5.1.20 – “The Distressed Debt Space Has Plenty of Interest, but the Dam Hasn’t Opened, Yet”

As reported by the Commercial Observer:

For years prior, industry participants had speculated as to what could cause the next downturn. The general consensus was that the impetus behind that downturn wouldn’t stem from the real estate sector, but rather something that none of us would expect. That was an accurate bet.

Financial markets have been in turmoil since the coronavirus hit, and the silver lining sought amid the pain and uncertainty is distressed market opportunities. After all, for years now, the debt markets have been crowded, yields have been low, competition for deals has been fierce and bargains have been especially hard to come by.

In the past few weeks, whispers of loan sales have materialized in the press. Ladder Capital offloaded $200 million in loans in mid-April to Madison Realty Capital in a bid to meet margin calls; and Bloomberg reported that SL Green was in talks to offload loans on Industry City to CIM Group, on 95 Morton Street to Rockwood Capital and on a Brooklyn residential project to Kushner Companies — a $30 million loan that Kushner recently bought for 90 cents on the dollar, according to a Wall Street Journal report from April 27.

Elsewhere, sources told CO that Colony Credit Real Estate, Benefit Street Partners, Granite Point, Pine River and Shelter Growth Properties are among the shops who have all been in the market actively selling debt.

While some industry participants at large brokerage houses have said that they are being inundated with requests from eager clients looking for a “bad” or a “distressed” loan to pick up, the tsunami of trades hasn’t quite materialized yet.

“The ‘distressed’ term is not floating around just yet,” said David Stern, the founder of due diligence firm Townhouse Partners, which works with major investment banks as well as many non-bank lenders. Stern said his firm hasn’t yet been flooded with requests to re-underwrite for loan sales or purchases, but instead his firm has been busy simply reviewing and reassessing its clients’ current loan books. “Our lenders and debt funds want to try to work out whatever they can before [they look to sell].”

Still, many investors are sharpening their knives in hope of feasting on distressed opportunities.

Read the full story here.

— Posted by JVS on 5.2.20, backdated to 5.1.20


4.22.20 – Recent reports: SL Green Realty is trying to sell Industry City loans

As reported by Bloomberg on 4.21.20:

SL Green Realty Corp. is in advanced talks to sell at least three loans attached to New York properties to bolster its cash balance, according to people with knowledge of the matter.

The real estate investment trust is in talks to sell a mezzanine loan position backing Brooklyn’s Industry City to CIM Group and a loan tied to a Manhattan office building to Rockwood Capital, the people said. It is also in advanced discussions with Kushner Cos. about debt on a residential property in Brooklyn.

The pricing of the loan sales couldn’t be learned but the levels being discussed are below par, some of the people said.

SL Green, a major New York landlord, has seen its shares battered this year amid concerns that the coronavirus pandemic will weigh on real estate values, particularly in big cities hit hard by the virus. The company announced last month that a $815 million deal to sell the former Daily News building in Manhattan collapsed and said it was suspending share buybacks.

As it seeks to shore up its balance sheet, SL Green has tapped Newmark Knight Frank and Eastdil Secured to market at least eight different loans, according to documents seen by Bloomberg News.

Representatives for SL Green, Kushner Cos., Eastdil, Newmark and Rockwood declined to comment. CIM didn’t immediately respond to a request for comment…

CIM is in talks to buy the company’s $71.5 million mezzanine loan tied to Industry City, which pays at least 7.5% and has only been funded up to $54.1 million

CIM, which describes itself as an owner, operator, lender and developer of real assets, owned and operated assets valued at roughly $30 billion as of Dec. 31 according to its website.


As reported by The Real Deal on 4.21.20:

SL Green Realty is in talks to sell a package of loans in order to fill its cash coffers.

The real estate investment trust is in advanced discussion to sell at least two loans, Bloomberg reported. SL Green is negotiating to sell a mezzanine loan on the sprawling Industry City redevelopment in Brooklyn to CIM Group. The other is a loan on a Manhattan office property that Rockwood Capital is considering buying.

Pricing on the deals wasn’t immediately clear, but sources told Bloomberg discussions price the loans below par.

The Industry City debt is a $71.5 million mezzanine loan that pays at least 7.5 percent and has been funded up to $54.1 million.


As reported by Bisnow on 4.22.20:

One of New York’s largest property owners is working toward the sale of more than $100M of loans it owns, as REITs nationwide struggle to maintain cash flow amid the coronavirus pandemic. 

SL Green is in talks to sell debt on several properties to private real estate firms including Rockwood Capital, CIM and Kushner Cos., Bloomberg reports. These are the first of eight loans it plans to market.

SL Green is negotiating to sell a $25M junior mezzanine loan on RFR’s 220K SF, eight-story retail property at 95 Morton St. in Manhattan to Rockwood, according to Bloomberg. Kushner is planning to buy the REIT’s $30M mezzanine loan on Lightstone’s 12-story, 460-unit luxury condominium building in Gowanus, Brooklyn, and CIM Group is discussing buying a $71M mezzanine loan backed by parts of Jamestown and Belvedere Capital’s 6M SF multi-building complex Industry City along Brooklyn’s waterfront. 

This is the latest in a series of financial woes for SL Green, which owns $967M in real estate debt, since the crisis began. The company’s stock has dipped 50% this year, and it announced it would halt its ongoing share buyback program.


— Posted by JVS on 4.25.20, backdated to 4.21.20

2.12.20 – “Singapore sovereign wealth fund buys stake in Industry City”

As reported by The Real Deal:

Singapore’s GIC sovereign wealth fund has acquired a stake in Sunset Park’s Industry City.

The transaction involving GIC, one of the largest real estate investors in the world, will value the sprawling industrial park at $1.3 billion, according to the Wall Street Journal. The size of GIC’s stake, which it acquired from property owner and investment firm Angelo Gordon, is undisclosed.

The deal comes as the redevelopment of the waterside industrial park enters a new phase. The sites other owners — including Belvedere Capital Real Estate Partners, Jamestown LP and investors Abraham Fruchthandler and Rubin Schron — have been fending off local opposition to plans for rezoning that would allow them to build three new buildings, a school and more retail space.

The rezoning is expected to go before the City Planning Commission next week, the Journal reported. If approved, the City Council will vote on it by May…

In December, the ownership refinanced the 6 million-square-foot development with a $720 million loan provided by Blackstone and others…

Cushman & Wakefield’s Doug Harmon, Adam Spies and Kevin Donner brokered the deal. [WSJ] — David Jeans

Read the full story here.

— Posted by JVS on 2.13.20, backdated to 2.12.20

2.12.20 – “Singapore’s GIC Buys Stake in Brooklyn’s Industry City”

As reported by The Wall Street Journal:

Singapore sovereign-wealth fund GIC Pte. Ltd. has purchased a stake in Industry City in Brooklyn in a deal that puts a valuation of more than $1.3 billion on the sprawling redevelopment of New York’s largest privately owned industrial property, according to people familiar with the matter.

GIC, which is one of the world’s largest real-estate investors, is buying an undisclosed portion of the stake in the Sunset Park property currently owned by investment firm Angelo Gordon, the people said. The deal doesn’t affect Industry City’s owners: Belvedere Capital Real Estate Partners, Jamestown LP, and investors Abraham Fruchthandler and Rubin Schron.

GIC’s investment and the new valuation is the latest step for a project that has been gaining traction as a hub of manufacturing, creative, technology and other businesses. About 550 mostly small businesses employed 8,000 workers there as of October, compared with 150 businesses and 1,900 jobs in 2013, Industry City says.

The deal comes as a rezoning effort by Industry City enters a critical phase…

Some Sunset Park residents and advocacy groups are against the rezoning. They have raised concerns about gentrification, echoing the opposition that met Amazon.com Inc. when it proposed a campus in Long Island City…

Unlike the proposed Amazon project, Industry City isn’t getting any special city subsidies. The developer also says it has set up job-training programs for community residents and has made some concessions, including agreeing to reduce the amount of new retail and eliminate the hotels that were proposed in the plan…

Even if the city denies the rezoning, Industry City will be able to keep growing by adding the kinds of businesses that have been operating there, according to Andrew Kimball, Industry City chief executive. The project has “bright prospects for the future regardless of the rezoning,” he said.

Mr. Kimball declined to comment on GIC but he said that any new investment in the project would be “good news, which is a reflection of the progress the project has made.” He also said the rezoning would create thousands of new jobs that would be targeted at community residents.

GIC is primarily known for its property investments in trophy office buildings, major real estate operators and other traditional assets. Its Sunset Park investment comes as big name institutions are increasingly looking at unconventional properties for higher returns because prices have plateaued in many major markets.

Read the full story here.

— Posted by JVS on 2.15.20, backdated to 2.12.20

1.21.20 – NYC Department of Finance rejects FOIL request for (possible) Industry City REAP tax credits

REAP tax credits are described by NYC’s Department of Finance as follows:

The Relocation and Employment Assistance Program (REAP) offers business income tax credits for relocating jobs from outside of New York City or below 96th Street in Manhattan to designated locations above 96th Street in Manhattan or in one of the other four boroughs.

To apply, the eligible business has to move at least one employee from outside the REAP area to a qualified location.

On 11.22.19, I submitted the following FOIL request to the Department of Finance:

I would like to know if any of the owners of Industry City in Brooklyn, NY have received a REAP tax credit or credits. As such, I am requesting:

1) Any documents dating from 2013 to the present stating whether a REAP tax credit or credits were awarded to any of the owners of Industry City.

2) Any documents dating from 2013 to the present stating the sum of the REAP tax credit(s).

3) Any documents dating from 2013 to the present stating the number of employees the credit(s) were linked to.

If the requested information is contained in the same document, please feel free to simply send that document. 

On 1.21.20, I received the following response to that request from the agency’s FOIL office:

Dear John,

This is in response to your November 22, 2019 Freedom of Information Law (FOIL) request, regarding REAP tax benefits for Industry City, Brooklyn. Specifically, you have requested:

1) Any documents dating from 2013 to the present stating whether a REAP tax credit or credits were awarded to any of the owners of Industry City

2) Any documents dating from 2013 to the present stating the sum of the REAP tax credit(s).

3) Any documents dating from 2013 to the present stating the number of employees the credit(s) were linked to.

Please be advised that after careful review, your request is denied because the records requested are exempt from disclosure pursuant to Public Officer’s Law (POL) §87 (2)(a), which allows an agency to deny access to records which are specifically exempted from disclosure by state or federal statute. REAP benefits are attached to the relevant taxpayer’s income tax return. Thus, any REAP data or information attached to those returns, is prohibited from disclosure pursuant to the tax secrecy rules found under the NYC General Corporation Tax (GCT), Banking Corporation Tax (BCT), Unincorporated Business Tax (UBT), and/or Utility Tax.

Under POL §89 (4)(a), you have a right to appeal this decision…

NOTE: I do not know if the FOIL request I filed made sense. For example, it’s possible that REAP credits would only be awarded to tenants of IC, rather than IC itself. Beyond this, however, the FOIL office seemed to state in its rejection that REAP credits are private information not subject to FOIL law. If I learn more about this subject, I’ll post it to the blog.

— Posted by JVS on 1.21.20

12.27.19 – “New York Life building gets $410M refi”

As reported by The Real Deal:

The owners of the New York Life building at 28 East 28th Street just got a massive $410 million refinancing package.

Wells Fargo provided the loan to the owners of the building, which is a joint venture of Jamestown, George Comfort and Sons and Loeb Partners Realty, according to public records.

The refinancing replaces a $313.5 million loan made in 2016 from Bank of China for renovations at the 15-story, 870,000-square-foot NoMad building. Bank of China had provided the previous joint owners with a $150 million loan in 2010.

Jamestown acquired its 49 percent stake in the building in 2016 for $271 million as part of a two-office building package that included 200 Madison Avenue, and valued the pair of buildings at $1.15 billion.

In August, Amazon-owned grocery chain Whole Foods inked a lease for 60,000 square feet of space at the base of the property…

Jamestown is a major national real estate investor, and the previous owner of Chelsea Market and the Milk Building, connected by a bridge and now both owned by Google. Jamestown still owns various properties in New York, including the Falchi Building, 1250 Broadway and One Times Square and a stake in Industry City. The firm is one of four developers seeking a rezoning to expand Industry City to roughly 6.5 million square feet from 5.2 million and invest $1 billion to upgrade the campus.

Read the full story here.

— Posted by JVS on 12.28.19, backdated to 12.27.19

12.22.19 – Questions re: Industry City’s debt and related development vision

QUESTION 1: What would Industry City’s debt be used for? IC is currently seeking a rezoning that would allow it to expand, construct new buildings, and host new uses on the site, such as larger scale retail, academic spaces, conference spaces, and hotels (although the development now says it won’t pursue that last use). 

Page six of IC’s 2017 Draft Scope of Work related to its rezoning proposal states that it will “have to allocate an additional $638 million towards capital upgrades for existing buildings and the construction of new facilities in order to achieve full utilization of the site. Such capital investments cannot be financed absent regulatory changes…” 

Reporting on IC’s loans: Commercial Observer recently reported that IC’s owners had “sealed a $720 million refinance” for the project. This appears to be a refinancing of debt IC took on in 2017. In December of that year, Commercial Observer reported that “Bank of China and SL Green are upsizing their loan for the Industry City complex in Sunset Park, Brooklyn by $244 million to $647 million.” 

Is it logical to assume that these are loans that would be used to finance the expansions IC says it wants to do following a rezoning? 

QUESTION 2: What can we conclude from the fact that IC’s debt has increased? In 2017, Commercial Observer reported that IC’s debt was $647 million, but it just reported a refinancing of $720 million. What can we conclude from the extra debt IC has taken on? Could it mean something has changed in IC’s redevelopment plan? Could it mean the development is more profitable than before, or more valuable than before, even without a rezoning? 

QUESTION 3: What is the significance of IC’s mezzanine financing? The most recent Commercial Observer story reported that, “The debt included a mezzanine component, sources said.” What can we conclude about IC’s business model based on the inclusion of mezzanine financing? 

QUESTION 4: Can we connect IC’s debt to past statements regarding office tenants on the site? On two previous occasions, the CEO of IC, Andrew Kimball, has issued public letters stating that without a rezoning, the development will need to move in an all-office direction, which is permitted under current zoning. Specifically: 

– In a March 6th, 2019 letter, Mr. Kimball wrote that a failure to rezone IC would “force the project to turn entirely to commercial office-type tenants.” 

– In a November 5, 2019 letter, Mr. Kimball wrote: “We hope that ULURP results in an outcome that encourages us to continue to develop the unique innovation ecosystem, including manufacturing, with pathways for local job opportunity and small business development, that we’ve cultivated over the last six years and not be forced to solely pursue existing as-of-right leasing opportunities, including unlimited office and last mile warehouse.” 

These statements have never been commented on or explained, but is it logical to link them to IC’s debt? For example (and this is just me thinking out loud): perhaps the terms of IC’s loans require it to develop at a certain rate – to expand into new space, and take on new tenants that will pay a certain amount in rent over time. Without a rezoning, however, IC’s expansion would be limited, and it would therefore need to repay its loans using revenue from currently occupied space. That, in turn, would force it to increase the revenue it is generating from that space, requiring it to take on higher-profit tenants, such as office clients (or, in the case of the second letter, a last mile distribution facility). Might this reasoning be correct?  

QUESTION 5: Why would anyone associated with IC’s debt discuss it publicly? IC itself was the source of the 2017 story about its debt, but other stories (such as the most recent one) are sourced anonymously. Why would developers or financiers want to comment on debt in the press? And is anonymous sourcing on these kinds of stories to be trusted?  

QUESTION 6: Could IC use its debt for an alternate use? As you can see in Mr. Kimball’s March, 2019 letter, IC says that it wants to continue advancing the “innovation economy” it hosts. But we also know that in 2017, the development proposed turning over 4 million square feet of the site to Amazon for that company’s HQ2 project. That proposal assumed a rezoning would take place.

Is it possible that IC’s current debt could be used to finance development of a kind other than what IC says it wants to do? Typically, how tightly linked is debt to a specific development vision? 

QUESTION 7: What explains the timing of the loans? Why would IC take on debt to finance a particular redevelopment project before it has obtained the rezoning needed to allow that project to go forward? 

Past related news stories: 

One other piece of information:

A 2016 presentation given by Mr. Kimball included a slide which stated that at that time, 27 percent of IC remained vacant, with another 28 percent dedicated to storage. The slide read that, “Without regulatory changes, ownership estimates that it will take 25-30 years to fully invest in the portfolio.”

— Posted by JVS on 12.22.19

12.20.19 – “Industry City gets $720M refinancing”

As reported by The Real Deal:

The developers of Industry City scored a $720 million refinancing package.

Blackstone led the debt package, along with Bank of China, Deutsche Bank and SL Green Realty Corp., Commercial Observer reported. The deal also includes mezzanine debt. The financing replaces a previous $647 million loan provided in 2017. Iron Hound Management negotiated the financing…

Amazon has reportedly looked at renting as much as 1 million square feet of industrial space at the campus for a new logistics facility.

A $1 billion plan for rezoning Industry City stalled in September, after the local City Council member Carlos Menchaca, demanded the developers make another concession. Menchaca had initially described the plan as “dead on arrival” unless the developers gave the proposal more time for community input. The seven-month land-use review process officially launched in October. [CO]

Read the full story here.

— posted by JVS on 12.21.19, backdated to 12.20.19

12.20.19 – “Blackstone lends to Industry City”

As reported by Real Estate Daily Beat:

The ownership group behind Industry City has secured a $720 million loan package led by BlackstoneCO first reported. Bank of China, Deutsche Bank, and SL Green Realty also participated in the financing, which included a mezz component. The 6-million-square-foot, 35-acre development, sits on the waterfront in Sunset Park…

  • Financing details: The new debt replaces and upsizes the $647 million loan provided by Bank of China and SL Green on the 16-building commercial complex in December 2017…
  • Be Smart: Plans for a $1 billion expansion plan is currently underway, and the ownership group is pushing rezoning that would allow additional retail, academic space, and offices at the site. A City Council vote will take place in the spring.

Read the full story here.

— Posted by JVS on 12.22.19, backdated to 12.21.19

12.19.19 – “Blackstone Leads $720M Refinance for Industry City”

As reported by the Commercial Observer:

The ownership group behind Industry City has sealed a $720 million refinance for the Sunset Park mega-project, Commercial Observer has learned. 

Blackstone led the financing, with Bank of China, Deutsche Bank and SL Green Realty Corp. also in the lending group. The debt included a mezzanine component, sources said. 

The new financing replaces and upsizes the $647 million loan provided on the property in December 2017 by Bank of China and SL Green. 

As with previous rounds of financings on the behemoth development, Iron Hound Management negotiated the debt on the 16-building commercial complex, sources said. Officials at Iron Hound did not immediately return a request for comment.

The 6-million-square-foot, 35-acre development, on Sunset Park’s waterfront in Brooklyn, is owned by Jamestown Properties and Belvedere Capital own the along with Angelo Gordon & Co.Ruby Schron’s Cammeby’s International and Abraham Fruchthandler’s FBE Limited. Representatives for the property’s sponsorship declined to comment…

The property has seen a lot of tenant—and potential tenant—activity this year.

In July, Crain’s New York Business reported that Amazon was eyeing Industry City as the site of its next logistics facility, in a deal that would see the e-commerce giant taking a whopping 1 million square feet. Earlier in the year, E-bike and hoverboard manufacturer Jetson inked a lease for 12,500 square feet at the development while Essence Communication signed a 10-year lease for 29,000 square feet at 34 35th Street

Additionally, plans for a $1 billion expansion plan is currently underway at Industry City, with sponsorship pushing for a rezoning that would allow additional retail, academic space and offices at the site, The Real Deal reported. A City Council vote will take place in the spring…

Officials at Blackstone, Deutsche Bank and Bank of China declined to comment. Officials at SL Green were not immediately available for comment.

— Posted by JVS on 12.21.19, backdated to 12.19.19