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Higher borrowing costs interwoven with higher interest rates may equal imminent default for a string of properties between West 97th and West 100th streets along Columbus Avenue.
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Columbus Square, a series of five luxury rental buildings located atop three blocks of retail and other commercial spaces, is at risk of default on its $370 million mortgage, according to Crain’s New York Business. The loan was sent to special servicing because it is maturing in August and faces likely refinancing “at a significantly higher rate than its current 4.5%.”
However, the potential default seems to be linked only to the commercial properties that the Chetrit Group and Stellar Management purchased from real estate mogul Leona Helmsley in 2007 for $500 million.The residential rentals have been under the separate ownership of UDR (a Colorado-based real estate investment firm) and MetLife since 2012.
“The debt on the residential component of Columbus Square is in good standing,” Trent Trujillo, vice president for investor relations at UDR, told Crain’s. The luxury apartments range from over $3.5k to roughly $10k, with studios starting at $3,502, one bedrooms at $4,402, two bedrooms at $6,196, and three bedrooms at $9,977.
READ MORE: Lux Building with $13,000 Rental Defaults, is Now for Sale
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The three-block stretch of retail storefronts includes Target, Whole Foods and T.J. Maxx. Jewish day school Solomon Schecter, a Montessori school, and a KinderCare learning center are also located in the complex.
The financial woes facing Columbus Square are not unique. Fitch Ratings, a renowned provider of credit ratings, commentary, and research, expects similar troubles for retail spaces this year and beyond. It is forecasting “significant” delinquency rates to hit 4.50% in 2024 and 4.90% in 2025, a vast difference from 2.25% just two months ago. As delinquencies and interest rates increase across “all major property sectors,” the ability to refinance will decrease.
There is a glimmer of hope for the retail loan, however. Crain’s reports that the commercial owners have “simply taken a proactive measure regarding the retail loan, which is scheduled to mature in August 2024. In anticipation of this date, discussions have already commenced with the lender to explore extending the loan, which reflects our confidence in a favorable outcome, underscored by the property’s robust financial health.”
