An 18-story office building in Midtown South has been taken over by its lender at a value that represents a 72% loss from its prior sale.
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Metropolitan Life Insurance Co. is the new owner of 240 W. 35th St. after winning a foreclosure auction with a $30M bid, according to public records.
Atco Properties & Management paid $108M for the 166K SF Class-B property in 2016 and took out a $72.8M loan from MetLife in 2018 to refinance the property. The loan matured in February 2023, and Atco failed to pay off the balance, defaulting on the debt.
In July, MetLife sued to foreclosure on Atco at the building, according to court records. A receiver was appointed to manage the building the following month, and New York Supreme Court Judge Francis Kahn III ruled in January that MetLife could proceed with a foreclosure auction handled by a court-appointed referee.
Those legal proceedings ultimately resulted in an auction ordered for May 29, court records show. MetLife offered a $30M credit bid for the property, resulting in the ownership change that closed on June 26 and appeared in city records Tuesday.
“240 West 35th Street is a high-quality real estate asset that is well positioned in the New York City market,” a spokesperson for MetLife told Bisnow in a statement. “While we cannot comment on specifics of this transaction, MetLife Investment Management has a proven track record in institutional real estate and a dedicated team focused on the New York area.”
Atco declined Bisnow’s request for comment.
As much as 68K SF could be available for lease, according to the property’s most recent listing with broker Avison Young, but it is unclear if that figure is still current. Broker Todd Korren, who formerly represented the building with Avison Young, moved to Lee & Associates NYC in April, according to a release.
Korren's team at Lee & Associates has been hired by MetLife as the building's exclusive leasing agent, Korren told Bisnow in an email. A representative for Korren didn't immediately respond to questions about what percentage of the property is leased.
Israeli insurer Migdal Group bought a 49% stake in the building in 2017, one year after Atco acquired it. Atco remained the majority owner with a 51% stake, The Real Deal reported at the time.
It is unclear if Migdal Group still had a stake in the property when legal proceedings began. The insurance firm didn't respond to Bisnow’s request for comment.
When accounting for default interest, attorney's fees and extra costs, the building owners owed MetLife $78.7M on their unpaid mortgage. In his foreclosure judgment, Kahn said MetLife can still file a motion to recover the $48.7M difference between the building's sale price and the remaining balance owed.
CORRECTION, JULY 10, 4:55 P.M. ET: A previous version of this story included a typo regarding Lee & Associates’ relationship to 240 W. 35th St. The article has been updated.
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