New York Times food critic Pete Wells’ epic takedown of Guy Fieri’s restaurant is no longer the worst review ever at the Kushner Companies’ Times Square property.
Eight years after that devastating writeup, an appraisal of Kushner’s 248,457-square-foot retail condo at 229 West 43rd Street slashed its value by 80 percent, to $92.5 million, from $470 million in 2017, according to Trepp.
The property is now valued well below the $225 million commercial mortgage-backed securities loan backing the property.
It was reappraised after two of its major tenants vacated: the miniature buildings store Gulliver’s Gate and National Geographic. That dropped occupancy down to 52 percent from 95 percent last year.
The appraisal’s drastic reduction shows how severe the pandemic’s impact has been on Times Square retail. With tourism falling by more than 80 percent and nearly 9 in 10 office employees still working remotely, retailers in Times Square are vacating and landlords are finding it difficult to find new tenants.
“There are a lot of issues with retail in the city, but I would say no area has been hit harder than Times Square,” said David Firestein, a retail broker with the Shopping Center Group.
The Kushner Companies’ retail property is located on the first four floors of an 18-story office building where the New York Times was headquartered until 2007.
Kushner bought the property for $296 million in 2015 from Lev Leviev’s Africa-Israel. The company soon secured $370 million in refinancing, including a $70 million mezzanine loan from Paramount Group, a $15 million mezzanine loan from SL Green and a $285 million CMBS loan from Deutsche Bank.
Even before the pandemic, the property faced challenges with its retail and restaurant space.
In 2017, five years after being taken apart by Wells, celebrity chef Fieri’s Guy American Kitchen closed with 10 years left on its lease. Then plans to open a food hall led by Chef Todd English fell apart as the Kushner Companies became entangled in litigation.
The CMBS loan backing the property went into special servicing in November after Kushner defaulted on a smaller, high-interest part of the debt in October 2019.
The mezzanine lender, Paramount Group, was seeking in June to take the property through a foreclosure auction, but backed away at the last minute to allow for more negotiations, according to the New York Times.
The CMBS loan remains in special servicing, according to Trepp. In September, the loan was more than 90 days delinquent, but Trepp now shows the loan is no longer delinquent, but rather is in a “grace period.”
The remaining tenants at the property include Bowlmor, The Ribbon, Guitar Center, Haru and Los Tacos, according to Trepp.
A spokesperson for Kushner Companies did not immediately return a request for comment.
Some office tenants are also looking to get out of Times Square. Thomson Reuters is reportedly considering selling its stake in its Times Square headquarters. The media company hired an adviser to solicit interest for the 50 percent stake it owns in the 885,000-square-foot building at 3 Times Square, Bloomberg News reported.