RFR Seeking $1B Refi for Seagram Building, $100M+ in Pref Equity Also Coming Due: Sources
By Andrew Coen February 14, 2023 5:22 pmreprints
RFR Holding is under pressure to refinance its 38-story Seagram Building in Midtown Manhattan as a $1 billion debt package on the struggling office tower nears maturity, sources told Commercial Observer.
As the office sector faces ongoing headwinds from changing work behaviors spurred by the COVID-19 pandemic, RFR has tapped Eastdil Secured to secure a loan to retire outstanding debt on the 860,000-square-foot office property at 375 Park Avenue. The existing $1 billion 2013 financing package on the building is scheduled to mature in early May, Commercial Mortgage Alert first reported Friday.
Executing a large office transaction is challenging enough in a rising interest rate environment, but RFR is further saddled by an additional $100 million of preferred equity in the deal, provided by MSD Partners and maturing coterminous with the debt, bringing the total capital stack needs to $1.1 billion.
Sources said RFR is currently in the market trying to raise the preferred equity itself. If the current investment isn’t paid off, MSD has the rights to purchase the preferred equity at par and exercise mezzanine rights in the deal, sources said. Other factors from additional accrued costs including leasing and free rent could bring the preferred equity total closer to $250 million, according to sources.
MSD declined to comment.
RFR, which is led by Aby Rosen and Michael Fuchs, recently invested $25 million in building upgrades including a new 35,000-square-foot amenity center called Seagram Playground. The new addition debuted last August in an area formerly used as a parking garage under the building plaza as a way to attract young workers. The space features a climbing wall, indoor track, basketball courts, yoga and spinning studios, a weight room and a boxing area.
Completed in 1958, the Seagram Building took a big hit during the height of the COVID-19 pandemic like many other New York office assets, with leasing occupancy dropping to 67 percent in 2021 from 94 percent in 2020. Wells Fargo departed from the property, where it had leased 238,000 square feet, for Hudson Yards ahead of its lease expiring in January 2021.
Leasing rebounded to 80 percent by September 2022, and the building is now around 96 percent leased with weighted average of remaining term by tenants of 9.2 years, according to CMA. The building’s largest tenants include Blue Owl Capital, which signed a lease for 138,000 square feet in 2022, and private equity firm Clayton, Dubilier & Rice, which accounts for 69,000 square feet. TIAA, which bought the property in 1979 from Seagram & Co. before selling to RFR in 2001 for $371 million, leases roughly 51,000 square feet at the property.
The debt RFR is currently working to refinance comprises $782.8 million of senior CMBS debt, supplied by Citigroup and Deutsche Bank, plus $217.25 million of mezzanine loans. The senior portion of the deal was broken out into a $573.75 million CGCMT 2013-375P single-borrower deal, with the remaining $209 million included in a collateral pool of a $1.4 billion COMM 2013-CCRE8 conduit transaction. None of the outstanding debt has been paid off, according to sources, and RFR also was in discussions to try to extend the existing loan with its lenders.
Officials at RFR and Eastdil Secured did not return requests for comment.
Andrew Coen can be reached at email@example.com