Citing opposition from some political leaders, Amazon has withdrawn its plans to bring its second headquarters to Long Island City, Queens. Investors who made real estate commitments based on the anticipation of Amazon’s investment in Queens are in for a big disappointment.
One disappointed property owner is likely to be the owners of One Court Square. The property is owned by New York fund operator Savanna and J.P. Morgan’s Junius Real Estate unit. Amazon was slated to take 1 million square feet in the 1.4-million-square-foot tower. The lease was anticipated to be a bonanza in terms of increased building value for the owners while filling a leasing hole in the building as the current tenant, Citibank, is expected to substantially reduce its presence in the building.
The property is encumbered by a CMBS conduit loan that was originated in 2005. The financing totaled $315 million and was structured with interest-only payments for its entire 10-year term based on a 4.90% interest rate. When the loan matured in 2015, it was refinanced with a 5-year interest-only CMBS conduit loan at 3.89% that would mature in the same year as the Citibank lease expiration, creating substantial vacancy risk should Citibank leave the building in 2020. That risk would have been mitigated by the Amazon lease, but for now, the vacancy risk remains.