Judge orders foreclosure sale of BentallGreenOak, Capstone building with $69M in debt

A New York State Supreme Court judge ordered the foreclosure sale of BentallGreenOak and Capstone Equities’ 5 East 59th Street, a Plaza District office and retail building with $69.7 million in debts, according to the order signed February 6, 2023. The order did not specify a sale date, only noting the sale must be held within a year.

The decision comes 15 months after United Overseas Bank filed the pre-foreclosure action 850266/2021 against BentallGreenOak and Capstone, on  November 17, 2021, which PincusCo reported on at the time. Underscoring the challenges confronting the owners, the building received no revenue at all in 2022, according to court filings.

The sale is another example of the impact that falling retail and office values have had on investment sales combined with tighter lending standards, especially those acquired during the market boom between 2014 to 2018. Over the past year, lenders filed pre-foreclosure actions against owners of retail-focused properties, including Thor Equities, Wharton Properties, Dune Real Estate Partners and others.

Capstone Equities has been an active player on both sides of the distress market over the past year, both acquiring assets and fighting to retain them. For example Capstone acquired a note with an original principal of $41 million secured by a hotel in Manhattan in late December. But on the defense side, Yellowstone bought the note on Capstone’s Maxwell Hotel.

In 2015, BentallGreekOak, at the time just GreenOak, partnered with Daniel Ghadamian and Josh Zamir’s Capstone Equities to pay $85 million for the former Playboy Club location, a 9-story building that includes 45,796 square feet of space, composed of 35,211 square feet of office and 10,585 square feet of retail. To finance the purchase, United Overseas Bank lent the owners $59.15 million. That loan matured June 18, 2021, and the owners were not able to refinance, and several months later the bank filed the pre-foreclosure action.

The building is not generating any income, according to a report covering December 2022 from the building’s receiver, Klaus Kretschmann. Kretschmann was appointed on June 16, 2022.

The PincusCo database currently indicates that BentallGreenOak owned at least five commercial properties with 394 residential units in New York City with 1,797,402 square feet and a city-determined market value of $567.3 million. (Market value is typically about 50% of actual value.) Within the portfolio, the bulk, or 70 percent of the 1,797,402 square feet of built space are office properties, with elevator properties next occupying 25 percent of the space. The bulk, or 95 percent of the built space, is in Manhattan, with Brooklyn next at 5 percent of the space.

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