Aby Rosen was a real estate king in New York. Is his office empire crumbling?

By the time developer Aby Rosen bought New York’s Seagram Building in 2000, both the mid-century Midtown tower and the Canadian distiller of the same name were past their prime.

But the building formed the basis for Rosen’s real estate empire. Together with his longtime business partner Michael Fuchs, their company RFR Holding, and an extensive collection of modern art, Rosen renovated, renamed, and remarketed unloved landmarks at higher rents.

“Rosen brought an art collector’s eye to real estate,” said Bob Knakal, head of brokerage firm BK Real Estate Advisors and who has worked on deals for Rosen in the past. “He looked at buildings and saw things that other people missed.”

Never officially called the Seagram Building, the 375 Park Avenue Tower was completed in 1958 as the first skyscraper in Manhattan with floor-to-ceiling windows. By the start of its fifth decade, it was drafty and energy inefficient, with a fire-hazardous electrical system and leaking fountains in the square. The building’s famous Four Seasons restaurant was at dusk.

The German emigre bought the property for $375 million and spent tens of millions more on upgrades. Over the next ten years it was rarely anything other than full. In 2013, it was a $1.6 billion testament to Rosen’s acumen in making fortunes from faded landmarks and his place among the top ranks of New York developers.

Now it produces only about half the income it did before the pandemic, and Moody’s Analytics last month placed it on a list of properties that may be difficult to refinance. RFR refinanced $400 million in debt on the building in December, but still owes $750 million on a 2013 loan.

Since 1991, Rosen has purchased more than fifty buildings in Manhattan, including a half interest in the Chrysler Building. He has sold some along the way and diversified, buying buildings in Seattle, Tel Aviv and elsewhere.

But the flashy purchases of a man with an equally flashy social life may now be catching up with him.

The Seagram Building at 375 Park Avenue, the world's first bronze skyscraper, lights up the night sky in Manhattan, New York City
The Seagram Building at 375 Park Avenue was the world’s first bronze-clad skyscraper © Bettmann Archive/Getty Images

Billions that Rosen borrowed for the Seagram Building and other properties will either mature within the next year or have already been repaid, at a time when higher interest rates and the post-Covid reality of offices have lowered commercial real estate valuations and made refinancing more difficult made .

RFR said the Seagram building was “fully leased with an investment grade lease” and operating profit is expected to more than double this year.

Yet similar stress is replicated in the RFR portfolio.

In 2018, Rosen told the Financial Times that the value of RFR’s portfolio had risen to $14 billion. Since then, the global real estate market has not been kind.

He has already been forced to leave some of his major properties, including the Lever House and a high-profile office-to-apartment project in Midtown Manhattan.

As of last week, he owed $470 million on 285 Madison, a 26-story building near New York’s Grand Central Station that was worth $610 million when he closed the loans in 2018. In 2022, its value was estimated at $60 million less than the debt. .

RFR is far from the only New York developer feeling the pain of a post-Covid real estate downturn. Still, the developer and its partners have to consider at least $2.5 billion in debt maturing in the coming year or already delinquent, an FT analysis of publicly available loan data shows.

The analysis identified 16 loans tied to more than 20 properties that RFR owns itself or with partners. Collectively, these buildings generated just over $26 million after interest payments last year, nearly three-quarters less than the $97 million they were expected to generate when RFR and its partners retired the debt.

Twelve of the loans are in some state of distress, whether they have been identified by mortgage servicers as at risk of default, delinquent or still outstanding despite passing due dates.

Four of the buildings do not generate enough rent to cover mortgage costs. Another two are vacant or about to be vacant: One is a Brooklyn office building that was occupied entirely by WeWork before the bankrupt co-working company broke its lease last year.

Lawsuits and mortgage applications point to a growing pile of unpaid bills.

Earlier this month, a former executive of Rosen’s RFR Holding sued Rosen and Fuchs for $20 million, saying they missed two deadlines this year for payments related to a 2019 exit package.

A Blackstone firm is separately pursuing the developers for nearly $50 million, one of the outstanding loans the private equity group and its partners bought from failed bank Signature.

RFR has also missed mortgage payments and a property tax bill totaling just over $9 million at 522 Fifth Avenue. The building about to be sold is a Miami retail property that the Rosen group purchased in 2019 for $20.5 million.

“Aby is at the top in terms of acumen, but even the people who were smart about their leverage fall under these higher interest rates and are unable to refinance,” says Knakal of BK Real Estate Advisors.

The sun sets on the Chrysler Building as seen from the 102nd floor observation deck of the Empire State Building in New York City
Rosen has purchased more than 50 buildings in Manhattan since 1991, including a half interest in the Chrysler Building © Gary Hershorn/Getty Images

With his other landmark in Midtown Manhattan, the Chrysler Building, Rosen faces a clear challenge. RFR co-owns the building with Signa, the bankrupt Austrian real estate group founded by former billionaire René Benko.

Signa’s manager is now trying to sell half of the 77-storey art deco skyscraper to raise money. Although the building is 90 percent rented, it has an expensive leasehold, which limits its attractiveness. A low sale price could crystallize a depressed valuation – leaving Rosen with a partner he didn’t choose.

RFR declined to comment on the lawsuits but said the vast majority of its nearly 100 properties were “well-rented and performing well.” The company was actively working to restructure the debts of those under pressure on its properties, it added.

“No one investing in real estate is immune to the pressures of fluctuating capital markets or the changing work and lifestyle trends we are currently seeing,” RFR said. “We are confident that we can overcome these obstacles, just as we have done in the past.”

Rosen has also used unpaid bills as a negotiating tactic before. In a fight over the currently closed Gramercy Hotel, RFR stopped paying its lease in mid-2020, claiming the pandemic had made the property worthless.

But with $929 billion in U.S. commercial mortgage debt due this year, according to the Mortgage Bankers Association — about $180 billion of which is tied to office properties — investors are looking not just at what happens to Rosen, but also at what his challenges herald. for the rest of the real estate sector.

“Every office owner is under significant pressure, so it’s not a question of if, but when maturities are coming,” said an investor in distressed real estate loans.

“RFR has a lot of high-profile items that need to be refinanced right now, but there are a lot of developers across the country with loans that need to be worked out.”

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