Taconic, Square Mile Get $164M Loan for 375 Pearl St. in Lower Manhattan

A Holliday Fenoglio Fowler L.P. managing director said today that the firm’s New York office had secured a $163.5 million acquisition and pre-development loan enabling the joint venture between Taconic Investment Partners and Square Mile Capital to buy a nearly 1.1 million-square-foot condominium interest in Lower Manhattan’s 375 Pearl St. As reported Dec. 18 by CPN, the partnership had acquired 29 stories in the 32-story building at the base of the Brooklyn Bridge from Verizon. The joint venture is planning extensive renovations that reportedly may cost as much as it did to buy the space, including installing a new façade, lobby, HVAC system and elevators. HFF managing director Evan Pariser told CPN today that financing a deal that large during the fall of 2007 was not easy, but that he and his colleagues were able to offer Taconic and Square Mile several options. He said HFF secured an adjustable-rate first mortgage and mezzanine financing through Apollo Real Estate Advisors L.P. and M&T Bank for the JV. The deal closed in late December. HFF director Steven Klein and senior analyst Todd Newman worked on the financing with Pariser. “Getting this kind of financing in this capital market really speaks highly to the sponsors, their reputations and expertise,” Pariser said. “Their business plan is sound.” Located near City Hall and just north of the South Street Seaport, the building was constructed in 1975. Verizon plans on leasing back three floors for its telecommunications operations. Taconic and Square Mile’s interest includes the remaining 29 floors, a portion of the ground floor and cellar. The space will be redeveloped into Class A, multi-tenant offices with spectacular views and large floor plates. J. Alex Tarquinii of the New York Times reported Jan. 2 that the partnership may charge about $60 per square foot in rent once the building is ready for occupancy in late 2009. The partnership is hoping to take advantage of the city’s hot office rental market. Even with the troubled capital markets in the last few months, Manhattan Class A office rents have continued to rise, with midtown rates surging to record highs of about $74 per square foot and several leases going for more than $100 and $150 per square foot, according to third-quarter 2007 reports from several real estate brokerages. Several third-quarter surveys stated downtown Manhattan rents were averaging between $46 and $47 per square foot. The rates were all double-digit increases from the same time in 2006. CPN previously reported that Robert Alexander, Robert Stillman and Brian Gell of CB Richard Ellis Inc. will be handling the leasing at 375 Pearl St. Alexander had noted that the building represents one of the largest blocks of contiguous office space available in Manhattan. Since 1997, Taconic has acquired and developed more than 8 million square feet of office properties in New York City, Chicago, Washington, D.C., and Atlanta. The firm is also involved in several residential projects in Manhattan, the Bronx and Brooklyn. Square Mile is a real estate investment firm that looks to buy or capitalize value-added properties. HFF has 18 offices across the United States. Among its recent deals, CPN reported Dec. 21 that the firm had arranged a $114.4 million non-recourse construction loan for Phase II of The Tower Residences at the Ritz Carlton in Dallas. On Dec. 20, CPN noted that HFF had secured $71.3 million in financing for the purchase of a 506,000-square-foot, Class A office building in suburban Milwaukee, Wisc.