Blackstone Group Real Estate Partners is benefiting from another cash-out, commercial-mortgage refinancing in a $382 million securitization involving its Market Center twin office-tower complex in San Francisco.
The deal, BX 2018-MCSF, is backed by a portion of a $424 million, interest-only loan originated by Morgan Stanley and Wells Fargo that was used to retire $394.4 million in existing debt on the prior mortgage and fund $16.3 million in equity to funds controlled by Blackstone. Remaining funds will be used as reserves for improvements, leasing commissions and free-rent obligations.
The mortgage is for 555 and 575 Market Street, a Class A office property in San Francisco’s South Financial District built originally in 1964 as a single, 22-story office building (with the 40-story second tower added in 1975). The major tenants of the building, formerly known as the Chevron Towers, are the ride-sharing and food-delivery service Uber (the largest tenant occupying 235,955 square feet); the workspace-sharing firm Mindspace; the accounting firm Crowe Horwath; and TIBCO Software.
As of January the 787,686-square-foot property was 91.3% leased.
In the transaction, the trust will issue six classes of principal and interest bonds, including a $172.5 million Class A notes tranche that Kroll Bond Rating Agency expects to rate AAA.
The remainder of the capital stack includes AA-rated Class B notes totaling $32 million; $21.5 million in A+-rated Class C notes; $34 million in Class D notes with a BBB rating; $52 million in Class E notes with a BB rating; a $50.9 million Class F tranche rated B; and a $19.1 million subordinate certificate class rated B-. The subordinate notes are to be maintained for compliance with U.S. risk-retention rules.
The deal will also include two tranches of interest-only certificates.
Blackstone originally acquired the property in 2016 for nearly $490 million.
Blackstone has most recently sponsored single-borrower transactions to cash out equity on a $1.4 billion loan backed by medical office properties and its portfolio of Club Quarters-branded hotels.