Shorenstein Properties’ 1407 Broadway loses $400 million in value
![Shorenstein Properties’ 1407 Broadway loses 0 million in value Shorenstein Properties’ 1407 Broadway loses 0 million in value](https://static.therealdeal.com/wp-content/uploads/2024/06/Shorenstein-Properties-1407-Broadway-Loses-400M-in-Value-f.jpg)
The assessed value of Shorenstein Properties’ 1407 Broadway fell from $510 million in 2019 to $136.1 million this year. The decline amounts to $334 per square foot, according to a Morningstar analysis.
It’s the latest blow to the office tower, which sits between West 38th and West 39th streets in the slow-developing Garment District. In March, the special servicer on the building’s $350 million CMBS loan filed for foreclosure, months after Shorenstein stopped paying interest.
Shorenstein’s defaulted or impaired debt totals nearly $1 billion, reflecting declining values in the post-pandemic office market. Commercial Observer first reported on the decline at 1407 Broadway.
Barclays provided the $350 million loan in 2019. The only true It was previously reported that the bank and Shorenstein had been negotiating following the default. Shorenstein declined to comment for this article and Barclays did not respond to a request for comment.
The Financial Times Last week, 1407 Broadway was featured in an article about problem loans that continued to receive top ratings from credit agencies, similar to how mortgage-backed securities received high ratings during the housing bubble but proved worthless. In this case, Fitch gave $187 million worth of bonds for the Broadway building’s debt AA ratings. Shorenstein has not made a payment on the loan since July 2023.
Shorenstein struggled to keep the building near Times Square full. According to Kroll Credit Profile, 16 percent of the space was vacant at the end of 2022, compared to 6 percent in 2019, when the $350 million loan was made.
The dramatic drop in value may have been caused by a now-increased vacancy rate or is expected to rise further as leases expire. This is part of a broader trend of distressed commercial real estate loans in major cities post-pandemic, particularly in older office districts.
The Garment District suffered for years from outdated zoning as politicians sought to preserve manufacturing jobs. Higher-paying tenants moved instead to Hudson Yards and the Grand Central area, which were rezoned during the Bloomberg and de Blasio administrations.
Although observers believe New York’s office sector has avoided a “vicious cycle” scenario – partly due to demand for high-quality space – vacancy rates remain much higher than pre-Covid levels, rising from 6.4 percent in early 2020 to 12.8 percent in 2024, according to city treasurer data.
The ground lease for 1407 Broadway expires in 2030 but can be extended through 2048. According to Morningstar, the property’s value could also be impacted by the impending end date, which could lead to an increase in the lease on the property.
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![Office giant Shorenstein’s debts approach $1 billion](https://static.therealdeal.com/wp-content/uploads/2024/06/Office-Giant-Shorensteins-Debt-Approaches-1-Billion-f-150x106.jpg)
Shorenstein’s debts are piling up and approaching a billion dollars
![Shorenstein faces $350 million foreclosure on 1407 Broadway](https://static.therealdeal.com/wp-content/uploads/2024/03/Shorenstein-Faces-350M-Foreclosure-at-1407-Broadway-f-150x106.jpg)
Shorenstein faces foreclosure on $350 million office building at 1407 Broadway
![Shorenstein Properties, defaulting owner at 1407 Broadway](https://static.therealdeal.com/wp-content/uploads/2023/09/Shorenstein-Properties-Delinquent-on-1407-Broadway_FT-Thumbnail-150x106.jpg)
Shorenstein stays behind on 1 million square foot office tower in Garment District
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