The Distress Record: Valley Bank moves to foreclose, RXR looks to restructure $670M loan

The light at the end of the tunnel seems to be nowhere in sight for commercial real estate, as news of distress continues to gain momentum across the country.

Valley Bank, after years of litigation, can foreclose on a $120 million loan for Fortis Property Group’s Seaport Residences, a luxury condo tower that has sat unfinished for three years. A judge last week granted the bank’s motion for summary judgment at 161 Maiden Lane, allowing the bank to move forward with its foreclosure on the loan, of which $90 million has been funded.

The decision marks a new chapter for the disastrous Financial District project, which has been repeatedly delayed by lawsuits, notably over alleged design defects that have left the tower leaning a few inches to the north.

The bank can now move toward an eventual sale of the property, but it is unclear what someone might pay. Whether the tower can be salvaged is not certain, although an engineer hired by Fortis estimated in January that it would cost $106 million to complete it.

Meanwhile, a $670 million loan on RXR’s 230 Park Avenue — also known as the Helmsley Building — is set to mature on Dec. 8. A report from Kroll Bond Ratings reported by Crain’s said the mortgage was sent to special servicing and the landlord is facing “imminent maturity default.” 

RXR is working to restructure the loan, a spokesperson for the firm told the outlet. 

Across the country, Brookfield, one of DTLA’s most distressed office landlords, is looking to move on from a 52-story skyscraper in the neighborhood. Brookfield defaulted on $318 million in debt tied to the tower at 777 South Figueroa Street earlier this year. 

The price for 777 Tower, the seventh tallest building in town, was not disclosed. Eastdil holds the listing, according to three unidentified sources familiar with the sale.

In Chicago, a pair of West Loop office buildings look poised to head back to their lender as part of a $36 million foreclosure suit that also seeks personal judgments against landlords Andrew and James Vaccaro.

The lender is an affiliate of Aflac that in 2021 bought the debt that was originated by Chicago-based NXT Capital co-headed by Joseph Lazewski and Ted Denniston, and it wants the keys to the buildings in the Greektown area at 833 West Jackson Boulevard and 322 South Green Street, according to a a lawsuit filed in Cook County court this month. It’s also seeking the title of the parking lot in between the structures at 310 South Green that was once slated for a 12-story office development.

The buildings secured a $33 million loan taken out in 2018 from NXT by affiliates of the Vaccaros, a west suburban family whose real estate assets are operated by Chicago-based Crayton Advisors, according to public records and Crayton.

John Abell, managing partner for Crayton, told The Real Deal the lender hired a new special servicer for the property and that the foreclosure was filed prematurely, while the parties are still working out a solution with the lender. 

He said the loan, which the suit says requires the borrowers to pay back $36 million after fees and interest, came due at a time when capital was unavailable for many landlords seeking loans but that they anticipate resolving the debt in about a week.

Meanwhile, after a long wait, the day of reckoning is here for a handful of multifamily syndicators who were expected to face mounting debt problems in the fall. Rise48, whose CEO argued it would not face the problems that so many in the industry are struggling with, has found itself with $250 million in watchlisted debt tied to its Phoenix-area multifamily buildings. 

But these issues have little to do with the firm itself, and much more to do with the industry-wide challenges of rising interest rates, rental market declines, and delayed renovations. 

Austin-based syndicator GVA also saw debt troubles mount recently, with $55 million in delinquent loans tied to four apartment buildings. 

More on distressed properties and businesses:

A troubled office building in Dallas will soon be in the hands of a lender. 

The loss of a major tenant has put a Houston office landlord in financial danger.

Reschke, CEO of Chicago-based Prime Group, is poised to acquire the distressed 40-story Jewelers Building at 35 East Wacker, with potential plans to convert at least part of the 556,200-square-foot property into a hotel.