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Outlook downgraded at Kushner’s Times Square property

Retail space at 229 West 43rd Street sporting 40% vacancy

Kushner Companies CEO Laurent Morali and 229 West 43rd Street (Getty, Kushner Companies, Google Images)
Kushner Companies CEO Laurent Morali and 229 West 43rd Street (Getty, Kushner Companies, Google Images)

For Kushner Companies, it’s all the blues that’s fit to print at its Times Square retail property.

Fitch Ratings downgraded the outlook on a mortgage-backed security tied to a $285 million loan on Kushner’s 229 West 43rd Street retail space, Crain’s reported. The 245,000-square-foot space has a 40 percent vacancy rate and its most recent appraisal declined 23 percent from the previous one.

After the pandemic erupted, a lender sought to foreclose on the property and a date with the auction block appeared destined before Kushner managed to escape delinquency on that loan. That push, however, came from mezzanine lender Paramount Group, which originated a $70 million package for Kushner.

Troubles persisted and a special servicer started handling the larger of the loans two years ago.

The first signs of trouble at the property, which once housed headquarters to the New York Times, came shortly after the pandemic ravaged Manhattan’s retail market. Two of the top tenants, Gulliver’s Gate and National Geographic, vacated their spaces; Fitch says a tenant is in talks for the latter, which spans 59,000 square feet.

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Even before the pandemic, Guy Fieri’s Guy’s American Kitchen closed with 10 years left on its lease. An outpost of the Upper West Side restaurant The Ribbon moved in, but appears to have closed in recent months and litigation is ongoing between Kushner and the restaurant regarding $2 million in back rent going back to last February.

Remaining major tenants include Bowlmor and Los Tacos No. 1.

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Kushner purchased the four retail floors of the 18-story building from Lev Leviev’s Africa-Israel in 2015 for $296 million. After making the purchase, it landed $370 million in refinancing, including a $285 million CMBS loan from Deutsche Bank.

The remainder of the property was purchased the same year by Columbia Property Trust for $516 million. That part of the building is considered a separate commercial condo unit, meaning it wasn’t considered in the Fitch downgrade decision.

— Holden Walter-Warner

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Fitch RatingsKushner CompaniesReal Estate LoansRetailTimes Square