Last month, Meyer Chetrit’s headache at 65 Broadway went from bad to migraine.
The $151 million CMBS loan tied to the FiDi office building had landed in special servicing in February after a tenant exodus. Cash flow couldn’t cover loan payments, according to Trepp, and by April, the loan was flagged for maturity default.
In June, the former American Express Building was reappraised at $104 million — half of its 2019 value and below the loan balance.
As his asset weathered that blow, Chetrit was hashing out a rescue plan.
The head of The Chetrit Group, and his co-sponsor, Robert Wolf of Read Property Group, brought payments current in June, according to Fitch commentary.
The loan’s next payment is due July 15, according to Trepp, signaling the pair may have negotiated an extension.
A spokesperson for Chetrit did not return a request for comment on the specifics of the turnaround.
But servicer commentary from before the loan became current shows the borrowers were trying for a two-pronged approach.
Chetrit had “offered to inject additional equity,” to lock down an extension, according to Trepp.
The modification would also make some of the $96 million B-note that comprised the bulk of the loan subordinate to the rest of the debt stack.
Such splits are typically used to reduce a sponsors’ loan payments so they can shore up operations and boost value. Often, subordinate notes, sometimes called “hope notes,” will not accrue interest and only come due once the full loan does. Any balance that can’t be paid off at maturity may be forgiven.
As the name suggests, those modifications rely on the lender’s hope that the borrower can boost value before the new maturity dawns.
If the sponsor fails, the bondholders on the CMBS bear the losses.
Drawing new tenants to 65 Broadway may prove tough. The building is 110 years old and was last renovated in 2018, before the pandemic upped tenant expectations around amenities and customized space.
The building remains 35 percent vacant, meaning Chetrit and Wolf have their work cut out for them.
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