A big-name developer appears to be facing a refinancing dilemma at a prime Manhattan office building.
A $485 million CMBS loan backed by Tishman Speyer’s 300 Park Avenue in Midtown was sent to special servicing late last month because of “imminent balloon/maturity default,” according to a report from Trepp.
Tishman Speyer said it requested the loan go to special servicing to work out an extension prior to its August maturity. It is a common step for a borrower seeking to extend the expiration of a loan when refinancing may be difficult.
“Given the current credit market dislocation, we requested that our loan be transferred to the special servicer well in advance of its maturity so that we can work together on a mutually beneficial extension,” a Tishman Speyer spokesperson told The Real Deal.
The action will have no impact on 300 Park tenants, the firm said.
The 10-year loan was issued by German American Capital Corporation in 2013 at a fixed rate of 4.41 percent when the Class A office property was valued at $1 billion, according to Trepp. The $485 million coming due includes the loan balance, accrued interest and other expenses.
Green Loan Services, an arm of SL Green Realty, is the special servicer, and KeyCorp Real Estate Capital is the master servicer. Green Loan Services did not respond to a request for comment. KeyCorp declined to comment.
Recent tenant turnover and downsizing at the 25-story, 770,000-square-foot office building may be complicating the refi for Tishman Speyer. Building occupancy was at 99 percent in 2018 but just 75 percent in 2020, according to Trepp. Although the rate recovered to 84 percent last year, the report noted that it was unclear if all the space was physically occupied.
The property has since 1980 been the global headquarters for Colgate-Palmolive, which once occupied about 65 percent of it — around 503,600 square feet.
But the consumer products giant now occupies about 53 percent of the building after a restructure in 2020, and is expected to shrink its footprint by more than 21 percent and its rent per square foot by 20 percent as part of a 10-year renewal beginning in June, according to Trepp and Kroll, a bond rating agency.
Fitch downgraded four classes of the CMBS loan tied to 300 Park Avenue in November and placed all seven classes on a negative rating watch, citing declines in occupancy and net cash flow. The ratings agency said it was largely driven by the restructuring of Colgate-Palmolive’s lease.
Other notable office tenants at the property with leases set to expire in June include Madison International Realty with 25,500 square feet and Golden Tree Asset Management with 20,600 square feet, according to Trepp.
About 25 percent of the property’s leases are scheduled to expire within the next year. More than half of its leases don’t expire for at least four years.
The property had $57 million in base rent at a rate of $73.91 per square foot between April 2021 and March 2022, according to Trepp, down from the $66.8 million in base rent at $86.55 per square foot it had in 2020. The building’s revenue during that same 12-month period was $62 million, down from $75.3 million in 2020, and its profit dropped from $33.4 million to $27.6 million.
The annualized nine-month financials through last September reported the property’s net cash flow to be 44 percent lower than GACC’s underwritten expectation and 33 percent lower than in 2019, according to Kroll.
The property suffered a significant tenant departure in 2020 when Greenhill & Co. gave up its 105,000-square-foot headquarters as its lease expired. The investment bank, which had accounted for more than 13 percent of the building’s square footage, relocated to the former Time Inc. building at Rockefeller Group’s 1271 Sixth Avenue.
Tishman Speyer’s attempt to refinance the property comes as higher interest rates and doubts about the office sector are making refinancing difficult.
More than $16 billion in loans secured by New York City commercial properties are set to mature this year, according to Trepp. That’s almost 30 percent more than the $12.7 billion that came due last year, an increase driven partly by borrowers exercising extension options on their loans over the past three years.
Not every office owner is kicking the can down the road, perhaps because not all have extension options. Aby Rosen’s RFR Holding is seeking a $1 billion refinancing of the 38-story, 860,000-square-foot Seagram Building at 375 Park Avenue in Midtown before its loan matures next month.
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