The Meadows is facing a drought.
The office complex in Rutherford, New Jersey, has taken a 30 percent valuation cut in the last decade — from $128 million to $90 million, according to Morningstar Credit. The property entered special servicing in May and the servicer said it recently initiated the foreclosure process.
The owner, commercial real estate investment firm American Landmark Properties, has requested a modification of the loan, according to information provided to Morningstar.
The office market in north and central New Jersey hasn’t recovered from its pandemic-era dive as firms embrace hybrid work and pursue Class A space.
American Landmark purchased the two-building complex at 201 Route 17 North for $125.2 million in 2015, according to the firm’s website. The company took out a senior loan for $92 million from LCF and $12 million in mezzanine debt from Harbor Group International, according to Morningstar. The senior loan matured in September.
But by 2018, the complex’s largest tenant, Malo Consulting, had defaulted on its lease. Malo, which operated a medical facility at the office complex, had taken up about 12 percent of the leasable area. That put the Meadows on its servicer’s watchlist.
Then revenue dipped precipitously during the pandemic — from $16.6 million when the loan was written to just $11.9 million in 2020, according to Morningstar Credit. Things picked back up but by 2024 numbers were trending in the wrong direction. Occupancy fell to 83 percent that year as net operating income dropped to $7.2 million from $8.6 percent nine years earlier.
American Landmark focuses mostly on office investments, and owned Chicago’s Willis Tower from 2004 to 2015. Yisroel Gluck, a principal at American Landmark who is listed as the sponsor of the loan, did not immediately respond to a request for comment.
Most recently, the office complex is occupied by several smaller firms, with none leasing more than 9 percent of the total area. The biggest tenant, according to Morningstar, is the American arm of Japanese cosmetics company Shiseido, which owns its titular brand, as well as NARS and Drunk Elephant.
Other major tenants include United Healthcare Service and the headquarters of tutoring chain Kumon. The office space is nearby the Meadowlands Sports Complex, home to the Giants and Jets and the American Dream mall, the debt-laden megamall concept by the Ghermezian family’s Triple Five Group.
The office market in north and central New Jersey has slowed in recent years, according to a report from Colliers International. The vacancy rate in the region has ticked up since the beginning of 2022, and currently stands at about 25 percent. The high availability is expected to remain, although 2025 may see the sector’s first positive net absorption since 2019, Colliers analysts wrote.
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