Default on Skyscraper Bonds Foreseen : Real estate: Olympia & York anticipates missing payments on the building in Manhattan next year.

Olympia & York warned bondholders Tuesday that it expects to miss bond payments on a Manhattan skyscraper next year when 40% of the leases are set to expire.

The company offered investors a gloomy outlook for its 55 Water St. building, a 53-story financial district tower that counts Citibank, Chemical Bank and Depository Trust as major tenants.

It told investors who hold $548 million in bonds backed by the building to form a committee and decide what to do about the impending financial crisis. Although bondholders are being paid, the investors could move to seize the building if Olympia & York falls behind on its payments.

The development shows how the world’s largest private commercial landlord continues to struggle with payments on the parts of its empire not included in last week’s bankruptcy filing.

Olympia & York USA’s executive vice president, Jerry Kelfer, told about 100 investors that neither the Toronto parent company nor its main U.S. affiliate intends to bail out the building.

The 55 Water St. building, like several other O&Y; properties, is financed by a special company that’s legally separate from the parent, Olympia & York Developments Ltd.

That company, Olympia & York Water Street Finance Corp., said it expects leases covering 40% of the 3.6-million-square-foot building near Wall Street to have expired by June 30, 1993.

Further, the company said, the cost of releasing the space could total $100 million to $200 million or more through 1997. It told bondholders to decide among themselves how best to use existing funds to meet bond payments.

The funds include $10 million in the operating account by the end of June and $50 million in credit guarantees from other lenders.

“Today’s announcement by Olympia & York Water Street Finance Corp. reflects the unprecedented recession in the downtown Manhattan office market,” the company said.

Olympia & York Water Street Finance bonds plunged 7 points after the news to an asking price of $30, a trader at Donaldson, Lufkin & Jenrette said.

A source who attended the closed meeting, speaking on condition of anonymity, said the investors were reserved, asking only factual questions of the O&Y; executive.

During the questioning, Olympia & York said the building’s last appraised value ranged between $600 million and $700 million. “They laughed at that,” the source said of bondholders.

The company also told investors that it’s negotiating with New York City officials about upcoming property tax payments. A source familiar with the situation said Olympia & York intends to “fulfill its commitments and obligations” to the city, but wouldn’t elaborate.