01 April 2024

Drip, Drip, Drip

As the (largely commercial) real estate collapse advances, we have another interesting data point, the default and upcoming foreclosure sale of the tallest building in Brooklyn, the 93 floor mixed-use Brooklyn Tower at 9 DeKalb Avenue.

It could be argued that this is less of a CRE issue than it is an issue of higher interest rates and increased regulatory scrutiny of the intersection of New York real estate and money laundering by various oligarchs, but I do think that this is indicative of a fundamental problems in real estate.

I think that there is a significant chance of a repeat of the 2008 meltdown.

The mezzanine loan came due, and there was no cash to pay.

Who you gonna call? Ghostbusters!
Expect to see more of this:

The bigger they are, the harder they’re hit by rising interest rates.

Developer Michael Stern has defaulted on his mezzanine loan at 9 DeKalb, Brooklyn’s tallest tower, and is now facing foreclosure.

Larry Silverstein’s Silverstein Capital Partners, which issued a $240 million mezzanine loan in 2019 to help finance the 93-story skyscraper at 9 DeKalb Avenue, has scheduled a UCC foreclosure auction for June 10, according to marketing materials from JLL.

It’s not clear what will become of the tower, which has become an object of strange fascination for its Gothic (some might say sinister-looking) design.

Think the building designed by  Ivo Shandor to summon Gozer the Gozerian, and you got the vibe.


A spokesperson for Silverstein said that 9 DeKalb’s junior mezzanine, senior mezzanine and mortgage loans are in maturity default, and the lender is enforcing its rights through a UCC foreclosure.

Ten31 reported JLL’s offering memo on X earlier Wednesday.

Stern’s JDS Development began building the tower in 2015 at the site of the former Dime Savings Bank. The 1,067-foot edifice includes a 130,000-square-foot retail section mostly occupied by the luxury gym chain Life Time Fitness, a rental portion with 417 units, and 143 residential condominiums in the upper portion of the building.

Absent the pre-pandemic real-estate mania, I'm not sure that the developer would have gotten a loan.  The whole concept appears to be half baked.

And now it's about to be sold at fire sale prices, so it's burnt bread, I guess.


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