Two Gateway Financing Goes To Special Servicing

NEWARK, NJ—The $122.8 million loan financing the Two Gateway office property in Newark has been sent to special servicing, according to Trepp.com, a service that monitors securitized mortgages, but the property's owner, C&K Properties, says the move is a "necessary procedural step" for the property. C&K is coping with the departure of Prudential Financial following the completion of the financial services giant's new office tower in Newark.

"It has been widely reported that Prudential has vacated the vast majority of its office space in the Gateway Complex to move to its new headquarters building in Newark," Ben Korman, cofounder and principal of C&K Properties says in a statement provided to GlobeSt.com. "Despite having made significant inroads through an aggressive leasing campaign, we must take this necessary procedural step to ensure that we are able to continue to provide first-rate ownership and management of this asset for the long term."

C&K declined to comment beyond the statement.

Two Gateway is a 780,000 square-foot class A office tower adjacent to Penn Station in Newark, NJ. Trepp says the Two Gateway debt makes up 6.4 percent of the collateral behind a commercial mortgage-backed securities series known as CD 2006-CD3. In June 2015, Moody's Investor Service downgraded a number of the bonds in the series and noted that the Two Gateway loan was the third largest in the pool.

Moody's says occupancy in the building had declined to 88 percent in June from 95 percent leased in December 2014, and noted that Prudential's leased space was going to decline from 36 percent of the building to just 17 percent. At the same time, Moody's noted that the Port Authority of New York and New Jersey, which had been leasing 30 percent of the tower, would not renew a lease expiring in August 2015.

As previously reported by GlobeSt.com, the owners of Two Gateway have been renovating public areas of the building, and have attracted some non-standard tenants to the building, including The Gateway Project, originally planned as a temporary arts installation, which has been made permanent. In addition, NJTV's main studios occupy highly visible space on the concourse level of the property, with windows looking into the main studio so pedestrians in the complex can watch live NJTV programs being produced.