More time couldn’t save RFR’s Grand Central office tower from default.
In July, Aby Rosen’s firm was granted a few months’ forbearance to refinance 285 Madison Avenue’s $219 million senior loan. The mortgage had hit its extended maturity in May, but the modification gave Rosen until November to find new debt.
Now the CMBS loan is back in special servicing for imminent maturity default because Rosen and partner Michael Fuchs failed in that quest, according to Morningstar.
Compounding RFR’s problems at the office property, several weeks ago a New York judge ordered the firm to pay its mezzanine lender on 285 Madison $18 million, the Promote reported. The sponsor had defaulted on the building’s $205 million in subordinate debt in February.
A spokesperson for RFR said the sponsor “remains committed to 285 Madison and looks forward to working with the special servicer.”
Rosen is among a crop of borrowers who negotiated short-term loan modifications on office properties with shaky financials. Lenders, not eager to foreclose on devalued office properties, were hoping owners could boost revenue at the buildings as interest rates fell.
But rate cuts by the Federal Reserve have not yet been enough, and the financial picture at 285 Madison Avenue has only gotten worse.
The building has been underwater since at least 2022, when a reappraisal cut its value from $610 million to $411 million — below the total debt balance. At the time, revenue was just covering mortgage payments and the loan was headed toward its first maturity.
Rosen was able to secure an extension through 2024 but couldn’t improve performance. Despite the building’s 96 percent occupancy rate, net cash flow as of June had fallen more than 50 percent in six months.
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It’s unclear what interest rate RFR was playing on the mezzanine debt on which it defaulted in February. The senior loan now in special servicing carried an interest rate of just 3.8 percent.
Any refinancing would carry a higher rate and likely require an additional equity commitment from RFR, judging from debt workouts at other office properties. With an $18 million judgment to satisfy and multiple foreclosures underway, the last thing RFR wants to make is a capital call to investors for 285 Madison.