Commercial real estate will never be the same again ...

[David Goldsmith]

https://new-york/2023/02/01/nearly-completed-west-chelsea-office-project-heads-to-foreclosure/
https://preview.therealdeal.com/

Nearly completed West Chelsea office project heads to foreclosure​

Warehouse conversion at 541 West 21st Street beset by construction delays, liquidity issues

FEB 1, 2023, 7:00 AM
By

• Orion Jones

It was a blank canvas for new office space, until it got stretched a little too tight.
A nearly finished boutique office building in Chelsea’s art district is headed for a takeover, most likely by one of its lenders, unless the owner can stave off a pending foreclosure sale.

An auction for the eight-story warehouse-to-office conversion at 541 West 21st Street, dubbed “The Frame,” is set for Feb. 14, according to marketing materials seen by The Real Deal.
Erno Bodek, the property’s longtime owner, can stop the UCC foreclosure by cutting a deal with mezzanine lender SME Capital Ventures, or by putting the 65,000-square-foot project into bankruptcy. If the auction does take place, SME would likely come away with the property.

The redevelopment of the century-old warehouse between 10th and 11th avenues kicked off in 2019, with $56 million in senior loans from G4 Capital, and a $4.75 million mezzanine loan from SME.
But construction delays caused by liquidity problems scared off potential office tenants, including web designer Wix and online retailer Shopify, according to SME co-founder Eran Silverberg. All eight stories, including ground-floor retail space, are available for lease, according to the marketing materials.

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Exterior work on the project appeared to be wrapping up earlier this month, according to New York Yimby, but Silverberg said another $10 million would be needed to finish the conversion.
“We think this building is in the right location to be successful,” said Silverberg, who mentioned the Cortland, a nearby residential development, and the High Line as neighborhood draws.

Silverberg said SME would finish the project and stabilize tenancy before selling. Bodek initially tried selling the property as either a hotel or office conversion in 2015 and sought $65 million for it before taking on the redevelopment himself.
A representative of Newmark, which was tapped to market the foreclosure sale, declined to comment. Bodek, who bought the property in the 1980s, could not be reached for comment.
Chelsea has drawn more residential development than office in recent months, including new projects by MaryAnne Gilmartin’s MAG Partners and John Catsimatidis’ Red Apple Group, although the latter’s is mired in legal disputes.

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[David Goldsmith]

Lenders Sue American Dream Mall for $389M

Lenders sued American Dream mall owner Triple Five Group, alleging a breach of contract after being cut out of a loan extension.

therealdeal.com

Lenders sue American Dream mall for $389M​

Western Asset Management, South Korea bank claim breach of contract

The American Dream mall’s financial woes continue to pile up.
Two lenders filed a lawsuit alleging a breach of contract by Triple Five Group, the owner of the beleaguered retail and entertainment center in New Jersey, NorthJersey.com reported. Bloomberg Law first reported the suit by an administrator representing Western Asset Management and South Korea-based Nonghyup Bank.

The lawsuit, filed last week in New York State Supreme Court, seeks $389 million on behalf of the firms. A spokesperson for the American Dream declined to comment to NorthJersey.com regarding the lawsuit.
At the heart of the lawsuit is an extension Triple Five recently received to pay off its debt on $1.7 billion in construction financing. Senior lenders in November gave the mall owner a four-year extension on the loan, taking the debt to October 2026. That extension effectively cut out the two junior lenders, according to The Bond Buyer trade newspaper.

The lenders’ attorneys did not respond to a request for comment from NorthJersey.com.
It’s the latest wrinkle at the East Rutherford retail complex that’s had its fair share of issues during its brief run.

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Don Ghermezian’s firm this month missed an $8.8 million semiannual debt service payment for interest due on $290 million in municipal bonds. Triple Five claimed the state bore the responsibility of releasing the funds to make that payment, at least the second time it has made that argument.
In June, Triple Five missed a semiannual payment on an $800 municipal bond, which was ultimately paid later. The firm received $2.7 billion from banks and bondholders to complete the complex. In 2021, the mall reported $60 million in losses.

With the backdrop of the mall’s troubles, Asian supermarket chain H Mart is set to hold its grand opening at the complex this week. The debut comes four years after the store’s occupancy at the mall was announced.

 

[David Goldsmith]

RFR Seeks $1B Refi at Seagram Building

RFR Holding is seeking a refinancing at the Seagram Building as a debt package and preferred equity near due at 375 Park Avenue.

therealdeal.com

RFR seeks $1B refi of Seagram Building​

Aby Rosen and Michael Fuchs’ firm face debt package, preferred equity due in May
RFR Holding is on the hunt with for refinancing with three months until maturity at the Seagram Building.
Aby Rosen and Michael Fuchs’ firm hired Eastdil Secured to secure a loan to retire the outstanding debt on the 38-story office property at 375 Park Avenue, the Commercial Observer reported.

The $1 billion financing package RFR secured a decade ago is scheduled to mature in May, according to Commercial Mortgage Alert. The package comprises $783 million in senior CMBS debt from Citigroup and Deutsche Bank and $217 million of mezzanine loans. None of the outstanding debt has been paid; RFR has discussed extending the loan.
An additional $100 million of preferred equity in the deal — provided by MSD Partners — is also maturing alongside the larger package. If it’s not paid off, MSD can purchase the preferred equity at par and exercise mezzanine rights.

In total, RFR needs a $1.1 billion capital stack. The firm did not return the Observer’s request for comment.
RFR recently conducted a $25 million renovation of the 860,000-square-foot tower, adding a 35,000-square-foot amenity space to replace a parking garage.

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Private equity firm Blue Owl Capital recently signed a lease for 138,000 square feet, increasing the volume of leasing at the building last year to at least 375,000 square feet. Still, RFR is smarting from the departure of Wells Fargo a couple of years ago; the bank shifted to Hudson Yards.
Commercial mortgage maturities are cascading across the New York City office market, facing a one-two punch between rising interest rates and waning interest in full-time in-person office work. More than $16 billion in loans secured by commercial properties are scheduled to mature this year, according to Trepp.

The $783 million CMBS debt is one of the most significant loans set to mature this year. The property is approximately 96 percent leased.

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[David Goldsmith]

https://commercialobserver.com/2023/02/distress-rate-in-nyc-multifamily-cmbs-set-to-rise/

Distress Rate in NYC Multifamily CMBS Set to Rise​

BY MARC MCDEVITT FEBRUARY 28, 2023 11:44 AM​

PHOTO: ANGELA WEISS/AFP VIA GETTY IMAGES

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A point of interest among multifamily investors reviewing February 2023 reporting data for CMBS securitizations was the special servicing transfer of a $270.3 million floating- rate mortgage secured by a 637-unit, 11-property multifamily portfolio owned by Blackstone.
CRED iQ anticipates the special servicing transfer to elevate the distressed rate for CMBS loans secured by multifamily properties within the New York City Metropolitan Statistical Area (MSA). Prior to February 2023, CRED iQ’s distressed rate for NYC Multifamily was 0.71 percent. The distressed rate is defined as the percentage of loans that are specially serviced, delinquent, or a combination of both.

Although the distressed rate for New York City multifamily appears nominal at first glance, the New York MSA still ranked as the sixth-highest for multifamily distress among the top 50 markets tracked by CRED iQ.
Other notable distressed properties in the New York MSA include 1209 Dekalb, a 127-unit mid-rise property in Brooklyn. The property secures a $46 million mortgage that has been specially serviced since October 2020.

Among multifamily markets with higher distress than New York were San Francisco (5.83 percent) and Los Angeles (1.24 percent). To be fair, the New York MSA is by far the largest multifamily market in the U.S and is expected to continue to attract multifamily investment given vacancy rates that trend below national levels and favorable demographics. These positives are balanced by headwinds such as negative net migration away from the metro and geographical resident deterrence stemming from remote working alternatives.
Reframing our view of distress to a historical perspective, the New York MSA has improved on an absolute basis compared to 12 months prior when the multifamily distressed rate for the market was 1.41 percent. However, the distressed rate appears to have reached its apex in October 2022 when the distressed rate declined as low as 0.51 percent. After October 2022, the New York MSA multifamily distressed rate increased for three consecutive months, without yet accounting for the latest $270.3 million addition to the distressed bucket.
Compared to the overall CMBS distressed rate for multifamily loans, historical trends for the New York MSA have exhibited similar patterns over the past year. The multifamily distressed rate for CMBS has been trending higher for six months.
The low-point for distress in CMBS multifamily loans over the past year occurred in July 2022 when the distressed rate was 1.41 percent. There were spikes in distress in August and November caused maturity defaults that were worked out by the next month. The multifamily distressed rate for CMBS has nearly doubled since July 2022.

Overall, the performance of the CMBS multifamily sector can be put into perspective when considering other property types and the broader multifamily market. Multifamily, along with industrial, have been the two best performing property types in recent history.
Other property types like retail, lodging and more recently office have faced secular headwinds due to shifting usage trends. For comparison, Fannie Mae’s multifamily delinquency rate — defined as loans that are 60-plus days delinquent — has consistently and steadily declined from its February 2022 mark of 0.40 percent. The Freddie Mac K-deal multifamily delinquency rate has barely registered with a delinquency rate — defined as loans that are 30-plus days delinquent — of just eight basis points as of year-end 2022.
CMBS multifamily collateral tends to have more idiosyncrasies than Fannie Mae and Freddie Mac collateral, partially explaining the variation in distressed rates. Additional idiosyncrasies and pockets of distress, such as the New York multifamily default, may materialize market by market as maturity balloon payments come due and floating-rate debt service continues to pressure coverage ratios.
Marc McDevitt is a senior managing director at data analytics firm CRED iQ.

 

[David Goldsmith]

Twitter Puts 200K SF Up for Sublease

Twitter is offering office space for sublease in Chelsea at Columbia Property Trust’s 245 West 17th Street and 249 West 17th Street.

therealdeal.com

Twitter lists Chelsea office space​

Company offers 200K sf on West 17th St. after Columbia Property Trust default
Twitter is looking to cut costs in Manhattan, joining scores of tech firms offering New York City office space for sublease.
The social media company listed 200,000 square feet of space up for sublease at its Chelsea offices, brokerage Savills told Bloomberg. The connected buildings at 245 West 17th Street and 249 West 17th Street comprise a property owned by Columbia Property Trust, a subsidiary of PIMCO.

The addresses surfaced last week as one of seven properties tied up in a recent default by Columbia.
The office landlord last week defaulted on $1.7 billion in loans tied to the properties, including three in New York. The REIT has said it is working with lenders to restructure the debt in the wake of one of the largest office defaults since the onset of the pandemic.
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Twitter, which cut its entire public relations department, did not respond to a request for comment from the outlet.
Columbia has had its issues with Twitter and Musk’s alleged non-payment of rent. Two months ago, an affiliate of Columbia sued the social media company for allegedly not paying rent for its San Francisco office at 650 California Street, claiming Twitter owed more than $136,000 in back rent.

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Rent disputes have become a recurring problem for the social media platform. A landlord in Boston sued the company last week, claiming the company owed $632,000 in rent. Other landlords for Twitter in San Francisco have sued the company, as has the Crown Estate, which manages property for King Charles III of the United Kingdom.

Twitter’s opting to sublease places it in line with a larger retreat from the Manhattan office market by big tech firms, which have been laying off employees in large amounts in recent months. Amazon and Meta are among the companies to roll back office plans in the borough in the past year.