Troubled Midtown rental saga headed for a foreclosure finale
After years of defaults, bondholders have had enough
UPDATED: January 24, 2023, 5:12 p.m.
A Midtown rental building with a checkered past is on the brink of foreclosure.
Late last week, Wells Fargo filed to foreclose on 15 West 55th Street, a 10-story building just south of the Plaza, claiming the mortgagees have defaulted on the loan several times and are behind on payments by at least $84 million.
Solly Assa, as well as co-defendants Steven and Marilyn Finkelstein of FTRE Real Estate, are listed as defendants on the suit, as Wells Fargo claims they signed personal recourse guarantees on the debt.
The suit stems from a $73 million loan received from Barclay’s in 2015. Shortly after issuing the debt, Barclay’s sold the note to a commercial mortgage securities trust. But the building soon ran into trouble.
In 2018, Assa agreed to a $1.2 million settlement with the city over claims that apartments in the building were being rented as short-term Airbnbs. At the time, it was the largest such settlement in city history.
Concurrently, Assa was duking it out in court with the suit maker Domenico Vacca, the building’s ground-floor tenant. Assa accused the firm of not paying its $4 million rent, and Vacca ended up leaving the building in 2019. Wells Fargo now claims that the broken lease constituted a default under the mortgage, which stipulated that the building could not terminate a major rent without the lender’s written consent.
After that alleged default, the loan was modified in January 2021, according to Wells Fargo. The new agreement identified five different defaults that had taken place under the old mortgage, including a failure to pay monthly debt service in the months after the pandemic spread to New York.
As part of the modified loan agreement, the owners consented to make monthly interest payments, but that August, they failed to pay the full amount due. The loan was accelerated, and Wells Fargo, the bondholders’ trustee, declared the entire balance due in November, the suit alleges.
Now, in addition to the defaults already acknowledged by both parties in the modified loan agreement, Wells Fargo claims further violations occurred. In 2019, the building allegedly signed a deal with online leasing company REZI, which gave the service the right to lease nearly half of the building’s 31 apartments. Wells Fargo claims the bondholders apparently never agreed to such a deal, which was another breach of the mortgage terms.
Additionally, under the mortgage agreement, the building was supposed to deposit all gross income from building operations into a lockbox account. Wells Fargo claims that REZI did not put the rents it collected into the account, even as the signatories to the loan modification agreed that all rents were being regularly deposited into the lockbox.
If the bank gets its way, bondholders will be taking over a drastically devalued building. In 2015, Trepp valued 15 West 55th at $119 million; in 2021, that fell by nearly 70 percent to $37.8 million.
Wells Fargo alleges that Assa and the Finkelsteins each owe up to $11 million, the maximum guaranteed amount under their personal guarantee agreements. Still, the bank claims the unpaid balance on the loan as of July 2022 was at least $84 million. That includes an unpaid principal of $73 million, $7 million in interest and nearly $4 million in fees.
An attorney for Assa told The Real Deal that Assa is a consulting fee manager at the building, not an owner.
“While the Assa’s did in the past a few years ago have an ownership interest, their only interest now is for management,” the attorney wrote. “Neither Mr. Assa, nor his family own 15 West 55th St.”
This story was updated to include Assa’s denial of currently owning the property.