Could this suggest mounting challenges for aging office buildings?
The owner of 85 Broad St., a landmark office tower in downtown Manhattan and former headquarters of Goldman Sachs Group Inc., has defaulted on its $359 million mortgage loan, according to individuals with knowledge of the situation.
Bloomberg reported that the loan, which is part of a commercial mortgage-backed security (CMBS), was transferred this week to a special servicer to develop a resolution strategy. The building is owned by Ivanhoe Cambridge, the real estate subsidiary of Canadian pension fund manager Caisse de Dépôt et Placement du Québec (CDPQ).
The default comes amid broader pressures in Manhattan’s commercial property market, particularly for aging office buildings with high vacancies. Sources also indicated that Ivanhoe Cambridge is in discussions with one of its largest tenants, Oppenheimer Holdings Inc., regarding the terms of its lease. A possible conversion of the property into residential use is reportedly being considered.
Neither Ivanhoe Cambridge nor Oppenheimer commented on the matter.
Constructed in 1983, the 1.1 million ft² (102,000 m²) building was originally developed as Goldman Sachs’ global headquarters before the investment bank relocated in 2011. Today, its major tenants include Oppenheimer, which maintains its headquarters there, and WeWork Inc.
Data compiled by Bloomberg earlier this year showed that approximately 25% of the tower’s leasable area faces renewal within three years. Although interest in premier office properties has been slowly returning across Manhattan, older assets like 85 Broad St. continue to face challenges from rising costs and declining rental income. More than 20% of downtown Manhattan’s office inventory remains available, reflecting ongoing softness in the sector.
The broader CMBS market is showing signs of stress. According to Fitch Ratings, the US CMBS delinquency rate rose to 3.08% in May, up from 3.01% in April, driven primarily by new office loan delinquencies. Office properties accounted for nearly half of all new 60+ day delinquencies, totaling $646 million. The office sector’s special servicing rate also increased, rising to 13.4% in May from 12% the previous month.
What are your thoughts on the future of older office buildings in downtown Manhattan? Share your insights below.
