Despite getting a life raft last year, 1440 Broadway is still taking on water.
The $399 million loan tied to the Manhattan building has gone into special servicing once again. After a loan modification, new ownership and a new property manager, it’s unclear what it will take to turn things around at the Midtown property.
Australian pension fund QSuper purchased the building off West 40th Street in 2017 with CIM Group. But by 2023, the loan, backed by the property, landed in special servicing, with investors preparing to hand over the keys to their lender.
At the time, things were dire. Not only were high interest rates and remote work hammering revenues across the city, but the building’s anchor tenant, WeWork, was imploding. The co-working company filed for bankruptcy protection, negotiating its rent down 40 percent and shortening its lease by seven years, Bloomberg reported. Then, Macy’s pulled out in early 2024.
Investors, however, were able to reach a lifeline, scoring a loan modification in May 2024. They were able to push the March 2024 maturity date back to October 2025, replace CIM with StepStone LP and bring on a new property manager. But missing the maturity deadline did slash the building’s value 46 percent, from $595 million to $320 million.
All of that hasn’t rescued the loan. Lenders placed it in special servicing this month due to a balloon payment or maturity default, according to Morningstar Credit. The property’s debt service coverage ratio, measuring the owner’s ability to pay off debt, was poor, at only .15 before considering the loan’s rate cap. As of October 2024, the building was only 59 percent occupied, with rental rates averaging about $57 per square foot.
Office leasing has been ticking up across Manhattan in recent months. However, the area around 1440 Broadway is not doing as well as others in the borough. The Times Square area had a vacancy rate of 17.3 percent, according to a recent report from Colliers, compared to 13 percent in the Plaza District. Times Square had the lowest asking rent for Class B office space among neighborhoods in Midtown, at $47 per square foot annually.
Neither QSuper, now the Australian Retirement Trust, nor StepStone responded to requests for comment by press time.
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Valuation slashed as 1440 Broadway nabs loan mod, guarantor
