UPDATED: Thursday, Jan. 26 at 12:17 p.m.: Wells Fargo filed to foreclose on RFR Realty’s Lever House. Aby Rosen and Michael Fuchs’ company has until Jan. 27 to respond to the complaint.
In 2015, RFR defaulted on a $98 million CMBS mortgage on its leasehold on the 21-story office property at 390 Park Avenue. The company pays $6.15 million per year in rent for the tower under the terms of the 99-year ground lease, but that is set to increase to more than $20 million after 2023. “The rental reset language in the ground lease is not economically viable and has made a refinance of the loan improbable,” reads one servicing document cited by the Commercial Observer.
Wells Fargo is the trustee of the 2006 loan, which was sponsored by Credit Suisse.
A source told CO that RFR is in talks with the ground lessor, Omnispective Management, to change the terms of the ground lease.
“This is an example of the risk associated with leasehold mortgages made at the height of the market,” the source told CO. “Not enough attention is paid to escalation clauses in ground leases and the potential for economic impairment to the property.”
Correction: An earlier version of this report incorrectly stated when the building was completed. It was completed in 1952.