NEW YORK CITY-A loan secured by a prominent office tower in Midtown’s Grand Central submarket has been transferred into special servicing shortly before a high-profile real estate owner/manager is expected to acquire the building. According to Fitch Ratings, the $310 million loan on 450 Lexington Ave., part of Credit Suisse Commercial Mortgage Trust Series 2007-C5, was passed off to C-III Asset Management LLC due to maturity default after passing its July 17 maturity date.
The transfer now paves the way for RXR Realty to snatch up the 40-story, 910,000-square-foot class A office building from Istithmar Building FZE after published reports showed that the company has been actively eyeing the property. After the loan matured on July 11, sources close to the deal say RXR is expecting to close on the deal next month and only the special servicer can make any decisions of this nature for the CMBS trust.
Britt Johnson, senior director at Fitch tells GlobeSt.com in an e-mail that if the contract closes and the loan pays off, it will take care of the default. But until that time, the five-year, interest-only loan is considered in default and will remain with the special servicer.
The property – located between East 44th and 45th Streets just east of Grand Central Terminal – was built in 1992 as the corporate headquarters for the largest tenant, Davis Polk & Wardwell. According to a performance report from Fitch, the loan, sponsored by Istithmar, was originally purchased for $600 million in June 2006. Following that, a 2007 refinancing represented a full cash-out by the sponsor, and a $200 million pari passu note is held outside the trust, along with the $290 million mezzanine debt.
According to the report, property cash flow is expected to remain stable at the building. Fitch says less than 3% of the net rentable area rolls during the remaining term, and less than 10% of the NRA rolls over the next four years. The property’s two largest tenants, comprising 85% of the NRA, operate on long-term leases through 2022 and 2024, respectively.
Overall, vacancy for Grand Central submarket offices was 10.8% as of Q4 2011, compared with 10.5% for the New York market, according to Reis data. In addition, average asking rents were approximately $63 per square foot in the submarket, which is in line with in-place rents for the property.
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