The Royal Bank of Canada Inc. (NYSE: RY; TSX: RBC) is reportedly seeking to foreclose the $210 million mortgage on Manhattan's Lipstick Building, which Israel Financial Levers Ltd. (TASE:LVR), controlled by Jackie Ben Zakan owns a 35% stake. Financial Levers has no financial exposure to the property, after writing off its $35 million investment in it in the company's financial reports for 2007 and 2008.
The 34-storey Lipstick Building at 885 Third Avenue was acquired by Financial Levers and its partners, including Haim Revah-owned Metropolitan Real Estate Investors LLC, for $648.5 million in July 2007, just before the real estate market crash. The buyers took a $527 million non-recourse loan from a banking syndicate to buy the property.
Although the 6.58% interest loan is performing, the loan reserve is depleted. The Lipstick Building's owners promised RBC that the loan reserve would not fall below $2.3 million, and it is seeking to negotiate with the bank over the breach of contract. RBC accuses the building's owners of dipping into the reserve to cover the fall in rental income from the property
The Lipstick Building lost $122 million in 2007-08, although Financial Levers no longer includes the company in its consolidated financial report. The 57,382-square meter building has 24 tenants and is 97% occupied.
The building gained some notoriety as Bernie Madoff's Madoff Investment Securities LLC rented two floors, which were seized by the US government as part of the investigation into his ponzi scheme.
Published by Globes [online], Israel business news - www.globes-online.com - on April 26, 2010
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