Shorenstein’s 1407 Broadway drops 73% in value since 2019: Trepp – Commercial Observer

The office and commercial building at 1407 Broadwaysouth of Times Square, has experienced a 73 percent drop in value since the loan was granted, according to a Stairs Warning issued on Wednesday.

The $350 million loan in the form of commercial mortgage-backed securities (CMBS) was granted to the borrower in November 2019 Shorenstein Real Estatewhich owns the leasehold contract, and placed in the BBCMS 2019-BWAY A single asset, a single borrower. The assessed value of the 43-story building at the time was $510 million.

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Trepp reports that the building’s appraised value was reduced to $136 million in June, a 73 percent drop. The loan was due to mature in November 2023 and was Posted underwent special maintenance last September after payments were 30 days overdue.

The valuation decline in June follows Fitch Ratings Downgrade the loan and put it on a negative rating scale in April, citing that its loan-to-value (LTV) ratio was 114 percent at the time. Trepp said the 114 percent LTV would imply a $307 million valuation and the updated appraisal “raises questions, particularly about the prospect of another round of downgrades.”

The debt service coverage ratio of the variable rate loan fell from 2.75 in 2022 to 0.75 in 2023, according to Trepp. The office occupancy rate is now 81.38 percent, compared to 84 percent two years ago, according to the Trepp report.

Keycorp Real Estate Capital Markets is a special servicer for the loan, according to CRED iQ.

Trepp noted that Shorenstein received a pre-negotiation agreement (PNA) from the special servicer, which was finalized in the fourth quarter of 2023. The borrower later proposed a loan modification, which has not yet been finalized. Negotiations for a loan modification took place earlier this year, in parallel with a foreclosure that was initiated against Shorenstein on March 15, 2024, Trepp said.

According to Trepp, a special comment from a service provider in June stated that the change “could lead to a significantly higher recovery than the updated actual value” because it would give Shorenstein more time to allow a longer extension of its leasehold, which could increase “the refinancing potential with an extended maturity date”.

Barclays (BCS) supplied $350 million of CMBS debt for the loan in late 2019 for Shorenstein to refinance its lease on the property it acquired in 2015. The loan repaid approximately $270 million of previous debt from Bank of America in 2015 to finance the acquisition of the property by Shorenstein under a leasehold agreement in 2015.

The 1407 Broadway property has a 76-year-old ground lease that runs through Dec. 31, 2030, with an 18-year extension option remaining that would extend it to December 2048, according to Trepp. Current ground lease payments are $414,000 annually and are set to increase to $450,000 annually for the remainder of the extension option period, which begins in January 2031, Trepp said.

The building, built in 1950, is currently leased to 119 office and nine retail tenants. Comcast is the main tenant of office properties with a lease for 104,048 square meters, which represents 9 percent of the total net leasable area, and a remaining lease term of five years, according to Trepp.

Shorenstein did not immediately respond to a request for comment.

You can reach Andrew Coen at [email protected]