Vornado Realty Trust’s 350 Park Avenue office tower was put on Wells Fargo’s loan servicer watch list this month after its income from rents fell to less than 110 percent of its debt payments, Bloomberg News reported, citing a report from Morningstar.

“The asset is currently generating insufficient net operating income to cover debt service and Vornado has been funding the shortfalls to date,” Morningstar said. Income “is not currently expected to recover enough through re-leasing to eliminate the shortfall prior to the maturity of the loan.”
Vornado acquired the 538,000-square-foot building for $541 million in 2006. [more]

Kuwaiti investment firm Fosterlane Management, the former owner of the Lipstick Building and 350 Park Avenue, is getting back into the New York City real estate game with the purchase of Hines Interests’ 750 Seventh Avenue for $485 million, or roughly $808 per square foot, the Post reported. Earlier this week, the Observer reported that the 600,000-square-foot tower near 49th Street tower was in contract to sell to an anonymous offshore investor. Hines purchased the 36-story tower, half of which is occupied by Morgan Stanley, for $150 million in 2000 through a partnership with General Motors. [more]

It has been taken as an article of faith in the current downturn that tenants are shying away from highly leveraged buildings in an effort to protect themselves against possible building service cutbacks or other interruptions tied to onerous debt-service payments.

High leverage along with financially strapped ownership, legal uncertainty or extremely high vacancy, lead to tenants shunning leasing in certain buildings, brokers have said.

As recently as last week, Real Estate Board of New York panel member Isaac Zion, a managing director at SL Green Realty, said relatively low leverage on the company’s buildings was an advantage.

“Most of our buildings have very low leverage, so it is a positive. We see sort of — for the tenants that are actually moving — there is a flight to quality,” Zion said.

But data requested by The Real Deal from two research firms reveals that the situation is complex, and that high leverage in some buildings leads to high availabilities, while in others it does not. [more]