Real estate investor Jeff Sutton thought he found a refinancing solution for a prime property he co-owns on Fifth Avenue that would have kept foreclosure at bay, but his lender sunk the deal by demanding a steep late fee, according to a new court filing.

New York Life Insurance Co. filed a lawsuit in August against an affiliate of Sutton’s Wharton Properties, alleging it failed to pay off a $314M loan on the retail space at 717 Fifth Ave. that had matured. Sutton said in a court filing this month that British billionaires Simon and David Reuben had agreed to provide a replacement loan last July, but New York Life insisted on a $15M late fee and the deal fell apart, The Real Deal reports.

Sutton claims the lender was already pulling in default interest of 8.45% — $70K per day — and had no right to ask for an additional fee. Plus, Sutton said the lender failed to provide a payoff letter for five days after the request, adding $350K to the default interest, per TRD.

An Aug. 5 letter included a request for a $10M late payment and default interest of $1.8M. When Sutton told New York Life the Reubens wouldn't take on the deal if they had to make that payment, the lender wouldn't budge and moved to foreclose on the property, which has Dolce & Gabbana and Armani as tenants.

New York Life Insurance and the Teachers Insurance and Annuity Association provided two separate $150M loans on the property 10 years ago, and New York Life took over TIAA’s half in 2021, per TRD.

The lender claimed Sutton failed to meet obligations when the $300M debt matured in July. SL Green also owns a 10.92% stake in the property, according to a public filing.

Sutton's firm owns dozens of retail properties in Manhattan, including along Fifth Avenue, 125th Street, 34th Street and Times Square. Wharton owns Prada’s flagship at 724 Fifth Ave. and Nike's flagship store at 650 Fifth Ave., also a joint venture with SL Green.

Retail has been a particularly troubled sector of the real estate industry in New York. But luxury brands have helped boost the recovery in the city, and rents in some parts of the city are on their way to returning to their pre-pandemic levels. Average asking rent in Manhattan’s retail corridors was $638 per SF in the first quarter of the year, the third straight quarterly increase and 8% higher than Q1 2022, according to CBRE.