Oaktree Forecloses on 111 Wall Street Office Tower Redo

Oaktree Capital Management is foreclosing on a $100 loan backed by 111 Wall Street, an office redevelopment project in Lower Manhattan.

Nightingale Properties and InterVest Capital Partners own the 1.2M SF tower, which was built in 1968. The partners lined up a $500M financing package to fund the modernization of the 24-story building in 2021.

The renovation is almost finished, but the building remains vacant and the owners have fallen behind on their debt payments, including a $100M mezzanine loan held by Oaktree, Green Street reported.

Oaktree has tapped JLL to run a foreclosure auction for the property, scheduled for Sept. 19. According to the report, the Los Angeles-based investment manager is planning the use the face value of the mezzanine loan to outbid other suitors.

The joint venture of Nightingale and InterVest also is on the hook for buildings it owns with separate partners at 300 Lafayette Street in Manhattan and 1500 Spring Garden Street in Philadelphia.

TPG Real Estate Finance Trust has been shopping a nonperforming $132M mortgage on the leasehold interest in the 82K SF Lafayette Street building, which Nightingale and InterVest bought for $125M in 2019, Green Street said.

The Lafayette building has Microsoft anchoring 63K SF of office space, but 19K Sf of ground-floor retail space is vacant.

The 1.8M SF Centre Square office complex, owned by Nightingale and InterVest and located at 1500 Market Street has entered receivership, Bisnow reported last week. Nightingale and InterVest stopped making payments on their $368M CMBS loan in January after it matured in December. The JV bought Centre Square in 2017 for $312M.

Financial tranches that could be wiped out by Oaktree’s foreclosure of 111 Wall Street include a senior mortgage written by PICO for more than $200M, and junior mezzanine debt provided by SKW Funding and Bain Capital, the report said.

Petros PACE Finance also provided the project with $89M in the form of a commercial Property Assessed Clean Energy loan specifically tied to financing energy-efficient improvements.

Nightingale and an earlier version of InterVest known as Wafra Capital Partners, bought the leasehold interest in 111 Wall Street in January 2020 for $175M, a deal that Newmark brokered for Zurich Insurance.

Citigroup had vacated the building, which the partners planned to modernize by adding a bronze-trimmed curtain-glass façade and technology including View smart glass, which automatically tints to conserve energy and looks really snazzy.

The plan was to market the renovated building as Class-A space in the heart of the Financial District with spectacular views of New York’s Harbor, as well as a new food court and a public plaza. But the valuation on the property has dropped well below what the partnership paid for it.

On top of all of this distress, Nightingale is embroiled in a scandal over its pending purchase of the Atlanta Financial Center for $180M, which Nightingale was planning to help finance with equity from CrowdStreet. A fiduciary hired by CrowdStreet has raised an accusation of misappropriation of funds.