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A Midtown office loan’s in trouble. Is WeWork to blame?

Rent at APF’s 25 West 45th Street can’t cover payments on $65M debt

From left: 25 West 45th Street, 183 Madison and APF's Kenneth Aschendorf and Berndt Perl
From left: 25 West 45th Street, 183 Madison and APF's Kenneth Aschendorf and Berndt Perl (Getty, APF)

As WeWork’s lease-breaking rattles office landlords, the firm’s discrete exit from one Midtown office tower may have pushed the property to the brink of distress.

Last week, a $65 million loan backed by 25 West 45th Street landed in troubled territory after a decline in occupancy dragged down operating income, a Moody’s ratings action detailed.

The building, owned by office landlord APF Properties, reported 82 percent occupancy as of November and nine more leases nearing their end, according to Morningstar data.

As of March, the property carried a debt service coverage ratio of 0.93 percent, signaling cash flow fell just short of covering operating expenses on a loan that comes due in just six months.

APF grappled with broken leases and rent arrears throughout the pandemic, but WeWork’s departure may have served the biggest blow.

In early 2019, mere months before WeWork’s failed IPO, the coworking firm nabbed space at four APF buildings, including two floors at 25 West 45th Street.

WeWork did not begin paying rent at 25 West 45th until the second quarter of 2020 and found itself in a legal dispute with APF that December. The landlord alleged WeWork failed to submit the required documents for its requested reimbursement on improvement expenses.

Despite the litigation, WeWork appears to have opened up shop in the building by early 2021. The location first went live on WeWork’s site in February 2021, online archives show.

But by November 2021, the firm’s 25 West 45th listing had been wiped from the web.

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It’s unclear whether WeWork terminated its lease with APF. The firm, which is led by Kenneth Aschendorf and Berndt Perl, did not respond to a request for comment.

But records point to an exit. 

The building’s occupancy dipped to 73 percent from 86 percent the same year that the listing vanished. WeWork’s lease covered 12.5 percent of the property, according to Morningstar.

The floors WeWork occupied — the second and 15th — are each listed as available on the commercial leasing site SquareFoot.

The coworking firm with the 18-cent stock price has proved an equal irritant at another APF Property: 183 Madison.

After leasing space at the building in 2019, the firm failed to pay rent from September 2021 through March 2022 and has been frequently delinquent since. WeWork is current as of this spring. But APF extended a lease amendment that offered the firm a $4.3 million break on the last seven years of its lease.

Given those challenges, Aschendorf’s comment in 2019 after inking four leases with the startup carries a certain irony.

“WeWork is exactly the type of firm we would want to have across our portfolio,” Aschendorf said then.

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DistressDSCRManhattan Office MarketMidtownOffice LeasingWeWork