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Madison Realty Capital Buys Debt in Large Multi-Family Project in Gowanus

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By: Ellen Cans

Josh Zegen’s Madison Realty Capital is buying debt in Aby Rosen’s colossal multifamily project in Gowanus, Brooklyn. As reported by the Real Deal, RFR, led by Rosen, defaulted on the $80 million mortgage backing on its massive Brooklyn development site at 175 Third Street. Madison Realty Capital saw it as an opportunity and swept in to purchase the distressed debt, positioning itself to wrestle control over the project. Per sources for the Real Deal, Madison may have plans to foreclose on RFR’s interest in the site, to take it over.

RFR, founded in 1991, has plans to develop an 827-unit multifamily development, across from the local Whole Foods Store. The 20-story mixed-use project includes ground-floor retail space, and enclosed parking. A completion date has yet to be announced.

Back in 2018, when RFR purchased the three-acre property for $115 million from SL Green and Kushner Company, it financed the block-long development site with a loan from Union Labor Life Insurance Company. Unfortunately, with multi-family construction in the city lagging, the developer defaulted on that loan. Per the Real Deal, Union Labor enlisted David Schechtman at Meridian Investment Sales to sell the debt. Madison Realty Capital teamed up with Marvin Azrak’s Maguire Capital Group to scoop up the note. The partners have scheduled a UCC foreclosure of RFR’s interest in the property.

RFR owns and manages some of Manhattan’s most prestigious signature office properties— including 375 Park Avenue (known as The Seagram Building), and 405 Lexington (The Chrysler Building). It also boasts properties in cities including: Miami, Seattle, Stamford, San Francisco, Denver, Frankfurt and Tel Aviv. It has, however, already lost a number of NY properties and is facing foreclosure on others. It has already lost control of the Lever House, an illustrious office building at 390 Park Avenue, as well as the Gramercy Park Hotel, a luxury 197-room hotel located at 2 Lexington Avenue.

RFR’s Gowanus project is one of the largest apartment developments under construction in Brooklyn. Work at the site, however, has been stalled. Rosen’s company attempted to sell the property, offering it at more than $200million in 2019. There was, however, no buyer found. High interest rates and tight lending has led many projects to stall. Also, housing projects in particular, lagged as developers waited for the state to renew the 421a, a tax abatement helping developers who promise to set aside some units as affordable housing. Per the Real Deal, in May, NYS finally extended the construction completion deadline for 421a by five years, till 2031, breathing life into lagged residential projects, such as RFR’s.

Representatives for RFR and Madison Realty Capital did not immediately respond to The Real Deal’s requests for comment.

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