Fosun International has locked in $500 million in refinancing for its 28 Liberty office tower in Lower Manhattan, even as the Chinese conglomerate warns of mounting losses elsewhere. The move comes as Fosun pushes to upgrade its flagship property while grappling with a steep loss in its tourism business.
Major Refi for 28 Liberty Tower
Deutsche Bank and HSBC are leading the $800 million refinancing package for Fosun’s 28 Liberty, a 2.1 million-square-foot office tower in Lower Manhattan that was once the JPMorgan Chase headquarters. The initial closing will provide Fosun with $500 million in floating-rate debt, with another $300 million expected later to fund capital improvements and upgrades to the building. Sources familiar with the deal say the plan is to syndicate the loan after closing, likely bringing in Natixis and Credit Agricole as co-lenders.
Fosun acquired 28 Liberty in 2013 for $725 million, paying cash for the property. At that time, occupancy was under 50 percent, but Fosun has since boosted it to 72 percent with new leases, including a major 345,000-square-foot deal with the New York State Attorney General’s office. The new refinancing values the loan at roughly 55 percent of the property’s current value, reflecting Fosun’s confidence in the asset despite a shifting office market.
Challenges Inside the Tower
While occupancy has improved, the building faces some headwinds. The law firm Milbank, Tweed, Hadley & McCloy plans to vacate the top floors as it moves to 55 Hudson Yards. This firm currently pays below-market rents of about $42 per square foot, which makes people wonder about the building’s income stability. Fosun’s plan to invest $300 million in upgrades aims to enhance the tower’s appeal to tenants and maintain its competitive edge in a crowded Manhattan office market.
Fosun’s Broader Financial Picture
Fosun’s refinancing win contrasts with struggles in its tourism division. The Hong Kong-listed group, owner of brands like Club Med and Atlantis, reported a $308 million loss in the first half of 2021—more than double the loss from the previous year. Still, Fosun’s resorts in China showed growth, with Club Med’s operations on Hainan Island performing well and resort volume in China rising nearly 172 percent year-over-year. The company’s tourism segment continues to face pressure worldwide, but its real estate assets like 28 Liberty offer some financial stability.
Fosun’s ability to secure substantial refinancing from leading global banks despite ongoing losses signals confidence from lenders in the company’s real estate holdings. The conglomerate’s strategy appears to balance its expanding portfolio of office and hospitality assets with efforts to shore up cash flow and invest in property improvements.
Market Implications
Fosun’s refinancing deal highlights the challenges and opportunities for office owners in New York City. This pandemic accelerated remote work trends, pushing landlords to offer incentives and upgrade spaces to attract tenants. Fosun’s investment in 28 Liberty fits this pattern, aiming to keep the building competitive in a tight leasing environment. Meanwhile, the $500 million refinancing injection provides liquidity for Fosun to execute these plans without selling assets or raising equity.
Look, refinancing deals of this size are rare these days, especially for properties with tenants paying below-market rents and upcoming vacancies. Fosun’s success in arranging this loan package could encourage other owners of major Manhattan office towers to seek similar financing, signaling some resilience in the commercial real estate market despite the pandemic’s blows.
Fosun’s $500 million refinancing of 28 Liberty, led by Deutsche Bank and HSBC, closes just as the conglomerate faces rising losses in tourism. The funds will help upgrade the landmark building and maintain occupancy amid tenant shifts. How Fosun balances these pressures will be key to its financial health going forward.
