Bank OZK is positioning itself to seize control of 40 Thorndike, a brand new and largely empty 20 story office tower in East Cambridge, after the project’s construction loan came due and tenants failed to show up in meaningful numbers. The mixed use redevelopment stacks roughly 422,000 to 475,000 square feet of office space on top of 48 inclusionary apartments and quietly opened in late 2024 with minimal signed office leases. Any foreclosure or distressed sale would be a very public stress test of demand for Class A office space in Cambridge and could reset prices across the region.
Bank OZK Moves Toward Foreclosure
Bank OZK has told investors it is “dual tracking” the building, working with the ownership group while also preparing to take title if the current sponsors cannot bring in fresh capital. CEO George Gleason put it bluntly on the bank’s earnings call, saying, “Our rule is you pay, you stay. You don’t pay, you don’t stay,” according to a transcript on MarketBeat. The lender has already booked roughly a $72 million charge tied to the loan, Banker & Tradesman reported, a move that puts a potential bank led sale front and center.
How the Project Was Financed and Built
Back in 2021, JLL arranged a $300 million fixed rate construction loan to fund the conversion of the former Sullivan Courthouse, according to a JLL press release. The redevelopment, led by Leggat McCall Properties with partners Granite Properties and CBRE Investment Management, turned the old complex into roughly 421,000 to 475,000 square feet of office space above 48 affordable units, per Leggat McCall Properties and the original financing announcement. A ribbon cutting in October 2024 marked the official opening, but the upper floor offices debuted without major tenants, a leasing gap that quickly made refinancing the construction debt far more complicated.
Market Math: Development Cost, Vacancy and a Potential Discount
Industry observers told The Boston Globe that the development team poured about $380 million into the project, or roughly $800 per square foot, and warned that a distressed sale might only recoup a fraction of that number. The Globe also reported that about 24 percent of Class A office space in Cambridge is either vacant or available for sublease, leaving plenty of options for any company still in the market. That cocktail of heavy supply and softer post pandemic demand is exactly what makes 40 Thorndike a candidate to reset pricing for top tier offices.
Local Impacts: Empty Housing and Neighborhood Questions
The housing piece of the project is also off to a slower start than advertised. Cambridge Day reported that nine months after opening, only 17 of the 48 inclusionary apartments had been leased. City officials and property managers say apartment tours and tenant screenings are ongoing, but the sluggish pace has raised eyebrows about rollout, timing and how the building is being marketed. Leggat McCall has said it remains “proud of what we’ve produced but obviously disappointed in market timing,” and has signaled a clear preference to recapitalize rather than hand the keys to the bank, as reported by The Boston Globe and other local coverage.
What Comes Next for 40 Thorndike and the Cambridge Market
Executives at Bank OZK say they are ready to follow several different paths, from backing the current owners as they hunt for new equity to taking title to the property themselves and putting it on the market, a stance laid out in the bank’s earnings comments on MarketBeat. In practice, that means a deal struck with a major tenant or a lender driven sale sometime around midyear could determine whether 40 Thorndike turns into a bargain buy for opportunistic investors or slowly stabilizes under its existing sponsors. Either way, the outcome is likely to serve as a closely watched barometer for office values in East Cambridge and across Greater Boston.
