Brookfield Refinances Tower With Chinese Loan

The Wall Street Journal

Bank of China Ltd. is lending $800 million to Brookfield Office Properties to refinance a Manhattan office building in the latest sign that well-capitalized Chinese investors are helping to fuel a commercial real-estate recovery in U.S. cities.

The loan on the office building, a 44-floor, block-long office tower in midtown Manhattan majority-owned by Brookfield, is one of the biggest made on a single building since the economic downturn began. It also is the biggest commercial real-estate loan ever made by the Bank of China's New York branch, which has helped fill a void in the commercial real-estate market for loans valued at hundreds of millions of dollars.

Brookfield confirmed the Bank of China loan but declined to comment further. A mortgage loan on the building comes due in February, according to a regulatory filing.

"Our standards are conservative and they haven't changed," said Bill Smith, chief lending officer of the Bank of China's New York branch. "It's just that now, for the moment, there's no other competition."

The loan for the building at 245 Park Ave. near Grand Central Terminal, whose tenants include J.P. Morgan Chase & Co. and Major League Baseball, comes as the commercial real-estate industry is becoming divided into two markets: one mostly of property in New York, Washington and other big cities where values are recovering; and one of less-attractive properties in the suburbs and in smaller cities that is continuing to languish. The industry also continues to struggle with billions of dollars of properties that are valued at less than their mortgages.

Both foreign and domestic lenders are returning, but Chinese institutions have been more aggressive than many. Chinese banks had $1.8 billion in commercial real-estate loans outstanding in U.S. branches in the second quarter, according to data firm Foresight Analytics, more than double the level a year before.

Bank of China in the last year and a half made at least two other large loans on Manhattan skyscrapers.

Industrial & Commercial Bank of China Ltd., China's largest bank by assets, said this year that it was rolling out a "large-loan" program aimed at U.S. commercial real-estate owners in need of loans that exceed $100 million. China Investment Corp., the $300 billion sovereign-wealth fund, also is looking to pile cash into U.S. real estate through investing with U.S. property-fund managers.

"The bank was interested in this asset because it was a stabilized, safe, secure asset with good ownership," said Robert Martin, a Jones Lang LaSalle Inc. broker who helped arrange the 245 Park deal.