New signs of trouble: another CT downtown office tower falls into foreclosure

Another Connecticut office tower owned by downtown’s largest commercial landlord has fallen into foreclosure, a sign of more trouble for the city’s office market in the aftermath of the pandemic.

The 12-story Metro Center office building on Hartford’s Church Street, purchased by Shelbourne Global Solutions in 2017 for $49 million, fell into foreclosure earlier this summer. According to documents filed in Superior Court in Hartford beginning in June, Shelbourne failed to pay off a $38 million loan taken out in 2019. The loan matured in March, the court documents said.

Tax auction off for Hartford apartment tower; new problem on Pratt Street for owner

As part of the foreclosure filing, Stamford-based Webster Bank also is seeking at least $1.3 million in city property taxes that have not been paid, beginning in July, 2023. Brooklyn, N.Y.-based Shelbourne has been appealing the assessments on all its holdings in the city.

In addition to Metro Center, Shelbourne has been mired in a long-running foreclosure on 20 Church St., the “Stilts Building.” In late July, a receiver was named for the 23-story office building, meaning Shelbourne gave up day-to-day control of the building while there are foreclosure proceedings.

Shelbourne also is fighting foreclosure on historic structures on the south side of Pratt Street. Shelbourne has been a key player in the revitalizing the street as both a place to live and as a dining and entertainment destination.

In a statement Monday, Shelbourne said it has been unable to secure new financing for Metro Center because of the “current economic conditions which are challenging all markets across the country.”

Shelbourne said those economic conditions include higher office vacancy rates as companies downsize leases, not needing as much space with employees working some or all of the time at home. Higher construction costs have made tenant improvement packages, used to attract new tenants, far more expensive. And higher interest rates have “choked off” financing options.

The national rate for loan maturity defaults — the inability to refinance when a loan reaches its payoff date — was 43.5% in the quarter ended March 30, Shelbourne said, citing Moody’s.

Despite the tough economic environment, Shelbourne said it has been successful in leasing at Metro Center, with the 293,640-square foot tower now registering a 90% occupancy.

Shelbourne said it is working towards a resolution in the Metro Center foreclosure.

Kenneth R. Gosselin can be reached at kgosselin@courant.com .