The Distress Record: SL Green, others create funds to pounce on market

Private funds cropping up to take advantage of potential low-price deals

SL Green to Create Distress Fund, Thor Properties Takes a Hit
SL Green CEO Marc Holliday, KDM Financial CEO Holly MacDonald-Korth and ANiMAL's Max Cookes and Alex Hay (Getty, KDM, ANiMAL)

If a business is big enough, it can not only feel the effects of distress, but also capitalize on it.

SL Green Realty, as one of New York City’s largest commercial landlords, serves as one example as it starts raising money this month for a $1 billion property debt fund, according to its quarterly earnings statement reported by Bloomberg.  

That plan was announced after SL Green has weathered its own moments of financial turmoil this year. In October, portions of the debt held by SL Green and Scott Rechler’s RXR at Worldwide Plaza in Midtown were watchlisted. The three-building office portfolio, which also includes residential and retail space, backs a $940 million loan.

Over the summer, Fitch downgraded the credit rating of SL Green, Manhattan’s largest office landlord, the second time in a year that Fitch lowered the score for the company. 

Other real estate firms are eyeing distress opportunities in New York City, including RXR and Ares Management, which are partnering to launch their own $1 billion fund targeting distressed office buildings.

In South Florida, KDM Financial is launching a $350 million fund to provide bridge loans for recently completed multifamily projects and to purchase distressed properties.

In Atlanta, ANiMAL, founded by Max Cookes and Alex Hay, has $200 million to invest and will primarily target assets across the Southeast.

The firm has already acquired the former Atlanta Humane Society property, at 981 Howell Mill Road Northwest, and a neighboring city block in the West Midtown area.

While the prospects are looking up for some eyeing cheap acquisitions of distressed property, others are feeling the pain.

In New York, the owner of the Waterfall Mansion on the Upper East Side has handed back the keys to the opulent townhouse after her art business hit hard times during the pandemic.

Kate Shin signed over the deed for the property at 170 East 80th Street to lender ACRES Loan Origination. The transaction, which was structured as a deed transfer in lieu of foreclosure, came with a $34.4 million valuation of the 11,000-square-foot house.

“Due to the prolonged legal process stemming from the pandemic, which has taken a toll emotionally and economically on both parties, I’ve opted for a settlement,” Shin said. “I prefer to cut losses now from the property and refocus on our Waterfall art business brand and gallery, supporting over hundreds of international living artists as we have done for a decade.”

In addition, two of Thor Equities’ Midtown buildings were cut down to half of their former value by an appraiser.

The appraiser priced 597 Fifth Avenue and Three East 48th Street at $84 million, or 53 percent below the $180 million the buildings were valued at in 2014.

That was only a 4 percent drop from their appraised value last March, but that is no silver lining for Joe Sitt’s company Thor, which has already given up on the properties.

The 12-story, landmarked 567 Fifth, known as the Scribner Building, and its six-story neighbor are now worth less than Thor owes on debt tied to the property. The office and retail buildings are coupled because they back a single $105 million CMBS loan Sitt took out in 2014.

After Thor defaulted on the loan in 2020, unpaid interest and fees swelled the buildings’ total debt, which reached $124 million last year, according to BisNow. Thor paid $109 million for the properties in 2011.

A Thor spokesperson pushed back, calling the valuation decline “dated information,” and said the firm had wrote off the assets years ago.

In Los Angeles, lender Thorofare Capital launched a foreclosure sale for two historic office buildings in Downtown Los Angeles after Livwrk defaulted on a $17.5 million loan.

The El Segundo-based lender has listed for sale AtTraction, the two-building property at 800 and 810 Traction Avenue, the Commercial Observer reported. The price for the buildings was not disclosed.

Livwrk, based in New York, bought the buildings in September 2021 for $19.5 million, after borrowing $17.5 million from Thorofare. The 18-month, interest-only loan had two extension options.

And down in Texas, Dallas-based investor Elevate defaulted on a $38 million loan tied to the Selena, a 446-unit apartment building at 250 Uvalde Road in Houston, after falling delinquent on loan payments late last year, according to Morningstar.  This month, Arbor Realty Trust filed to foreclose, BisNow first reported.

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Jorge Abreu’s Elevate partnered with private equity firm Careventures Capital on the deal, and Abreu claimed that firm is the debt’s main sponsor. Loan documents list four sponsors including Abreu and Careventures Managing Partner Saji Salam. However, Abreu, in a 2022 video posted on Elevate’s Facebook page, refers to the property as “one of our apartments.”

Elsewhere in the news…

Brookfield’s San Francisco apartment buy leads to “massive loss” for investors 

CIM, Golub on tight deadline for $123 million Chicago office debt

Onni Group sues Equinox’s SoulCycle for “abandoning” Los Angeles site

While the prospects are looking up for some, others are feeling the pain.

In New York, the owner of the Waterfall Mansion on the Upper East Side has handed back the keys to the opulent townhouse after her art business hit hard times during the pandemic.

Kate Shin signed over the deed for the property at 170 East 80th Street to lender ACRES Loan Origination. The transaction, which was in lieu of foreclosure, came with a $34.4 million valuation of the 11,000-square-foot house.

“Due to the prolonged legal process stemming from the pandemic, which has taken a toll emotionally and economically on both parties, I’ve opted for a settlement,” Shin said. “I prefer to cut losses now from the property and refocus on our Waterfall art business brand and gallery, supporting over hundreds of international living artists as we have done for a decade.”

In addition, two of Thor Equities’ Midtown buildings were cut down to half of their former value by an appraiser.

The appraiser priced 597 Fifth Ave and 3 East 48th Street at $84 million, or 53 percent below the $180 million the buildings were valued at in 2014.

That was only a 4 percent drop from their appraised value last March, but that is no silver lining for Joe Sitt’s company, which has already given up on the properties.

The 12-story, landmarked 567 Fifth, known as the Scribner Building, and its six-story neighbor are now worth less than Thor owes. The office and retail buildings are coupled because they back a single $105 million CMBS loan Sitt took out in 2014.

After Thor defaulted on the loan in 2020, unpaid interest and fees swelled the buildings’ total debt, which reached $124 million last year, according to BisNow. Thor paid $109 million for the properties in 2011.

A Thor spokesperson pushed back, saying the valuation decline as “dated information.”

In Los Angeles, Thorofare Capital launched a foreclosure sale for two historic office buildings in Downtown Los Angeles after Livwrk defaulted on a $17.5 million loan.

The El Segundo-based lender has listed for sale AtTraction, the two-building property at 800 and 810 Traction Avenue, the Commercial Observer reported. The price for the buildings was not disclosed.

Livwrk, based in New York, bought the buildings in September 2021 for $19.5 million, after borrowing $17.5 million from Thorofare. The 18-month, interest-only loan had two extension options.

In Texas, Dallas-based investor Elevate defaulted on a $38 million loan tied to the Selena, a 446-unit apartment building at 250 Uvalde Road in Houston, after falling delinquent on loan payments late last year, according to Morningstar.  This month, Arbor Realty Trust filed to foreclose, BisNow first reported.

Jorge Abreu’s Elevate partnered with private equity firm Careventures Capital on the deal, which Abreu claimed is the main sponsor. Loan documents list four sponsors including Abreu and Careventures Managing Partner Saji Salam. Abreu, in a 2022 video posted on Elevate’s Facebook page, refers to the property as “one of our apartments.”

Elsewhere in the news…

Brookfield’s San Francisco apartment buy leads to “massive loss” for investors 

CIM, Golub on tight deadline for $123 million Chicago office debt

Onni Group sues Equinox’s SoulCycle for “abandoning” Los Angeles site