Vornado, partners sign $300M refi for office in Midtown West, part of $400M package

Vornado Realty Trust and unnamed sovereign wealth fund and pension investors, through the entity 640 Fifth Avenue Owner LLC as borrower, signed a refi loan with lender Morgan Stanley, Goldman Sachs, and Bank of Montreal valued at $300 million for the office and retail building at 640 Fifth Avenue in Midtown West, Manhattan. The $300 million was senior debt. Vornado reported it refinanced the building with a total of $400 million, so it’s possible the remaining $100 million was unrecorded mezzanine debt.
The deal closed on June 10, 2024 and was recorded on June 14, 2024. The prior lender was Bank of China which held debt that had an original loan amount of $500 million.
The property 640 Fifth Avenue has 315,000 square feet of leasable space. The loan price per built square foot is $952 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 Morgan Stanley, Goldman Sachs, and Bank of Montreal were Kristin Sansone, Sid Shrivastava and Michael Birajiclian, respectively. The loan is down from $500 million Bank of China.

BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal and BMO Bank N.A.

Vornado sold a 48.5 percent interest in a portfolio of retail-related properties including 640 Fifth Avenue to unnamed institutional investors including sovereign wealth funds and pension funds, arranged by the Chera family’s Crown Acquisitions.

“As of December 31, 2023, we own a 51.5% common interest in a joint venture (“Fifth Avenue and Times Square JV”) which owns interests in properties located at 640 Fifth Avenue, 655 Fifth Avenue, 666 Fifth Avenue, 689 Fifth Avenue, 697-703 Fifth Avenue, 1535 Broadway and 1540 Broadway.”

According to Vornado, “Vornado Realty Trust (NYSE:VNO) announced today that its 52% owned street retail joint venture has completed a $400 million refinancing of 640 Fifth Avenue, a 315,000 square foot Manhattan office and retail property. The interest only, non-recourse loan carries a fixed rate of 7.47% and matures in July 2029. The street retail joint venture paid down by $100 million the prior $500 million loan, which was fully guaranteed by Vornado, bore interest at SOFR plus 1.11% and was scheduled to mature in August 2024.”

Vornado values the portfolio $840 million below the initial investment amount, according to the company’s annual report for 2023. “As of December 31, 2023, the carrying amount of our investment in the joint venture was less than our share of the equity in the net assets of the joint venture by approximately $840,300,000, the basis difference primarily resulting from the non-cash impairment losses recognized in prior periods. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Fifth Avenue and Times Square JV’s assets and liabilities, to real estate (land and buildings).”

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 received $6,190 in OATH penalties in the last year.

The neighborhood

In Midtown West, The majority, or 75 percent of the 75.9 million square feet of commercial built space are office buildings, with hotel buildings next occupying 14 percent of the space. In sales, Midtown West has the 3rd highest sale turnover among other neighborhoods in the city with $2.6 billion in sales volume in the last two years. For development, Midtown West is the most active neighborhood among other neighborhoods. It had 27.9 million square feet of commercial and multi-family construction under development in the last two years, which represents 37 percent of the neighborhood’s built space. There were two pre-foreclosure suit filed among other office buildings in the past 12 months.

The block

On the tax block of 640 5th Avenue, PincusCo has identified the owners of six of the seven commercial properties representing 3,161,234 square feet of the 3,209,955 square feet. The owners include Women’s National Republican Club, Wharton Properties and Vornado Realty Trust.
There are no active new building construction projects on this tax block.

The majority, or 98 percent of the 3.2 million square feet of built space are office buildings, with hotel buildings next occupying 1 percent of the space.

The borrower

The PincusCo database currently indicates that Vornado Realty Trust owned at least 54 commercial properties with four residential units in New York City with 15,154,375 square feet and a city-determined market value of $6.8 billion. (Market value is typically about 50% of actual value.) The portfolio has $5.6 billion in debt, with top three lenders as JPMorgan Chase, Goldman Sachs, and Morgan Stanley respectively. Within the portfolio, the bulk, or 78 percent of the 15,154,375 square feet of built space are office properties, with retail properties next occupying 12 percent of the space. The bulk, or 97 percent of the built space, is in Manhattan, with Bronx next at 3 percent of the space.
The PincusCo database currently indicates that Crown Acquisitions owned at least six commercial properties with 107 residential units in New York City with 641,036 square feet and a city-determined market value of $573.3 million. (Market value is typically about 50% of actual value.) The portfolio has $11.5 million in debt, borrowed from East West Bank. Within the portfolio, the bulk, or 70 percent of the 641,036 square feet of built space are office properties, with D4 properties next occupying 22 percent of the space. The bulk, or 98 percent of the built space, is in Manhattan, with Brooklyn next at 2 percent of the space.

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