Citigroup taps CMBS to partially finance $400M N.Y. luxury apartment mortgage

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Citigroup plans to market bonds backed by a sponsor's leasehold interest in a recently constructed luxury apartment building in New York’s Midtown Westside submarket.

The notes in Citigroup Commercial Mortgage Trust 2020-555 are backed by a beneficial interest in the trust’s $350 million portion of $400 million, 119-month fixed-rate commercial loan. The loan is secured by a 52-story New York luxury apartment building in Manhattan’s Midtown West submarket.

The high-rise, built in 2016 at 555 10th Ave., includes 598 units, along with 4,893 square feet of ground-floor retail space. The property includes space conveyed to a not-for-profit charter school operating on eight floors of the building. The sponsor is including installment payments on Success’ $3.3 million in annual base rent as collateral for the loan, but the property space itself is excluded from the trust collateral.

The loan, via Citi Real Estate Funding, has a fixed rate of 3.52%, and is interest-only for the duration of the loan.

The property, which was 93.8% occupied as of Feb. 5, was developed by Extell Development Co., a New York-based company founded by real estate developer Gary Barnett. Extell has over 25 million square feet of hospitality, mixed-use, office and residential properties in Manhattan, including One57, Central Park Tower, Hyatt Times Square, One Manhattan Square, The Rushmore and W Hotel Times Square.

The capital stack includes a $142.9 million Class A tranche with a preliminary AAA rating from Fitch Ratings and DBRS Morningstar. Citi is also marketing six classes of subordinate notes that part of the 53.75% credit enhancement to the senior notes.

The $400 million whole mortgage consists of $263.4 million in senior notes and $136.6 million of junior notes. According to presale reports, $213.4 million of the senior notes were contributed to the 2020-555 transaction, while all of the junior notes were included.

The building has 447 market-rate units and 150 affordable housing units with rent levels restricted based on the area median income. The property receives benefits from a New York tax abatement agreement based on the space provided for Success Academy and the affordable housing unit, according to presale reports. The abatement provides an exemption from property tax increases for 35 years.

Fitch reports the retail space is 100% leased.

The property is subject to a 99-year ground lease with Sol Goldman Estate and Femily, with ground rent payments on a fixed schedule through 2041; 10% rent escalations are built into the lease to occur on three dates during the fixed period.

The capital stack of the financing includes a $140 million mezzanine loan held outside the trust. Fitch Ratings estimates the mezzanine debt places the stressed debt-to-service-coverage ratio at 0.55x and the loan-to-value ratio at 159.9%.

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