Signature’s crash puts its office landlords in a pickle

Signature Bank’s sudden demise this week may leave some of Manhattan’s largest office landlords holding the bag.

The prolific multifamily lender occupied at least 472,000 square feet across seven offices in the borough, according to data provided by CompStak, when regulators seized the bank Sunday to protect depositors.

Signature has three other offices in Manhattan, although it is unclear how much space it leases at those locations. The firm also has nine locations in Brooklyn, Queens and the Bronx.

About 83 percent of the company’s office leases were not slated to expire before 2032, according to CompStak, which could leave the bank’s landlords on the hook to re-rent space it expected to be full for the next decade. Only 10 percent of its office leases expire in 2025 or sooner.

Nearly two-thirds of its leases were inked prior to the pandemic, when the office market was stronger.

Signature Bank declined to comment. It was placed in receivership by New York state and is being run by the Federal Deposit Insurance Corporation. Its senior executives have been ousted and its shareholders wiped out.

The fate of the bank’s leases is unknown, but Tony Malkin’s Empire State Realty Trust may be in the most precarious position. Signature expanded its footprint last April at ESRT’s 1400 Broadway in the Garment District to more than 313,000 square feet across 11 floors — a third of the 37-story, 938,000-square-foot office tower.

Only three months earlier, the lender had tacked on more than 168,000 square feet to bring its footprint at 1400 Broadway to about 280,000 square feet. The January deal was for $67 per square foot, or $169 million over 15 years. The price of the previously leased space could not be determined, but it included 91,000 square feet leased for 15 years in 2018, when the asking price was $67.

ESRT did not immediately respond when contacted for comment. Colliers’ Michael Cohen and Newmark’s Erik Harris, who represented Signature and ESRT in the negotiations, declined to comment.

Signature’s closure comes as its main landlord, which owns the Empire State Building, has sought to expand its portfolio into multifamily as a hedge against the office sector’s uncertainty in the Covid era.

Investors haven’t looked fondly upon ESRT during the pandemic, cutting its market capitalization by more than half. The percentage of its publicly tradable shares being shorted has hovered for several months near or slightly above 10 percent, a threshold that indicates a bearish outlook on the company.

The firm’s share price is down 32 percent in the past year and 17 percent in the past eight days.

Another major office landlord who rents space to Signature is Larry Silverstein, whose Silverstein Properties leases about 90,000 square feet to the bank at 1177 Sixth Avenue in Midtown.

The lender pays about $70 per square foot at the 47-floor, 1-million-square-foot office tower, or about $6.3 million annually. Signature’s lease runs to 2033. Silverstein declined to comment.

Signature also occupies about 27,800 square feet at its corporate headquarters at Stawski Partners’ 565 Fifth Avenue in Midtown, according to CompStak, and an undetermined amount of space at the Sapir Organization’s 261 Madison Avenue in Midtown South.

Neither Stawski nor Sapir responded to requests for comment.

Signature’s lease at Sapir’s 28-floor, 384,000-square-foot office building could complicate the landlord’s mortgage at the property, which it refinanced in December with a $200 million loan from JPMorgan Chase to replace expired CMBS debt.