NEW YORK CITY-Last week's news of the Times Square Gateway Center and the country's largest LED sign was all the rage in the city's real estate circles. And now, the company responsible for acquisition and construction financining on the project is already bringing in new partners.
Greenwich, CT-based Starwood Property Trust and Starwood Capital Group has sold a 25% stake in both the first mortgage and mezzanine loans at 701 Seventh Ave. to Vornado Realty Trust, according to a company statement.
On Oct. 16, Starwood co-orginated a $475 million first mortgage and mezzanine financing for the acquisition and redevelopment of a 10-story retail building located in Times Square. At closing, $375 million was funded at closing and $100 million will be funded upon reaching certain milestones during the transformation.
STWD, Starwood Distressed Opportunity Fund IX, and VNO have now funded $210.9 million, $70.3 million and $93.8 million, respectively, and each party will fund their pro rata share of any future fundings. Following the sale to Vornado, the Starwood entities retained the controlling position in both the first mortgage and mezzanine loans.
The lenders intend to sell the first mortgage in the near term to increase their investment returns and retain the mezzanine loan. Following the completion of the sale, the existing lenders expect that the mezzanine loan will generate an IRR in excess of 14% before attributing value to the equity participation received in the transaction which could be material, according to Starwood.
A joint venture partnership of New Valley, Winthrop Realty Trust, Maefield Development and Infinity Urban Century are developing the $800 million, 0.4-acre site, which upon completion, will include hotel and retail uses, as well as a 24,000-square-foot LED screen facing Times Square.
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