Metro Loft Developers, led by Nathan Berman, is navigating financial challenges at 180 Water Street, a prominent office-to-residential conversion in New York City’s Financial District. For the second time in recent months, the firm is facing the possibility of defaulting on a substantial loan tied to one of its key properties.
A $265 million senior mortgage secured against 180 Water Street is coming due this month, according to a report from Crain’s New York. The financial strain is further highlighted by KBRA’s recent downgrade of the mortgage to “underperform,” signaling increased concerns about its repayment. Adding to the complexity, a $100 million mezzanine loan is also maturing in the same timeframe, creating a significant financial hurdle for Metro Loft.
KBRA’s assessment directly addressed the uncertainty surrounding the loan repayment, stating, “It is unknown if the borrower will be able to pay off the loan maturity.” This cautious statement underscores the precarious financial position of the property.
Despite the looming deadlines and concerning ratings, Nathan Berman, principal at Metro Loft, conveyed a sense of measured optimism. He informed Crain’s that the company is actively “working things out with both lenders,” though he refrained from providing detailed specifics about the ongoing negotiations or potential solutions being explored.
The senior mortgage of $265 million was originally provided by Deutsche Bank in 2019. Parts of this loan were subsequently incorporated into commercial mortgage-backed securities, as reported by the Commercial Observer. Wells Fargo currently acts as the trustee for the debt holders, managing the mortgage, according to public records. Deutsche Bank also originated the $100 million mezzanine loan, which Rockwood Capital later took control of in 2019.
Metro Loft’s acquisition and transformation of 180 Water Street represents a significant chapter in the Financial District’s residential evolution. In 2017, Berman finalized the full purchase of the building, buying out Vanbarton Group for $450 million. This move followed Metro Loft’s initial minority stake acquisition in 2014 and the subsequent launch of a $100 million conversion project in 2015.
The ambitious conversion project transformed the 460,000-square-foot office building into a 573-unit residential tower. Upon its completion and opening in 2017, 180 Water Street quickly achieved impressive leasing success, reaching 97 percent occupancy shortly after launch. Currently, occupancy stands at a strong 98 percent, with an average rent of $4,800. However, rent growth at the property has reportedly plateaued in recent years compared to broader Manhattan market trends, and incentives like free months are often used to secure long-term leases.
Residents of 180 Water Street enjoy a range of amenities, including a 1,200-square-foot courtyard and an indoor swimming pool, enhancing the building’s appeal in the competitive downtown rental market.
Nathan Berman is recognized as a key figure in New York City’s office-to-residential conversion landscape. Despite his expertise and track record, Metro Loft, like many in the real estate sector, is facing headwinds. Earlier in the summer, the firm publicly disclosed its inability to repay a $250 million loan associated with 20 Broad Street, another Financial District property, when it matured the following month. According to Fitch Ratings, discussions regarding a loan modification for 20 Broad Street are ongoing, potentially involving an extension, interest rate adjustments, or principal reduction.
The situation at 180 Water Street underscores the broader pressures in the commercial real estate market, particularly for large-scale conversion projects facing maturing loans in a fluctuating economic environment. The outcome of negotiations between Metro Loft and its lenders will be closely watched by industry observers, as it could set a precedent for similar properties facing refinancing challenges in the current market.
