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The Eretz Group is in danger of losing another Manhattan building to foreclosure.
And in a presumably awkward scenario, the group that aims to seize and sell 224 W. 57th St. is essentially the building’s main tenant.
Soros Fund Management, the asset manager for investor George Soros, has filed a foreclosure lawsuit against Eretz for defaulting on a $145 million mortgage for the Midtown property, which is home to Soros’ grant-making group, Open Society Foundations.
The suit, filed in Manhattan’s Supreme Court on Friday, accuses Eretz of failing to pay off the loan’s principal by its maturity date of June 2023 and two subsequent deadline extensions.
Soros Fund seeks to take title to the building, a prewar landmark at Broadway, and unload it to pay off Eretz’s debt plus interest and fees, according to the filing.
And the legal action comes just a few weeks after a lender moved to foreclose on a different Eretz-owned site, an 18-story office building at 252 W. 37th St. in the Garment District.
Reached by phone on Friday morning at Eretz’s Madison Avenue office, firm executive Nick Mok had no comment on the case, which specifically names firm founder Abraham Talassazan as a defendant. Talassazan signed the original loan documents, records show.
In addition emails sent to Open Society Foundations and Soros Fund Management were not returned by press time. And a phone message left for a Soros attorney in the case, Jack Doherty, was also not returned.
While persistently high vacancy rates have doomed some landlords, 224 W. 57th St. would seem relatively well off.
Indeed, the entirety of the office portion of the 10-story, 170,000-square-foot mixed-use building is occupied by Open Society, whose lease runs until 2042, according to the data firm CoStar. Open Society, which invests in pro-democracy and public-health initiatives in 120 countries, has an endowment of about $6 billion, according to its website.
Even the retail spaces at the No. 244, which was the media giant Hearst’s headquarters for decades, are completely filled with tenants, including a branch of TD Bank. And a large Nordstom department store is across the street from the renovated address, which is near Columbus Circle.
But full floors might not be enough to offset the other issue dogging the commercial real estate market these days: historically high interest rates, which has sent the costs of loans soaring.
In the past, commercial landlords have taken on massive amounts of debt with the assumption that they would essentially kick the can down the road when it came to repaying the money by coming up with a new loan package on more favorable terms, a strategy that seems to be backfiring now.
According to the city register, Eretz in 2015 paid $213.8 million for 224 W. 57th St., a terracotta-lined 1910 edifice that was once known as the Argonaut Building and that served as an early General Motors showroom back when this part of Midtown was nicknamed Automobile Row.
In 2018, Eretz borrowed $145 million to refinance the property from the lender Aareal Capital Corp., which after it could not collect the money it was owed then sold the outstanding debt to Soros Fund Management in the fall, the lawsuit says.
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C. J. Hughes , 2024-04-19 19:51:09
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