Real Estate News | Commercial Real Estate
Jinxed Bank of America Tower in NYC Lines Up $1.3B Loan to Finish Construction
By Alex Finkelstein | June 29, 2009 9:00 AM ET
(NEW YORK CITY, NY) -- New York City Mayor Michael Bloomberg is calling it the biggest commercial real estate financing package created since the Recession kicked in 20 months ago.
Five banks have put together a $1.3 billion loan for The Durst Organization, the developer of the 55-story, 945-foot tall Bank of America Tower.
Terms of the deal were not immediately disclosed. The deal took nine months to complete.
The loan will allow Durst to complete construction of the Midtown skyscraper which began in 2004 and has been sidelined with several construction-related incidents over the last five years.
Mayor Michael Bloomberg and Gov. David Paterson hailed the deal as a sign the lagging real estate financing market might be reviving.
"When you have a transaction that has this many zeroes after it, people take notice," says Dennis M. Sughrue, a real estate attorney with Herrick, Feinstein LLP, which wasn't involved in the deal.
"It's a singular building and a singular transaction, but it is a note of hope for a real estate market which is flat on its back," Sughrue told the Associated Press.
The tower, prominently located off Bryant Park, was formerly known as 1 Bryant Park. The building is scheduled to be finished next year.
The Durst Organization says 98 percent of the tower has been leased, about 80 percent to Bank of America Corp. which is financing about half of the $1.3 billion loan package.
Durst spokesman Jordan Barowitz says the loan money will pay off a construction loan that came due last month, and finance the remaining work which has proceeded on schedule.
"This is the kind of deal that would be done in a week at the height of the market," says Dan Fasulo, a managing director at Real Capital Analytics, a real estate research and consulting firm that wasn't involved in the deal.
The AP reports that since the economy soured, some building owners around the country have fallen behind on mortgage payments after tenants left or went out of business.
Unable to refinance, some owners have sold marquee skyscrapers at cut-rate auctions. Boston's tallest skyscraper, the John Hancock Tower, sold at auction in March for just over $20 million, with the buyers agreeing to take on $640 million in debt.
The project's original financing included $650 million in tax-exempt bonds intended to help spur construction in lower Manhattan after the Sept. 11, 2001 terrorist attacks on the World Trade Center.
Construction began in 2004 and has involved a number of accidents. In October 2007, a crane's bucket toppled off the building and broke windows; eight people were slightly hurt as glass rained down.
Last August, a 1,500-pound glass panel fell 51 stories off the building and shattered on a walkway, leaving two people with minor injuries.
Another panel plunged off the tower the next month, but no one was hurt. In November, a worker was seriously hurt after falling almost 40 feet when a scaffold collapsed.