Blackstone Group’s transfer of a $308 million loan on 1740 Broadway to a special servicer had real-estate jaws dropping on Wednesday.
“How could one of the world’s biggest landlords quit on a relatively modest $308 million loan, after they spent a fortune on modernizing the building with a new lobby and restaurant?” mused one observer.
But while some analysts feared that Blackstone’s possible exit from 1740 Broadway augured future retreats by other landlords from the pandemic-battered office market, insiders insisted it was a one-off case due to a rare blunder by Blackstone’s EQ office division.
Blackstone’s decision to turn the Art Deco-style tower over to a CMBS trust was first reported by the Commercial Observer. The move doesn’t necessarily mean that Blackstone will lose the property. A Blackstone rep said, “We are working diligently to find a solution that is in the best interests of all parties involved, including our investors and lender.”
A knowledgeable source said of the move, “They overpaid for the building by at least $100 million and the loan terms left them no wiggle room to ask for lower rents. End of story.”
EQ bought the 26-story, 600,000 square-foot tower from Vornado in 2014 for $605 million. Although 1740 was full at the time with tenants paying below-market rents, “That number was bananas — slightly more than $1,000 per square foot for a 1950-vintage building in the West 50s that needed a lot of work,” the source said.
Major redesign
Facing lease expirations and planned move-outs by major office tenants L Brands and law firm Davis+Gilbert, EQ set about making the former MONY tower more appealing to modern tenants.
Last summer, EQ executives and brokers proudly showed The Post 1740’s impressive lobby redesign, which included a 15,000 square-foot private tenants’ club on the mezzanine. The property’s Web site described the building as “the neighborhood’s creative nucleus.”
Hoping to spark culinary buzz as well, EQ lured prominent chef John Fraser’s restaurant Iris, which has earned critical accolades and drawn large crowds since it opened early last year.
But those improvements weren’t enough to swiftly attract new office tenants. “They wanted in the $80s per square foot,” said one dealmaker. “The numbers didn’t fly in a secondary location and in a market with 20 percent availability.”
A Blackstone source termed the 1740 matter an “isolated situation” that didn’t reflect on the company’s view of the Manhattan office market.
Indeed, Blackstone-owned EQ Office recently closed on a 49 percent stake at One Manhattan West which it bought from Brookfield and the Qatar Investment Authority. EQ Office manages 20 million square feet of offices in the US.
