By John Covaleski, Commercial Real Estate Direct Staff Writer
After struggling to retain enough tenants to generate the income needed to pay down its loan, the former Newsweek Building at 1775 Broadway in Manhattan fell under water when the debt started amortizing last month.
The 618,122-square-foot office property, which covers a full block at 58th Street in midtown's Columbus Circle area, is encumbered by $250 million of debt that is securitized through Wachovia Bank Commercial Mortgage Trust, 2006-C23. The loan has been moved to the deal's special servicer, CW Capital Asset Management.
Joseph Moinian, a prominent New York investor, bought the building for $130 million in 1999 and obtained the financing in 2006. The debt carries a 5.66 percent coupon and matures in 2016.
The property, whose occupancy has dropped to 23 percent from 95 percent in 2006, had remained current on its debt when the loan required only interest payments. But the loan started amortizing last month, resulting in a larger mortgage bill, and the property missed that payment.
The loan is generating roughly $226,000 less cash per month than is required to service its monthly debt requirement. And it has only about $98,000 of reserves available to make up any shortfalls between its income and the debt service.
Moinian has a tenant lined up for about 5 percent of the building's vacant space, according to Realpoint, but that lease is not expected to generate enough additional rent to make up the debt-service shortfall.
The transfer of the loan to special servicing enables Moinian to meet with CWCapital and start workout negotiations. Possible outcomes would presumably include eliminating amortization, at least for a time.
Moinian is experienced at modifying his loans and has worked with Iron...
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