Beleaguered 110 William Street Secures Tenant for 640,000-SF Office Void
Pacific Oak and Savanna restructured $334 million in debt and altered ownership rights
By Brian Pascus June 8, 2023 1:32 pm
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Pacific Oak Capital Advisors and Savanna Real Estate Fund have reached an agreement to restructure more than $334 million in outstanding debt on 110 William Street — a 32-story, 930,000-square-foot office building in Manhattan’s Financial District — after an unnamed New York City agency signed on as the building’s largest tenant, Commercial Observer has learned.
The restructuring agreement with lender Invesco Real Estate (IVZ) was first reported by Bisnow and was confirmed by a Pacific Oak quarterly presentation before the Tel Aviv Stock Exchange.
The new tenant at 110 William Street will lease 640,000 square feet for 20 years at an annual rent of $44 per square foot (approximately $28 million per year once the total floor area is occupied), a rate scheduled to increase $4 per square foot every five years, according to Tel Aviv Stock Exchange documents. The unnamed tenant will lease the property in a staggered manner, occupying 200,000 square feet in different blocks of time as improvements are finalized, and carry the option to extend the lease for two additional five-year periods.
The deal includes a covenant that transfers the 40 percent ownership Savanna held in the building entirely to Pacific Oak, which as sole owner would invest between $110 million and $130 million of new equity into the building for tenant improvements, according to Tel Aviv Stock Exchange documents.
The property’s existing $85.7 million in existing mezzanine debt is scheduled to be converted into preferred equity, while the restructured loan is the amount of the existing senior loan balance that includes a provision to withdraw $56.7 million to finance future building improvements, according to Tel Aviv Stock Exchange documents.
Pacific Oak and Savanna had received a three-month extension after defaulting on their $349 million loan from Invesco in January, CO reported. That was the third extension granted by the lender since the property first went into default in June 2022.
The irony of Pacific Oak finding an unnamed city agency to fill a 640,000-square-foot void is not lost on longtime watchers of 110 William Street. The building was thrown into leasing turmoil beginning in 2016 when the New York City Economic Development Corporation (EDC) decided to leave in favor of 222,000 square feet at One Liberty Plaza, a nearby office tower across from Zuccotti Park.
The hits continued in mid-2022 when the New York City Housing Development Corporation (HDC) vacated its space at 110 William Street and signed a 109,000-square-foot lease at 120 Broadway, a landmarked downtown office building near Trinity Church.
110 William Street has struggled to fill its floors lately. Prior to the latest lease agreement, the 65-year-old office building had signed only two leases since 2020, both short term. Tech firm Twilio took 35,848 square feet that it had previously subleased from Knotel, a former tenant, at $50 per square foot for 2.5 years, while Propeller took 6,507 square feet at $65 per square foot for 3.3 years, CO reported in January.
Neither Pacific Oak nor Savanna responded to requests for comment. The city’s Department of Citywide Administrative Services did not answer an inquiry, as well.
Brian Pascus can be reached at bpascus@commercialobserver.com
