From left: Leon Charney, owner of L.H. Charney, Peter Duncan, president of George Comfort, and 119 West 40th Street (Building photo source: PropertyShark)

Just weeks after negotiating an agreement to rescue 119 West 40th Street from a mezzanine loan default, George Comfort & Sons and L.H. Charney Associates are facing foreclosure on a $160 million senior mortgage at the site.

CW Capital Asset Management, which is servicing the senior loan on behalf of Bank of America, filed suit in New York State Supreme Court Dec. 14 to foreclose on the property.

George Comfort and Charney originally borrowed $160 million from Wachovia Bank and Greenwich Capital Financial Partners in April 2007, according to the lawsuit, with half coming from each bank. The loan was later sold to GS Mortgage Securities Corp. II, as part of a July 1, 2007, loan purchase deal signed between Greenwich and GS.

In July 2009, Fitch Ratings warned that the 119 West 40th Street loan was performing below expectations. Fitch said the loan was underwritten based on the expectation of resigning below-market leases at higher rents; however, the building fell behind schedule and was transferred to the special servicer in June 2009 with the expectation of imminent default.  More

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The year 2009 was a trying time to be a real estate broker, developer or investor, but it never lacked for news. In the aftermath of the financial crisis, the industry watched in awe — and sometimes horror — as residential sales ground to a virtual halt, condo projects stopped in their tracks, office rents shrank and retail stores disappeared. Buyers at buildings like 22 Renwick sued to get out of their contracts, and some were granted the opportunity to back out of their contracts. Meanwhile, an amazing cast of characters — from Kent Swig to Harry Macklowe to Lev Leviev — publicly fought for survival. There were also glimmers of hope, from the opening of the High Line in June to the expansion of Halstead Property into Connecticut to the sale of Former Lehman Brothers CEO Dick Fuld’s sale 16-room co-op apartment at 640 Park Avenue for $25.87 million, almost $5 million more than he bought it for two years ago. Click here to see The Real Deal staff’s picks for the stories that most altered the New York City real estate landscape in 2009. [more]

From the October issue: New York City is at a peculiar crossroads. For months, investors have
marshaled unprecedented amounts of capital, salivating at the prospect
of snapping up distressed properties. “We’re fortunate this cycle to
have the most dry powder in our
history,” Blackstone Group president Tony James said last month at the
Barclays Capital Global Financial Services Conference, which was held
in Manhattan. The firm has about $28 billion in unspent capital, he
said. About $12 billion of that is earmarked for real estate. “We’re
just beginning what will be the best period in decades for private
investing,” he said. Dan Fasulo, a managing director at Real Capital
Analytics, estimated
that $50 billion has been raised and is ready to be deployed into
distressed real estate. Paradoxically, investors have found very little
worth buying so far, in large part because banks continue to hold
troubled loans on their books, hoping conditions will improve. [more]

From left: Worldwide Plaza, Peter Duncan

Real estate investor Peter Duncan, who scored a deal on the 49-story Worldwide Plaza building in July, now has the chance to shape the New York commercial real estate market’s investment landscape. Duncan, who is president of George Comfort & Sons, purchased the property at 825 Eighth Avenue for $590 million, roughly a third of what Harry Macklowe paid for it in February 2007. The price means Duncan might be able to lease out the first 14 floors, which stand vacant as the second-largest empty space in the city, for as little as $30 or $40 per square foot, according to Robert Sammons, research director at Colliers ABR. Whereas Midtown office buildings have had a rough year — CB Richard Ellis Group reported that there have been no single leases in the area for more than 250,000 square feet — low prices may hasten leasing activity for the space in Duncan’s building formerly occupied by advertising firm Ogilvy & Mather. That could, in turn, encourage other investors to take on risk in buying up more New York office buildings, said Jim Frederick, also of Colliers.
[Bloomberg] [more]

From the October issue: As the real estate industry scrambles to unwind billions of dollars in
distressed inventory, a number of high-profile deals are stuck in
neutral as lenders battle it out with each other to see who will get
paid and who will be left holding the (empty) bag. While creditors often turn on each other during a workout, the massive
number of securitized loans with multiple lenders and third-party
servicing firms managing the funds is creating a level of complexity
that may take years to sort out, analysts said. Unlike the previous downturn in the 1990s, the majority of large deals
during the recent real estate boom were made using securitized loans –
or at least loans with large syndicates, or groups of lenders sharing
the burden of a single loan.

As the economy braces for what could be an increase in commercial property foreclosures, Robert White of Real Capital Analytics led PBS “NewsHour’s” Paul Solman on a tour of some of Manhattan’s at-risk commercial properties. White said that over-exuberance and optimism led to overpriced commercial towers with little equity. Developer Harry Macklowe’s Worldwide Plaza, for example, which was priced at $1.7 billion, was traded a month ago at a little under $600 million, in part because the building was around 50 percent vacant when it was sold — something few anticipated. “The market was full of such optimism that rents would keep increasing and the buildings would stay fully leased,” White said. “The economy was still growing, banks had a lot of money to lend and there were many investors who also wanted to be in commercial real estate.”

Worldwide Plaza’s new owners, George Comfort & Sons and RCG Longview, have 639,540 square feet ready to rent and are talking to prospective tenants, the New York Post reported. Brokers said there are several tenants looking for more than 100,000 square feet that might be interested in the space. The building’s current ads place it at 1.9 million square feet, leading to the purchase price of $318.42 per square foot. Comments

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After the last deal
fell apart, George Comfort & Sons and RCG Longview finally
completed a $600 million deal with Deutsche Bank to purchase Worldwide
Plaza. Rather than creating a joint venture, Deutsche Bank will just
provide a $470 million mortgage for George Comfort and put up about
$135 million in equity. The price comes to about $375 a square foot for
the 1.6 million-square-foot tower at 825 Eighth Avenue, and the deal is expected to close
later this month. As part of the agreement, Deutsche Bank will write
down the original $1 billion mortgage it held on the property when
Macklowe Properties bought the building in 2007.

Left to right: 452 Fifth Avenue, Stephen Siegel and Worldwide Plaza

CB Richard Ellis’s chairman of global brokerage, Stephen Siegel,
pointed to multiple bidders for Midtown office properties as evidence
of strength returning to the investment sales market. He said the 30 bids entered by last Friday’s deadline for 452 Fifth
Avenue at 40th Street, an office tower owned by HSBC Bank, and the 16
or 18 bids at Worldwide Plaza, at 825 Eighth Avenue, marked the
beginning of a coming wave of activity. And although the deal at Worldwide Plaza recently collapsed, he said there were “five or six backup transactions there.” Siegel said, “I think this is the beginning of what will be a very
accelerated pace by the end of the year and the first half of 2010.” [more]

With few comparable building sales to price Midtown trophy properties,
an appraisal of the 1.8 million-square-foot 787 Seventh Avenue at $611
per square foot provides the market with one more data point. Or does it? AXA Equitable Life Insurance filed a deed with the city June 17 valuing
the 51-story office tower it owns on Seventh Avenue between 51st and
52nd streets at $1.1 billion, or about $611 per square foot, property
records posted yesterday show. [more]