UBS AG (UBSN) and Barclays Plc (BARC) are preparing a commercial-mortgage deal linked to properties including Manhattan’s Dream Downtown hotel, the site of Heidi Klum’s Halloween bash, as Wall Street increases lending.
The largest loan in the bond offering is $120 million in debt tied to fees associated with a parcel of land in New York City’s Chelsea neighborhood where the 316-room boutique hotel stands, according to a regulatory filing.
Demand for securities tied to everything from suburban strip malls to luxury lodgings is surging as investors wager that with unemployment at its lowest level since February 2009 commercial-property owners will be able to cover their mortgage payments. Bank forecasts for commercial-mortgage bond sales in 2012 range from Wells Fargo & Co.’s $25 billion to Credit Suisse Group AG’s projection of as much as $45 billion. About $4 billion has been issued this year, according to data compiled by Bloomberg.
The Dream Downtown hotel, a 1960s-vintage building that reopened in 2011, secured bookings for the designer Marc Jacobs’s fashion-week event, the New York City Wine & Food Festival and the Victoria’s Secret show, as well as the party thrown by Klum, the model and host of the television show Project Runway, according to the filing.
The hotel is “renowned” for its Manhattan nightlife and features an “ultra-luxury VIP lounge,” according to the filing. A setback occurred when Chef Miguel Sanchez Romera closed his restaurant Romera this month. A 12-course tasting meal cost $245.
New York City isn’t the only beneficiary of renewed lending on Wall Street. A $65.7 million loan on the Hilton Downtown Nashville in Tennessee and $94.7 million of debt on the Civic Opera House in Chicago are included in the pool of securities from UBS and Barclays.
Wall Street banks arranged about $28 billion of commercial- mortgage backed securities last year, compared with $11.5 billion in 2010. Rising sales are a boon for property owners with loans coming due. Borrowers have $51 billion of mortgages packaged into securities maturing this year, according to Bank of America Merrill Lynch data.
Relative yields on top-ranked commercial-mortgage bonds have plunged to 181 basis points more than Treasuries, the lowest since May, according to the Barclays Capital CMBS Aaa Super Duper Index. That’s down from a high of 323 basis points on Oct. 4, at the height of the European sovereign-debt crisis. A basis point is 0.01 percentage point.
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