Real estate investment trust Boston Properties has completed refinancing of its stake in the legendary GM Building in Manhattan. Boston Properties owns the building through a consolidated joint venture entity which has a 60% interest in the building located at 767 Fifth Avenue, which also houses a 24-hour Apple Store at its base.
Boston Properties also completed the refinancing of approximately $1.6 billion of indebtedness that had been secured by direct and indirect interests in 767 Fifth Avenue. The new mortgage financing has a principal amount of $2.3 billion, bears interest at a fixed interest rate of 3.43% per annum and matures on June 9, 2027. The loan requires interest-only payments during the 10-year term of the loan, with the entire principal amount being due at maturity.
In contemplation of the refinancing, on April 24, 2017, the consolidated joint venture entity terminated forward-starting interest rate swap contracts with notional amounts aggregating $450.0 million and paid approximately $14.4 million, which amount will increase the Company’s interest expense over the ten-year term of the financing, resulting in an effective GAAP interest rate of approximately 3.64% per annum (including the amortization of financing costs and additional mortgage recording tax).
After extinguishing the existing indebtedness on the property, the Company intends to use a portion of its share of the net proceeds to repay the $310.0 million of borrowings outstanding under its $1.5 billion unsecured line of credit and for other working capital purposes. The extinguished debt bore interest at a weighted-average rate of approximately 5.96% per annum, an effective GAAP interest rate of approximately 3.03% per annum and was scheduled to mature on October 7, 2017.
Boston Properties is one of the largest owners and developers of Class A office properties in the United States, concentrated in five markets – Boston, Los Angeles, New York, San Francisco and Washington, DC. It owns 164 office buildings totaling 47.7 million square feet.