Call me Houdini: Eichner gets Madison lifeline at Flatiron condo project
$168M inventory loan will settle dispute with JV partners
It was an opera, as it often is when the developer in question is Ian Bruce Eichner. But after a long battle with his partners, Eichner looks to have ensured that the saga of his Flatiron condominium project won’t be remembered as a Greek tragedy.
Eichner’s Continuum Company just scored a $167.5 million condo inventory loan from Madison Realty Capital for 45 East 22nd Street, The Real Deal has learned. The financing, according to sources familiar with the negotiations, will put to rest disputes the developer is embroiled in with Fortress Investment and Dune Real Estate Partners, his preferred-equity investors on the project, and allow him to focus on selling the remaining product at the glassy 60-story, 83-unit tower, where sales have recently picked up.
The developer had been searching for a condo-inventory loan of about $180 million, TRD reported in September, covering about 120,000 square feet worth of condo product at the building. The loan from Madison, which closed Thursday, reflects the amount needed after the recent trades at the building.
Madison, a real estate investment firm led by Josh Zegen, Brian Shatz and Adam Tantleff, has not shied away from financing projects mired in infighting or those that have attracted negative press. In fact, it’s carved out somewhat of a niche as a white knight, seeing opportunity in chaos: The firm backed Fortis Property Group’s controversial redevelopment of the Long Island College Hospital in Cobble Hill with a $297 million construction loan; Sharif El-Gamal’s 45 Park Place with a $33 million acquisition and predevelopment loan; Raphael Toledano’s acquisition of an East Village portfolio with a $125 million loan; and, most recently, made a $90 million investment in the supertall rising at 111 West 57th Street, allowing developers Michael Stern and Kevin Maloney to retain their stakes in the project. It’s also become a prominent backer of more straightforward development projects, loaning $300 million to Ceruzzi Properties for a 72-story luxury condo at 138 East 50th Street and $91 million to Stern’s JDS Development and Largo Investments to finish construction of the Fitzroy condo in Chelsea.
In March, Eichner alleged in court papers that Fortress and Dune were trying to torpedo his efforts to refinance the project so that they could protect their returns, pushing him to the brink of default and putting him on the hook for personal guarantees.
At the time, Eichner said he had secured a term sheet for a $160 million inventory loan from JPMorgan Chase in late January — but that financing would have left a $20 million shortfall that Fortress and Dune would have had to account for.
In April, Fortress managing director Randall Shy testified in court that the partners had to be “very considerate, careful and deliberate in structuring our joint venture,” with Eichner, given his track record of losing projects. “It was made clear to us that we needed to be very thoughtful and careful about how we structured our transaction,” he added.
According to Shy, the partnership was structured in a way that Fortress and Dune, rather than Eichner, were the managing members, a maneuver that they maintained would make the project more palatable to lenders. Court documents from April show that Fortress and Dune together have a preferred-equity investment of $85 million in the project, while Eichner has common equity of $61 million. Fortress is also working with Eichner on another project as a lender, giving him and Joel Bergstein’s Lincoln Equities $35.4 million to help close on the site of a large residential development in Crown Heights.
Fortress and Dune had said Eichner missed a sales milestone to put $500 million worth of units under contract last fall at the building. The developer responded that Fortress and Dune were pressuring him to slash prices and unload units in what would be akin to a fire sale. In early April, a Manhattan Supreme Court judge granted Eichner a preliminary injunction that prevented Fortress and Dune from declaring the developer in default under their joint-venture agreement.
But sources close to the loan deal said that over the last month, Eichner has put five pricey units into contract at the building, adding to the $400 million worth of done deals. Some of the new deals, the sources said, were for full-floor pads in excess of $16 million, and Eichner has only had to cut prices marginally. The project’s total projected sellout back in 2015 was $715 million. It is one of the only residential skyscrapers in the much-vaunted Flatiron District, hoping to emulate the success of towers such as One Madison. Douglas Elliman’s Fredrik Eklund and John Gomes are handling sales.
The uptick in sales activity at 45 East 22nd Street supports what many have been saying about today’s market: Price fairly, and good product in a top location will trade.
Rich Bockmann contributed reporting.