Key Takeaways
- • According to CRED iQ, 9% of CMBS debt on towers where a top-100 law firm ranks among the five largest tenants is in special servicing, versus 15.8% for office loans overall, but $10.5 billion in debt on 27 such buildings matures by the end of 2027.
- • Weil, Gotshal & Manges partners voted November 10 to dissolve the firm after partner departures and failed merger talks, putting its roughly 447,000 square feet at the GM Building on Fifth Avenue at risk.
- • Weil accounted for 19.4% of the GM Building's gross rent when its $2.3 billion loan was securitized in 2017; the loan is current and matures in June 2027.
- • Weil's exposure extends to about 519,000 square feet across the GM Building and The Crescent in Dallas, which together secure $2.6 billion in debt.
- • At 555 California Street in San Francisco, Kirkland & Ellis holds a lease through 2030, but the building's 74.3% occupancy and 0.47 debt-service coverage ratio show weak income beyond that anchor.
Summary
Large law firms anchoring office towers have cushioned landlords through the office downturn, but that protection carries concentration risk. According to CRED iQ, 9% of CMBS debt on buildings where a top-100 firm ranks among the five largest tenants is in special servicing, compared with 15.8% for office loans overall. However, $10.5 billion in debt on 27 of these buildings comes due by the end of 2027, and when a single firm supplies a large share of rent, the loan's performance depends heavily on that tenant.
The General Motors Building on Fifth Avenue in New York illustrates the exposure. Weil, Gotshal & Manges, the building's largest tenant, leases about 447,000 square feet through August 2034. When the building's $2.3 billion loan was securitized in 2017, Weil accounted for 19.4% of gross rent. Weil's partners voted on November 10 to dissolve the firm following a wave of partner departures and failed merger talks. The Financial Times reported that Weil will seek to resolve its leases, including its New York headquarters lease. CRED iQ said the loan is current and matures in June 2027. Although the lease extends roughly seven years beyond loan maturity, which would ordinarily ease refinancing, the central question for lenders is how the building replaces nearly a fifth of its original gross rent.
Weil's exposure extends beyond Fifth Avenue. According to CRED iQ's analysis, the firm leases about 519,000 square feet across two properties, the GM Building and The Crescent in Dallas, which together secure $2.6 billion in debt.
The risk at 555 California Street in San Francisco works differently. Kirkland & Ellis is the building's largest tenant and has a lease through 2030 with no announced plans to leave. The problem lies in the rest of the building, which was 74.3% occupied, and whose debt-service coverage ratio fell to 0.47 in June, meaning property income covered less than half of its debt payments. In both cases, the refinancing outlook depends on a single law firm and the leasing of the space around it.
The General Motors Building on Fifth Avenue in New York illustrates the exposure. Weil, Gotshal & Manges, the building's largest tenant, leases about 447,000 square feet through August 2034. When the building's $2.3 billion loan was securitized in 2017, Weil accounted for 19.4% of gross rent. Weil's partners voted on November 10 to dissolve the firm following a wave of partner departures and failed merger talks. The Financial Times reported that Weil will seek to resolve its leases, including its New York headquarters lease. CRED iQ said the loan is current and matures in June 2027. Although the lease extends roughly seven years beyond loan maturity, which would ordinarily ease refinancing, the central question for lenders is how the building replaces nearly a fifth of its original gross rent.
Weil's exposure extends beyond Fifth Avenue. According to CRED iQ's analysis, the firm leases about 519,000 square feet across two properties, the GM Building and The Crescent in Dallas, which together secure $2.6 billion in debt.
The risk at 555 California Street in San Francisco works differently. Kirkland & Ellis is the building's largest tenant and has a lease through 2030 with no announced plans to leave. The problem lies in the rest of the building, which was 74.3% occupied, and whose debt-service coverage ratio fell to 0.47 in June, meaning property income covered less than half of its debt payments. In both cases, the refinancing outlook depends on a single law firm and the leasing of the space around it.
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