CoStar News
Summary
- Multifamily loans rise as office deals fall: The Bank of Montreal is set to launch a multiborrower commercial mortgage-backed securities deal, with over half of the nearly $960 million backing multifamily loans, marking the highest proportion in two years. This $490 million allocation contrasts sharply with the declining trend in office loans, which have dropped from nearly a third of such offerings in 2022 to less than 16% this year. Moody’s Investors Service notes that multifamily properties are viewed as less volatile and have historically lower loss severities compared to other commercial sectors. The shift toward multifamily loans is driven by concerns over the office market’s performance amid ongoing challenges with occupancy and refinancing. The largest multifamily loan in the offering is a $60 million portion of an $84 million loan for a Brooklyn complex.
- Trouble for St. Louis hotel: The Hyatt Regency St. Louis at the Arch is facing financial difficulties, as a $93.4 million loan has moved into special servicing due to payment issues ahead of its due date. Despite a slight increase in occupancy to 57% in 2023 from 49% the previous year, this remains below the underwritten target of 70%. Net cash flow for the hotel has decreased by 10% compared to last year and is 12% lower than in 2016. The downtown St. Louis hospitality market is struggling amid a rising office vacancy rate, which stands at 18.9% and is expected to worsen following the departure of FleishmanHillard to a suburban location. Overall, the combination of declining cash flow and high vacancy rates presents significant challenges for the hotel and the broader downtown area.
- Departure dings New York office building: A $940 million loan on One Worldwide Plaza in New York has been transferred to special servicing due to an imminent monetary default after law firm Cravath, Swaine & Moore vacated the building in August. Cravath, previously the second-largest tenant, occupied 30% of the building and contributed to half of its rental revenue. With the firm relocating to Two Manhattan West, the building’s occupancy has dropped from 90% to 65%. Provisions in the loan allow the lender to retain excess cash flow to fund tenant improvements. The building also has $260 million in mezzanine loans, and RXR Realty, the majority owner, has not commented.
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