Special Servicer Files to Foreclose on 1407 Broadway

Shorenstein Properties is facing foreclosure on its premier NYC asset, a 1.1M SF office tower at 1407 Broadway in Manhattan’s Garment District.

The San Francisco-based firm defaulted on a $350M loan backed by its ground lease on the 48-story tower in September. The lender extended the loan twice until November 9, but Shorenstein failed to make interest payments or pay off the debt when it came due, according to a filing in New York Supreme Court last week.

Mount Street, a London-based special servicer, filed the action, PincusCo, reported.

When the loan was transferred to special servicing in September, Trepp’s report said the special servicer comments cited Shorenstein’s “inability to pay monthly debt service.”

“The transfer does not appear to be the relatively benign transfer that surrounds negotiations over an embedded extension option,” Trepp’s report said.

Shorenstein paid $330M in 2015 to acquire the leasehold for 1407 Broadway, which is located between West 38th and West 39 Street in the Garment District.

The $350M floating-rate loan was provided by Barclay’s in 2019 after Shorenstein renovated the property. When the loan originated, the interest rate was 3.4%, but the federal funds rate had increased to 5.25% last summer when Shorenstein started missing payments.

Shorenstein invested $62M to upgrade the tower, built in 1950, with a new lobby, elevators, common areas and retail storefronts offering fast casual dining and a deli.

According to a website for the building, “1407 Broadway is at the center of it all in New York’s Time Square South submarket. Serving as a hub of technology and creativity, the property is a dynamic, collaborative office and retail destination for market-leading firms.”

As of last June, the building was 82% occupied, according to a Morningstar report.

In September 2022, Shorenstein was unable to refinance its $400M loan on the Art Deco-style headquarters for the company formerly known as Twitter, a complex known as Market Square.

The company was given an extension by the lender, Barclay’s, and special servicer Wells Fargo until January 2023. The loan was repaid by in full by Shorenstein in time for the Jan. 9, 2023 deadline.

Market Square is made up of two side-by-side Art Deco buildings at 1355 Market Street that Shorenstein purchased in 2011 for $110M.

The company spent $300M refurbishing the buildings into a headquarters for Twitter (now known as X). The two buildings, built in 1937 and 1974, originally served as homes to the Western Furniture Exchange and the Merchandise Mart.

Net Lease Spring:

Held April 16-17 in NYC, Net Lease Spring will bring together hundreds of dealmakers from the nation’s top firms. This year’s program will feature 5.5 hours of face-to-face networking and over 5 hours of content focused on micro and macro trends for 2024, being resilient through market volatility, how to serve your corporate tenant clients and much more! Learn more or register here.

Multifamily Spring:

Multifamily Spring is coming to New York City this April 18. This year’s program will bring together the industry’s most influential and knowledgeable real estate executives from the multifamily sector for 5 hours of face-to-face networking and over 5.5 hours of can’t miss sessions. Learn more or register here.