Blackstone leaves 1740 Broadway and gives the keys to the lender

1740 Broadway

Blackstone is abandoning one of its office buildings in Midtown Manhattan, the latest sign that distress is beginning to hit the office sector.

One of the world’s largest real estate owners, Blackstone handed over the keys to 1740 Broadway, a 26-story office tower one block from Carnegie Hall, to the special agent on his 308 commercial mortgage guarantee million, reports Commercial Observer.

Deutsche Bank originated the loan in 2015 under a single-asset, single-borrower CMBS arrangement and engaged special Green Loan Services to manage the financing arrangement. Blackstone has vast holdings in Manhattan, and the decision to hand over the keys to Green Loan Service is “a one-time event,” a source familiar with the deal told CO.

Blackstone bought the 621K SF tower from Vornado Realty Trust in 2014 for $605 million. It has lost two major tenants in recent years, with law firm Davis + Gilbert moving to Rudin’s 1675 Broadway in 2019 and L Brands choosing not to renew its lease of 418K SF, moving instead to 55 Water St. in 2020. .

“This asset faces a unique set of challenges, and we are working diligently to find a solution that is in the best interests of all parties involved, including our investors and our lender,” a Blackstone spokesperson said. about the building. “The vast majority of our office portfolio comprises differentiated office properties, such as life sciences offices and office properties benefiting from the tailwinds of content creation, and we are confident that these properties will continue to grow. outperform. We continue to be strong supporters of New York and cities like it which are centers of innovation and talent.

Blackstone’s decision to cut its losses at 1740 Broadway echoes recent moves in Chicago, another office market suffering from macroeconomic shifts. Last week, two towers each spanning more than 1 million square feet were on track to end up in the hands of lenders, according to tracking firm CMBS Trepp.

Trepp reported that the property of Brookfield Asset Management, 1.4M SF 175 West Jackson Blvd. was taken over by its lender last Monday, then the next day reported that the special repairer on a $100 million loan for the 1.3M tower SF 135 South LaSalle St. expected the borrower to hand over the deed instead of a foreclosure action.

The future of the office market across the country is in flux, with many employees choosing to continue working from home at least occasionally. In New York, the Manhattan office availability rate reached 17.4% last month, a new record, according to Colliers. Since the start of the pandemic in March 2020, overall availability has increased by 74.1% and now stands at nearly 94 million square feet.

Many of these issues will be most visible in the CMBS market; borrowers like Blackstone at 1740 Broadway have made large single-asset transactions, and the realities of the office market have cast doubt on the ability of many landlords to meet their obligations without investing significantly more money in their properties.

“The problems going forward will mainly come from markets that have significant amounts of dated properties that aren’t particularly desirable for big demand drivers these days,” said Trepp senior managing director Manus Clancy. bisnow in January. “You’ll see episodes in New York, Chicago and other places where big buildings that are securing loans with nine-figure balances are getting into trouble.”

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