Signature Bank’s collapse spiked Silverstein building vacancy

Availability rate more than double the rest of Sixth Avenue buildings: Fitch

Signature Bank’s Collapse Spiked Silverstein Office Vacancy
1177 Sixth Avenue and Silverstein Properties chair Larry Silverstein (Americasroof at English Wikipedia, CC BY-SA 3.0, via Wikimedia Commons, Getty)

More than a year later, Signature Bank’s collapse is still creating problems for office landlords.

The bank’s failure caused availability to spike 10 percentage points at Silverstein Properties’ 1177 Sixth Avenue in Midtown Manhattan, where Signature was the second-largest tenant, Crain’s reported. The rate hit 26 percent last year, according to Fitch Ratings, roughly double the availability rate Savills recorded for the rest of the avenue.

When Signature failed last March, the bank vacated roughly 90,000 square feet at the 47-story, 1 million-square-foot tower. That did no favors for Silverstein’s cash flow, which has declined 5 percent since 2021, according to Fitch, when Silverstein and the California State Teachers Retirement System bought out UBS at an $860 million valuation.

There’s more for the building owner to fret over coming soon. In the next three years, approximately 16 percent of the property’s space could be vacated, according to Fitch. Tenants including law firm Faegre Drinker Riddle & Reath and Tradeweb Markets are on expiring deals.

The recent and impending departures led Fitch to lower its outlook on the $450 million mortgage backing the property. While Fitch maintained investment-grade ratings for the various debt slices and said performance was “in line” with expectations, the outlook for the mortgage is now negative.

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Building ownership landed the $450 million refinancing from DBR Investments Co. — a Deutsche Bank affiliate — and Wells Fargo in 2021. At the time of the refinancing, the building’s occupancy rate was 87 percent, according to DBRS Morningstar, down from 91 percent in 2021.

At the time of refinancing, Signature Bank was responsible for 9 percent of the building’s rent. Its lease wasn’t due to expire until 2033.

Silverstein and CALSTRS are attempting to fill the void; Silverstein says about half of the space that Signature abandoned is being filled. Private equity firm Mill Point Capital Partners expanded to 24,000 square feet while agreeing to a six-year extension. The YMCA Retirement Fund, meanwhile, moved over from 120 Broadway, taking a similar amount of space as Mill Point.

Holden Walter-Warner

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