In today’s uncertain real estate investing marketplace, a disciplined risk-management process is more important than ever. The value of such a strategic approach was demonstrated by the successful, at-par exit strategy that Case Real Estate Capital, LLC (Case) executed on an $11.9 million senior note secured by a five-building, 105,560-square-foot warehouse-industrial portfolio. The asset was located on approximately 3.5 acres in the Hunts Point section of the Bronx, N.Y.
When Case purchased the note, the issuer, a respected business owner based in New York State, was unable to agree on refinancing terms with the then-note owner. “The business was a going concern,” said Sandy Herrick, managing principal, who founded Case in early 2013 as a middle-market situational lending platform. “But at the time it suffered from a series of tax liens that impacted its cash flow.”
Case professionals however, determined that there was significant equity value in the property, which is situated in a key import/export logistics node within New York City with a vacancy rate of two percent or less. “By bringing money and a high level of patience to the table, we were able to buy the note and give the asset owner some breathing space,” Herrick added. “This enabled him to unlock the value of the property and redeem the note, at par, after about two years.”
The tax liens complicated the original purchase, which required a global workout, and the complexity was compounded by the fact that the note was in default at the time. Although the asset owner’s lawyers had to obtain the state’s approval before the deal could be sealed, Case was confident of a resolution.
“The business owner needed assistance to navigate some issues, but the due diligence we conducted pointed to continued robust demand for Hunts Point warehouse/industrial space, particularly as other industrial sites around New York are demolished or repositioned into alternative land uses,” Herrick added. “Looking ahead, we anticipate similar acquisition opportunities.”
The Hunts Point transaction marked Case’s second deal with the note seller — a hedge fund with a strong track record of achieving defaulted note resolutions — for a well-located industrial asset in the New York/New Jersey submarket.
A northern N.J.-based commercial real estate investment firm, Case concentrates on transactions in the $2.5 million to $40 million range for transitional properties. Case is active as a high-yield private lender in New Jersey, New York and Florida as well as in the Northeast and Mid-Atlantic regions; a financier of transitional properties; a purchaser of performing, sub- and non-performing debt; and a mezzanine and equity investor. Funds can be deployed as real estate debt purchases, bridge and acquisition loans or rescue and restructure capital. Case is one of the leading bridge lenders in New Jersey, New York and Florida.