Vornado Realty Trust (VNO), one of New York?s largest owners of retail and office space, has completed a refinancing of one of its boom-era Manhattan acquisitions, converting nearly $500 million in equity into cash in the process.
Vornado refinanced the 43-story midtown building at 1290 Ave. of the Americas, which was appraised this month at $2 billion, some 28% above the 2007 purchase price of $1.55 billion, according to the term sheet for the commercial mortgage-backed securities financing the new loan.
The $950 million, 10-year interest-only loan from Deutsche Bank, Goldman Sachs Group Inc., UBS Securities and the Bank of China paid off $412 million in existing debt, and after reserves and closing costs provides $479 million in excess cash. Vornado owns 70% of the building and billionaire Donald Trump owns a noncontrolling 30% stake, according to the term sheet.
Vornado declined to provide immediate comment, though it confirmed the refinancing in a statement earlier Tuesday.
The deal comes as Manhattan prices have soared by 16.3% over the past 12 months, according to the Moody?s RCA Commercial Property Price Indices. Since the trough in October 2009, Manhattan prices have gained more than 52% though they remain 13.7% below their December 2007 peak.
Nationally, prices have climbed 28% since the January 2010 trough but remain 21.8% below their December 2007 peak, the indices said.
The CMBS?which will finance the full $950 million?are part of an expected surge in issuance to meet demand for the securities prized for their higher yields relative to other investment-grade debt. Investors expecting low interest rates to add fuel to the U.S. real-estate recovery have added to the demand, which has reduced yield premiums to levels that are attracting more borrowers.
The ?substantial return of equity? to the sponsor, the interest-only loan and the 2014 exit of one of the major tenants, law firm Morrison & Foerster, are among the ?bear? observations by Morningstar, which rated the CMBS.
But the concerns are offset by strong cash flow, proximity near Rockefeller Center and strong market fundamentals, the rating firm said in its presale note.
CMBS volume may reach $46 billion this year, up from $33 billion in 2011, according to Commercial Mortgage Alert. Some lenders and issuers expect the volume could rise to $65 billion next year, though that still would be far short of the $230 billion sold in 2007.
Write to Al Yoon at albert.yoon@dowjones.com
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Copyright ? 2012 Dow Jones Newswires
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Vornado Realty Cashes Out On Commercial Mortgage-Backed Securities Loan Refinancing
Source: http://cashwoe.com/?p=9311
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