Finance  ·  Distress

Extension Eyed for Distressed 20 Times Square Loan

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A $900 million loan package on Maefield Development’s 20 Times Square, a property that recently appeared to be destined for foreclosure, may suddenly have new life.

An extension and partial paydown of the property’s commercial mortgage-backed securities (CMBS) debt — backed by the Midtown Manhattan asset’s 99-year ground lease — “could be in the works,” according to an email alert from Trepp Monday. The alert noted that the potential loan changes “may take several months to play out,” however.

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Once the site of a Marriott-branded hotel that was forced to shutter early in the COVID pandemic, the property has been the subject of some negative news headlines of late. 

Wilmington Trust, a trustee representing CMBS bondholders, filed a lawsuit against Maefield and its CEO, Mark Siffin, on Aug. 21 for failing to repay a $750 million senior loan on 20 Times Square, The Real Deal reported last week.  The debt package derived from a Times Square Trust 2018-20TS single-borrower deal originated by Natixis in 2018. 

The property’s CMBS loan transferred to special servicing in November after $26.8 million of liens were filed against the property in connection with construction of the Marriott International’s Times Square Edition Hotel. Marriott opened the 452-room hotel at the property, also known as 701 Seventh Avenue, but it lasted only a year and a half before closing in August 2020, five months into the pandemic. 

Revenue from the hotel’s operations along with four floors of retail space and Times Square electronic billboards were supposed to support a 99-year ground lease on the property that serves as collateral for the loan. The National Football League was previously the anchor retail tenant with a 43,130-square-foot NFL Experience store that closed soon after opening in 2018. Loan documents show the NFL was scheduled to pay $8.25 million in annual rent at the time of the underwriting.

Lenders on the $150 million of mezzanine debt tied to the CMBS deal — but held outside of the CMBS trust — include Korean banks KB Kookmin, Hana and NongHyup along with other institutional investors in Korea, the Korea Herald previously reported. 

The Trepp alert noted that those backing the mezzanine loan initiated a Uniform Commercial Code (UCC) foreclosure after payments stopped, with a standstill agreement between the mezz lenders and the senior lender ending in December. 

According to Trepp, if a UCC foreclosure proceeds at the December expiration date, Natixis “anticipates a modification of the loan that will include a two-year extension in exchange for $50 million principal curtailment.”

In addition to the $750 million Times Square Trust 2018-20TS deal, the loan also includes a $64 million piece from CSAIL 2018-CX12, $50 million from UBSCM 2018-C11, $25 million from UBSCM 2018-C12 and $11 million from CSAIL 2018-C14, according to Trepp. 

“CMBS investors should take the potential changes into consideration when trading those deals,” Trepp said in the report.  

Officials at Maefield Development and Natixis did not immediately return requests for comment.

Andrew Coen can be reached at acoen@commercialobserver.com