Midtown Tower’s Value Lowers by $123M Despite Near Full Occupancy

Bond-rating firm KBRA recently downgraded the value of Axa Equitable Center from the pre-pandemic level of $1.04 billion to $917 million. Located at 787 Seventh Avenue, the 54-story tower boasts a 96% occupancy rate and a roster of blue-chip tenants. A decline in cash flow by 10% following a slight uptick in vacancies since the 2016 acquisition of majority ownership by the California Public Employees Retirement System (CalPERS), as well as a fair amount of leases winding down prompted the decisions by KBRA. Nearing big block lease expirations include the 120,000 square feet currently occupied by global financial services firm UBS under a lease expiring next year and law firm Wilkie Farr’s lease for its 300,000-square-foot space expiring in 2027. The potential of an increase in vacancy comes at a time when the $780 million mortgage incumbering the property comes due in 2026 and will have to be refinanced at a higher rate that is current 3.84%. KBRA’s head of commercial mortgage-backed securities estimates “the new loan would come with a rate of at least 6%,” and lenders “will probably demand a higher down payment from the building’s 99% owner, CalPERS, which manages $465 billion in assets.”

Source:    https://www.crainsnewyork.com/real-estate/axa-equitable-center-midtown-faces-growing-financial-challenges