Joel Gluck eyes Israeli bond offering to refi half-finished church conversion. Appraisers have questions.
New debt to replace existing $46M loan from Signature Bank
Is the comeback on? A week after Silverstein Properties signaled its intent to issue a new bond series on the Tel Aviv Stock Exchange, another New York developer is following suit.
Joel Gluck’s Spencer Equity Group is preparing to issue its fourth Israeli bond series, according to a disclosure filed with TASE on Sunday. The size of the issuance has yet to be announced, but the new bonds will be backed by a first mortgage on a Williamsburg rental project known internally as “North Flats,” replacing an existing $46 million mortgage on the property from Signature Bank.
Spencer Equity did not respond to a request for comment.
The Brooklyn developer owns a 66.9 percent stake in the development at 163 North 6th Street, more commonly known as the Spire Lofts, while Yoel Goldman’s All Year Management owns the remainder. Toby Moskovits’ Heritage Equity Partners previously held a roughly 30 percent stake in the property as well, before falling out with Gluck and Goldman in a dispute over the financing of this project and others.
The partners eventually resolved their differences, with Moskovits selling her stake in North Flats to All Year, while increasing her share in the Williamsburg Hotel to 99 percent. Stakes in several other projects also changed hands in the settlement.
Phase 1 of the Spire Lofts project, the conversion of the 145-year-old St. Vincent De Paul Church into 40 rental apartments, was completed in 2014. Phase 2, the conversion of a former school facing North 7th Street into an additional 52 units, was slated to complete in early 2016 but remains vacant to this day — because the building is slightly too large, apparently.
According to an appraisal report filed with TASE in 2017, “the subject property is overbuilt by about 5,000 square feet and this has caused a delay in obtaining a Certificate of Occupancy which is necessary to lease the property.” The developers planned to purchase additional air rights for $1.5 million and secure a Certificate of Occupancy by the end of the year, but this did not pan out.
Spencer Equity’s 2018 earnings report notes that Phase 2 of the project is still vacant, and that the company recorded an $8 million dollar loss over the course of the year as a result.
Meanwhile, rents in the church portion of the property range from $4,000 to $12,000 a month, according to rent rolls filed on TASE, although one appraiser noted that “there were many inconsistencies in the bedroom and room counts of the units indicated on the rent roll we received.”
The report also notes that “some units contain temporary walls that create additional bedrooms,” while “one of the larger units was subdivided to contain seven total bedrooms.”
Last year, Spencer Equity took to Tel Aviv to refinance the newly completed rental tower at 436 Albee Square in Downtown Brooklyn, in which All Year also holds a 50 percent stake. Like many New York real estate bonds, Spencer’s Series C bonds took a beating late last year, but have since recovered to trade at more than 100 cents on the dollar.