With the loss of its major tenant last year, the owners of CityPlace I in downtown Hartford faced not only the prospect of a half-empty skyscraper, but other serious problems, as well, including a $2.4 million, past-due property tax bill.
The vacancy in the city's tallest tower will be plugged by UnitedHealth Group, and now the building's owners have secured $49 million in financing that has paid the tax bill for the 38-story, marquee tower.
Just two years ago, a financing deal of a $39 million mortgage and an additional $10 million loan might not have drawn much attention. But in today's tough commercial real estate financing climate, lenders are worried about a weak economy and tenants who might cut back on space. That makes the CityPlace deal notable, especially for downtown Hartford, where vacancies in prime office space are nearly 20 percent.
The Federal Reserve reported Monday that banks intend to keep lending standards tight for at least another year.
"Notwithstanding the credit crunch, trophy assets in Hartford will attract national lenders," said William R. Crowe, a lawyer for the tower's owners, CityPlace Owner LLC, based in New York.
Crowe said the financing was used to pay off the property tax bill, which had been sold by the city to a third party for collection. The money will also be used make improvements promised to tenants and for operating expenses.
UnitedHealth, which is investing $35 million in renovations for its quarters, is expected to move in next summer, filling much of the space vacated by MetLife last year. Other major tenants are consulting firms Deloitte and PricewaterhouseCoopers.
CityPlace, which opened in 1983 and encompasses more than 800,000 square feet, no longer had a mortgage as of 2008.
Bridgeport-based People's United Bank provided the new $39 million mortgage, but the tricky part was the additional $10 million that was needed.
Buchanan Street Partners, a national real estate investment management firm in California, stepped in with a $10 million loan. CityPlace's new lease with UnitedHealth will bring occupancy in the tower to 93 percent.
The $49 million represents about $57 a square foot, well below the $300 to $325 a square foot it would take to build CityPlace new, so it is not tapping too heavily into the building's value, said Wayne Brandt, managing director at Buchanan.
"CityPlace, by our estimation, also is very well-regarded and has high-quality tenancy," Brandt said. "It has stood the test of time in the market."
Reprinted with permission of the Hartford Courant.
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