- Struggling with rapidly declining values and defaults, a Brooklyn office portfolio faced imminent disaster.
- The refinance was essential as the portfolio faced default on a $180 million CMBS loan, along with struggling to repay $145 million B note and two mezzanine loans totaling $155 million.
- The refinancing provides a four-year extension and the opportunity to launch a new marketing effort to improve occupancy, currently at 73%.
A $480M refinancing deal rescued Kushner Companies and RFR Realty’s Dumbo office portfolio from default. The four-year extension allows them to retain the properties and embark on revitalization efforts to attract new tenants.
Making It Work
The nearly half-billion-dollar deal saved a Brooklyn office portfolio that was facing default on $180M in CMBS loans, $145M in B notes, and $155M in Korean mezzanine loans.
The complex negotiations involved numerous stakeholders, with SL Green (SLG) representing CMBS investors and Iron Hound Management orchestrating the deal. This ensured landlords retained ownership and had the resources to fill vacant spaces.
Just in Time, Too
The troubled office portfolio was facing imminent disaster with expiring mortgages and mezzanine loans. It tumbled from a valuation of $640M to just $207M in five years, with occupancy dropping from 94% to 73%.
WeWork’s decision to retain a portion of its space in the portfolio, alongside NYC’s continued economic recovery, also helped landlords pull off a successful refinancing in their favor.
Why It Happened
Avoiding foreclosure on the Brooklyn office portfolio, especially with vulnerable Korean mezzanine debt holders, was a key motivator for the lenders to strike a refinancing agreement. The renegotiated terms provide the Kushner-RFR joint venture with a lifeline to revitalize the portfolio and benefit from market improvements.
