- Ivanhoe Cambridge defaulted on the $359M mortgage for 85 Broad Street. The loan has been transferred to special servicer CWCapital for resolution.
- A quarter of the building’s space faces lease renewal within three years, raising concerns about occupancy.
- The landlord is considering turning the office tower into residential units, as demand for older offices continues to decline.
A High-Profile Default
Ivanhoe Cambridge, the real estate arm of Caisse de Dépôt et Placement du Québec, is facing a loan default on the mortgage for Broad Street, per Bloomberg. CWCapital is now handling the loan after it was transferred for special servicing this week. The debt, part of a commercial mortgage-backed security, had been on a watchlist since February.
Lease Challenges Ahead
The 1.1M SF tower faces rising vacancy risks. Around 25% of the building’s leases will expire within the next three years. Oppenheimer Holdings, one of the main tenants, is in lease talks with the landlord. WeWork also occupies space in the building.
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Market Conditions Remain Tough
Although interest in trophy office buildings has returned, older properties are still struggling. They face higher operating costs and falling rents. In downtown Manhattan, more than 20% of office space remains available, despite an uptick in leasing activity.
A Possible Residential Pivot
To address the tower’s challenges, Ivanhoe Cambridge is exploring a conversion to housing. The trend of office-to-residential shifts is growing as cities seek solutions to surplus office inventory and housing shortages.
Why It Matters
This loan default highlights the ongoing struggles in New York’s office market. With high vacancy and aging buildings, landlords are looking for new strategies to retain value.
What’s Next
Expect more landlords to follow suit. Office conversions are likely to increase as developers search for viable uses in a shifting market.
