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NYC Office Owners Face Daunting $7B Of CMBS Debt Maturing This Year

A $463M CMBS loan for Savanna's 5 Bryant Park will mature in 2022.

Even as the pandemic’s influence fades from the daily lives of many New Yorkers, the city’s office market is still suffering — and that pain might be about to get worse.

More than $7B of commercial mortgage-backed securities debt belonging to office buildings in the city is set to mature this year, according to Trepp, The Real Deal reported

The $7.16B of office debt due to expire this year is more than in the previous three years combined — a result of borrowers extending loan terms during the pandemic, Trepp’s head of research, Manus Clancy, told TRD. If office buildings have managed to sign higher-paying tenants recently, they may be able to get better loan terms, Clancy said. 

Finding replacement debt may prove a tough sell for building owners: As leases expire, many tenants are unsure of their future space requirements as they contemplate operating as hybrid workplaces. The Federal Reserve’s increase to interest rates also complicates the picture, making loans more expensive for building owners.

Manhattan’s newest office projects, like Tishman Speyer’s The Spiral, are signing large volumes of tenants fast. But many owners of older buildings are struggling as employers fail to force employees back to in-person work. The borough had an office vacancy rate of 17.4% in March, according to Colliers data, and Manhattan’s overall office market still has around 20M SF of office sublease space available.

Several significant loans are due this year. Savanna faces a $463M maturity at 5 Bryant Park, which is mostly leased but still has approximately 145K SF available, while Brookfield Properties has $515M coming due for 620 Eighth Ave., the home to The New York Times that Brookfield acquired when it bought Forest City Realty Trust.

Some owners have maturities coming larger than $1B, like SL Green and Vornado Realty Trust at the 1.3M SF 280 Park Ave. RXR is seeking $1.5B to refinance its 1.1M SF office building at 5 Times Square, which will soon only be 25% occupied.

Some borrowers may decide to cut their losses altogether. Earlier this spring, Blackstone — one of the largest global owners of real estate — handed over the keys for 1740 Broadway.

RXR CEO Scott Rechler has said he may put as much as $500M of RXR’s own money toward the renovation plans for 5 Times Square.

“The current environment has definitely made refinancing in general more complicated,” he told TRD.