The owner of an office building that is facing foreclosure after being abandoned by WeWork last year is looking to convert the property into a migrant shelter.
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The owner of 315 W. 36th St. is in discussions with the New York City government to sign a three-year lease to turn the office space into a migrant shelter, according to special servicer commentary posted to the Morningstar Credit database.
WeWork signed a 15-year, 135K SF lease covering the building's nine stories of office space in 2015, but last year it stopped making rent payments. The lease was among the first the company rejected as part of its bankruptcy proceedings.
WeWork's struggles caused the building's owner, Walter & Samuels, to default on a $77M CMBS loan it took out in 2018. Walter & Samuels stopped making payments for a time but has resumed making interest-only payments via a letter of credit tied to WeWork's lease, according to servicer commentary.
"The Borrower has stated that they are in discussions with the City to sign a lease to house Migrants for three years with two one year extension options," special servicer Midland Loan Servicer wrote last month. "This Borrower should have more clarity from the City related to the status of this potential lease during the 1st quarter of 2024."
Representatives from Walter & Samuels didn't respond to a request for comment. Spokespeople for New York City Mayor Eric Adams and NYC Health + Hospitals, which has overseen migrant shelter contracts, didn't respond to Bisnow's messages seeking comment.
The special servicer has been pursuing foreclosure and the appointment of a receiver to take over the building from Walter & Samuels since September, The Real Deal reported. It is dual-tracking that pursuit with discussions over the shelter contract, according to servicer commentary.
The building also has roughly 8K SF of retail space and sits below eight stories of residential condominiums. Walter & Samuels has owned the building outright since 2015 when it paid SL Green $115M for its 35.5% stake.
When the CMBS loan was issued in 2018, the office and retail property was 97% occupied and it was valued at $127M, according to the Morningstar Credit database. A new appraisal issued in the fall pegged the building's value at $42.4M, a 66% decrease. It was 3% occupied as of May 2023.
WeWork leased space at five NYC buildings owned by Walter & Samuels, The New York Times reported last year. In addition to 315 W. 36th St., 130 Madison Ave. and 419 Park Ave. S. both were on WeWork's rejected lease list.
While most of the temporary shelters the city has set up to house the migrants pouring into the city in need of housing have been in hotels, Adams' administration is increasingly looking to vacant office buildings to convert to shelters.
In September, the city announced it would open a 1,000-bed shelter at the warehouse-turned-office building at 4711 Austell Place in Long Island City. More than 100,000 migrants have entered the city since spring 2022.
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