Lots More on the Two Troubled NYC Office Buildings Everyone's Talking About

Joe Weisenthal (0:03)

Bloomberg Audio Studios. Podcasts, radio, news.

Tracy Alloway (0:10)

Joe, do you know that song, Money Money?

Joe Weisenthal (0:13)

I remember it, yeah.

Tracy Alloway (0:13)

Money money.

Joe Weisenthal (0:14)

Yeah, yeah.

Tracy Alloway (0:15)

Okay, I didn't know this. Apparently, it was inspired by a building here in New York.

Joe Weisenthal (0:20)

Really? I didn't know that at all.

Tracy Alloway (0:22)

Yeah, I don't know why.

Joe Weisenthal (0:23)

I'm gonna Wikipedia it.

Tracy Alloway (0:24)

Why we would actually know this. But apparently, there used to be a sign that said money, but M-O-N-Y on top of this building at 1740 Broadway.

And the M-O-N-Y money was supposed to be Mutual of New York, I guess. And then it got like compressed. And then it was on top of this building for a really long time. And then I guess the band, what were they called?

Joe Weisenthal (0:47)

I'm looking on Wikipedia. Is this the one Tony James, Tommy James and the Shandell?

Tracy Alloway (0:52)

Yes.

Joe Weisenthal (0:53)

Yeah, there it is.

Tracy Alloway (0:54)

Tommy James and the Shandell. So they were like staying around that area, looking for inspiration for a song and they saw the sign and they were like, that's it.

Joe Weisenthal (1:03)

And they got a hit out of it. Oh yeah, here it is. Atop the Mutual New York Building in Manhattan.

I did a deadlift. One, two, three.

Tracy Alloway (1:17)

Barges.

Joe Weisenthal (1:17)

This is an after school special, except.

Tracy Alloway (1:19)

I've decided I'm gonna base my entire personality going forward on campaigning for a strategic pork reserve in the US.

Joe Weisenthal (1:25)

Where's the best squid ink pasta?

Tracy Alloway (1:27)

These are the important questions. Is it robots taking over the world?

Joe Weisenthal (1:30)

No, I think that like in a couple years, the AI will do a really good job of making the Odd Lots podcast.

And people will think, I don't really need to listen to Joe and Tracy anymore. We do have.

Tracy Alloway (1:42)

Cha-ching.

Joe Weisenthal (1:45)

Welcome to Lots More, where we catch up with friends about what's going on right now.

Tracy Alloway (1:49)

Because even when Odd Lots is over, there's always lots more.

Joe Weisenthal (1:54)

And we really do have the perfect guest.

Tracy Alloway (1:58)

You might have heard just then, we are speaking with Hiten Samtani, the founder of 1031 Media, which is a newsletter focusing on real estate. And Hiten has been on the show before, but we had to bring you back on because there's a lot going on in office buildings in New York, it seems. And particularly on one street on Broadway.

Hiten Samtani (2:19)

Yeah, it's been quite the carnage season for a bit, but I think what happened with reference to this building is even more alarming because-

Joe Weisenthal (2:27)

Wait, just to be clear, just to be clear, when you say this building, we are talking about the Mutual of New York building.

Tracy Alloway (2:33)

1740 Broadway, the money building.

Joe Weisenthal (2:35)

Keep going, tell me about 1740 Broadway.

Hiten Samtani (2:38)

So 1740 Broadway was your prototypical Class A office building, sort of Tower of Power, Manhattan, credit tenants, that whole jazz. And what's happened just last week or this month was that the AAA trench holders, so basically the people who hold what is considered the safest part of the CMBS stash lost a big chunk of money when this building's debt was sold. So that doesn't happen very often. In fact, the last time it happened was the GFC. So now people are looking at this and saying, okay, so if AAA bondholders aren't safe, then God, how bad is this thing? Because we've talked about CRE distress for about a year and a half now.

This one is particularly alarming.

Tracy Alloway (3:23)

The money building stopped making money, I guess. Sorry, you knew that was coming eventually. But okay, the one saving grace in this seems to be that this particular CMBS deal, commercial mortgage backed security, it was a single property deal, right? So the risk was trenched up. So you had that AAA slice, the AAA bit, but there was only one property. So you didn't necessarily have the diversification benefits that you would see in a normal CMBS conduit type deal.

Hiten Samtani (3:55)

Correct. And this is something that people have been asking is, is there any point where it's justified to give a single asset transaction like this a AAA rating? Because yes, it is a diverse group of what you would call credit worthy tenants.

But as we've seen with this building and another we're gonna talk about, things can go wrong pretty quickly.