The lenders for the Midtown development where Aby Rosen’s RFR Holding was slated to build Shangri-La Hotel, New York, have filed to foreclose on $144.2 million in loans and fees used to buy, plan and develop the site, court records say.
ING Real Estate Finance and Swedbank sued to foreclose on the loan to Park Avenue Hotel Acquisition, a company registered at the address of developer Aby Rosen’s RFR Holding, which was slated to develop the Shangri-La Hotels and Resorts’ tower at 610 Lexington Avenue, at 53rd Street.
The borrower was unable to refinance its loan by an April 8 deadline, and so ING determined the loan was in default on June 15, the filing says.
Crain’s reported in April that Shangri-La had pulled out of the New York project, where the hotel and RFR Holding planned to build a 64-story hotel tower with residential condominiums on the top 10 floors, next to the landmarked Seagram Building at 375 Park Avenue at 53rd Street. Shangri-La was to manage the hotel under a 2007 development and operating agreement signed with RFR Holding.
The default could be costly for Rosen, his RFR partner Michael Fuchs and Shangri-La Asia Limited, all of whom are named in recourse carve-out provisions as guarantors, the court papers filed June 16 in State Supreme Court say.
RFR Holding, Shangri-La and ING did not respond to requests for comment.
RFR Holding owns significant properties in New York City such as Lever House and the Seagram Building. Although considered a stable company, a loan to an RFR Holding-affiliated entity that owns a retail condo at 60 East 55th Street, was listed as delinquent in May, according to loan tracking firm Trepp.
The original $145 million loan issued by Lehman Brothers Holdings in April 2007 to the RFR affiliate was composed of a $98.64 million acquisition loan; a project loan of $19.3 million for pre-developments costs; and a building loan of $27 million to fund demolition and construction costs, the court filing says.
The note had an original repayment date of October 8, 2008, with an option to extend to April 8.
That loan was transferred in stages from Lehman Brothers and related entities to ING Real Estate Finance, a division of the Dutch ING Group; and the Swedish Swedbank, in a shift that was completed by November 2008.
David Arena, president of Grubb & Ellis New York, who was not involved in the property, said falling property values would bring more defaults of this type.
“It is all maturity default risk. The loans are going to come due, and values will be way below what the current owner is in for, and the buildings are going to go back to the banks and financial service companies,” he said.