Silverstein in Negotiations to Step In at 125 Greenwich Street: Sources
The ownership partnership at 125 Greenwich Street is in the midst of negotiating a few potential resolutions for the beleaguered residential condominium building with Silverstein Capital Partners (SCP), Commercial Observer has learned.
Time is ticking, with a Uniform Commercial Code (UCC) foreclosure auction scheduled for mid-August that was initiated this week by the project’s mezzanine lender, United States Immigration Fund (USIF). In addition to that, the senior construction lender, United Overseas Bank, went forward with a mortgage foreclosure last month after the project’s sponsors defaulted on roughly $196 million in payments.
But, a resolution with SCP will be ironed out within “four to five weeks,” one source said.
A source close to the deal told CO that in the first scenario, the landlord lender has offered to inject capital into the asset to try to resume construction and get the condo project completed. The property “hasn’t met construction hurdles,” one source said, so its senior lender halted funding. Multiple sources estimated that the building is just 65 percent complete. As one source put it, that situation isn’t for the faint-hearted. “The hardest thing is to step into a construction project that’s 65 percent completed,” the source said.
Another option is that SCP will look to wipe the slate clean by entirely recapitalizing the asset. Sources said that a $530 million recap is in the works as another possible resolution, and that SCP is compiling a lending syndicate to resolve and refinance the defaulted senior and subordinated debt, with a plan to take a mezzanine position in the final deal. A source said there will likely be an additional mezzanine lender.
Sources confirmed that a JLL (JLL) team led by Aaron Appel has been tapped to arrange the potential recap.
Lastly, SCP could end up executing both potential resolutions: injecting capital as well as working out a recap.
Whatever happens, multiple sources confirmed that the debt on the stalled, 88-story construction project in Lower Manhattan will likely not reach its scheduled August 15 UCC foreclosure auction sale, which CO first reported yesterday upon receiving confidential offering documents.
“It’s a very complicated deal,” one source said. “You have four layers of debt and three sources of equity, and one of those equity sources is also providing debt.”
Last month, USIF—an EB-5 visa-program fundraiser that provided nearly $200 million in mezzanine debt to the developers in 2017—indicated its intent to initiate a foreclosure after the sponsors failed to meet debt repayment requirements. It followed through on the UCC action on Tuesday.
Dustin Stolly, Jordan Roeschlaub and Nick Scribani of Newmark (NMRK) Knight Frank were tasked with leading the UCC auction on behalf of USIF, according to yesterday’s foreclosure auction notice. The brokers could not be reached for comment.
UOB’s foreclosure, filed in June, claimed the sponsors were past due on almost $196.4 million in payments. Bizzi & Partners Development, New Valley Real Estate, China Cindat and the Carlton Group make up the ownership group.
In UCC foreclosure sales, lenders can move faster than they can through the traditional mortgage foreclosure route, with the ability to move to a foreclosure sale in just weeks, not years. Unlike in mortgage foreclosures, UCC foreclosures give lenders a chance to go after the defaulted sponsor’s business interest in the asset, as opposed to the real property.
The project at 125 Greenwich has been plagued by conflict between the developers and their financiers, and more recently, by mechanics’ liens, in which the sponsors owe around $41 million, court records show, plus $11 million in contractor fees.
The building—designed by Rafael Viñoly—has struggled with lackluster sales as its been dealt blows by the “tremendous supply” in Lower Manhattan, one source said, plus, “they wanted mid-$2,000s-per-square-foot pricing, in a $2,000-per-square-foot location.”
Apartments in the 273-unit building are intended to be priced at figures ranging from $1 million to $7 million. There will also be about 13,000 square feet of ground-level retail space, according to CoStar Group.
Neither Bizzi & Partners nor New Valley responded to inquiries. A representative for Vector Group, the parent company of New Valley, declined to comment on the project’s finances.