Bluestone UCC foreclosure on 85 Flatbush blocked by Ch. 11 filing
By Adam Pincus
A Chapter 11 filing Friday afternoon halted a scheduled mezzanine foreclosure auction sought by lender Bluestone Group which was planned for that day and which could have transferred control of 85 Flatbush Avenue Extension in Downtown Brooklyn to the Bluestone Group.
85 Flatbush is a 132,641-square-foot new construction property which houses the 174-key Tillary Hotel Brooklyn and a 58,652-square-foot residential multifamily building with 64 units. The unit mix is 29 two-bedrooms, 26-one bedrooms and nine studios. Currently only five are occupied, according to the bankruptcy filing. The intention is to convert the residential component into condominiums. The building obtained its initial temporary certificate of occupancy in July 2015.
This hotel, as others in the city, was severely impacted by the Covid-19 pandemic and its related restrictions. In fact, the hotel closed in April, and then it reopened from mid-May to the end of June as a homeless shelter. The hotel reopened to the public on July 15, 2020, according to the filing.
Bloomberg first reported the Chapter 11 petition on Friday.
Hager and Rubin Equities were identified as buyers of the property in September 2019, as PincusCo first reported, for approximately $95 million from the Chetrit Group and Read Property Group. The combined sale price in property records was $90 million.
The acquisition was financed with a $70 million first mortgage from Madison Realty Capital and a $6 million mezzanine loan from Eli Tabak’s Bluestone Group, The borrower signatory for the first mortgage was Jacob Brach.
Earlier this year, Bluestone notified the owners that the mezzanine loan was in default and that it would hold an auction marketed by Greg Corbin and Aaron Jungreis of Rosewood Realty Group, to sell the debt, The Real Deal reported in September 2020. The auction was first set for October.
The auction was rescheduled for November 30 and later December 18, according to the bankruptcy filing.
The signatory for the Chapter 11 filing was David Goldwasser of FIA Capital Partners, who was identified as a member of the mezzanine group as well as chief restructuring officer for the filing entities 85 Flatbush RHO Mezz LLC, 85 Flatbush RHO Hotel LLC and 85 Flatbush RHO Residential LLC.
The filing is seeking in part an order from the court allowing the hotel to use the secured lender’s cash collateral to fund ongoing expenses. The filing projects revenue for the hotel between $87,733 per month and $140,373 per month over the next four months.