The One Five One office tower in Times Square offers attributes lenders favor in the still troubled office market, but investors in the $1.3 billion commercial mortgage-backed security (CMBS) large loan transaction approaching the market will have at least one unique and potentially problematic issue to consider.
The borrower is the Durst Organization, a 110-year-old, family-run commercial and residential real estate company. Its interest-only, fixed-rate commercial mortgage loan matures in five years and is anticipated to carry an interest rate of 6.0%, according to S&P Global. The loan originators selling the loan to the DURST Commercial Mortgage Trust 2025-151 that will issue the CMBS are Wells Fargo Bank, JP Morgan Chase Bank, and Bank of America.
The deal is expected to close on or about Aug. 19, 2025.
In a July 29 presale report, S&P noted several risk considerations for investors, including the fate of the building's largest tenant, TikTok, which provides 15.2% of gross rent. In April 2024, President Biden signed a law that gave TikTok's owner, ByteDance, nine months to divest its US company or be banned from operating in the US. An executive order delayed enforcement, but the fate of the US operations remains unknown.
To mitigate that risk, when the loan closes $50 million will be deposited into an upfront TikTok reserve, and an additional $31.2 million will be available via a letter of credit should TikTok default on its lease.
"The reserved funds are designated for re-tenanting costs and may be released to the borrower if the 'TikTok legislation' is overturned, repealed, or if TikTok is sold to an entity reasonably approved by the lender that complies with the 'TikTok legislation,'" S&P said.
Other risk considerations, according to S&P, include relatively low debt-service coverage, the loan's interest-only structure for its entire five-year term, which increases refinancing risk, and the "strong headwinds" the office real estate market still faces.
In a July 1 research report, Moody's Analytics said that the national primary vacancy rate for primary office market "rose 20 bps, to 20.6%, setting another record six quarters after breaking historic pre-pandemic peaks."
One Five One is currently 92.3% leased to 40 unique tenants, S&P said, providing a vacancy rate of 7.7%. The rating agency said the transaction exhibits several strengths, including the 48-story tower's central location close to several types of mass transit, its LEED Gold environmental certification, and well-known tenants including Nasdaq and retailer H&M. Built in 1999 as part of the Times Square revitalization program, S&P said, the property is in "excellent condition and offers benefits including high quality office space with flexible layouts, abundant natural light and unobstructed views of Manhattan, outdoor tenant-exclusive terraces, and numerous amenities.
