Koch Industries goes all in on distressed properties

Charles Koch using war chest to buy troubled real estate

National /
Mar.March 02, 2021 12:45 PM
Charles Koch of Koch Real Estate Investments and 2777 South Las Vegas Boulevard (Getty, iStock)

Charles Koch of Koch Industries and 2777 South Las Vegas Boulevard (Getty, iStock)

UPDATED, March 2 2021, 5:05 p.m.: Koch Real Estate Investments, the property-focused arm of the billionaire conglomerate’s empire, has become one of most active players when it comes to snapping up distressed real estate during the pandemic.

The real estate firm, led by Jacob Francis, aims to diversify its business and buy real estate at depressed prices, according to the Wall Street Journal. At the beginning of the pandemic, it provided Ladder Capital with a $206.4 million credit facility. The company also invested in a single-family rental business and an office project in Nashville.

Until the pandemic hit, the Dallas-based real estate arm of Koch Industries — the firm led by Charles Koch — was mostly a silent backer to other real estate developers. That changed with its February takeover of the Las Vegas hotel formerly owned by New York developer Steven Witkoff, the publication reported.

Miami developer Jeffrey Soffer started developing the 63-story, 4,000-unit hotel, condominium and casino tower in 2007, but the project filed for bankruptcy. Carl Icahn bought it for $150 million in 2010 before selling it to Witkoff for $600 million in 2017.

Witkoff had trouble securing financing due to the pandemic’s impact on the hotel market, and later defaulted on a mortgage from JPMorgan Chase and Deutsche Bank, along with more than $200 million in junior debt held by South Korean investors.

Koch bought the mortgage for about $350 million and brought Soffer back as a partner, the Journal reported, citing sources.

CORRECTION: This story has been updated to reflect that Jacob Francis is the president of Koch Real Estate Investments. 

[WSJ] — Keith Larsen

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