Related, BGO to Surrender Empty Long Island City Office Campus
Lender io sell mortgage for The Point in deed-in-lieu-of-foreclosure deal.
Related Fund Management and BentallGreenOak (BGO) are surrendering a Long Island City office complex they purchased in 2016 and renovated, after defaulting on a CMBS loan on the property.
The partners have agreed to a deed-in-lieu-of-foreclosure arrangement with BrightSpire Capital, a REIT holding a non-performing loan for The Point LIC, a two-building campus including the Paragon Building at 2100 49th Ave. and the Blanchard Building at 2109 Borden Ave.
BrightSpire will try to sell the non-performing loan, handing the keys to a purchaser. Related’s asset management unit and BGO paid $104M for the two Long Island City buildings in 2016, and then spent about $45M renovating them.
Owners of aging office buildings in NYC now are faced with what CBRE has called “structurally higher” vacancy levels that are the new normal in the post-pandemic environment.
In its 2023 office outlook, CBRE said “the slow and uneven recovery of the US office market in the aftermath of the pandemic has created a deep divide between primary and secondary office buildings that will continue to widen in 2023.”
“Demand for the best buildings in attractive locations will support rent growth in top-tier office towers. By contrast, there will be a smaller pool of tenants interested in older office buildings,” the report said.
RXR Realty, one of the largest office building owners in New York City, has disclosed that it is preparing to halt debt payments on several older Manhattan office properties and “give the keys back to the bank.”
After what the company described as an “exhaustive” review of its office portfolio, RXR has concluded that an unspecified number of these assets no longer make economic sense in a post-pandemic office market driven by a flight to quality in new Class A buildings, according to a report in Financial Times.
Last year, Blackstone turned over the keys of 1740 Broadway, a 26-story office tower a block from Carnegie Hall, to the special servicer on its $308M CMBS loan.
Deutsche Bank originated the loan in 2015 as part of a single-asset, single-borrower CMBS deal and enlisted special servicer Green Loan Services to manage the financing deal.
Blackstone bought the 621K SF tower from Vornado Realty Trust in 2014 for $605M. It has lost two major tenants during the pandemic, with law firm Davis + Gilbert leaving for 1675 Broadway in 2019 and L Brands electing not to renew its 418K SF lease, instead moving to 55 Water St. in 2020.