The Real Deal New York

Macklowe faces foreclosure on Drake site

September 03, 2008 01:49PM
By Adam Pincus

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Deutsche Bank sued Harry Macklowe and others to foreclose on $482 million in principal loaned to develop the Drake Hotel site at Park Avenue and 56th Street, according to a complaint filed in New York State Supreme Court.

The bank, acting as agent for the lender German American Capital Corporation, filed a 45-page complaint August 28 to force the sale of the Drake site and six buildings to be demolished for the development of a mixed-use hotel and condominium project.

This would not be the first time Macklowe lost control of properties to Deutsche Bank. The lender sold his prize possession, the General Motors Building, as part of a $3.95 billion package to a group led by Mortimer Zuckerman to repay the lender for the purchase of seven office buildings from Equity Office Properties.

Macklowe bought the Drake Hotel in 2006 for $418 million using money borrowed from Deutsche Bank. It was demolished last year.

In addition to Macklowe, the bank names his ownership company for the Drake site, 440 Park Avenue Owner Associates; two of his companies that own three buildings on 57th Street; as well as 12 unknown defendants.

Harry Macklowe’s son William Macklowe, the chairman and CEO of Macklowe Properties, was unavailable for comment, a spokesman said.

A spokesman for Deutsche Bank declined to comment.

Sources said Macklowe was trying to find a buyer for the site but was unable.

The suit seeks to regain control not only of the 24,000 square foot development site at the corner of Park Avenue and 56th Street, but also six properties that were drawn into the development loan.

Harry Macklowe was widely believed to be trying to assemble seven buildings along 57th Street, to create a development site with frontage on 56th as well as 57th street, but had gained control of just four.

Macklowe controlled 38, 40, 44 and 50 East 57th Street, but not 42, 46 and 48 East 57th Street. The lawsuit contends his companies were in negotiations to buy 46 and 48 East 57th Street, and had signed a contract to buy 42 East 57th Street.

The initial $543 million development loan to Macklowe was made in March 2006, and secured by the Drake site, 50 East 57th Street and 44 East 57th Street. The loan was spread through three agreements in 2006 and 2007 to cover air rights to 42, 44 and 48 East 57th Street.

The lender seeks to foreclose on Macklowe’s buildings at 38, 40, 44, and 50 East 57th Street. The suit asks for foreclosure on 42 and 46 East 57th Street, even though he does not control the properties, because they were in contract or being negotiated, the filing said.

The loan was restructured in October 2007 with a maximum principal amount of $559.6 million, due in full on November 30, 2007. That was not repaid, the suit alleges, leading to the foreclosure filing.

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