Back when WeWork was the hottest startup in real estate, APF’s Kenneth Aschendorf and Berndt Perl leased space to the co-working firm at three New York buildings: 183 Madison Avenue, 28 West 44th Street and 25 West 45th Street.
Now, with WeWork hurtling toward bankruptcy, remote work persisting and the Federal Reserve keeping interest rates up, APF is struggling with loan payments tied to two of those properties and is delinquent on the debt collateralized by a third.
All told, the buildings back $423 million in debt. All three have suffered a WeWork exit.
In the worst shape is 183 Madison Avenue, which APF bought from Tishman Speyer and Cogswell-Lee Realty for $220 million in 2018. The property’s $173 million loan is over 60 days past due. APF missed the September maturity date.
Aschendorf and Perl nabbed the floating-rate financing when it acquired the Murray Hill office building in 2018. The next year, they leased 12 percent of the space to WeWork, making the co-working firm its second-largest tenant.
WeWork began to unravel when its attempted public offering fell apart that same year and the pandemic hit in 2020. The firm repeatedly fell behind on rent at 183 Madison, Morningstar reported. APF eventually worked out a lease modification that shaved $4.3 million off WeWork’s 15-year commitment.
Meanwhile, APF continued to push back the due date on its debt. The firm exercised all three of its one-year extension options, pushing the maturity to September 2023.
As of April, Morningstar reported that WeWork was current on its rent. But with interest rates rising, APF’s cash flow at the building was only covering two-thirds of its debt payments, according to Morningstar.
When APF failed to pay off the loan last month, 183 Madison was no longer listed on WeWork’s site. WeWork’s 183 Madison office is marked closed on Google.
APF did not respond to a request for comment. WeWork did not comment on 183 Madison.
The landlord could still snag another loan extension. Six months ago, Morningstar reported that another modification was being contemplated, but lender LoanCore would likely require a paydown to push back the due date.
At the time, WeWork was still paying rent. It’s unclear whether that is now the case.
Meanwhile, 28 West 44th Street — which APF rebranded the Club Row Building and renovated after buying it from SL Green in 2011 for $161 million — and 25 West 45th Street have both seen WeWork go dark and occupancy suffer as loan maturities draw near.
WeWork was once the largest tenant at the West 45th building with about 13 percent of the space. In January, a spokesperson for WeWork said it had signed an agreement to exit.
Servicers watchlisted the debt a month later. But the property was struggling before WeWork bolted. At the end of 2022, occupancy stood at 82 percent.
Nine other tenants occupying 13 percent of the building had leases that would end in the next year, servicer commentary from December noted.
At Club Row, WeWork held the second-largest lease, totaling 7 percent of the rentable area. It’s unclear when WeWork closed that location, but the building’s occupancy has dipped by the same amount this year.
In fact, occupancy dropped throughout the pandemic, from 86 percent at the end of 2020 to 76 percent two years later. Last month it slipped to 69 percent.
A WeWork page dedicated to the property still appears in internet searches but the building is no longer listed on WeWork’s website.
As of late last year, both buildings’ cash flow was just enough to cover debt service. But in June, Moody’s flagged 25 West 45th Street’s $70 million debt as a “troubled loan” about six months ahead of its maturity. In September, the Club Row building’s $180 million debt was watchlisted for an elevated default risk, according to Morningstar.
“The property has WeWork,” an October update by Morningstar reads. “WeWork has expressed doubts about its ability to continue to operate in the current environment.”
The Club Row Building loan comes due in 14 months.