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Former Hit Factory studios edge closer to selling
15,000 sf retail property was last used by Gibson Guitars
The remaining studios at the Hit Factory in Hell’s Kitchen — where Bruce Springsteen, Eric Clapton, Whitney Houston and many others recorded a generation of chart-topping songs — may have laid down their final tracks.
American Strategic Investment, landlord of a 15,000-square-foot retail property that has been vacant at 421 West 54th Street since 2018, told investors last week that it took a $150,000 impairment charge at the property, suggesting that retail space may soon be sold.
Closing the sale would mean a cash infusion for American, which never mortgaged the property, providing it with needed cash to cover ailing loan obligations at some of its 1.2 million square feet of office and retail space in New York City.
A new owner would decide whether the Hit Factory’s retail space, with its angular acoustics and nostalgic control rooms, will remain faithful to its musical heritage.
Most of the six-story building’s legendary studios were converted to residential condos in the mid 2000s, including one snapped up by Lady Gaga. However, recording space on the ground floor continued to be used as retail by Gibson Guitars as a flashy place to demo its iconic instruments until entering bankruptcy protection in 2018.
The space has been vacant ever since, making it nearly impossible for American to squeeze cash out of it. The company put the space up for sale in spring of last year.
The size of the impairment may signal an eventual sale near $7.25 million, the price that American paid for it in 2014. Prospective buyers have taken more of an interest in the property in the last month or two, said Bob Knakal, who is brokering the sale for JLL.
An impairment charge is an accounting event that syncs the book value of an asset to its present market value. The practice can signal an approaching sale because the market value of a property is needed by underwriters before they take it as collateral for a loan.
The sale of the retail space would help American shore up its loan obligations at 1140 Sixth Avenue, a 250,000-square-foot office building where it has breached a debt service coverage agreement and a reserve fund provision on a CMBS mortgage secured by the building.
American has also breached a debt service coverage ratio at 8713 Fifth Avenue, a 14,000-square-foot office building in Brooklyn, according to its latest financial disclosures. The company did not return a request for comment.
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