Rithm Capital Chips In $73M To Refinance Midtown Office Loan
Rithm Capital Corp. is coughing up a pretty penny to refinance another substantial mortgage it inherited when it acquired Paramount Group last year.
Rithm has lined up a $415M CMBS loan, plus $85M of mezzanine debt, for the 29-story skyscraper at 31 W. 52nd St., which it assumed ownership of when it bought the New York City office REIT in December for $1.6B.
Elecor Properties, Rithm's rebranded office subsidiary, kicked in $72.5M of equity to cinch the new financing for the Midtown tower, which comes with a fixed 6.85% interest rate and matures in December 2029, according to a Fitch Ratings report.
Wells Fargo Bank, Bank of America, Barclays, Citi Real Estate Funding and Goldman Sachs Bank originated the tower’s new mortgage, which replaces a $500M loan.
Rithm plans to set aside a $42.9M reserve to cover leasing commissions and property improvements to land new tenants and keep existing ones at 31 W. 52nd St.
The transaction is expected to close on July 15, according to Fitch Ratings, which first disclosed the financing. Rithm didn't immediately respond to a request for comment.
The building is 86.5% leased, according to Fitch, after Cushman & Wakefield inked a 134K SF deal in the tower last summer.
But around 41% of the building’s leases are set to expire in 2030, accounting for $19.2M of its base rent. On average, tenants are paying $81 per SF for their spaces, but Class-A building rents are on the rise in Manhattan, and asking rent in the surrounding area is roughly $108 per SF, according to Fitch.
Among those 2030 expirations are the leases of law firm Pillsbury Winthrop Shaw Pittman and financial planner Centerview Partners. Both tenants have five-year extension options. They are the building’s third- and fourth-largest tenants, respectively, and together they make up almost 34% of its rent roll.
The building’s Plaza District location, combined with its quality, likely spells good news for its owner, according to Fitch’s analysis.
“The broader slowdown in Manhattan office development has reduced competitive supply pressure, particularly at the top end of the market,” Fitch analysts wrote. “This dynamic has supported occupancy and rent levels for trophy and class A assets, as tenants continue to favor high-quality buildings in established core locations.”
The refinancing is the second major transaction for Rithm since the Paramount acquisition, following its $283M refinancing of 1325 Sixth Ave. in April. It comes amid an acceleration in Manhattan's office recovery from the pandemic — 22.8M SF of leases were signed in the first six months of the year, the most in a first half since 2002, according to Colliers.
