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Shorenstein Properties has fallen behind on debt payments on a $350M CMBS loan backed by its 1407 Broadway office property.
The San Francisco-based investor is 30 days delinquent on the loan, a single-borrower, single-asset security provided by Barclays in 2019, Commercial Observer reported, citing CMBS tracking firm Trepp. The loan is now in special servicing.
“The transfer does not appear to be the relatively benign transfer that surrounds negotiations over an embedded extension option,” Trepp analysts wrote in a notice this week. “In this case, September special servicer comments reference the borrower’s ‘inability to pay monthly debt service.’”
Shornstein acquired the leasehold on the property for $330M back in 2015, and spent $62M upgrading it. The 1.1M SF, 43-story tower is 84% occupied, The Real Deal reported, citing Kroll Credit Profile. The landlord took out a two-year, $350M loan in 2019 with three one-year extension options, the last of which is set to mature in November.
Comcast signed on for 100K SF at the building in 2017, and flexible office provider Knotel signed a 28K SF lease across two floors in 2019, two years before it filed for bankruptcy.
The capital markets environment, as well as slower leasing, has made it difficult for many office owners to refinance properties — resulting in loans in special servicing and some owners walking away from buildings.
A few blocks north at 1740 Broadway, Blackstone handed back the property to its lender last year. The loan is now set to be marketed for sale. At the Brill Building at 1619 Broadway, Brookfield transferred control to its lender this summer. In the Financial District, RXR did the same at 61 Broadway.
Owners like Tishman Speyer and Aby Rosen have also sent loans on offices to special servicing in the last year as debts have come due, although both were able to negotiate extensions.
The impact on older properties has been particularly tough.
“The Fed hasn't started cutting rates, the costs of putting tenants in hasn't gone down, and demand for space in those buildings has not increased,” Michael Gigliotti, the co-head of JLL’s New York Capital Markets office, said of older buildings in an interview this week.
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