Wharton Properties seems ready to hand over the keys in Herald Square.
The major retail landlord and its partners have agreed to an “optional default” at 11 W. 34th St., which clears the way for lender Wells Fargo to foreclose on the property, according to a new court filing.
Wharton, which owns the site with SL Green Realty Corp. and the Cohen family, based on property records, missed a January 2023 deadline to fully pay off a $23 million mortgage on the property, a 25-foot-wide prewar building that has had Foot Locker as a tenant for years.
The sneaker chain announced last year it would shutter 400 stores in North America by 2026 in an effort to shrink its real estate footprint, though the No. 11 outpost was open Tuesday.
Wharton and SL Green took control of No. 11 in 2010 after purchasing a $12 million distressed mortgage note on the site, which once had a branch of the Cohen-owned Conway Stores chain. The narrow, single-tenant structure, which faces the Empire State Building, is on a Wharton-dominant strip. The company, headed by founder Jeff Sutton, also controls retail real estate at 15, 21, 27, 29 and 40 W. 34th St., according to Wharton’s website.
In 2016 Wells Fargo refinanced an existing loan for the 17,200-square-foot building in a $23 million deal, according to the Monday filing in Manhattan Supreme Court. Wells Fargo is seeking to sell No. 11 to recoup its loan and also cover interest and attorney fees.
The loan’s principal had originally been due in January 2021, but the landlord group exercised options to extend the deadline till last year, the filing says.
Wharton has not yet filed a response in the case, and an email sent to Sutton was not returned. Also, an SL Green spokeswoman had no comment, and the Cohens could not be reached by press time.
But for the past couple of years, commercial landlords have been struggling to refinance maturing mortgages at favorable interest rates as loan costs remain above average. Other landlords in the same boat have considered converting commercial sites to residential ones or walking away entirely.
No. 11’s financial problems come amid an otherwise banner run for Wharton, which in recent months has sold a staggering $1.8 billion worth of real estate in a higher-end retail area, Fifth Avenue in Midtown. Indeed, Sutton unloaded 720 and 724 Fifth to fashion house Prada for $822 million before selling nearby 717 Fifth to Gucci parent Kering for $963 million. SL Green was also a seller in the Kering transaction.
Retail real estate has followed a somewhat contradictory trajectory in the post-pandemic period. Though vacancy rates have been steadily dropping, giving hope to the sector, some big retailers like Target have closed up shop because of what they claim are high shoplifting rates.
SL Green, New York’s largest office landlord, meanwhile, has enjoyed a recent improvement in its share price even though overall daily office occupancy rates are still short of pre-Covid levels, and Manhattan’s vacancy rate hit a record 18% this winter.
C. J. Hughes , 2024-04-02 19:33:50
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