Content area
Full Text
One of the country's most skilled real estate investing companies seems to have met its match in struggling Midtown.
Blackstone, which controls $280 billion in real estate assets, was forced in March to surrender the keys to its 1740 Broadway office tower after defaulting on a $308 million mortgage issued by an affiliate of Deutsche Bank.
Two office tenants that occupy most of the 26-story building at West 56th Street, including the former parent company of Victoria's Secret, plan to head elsewhere. And those spaces—a total of about 500,000 square feet—have not been re-leased, even after Blackstone invested heavily in updating amenities at the 1950s building, including adding a 5,000-square-foot restaurant, Iris, and a private club.
"We are working diligently to find a solution that is in the best interests of all parties involved, including our investors and lender," said a Blackstone spokeswoman, who added, "We continue to be big believers in New York."
The unusual stumble of course has something to do with the Covid-19 pandemic, which has prompted many firms to allow their employees to work remotely.
But other factors also might be in play. Midtown was struggling mightily even before the pandemic, as companies were leaving the older business district for Hudson Yards and other trendy locales, according to Frank Wallach, an executive managing director of Colliers.
In that sense, Blackstone's loss of 1740 Broadway, Wallach says, is really a symptom of an earlier era.
"The pandemic complicated an already challenging situation," said Wallach, who pointed to a Colliers report showing Midtown leased 1.33 million square feet of office last month, up from 1.22 million in March. Hudson Yards and FiDi reported rare decreases.
He added that Midtown's availability rate hit a high of 17.5% in July but now stands at 16.5%.
Other milestones might not be as promising. Asking rents for offices in the neighborhood, which is north of 40th Street, declined to $80 per square foot annually, the first time...