From Real Deal -
After their attempts to [refinance a Dumbo office campus fell flat, owners RFR and Kushner Companies defaulted this month on the portfolio’s $180 million loan.
The firms, who failed to pay off the debt at maturity, are pushing for a five-year extension, service commentary shows, in a means of kicking the can and avoiding the near-term risk of foreclosure. The debt is collateralized 117 Adams Street, 55 Prospect Street, 81 Prospect Street and 77 Sands Street, Trepp shows.
The botched refi signals how challenging the financing market has become for office landlords, after the valuations of many office buildings [slipped below their debt balances, according to JLL.
Lenders are also requiring sponsors to refinance at a lower loan-to-value ratio, a recent [CBRE report found. The combination of falling valuations and larger equity commitments has created a sizable financing gap — CBRE forecasted it would hit $73 billion within the next two years and could leave some landlords out in the cold.
It’s unclear where the valuation of the Dumbo Heights portfolio now stands. RFR did not comment, Kushner Companies did not respond to a request for comment and Morningstar has yet to list a current appraisal value.
But financials that have been updated by Morningstar signal the portfolio is struggling. Cash flow at the properties was barely covering debt service in March and occupancy had slipped to 73 percent from 94 percent in 2018 when the loans were made, according to servicer commentary.
It’s possible WeWork is to blame for that jump in vacancy. The coworking firm was the second-largest tenant when the loans were made with a lease totalling 21 percent of the portfolio’s total rentable area.
WeWork appeared to have leased space at 81 Prospect and 77 Sands Street, which is still listed for rent on WeWork’s website. The Wayback Machine shows 81 Prospect disappeared from the firm’s site sometime between 2020 and 2021.