UPDATED, 10:04 a.m., Sept. 16: Junior mezzanine positions on four of HFZ Capital’s New York condominium projects are being marketed through a foreclosure sale, The Real Deal has learned, a possible sign of the distressed deals that investors have been anticipating.
Marketing materials from Newmark Knight Frank reviewed by TRD show that four junior mezzanine loans are being offered for a combined $89.5 million through a UCC foreclosure sale. The loans are tied to four of HFZ’s luxury condo properties in Manhattan: 88-90 Lexington Avenue, The Astor at 235 West 75th Street, and Fifty Third and Eighth at 301 West 53rd Street.
CIM Group holds the mezzanine loans, sources familiar with the properties said. The company, led by Shaul Kuba, Avi Shemesh and Richard Ressler, is an active developer and lender in New York and Los Angeles, with controlling interests in several major condo projects.
The auction would give the winning bidder an “indirect interest” in the four properties, according to the materials. Sources close to the deal confirmed the auction is scheduled but declined to comment further.
Representatives for NKF declined comment. HFZ representatives couldn’t be reached for comment.
The junior mezzanine balance for the properties totals $89.5 million. The total capital stack is $258.8 million, the materials show.
Mezzanine loans take a junior position to senior loans in the capital stack, and usually carry higher interest rates. JPMorgan and Oaktree Capital led a $500 million refinancing of the four buildings in 2016. The loans replaced financing from Deutsche Bank in 2013.
In July 2013, HFZ, led by Ziel Feldman and Nir Meir, paid Westbrook Partners $610 million for the four properties, teaming up with Fortress Investment Group on the buy. The portfolio consisted of 743 rental units, and the partners began the process of converting the buildings into residential condos.
HFZ’s other major projects include the XI, a mixed-use condo and hotel project near the High Line, and the Belnord, a storied Upper West Side rental that the developer converted to a 95-unit condo project.
Rich Bockmann contributed reporting.
This story was updated to reflect that CIM Group holds the junior mezzanine debt.