3850 SE Three Mile
US - McMinnville, OR
IDR 74,881,734,000 | 2,309 m²
Jones Lang LaSalle (“JLL”) has been retained on an exclusive basis by the Seller, an institutional lender group, to arrange the sale of a $240 million ($306 PSF) non-performing loan (the “Loan”). The Loan is secured by a firstlien mortgage on the fee simple interest in a office tower (the “Property”), in the Financial District of New York City. The Loan was originated in 2019 on a 2-year initial term, with three (3) one-year extensions, to refinance.
The Loan entered default in December 2022, when the Sponsor failed to remit monthly payments, and subsequently reached maturity default on May 1, 2023 with Lender and Borrower working to facilitate a Deed-in-Lieu.
The Property is a 33-story, 790,000 SF Class A office tower situated in Downtown Manhattan’s Financial West District. Built in 1913, the property underwent renovations in 1985 and 2019. Currently, it’s 58.5% occupied with a 4.2-year WALT as of May 2023. The top seven tenants, including a nationally recognized boutique investment bank and two S&P-rated entities, account for 25% of the building, and all have lease maturities beyond late 2026. The offering presents investors with an opportunity to acquire a non-performing loan secured by a well-located office with remaining upside at an attractive basis.
EXISTING OCCUPANCY BRINGS TROPHY CREDIT
The property boasts a rent roll led by seven secure, long-term, full-floor
tenants, occupying 197,863 SF (25.2% NRA) with a 5.6-year WALT. The largest
tenant, occupying 5.8% NRA, has over six years of remaining term and is
considered investment-grade by Fitch (AA+), Moody’s (Aa1), and S&P (AA+)
credit ratings. This in-place occupancy provides a stable, creditworthy, source
of rental income.
FLEXIBLE, AS-OF-RIGHT CONVERSION OPTIONALITY
Flexible C5-5 zoning in Lower Manhattan Special District permits for as-of-right mixed-used, office, residential, hospitality or community uses and the Property’s pre-1977 vintage allows for the full allocation of existing FAR for potential conversion. Existing building infrastructure lends itself to partial conversion to residential use, either as rental units or condominiums.
LENDER CONTROLLED & SELLER FINANCING AVAILABLE
The opportunity is driven directly by the Lender group which is the current senior controlling party. Given the direct process with the Lender and the expected Deed-In-Lieu, investors will have increased transparency and comfort around the ability to effectuate a transaction.
The property offers an attractive basis for investment. The last-dollar exposure of the Loan, which is at $306 PSF on the current NRA, sits at a 51.5% discount to the origination appraisal and a 26.2% discount to the last dollar of full-lender exposure from the refinance. This provides investors with the opportunity to step in well below replacement cost and comparable transactions, providing an excellent opportunity for potential capital appreciation.
TRANSFORMATIONAL DOWNTOWN MANHATTAN MARKET
Downtown Manhattan continues to experience significant transformation
and tenant relocation, prompted by the influx of $30 billion of fund
commitments and economic incentives for investors and tenants alike. The
Multi-housing market remains constrained as evidenced by a 2.7% vacancy rate and a limited construction pipeline while also being an ideal location to offer a strong office value proposition with class A rents 26% below New York City average.