Developer willing to pay $26m penalty in the face of looming interest rate hikes
JP Morgan Chase Bank and Deutsche Bank’s German American Capital Corporation have provided the Rudin Organization with a $425m loan to refinance 32 Sixth Avenue in Lower Manhattan.
The New York City-based real estate development firm, headed by Bill Rudin, opted to take out a previous securitized loan with more than $26m in prepayment penalty fees, demonstrating apprehension among some owners in anticipation of Federal interest rate hikes.
“There is uncertainty about what the market will look like in the future, so borrowers want to take advantage of the rates they can get now,” said Sean Barrie, a research associate with data and research firm Trepp.
The new 10-year securitized loan replaces a previous $360m (10-year) vintage loan from 2007 — split between two A-note pieces, a $320m note that comprised 13.8% of BSCMS 2007-PW16 and a $40m piece that made up 1.74% of BSCMS 2007-PW17 — that had been set to mature in April of 2017, according to Trepp data. There was a $23.2m prepayment fee on the larger piece and a $3m fee on the second note.
“We liked where the interest-rate market is today and thought this was an opportune time to refinance on a long-term basis,” Rudin told Crain’s. “In two years from now, we think rates will be significantly higher than where they are now.”
Formerly owned by AT&T and built by the firm to serve as its headquarters, the 27-story, 1.2m sq ft office tower has been marketed predominantly for telecommunications and technology firms since the billionaire Rudin family purchased it in 1999.
The building had a 95% occupancy rate and a DSCR of 1.59x as of December 2014, according to Trepp, but AT&T’s 215,324 sq ft lease expired in 2010. Remaining tenants include Centurylink Communications and AMFM Operating Inc.