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A group of investors including alternative asset manager Blackstone have filed a lawsuit against the current developers of a medical office building on the Upper East Side, Crain’s New York Business reports.
Claiming that terms for the $9 million loan for 162 East 78th Street have not been met, the consortium sued for foreclosure in the New York State Supreme Court on Wednesday. The mortgage default case has been made against the building’s developers, the Feil Organization and Rosen Equities.
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The case suggests that the developers are more than a year behind on payments for the seven story, 9,000 square foot townhouse between Third and Lexington avenues, alleging that they’ve failed to make a payment since February 2024.
Among the tenants of the building are Calla Women’s Health, a boutique gynecologist, and the Upper East Side branch of the Advanced Hearing Center, although the building is not entirely leased.
The Feil Organization and Rosen Equities have owned the building since 2016, purchasing it for $17.4 million, funded in part by a loan from Signature Bank. Following the winding down of Signature Bank in 2023 in the wake of the Credit Suisse collapse and ensuing banking crisis, the consortium acquired a portfolio of outstanding loans from Federal Deposit Insurance Corporation, the banking regulator.
The acquiring consortium is comprised of Blackstone Real Estate Debt Strategies and Blackstone Real Estate Income Trust, Rialto Capital and the Canada Pension Plan Investment Board. The $1.2 billion purchase saw the group acquire a 20% interest in the failed bank’s $16.8 billion commercial real estate debt portfolio, including 162 East 78th Street.
Since taking on the portfolio, the group has been actively chasing down bad loans, including a foreclosure case for the art deco McGraw-Hill Building at 330 West 42nd Street against Deco Tower Associates, and RFR Holdings for a $45 million loan default for nearby 188 East 78th Street.
There has been some backlash to this aggressive approach to reclaim distressed assets, but the move is also an indicator of a wider trend of real estate foreclosures in Manhattan in the years following the pandemic. High interest rates and low occupancy rates, driven by a changing approach to work and low office attendance, are causing widespread damage in the sector.
The case is yet to be heard and the property developers have not responded to the claims called against them.
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Lotta sharks in this small pond.
I thought the FDIC held the loans. The FDIC put a group together to financially back these loan they hsd to pay a certain amount if money to become part of this group . This covered commercial and residential building loans. .
This was pushed by politicians to keep these buildings affordable . From the looks if it I don’t think this will be rhe outcome in the long run..