Rockefeller Center $3.5B CMBS Deal Was Oversubscribed, Boosting Class A Office Market

The historic $3.5 billion commercial mortgage-backed securities (CMBS) deal that closed Friday to refinance Rockefeller Center generated large-scale investor demand and could present hope for the future of high-quality Class A office assets, according to Bank of America (BAC), which co-led the transaction.

The  CMBS deal, which was co-originated by Bank of America and Wells Fargo (WFC), was overssubscribed from its initial pricing levels to close with a fixed interest rate of 6.23 percent after starting off at 6.5 percent. It marked the largest CMBS issuance ever for a single office asset, according to Tishman Speyer, which co-owns the 13-building Midtown Manhattan office and retail complex with Henry Crown and Company. 

“I think it is a strong signal to the market that for Class A, well-tenanted, well-sponsored offices the market is wide open,” Matt McQueen, head of municipal banking, markets and global mortgages within the global markets business at Bank of America, told Commercial Observer. 

The new behemoth loan has a 2029 maturity date, and proceeds will be used to pay off a previous 20-year loan for Rockefeller Center securitized in the GSMS 2005-ROCK CMBS deal — a far different office environment in 2005 when Rockefeller Center received a long-term loan at a 5.6 percent interest rate — plus additional mezzanine debt set to mature in May 2025. It will also fund reserves for contractual leasing costs.

“It’s incredibly gratifying to help a key client and partner be able to effectively achieve their objectives,” McQueen said of the mammoth deal closing this week. “A successful transaction of this size reinforces BofA’s commitment to securitized products and our clients in these markets.”

Rockefeller Center is currently 93 percent leased to national, highly regarded firms such as J.P. Morgan Chase, Deloitte, Lazard, Christie’s and Simon & Schuster, according to Tishman Speyer. The development also hosts a number of retail tenants including Banana Republic, Anthropologie, Michael Kors, FAO Schwarz and Nintendo New York.

“The lending market’s overwhelming response speaks volumes about the success of our redevelopment and their confidence in top-performing assets,” Tishman Speyer CEO Rob Speyer said in a statement. 

McQueen said the Rockefeller Center loan brings further validation that the overall CMBS market is in “a very healthy spot,” with more spread stability and more investor demand for the product despite interest rates remaining elevated.   

He expects more activity in the CMBS market as interest rates trend downward, as the big banks will likely remain cautious with balance sheet lending and pick their lending spots carefully.

“Banks have been particularly cautious through this cycle given some of the issues that exist with office loans on various balance sheets that’s inherently made institutions more conservative,” McQueen said. “To the extent we see lower rates I don’t think we’re going to see massive bank demand overnight, and I still think the strength for funding will stay in the capital markets.”

Andrew Coen can be reached at acoen@commercialobserver.com