Aby Rosen’s loan servicer tossed him a lifeline this month when it greenlit a short-term extension on the troubled loan tied to 285 Madison Avenue.
The RFR principal now has until November to refinance the $222 million CMBS debt collateralized by the pre-war office building, according to Morningstar Credit.
A spokesperson for RFR declined to comment.
The loan transferred to special servicing in April, a month before its initial maturity date, after
Rosen and fellow principal Michael Fuchs claimed “they cannot pay off the loan at its maturity,” according to servicer commentary.
Fresh debt will come with a higher interest rate, which has likely complicated Rosen’s search. The principal borrowed at 3.8 percent interest in 2017, according to Morningstar. The going rate for CMBS office loans is now in the 6 to 7 percent range.
Another hurdle is the property’s slipping value. Once appraised at $610 million, the Grand Central-area building was revalued at $411 million in October 2022.
It’s possible the asset is worth even less now. Interest rates continued to rise through the end of 2022 to mid-2023, pressuring property values.
And the $222 million CMBS loan isn’t Rosen’s only debt on the building. The sponsor also took out a $35 million B note, which is not securitized and a $205 million mezzanine loan, according to Morningstar.
That puts Rosen’s total exposure at $462 million, more than the building’s total value two years ago.
On the plus side, net cash flow as of 2023 was above reported revenues when the loan was made, and RFR has kept occupancy around 96 percent over the past two years.
Still, Rosen has struggled to pay debt service — he is operating just a touch above break even, according to Morningstar — as expenses have risen faster than revenue over the past couple of years.
One ace in Rosen’s pocket is the CMBS loan is single-asset, single-borrower, meaning if the sponsor defaults there are no other mortgages in the loan pool to cushion the blow to bondholders.
That means the special servicer, acting on the bondholders’ behalf, could be inclined to modify the debt if Rosen is unable to refinance before maturity.
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