1 | MARCH 10, 2017

Jeff Sutton’s Wharton Properties just bagged a big loan for the Whole Foods Market

site in Harlem, sources have told Commercial Observer Finance.

J.P. Morgan Chase and Morgan Stanley originated $125 million in financing on the six-story retail structure at 100 West 125th Street, which sits on the corner of Malcom X Boulevard. The transaction is comprised of a first mortgage and a mezzanine loan, but the amount of each note was not immediately clear nor was the breakdown of debt that each bank took on its balance sheet.

Meridian Capital Group’s Aaron Birnbaum and Tal Savariego brokered the deal, which carries a five-year term with interest-only pay-

ments for the full life of the debt. The transaction closed last week.

The new debt package replac-es an aggregate of $102 million in fi-nancing that Natixis Real Estate

Capital provided for the construction of the 200,000-square-foot building over the last two-and-a-half years, property records indi-cate. COF broke news of the first development loan that Natixis originated on the site, which

Square Mile Capital Management has pro-vided a $70 million mortgage for the acquisition of two office buildings in San Francisco.

The loan was made to California-based de-veloper Align Real Estate and Vanke Holdings USA, a U.S. subsidiary of developer China Vanke. The debt funds the acquisition of the properties, their complete renovation and fu-ture leasing costs.

The buildings, which comprise 130,000 square feet, are located at 657 and 667 Mission Street in the Financial District of San Francisco. They are currently 65 percent occupied, and the owners intend to reposition the two properties as Class A creative office space with ground-floor retail.

“This transaction represents an important step in the expansion of Square Mile’s lending

Square Mile Lends $70M on San Francisco Office Twosome

The Insider’s Weekly Guide to the Commercial Mortgage Industry

FINANCE WEEKLY

‘We’re seeing a recognition that green isn’t a hippy,

Birkenstock feel-good thing, but it’s actually another way to

create value.’—Chrissa Pagitsas from

Q&A on page 11

3 Astoria Bank Finds New Beau, Announces Merger With Sterling

5 Norwich Partners Bags $70M Construction Loan for Marriott Moxy

7 Sterling Lends $15M on Bronx Affordable Housing Development

In This Issue

The LEAD

Morgan Stanley, JP Morgan Provide $125M Refi for Jeff Sutton’s

Harlem Whole Foods Site

100 West 125th Street.

SUTTON... continued on page 5 SQUARE MILE... continued on page 3

EXCLUSIVE

2 | MARCH 10, 2017

$29,725,00067 LIVINGSTON STREET BROOKLYN HEIGHTS, NEW YORK

• 29-STORY VACANT DORMITORY • 50,000 SQUARE FEET• PRIMED FOR REDEVELOPMENT

MIS.MeridianCapital.com

DAVID SCHECHTMANSenior Executive Managing Director 212.468.5907

MARK STEINMETZManaging Director212.468.5950

ABIE J. KASSINDirector 212.468.5909

LIPA LIEBERMAN Managing Director212.468.5908

COFW – MIS – SOLD – 67 livingston.indd 1 3/9/17 2:09 PM

3 | MARCH 10, 2017

Three months after regulators ixnayed New York Community Bancorp’s acquisition of Astoria Financial Corp., another merger may now be on the books.

Sterling Bancorp and Astoria Financial, the parent company of New York-based Astoria Bank, entered a definitive merger agreement on March 6, the institutions announced in a press release early this week.

The deal is valued at $2.2 billion, and togeth-er, the banks would have a total of $29 billion in assets—less than half of what a NYCB and Astoria merger would have looked like.

Financial regulators had frowned upon the deal between NYCB and Astoria because their combined assets would have been greater than $50 billion, which would have been considered a “systemically important financial institution” or “too big to fail,” as has been widely reported.

“By joining forces, Astoria and Sterling will create one of the leading banking enterprises in the New York City metropolitan area and will be well positioned to deliver performance and value for our customers, shareholders, employ-ees and communities,” Jack Kopnisky, the pres-ident and chief executive officer of Sterling, said in prepared remarks. “We are excited about the opportunity to bring together two companies with extremely complementary strengths, pro-viding a platform to extend Sterling’s business banking solutions across a substantially larger market area, while introducing Astoria’s retail products to a wider financial center network.”

When the deal closes, Sterling stockholders would own 60 percent of the resulting compa-ny, while Astoria stockholders would own the remainder.—D.B.

Astoria Bank Finds New Beau, Potential Merger With Sterling

657 and 667 Mission Street in San Francisco.

platform on the West Coast and enables us to participate in an acquisition that has significant potential to further transform the streetscape along Mission Street,” said Michael Mestel, a principal at Square Mile, in prepared remarks. “We were pleased to facilitate a quick closing for the owners, whom we consider very well suited to max-imize the buildings’ value while drafting

off the strong real estate fundamentals that continue to define San Francisco’s south fi-nancial district.”  

The financing was arranged by CBRE’s Brad Zampa, Michael Walker and Megan Woodring.

Representatives for the borrowers and CBRE did not respond to a request for com-ment.—Cathy Cunningham  

SQUARE MILE... continued from page 1

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4 | MARCH 10, 2017

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5 | MARCH 10, 2017

Norwich Partners has received a $70 million construction loan for a 340-room Marriott Moxy hotel in downtown Boston. Citizens Bank was the lead arranger in the four-bank group that provided the financ-ing but declined to name the other banks.

“Citizens has been a great strategic and fi-nancial partner on this project, and we’ve worked with them very closely for many years,” said David Leatherwood, the presi-dent and partner at Norwich Partners. “We

appreciate their expertise and quick execu-tion on transactions like this.”

Norwich Partners is a New England and Florida-based developer of, and investor in, commercial real estate—hotels primarily—in the northeastern U.S. Its 142,400-square-foot, 25-story Beantown hotel will include an illu-minated rooftop lounge with views of Boston Commons, a restaurant and lounge, a fitness center and common areas.

“Norwich Partners is a longtime client

and we look forward to continuing to work with the great team there on more projects in the future,” said Gary Magnuson, the executive vice president and head of com-mercial real estate finance at Citizens Bank. “Providing construction loans is just one of the ways that Citizens can deliver value for clients.”

The Marriott Moxy is scheduled to open in the fourth quarter of 2018, according to Norwich Partners’ website.—C.C.

A rendering of the Marriott Moxy Hotel in Boston.

Norwich Partners Bags $70M Construction Loan for Marriott Moxy Hotel

was a $95 million three-year, interest-only mortgage.

“The new financing provides efficient inter-est-only payments at a favorable rate and gives the borrower the flexibility to continue its op-eration of the asset and retire the construction loan,” Birnbaum said through a spokesman.

While the long-awaited Whole Foods is slated to open this summer, the site is already home to American Eagle, Burlington Coat

SUTTON... continued from page 1 Factory, Raymour & Flanigan and TD Bank are currently open. Olive Garden also has an outpost in the building. The lenders were able to get comfortable with the property because of its “great tenancy” and location on “one of the best corners in Harlem,” according to one of the sources, who spoke on the condition of anonymity.  

Sutton’s firm has been an active borrower, last year closing roughly $2 billion in mort-gages, according to one of the sources. Most recently, Wharton Properties secured a $60

million refinancing from Bank of China for a property solely occupied by Duane Reade at 661 Eighth Avenue in Times Square. In August 2016, the company received a $195.3 million fi-nancing package from UBS and Morgan Stanley for the six-story Nike store at 529 Broadway in Soho.

Representatives for Morgan Stanley and Wharton Properties were not immediately available for comment, while a representative for J.P. Morgan did not immediately respond to a request for comment.—Danielle Balbi

6 | MARCH 10, 2017

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7 | MARCH 10, 2017

Sterling National Bank has provided a credit facility totaling $15.7 million for the construction of West Farms Apartments, an affordable housing initiative in the Crotona Park East/East Morrisania section of the Bronx, according to a release from the bank. The lender has a further 15 af-fordable housing projects in the pipeline, James Dittbrenner, the managing direc-tor of community development at Sterling National Bank told Commercial Observer Finance.  

West Farms’ credit facility includes a $12 million construction loan and a $3.7 million senior commercial multifami-ly mortgage. Construction of the 81-unit affordable apartment building will begin within two weeks, and when complete, the property will be used to transition homeless persons living with HIV and AIDS from shelters to permanent housing.

Walison Corporation is the project’s developer.

“We have a responsibility under the community reinvestment act legislation to provide lending opportunities for afford-able housing developments,” Dittbrenner told COF this week. “We work with sever-al syndication partners that help us source opportunities in the market, and we were presented with this partnership opportuni-ty by Hudson Housing Capital six months ago.”

Sterling National began lending on af-fordable housing projects roughly a year ago and is currently involved in 15 deals at various stages of development, spread across New York City, Dittbrenner said.

The deals are structured similarly in that Sterling will provide the construction financing, and if there is a need for a per-manent mortgage at the end of the proj-ect, the bank will also provide that loan, he explained.

“We also are providing and monetiz-ing the low-income tax credits that come into these projects. Sterling is actually the investor and purchases those tax credits, monetizes them and provides the equity into the project as well,” he said. “So we’re investing millions in equity through the low-income tax credits.”

The project also has a HIV/AIDS Services Administration (HASA) sup-port subsidy. HASA gives a portion of the rent for the units and provides pro-gram support to Comunilife, which will

Sterling Lends $16M on Bronx Affordable Housing Development, 15 More Projects on the Way

A rendering of West Farms Apartments.

provide social services to residents to help them to remain self-sustaining and in their residences.

“Sterling has been a key partner in mak-ing this project possible and has worked with us every step of the way to under-stand the importance of the initiative and the uniqueness of our financial needs,” said Rafi Rajput, the chairman of Walison Corporation.

Sabah Rajput, a principal at Walison, added, “We are looking forward to seeing the benefits this project will bring to the community and to making a real differ-ence for homeless New Yorkers with HIV and AIDS.”

Sterling’s 15 other affordable projects are expected to close over the next couple of years. “All of these projects have a very slow turn,” explained Dittbrenner. “From the time they are initially developed and tax credit approvals are applied for to closure is

probably an 18- to 20-month turn.” In order to expedite the process,

Dittbrenner told COF that Sterling tries to get involved early and support develop-ers’ applications, whether they are apply-ing for tax credits through New York City’s Department of Housing Preservation or at the state level through New York State Homes and Community Renewal. The bank provides a letter of intent that sup-ports their application for the designa-tion of tax credits. This helps the process in showing the agencies that the develop-er already has a lender (and the project can be built) as well as an investment partner.

“There aren’t enough developers or enough money to meet the need [for af-fordable housing] that exists,” Dittbrenner explained. “And I’m the luckiest guy in the world. I get to do something that makes me personally happy, and I know is helping other individuals.”—C.C.

8 | MARCH 10, 2017

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9 | MARCH 10, 2017

The Takeaway

San Francisco MSA Tops CMBS Debt Issuance in February

Source:

“The San Francisco metropolitan statistical area topped the

list of regions with the most commercial mortgage-backed

securities debt issued in February, as six notes totaling $1.06

billion were doled out,” said Sean Barrie, an analyst with

Trepp. “However, the lion’s share of that debt belonged to

One Market Plaza. The 1.6-million-square-foot office tower is

located in San Francisco’s Financial District and houses ten-

ants such as Google, Visa and Autodesk. One Market Plaza

is now backed by a $975 million securitization that serves

as the lone piece of collateral behind the single-asset OMPT

2017-1MKT deal. The New York City MSA took the second

spot on the list, with 14 notes totaling just under $894 mil-

lion in combined debt. Three deals at a combined balance

of just under $2.2 billion were securitized with a vertical

risk retention structure, more than any of the other struc-

tures. Two deals with horizontal structures, which also hap-

pened to be single-asset transactions, were issued: one for

One Market Plaza, the other for 485 Lexington Avenue in

Manhattan. The market’s first L-shape, or hybrid deal, was

the $1.3 billion conduit CD 2017-CD3 transaction.”

Deal TypeLoan Count

Balance

Conduit 173 $3,160,324,534

Single Asset/Single Borrower

3 $1,706,000,000

Grand Total 176 $4,850,324,534

Risk Retention TypeLoan Count

Deal Count

Balance

Vertical 122 3 $2,197,840,376

L-Shape 52 1 $1,327,484,158

Horizontal 2 2 $1,325,000,000

Grand Total 176 6 $4,850,324,534

MSALoan Count

Balance

San Francisco-Oakland-Hayward, Calif.

6 $1,061,536,890

New York-Newark-Jersey City, N.Y.-N.J.-Pa.

14 $893,775,000

Los Angeles-Long Beach-Anaheim, Calif.

15 $350,793,239

Seattle-Tacoma-Bellevue, Wash. 4 $168,975,000

Riverside-San Bernardino-Ontario, Calif.

8 $132,751,309

Birmingham-Hoover, Ala. 2 $123,325,000

Washington-Arlington-Alexandria, D.C.-Va.-Md.-W. Va.

6 $112,163,308

Kansas City, Mo.-Kan. 4 $97,800,000

Chicago-Naperville-Elgin, Ill.-Ind.-Wis.

3 $84,088,938

Miami-Fort Lauderdale-West Palm Beach, Fla.

3 $82,985,139

10 | MARCH 10, 2017

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11 | MARCH 10, 2017

Q+A

Commercial Observer Finance: How did you get involved in green financing?

Pagitsas: I’ve been in the energy industry for 17 years. I actually started out working as a con-sultant for a large firm and working for utili-ties both in the U.S. and in Europe. The focus for us was building financial billing systems for large industrial and commercial custom-ers, so utilities bills in the hundreds of thou-sands of dollars—not your and my utility bill for $100. I lived in Holland for a year, and when I came back to the U.S., I worked [from the U.S.] on renewable energy projects and water man-agement projects in the Philippines and in Jordan, looking at how to use animal waste to fuel methane biodigesters.

When I looked at who was using the ener-gy, it was the real estate sector. Properties use 40 percent of the energy in the U.S., according to the Environmental Protection Agency, so that was a lightbulb moment for me. About the same time LED and green energy and sustain-ability were really being focused on by the real estate sector. I was hired by Fannie Mae, where I’ve been for the past seven years, to bring all of these areas together.

For how long has Fannie Mae offered green financing products?

When I was hired in 2010, we called it “the green initiative” because we didn’t know what it was going to be. We rolled out our first product in 2012, and that was a joint product with the Department of Housing and Urban Development. Our first loan was a $19 million loan on an affordable housing property out in California. In 2012 we reiterated that product and launched the Empire product in 2014 [only for New York City properties] and added green building certifications and green rewards. We did $3.6 billion in financing last year.

What was the biggest challenge you faced? For Fannie Mae, the challenge was how to

make green financing “vanilla” lending and not a standalone product. That’s what we focused on—not making green its own path but rather incorporating it into the standard mortgage fi-nancing path.

How did you achieve that? We figured out the key points on the origi-

nation and asset management paths that had to be green in order for the outcome to meet an environmental target, while also being

understandable to an average originator. We first developed an energy audit that was simple and could be ordered at the same time as the standard appraisal and property condition assessment. Second, we asked how we could know that a prop-erty has hit an environmental target or lowered its energy costs. So, we partnered with the EPA and developed the energy star score for multifamily properties.

You recently issued a real estate mort-gage investment conduit (REMIC) with green tranches. How was that received?

Yes, two weeks ago we issued a $1 billion REMIC of which there were two tranches for $600 mil-lion that were only green deals. What we saw were new investors who had never purchased Fannie Mae bonds before coming in because of the green tranches. That’s a measure of success.

What’s driving investor appetite? The investor may believe it’s a better invest-

ment, or they may have a mandate from their shareholders. Some pension funds, for example, have a statement that says 10 percent of assets must be green. So we’re seeing a recognition that green isn’t a hippy, Birkenstock feel-good thing, but it’s actually another way to create value.

What are the benefits of going green for owners?

We offer lower interest rates so interest pay-ment reductions; we take out a closing cost—Fannie Mae pays 100 percent of the energy audit; we offer additional loan proceeds so they can access that capital and they get a reduc-tion on expenses. So, higher cash flow when the improvements have been made. Those are very potent capital benefits and really re-move the barriers for owners to try going green.

Chrissa PagitsasDirector of Fannie Mae’s Green Financing Business

Chrissa Pagitsas.

FINANCE WEEKLY

1 Whitehall Street, New York, NY 10004

212.755.2400

Cathy Cunningham Finance Editor

Danielle Balbi Finance News Editor

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