Posted on 02/24/2023 4:21:26 AM PST by EBH
Columbia Property Trust, a large office landlord controlled by PIMCO, has defaulted on $1.7 billion in loans tied to seven buildings across the country, marking one of largest office defaults since the start of the pandemic.
The firm is now working with its lenders — a group that includes Goldman Sachs, Citigroup and Deutsche Bank — to restructure its portfolio, according to Bloomberg. The loans were all floating rate, meaning Columbia Property Trust started to feel pain after interest rates soared last year.
The loans are tied to three office buildings in New York, two in San Francisco, one in Boston and one in Jersey City — a portfolio that was most recently appraised at $2.27 billion in 2021.
The New York properties are 245 West 17th Street, 315 Park Avenue South and the office portion of 229 West 43rd Street.
Columbia bought the 481,000-square-foot office piece of 229 West 43rd Street — the former New York Times building — for $516 million in 2015, SEC filings show. The default marks the second time the building has wound up in financial trouble in less than three years. In 2020, Kushner Companies, which owns a 250,000-square-foot retail condo at its base, defaulted on a $70 million mezzanine loan connected to the property
Two of the properties in the portfolio — 650 California Street in San Francisco and 245 West 17th Street in Manhattan — are linked to Twitter, which made headlines late last year when new owner Elon Musk stopped paying rent.
Columbia sued Twitter in January for allegedly owing about $136,000 in back rent. The REIT, which PIMCO affiliates acquired in 2021, bought 650 California Street for $309.1 million in 2014, records show.
“We, like most office owners, are addressing the unique and unprecedented challenges currently facing
(Excerpt) Read more at therealdeal.com ...
Anyone stupid enough to have variable rate loans long term is going to have huge regrets.
That includes the USA and the Fed mortgage companies like Ginnie Mae and Freddie Mac.
Amazing these firms didn’t hedge their interest rates - it was unbelievably cheap to fix these rates 15 months ago - like adding 25 basis points to the interest - to lock in at 0 LIBOR. Just dumb.
Gee, I guess those “Masters of the Universe” on Wall Street aren’t as smart as they think.
Just depends. When interest rates are effectively zero, variable makes little sense. At today’s interest rates, if you need to borrow taking a variable one could make sense as its likely to be lower in 2-3 years than today. Some of these REITs though believed if interest rates went up, it meant that the rates they charged would likely be higher and it wouldn’t matter. And for a long, long time that was the case. But the pandemic killed demand for office space in much of the country and out went that idea. Many of these would be in trouble with or without variable rates - if not now, when their debt matured.
Thank You Dr. Fauci May I Have Another
This is one of many such commercial building finances that are running into trouble as vacancy rates on commercial (office) space continues to NOT recover fast enough, and that reason is remnote office work established during the pandemic is not going away, even if it is reduced somewhat.
I predicted this over a year ago.
This is just the tip of the iceburg. Incredible, economy-shaking defaults are coming in the commercial real estate business - and they will domino-affect everything......
Exactly, everyone is watching the ‘housing markets,’ but are missing the commercial real estate and office space sectors.
Who gets these bail-outs when this all collapses. Because I do not see this getting any better as workers are demanding work from home or hybrid arrangements.
About the only sector that may profit from this new work-style are the day office rentals. But the days of the dedicated office are over.
Just use the office space as housing for illegals and the homeless. .gov will foot the bill, for the common good, of course. 😑
Curious what your year old prediction was based on.
I predict the office building slump won’t recover….due to labor shortage, as well as population decline.
Agree that this will have severe domino effect.
Just use the office space as housing for illegals and the homeless. .gov will foot the bill, for the common good, of course. 😑
They’re already doing this, with hotels.
Time for these office building owners to get in on the TAXPAYER FUNDED deal, too?
I was CEO of a technology corp and have watched so many IT companies send workers home to work - including my high-level IT genius son. Large international IT company he works for has no intention of ever returning employees to office. Hear the same for many companies.
That’s a death-knell for commercial office space.
I also was an upper-level exec for 2 Fortune 500 firms (no thanks - gotta run my own business...) for a few years when in my mid-fifties......managing staff, leasing high $$$ office space.....
Theyre gonna get the money anyway.
Bail outs for Wall Street. Main Street is on it own.
Same as it ever was
Well, NYC occupancy may be down. And also down in San Fran.
But I think occupancy in Florida is doing quite well.
Diversification is your friend.
#7 My old work place is mostly empty. It had 300 people there before the illegal lockdown. Currently only a small 5 person group shows up on Thursdays and a few in the Legal dept and more in the Payroll dept and the admin staff that takes care of the building.
I once thought engineers working in teams on complex industrial projects were not very conducive to remote work. A nephew works for Lockheed Martin, as an industrial engineer. He has been working from home all week every week since a year before the pandemic.
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