Ceruzzi’s $272M loan on Lipstick Building ground lease goes to special servicing

Developer has been seeking to sell ground lease since last fall

New York /
Jun.June 08, 2020 11:25 AM
Ceruzzi Properties’ Arthur Hooper and the Lipstick Building at 885 Third Avenue(Google Maps; Hooper by Sasha Maslov)

Ceruzzi Properties’ Arthur Hooper and the Lipstick Building at 885 Third Avenue(Google Maps; Hooper by Sasha Maslov)

The coronavirus-fueled economic fallout has pushed countless hotel and retail property loans into special servicing. But one of the latest CMBS loans to run into trouble is from a different asset class altogether — the ground underneath a famed Midtown East office building.

The $272 million CMBS loan on the ground under the Lipstick Building at 885 Third Avenue has been transferred to special servicing, according to Trepp data. The reason is listed as “Imminent Monetary Default.” The borrower, Ceruzzi Properties, missed June’s payment; the loan had been paid through May 1.

Special servicer commentary on the deal indicates that the ground lease tenant — a partnership led by Argentina’s Inversiones y Representaciones Sociedad Anónima, or IRSA — defaulted on last month’s rent payment. “The borrower has expressed a need for relief, which was referred to the Special Servicer,” the commentary notes.

According to a lawsuit filed by a subtenant at the property last month — which has since been discontinued — Ceruzzi had sent a notice of default to IRSA on May 15. The annual base rent for the ground lease was about $18 million in 2017, and was subject to a potential “fair market value” reset on May 1, according to loan documents.

The debt-service coverage ratio for the ground lease was 2.0 in 2019, according to Trepp, indicating a rather solid financial position.

Representatives for Ceruzzi declined to comment.

In September, The Real Deal reported that Ceruzzi was seeking to sell the ground underneath the 592,000-square-foot office building after IRSA allowed an option to buy the ground underneath the 34-story tower to expire.

Ceruzzi and partners secured the financing for the fee and leasehold interests in the property in 2017, and the loan was packaged into a single-asset, single-borrower CMBS deal known as CSMC Trust 2017-LSTK. The developer owns about 78.9 percent of the ground outright, and the remainder in the form of a “sandwich” ground lease with another land owner.

Alongside Ceruzzi, Shanghai Municipal Investment owns an 80-percent stake in the borrowing entity, according to loan documents. SL Green also holds a preferred equity interest in the ground lease.

(Source: Loan prospectus, via Trepp.)

(Source: Loan prospectus, via Trepp.)


Related Articles

arrow_forward_ios
What CBS, “Salt Bae” and others pay at Black Rock
What CBS, “Salt Bae” and others pay at Black Rock
What CBS, “Salt Bae” and others pay at Black Rock
From left: Robert Mercer with 48-05 Metropolitan Avenue and Gary Barnett with 17 West 60th Street (Getty, Google Maps, Bulado General Contractors Corp)
$730M loan bundle funds slew of NYC projects
$730M loan bundle funds slew of NYC projects
Cerberus nabs $616M CMBS loan on FirstKey single-family rentals
Cerberus nabs $616M CMBS loan on FirstKey single-family rentals
Cerberus nabs $616M CMBS loan on FirstKey single-family rentals
55 East 52nd Street and Kenneth Fisher (Court Square, Fisher Brothers)
What the financial titans pay at Fisher Brothers’ Park Avenue Plaza
What the financial titans pay at Fisher Brothers’ Park Avenue Plaza
The Shoppes at Buckland Hills in Connecticut (Google Maps, iStock)
CMBS delinquencies plunge, but still above pre-pandemic levels
CMBS delinquencies plunge, but still above pre-pandemic levels
Here’s what tenants pay at Vornado, Trump’s 1290 Sixth Avenue
Here’s what tenants pay at Vornado, Trump’s 1290 Sixth Avenue
Here’s what tenants pay at Vornado, Trump’s 1290 Sixth Avenue
Blackstone secures $1.1B refi on Sun Belt multifamily portfolio
Blackstone secures $1.1B refi on Sun Belt multifamily portfolio
Blackstone secures $1.1B refi on Sun Belt multifamily portfolio
Bet against retail costs investor big-time
Bet against retail costs investor big-time
Bet against retail costs investor big-time
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...