CMBS servicer files to foreclose on Spruce Capital’s $46M Bushwick loan

The special servicer for a commercial mortgage-backed security filed yesterday to foreclose on Spruce Capital Partner’s loan with an original principal of $46 million given in 2015 to refinance the 127-unit rental building Dekalb 1209, at 1209 Dekalb Avenue in Bushwick, Brooklyn. Bloomberg reported on the potential for a foreclosure action in January 2021.

This is at least the second foreclosure for the parcel, which fell into distress following the recession of 2008, and was foreclosed on in 2012. The building was completed in 2013 and Spruce Capital bought the property in 2014 for $58 million, financed with a $42 million loan from Deutsche Bank. Spruce obtained the $46 million refinancing in October 2015, at a recent peak of the New York City real estate market.

The CMBS special servicer, representing the bondholders of COMM 2015-LC23, alleges a maturity default of the $46 million interest-only loan and is seeking to foreclose on it and to pursue deficiency guarantees, if any, against Spruce principals Joshua Crane and Robert Schwartz. The suit alleges the total amount due as of July 2021 was $48.6 million.

Court filings are the positions of one party, and are not necessarily accurate or complete.

According to the complaint, “Pursuant to Article II of the Note and Section 2.3.2 and Schedule I of the Loan Agreement, Borrower agreed to pay “the outstanding balance of the principal sum of th[e] Note and all accrued and unpaid interest thereon and all other amounts due under the Loan Agreement and the other Loan Documents” (the “Debt”) on October 6, 2020 (the “Maturity Date”).  Borrower failed to pay the Debt in full on the October 6, 2020 Maturity Date, or at any point before or after.” on or around October 27, 2020, Plaintiff sent Borrower a notice of default (the “Notice of Default”) ” Pursuant to the Loan Documents and applicable law, the unpaid balance of Borrower’s obligations under the Loan Documents, calculated as of July 6, 2021, totals at least $48,586,191.12, and includes (i) the unpaid principal amount of $46,000,000, (ii) interest at the non-default rate (“Note Rate”) in the amount of $549,412.50, (iii) separate and additional default interest in the amount of $1,744,166.67, (iv) protective advances and various fees, costs and expenses totaling $643,662.72, less certain funds held in suspense, reserve, or escrow accounts. Attorneys’ fees and costs, due diligence report costs, title charges, and other amounts due and owing pursuant to the Loan Documents and applicable law continue to accrue. Interest accrues at the Note Rate of 4.725% per annum, and default interest accrues at the additional rate of 5.00% per annum (the “Default Rate”), for a cumulative rate of 9.725% per annum.” https://www.crainsnewyork.com/residential-real-estate/class-action-status-bolsters-tenants-overcharge-case-against-spruce-capital Bloomberg reported in January 2021 citing securitized loan documents, that the lender expected for foreclose on the property since it was in default, but they were also “discussing workout alternatives with the borrower.”

Direct link to Acris document. link