More than a year ago, Blackstone defaulted on a $308 million mortgage on a Manhattan office tower, and that debt is now on sale at a discount of more than 50%.
Special servicer Midland Loan Services was hired by brokerage firm Jones Lang LaSalle to sell Blackstone's loans. The loan is backed by 1740 Broadway, a 26-story Art Deco tower between 55th and 56th Streets. bloombergsaid a person familiar with the matter.
JLL packaged the debt into commercial mortgage-backed securities and paid $150 million, a 51% discount, Bloomberg reported.
Given that the loan is heavily discounted, sources told the outlet that the building could be eligible for an office-to-residential conversion.
The skyscraper has been declining in value since 2014, when a mortgage was placed on it and 1740 Broadway was valued at $605 million, according to loan documents reviewed by Bloomberg.
At the time, EQ, Blackstone's U.S. office portfolio company, had just purchased a 600,000-square-foot property from real estate investment trust Vornado. It is reportedly filled with tenants paying below-market rents, and sources told the Post that EQ “overpaid at least $100 million for the building.”
The debt went into special repayment in March 2022, when Blackstone shocked the real estate world by transferring its $308 million loan on the building.
“How could one of the world's largest landlords walk away with a relatively small loan of $308 million, after spending a fortune modernizing the building with a new lobby and restaurant? ” one observer mused to the Post at the time.
According to Bloomberg, Blackstone has stopped financing the building's shortfalls and stopped making mortgage payments as of March 2022.
However, Midland has not yet seized the tower, and it is unclear why.
“We wrote down the property two years ago and will work with a buyer to transfer ownership if a buyer is identified,” a Blackstone spokesperson told the Post. .
Representatives for Midland Loan Services, JLL and Blackstone did not immediately respond to The Post's requests for comment.
As of September 2023, 1740 Broadway had just 7.4% occupancy, according to the capital markets firm. global capital.
The tower is just one of many empty office buildings dotting New York City. New York City is stuck in a so-called “urban doom loop” caused by the influx of telecommuting during the pandemic. This trend continues despite rehabilitation. office duties.
The concept of a doom loop is defined by empty office towers, destroying quality of life and ultimately displacing residents.
In the Big Apple, occupancy has only recovered to 48.4% since the pandemic.
However, office occupancy rates were strong at 90% at the beginning of 2020, but plummeted to 10% due to the coronavirus outbreak.
In a published research paper, researchers from Columbia University, Stanford University, the University of Southern California, and Northwestern University found that banks hit by a wave of defaults from landlords have reduced their lending to the commercial real estate market by 1%. It is said to have a loss of $60 million. The National Economic Research Bureau announced this last month.
The damning findings support Morgan Stanley's previous calculations that showed lenders would need to negotiate more than $1.5 trillion in commercial real estate portfolios by the end of 2025 to avoid default. .
