Bad year: 1 in 5 units at Gehry skyscraper goes vacant

Rental occupancy plunges to 74% at 8 Spruce Street

8 Spruce Street and Brookfield's Bruce Flatt (New York by Gehry, iStock, Brookfield)
8 Spruce Street and Brookfield's Bruce Flatt (New York by Gehry, iStock, Brookfield)

More than 200 renters have packed their bags and moved out of the tallest residential skyscraper in Manhattan this year.

The New York by Gehry saw rental occupancy fall to 74 percent in September from 98 percent at the end of 2019, according to Trepp, which tracks mortgage-backed securities. Since 2014, occupancy at the 899-unit Financial District building had been above 93 percent, according to Trepp.

Frank Gehry designed the rippling stainless steel tower at 8 Spruce Street, which architecture critics marveled at for its unique “deconstructivism style.” Formerly called Beekman Tower, the building was developed by Bruce Ratner’s Forest City Ratner in 2011.

Below the rentals, the property has an elementary school on its first five floors. It is among the tallest residential buildings in the Western Hemisphere.

The skyscraper was refinanced in 2014 with a $550 million commercial mortgage-backed securities loan from the city’s Housing Development Corporation. That same year, the property was appraised at $1.1 billion. The CMBS loan refinanced floating-rate bonds issued between 2008 and 2010 that included Liberty Bonds.

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Brookfield Asset Management acquired Forest City Ratner in December 2018, giving the investment giant control of the distinctive skyscraper.

But since the coronavirus hit, occupancy has nosedived. As a result, the $550 million loan tied to the property is now on Trepp’s watchlist. Brookfield, however, has not missed any of the loan payments.

The luxury apartments appealed to high earners in the Financial District. But since mid-March, the area has been almost a ghost town as employees work remotely. Only about 13 percent of New York workers are back in the office, and roughly 500,000 residents skipped town. No borough cleared out more than Manhattan.

Brookfield and its affiliates are among the largest office landlords in New York with properties that include Brookfield Place and One Manhattan West. During the pandemic, the investment firm has emerged as a contrarian on the future of New York’s office market. In June, Brookfield Property Partners CEO Brian Kingston told The Real Deal he did not see working from home “as an existential threat” to office properties.

A spokesperson for Brookfield did not immediately return a request for comment.

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