A major Times Square development has secured more than $780 million in new equity, including about $400 million from
UBS Group AG's ultra-high-net-worth and family office clients.
Construction on the 46-story tower at 1568 Broadway known as TSX Broadway is set to begin in January.
Beyond the capital raised by
UBS,
Fortress Investment Group owner SoftBank Group Corp. is investing about $200 million, according to people familiar with the matter, who asked not to be identified because the information is private. Fortress is developing the project alongside L&L Holding Co. and Maefield Development. L&L co-founders David Levinson and Rob Lapidus and Fortress executives Peter Briger and Dean Dakolias are personally investing in the project, the people said.
(
More: A new tax break for impact investing has arrived)
"We have seen a substantial increase in interest from our ultra-high-net-worth and family office investors for direct, single-asset real estate investments like TSX Broadway, including potential deployment of billions of dollars of capital gains in opportunity-zone investments," said Donato Giuseppi, head of direct investments in the Americas for UBS Wealth Management.
Buried in last year's U.S. tax overhaul is a provision designed to encourage investment in low-income areas dubbed "
opportunity zones," enabling investors to defer, avoid or reduce capital-gains taxes.
Alan Felder, head of real estate, lodging and leisure in the Americas for UBS' investment bank, said the firm's ability to connect corporate clients seeking differentiated sources of capital with its network of ultra-high-net-worth investors is a "win-win."
The capital raised for TSX Broadway represents the largest direct real estate deal pursued by UBS on behalf of its clients, Giuseppi said. Earlier this year, the Zurich-based bank raised $38.5 million for a new W Hotel in Nashville, Tennessee. Direct real estate investments account for 17% of the average family office portfolio, according to UBS's 2018 global family office report.
(
More:
Taking advantage of opportunity zone investments for tax breaks requires high risk tolerance)
A person close to Fortress said it's normal for the firm's senior staff to invest personally alongside its fund investors. Representatives for L&L and SoftBank declined to comment.
"Our investors share our vision for leveraging Times Square's unique value as the predominant global destination of retail and engagement," Levinson, L&L's chairman and CEO, said in a statement.
Goldman Sachs Group Inc. is providing a $1.13 billion construction loan for the project that includes the elevation and restoration of the Palace Theater, recently home to "SpongeBob SquarePants: The Broadway Musical." It also will feature 18,000 square feet of LED advertising, 75,000 square feet of retail, an outdoor dining terrace and a 669-room luxury hotel.
