Savanna’s CMBS Loan on 521 Fifth Avenue Sent to Special Servicer
By Mark Hallum August 16, 2024 12:09 pm
reprints
There’s trouble in paradise for Savanna — paradise being the Bryant Park submarket.
The office landlord’s commercial mortgage-backed securities (CMBS) loan on 521 Fifth Avenue is headed to special servicing after multiple extensions to its maturity date. Deutsche Bank provided the $242 million CMBS loan in 2019 for Savanna’s $381 million purchase of the building.
Bisnow first reported the story.
Savanna declined to comment on the action taken by its lender.
The building was leased at 93 percent in 2019 but fell to 74 percent toward the end of 2023, the opposite trajectory for most office buildings in the sought-after Bryant Park area in the post-pandemic market.
“Buildings around Grand Central and Bryant Park in particular, like 452 Fifth avenue are all leasing up ahead of the market at some of the highest rents achieved,” JLL’s Paul Glickman told Commercial Observer in June. “These Park Ave/Bryant Park assets are benefiting from the fact that they don’t have too much above them in terms of asset class of new construction. We’re seeing the vacancy rate come down in the better assets in prime corridors where vacancy is hovering around two and a half to three percent rate.”
The Durst Organization has been riding the flight to quality wave that’s been heading toward Bryant Park as well for the last six years, investing about $350 million in its assets there which has been vindicated by the popularity of the section of Midtown among tenants.
“At most, the Class A office towers in the submarket have a vacancy of only 6 percent, which is among the lowest in New York City,” Durst’s David Neil told CO in July. “The upper floor of the towers have an availability of only 2 percent. So low vacancy is certainly one of the defining features of this particular submarket.”
Its not just Bryant Park causing issues for Savanna. The firm has had problems across its portfolio, however, with 360 Lexington Avenue — also purchased in 2019 for $180 million with a $110 million loan from Barclays and PPM America — being listed for sale by the lenders in April.
In 2022, Savanna and Pacific Oak Capital defaulted on a $349 million line of credit tied to 110 William Street, which was only 58 percent occupied when it extended with lender Investco Real Estate in early 2023 and secured New York City Administration for Children’s Services as a tenant later that year for 640,000 square feet in the building.
The deal gave Pacific Oak the leverage to restructure the debt while Savanna exited the partnership, according to The Real Deal.
Mark Hallum can be reached at mhallum@commercialobserver.com.
