In Union Square, a notable financial predicament is emerging for Aby Rosen, a distinguished personality in the real estate sector.
The $104.5 million mortgage on RFR Realty’s office building at 90 Fifth Avenue, under Rosen’s ownership, is undergoing a transfer to special servicing owing to a confluence of factors including escalating property taxes, mounting vacancies, and dwindling cash flow.
This scenario underscores a mounting apprehension within the New York real estate arena, wherein even longstanding properties confront financial challenges.
The Financial Challenges at 90 Fifth Avenue
RFR Realty’s difficulties with 90 Fifth Avenue are complex. The 140,000-square-foot building experienced an 8 percent decrease in cash flow to $5.9 million last year, according to bond rating firm KBRA.
This decline is worsened by a 50 percent vacancy rate, leaving half of the building’s space unoccupied. Although the anchor tenant, real estate brokerage Compass, occupies 89,000 square feet, it has been subleasing portions of its space, compounding the building’s financial troubles.
Moreover, the retail space, leased to Republic First Bank, is approaching the end of its lease, adding to uncertainties about the property’s income.
Tax Issues and Legal Battles
The immediate trigger for transferring the mortgage to special servicing isn’t defaulting on loan payments but rather a substantial backlog in property taxes.
RFR Realty missed a tax payment last June and faced a hefty property tax bill in January, which included $1.8 million in new charges on top of $2 million in outstanding charges from the missed payment. Despite eventually settling the bill in full, the delay underscores the financial pressure on the property.
This scenario isn’t an isolated incident; just two months ago, Wilmington Trust launched a lawsuit against an entity managed by Rosen over an alleged default on a $15.1 million mortgage for a property in Miami-Dade County, pointing to broader financial hurdles within Rosen’s real estate holdings.
Implications for the Real Estate Market
The challenges encountered by 90 Fifth Avenue signal larger patterns impacting the New York real estate landscape. Escalating property taxes and growing vacancies are squeezing property owners, including those with historically resilient portfolios.
Aby Rosen and RFR Realty’s scenario underscores the fragility of commercial real estate amidst economic fluctuations, emphasizing the necessity for property owners to adjust to shifting market dynamics.
Moreover, it prompts inquiries into the future viability of office spaces in premier locations as the market adapts in the wake of the pandemic.
