ADIA, Vornado tap CMBS for cashout refi of Manhattan skyscraper

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The Abu Dhabi Investment Authority and Vornado Realty are tapping the commercial mortgage bond market for a cashout refinancing of a skyscraper in Midtown Manhattan.

The 39-story, Class A office building is located at the corner of Madison Avenue and 42 Street, just one block east of Grand Central Station.

The owner, a joint venture between Chadison (a subsidiary of ADIA) and Vornado, has owned the property in one respect or another since 1979. It has obtained a $500 million loan from Wells Fargo that is being used to refinance existing debt of $150 million a pay out $330.7 million equity distribution, according to rating agency presale reports.

While that is a sizeable sum, the borrower still has significant equity in the property CBRE puts the as-is value at $950 million, using a 4.5% cap rate. Moreover, DBRS takes comfort from the fact that the owners spent $121 million renovating the property just three years ago, in 2014, suggesting a long-term commitment.

DBRS’ valuation of $538.4 million is 43.3% discount to the appraiser’s value and is based on a 7.25% cap rate. This results in a loan-to-value ratio of 92.9%, which the rating agency characterizes as “higher leverage financing.”

The mortgage, which pays only interest, and no principal, for its entire seven-year term, is being securitized in a transaction dubbed MAD Mortgage Trust 2017-330M. DBRS expects to assign an AAA to the senior tranches of notes.

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