Late last month, the giant Korean banking firm Hana Financial Group took control of the fee interest under the Marriott Times Square Edition hotel from Mark Siffin’s Maefield Development and then sent a letter to the leasehold owner, the French bank Natixis, that it would seek to terminate the 99-year ground lease if Natixis did not clear $39 million in mechanic’s liens within 30 days.
In response to that threat, yesterday Natixis filed a suit in New York State Supreme Court, seeking to a temporary restraining order, and a related Yellowstone injunction that blocks the landlord from terminating the lease while the case is litigated. LINK
In 2018, Mark Siffin’s Maefield Development bought out its partners at 701 Seventh Avenue, also known as 20 Times Square, in a $1.5 billion deal, with the asset divided into a fee position and a leasehold position.
In 2019, Marriott International opened the 452-room Times Square Edition Hotel but the hotel temporarily closed in August 2020 as the pandemic put pressure on hotels. It reopened in 2021. The hotel is biggest piece of the building and the Marriott contract will survive any foreclosure action, the New York Post reported in 2021.
The 42-story hotel building in Times Square has 369,864 square feet of built space according to a PincusCo analysis of city data, including 75,000 square feet of retail and valuable signage.
To finance the buyout, the Maefield Development leasehold position, 20TSQ Lessee LLC, borrowed $650 million from Natixis. At the same time, Maefield’s fee position, 20TSQ Groundco LLC, borrowed $750 million from Natixis, and that loan was sold off as into a securitized trust, 20 Times Square Trust 2018-20TS, Series 2018-20TS.
Natixis in December 2019 filed (850272/2019) to foreclose on the $650 million loan. Natixis took control of the leasehold interest through a January 26, 2022, foreclosure auction as the credit bidder.
According to the new complaint, “On or about September 28, 2023, a mezzanine lender that held a pledge of the membership interests in Ground Lessor as security for its loan or an affiliate of such mezzanine lender, Hana Alternative Private Real Estate Trust No. 71, took ownership of those membership interests in connection with enforcement of the mezzanine loan.”
Just a month before, the Commercial Observer reported there were talks to extend the $900 million loan.
The financial services company Natxis, which owns the leasehold interest in 701 Seventh Avenue following a foreclosure auction January 26, 2022, while Hana Financial Group while Mark Siffin, of Maefield Development owns the fee, sued Siffin’s company, which the bank claimed threatened to terminate the 99-year ground lease unless Natixis paid off $XX million in mechanic’s liens. Natixis claims its leasehold interest does not obligate it to pay off the construction liens and that remains the responsibility of Maefield Development as the developer. The lawsuit is seeking a Yellowstone injunction, which is a form of temporary restraining order that preserves the status quo of a lease while the case is litigated in court. “Applying discount and capitalization rates supported by market surveys and transaction data, Situs calculated that the Hotel had a fair market value of $271 million and the Retail Component had a value of $408 million on the Auction Date. ” https://iapps.courts.state.ny.us/nyscef/ViewDocument?docIndex=2C_PLUS_sZ7qD7K1S07frE61UIw== The notice of sale in 2022 puts the total debt at $800 million for the leasehold note. https://iapps.courts.state.ny.us/nyscef/ViewDocument?docIndex=mn8394plUKdBtBpnKYUtig== On 1/26/2022 the court held the sale, after which Natixis took title through the sale https://iapps.courts.state.ny.us/nyscef/ViewDocument?docIndex=0kDTi9Y3d7SPHUHUyDFozQ== “Upon information and belief, on or about September 28, 2023, a mezzanine lender that held a pledge of the membership interests in Ground Lessor as security for its loan or an affiliate of such mezzanine lender, Hana Alternative Private Real Estate Trust No. 71 (“Hana”), took ownership of those membership interests in connection with enforcement of the mezzanine loan.” https://iapps.courts.state.ny.us/nyscef/ViewDocument?docIndex=An/hyXigbLPkNJiZ9jVjnw==
Direct link to the property’s ACRIS page.