(Recasts, adds details)
By Al Yoon
NEW YORK, June 21 A debt package tied to a New
York office tower will be the first of its kind to tap property
securitization and public finance markets together, sources
close to the deal said on Monday.
Some $1.275 billion of construction loans on Bank of
America Corp's (BAC.N) 52-story building, 1 Bryant Park, will
be refinanced with commercial mortgage-backed securities and
Liberty bonds, which were aimed at creating tax-free funding
for lower Manhattan after the September 2001 attacks, the
Within the private deal managed by Bank of America and
JPMorgan Chase, a $650 million, AAA-rated commercial property
loan would be the largest to be securitized since the CMBS
market reopened in late 2009.
The $700 billion CMBS market has been reawakened with help
from a federal lending program and the improving economy,
giving investors confidence they can judge the performance of
the sector. But as lenders express a desire to lend, tight
underwriting requirements and falling values on office, retail
and apartment buildings have kept issuance at a trickle
relative to the record years of 2006 and 2007.
Another $650 million in tax-exempt bonds will refinance an
existing Liberty bond and carry ratings of "AA," "A," and
"BBB-," a source said. The Bank of America tower, although in
midtown Manhattan, was able to garner financing as the Liberty
bond program provided up to $2 billion for commercial projects
outside the ground zero area of lower Manhattan.
The deal has been in planning stages for months, and
according to investors coincides with solid demand for both
The new mortgage debt is supported by equity in the 2.1
million-square-foot building, jointly owned by Bank of America
and New York real estate developer Douglas Durst. The building
was appraised on May 1 at $2.2 billion, suggesting a 59.1
percent loan-to-value ratio, according to the term sheet.
"There appears to be a stabilization occurring in
commercial property fundamentals," said Christopher Sullivan,
chief investment officer at the United Nations Federal Credit
Union in New York. "Financing availability is slowly increasing
with transactions, but at relatively conservative leverage."
The CMBS will be priced in about a week, and the Liberty
bonds will follow, one source said.
(Reporting by Al Yoon; Editing by Leslie Adler)