How One Borrower Is Faring With Extend and Pretend

New York City’s iconic Seagram Building — long a dazzling example of Deco design — is getting attention for finance, not fine art, at the moment. The building’s owner, RFR Realty, exercised a second one-year maturity extension on the building’s $764 million loan, according to Moody’s.

Last year this loan was the third largest to get an extension, right behind the Willis Tower at $1.3 billion and 280 Park Avenue at $1.0 billion, according to Moody’s. “Since their initial extension in May 2023, RFR has prepaid $13.75 million on the principal, most likely a part of the extension agreement.”

RFR has had problems leasing the building up, Moody’s wrote, since Wells Fargo, the trophy office’s largest tenant at 250,000 square feet, moved to 30 Hudson Yards after the lease expired in 2021. That sent occupancy tumbling from 94% to 63%.

“The owners were able to turn things around in 2023 after investing $25 million and lease out a substantial amount of space, raising the occupancy to 97%, but 15% is set to expire in the next two years,” the firm wrote. “In a ‘higher-for-longer’ environment dominated by hybrid work, the Seagram Building loan represents the sentiment heard in CRE lending: elevated interest rates have made refinancing difficult. However, borrowers are not ready to hand over the keys just yet.”

RFR is far from the only company struggling. Trepp recently noted that in April, special servicing on CMBS loans took an 80-basis point month-over-month jump.

“There were some big movers when analyzing by property type, with three up by at least 100 basis points,” Trepp wrote. The special servicing percentages by property type were — retail (up 105 basis points to 10.85%); office (up 53 basis points to 10.84%); mixed-use (down 28 basis points to 8.25%); lodging (up 5 basis points to 7.40%); multifamily (up 269 basis points to 5.10%); and industrial (flat at 0.41%). The multifamily rate passed “the 5.00% mark for the first time since June 2017.”