Loan On Trump’s 40 Wall Sent To Special Servicing
The mortgage on 40 Wall Street, one of the buildings at the center of former President Donald Trump’s civil fraud trial, is now in special servicing as it faces tumbling office occupancy.
The CMBS loan, which has an outstanding balance of $122.6M, down from an original balance of $160M, was transferred to special servicer Rialto Capital this month, Bloomberg reports. The debt on the 1.2M SF building doesn't mature until July 2025.
A representative for The Trump Organization told Bloomberg the loan is in “full conformance.” It is listed in the Morningstar Credit database as performing despite being placed on the lender's watchlist in February.
“We have never missed a payment, we have never paid late and we have never breached a loan covenant,” The Trump Organization's spokesperson said. “We are incredibly proud of 40 Wall St. and we will continue to operate this world-class building.”
The former president is listed as the sponsor on the loan, and the special servicer said a pre-negotiation letter was sent to the borrower.
Ladder Capital issued the loan in 2015, with the 72-story building underwritten at an appraised value of $540M. But occupancy fell from over 95% to 77% at the end of June, according to Morningstar Credit data.
The third-largest tenant in the property, pharmacy chain Duane Reade, took an early termination option on its 79K SF office in March, according to Morningstar. Its 25K SF retail space underneath the large gold-lettered “The Trump Building” sign, closed there last month.
Fitch Ratings downgraded its rating on the CMBS debt in August because of increasing vacancies, Crain's New York Business reported.
The building is also one of the properties at the heart of New York Attorney General Letitia James' civil fraud investigation of The Trump Organization, in which a New York state judge has already ruled that the Trumps committed fraud by inflating their real estate holdings' values to secure favorable loan terms while positioning properties as less valuable to reduce property taxes.
In her investigation, James found that appraisers valued 40 Wall Street at $200M in August 2010 and $220M in 2012. But on Trump’s 2011 financial statement, he pegged the value of 40 Wall at $524M, then going up to $530M in the next two years, more than double the professional calculation, according to court filings.
In court testimony last week, Trump said he believed the value of the property was “very underestimated” after admitting that the valuation provided for his Trump Tower penthouse was high, CNN reported.
The Trump Building wasn't the only prominent Manhattan office building to see its CMBS debt hit special servicing last week. The loan secured by RXR Realty’s iconic Helmsley Building at 230 Park Ave. was also transferred to special servicing because of “an imminent maturity default,” Commercial Observer reported.
