Capstone Equities acquires Whale Building in Sunset Park with $49.5M loan from Argentic

Capstone Equities through the entity 14 53 Owner LLC acquired the Whale Building, an office building (O6) at 14 53rd Street in Sunset Park, Brooklyn from Nightingale Properties through the entity Onh 14 53rd St LLC. The deed was a no-consideration transfer. Capstone held the prior debt with an original principal of $88 million.
The Real Deal reported last month on the auction that Capstone won as the credit bidder. Greg Corbin of Northgate Real Estate Group and Aaron Jungreis of Rosewood Realty Group marketed the property in preparation for the auction.
The deal closed on August 25, 2023 and was recorded on September 7, 2023. The property has 382,080 square feet of built space according to a PincusCo analysis of city data.
To finance the acquisition, Capstone Equities through the entity 14 53 Owner LLC as borrower signed a $49.5 million loan with lender Argentic Investment Management through the entity Argentic Real Estate Investment 2 LLC.
The loan closed on August 25, 2023 and was recorded on September 7, 2023. The prior lender was Capstone Equities which held debt that had an original loan amount of $88.9 million. The signatory for Capstone Equities was Justin Adelipour.

Nightingale Properties bought the building on September 25, 2020, for $84.1 million.

Prior sales and revenue

Prior to this transaction, PincusCo has records that the buyer Capstone Equities purchased one property in one transaction for a total of $41 million and has no record it sold any properties over the past 24 months.
The seller Nightingale Properties sold one property in one transaction for a total of $79.6 million over the same time period.

The property

The office building in Sunset Park has 382,080 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 621 feet and is 181 feet deep with a total lot size of 112,665 square feet. The zoning is M3-1 which allows for up to 2 times floor area ratio (FAR) for manufacturing The city-designated market value for the property in 2022 is $41.4 million.

Violations and lawsuits

The property was involved in three lawsuits and zero bankruptcies over the past two years. The highest value suit was an $88 million money judgment concerning a loan filed on July 11, 2023, by Capstone Equities against Nightingale Properties alleging that Elchonon Schwartz of Nightingale Properties is bound by guarantys including recourse, carry, completion, payment, environmental, and through them owes more than $90 million because the loan with an original principal of $88.9 million is, the complaint says, in maturity default. “Although prior defaults existed, pursuant to the terms of the Senior Loan Note, the Senior Loan Mortgage, and the Senior Loan Agreement, all sums due and owing under the Senior Loan Note became immediately due and payable on April 9, 2023.” Nightingale Properties obtained an $88.9 million loan from TPG. TPG sold the loan to Capstone Equities May 17, 2023.  Nightingale Properties bought the building on September 25, 2020, for $84.1 million, but the seller Madison Realty Capital retained a 25 percent stake, according to news reports from the time.

Development

On the lot, there is one active major alteration construction project for a 390,237 square-foot F-2 building. The project was submitted by Daniel Cobleigh with plans filed January 13, 2016 and permitted April 12, 2017.

The neighborhood

In Sunset Park, The bulk, or 30 percent of the 34 million square feet of commercial built space are industrial buildings, with specialty buildings next occupying 24 percent of the space. In sales, Sunset Park has 1.2 times the average sales volume among other neighborhoods with $413.2 million in sales volume in the last two years and is the 18th highest in Brooklyn. For development, Sunset Park has had very little major development activity relative to other neighborhoods.It had 24,854 square feet of commercial and multi-family construction under development in the last two years, which represents 0.07 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of four of the 13 commercial properties representing 489,389 square feet of the 589,383 square feet. The two identified owners are Nightingale Properties and City Of New York.
There are no active new building construction projects on this tax block.

The majority, or 65 percent of the 589,383 square feet of built space are office buildings, with specialty buildings next occupying 21 percent of the space.

The seller

The PincusCo database currently indicates that Nightingale Properties owned at least six commercial properties in New York City with 1,519,103 square feet and a city-determined market value of $222.6 million. (Market value is typically about 50% of actual value.) The portfolio has $106.9 million in debt, with top three lenders as TPG Real Estate Partners, East West Bank, and Capstone Equities respectively. Within the portfolio, the bulk, or 100 percent of the 1,519,103 square feet of built space are office properties, with specialty properties next occupying 0 percent of the space. The bulk, or 75 percent of the built space, is in Manhattan, with Brooklyn next at 25 percent of the space.

The buyer

The PincusCo database currently indicates that Capstone Equities owned at least five commercial properties in New York City with 574,111 square feet and a city-determined market value of $172.6 million. (Market value is typically about 50% of actual value.) The portfolio has $41 million in debt, borrowed from Aareal Capital and Yellowstone Real Estate Investments. Within the portfolio, all identified are hotel properties. They are all located in Manhattan.

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