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Next single-asset CMBS backed by 375 Hudson Street

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Another Manhattan skyscraper is being financed in the commercial mortgage bond market.

This time it’s 375 Hudson Street, a 19-story Class A building with LEED Gold certification and a concentrated tenant roster. Saatchi & Saatchi, the largest tenant, leases 63.7% of the total net rentable area and contributes 64.3% of the total base rent, as measured by DBRS; its lease expires in January 2023. Penguin Random House, the second largest tenant, occupies 27.4% of the total net rentable area and contributes 33.4% of the total base rent, with a lease expiring in March 2025.

The building’s owners, a joint venture between Trinity Real Estate (51%), Norges Bank Estate Management, a sovereign wealth fund (48%), and Hines (1%), obtained a $400 million loan from Goldman Sachs. Proceeds, together with $473.4 million of equity, will finance the purchase price of $865 million and pay closing costs.

Goldman is using the loan as collateral for a deal dubbed GS Mortgage Securities Corporation Trust 2017-375H. DBRS expects to assign an AAA to the senior tranche of notes to be issued, which benefit from 36.916% credit enhancement.

Cushman & Wakefield has determined the value of the collateral leasehold interest to be $1.05 billion, or $964 per square foot; however DBRS puts the value substantially lower, at $501.68 million, or $460 per square foot. This results in a loan-to-value ratio of 79.7%.

Although Norges and Hines are new to the ownership structure, Trinity has in one way or another owned the land and fee interest in the property since long before the subject was built in 1987.

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