July 2, 2009

Financing a go for Bank of America tower in New York

NEW YORK

Developers of one of the city’s tallest new skyscrapers says they have lined up a nearly US$1.3 billion loan, sealing what experts called one of the biggest real estate financing deals since the economic crisis began last fall.

Coming amid the worst commercial real estate market in decades, the refinancing package for the Bank of America tower drew congratulations from Mayor Michael Bloomberg and Gov. David Paterson. Real estate experts hailed the deal as a sign that the moribund market might be reviving.

“When you have a transaction that has this many zeroes after it, people take notice,” said Dennis M. Sughrue, a real estate attorney with Herrick, Feinstein LLP, which wasn’t involved in the deal. “It’s a singular building and a singular transaction, but it is a note of hope for a real estate market which is flat on its back.”

The 945-foot-tall tower in midtown Manhattan is partially occupied and is set to be finished next year. The glass-covered skyscraper boasts a prominent location off Bryant Park and a roster of green features that drew Al Gore’s environmentally friendly investment firm.

The building’s developer, The Durst Organization, says 98 percent of it has been leased — about 80 per cent to Bank of America Corp.

Despite those attributes, it took about nine months to line up the new financing, Durst spokesman Jordan Barowitz said. The money will pay off a construction loan that came due last month and finance the remaining work, among other things, he said.

The refinancing lag didn’t affect construction of the 55-floor building, formally known as 1 Bryant Park, he said.

To real estate watchers, lenders’ reluctance to refinance the project symbolized how paralyzed the market had become.

“This is the kind of deal that would be done in a week at the height of the market,” said Dan Fasulo, a managing director at Real Capital Analytics, a real estate research and consulting firm that wasn’t involved in the deal.

Since the economy soured, some building owners around the country have fallen behind on mortgage payments after tenants left or went out of business.

Unable to refinance, some owners have sold marquee skyscrapers at cut-rate auctions. Boston’s tallest skyscraper, the John Hancock Tower, sold at auction in March for just over US$20 million, with the buyers agreeing to take on US$640 million in debt.

About half the new loan for the Bank of America tower comes from the bank itself, Barowitz said.

The project’s original financing included $650 million in tax-exempt bonds intended to help spur construction in lower Manhattan after the Sept. 11 terrorist attacks on the World Trade Center.

Construction began in 2004 and has involved a number of accidents. In October 2007, a crane’s bucket toppled off the building and broke windows; eight people were slightly hurt as glass rained down.

Associated Press

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