By: Serach Nissim

The owner of the office tower at 731 Lexington Ave. was able to extend its $500 million mortgage, which came due last week.

As reported by Crain’s NY, Alexander’s Inc, the owner of the fully-occupied iconic Midtown Manhattan office building, extended the mortgage by another four months, just days before it came due. This extension was critical, as the owner was spared from refinancing at a much higher interest rate. “The borrower did not have time to refinance by the June 2024 maturity given the uncertainty at the time of the Bloomberg lease and the capital markets environment for an office loan of this size,” Morningstar said last month.

Alexander’s, which is a publicly traded Real Estate Investment Trust, is hoping interest rates will be more reasonable by October, when the extended lease will be due. The original mortgage was granted by Deutsche Bank and Citigroup. As part of the terms of the modification, Alexander’s Inc. Had to pay down $10 million of the loan’s principal. Alexander’s holds $526 million in cash, per a recent filing. The extension may be a sign that banks are also reluctant to write big new loans— even for occupied and sought-after office buildings. “The market is really tough,” said Piper Sandler analyst Alexander Goldfarb. “Shopping centers can get loans; office buildings are a much tougher proposition.”

Per Crain’s, Alexander’s expects to complete the refinancing by Oct. 11, as per last week’s regulatory filing. 731 Lexington’s mortgage has a floating-rate, which has already ballooned to 6.2%, up from just 1.4% over the last two years. Like many landlords, the company is on the hook to pay quarterly interest payments that have tripled over the last two years. Alexander’s quarterly interest and debt expense is now $16 million. A company spokesman didn’t reply to Crain’s request for comment.

The 57-story tower at 731 Lexington boasts 1.3 million square-feet, and is 100% occupied, as per bond-rating firm KBRA. In early May, Bloomberg LP, the building’s anchor tenant, announced an 11-year lease extension, inking a contract to retain all its 900,000 square feet of space through 2040, as per a company press release on GLOBE NEWSWIRE. “I firmly believe in New York City’s continued growth as a global capital that creates jobs and attracts top talent, and our company is determined to do our part to help lead the way,” said Michael R. Bloomberg, founder of Bloomberg LP. “I also believe in the power of in-person work to drive collaboration and innovation, and 731 Lexington’s open spaces help us do that. We’re glad to be staying.”

The building is owned by Alexander’s, while Vornado Realty Trust developed, manages, and leases the property, and owns a 32.4% stake in Alexander’s. “731 Lexington remains a best-in-class Midtown tower, impeccable in its design by Ceasar and Rafael Pelli, and light years ahead of the curve technologically,” said Steven Roth, Chairman and CEO of both Vornado and Alexander’s. “Bloomberg’s decision to remain is a testament to the rare and enduring quality of the tower as well as to our successful decades-long partnership.”

The mixed-use glass skyscraper, on the East Side between 58th and 59th street, opened in 2004.