Between failed refinancing attempts and a default, RFR Realty and Kushner Companies have had a difficult year at their Dumbo office portfolio.
The four Brooklyn office buildings have been on five-year descent, losing 68 percent of their value since 2018, according to a Trepp alert reported by the Commercial Observer. The value of the collateral behind the portfolio fell from $640 million five years ago to $207.1 million.
RFR and Kushner tried refinancing the office campus before defaulting on the $180 million loan. Citi Real Estate Funding originated the CMBS loan in 2018, which was then split into three tranches. The loan matured in September and is being transferred to a special servicer.
The properties at 117 Adams Street, 55 Prospect Street, 81 Prospect Street and 77 Sands Street make up more than 750,000 square feet and were renovated in 2017.
Cash flow was barely covering debt service in March and occupancy in September had slipped to 73 percent from 94 percent in 2018, according to servicer commentary.
WeWork’s struggles have done no favors for the portfolio. The co-working firm was the campus’ second-largest tenant when the debt originated, occupying 21 percent of the rentable area. But some of WeWork’s supposed space there started disappearing from the company’s website in the last few years before its bankruptcy.
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After telling investors this summer it would renegotiate a swath of leases, the firm previously declined to comment to The Real Deal on whether it had renegotiated its Dumbo Heights lease.
The largest tenant in the portfolio, at least as of 2018, is Etsy. The company occupies nearly 30 percent of the rentable space across the three properties. Its lease, however, is set to expire in July 2026.
RFR declined to comment to the Observer, while Kushner did not return the publication’s request for comment.
— Holden Walter-Warner