Andrew Farkas wrests control of discarded Blackstone portfolio

September 20, 2024 04:00 AM PDT | By EODHD

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Andrew Farkas wrests control of discarded Blackstone portfolio — Image source: Kalkine Media

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Blackstone’s Jon Gray; Atlas Capital Group’s Jeffrey Goldberger and Island Capital’s Andrew Farkas (Getty) In a one-two punch, a partnership led by Andrew Farkas’ Island Capital acquired a distressed New York multifamily portfolio previously owned by Blackstone and landed a $270 million loan to pay off the properties’ problematic debt. Island Capital and JW Capital Management seized control of 11 buildings concentrated in the Upper East Side and Chelsea by picking up the 637-unit portfolio’s mezzanine debt, Commercial Mortgage Alert reported. Island and JW then closed on a $270 million loan from Bridge Investment Group to pay off the senior mortgage, according to Commercial Mortgage Alert. The moves come some 18 months after Blackstone’s $272 million senior loan landed in special servicing. The floating-rate loan was originated in 2019.

Debt service nearly tripled between 2021 and 2023, pressuring cash flow, the publication reported. Blackstone declined to provide a statement. Neither Island nor JW immediately responded to requests for comment. Blackstone wasted no time charting a way out of the distress. The investment giant in August 2023 transferred a majority controlling interest in the so-called Manhattan multifamily portfolio to Atlas Capital Group.

Atlas also bought $90 million in mezzanine debt tied to the deal. Ultimately, Farkas’ firm and JW Capital snapped up the mezzanine debt in a secondary sale, then used their position to seize control of the properties, the publication explained. It’s unclear what the mezz debt sold for or if Atlas is still an owner. Atlas did not respond to a request for comment. Island Capital’s new, $270 million bridge loan has a floating rate and a five-year term, including extensions.

Bridge debt is often tapped for value-add plays. The newest building in the former Blackstone portfolio is nearly 40 years old and most of the assets were last renovated in the mid-2010s, according to Morningstar Credit. New development in Manhattan is fetching a median rent of $5,530, compared to $4,200 for existing product, according to appraiser Jonathan Miller’s August report for Douglas Elliman. The choice of a floating-rate implies a bet that rates will fall over the next several years. The Federal Reserve cut rates by 50 basis points on Wednesday and has signaled that more cuts are coming.

Many in the industry expect the actions to trigger a new cycle. Read more Blackstone’s $271M multifamily loan in special servicing Blackstone sidesteps foreclosure with Manhattan multifamily sale Blackstone mezz loan offered up by Koreans, signaling distress This article originally appeared on The Real Deal. Click here to read the full story. View comments

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