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Boston Properties secures $2.3B GM Building loan

Boston Properties has secured a $2.3 billion loan for the GM Building at 767 Fifth Avenue.

Boston Properties CFO Michael LaBelle announced the transaction during an earnings call last week.

The ten-year loan will have a fixed interest rate of 3.4 percent. Boston Properties expects to close on the loan in June, when the current $1.6 billion first mortgage and mezzanine loans on the property can be prepaid without penalty.

According to LaBelle, they plan to use the extra $700 million in proceeds to cover a huge bill for closing costs.

“We anticipate that we’re going to be paying mortgage tax … so the closing costs are probably north of $40 (million) in total. And then, my expectation is that we would hold back between $50 million and $75 million dollars for capital improvements at the asset level,” he said.

“So if you pull out $100 million or $120 million from the $700 million of excess proceeds and you take our share, and you’re talking about $300 million, the (remaining) $275 million we would be able to distribute to ourselves and to our partners to fund the remainder of the development pipeline that we have, as well as (the) future development pipeline.”

The current loans on the building expire in October 2017 at an interest rate of six percent. According to LaBelle, Boston Properties’ share of the cash interest payment on the new loan will be $9 million less per year compared to the current mortgage.

A group of 16 lenders will be providing the financing for the deal. Boston Properties did not identify the members of the consortium during the earnings call. However, a report from the Commercial Observer identified Morgan Stanley as the lead arranger for the mortgage. The report also said that Wells Fargo partially funded the loan.

Boston Properties owns 60 percent of the building. The company, along with its partners Goldman Sachs and the nations of Kuwait and Qatar, bought the property and three other Midtown buildings in 2008. The package, which was sold by the Macklowe family, had a purchase price of $3.95 billion.

The 50-story property, which has more than two million square feet of space, occupies an entire block between Fifth and Madison Avenue and 58th and 59th Street.

The Apple Cube store, one of the most photographed attractions in the city, sits on the building’s Fifth Avenue plaza. Current tenants in the building include Estee Lauder and law firm Weil, Gotshal & Manges.

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