Rialto, Hines Scoop Up $100M in Midtown Office Loans

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Rialto Management Group and Hines acquired a trio of loans in Manhattan, each secured by an office property owned by the same company.

Rialto and Hines purchased the Midtown office debt totaling $99.8 million, according to PincusCo. All three properties tied to the loans are owned by Hilson Management.

The loans — originally issued by Flagstar Bank — are backed by 185 Madison Avenue, 5 West 37th Street and 349 Lexington Avenue. The deal closed June 27 and was recorded Aug. 1; all three transactions were executed through an entity tied to Hines Rialto Credit Partners.

The largest note, $35.2 million, is secured by the 71,00-square-foot building at 349 Lexington Avenue in Murray Hill. A $34.5 million note is tied to 185 Madison Avenue, an 80,000-square-foot office property, and the third, for $30 million, is backed by the 83,000-square-foot building at Five West 37th Street.

Flagstar Bank, the seller of the notes, has previously held debt on all three properties. Signatories for the transaction were Jeremy Schwalbe for Hilson and Eric Green and Liat Heller for the Rialto and Hines joint venture.

Rialto and Hines did not immediately respond to requests for comment from The Real Deal.

In the fall, the two companies held the initial close on a targeted $2.5 billion commercial real estate credit fund, PERE Credit reported. They raised roughly $700 million by first close and quickly started deploying capital, geared towards originating loans backed by high-quality office buildings across the country.

The latest debt acquisition comes as Manhattan’s office sector continues to face elevated vacancy and limited refinancing options.

Hines, based in Houston, recently landed $450 million in fresh financing for the 1.2-million-square-foot office building it co-developed with Ivanhoe Cambridge in the Texas city. The deal represented the first in two years for a multi-tenant office tower outside New York City financed in the CMBS single-asset, single-borrower market, according to Newmark’s Jonathan Firestone.

— Holden Walter-Warner