Vornado Secures $3.2B for Refis

100 W. 33rd St.

Vornado Realty Trust has completed four refinancing deals totaling $3.2 billion. The transactions included the replacement of loans encumbering two Manhattan office buildings that comprise more than 2.2 million square feet, as well as the extension of a revolving credit facility and an unsecured term loan.

The REIT obtained $480 million from U.S. Bank for the refinancing of 100 W. 33rd St. in the Chelsea submarket. This interest-only loan has a June 2027 maturity date and two one-year extension options, with a rate of SOFR plus 1.65 percent through March 2024, growing to SOFR plus 1.85 percent for the remaining term. The previous financing was a $580 million note which Vornado initiated in 2019 and bore an interest rate at LIBOR plus 1.55 percent.

Originally a department store dubbed Manhattan Mall, the building was repurposed for office use in 2002. It currently features 859,000 square feet of office and 255,000 square feet of retail space. Vornado acquired the building in 2007 for $689 million, according to CommercialEdge data. The property is part of the REIT’s PENN District project—an office campus comprised of 10 million square feet of office space around Penn Station, along with an expansion of roughly 5 million square feet.

READ ALSO: Why CRE Investors Are Rethinking Refinancing

Vornado also refinanced its property at 770 Broadway in the East Village, for $700 million. This loan is also interest only, at SOFR plus 2.25 percent, with a maturity date of July 2027. Upon certain conditions within the first 18 months, the REIT has the option to draw an additional $300 million in proceeds, while the loan’s rate decreases to SOFR plus 1.75. This round of financing replaces a previous $700 million note from Morgan Stanley, originated in 2016 at a rate of SOFR plus 1.86 percent.

The Class A building became part of Vornado’s portfolio in 1998 and was completely renovated in 2000, CommercialEdge shows. It features 1.2 million square feet of office space and received LEED Gold certification. According to The Real Deal, Facebook parent Meta leased 300,000 square feet this April, bringing its total footprint in the building to more than 800,000 square feet.

Credit extensions despite ratings downgrade

770 Broadway

Additionally, Vornado fully extended an unsecured credit facility of $1.25 billion, from March 2024 to December 2027. It features an interest rate of SOFR plus 1.15 percent, and a facility fee of 0.25 percent. The REIT also extended its $800 million unsecured term loan, from February 2024 to December 2027, at a rate of SOFR plus 1.30 percent.

Entities involved in the refinancing deals included more than a dozen banks and divisions, including JPMorgan Chase Bank, BofA Securities Inc., U.S. Bank, Wells Fargo Securities, Citigroup Global Markets, Deutsche Bank Securities and TD Securities, among others.

Vornado managed to secure new funding within a cautious lending landscape. According to experts interviewed by Commercial Property Executive, lenders are eager and enthusiastic about 2022, but also more selective about what office buildings to refinance, with Class B assets expected to fall behind.

Earlier this year, both Fitch and Moody’s downgraded their ratings of Vornado, pointing to concerns about Manhattan’s high office vacancy rate. Fitch downgraded the Issuer Default Ratings for Vornado to ‘BBB-‘, maintaining a negative outlook. In April, Moody’s announced it downgraded Vornado’s senior unsecured debt rating to ‘Baa3’, and its preferred stock rating to ‘Ba1’.

Manhattan’s office vacancy continued to struggle, reaching 14.2 percent in April, according to CommercialEdge data. The borough recorded one of the largest drops in listing rates, with the full-service equivalent average down 13.3 percent year-over-year, to $71.9.