The Real Deal New York

Amalgamated acquires iStar loan at One Mad.

Deal threatens HFZ Capital’s rescue plan 

June 28, 2011 04:30PM
By David Jones

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Ziel Feldman and One Madison Park

Amalgamated Bank has acquired the senior piece of the One Madison Park condominium mortgage loan from iStar Financial, according to federal bankruptcy records obtained by The Real Deal, jeopardizing a rescue plan submitted earlier this month by HFZ Capital.

Manhattan-based Amalgamated already held the $78.5 million junior piece of the mortgage loan, and a New York state Supreme Court judge refused to block the deal despite a $75 million lawsuit from HFZ, a distressed real estate firm led by investor Ziel Feldman.

HFZ asked the judge to block the deal on the grounds that Amalgamated, after initially promising to sell the junior piece to HFZ in November 2010, reneged on that deal and swooped in on the senior note after HFZ filed a rescue plan in U.S. Bankruptcy Court.

Amalgamated has been quietly negotiating with Related Cos., led by Stephen Ross, to take over the troubled 69-unit condo project, at 23 East 22nd Street, which was 20 percent sold when state regulators shut down sales and iStar filed to foreclose.  

Feldman told The Real Deal that it’s unclear how the loan acquisition will impact the effort to get the project moving forward.

“It all depends on whether there’s going to be a dispute,” he said. “They were always a part of this; they were the holders of the B piece. Now they own the A piece as well.”

As The Real Deal previously reported, HFZ and Los Angeles-based CIM Group submitted a long-awaited rescue plan to the U.S. Bankruptcy Court in Delaware earlier this month, in which they would pay off iStar, which held a $234 million mortgage on the property. 

As part of that plan, iStar would have a new secured mortgage note issued for $162 million, while $12.5 million in mechanics liens would be recovered in cash, and $15 million to $20 million in unsecured claims would be recovered in cash.

As part of the HFZ plan, CIM a real estate fund that has already acquired several troubled condo projects including William Beaver House and Trump Soho agreed to fund $200 million, and signed a backup commitment letter for another $200 million.  

The Amalgamated acquisition of the note could place the entire HFZ plan in jeopardy, because observers see the Amalgamated plan going in a different direction. Amalgamated is working as a trustee on behalf of the Longview Ultra Construction Loan Investment Fund.

In a June 7 letter filed in state Supreme Court, James Freel, a senior vice president and chief real estate officer at Amalgamated, told iStar that it would hold the REIT liable for “any and all damages, losses or other adverse effects” should iStar support the HFZ Chapter 11 plan.

Attorney Andrew Weltchek, who is not involved in the case, said the move by Amalgamated solves two potential problems: it prevents the lender from being wiped out of the subordinate position in the capital stack and it potentially gives the lender a chance to profit from the entire One Madison debacle.

“One of two things happened — either it was voluntary or forced,” Weltchek said. “Amalgamated felt it had no better option to keep from losing more than what it already lost, or Amalgamated saw some profit opportunity to buy a better position.”

An Amalgamated spokesperson declined to comment, as did Shapiro. Related officials were not immediately available for comment.

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