Blackstone Group’s determination to present 1740 Broadway again to its lenders had real-estate jaws dropping on Wednesday.
“How might one of many world’s greatest landlords stop on a comparatively modest $308 million mortgage, after they spent a fortune on modernizing the constructing with a brand new foyer and restaurant?” mused one observer.
However whereas some analysts feared that Blackstone’s exit from 1740 Broadway augured future retreats by different landlords from the pandemic-battered workplace market, insiders insisted it was a one-off case as a result of a uncommon blunder by Blackstone’s EQ workplace division.
Blackstone’s determination to show the Artwork Deco-style tower over to a CMBS belief was first reported by the Commercial Observer. A Blackstone rep mentioned, “We’re working diligently to discover a resolution that’s in the most effective pursuits of all events concerned, together with our traders and lender.”
A educated supply mentioned of the transfer, “They overpaid for the constructing by a minimum of $100 million and the mortgage phrases left them no wiggle room to ask for decrease rents. Finish of story.”
EQ purchased the 26-story, 600,000 square-foot tower from Vornado in 2014 for $605 million. Though 1740 was full on the time with tenants paying below-market rents, “That quantity was bananas — barely greater than $1,000 per sq. foot for a 1950-vintage constructing within the West 50s that wanted a variety of work,” the supply mentioned.
Going through lease expirations and deliberate move-outs by main workplace tenants L Manufacturers and legislation agency Davis+Gilbert, EQ set about making the previous MONY tower extra interesting to trendy tenants.
Final summer time, EQ executives and brokers proudly confirmed The Put up 1740’s spectacular foyer redesign, which included a 15,000 square-foot non-public tenants’ membership on the mezzanine. The property’s Web page described the constructing as “the neighborhood’s inventive nucleus.”
Hoping to spark culinary buzz as properly, EQ lured outstanding chef John Fraser’s restaurant Iris, which has earned vital accolades and drawn massive crowds because it opened early final yr.
However these enhancements weren’t sufficient to swiftly appeal to new workplace tenants. “They wished within the $80s per sq. foot,” mentioned one dealmaker. “The numbers didn’t fly in a secondary location and in a market with 20 p.c availability.”
A Blackstone supply termed the 1740 matter an “remoted scenario” that didn’t mirror on the corporate’s view of the Manhattan workplace market.
Certainly, Blackstone-owned EQ Workplace lately closed on a 49 p.c stake at One Manhattan West which it purchased from Brookfield and the Qatar Funding Authority. EQ Workplace owns 40 million sq. ft of workplaces within the US unfold over 80 buildings.