NorthStar Real Estate Income II, Inc. has originated a $144 million senior loan secured by a portfolio of 28 commercial properties located in Woodbury, NY. The borrower is an affiliate of an institutional real estate fund managed by RXR Realty LLC.
The property portfolio contains over 1.4 million square feet, consisting predominantly of Class A and B office space, which is currently leased to more than 250 tenants. The borrower plans to fund tenant improvements, leasing commissions and capital investments to the portfolio using proceeds from the Senior Loan, cash flow after the payment of debt service on the Senior Loan, and any excess sales proceeds in connection with property sale releases.
The Senior Loan bears interest at a floating rate of 5.0% over the one-month LIBOR, but at no point shall LIBOR be less than 0.20%, resulting in a minimum interest rate of 5.20% per year. The Senior Loan was originated at a 0.50% discount and NorthStar Income II will earn an exit fee equal to 1.00% of the outstanding amount of the Senior Loan at the time of repayment.
The initial term of the Senior Loan is 24 months, with a two-year extension option and a subsequent one-year extension option available to the borrower, subject to the satisfaction of certain performance tests and the payment of a fee equal to 0.25% of the amount being extended for the second extension option.
During the Initial Term, the borrower may prepay up to 30.0% of the Senior Loan without penalty in connection with the partial sale or other release of underlying collateral based on predetermined release pricing. Additional prepayments are permitted provided the borrower pays an additional amount equal to the remaining interest margin due on the amount prepaid through month 36.
The loan-to-value ratio (“LTV Ratio”) of the Senior Loan is approximately 84% on a portfolio basis. The LTV Ratio is the amount loaned to the borrower net of reserves funded and controlled by NorthStar Income II and its affiliates, if any, over the appraised value of the Portfolio at the time of origination.
NorthStar Income II initially funded $132.0 million of the Senior Loan with a combination of proceeds from its ongoing initial public offering and an advance under its secured credit facility with Deutsche Bank AG, Cayman Islands Branch. NorthStar Income II intends to fund the remaining $12.0 million over the next 24 months, which additional amounts may be financed on the DB Facility in Deutsche Bank’s discretion.
RXR Realty LLC is a real estate owner, manager and developer in the New York metropolitan area with approximately $7.5 billion of assets under management encompassing approximately 18.3 million square feet.
As of October 6, 2014, NorthStar Income II’s portfolio consists of six senior mortgage loans with a combined principal amount of $347.0 million and one subordinate interest totaling $24.9 million.