Elon Musk’s unwillingness to pay rent for offices leased by X, formerly known as Twitter, has been a gut punch for his landlords.
Last week, Moody’s downgraded a security holding the mortgage at Columbia Property Trust’s 245-249 West 17th Street in Chelsea, Crain’s reported. The 281,000-square-foot building’s largest tenant is Musk’s social media company, which occupies 76 percent of the space.
Columbia was acquired by PIMCO two years ago for $3.9 billion.
Musk stopped paying rent at X offices across the country when he bought the social media giant 11 months ago. In February, Columbia defaulted on $1.7 billion in office loans tied to seven buildings in the United States, including the Chelsea property.
The controversial billionaire not only stuck the knife in his Chelsea landlord’s back, but twisted the blade: X has sublet approximately a quarter of its West 17th Street space since it stopped paying rent. Musk’s company has been looking to sublet up to 200,000 square feet at the property, which comprises two attached buildings.
Making matters worse for Columbia, other significant tenants at its West 17th Street address are having problems. One is WeWork, which is trying to renegotiate nearly all of its leases as the co-working platform seeks to avoid bankruptcy. Another is — or rather, was — First Republic Bank, which failed in the spring. It appears to have cleared out, Crain’s reported.
In addition to the downgrade, Moody’s also lowered the estimated net cash flow produced by the seven properties by 16 percent to $81 million. The downgrades pushed ratings of the mortgage-backed securities farther into the realm of below investment grade, otherwise known as junk.
In June, an appraisal valued the Columbia portfolio at $1.6 billion. Oaktree Capital, believed to hold the riskiest tranche of the CMBS, put forth a $1.8 billion valuation as it aimed to hold on to its right to oversee the loan workout.
Musk’s rent stoppage has caused havoc for office landlords across the land. Landlords are taking their battles to court to recoup some of their losses.
— Holden Walter-Warner