Eichner inventory loan grows to USD 204m, Baupost said to be leading bidder

18 October 2017

Developer Ian Bruce Eichner is close to completing a USD 204m financing package backed by inventory of residential condominiums at his Madison Square Park Tower project, said three sources familiar with the situation.

 

The loan has ballooned to that amount, up from the USD 180m Eichner was reportedly seeking last month. Hedge fund Baupost Group is tipped as the leading bidder, said the first and second source. The third source familiar said that a loan of that risk profile “is exactly where Baupost plays.”

 

Pricing is likely to be between 850bps-900bps over LIBOR, the first source said. That is the normal range for loans of this type, backed by the unsold inventory at a complete project. The building, at 44 East 22nd Street in Manhattan, reportedly topped out in July. 

 

Neither Baupost nor Eichner responded to a request for comment by the time of publication.

 

The developer was in talks with banks earlier this year for a USD 125m inventory loan backed by the same properties, but after sales at the tower picked up, Eichner abandoned talks for the financing, planning instead to use cash to pay off his USD 340m construction loan from Goldman Sachs, which was originated in 2014, and retain equity in the project.

 

Last month, The Real Deal reported Eichner was back in the market, this time for USD 180m in inventory financing, despite having supposedly paid off the Goldman loan. 

 

But a source close to the situation said Eichner repaid the Goldman loan only this week. Eichner also reportedly took a USD 80m multipurpose facility from Fortress Investment Group and Dune Real Estate Partners in 2014 for the project; it was not immediately clear if that loan remained outstanding. 

 

Now, Eichner is prepping to take the larger loan, even as the market for high-end condo product in Manhattan is cratering. In 2Q17, luxury residential properties in Manhattan spent 37 percent more time on the market than in 2Q16 and 34 percent more time on the market than in 1Q17, according to data from Douglas Elliman.

 

It was not clear how many condo units would back the new loan, but 75% of units in the building were reportedly sold as of early July. The first source said the USD 204m in financing would put the lender in at a basis of about USD 2,000 per sq ft. While several units are in contract for over that price per sq ft, several others are in contract at USD 1,500 per sq ft or thereabouts, according to StreetEasy, which tracks New York City apartment sales and rentals.

 

The 83-unit, 63-story Madison Square Park Tower launched sales in 2015.

 

The Real Deal said the apartments backing the loan Eichner was looking for are the more expensive units. A penthouse apartment at the property is currently asking USD 48m and a 56th floor unit is asking USD 20.8m, per StreetEasy. There are 35 current sales listings in the building, but some of those may not be sponsor units. So far 67 sales have closed in the building and 26 are in contract.

 

Eichner last year handed an East Harlem site where he had planned more than 600 rental units back to a lender. After The Durst Organization, a Manhattan developer, reportedly moved to foreclose on the development site after acquiring USD 100m in distressed debt, the two worked out a deal to give the project over to Durst for an undisclosed sum.

 

by Guelda Voien