Owner of Lipstick Building in NYC Seeks Bankruptcy
The owner of Lipstick Building, the midtown Manhattan tower where Bernard L. Madoff ran the biggest Ponzi scheme in U.S. history, filed for bankruptcy with a plan to reorganize with support of its largest creditor.
Metropolitan 885 Third Avenue Leasehold LLC’s petition for Chapter 11 bankruptcy filed today in U.S. Bankruptcy Court in New York listed as much as $500 million in both assets and debt. In June, Royal Bank of Canada sued to force a sale of the 34- story tower, because the landlord had defaulted on a $210 million loan.
Goldman Sachs & Co. owns Metropolitan 885 Third Avenue Leasehold, according to court papers.
The skyscraper, between East 53rd Street and 54th Street, was designed by John Burgee Architects with Philip Johnson. It gets its name from its elliptical shape, which resembles a tube of lipstick, and the red granite on its exterior.
“The recent violent downturn in the building and real estate markets have had a significant impact on the debtor’s operations,” Jacob Abikzer, a managing member of Metropolitan Real Estate Investors LLC, said in court documents. Increasing vacancy rates and lease renewals led to a serious liquidity issue, he wrote.
Latham & Watkins LLP is the building’s largest tenant, occupying about two-thirds of its total rentable area as of July 2008, according to a statement that year. According to court papers, the law firm’s lease lasts until June 2021. Bernard L. Madoff Investment Securities LLC rented the 17th, 18th and 19th floors. Federal investigators seized his offices when he was indicted in 2008, and ran their investigation from the property.
RBC will support the prepackaged plan, which gives it a 61 percent recovery on its $130 million secured claim, according to a “disclosure statement” that outlines the terms of a reorganization. It supports the Chapter 11 plan by allowing use of its cash collateral in exchange for protections, and reducing its debt to $130 million from $210 million.
“Plan funders” will give a $15 million equity infusion to the company, according to court filings, which didn’t disclose the identity of the funders. Marc Richards, the Blank Rome LLP lawyer representing Metropolitan, didn’t return a call for comment.
RBC was listed as the largest unsecured creditor. As part of its restructuring plan, an entity named “New Lipstick” will pledge its entire ownership stake to RBC, according to Abikzer’s statement.
If the plan is contested and doesn’t get confirmed, RBC will keep its $210 million claim in principal, plus interest, expenses, penalties and fees, according to court papers. It also calls for general unsecured creditors to be repaid in full.
RBC will waive unsecured deficiency claims worth $80 million, according to court papers.
Metropolitan, whose principal includes real-estate investor Haim Revah, bought the building in 2007 for $648.5 million from Tishman Speyer Properties LP, as U.S. commercial real estate prices were reaching their peak. In addition to the RBC loan, the buyers borrowed $60 million from Goldman Sachs Group Inc. and sold a 79 percent interest in the ground beneath the building to SL Green Realty Corp. and Gramercy Capital Corp. for $317 million. The group leased the land back for 70 years, and has the right to repurchase it.
The case is In re Metropolitan 885 Third Avenue Leasehold LLC, 10-16103, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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