Essex Crossing’s $215M Debt Sent to Special Servicing
The Essex Crossing megadevelopment on the Lower East Side is days away from reaching a maturity default on its debt.
The massive complex saw its $215 million debt transferred to special servicing due to an imminent maturity default, according to Crain’s, which cited Morningstar Credit Analytics.
The loan originated in 2019, the same year the 1.9 million-square-foot complex opened. The debt is set to mature at the end of this week, on Oct. 30.
Cash flow is an issue for the development team, which includes Taconic Partners, L&M Development Partners, BFC Partners, Prusik Group and Goldman Sachs. The Morningstar Credit report described cash flow as “middling at best.”
Those problems were most acute at the onset of the pandemic. In 2020, net operating income was negative $3.5 million. Revenue is more than three times expenses, however, according to the latest financial report, and the residential portion of the property was 96 percent occupied as of last year. Morningstar anticipates an extension for ownership.
The developers did not immediately respond to a request for comment from The Real Deal.
Two years ago, Deutsche Bank snapped up the office and retail condos at Essex Crossing, paying a total of $221.6 million for the office portions of 180 and 202 Broome Street in two separate transactions, according to property records. It also purchased the retail spaces for $15.2 million.
In 2022, Deutsche Bank and Square Mile Capital provided $466 million in debt to stabilize the project’s second phase, replacing $455 million worth of construction loans. Deutsche Bank previously provided a $285 million loan for the Offices at Essex Crossing, the 350,000-square-foot office component of the project, where Verizon agreed to lease more than 140,000 square feet.
Essex Crossing spans nine sites with more than 1,000 residences, 350,000 square feet of offices, 300,000 square feet of retail and 100,000 square feet of open space. Average rent in the residential complex is $3,381.61 per unit, according to Morningstar. It’s also the site of the Regal Essex Crossing movie theater. According to Morningstar, Regal pays $72.31 per square foot with a 2035 expiration date on the lease.
The Delancey Street Associates joint venture was awarded the rights to develop the project by the Bloomberg administration following a competitive bidding process in 2013.
Lilah Burke contributed reporting.
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