It was the early 1990s when Downtown leasing broker—and neophyte developer—Bill Brodsky plunked down around $250,000 to buy a 1915 Tribeca building with the notion that he would convert it from rentals to condominium units and live there. Despite his lack of experience, about two years later he successfully completed the job.

Today, the five-story, five-condo, 15,000-square-foot building—which also houses the offices of his development company, Tribeca Associates—has an average condo sale price of $3.2 million, according to StreetEasy.

“At the time, no one wanted buildings in Tribeca, so for a young guy who was looking for some space, it was like a feather,” Brodsky, 50, told Commercial Observer last week while seated in the lobby of his boutique Smyth hotel and residences at 85 West Broadway. “It was like an Indian trade, you know.”

Brodsky wanted to move from East 53rd Street, where he was living with one of his brothers, so he could be closer to his offices at Edward S. Gordon (Edward S. Gordon was acquired in 1996 by Insignia Financial Group, which was then bought by CBRE in 2003) on Liberty Street. He worked in the company’s Downtown office, as a leasing broker focusing on Lower Manhattan and Midtown South office deals.

“When we built the Smyth hotel [in 2009] there weren’t that many hotels Downtown,” said Brodsky, who was clad in a gray suit jacket with thin gray corduroy pants. “So we were taking a little bit of a gamble, and so even when I moved to Tribeca in [the 1990s] it wasn’t what it is today.”

That view comes in stark contrast to the picture of Downtown today.

“There’s a huge increase in the number of residential units that are being built, developed and now lived in,” Brodksy said. “There’s an enormous amount of retail that is coming to this area. There’s a huge government investment through the World Trade Center and the different memorials and museums that are being built down here.”

Brodsky got into the development business after brokering the sale of 125 Broad Street in FiDi to investor and developer Steven Witkoff of The Witkoff Group more than 16 years ago.

“During that process, he unwittingly inspired me to leave the [brokerage] business and try to do what he does,” said Brodsky, a married father of three teenagers (who has no relation to the Brodsky Organization, in case you were wondering.) “By seeing him operate, he had such joy and enthusiasm for what he was doing—he made it seem possible and so easy.”

Anthony “Tony” Saytanides remembers hiring Brodsky as a broker at Edward S. Gordon. He also recalls Brodsky’s late father who was a litigation attorney at Proskaeur. (Brodsky’s mother lives on the Upper East Side.)

“I hired him,” said Saytanides, who was the chief operating officer at the brokerage and was heading the Downtown office at the time. “I thought he would be aggressive. He just struck me as being bright. I was worried he was too bright for the business.”

In 2000, Brodsky and pal Elliott Ingerman, a broker at the time in another Insignia/ESG office, launched Tribeca Associates, with a third managing partner, Mark Gordon, joining the company about five years ago.

Tribeca Associates’ first deal was buying, along with an institutional partner, the 500,000-square-foot factory of the New England Confectionary Company, maker of Necco candy wafers, at 254 Massachusetts Avenue in Cambridge, Mass., for around $80 million, Brodsky said.

“We bought the Necco candy factory in Cambridge because we really didn’t know what we were doing,” Brodsky admitted. “It’s in Cambridge, right near MIT. To make a long story short, we sold the building to Novartis AG [in 2003] for their research headquarters [for about $120 million]. It worked out quite nicely.” But since then the company has targeted Manhattan properties.

The team’s second deal was buying Penncom Plaza office building at 132 West 31st Street with investment partner Ritchie Capital Management at the end of 2003 for $63 million. They sold the site for $91 million “within a year after we bought it,” Brodsky said. “I think that helped us establish some kind of credibility.”

Perhaps its highest-profile project to date was co-developing with Starwood Capital Group the Baccarat Hotel & Residences New York at 28 West 53rd Street. The two companies acquired the site in 2011 as well as the assemblage of air rights and the acquisition of a light and air easement from neighboring property owners to complete the project. The 114-room hotel on the first 12 floors of the building sold last year to a Chinese insurance firm for $230 million, one of the highest prices on a per-room basis in New York City.

The bulk of Tribeca Associates’ projects have been Downtown.

There is the Smyth hotel, which it built at 85 West Broadway with Walton Street Capital (Kourtney and Kim Kardashian have stayed there), and the Residence Inn New York Downtown Manhattan/World Trade Center Area at 170 Broadway at Maiden Lane, done with Crown Acquisitions, Carlyle Group and Highgate.

Now the company is co-building a Marriott Moxy at 143 Fulton Street and performing a $30 million renovation of the 47-story office building at 30 Broad Street. In April, Tribeca Associates financed the $130 million leasehold acquisition at 30 Broad Street (a building in which Brodsky had negotiated leases as a broker) with a $115 million loan from M&T Bank, according to Jacob Nimmer, an assistant vice president of commercial real estate at M&T Bank.

“M&T Bank has worked with Tribeca Associates on multiple past transactions,” Nimmer said in an email. “Tribeca Associates has a talent for finding underutilized assets and creating value by repositioning buildings to their highest and best use. In the last few years, the Financial District has transitioned into a dynamic, 24/7 community and is attractive to tenants seeking convenient transportation options and discounted rents relative to Midtown, Midtown South and certain neighborhoods of Brooklyn.”

Edge Principal Advisors provided $50 million-plus in equity for the acquisition, according to Jeffrey Walker, a principal at Edge Principal Advisors, because of “Bill’s background, really coming out of the office market, specifically the Downtown office market, living in Tribeca, all that stuff,” Walker said. “This opportunity lined up for us a great building in a great market.”

Andrew Peretz, an executive managing director at Newmark Grubb Knight Frank, is part of the leasing team for 30 Broad Street, which is being repositioned with modern equipment and touches including new elevators, a new cooling tower, a new lobby and an amenity space with video games, a Ping-Pong table and a coffee vendor.

Peretz said when done, the building will feel as if you are “in a boutique hotel.” It will appeal to a technology, advertising, media and information services, or TAMI, tenant, he said noting: “All things you expect of a 2017 building are there with the soul of an old building.”

The building at 30 Broad Street garnered quite a bit of interest, but investors were a bit wary because of the lack of investment in the asset.

“I give him credit for buying 30 Broad,” said Bradley Gerla, an executive vice president at CBRE, who worked with Brodsky at Insignia/ESG. “It needs a lot of work. Not much money was spent on the building in the past.”

Brodsky has lived in New York City since his parents moved to the Big Apple when he was in high school. He commuted to New Jersey to attend the Dwight–Englewood School in Englewood, “because at the time I liked to play sports,” he said.

He still is athletic and active; he likes to ski, hike and camp. (This past summer and he one of his sons camped out in a tent on a trek in Wyoming. Last year he and his whole clan went camping in Baja.) Brodsky has done the Tough Mudder obstacle-course event.

Peretz, who has known Brodsky since junior high school in the town of Scarsdale in Westchester, N.Y., described his best friend as a guy who likes to smoke ribs in the Hamptons, a home Brodsky’s dad built 30 years ago and his mother still owns.

Brodsky said he wore “Old Navy with a sprinkling of Gap” to his interview with CO.

“He’s a quirky dude,” Peretz said. “He’s very humble in a lot of ways. He’s not materialistic and not egotistical. He’s sort or crunchy and granola-y in a way, and at the same time he’s an art collector.”

One time when they received their broker commissions on a deal they did together, Peretz recalled that Brodsky used the money for a Chuck Close painting, while Peretz bought a Porsche. (Brodsky leases a Toyota Highlander, Peretz said, laughing.

Few developers this decade have shown a desire to reshape the Manhattan skyline like Gary Barnett. The Extell Development Company chief virtually invented Billionaires’ Row with his One57 condominium tower at 157 West 57th Street—which set the template for the ultra-luxury, supertall residential skyscrapers that subsequently popped up throughout Midtown—and is currently at work on an even larger project, the 1,550-foot-tall Central Park Tower at 217 West 57th Street. (It should be noted that Barnett rolled the dice on One57 when the economy was still convulsing, and there was no guarantee he’d strike gold.)

But Barnett is now looking to work his magic farther downtown with a development that, in some respects, represents one of his biggest gambles yet: One Manhattan Square, an 815-unit condo building rising at 252 South Street, right next to the Manhattan Bridge and across from the FDR Drive, in the neighborhood known as Two Bridges. Despite the fact that One Manhattan Square is a project of unprecedented scale and ambition for the sparsely developed waterfront area, once again companies like JDS Development Group and Starrett Corporation are borrowing from Extell’s playbook with plans for high-rise apartments of their own in the neighborhood.

Yet it remains to be seen exactly how the developer’s latest endeavor pans out. In response to headwinds in the luxury Manhattan condo space that have discouraged developers from further investing in the high-priced projects that characterized the market in recent years, Barnett conceived One Manhattan Square as catering to “midmarket” buyers, with prices for one-bedroom apartments starting at $1.2 million and most of the units ranging up to $3 million.

Extell launched sales for the building to the general public this past November but not before pursuing a notably unorthodox strategy: exclusively marketing the property to Asian buyers one year before putting the apartments up for sale domestically. The tactic appears to have reaped some initial rewards. Extell announced in early March that it had sold more than 100 units, or nearly an eighth of the apartments at One Manhattan Square, in the four months since the sales launch—including a five-bedroom, $13 million duplex penthouse.

Raizy Haas, Extell’s senior vice president of development, described the building’s price point as “very competitive compared to other Downtown [condo] projects,” citing how buyers benefit from a 20-year tax abatement at One Manhattan Square that makes carrying costs at the property “the lowest in the city.” (One-bedroom units at Witkoff and Fisher Brothers’ 111 Murray Street in Tribeca, for comparison, started at $2 million.)

The Asian buyers that Extell initially marketed the building to, Haas told Commercial Observer, “are interested in diversification and are focused on stable, liquid, safe real estate markets, especially New York City…They are comfortable with and trust our reputation, and so it made sense to introduce One Manhattan Square [to them] given the price point, unit mix, amenities, waterfront views and low carrying costs.”

Though Extell only recently launched sales at the tower, the project’s sheer size and particular location has some observers wondering how long a potential sellout could take—especially given how other Manhattan condo developers, like Ben Shaoul’s Magnum Real Estate Group and Ziel Feldman’s HFZ Capital Group, have taken the hint and similarly positioned their own projects at the midmarket, $10-million-and-under price point.

“What’s attracted the most attention [to One Manhattan Square] is the unusual location for the project and its sheer size,” said Jonathan Miller, the president and chief executive officer of real estate appraisal firm Miller Samuel. “I think selling 100 units is a positive stat for [Extell], though I think sales will be viewed in terms of years, not quarters.

Miller added that the project “is coming in at a price point that hasn’t been set for this location, but that’s been the pattern with new development throughout this cycle—new product comes into the neighborhood and redefines value expectations for the market.”

Leonard Steinberg, the president of residential brokerage Compass, said one of the building’s challenges is that some condo buyers looking for a Lower Manhattan apartment “will have an objection to going this far east [to Two Bridges], and this is as far east as you can go Downtown.”

He said, however, that views overlooking the East River and over 100,000 square feet of amenities—including multiple swimming pools, a bowling alley, a cinema, a spa centered around a courtyard and a “relaxation garden”—differentiate the building from Downtown competitors.

“I think there’s been a tremendous undersupply of attainable, quality apartments [in Manhattan], and developers certainly saw that need,” said Steinberg, who has no involvement with One Manhattan Square. “[Extell] literally want to create a neighborhood within the building, and I hear a lot of investors are very attracted to the fact that it has the [tax] abatement.”

The concern, Steinberg added, is whether One Manhattan Square “will have a big enough audience,” citing a likely “two- to three-year minimum” timeline for a sellout. “You look at those prices and you think, ‘Everyone has a million dollars,’ ” he said, referring to the starting prices at the building. “We get very skewed in Manhattan real estate.”

Haas dispelled concerns about Extell’s ability to move the inventory at One Manhattan Square, noting that the developer “has successfully sold out large-scale projects such as The Orion,” the 551-unit condo tower it built at 350 West 42nd Street. Regardless of any potential challenges in selling out the building, Extell has “no current plans to offer units at One Manhattan Square as rentals,” she said.

Extell even raised prices on certain units at the property recently, with Haas describing the slight price hikes—such as a recent $90,000 increase on a $1.9 million one-bedroom—as “tell[ing] the market we are confident in our product and that we are selling well and selling fast.”

But Extell’s ability to sell its units at One Manhattan Square would appear particularly important given the lengths to which the developer had to go in order to finance the $1.4 billion project. Extell received more than $463 million in mezzanine lending from Scott Rechler’s RXR Realty—a financing package that was delayed amid concerns about Extell’s ability to secure senior lending—to fund the tower and two other projects, while also raising EB-5 funds and sealing a $600 million senior construction loan from a consortium led by Deutsche Bank.

“Lenders today are more selective when choosing to finance condo projects, especially large-scale developments such as One Manhattan Square,” Haas said. But she said Extell was able to structure “financing that was conservative and received the support of several banks that have been lenders on past projects,” while also noting that RXR is also a financing partner on “three [Extell] projects,” including One Manhattan Square. RXR did not immediately return a request for comment.

Only time will tell whether Barnett’s latest project will have been worth the hoops the developer had to jump through to bring it to fruition. Miller noted that Extell would likely have to rely on investors to buy up “a large swath” of the units at One Manhattan Square, rather than buyers purchasing to live in the building themselves.

But that would presumably suit Extell fine, as long as the building is able to deliver the necessary returns to Barnett and his financial backers. “Developers are going to build in this market whatever is economically viable, and if the market shifts, they shift,” Miller said. “Builders build until they can’t build anymore.”

TH Real Estate, an affiliate of TIAA Global Asset Management’s investment arm Nuveen, has acquired a retail condominium on the ground floor of the 23-story 10 Madison Square West from Savanna, Commercial Observer has learned.

The 20,619-square-foot condo, which is 100 percent leased and is located on Broadway between West 24th and West 25th Streets, traded for $97.5 million, a source with knowledge of the deal told CO. TH Real Estate was drawn to the investment because of the site’s location, according to TH Real Estate’s Todd Rollins.

“The Flatiron District is one of the most desirable live, work, play areas in Manhattan and is situated in a convenient location on the west side of Madison Square Park,” Rollins said in a statement. “Given its excellent visibility and strong national tenancy, we believe the asset will provide long-term stable income and an excellent return profile and will make a great addition to our urban retail portfolio in New York City.”

Savanna purchased the retail condo from the residential building’s developers, Witkoff and Morgan Stanley Real Estate Investing, for $60 million in 2014 a year prior to completion, as CO reported at the time.

Savanna recently leased 16,000 square feet of the space, including a 4,000-square-foot basement, to PetSmart. And the remaining space, roughly 4,000 square feet, has been leased to another tenant. A spokeswoman for Savanna declined to identify the other tenant it signed on to the property.

“We set out to create an institutional quality, stabilized flagship retail space in this world-class location,” Savanna’s Cooper Kramer said in a statement. “And the Savanna team achieved a terrific outcome for our investors.”  

Cushman & Wakefield’s Adam Spies, Doug Harmon, Adam Doneger and Josh King brokered the transaction.

“There has been continued retail strength in the vibrant Madison Square Park [and] Flatiron submarket, which has become a 24/7 live, work, play neighborhood,” Doneger said in prepared remarks.

When Sheldon Silver was the Speaker of the New York State Assembly he acquired the descriptor those in politics and cookware aspire to: He was Teflon.

That image—which looked so bogus when he was finally sentenced to a whopping 12 years in prison thanks in part to a kickback scandal involving real estate developers Glenwood Management and the Witkoff Group—reclaimed its luster yesterday when the Federal Appeals Court announced it was overturning the 2015 conviction.

According to The New York Times, prosecutors have vowed to retry Silver but the former speaker’s good fortune will no doubt be enhanced by the recent Supreme Court ruling vacating the conviction of former Virginia Gov. Bob McDonnell in another bribery scandal. (The court specifically referred to the McDonnell case in their Silver ruling.)

Commercial Observer followed Silver’s various machinations from how he used his position to get jobs for mistresses, to the money that he accumulated thanks to his real estate contacts, culminating in Jillian Jorgensen’s epic 3,000-plus-word chronicle of how Silver worked his way up from the Lower East Side Democratic political clubs in the 1970s to becoming arguably the most powerful man in Albany (well, at the very least, one of “Three Men in a Room” who made all decisions for the state if you included the governor and the state senate leader.)

Given this jaw-dropping new development it is worth a moment to reread Jorgensen’s piece and reflect on how this quiet, unshowy, devoutly religious pol rose, fell and might indeed rise again.

Architecture and design firm CallisonRTKL is moving its New York City offices to the iconic Woolworth Building in the Financial District.

The firm is taking the entire 28,096-square-foot 16th floor at the landmarked 60-story tower at 233 Broadway between Barclay Street and Park Place, The New York Post reported earlier this week. The 10-year deal will sese CallisonRTKL move from its current offices at 148 Lafayette Street in Soho.

Asking rent in the transaction was $57.50 per square foot, according to the Post. Mitchell Konsker and David Dusek of JLL represented the tenant, while David Ofman, Brian Siegel and Thomas Hettler of The Lawrence Group represented the landlords, partners Cammeby’s International and Witkoff.

Representatives for The Lawrence Group confirmed the deal but declined additional comment. A spokesman for JLL did not return a request for comment.

The Woolworth Building also houses the New York City headquarters of design giant SHoP Architects, as well as the offices of the New York City Police Pension Fund and NYU Langone Seaport Orthopedics.

Cammeby’s and Witkoff own the lower, office portion of the Woolworth Building, while the upper half of the tower is currently undergoing an residential condominium conversion led by developer Alchemy Properties. The conversion features a 9,500-square-foot “Pinnacle Penthouse” unit, located in the property’s iconic spire, that is asking $110 million.

Witkoff Group and Howard Lorber‘s New Valley Group have landed a $300 million refinance for the West Hollywood Edition Hotel and Residences in West Hollywood, Calif., Commercial Observer can first report.

Deutsche Bank and South Korean investment bank Mirae Asset Daewoo provided the floating rate-financing in a deal arranged by Newmark Knight Frank’s Dustin Stolly, Jordan Roeschlaub, Nick Scribani and Chris Kramer. Officials at NKF confirmed the lenders but declined to confirm the loan amount.

Located at 9040 Sunset Boulevard, the West Hollywood Edition sits in a prime spot on the border of Beverly Hills and West Hollywood and comprises a 190-luxury room lifestyle hotel and 20 luxury residential condominium units. It was Witkoff Group Chairman and CEO Steven Witkoff’s first project undertaken in Los Angeles; the seasoned developer is currently engaging in an ongoing expansion of his business away from his New York stomping grounds. 

The mixed-use hotel and condominium operates under the Marriott International brand and features more than 11,000 square feet of meeting space and roughly 16,500 square feet of hotel terrace space. In January, Witkoff officially debuted the luxury condos at the development.

“The premier location and quality of the development adds another top-shelf project to the sterling resume of Witkoff and New Valley,” Roeschlaub said in a prepared statement.

Many of the condos offer private outdoor green space, a rare amenity for the submarket in which the building resides. Amenities for the residences include a private rooftop pool, a private driveway, two dedicated elevators as well as access to all of the hotel’s services.

“The world-class hotel and condo development represents a truly one-of-a-kind experience for visitors and tenants with a trendsetting restaurant, rooftop pool, state-of-the-art fitness center, spa and unobstructed views of Beverly Hills and Downtown L.A.,” Stolly said in prepared remarks.

Witkoff’s western expansion also includes a Marriott Edition-branded resort in Las Vegas that was formally announced in February 2018. The firm is planning a redevelopment of the dormant Fontainebleau, a 60-story resort on the Las Vegas strip, where Witkoff will deploy The Drew Las Vegas, a much-anticipated rebranding that will debut the Edition brand in Las Vegas. The $3 billion project, which was named after his late son Andrew, will feature 4,000 rooms and roughly 500,000 square feet of convention and meeting space.

Witkoff did not immediately respond to an inquiry.

J.P. Morgan Chase and Deutsche Bank have teamed up to provide $615 million to The Witkoff Group and Emirati sovereign wealth fund Mubadala Investment Company to refinance the Park Lane Hotel in Midtown, according to city records.

The five-year, floating-rate facility refinanced around $266 million in previous acquisition debt from Well Fargo used for the joint venture’s $654 million purchase of the asset in 2013 and provided additional funds that will be injected into the property.

Newmark Knight Frank’s Dustin Stolly and Jordan Roeschlaub arranged the debt financing but declined to comment on the transaction.

The deal included $425 million in mezzanine debt provided by a syndicate of lenders, a source told Commercial Observer. “It’s a pretty wide [collection],” the source said, although the person declined to provide names. Also included in the package was a $158.3 million gap mortgage.

The 43-story hotel—at 36 Central Park South—has been ensnared in the infamous 1Malaysia Development Berhad (1MDB) fraud scheme that was brought to light in 2015. That year, the prime minister of Malaysian at the time, Najib Razak, was accused of funneling around $700 million from 1MDB, the state’s sovereign wealth fund, into his personal accounts. He was appointed to 1MDB’s board of directors not long after being named prime minister in 2009.

Low Taek Jho—an associate of Razak known as Jho Low—allegedly helped facilitate the money laundering scheme through a holding company called Jynwel Capital, which was set up in 2010 by him and his older brother Szen Low.

Through Jynwel, Low and his accomplices are alleged to have used funds siphoned from 1MDB to acquire the 631-unit Park Lane Hotel in 2013, in a joint venture with Witkoff and his investment partners, Howard Lorber and Harry Macklowe. Low’s initial stake in the asset was 85 percent, but he sold a portion to Mubadala that year for $135 million, Bloomberg reported in November 2018. That month, intermediaries holding Low’s interest in the property agreed to withdraw their claims in a U.S. forfeiture lawsuit in federal court in Los Angeles.

After Low’s interest was relinquished, Mubadala was able to up its position in the asset, which sources told CO is now a majority, controlling stake. Mubadala bought Low’s remaining stake for $140 million in December 2018, according to data from CoStar Group.

With the 2013 acquisition, the buyers had first planned to convert the hotel into a large-scale ultra-luxury residential condominium project. But Witkoff, with minority partners Macklowe and Lorber, shelved the plan in 2016, instead moving forward with a renovation of the hotel.

Built in 1967 by late New York real estate tycoon Harry Helmsley, whose family estate sold the hotel to Witkoff and Low in 2013, the roughly 450,000-square-foot property is currently operated by hotel management and investment company Highgate.

An official at The Witkoff Group did not immediately respond to an inquiry.  

Deutsche Bank has provided $42 million to The Witkoff Group to refinance two office condominiums at 420 Fifth Avenue that serve as Major League Soccer’s (MLS) New York headquarters, Commercial Observer has learned.

A JLL capital markets team led by Aaron Appel, who was joined by Keith Kurland, brothers Jonathan and Adam Schwartz, Jackson Sastri and Michael Ianno, arranged the financing.

“Witkoff has extensive knowledge of the office condominium market and has been involved in many notable acquisitions and projects in Midtown and throughout Manhattan,” Appel said in prepared remarks. “We are pleased to have been able to refinance with the existing lender on terms that benefit both parties.”

Last month, Steven Witkoff’s firm sold two of his previously held four condos at the property for a combined $52 million. He offloaded the fifth floor condo to Ziff Brothers Investments for $27.3 million and sold the fourth floor to Mediterranean Shipping Company for $25.1 million.

An official at The Witkoff Group did not immediately respond to a request for comment.

Built in 1990, 420 Fifth Avenue is a 28-story office condo located two blocks south of Bryant Park, between 37th and 38th Streets in Midtown. The roughly 600,000-square-foot building has a two-story lobby and 45 condo units.

The office—designed by BBGM Architects, according to CoStar—is currently 95 percent leased, according to CoStar, and includes office tenants such as The Rockefeller Foundation and Italian eyewear manufacturer, Luxottica Group, among others. The current asking rent at the location is $65 per square foot, CoStar data shows.

MLS moved into the building in May 2005 and have remained and even expanded since, according to JLL. The league now occupies the entire sixth and seventh floors—just over 64,000 square feet—on a lease that expires in October 2021, according to data from CoStar Group.

“Midtown continues to be one of the most sought after and active office markets in Manhattan,” Kurland said in a prepared statement. “With MLS’ continued commitment to the property and best-in-class ownership such as Witkoff, the unparalleled appeal of this offering was unquestionable.”

The appeal of soccer in North America has been growing for years. The league currently has 24 teams spread throughout the U.S. and Canada, and in April, the league voted to expand to 30 teams over the “coming years,” with Miami and Nashville expected to join in 2020 and Austin, Texas the following year. MLS has added a staggering 17 teams under its banner over the last 14 years.

The league has also moved forward in discussions with St. Louis and Sacramento, hoping to approve those bids as the 28th and 29th teams by late July.

South Korean investment firm Mirae Asset Daewoo has provided a $31 million mezzanine loan to Steven Witkoff’s The Witkoff Group to help facilitate the resumption of the firm’s planned luxury multifamily project in downtown Santa Monica, Calif., according to information from BridgeRock, which advised the lender on the deal. 

The five-year, floating-rate mezzanine loan partly funds the remaining construction costs for 500 Broadway, a mid-rise mixed-use multifamily development in Santa Monica. It’s the only rental project in downtown Santa Monica to comprise over 200 units, according to BridgeRock. 

“[A] couple of years ago, it was unheard of that Korean institutional capital would do construction loans. But as Korean institutional lenders mature in the U.S. real estate debt market, we are continuing to expand the types of loans we originate,” Wonsuk Bong, the head of investment banking at Mirae, said in a prepared statement, highlighting the increased interest in U.S. real estate subordinate debt from Korean investors that really began to catch the industry’s attention in 2017, as Commercial Observer had previously reported. 

The total amount of the financing package, with the senior portion, could not immediately be ascertained. In 2017, The Real Deal reported that the price of the project is around $400 million. 

The seven-story property — located just a couple blocks from the light rail Santa Monica Expo Line terminus — will boast 249 market-rate rental units across roughly 265,000 square feet of residential space, according to BridgeRock. There will be an additional 56,000 square feet reserved for retail or restaurant use as well as 524 below-grade parking spaces. The project is expected to be completed by 2021, according to information from architect Koning Eizenberg’s website.

According to Koning Eizenberg, the units will “flank upper-level courtyards to create nested communities,” while the units that face south and west will include movable screens, providing personalized control over natural lighting. 

It will also sport a rooftop pool-deck, a fitness center and a full-service spa, according to BridgeRock. 

The site had previously been home to fashion brand Fred Segal, which vacated in 2014. And Santa Monica’s City Council officially approved the plans for the design and development in 2016, according to a 2017 report from The Real Deal, after the design received public praise from locals in 2014. 

BridgeRock has advised Mirae on a couple Witkoff projects recently, including helping finance his West Hollywood Edition luxury hotel and condo mixed-use project, the firm’s first foray into Los Angeles, earlier this year with a condo inventory and mezzanine loans; and also a mezzanine loan in 2018 on The Drew Las Vegas, a mixed-use luxury resort complex in the city that was named after CEO and Chairman Steven Witkoff’s late son Andrew. BridgeRock also worked with Witkoff in securing mezzanine debt on 20 Times Square, an Edition branded luxury hotel in Midtown Manhattan. 

Officials at Mirae Asset Daewoo could not immediately be reached.

Never fear! Your friendly neighborhood lender is here! 

When global real estate owner Bizzi & Partners Development broke ground on its supertall 273-unit condominium project downtown at 125 Greenwich Street in 2017, it couldn’t have predicted the super roadblocks ahead. But, the issues started at the time of acquisition, sources said. 

In 2014, the development group, led by Bizzi and including Howard Lorber’s New Valley Real Estate, paid The Witkoff Group and Fisher Brothers $185 million for the plot, nearly double what it had traded for just over a year prior. 

By the fall of 2017, the developers had begun construction, and they launched condo sales, which ultimately proved lackluster, according to sources that requested anonymity. The units were priced in the “mid-$2,000s to $3,000s per square foot” in a downtown market where “everything’s going for around $2,000,” the source said. 

A year later, in the fall of 2018, it was reported that the owners nabbed a hefty $473 million construction package from a bevy of Asian contributors, including Bank of China, United Overseas Bank (UOB) and China Cindat, to finish the build out. 

Several months later, in March 2019, the project stalled due to a lack of funding after topping out at over 900 feet that month. When the project didn’t meet a desired “proof of concept” sales hurdle as a loan covenant established by its senior lender, Bank of China, the bank declined to fund into the project, a source explained. As of the end of August, the interiors aren’t finished, and sources said “it’s not even watertight” and only around “65 percent complete.”

As it sits dormant, the unpaid debt is rapidly accruing interest and, “when you own a [condo] building that height, if you keep tacking on weeks, it’s a lot of money,” one source said, estimating that the sponsors are incurring costs of at least $2 million per month.

Inquiries to Bizzi & Partners Development and Vector Group, the parent company of Lorber’s New Valley Real Estate, were not returned. 

Ground-up construction at this point in the cycle comes with its fair share of risk but stepping in mid-construction or on a distressed project takes a specific kind of lender. 

A few months ago, Silverstein Capital Partners, the shiny new lending arm of Larry Silverstein’s Silverstein Properties, as a premier developer with the monetary backing to be the hero, offered to lead the roughly $530 million recapitalization and rescue of the troubled Financial District project.

To date, SCP’s two most high-profile loans were made mid-construction or on new construction. In April, JDS Development Group closed on a $664 million construction package with SCP and Canadian lender Otéra Capital — in which SCP provided a $235 million mezzanine loan — to finally get the ball rolling on its planned tower at 9 DeKalb Avenue in Brooklyn, which will eventually become the borough’s tallest tower.

SCP’s connection to the process of large-scale development makes these types of opportunities especially attractive. And debt funds and other alternative lenders with higher yield targets, or other large “landlord lenders” equipped with eager investment dollars, are ready to swoop in and save the day.

“I think there’s a ton of capital sitting on the sidelines waiting to find distressed opportunities,” said Pacific Western Bank managing director Patrick Crandall. “It won’t be commercial banks, with the regulatory requirements … distressed projects don’t play well with regulators. Some commercial banks may provide some leverage in certain situations, depending on the nature of the distress.” 

What caused the problems at 125 Greenwich, though, could’ve been predicted, as one source explained. 

The 88-story project topped out in March, followed by Bank of China cutting off funding due to “construction hurdles” and unmet sales projections. 

Fellow senior lender and B-note holder UOB had fully funded its portion of the stack when Bank of China decided to turn off the spigot, a source said. By June, the project faced foreclosure action from UOB as well as its mezzanine lender — EB-5 provider United States Immigration Fund (USIF), which contributed a $194 million loan in 2015, one source said. The firms moved to foreclose on a combined $400 million in unpaid debt to essentially force action by the borrowers, the source said. 

UOB stopped short of trying to negotiate and salvage its position, instead just moving to sell it off and eject from the project, one source said. Just a couple weeks ago, UOB offloaded its debt position to “a group out of Florida,” one source explained, although they declined to name the buyer.  

“[The sponsors have] already built it, but the problem is [that] they’ve spent hundreds of millions more than anyone possibly would ever [buy it for],” said a source with knowledge of the project.

Subsequent Uniform Commercial Code (UCC) auctions planned for early August were snuffed out with the inclusion of Silverstein.

It’s likely that a second financier, possibly an institutional lender, is in line to enter the fray and support Silverstein’s efforts to “clean up the stack,” which will involve bringing in “new players with new cash to balance it out and create a situation where the current subordinate players are not in a position to put the deal back into default,” a source explained.  

SCP has put forth a proposal that aims to simply move the ball, sources said. The biggest hurdle has been progress. Along with the infusion of fresh cash, SCP wants to price and offload the units at what the landlord lender feels is at a fair market rate, include enough capital to pay interest and see the project through completion as well as implement a new marketing strategy. 

The project was plagued by what a source deemed an “entirely dysfunctional” capital stack, the “poster child” of messiness. 

Behind the two senior lenders there are two lenders in subordinate positions: USIF and China Cindat; and behind the two subordinate lenders are four equity holders, one being China Cindat in a preferred equity role and the other three being Bizzi, the Carlton Group and New Valley Real Estate, a source explained. 

One source said that Cindat is trying to figure out whether or not it wants to protect its debt position, its equity position, or both. USIF is currently shopping its mezzanine position after triggering the warning-shot UCC foreclosure. 

USIF lacks capital, a source said, making it not the ideal entity to assume control of the project’s completion. 

“These deals … they take a lot of time and energy,” SCP President Michael May said, speaking generally about getting involved in deals mid-construction. “There are certainly good opportunities [out there]. But, there are days I wake up and I think, ‘Is this the best use [of my time] compared to a down-the-middle deal?’” 

May declined to speak about the intricacies of the capital stack or the ongoing negotiations at 125 Greenwich. He did indicate that it should take four or five months to hash out the deal and get the project back up and running.

125 Greenwich is an example of a condo project directly and adversely affected by pricing and ever-shifting market dynamics, as Manhattan’s high-end condo sales market has languished over the last 12 to 18 months.

Regardless, where’s there’s a project in distress, there’s almost always a “hero” lender ready to save the day.

While the cycle has lengthened even further, and the expansion has matured, lending into commercial real estate, overall, has hit record highs in two of the last five years, according to data from the Mortgage Bankers Association. But traditional opportunities are becoming scarcer. Lenders remain hungry, but overall development has dialed back. Growth in new construction dipped to 3 percent last year, from a rate of 11 to 14 percent from 2012 to 2015, according to Dodge Data and Analytics. That rate is expected to remain unchanged in 2019.

A number of economic and fundamental factors have contributed to uncertainty, such as rises in short- and long-term interest rates and cost increases for foreign building materials like steel and aluminum, mostly caused by President Trump’s tariffs. 

In July 2018, after the Trump administration implemented a 25 percent tariff on steel imports, the price for flat-rolled steel used to build many high-rise projects in New York climbed to a peak of $920 per ton, the highest mark in a decade.

But, at this stage, and as the trade war trudges on, construction costs alone are in no way the sole detriment to a project. 

“If there’s going to be a miss, it’s probably not going to be because of rising construction input costs,” said Savills Chief Economist Heidi Learner, indicating that troubles would more than likely originate from overly-optimistic projections of sales or rental income growth that failed to materialize. Many New York contractors have already begun to price up materials, adding between 5 and 10 percent on total costs, in anticipation of further impacts from tariffs, according to a 2019 cost study by U.K.-based consultancy Turner & Townsend.  

“I haven’t seen anything like skyrocketing costs derailing projects, because, if anything, [properties] are being much more cautiously underwritten,” Learner added. 

On 125 Greenwich, one source said that infighting between all the players in the deal over what materials would be used, what the design would look like and how the building’s marketing campaigns would be deployed created early divisions.

For a developer, new large-scale construction at this stage in the business cycle is a daring play. Costs coupled with depreciating property values across many major U.S. markets raises questions about potential yield projections on construction projects. 

Still, the volume of construction and land development loans from all commercial banks has climbed around $10 billion since August last year, according to data from the Federal Reserve Bank of St. Louis. With that, the delinquency rate for commercial property loans — including construction loans — provided by commercial banks fell to a record 0.68 percent in the second quarter, according to Fed data. 

Even with a cyclical downturn possibly on the horizon, financiers still aren’t frightened by construction, and alternative lenders see a rescue job as a good play in an oversaturated market. Life insurance companies and regional and local banks have captured a greater percentage of the market share of construction lending, according to data from Real Capital Analytics, but the pool dwindles for lending mid-construction. 

“I’ve been presented a number of deals where there’s been an opportunity to come in mid construction, but not necessarily on a distressed project; they’re looking to take out their construction loan,” Crandall said. “We’re not really interested in doing that either, because construction is hard enough. But then coming in in the middle of a job is just not something that we really want to do.”

Multiple sources pointed to financiers like Square Mile Capital Management, Blackstone, and Mack Real Estate Credit Strategies as players who are usually engaged and ready and willing to get involved in, or buy into, a capital stack mid-construction. 

Officials at Square Mile did not respond to an inquiry. Mack declined to comment, and a representative for Blackstone was not able to provide comment before publication. 

Mack recently put $233 million in non-performing debt on the market in May, upon its default at its Dec. 31, 2018, maturation. The original debt from Mack was provided to Ceruzzi Properties and SMI USA in June 2017 and consisted of a $130 million senior mortgage as well as $70 million in mezzanine financing, which, with interest, had ballooned to $232.9 million as of May. 

The loan was against the 425,688-square-foot development site at 520 Fifth Avenue, which was in line to get a 76-story mixed-use skyscraper but stalled in part due to the death of Ceruzzi founder and president Lou Ceruzzi in September 2017, according to a report from the New York Post. 

Ultimately Rabina Properties, in a joint venture, led a $205 million restructuring and recap of the property, taking over for Ceruzzi and SMI. The deal included a new $110 million Bank OZK loan that replaced Mack’s debt, which was paid off as part of the transaction. 

And, in Downtown Los Angeles, Oceanwide Plaza, a $1 billion, three-tower mega development from Beijing-based Oceanwide Holdings Company that’s situated across from the Staples Center, has made waves after topping out in April 2018. 

Despite the progress, it’s nowhere near completion. Oceanwide stopped work on the site in January. Development first started in 2015, with the Chinese firm joining the waves of foreign capital that poured into U.S. real estate. 

Oceanwide’s only direction on the future of the project was a statement earlier this year that it needed to be recapitalized. Months later, it still remains empty, with cranes still on site but no news of a future capital injection. It was reported in the spring that contractors were chasing down around $100 million in payments for their previous work, with Lendlease subcontractor Webcor Construction filing a $53 million claim. 

Oceanwide also has a megaproject in San Francisco called Oceanwide Center that was halted in May in want for additional financing. 

Whatever happens, these projects can more than likely count out traditional senior lenders, who aren’t afforded the flexibility enjoyed by the alternatives, Crandall said. 

“I would really have to be very, very comfortable with the story as to why someone would need me to come in as a senior lender, why they would need someone like us to come in midstream,” Crandall said. “If it’s just that they’re trying to reduce their cost of capital, I’m not sure I want to be that capital provider. But, never say never.”

This piece was updated to include additional color on the loan covenant established by Bank of China in its senior position at 125 Greenwich that was unmet and kept the bank from providing proceeds on the project. 

Witkoff has landed a $230 million refinance of its West Hollywood EDITION Hotel, Commercial Observer has learned. 

J.P. Morgan and Mack Real Estate Credit Strategies provided the debt in a transaction arranged by Newmark’s Dustin Stolly and Jordan Roeschlaub, co-heads of the debt and structured finance team, along with Senior Managing Director Nick Scribani and Associate Dan Morin. 

The Witkoff Group and Monroe Capital are teaming up to refresh a historic oceanfront hotel in Miami Beach, the pair announced.

The New York-based developer and Chicago-based asset management firm submitted a proposal to restore and renovate the Shore Club Hotel and Cromwell Hotel to the City of Miami Beach’s historic preservation board.

The Witkoff Group is planning a massive residential development in Downtown Miami. 

The New York-based developer wants to build 2,195 residential units at its Miami Worldcenter project at 700 North Miami Avenue, according to documents filed with city planners, first reported by The Next Miami. 

Miami Beach officials approved three redevelopment projects of historic properties on the island by three real estate heavyweights Tuesday.

Michael Shvo will revamp a prominent office building on Lincoln Road, and Crescent Heights’ Russell Galbut and Steven Witkoff will each demolish existing structures, paving the way for new hotels and condos. 

The Witkoff Group and Emirati sovereign wealth fund Mubadala Investment Company came close — but not close enough — to breaking even on the Park Lane Hotel.

Qatar Investment Authority (QIA) — the sovereign fund for the Middle Eastern country — has purchased the hotel overlooking Central Park for $623 million, according to property records. PincusCo first reported the sale.