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Vornado Refinances The Center Building for $100M

In Restructuring Terms for its LIC Asset, REIT Secures Fixed Rate for Next Seven Years
January 16, 2018
New York City-based Vornado Realty Trust (NYSE: VNO) has closed on a $100 million refinance of The Center Building, its 471,000-square-foot office tower located at 3300 Northern Blvd. in Long Island City, NY.

The office and retail REIT originally held a seven-year loan for the asset structured at LIBOR +1.80%. It has restructured the loan to a fixed 4.14% interest rate with interest-only payments for the first five years. A principal amortization of $1.8 million kicks in at the sixth year.

The original loan, currently at a 4.43% interest rate, was repaid to the tune of $59.8 million and closing costs. In refinancing, Vornado garnered $37.2 million in net proceeds.

In March 2015, Vornado acquired The Center Building for $142 million from Madison Marquette, the privately held Washington D.C. investment firm behind the District’s Wharf redevelopment, and Perella Weinberg Partners LP. The transaction reflected a purchase price of approximately $321 per square foot, and included debt assumption, according to CoStar data.

Situated at the eastern corner of Northern Blvd. and Honeywell St. in the Northwest Queens submarket, the eight-story office building is home to mostly government agencies and service providers, including the MTA, New York City Department of Administrative Services, New York City Office of Court Administration, the Fulep Fire Protection Company and Material for the Arts, a non-profit that supplies donated art supplies to institutions including public schools.

The refinancing follows a month of fundraising for Vornado. In an 8-K filed on December 27, it confirmed an agreement with underwriters Citigroup Global Markets, Inc., Deutsche Bank Securities, Inc., J.P. Morgan Securities LLC and Jefferies LLC, "With respect to the issue and sale by the Company and the purchase by the underwriters, acting severally and not jointly, of the $450 million aggregate principal amount of 3.5% notes due 2025."

On December 13, it sold 12 million shares of its 5.25% Series M Cumulative Redeemable Preferred offerings at $25 per share in an underwritten public offering. The company wrote in an 8-K that it has entered into the underwriting agreement with UBS Securities, Morgan Stanley & Co., Wells Fargo, Merrill Lynch and Pierce, Fenner & Smith, Inc., and granted them, "An option to purchase up to an additional 1.8 million shares of the Series M Preferred Shares from the Company at $25 per share, less the applicable underwriting discount, within 30 days of December 4, 2017."

Diana Bell, New York City Market Reporter  CoStar Group   
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