BH3 Buys $195M Loan on Distressed NYC Skyscraper
- Aug 01, 2019
Real estate investment firm BH3 has taken over a $195 million non-performing loan on 125 Greenwich St., an 88-story luxury condo tower that topped out earlier this year in Manhattan’s Financial District. Affiliates of the company purchased the senior mortgage from United Overseas Bank, which had provided the initial loan to the project’s sponsors and recently filed a notice to foreclose on the development.
READ ALSO: 125 Greenwich Hits the Market
“One of the reasons the project got into trouble was that a condition of the substantial amount of money being released by the lender to continue construction was predicated on sales thresholds,” commented Gregory Freedman, principal & co-founder of BH3 to Multi-Housing News. “Those sales thresholds were not achieved.”
Built by Bizzi & Partners Development, the Rafael Viñoly-designed skyscraper is located two blocks south of the World Trade Center. The slender tower, which topped out at 912 feet in March, provides 275 residences totaling 320,000 net sellable square feet. Condo sales launched in 2017, with 418-square-foot units starting at $1.2 million and 1,933-square-foot units priced at $5.6 million and up.
The project will include retail space and will have a gross asset value of about $1 billion, according to the developer’s website.
Distressed asset specialist steps in
In its complaint, Singapore-based United Overseas Bank claimed that the lending consortium is owed the $195 million that it advanced, plus unpaid interest, according to a report in The Real Deal. U.S. Immigration Fund, an EB-5 visa firm acting as a mezzanine lender on the development, has also scheduled a foreclosure auction after providing a $194 million loan.
BH3 will carry forward the foreclosure action initiated by United Overseas Bank, having replaced the bank as the project’s senior lender, Freedman noted. If its own foreclosure action is successful, U.S. Immigration Fund will replace the existing borrower group, which includes Bizzi & Partners, Carlton Group, Howard Lorber’s New Valley, and Cindat USA, a unit of China’s Cindat Capital Management.
BH3 set up a debt opportunity fund last November in order to tap what it sees as a rising wave of non-performing loan opportunities in the markets where it operates, primarily New York City and South Florida.
“As we approached the end of 2018, we saw some writing on the wall that was reminiscent to us of 2007,” said Freedman. “125 Greenwich represents to us the first real validation that the bull market that we’ve been in for the past eight or nine years has kind of come to an end, and we’re in a new chapter.”
The distressed asset specialist has a track record of acquiring projects in South Florida such as Trump Hollywood, a 200-unit luxury condo in the Miami area, and taking on selective developments including Privé at Island Estates, a 160-unit island residential community in Aventura, Fla.