Occupancy Woes Push JEMB Realty's 35-Story Financial District Tower To Special Servicing

After months of ratings agencies raising concerns about the office tower at 75 Broad St., JEMB Realty has asked that the $230M loan tied to the property be transferred to special servicing. 

The historic 35-story Financial District building, which once served as the headquarters of ITT Inc., has been slowly bleeding tenants. As of the end of March, it was just under 60% occupied, according to special servicer commentary from the Morningstar Credit database.

“While the loan is current on debt service, the Borrower indicated there will be insufficient cash flow to pay debt service moving forward,” special servicer Torchlight Loan Services wrote in a May note.

Torchlight wrote it has hired advisers to initiate negotiations with the landlord. JEMB didn't respond to Bisnow’s request for comment.

The loan consists of two senior notes with an aggregate principal balance of $92M, along with two junior notes totaling $128M. There is another $20M of mezzanine debt that isn't securitized. 

JEMB originally purchased the building in 1999 for $75M. Its occupancy has been steadily falling — in November 2023, it dropped below 80%, according to a September 2024 report by S&P Global. The ratings agency downgraded 11 classes of debt tied to the single-asset, single-borrower CMBS loan, citing lower occupancy, cash flow and the Financial District’s higher availability rates.

Morningstar DBRS similarly downgraded the loan's credit rating in 2024. In March of this year, it reaffirmed that rating.

It’s not JEMB’s first encounter with trouble at the building. It was hit hard during Hurricane Sandy in 2012, but the owner has attempted to keep it relevant by upgrading its digital infrastructure. It has invested $15M since then to install new and relocated electrical switchgear, a new fuel system and flood gates, Data Center Frontier reported.

The building houses a 9K SF data center, making up less than 2% of its net rentable area, according to Morningstar’s report. Additionally, two floors, representing almost 4% of NRA, are used for generators.

The New York City Board of Education is the building’s largest tenant, occupying 16%. Approximately 12% of its lease expires in 2033, with the remaining 4% expiring in 2035. 

However, the rest of the property is filled with small leases, with the second and third largest tenants representing 4% of its NRA, according to the March report. Approximately 11% of the NRA is scheduled to roll over in 2025, with another 4% in 2026.

Over the past few years, Lower Manhattan has fallen behind other neighborhoods when it comes to office leasing. Instead, it has become a hub for office-to-residential conversions. 

But in the first quarter, it recorded its strongest office leasing quarter since 2019, according to the Downtown Alliance. More than 1.4M SF of leases were signed in the area in the beginning of the year, nearly three times greater than the previous quarter and over half of the previous year’s total.

That was largely supported by Jane Street Capital’s 984K SF renewal and expansion at Brookfield Place.