RFR Holding is facing yet another crisis as 2024 draws to a close, this time concerning the office building located at 17 State Street Ny Ny. Lender Wilmington Trust and special servicer Rialto Capital Advisors have initiated a foreclosure lawsuit against Aby Rosen and Michael Fuchs’ firm, potentially leading to RFR losing control of the Financial District property.
The legal action, reported by Crain’s, stems from RFR’s alleged default on a $180 million loan earlier this summer linked to 17 State Street in NY NY. According to the lawsuit, RFR reportedly owes $183.5 million as of early November, a figure that includes accrued interest and fees on the outstanding debt. The plaintiffs are seeking a court order to foreclose on the 42-story building, allowing them to seize the property and subsequently put it up for sale to recover the owed funds.
While RFR has not officially responded to the specifics of the lawsuit, a company spokesperson informed the publication that they are actively working with the special servicer through what they termed “procedural steps.” The spokesperson conveyed RFR’s intention to retain ownership of 17 State Street, NY NY, suggesting they are aiming to resolve the issue without relinquishing the asset.
This stance mirrors the company’s public statements from the summer when the debt was initially transferred to special servicing. At that time, RFR indicated plans to refinance the debt in the near future. Despite these assurances, the lawsuit indicates that the situation has escalated, leading to the current foreclosure proceedings for 17 State Street, NY NY.
Interestingly, the fundamentals of 17 State Street NY NY appear relatively strong. As of mid-August, the building boasted a healthy occupancy rate in the mid-90s, according to data from Morningstar. Furthermore, the cash flow generated by the property at the end of last year was reportedly 3.5 times greater than the debt service, indicating a financially viable asset.
However, issues have emerged in recent months that have contributed to the current crisis at 17 State Street NY NY. The lawsuit alleges that RFR has failed to deposit sufficient rental income into a designated special account, a requirement stipulated in the loan agreement. For example, in July, despite collecting $3.4 million in rent, RFR allegedly only deposited $2.3 million into the specified account. Adding to the complications, RFR is also accused of not cooperating with a request to audit the company’s financial records related to 17 State Street.
The unfolding drama at the 571,000-square-foot 17 State Street NY NY property is not an isolated incident for RFR. The firm is grappling with broader financial challenges, including a recent default on a $219 million senior loan at 285 Madison Avenue last month, following a previous default on the mezzanine debt for the same property. RFR is also entangled in a dispute with Cooper Union concerning lease terms at the iconic Chrysler Building, further highlighting the mounting financial pressures on the company. The situation at 17 State Street NY NY underscores the ongoing difficulties RFR is facing as it navigates a challenging real estate market.
