The former office building is being converted in two phases into a "lollipop building", according to Weiss. The top twelve floors of office space are being converted into residential luxury condominium apartments, renaming the building 15 Madison Square North. The bottom eight floors have remained fully-leased office space, containing multinational tenants, El-Al Airlines, Bertelsmann, Dewberry-Goodkind and Associated Textile. The property is also leasing 8,000 sf of retail space on the ground floor to Tony May's restaurant, formerly named San Domenico, which is relocating from Central Park South and redubbing itself SD26 in 2009.
"On the residential portion, we're 85% sold," Weiss explains to GlobeSt.com. "Construction was done in phases. We sold out the first phase and the second phase should be done by the end of the year." Weiss predicts all the remaining units will be sold by then. The project was broken-up into these phases to adjust to the nature of the beast.
"It was a function of the acquisition of the commercial floors," Weiss expounds. As certain floors became available, through expiring leases, the space was built out. The condominiums are aimed at a high-end clientele and, Weiss says, it's a plan that has worked so far. It is the high-end nature of the condos, he explains, that helped secure the single-entity refinancing.
"[It was] the uniqueness of [the loan]," Weiss enumerates. "Since this was a phased construction, your typical construction loan, is 90% and goes down to pay the loan. But [the group] argued, successfully, that since we had so many contracts in hand that we'd be able to use some of the proceeds, of the units we were closing, to then fund the last phases of construction on the remaining units. So we have what we call 'leakage' of a substantial nature, roughly 20%. As we close units, we pay down our sales costs, the broker, but we take rougly 20% of the proceeds and put it back into the principle of the loan to go do the remaining construction."
The credit crisis is causing banks to remain cautious in their lending practices, making any refinancing hard, but the odd nature of the building and its location, seemed to work in the development's favor. "It was a great loan in a difficult market," Weiss explains. "Given that we had $200 million in contracts signed, and yet, there were no lenders in sight for condominium projects. These are all contracts not subject to financing of the residential unit buyers. Cash only." The buyers were vetted, but still the lending market seemed weary, according to Weiss. "Wells was one of the few lenders willing to step up, even though you had the contracts in hand," he remarks. "Which is kind of a fright to the environment today."
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