This week's column examines a delay on refinancing a $428.1 million loan on properties owned by retail giant Saks Global, as well as a Brookfield Asset Management debt win and a separate challenge for another loan in New York. Read the entire piece by clicking "read more" below.
Saks Global financing stuck in limbo: A $428.1 million commercial mortgage-backed securities loan on a 28-property retail portfolio has hit a snag on its path to refinancing. The debt remains in special servicing, bondholder notes show, as corporate agreements have prevented the borrower, a Saks Global-controlled joint venture, from completing a deal.
Those efforts are also now complicated by Saks Global's Chapter 11 bankruptcy case that seeks a company restructuring of $3.4 billion in debt.
Saks Global is the lead partner in the joint venture, known as HBS, with Simon Property Group and other third-party investors, according to bankruptcy court filings. Saks Global, a retail conglomerate and the parent company of Saks Fifth Avenue and Neiman Marcus, currently owns 62.4% of the equity interests in HBS. The loan for the HBS portfolio, made up primarily of former Lord & Taylor stores, was securitized in CMBS deal HBCT 2015-HBS.
The portfolio includes a King of Prussia, Pennsylvania, mall where the entertainment venue Netflix House recently opened in a former Lord & Taylor location. That space is up for sale.
The loan transferred to special servicing in July ahead of its August due date, according to CMBS notes this month. The borrower had secured a term sheet for financing with proceeds sufficient to retire the debt. However, certain corporate-level covenants now block the deal from closing.
The joint venture is negotiating to lift those restrictions, the loan notes said, without elaborating.
Saks Global did not respond to CoStar News' request for comment. Bond rating firms that initially rated the CMBS offering also did not respond to requests for comment.
In its bankruptcy filing, Saks Global asked the court to reject 26 unexpired leases — at least 15 at properties backing the CMBS loan.
The special servicer entered into a forbearance agreement extending the refinancing window through March 1, the loan notes said. The agreement includes provisions for additional extensions if the borrower meets principal paydown thresholds. Financial penalties apply if the borrower fails to achieve required milestones.
The agreement creates incentives for the borrower to liquidate and pay off the loan, according to the commentary.
Brookfield extends One New York Plaza loan: Brookfield Asset Management has secured a two-year extension on its CMBS loan for One New York Plaza, pushing the maturity date to January 2028 and reducing the principal balance by $25 million to $810 million. The 50-story office tower in New York's Financial District underwent special servicing after the original $835 million loan was set to mature this month.
The modification requires Brookfield to make an initial $25 million principal paydown and deposit $20 million into a leasing reserve for future tenant recruitment. Any unused leasing reserve funds would be applied to the principal balance at loan maturity.
"As expected, we achieved a positive outcome for One New York Plaza given the current and anticipated demand for office space in the building," Lauren Young, managing partner at Brookfield Real Estate, told CoStar News in an email. "This was a prime example of special servicing providing a means to a mutually beneficial solution for the parties involved."
The extension reflects significant challenges at the 2.6 million-square-foot property. A new appraisal valued the tower at $1.07 billion, 30% below its $1.54 billion valuation at issuance. Net cash flow reached $51.2 million in 2024, falling short of the $84.4 million projection used in the underwriting process. Occupancy has declined sharply from 94% in late 2022 to 65% currently, with major tenant Morgan Stanley listing 250,000 square feet for sublease in December.
Loan backing New York Times Building misses payoff: Brookfield is dealing with the transfer of a $515 million CMBS loan on Manhattan's New York Times Building to special servicing that matured without payoff in December. The transfer set the stage for a potential debt restructuring that now totals $750 million, including additional debt.
Brookfield's loan is secured by an interest in the office and retail condominiums of the New York Times Building, consisting of floors 28 through 52 of the office tower and the ground-floor retail, totaling 738,385 square feet. The condominium faces a 37% decline in appraised value to $635 million from its $1.01 billion valuation at issuance in 2019.
Meanwhile, the second-largest tenant, the law firm Covington & Burling, plans to vacate its 193,188-square-foot space in September 2027, according to loan servicer notes. That could drop occupancy to 73%.
"We are taking the first step in opening a structured, good-faith dialogue with our lenders to determine the best outcome for all stakeholders," a Brookfield spokesperson told CoStar News. "This office condo was acquired through our 2018 Forest City portfolio purchase, which has since generated more than $9.5 billion in proceeds for investors. Importantly, this is a non-recourse loan, and the exposure is immaterial within our $280 billion real estate platform."
The special servicer has completed the updated appraisal and negotiated a participation agreement with the borrower and mezzanine lender.
A 26% reduction in occupancy when Covington departs could compound refinancing challenges in a market where valuations have dropped sharply. With total debt at $750 million against a $635 million appraisal, the loan faces significant structural challenges that may require principal reduction or an infusion of equity to resolve.