Ceruzzi Properties and SMI have brought in a new partner on their troubled Midtown development project as they race against the clock to stave off a foreclosure.
Rabina Properties recently signed a joint-venture agreement to co-develop the planned 76-story mixed-use project just north of Bryant Park, a representative for the partnership told The Real Deal.
“Rabina’s going to be running this deal,” Ceruzzi president Art Hooper told TRD. “We’ll be codeveloping the deal, but we’ll be in the back seat to Rabina.”
Hooper added that Rabina put additional equity into the deal, but declined to comment on the dollar amount. A representative for Rabina was not immediately available to comment.
The new partnership is working with a lender to secure a loan to refinance the property, though time is short.
Ceruzzi and SMI USA are in default on the $200 million in debt that Mack Real Estate Credit Strategies provided the partners in June 2017. Late last week, Commercial Observer reported that Mack scheduled a foreclosure auction for the $130 million senior mortgage and $70 million mezzanine loan for July 1.
If the partners can secure financing to repay the loan — the balance of which now totals roughly $233 million with interest — they can repay Mack and head off the auction.
A representative for Mack declined to comment, though a spokesperson told CO last week that the company “remain[s] hopeful that the borrower will promptly fulfill its obligations.”
Ceruzzi and SMI purchased the site at the corner of West 43rd Street in 2015 for $275 million. But many in the market feel the property today is worth less than the debt.
Hooper said Rabina wrote a check to put additional equity in the deal, though he declined to comment on the amount, and said they’re working to pay Mack.
“I understand why they’re doing what they’re doing. It’s unfortunate that it dragged out this long,” he said. “It’s always been our intent to pay everything owed to Mack, and we’re very close to doing that and resolving this amicably between us. There’s no animus toward them.”
Hooper declined to comment on specifics about the default, but a source familiar with the loan said things started to go downhill earlier this year when Ceruzzi and SMI’s talks with a new potential partner fell through.
Madison Equities’ Robert Gladstone had spent the last few months of 2018 negotiating to come on as a new partner, as TRD reported at the time. But those talks eventually fell through, and after the borrowers pushed back the deadline to refinance the property, Mack sent a notice of default.
The lender considers the loan under a technical default effective August 2017, due to the sudden death of Lou Ceruzzi that month.