RFR to contribute new equity for $1bn Seagram Building extension

The New York-based manager received a one-year extension, with an additional 12-month extension option.

RFR Realty, the owner of New York’s iconic Seagram Building at 375 Park Avenue, will be contributing substantial additional equity as part of an extension on roughly $1 billion of maturing debt on New York’s Seagram Building.

The New York-based manager received a one-year extension, with an extra 12-month extension option. As part of the deal, RFR contributed $15 million of equity to the modification at closing and will contribute another $40 million to the deal over the next 24 months, according to a report from Trepp, citing May servicer data.

RFR turned to Deutsche Bank and Citibank to refinance maturing debt on the 830,000-square-foot, 38-story tower in 2013 and were able to take out a substantially higher mortgage based on the appreciation of the asset during its hold.

The loan was securitized in a pair of 2013 vintage commercial mortgage-backed securities deals, with part of the senior note and additional subordinated debt held in CGCMT 2013-375P. The remainder, roughly $209 million, was securitized in COMM 2013-CR8 and makes up 46.4 percent of the deal. There is also additional mezzanine debt.

Fitch fears

A report from Fitch Ratings raised concerns over CGCMT 2013-375P at the time of securitization. The agency, which was not hired to rate the deal, published an unsolicited opinion citing concerns over a roughly $20 million gap between the building’s actual and pro forma income. There would not be sufficient credit enhancement for the AAA tranches and this, in the agency’s opinion, meant the AAA tranche would not have received a rating higher than A.

“Fitch considers the building one of the most prestigious in New York city and believes the loan on the building is unlikely to incur losses even at full debt levels. That said, downgrade risk could be material in an environment similar to the recent recession with the realization of pro forma income almost impossible to predict,” the report stated.

Despite a slow office leasing market in New York, RFR has been signing leases at the property and, according to market participants which spoke to Real Estate Capital USA, this was a key reason why the firm was able to get a loan extension. The firm completed about 375,000 square feet of new leases at the building last year and in March signed a lease extension with existing tenant Temasek International, Singapore’s sovereign wealth fund. The building is now about 95 percent leased.

2000 – RFR Realty acquires New York’s Seagram Building for $380 million, or $540 per square foot

2013 – RFR refinances the building via $1 billion of new debt, with a valuation of about $943 per square foot

Feb 2023 – RFR hires Eastdil to line up $1 billion to refinance maturing loans

March 2023 – The building reaches 95 percent occupancy, with RFR signing 375,000 square feet of new leases in 2022

May 2023 – RFR receives a one-year extension on its maturing debt