The Real Deal New York

Owner of Greenpoint portfolio dodges foreclosure with sale to Black Spruce

SMK’s buildings were tied to now-dismissed predatory lending suit against Madison Realty Capital
By Mark Maurer | Twitter_logo_blue copy February 23, 2017 08:30AM

3 and 5 Sutton Street in Greenpoint (inset from top: Sylvester Smolarczyk and Josh Zegen)

The owner of nine Greenpoint rental buildings narrowly escaped foreclosure Wednesday after closing on the $27 million sale of eight of the properties to Black Spruce Management, sources told The Real Deal.

The distressed properties were notably at the center of a $150 million lawsuit from 2015 in which the owner, Sylvester Smolarczyk’s SMK Property Management, accused Madison Realty Capital of predatory lending practices. A Kings County Supreme Court judge dismissed the suit in September.

Madison, which had moved to foreclose on the buildings prior to the suit, has since received full repayment of the more than $22 million in existing debt as a result of the portfolio sale, sources said. Sources said a foreclosure auction was scheduled to occur later this month, though court documents do not indicate a date.

Smolarczyk decided to sell all of the buildings to Josh Gotlib’s Black Spruce TRData LogoTINY except 553 Meeker Avenue. That building is no longer in danger of foreclosure now that the debt has been repaid, sources said.

Rosewood Realty Group’s Aaron Jungreis

The portfolio consists of 3 Sutton Street, 5 Sutton Street, 673 Meeker Avenue, 669 Meeker Avenue, 667 Meeker Avenue, 657 Meeker Avenue, 661 Meeker Avenue and 164-166 Kingsland Avenue.

Madison will continue to serve as a lender on the properties. It provided $18 million in acquisition financing to Black Spruce, sources said. The purchase price equates to about $450 per square foot.

The properties, all located near the Brooklyn-Queens Expressway, collectively span 64,000 square feet and hold 57 rental apartments. They were built separately throughout the 2000s, records show, and are nearly fully occupied.

A source involved in the transaction described it as a “hairy deal” and a “tough one,” given that it took SMK nearly a year to sell the distressed portfolio.

Rosewood Realty Group’s Aaron Jungreis, Ben Khakshoor and Mike Kerwin represented both sides in the deal. Madison and Rosewood declined to comment. Black Spruce and SMK could not be reached.

Black Spruce, a NoMad-based investment firm, has been increasingly active in the city’s multifamily market over the past six months. The firm bought a 14-building Hell’s Kitchen portfolio for $110 million, a 14-building Chelsea package for $80 million, and earlier this month an 11-story property in the Bronx for $26 million.

Earlier this month, Madison moved to foreclose on an East Village portfolio owned by Raphael Toledano. But Toledano, sources told TRD, is engineering a sale of the portfolio to Jeff Sutton for about $145 million.