$145M Funds Equity Recap for Class A Tower

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NEW YORK CITY-Carlton Advisory Services Inc. has arranged the equity and debt recapitalization of 104 W. 40th St., a 22-story class A office tower within Midtown Manhattan. The property just recently sold to Principal US Property Separate Account for $140 million, as GlobeSt.com recently reported.

Carlton accessed a major insurance company which provided 95% of the equity capital along with favorable financing to effect the recapitalization on very favorable terms for the sponsor, the firm says in a statement. For this transaction, Carlton was engaged by Manhattan leasing expert Myers Mermel, to assist in the recapitalization of the asset at a market valuation in order for Mermel to buy out his investment partner.

The sponsor, Mermel & McLain, was founded by Myers Mermel and Caroline McLain. Mermel has supervised over 1.9 million sf in construction projects and over 35 million sf of transactions. McLain directs the finance and accounting direction of the companies.

This recapitalization continues a stream of well over $1 billion of Manhattan transactions for the company including the equity and debt capitalization of the Lipstick building, 110 E. 42nd St., a $350-million, ground-up financing on a confidential transaction in Manhattan, and a string of other closings around the New York City metro area.

According to Carlton, Mermel intends to convert the second floor of the building to retail, capitalizing on the surging demand and escalating retail rents in the immediate neighborhood. The property will continue to benefit from a strong occupancy rate and strong demand for high design office space, Carlton says.

The building is approximately 90% occupied and has significant upside potential, the firm said. In addition to the retail improvements on the second floor, 70% of the below market office rents in the building expire over the next few years, allowing for substantial NOI growth and attracting significant interest from multiple potential equity partners, Carlton says.