Loan Backed by 1440 Broadway Goes to Special Servicing

The collapse of WeWork appears to be setting off a chain reaction of distressed loans in NYC buildings that have significant exposure to the coworking giant.

Trepp is reporting that a $399M loan backed by 1440 Broadway went to special servicing this month. According to Trepp, WeWork, the anchor tenant in the Times Square tower, is no longer on the building’s tenant list.

Los Angeles-based CIM Group and QSuper, an Australian pension fund, owners of 1440 Broadway, have stopped making payment on the loan and are handing the keys back to the lender, according to a report in TheRealDeal.

In a statement, CIM said the loan had been transferred to special servicing because “there is no single lender to negotiate with and the loan must first be transferred to special servicing in order to enter into any negotiations.”

TRD’s report included a statement from a WeWork spokesperson saying the firm is still a tenant at 1440 Broadway. In August, Amazon renewed a sublease with WeWork for 210K SF.

CIM refinanced 1440 Broadway in March 2021 with floating-rate debt securitized by JPMorgan into a single-asset CMBS. The tower was valued at $540M at the time, according to DBRS Morningstar, which flagged the property’s exposure to WeWork, which leased about 40% of the tower’s rentable area.

Morningstar watchlisted the building in the summer of 2021. As of March 2023, cash flow at 1440 Broadway was covering only 75% of the monthly debt service, according to Trepp, despite the fact that the building was 91% occupied.

Last month, Walter & Samuels defaulted on a $77M loan backed by 315 West 36th Street. WeWork inked a 15-year lease in 2015 for 93% of the building’s rentable area.

In September, RFR and Kushner Companies defaulted on a $180M loan backed by Dumbo office complex. WeWork had vacated a lease for almost all of the space at the campus.

Properties owned by WeWork’s NYC landlords owe an estimated $2.6B in CMBS debt, including many loans that are already facing distress.

In August, WeWork warned in an SEC filing that it may be on the verge of going bankrupt. Earlier this month, the company disclosed that it would not make two sets of interest payments totaling about $95M, a move it said was meant to jump-start negotiations with lenders, The New York Times reported.

A WeWork bankruptcy would create a gigantic crater in NYC’s struggling office market. The coworking company, once one of the largest private-sector tenants in New York and London, still occupies nearly 7M SF of offices in Manhattan, according to first-quarter data from Savills.

The company’s US national office footprint is more than twice as large, about 16.8M SF, according to CoStar data. Square footage alone doesn’t measure the exposure to a WeWork collapse:

Analysts at Barclays have estimated $7.5B of CMBS are backed by office buildings that are “potentially exposed” to WeWork, with 38% of that total concentrated in NYC, Bloomberg reported.