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Former President Donald Trump’s grip on 40 Wall Street, a landmark Manhattan office tower, has tightened after the mortgage recently transferred to a lender specialized in sorting out problematic debt situations.
Loans created by Wall Street lenders typically transfer to “special servicing,” or a lender hired to recoup the most value for bondholders, when a borrower is an imminent default risk or wants to request a modification or another form of debt relief.
The 40 Wall Street loan, currently at a $122.2 million balance, transferred to special servicing in October, but in December, the loan was no longer classified as such, according to CrediQ and Trepp, both of which track the performance of properties financed in Wall Street’s commercial mortgage-backed securities market.
“The loan is in full compliance. We have never missed a payment, we have never paid late and we have never breached a loan covenant,” a Trump Organization spokeswoman said in a statement to MarketWatch. “We are incredibly proud of 40 Wall Street and we will continue to operate this world-class building.”
The spokeswoman didn’t respond when asked for details on the loan’s current status, any potential changes to debt terms at the property or why it was classified as out of special servicing. The special servicer declined to comment.
“When you are transferred to special servicing that means there’s likely some risk to bondholders,” said Matthew Cypher, director of the Steers Center for global real estate at Georgetown University, adding that in the 2007-2008 global financial crisis borrowers typically transferred after they missed a debt payment.
In recent periods of stress, however, including during the COVID pandemic, many borrowers transferred before defaulting, while seeking loan modifications, extensions or other forms of relief.
Loans typically move out of special servicing when a debt has been modified or extended, a borrower puts more equity into a property or a property’s finances improve.
Read: Trump’s businesses got $7.8 million from 20 countries when he was president: report
Trump’s 40 Wall Street sits across from the New York Stock Exchange in lower Manhattan. In the 1930s it was among Manhattan’s tallest skyscrapers. It has been a jewel of the Trump Organization’s real-estate portfolio since Trump reportedly paid less than $8 million for it in the early 1990s.
Importantly, 40 Wall Street is also among the former president’s buildings at the center of a civil fraud trial in New York, which is due to soon to wrap up. New York Attorney General Letitia James sued Trump, the Trump Organization and others in his real-estate business in 2022, claiming they illegally conflated the value of Trump’s personal wealth to secure favorable terms on real-estate loans.
Related: Trump lashes out, is admonished by judge during testimony in civil fraud trial
A Trump spokesperson didn’t respond when asked if the lawsuit has been a factor in obtaining fresh financing at the property.
Trump took out $160 million on 40 Wall Street at a 3.665% rate in 2015 to refinance the skyscraper through Ladder Capital. The debt was later sliced up by Wall Street into several bond deals that were sold to investors.
The loan is scheduled to mature in July 2025, according to a Trepp researcher, who said data available in January to bondholders might provide additional clarity about the status of the property. Still, the property remains on a “watch list” of buildings that potentially face trouble.
December servicing notes indicate occupancy has fallen below 80% from 97.8% when the loan was originated nearly a decade ago. Office properties in big cities have been reeling from higher rates and flexible-work arrangements since the pandemic.
Moody’s recently estimated that flexible work has reduced office demand by 14.5% on a national basis.
See: Office-loan delinquencies hit 5-year high in 2023 and likely will rise even higher, Moody’s says
