Photo: Flickr/Marianne O’Leary
Real estate investors are complaining that distressed opportunities in Manhattan have become much harder to find in recent months.Of the $29.9 billion in distressed assets identified in Manhattan after the financial crisis, 74 per cent have been worked out, according to data from Real Capital Analytics. Just $3.3 billion in Manhattan assets went into distress in 2012, while $6.1 billion in distressed assets was worked out.
However, there is still debt to be found in Manhattan. The borough’s 10 most distressed properties account for more than $4 billion in debt, according to data provided to The Real Deal by analytics firm Trepp. Among those 10 properties are longtime distressed apartment complexes, such as Stuyvesant Town-Peter Cooper Village and Harlem’s Riverton Apartments. But the list also includes owners whose portfolios are usually associated with profit, such as Gary Barnett of Extell Development and SL Green. Read on for the full list.
Stuyvesant Town-Peter Cooper Village: $3B
A distressed first mortgage at Stuyvesant Town and Peter Cooper Village in the East Village accounts for a significant chunk of Manhattan’s distressed property debt all on its own. Holders of the senior mortgage at the rental complex, formerly owned by Tishman Speyer and now controlled by CWCapital Asset Management, are owed $3 billion, according to Trepp’s data, while another $1.4 billion is owed to the holders of the mezzanine debt. Tishman paid a record $5.4 billion to Metlife for the complex in 2007 and defaulted on the mortgage in 2010.
The mammoth affordable housing compound was reportedly valued at $3.2 billion late last year, a $400 million improvement over its last appraised valuation, but the property’s bondholders need to sell the property for a minimum of $3.4 billion to break even.
CWCapital may be getting closer to selling the property, thanks in part to the recent settlement of a lawsuit brought by tenants of the complex against Tishman and MetLife in 2007. Tenants claimed the owners improperly deregulated the rent-stabilised apartments while taking J-51 tax benefits. The deal is worth an estimated $147 million but must still be approved by a state judge.
The Belnord at 2360 Broadway: $375M
Extell Development’s 215-unit rental property, which spans the entire block from West 86th to West 87th streets between Amsterdam Avenue and Broadway, has been in financial trouble since the company stopped making loan payments on the building in May 2011. The $375 million loan on the property is currently more than 90 days delinquent, according to Trepp’s data.
The building’s problems stem from a decision made by Extell in 2006 to consolidate the property’s existing debt into a $375 million interest-only loan, which was then sold to investors as part of a package of commercial mortgage-backed securities, as previously reported. Extell’s debt service soon far outpaced the building’s revenue, which was held back by a 2009 state appeals court ruling forbidding landlords from raising rents above certain levels if they had participated in the city’s J-51 tax abatement program. The loan was transferred to a special servicer in 2011.
In response to an email from The Real Deal, Barnett said only that he was “hopeful that [the company] will have a mutually satisfactory conclusion with the lender.”
Riverton Apartments at 2171-2200 Madison Avenue: $225M
When a joint venture between Laurence Gluck’s Stellar Management and private equity giant the Rockpoint Group bought this Harlem apartment complex in 2005 for $132 million, they secured a $105 million mortgage. When they refinanced that mortgage with Deutsche Bank in 2006 — with an eye toward renovating the complex — they more than doubled the debt on the property to $250 million.
Despite converting more than half of the units from rent stabilised units to market rate rentals, the owners struggled to match their rental income to debt service payments, ultimately defaulting on the loan. Deutsche Bank then sold the loan as part of a CMBS package. CWCapital took over ownership of the complex in 2010. The delinquent loan currently totals $225 million, Trepp’s data show.
119 West 40th Street: $160M
This 340,000-square-foot Garment District office building — known as Mendelssohn Hall — has been in financial difficulties since December 2009, when CWCapital filed to foreclose on a $160 million senior mortgage on the property held by owner, billionaire Leon Charney.
L.H. Charney Associates acquired the property for $182 million in 2007 in partnership with George Comfort & Sons and Fortis Property Group, angling to renovate the building and sign on new tenants at higher rates, as previously reported. But plans went awry in 2008 when the company failed to make payments towards an unpaid mechanic’s lien, and construction work on the building stalled.
Malkin Holdings, which held the $22 million mezzanine loan on the property, called in a default in 2009. Under a deal reached later that year, Charney agreed to sell the loan to Malkin for $7 million, but he reneged after he fell ill in 2010, it was previously reported.
The $160 million loan on the property is currently more than 90 days delinquent, according to Trepp’s data.
90 Fifth Avenue: $62.34M
Aby Rosen’s RFR Holdings, the owner of 90 Fifth Avenue, reportedly lost out on a $115 million deal to sell this distressed building last year after it was revealed that the building’s main tenant, Forbes, had ceased to pay rent at the property. Jamestown Properties, the reported buyer of the building, walked away as a result of Forbes’ missed payments, it was previously reported. Forbes leases 110,000 square feet of the building’s total 140,000 square feet.
Meanwhile, RFR is more than 90 days late on making its own loan payments, according to Trepp’s data for the month of February. Lender Wells Fargo appears to be owed a principal balance of $62.34 million secured by the property, made up of a $33.29 million gap note and a $33.7 million original mortgage. The loan was 60 days delinquent in January, according to Trepp. A spokesperson for RFR was not immediately available for comment.
369 Lexington Avenue: $59.19M
A foreclosure action is pending on the $59.19 million loan secured by the 28-story tower at 369 Lexington Avenue, on the corner of East 41st Street, according to Trepp’s data, but the total unpaid balance owed by the property’s owners actually amounts to $76.7 million, including interest and accrued charges.
The building, which includes 108,000 square feet of office space as well as 20,000 square feet of retail, is subject to the same action as a building lower on our list, at 2 West 46th Street. Both buildings are owned by Joseph Stavrach’s Manhattan-based Triangle Assets and Freddy Srour of Atlas Ventures. A person who answered the phone at Srour’s office said he would not be available to speak this week. Stavrach was not immediately reachable for comment.
The loan was reportedly cross-collateralized with another loan at the building at 2 West 46th Street. When the borrower failed to make payments on the loan for 2 West 46th Street, the loan for the Lexington Property was also thrown into default. An attorney for the borrower said the owners are working to have portions of the complaint against both properties dismissed. He disputed the fact that the borrower had failed to make the necessary payments.
The Time Hotel at 224 West 49th Street: $53.9 million
Vikram Chatwal’s 192-unit Time Hotel is still battling a foreclosure suit from special servicer LNR Partners after his company, London-based Hampshire Hotels, failed to make any interest payments on $55 million in loans from January 2012 onwards. The suit followed the end of the two-year forbearance agreement between the owner and the lender. The loan was sold to LNR in May 2012.
The hotel owner reportedly took out a $43.1 million mortgage loan on the property from Lehman Brothers in 2005 and an $11.9 million gap mortgage loan; the loans were then combined into one $55 million loan. The loan is currently classed as 90 or more days delinquent, according to Trepp.
The hotel has become known as a hotspot for celebrities, such as supermodels Naomi Campbell and Kate Moss.
At the Dream Hotel at 210 West 55th Street, Chatwal has refinanced a loan which until last month had an outstanding principal balance of $97.25 million, a spokesperson told The Real Deal. He declined to provide details on the refinancing by press time.
17 Battery Place North: $53M
Moinian Group President Joseph Moinian is currently negotiating a refinancing of 17 Battery Place North, a Financial District office property where the debt is currently classified as non-performing beyond maturity, a spokesperson for the developer told The Real Deal. The loan, which has an outstanding balance of around $53 million, matured in 2009, Trepp’s data show.
Moinian informed lenders in 2009 that he expected to default on the loan, after the credit crunch made it more difficult to refinance debt. His office towers 17 Battery Place North and South have an estimated combined annual pretax net operating income of $13 million, The Real Deal previously reported. Moinian bought 17 Battery Place North from SL Green in 2004 for $70 million.
At another of the buildings in Moinian’s portfolio, 245 Fifth Avenue, the deadline for payment of a formerly distressed loan has been extended, the spokesperson said. A $140 million loan on the property, which Moinian owns with Thor Equities’ Joseph Sitt, was transferred into special servicing because of default concerns last year.
2 West 46th Street: $46M
As previously noted, Triangle Assets, the owner of the office tower at 369 Lexington Avenue, is also facing a foreclosure action against 2 West 46th Street, where their principal outstanding balance is $46 million. The total balance of the loan is $51.9 million, including default interest and accrued charges, The Real Deal previously reported.
The mortgage on the property appears to have been granted to the owners by Deutsche Bank at the end of 2006, records show. LNR is the special servicer on the loan. The building was listed for sale by Eastern Consolidated in 2011, asking $80 million.
Mitchell Haddad of the law firm Sills Cummis & Gross, who is representing the owners in the foreclosure suit, told The Real Deal they are working to have a portion of the lender’s claims dismissed and to reach a settlement. In the meantime, the litigation is ongoing.
1604 Broadway: $25.69M
As reported by The Real Deal yesterday, the ground lease holders on this large Times Square retail building, formerly home to the Spotlight Live Club, are currently falling behind on the $27 million dollar loan attached to the property. The loan, granted to the operators SL Green and Onyx Equities in 2007 by Deutsche Bank, was transferred to special servicer LNR in 2009, according to Trepp’s data, and is secured by the partnership’s leasehold interest in the 29,875-square-foot property. The loan is currently being monitored by LNR while discussions with the borrower continue, according to a servicer’s report provided to The Real Deal by Trepp.
Meanwhile, the SL Green partnership has filed suit against lender U.S. Bank, claiming that the bank declined to provide a necessary stamp of approval for a new tenant to move into the building in 2009, in an alleged effort to keep the building in a distressed state as fodder for a separate legal action against Deutsche Bank.
The retail property, best known as the site of a murder at rapper Lil’ Kim’s birthday party in 2008, is currently only about 25 per cent occupied and has been listed for lease by Newmark Grubb Knight Frank since Spring 2012, The Real Deal previously reported. The land beneath is owned by Farmore Realty, who has also filed to evict the leaseholder from the site.
Correction: In a previous version of this story, The Real Deal incorrectly stated that a judgment of foreclosure had been issued at 369 Lexington Avenue. The foreclosure action is actually still pending.
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