M&T Bank lent $36 million to help fund a recent Meadow Partners acquisition, taking a bet on a beleaguered multifamily loft building in Williamsburg, Brooklyn, sources familiar with the negotiations told Mortgage Observer.
The Midtown-based investment firm acquired the rental property at 100 South 4th Street, which was developed by the late Menachem Stark and his partner Israel Perlmutter for $52 million, on Aug. 7, taking it out of a five-year bankruptcy process.
“Meadow Partners had been looking at the property for several years, going back three or four years ago,” one person said on the condition of anonymity. “The fact that the property went into bankruptcy in the first place was really surprising considering it was producing enough cash flow to cover the debt service payments. But the previous owners preferred to keep the cash flow.”
Stark, one of the building’s developers and previous owners, was found dead in a gas station dumpster in Great Neck, Long Island, in early January, according to news reports at the time. Investigators in April arrested Kendel Felix, 27, a construction worker employed by the late developer, and charged him with kidnapping and murdering Stark.
Following the news of the previous owner’s death, Meadow Partners, led by Jeffrey Kaplan, J. Andrew McDaniel and Timothy Yantz, saw another opportunity to buy up the loft property and tap into the area’s immense popularity.
“[Meadow Partners] felt like that might be a catalyst for something to happen with the property, that maybe the remaining partner would want out just because of all the bad publicity,” another person familiar with the negotiations said on background. That person noted that the building had been inadequately maintained under the previous ownership.
Deutsche Bank’s special situations group, which invests in distressed loans, bought the defaulted debt on the rental property at close to par value a year ago, according to that person. Meadow Partners reached out to the bankruptcy trustee soon after to begin negotiations on obtaining the property and its debt.
The real estate investors purchased the senior loan in foreclosure from Deutsche Bank for $38 million in April. At that time, the firm’s partners were already under contract with Mr. Perlmutter and the estate of Stark to pay $14 million for the junior debt and equity components of the property’s capital stack.
The Brooklyn bankruptcy court eventually approved Meadow Partners’ acquisition of 100 South 4th Street in early August, court records show.
The new owners plan to renovate and reposition the seven-story, 75-unit rental building—which is just over 80 percent occupied—with upgraded common areas, improvements to the individual units and new amenities, according to both sources.
“They plan to institutionalize the leasing and management in order to maximize the potential of the real estate there,” one of them said. “There was obviously significant upside in the rents. It’s a real unique property.”
The five-year M&T loan to Meadow Partners carries interest-only payments at an attractive Libor-based rate, said Tal Bar-or, a managing director at Meridian Capital Group, who brokered the loan.
“There were some intricacies to the loan because of the prior ownership and the structure itself with the bankruptcy,” Mr. Bar-or told Mortgage Observer. “The borrowers brought us in to find the right type of relationship lender who would understand the story and their business plan.”
Meadow Partners and M&T Bank declined to comment for this story.