The five-year interest-only loan on the former American Express Building, which became part of the CF 2019-CF1 and MSC 2019-H6 conduit CMBS transactions in April 2019, was originated by CCRE at a fixed rate of 4.94%.
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The 355,000-square-foot tower, built in 1917 and co-owned by Chetrit Group and Reed Property Group, has 2022 net cash flow forecasted to be 15% below issue levels, and its debt-to-income ratio has fallen to 1.02 times, below breakeven, according to Morningstar.
Sarah Hellwig, a vice president at Morningstar, said the borrower has asked the firm's special services firm, CW Capital Asset Management, to modify the loan terms. The 21-story building's sluggish earnings are being driven primarily by a steep decline in rental occupancy, which is 67% as of September 2023, down from 75% in December 2022 and 99% at closing.
“The property has a number of smaller tenants who are exiting as their leases near the end, and we expect to see more rollovers next year,” Hellwig says. “Demand for older Class B buildings in New York has generally declined, especially as the pandemic subsides and companies increasingly leave these spaces, either downsizing or upgrading to higher quality space.”
The biggest tenant loss at 65 Broadway is Great American Insurance, which leased about 6% of the building before exiting in May 2020, Hellwig said. Nonprofit New York Cares also exited in June 2023, relocating its headquarters to nearby 39 Broadway after leasing 5% of the building.
Hellwig noted that most of the existing tenants occupy small spaces in the building, with none occupying more than 5%. The largest tenant is workforce development services company Arbor E&T, which has a lease remaining through 2029.
Chetrit & Reed acquired ownership of 65 Broadway in 2015 and has since invested $16.7 million in renovating the lobby and upgrading the office space. The building served as the headquarters for American Express until 1975, and later became the headquarters for Standard & Poor's (now S&P Global Ratings), Commercial Observer previously reported.
Chetrit and Reed did not immediately respond to requests for comment.
Andrew Coen can be reached at acoen@commercialobserver.com.