JPMorgan Selling $350M Loan for HSBC Tower

JPMorgan Chase is shopping a $350M backed by the HSBC Tower at 452 Fifth Avenue, offering financing with cheaper-than-market rates to the potential buyer.

A year ago, JPMorgan refinanced the debt on the office tower, which is owned by Israel-based Property & Building Corp. The loan matures in 2024, with potential extension, according a report in Bloomberg.

The report said the 30-story, 865K SF Midtown tower has struggled in the past year, with its anchor, HSBC Bank announcing plans to downsize its office footprint and move its HQ from 452 Fifth Avenue to a space on the far west side of Manhattan in Q1 2024.

HSBC has attempted to sell the tower twice since 2021, with each effort collapsing. Innovo Property Group agreed to buy the tower for $855M in Q4 2021 but couldn’t secure equity to close the deal, according to reports cited by Bloomberg.

According to filings, a second potential deal to sell the Fifth Avenue tower failed to close. The value of the tower dropped to $720M in September 2022, after the refinancing from JPMorgan.

Several banks are moving to limit their exposure to office real estate as risks and borrowing costs increase while hybrid work remains the dominant pattern.

Last month, US banking regulators publicly asked lenders to work with credit-worthy borrowers that are facing stress in the CRE market.

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp, the National Credit Union Administration and the Office of the Comptroller of the Currency jointly issued an update of the guidance on commercial real estate loan workouts it issued in 2009, immediately after the GFC.

The joint statement said financial institutions should work “prudently and constructively” with good borrowers during times of financial stress.

The new guidance contains short-term loan accommodations that includes an agreement to defer one or more payments, make a partial payment, or provide other assistance or relief to a borrower, Reuters reported.

According to a Citigroup analysis, banks represent 54% of the overall $5.7T commercial real estate market, with small lenders holding 70% of CRE loans. Trepp has estimated that more than $1.4T in CRE-backed loans will mature by 2027, with about $270B coming due this year.

More than $16B in CMBS loans are coming due for New York City building owners this year, a 30% increase over last year’s $12.7B in mortgage-backed loan maturities, according to Trepp. A significant part of the increase in loan maturities is due to owners who opted for one-year loan extensions last year.