Goldman Sachs is selling $1.02 billion of bonds refinancing the Blackstone Group's acquisition of the Willis Tower, formerly known as the Sears Tower.
The deal, Chicago Skyscraper Trust 2017-SKY, will also finance nearly $500 million of renovations on the landmark property, which is one of the world's tallest buildings but maintains a "monolithic street level appearance," in the opinion of Morningstar Credit Ratings, and "falls well-short of being a destination for anyone other than the employees that work in the building."
The CMBS trust holds three promissory notes, from Goldman Sachs 50% of the total), Bank of America (30%) and Citigroup (20%), secured by a $1.02 billion first-lien mortgage on a 3.8 million-square-foot, Class A office building, according to Morningstar, which is rating the deal.
The floating-rate loan, which pays only interest, and no principal, has an initial term of two years and can be extended for a total of five years. It was used to refinance $708.3 million of outstanding CMBS debt that matured in February 2017, pay down an existing revolving line of credit, return equity to the sponsor, and fund contractual leasing and closing costs.
The sponsor purchased the property in June 2015 for $1.3 billion, and at closing had a cost basis of $1.43 billion. Upon completion of the majority of the building's full-scale renovation by May 2019, Blackstone will have a total cost basis of $1.82 billion. Including the additional $81.8 million that the borrower plans to spend after the initial mortgage loan term, the borrower's ultimate cost basis will be $1.91 billion.
Morningstar valued the collateral on an as-is basis at $1.18 billion, based on underwritten net cash flow and a capitalization rate of 6.75%. This results in an as-is loan-to-value ratio of 86.2%
There is currently no additional subordinate debt on the property; however, the loan documents allow for a one-time addition of mezzanine financing.
Wells Fargo Bank will act as both the master servicer and special servicer.