Friday, December 28, 2012

Times IS Money

The good folks at the WSJ busted their load over the One Times Square building (1471 Broadway) this past week not once but twice. The $208M IO loan was recently securitized by Goldman into GSMS 2012-TMSQ with Jamestown Properties as the sponsor.

According to the solid presale report put together by Kroll, the history and proceeds are as follows:
  1. Jamestown bought in 1997 for $117M when NCF was ~$6M which compounded annually at ~8.7%.
  2. Another Jamestown investment vehicle bought the building in 2011 for ~$419M and assumed ~$55M in debt.
  3. Proceeds from the deal will return $147M of equity to Jamestown, leaving current equity that Jamestown has in this building is at ~$210M. 
I suggest giving the Kroll report a read because they break-down the valuation of this building which generates most of it's revenue from billboard advertising.  Some facts:
  1. In 2013, One Times Square is expected to generate $24M in advertising revenue which represents ~85% of the base rental income.   The other 15% comes from Walgreens (lease rolls in 2023), which is the only base tenant.
  2. The building hosts the New Years Eve ball drop which generates between $2.5M and $3M in revenue.
  3. Estimated CPM for LED displays on the building is $9.00-$10.75.
    1. CPM = Costs Per Thousand Passerbys.  For every thousand people that walk by the building, that is the rate advertisers are charged to flaunt their wares on the side of the building.
      1. So for every thousand people that walk by Times Square, the building can charge advertisers anywhere between $9.00-$10.75 so their product can touch their eyeballs.
        1. With 1MM people going through Times Square on any given day, the building can charge $193K-$300K monthly and $2.2M-$3.6M annually; depending on the location of the billboard.
The one thing that did catch my eye from the presale report has to do with the special servicer.  It seems that Orix and LNR won't be able to get their hands on this beauty anytime soon:

"However, for as long as the borrower is controlled by the sponsor, neither LNR nor ORIX (nor any of their respective affiliates) is permitted to act as the successor special servicer. In this transaction, the holders of the most subordinate class of certificates outstanding do not have the right to replace the special servicer."

Hm, interesting.  If any of our esteemed commenters know why this is then don't be a stranger.

*No I do not work for Krolls but kudos to them for doing a decent job on the presale.  If you're looking to learn more about a single-borrower deal with the collateral basically being a giant billboard in one of the best locations in the world, then give it a spin.*

~Jingle Male

  1. Kroll BondRatings: GSMS 2012-TMSQ - One Times Square CMBS Presale Report
  2. WSJ Developments Blog: Landlords Have a Ball With Times Square Billboards
  3. WSJ: Ads, Not Tenants, Make Times $quare


crabsofsteel said...

I guess Jamestown Properties has a bone to pick with LNR and Orix. I can't say why, but Orix does tend to sue for repurchase and this way, they've been headed off at the pass.

Jingle Male said...

Solid, thanks crABSofSteel