Korean Lenders Foreclose on RFR Office Building

RFR Realty has handed ownership of 285 Madison Ave. in Midtown Manhattan to its mezzanine lender, a consortium of some of South Korea’s largest insurance companies advised by Daol Asset Management. Ocean West Capital Partners led the UCC foreclosure of the 511,000-square-foot office property near Grand Central Terminal, Ocean West reported Monday.

The loan fell into maturity default in late 2022, according to Ocean West. The loan was extended to provide time for recovery, but it went back into default in late 2024 when the extension expired. Ocean West entered the situation at that time to advise the mezzanine lender regarding debt recovery strategies. Based on improving investment and leasing in the Manhattan office market, the mezzanine lender decided to exercise its foreclosure rights. 

The property reportedly remains well leased and is in a strong submarket. Furthermore, a recent $80 million-plus renovation modernized the building and enhanced amenities, including a rooftop deck and event space, conferencing center, and onsite gym.

“We have seen a change in tenor from the Korean lending community whereby they have become more aggressive in protecting assets located in strong markets. These investors represent some of the largest insurance companies and pension funds in the world, who have capital to execute a wide variety of strategies,” Ocean West principal & co-founder Phil Choi said in a prepared statement.

DLA Piper LLP represented the mezzanine lender throughout the process and was active in planning and executing the foreclosure strategy. Newmark managed the UCC auction marketing process, with Seoul-based Daol Asset Management serving as the Korean investment advisor.

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Owner RFR Realty has made its share of financial dance moves lately, as it’s fought to retain control of a number of New York City assets. It lost control of the storied Chrysler Building in October, and faced foreclosure on 17 State St. in Lower Manhattan for several months before achieving a three-year loan extension in January. It similarly achieved a $160 million loan plus an unknown sum of new equity capital from unidentified partners for 475 Fifth Ave., a 275,738-square-foot trophy office building, following a foreclosure suit by lenders JPMorgan Chase and Citibank. Its 90 Fifth Ave. in Union Square is currently in the midst of a foreclosure suit.

Foreclosures not so rare these days

CRE foreclosures are nowhere near their peaks of past years, but they’ve struck other sizable properties recently, as well, as the office sector has struggled to recover from Covid-induced vacancies. While office traffic has improved, March visits remained 32.2 percent below the same month in 2019, according to a report from Placer.ai.

In Boston last month, an affiliate of merchant bank BDT & MSD Partners, reportedly in partnership with DivcoWest, acquired the 1.1 million-square-foot One Lincoln office tower (formerly State Street Financial Center) at a foreclosure auction.

Their bid of $400 million for the 36-story tower was the only one; the ownership change represented the asset’s lenders taking the building for less than half of its original price. MSD Capital reportedly held the larger of the loans secured by the property, at $763 million, while DivcoWest held a $257 million secured loan.

The building’s former owner, Fortis Property Group, had acquired the tower in 2006 for $889 million. In 2022, Fortis refinanced the asset for $1 billion, which included $200 million for upgrades covering lobby renovations, an amenity center, food services and reconfigured floorplates. Trouble arrived in 2023, however, when One Lincoln’s anchor tenant, State Street, vacated its 750,000 square feet for another downtown Boston location.

A year ago, veteran CRE reporter Lew Sichelman noted an uptick in foreclosures, based on data from the Mortgage Bankers Association and property data analytics company ATTOM.