Defaulted Loan On Blackstone's 1740 Broadway For Sale After $430M Value Drop
After the appraised value of a Blackstone-owned office tower in Manhattan fell by more than 70%, the lender is looking to sell the mortgage tied to the building for a discount.
The $308M CMBS loan on 1740 Broadway is on the market for roughly $150M, Bloomberg reports. Blackstone, the world's largest owner of commercial real estate, defaulted on its mortgage tied to the 26-story building in March 2022.
“We wrote this property off two years ago, and in the event a buyer is identified, we will work collaboratively to transfer the ownership,” a Blackstone spokesperson told Bisnow in a statement.
The discount on the loan could make the troubled Midtown office tower a prime candidate for a residential conversion, Bloomberg reported, citing unnamed sources.
Blackstone stopped funding the property's operating shortfall in March 2022, as it became clear that older office buildings were facing a long road to recovery. It stopped making mortgage payments on the property around the same time and said it would work to hand over the deed to the property.
More recently, special servicer Midland Loan Services attempted to get Blackstone to agree to a loan modification. Blackstone in response “stated that they were not interested,” according to special servicer commentary.
The special servicer first marketed the loan last September but withdrew it from the market as it reassessed the building, according to commentary in the Morningstar Credit database.
It hired JLL this month to sell the loan, according to Bloomberg. Neither Midland nor JLL immediately responded to Bisnow’s requests for comment.
“Midland is in the process of getting updated valuations and having discussions with brokers in the market to determine the appropriate timing and way to bring this asset to market for sale, it is expected that the property will be brought to market for sale in January 2024,” special servicer commentary from last month says.
The property was appraised at roughly $175M in April, down more than 70% from the $605M valuation when the mortgage was originated in 2015.
“There was some industry news as well as an investor Q/A that suggests another appraisal from August 2023 was forthcoming and was in-line with the $175 million figure from April 2023,” Morningstar Credit Analytics Vice President Jonathan Ramel told Bisnow in an email. “Nothing formal has been disclosed by the special servicer yet but we anticipate it could be released in the near term as investors have formally requested this information.”
Blackstone's handling of 1740 Broadway is one of several stories of distress that continue to play out in Manhattan's office market. While the greatest source of distress is expected to come from the billions of office loans maturing this year, experts expect more owners like Blackstone to decide to stop making interest payments and cut their losses well before loans mature.
The CMBS loan on 1740 Broadway is set to mature in January 2025, according to the Morningstar Credit database.
“These term defaults are going to be an increasing concern as things play out,” David Putro, head of CRE analytics at Morningstar Credit, told Bisnow in September. “I certainly expect more term defaults moving forward.”
Ethan Rothstein contributed reporting to this story.
