(Bloomberg) -- The owners of Rockefeller Center, the site of New York City's iconic Christmas tree and Radio City Music Hall, are refinancing the office and retail space with one of the largest commercial mortgage bonds in the last decade.
Affiliates of real estate company Tishman Speyer and investment firm Henry Crown & Co. are selling $3.4 billion of commercial mortgage-backed securities in a deal that's expected to price Thursday, according to a source familiar with the matter.
Once completed, this bond sale would rank in the top five of single-asset, single-borrower CMBS deals sold since 2014 and the biggest since 2021, when a bond backed by a mortgage on 560 hotel properties associated with Extended Stay America sold for $4.65 billion. SASB deals are commercial mortgage bonds typically tied to a single mortgage, borrower or property, as opposed to a vast portfolio of real estate loans from different owners.
Representatives for Wells Fargo & Co. and Bank of America Corp., lead managers on the sale, declined to comment. Tishman Speyer declined to comment. Messages left for Henry Crown employees weren't immediately returned.
Investors are broadly buying CMBS at a frantic pace, with sales of the bonds this year running more than 160% higher than last, according to data compiled by Bloomberg News.
That's partly because the market virtually shut down at the start of 2023, with investors worried about ripple effects from a crisis in office real estate. This year, pain in office buildings triggered the first loss on a top-rated tranche since the financial crisis, for a SASB bond backed by 1740 Broadway, an office building in midtown Manhattan, Bloomberg reported.
Investors' concerns now tend to center on specific properties, but money managers will still buy bonds tied to buildings seen as top notch, such as Rockefeller Center, people with knowledge of this CMBS offering said. The deal has attracted more orders than the amount set to be borrowed, they added.
"The commercial mortgage bond market is divided into two worlds right now," said Anuj Jain, CMBS strategist at Barclays Plc. "There are the older office deals that are struggling, and then there are the newer office deals. And the fact that some large ones are getting done is a sign that this part of the market is healthy."
The bond sale will refinance $3 billion in existing debt, and fund around $247 million of reserves while returning $180 million to Tishman Speyer and Henry Crown, according to a pre-sale report from Kroll Bond Rating Agency.
Rockefeller Center, which includes more than a dozen commercial buildings, is considered one of New York City's top attractions. It's home to Radio City Music Hall, NBC Studios and the Rainbow Room, as well as an ice rink, an observation deck and more than 400 office and retail tenants, Kroll said.
A majority of the property was used to secure a $1.7 billion securitization in a 2005 deal that never reported being delinquent, Kroll added.
The space is leased to tenants "who operate across a wide array of industries, including accounting, legal, finance, media, entertainment, real estate, auction house, publishing and hospitality," Kroll said. The Rockefeller Center is the US headquarters for tenants including Deloitte, Lazard Inc., Simon & Schuster, NBC and Tishman Speyer, according to Kroll.
--With assistance from Charles Williams.
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