$100M pre-foreclosure filed at Clipper Equity’s Brooklyn court building, Clipper disputes default

The special servicer managing a $100 million securitized loan filed a pre-foreclosure action Friday alleging a series of technical defaults at Clipper Equity’s Downtown Brooklyn court building, 141 Livingston Street, that have resulted from an failure to lock in a lease renewal with the city, as well as the general decline in the value of commercial properties. Clipper Equity‘s affiliate Clipper Realty is a public company which owns real estate including 141 Livingston Street, the Brooklyn Civil Courthouse. Both companies are led by David Bistricer. Bistricer, in a letter to the special servicer in October 2024 and included in the court filings, disputes the loan is in default.

Court filings represent the positions of one party and are not necessarily accurate or complete. The Commercial Observer reported on this loan in September after it was declared delinquent.

Case LINK

Midland Loan Services alleges in the complaint that since the city’s Department of Citywide Administrative Services, which manages leasing for the city, did not sign a renewal lease by June 27, 2024, a provision in the loan required Clipper Equity to begin depositing $555,555 into a fund that would be used to prepare the building for another tenant, up to $10 million. The lease ends on December 27, 2025. The city and Clipper Equity remain engaged in negotiations for a renewal.

But negotiating with the city is not enough to comply with the terms of the loan, the complaint says. The city, “did not provide written notice to Borrower by June 27, 2024 to extend or renew the Specified Tenant Lease for a renewal term of five years. Therefore, the Renewal Trigger Period began on that date, and Borrower was obligated to start making Renewal Tenant Reserve Monthly Deposits on July 6, 2024.” The complaint alleges Clipper Equity has made none of the payments.

In response to this, David Bistricer said in the October 2024 letter to Midland, “In reply, and as we have communicated with the Master Servicer on several occasions, we have, in fact, made all required payments under the governing loan documents, and dispute that we owe the Renewal Tenant Reserve Monthly Deposits, the principal issue in question. As Mr Ivanhoe, senior partner Greenberg Traurig, explains in more detail in the attached letter, the Renewal Tenant Reserve Monthly Deposits are not required at this time because (a) the proposed NYC lease being renewed is a five-year lease under the terms of the Mortgage Loan and (b) no Renewal Tenant Reserve Monthly Deposits would berequired, in any case, until 18 months after commencement of a Renewal Trigger Period.”

In addition, the complaint alleges the borrower has defaulted on another requirement of the loan, to maintain a net worth of $100 million. The complaint says, the “Guaranty requires Guarantor (an LLC, not an individual person) to maintain a net worth of not less than $100,000,000 and a liquidity of not less than $15,000,000… In or around early December 2024, Guarantor provided Trustee with financial statements for the years 2022 and 2023 reflecting a net worth of $7,235,000––which amount is clearly below the $100,000,000 net worth threshold required.”

In 2021, Clipper Equity through the entity 141 Livingston Owner LLC as borrower signed a loan agreement with lender Citigroup’s Citi Real Estate Funding Inc. valued at $100 million at 141 Livingston Street. The deal closed on February 18, 2021 and was recorded on March 3, 2021.
The property contains a total of 193,195 square feet of built space. The average loan per buildable square foot is $518. The financing increased the debt by nearly a third, adding $26 million to $73 million, which is the remainder of the original $79.5 million principal.

The property

The office building in Downtown Brooklyn has 193,195 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 75 feet and is 147 feet deep with a total lot size of 12,536 square feet. The lot is irregular. The zoning is C6-4.5 which allows for up to 12 times floor area ratio (FAR) for commercial. The city-designated market value for the property in 2022 is $44 million. The most recent loan totaled $100 million and was provided by Citibank on February 18, 2021.

Prior sales and revenue

The 193,195-square-foot property generated revenue of $9.7 million or $50 per square foot, according to the most recent income and expense figures.

Development

For the tax lot building, it received its initial certificate of occupancy on December 19, 2014.

Violations and lawsuits

According to city public data, the property has not received any significant violations in the last year.

There were no lawsuits or bankruptcies filed against the property for the past 24 months.

The neighborhood

In Downtown Brooklyn, The bulk, or 40 percent of the 22.4 million square feet of commercial built space are office buildings, with elevator buildings next occupying 24 percent of the space. In sales, Downtown Brooklyn has near average sales volume among other neighborhoods with $390.7 million in sales volume in the last two years and is the 18th highest in Brooklyn. For development, Downtown Brooklyn has near average amount of major developments among other neighborhoods and is the 2nd highest in Brooklyn. It had 3 million square feet of commercial and multi-family construction under development in the last two years, which represents 13 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of nine of the 13 commercial properties representing 405,941 square feet of the 420,032 square feet. The largest owner is Clipper Equity, followed by Extell Development and then Nyc Department Of Education. On the tax block, there were two new building construction projects totaling 551,491 square feet. The largest is a 363-unit, 443,418 square-foot residential (R-2) building submitted by Feil Organization and filed by Jeff Mongno with plans filed November 17, 2021 and permitted April 21, 2022. The second largest is a 108-unit, 108,073 square-foot residential (R-2) building submitted by Quinlan Development Group and filed by Timothy Quinlan with plans filed September 9, 2014 and permitted June 10, 2015.

The owner

The PincusCo database currently indicates that Clipper Equity owned at least 30 commercial properties with 6,399 residential units in New York City with 5,245,283 square feet and a city-determined market value of $705.1 million. (Market value is typically about 50% of actual value.) The portfolio has $2 billion in debt, with top three lenders as JPMorgan Chase, Bank of China, and Valley National Bank respectively. Within the portfolio, the bulk, or 82 percent of the 5,245,283 square feet of built space are elevator properties, with D6 properties next occupying 11 percent of the space. The bulk, or 72 percent of the built space, is in Brooklyn, with Manhattan next at 28 percent of the space.

The surrounding

Within a 400-foot radius of 151 Livingston Street, PincusCo identified three commercial real estate items of interests occurred over the past 24 months. Of those three items, one was for major renovation including a certificate of occupancy change. It was a permit issued on July 20, 2023 for the $271,250 renovation of 3,875-square-foot mercantile (M) building with zero residential units at 453 Fulton Street. One of those three items was a sale which Edison Properties bought the 431,428-square-foot industrial (G6) on 55 Smith Street and eight other properties for $396.4 million from Edison Properties on August 4, 2023. One of those three items was a loan which Avery Hall Investments borrowed $140.2 million from KKR & Co. secured by the 237,587-square-foot, 142-unit rental (D6) on 1 Boerum Place on June 4, 2024.

Direct link to the property’s ACRIS page and link to DOB NOW portal.