CMBS Office Case Study: From “Safe Asset” to a $257 Million Loss — 229 W 43rd St (Times Square)

“West 43rd Street near 229 W 43rd St (The Times Square Building), Times Square—dense mid‑block corri

1. Property Description

The property at 229 West 43rd Street, New York, NY 10036  – known as The Times Square Building – is a mixed-use Manhattan asset consisting of an office condominium (~486,000 SF, 66.5% of total) above a multi-level retail condominium (~245,000 SF, 33.5%). The 16-story building was constructed in 1913 as the headquarters of The New York Times, which it remained until the newspaper relocated in 2007. It underwent a major redevelopment completed in 2015, upgrading it to Class A office standards with modernized systems and interiors. The office portion spans floors 5–16, while the retail condo comprises the basement through 4th floors.

Location: The building occupies a prime location on West 43rd Street between Seventh and Eighth Avenues, in the heart of Times Square. It sits directly across from the planned Caesars Palace Times Square casino site. The address boasts exceptional foot traffic and transit access (Walk Score 99, Transit Score 100), making its retail space highly visible to tourists and its offices convenient for commuters.

Physical Characteristics: Total gross building area is 731,596 SF across 16 stories (typical floor ~45,700 SF). The building is steel frame with masonry facade and was fully sprinklered as of the 2015 renovation. Ceiling heights and floor load capacity are suitable for modern office use. There are 14 passenger elevators plus freight service. Year Built: 1913; Year Renovated: 2015. The lot spans ~1.16 acres with a 318′ x 201′ footprint.

Tenancy: The office condo is multi-tenant. As of 2025, the largest office tenant is Snap Inc. (Snapchat) with 137,000 SF leased through June 2027. Other notable office tenants have included Yahoo (which had leased five floors post-renovation) and coworking provider Knotel (51,000 SF, now vacated). In the retail portion, a 75,000 SF Bowlero (Lucky Strike) bowling/entertainment venue occupies the 3rd and 4th floors as a flagship location. Ground-floor retail tenants have included Los Tacos No. 1 and Benihana’s RA Sushi (each ~7,000–8,000 SF). The retail condo was previously anchored by experiential attractions (National Geographic Encounter and Gulliver’s Gate) which together occupied ~43% of the retail space before vacating in 2020.

Leasing Activity & Rents: Office space in the building has been marketed in the $78–$95/SF range (modified gross) according to market estimates. For example, a recent large office lease (87,000 SF in 2023) started at ~$83/SF MG. However, many in-place office rents are below market due to leases signed mid-2010s; the building was ~98% leased in 2015 at acquisition, with first-year NOI of $22.3M (implying $46/SF net). Retail rents have generally been withheld in reporting (often negotiable based on revenue participation), but premier Times Square ground-floor retail can command over $300/SF in healthy market conditions. The property’s current asking rents ($77/SF office) are in line with the Times Square submarket average, reflecting its prime location and Class A positioning. Recent leasing has included short-term pop-up retail uses as ownership works to re-tenant the vacant entertainment spaces.

Historical Ownership & Sale Prices: The asset has changed hands at highly divergent values over the past 15+ years, mirroring market cycles:

• 2007: Tishman Speyer and partners sold the entire building for $525 million (~$718/SF) at the height of the mid-2000s boom. The buyer (an investor group) intended to reposition the historic property after the NYT’s departure.

• 2011: Amid the post-financial-crisis slump, Blackstone Group acquired the office condo portion (floors 5–16) for only $160 million (~$333/SF) – roughly 70% below its 2007 valuation. Blackstone invested an estimated $105 million in capital improvements and lease-up (bringing in Yahoo and others).

• 2015: Columbia Property Trust purchased the 481,000 SF office condo from Blackstone for $516 million (≈$1,073/SF). At acquisition the office space was 98% leased and producing stable income, and Columbia projected continued growth with many rents below market. Separately in 2015, Kushner Cos. acquired the 248,000 SF retail condo for $296 million (~$1,190/SF), reflecting the high expectations for Times Square retail at that time.

• 2025: Following a pandemic-driven collapse in retail tenancy and a foreclosure (detailed below), the retail condo was sold at auction for just $28 million (a mere ~$114/SF). This represents a 91% value decline from Kushner’s 2015 basis. The office condo remains under Columbia (now owned by PIMCO) but is encumbered by a defaulted loan (discussed later).

Current Occupancy: The overall property is only ~80% leased as of 2025. The office floors are relatively well occupied (major tenants Snap and BuzzFeed among others), but the retail portion is only ~34.5% leased by area. This is a sharp drop from essentially full occupancy pre-2020. The exodus of key retail tenants in 2020, along with the bankruptcy of Knotel in 2021 (which had been a significant office tenant), drove occupancy to well under 70% during the height of the pandemic. Some recovery has occurred – e.g. Bowlero (Lucky Strike) remains in place and smaller retail shops have been backfilled – but the building still has large vacancies, including an entire 4-story entertainment space. The vacancy rate for the subject property is ~23.6%, significantly higher than the 15% submarket average. (See Section 4 for occupancy trend details.)

2. Loan and Value Analysis

Multiple CMBS loans have been associated with 229 W 43rd, and the property’s saga is particularly notable for the severe losses inflicted on lenders. Below we outline each major financing and its outcome:

• 2016 CMBS Loan (Retail Condo): In late 2015, Kushner Cos. refinanced the newly acquired retail condo with a $370 million loan package (senior and mezzanine) from Deutsche Bank and SL Green. The loan was securitized (senior ~$285M in a CMBS trust) in November 2016. At origination, the collateral was appraised at $470 million, implying a comfortable 60.6% LTV on the senior mortgage. The retail space was expected to generate increasing cash flow from the high-profile National Geographic and Gulliver’s Gate leases. However, by 2020 this loan defaulted – the tenant anchors stopped paying rent and vacated amid COVID-19, devastating cash flow. The loan was transferred to special servicing and foreclosure proceedings began in November 2020. The CMBS trust (led by servicer KeyBank) ultimately took title via a foreclosure auction in May 2024, credit-bidding the debt. An updated appraisal in February 2025 valued the retail condo at just $48 million – an 89% drop from 2016. The foreclosing trust promptly sought to sell the asset, but the first buyer prospect fell through. Finally, in mid-2025 the 248,000 SF retail condo traded for $28 million to a new investor. This fire-sale price was less than 10% of the 2016 appraised value. For the CMBS lenders, the loss severity was enormous: essentially the entire ~$285M principal was wiped out, with recovery of only ~$28M (≈90% loss). In absolute terms, this ~$257M loss on a single asset is one of the largest observed in the post-2020 office/retail downturn. The loan’s outcome underscores how dramatically values eroded – from ~$470M in 2016 to ~$48M (appraisal) to ~$28M (market bid) in 2025.

• 2021 CMBS Loans (Office Condo): In December 2021, Columbia Property Trust refinanced a portfolio of office assets (including 229 W 43rd’s office portion) with a $1.718 billion floating-rate loan. This debt was split across multiple CMBS deals. The Times Square Building’s allocated loan amount was roughly $314.5 million, secured by the 481,000 SF office condo. Initially, the loan was performing and on cash management, as Columbia had a strong lease profile (Snap, BuzzFeed, etc.) and the broader portfolio support. However, rising interest rates and weakening office fundamentals soon put pressure on this debt. By early 2023, Columbia (by then owned by PIMCO) defaulted on the $1.72B portfolio loan due to debt service strain and pending maturity. Wells Fargo, as trustee, moved the loan to special servicing. The 229 W 43rd Street office asset was specifically cited as struggling – it counts major tech tenants like Snapchat and BuzzFeed, who themselves were downsizing. In mid-2023, the lenders and PIMCO reached a restructuring rather than foreclosing on all seven properties. While details are private, it likely involved additional equity from PIMCO and modified terms. Valuation Impact: The office condo’s latest reported appraised value isn’t public, but given rising cap rates and occupancy issues, it has likely fallen well below the ~$516M Columbia paid in 2015. Even a speculative mid-2020s value on the order of ~$200M–$250M would put the $314M loan underwater (LTV > 125%). Columbia’s default underscores the loan-to-value spike: what was a ~60% LTV loan in 2021 may have ballooned to an effective LTV of 120–150% by 2023 as office values dropped. (Notably, Manhattan office values fell ~25–40% on average from 2017 peak to 2023.) The 229 W 43rd office loan remains outstanding under modified terms; its ultimate resolution is TBD, but the lender has avoided a fire sale for now.

• Previous Financing (2015 Bridge Loan): It’s worth noting Columbia originally financed the 2015 office acquisition with short-term bridge debt (a $300M loan at Libor+1.10%), which was paid off/refinanced prior to the 2021 packaging. That interim loan did not go into default, but Columbia’s high basis ($516M) and subsequent value decline meant that by 2021/22, traditional refinancing proceeds would not fully cover the investment.

Loss Calculations (2016 Loan): For the 2016 retail CMBS loan, the magnitude of loss can be quantified as follows. The senior trust balance was $285,000,000, and liquidation proceeds were $28,000,000 (pre-costs). This equates to a $257 million principal loss. Adding unpaid interest and fees, trust data (CoStar) indicates a total resolution severity of ~100% – essentially a full write-down for bondholders. Even including the presumed mezzanine piece (which was ~$85M of the $370M package), the combined $370M lenders got back under $30M – a staggering $340M+ in losses (94% of loan value). By comparison, the original 2016 appraisal of $470M suggests nearly $442M of value evaporated over nine years. Figure 2 above visually contrasts the original underwriting vs. the final outcome. The 2016 appraised LTV of 60% exploded to an effective LTV of ~600% in 2025, meaning the collateral was worth only one-sixth of the debt amount. This case thus delivered one of the worst loss severities in CMBS history for a single asset of this size.

Appraisal Value vs. Actual Market Value: It’s notable that even the February 2025 appraisal of $48M overshot market reality – the actual sale was 42% lower at $28M. In distressed scenarios, appraisals often lag, but here the gap highlights the illiquid, sentiment-driven nature of pandemic-era valuations. The buyer essentially paid 6% of the 2016 value for a Times Square asset, reflecting extreme pessimism about backfilling large retail spaces in a soft market.

3. Operating Financial Analysis (2016–2019)

We analyze the property’s operating performance using CMBS servicer-reported financials from 2016 through 2019 (the period leading up to default). The figures below pertain to the retail condo loan collateral (which included some ancillary income, possibly from signage and event space). They provide insight into the income erosion and expense profile. All amounts are presented on a per square foot (PSF) basis to facilitate comparison:

• Revenue: In 2017–2018 (stabilized years), gross potential rent was $54–64/SF, but effective realized rent was lower due to vacancy and free rent concessions. For example, in 2018 the property grossed ~$55.27/SF in rent, net of a minor ~$4.10/SF vacancy loss – indicating occupancy was around 92%. Total effective gross income peaked around $55/SF. By 2019, however, revenue was plummeting – the first 9 months of 2019 show only $32.69/SF effective income. (Annualizing that would be ~$43.59, implying a sharp drop from prior years.) This collapse was driven by tenant defaults: by late 2019, Gulliver’s Gate and others were struggling to pay, drastically cutting collections.

• Operating Expenses: The property’s operating expenses were relatively moderate for Manhattan, but certain categories spiked during the period:

  • Real Estate Taxes: Increased from ~$4.57/SF in 2016 to $7.35 in 2017 (likely as post-renovation assessed value caught up), then slightly down to $6.49 in 2018.

  • Insurance: Stable around $0.12–$0.18/SF annually.

  • Utilities: Ranged from $2.39/SF in 2016 to $1.91/SF in 2019 – a slight decline, perhaps due to lower occupancy or energy efficiencies.

  • Repairs & Maintenance: Fairly high in 2016–2017 ($4.25–$4.38/SF) during initial lease-up and fit-outs, then easing to $2.88/SF by 2019.

  • Janitorial: Reported as $0 (likely because tenants handled interior cleaning costs directly in this retail configuration).

  • Management Fees: Varied with revenue – about $1.65/SF in 2016, down to $0.77/SF by 2019 as income fell.

  • Payroll & Security: Around $0.56–$0.80/SF – modest, reflecting limited on-site staff (the building was managed as part of a larger portfolio by Columbia).

  • General & Administrative: Appeared as negative in 2016–17 (perhaps due to expense reimbursements or accounting adjustments), then +$0.25/SF in 2019.

  • Other Expenses: A one-time $8.04/SF hit in 2016 suggests a non-recurring cost (possibly write-offs or a one-time ground lease payment; ground rent itself was listed as $0).

  Summing up, total operating expenses fluctuated from $12.81/SF in 2017 to $16.12/SF in 2018. The jump in 2018’s expenses (despite slightly lower R&M) may have been due to higher property taxes and the normalization of previously netted reimbursements. In the partial 2019 period, Opex was $13.98/SF – a slight reduction achieved likely by cost-cutting as occupancy dropped.

• Net Operating Income (NOI) and Cash Flow: The NOI peaked in 2017 at $41.88/SF, equivalent to about $20.8 million annual NOI (using ~498K SF for the retail condo; note that Snap’s office space was separate). In 2018, NOI slipped ~7% to $39.15/SF ($18.8M), reflecting either some rent roll-down or higher expenses. The 9M 2019 NOI was only $18.71/SF – on a full-year basis that would be roughly $25/SF, illustrating the steep decline as tenants defaulted. Essentially, NOI was cut nearly in half by 2019 versus two years prior. After capital costs (tenant improvements and leasing commissions), the Net Cash Flow (NCF) in 2018 was $36.46/SF, but by 2019 NCF had fallen to $16.70/SF (9 months). In fact, by late 2019 the debt service coverage on the retail loan had fallen to ~1.0× (NCF DSCR 0.93 for 9M 2019) – meaning the property was barely covering the mortgage interest, even before the pandemic hit. This was a precipitous drop from the healthy 1.62–1.73× DSCR range in 2017–2018.

The trends are visualized in Figure 3. Initially, in 2017, NOI comfortably exceeded debt service (1.73× DSCR), and operating expenses were only ~23% of gross income. But by 2019, the margin evaporated – NOI and NCF plunged ~50%, while expenses couldn’t fall proportionately, pushing the expense ratio above 40%. In short, the property’s operating performance deteriorated rapidly in the lead-up to default, driven by occupancy and rent losses rather than exorbitant expense growth. Fixed costs like taxes kept Opex elevated even as revenue fell, compressing NOI.

Expense Benchmarking: On an absolute basis, total Opex around $14–16/SF is reasonable for a large NYC asset (for comparison, many Manhattan office buildings run $18–$25/SF in expenses). The fact that the Times Square Building’s Opex was somewhat lower likely relates to the retail nature of the collateral – e.g. tenants might directly handle more costs, and the owner’s expenses exclude full interior office services. However, the tax burden grew as assessments rose (notably, the 2025 assessed value was ~$117.6M, 22% of the last sale) and would likely have required reductions via appeal given the post-2020 value plunge.

Conclusion (Financials): The key story in the financials is the collapse of NOI/NCF as occupancy fell (see next section). The property went from a profitable, cash-flowing asset in 2017 to a breakeven operation by 2019. Once NOI could no longer cover debt service, default became inevitable, as the sponsor (Kushner) chose not to inject cash. Notably, the underwritten pro forma at loan origination assumed ~$44.66/SF NOI and a 1.86× DSCR – those projections proved far too optimistic by 2019. This case highlights how quickly downtown asset cash flows can unravel with just a couple of major tenant losses.

“Dusk aerial rendering of 229 W 43rd St (former New York Times Building) in Times Square—historic cr

4. Occupancy Trends and Tenancy Changes

Initial Lease-Up: When Columbia and Kushner acquired their portions in 2015, the building was nearly fully leased. The office condo was 98% occupied (major tenants: Yahoo, Snapchat (subleasing), and various media firms). The retail condo was also substantially leased or committed – Kushner’s $296M purchase was predicated on two new entertainment tenants (NatGeo and Gulliver’s Gate) taking ~100k SF combined. Through 2017, occupancy remained high; CoStar data show the subject property ~80–100% leased in 2016–2017, and Columbia noted “strong tenancy” with rent growth upside.

Tenant Departures: The first cracks appeared in 2018–2019. Yahoo, which had occupied five floors, downsized as its parent company restructured (Snap Inc. eventually backfilled some of this space). Knotel, a flexible office operator, had taken ~51,000 SF, but by 2019 was already struggling; it would file bankruptcy in early 2021, vacating its space. In retail, National Geographic Encounter (an interactive exhibit) and Gulliver’s Gate (miniature world attraction) saw attendance below expectations and both stopped paying rent in 2020, then terminated their leases. These two alone represented 42.7% of the retail square footage. Their collapse, directly tied to the COVID-19 tourism freeze, suddenly left almost half the retail condo dark.

Occupancy Collapse: By late 2020, overall occupancy plunged to roughly 65–70% (from ~98% two years prior). The retail portion went from fully leased to only ~35% leased (Bowlero and a few restaurants remained). Office occupancy also slipped as sublease space hit the market – e.g. BuzzFeed put some of its space up for sublease and many smaller tenants did not renew. CoStar reported the property’s vacancy rate spiked to ~30+% in 2021 (implying occupancy near 70%). This aligns with the loan reports: the servicer noted occupancy dropped below 75% when the big retail tenants defaulted.

Importantly, the occupancy decline directly drove the financial deterioration described in Section 3. With much of the retail GLA not paying, effective income nosedived in 2019–2020. By 2021, the retail condo was in foreclosure, and its occupancy flatlined around 34% (just the bowling alley and a few street-front stores). The office condo fared better but still saw occupancy drift downward into the 70–80% range as of 2022. Snap Inc. remained (137K SF through 2027), providing a stable anchor, but other floors had empties. For instance, BuzzFeed reportedly reduced its footprint (BuzzFeed had been listed as a tenant in the building), and Yahoo fully exited. The net effect was a double-digit percentage point rise in vacancy.

Current (2025) Occupancy: The latest data show a modest improvement: overall leased rate ~80.2% as of mid-2025. This uptick (from ~72% a year prior) may reflect small leases or interim activations in the retail space while under receivership. Still, vacancy at ~20%+ is very high for a formerly core asset, and nearly all of it is in the retail sector. The retail condo is only 34.5% leased by area – essentially just Bowlero (76K SF) and a couple of restaurants are open, while ~160,000 SF of multi-level space sits empty. The office floors are closer to ~90% leased (Snap, some other tech/media firms fill a majority of the space), which brings the blended occupancy up. However, even the office component faces headwinds: subleases are on the market and tenant downsizing is a risk given hybrid work trends.

In summary, the property went from near-stabilized in 2017 to effectively half-empty by 2020. That dramatic occupancy swing caused NOI to implode and led directly to the retail loan default. It exemplifies how tenant credit concentration (two experiential tenants comprising >40% of rent) can be a fatal weakness – once those tenants failed, the property could not recover in time. The inability to replace them in a pandemic-stricken market sealed the fate of the 2016 CMBS loan. Occupancy has since stabilized at ~80%, but largely because the foreclosure wiped out debt and allowed a low-basis buyer to hold the asset; for the original lenders, the damage was done.

5. Times Square Submarket Context (2018–2025)

The challenges at 229 W 43rd St reflect broader headwinds in the Times Square office submarket, though with some distinctions. Using MMCG’s proprietary market data, we observe the following trends over the past five years:

• Availability and Vacancy: Times Square’s office availability rate surged during the pandemic, peaking at 20.3% in Q2 2023 (for all classes). This was roughly double the sub-10% availability seen pre-2020. As of Q3 2025, availability has improved to 16.0% – still starkly elevated versus pre-pandemic (~8%). The direct vacancy rate stands at about 15.0%. By comparison, 229 W 43rd’s vacancy (~20%+) exceeds the submarket, owing largely to its retail woes. Figure 4 contrasts the subject’s metrics with the market. Notably, Times Square’s vacancy is higher than the overall Manhattan office market (which is ~13.5%), as this submarket was heavily hit by media/entertainment tenant contractions.

• Rental Rates: Asking rents in Times Square average $75 per SF (full-service gross) for Class A & B space. This is the second-highest among NYC submarkets (trailing only the Plaza District). Rents have been relatively sticky – landlords largely held face rents flat during 2020–2022, preferring to give concessions rather than cut headline rates. Consequently, current asking rents are only ~0–1% higher year-over-year, essentially flat. In fact, rent growth since 2019 has been minimal (with a temporary dip in 2020 offset by a gradual recovery). For context, the historical peak rent growth in Times Square was nearly +20% in late 1998, and the worst decline was -12% in 2009. The recent period has seen <1% annual rent change, reflecting the stagnant demand. The subject property’s asking office rent of ~$77.36/SF is in line with the submarket average. However, effective rents are lower after free rent and TI packages – a dynamic market-wide. In short, nominal rents have not cracked, but net effective rents are down.

• Absorption and Demand: Net absorption in Times Square turned deeply negative in 2020–2021 as many firms shrank footprints. The submarket saw its worst quarterly net absorption in Q3 2022 (~-2.65 million SF). Since then, demand has seesawed back to positive. Notably, 1H 2025 saw two consecutive quarters of positive absorption. Large deals (e.g. law firm Mayer Brown renewing/expanding 353K SF at 1221 Ave. of Americas, and MUFG Bank expanding 220K SF in the same building) demonstrated a “flight to quality” within the submarket. New leasing activity in Q2 2025 hit ~840,000 SF – more than double the 5-year quarterly average. This rebound is partly attributed to NYC having one of the highest office attendance rates in the country (~95% of pre-COVID levels by some measures). In short, Times Square leasing is recovering, but mainly concentrated in top-tier properties (Class A towers account for 85% of new leases). Older or lower-quality buildings still struggle, as evidenced by 3-Star availability remaining over 22%. Since 229 W 43rd is a century-old building (albeit renovated), it faces stiff competition from newer product for tenants.

• Sublease Space: A worrying trend specific to Times Square has been a spike in sublease availability in 2024–2025. Sublet space is now ~17.4% of all available space, up from 12.8% at end-2024. Two big subleases hit the market recently: a full-building 525,000 SF sublease at 535 W 46th St, and a 192,000 SF sublease at 1515 Broadway (ViacomCBS space). These flood the market with discounted space and compete directly with landlord offerings. For 229 W 43rd, sublease competition (and potentially the shadow space from BuzzFeed, etc.) puts additional downward pressure on achievable rents.

• Historical Context: Over a 5-year horizon, Times Square’s availability rate is still roughly double its pre-pandemic level (16% vs ~8%). Market pricing has corrected: sales of older Times Square offices in 2023–2025 show 50–70% value declines from prior peaks. For instance, 1700 Broadway (an older 3-Star office) sold for only $164/SF in 2024 – 74% below its 2018 sale price. This mirrors the subject property’s retail crash. On the leasing side, while headline rents remain high (second only to Plaza District), effective rents are far lower after concessions. Newer, amenitized buildings are capturing most demand, while assets like 229 W 43rd (though renovated) may have to concede on terms to attract tenants in this environment.

  
  

Takeaway: The Times Square submarket is healing but not fully recovered. Availability is trending down from its peak, and strong leasing in 2025 is an optimistic sign. Nevertheless, vacancy remains elevated, and tenant preferences have shifted – most demand is for high-quality, well-located buildings (often newer or heavily upgraded). Older buildings with large floor plates may face an identity crisis if they can’t attract traditional office tenants; some may consider alternative uses. Indeed, conversions of obsolete offices to other uses (hotel, residential) are being explored in NYC where feasible, though Times Square’s zoning and configuration make that challenging for this asset. In summary, 229 W 43rd’s struggles are emblematic of Times Square’s broader narrative: a prime location hit by a perfect storm of pandemic, changing tenant needs, and overleveraging, now slowly finding its footing in a “new normal” of higher vacancy and flattening rents.

(Data source: MMCG proprietary database, Times Square Office Submarket Report, Q3 2025.)

6. Comparative Transactions in 2025

The distress at the Times Square Building is not an isolated case – 2025 has seen numerous high-profile distressed office transactions that highlight the widespread valuation collapse and lender losses in the office sector. Two notable parallels come from Philadelphia and St. Louis:

• Philadelphia: Center City Philadelphia’s office market is facing record vacancy and declining values, similar to Manhattan. For example, 1700 Market Street, a 32-story, 851,000 SF tower owned by Shorenstein, fell into severe default and is now in foreclosure proceedings. The CMBS loan on 1700 Market is $186.7 million, and the building is only ~50% occupied. Its appraised value has likely fallen by 40–50%, and a foreclosure trial is set for late 2025. Likewise, 1650 Arch Street (553,000 SF, ~50% vacant) was placed in receivership as its owner defaulted; a foreclosure action was initiated by the lender (Delphi Financial) in mid-2025. In another case, the 296,000 SF 1635 Market Street had its assessed value slashed by 55% (from $62M to $35.8M) due to high vacancy – a dramatic indicator of how capital values are being written down. Philadelphia’s downtown vacancy has climbed above 20%, and even trophy towers are not immune. CMBS loans on several Philly offices have been transferred to special servicing or face refinancing hurdles. In short, the urban office distress seen at 229 W 43rd is playing out in Philadelphia as well: lenders are encountering big losses as properties reprice. In fact, a recent CoStar analysis labeled Philadelphia’s Market Street West corridor as particularly troubled, with multiple towers (e.g. Three Logan Square, Centre Square) confronting default or drastic valuation cuts.

• St. Louis: Secondary markets are also impacted. In St. Louis, the 30-story Bank of America Plaza (800 Market St., 750,000 SF) went into foreclosure after its owner defaulted on a $50 million loan. The building is only ~50% leased and has been in receivership since 2024. A sale is planned by the lender (US Bank Trust) after the borrower stopped making payments. The estimated value of BoA Plaza is now just a fraction of its replacement cost – similar to how 229 W 43rd’s retail condo fell to essentially land value. St. Louis’s downtown office occupancy averages only ~75%, and investor appetite is minimal; one large St. Louis tower sold in 2023 for under $10/SF in a foreclosure sale. These examples underscore that even mid-America markets are seeing office asset capitulation, with towers trading at extreme discounts that wipe out prior debt. The common threads are rising interest rates, high vacancy, and aging buildings that lack demand – all leading to distressed sales.

Other 2025 distressed transactions include: a downtown Chicago office auctioned at a steep loss; several Los Angeles office loan defaults (Brookfield notably defaulted on two DTLA towers); and San Francisco towers transacting at 70–80% discounts from pre-pandemic values. The Times Square Building’s story – a 90% value decline and massive CMBS loss – fits into this broader pattern of 2023–2025 being the “reckoning” period for overleveraged offices.

7. Conclusion

The saga of 229 West 43rd Street exemplifies the broader distress in the office sector and CMBS markets in 2025. A trophy asset in a prime location was unable to withstand a combination of overleverage and an unforgiving market shift. Key takeaways and contextual insights include:

• Broader CMBS Impact: The liquidation of the Times Square Building’s retail loan at a ~94% loss is one of the worst on record, contributing to a spike in CMBS losses. Across CMBS, office loan delinquencies have soared – the office delinquency rate hit an all-time high of ~11.0% at end-2024. Although it eased slightly to ~10.6% by mid-2025, this is still over 350 bps higher than a year prior. Many CMBS trusts are realizing unprecedented losses as assets like this are written down to a fraction of their loan balances. In 2025, CMBS lenders posted some of the largest losses in a decade, and 229 W 43rd’s $257M wipeout is a case in point. Bond investors are increasingly cautious of office-heavy securitizations; spreads have widened and new issuance backed by office collateral is minimal.

• Refinancing Walls and Maturity Risk: The case highlights how refinancing became impossible once values fell. Industry-wide, a “maturity wall” is looming – roughly $1.0 trillion of commercial mortgages come due in 2025 alone, and an even larger wave peaks in 2027 (est. $1.26T). Office properties, with 50% value declines in some instances, simply cannot refinance without substantial paydowns. Loan-to-value ratios have spiked well above 100% for many 2015–2017 vintage loans. The subject property’s retail loan went from 60% LTV to effectively 600% LTV, illustrating this dynamic. As rates doubled and NOI shrank, debt yields plummeted – no lender would refinance the $285M at anything close to par. This scenario is playing out nationwide. Borrowers are pursuing extensions, restructurings, or handing back keys when faced with maturity and negative equity. The cost of debt (e.g. the Columbia portfolio loan at ~5% floating) also jumped such that even performatively paying loans became unviable, forcing defaults like Columbia’s $1.72B portfolio.

• Macroeconomic Pressures: Higher interest rates and remote work have fundamentally altered office economics. Cap rates for offices expanded 200–300 bps since 2019 in many markets, directly reducing values ~30–40%. Meanwhile, office demand remains tepid – national office utilization is ~50% on average, and tenants are downsizing. This creates a vicious cycle: declining NOI and higher cap rates = lower values, which then undermine refinancing, leading to distressed sales that further depress comparables. Additionally, construction cost inflation and capital expenditure needs (for re-tenanting older buildings) make rescuing these assets expensive. In the subject’s case, re-leasing the cavernous retail space likely requires tens of millions in new investment, which the foreclosed trust was unwilling to fund – hence the bargain sale to an entrepreneurial buyer.

• Sector Outlook: The Times Square Building now enters a new chapter with a low-basis owner aiming to reposition the retail space (entertainment-oriented use tied to the prospective casino across the street). Many other distressed offices in 2025 are seeing similar change in ownership at reset pricing. This transfer of equity (often at cents on the dollar) is a painful process for lenders but arguably a necessary one to find a market clearing price. We are seeing an acceleration of such transfers in 2025: e.g., Silverstein Capital took deed-in-lieu on Philadelphia’s Centre Square; lenders are foreclosing on outdated towers in Chicago, Houston, and Atlanta. Some buildings, unable to attract new tenants, may face conversion or even demolition if economics don’t pencil out (e.g., discussions of office-to-residential conversions in Philadelphia and NYC for structurally suitable candidates).

In conclusion, 229 W 43rd Street stands as a cautionary tale for debt investors. It encapsulates how a flagship property can go from a $470M appraised value to a $28M distress sale in less than a decade. For CMBS lenders and bondholders, it underscores the importance of realistic underwriting (e.g. not relying on rosy rent growth or high tourist traffic indefinitely) and the peril of high-leverage loans on speciality assets. As we navigate 2025’s wave of maturities, the broader office sector is experiencing a true price discovery moment, often via forced sales. The Times Square Building’s outcome – a nearly total wipeout for the 2016 lenders – may be extreme, but it reflects a trend seen in other markets like Philadelphia and St. Louis where office values have reset 50–90% lower.

For institutional lenders and investors, the lessons are clear: conservative leverage and proactive asset management are paramount in a post-pandemic world. Properties with significant leasing risk or capex needs must be capitalized appropriately to withstand shocks. The case of 229 W 43rd shows what can happen when that isn’t the case. It also highlights that in today’s market, even prime addresses offer no immunity from secular headwinds. As refinancing challenges mount and more loans mature, we can expect to see further distress and opportunistic transactions – and each will, much like this one, test the resilience of lenders’ portfolios and the resolve of investors in the office sector.

September 02, 2025, by a collective authors of MMCG Invest, LLC, (retail/hospitality/multi family/sba) feasibility study consultants.

Sources:

• CMBS Office Case Study: From “Safe Asset” to a $257 Million Loss — 229 W 43rd St (Times Square)

• 2016–2025: Value erosion, NOI compression, and submarket headwinds

• CMBS Office Case Study: How a Prime Times Square Asset Became a $257M Loss

• From Core to Distress: A $257 Million CMBS Loss at 229 W 43rd St

• Times Square CMBS Case Study: The $257M Value Collapse at 229 W 43rd St

• De‑Risked to Distressed: Tracing a $257 Million CMBS Loss (229 W 43rd St)

• When “Safe” Isn’t Safe: A $257M CMBS Loss on a Times Square Office/Retail Condo

• CMBS Loss Anatomy: 229 W 43rd St’s Descent to a $257 Million Shortfall

• Prime Address, Negative Equity: A $257M CMBS Office Loss in Times Square

• From Stabilized to Special Servicing: The $257M CMBS Write‑Down at 229 W 43rd St

• Office Demand Shock in Times Square: A $257 Million CMBS Loss Case Study

• CMBS Risk Unmasked: 229 W 43rd St’s $257M Loss Despite Trophy Location