Fitch downgraded a group of securitized loans from Wachovia Bank that includes a Flatiron office tower owned by Joseph Moinian and a Midtown office tower owned by Sitt Asset Management.
The ratings agency downgraded eight loans by Wachovia Bank Commercial Mortgage Trust series 2005-C19, citing concerns about declining cash flows and commercial real estate values.
One Moinian loan is backed by the developer’s 13-story office tower at 50 West 23rd Street in the Flatiron District. The building was 97 percent occupied as of October and has a debt service coverage ratio of 1.52 percent as of June, according to Fitch. A building with a ratio of less than 1 is considered to have negative cash flow.
In June, the building’s broker, Newmark Knight Frank, renewed the 64,000-square-foot lease for a magnet school, called the Manhattan Village Academy for lower rent, following more than a year of negotiations.
Moinian acquired the 333,000-square-foot building at 50 West 23rd from SL Green in 2003 for $66 million, or $198 a square foot.
Fitch noted that vacancies are up and average rents are down in the Midtown South submarket, according to a third-quarter office market report from CB Richard Ellis.
Sitt Asset Management’s office tower at 240 West 40th Street was 99 percent leased as of June. The lease for Donna Karan New York, which represents 92 percent of the building, expires in 2016.
A spokesperson for Moinian said the developer would not comment on the ratings action. Sitt Asset Management officials were not immediately available for comment.