After loan default, Vornado, Crown restructure debt at St. Regis retail down to $355M

Vornado Realty Trust, Crown Acquisitions and Qatar Investment Authority, through the entity 697 Fifth/2 East 55th Street TIC A Titleholder LLC as borrower, signed a loan refinance with lender Credit Agricole through the entity Credit Agricole Corporate And Investment Bank valued at $355 million for two properties including the retail condo at 2 East 55th Street and the mixed-use building (K4) at 697 Fifth Avenue in Midtown East, Manhattan. The refinancing through an amendment to the original 2015 loan documents, including paying down the debt to $355 million. The debt at origination in 2015 was $450 million and it matured December 21, 2022. The partners did not refinance the loan and it fell into default, according to Vornado executive Michael Franco on an earnings call covering the fourth quarter 2022. https://therealdeal.com/new-york/2023/02/14/vornado-led-jv-defaults-on-450m-loan-at-697-790-fifth-ave/
The partners bought the condo and the townhouse in 2014 for $700 million.

The refinance deal closed on June 14, 2023 and was recorded on June 20, 2023. The two properties have 23,813 square feet of built space and 14,044 square feet of additional air rights for a total buildable of 24,990 square feet according to a PincusCo analysis of city data. The loan price per built square foot is $14,907 and the price per buildable square foot is $14,205 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)
The signatory for Vornado Realty Trust was Steven Borenstein. The signatory for Credit Agricole was Amadou M. Diop and Theodore M. Vandermel.

Because multiple properties have been transacted, some of the following sections will follow the property with the largest assessed value, which in this case, is the property on 697 5th Avenue.

Prior sales and revenue

Out of the two properties, one with a total of 23,813 square feet of built space generated revenue of $27.2 million per year.

The property

The mixed-use building in Midtown East has 23,813 square feet of built space and 14,044 square feet of additional air rights for a total buildable of 24,990 square feet according to a PincusCo analysis of city data. The parcel has frontage of 25 feet and is 100 feet deep with a total lot size of 2,499 square feet. The zoning is C5-3 which allows for up to 15 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $147.8 million.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the properties for the past 24 months. In addition, according to city public data, the properties have not received any significant violations in the last year.

Development

For the tax lot buildings, one out of the two buildings received a initial certificate of occupancy in the last ten years. On these lots, there is one active major alteration construction project for a 420-unit, 323,504 square-foot R-1 building. The project was submitted by Hermann Elger with plans filed November 28, 2012 and permitted February 6, 2014.

The neighborhood

In Midtown East, The majority, or 81 percent of the 62.6 million square feet of commercial built space are office buildings, with hotel buildings next occupying 7 percent of the space. In sales, Midtown East has the 2nd highest sale turnover among other neighborhoods in the city with $3.8 billion in sales volume in the last two years. For development, Midtown East is the most active neighborhood among other neighborhoods. It had 17.2 million square feet of commercial and multi-family construction under development in the last two years, which represents 27 percent of the neighborhood’s built space. There was one pre-foreclosure suit filed among other mixed-use buildings in the past 12 months.

The block

On the tax block of 697 5th Avenue, PincusCo has identified the owners of seven of the 23 commercial properties representing 705,611 square feet of the 2,083,024 square feet. The largest owner is Watermark Interests, followed by Vornado Realty Trust and then Savitt Partners.
There are no active new building construction projects on this tax block.

The majority, or 86 percent of the 2.1 million square feet of built space are office buildings, with retail buildings next occupying 11 percent of the space.

The borrower

The PincusCo database currently indicates that Vornado Realty Trust owned at least 56 commercial properties with five residential units in New York City with 15,245,100 square feet and a city-determined market value of $6.7 billion. (Market value is typically about 50% of actual value.) The portfolio has $5.1 billion in debt, with top three lenders as JPMorgan Chase, Goldman Sachs, and Landesbank Baden-Wurttemberg respectively. Within the portfolio, the bulk, or 77 percent of the 15,245,100 square feet of built space are office properties, with retail properties next occupying 13 percent of the space. The bulk, or 96 percent of the built space, is in Manhattan, with Bronx next at 4 percent of the space.

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