The Real Deal New York

Brookfield forecloses on Brill Building

Lender won the landmark Midtown office property at UCC auction
By Mark Maurer | March 20, 2017 02:35PM

From left: Ilan Bracha, the Brill Building and Ric Clark

Brookfield Asset Management’s real estate debt fund, a lender on the Brill Building, foreclosed on the full ownership interest in the iconic Midtown office property after winning a foreclosure auction Friday, a representative for the firm told The Real Deal.

The Toronto-based office giant had the winning bid at a UCC foreclosure auction, allowing it to foreclose on $5.6 million in defaulted mezzanine debt and take control of the property, which was owned by two different groups of investors, the Brookfield representative said.

Brookfield’s bid for the landmarked 11-story, 175,000-square-foot building at 1619 Broadway was close to par — $220 million, or the amount of the existing total debt, sources said. The holder of such debt typically bids the full value of the outstanding debt held on the property.

In what some have described as a byzantine ownership structure, Brickman & Associates and Allied Partners owned 59 percent of the building, while a group including Ilan Bracha’s TRData LogoTINY B+B Capital, Abe Conway’s Conway Capital, Israeli pension fund Halman-Aldubi, Schottenstein Realty and Israeli fashion chain Fox-Wizel collectively held the remaining 41 percent. The latter group paid $295 million for the minority interest in July 2016.

Prior to the auction, Brookfield controlled $60 million of the property’s debt, along with Arkansas-based Bank of the Ozarks, which had provided $150 million.

A problem arose when the majority owners, unable to cover their investment through retail and office rent deals, defaulted on the $5.6 million in November 2016, the New York Post reported.

In the span of time since the default, pending lease deals with WeWork and Jimmy Buffett’s Margaritaville at the building fell through.  The majority of the property is vacant. Office asking rents are between $60 and $70 per square foot, and retail asks range from $650 to $700 a foot.

In the months prior to the auction, the minority partners were working to negotiate a restructuring and settlement with Brookfield in which they would have prepaid 10 months of interest and paid $18 million in due funds, sources said. Those negotiations stalled the night before the auction.

Sources told TRD that Brookfield, which is developing the Manhattan West megaproject, was not interested in acquiring the Brill Building. Sources close to the minority partners said they remained hopeful they could work out a deal.

JLL’s Brett Rosenberg, who handled the auction, declined to comment, as did the ownership groups.

The nearly 80-year-old property is best known for housing music industry offices and studios for years.