Blackstone’s, $BX, defaulted NYC office tower loan up for sale at a 50% discount.
The $308 million mortgage tied to a Manhattan office tower owned by Blackstone Inc. is once again on the market following the private equity giant's default on the debt over a year ago.
According to insiders, Midland Loan Services, the special servicer, has enlisted Jones Lang LaSalle Inc. to handle the sale of the loan backed by 1740 Broadway. The debt, bundled into a commercial mortgage-backed security, is currently being marketed at approximately $150 million, representing a substantial 50% discount.
Back in September, Bloomberg reported that CBRE Group Inc.'s loan sales team had been tasked with selling the mortgage, but the offering was withdrawn from the market shortly thereafter.
The 26-story tower, situated between 55th and 56th streets, underwent an appraisal in April, valuing it at $175 million. This figure marks a significant 71% decrease from the $605 million valuation in 2014 when the mortgage was initially originated, as outlined in loan documents. In March 2022, the debt was moved to special servicing, with Blackstone announcing the cessation of funding for operating shortfalls at the building, including a halt to mortgage payments.
In the face of higher borrowing costs, diminishing property valuations, and an increase in remote work, office owners in New York and across the US are grappling with strategic decisions. Some are opting to relinquish ownership of their buildings, while others are choosing to extend debt and retain ownership.
Despite Blackstone no longer injecting funds into 1740 Broadway, Midland has not pursued foreclosure on the tower.
A spokesperson for Blackstone remarked, "We wrote this property off two years ago, and in the event a buyer is identified, we will work collaboratively to transfer ownership."
Requests for comment from representatives of Midland and JLL were not immediately addressed.
Insiders familiar with the matter suggest that the building could present a viable opportunity for an office-to-residential conversion, given the substantial discount on the loan.
The offering of the 1740 Broadway loan comes as transactions were put on hold last year amid geopolitical uncertainties, concerns about escalating borrowing costs, and declining property valuations. As central banks indicate a gradual reduction in their interest rate policies, investors are gaining more confidence to engage in transactions.
