Real Estate News | Commercial Real Estate
Historic Times Square Building Gets $267M Infusion for New Broadway Future
By Alex Finkelstein | December 23, 2009 1:28 PM ET
(NEW YORK, NY) -- The largely vacant Times Square Building, one of the best-known commercial sites in the world has been given a new lease on life.
The owners, Africa Israel and its subsidiary, AFI USA, have received new five-year refinancing totaling about $267 million and access to a revolving line of credit from Banco Inbursa SA.
Five Mile Capital Partners LLC of Stamford, CT is converting its existing debt to equity to become a 50 percent equity partner in the property.
The 25 story, 807,000-sf former headquarters of The New York Times at 229 W. 43rd St. (42nd and Broadway) has had no tenants above the retail floors since the current owners bought the building in 2007.
When it was built in 1905, it was the second tallest building in the world, according to Wikipedia. The building has had several owners since The Times sold the building in 1961.
The digital signs on the building are considered to be the most valuable in the world. They can often be rented by the day or by the hour for product launches or other special events. The rental rates can be as high as $10,000 per hour.
"We applaud the flexibility, creativity and determination of Inbursa, our other lenders and our new partner, Five Mile Capital, for working so hard with us to restructure the debt on the Times Square Building," says Richard A. Marin, Chairman and CEO of AFI USA.
Marin is the former chairman and CEO of Bear Stearns, a New York City-based global investment bank and securities trading and brokerage that collapsed in 2007 and was sold to JPMorgan Chase in 2008
"The renewed commitment of equity and involvement by our chairman Lev Leviev has made this all possible,," he says. "As a result, we are proud to unveil today new plans for the property that will allow us to create the most value and make the greatest contribution to the Times Square neighborhood."
AFI USA achieved the successful restructuring of the financing of the Times Square Building by settling the $236 million mezzanine debt with a group made up of BlackRock, CIT Lending Services Group, Five Mile Capital and Column Financial; securing a five-year extension of the senior debt; eliminating over $70 million in guarantees and transforming the entire project to being off-balance-sheet.
Jonathan Geanakos, Managing Director of Houlihan Lokey, advised AFI USA on the restructuring.
According to Marin, the financial restructuring of this property will result in a write-back of $370 million to the equity of AFI USA.
"This sets us on a course of renewal and success for our company, for our partners going forward, and for the Times Square Building," Marin says.
AFI USA's original plans after acquiring the building in 2007, called for the 365-foot tall building to offer 622,000 square feet of office space and 128,000 square feet of retail space.
The new plans call for an increase in retail space from 17% to over 38% of the total square footage.
In addition, AFI USA will sell or lease seven floors totaling approximately 330,000 square feet to a hotel operator for a high-end hotel property; and redevelop the remaining four top floors into a select number of luxury condominium penthouse residences.
The Times Square Building will offer exclusive landmarked signage opportunities.
"We believe in this project and are confident that the new leadership of AFI USA will bring the project to a successful completion," says James G. Glasgow Jr., , a Partner of Five Mile Capital. "We are glad to be a partner in a redevelopment that offers so much unique value, even in a challenging real estate market."
Glasgow says the new Times Square Building will meet the needs of Times Square's most ardent users: the over 37.6 million tourists who visit each year.
The property's location - just 500 feet from where the ball drops each New Year's Eve and across from Broadway's Schubert Alley - makes it attractive to many restaurateurs and retailers, Glasgow says.
This, in combination with its unique architectural features - historic façade, high-ceilings, and oversized windows - and access from 43rd and 44th Streets, makes it an ideal hotel asset, he adds.
Marin says the retail space at the Times Square Building is already 55-percent leased in two deals totaling 134,000 square feet.
The first deal, with Discovery Times Square Exhibitions, occupies the sub-lower, lower and ground floors, and houses traveling exhibitions such as Titanic, the Artifact Exhibition and King Tut.
The second transaction, with the operator of Bowlmor Lanes, will offer bowling, entertainment and seven separate dining/bowling areas (fashioned after iconic New York neighborhoods) on floors three and four.
AFI USA's plans call for the hotel to occupy floors five through 11 of the property.
The sky lobby, with double-height ceilings and arched windows, will be reached from its own entrance and elevator bank.
In addition to the 397 oversized hotel rooms, the property can deliver a spa, gym (complete with pool), restaurant and other amenities.
Marin says AFI USA will sell or lease this space to a hotel operator, and is currently in negotiations with a number of interested parties.
The final portion of the repurposing of the Times Square Building is the redevelopment of floors 12 through 16 into approximately 26 luxury condominium residences, and the marketing of the property's grandfathered rooftop signage rights.