The longtime owner of a nearly 700K SF office building across the street from Madison Square Garden is seeking a modification of its CMBS loan more than a year before it's set to mature.

The $260M CMBS loan tied to 5 Penn Plaza was moved to special servicing this month, according to Morningstar Credit. The loan's sponsor is Stephen Haymes, whose family real estate firm has owned the building for decades, according to city property records.

Ed Curty, the chief financial officer of landlord entity 5 Penn Plaza LLC, told Bisnow Wednesday that ownership hopes to modify the terms of the loan, which matures in January 2026.

“We perceive this as good news,” Curty said, declining to give details into modification discussions.

“I can’t talk about any of that,” he said. “We haven’t sat down, we’ve just had introductions.”

The loan servicer reported that building occupancy was 76% in March, down from 97% when the debt was issued in 2016, according to Morningstar. But Curty said the leasing market has picked up, and after signing 30K SF of leases over the past month, the building is on pace to hit 85% occupancy. He declined to identify the new tenants.

A JLL team led by Kristen Morgan, Greg Wang and Mitchell Konsker represents Haymes in leasing up the building. The landlord upgraded the property last year, adding a golf simulator, rooftop terrace, gym and conference center.

“We’re now attracting tenants. We have numerous inquiries from JLL regarding half floors and full floors,” Curty said.

The 679K SF building was constructed in 1915. It has been dealing with “weakening cash flow” in recent years, according to Morningstar, with the building's debt-service coverage ratio falling below break-even levels.

But the borrower has stayed current on its interest payments, and earlier this year it requested access to reserves being held by the lender as it was working to boost occupancy, according to watchlist commentary.

In addition to the $260M CMBS loan, Haymes took out a $40M mezzanine loan in 2016 to refinance a $200M CMBS loan from 2007 tied to the property, Commercial Observer reported at the time. Citigroup originated the refinancing and securitized the senior note into four CMBS trusts — CGCMT 2016-GC36, CGCMT 2016-GC37, CGCMT 2016-P3 & JPMBB 2016-C1.

The building was appraised for $540M in 2015, according to Morningstar. Its present market value is likely lower considering its age and the higher interest rate environment. Office values have dropped 37% since their 2022 peak, according to Green Street.

Haymes' family firm, Haymes Investment, is approaching its 100th anniversary. Many longstanding real estate dynasties have had to reckon with the rapid decline in desirability of some of their core holdings, The Wall Street Journal reported, leading a new generation of owners to break a cardinal rule that allowed their families to accumulate vast fortunes: never sell.