Iron Point Said to Buy Defaulted Moinian Debt Tied to New York's W Hotel

Iron Point Titan Ventures LLC, a real estate private-equity firm, bought defaulted debt tied to downtown Manhattan’s W Hotel as funds seek distressed opportunities, according to a person briefed on the transaction.

Joseph Moinian, the developer who has amassed a $4.4 billion property portfolio since 2001, defaulted on the $25 million mezzanine loan in October 2009 and was negotiating with the servicer to rework terms, according to Real Capital Analytics Inc. Iron Point purchased the W Downtown Hotel & Residences debt at a discount last week, said the person, who asked not to be named because the sale wasn’t public.

Investors have been acquiring so-called mezzanine loans as property owners struggle with debt taken on before the real estate decline. Holding subordinate debt gives investors the option to take over if the borrower is unable to make payments. Dubai World’s Istithmar unit lost control of the W New York Union Square hotel, for example, to LEM, an affiliate of Lubert- Adler Real Estate Funds, in a mezzanine foreclosure auction in December.

“A brand-new property with a high-quality flag at a discount in this city is bound to be a good investment for any investor,” said Ben Thypin, an analyst at Real Capital in New York.

Gene McQuown, a managing director at Iron Point, declined to comment. Eric Gerard, a spokesman for Moinian, had no comment.

Iron Point, with offices in Washington, already owned a separate, $40 million portion of mezzanine debt, the person said. Mission Capital Advisors, a New York-based loan advisory firm, managed the sale, according to the person.

Debt Load

Mezzanine loans are a form of higher-interest debt that’s subordinate to a first mortgage. Unlike a mortgage, through which the bank has a lien on the property itself, a mezzanine loan is secured by a pledge of equity ownership in the borrowing entity that bought the property.

LEM gained control of the W Union Square in the foreclosure auction, and then put the hotel into bankruptcy in March. In July, Host Hotels & Resorts Inc., as part of the settlement to bankruptcy proceedings, bought the hotel in a partnership with Istithmar World PJSC as a minority partner.

In August, an investor group led by Bill Ackman tried to take control of Manhattan’s Stuyvesant Town-Peter Cooper Village by buying $300 million of mezzanine debt for 15 cents on the dollar.

The group scheduled a so-called mezzanine foreclosure that could have put it in control of the legal entity that owns the apartment complex and place it into bankruptcy, thwarting senior lenders from foreclosing. A New York state judge halted the Ackman venture’s plans.

Condo Suit

In addition to the $65 million in mezzanine debt, the W Downtown is encumbered by a $245 million first mortgage originated in part by a unit of Bonn-based Deutsche Postbank AG in March 2007, according to Real Capital.

Three condominium buyers at the W Downtown earlier this month sued Moinian, seeking a combined $665,000 in deposits back after values fell and fewer than a third of units went into contract.

The W Downtown, which opened in August, offers views of the World Trade Center memorial and waterways, according to the hotel website. The lobby features a chandelier with 1,260 individually hung glass droplets, black mini-mosaic-tiled walls and polished granite floors.

Guest beds feature 350-thread count Egyptian cotton sheets, goose-down comforters and pillows. Bathroom “rainforest” showers with frosted-glass walls are set against snakeskin reflective porcelain tiles. Rates for the week of Nov. 8 start at $599 plus charges and tax.

Purchases Rising

Hotel purchases are increasing faster than deals for office buildings, shopping centers or any other type of U.S. commercial property as rising occupancies and room rates benefit the lodging industry. Sales of hotels jumped 136 percent in the first half of 2010 from a year earlier, the biggest gain among five commercial real estate categories tracked by Real Capital.

Hotel occupancies in the top 25 U.S. markets climbed to 65 percent this year through August from 61 percent a year earlier, according to Smith Travel Research Inc. of Hendersonville, Tennessee. The occupancy rate in New York, the best performer among U.S. regions, was 80 percent.

SL Green Realty Corp., New York’s biggest office owner, agreed earlier this week to provide financing to help Moinian stave off a takeover of his 3 Columbus Circle tower.

Moinian, whose holdings include a stake in Chicago’s Willis Tower, the tallest building in the U.S., restructured about $550 million of debt in January for three lower Manhattan buildings.

The Moinian Group renegotiated $340 million of mortgage and mezzanine loans for 180 Maiden Lane, a 1.1 million-square-foot (102,000-square-meter) skyscraper, according to two people familiar with the transaction. It also obtained a new $130 million first mortgage on the Ocean Residences apartments and a loan extension on 17 Battery Place, a 22-story office property.

For Related News and Information: Stories on hotel industry: {NI LOD} S&P Hotels Index Year-to-Date Return: {S15HOTL <Index> MRR 10} Stories on New York hotels: {TNI NYC LOD}

To contact the reporters on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net; Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

• Facebook Share
• LinkedIn
• Google +1
• COMMENTS
• Print
• QUEUE