A 1920s office building is the latest Garment District casualty after the owner defaulted on the loan.
Wells Fargo is suing the Eretz Group and principal Abraham Talassazan on behalf of CMBS bond holders, seeking to foreclose on 252 West 37th Street. The lawsuit, filed Monday in state Supreme Court, alleges that Talassazan failed to pay the principal and interest on the loan in January when it matured.
The occupancy rate at the 17-story Class B building plunged over the last decade to 62 percent as of September, down from 100 percent in 2014, according to Morningstar. The 140,000-square-foot building has an outstanding debt of $34.5 million, Morningstar data show.
The Eretz Group purchased the building in 2007 for $33.7 million and took out a mortgage in about the same amount, according to property records. It refinanced in 2014 with a $41 million mortgage from Cantor Commercial Real Estate, which packaged it into a commercial mortgage-backed security. Talassazan guaranteed the loan, according to court documents.
The outstanding debt was transferred to a special servicer in October, BisNow reported at the time. A representative of Eretz Group told Bisnow that the company put the loan into special servicing because it wanted to negotiate an extension.
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The borrower was unable to get financing before the maturity date, according to Morningstar.
The Eretz Group did not immediately respond to a request for comment. The lawyer for Wells Fargo referred questions to the special servicer, LNR Property LLC, which did not immediately respond.
The Garment District, with its glut of older, unadorned office buildings, was hit especially hard by the pandemic. Average starting office rents hovered around $46 per square foot at the end of 2023, according to a report by the Garment District Alliance, the lowest of the six neighborhoods included.