The Real Deal New York

RFR defaults on $100M Lever House mortgage

Ground lease rent is scheduled to increase threefold in 2023

July 08, 2015 03:25PM

Lever House at 390 Park Avenue in Midtown (inset: Aby Rosen)

Lever House at 390 Park Avenue in Midtown (inset: Aby Rosen)

Aby Rosen’s RFR Realty defaulted on the mortgage for Lever House, its prized Midtown office tower, after it was unable to refinance its mortgage over concerns that the ground lease rent is scheduled to triple in 2023.

RFR has been unable to refinance its $100 million mortgage, which expired in March. The main issue is that according to the terms of the developer’s ground lease with the Korein family, the yearly rent will more than triple to $20 million in 2023, up from $6 million that it is currently paying, Crain’s reported.

According to financial research firm Nomura, RFR could lose $11 million per year once its rent increases. In order to break even, it would have to secure average rents of $140 per foot.

Leases on 80 percent of the building’s 270,000 square feet will expire in 2020, creating both uncertainty and an opportunity to increase rents.

Lever House is a 21-story, landmarked, mid-century office building located on Park Avenue between 53rd and 54th streets. It will face stiff competition in the coming years from newer construction in the neighborhood, including L&L Holding Co.’s office tower 425 Park Avenue and office space in Macklowe Properties’ 432 Park Avenue. [Crain’s] — Tess Hofmann