RFR Staring Down Foreclosure At Another Prominent NYC Office Tower
A lender is seeking to seize a 42-story office tower that overlooks the southern tip of Manhattan from its longtime owner, RFR.
The prolific real estate investor failed to pay off the $180M mortgage tied to 17 State St., a 42-story office tower in Battery Park City, when it matured in August, and this week the special servicer on the debt moved to foreclose on the 571K SF building, according to a lawsuit filed in New York County Supreme Court.
RFR purchased the distinctively curvy building, built in 1988, for $188M in 1999. It took out the mortgage in 2014 with JPMorgan Chase, which then split the debt into a $105M piece and a $75M piece and sold them into a CMBS trust. When the loans matured on Aug. 1 and Aug. 6, respectively, and RFR didn't refinance, Rialto Capital Advisors was appointed to oversee the workout as special servicer.
In its foreclosure suit filed on behalf of the CMBS investors, Rialto claimed RFR now owes $183.5M, including default interest and other charges.
It also said RFR failed to deposit all of the rents and revenue from the property into a cash management account as it had agreed to in the original mortgage. Rialto said it requested to have the landlord's books audited, but that request has gone unheeded.
Rialto is asking a judge to appoint a receiver to oversee the property, allow it to audit its owner's books, and force a sale of the building. It also seeks to hold RFR co-founders Michael Fuchs and Aby Rosen “personally liable for the full amount of any rents and revenues that have been misappropriated,” according to the complaint.
A spokesperson for RFR said in an email to Bisnow that the company intends to maintain ownership of the building, which is 94% leased, according to CoStar data reported by Crain's New York Business.
“17 State Street remains one of the most sought-after office properties in downtown Manhattan,” the statement says. “RFR continues to work with the special servicer through its procedural steps, and is committed to maintaining its long-standing stewardship of this iconic building, a legacy it has upheld for over 20 years.”
The property is one of several where RFR has faced allegations of default, takeover threats and judicial proceedings this year.
A judge ruled in late October that RFR had to hand over control of the Chrysler Building to its landlord, Cooper Union. That came a week after Rosen and Fuchs were ordered to pay an $18M judgment following a default on two mezzanine loans tied to 285 Madison Ave.
Earlier in the year, lenders Citibank and JPMorgan Chase filed a foreclosure suit connected to a $180M loan for 475 Fifth Ave., an office tower near Bryant Park that was 90% leased at the time of the filing.
Less than a week before that, a Blackstone and Rialto Capital joint venture, which acquired the failed Signature Bank’s commercial real estate loans, filed to foreclose on loans backed by four RFR properties after the JV said RFR had been in default for several months.
But Rosen and Fuchs have also capitalized on other parts of their vast portfolio. They sold 980 Madison Ave. to Michael Bloomberg's foundation for $580M in June, and four months later, along with a partner, they sold the W South Beach in Miami for more than $400M.
