Are Distressed Deals Finally Coming?

David Goldsmith

All Powerful Moderator
Staff member
All throughout the pandemic huge amounts of funds have been raised to buy distressed assets. But largely such assets have not been available to be bought as debtors have availed themselves of various sorts of relief.

Recently Vornado Realty Trust CEO Steve Roth complained about the lack of availability in the market given they had liquidated assets in anticipation of picking them up:

But today The Real Deal reports we may be seeing a crack in that dam:

Torchlight buys $40M delinquent Fifth Avenue retail loan​

Harbor Group allegedly defaulted on the financing in May​

New York’s much-anticipated distressed deals could finally be starting to appear.
The Canadian bank CIBC sold a delinquent $40 million loan on the retail portion of 445 Fifth Avenue to a debt fund tied to Torchlight Investors.

Harbor Group International allegedly defaulted in May 2020 on the loan that the firm used to acquire the 18,000-square-foot retail portion of the 33-story Midtown condo building.
CIBC sued the developer in September, alleging that Harbor Group missed monthly payments and failed to keep the minimum required reserve balance of $725,000.

In January, a judge appointed a temporary receiver, New York City attorney Phil Sklar, to take control of the property. The loan sale was completed in March, but was only recorded in public records late last month. Torchlight recently filed a motion to replace CIBC as the plaintiff in the lawsuit against Harbor Group.
But it could be a while before Torchlight can proceed with a foreclosure. New York state has a moratorium on Covid-related commercial evictions until Aug. 31.

When the moratorium ends, Torchlight could foreclose and take control of the property. The lender could also restructure the loan.
Nearly all of the 18,000-square-foot retail space will be occupied by Australian firm Brickworks, which signed a 10-year lease last year and had planned to open a design store this summer. The space was previously leased to jewelry store Charming Charlie, which filed for bankruptcy in 2017 and again in 2019.

Harbor Group bought the retail portion of the Fifth Avenue condo tower in 2015 from Thor Equities for $68 million.
Despite apocalyptic projections, little distress has hit New York’s commercial real estate market. At the end of 2020, distressed asset sales accounted for just 1 percent of real estate sales, according to Real Capital Analytics. Some industry pros expect this to change when the foreclosure moratorium ends.

Harbor Group, led by Jordan Slone, owns and manages 4.1 million square feet of commercial real estate and its portfolio is worth $12.7 billion, according to its website. Harbor Group did not return a request to comment.
Torchlight specializes in distressed debt workouts and has acquired over $25 billion in commercial debt investments, according to its website. The firm did not respond to a request for comment.

CIBC also did not return a request for comment.

David Goldsmith

All Powerful Moderator
Staff member

Premier Equities buys Tribeca hotel, inks Sonder to lease​

Duane Street Hotel was purchased from Hersha Hospitality Trust​

Premier Equities bought the Duane Street Hotel in Tribeca for $18 million and signed short-term rental company Sonder to a lease there.
The sale of the 43-room hotel at 130 Duane Street works out to $419,000 per room, according to the Commercial Observer. Hersha plans to use the proceeds to pay down debt.

Sonder will lease the entire hotel. The rental company recently also leased the Flatiron Hotel from Premier Equities.

Earlier this year, Sonder said it would go public by merging with a SPAC backed by billionaires Alec Gores and Dean Metropoulos. Sonder expects to reap $650 million in the offering. Francis Davidson co-founded the company in 2014 while managing several apartments in Montreal as a university student.
Earlier this year, Hersha Hospitality, led by Jay Shah, lost control of its stake in a seven-hotel Manhattan portfolio in a UCC foreclosure to lender Mack Real Estate. Hersha owned the properties — which did not include the Duane Street Hotel — in a joint venture between Hersha Hospitality Trust and the Chinese investment firm Cindat Capital Management.

Cushman & Wakefield’s Dan O’Brien and Jared Kelso brokered the deal on Monday.

David Goldsmith

All Powerful Moderator
Staff member

Mall short-sellers see a big payout from Nevada mall auction​

Loan on Las Vegas’ Prizm Outlets realized 120% loss​

A big payout has arrived for investors who shorted a retail-heavy commercial real estate debt index.
A loan on the Prizm Outlets mall outside Las Vegas realized a 120 percent loss after the property sold at auction for just over $400,000, according to Bloomberg News. The buyer was not revealed, but New York-based Kohan Retail Investment Group now lists the property on its website.

The total realized loss for the $62.2 million loan, accounting for fees and reimbursements to the master servicer, was $74 million. It’s the largest loss for a CMBS loan since 2008, according to Bank of America.

The Prizm sale was the first auction of a property linked to CMBX 6, a credit derivatives index that has heavy exposure to malls and shopping centers. Of its 39 malls, 31 are impaired, according to MP Securitized Credit Partners, which is shorting the index.
Carl Icahn is another investor shorting the index. Icahn has preached the short since it became clear the pandemic would devastate brick-and-mortar retailers and properties.

“We believe these mortgages will have the same disastrous fate as mortgage-backed securities had in the 2008 debacle,” Icahn told Bloomberg this week.
Icahn and other investors betting on those debts have already cashed out on some of their bets. Some of the biggest mall investors in the country, including Simon Property Group and Starwood Capital Group have defaulted on loans.

David Goldsmith

All Powerful Moderator
Staff member
"The debt, which originally carried a balance of $193 million, was secured by three properties on the Upper East Side, from 27 to 39 East 62nd Street. It sold for $115 million, a 40 percent discount."