On behalf of a partnership between RXR Realty and Walton Street Capital, Jones Lang LaSalle’s Capital Markets team announced the firm has secured up to $165 million in mezzanine financing for 237 Park Avenue, the 22-story, 1.2 million-square-foot office tower adjacent to Grand Central Terminal in midtown.
The asset was acquired for $810 million and the partnership has assumed a $420 million securitized senior mortgage.
SL Green Realty Corporation and Blackstone provided a mezzanine loan, which carries an interest rate of seven percent and provides the borrowers $125 million up front and could provide up to $40 million more.
Managing director Kellogg C. Gaines and executive vice president Dustin Stolly led the Jones Lang LaSalle team on this transaction.
“237 Park Avenue is an outstanding asset and offered lenders a rare chance to originate a loan collateralized by the equity in a true Class A tower in one of the most coveted and irreplaceable locations in Manhattan with best in class sponsorship,” Gaines said.
“Furthermore, as the owners are about to embark on a comprehensive renovation of the property and with extensive discussion at the NYC Department of Planning about improved zoning to the Grand Central District along with the East Side Rail Project bringing more commuters through Grand Central Terminal this asset is well positioned to be a premier Manhattan office property.
“The value here was well recognized by the lending community which resulted in a very favorable execution on the sourcing and structuring the debt on this asset.”
“Mezzanine lender interest came from an ever increasing variety of capital sources, including insurance companies, money managers, banks, and mortgage REITS; all a testament to the continued evolution of the mezzanine lending space for prime assets such as 237 Park,” added Stolly.
Ninety-eight percent of the building’s tenants are investment grade; current tenants include J. Walter Thompson, UBS, J.P. Morgan Chase, Credit Suisse and Jennison Associates.
Formerly the Railroad Mail Services Building, the property was built in 1920 and fully redeveloped in 1981. 237 Park Avenue features a dramatic atrium lobby, and includes 153 feet of retail frontage on Lexington Avenue and 145 feet of retail frontage on Depew Place.
RXR Realty and Walton Street Capital are planning a multi-million dollar renovation of 237 Park Avenue, which will include modernizing and brightening the lobby and atrium, enhancing the Park Avenue entrance, improving the retail entrance on Lexington Avenue and generally improving the exterior of the building.
237 Park Avenue is located in perhaps the strongest office market in the nation, one that is characterized by strong performance fundamentals, robust job creation, adiverse tenant base and a growing reputation as a center of technology and innovation.
The Midtown office market, which represents 60 percent of Manhattan’s inventory and has an Class A vacancy rate of 11.6 percent, is benefiting from three trends: competition for space in trophy buildings, which has fueled rent growth; the migration of technology and new-media tenants to the area due to the lack of high-quality Class A space below 42nd Street; and the growth of Midtown’s media firms, which is drawing businesses, such as digital marketers and digital content creators, to the market.
