The CMBS loan backing Lever House at 390 Park Ave. lost $68.3 million, the financial advisory firm Trepp reported on Tuesday.
The loan was sold for $12.8 million, below the most recent valuation of the “collateral” of $14.9 million and down from $150 million in 2005.
“This has value from a nuisance point of view, and someone could come in and buy [the lease] for $20 million,” suggested Manus Clancy of Trepp.
The buyer of the loan — an entity of the Ramsfield Hospitality Finance — is believed to have purchased it as a white knight to Aby Rosen and Michael Fuchs’ RFR Holding, which owns the ground lease and operates the building.
Ramsfield was launched in 2003 by Richard Mandel, the former president of Kennedy Wilson’s commercial investment sales division.
The loan loss relates to a looming rent reset in 2023 that would hike the yearly tab from $6 million to around $20 million to be paid to the Korein family landowners. The real estate taxes run around $9 million a year.
Once pencil pushers determined the landmarked building’s income was unlikely to cover the new rent, it set the stage for a default on the loan that was due in 2015. This made the 2005-era loan “virtually impossible to refinance,” Trepp wrote.
At the same time, occupancy plummeted and prospective tenants avoided the world-renowned property given the uncertainty of the ground lease.
Worse, the Korein family was angry over interactions at another building and wouldn’t renegotiate the ground lease rent with RFR.
Thinking RFR was about to be foreclosed, the Korein family wrote a second ground lease to a Brookfield/Tod Waterman partnership designed to kick in once RFR was gone.
But if RFR can now redevelop and financially invigorate the property to cover the new rent, whether as office or hotel or otherwise, Brookfield and Waterman may have a very long wait — or they could pay Ramsfield and Rosen to go away.
It is unlikely that Rosen would take an offer if he has a redevelopment plan, given his obsession with art, restaurants and landmark properties, such as the Seagram Building, which RFR also owns, and the Casa Lever restaurant and art installations in 390 Park Ave. But cash is king, and everyone has his or her price. Stay tuned.
