Nathan Berman is one of the kings of office conversions in New York City, but in real estate, no one bats 1.000.
Berman’s Metro Loft Developers is about to default on a $250 million mortgage at 20 Broad Street in the Financial District, Crain’s reported. Metro Loft indicated it would not be able to repay the loan when it matures next month, according to a report from bond-rating firm KBRA.
Athene Annuity & Life, a subsidiary of Apollo Global Management, is the lender. It declined to comment on the issue, while Berman did not respond to a request for comment from Crain’s or The Real Deal.
The conversion of the 1950s property originated in 2015, when Metro Loft paid $185 million to Vornado Realty Trust for the leasehold. Vornado operated the building as an office for the New York Stock Exchange.
Berman converted the 29-story, 470,000-square-foot office property into 533 apartments, which opened in 2018. Berman expected to spend $100 million to renovate the property, he told TRD in 2016.
The rents that 20 Broad could command, in combination with today’s higher interest rates, however, have apparently prevented Metro Loft from refinancing.
Occupancy was not the problem: The building was 98 percent leased as of May, according to KBRA. But net cash flow was down 11 percent from 2020 as concessions took a bite out of revenue.
Listings on StreetEasy show the property is still one month free on one-year leases, despite concessions largely disappearing from the Manhattan rental market, according to Miller Samuel’s Jonathan Miller.
An issue for conversions is how to renovate in a way that appeals to potential tenants. At least one resident previously bemoaned to Bloomberg that her studio apartment at 20 Broad was an “awkward space” with “bizarre edges and weird corners.”
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An outbreak of Legionnaires disease also led to a dispute with short-term rental operator Sonder, which tried to break its lease covering about 360 units at 20 Broad. Berman emerged victorious in their legal dispute. Quality of life problems allegedly caused by Sonder guests also led to a lawsuit against Metro Loft in 2020; it was settled a year later.
Berman has a number of conversions in the works, both in the Financial District and beyond. In March, Metro Loft struck an agreement to convert Pfizer’s former headquarters in Midtown into roughly 1,500 rentals, which would make it the city’s largest office-to-resi conversion.