With NYC office vacancy rates soaring up to what seems to be insurmountable heights (22% as reported by Cushman Wakefield this week), landlords are being saddled with the inability to cover their building’s loans, carrying costs, or record high property taxes. (The Real Cost of New York City Office Real Estate (curbed.com)
This month, Brookfield Properties joined a growing list of commercial real estate powerhouses who have defaulted on a loan that left them with no choice but to hand their lender the keys to a signature NYC office building. (Brookfield Hands Keys Back to Lender for Manhattan’s Brill Building | GlobeSt)
At one time, the Brill Building was a “destination-office” – a place where businesspeople flocked and hoped to rub elbows with global sensation recording artists like Elvis Presley, Liza Minnelli, Paul Simon and Neil Diamond. Unable to shake the post-pandemic work from home trend, the building lost its star power and its ability to support its carrying costs, landing into the hands of its lender.
In May, after declaring to the Financial Times that there was no hope for obsolete office towers, the owners of the famed Adams Express Tower defaulted on its loan and surrendered the keys to its lender. New York property tycoon to give worn-out offices ‘back to the bank’| Financial Times (ft.com)
Located in the heart of the Financial District and built in 1914, this building was able to withstand the Great Depression, 2 World Wars, the dot-com crash and a century’s worth of changes to the office landscape. Unfortunately, the building could not withstand the post-pandemic lure of remote employment. The astronomical vacancies and crippling carrying costs led ownership to pitch a conversion of the property’s use to residential which was rejected by the lender. After the owner’s conversion plan was rejected, the lender was handed the keys.
The story told here is one for landlords of all shapes and sizes – take heed. If your commercial property is saddled with vacancies and there are no prospects for new tenants, one of the best ways to offset economic loss is to review your building’s expenses, including property taxes. When contacting a property tax attorney for guidance, make sure that you provide a complete picture of the property’s financial well-being by supplying rental income, expense and vacancy data. .
Thank you to Ryan C. Hild for this week’s Tax Tracker!