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STARRY-EYED REDEVELOPMENT

New York

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STARRY-EYED REDEVELOPMENT
161 Ave of the Americas on May 16, 2012
Starwood Capital Group affiliate Starwood Property Trust threw $408M in loans at Class-B office properties a week ago, starting with $170M for the two-building One SoHo Square at Manhattan's Spring and Sixth and then $238M for six DC-area office properties. Starwood Property prez Boyd Fellows and chief credit officer Chris Tokarski tell us the SoHo deal is a monumentally rare opportunity to create "new space" in a 98%-occupied submarket.
233 Spring St on May 16, 2012
Boyd described the deal for us: Stellar Management's Larry Gluck acquired the pair of properties—161 Ave of the Americas (two photos up, which we snapped last night) and 233 Spring St (above). He'll essentially add 100k SF of usable space to the 650k SF property. He'll move 10 Spring St loading docks (this was an industrial area once upon a time) to the back, creating retail frontage as the hopping SoHo retail submarket expands west. The six elevator banks will move to one central location. And a two-story office penthouse will stack on top of the existing building. (To quote the A-Team: We love it when a plan comes together.)
233 Spring St and 161 Ave of the Americas on May 16, 2012
New Yorkers know how to make the most of small spaces. This mini-gap between the two buildings is just the right size for a few centralized elevators. Boyd and Chris say all the work Stellar has planned can be done with tenants in place (it's 96% occupied now), and Boyd suspects tenants will pay the increased Class-A rent as leases roll over. Still, the mortgage loan includes $35M available as needed to cover interruptions to the property's cash flow, TIs, and leasing commissions as tenants depart. The floating-rate, 65% LTV loan matures in three years, with two one-year extension options.