280 Park Avenue loan hits special servicing 

SL Green Realty Corp and Vornado Realty Trust will have to contribute substantial equity to extend the loan, per servicer remittance reports. 

A $1.1 billion commercial mortgage-backed securities loan backed by New York skyscraper 280 Park Avenue hit special servicing this week, with special servicer Wells Fargo stipulating sponsors SL Green Realty Corp and Vornado Realty Trust will need to contribute substantial equity for the maturing loan to be extended.

The sponsors, both local real estate investment trusts, gained control of the Class A office in 2021. The partner refinanced the debt on the property in August 2017, tapping a consortium of lenders led by Deutsche Bank for a floating-rate, interest-only loan. The loan was priced at LIBOR plus 1.73 percent and was slated to mature in September 2024. It replaced $900 million of existing debt, which was priced at LIBOR plus 2 percent and was slated to mature in May 2023.

The floating-rate, interest-only loan, securitized in a stand-alone CMBS deal, is slated to mature in September 2024. However, the loan’s prior interest rate cap agreement expired in September 2023, according to New York-based credit rating analysis agency KBRA.
Wells Fargo Bank, the loan’s special servicer, said in its January remittance report that “any extension will be contingent upon a substantial equity contribution to support the future cash needs of the property.” The loan was securitized in PRK 2017-280P.

SL Green Realty Corp and Vornado Realty Trust did not reply to statement requests.

Property snapshot 

The occupancy of 280 Park Avenue had been above 94 percent since the loan was originated, but the recent departure of several tenants has caused the occupancy to dip below 90 percent, according to a KBRA report. This triggered a low debt yield period where the borrower is required to deposit $105,000 each month into a rollover reserve account to mitigate the tenant rollover risk, the report found.

Additionally, leases that generate 21.8 percent of the base rent are set to expire in 2024, according to KBRA.

Still, the joint adventure of the owner last December announced multiple renewal and expansion leases, with PJT Partners, a New York-based investment bank, expanding its footprints at the building to 270,000 square feet in a 15-year deal. Another sovereign wealth fund signed a renewal lease of 100,000 square feet with the office tower.

Bigger picture, KBRA is seeing a rise in distress in the office sector, tracking an increase to 10.88 percent from 8.55 percent in December. This was largely due to the CMBS loans on 280 Park Avenue and One Market Plaza ($975 million in OMPT 2017-MKT) being transferred to special servicing for imminent maturity default.