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NEW YORK CITY — The ownership group of 1290 Avenue of the Americas, a 2.1 million-square-foot office tower in Manhattan, has refinanced the property for $950 million.

The 10-year, interest-only loan bears a 3.34 percent interest rate, and the net proceeds from the refinancing were approximately $522 million following the repayment of the existing loan and closing costs.

New York City is among the tightest markets in terms of occupancy with a 10.1 percent vacancy rate in the third quarter, according to Reis. The New York City-based research firm credits the sound real estate fundamentals to the growth in hiring in the private sector.

New York leads the country in terms of rental rates, which is $58.49 per square foot in the third quarter, more than double the average rate of the U.S. ($28.24 per square foot). The city’s rent is also trending upward, posting a 0.7 percent increase compared to the second quarter and a 3.5 percent increase compared to the third quarter of 2011.

New York City landlords such as the owners of 1290 Avenue of the Americas have pulled back on tenant improvement (TI) allotments compared to last year, according to Jones Lang LaSalle. TI allowances are hovering close to $40 per square foot, down from about $43 per square foot in 2011.

The downtown submarket has tenant-favorable conditions due largely to the lull in hiring for the financial and legal services industries, which are two of the largest drivers to the Manhattan market, according to Jones Lang LaSalle. Those industries are still below 2008 levels. However, the city as a whole has regained all the jobs it lost in the recession. The city is currently seeing strong demand in the technology sector, both from start-ups and established tenants, according to Jones Lang LaSalle.

Vornado Realty Trust (NYSE: VNO) has a 70 percent controlling interest in the ownership group that owns 1290 Avenue of the Americas. In its portfolio, the company has interests in 30 office properties in New York City, totaling approximately 19.4 million square feet. Vornado also has a 32.4 percent interest in Alexander’s Inc. (NYSE: ALX), which owns six properties in the greater New York metropolitan area.

Vornado’s stock price closed Tuesday at $75.54 per share, down from $77.80 per share at this time last year.

Alexander’s stock price closed Tuesday at $437.80 per share, up from $409.14 per share a year ago.

— John Nelson

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