Brookfield Nears $800M CMBS Office Refi in Manhattan
The company is adding $173 million of its own cash equity to the refinancing.
Just months after extending its ground lease at the 14-acre, 9.4 million-square-foot Brookfield Place complex in Lower Manhattan through 2119, Brookfield Properties is expected to refinance one of the trophy office towers with an $800 million CMBS loan.
The Canadian investment giant and one of the world’s largest commercial property owners is also planning to contribute about $173 million of cash equity into the deal to refinance 225 Liberty St., a Class A, 44-story, 2.4 million-square-foot building, according to Bisnow.
The five-year loan will be co-originated by Citi Real Estate Funding Inc., JPMorgan Chase, The Bank of Nova Scotia and Wells Fargo. The loan is expected to require monthly interest-only payments and a fixed-rate of approximately 5.9 percent. The final interest rate will be determined at closing, according to credit rating agency KBRA.
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The new financing will replace a 10-year, $900 million CMBS loan originated in February 2016 that comes due this week. The original loan carried a 4.66 percent fixed rate and was originated by Citibank, according to Yardi Matrix data. The original loan was never delinquent, KBRA reported.
The most recent appraisal valued the LEED Gold-certified tower at $1.3 billion, down from its $1.4 billion appraisal 10 years ago, according to KBRA.
The refinancing comes five months after Brookfield extended its ground lease with Battery Park City Authority for the entire mixed-use complex for an additional 50 years in a deal valued at $1.5 billion. The agreement calls for Brookfield to pay the authority about $7 million a year, with 10 percent increases every five years and by 20 percent after 16 years, KBRA reported.
In addition to 225 Liberty St., Brookfield Place includes 200 Liberty St., 200 Vesey St., 250 Vesey St. and 300 Vesey St. The four original towers were developed by Olympia & York as the World Financial Center between 1983 and 1988. Designed by Haines Lundberg Waehler and Cesar Pelli & Associates, 225 Liberty St. was completed in 1987 and known as Two World Financial Center.
Brookfield acquired the majority interest in four of the five towers in 1992. In 2013, Brookfield acquired 300 Vesey St., a 16-story, 555,851-square-foot building that is home to the Mercantile Exchange, from CME Group for $200 million.
Taking advantage of the rebound in the CMBS market, Brookfield has refinanced several other key Manhattan office properties in recent months. In late October, Brookfield completed the $1.3 billion refinancing of 660 Fifth Ave., a 1.3 million-square-foot trophy tower in Midtown Manhattan, with a consortium of Citi Real Estate, Barclays, ING Capital, Bank of America and Santander Bank originating and selling the CMBS debt.
Earlier that month, Brookfield refinanced Five Manhattan West, a 1.7 million-square-foot trophy office tower in the Manhattan West development on the Far West Side, with a nearly $1.3 billion CMBS loan provided by a syndicate including Citigroup, Deutsche Bank, Société Générale, Bank of Montreal and JPMorgan Chase.
Closer look at 225 Liberty St.
In its ratings report on the proposed 225 Liberty St. CMBS loan, KBRA stated it “considers the asset to be of high quality due to its location, tenancy, renovations and overall appeal.”
Since acquiring the property, Brookfield has invested approximately $580.7 million, or $247 per square foot, on comprehensive renovations to reposition and modernize the property, including $59 million for the lobby completed in 2017, KBRA reported. Other renovations included $8 million for elevator modernization between 2012 and 2014 and $6 million for HVAC compartment unit upgrades that are currently underway. The total also includes money to fund tenant improvements, redevelop the retail spaces and upgrade common areas and outdoor spaces.
In addition to office space, 225 Liberty St. has 35,000 square feet of retail space including several gourmet and fast casual restaurants. Brookfield is the largest office tenant, occupying more than 535,000 square feet. Other office tenants include J. Crew, which leases 324,658 square feet; OFI Global Asset Management, which leases 291,129 square feet; BNY, which leases 324,658 square feet; Invesco, which leases 204,424 square feet, and Commerzbank with 120,363 square feet.
Convene, a flexible office and meeting space provider, leases nearly 75,000 square feet and can host up to 1,000 people for events including conferences, trade shows, summits, exhibits and galas.
The tower has direct access to the World Trade Center subway station, the PATH train and Brookfield Place Ferry Terminal.
Strong leasing activity, steady occupancy
KBRA noted it generally views office properties less favorably due to current market conditions, stating remote and hybrid work models continue to impact office demand and property values. The credit rating agency also points to “some of the cyclical factors such as rising interest rates, inflation, a surge of high-profile layoffs, and a slowing economy that may cause distress to the office market.”
However, KBRA stated 225 Liberty St. is a Class A office building which is well located in the Financial District. The building has had annual average occupancy of 93 percent from 2016 through 2026, underscoring resilient office space trends in prime Manhattan assets. The property’s latest occupancy in November was 90.1 percent.
The firm cited recent strong leasing activity, noting that new leases, renewals and expansions accounting for 46.1 percent of base rent across seven tenants have been executed since August 2024. The weighted average rent for recent leasing was $69.49 per square foot, according to KBRA. The firm said it considered these factors when determining property cash flow and cap rate assumptions.
KBRA did not include a 232,000-square-foot lease for Saks Global, which was signed in 2014, in its calculations. Although its lease expires in 2031, the KBRA report noted Saks Global is delinquent on its rent and the space is “considered vacant.” The luxury store conglomerate filed for Chapter 11 bankruptcy in mid-January after falling behind in payments to vendors and missing a $100 million debt payment in December.
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