The future of an ailing office tower in Midtown Manhattan could soon become clearer.

Yellowstone Real Estate is paying less than $200M to acquire the CMBS loan on 1740 Broadway, a 26-story office tower that Blackstone paid $605M to acquire in 2014.

Now, 1740 Broadway could reportedly become housing after almost 75 years as an office tower, as Yellowstone considers a residential conversion, Commercial Observer reports.

Steven Binswanger, Andrew Scandalios, Jennifer Zelko, Drew Isaacson and David Giancola of JLL reportedly led the note sale. JLL didn't immediately respond to requests for comment from Bisnow.

The fate of the 621K SF property has been in the air for some time, after former owner Blackstone handed over the keys to a special servicer just over two years ago. The property was facing “a unique set of challenges,” a Blackstone spokesperson said at the time, and the world's largest real estate owner has pivoted away from office investments into data centers and rental housing.

Blackstone acquired the building a decade ago from Vornado Realty Trust but lost two key tenants in 2019 and 2020. The firm's debt on 1740 Broadway was around $308M. But by January this year, the asking price for the note had reportedly dropped to $150M after a 2023 appraisal valued the property at $175M, well below the previous debt balance.

Blackstone reportedly hasn't made any payments toward the property’s debt since it was transferred to special servicing.

“We wrote this property off nearly three years ago and have now exited this investment,” a Blackstone spokesperson said in a statement. “These are rare instances in our nearly $600 billion portfolio comprising more than 12,000 assets, and we’re incredibly proud of our performance, which speaks for itself.”

The property was one of the first in the wave of distressed office actions in New York City, where leasing demand has centered around the Class-A properties that make up just a quarter of the Manhattan office supply, according to Avison Young’s first-quarter report.

Yellowstone also recently spent $106M to buy a defaulted note on the New Yorker Hotel. The private equity firm didn't immediately respond to Bisnow’s request for comment.