$180M pre-foreclosure filed at Jeff Sutton’s 1551 Broadway, loan matured in July 2021

The special servicer for a $180 million commercial mortgage-backed security loan filed a pre-foreclosure action alleging the loan secured by 1551 Broadway in Times Square, Manhattan, is in a maturity default and following a forbearance period, has not been repaid. The property is owned by Jeff Sutton of Wharton Properties.

This is the second maturity default pre-foreclosure action filed against a Sutton asset since August. That month New York Life Insurance Company filed to foreclose on a $300 million loan given to entities owned by Sutton and partner SL Green Realty, secured by a retail and commercial condo at 717 Fifth Avenue. According to a source at the time,  the borrowers were negotiating with both the senior debt, New York Life, and the mezzanine debt, the German lender RREEF, to resolve the default at that property.

Retail was hit particularly hard during Covid, but tourism and office workers have returned to the city, though in lower numbers, providing some stability to the market.

Jeff Sutton is New York City’s top individual retail investor, and ranked a billionaire by Forbes. This action is the second pre-foreclosure action against Sutton, who made it through the 2008 crash with no foreclosure litigation. Other active retail investors such as Thor Equities, Meadow Partners, JTRE and others have been hit with pre-foreclosure filings in the past two years.

The loan was originated June 7, 2011, and had an original maturity date of July, 6, 2021. On September 2, 2021, but effective as of July 6, 2021, the lender agreed to a forbearance through November 6, 2021. The loan was not repaid, and so on November 24, 2021, the special servicer sent a notice to Sutton of the alleged maturity default.

DBRS Morningstar in July 2022, reported that, “The property was re-appraised in January 2022 at a value of $442.0 million, representing a 22.8% increase from the issuance value of $360.0 million.”

According to Fitch in an April 2022 report,  the loan at, “1551 Broadway… is secured by a 25,600 sf retail property located in Manhattan’s Times Square neighborhood. The collateral also includes a 250-foot rentable LED signage tower. The retail space covers three stories and the signage is spread across 12 separate screens and 14,500 sf. Performance has been stable and the property remains 100% occupied by American Eagle whose lease expires in February 2024.

“The property serves as the flagship store for American Eagle. The store was closed for several months in 2020 due to the pandemic but is currently open. The tenant also fully renovated the space for a new concept. The loan did not pay off at its scheduled maturity on July 6, 2021; however, given the property’s strong infill location, Fitch expects strong recovery prospects for the loan. Fitch’s analysis accounts for the property’s strong infill location and reflects a stressed value of approximately $6,000 [per square foot].”

Correction: A prior version of the story incorrectly implied Jeff Sutton had an outstanding personal obligation on the loan, which is not the case.

Pre-foreclosure LINK

Direct link to the property’s ACRIS page.