search

The Real Deal Logo

Trending

LA court strikes down SB9 law allowing single-family lot splitsLA court strikes down SB9 law allowing single-family lot splitsHousing deal finally passes; here are the detailsHousing deal finally passes; here are the detailsLawmakers reach sweeping housing deal with “good cause eviction,” new 421aLawmakers reach sweeping housing deal with “good cause eviction,” new 421aBushburg buying Rudin’s half-empty FiDi office building for $160MBushburg buying Rudin’s half-empty FiDi office building for $160M
Commercial
New York

Natixis sues over Hana’s 20 Times Square lien claims

Mezz lender says Natixis owes $39 million on mechanic's liens

Natixis Pushes Back On Maefield’s 20 Times Square Lien Claims
Hana Financial Group's Ham Young-Joo and 20 Times Square (Getty, Edition Hotels)

Hana Financial Group and Natixis are warring at 20 Times Square, one of New York City’s biggest development disasters.

Hana wants Natixis, a French bank and fellow lender on the project, to pay $39 million in mechanical liens related to work on the hotel project. Natixis says it didn’t even own the ground lease at the time the work was done.

Natixis sued this week, seeking a ruling that it is not subject to the liens because the work in question was mostly done by the time Natixis bought the ground lease out of foreclosure in January 2022.

Hana Financial took over the fee position on the hotel from Maefield Development at the end of September through an assignment in lieu of foreclosure.

The saga dates back to 2012 when developer Steve Witkoff purchased the parcel with plans to build a 42-story luxury hotel. The project broke ground in 2015 and was nearing completion when Maefield and Fortress Investment Group bought out its investors in 2018. That deal valued the project at $1.6 billion.

Natixis lent $650 million in that deal and kept the debt on its balance sheet with the leasehold as collateral, and it securitized another $750 million into one single-borrower deal and four conduit deals with the fee position as collateral. Hana provided a $150 million mezzanine loan.

That’s when the trouble started. Maefield and Fortress set up a situation where the two owned both the leasehold and the fee position, meaning the two companies were both tenant and landlord, an obvious conflict of interest for lender Natixis.

Sign Up for the undefined Newsletter

A Marriott Edition opened in the building, also known as 701 Seventh Avenue, in March 2019. Despite a strong start, the hotel was forced to close a year later because of the pandemic. (It is open again; rooms start at $586.)

Meanwhile, Maefield and Fortress struggled to fill the property’s 76,000-square-foot retail space. Hershey’s took 7,500 square feet and is still in it. But the largest tenant, a partnership between the National Football League and Cirque du Soleil, abandoned its 50,000 square feet within a year.

Maefield and Fortress defaulted on the leasehold debt that same year, 2018, and Natixis bought it for $50 million out of foreclosure in 2022. The bank tapped SL Green Realty to manage it.

But the damage was done. The emperor’s new clothes were revealed when the $1.6 billion valuation was reduced to $1 billion. A source told The Real Deal in 2022 that Natixis is “going to get slaughtered.”

Wilmington Trust, the trustee on the CMBS holders of Maefield debt on the property, filed a lawsuit in August to foreclose on 20 Times Square.

Hana, Natixis and Maefield could not be reached for comment.

Correction: An earlier version of this story misidentified the plaintiff in Hana’s lawsuit.

Read more

Tags
Fortress Investment GroupReal Estate LawsuitsSteve WitkoffTimes Square