In a sign of continuing stress in the commercial real estate market, First Stamford Place, a massive office complex owned by Empire State Realty, has filed a consensual foreclosure returning the building to its lenders, a commercial trust managed by Wells Fargo. The defaulted loan to Wells Fargo is $176 million with an interest rate of 4.73%
About the complex. First Stamford Place located near the Stamford train station has 50 tenants occupying 82% of the 780,000 square foot complex, including the headquarters for United Rentals, Odyssey Re and Crane and offices for Franklin Templeton, Ernst & Young, Grant Thornton, Legg Mason and others. First Stamford Place is a major holding of Empire State Realty (NYSE ticker ESRT), a NY City-focused Real Estate Investment Trust (REIT) with large ownership by the Peter Malkin family of Greenwich whose son Tony is CEO and whose daughter is married to CT Senator Richard Blumenthal.
Weak suburban commercial real estate demand. According to the Greenwich Time, Empire State Realty Trust is jettisoning First Stamford Place even as it generates momentum in its Manhattan office portfolio, which includes the Empire State Building and 1 Grand Central Place in Manhattan. But that momentum has not spilled over to suburban office properties. The firm's Metro Center office building adjacent to Stamford's downtown rail station is 71 percent occupied, and Empire State Realty Trust has sold off other suburban office buildings in the past several years amid dwindling lease volumes. That includes the MerrittView office building in Norwalk in 2022, with CEO Tony Malkin telling investment analysts that year "we decided to walk" rather than continue paying down a loan that leases were not supporting.
Squeezed by rising borrowing costs Investors are selling off shares of Empire State Realty Trust (ESRT -4.9%) today and other Commercial Real Estate (CRE) REITs such as Vornado Realty Trust (VNO -7.9%) and SL Green (SLG -6.8%). Also, the stocks of regional banks that hold large amounts of CRE in their portfolios are weak. Investor concerns that interest rates are rising (not falling) causing more CRE defaults are weighing on the market.