The developers of a Rafael Viñoly Architects-designed Fifth Avenue condo conversion held off a foreclosure sale Thursday by placing the project into Chapter 11 bankruptcy on the eve of the auction.
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Top Rock Holdings and RJ Capital Holdings plan to transform the existing 14-story office and retail building at 609 Fifth Ave. into a 31-story mixed-use tower with 66 apartments, according to 2023 filings with the Department of Buildings. However, the project’s status is listed as on hold.
Top Rock secured an $80M mortgage from Valley National Bank in June 2022, along with mezzanine debt from GW Asset Management, to purchase 609 Fifth Ave. from SL Green for $100.5M.
An affiliate of GW Asset Management filed a notice of public UCC sale on Jan. 13, alleging that the borrowers were in default of a mezzanine loan that closed Nov. 18.
A UCC foreclosure involves the ownership entity that controls the underlying asset, allowing the winning bidder to seize control of the building while keeping the senior debt in place. There is a $71.8M balance on the senior debt, according to the notice.
GW Asset Management is a subsidiary of Naperville, Illinois-based Gar Wood Securities, an investment bank and brokerage with “built upon Midwest sensibilities,” according to its website.
Hilco Real Estate was tapped to conduct the auction for 609 5th Junior Mezz LLC, which was scheduled for Thursday.
On Wednesday, the LLC filed for bankruptcy protection, citing $50M to $100M in assets and $10M to $50M in liabilities. The auction notice has since been removed.
“When a process turns value-destructive, you step in and stop it,” Leo Jacobs, the attorney representing the developers in the bankruptcy, said in a statement. “That’s what we did here. Chapter 11 gives us the ability to reset and drive toward the highest-value outcome.”
The bankrupt entity lists the mezzanine lender, GW Assets FZE, as an unsecured creditor with a disputed claim of an unknown amount.
GW Asset Management, Top Rock and RJ Capital didn't immediately respond to Bisnow’s requests for comment. A Hilco representative declined to comment.
The office portion of the building has been empty since WeWork terminated its lease in 2021. The retail space, anchored by Puma, was purchased by the Reuben Brothers for about $165M in 2020, according to property records.
Top Rock and RJ Capital planned to secure a luxury brand to launch the condo project, but property records indicate that the developers haven't secured construction financing for the conversion.
The building's debt was previously subject to a different controversy between Top Rock and Northwind Group.
In June 2022, Northwind sued Top Rock and founder Uri Mermelstein. Northwind claims it had agreed to provide nearly $76M for the redevelopment, according to court records.
As part of their agreement, Northwind claimed the developer couldn't pursue financing with other lenders after a 50-day “no shop period.” Despite that exclusivity requirement and other confidentiality provisions, Northwind alleged that Top Rock sought alternative financing from Valley Bank.
Top Rock withdrew from its loan with Northwind but never paid closing costs or breakup fees, according to the lawsuit. Northwind sought damages in excess of $38M, but the lenders settled the lawsuit a few weeks later.
