The bigger they are, the harder they’re hit by rising interest rates.
Developer Michael Stern has defaulted on his mezzanine loan at 9 DeKalb, Brooklyn’s tallest tower, and is now facing foreclosure.
Larry Silverstein’s Silverstein Capital Partners, which issued a $240 million mezzanine loan in 2019 to help finance the 93-story skyscraper at 9 DeKalb Avenue, has scheduled a UCC foreclosure auction for June 10, according to marketing materials from JLL.
It’s not clear what will become of the tower, which has become an object of strange fascination for its Gothic (some might say sinister-looking) design.
Most mezzanine foreclosures draw little interest from bidders and end with the lender taking control, though there have been some recent examples where investors have come in and acquired the stake.
Stern had tried to sell the rental portion of the building earlier last year but didn’t end up doing a deal. It’s unclear what kind of interest the offering got.
Stern could not be immediately reached for comment.
A spokesperson for Silverstein said that 9 DeKalb’s junior mezzanine, senior mezzanine and mortgage loans are in maturity default, and the lender is enforcing its rights through a UCC foreclosure.
Ten31 reported JLL’s offering memo on X earlier Wednesday.
Stern’s JDS Development began building the tower in 2015 at the site of the former Dime Savings Bank. The 1,067-foot edifice includes a 130,000-square-foot retail section mostly occupied by the luxury gym chain Life Time Fitness, a rental portion with 417 units, and 143 residential condominiums in the upper portion of the building.
It wasn’t immediately clear if Silverstein’s mezzanine loan was secured by interests in all three portions of the building. Otera Capital had provided a $424 million senior mortgage as part of the 2019 construction package. Silverstein bought that senior debt earlier this year.
9 DeKalb is not the only supertall tower that Stern has struggled with. The developer has also faced financial difficulties at his Billionaires Row tower at 111 West 57th Street.
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