The $1.2-billion loan on 666 Fifth Ave. in Manhattan, which in early 2007 set a sales record for a single office property, was transferred to a special servicer in early March. According to a statement, the transfer was made to allow the trophy tower's owners, the Kushner Cos., "to engage more easily in productive discussions with the lender. The loan is not currently in default."

Shortly after 666 Fifth was transferred into special servicing, the $325-million balance on another Manhattan property purchased at the market's peak, 575 Lexington Ave., went the same route. The statement issued on behalf of the owners, a joint venture of the California State Teachers Retirement System and Silverstein Properties, was similar: the loan wasn't in default and the transfer was intended to facilitate discussions about modifying the loan.

For office landlords across the US, rising joblessness and the resulting uptick in vacancy led to a decline in NOI and hampered owners in servicing the debt. The office sector has been slower to feel these effects than other property types, but it is starting to catch up.

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