Brookfield’s $515M CMBS Loan on New York Times Building Sent to Special Servicing

The $515 million loan secured by Brookfield Asset Management’s ownership of The New York Times Building at 620 Eighth Avenue in Manhattan has been sent to special servicing before it reaches maturity next month, according to a report from Morningstar Credit published Monday.  

However, rather than reflect on turns of fortunes for The New York Times newspaper, which owns the base of the building through the 27th floor and carries no debt on the site, the $515 million commercial mortgage-backed securities (CMBS) mortgage — secured in the NYT 2019-NYT single-asset, single-borrow deal  — is secured solely by Brookfield’s interest in the upper half of the 52-story, 1.5 million-square-foot office tower — floors 29 to 51, approximately 740,000 square feet — which it purchased in 2018. 

Brookfield requested the transfer, according to Morningstar.

Brookfield told CO in a statement that a special servicing transfer falls in line with the firm’s capital management strategy and that the loan is non-recourse, meaning the borrower is not liable for any debt beyond the actual physical asset.

“We are taking the first step in opening a structured, good-faith dialogue with our lenders to determine the best outcome for all stakeholders,” said Andrew Brent, Brookfield spokesperson. “Importantly, this is a non-recourse loan, and the exposure is immaterial within our $280 billion real estate platform.”

The Real Deal reported in February that Deutsche Bank, Bank of America, Barclays Capital Real Estate and Citi Real Estate Funding originated the CMBS debt in 2018, after Fitch Ratings had downgraded Brookfield’s outlook to repay the loan to negative. 

Morningstar commentary noted that “refinancing efforts are further complicated” because the CMBS deal includes $120 million in secured subordinate debt and $115 million of mezzanine debt, bringing total debt owed by Brookfield to $750 million. 

Brookfield has now extended its maturity dates five times since 2020, according to Fitch Ratings. 

Much of the problems within the upper floors owned by Brookfield come down to occupancy and cash flow. While the office portion of Brookfield’s is fully occupied, cash flows hit $42.3 million last year, roughly 14 percent less than the levels underwritten five years ago. Moreover, law firm Covington & Burling, the building’s largest tenant after The New York Times, announced in September it will leave 200,000 square feet to move to nearby Hudson Yards this year. 

Other tenants who have left the building since 2018 include law firms Goodwin Proctor, Osler Hoskin & Harcourt and investment firm ClearBridge Investments. 

620 Eighth Avenue opened in 2007 following a $1 billion, multiyear development, which was led by the New York Times Company, Forest City Ratner, and ING Real Estate. 

Brian Pascus can be reached at bpascus@commercialobserver.