Brookfield Asset Management is tapping the securitization market to refinance still more buildings that it acquired through its purchase of Forest City Realty Trust. This time, it is two Class A office buildings totaling 1.1 million square feet in MetroTech Center, an academic-industrial research park in Brooklyn, New York.
Brookfield obtained $230 million of loans — a $200 million first mortgage and a $30 million mezzanine loan — from four banks: Citigroup, Barclays, Bank of America and Deutsche Bank. The first mortgage, which has an initial term of two years and allows for three one-year extension options, is being used as collateral for a mortgage bond offering called MTRO 2019-TECH, according to Morningstar Credit Ratings. The loan bears interest at a weighted average mortgage loan component spread of about 1.725% spread over one-month Libor. There is a Libor cap of 4.00% to protect against interest-rate increases.
The mezzanine loan has been sold to MetroTech Mezz LLC, an entity managed byPropCap Advisors, an investment manager based in Los Angeles. It has a spread of 5.75% over one-month Libor. There is also a Libor cap of 4.00% with the mezzanine loan.
The mortgage loan is backed by the borrower’s leasehold interest in the office properties, which are subject to two ground leases, one that runs through 2087 for One MetroTech Center and the other through 2092 for Eleven MetroTech Center. The borrower pays ground rent and site acquisition costs to New York City. The ground rent and SAC payments are fixed through year eight (2026) with respect to One Metro Tech, and through year 12 (2030) with respect to Eleven Metro Tech. After the 12th year, the payments begin to increase.
The collateral is 98.2% occupied by 26 tenants across 50 leased spaces as of Dec. 1, 2018.
Prominent tenants are JPMorgan Chase, National Grid, New York University and several New York City agencies, including the Department of Information Technology & Communications and the Emergency 911 facility. Much of the space is subject to long-term leases with an average remaining term of 8.2 years, which is about 3.2 years beyond the five-year loan term.
Citigroup will retain a stake in the transaction in order to comply with risk retention requirements.
