The Real Deal New York

After last-minute rescue, Bobkers to hold on to Morgan Lofts

Madison Realty Capital lends $19M to stave off Murray Hill condo auction; DelShah paid off
By Hiten Samtani | August 13, 2014 03:49PM

UPDATED, 3:08 p.m., August 14: The Bobker Group will get to hold on to the Morgan Lofts for now, after securing $19 million in financing on the same day the unsold condos at the property were headed to a Chapter 11 bankruptcy auction.

Josh Zegen’s Madison Realty Capital completed the debtor-in-possession financing for Bobker, putting an end to DelShah Capital’s hopes to take control of 14 residential condos and an office condo at the Murray Hill mixed-use property, located at 11 East 36th Street. DelShah owned the senior debt on the building, which contains 66 residential condos and three commercial condos.

The deal is “a testament to our being able to act quickly and understand a complicated site,” Zegen told The Real Deal. “If we didn’t close, the borrower may have lost control of that property.”

DelShah, a buyer of distressed debt, bought two notes at Morgan Lofts — one in 2009 for $2.2 million and the other in 2012 for about $11 million — making it the largest debt holder at the 68,736-square-foot building, according to previous news reports.

The Bobker Group held the two retail condominiums at the property through an entity called Bay Condos LLC, which declared bankruptcy in 2011, and DelShah subsequently sold the units for $6.1 million.

The Bobker-controlled entities that owned the office condo and the 14 unsold residential condos at the building also declared bankruptcy last year. DelShah was vying to gain control of these assets at a court-ordered auction scheduled for August 11. Bobker’s deal with Madison, however, closed just minutes before the auction, according to Zegen.

DelShah CEO Michael Shah told TRD in a statement today that the firm “navigated through two foreclosure actions and three bankruptcies and ultimately secured a payoff in full of their claims, including full default interest against a very litigious borrower.”

Representatives for the Bobker Group couldn’t be reached for comment by press time.

A source familiar with the property said that the turn of events was bad for the building’s condo owners, who have had to deal with years of the Bobkers neglecting basic maintenance and failing to build out the property’s common areas. The Bobkers’ financial troubles at the property were likely to continue, he warned, saying that he “wouldn’t be surprised if they end up in bankruptcy again.”