As first reported by Eliot Brown of the Wall Street Journal, New York City –based private equity and asset management firm, Savanna, has injected more capital into 2 Rector St in the Financial District. This move is expected to help the 480,000 square foot office space to avoid default.
Savanna became a part owner of the building at 2 Rector St. in 2010 when it restructured a loan for landlord, Stellar Management. At that point, the property lacked the necessary liquidity to make debt payments on its $110 million mortgage. 2 Rector St.’s cash flow problem for began in 2009 when the building’s largest tenant, the New York City Department of Transportation, left at the end of their lease.
After the initial restructuring in 2010, Stellar Management was able to increase vacancy to 81% the next year from the previous 74% rate. However 2012 leasing at 2 Rector Street still moved slowly, necessitating Savanna’s most recent rescue maneuver, in which $2.8 million was set aside for future debt payments while Stella Management continues its search for tenants
Yet, the bigger story here is not Savanna’s mission of mercy but the inability of Larry Gluck, owner of Stellar Management, to find tenant. Thus the prevalent narrative of Lower Manhattan redevelopment is giving way to an emerging disinterest in Lower Manhattan landmark properties.
Thus developers and property managers in Lower Manhattan must weight their options carefully. How high do you hold the leasing price bar for potential tenants before you risk the predicament of 2 Rector Street? This is a question having to be pondered by those seeking tenants at Lower Manhattan properties. Moreover, it’s a question to which we all hope they find the perfect solution.