At 15 Central Park West, one of the city’s priciest condos, trickle-down economics could not save its ailing retail space from a foreclosure lawsuit.
Financial titans, sheiks and movie stars paid eight figures for apartments in the building but were unlikely to shop for an HDMI cable, a modest wood chair or other products at the shops below. Tenants included a Best Buy, West Elm and a candy store.
Now the retail owners, led by Eyal Ofer’s Global Holdings and Arthur and William Zeckendorf, are in court facing down lenders who lent them $125 million a decade ago.
The latest appraisal of the 84,000 square-foot space, according to Morningstar, valued it at $79 million, far below its 2012 purchase price of $116 million.
Fronting West 62nd Street and Broadway, it doesn’t even have the same address (1880 Broadway) as its upper-crust upstairs. The split personality of 15 CPW, aka Limestone Jesus, was ruptured further in January, when Best Buy declined to renew its lease, leaving a 54,800-square-foot hole in the building’s tenancy.
“The borrower can hand back the keys or claim bankruptcy,” said bankruptcy expert Adam Stein-Sapir of Pioneer Funding Group, which is not involved with the property.
A third option has yet to materialize: “A new tenant,” Stein-Sapir observed, “would make the property finance-able again.”
Trouble at 1880 Broadway had been brewing for some time. Placed on a watchlist of potentially troubled CMBS debt in February 2022, the $125 million loan was sent to special servicing after maturing in September — despite generating more than $10 million per year, after expenses, according to Morningstar.
The borrowers, including minority partners Fortress Investment Group and Madison Capital, bought time to refinance by seeking forbearance, incurring additional interest along the way. The foreclosure suit was filed by special servicer LNR Partners, an increasingly busy subsidiary of Barry Sternlicht’s Starwood Property Trust.
“Special servicers are more difficult to negotiate with than other kinds of lenders,” said Stein-Sapir, “and there may be no equity in the property.”
“We are in continuing discussions with LNR,” owners of the retail space said in a statement, “and are hopeful that we can come to an agreement on a mutually-beneficial resolution – one that reflects current and expected market conditions and allows us to reinvest confidently in the property.”
Before being sold to investors, the debt was issued by Morgan Stanley and Bank of America as part of a $1.1 billion CMBS deal in 2012. The lenders are in workout discussions while also pursuing foreclosure. Investors behind the debt either declined to comment or did not respond to questions.
Big-box stores including Best Buy and Bed, Bath and Beyond have struggled in New York City during the pandemic, which accelerated the shift to online commerce and brought tourism to a halt.
The market showed signs of recovery in the second half of last year. In the third quarter, asking rents rose across 16 prime Manhattan retail corridors — the first quarterly increase since 2016, according to CBRE.
Now the owners of 1880 Broadway have to buy some time.
“The borrower won’t let it go,” Stein-Sapir predicted. “They’ll sooner file for bankruptcy. It gives them a fighting chance to salvage something.”
Correction: The story previously put the amount of interest accrued during forbearance at $9 million. However, that amount was from a prior note.
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