Delshah Finalizes Prepackaged Bankruptcy Exit for Two Meatpacking District Properties

Michael Shah’s Delshah Capital has finalized a prepackaged bankruptcy plan for two of the firm’s Meatpacking District properties, Commercial Observer has learned. 

A $28 commercial mortgage-backed securities million (CMBS) loan tied to the mixed-use buildings at 58-60 Ninth Avenue and 69 Gansevoort Street was previously in default. 

As part of the reorganization plan two new buyers are now in play, all lenders and junior creditors on the properties’ loan will be repaid in full, and Delshah Capital is also contributing $2 million into the deal, Shah told CO.

London-based BNF Capital is buying 58-60 Ninth Avenue for $21 million, as CO reported Monday, and a “wealthy private individual” represented by Iconiq Capital is buying 69 Gansevoort Street for $9.25 million, Shah said. Delshah Capital sourced both buyers, and closings are expected to occur within 30 days. 

Both buyers are end users, with BNF planning to put one of its hospitality concepts at its new space, Shah said. 

As part of the prepackaged bankruptcy plan, Delshah Capital will keep its $6.7 million judgment against retailer Free People, which skipped $13 million in rent payments at the 58-60 Ninth Avenue property during the pandemic. 

The property’s $28 million CMBS loan, part of the UBSCM 2017-C5 conduit deal,  was due to mature on Aug. 26, 2022, but faced a maturity default. Last July,  Wells Fargo — acting on behalf of the CMBS trust — filed a foreclosure lawsuit against Delshah Capital in federal court, The Real Deal reported. Now, the CMBS trust will be repaid in full, Shah said. 

It’s a volatile market to be pulling deals with multiple moving parts together, but Shah said the most challenging aspect was educating participants on the prepackaged bankruptcy route. 

“Many lenders and buyers are not familiar with the benefits that come out of it, but the buyer gets a free and clear order and — for a distressed property — that’s probably the best way for a buyer to acquire a property,” Shah said. “It also preserves the mortgage and there’s no foreclosure, so the lender gets a resolution way faster and junior creditors also get paid in a way they wouldn’t get in a foreclosure.” 

It’s also a process that Shah is familiar with, having sat on the other side of the table as a senior creditor in “10 or 11 bankruptcies,” he said. “As a result of that experience, we have a very good sense of what lenders, servicers and note buyers are looking to accomplish, and we’re able to put that to use here and get everyone to a good outcome.” 

Elsewhere, Delshah Capital has been keeping busy with its existing portfolio, as well as new investment opportunities. 

“We refinanced all of our Signature Bank loans with Rialto,” Shah said. “We secured an extension with Related and CPC on our rent-stabilized portfolio, and a rate reduction to make that portfolio cash-flow positive again because there had been a rate reset from 3 percent to 9 percent. So, we completed that and we were also able to come to satisfactory deals with Rialto on payoffs for our three loans that they had on the commercial side.” 

With its portfolio cleaned up, “we’re in good shape, and we’re busy looking at new opportunities, especially nonperforming notes in distressed deals,” Shah said. 

Officials at Wells Fargo were not immediately available for comment.

Cathy Cunningham can be reached at ccunningham@commercialobserver.com