Office Problems in New York, Pittsburgh Lead to CMBS Bond Downgrade
A report by Trepp cited Fitch Ratings’ concerns about occupancy for two buildings
By Brian Pascus October 10, 2024 5:05 pm
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Heavy losses expected on loans secured by two office buildings that are struggling to keep tenants have caused Fitch Ratings to downgrade a commercial mortgage-backed securities (CMBS) bond.
Trepp reported on Thursday that JPMCC 2015-JP1 is expected to bring losses to bondholders due to its exposure to two office loans, leaving Fitch Ratings no choice but to downgrade four bond classes within the CMBS deal.
“[Fitch] said the deal’s 50.8 percent exposure to office loans, among other factors, resulted in the negative forecast,” wrote Trepp.
Fitch cited two loans in particular: a $100 million piece of the $425 million loan secured by 32 Avenue of the Americas in New York City, and $64.6 million mortgage secured by Heinz 57 Center in Pittsburgh.
Occupancy troubles lie at the core of the ratings downgrade.
32 Avenue of the Americas — formerly the AT&T Building, a 1.2 million square foot Art Deco skyscraper built in 1932 — has seen its occupancy shrink from 100 percent in 2019 to 57 percent as of June 2024, according to Trepp.
And there’s more trouble on the horizon: Dentsu Holdings USA, which occupies 100,000 square feet, will be leaving the building soon, while Cedar Cares and Industrious — holders of a combined 119,518 square feet — have both retracted earlier commitments to lease more space, according to Trepp.
Things aren’t much better in the Steel City of Pittsburgh. Heinz 57 Center — a 13-story, 699,610-square-foot office building that opened in 1913 — has seen its occupancy decline from 95 percent in 2023 to 74 percent in 2024. The building lost its ground-floor tenant, Burlington, in March, opening a void of 140,509 square feet of space, per Trepp analysis.
Brian Pascus can be reached at bpascus@commercialobserver.com
