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August 19, 2024

Another major Class A downtown Hartford office tower faces foreclosure

COSTAR The 12-story Metro Center office building at 350 Church St., in downtown Hartford.
By Greg Bordonaro

Downtown Hartford’s largest office landlord is facing foreclosure on another major center-city property. 

Waterbury-based Webster Bank has filed for foreclosure against Shelbourne and the Brooklyn, New York-based landlord’s 293,639-square-foot Class A office tower at 350 Church St.

Shelbourne originally purchased the 12-story building — known as the Metro Center — in 2017 for $49 million. 

According to the foreclosure lawsuit filed in Hartford Superior Court, Shelbourne took out a $38 million commercial mortgage loan on the property in 2019 that matured on March 1, 2024.

The loan was originally provided by New York-based Sterling National Bank, which has since merged with Webster Bank. 

Shelbourne failed “to timely pay” off the $38 million loan on the maturity date, according to the suit, which was filed in June. 

Shelbourne also owed more than $1.3 million in taxes on the property as of the initial foreclosure filing date, court records said. 

The property has a current assessed value of $14.7 million, city records show. Shelbourne in 2022 filed a lawsuit against the city of Hartford protesting the city’s tax assessment of the Metro Center and its other Hartford holdings. 

Following a citywide property revaluation, the city originally tagged the Metro Center with a $21.5 million assessed value. 

Shelbourne has been successful in protesting the valuations of other Hartford properties. 

In a statement to the Hartford Business Journal, Shelbourne said the Metro Center foreclosure action is due to a loan maturity default. 

“Shelbourne has been unable to secure new financing due to the current economic conditions which are challenging all markets across the country,” the company said. “In fact, the national Loan Maturity Default rate was 43.5% in Q1 2024 according to Moody’s. This is not just a challenge that Shelbourne or Hartford is facing. It is a national issue.” 

Shelbourne said there are various factors impacting the office market.

“Post Covid work-from-home trends have led to many companies downsizing their office footprint, leading to higher office vacancy rates,” Shelbourne said. “Increased construction costs have caused … (tenant improvement) packages to be much more prohibitive. Rising interest rates have choked off financing options.”

Despite those headwinds, Shelbourne said it has been successful this year in generating increased leasing activity at 350 Church St., which has increased the building’s occupancy rate to 90%.

Shelbourne said it “is working toward a resolution” on the foreclosure complaint. 

This is the latest foreclosure to impact Shelbourne and the downtown Hartford office market, which has struggled coming out of the pandemic with elevated vacancy rates.

In late July, another Shelbourne Class A office building at 20 Church St. (the Stilts Building), which has been in foreclosure since 2022, was taken over by a receiver.

Shelbourne is also facing foreclosure on several smaller office buildings on Pratt Street it purchased to convert into apartments.

Other Hartford landlords are also facing pressure. In January, a lender filed a lawsuit seeking to foreclose on much of the Constitution Plaza office complex.
 

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