February 7, 2011
By Barbra Murray, Contributing Editor
The credit markets are loosening up and not just for the premier, well-leased assets. Mesa West Capital has supplied institutional real estate firm Savanna with $47 million in first mortgage financing for 5 Hanover Square, a 333,000-square-foot Class B office property in Manhattan that the borrower is currently repositioning.
Designed by architect Henry G. Greene, 5 Hanover Square first opened its doors in 1962 in Manhattan’s Financial District. Savanna came into possession of the building last fall after acquiring a discounted mortgage on the property from Capital One Bank, the lender of 5 Hanover’s previous owner, Swig Equities. Savanna then took hold of the fee title through a deed-in lieu arrangement with Swig Equities, which is still on board as managing agent of the building.
The 25-story tower is home to multiple tenants but the roster is not full–yet. And Mesa West didn’t mind the brevity of the occupancy list at all. “In general, we look for strong sponsors with institutional quality assets that have some element of transition to them, like leasing to be done, which is the case with 5 Hanover so it fit perfectly in our sweet spot,” Raphael Fishbach, principal with Mesa West, told CPE. “The market is improving and Savanna’s investment in the asset is less than that of the competition, so it allows them to lease up at market rates. By owning a building at a lower cost than competitors, it gives them a competitive advantage.”
The office property has been submitted to approximately $24 million in upgrades since 2003. Savanna plans to employ proceeds from the recapitalization to wrap up the final steps of the capital improvement plan, finance lease-up activity and fund tenant fit-out for the high quality occupants it hopes to attract at 5 Hanover Square with the assistance of commercial real estate services firm Cushman & Wakefield and Swig Equities.
For Mesa West, the mortgage loan secured by 5 Hanover marks the portfolio lender’s first deal in New York City. The firm has not been sitting on the sidelines. A spokesperson for the firm told CPE that Mesa West has been one of the more active lenders in the market, having deployed a half-billion in debt on office, industrial, multifamily and hotel assets throughout the U.S. since June.