Special Report: Leading development financings 2016

Developers across the European and US real estate markets sourced finance during 2016 to bring their schemes to reality. Jane Roberts, Daniel Cunningham, Al Barbarino and Justin Slaughter examine some of the key deals.

Financing development is an inherently risky business and only select real estate lenders are prepared to write debt against un-built property projects.

During 2016, a slew of major development financing deals across the European and US markets have demonstrated that banks and alternative lenders are prepared to back the most prime build projects in the best locations.

London and New York have seen significant deals. In the UK capital, schemes which have attracted development loans include a major build-to-rent housing project surrounding Wembley Stadium, a 37-storey office tower in the heart of the financial district and a new shopping scheme at one of the city’s most prominent entertainment venues.

In New York, new loans have funded the latest element of the gargantuan Hudson Yards development on Manhattan’s far west side, as well as Midtown Manhattan’s to-be tallest tower and various high-end residential schemes across the city.

Large-scale regional development financing has been patchier, although the UK’s first major regional build-to-rent apartment scheme received funding, while banks backed several projects in ‘gateway’ US cities.

However, development financing remains a niche part of the real estate debt industry. De Montfort University’s latest bi-annual report showed that only 11 organisations were prepared to provide the authors with information on financing terms for fully pre-let UK development. At the end of 2015, 21 had done so.

German banks are more open to providing construction finance, with new business of €32.2 billion recorded in 2015 by the University of Regensburg’s German Debt Project, up 22.6 percent year-on-year.

Across the following pages, Real Estate Capital examines some of this year’s key development financings in the US and European markets and the projects they will bring to life.


Marble Arch Place, London

The UK debt community buzzed with speculation earlier this year about the identity of a mysterious lender which had agreed a £400 million, five-year secured loan for Almacantar’s entirely speculative redevelopment of Marble Arch Tower in the capital.

In May, Real Estate Capital revealed that the lender on what will become Marble Arch Place was The Children’s Investment Fund Management (TCI), the alternative asset investor which had financed prominent Manhattan condo towers, but had never lent on real estate before in the UK.

Almacantar’s team, led by CEO Mike Hussey and finance director Jonathan Paul, had bought the 1960s tower in 2011 for £80 million and began working on a scheme to replace it with 54 apartments overlooking Hyde Park and 100,000 square feet of offices in a seven-floor building next door, plus street level retail, a cinema and off-site housing. They first spoke to TCI’s chief investment officer Martin Frass-Ehrfeld two years before the loan was secured.

“He made it very clear this was the scheme he’d like to fund in London. He said, come back when you’re ready,” Paul recalls.

With development finance in short supply, TCI was one of the very few able to underwrite £400 million at all, let alone an entirely speculative, mixed-use project which will take four years. Almacantar also negotiated with two other parties: another alternative lender, believed to be Starwood, and a bank, thought to be Lloyds. CBRE Capital Advisors advised Almacantar on the financing.

Paul says TCI was chosen because “of their incredible flexibility and responsiveness as lenders, which is quite unusual. We took advice from other borrowers who they’d worked with in the US and they made the same point. They only have to deal with one individual, (Frass-Ehrfeld) so you don’t have a credit committee structure to go through as you would with a traditional lender.”

Changes are often needed along the way in development, and as Almacantar is the leaseholder and the freeholder is the Portman Estate, there was additional complexity. TCI’s flexibility trumped cost – the all-in coupon on the 60 percent loan-to-cost facility is is believed to be in the high single digits – although Paul says that with none of the commitment fees a bank might charge, “it becomes apparent how alternative lenders can compete quite effectively.”


O2 Outlet Shopping Village, London

One of Lloyds’ largest underwrites this year was a £183 million senior loan for private equity firm Crosstree and US entertainment giant Anschutz Entertainment Group (AEG) which the UK bank closed in January.

The O2 Arena in Greenwich, London
The O2 Arena in Greenwich, London

Crosstree and AEG are developing London’s second outlet shopping village at the iconic O2 arena in Greenwich. Some £142 million of the loan is secured on the existing, income-producing shopping, bars and restaurants under the giant dome, and £41 million for the development.

“The business plan is to develop a 205,000 square foot designer outlet village and we looked to source financing that allowed us to leverage the value that’s inherent in the entertainment district as well as giving us the ability to develop the village that we already had planning permission for,” explained Ryan Craig, Crosstree’s finance director talking to Real Estate Capital in August.

The leverage on the four-year debt was 55 percent and the blended margin very competitively-priced, in the low 200 basis points. Eastdil Secured advised the borrowers.

One eye-catching aspect of the deal is that Lloyds syndicated half the debt to Industrial and Commercial Bank of China. It was the first European deal the Chinese bank chose to publicise, although since launching in the UK in 2013, the bank has put 20 loans on its European property book and Andrew Day, head of commercial property at the bank, said that the O2 participation “demonstrates our continued commitment to the UK real estate market.”

Craig said that Lloyds’ ability to underwrite the whole loan “was a huge positive” and met Crosstree’s fast timetable, adding that the bank also took “a very commercial view on the asset given the income that it has in place and the fact that we can pay current interest.” AEG has entertainment centres in the US and other international cities and for Lloyds, landing the financing brought two new borrower relationships.


Angel Gardens, Manchester

Financing central London residential development became progressively more difficult in 2016, first as the market softened and then when liquidity reduced even further after the Brexit vote. So when Lodha Group replaced a facility it had used to acquire a large Midtown site, New Court in Carey Street, WC2, with development finance, it was a notable achievement.

Alternative lender Cain Hoy provided a £78 million bespoke finance package to begin development of New Court into 202 apartments called Lincoln Square, taking out a £70 million loan from pbb Deutsche Pfandbriefbank and Apollo.

It is believed that pbb, in common with other lenders since the central London market began to soften 12-18 months ago, is cautious about providing debt for residential projects in the capital which are being marketed at sales prices at higher than £1,000 per square foot. Before sourcing replacement finance with Cain Hoy, Lodha is believed to have held discussions with Lloyds and RBS about financing the scheme, but neither bank followed through.

Lodha is pricing the Lincoln Square flats at just over £2,000 per square foot and has sold about 30 in the first phase at this price point ranging from studios to three-beds.

The deal is the first for Lodha’s new director of finance, Ab Shome. The Cain Hoy facility gives the Indian developer enough capital for now and Shome’s next task is to close additional development finance, taking the secured loan up to circa £200 million, probably from a banking club. The completed scheme is expected to have a value in the region of £450 million.

John Cole, managing director of Cain Hoy, declined to comment on the pricing of its Lincoln Square facility. He said the deal “ticked all the boxes for the kind of value-add transaction we like to do. It is a structured, bespoke facility which needs an understanding of real estate.”

“Pre-Brexit, the market was quite borrower-friendly; since the Brexit vote, while liquidity remains, it can be a bit more difficult to access – hence the reason we are so busy.”


Newfoundland, London

UK banks were more selective this year about writing development finance loans for residential for sale in London, but to an extent, this business was replaced by lending to the private rented sector (PRS). Royal Bank of Scotland (RBS) set out its stall to be a leading lender of development finance to the PRS, but Barclays and Lloyds were active too.

The largest facility for PRS signed in the first half of 2016 was the £248 million club for Canary Wharf Group’s 60-storey Newfoundland residential tower at its London Docklands estate, which RBS led, together with Barclays and the government Homes & Communities Agency.

The financing was signed at the end of March. The Newfoundland tower, at the western end of the Canary Wharf complex, will have 566 luxury flats for private rental and has a striking “transparent diagrid” structure like the one used in the City of London’s ‘Gherkin’ tower.

Qatar National Bank, which had intended to be part of the lending club and which has participated in other loans to the property company since it was taken over by Brookfield and the Qatar Investment Authority in March 2015, did not lend.

RBS’s Chiara Zuccon, head of private rented sector, said the deal: “Demonstrates our commitment to Canary Wharf Group, and reflects our support for the UK’s growing build-to-rent sector. Large scale purpose-built private rental schemes have an important role to play in increasing and diversifying the housing supply in London and across the UK.”

Dennis Watson, head of real estate at Barclays, which took an £83 million participation, believes PRS will continue to be a resilient area of business.

In 2014, before the Brookfield/QIA takeover, Canary Wharf set up a unit called Vertus Residential to develop, own and manage a rental residential estate. Most of the group’s residential schemes are concentrated at the 13.6 hectare Wood Wharf site, to the south of the existing office complex.

Brookfield and QIA are believed to be talking to potential partners with PRS experience about coming in as investment partners and managers on some or all of the company’s slated PRS projects.


The Post Building, London

The bulk of the site of The Post Building on the eastern side of London’s West End stood vacant for almost 20 years until Brockton Capital and Oxford Properties embarked on a major redevelopment earlier this year.

A Royal Mail sorting office until the 1990s, the nearby British Museum worked up plans to extend to the site, but sold it on in the early 2000s. Before the Holborn area emerged as a genuine London sub-market, the island site remained an untapped development opportunity until Brockton bought it in spring 2013.

The site’s proximity to Tottenham Court Road station, set to be a major hub in the Crossrail transport network, and the potential for volume and vast section heights spurred Brockton on. The firm worked up plans for a 320,000 square foot redevelopment including offices, plus some ground floor shops and restaurants, affordable housing and rooftop gardens.

A 50/50 joint venture with Oxford was announced in January this year to develop The Post Building, speculatively, with completion scheduled for summer 2018. BNP Paribas and pbb Deutsche Pfandbriefbank agreed to provide £230 million of development finance.

The former sorting office is being partially demolished and remodelled in a project designed by architects AHMM, explains Brockton co-managing partner David Marks: “It’s essentially a new building which utilises the values of the existing building,” he says.

“We feel we’ve got the location and the timing in the cycle right, plus the design,” says Marks, “unique elements such as six metre floor-to-ceilings heights and wrap-around roof terraces are part of that.”

Marks is adamant that the developers pushed the button at the right time: “banks have not been falling over themselves to lend to speculative developments, so we will have one of the few HQ buildings in the West End by 2018.”

Brockton and Oxford’s existing relationships with BNP and pbb helped to seal the financing deal, adds Brockton associate director Alex Wright: “Lenders have been very sensible during this cycle, and so development finance has been muted. But we thought it was important to go ahead with this project, and BNP and pbb also saw the benefit.”

Real Estate Capital reported in January that the loan was written at a circa 60 percent loan-to-cost ratio and was priced with a margin in the mid-200 basis points area.


Wembley Park, London

One of the UK’s largest proposed private rented sector (PRS) residential developments, Wembley Park, secured development finance in November.

The masterplan, which covers an 85 acre site surrounding the UK’s national stadium, includes 4,850 homes, more than a third of which will be affordable, with many available to rent through Quintain’s private rented sector business Tipi, plus additional commercial space.

Quintain, the scheme’s backer, was bought by US private equity giant Lone Star’s Real Estate Fund IV in September, partially funded with a £425 million bridge loan provided by Wells Fargo. The new £800 million five year corporate and development financing will repay that bridge loan and fund the development of the scheme.

Wells Fargo has played a key role in the new financing, alongside two fellow North American lenders; insurer AIG and the Canada Pension Plan Investment Board (CPPIB). Wells and AIG provided a £560 million revolving senior loan, with CPPIB topping it up with £240 million of mezzanine finance.

“We understand that this may be the biggest UK development and PRS financing this year,” said Simon Carter, finance director of Quintain. “This is to finance the whole group, and importantly for us, Wembley, in one go, giving us the flexibility for development. The senior loan is fully revolving and that allows us to recycle capital efficiently as we sell assets from our non-core portfolio.”

As buildings are completed over the next few years, they are likely to be refinanced. “Once we have completed each project we can refinance with longer-term asset-specific debt,” added Catherine Webster, Quintain’s strategic finance and investment director.

Quintain’s revised plans for Wembley Park, which won consent from Brent Council in May, involve investing between £800 million and £1 billion over the next five years. There are already 1,000 residential units at the site and some 141 PRS apartments under the Tipi brand have been let this year at prices of over £20,000 per annum for two-beds.


100 Bishopsgate, London

In the immediate aftermath of the UK’s vote to leave the European Union, a major development financing of a 37-story office tower in the heart of London’s financial district was closed.

The developer is Canadian office development giant Brookfield. The scheme is 100 Bishopsgate, containing 962,000 square feet of offices, which are under construction now for completion in 2018.

The £515 million development financing package was provided by six banks and arranged by Wells Fargo. The five-year loan is understood to be priced at circa 300 bps with provision to ratchet the margin down subject to future pre-lets, Real Estate Capital reported at the time. The deal closed on 6 July, just two weeks after the vote for Brexit.

The bank club was comprised entirely of foreign banks. Wells took a £100 million participation. It was joined by a German bank, Helaba, as well as French bank, BNP Paribas and an Italian bank, Banca IMI.

Two Asian lenders made up the remainder of the club. Singapore’s UOB (United Overseas Bank), which had one week earlier placed a post-Brexit moratorium on London home mortgages for its customers, took a slice of the financing. The line-up was completed by Industrial and Commercial Bank of China (ICBC).

Despite the uncertain market conditions, the scheme had many plus-points. The developer is behind some of London’s most prime developments, while London’s vacancy rate is falling and at a 14-year low, according to Knight Frank. Since the deal was agreed, others have signalled their faith in the City market. In October, AXA announced that it would press ahead with the nearby 22 Bishopsgate Tower.

Crucially, Brookfield has already partially de-risked the scheme through pre-lets. Royal Bank of Canada agreed to pre-let around 250,000 square feet last November, while investment bank Jefferies Group is due to take around 150,000 square feet.

With commentators estimating that the City will leak some jobs due to the Brexit effect, Brookfield’s challenge in the next two years will be to gradually fill the remainder of the tower.


Hochhaus am Park, Frankfurt

‘Hochhaus am Park’ – skyscraper in the park – is currently a vacant office building on the edge of the Grüneburgpark in Frankfurt’s plush ‘Westend’ area.

The pair of inter-connected office buildings were bought in February by New York-based investors RFR Group and Revcap with a view to transforming the properties into high-end apartments and a luxury hotel.

Pbb Deutsche Pfandbriefbank proved willing to finance the scheme, providing a loan of more than €150 million during Q1 this year.

“The revitalisation of the ‘Hochhaus am Park’ complex is an interesting project, located in a desirable residential area,” Gerhard Meitinger, head of real estate finance Germany at pbb said in a statement as the bank announced the financing.

“The northern part of Frankfurt’s Westend offers good opportunities for a special hotel. We continue to see strong demand for high-quality residential space in Frankfurt, whilst the situation on the Frankfurt hotel market remains positive,” he added.

The existing building is to be stripped back to core and redeveloped. The plan is to convert one of the two buildings into 100 apartments with an aggregate floorspace of 13,700 square metres. The second building will be redeveloped as a 140-room five-star hotel with conference and spa facilities. The apartments are expected to be completed by mid-2019, with marketing due to commence at the end of this year. The hotel is also scheduled to open its doors by mid-2019.

Frankfurt’s high end residential market has typically attracted buyers from overseas including Asia Pacific and the Middle East. While Hochhaus am Park will compete with such schemes, it is tipped to appeal mainly to wealthy German buyers, due to its location in the city’s most exclusive residential area. Buyers are likely to be senior managers at the city’s banks and financial services firms, one source suggested.

RFR has a track record in Frankfurt. The firm, which owns New York’s Seagram Building, owned the European Central Bank’s Frankfurt offices until it sold them to IVG Immobilien last year. It also owns the WestendGate Marriott hotel in the city. The firm was founded by German-born Aby Rosen and Michael Fuchs.


Marieninsel, Frankfurt

Located among the skyscrapers of central Frankfurt’s banking district, the Marieninsel development promises to be another high-rise addition to the German city’s skyline.

The project is backed by New York-based fund manager Perella Weinberg Partners’ Real Estate Fund II. Its development partner is Pecan Developments, a firm founded by a team of former employees of German firm Hochtief.

The debt finance behind the project was arranged in March 2016. Two German banks – pbb Deutsche Pfandbriefbank and Deutsche Hypo – have committed to a €267 million financing. Pbb is lead manager and structurer for the facility and is acting as the facility and security agent.

The Perella Weinberg fund, which raised €1.3 billion of equity in 2013, acquired the options for the site from Hochtief last year. The site sits on Taunusanlage and Mainzer Landstrasse, not far from the distinctive Deutsche Bank twin towers.

The scheme contains 57,000 square metres of offices across two adjacent buildings. The largest, the Marienturm tower, will be 38 storeys, 155 metres high and offer 45,000 square metres of office space. The project also includes an adjoining 10-storey, 11,700 square metre building called Marienforum.

The smaller of the two elements, Marienforum, is scheduled to complete in early 2018. The larger tower will complete the year after.

Although it is being developed speculatively, Marieninsel is viewed as the next significant addition to Frankfurt’s office space, a market with continued strong demand from the banking and finance sector and hopes of capturing some areas of business from London as Brexit unfolds. The fact that the Perella Weinberg fund provided almost 50 percent of equity is also understood to have de-risked the project to a degree.

Speaking at the time, Charles Balch, pbb’s head of real estate finance for international clients, UK & CEE, said the bank had a long-standing relationship with PW Real Assets which advises the Perella Weinberg fund. “The Marieninsel development is an interesting project, located in Frankfurt’s city centre. It’s a high-quality office premises being built in an absolutely top location,” he said.


35 Hudson Yards, New York

Related Companies has secured about $14 billion in financing so far on its 28-acre Hudson Yards development on Manhattan’s far west side, about evenly split between debt and equity.

In July of this year, Related announced the $2 billion full capitalisation of 35 Hudson Yards, a 1.1 million square foot, 1,000 foot tall mixed-use tower, which is now under construction and set to open in 2019.

Its capitalisation includes $1.2 billion in debt financing led by The Children’s Investment Fund. The London-based hedge fund has gained a reputation as a one-stop-shop for writing large loans, as it has also done this year in London, on Marble Arch Place, and in 2015 had provided an $850 million construction loan on a residential tower at 15 Hudson Yards.

“We had such a great transaction with them on 15 [Hudson Yards], and the relationship was strong, so it was easy to roll right into 35 Hudson Yards,” says Related CEO Jeff Blau.

“It’s actually a great opportunity for someone like TCI to step in where the banks would historically have played,” he adds. “They’re able to charge a premium, not for taking more risk but just for providing large amounts of proceeds. We love that business; you get a premium because you’re able to write a big cheque, without doing anything that’s riskier.”

The property will contain office, residential, retail uses, and a 200-room Equinox branded luxury hotel. The 137 exclusive for-sale residences start at 500 feet in the air. It will also feature the Equinox global office headquarters, as well as a SoulCycle.

Previous debt (secured in 2015) on Hudson Yards included the recap of the 10 Hudson Yards building with a $1.2 billion securitised single-asset deal from Deutsche Bank and Goldman Sachs (Allianz was brought in and acquired a 44 percent stake in the building); and the closing of over $5 billion in bank debt financing led by Deutsche Bank for the flagship office tower at 30 Hudson Yards.


One Manhattan Square, New York

On completion in 2019, the One Manhattan Square property at 252 South Street in Manhattan’s Lower East Side neighbourhood is planned to rise 80 storeys and contain 815 residential condominium units with 100,000 square feet of amenity space, a 105-space parking garage and 45,000 square feet of retail space.

In September Gary Barnett’s Extell Development secured $500 million in construction financing for the development, which could reportedly grow to $750 million within the first nine months of the initial agreement.

Natixis Real Estate Capital, Deutsche Bank and Industrial & Commercial Bank of China co-led the financing, and CIT Bank and China Merchants Bank were additional members of the bank group.

RXR Realty was reported to be providing an additional $300 million mezzanine loan, which was said to have been reduced from an original $463.2 million agreement after delays in securing the construction loan.

Any delay that occurred in securing financing could arguably be attributed to reluctance on the part of lenders as the New York condo market – and residential market more generally – cools down after years of aggressive building.

Extell has served as a poster child for New York’s ‘supertall’ condo market. The developer is behind One57, a 75-story skyscraper at 157 West 57th Street, just south of Central Park, which opened in 2014. A number of other new residential supertall towers have followed, including CIM Group’s now complete 432 Park Avenue and Extell’s own Central Park Tower, which is also under development.

The residential condominium units at One Manhattan Square will offer views of Manhattan, the Brooklyn and Williamsburg Bridges and the East and Hudson Rivers.

The building will not be short on amenities either. It will include “a basketball court, bowling alley, squash court, golf simulator, bar/lounge, pool room, cigar room, wine room, theatre, spa lounge, sauna, lap pool, kid’s pool, dog wash, package/dry clean room, bicycle storage, refrigerated storage, fitness room and outdoor landscaped areas,” according to Natixis.


Park Tower at Transbay, San Francisco

The gleaming 605-foot, 43-story Park Tower at Transbay building rising in San Francisco, California will sit adjacent to the multibillion-dollar Transbay Transit Center.

Located at Howard and Beale streets, it will feature 743,000 square feet of office space, a three-story atrium lobby and 14 sky decks with outdoor space.

The building is just one component of the Transit Center, a $4.5 billion residential, commercial and transportation redevelopment project, which sits three blocks from San Francisco Bay.

For the financing of the tower, in January its developers tapped Wells Fargo for a $350 million construction loan. The lender placed a 10-year loan on the Park Tower at Transbay, which carries an estimated $700 million price tag, according to data from Real Capital Analytics.

The undertaking comes from Chicago development firms Golub Real Estate and The John Buck Company, who paid a reported $172.5 million for the site in September.

MetLife announced in October 2015 that it had formed a joint venture with the developers to build the 743,000 square foot, class A office tower, becoming the lead equity contributor and securing a majority interest, and the trio broke ground the following month.

The project, located at 250 Howard Street, will join two other major office developments – 181 Fremont and Salesforce Tower – in the Transbay District. The three towers are understood to be competing for tenants.

The joint venture is said to be directing its marketing efforts at attracting Silicon Valley technology tenants looking for easy access to the new Transit Center, with promises of amenities such as balconies with city views, an array of retail shops and the three-story atrium lobby.

The tower’s completion is expected for June 2018, as is the rest of Transbay Transit Center, which has more than 4,400 residential units, 200,000 square feet of retail and nine acres of parks are planned within the immediate vicinity.


Kent, New York

In May, Commercial Mortgage Alert reported that former New York governor-turned-developer Eliot Spitzer and his Spitzer Enterprises was in talks to secure more than $300 million in construction financing from Starwood Property Trust for a three-tower multi-family development in the Williamsburg neighbourhood of Brooklyn. Commercial Observer later reported in June that a $330 million, four-year, interest only loan had been secured.

The development at 416-420 Kent Avenue sits on a 2.8-acre waterfront site between South 8th and South 9th Streets on South Williamsburg’s waterfront and will feature 856 units, with 20 percent of those deemed “affordable”.

Collectively known as Kent, the buildings will range between 16-20 storeys and total 762,000 square feet, with 19,000 square feet of retail, a 400-car garage, fitness centres, swimming pools, hot tubs, a rooftop deck and communal garden.

The architectural style has garnered mixed reviews at best. A series of setbacks and cantilevers gives the structures a block-like, perhaps futuristic look.

“By using two standard floor plans – mirrors of each other – and flipping them in different directions around the central axis of each tower’s mass, we created three distinct, multidimensional facades, each filled with mid-floor ‘corner’ units,” ODA New York, the project’s design firm, stated in a press release.

Referring to its appearance, ODA founder Eran Chen assimilated the buildings to a “molded iceberg, sculpted to create the maximum number of views and outdoor spaces”.

The firm says that the property will overlook the Williamsburg Bridge and East River to the north and downtown Manhattan to the east, and that the properties were strategically designed to provide the best views.

According to CMA, Spitzer Enterprises began looking for construction financing around the beginning of the year and in February Bank of America took the lead at assembling a syndicated loan; but the effort fell apart after a woman alleged that Spitzer had assaulted her at the Plaza Hotel in Manhattan (though she would later drop the charges, claiming she’d made it up).


160 Leroy, New York

In February, The Children’s Investment Fund (TCI) provided a $265 million construction loan to developer Ian Schrager and a joint venture of three other companies on a 12-story condominium property overlooking the Hudson River on the western edge of Greenwich Village in Lower Manhattan.

“Just as Ian Schrager redefined Bond Street, he is now transforming the West Village waterfront with this latest venture,” says HFF’s Eric Anton, who helped broker the deal.

The property will reportedly consist of 56 condominium units, including eight penthouses. Originally, Schrager had reportedly planned for an $80 million master penthouse, until deciding to break the unit into two condos, which he told The Real Deal was more in line with “what people were asking for” – 7,700 square foot and 4,800 square foot apartments, with price tags of $48.5 million and $29.5 million, respectively.

Ian Schrager Company is co-developing the condominiums with Ares Management, Weinberg Properties, and William Gottlieb Real Estate, and it is due for completion in 2017.

As exemplified in the condo deal as well as its work on Hudson Yards, London-based hedge fund TCI has gained a reputation as a one-stop-shop for writing large loans. The fund provided $1.2 billion in debt financing on 35 Hudson Yards in 2016, as well as an $850 million construction loan on a residential tower at 15 Hudson Yards the previous year.

Significant concern has grown regarding overbuilding and supply-demand issues in the US condo market, particularly in gateway markets like New York.

However, Schrager seemed unfazed in an interview with Bloomberg: “If you have a really great product, it sells irrespective of the time on the market,” he said.

“Apple comes out with a product – it sells. People don’t even know they need a new iPhone or iPad. It still sells because it’s so well-executed and that’s what we’re trying to accomplish.”

The financing followed a $260 million construction loan for the West Hollywood Edition Hotel & Residences, which Schrager and a group of separate partners secured in late 2015. Cornerstone Real Estate Advisors provided that loan.


One Vanderbilt, New York

SL Green Realty spurred its One Vanderbilt office development – set to become the tallest building in Midtown Manhattan – this September by locking in a $1.5 billion financing from Wells Fargo, which was joined by Bank of New York Mellon, JPMorgan Chase, TD Bank, Bank of China, and LBBW.

The loan has a seven-year term and a 3.5 percent floating interest rate over Libor, with the ability to reduce that to 3 percent “upon achieving certain pre-leasing and completion milestones,” according to SL Green.

“The loan facility allows us to immediately proceed with site prep and foundation work, and it confirms a 2020 completion,” Steven Durels, EVP and director of leasing and real property at SL Green says. The developer expects the project to total $3 billion.

The 58-floor, 1.6 million square foot trophy tower will encompass an entire block adjacent to Grand Central Terminal, bounded by Madison and Vanderbilt Avenues as well as 42nd and 43rd Streets, in Midtown Manhattan. Standing at 1,401 feet, the building would rise roughly 150 feet taller than the Empire State Building. The tallest building in Midtown currently is the 1,397 feet residential building at 432 Park Avenue.

“Working in partnership with a ‘dream team’ that includes Hines, Kohn Pederson Fox (KPF), Gensler and Tishman, we are delivering to the world-class tenants a one-of-a-kind combination of premier office space, wide-ranging amenities and maximum efficiency in a location that is adjacent to New York City’s most central transit hub,” adds Durels.

One Vanderbilt will include direct connections to Grand Central Terminal, while SL Green will provide $220 million of upgrades to transit in the area as part of a previous agreement stemming from a lawsuit filed by the transit hub’s ownership group. The owners of nearby Grand Central Terminal, under the name Midtown TDR Ventures, filed a $1.605 billion suit in 2015 claiming that the city and SL Green illegally had deprived them of hundreds-of-millions of dollars in air rights.

Vertical construction will begin in the second quarter of 2017 and is expected to be completed in three years. TD Bank signed a 20-year, 200,000 square foot lease in 2014, making it the first office and retail anchor tenant in the project.


CNA Center, Chicago

Bank of the Ozarks gave a boost to the CNA Center, a soon-to-be 35-storey office development in the West Loop neighbourhood of Chicago, Illinois, this August with a $233.3 million construction loan to the project’s hometown developer John Buck Company.

The Chicago-based firm is already constructing the 807,000 square foot tower at 151 North Franklin Street, which will serve as the headquarters of CNA Insurance and the international law firm Hinshaw & Culbertson. So far, the developer has completed the steel structure on six floors and concrete core on 11 floors, while the building is on schedule to be completed in May 2018.

Justin Parr, VP at the company, said that the equity from the original close on the project site has funded the construction so far, and added that the firm does not plan to dip into the Bank of the Ozarks financing until next year.

CNA Insurance decided to relocate to 151 North Franklin because it was looking for something with less space to match its current needs after selling its former property at 333 South Wabash in Chicago. CNA and Hinshaw & Culbertson law firm both signed leases on the property in the first quarter of this year, making the building about 50 percent leased.

“Because this is a Class A building in the high-end of the spectrum in terms of rent, the building has attracted more traditional office tenants, including CNA Insurance and Hinshaw, while we anticipate another law firm and financial services firm to sign-on in the future,” says Parr.

The 151 North Franklin Street is the eighth high rise office tower in downtown Chicago the developer has completed. “So as far as a typical deal for us, this is the bullseye,” he adds. The John Buck Company has been around since 1981 and currently has offices in Chicago and San Francisco.


2202 8th Avenue, Seattle

Clise Properties announced in January that it had launched the construction of its massive $284 million, 40-storey luxury multifamily development between the South Lake Union and Denny Triangle neighbourhoods of Seattle, Washington.

Bank of Ozarks took the lead role in financing a senior construction loan with a floating rate, while EverWest Real Estate Partners in partnership with Diamond Realty, a division of Mitsubishi Corporation, provided an additional mezzanine loan with a fixed rate and four-year term. The lenders did not disclose loan amounts.

“The mezzanine financing marks the Japanese lender’s first significant investment in Seattle, demonstrating the strength of the market,” according to a statement from JLL, which arranged the financing through a team led by managing directors John Lo, John Manning, and EVP Alex Witt.

The 474,112 square foot building at 2202 8th Avenue will total 450 units with floor-to-ceiling windows, offering views of Elliott Bay and the Olympic and Cascade Mountain ranges. The property will also feature ground floor retail and office space on top of a 350-stall parking garage. It promises extensive amenities, including a full-floor rooftop deck, clubroom, game room and fitness centre. While residents take advantage of the on-site yoga and barre studio, canine occupants will have a dog spa on hand.

The Seattle-based architectural firm Graphite Design Group designed the layout of the building, which makes use of an elliptical shape to compliment the rotated street grids of the South Lake Union and Denny Triangle neighbourhoods, “while responding to the curved forms of its neighbouring properties,” according to the firm’s website.

Construction on the building began November 2015 and will continue until the middle of 2018, according to a permit filed with the city. Clise expects the building to open in July 2018.


Residences by Armani/Casa, Florida

Wells Fargo Bank led a group of lenders including Blackstone on a $305 million construction loan this July to an affiliate of Dezer Development and the Related Group for the high-end, beach-front multifamily Residences by Armani/Casa in Sunny Isles Beach, Florida, county records show.

Located along the Atlantic Ocean at 18975 Collins Avenue, the Residences by Armani/Casa project will be a 60-storey high rise on the ocean front with 260 residences with a starting price tag of $1.35 million up to $5.6 million, according to real estate agency Linda G Properties which is representing the property.

In keeping with the luxury offer of the scheme, the Armani Casa Interior Design Studio is designing the interior furnishings in its first such project in the US.

“Armani/Casa was born from my desire to see my design aesthetic at work in interior spaces,” legendary fashion designer Giorgio Armani – president and CEO of Armani Group – said in a statement when the project was announced in 2014.

The developers broke ground this March. The building will include housing units ranging from 1,350 square feet to 4,160 square feet, reportedly priced from $2 million to more than $15 million each. The Residences by Armani/Casa should be completed in 2018, according to the borrower.

The scheme was designed by the renowned architect César Pelli, who previously designed the World Financial Center in New York. The project will include over 35,000 square feet of amenities, including a pool, fitness centre, movie theatre, spa, a beach club, restaurant, a cigar room and a wine cellar. Swiss landscape architect Enzo Enea designed a three acre garden oasis for the building featuring sculptures by artists Sandro Chia and Boaz Vaadia.

Related and Dezer are also collaborating on another high-end development, the Hyde Midtown Suites & Residences, a 32-story mixed-use residential tower in the Midtown neighbourhood north of downtown Miami, located at the intersection of Midtown Boulevard and NE 34th Street.


Virgin Hotel, New York

Shanghai Commercial Bank’s New York branch provided a $222 million financing package this March on a Virgin Hotel development in the NoMad neighbourhood of Manhattan, a few blocks south of the Empire State Building.

The Chinese bank provided the loan to an affiliate of the LAM Group, the developer on the project. The package refinanced $57.3 million of existing debt that Cathay Bank provided to the developer in October 2014 and added additional mortgage debt in the form of a $54.8 million project loan and a $109.9 million building loan, according to city records.

LAM Group broke ground on construction at the 1205, 1225 and 1227 Broadway sites between 29th and 30th Streets this September. To commemorate the ground-breaking, Sir Richard Branson, founder of the Virgin Group, joined Raul Leal, company CEO, in person in order to bury a time capsule filled with Virgin-branded products and mementos on the development site.

The hotel is set to open in 2018, according to Virgin’s website. Development plans filed with the city’s Department of Buildings depict a 38-story tower with 400,000 square feet of floor space and 447 hotel rooms.

The real estate investment firm reportedly purchased three buildings at the development site for $88 million in 2011 and 2012. The city approved the buildings for demolition in 2013, which began the following year.

This development will be the Virgin Hotels company’s first hotel in New York City, though the hospitality firm has developments in Chicago, Dallas, Los Angeles, Washington DC, San Francisco, and Miami.

Founded by John Lam, the LAM Group has developed over 50 projects, with the majority of the firm’s hotels located in New York, including Aloft Brooklyn, Four Points by Sheraton Manhattan Chelsea and Fairfield Inn & Suites by Marriott New York Manhattan/Fifth Avenue.

The NoMad neighbourhood has attracted a number of hotel developments within the last several years. In 2009, the Ace Hotel opened on the corner of 29th Street and Broadway, and in 2010 the Gansevoort Hotel opened on Park Avenue South and 29th Street.

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