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Two financial ratings services have noted with concern the impact that widespread distress in the shopping mall and office sectors may have on Battery Park City’s largest development, Brookfield Place. A spokesman for Brookfield Properties, which owns the complex, replies that “Brookfield Place is currently one of the best performing properties in New York and not at risk.”
According to Trepp, a firm that analyzes data for the commercial mortgage-backed securities (CMBS) market, Brookfield’s $265 million mortgage on the 360,000-square-foot retail mall within Brookfield Place has been placed on its “watchlist.” While Trepp notes that Brookfield has not fallen behind on this loan, and that the retail space is almost fully occupied, the firm expresses concern that a crucial metric known as the “debt service coverage ratio” is well below 1.0—meaning that income from rents is not enough to match the cost of loan payments. This loan was originally due for repayment in full this August, but Brookfield has exercised its as-of-right option to extend the term. Elsewhere, Brookfield’s mall in Woodbridge, New Jersey, has entered foreclosure, while seven other shopping malls operated by Brookfield around the United States are also on Trepp’s watchlist.
Brookfield responds that the retail space in its Battery Park City complex is 94 percent leased, and that the company has executed more than 30,000 square feet of new leases there since January 2022.
In a separate, but related development, the Fitch bond rating agency notes, in an evaluation of an upcoming debt issue by the Battery Park City Authority (BPCA), that the office downturn, sparked by the remote work trend that took hold during the pandemic, has translated into significantly reduced cash flow for the other component of Brookfield Place, its 8.5 million square feet of corporate offices. Fitch projects “a five percent decline of office property net income for 2024 with only modest growth returning in 2028.”
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