Harbor Group takes control of $31M distressed Vantage portfolio

Aug.August 03, 2011 03:15 PM

The global private real estate firm Harbor Group International partnered with Great Neck, L.I.-based Jadam Equities to take control of a four-building, rent-regulated portfolio in Hamilton Heights from owners Vantage Properties and equity partner Area Property Partners.

Harbor Group International, based in Norfolk, Va. and led by Chairman and CEO Jordan Slone, won control after buying the mezzanine loan secured by an ownership interest in the 214-unit portfolio and holding a nonjudicial foreclosure. Vantage, run by President and CEO Neil Rubler, and the William Mack-led Area bought the four-building Esquire Portfolio in 2007 for $31 million.

It was Harbor’s first acquisition of a multi-family building in Manhattan, even as it owns about 9.8 million in commercial property and approximately 20,000 apartment units internationally. The company owns an interest in 4 New York Plaza in Lower Manhattan and 1412 Broadway in Midtown.

An affiliate of Jadam and Harbor, who are 50-50 partners, took over the equity interest controlling the properties, on June 20, the city records filed July 22 show.

The actual price paid was not clear. The property transfer document set the price of the portfolio at $31.32 million, but insiders said that figure might simply reflect the value of the outstanding first mortgage debt on the building and not the purchase price of the mezzanine loan.

Vantage and Area (formerly known as Apollo Real Estate Advisors) originally bought the buildings — at 3489 Broadway, 610 West 163rd Street, 548 West 164th Street and 519 West 143rd Street — in March 2007 for $31 million. At the same time they took out a loan from Credit Suisse for $31 million, which was later repackaged into a commercial mortgage-backed security on the properties, known as the Esquire Portfolio.

Housing advocate Benjamin Dulchin, deputy director at the Association for Neighborhood and Housing Development, who has tracked private equity deals closely in the city, said the financial strain was not related to the operators, but to the high loan payments.

“The problem in these buildings is not the managing agent, and a change there won’t make a big difference,” Dulchin said. “The problem in these buildings — like the other 100,000 distressed ‘predatory equity’ deals sitting around the city today — is the overleveraged financing scheme.”

Vantage, Jadam and Area declined to comment. A spokesperson for Harbor Group noted it was their first foray into multi-family properties in Manhattan.

Vantage, which owns and manages about 10,000 mostly rent-regulated apartments in New York City, is under financial pressure at additional portfolios, even as it is expanding into the New Jersey marketplace with partner Angelo, Gordon & Co.  

The New York Post reported last week that Eastern Consolidated broker David Schechtman is marketing a loan on behalf of its special servicer with a $70 million principal that sources say is about $9 million behind in payments and penalties. It includes properties such as 3885 Broadway and 4455 Broadway in Upper Manhattan.

Earlier this year Massey Knakal Realty Services brought to market another loan secured by a Vantage portfolio, this one with a $51.5 million principal value, with addresses such as 552 West 188th Street and 90 Ellwood Street in Fort George. Since that loan is not securitized, it was not known if it was in distress.  

In addition, Vantage and Area brought to market several weeks ago a $300 million package of 2,124 apartment units in buildings such as 39-19 62nd Street in Woodside, known as the Queens Multi-family Portfolio (and also known as the Katz portfolio), sources said. And in March, Real Estate Alert reported that Massey Knakal was marketing another Vantage portfolio in Upper Manhattan, with addresses such as 4141 Broadway, in Washington Heights.  

It is not clear if Vantage is seeking to take advantage of the recovering multi-family market to sell at a profit or if it needs to sell in order to cut losses and cover costs at other properties.

Vantage has had a controversial track record as a manager even as it has poured millions of dollars into rehabilitating its buildings. In February 2010, Vantage signed a consent agreement with the Attorney General’s office over aggressive rental tactics in Queens.

The properties in the Esquire Portfolio were under intense financial pressure for years. That led Vantage and Area to default on their June 2011 payment, which the mezzanine lender covered, according to a report from the special servicer Torchlight Investors in late June. The income from the properties was only able to cover 48 percent of the first mortgage payment, the servicer reported even as the property was more than 98 percent occupied as of the end of last year. But unlike other distressed owners, the properties are considered well maintained, housing advocates said.

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