Lender Sues To Foreclose On Caerus’ Midtown Office Building

A lender is suing to foreclose on a mostly empty office building in Midtown.

The lender, Bank 2018-BNK13, filed a complaint in federal court in the Southern District of New York last week asking a judge to foreclose on an office building’s $37.5 million mortgage and appoint a receiver to run the property. The lender alleges that the building has faced significant vacancies and that its owner, Leo Tsimmer’s Caerus Group, stopped making monthly payments in April.

Caerus did not respond to a request for comment.

The building, 10 East 34th Street, is a 10-story, 55,000-square-foot office building located between Fifth and Madison avenues across the street from the Empire State Building. 

Caerus bought the building for $51.7 million in 2016 from Brause Realty as the real estate investment firm sought to expand its Midtown footprint. The firm soon closed on the building next door, 4 East 34th Street, a five-story, 29,000-square-foot office building that previously served as the headquarters for the Zionist Organization of America. Caerus secured $50 million in financing from mortgage REIT Apollo Commercial Real Estate Finance to fund its acquisition of the two buildings.

The 2016 purchase of 10 East 34th Street coincided with a mass exodus of its tenants. At the start of 2016, 60 percent of the property’s leases expired. Caerus capitalized on the opportunity by leasing nearly half the building — 27,750 square feet across five floors — to a Turkish trade group, TTC USA Consulting Corp, in 2016.

The firm soon got a 10-year, $37.5 million mortgage on the property from Morgan Stanley in 2018, according to court documents. The loan was packaged into a commercial mortgage backed security and Bank 2018-BNK13 was appointed as a trustee for its bondholders.

But the building has recently faced an onslaught of vacancies, the complaint states. The lender alleges that the building’s occupancy has plummeted over the last two years and that its lead tenant stopped paying rent for several months.

VR World, a virtual reality playground which once occupied the retail space on the ground floor of the building, has since closed. The tenant had leased the space through March 2028, but Morningstar DBRS reported that it has since gone dark, according to the building’s April 2024 rent roll.

The two remaining tenants, which occupy less than 30 percent of the building, are the Research Foundation of CUNY, whose lease expires in September, and Modernus Walls, which designs architecture products, whose lease expires next February.

Now, Bank 2018-BNK13 has sued to foreclose on the property. The lender alleges in its complaint that Caerus stopped making its monthly payments on April 1. Trimont, the loan servicer, sent the firm a letter on May 6 asking for over $500,000 to make up for the missed payments in April and May. But June and July came and went with no payments either, so the firm’s lawyers sent Caerus another letter on June 30. The lender is seeking to foreclose on the $37.5 million mortgage and appoint a receiver to run the property.

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