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Owner of NY's Lipstick Building files bankruptcy
November 16, 2010 / 5:09 PM / 7 years ago

Owner of NY's Lipstick Building files bankruptcy

* Lipstick Building housed Bernard Madoff’s firm

* Royal Bank of Canada had sued to force sale

By Jonathan Stempel

NEW YORK, Nov 16 (Reuters) - The owner of the Lipstick Building, the Manhattan office tower where Bernard Madoff ran his Ponzi scheme, filed for bankruptcy protection, becoming the latest victim of a downturn in commercial real estate.

Metropolitan 885 Third Avenue Leasehold LLC filed its Chapter 11 petition on Tuesday. Royal Bank of Canada (RY.TO), its main lender, sued in June to force a sale of the property following a default on a $210 million loan.

Under the prepackaged reorganization, a new entity known as New Lipstick LLC would be created, and pledge its entire ownership stake to the Canadian bank, court records show.

Completed in 1986, the 34-story Lipstick Building gets its name from its elliptical shape, which resembles an open lipstick tube, and red granite exterior. It was designed by the architects Philip Johnson and John Burgee, and is one of midtown Manhattan’s most recognizable buildings.

Bernard L. Madoff Investment Securities LLC once occupied three floors in the building before the swindler’s estimated $65 billion Ponzi scheme was uncovered in December 2008. Madoff, 72, is now serving a 150-year prison sentence.

Metropolitan Real Estate Investors LLC, which is an affiliate of the debtor, and its Israeli partners acquired the building in August 2007 for about $648.5 million. Goldman Sachs Group Inc (GS.N) has provided financing for the property.

The debtor filed for protection with creditors with the U.S. bankruptcy court in Manhattan. It has $139.9 million of assets and $210.3 million of liabilities, court records show.

Jacob Abikzer, president of Metropolitan Real Estate, said rising vacancy and lower lease renewal rates strained the debtor’s ability to generate cash flow to cover its debts.

“The recent violent downturn in the building and real estate markets have had a significant impact on the debtor’s operations,” Abikzer said in a court filing. “The debtor filed this case as a result of serious liquidity issues.”

Gillian McArdle, an RBC spokeswoman, did not immediately return a call seeking comment.

According to its website, Metropolitan Real Estate Investors was created in 2005 by Haim Revah. The company has offices in New York and Los Angeles, and also owns buildings in Dallas and in Tulsa, Oklahoma, the website shows.

The case is In re: Metropolitan 885 Third Avenue Leasehold LLC, U.S. Bankruptcy Court, Southern District of New York, No. 10-16103. (Editing by Derek Caney)

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