Former President Donald Trump's grip on 40 Wall Street, a landmark office tower in Manhattan, has tightened after he recently transferred his mortgage to a bank that specializes in resolving problematic debt situations.
Loans originated by Wall Street lenders typically turn to a “special servicer,” or a lender assigned to recover the most value for bondholders, when a borrower is at risk of imminent default or wishes to request a modification or other form of debt relief.
The Wall Street 40 loan, which currently has a balance of $122.2 million, was transferred to special servicing in October, but in December, the loan was no longer classified as such, according to CrediQ and Trepp, both of which track the performance of properties financed at Wall. Street commercial mortgage-backed securities market.
“The loan is in full compliance. We have never defaulted on any payment, never been late on a payment and have never breached the loan covenant,” a Trump Organization spokeswoman said in a statement to MarketWatch. “We are extremely proud of 40 Wall Street and will continue to operate this building.” “World-class.”
The spokeswoman did not respond when asked for details about the current status of the loan, any potential changes to the debt terms on the property or why it was classified as out of special service. The private server declined to comment.
“When you go private, it means there is potentially some risk to bondholders,” said Matthew Cypher, director of the Steers Center for Global Real Estate at Georgetown University, adding that in the 2007-2008 global financial crisis, borrowers typically By diverting borrowers after they have missed a debt payment.
However, in recent periods of stress, including during the coronavirus pandemic, many borrowers converted before default, while seeking loan modifications, extensions, or other forms of relief.
Loans typically move out of servicing when the debt is modified or extended, the borrower puts more equity in the property or the property's finances improve.
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Trump's 40 Wall Street is located across from the New York Stock Exchange in lower Manhattan. In the 1930s, it was among the tallest skyscrapers in Manhattan. It has been the jewel of the Trump Organization's real estate portfolio since Trump paid less than $8 million for it in the early 1990s.
More importantly, 40 Wall Street is also among the former president's buildings at the center of his civil fraud trial in New York, which is scheduled to conclude soon. New York Attorney General Letitia James sued Trump, the Trump Organization and others in his real estate business in 2022, alleging they illegally commingled the value of Trump's personal wealth to secure favorable terms on real estate loans.
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A Trump spokesman did not respond when asked if the lawsuit was a factor in obtaining new financing on the property.
Trump took out $160 million at 40 Wall Street at a rate of 3.665% in 2015 to refinance the skyscraper through Ladder Capital. Wall Street later split the debt into several bond trades that were sold to investors.
The loan is scheduled to mature in July 2025, according to the Tripp researcher, who said data available in January to bondholders may provide additional clarity about the condition of the property. However, the property remains on a “watch list” of potentially problematic buildings.
December servicing notes indicate occupancy has dropped to less than 80% from 97.8% when the loan was originated nearly a decade ago. Office properties in major cities have been suffering from rising prices and flexible working arrangements since the outbreak of the pandemic.
Moody's recently estimated that flexible working has reduced office demand by 14.5% nationally.
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