A Class A office building that touted high-end tenants like Ralph Lauren has been transferred to special servicing.
The borrower behind 650 Madison Avenue, a group that includes Vornado Realty Trust, has failed to meet payment obligations, according to a note from Morningstar Credit. The property was recently appraised at 21 percent less than it was in 2019.
The Plaza District building, located between East 59th and 60th Streets, is a 28-story office and retail building totaling 595,000 square feet. It was purchased by a group of investors — including Vornado, Oxford Properties Group and the Ontario Municipal Employees Retirement System — in 2013 for about $1.3 billion.
The owners secured a $214 million refinancing for the property in 2019. But revenue and occupancy have both taken a hit since then. Occupancy was 97 percent when the loan was issued. But Ralph Lauren, which once leased over 40 percent of the space in the building, downsized by 39 percent and is now paying about 30 percent less in rent. Occupancy dipped to 57 percent in 2024, according to Morningstar, but is now back up to 74 percent.
Beyond Ralph Lauren, current office tenants include Lakewood Capital, according to Vornado’s website, with retail space occupied by Celine, Moncler, Balmain, Cremieux, Tod’s and others.
Revenue last year was $69.9 million, down from $87.3 million in 2019.
At its most recent appraisal, the property also saw its value fall. Once estimated to be worth $1.21 billion, 650 Madison was appraised at $950 million.
The loan was transferred to special servicing after the borrower failed to fund a “waterfall shortfall,” a type of investment distribution. The borrower formally requested the transfer, according to information from the lender provided by Morningstar.
The lender said it’s in discussions with the borrower and evaluating all available legal and resolution options, including a loan sale and foreclosure. A pre-negotiation agreement has already been signed.
Vornado did not respond to a request for comment.
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