Acquires $72 Million Defaulted Mortgage in Foreclosure for $47 Million, Negotiates Clean Title and Sells to New Sponsor for $60 Million After Unsolicited Bid; Provides $45 Million of First Mortgage Financing to New Sponsor for Acquisition of 86-Unit Mixed-Use Luxury Condo Conversion Project
NEW YORK, March 12, 2014 /PRNewswire/ — Madison Realty Capital (MRC), an institutionally backed real estate private equity firm and asset manager focused on real estate equity and debt investments in the middle markets, announced the closing of a complex distressed debt transaction that will result in the sale and completion of the previously stalled condominium conversion project at 45 John Street in Lower Manhattan. Winning out in a competitive bid situation, MRC first acquired the defaulted first mortgage in foreclosure on 45 John Street for $47 million. Then, after resolving $7 million of non-bank liens to address title issues and further negotiating the delivery of a deed for the property from the defaulted borrower, MRC accepted an unsolicited offer of $60 million from a new sponsor, and provided $45 million of financing for the new sponsor's acquisition of the project.
The deal highlights the flexibility of MRC's investment strategy and the effectiveness of its vertically integrated platform, which includes in-house expertise necessary for equity investments, debt acquisitions, and new loan originations. This expertise allowed MRC to quickly access the real estate ownership and management knowledge required to understand and underwrite the transactions from both the debt purchasing and loan origination perspectives.
"This transaction exemplifies everything that makes our model successful," said Josh Zegen, Co-Founder and Managing Member of MRC. "The highlights here are speed, flexibility and vertical integration, in aid of risk-adjusted performance. We went into the debt acquisition planning to take ownership and complete the project. But when the opportunity came to sell the property after we cleaned up title, we had already analyzed the project thoroughly and insisted on staying involved as the bridge lender. In the end we added value on the initial loan acquisition, and reduced our market risk by lending to the deal rather than owning it. There are few organizations that could accomplish what we've done here, and I'm truly proud that we brought this transaction to fruition."
Constructed in 1908, 45 John Street was a 12-story, 102,000-square-foot office building until the previous sponsor acquired the property in 2006 and sought to convert it to an 84-unit luxury residential condominium. In addition to residential space, the property has 2 retail units, including a 5,000-square-foot ground floor space and a 3,000-square-foot space below grade. After failing to meet the target completion date of October 2008, the original sponsor defaulted on the first mortgage during the downturn. The original lender instituted foreclosure proceedings, which were closed to completion. The project is currently 80% complete and is expected to be completed within 12 months.
Cantor Fitzgerald represented the seller of the defaulted mortgage on 45 John Street. Matthew Lesser of Leslie Garfield represented MRC.
About Madison Realty Capital (MRC)
Madison Realty Capital (MRC) is an institutionally backed real estate private equity firm focused on real estate equity and debt investments in the middle markets throughout the United States. Founded in 2004, MRC has invested in over $2.0 billion of transactions in the multifamily, retail, office and industrial sectors. MRC's vertically integrated platform encompasses origination, servicing, asset management, property management and construction management expertise to maximize the value of its investments.
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