The Distress Record: Blackstone Mortgage, Greenland hit year-end turbulence

As the year comes to a close, some big players continue to navigate choppy waters.

Nowhere is that more evident than at Atlantic Yards, where two decades ago, developer Bruce Ratner revealed a visionary $2.5 billion plan to create Brooklyn’s most celebrated project since its iconic bridge opened in 1883. 

The unfinished project may have started with great fanfare, but it’s fate hangs in the balance as one of its lenders recently kicked off foreclosure proceedings.

Nine of the planned 15 buildings are complete, but the remainder of the project is in jeopardy. Greenland USA defaulted on $350 million worth of loans tied to six development sites. Finding builders and lenders for them is complicated by a 2014 agreement requiring 876 affordable apartments be built by 2025. Missing it — a near certainty — could trigger millions of dollars in penalties.

Meanwhile, short-seller Carson Block put Blackstone Mortgage in his crosshairs, saying the real estate investment trust was at risk of a liquidity crisis.

Up to three-quarters of Blackstone Mortgage or BXMT’s borrowers are unable to cover interest expenses without rate swaps, which offer insurance against rising rates, Block said on CNBC. Some $16 billion in swaps on the REIT’s $23 billion loans are set to expire next year.

The firm’s analysis, which targeted BXMT’s collateralized loan obligations — the short-term, floating-rate debt favored by value-add multifamily buyers — showed “most of those assets are underwater.

Block said that most borrowers will be unable to refinance and that Blackstone Mortgage, to insulate itself from heavy losses, would be forced to modify loans.

As more loans come due, industry observers expect lenders will formally extend loans, hoping rates eventually subside.

Blackstone, for its part, pushed back on Block’s assessment and predictions.

In Texas, an LLC tied to the Good Companies paid $12.5 million to buy the 170,000-square-foot Westway One, at 1707 Market Place Boulevard in Irving, from Hartman SPE, which is less than $74 per square foot.

The sale was spurred by Houston-based Silver Star’s bankruptcy and accompanying strategy to sell off its office and retail holdings to focus on self-storage assets. 

“I believe that the debtor is unlikely to receive a higher or better offer, the purchase agreement represents the best offer obtainable at this time and under current market conditions,” Hartman SPE president David Wheeler said in a bankruptcy court filing.

The 22-year-old property is valued for tax purposes at $20.6 million. 

The sale was spurred by Houston-based Silver Star’s bankruptcy and accompanying strategy to sell off its office and retail holdings to focus on self-storage assets. 

“I believe that the debtor is unlikely to receive a higher or better offer, the purchase agreement represents the best offer obtainable at this time and under current market conditions,” Hartman SPE president David Wheeler said in a bankruptcy court filing.

Also in the news:

In Los Angeles, WS Communities, the apartment landlord founded by Neil Shekhter, defaulted on a loan from Hankey Capital tied to a parcel in Santa Monica.

Mark Karasick’s 601W Companies punched another ticket to safety from the Chicago office market’s fallout by securing an extension on the $310 million debt tied to its 43-story tower at 1 South Wacker Drive.

Monty Bennett’s Ashford Hospitality Trust has evaded foreclosure proceedings with the sale of a ritzy hotel in downtown Atlanta.