As New York leads the U.S. office market in its recovery from the pandemic, another office property has secured a billion-dollar-plus refinancing loan.
Landlord Brookfield landed a $1.25 billion refinancing for 5 Manhattan West, at 450 W. 33rd St., according to presale reports of the bond offering backing the deal from credit-rating firms Moody’s and KBRA. The property is a 16-story, Class A office building spanning about 1.7 million square feet.
Some $985 million of the financing package involves a commercial mortgage-backed securities loan, with the balance expected to be contributed to future CMBS transactions. The loan matures in five years, according to the reports. Brookfield said the loan has a fixed interest rate of 6%.
Citi Real Estate Funding, Bank of Montreal, Deutsche Bank, JPMorgan Chase and Societe Generale are originating the loan.
The refinancing comes as demand for top-tier office properties with appealing amenities and easy access to public transit in the largest U.S. office market has led to a who’s who list of high-profile properties having landed top-dollar refinancing transactions.
As the Federal Reserve on Wednesday cut its benchmark interest rate by a quarter point, and with the market expecting more cuts coming, industry professionals have said that bodes well for financing and investment activities that had been mostly frozen since the U.S. central bank began to hike rates in 2022.
CBRE said it raised its forecast for this year’s gain in U.S. commercial real estate investment activity to 15% from its previous projection of a 10% increase in the wake of the Fed rate cut.
“The flight to better quality assets will influence investor and occupier activity, with an emphasis on gateway markets,” CBRE said.
The biggest U.S. CMBS office deals this year have all taken place in Manhattan, led by Tishman Speyer’s $2.65 billion debt, part of a $2.85 billion package, to refinance its new Spiral trophy tower on Manhattan’s far west side.
5 Manhattan West, fully leased, counts among its largest tenants Amazon, JPMorgan and WeWork, which has taken space on behalf of Amazon, according to CoStar data. Whole Foods is the property’s largest retail tenant. Brookfield owns the property with Qatar Investment Authority, CoStar data shows.
Brookfield, after buying the property in 2011, spent about $350 million between 2014 and 2017 in overhauling the building, originally built in 1969 as the Westyard Distribution Center, and transforming it into the first Class A office building at its Manhattan West development, Moody’s said. The complex, including also hotel, residential and retail properties, is sandwiched between Vornado's Penn District surrounding Penn Station and Related Cos.' Hudson Yards.
Since Brookfield’s overhaul of the property, 5 Manhattan West has been on average 99.8% leased, KBRA said separately.
“The property’s quality finishes, strong tenant roster and location establish it as a premier office building in Manhattan,” Moody’s said.
This story was updated Oct. 1 with new information from Brookfield about its interest rate on the loan.