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Carlton Grp Arranges $400M Construction Loan for Development of Tallest Residential Bldg in the U.S.

$1.2B Residential Tower Will Raise 95 Stories Above NYC
November 9, 2012
Manhattan-based Carlton Group has arranged the financing of $400 million for the institutional real estate investment fund developing what will become the tallest residential building in the United States - 432 Park Ave. in New York City.

The condos at 432 Park will average $5,800 per square foot, and about a dozen are in contract or near to closing, said people knowledgeable about the deals. When completed in 2015, the $1.2 billion residential tower will raise 95 stories above Manhattan's Plaza District. By comparison, One World Trade Center topped out in August 2012 at 104 stories, once again becoming the largest building in New York City by beating out the 102-story Empire State Building.

CIM Group LP is leading the project, designed by Rafael Vinoly Architects along with New York-based developer Macklowe Properties.

While foundations rarely make new construction loans, considered one of the riskiest property debts to carry, the borrower was able to reduce the risk to the lender because they have already secured about two-thirds of required capital in equity following recent sales from its portfolio. Most of the Los Angeles-based investor's projects have been largely financed using equity and cash on hand.

The details of this debt deal were not made public, but it is a non-recourse loan with approximately six years to pay off the borrowed amount. The fund stated the terms of the loan are both low-priced and flexible, receiving better terms from the London-based foundation, including a longer loan maturity, compared to offers from banks, hedge funds and private equity firms.

Howard L. Michaels (pictured, left), chairman of the Carlton Group, arranged the financing between the borrower and the foundation. Michaels selected this capital source because the foundation is not subject to the same liquidity requirements of many banks and financial institutions, allowing it to underwrite and close deals quickly.

The foundation's role as lender underscores how reluctant many banks remain to put up capital for new development, even though many experts say the property market is rebounding.

The closing of this loan comes on the heels of another large deal for Carlton, which arranged a $430 million sale at nearby 701 Seventh Ave. while raising more than $600 million in acquisition and development financing for the buyer. The Carlton Group is an international real estate investment banking firm specializing in equity and debt capital solutions. The group has consummated $85 billion in transactions since it was founded in 1991.

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