Borrowers across the country have started worrying about their ability to make mortgage payments while the coronavirus squeezes their finances, but one Times Square condo property is already in deep trouble.
A $35 million CMBS loan for the rental portion of Solly Assa’s Cassa Hotel and Residences has been marked as 30 days delinquent, Trepp reported. The loan has been paid through Feb. 6, meaning the borrower has already missed two monthly payments.
Despite the economic meltdown the virus has unleashed, the property faced financial stress and tenant troubles long before that.
The mortgage, which covers 41 of the unsold residential condo units in the building at 70 W. 45th Street, was provided by Cantor Commercial Real Estate Lending in 2013 and included in a CMBS transaction known as COMM 2013-CCRE6. Wells Fargo was the master servicer and special servicer on the loan, and Midland took over as special servicer in 2017.
Assa did not respond to a request for comment. Wells would not comment.
CMBS loan servicers have been inundated with requests for relief due to the current crisis, though it is unclear if Assa would be granted any forbearance because the property’s financial struggles predate the pandemic.
While the multifamily sector is viewed as somewhat more insulated from the immediate fallout of coronavirus compared to hotels or retail, the Cassa Hotel’s rental portion is not a typical multifamily property — the units were leased to 10 corporate tenants in 2013, and ratings agencies highlighted this tenant concentration as a downside risk.
Last January, Assa sued one of its tenants, Nectar Furnished Apartments, over $120,000 in unpaid rent for eight condo units it was leasing. Nectar could not be reached for comment — the firm’s phone numbers and email have been deactivated and its CEO has declared personal bankruptcy.
A few months later, American Furniture Rentals sued Assa, alleging that the developer was refusing to return furniture that had been leased by Nectar for its rooms.
Other corporate tenants at the Cassa include global investment and technology development firm D.E. Shaw, whose U.S. headquarters is less than a block away, and various corporate housing providers.
A loan with a past
The Cassa loan has been on and off the servicer’s watchlist for several years due to lackluster financial performance. As of last September, the property’s income could only cover 92 percent of debt service despite being 100-percent leased.
“Rents have been adjusted in order to compete in the current market,” the servicer noted at the time.
Assa Properties built the Cassa Hotel and Residences in 2010 for a total cost of $178.6 million. The condominium units attracted buyers from France, Israel, Mexico and Argentina, but little domestic interest.
In 2011, the developer filed for bankruptcy protection amid legal troubles that were hampering sales. The hotel portion — now closed because of the coronavirus — was sold to Chinese conglomerate HNA in 2012. Property records indicate that HNA still owns the hotel, after putting it on the market in 2018 amid scrutiny from Chinese regulators.
When Assa secured the CMBS financing in 2013, just 10 of the building’s 53 residential condominiums had been sold, and the terms of the loan do not permit any new sales. One of the Cassa’s penthouse units, PH3, hit the market in January with an asking price of $25 million.
In 2015, Assa was sued by the building’s condo board over unpaid common charges on the residential portion, which had allegedly brought the property to “the verge of financial collapse.” Wells Fargo brought in external legal counsel to defend the suit on behalf of the CMBS trust, and the parties settled the matter in 2016.
According to court documents, Assa admitted to operating an illegal hotel in six of the Cassa’s residential units in 2015, and the illegal occupancy was discontinued. In 2018, the developer agreed to a record $1.2 million settlement with the city over illegal hotel occupancy at four other properties.