A deal for Maefield Development and Fortress Investment to purchase their partners’ shares in the project underway at 701 Seventh Avenue will likely be financed by Natixis Real Estate Capital, said two sources familiar with the situation.
The planned sale came to light after Winthrop Realty Trust said in a Securities and Exchange Commission filing in February that it was in contract to sell its interest in the project, a 452-key Marriott Edition that has been under construction since 2015, in a deal that values it at USD 1.53bn. The buyer is “an affiliate of an indirect member of the venture,” the filing says. A source close to the transaction identified a Maefield and Fortress partnership as the buyer, confirming a report from The Real Deal. But the first source familiar said that the USD 1.53bn valuation fails to take into consideration the full value of the leasehold, which may be sold off separately. He said the project’s total value could be closer to USD 2bn.
The partnership will reportedly complete construction on the project and buy out the other minority partners, which include Steve Witkoff, Ian Schrager and New Valley Real Estate.
While it was not clear what loan-to-value ratio the partnership had sought for 701 Seventh, Fortress and Maefield are seeking construction debt at around 55% LTV on their other Times Square project, the USD 2.4bn redevelopment of the Palace Theater into a hotel and entertainment space, according to news reports and a source familiar with that situation. The pair are seeking USD 1.3bn in construction debt and a USD 500m equity partner there, the report and the source familiar said.
Records filed with the New York City Department of Finance show an outstanding mortgage of USD 510m led by JPMorgan on the Seventh Avenue property. The SEC filing states that the property received a senior loan in that amount and a USD 255m mezzanine loan in November 2016, which together have a blended rate of 6.49% over LIBOR. Another source close said that mezz debt was provided by Mack Real Estate Credit Strategies. The project also has USD 200m in outstanding EB-5 debt, which has a margin of 5.9%, according to the filing.
The six entities spent USD 250m to acquire 701 Seventh in 2012, records show.
by Guelda Voien