Mortgage Notes Payable, Net

3 Months Ended

Mar. 31, 2026

The Company’s mortgage notes payable, net as of March 31, 2026 and December 31, 2025 are as follows:


		Outstanding Loan Amount
Portfolio	Encumbered Properties	March 31, 2026		December 31, 2025		Effective Interest Rate		Interest Rate	Contractual Maturity
		(In thousands)		(In thousands)
123 William Street	1	$	140,000	$	140,000	4.74	%	Fixed	Mar. 2027

400 E. 67th Street - Laurel Condominium / 200 Riverside Blvd. - ICON Garage (1) (3)	2	50,000		50,000		4.59	%	Fixed	Nov. 2025
8713 Fifth Avenue (1)	1	10,000		10,000		5.05	%	Fixed	Nov. 2028
196 Orchard Street	1	51,000		51,000		3.91	%	Fixed	Aug. 2029
Mortgage notes payable, gross	5	251,000		251,000		4.56	%
Less: deferred financing costs, net (2)		(1,264)		(1,435)
Mortgage notes payable, net		$	249,736	$	249,565

_______

(1)These mortgage notes payable are currently either in an event of default, in breach of a debt covenant that may result in further restrictions as specified by the terms of the covenants or a cash sweep event of a debt covenant that may result in further restrictions as specified by the terms of the covenants. For more information please see “Debt Covenant Non-Compliance, Cash Sweep Events, Notices of Defaults and of Acceleration and Foreclosure Litigation” section below.

(2)Deferred financing costs represent commitment fees, legal fees, and other costs associated with obtaining commitments for financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.

(3)The Company was informed by the lender pursuant to letters dated in November 2024, December 2024, January 2025 and June 2025 that the Company was in default under the loan agreement governing the loan secured by the non-recourse mortgage on the property for events that first occurred in the third and fourth quarters of 2023, specifically the Company’s failure to establish a cash management account for excess cash sweeps over monthly debt service requirements failure to cooperate with the lender to cure the alleged cash management procedure failures, and failure to pay outstanding amounts due under such loan agreement beginning in April 2025. The Company responded to notices of default sent in November 2024, December 2024 and January 2025, rejecting the assertions made by the lender, and has not received a response from the lender. The Company has not responded to the notice of default received in June 2025. For more information, please see “Debt Covenant Non-Compliance, Cash Sweep Events, Notices of Defaults and of Acceleration and Foreclosure Litigation” section below. On November 6,2025, the Company received a notice of acceleration from the special servicer on behalf of the lender with respect to the loan secured by this property.

Collateral and Principal Payments

Real estate assets and intangible assets of $385.1 million, at cost (net of below-market lease liabilities), as of March 31, 2026 have been pledged as collateral to the Company’s mortgage notes payable and are not available to satisfy the Company’s other obligations unless first satisfying the mortgage note payable on the applicable property. This balance excludes the 1140 Avenue of the Americas property in court appointed receivership, which is held by the receiver as collateral for the underlying mortgage note payable. The Company is required to make payments of interest on its mortgage notes payable on a monthly basis.

The following table summarizes the scheduled aggregate principal payments subsequent to March 31, 2026:


(In thousands)	Future Minimum Principal Payments
2026 (remainder) (1)	$	50,000
2027	140,000
2028	10,000
2029	51,000
2030	—
2031	—
Thereafter	—
Total	$	251,000

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(1)On November 6, 2025, the Company was informed by the special servicer acting on behalf of the lender under the loan secured by the 400 E. 67th Street/200 Riverside Blvd. properties that the principal amount under the loan agreement had been accelerated and all amounts under such loan agreement were due and payable. The current outstanding principal amount of $50,000,000 is currently reflected in the above chart for the year 2026. The Company is evaluating its options with respect to this property and there can be no assurance as to the resolution of these matters with the lender.

Debt Covenant Non-Compliance, Cash Sweep Events, Notices of Defaults and of Acceleration and Foreclosure Litigation

1140 Avenue of the Americas

The Company has breached both a debt service coverage provision and a reserve fund provision under its non-recourse mortgage secured by the 1140 Avenue of the Americas property in each of the last 22 quarters ended March 31, 2026. The principal amount of the loan was $99.0 million and reflected as debt associated with property in receivership on the condensed consolidated balance sheet as of March 31, 2026 (refer to Note 6 — Property Disposition).

The Company was informed by the lender on February 19, 2025 that the Company was in default under the loan agreement for failure to make certain scheduled interest payments. The Company made the payments in question in full on the same day the default notice was received by the Company as a cure for the February event of default. On April 7, 2025, the lender notified the Company that the principal balance due under such loan agreement had been accelerated and all amounts under such loan agreement were due and payable as a result of a default described in the notice, together with interest at the default rate set forth in the loan document, which is a rate per annum equal to the lesser of (i) the maximum nonusurious interest rate or (ii) 5% above the interest rate of 4.109% per annum. Such amounts include, but are not limited to, the $99.0 million principal amount of the mortgage note. Based on the above, total effective interest is 9.11%, including 5.00% default interest, and as of March 31, 2026, the Company has $11.9 million in accrued interest.

On June 27, 2025, the trustee appointed to act on behalf of the lenders filed a complaint with the Supreme Court of the State of New York in the County of New York (the “New York County Court”), naming the OP and the Company’s subsidiary borrower under such loan agreement as defendants, requesting the New York County Court initiate foreclosure proceedings on the mortgage on the property and that the OP and such borrower pay the lenders the amount of the debt, inclusive of certain accrued fees and expenses, remaining unsatisfied after the sale of the property. On July 21, 2025, the trustee filed a motion with the New York County Court to appoint a receiver with respect to the property. On August 6, 2025, the Company filed its answer to such complaint, which admitted in part, denied in part the material allegations and stated that the Company has insufficient knowledge and information upon which to form a belief as to whether it has, as of yet, unstated affirmative defenses available. Notwithstanding the OP being named as defendant in the complaint, the complaint does not allege events giving rise to a recourse obligation by the OP under the guaranty agreement related to the loan agreement, and the Company does not believe that any of the allegations against the OP are sufficient to trigger any such recourse obligation of the OP under the guaranty agreement.

In September 2025, the Company and the lender agreed to pursue a cooperative consensual foreclosure. On September 11, 2025, the New York County Court appointed a receiver and the Company ceased managing the property. As a result of the consensual foreclosure and appointment of receiver, the Company removed its related assets and liabilities from the condensed consolidated balance sheet as of December 31, 2025 and recognized a gain of $47.9 million which is reflected in the consolidated statements of operations for the year ended December 31, 2025. As of March 31, 2026, the foreclosure has not concluded and therefore the Company continues to record accrued default interest. As a result, during the three months ended March 31, 2026 the Company recognized an additional gain of $2.3 million which is reflected in the condensed consolidated statements of operations for the three months ended March 31, 2026. For additional information, see Note 6 — Property Disposition.

8713 Fifth Avenue

The Company has breached a debt service coverage ratio covenant under the non-recourse mortgage secured by 8713 Fifth Avenue in each of the last 22 quarters ended March 31, 2026. The principal amount for the loan was $10.0 million as of March 31, 2026. The breach of the first part of this covenant did not result in an event of default but rather triggered an excess cash flow sweep period that has been ongoing. The excess cash flow sweep period will continue until the covenant breaches are cured in accordance with the terms of the loan agreement. This property has not generated any excess cash since the breach occurred, and thus no cash has ever been trapped related to this property.

Separately, in the event that (i) the debt service coverage ratio is in breach for two consecutive calendar quarters and (ii) the lender reasonably determines that such breach is due to the property being imprudently managed by the current manager, the lender has the right, but not the obligation, to require that the Company replace the current manager with a third party manager chosen by the Company. As of March 31, 2026, the lender has not notified the Company of a determination that a breach of the debt service coverage ratio is due to imprudent management.

400 E. 67th Street/200 Riverside Blvd.

The Company entered a lease sweep period under the non-recourse mortgage secured by 400 E. 67th Street/200 Riverside Blvd. in the year ended December 31, 2024, resulting from a near-maturity lease with a major tenant at the property which expired in the third quarter of 2024. The principal amount for the loan was $50.0 million as of March 31, 2026. Under the loan agreement, a lease sweep period is triggered, when (i) the date that is twelve months prior to the end of the term of the major lease, (ii) the date required by the major tenant to give notice of its exercise of a renewal option, (iii) any major tenant lease is surrendered or terminated prior to the expiration date, (iv) if the major tenant discontinues its operations and the major tenants long term debt is not rated lower than investment grade, (v) any material default under the major tenant’s lease, and (vi) any major tenant insolvency proceeding.

Under the lease sweep period, any excess cash generated, if any, is to be held in a segregated reserve account controlled by the lender as additional collateral. As of March 31, 2026 and December 31, 2025 the Company had $3.0 million and $3.7 million, respectively, in cash swept that is retained by the lender and recorded within restricted cash on the Company’s condensed consolidated balance sheet.

On November 19, 2024, the lender sent a notice to the Company alleging that the Company was in default under the loan agreement governing the loan secured by the non-recourse mortgage on the property for events that occurred in the third and fourth quarters of 2023, specifically the Company’s failure to establish a cash management account for excess cash sweeps over monthly debt service requirements. The lender had been remitting excess cash on their own accord until the period of cash sweep was put into effect in 2024 as described above. In that notice of default, the lender asserted the Company owes an estimated $1.0 million in excess cash to be deposited into the loan reserve account. The Company responded to such notice of default on February 20, 2025 rejecting the assertions made by the lender, which the Company believed were without merit as a result of the lender's failure to implement a cash management account and the Company’s inability to take such action unilaterally due to the mechanics for receipt of lease payments provided for by the loan agreement. Beginning in March 2025, the lender began charging default interest to the Company, currently totaling $4.3 million. On June 10, 2025, the lender sent a second notice to the Company alleging defaults under such loan agreement as a result of (i) the Company’s failure to pay the outstanding amount due thereunder beginning in April 2025 and (ii) the Company’s failure to cooperate with the lender to comply with the aforementioned cash management procedures. The second default notice reaffirmed that, as a result of the aforementioned defaults, interest was accruing at the default rate under the loan agreement and made a demand that all unpaid amounts due under the loan agreement be paid. As of the date of this Quarterly Report on Form 10-Q, the Company has not responded to the second default notice. Further, the Company incurred a liability as of March 31, 2026 in relation to the June 10, 2025 default notice. On November 6, 2025, the Company received a notice of acceleration from the special servicer on behalf of the lender with respect to the loan secured by this property identifying certain additional events of default, specifically incurrence of indebtedness that does not constitute permitted indebtedness and incurrence of liens that are not in favor of the lender or permitted encumbrances, subject to certain exceptions, as a result of our alleged failure to make certain additional payments and certain liens filed on the properties as a result thereof. In such notice, the lender notified the Company that, due to the alleged events of default under the loan agreement governing such indebtedness, the loan had been accelerated, and all amounts under such loan agreement were due and payable, together with interest at the default rate set forth in the loan agreement, which is a rate annum equal to the lesser of (i) the maximum rate permitted by applicable law, or (ii) four percent (4%) above the interest rate of 4.516% per annum, compounded monthly. Such amounts include, but are not limited to, the $50.0 million principal amount of the promissory notes evidencing the loan agreement.

On January 21, 2026, the trustee appointed to act on behalf of the lenders filed a complaint with the New York County Court, naming the OP and the Company’s subsidiary borrowers under such loan agreement as defendants, requesting the New York County Court initiate foreclosure proceedings on the mortgage on the property and that the OP and such borrower pay the lenders the amount of the debt, inclusive of certain accrued fees and expenses, remaining unsatisfied after the sale of the property.

On March 16, 2026, the Company filed its answer to such complaint, which admitted in part and denied in part the material allegations and asserted certain affirmative defenses. While the OP is named as a defendant in the complaint and the complaint alleges facts that under certain circumstances could give rise to limited recourse obligation by the OP under the guaranty agreement related to the loan agreement, the Company does not believe that any of the allegations against the OP are sufficient to trigger any such recourse obligation of the OP under the guaranty agreement.

Other Debt Covenants

The Company was in compliance with the remaining covenants under its other mortgage notes payable as of March 31, 2026 and, it continues to monitor compliance with those provisions. If the Company experiences additional lease terminations, due to tenant bankruptcies, tenants placed on a cash basis continue to not pay rent, or otherwise, it is possible that certain of the covenants on other loans may be breached and the Company may also become restricted from accessing excess cash flows from those properties. Similar to the loans discussed above, the Company’s other mortgages also contain cash management provisions that are not considered events of default, and as such, acceleration of principal would only occur upon an event of default.

The loan agreements for 123 William Street, 8713 Fifth Avenue and 196 Orchard do not contain cross-default provisions such that the default matters related to 1140 Avenue of the Americas or 400 E. 67th Street/200 Riverside Blvd., and the consensual foreclosure with respect to the 1140 Avenue of the Americas property or the acceleration of the outstanding obligation under the loan agreement related to the 400 E. 67th Street/200 Riverside Blvd. properties, is not expected to have an impact on those properties under such loan agreements.