Even deep-pocketed landlords seem to be weathering challenges in the current commercial real estate climate.
Developer Jeff Sutton, who about a year ago clinched $1.8 billion deal for the sales of Midtown storefronts to fashion houses Gucci and Prada, now finds himself battling a lender over much smaller stakes in the Flatiron District.
Rialto Capital Advisors has accused Sutton of allegedly being in default on an $8 million mortgage backed by 144 Fifth Ave. that was to be paid off in full in February 2024, a new suit claims.
Sutton, the president of 35-year-old Wharton Properties, supposedly owes the loan servicer $7.4 million, plus interest and fees, and could lose No. 144 if he does not fork over the amount, according to the suit, which was filed Wednesday in Manhattan State Supreme Court.
If it’s true the billionaire failed to retire the mortgage on time, it’s not clear exactly why. Sutton has not yet filed a response to the suit, which is from a firm that has moved aggressively and sometimes controversially to foreclose on properties across the city. And an email to Sutton was not returned by press time.
It’s possible that Sutton is strategically looking to relinquish the property, a 9,700-square-foot building at West 19th Street that represents a tiny piece of his portfolio and is outside of the Times Square and Herald Square zones where he has historically invested.
But No. 144 does appear to have struggled a bit with tenants. After acquiring the building in 2016, Sutton cleared out its longterm tenants and installed a Frye boot store in the ground-floor space. But Frye didn’t last long, permanently shuttering all its retail locations in 2020 during the pandemic to focus on online sales only.
The space then sat vacant, though in 2023 it was finally filled by an outpost of the Canadian jewelry retailer Mejuri, which also has stores in SoHo and Williamsburg. Psychic Temple, a Tarot card-reading service, took over a second-floor space at No. 144 around the same time.
Sutton controls the 5-story mixed-use prewar site, which also contains an apartment, through a lease from the Liggio and Puleo families, which have owned the property for decades, according to city register records. It’s not clear what Sutton paid for the leasehold in 2016, but he appears to have spent about $3 million to clear out retailers there, the register shows.
In 2017, Sutton used No. 144 as collateral for an $8 million loan from Signature Bank, which famously collapsed in March 2023 and saw its massive loan portfolio put into receivership with the FDIC.
A few months later, a joint venture that in addition to Miami-based Rialto also includes the New York-based banking juggernaut Blackstone paid $1.2 billion for a $17 billion slice of the portfolio, which includes 2,600 mortgages.
Sutton’s partner when he acquired No. 144 was reportedly Marvin Azrak’s Maguire Capital Group, though Maguire is not named as a defendant in the current suit.
Patrick Holston, an attorney with the firm Duane Morris who is representing Rialto, had no comment by press time.
