- 650 Madison Avenue has been transferred to special servicing after the borrower missed a required payment.rn
- The building’s occupancy fell from 97% in 2019 to 74% this year. Value dropped 21% since 2019.rn
- Lenders are considering a loan sale or foreclosure. A pre-negotiation agreement has already been signed.
Midtown Tower Faces Financial Distress
The 28-story tower at 650 Madison Avenue is facing financial trouble, reports TheRealDeal. The borrower group includes Vornado Realty Trust, Oxford Properties Group, and OMERS. They purchased the building in 2013 for $1.3B. The building spans 595K SF and sits in Manhattan’s Plaza District, between East 59th and 60th Streets.
A $214M loan was issued in 2019, when the building was nearly fully leased. However, a recent note from Morningstar Credit shows the borrower missed a required payment. Specifically, they failed to fund a “waterfall shortfall,” a type of investor distribution. The borrower requested that the loan be sent to special servicing.
Occupancy And Rent Decline
At the time of the 2019 refinancing, occupancy was at 97%. It later fell to 57% in early 2024. It has since recovered slightly and now sits at 74%. Ralph Lauren, the building’s largest tenant, once occupied over 40% of the space. The company has downsized by 39% and now pays 30% less in rent.
Other tenants include Lakewood Capital in the office portion. The retail space is leased to high-end brands like Celine, Moncler, Balmain, Cremieux, and Tod’s. Despite a strong tenant roster, revenues have dropped. Last year, the building generated $69.9M, down from $87.3M in 2019.
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Valuation Drops And Legal Options
The tower’s value has also declined significantly. It was once appraised at $1.21B. Its most recent appraisal puts it at $950M, a 21% drop. As a result of the missed payment, the loan has officially entered special servicing.
The lender has signed a pre-negotiation agreement with the borrower. They are now evaluating possible solutions. These include a loan sale, foreclosure, or some form of debt restructuring. Vornado has not commented on the situation.
Broader Market Implications
The case of 650 Madison Avenue reflects deeper struggles in New York’s office market. Even well-located, Class A towers are facing stress. Tenants are cutting space, and leasing demand is slower than before the pandemic.
As values fall and loans mature, more high-profile buildings could face similar outcomes. For now, lenders and owners are exploring all options to avoid deeper losses.
