The owner of a struggling office building at 681 Fifth Ave. is seeking a higher authority to affirm his belief that the tower could thrive again if expanded and converted into a residential and hospitality destination.
Robert Siegel, CEO of Metropole Realty Advisors, has asked a state appeals court to resurrect his rescue plan for the property in foreclosure proceedings. A lower-court judge, following the advice of a court-appointed receiver, described his proposal to turn most of the 17 floors into apartments or hotel rooms, and add 9 new floors, as “speculative.”
681 Fifth is a handsome 80,000 square-foot tower located a few blocks south from where LVMH is developing a new flagship Louis Vuitton store and Prada and Gucci paid hundreds of millions to acquire prime retail space. While it has some very posh neighbors, 681 Fifth has struggled ever since anchor tenant Tommy Hilfiger moved out six years ago; the receiver recently agreed to lease space to handbag designer Vera Bradley and Italian clothier Kiton, over the objections of Siegel.
Last year lenders moved to foreclose after Siegel defaulted on the $215 million mortgage. An auction could be scheduled soon for the pristinely located property.
In a seemingly last-ditch attempt to keep the building, this month Siegel proposed conversion, a costly strategy pursued by owners of obsolete office towers across the city.
In an interview, Siegel estimated it would cost more than $100 million to convert and expand the tower.
“It would be a boutique ultra-luxury building with views on all four sides,” he told Crain’s.
In an affidavit, he said converting 681 Fifth “transforms the property from a mixed-use office asset, in a challenged leasing environment, into a premier residential or hospitality asset in the heart of Manhattan’s Fifth Avenue/Plaza District.” His plan, developed with real-estate services firm Newmark Group, envisions adding nine floors to the building and he claims the work could be done “as of right,” meaning it would comply with zoning laws and not require a government review. Newmark declined to comment.
“This conversion plan represents the highest and best use of the property,” Siegel said in his affidavit, “and enables the borrower to satisfy the indebtedness of the plaintiff’s mortgage in full and resolve this foreclosure action.”
681 Fifth’s receiver, Richard Madison, wasn’t impressed.
For starters, he objected to Siegel trying to thwart his efforts to lease one floor in the building Vera Bradley and two to Kiton. Siegel argued that leasing the space would make conversion in a timely manner impossible.
Madison described Siegel’s conversion proposal as “purely hypothetical” because the plan, as explained in a court document, lacked important pieces of information – such as how much it would cost or who would pay for it.
“It is understandable that the borrower wants to save the property, but there is no definitive plan to do so – just ‘hopes,’ ‘beliefs,’ and ‘potential investors,’” Madison’s attorney, Danielle Weslock, wrote in a court filing this month. “If the conversion plan were so far along, one would think the parties would have decided, at a minimum, whether the converted use would be residential or hotel.”
Judge Jennifer Schecter sided with Madison. In an opinion handed down May 14, she said it would be “prudent” to lease space to Vera Bradley and Kiton because doing so would increase the property’s value in a sale. She described Siegel’s conversion plan as “speculative and imprudent.“
“A conversion will not occur during the pendency of this action; this case will not last that long,” Schecter wrote. “Defendant will not be overseeing any conversion unless it settles with or outbids plaintiff.”
Siegel’s faith remains unbroken.
In a document filed last week, his attorney Richard Schoenstein notified the appellate division of the New York State Supreme Court that Siegel would appeal “each and every part” of Schecter’s decision.
“Our goal is to pay the lender off,“ Siegel said in the interview.
