Single-tenant retail properties in New York City are showing increasing signs of distress. While big box retailers like Lord & Taylor, J. Crew and Brooks Brothers were more focused on troubles and bankruptcies, data from DBRS Morningstar found that single tenants were also experiencing unusually high arrears. In total, the report identified 14 CMBS loans totaling $ 467.4 million that were either defaulted or provided special services.
Collateral for a loan on 170 Broadway, a 16,135-square-foot condominium project used by the Gap, is the top single-tenant crime. The $ 70 million loan was transferred to a special agency in July after the tenant stopped paying the rent. The specialist service provider canceled the tenant's coronavirus aid package due to insufficient information, and the void was filled by a lawsuit to prevent the landlord from terminating the lease. The litigation is still ongoing.
345 West 14th Street is another example of a single tenant default. The 8,405 square meter property is inhabited by Columbia Sportswear. The business was temporarily closed during the pandemic and the $ 18.5 million loan was transferred to a special service in July at the request of the borrower seeking coronavirus relief. The tenant's lease expired in October and it is not known whether he will decide to extend it.
There are several similar arrears among these single tenants, including a $ 17.3 million loan for 350 East Fordham Road, home to America's kids. a $ 13.4 million loan for 380 Lafayette Street, home to the Lafayette Street Partners bakery and cafe; a $ 12 million loan to 130 Bowery, inhabited by Le Capitale; a $ 9.2 million loan to Norwood House, a private members-only club; a $ 5.6 million loan for 357 West 16th Street, a cocktail lounge; and finally, a $ 2.6 million loan for 25 West 51st Street, which is owned by a restaurant. All of these loans were specially serviced in either June or July, highlighting the recent challenges facing this particular retail segment.
New York City retail in general has been hard hit by the pandemic. Yelp reports that more than 2,800 businesses closed during the pandemic and the average rental collection rate was only 30%. DBRS Morningstar notes that this will become the norm in the metropolis by 2021 as there is less pedestrian traffic, temporarily moving out of town and working from home.
New York City retail rents were already falling late last year, and the pandemic only slowed the market down further. According to REBNY's autumn report 2019Demand for retail rents per square foot declined, although leasing activity increased.