Boston propertiesLtd., the nation’s largest publicly traded developer and holder of high-quality office assets, has taken on $1 billion in debt to refinance its 59-story office tower in 601 Lexington Street In Midtown East, according to information from Moody’s Investors Service.
Wells FargoAnd German BankAnd Morgan Stanley And City Group Subject to financing, it is scheduled to securitize $426.7 million in Egypt BXP Trust 2021-601L A single-asset, single-borrower Commercial Mortgage-Backed Securities (CMBS) transaction, according to Moody’s analysis of the CMBS deal.
10 year fixed rate mortgage backed by Boston Properties and its partner Norges Bank Investment ManagementSimple (NBIM) fees and rental interests in office condominiums comprising 601 Lexington Street, plus a recently renovated six-story office and mixed-use retail lobby, per Moody’s. NBIM has acquired a 45 percent stake in Boston Real Estate 601 Lexington Street and both 100 Federal Street And Atlantic Wharf in Boston in the fall of 2014 for $1.5 billion, to form a joint venture between the two companies.
There was about $620 million in current mortgage debt on the property – located between East 53rd and East 54th Street – which was due to mature in April 2022, Michael Labelle, Boston real estate The financial director said In the company’s third-quarter earnings call.
LaBelle added that imminent maturity was one of the only significant debt maturities the company was staring at over the next 18 months.
Obviously, it was important for Boston Properties to refinance across the bottom line to not only take advantage of the low interest rate environment that persists but also to cut interest expenses before next year. Labelle said the old debt, which was saddled with 601 Lexington, carried an “above market” interest rate of 4.75 per cent. This new funding, worth $1 billion for the company that just closed, carries a much better rate of 2.8 percent, according to data from Moody’s.
“Given the increase in cash flow from the building, in part due to the redevelopment we completed earlier this year, we expect to be able to significantly increase the amount of financing and lower the interest rate,” Labelle said during the call. , adding that the company had hoped to close the refinancing before the end of the year so that the decrease in interest expense “accumulates with our 2022 earnings.”
Boston Properties recently concluded a four-year, $283 million renovation of the property’s six-story mixed-use lobby, according to Moody’s. The work led to the reconfiguration of the original retail space to include more restaurant spaces, as well as the creation of Ground level entrance and separate lobby off East 53rd Street.
Other works for the landmark building included upgrades to the main entrances and foyer, as well as existing office space and retail space on the ground floor within the six-story atrium. The office suites were redeveloped from the second to the sixth floor, and a new office entrance was added. New York University Langone Health Next, Moody’s leased office space in the redeveloped foyer.
In September, Boston Properties opened A new large dining hall on the property called huh, which houses 17 restaurants and occupies space on the ground floor and basement of the original. The dining hall was created as part of the renovation and is named after the late Hugh Stebbins of the now-defunct architecture firm Hugh Stebbins & Associates, which worked alongside Emery Roth & Sons To design the building decades ago. The tower was formerly known as the Citicorp Center.
Built in 1977, the average occupancy rate for this 1.8 million square foot skyscraper since 2010 is about 98 percent. It is currently 84 percent leasing to a mix of Am Law Global 200 law firms, including one of the largest in the country, Kirkland and Ellis, which is by far the largest legal tenant in 601 Lexington – occupies 37 percent of the net leasable area, or more than 616,000 square feet. Kirkland and Ellis, a 112-year-old law firm, Expanded its presence in the building in 2017; The company represents more than 39 percent of the total rent per Moody’s. Other tenants include CitibankLondon-based law firm Freshfields Brockhaus Deringer And Black stone.
The significant funding comes despite a turbulent office market in Midtown East and broader Manhattan that is still reeling from the effects of the pandemic. In the third quarter, office availability in Manhattan hit a record 18.7 percent, up for the fifth consecutive quarter, according to Newmark Knight Frank Rating data from early November cited by Moody’s.
Newmark’s “as is” property has an estimated value of $1.7 billion and has determined the market value of the asset at stability to be $2 billion.
Mack Burke can be reached at firstname.lastname@example.org.