Lender Moves To Foreclose On $350M Loan Tied To 1.1M SF Garment District Tower
A pre-foreclosure action has been filed against Shorenstein Properties’ Garment District office building at 1407 Broadway after the firm defaulted on a $350M loan.
After extending the maturity date on the loan twice until Nov. 9, San Francisco-based Shorenstein failed to make interest payments or pay off the debt when it came due, according to records filed in New York Supreme Court Friday.
Mount Street, a London-based special servicer, filed the action. PincusCo first reported the filing. Shorenstein declined Bisnow’s request for comment.
The loan was transferred to special servicing in September after Shorenstein missed the August interest payment and the lender ruled the landlord in default. At the time, Trepp analysts did not mince words on the borrower’s inability to repay its debt.
“The transfer does not appear to be the relatively benign transfer that surrounds negotiations over an embedded extension option,” Trepp analysts wrote. “In this case, September special servicer comments reference the borrower’s ‘inability to pay monthly debt service.’”
1407 Broadway, the 1.1M SF office building backing the loan, was acquired by Shorenstein in 2015 as part of the firm’s Fund Eleven portfolio. The firm spent $330M on the leasehold and another $62M to upgrade it. In 2019, the company secured the $350M loan with Barclays, which valued the building at $510M.
The property was built in 1950 and designed by architect Ely Jacques Kahn. The 2015 modernization campaign included renovations to the lobby and common areas.
When Shorenstein purchased the building, it was 80% leased. Previously reported tenants include Comcast, which took on 100K SF in 2017; Knotel, which signed a 28K SF lease in 2019; and Uber, which moved into nearly 35K SF in 2018.
Shorenstein was once a prominent Manhattan office player, with holdings like the Starrett-Lehigh Building in Chelsea and Park Avenue Tower, according to its website. The 1407 Broadway tower is the third-generation family company's last remaining New York City asset.
The building was 94% occupied when the loan was originated in 2019. Its most recent occupancy was 82% at the end of June, according to the Morningstar Credit database.
The special servicer and Shorenstein executed a pre-negotiation agreement, according to servicer commentary, and Shorenstein requested a loan modification. As of Feb. 1, the most recent commentary, the servicer had sent a counterproposal to Shorenstein but hadn't yet received a response.
Mount Street is asking the court to appoint a receiver to oversee the property as it prepares a foreclosure auction.
