Josh Zegen’s Madison Realty Capital agreed to invest $90 million in the troubled condo project 111 West 57th Street.
The deal allows developers Michael Stern and Kevin Maloney to retain stakes in the project, Crain’s reported. Madison’s investment is set to plug a funding hole that sent the tower into foreclosure in August. Spruce Capital Partners, the most junior mezzanine lender, took control of the building through the foreclosure, but behind the scenes talks continued over a new ownership structure and financing to pay for cost overruns.
Crain’s reported that Stern’s JDS Development and Maloney’s Property Markets Group will get stakes in the new ownership. JDS will continue to manage construction. The article does not mention whether Atlantic 57 LLC, an entity managed by Arthur Becker and tied to British investor Andy Ruhan, will continue to be a part of the project.
Madison’s investment comes in the form of a preferred equity stake, which guarantees that the fund manager will be paid off before any other owners. JLL’s Aaron Appel represented Madison in the deal.
Stern, Maloney and then-partner Ambase Corp. bought the development site in 2013 and began work on a 1,400-foot-tall condo tower. But Ambase and the developers fell out amid cost overruns and started trading lawsuits. After the Connecticut-based holding company refused to okay a $100 million capital infusion by Baupost Group in late 2016, the project’s mezzanine loan fell out of balance.
Spruce bought a $25 million junior mezzanine loan on the project from lender Apollo Global Management and foreclosed on the building. Ambase, whose stake was wiped out, is trying to reverse the foreclosure in court and also sued Stern and Maloney for damages.
Madison recently issued a $91 million construction loan on JDS Development and Largo Investments’ Chelsea condo project 514 West 24th Street. The company, one of the city’s most active new construction lenders, is also backing Ceruzzi Properties’ 138 East 50th Street. [Crain’s] — Konrad Putzier