After losing accreditation, a Christian college in Lower Manhattan has announced that it will close its doors. But the decision means the lender on its Battery Park City space may find itself left in the lurch.

The 140-year-old Alliance University, formerly known as Nyack College, has been located at the 21-story, 1.2M SF complex at 2 Washington St. in Battery Park City since 2013. The college initially moved into its eight stories in the building as a tenant, but purchased a 160K SF condominium in 2016 for $49.2M.

In June, Alliance, which specializes in religious studies, received a notification from the Middle States Commission on Higher Education that it will lose its accreditation at the end of 2023. Consequently, its last day of operation will be Aug. 31, the school announced in a press release.

Alliance’s closure could trigger financial difficulties for its lenders as well as for the Christian and Missionary Alliance-affiliated institution itself.

The school's space was backed by a $50.6M loan that was securitized into the CGCMT 2016-P3 CMBS trust, according to Morningstar Credit, which noted in an email that the closure "heightens our concern" about the loan.

The building's reserves held $251K as of July, per Morningstar Credit. While the loan is not yet on a special servicer’s watchlist, Morningstar has been monitoring it since the college received news about its accreditation status in June.

While the college mentioned the possibility of continuing its Alliance Theological Seminary program, no further details about how it will meet its debt payments were provided in the release, Morningstar notes.

“Re-tenanting the space may otherwise prove challenging,” Morningstar’s analysis reads, adding that the Class-B office building has multiple vacancies that span 35K SF or more.

The college is the only tenant operating in the space it owns, which is made up of four condominium units and has one of the four units as collateral for its loans.

The borrowing entity for the college is wholly owned and operated by Alliance.

“There is a springing cash management provision noted in the prospectus with one of the triggers being Nyack College ceasing operations at the property,” Morningstar wrote in its analysis. “Of course, the source of the cash to be swept at this point is a bit of a mystery.”

CORRECTION, AUG. 7, 3:35 P.M. ET: The property has $251K in its reserve account, according to Morningstar, which sent a corrected note about the loan Monday afternoon. This story has been updated.