One Worldwide Plaza’s Loan Modification Signals New Chapter

One Worldwide Plaza, a prominent office tower situated at 825 Eighth Avenue in New York City, is exiting special servicing after experiencing several months of delinquency concerning its substantial commercial mortgage-backed securities (CMBS) loan.

Loan Modification Details

The $940 million loan, originally categorized as a single-asset, single-borrower (SASB) mortgage, underwent modifications that allow the sponsorship group, comprising SL Green Realty Corp. (SLG) and RXR Realty, to revert management of the loan to its master servicer. This modification strategy was crucial as the building faced a period of financial instability.

Ownership Background

SL Green and RXR obtained a 49.9% stake in One Worldwide Plaza in 2017, valuing the property at an impressive $1.7 billion. The remaining 50.1% ownership is held by New York REIT Liquidating, as noted by Crain’s.

Current Financial Situation

The modification was initially reported by Morningstar Credit, which revealed that the sponsors intend to utilize loan reserves to cover operating expenses and address shortfalls in debt service. The loan is scheduled to mature in November 2027, putting additional pressure on the sponsorship to stabilize the property’s financials.

Occupancy Challenges

The property’s financial plight became pronounced following the exit of significant tenants, specifically, Cravath, Swain & Moore, which vacated more than 30% of the space. This departure coincided with ongoing financial difficulties, leading to the loan’s transfer to special servicing in September 2024 due to a monetary default. Additionally, tenant Nomura, occupying 34% of the building, has the option to terminate its lease early in January 2027.

Cash Flow and Occupancy Insights

The loss of Cravath triggered a cash-trap provision that resulted in approximately $22 million being frozen, which had initially been reserved for tenant improvements. Instead, these funds were largely diverted to cover operational financial shortfalls, with a mere $1.9 million remaining in reserves as of this month, according to Morningstar.

Today’s occupancy is reported to be around 60%, a stark decline from previous levels where the building maintained over 90% occupancy before Cravath’s exit. Morningstar noted that “cash flow … had been declining largely due to increased expenses,” adding to the tower’s challenges.

Future Redevelopment Plans

In response to the building’s current struggles, SL Green CEO Marc Holliday revealed plans for redevelopment during an October 2023 interview. He emphasized the need to modernize the 500,000 square feet previously occupied by Cravath, stating, “It was kind of a state-of-the-art building when it was constructed back in the 1980s. With a little attention paid to modernizing and creating some amenities in the building, it will be competitive.”

Conclusion

As One Worldwide Plaza transitions out of special servicing, the road ahead will require strategic redevelopment and financial management to stabilize its position in the New York City real estate market.

For additional inquiries, contact Brian Pascus at bp*****@co****************.com.