The Real Deal New York

Thor Equities is in a very precarious position at 597 Fifth

The owner needs another high-paying tenant to make mortgage payments to SL Green
February 12, 2019 09:00AM

The 597 Fifth Avenue Lululemon storefront (Credit: Google Maps)

Lululemon’s departure from 597 Fifth Avenue could put Thor Equities in a pickle.

The retailer’s impending vacancy again puts landlord Thor Equities in danger of having to hand over the property to lender SL Green Realty, according to Crain’s. Without a high-paying tenant to replace Lululemon, the property might not generate enough income to cover its mortgage payments. SL Green has a $25 million mezzanine loan and another lender has a $10 million mezzanine loan. SL Green collects 9.3 percent on its financing. Joe Sitt’s real estate firm bought the property for $108.5 million in 2011.

Thor has had a tough time with the building after cosmetics retailer Sephora left in 2017. Lululemon came in after, signing a short-term lease. The retailer plans to move into a 20,000-square-foot space at nearby 592 Fifth Ave.

FIfth Avenue has been hit hard by the retail slump. The average asking rent on the avenue between 42nd Street and 49th Street fell to $996 per square foot in the fourth quarter of 2018, according to Cushman & Wakefield. That’s 12.5 percent lower than a year earlier. The availability rate, which measures current and expected vacancies, fell to 23.3 percent from about 34.5 percent a year earlier.

SL Green seized another Thor property last year — a 34-unit rental apartment building at 1231 Third Ave. The lender held a mezzanine loan against that building as well. Thor paid $52.5 million for it in 2013. It was previously reported that Thor was looking to offload its Fifth Ave properties. [Crain’s] — Meenal Vamburkar