Owners of Manhattan's 'Lipstick Building' File for Bankruptcy

Just a few days after an auction of Bernie Madoff's possessions, the office building where he worked is also likely up for sale.Just a few days after the auction of some of Ponzi scheme king Bernie Madoff's prized possessions, it looks like the building that housed his opulent offices may be heading to the auction block as well.

The owners of Manhattan's landmark Lipstick Building -- a Goldman Sachs subsidiary with the unwieldy name of Metropolitan 885 Third Avenue Leasehold -- filed for Chapter 11 bankruptcy protection Monday after defaulting on a $210 million loan back in April. The company's largest creditor, Royal Bank of Canada (RY), sued to force the sale of the building in June, and now is backing the prepackaged bankruptcy, which reportedly will give it 61% of its $130 million secured claim.

"The recent violent downturn in the building and real estate markets have had a significant impact on the debtor's operations," wrote Jacob Abikzer, a managing owner, in court papers supporting the filing. "Vacancy rates have increased, making it more challenging to service the debt on the property. Renewal lease rates have also been lower than anticipated."

Plunging Rents, Value

The liquidity crisis that began in 2008 devastated real-estate markets, and 2006 and 2007 leases expiring now might attract rents as much as 30% below their previous rates, says New York real-estate attorney Edward Mermelstein. The iconic Lipstick Building has lost significant value, he adds.

The owners bought the 34-story building at 885 Third Ave., between 53rd and 54th streets, at the top of the commercial real-estate market in 2007 for $648.5 million. "There's probably at least 30% to 40% of value that's disappeared -- most likely it's going to be more than that," Mermelstein says.

The most recent New York City market-value-history report appraises the property at a mere $199 million, although the true market value could be substantially higher.

Because the current owners have had trouble maintaining the building in the current economic conditions, Mermelstein predicts the building will likely change hands. "Who's going to step in and pick up the bulk of the major financial load?" he asks. "It's unlikely that it's going to be the current owner simply because additional equity in these types of situations is very difficult to bring in."

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November 17 2010 at 11:46 PM Report abuse rate up rate down Reply
2 replies to arreguin41's comment

hey ! what do you mean no comment ? what are you hiding anyways ? are you the people who got fortune brands to lose 22 billion in ten years ? how about walmart loss of 6 billion in ten years ? and a publicly traded corporation to be delisted and made bankrupt ? who are you all anyways ?

November 17 2010 at 11:51 PM Report abuse rate up rate down Reply

so you know who we are , we were ordered to do this by the ''alliance'' . they do not like the freemasons or the illuminatti . strange occurances have happened to all members of all these secret societies worldwide recently ? we are collecting souls for king anu as we speak . and they are on top of the list . as we speak . no money can stop us whatsoever !

November 17 2010 at 11:56 PM Report abuse rate up rate down Reply

if they are a goldman sachs subsidiary how in the bleep can they file bankruptcy? maybe some of the goldman execs could kick in a little of their bloated bonuses to bail them out

November 17 2010 at 10:36 AM Report abuse +7 rate up rate down Reply

Read the book. "Nobody will listen". You will understand how the octopus's arms were tangled up in everything.

November 17 2010 at 9:36 AM Report abuse rate up rate down Reply
1 reply to jdrumerrnr's comment

Additional recommended reading: "The Last Tycoons" "End the Fed" by ex-presidential candidate Ron Paul The dark details of what was done, and is being done, by the ultra-wealthy elitist, rather oligarchic special interests is explained in detail in several books. The problem is that the American people are just too self absorbed to spend the time to really read abot, and to become informed about what has been and is going on. The truths are there for all to see . . . they're just too lazy to spend the time reading about it all.

November 18 2010 at 6:44 AM Report abuse rate up rate down Reply

Given its iconic status, could you mention the architect? Philip Johnson.

November 17 2010 at 9:19 AM Report abuse +2 rate up rate down Reply

Are they still paying taxes on the 748 million valuation? Over assessments are bringing values down by reducing cash flow. If you take in 10K/mo. and have a tax of 10K/mo. your cap rate is zero, your value, other then speculative, is zero. Without the tax your value would be a million. So over assessments are killing already distressed REAL values. Where did all this bubble tax money go?

November 17 2010 at 8:23 AM Report abuse +3 rate up rate down Reply

maybe it will be taken over by the homeless....or better yet, government will buy it for 900 million, tear it down and build a prison for people who have no jobs

November 17 2010 at 12:12 AM Report abuse +4 rate up rate down Reply