As WeWork’s default has rattled office building owners, the company’s discrete exit from a Midtown office building may have pushed the property to the brink.
A $65 million loan backed by 25 West 45th Street struggled last week after falling occupancy rates weighed on operating income, Moody’s Rating Action detailed.
The building, owned by office owner APF Properties, was 82% occupancy as of November, with nine other leases expiring, according to Morningstar.
As of March, the property’s debt-servicing coverage ratio was 0.93%, indicating that cash flow was just insufficient to cover operating expenses on a loan that was due in just six months.
APF has grappled with broken leases and rent arrears throughout the pandemic, but WeWork’s departure could be the biggest blow.
In early 2019, months before WeWork’s failed IPO, the co-working company snapped up space in four APF buildings, including two floors at 25 West 45th Street.
WeWork didn’t start paying rent on 25 West 45th until the second quarter of 2020 and found itself in a Legal disputes Partnered with APF that December. The landlord alleges that WeWork failed to submit the documentation it requested for reimbursement of improvement expenses.
Despite the lawsuit, WeWork appears to have set up shop in the building in early 2021. The location first went live on WeWork’s website in February 2021, according to online profiles.
But as of November 2021, the company’s 25 West 45th listing has been removed from the web.
It is unclear whether WeWork has terminated its lease with APF. The company, led by Kenneth Aschendorf and Berndt Perl, did not respond to a request for comment.
But the record points to the exit.
In the same year that the listing disappeared, the building’s occupancy rate dropped from 86 percent to 73 percent. WeWork’s leases account for 12.5 percent of the property, according to Morningstar.
The floors occupied by WeWork — floors 2 and 15 — are listed as available on the commercial leasing website SquareFoot.
The 18-cent co-working company is proving to be just as irritating to another APF property: 183 Madison.
After leasing the building in 2019, the company has not paid rent from September 2021 to March 2022 and has been regularly behind on rent since then. WeWork launched this spring. But the APF extended the lease amendment, which provided the company with $4.3 million in relief over the lease term of the past seven years.
Given these challenges, there is a certain irony in Aschendorf’s comments in 2019, after he signed four leases with the startup.
“WeWork is exactly the kind of company we want to have in our portfolio,” Aschendorf said at the time.
