Fortress Group Acquires $1B Loan Portfolio from Capital One
Bank unloads loans that are backed by NYC office buildings.
Fortress Investment Group has acquired about $1B worth of CRE loans from Capital One, as the bank reduces risk from mortgages tied to buildings.
While the specific loans involved in the transaction were not disclosed, several reports indicated that the lion’s share of the debt packages were backed by office buildings in New York City.
In its second quarter earnings report, the McClean, VA-based bank disclosed that it had reclassified $888M in office loans “from loans held for investment to loans held for sale.”
Capital One has made office loans to The Durst Organization’s 855 Sixth Avenue and GFP Real Estate’s 40 Exchange Place, Bisnow reported.
Numerous office lenders have been moving to offload debt associated with properties that are not expected to secure enough revenue to cover owners’ skyrocketing debt service as valuations plunge.
The overall office vacancy rate in Manhattan notched another new record in Q2 2023, rising 60 bps to 16.7%, as leasing activity hit levels last seen in Q1 2021.
Leasing activity in Manhattan totaled 3.9M SF in the second quarter, a dip of nearly 24% from the first quarter and a YOY drop of almost 47% that was exacerbated by the delivery of an equal amount of inventory in Q2, according to JLL.
Average direct asking rents for Manhattan offices fell by $1.11 to $81.61 per SF, bringing direct asking rents back to the same level a year ago in Q2 2022, JLL said.
“While overall indicators would suggest highly tenant-favorable conditions market-wide, the right spaces in the best buildings in prime locations are now few and far between,” JLL noted.
A glimmer of a bright spot appeared in sublease vacancy, which dropped by 700K SF, the first decrease in five quarters.
According to bullet points released by CBRE, Manhattan’s net absorption in the second quarter was negative 884K SF, bringing the total year-to-date to negative 2.75M SF.
The office availability rate in Manhattan was up 20 bps to 19.9%, up 70 bps from a year ago, CBRE said.
In its breakdown of Manhattan submarkets, CBRE said leasing activity in Midtown totaled 2.53M in Q2, with year-to-date leasing activity totaling 5.05M SF, down 34% from the same time last year. The availability rate in Midtown remained at 18.5%, the same level as the first quarter.