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Iconic New York, D.C. Buildings Dominate May's CMBS Issuances

Monthly CMBS issuances were up in May, signaling a warming in the market to new risk retention rules that require lenders to keep more money on the books when issuing loans.

Olympic Tower on Fifth Avenue in Manhattan

There were 135 CMBS loans totaling $5.2B issued in May, according to recent Trepp data, backed by several iconic office towers in the New York City and Washington, D.C., markets. This is a marked increase from the $3.3B worth of securities issued in April.

“I think [there’s been] a gradual warming up to risk retention rules. In May new deals came to market with really favorable spreads that made investors say, 'This is quality stuff,’” Trepp analyst Sean Barrie said. “Investors are accepting that this is not the harbinger of doom ... and people are willing to eat their own cooking. That’s helped smooth things through the pipeline.”

New York, D.C. Towers Dominate Issuances

Lafayette Centre, MedStar Health in Washington, D.C.

Among the largest securities issued in May was for the iconic 50-year-old 245 Park Ave. building in Manhattan. China’s HNA Group acquired the 45-story building during Q1 for $2.2B — marking one of the largest single-asset acquisitions in commercial real estate history. Brookfield Property Partners put the skyscraper on the market in early January, and the pricetag worked itself out to about $1,227/SF for the 1.8M SF. The 121-month loan closed May 30 for $500M. 

This was one of several New York properties that accounted for the top 10 CMBS loans issued in May. Crown Acquisitions secured more than $1B in financing from a collection of some of the biggest lenders in the world for Olympic Tower, its Fifth Avenue trophy property. Crown locked down two loans worth a combined $1.27B from Goldman Sachs, Deutsche Bank and Morgan Stanley for 641 Fifth Ave. and a collection of smaller properties, including 10 and 2 East 52nd St.

In addition, New York’s Lipstick Building closed on a $272M, 121-month loan on May 17. New York’s Ceruizzi Holdings secured the loan to purchase the building at 885 Third Ave. from Zurich-based Credit Suisse AG. 

Securities for Washington, D.C.’s Lafayette Centre also topped the list of issuances in May. The office building at 575 Seventh St. NW was recently acquired by Singapore’s sovereign wealth fund, GIC, along with two other properties owned by Beacon Capital partners. The fund entered a joint venture with Beacon to invest $1.05B in the three assets totaling more than 2M SF. This loan in particular was secured on May 31 for roughly $80.3M.