APF faces $70M office foreclosure as portfolio struggles

After a $70 million default, APF Properties is at risk of losing one of its formative acquisitions.

The special servicer on the CMBS debt tied to 25 West 45th Street, a 111-year-old Midtown office building, filed to foreclose this week after APF failed to pay off the loan at maturity.

The foreclosure threat is the landlord’s second this year. It is also at risk of losing the New York Gallery Building at 24 West 57th Street, a commercial building that rents to art galleries. APF marketed the building as a development site early last year, seeking north of $80 million. 

But the distress extends beyond those assets. The 30-year-old firm, led by Kenneth Aschendorf and Berndt Perl, has faced vacancy issues and cash-flow problems across most of its seven New York assets.

WeWork departures from four buildings have caused some of those troubles. But moreso, APF looks to be a victim of an office market reshaped by Covid. Aschendorf did not respond to a request for comment. 

The firm picked up office buildings it considered “boutique” starting in the mid-1990s.

When the pandemic hit in 2020, APF’s New York holdings were largely century-old towers with refurbished lobbies in office districts such as Grand Central or Murray Hill. Amenities included conference rooms and free snacks, according to marketing materials on APF’s website.

The landlord had inked WeWork as a tenant at four of those buildings in early 2019, months before the co-working firm’s failed IPO exposed its fundamental weaknesses. The properties include 25 West 45th Street, 1156 Sixth Avenue, 183 Madison and the Club Row Building at 28 West 44th Street.

At first, WeWork’s instability only rattled 25 West 45th. The co-working firm, which leased 2 floors in the 17-story building, did not begin paying rent until the second quarter of 2020, then terminated its lease in January 2023, loan documents show.

By June, cash flow at 25 West 45th wasn’t covering debt service on a loan set to mature in six months. APF failed to refinance the debt.

When WeWork filed for bankruptcy, it exited its remaining APF leases, leaving three floors empty at 1156 Sixth Avenue and two apiece at 183 Madison Avenue and 28 West 44th.

At 1156 Sixth Avenue it leased a third of the building. At 183 Madison and 28 West 44th, the hit was smaller — about one-10th of the properties’ total rentable area.

APF defaulted on 183 Madison’s mortgage in September. In October, when the debt was set to come due, it landed in special servicing with an occupancy rate of 80 percent. It’s unclear where negotiations on the loan now stand.

Occupancy is even worse — 70 percent — at the Club Row Building on West 44th. Revenue is barely covering debt service and the loan matures in January.

Both buildings feature architecture and amenities that would have attracted tenants more before the pandemic: a landmarked Art Deco lobby at 183 Madison Avenue and terraces and an amenity center at Club Row.

But the renovations are dated. Club Row was last updated in 2014, soon after APF acquired it, according to Morningstar, and 183 Madison was revamped in 2012.

It’s unclear when 25 West 45th last got a refresh, but the building’s listed amenities —  a conference center with “state of the art communication technology,” and an on-site Chioptle and FedEx — are not going to get office employees out of their sweatpants and back to the office.

In 2024, owners of office buildings light on amenities are hard-pressed to compete unless their rents are “priced right,” according to broker Gabe Marons. But dropping rents may not be an option when revenue is already suffering and loans are coming due.

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