Shahs of NPLs

With great distress comes great opportunity. As the floating-rate reaper and over-exuberant projections laid waste to capital stacks across New York, a handful of firms set themselves up to take positions in prime properties via their non-perfoming debt – it’s an entrée into deals at a fat discount, but you really have to know what you’re doing.

Among the most active proponents of this high-wire act is Joshua Zamir’s Capstone Equities. After NPL side-dooring into properties such as Savanna’s Downtown Brooklyn office tower and Nightingale Properties’ 😍 Whale Building in Sunset Park, Capstone is now angling to take over 2 prominent Manhattan assets, The Promote has learned.

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Capstone (Cont.)

At 606 Broadway, Capstone’s in contract to buy the NPL for $51M ($1,400/🦶) from Société Générale & Webster Bank, according to internal docs viewed by The Promote; that’s about a 30% discount to the outstanding principal balance. Vornado Realty Trust & JV partner Madison Capital defaulted on the note on the 6-story office & retail building in Sept., after having shopped the property for close to $100M that summer. Meanwhile, in Tribeca, Capstone affiliate Rebel Hotels is in advanced discussions to buy the Smyth Hotel from Vanbarton for $43M; Vanbarton, which was the mezz lender, had foreclosed on the debacle-of-a-sponsor Prodigy Network during Covid. Rebel expects to be able to take the 100-key hotel’s NOI from $3M to $5.5M; the deal rhymes w/ one it made in partnership for Brookfield’s Ink48 hotel last year.

Capstone declined to comment. Zamir tends to bring in deep-pocketed partners once he sews up the deal; on Ink48, it was Canadian investment firm Leyad; on the office-resi conversion at Savanna’s 141 Willoughby, it was Daniel Lebensohn & Greg Freedman’s BH3; on the Whale Building, it was Namdar. Capstone was also reportedly partnering w/ AmTrust on its purchase of 360 Lexington, but at some point during the process, Capstone dropped out and AmTrust went solo, per sources.

Each individual Capstone deal isn’t that big, but zoom out and look at the collective activity, and it’s a fascinating playbook. If you know of other firms making similar moves, hit us up 📺️ 

Who Calls the Shots When a Building Tanks?  

The news of Blackstone walking away from its hulking Chicago skyscraper known as River North Point isn’t new; it’s part of Blackstone’s “less than <2% of our mega-portfolio is US office” storyline that investors have been fed for a couple years now. The aftermath, however, is worth diving into, as it brings up messy issues of lender control popping up all over the country as such buildings go through restructuring. Blackstone bought the building in ‘15, refi’d in ‘18 via a $300M+ CMBS loan & $60M from TIAA, and defaulted in ‘23. Wells Fargo took over as special servicer 🧃 and so began the drama about who called the shots: should it be jr. bondholders repped by Oaktree, or those who owned the safest tranches, such as Pimco? Per correspondence reviewed by WSJ, the sr. bondholders’ requests to Wells for intel went unanswered for months 🙊 ; TIAA got wiped on the deal, and Pimco only got control a year after the default. The 1.3M sf property is being shopped, but it’s a tough prospect in a submarket where office utilization is at about half of its ‘19 levels, per Avison Young.

Should note that the issue of special servicers slow-rolling requests seems to keep popping up nowadays – see here & here.

How to Land a Miami Mega Construction Loan

While new projects in the Miami office market struggle to pencil, the financing outlook for luxury condos could not be more different: Developers have been able to score massive construction loans from banks & debt funds – let’s take a quick look at 4 upcoming projects that have collectively landed $2.2B+ in funding – the clincher here is the roaring pre-sales, a big de-risking factor for lenders.

• Cipriani Residences: Mast Capital landed $600M from Banco Inbursa & Ascendant; 397-unit project was 50%+ presold at time of financing

• Waldorf Astoria: A PMG-led JV (partners incl. Greybrook, Mohari) landed a record $668M from Bank OZK & Related Fund Management; 387-unit condo portion was 90% presold at time of financing

• St. Regis Residences: Related Group & Integra landed $527M from Tyko; 152-unit project was 60%+ presold at time of financing

• One Twenty Brickell: PMG just landed $413M from Ares & Monarch; the 266-unit condo portion is 91% presold; project includes a 537-unit rental.  

Texas Syndicator Throws in the Towel

DJE, a San Antonio-based multi syndicator led by Devin Elder (bio: pilot 🟥 , podcast host 🟥 , nonprofit owner 🟥 ), is turning in its syndicator wings: Elder is stepping down from his role, and the firm has engaged restructuring firm Max Wayman & Associates to help it in "turning over assets and winding down the businesses," per an investor letter reviewed by the SA BJ. "While we are not able to provide returns of capital right now, we are exploring opportunities to divest assets as part of a strategic plan to benefit stakeholders," the restructuring firm’s CEO said in the letter. “We are hopeful that these initiatives will pave the way for the best possible outcomes.” We had written last month about DJE’s failed attempt to land a Traveling HFC deal for one of its distressed deals; a recent investor presentation claimed the firm had “never lost investor capital.” Never say never again.

Quickies

• Eyal Ofer lands decisive blow in Mondrian NYC fight 

• Blackstone plays peacemaker 🕊️ in Rialto-Jeff Sutton dispute

• Houston Housing Authority says no more PFC tax breaks (if new to Texas’ incredible property-tax mechanisms, start here)

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