The Real Deal New York

Lever House in “limbo”: Bondholders move to foreclose on troubled property

Will RFR lose control of office building?
May 08, 2018 09:10AM

Aby Rosen and Lever House at at 390 Park Avenue (Credit: Getty Images and RFR Holding)

While its neighbors prepare for upgrades and, in some case, complete overhauls, the Lever House sits in “limbo.”

RFR Realty, which controls the property through a 99-year ground lease with the Korein family, has been struggling to refinance an $85 million securitized mortgage, according to Crain’s. The debt is three years overdue and its bondholders have moved to foreclose on the property. RFR’s Aby Rosen and Michael Fuchs say they are working with lenders to resolve the issue.

But the company’s rent resets in 2023 and is expected to jump from an annual $6 million to north of $20 million. RFR’s inability to renew the lease would potentially leave bondholder’s empty handed, which is why they are moving to take control of the property at 390 Park Avenue.

The possibility of RFR losing the property has tenants wary. Planned departures could leave roughly 130,000 square feet (half of the building) empty. Currently, 13 percent of the building is vacant.

“We are now in a limbo period,” Michael Cohen, tristate president of Colliers International, told Crain’s. “Any tenant that will want to sign a long-term lease for this building is going to have to spend a good deal of money to fit out their premises. They’ll want assurances that their lease won’t be disturbed, and right now that’s not possible to provide.”

Meanwhile, the landmarked office building may soon face even fiercer competition in the neighborhood. Other buildings in the area — like 270 Park Avenue — are taking advantage of Midtown East’s rezoning[Crain’s] — Kathryn Brenzel