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$215M Foreclosure Looms For Former Tommy Hilfiger Flagship On Fifth Avenue

A prime 90K SF office and retail building on Fifth Avenue could be lost to foreclosure after its owner stopped making mortgage payments.

681 Fifth Ave. in Manhattan, captured in 2018 before Tommy Hilfiger closed its flagship store.

Special servicer Rialto Capital Advisors has moved to foreclose on 681 Fifth Ave., the building that long held Tommy Hilfiger's flagship store before the designer shuttered in 2019. Rialto, on behalf of a CMBS trust, filed a pre-foreclosure complaint in New York County Supreme Court on Wednesday.

Metropole Realty Advisors has owned the 12-story, 1913-built property since 2005, when the Robert Siegel-led firm paid $86M for it, then spent several years renovating before drawing in high-profile fashion tenants like Tommy Hilfiger and Vera Bradley. 

Metropole took out a $215M CMBS mortgage on the property in 2016, refinancing a $125M loan from Ladder Capital. The new debt, which was split into six notes, valued the building at $440M, according to the Morningstar Credit database. The building was 91% occupied at the time.

But 681 Fifth started to have difficulties in 2019 when Tommy Hilfiger vacated its lease. The fashion house occupied 27% of the property, Crain’s New York Business previously reported, but accounted for 78% of the building’s base rent.

The fashion house kept paying rent until May 2023, when its lease expired. Another tenant, Apex Bulk Carriers, left the property in March. Metropole has since spent approximately $350K on renovations to attract new tenants, The Real Deal reported in August

The building’s occupancy was less than 52% as of September, according to Morningstar Credit.

The drop in occupancy, which was 91% when the loan was issued, has led to Metropole not being able to make payments on the loan, according to Rialto's complaint, filed Wednesday.

The borrower missed its monthly payment, roughly $773K, for the first time in July. The property's debt was placed on a watchlist and downgraded in August, and Rialto was appointed special servicer in September. Rialto sent Metropole and Siegel, who is a personal guarantor on the loan, a letter of default Oct. 2, according to court filings.

Rialto and Metropole have executed a pre-negotiation letter and were in discussions as of Dec. 11, according to special servicer commentary.

But Rialto accelerated the loan and demanded full payment of the $215M outstanding principal, plus the unpaid interest and late fees, in a Dec. 15 letter that was filed alongside the foreclosure complaint. Metropole hasn't made an interest payment since July, Rialto said, adding up to more than $4.6M in unpaid interest.

In the letter, Rialto said Metropole's license to collect rents has been terminated and demanded that the landlord turn over rent collection to the special servicer. 

Rialto and Metropole didn't immediately respond to Bisnow's requests for comment.