1 | april 17, 2015

The Durst Organization took a $75 mil-lion loan from J.P. Morgan Chase to fi-nance recent upgrades on its 30-story office tower at 655 Third Avenue—the first prop-erty the Durst family built from the ground up—city records show.

The three-year mortgage carries a float-ing interest rate over Libor, a spokesman for the real estate giant told Commercial Observer Finance.

The Big East Conference, which oversees NCAA Division I competition for a number of sports, signed a 10-year lease for the building’s 13,742-square-foot seventh floor in April 2014 and settled into the new space in September. Durst customized the floor to accommodate the collegiate athletic conference.

Other tenants at 655 Third Avenue, lo-cated at the southeast corner of East 42nd Street, include Mitsubishi International

See Durst... continued on page 3

J.P. Morgan Finances Upgrades on Durst’s 655 Third Avenue

Luxury residential developer Crescent Heights is in negotiations for a $390 mil-lion permanent loan from Bank of China

to refinance its NEMA apart-ment complex in San Francisco, Commercial Observer Finance has learned.

The loan, which is expected to close this month, will replace con-struction financing from a life insur-ance lender, according to a broker who eyed the deal. The source re-quested anonymity since the transaction has not yet closed.

The two-tower, 754-unit property, which totals 1 million square feet, opened in 2013 and is fully leased. NEMA, short for “New Market,” cost Miami-based Crescent Heights upwards of $300 million

to complete, according to the broker in the know.

Studio apartments at the property start at $3,000 per month, while one-bedroom units start at $4,200 and two-bedroom units start at $6,000, according to the property’s website.

The multifamily complex, located at the corner of 10th and Market streets, next to Twitter’s headquarters, counts an outdoor saline pool and a 7,000-square-foot gym among its amenities.

The property also has 13,500 square feet of ground-floor commercial space, which is soon to boast a restaurant run by celebrity chef Suvir Saran, according to reports.

Representatives for Crescent Heights and Bank of China declined to comment.—Damian Ghigliotty

The LEAD

Crescent Heights to Refinance NEMA Complex

With $390M Bank of China Loan

In This Issue

3 Fairfax, Va., Townhomes Funded With $12M From premier Bank

3 l&l refinances Metropolitan Tower With aareal loan 3 Jonathan Gray on GE Deal: We Drank a lot of Coffee

5 Connecticut Mall receives $15M permanent loan

5 Summit Hotel Taps New $125M Credit Facility

7 Boutique Hotel Hit with $2.5M Foreclosure Suit

“Between 2008 and 2013, [multifamily

housing programs at HUD] experienced a six-fold increase in

origination volume.” —Benjamin Metcalf,

from Q&A on page 12

MOW EXCLUSIVE

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Blackstone Group has been at the center of some of the largest deals in history (i.e. the Equity Office portfolio buy, in 2007) and some

of the largest in recent mem-ory—i.e. the purchase of all of GE Capital’s real estate debt and assets, worth about $23 billion, announced last week. The firm was also be-hind the two largest sales last year in New York City—the Waldorf Astoria purchase by Chinese insurer Anbang,

for $1.95 billion, and the 1095 Sixth Avenue sale to Ivanhoe Cambridge and Callahan Partners for $2.25 billion. Phew. So how do they do it? According to jovial and modest Jonathan Gray, who appeared this week at New York University Schack Institute’s annual REIT symposium, it involves “a lot of coffee.”

The head of real estate, thought, by some cal-culations based on Blackstone stock prices, to be a billionaire himself now, chatted with Schack Dean Rosemary Scanlon about the mechanics of the GE deal, including the fact that GE execs in-formed him right off the bat that they needed the

deal, which included a diverse pool of mortgag-es and properties all around the globe, to close in only three weeks.

The Equity Office buy was “really child’s play,” compared to the GE deal, he said. The latter in-volved debt and equity as far afield as Bulgaria, and he and his team had to perform the due dili-gence in a massive rush.

“People assume we [got the deal] because we have so much capital,” he added, but in reality it was the fact that Blackstone is known to be able to act quickly, as it did in the Waldorf deal, that was the deciding factor.

This was especially challenging with the rel-atively lean staff Mr. Gray is known to keep in the real estate department at Blackstone. “We drank a lot of coffee,” he said, and worked around the clock with Tim Sloan of Wells Fargo and Michael Nash, head of Blackstone Real Estate Debt Strategies.

Nonetheless, he was clear that he does not think real estate values in the U.S. are too frothy. “We don’t think so,” he said when asked if there’s a a bubble, citing CMBS origination and LTVs that are nowhere near pre-crisis levels. —Guelda Voien

Jonathan Gray on GE Deal: We Drank a Lot of Coffee

New York-based L&L Holding Company took a $100 million loan from German lender Aareal Capital Corporation to refinance a commercial portion of its Metropolitan Tower at 146 West 57th Street, records filed with the city show.

The five-year mortgage closed on March 26 and replaces a 2011 loan from ING Real Estate Finance, which sold $1.6 billion of its debt to Wells Fargo in August 2013.

The 77-story mixed-use tower between West 56th and West 57th Street contains 235 apartment units, 211,617 square feet of office space and 3,036 square feet of ground-floor retail space.

The 531,657-square-foot property was completed in 1986.

An L&L representative declined to comment on the financing. Representatives for Aareal were unavail-able for comment.—Damian Ghigliotty

L&L Refinances Metropolitan Tower

With Aareal Loan

146 West 57th Street

Jonathan Gray

Eastern Union Funding arranged an 80 percent LTV construction loan on behalf of Pillars Development Group for its devel-

opment of a townhouse com-plex in Fairfax, Va.

The $11.8 million, 24-month loan from Sioux Falls,

South Dakota-based Premier Bank has a floating rate of 1 percent over prime, with a floor of 4.75 percent.

Eastern Union’s Marc Tropp negotiated the deal, according to a representative for Eastern Union.

Fairfax-based Pillars is planning ground-up construction of 25 four-story “urban townhomes,” which will be dubbed Mayfair Townhomes. Located at 10341 Main Street, the development will fea-ture three- and four-bedrooms with park-ing and rooftop terraces.

“This is a phenomenal deal,” Mr. Tropp said. “By tapping into Eastern Union’s strong lending relationships we were able to provide competitive financing for a proj-ect right in the heart of the Mid-Atlantic multifamily market.”—Guelda Voien

Fairfax, Va., Townhomes Funded With $12M From Premier Bank

MOW EXCLUSIVE

Corporation, Nippon Life Insurance Company and the accounting firm Loeb & Troper.

The 425,000-square-foot Midtown East tower was completed in 1958. The prop-erty was originally leased and financed by Seymour Durst, while his brother Roy su-pervised management and his brother David handled property construction and design.

—Damian Ghigliotty

655 Third Avenue

Durst...continued from page 1

4 | april 17, 2015

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Connecticut landlord and develop-er HB Nitkin Group nabbed $15 mil-lion in permanent financing on their

retail center Playhouse Square, according to CBRE, which brokered the loan.

The 10-year loan with a rate of 4 percent has an LTV of 75 percent. The fixed-rate loan from New Canaan, Conn.-based Bankwell Bank has “flexible prepayment terms and a 30-year amortization schedule,” said a representative for CBRE.

The 39,000-square-foot retail

center is located at 275 Post Road East in Westport, Conn.

CBRE arranged the 10-year loan with a coupon rate of 4.0 percent at 75 percent LTV. The fixed-rate loan provides flexible pre-payment terms and a 30-year amortization schedule.

Mark Fisher and Alex Furnary of CBRE’s Midtown Manhattan office worked on the transaction.

“Playhouse Square is a niche play,” Mr. Fisher said via email. “While the demographics are the same as Main Street, tenants pay less rent due to the ‘off-Main Street’ location. It’s a

win-win for everyone.”Tenants include Qdoba, Lilly

Pulitzer, Organic Market, Pure Barre and Massage Envy, among others.

Playhouse Square also has anoth-er secret weapon, according to HB Nitkin Director of Leasing Craig Way. “Parking is always an issue in Westport and other towns with vi-brant downtown retail corridors,” he said in prepared statements. “Playhouse Square has a unique downtown area setting, with ample on-site parking.”—Guelda Voien

Connecticut Mall Receives $15M Permanent Loan

Playhouse Square

Austin, Texas-based Summit Hotel Properties received a $125 million loan facility arranged by KeyBanc Capital Markets, Regions Capital Markets and Raymond James Bank to increase the company’s borrowing flexibility, the REIT announced this week.

Proceeds from the unsecured seven-year credit facility are being used to repay

outstanding borrowings provided through an existing senior unsecured revolving facility.

The new line of debt carries a floating in-terest rate with a spread dependent on the company’s leverage ratio, according to the press release from Summit Hotel.

The deal also carries an accordion op-tion that allows the borrower to increase

the loan facility to $200 million. “The support of our credit partners is a

validation of the quality of our portfolio and execution of our strategy,” the compa-ny’s president and CEO, Daniel Hansen, said in prepared remarks.

Summit Hotel owns and acquires name-brand, select-service hotels.—Damian Ghigliotty

Summit Hotel Taps New $125M Credit Facility

MOW EXCLUSIVE

6 | april 17, 2015

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Greenwich, Conn.-based Knighthead SSRE REIT, Inc.is suing the owner of East Houston Hotel for defaulting on more than a couple of million dollars in loan payments on the Lower East Side property, according to court documents.

The proprietor of the 42-key hotel at 151 East Houston Street at East Houston and Eldridge Streets owes $2.5 million plus late charges, default interest and costs and ex-penses as of April 1, according to the April 6 complaint filed in New York Supreme Court.

Soho New York Lodging LLC bought the property for $4.5 million in January 2005,

property records indicate. The 14,554-square-foot hotel was con-structed in September 2007 with six floors of guest rooms and a roof terrace, according to its website. Nightly rates for this week range up to $249, according to its website.

Williston Park, N.Y.-located Soho New York Lodging LLC borrowed around $2.4 million from Knigthead SSRE REITT in January and “despite demand, de-fendants have failed and/or re-fused to pay indebtedness which they owe plaintiff,” the suit claims. Among the payments Soho New York Lodging allegedly hasn’t paid is $118,421.98 in property taxes.

The hotel was up for sale with

Eastern Consolidated’s Marion Jones, David Schechtman, Gary Meese and Philip Huang at the end of 2011 into 2012 with a $21 million price tag, Bowery Boogie and The Real Deal previously reported.

A person who answered the tele-phone at Knighthead SSRE REIT said the company had no com-ment. A man who answered the phone for Soho New York Lodging LLC could not comment on the sit-uation. The attorneys for the plain-tiffs didn’t immediately respond to a request for comment. The name of Soho New York Lodging’s attor-ney wasn’t readily available.—Lauren Elkies Schram

Boutique Hotel Hit with $2.5M Foreclosure Suit

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Berkadia expanded its mortgage banking team in Bethesda, Md., hiring a team from Walker & Dunlop con-sisting of J. Tyler Blue, Andrew Coleman, Ted Hermes and Paul Wallace, Commercial Observer has exclusively learned.

The team joins as managing directors.

Mr. Blue will direct the Mid-Atlantic capital markets group and Mr. Coleman will head Berkadia’s National Hospitality group.

The hires are part of a larger push, nationally, on Berkadia’s part, Ernie Katai, head of production at Berkadia, told CO. Specifically the firm is looking to bulk up its East Coast presence and its investment sales personnel.

“It’s a hiring push in general across the country,” he said. “We had 25 percent growth last year; we did $17 billion. The goal this year is $20 bil-lion [between debt and investment sales].”

Berkadia is also looking to diversi-fy its team of professionals, he said. “We are big in the multifamily space and we want to continue to … pro-vide all the tools and use all the tools in our tool box.”

Naming Mr. Coleman the head of hospitality, for instance, is part of what Mr. Katai called “an effort to push to get back into this space in a very serious way.” (Before Mr. Coleman took on the role of head of hospitality, the firm did not have anyone in that role.)

“We immediately become a stron-ger company with this expansion of our Bethesda office,” said Justin Wheeler, CEO of Berkadia in a statement provided to CO. “Tyler, Andy, Ted and Paul bring an incredi-ble amount of mortgage banking and commercial real estate experience to the table.”

CBRE expanded its multifamily agency product offering to include Freddie Mac’s new small balance loan initiative, the firm announced this week.

The small balance program, which focuses on loans between $1 million and $5 million, launched last October.

Financing through the program will be offered on multifamily prop-erties with five units or more, accord-ing to a statement from the firm.

“CBRE has maintained a long and successful relationship with Freddie Mac and is proud to be a part of its new initiative,” said Jeff Majewski, COO of CBRE Capital Markets, in the statement. “Our experienced agency lending team led by veterans Jeff Hurley and Mitchell Kiffe will make for a successful launch.”

About 29 percent of the multifam-ily debt market is made up of small balance loans, with an average size of $1.2 million, according to 2012 data from Trepp.

The program offers both fixed-rate mortgages and hybrid adjustable-rate mortgages. Terms include up to 80 percent LTV with underwrit-ing that is “highly competitive with the banks, allowing for maximum le-verage with an interest-only compo-nent,” according to the statement.

“The Freddie Mac Small Balance Loan program is an important ini-tiative for CBRE,” said Mr. Kiffe in the statement. “There is a strong de-mand for small balance multifamily lending in the marketplace.”

Marcus & Millichap Capital Corporation added two mortgage brokers in the firm’s Brooklyn office, the company announced.

“We are excited to have Roger Kapsalis and Lior Goldberg join the firm. They will focus on provid-ing mortgage brokerage services for our clients in Brooklyn and through-out the New York metro area for an array of property types,” said MMCC Eastern Vice President John Wilcox.

Messrs. Kapsalis and Goldberg come from Cushman & Wakefield (formerly Massey Knakal)’s Brooklyn office.

“Roger and Lior both saw the value of joining Marcus & Millichap’s unique platform,” said J.D. Parker, first vice president and regional manager of the company’s Manhattan, Westchester and New

Haven offices. “We are the leading commercial brokerage firm in the re-gion. The opportunity to work with a growing team that has taken a mar-ket leading position in Brooklyn was attractive for Roger and Lior to bet-ter serve their clients.”

ARA Newmark, a recent acqui-sition of NGKF, hired Ryan Lang to lead its student housing division, the firm announced. He previously served as vice president at CBRE, where he co-led the firm’s national student housing group, according to a statement from NGKF.

“Since acquiring ARA late last year, we have been committed to expanding its resources and adding personnel to not just cement, but also surpass its top ranking in mul-tifamily sales and grow our capi-tal markets presence,” said NGKF President James Kuhn in the state-ment. “With his remarkable track record and extensive relationships with the dominant players in the sector, Ryan is the latest example of our continuing efforts and we are thrilled to welcome such an impres-sive brokerage professional to our ranks.”

David Leopold will join Freddie Mac on April 20, 2015, as vice pres-ident of affordable housing pro-duction for multifamily, the firm announced.

Mr. Leopold services, as well as manages the company’s affordable housing sales team. He will report directly to David Brickman, execu-tive vice president of the multifam-ily business.

“David will be an excellent addi-tion to our multifamily leadership team,” said Mr. Brickman in a state-ment. “He has extensive national leadership experience in multifam-ily lending and tax credit equity and debt products as well as established relationships with many of our cus-tomers. The need for affordable rental housing has never been great-er and David has the skills to help us expand our support of this impor-tant market.”

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The Takeaway“The loan for 390 Park Avenue was transferred to special servicing in December 2014, and it looks as if their maturity date will have come and gone without a payoff,” said Sean Barrie, an analyst at Trepp. “The model maturity date was this Wednesday, and the loan still carries a balance of $98.46 million. The prop-erty backing the loan is a 234-240-square-foot office building that is 100 percent occupied, but 80 percent of the leases will expire in the next six years. March’s special servicer commentary states that ‘the rent-al reset language in the ground lease is not economically viable and has made a refinance of the loan im-probable.’ Though the current DSCR for net cash flows is above water at 1.33, that number has been on the downturn since securitization.”

Source:

Balance ($) Loan Name City Prop. Type

Delinquency Status

FCL Start Date REO Date Origination

DateMaturity Date

3,000,000,000 Peter Cooper Village & Stuyvesant Town Pool

New York MF REO 20140603 20140603 20061117 20161208

225,000,000 Riverton Apartments New York MF REO 20090202 20100311 20061221 20120101

98,461,177 390 Park Avenue* New York OF Non-Performing Beyond Maturity

20050301 20150311

33,589,249 The Shoreham Hotel New York LO Foreclosure 20061101 20161111

31,000,000 1865 Burnett Street Brooklyn MF REO 20090227 20120629 20070215 20120301

30,000,000 300-318 East Fordham Road - A note

Bronx RT 90+ Days 20070301 20170311

25,699,964 1604 Broadway New York RT REO 20070329 20120401

24,249,142 Cross Island Plaza Rosedale OF 90+ Days 20060810 20160811

9,707,573 4234 Bronx Boulevard Bronx OF 90+ Days 20070515 20170601

5,507,843 770 & 780 Garden Street Bronx MF REO 20091203 20121106 20070901 20170901

5,430,954 1500 Astor Avenue Bronx OF Foreclosure 20040714 20140811

4,561,950 47-30 29th Street Long Island City SS Foreclosure 20041025 20141111

2,621,852 509 212th Street New York MF REO 20120702 20071101 20171101

1,917,201 1735 Lafayette Avenue Bronx MF Foreclosure 20090422 20061121 20131201

1,873,827 3126 Coney Island Avenue*

Brooklyn MF Foreclosure 20130130 20050913 20121001

1,514,248 166-33 Jamaica Avenue Jamaica RT Non-Performing Beyond Maturity

20041115 20141201

1,407,650 4878 Arthur Kill Road* Staten Island RT Foreclosure 20060310 20160311

TOTAL: 3,502,542,629 * newly 90+ days delinquent loans

COMMERCIALOBSERVER.COM

12 | april 17, 2015

Q+A

Mortgage Observer Weekly: Where did you grow up and graduate from?

Benjamin Metcalf: I grew up in Berkeley, Calif., in an environment where a commitment to social justice and inequal-ity was a given. After high school, I escaped and headed East, where I received a bach-elor’s degree from Amherst College and a master’s in public policy and urban plan-ning from the Harvard Kennedy School.

How did you get started in govern-ment work?

I was happily working in real estate de-velopment for BRIDGE Housing, a region-al nonprofit that focused on workforce and affordable housing. As the financial crisis hit in 2008, things got a lot harder—pub-lic sources of funding were drying up and bank financing was getting more restric-tive. My boss Carol Galante, tapped by President Obama to serve as deputy assis-tant secretary for the Office of Multifamily Housing Programs, and later Federal Housing Administration commission-er, recruited me to become her senior advi-sor here at HUD.

What are your day-to-day responsibilities?

As deputy assistant secretary for multi-family housing programs, I oversee a vari-ety of rental assistance programs, insured lending programs and special initiatives, in-cluding the Section 8 project-based rental assistance portfolio, Section 202, Section 811, the Rental Assistance Demonstration, and the FHA multifamily insurance programs.

HUD is in the process of restructur-ing. What was the motivating factor for this reorganization?

Through the Multifamily for Tomorrow transformation, MHP is adopting a more effective operating model that will allow employees to accomplish their work with less effort and fewer resources. Between 2008 and 2013, MHP experienced a six-fold increase in origination volume, from $3 billion to nearly $18 billion. In addition, the complexity of the work increased. As a result, application processing times ranged from nine months to two years. Offices and staff were overwhelmed by the high vol-umes. As MHP began to work through these challenges, it became clear that the

business model was in need of an update.

What will the benefits be for FHA borrow-ers and HUD partners?

Multifamily for Tomorrow consists of four components, which allow MHP to provide bet-ter service and improve risk management. The multifamily production and asset management workload is being digitized and distributed even-ly across the country. A single underwriter will manage the end-to-end review of the applica-tion. This increases the efficiency of processing applications, provides improved customer ser-vice and helps better manage risk. MHP is consol-idating its 17 hubs into five new regions and has established four new offices in our headquarters. This enhances communication, consistency, ac-countability, and simplifies the decision-making process.

How close to the finish line are you in that effort?

We’re getting close. We’ve completed the transformation of our headquarter offices, and launched two of our five new regions: the Southwest region and the Midwest region. Our third region in the Southeast will be up and running in July and the final two regions, the Northeast and West regions, are expected to be fully operational by summer of 2016.

What are your expectations for affordable housing in the U.S. in the coming years?

A recent HUD report identified 7.7 million American very poor households paying more than half their income in rent, living in severe-ly substandard housing or both. We have a lot of work to do as a country to ensure that this lack of affordable housing doesn’t become a barrier to families in accessing opportunity.

Benjamin MetcalfDeputy Assistant Secretary for the Office of Multifamily Housing Programs at the U.S. Department of Housing and Urban Development

Benjamin Metcalf

321 West 44th Street, New York, NY 10036

212.755.2400

Guelda Voien Editor

Damian Ghigliotty Senior reporter

Lauren Elkies SchramContributing Writer

Cole Hill Copy Editor

Barbara Ginsburg Shapiro associate publisher

Miguel Romero art Director

Lisa Medchill advertising and production Manager

OBSERVER MEDIA GROUP

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For editorial comments or to submit a tip, please email Damian Ghigliotty at

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