Foreign Lenders Find Appeal in New York Market

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“The tap is open for real estate financing, and the flow of providing funds is being generated by a number of new international lenders,” said Stanley Blumberg, who is special counsel to First American Title Insurance Company of New York and retired senior real estate partner of Stroock & Stroock & Lavan LLP.


Last September, Wachovia Securities was prepared to close on the financing for the purchase of the General Motors building at 767 Fifth Ave., by the Macklowe Organization. In the final hours two days prior to the closing, Deutsche Bank was selected instead, and it arranged $1.4 billion in financing for the acquisition of the Fifth Avenue tower.


In this highly leveraged transaction, Macklowe’s investment was limited to $50 million. Deutsche Bank originated an $800 million first mortgage, a $350 million mezzanine loan, and a $250 million equity bridge loan.


Notwithstanding the loss of the loan on the General Motors building this year, Wachovia Securities has been very busy providing financing for local real estate transactions. On Wednesday, it arranged a $336 million five-year fixed-rate loan for the Moinian Organization’s acquisition of the Paramount Group’s 1.1 million square-foot office tower at 180 Maiden Lane. The purchase price of the building was $355 million, or $323 a square foot. In June, it provided a $64 million floating-rate loan for Kent Swig’s purchase of the 36-story, 395,000-square-foot building at 80 Broad St. Mr. Swig paid $80 million, or $202 a square foot. Last month, Wachovia, along with Lehman Brothers, arranged a $425 million, three-year floating-rate loan for a building at 1515 Broadway. The building is owned by SL Green and Caisse de Depot et Placement du Quebec, which acquired the 1.8 million-square-foot building in 2002 for $480 million. This past April, Wachovia arranged a $195 million three-year floating-rate loan to a joint venture, which included the Moinian Organization, The Chetrit Group, and David Werner, for the $210 million purchase of 530 Fifth Ave. Last month, it provided an $80 million floating-rate loan to C & K Properties and Zamir Equities for the $91 million acquisition of Penncom Plaza building at 132 W. 31st St.


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In June, Deutsche Bank arranged a $314 million loan for the 695,000 square-foot office condominium on floors three to 19 at the new Bloomberg Tower at 731 Lexington Ave. This is part of the total loan of $1.3 billion on the project, which includes the luxury residential condominium One Beacon Court and retail space planned to open this fall. Retail tenants include H &M and Home Depot. The original construction and mini-permanent financing for the project was provided by Hypo Real Estate Capital. The Deutsche Bank loan is a 10-year fixed-rate loan secured by the 25-year lease on the portion of the tower housing Bloomberg offices.


One of the most active lenders, who declined to be named, said, “We have done well in the market due to the speed of our closing, flexibility, pricing, and the fact that we are very competitive.”


In 2002, the Frankfurt-based Euro-Hypo AG was formed by Germany’s three largest banks: Dresdner, Deutsche, and Commerzbank. In July, EuroHypo AG provided a $250 million acquisition loan, with a potential commitment to arrange a $1.1 billion construction and mini-permanent loan, to a partnership consisting of Zeckendorf Realty and Goldman Sachs’s Whitehall Street Real Funds, for acquisition of the vacant parcel of land adjacent to Central Park and near the Mayflower Hotel. The property is adjacent to Trump International Tower and Hotel. The partnership paid $401 million for the hotel and vacant land.


Later this month, EuroHypo will provide a $168 million floating-rate loan to an SL Green partnership to finance the purchase of the 870,000-square-foot office building, built in 1956, at 485 Lexington Ave. In June, SL Green agreed to buy that building and one adjacent to it at 750 Third Ave. from TIAA-CREF for $480 million. The transaction valued the building on Lexington at $225 million and the building at 750 Third Ave. at $255 million. SL Green is purchasing the building in partnership with the New York City Investment Fund. The fund will hold 62.5% of the equity and SL Green 37.5%.


In June, Hypo Real Estate Capital Corp. provided a $175 million two-year floating-rate loan to Macklowe Properties to refinance the debt on the 618,000-square-foot tower located at 140 E. 45th St., which is called 2 Grand Central. The office building is located a half block from Grand Central Terminal off Third Avenue.


“Transactions in North America provide better yields and risk diversification,” said the managing director of Westdeutsche ImmobilienBank, Andrew Cooper. “We are interested in providing financing for Class A, institutional, retail, residential for rental or condominium development.”


Last year the bank co-arranged a $150 million facility for the construction and mini-permanent financing for the new condominium-and-rental development One Morton Square, a one-block development in Greenwich Village.


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Earlier this year, CDC Mortgage Capital, Inc., an indirect subsidiary of its European parent the international bank CDC IXIS, provided a $62 million five-year floating-rate loan to Macklowe Properties to refinance the 26-story, 293-unit luxury apartment building the Longacre House at 305 W. 50th St., located off Eighth Avenue.


“Real estate financing has been particularly profitable for many financial institutions who have targeted focus in the New York region,” said the chairman of the Real Estate Lenders Association and a managing director at CDC Mortgage Capital, Matthew Landau. “The margins are thinning, the market is overheating, there are a lot of new players offering financing.”


The head of Real Estate for North America at HSH-Nordbank, James Fitzgerald, said, “In my mind, I think it is clear that New York is advantaged by its international following, such that equally performing real estate assets will always garner a premium in this market. We are reviewing several condominium development deals, and hopefully will play an important role in the Mayflower development on Central Park West.”


Two years ago, Dr. Alex Stawski completed the development of the office tower at 360 Madison Ave. Dr. Stawski is presently developing a 27-story, 295,000-square-foot office tower at 505 Fifth Ave. The building is located on the northeast corner of E. 42nd Street and Fifth Avenue. Last month, Helaba Bank originated a $60 million construction loan. The building is being built without any anchor tenants and is one of the few speculative towers under construction in Manhattan. The property was owned by a partnership of Lehman Brothers and LCOR, and was sold to Dr. Stawski in June of 2002. The total cost anticipated for the project is about $125 million.


In June, Helaba Bank agreed to provide a $190 million letter of credit to Jack Resnick & Sons for the construction of a new 456-unit residential apartment building in Battery Park City. The five-year loan will cover the real estate risk on a new residential rental tower planned to be built at 200 Chambers St. The developer has applied and expects to be approved for funding of the construction loan using tax-exempt Liberty Bonds issued by the NYC Housing Development Corporation.


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