Saks Fifth Ave. flagship store in midtown Manhattan takes up the entire blockfront on Fifth Avenue, between 49th and 50th streets

Hudson’s Bay Co. of Toronto, the owner of the Saks Fifth Avenue chain, plans to securitize a $1.25 billion loan secured by the ground beneath the retailer's 611 Fifth Ave.,650,000-square-foot flagship store in midtown Manhattan.

The 20-year mortgage loan is based on an independent appraiser’s assessment of the property’s value at $3.7 billion. In 2013 Hudson's acquired the entre chain for $2.9 billion. The loan pays only interest for its entire 20-year term and was underwritten by Bank of America, N.A., Morgan Stanley Bank, N.A., Goldman Sachs Mortgage Co. and Bank of Nova Scotia, in December last year.

Standard & Poor’s is rating the deal, called SFAVE 2015-FAVE. The trust will offer $556 million of ‘AAA’ rated class A1 notes with credit enhancement at 25.5%; $150 million of class A2-A notes with credit enhancement at 70.2%; $225 million of ‘AAA’ rated class A-2B notes with credit enhancement at 25.5%.

At the junior level, the trust will offer $107 million of ‘AA- rated class B notes with credit enhancement at 16.9%; $135 million of ‘A- rated class C notes with credit enhancement at 6.1%a and ’BBB’ rated class D notes.

Although the Saks Fifth Avenue is not collateral for the loan ( only the land and the lease on the land secure the loan), S&P still considered the income-generating capability of the building in its rating. That is becasue the building genrates the income from which the ground lease is paid; which in trun pays the loan, that pays the bonds. 

Hudson’s Bay plans to begin a $250 million renovation on the flagship location this year.

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