Brooklyn Industrial NPL Acquisition

Investment Strategy

Introducing "The Whale" Industrial Property in Brooklyn, NY

High cash on cash and a favorable basis by capitalizing on the acquisition of a non-performing loan (NPL) and pursuit to foreclose and secure 100% ownership interest in the property.

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Offering Overview

Brooklyn Industrial NPL Acquisition

Minimum Investment
Target Hold
5 Years
Net Avg Cash-on-Cash
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Net Equity Multiple
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NPL Acquisition of an Iconic Property in Brooklyn, NYC

For the first time on our platform, investors have the opportunity to invest in an LP equity investment in the recent acquisition of a non-performing loan (NPL) and pursuit to foreclose and secure 100% ownership interest in The Whale, a 423K SF asset, currently an office building that will be repurposed into an industrial building. A well known sponsor, Capstone Equities LLC, acquired the NPL in May 2023 for $53M, which represents a ~30% discount below the unpaid balance on the first-mortgage loan.

Given that the Borrower is in default, this presents a unique opportunity to the Sponsor to secure full ownership of the Property through a UCC foreclosure. The Sponsor is highly adept at obtaining ownership via UCC foreclosures. Since acquiring the NPL, the Sponsor has hired a broker to initiate the UCC foreclosure process.

  • 100% ownership interest is being pursued by the Sponsor via a UCC Foreclosure. The Sponsor’s purchase price inclusive of closing costs is $53M compared to a remaining balance of $76M. The purchase price inclusive of closing costs represents a 30% discount to the remaining unpaid balance.
  • The Sponsor’s purchase price inclusive of closing costs represents a 35% discount to the prior Sponsor’s purchase price, and a 63% discount to comparable industrial transactions.
  • The Property is currently ~70% vacant, including the renovated space catering to creative office use, in a submarket with ~3.8% of industrial vacancy.
  • The Sponsor intends to license 60K SF of the second floor to affiliate co-warehousing operator, Portal, who has a waitlist of over 40 tenants for their intended co-warehousing suites ranging from 250 SF to 2,500 SF.
  • The remaining industrial space appeals to (overflow) tenants unable to afford the higher-prices nearby Industry City and not categorized as light manufacturing to qualify for a lease at the EDC-owned/ regulated Brooklyn Army Terminal.

About the Sponsor

  • Capstone Equities is a seasoned Sponsor, acquiring over $2.5B across 25 transactions since 2006.
  • The Sponsor has extensive experience with NPL acquisitions, having acquired over €500M in NPLs in Europe as well as three NPL hotel investments in New York in 2022 (The Renwick, The Gregory, and the Life Hotel). The Sponsor exited the loan on The Gregory, which was acquired for a 30% discount to par and was repaid in full two months later.
  • Capstone has worked with top-tier institutional investment partners such as The Carlyle Group, Capmark Investors, Silverstein, Angelo Gordon, and Harbor Group International and collectively have exited eight deals with a total capitalization of $1.05B.

About the Property

  • The Property recently underwent extensive renovation/conversion to office with ~$30M in capital expenditure and floors two through four are in great condition, which is expected to lower tenant improvement needs for prospective industrial tenants.
  • The Property is well-situated in the increasingly appealing industrial office corridor in Sunset Park bolstered by new developments such as nearby $320M Steiner Studios, the $160M Made in NY Campus, as well as the redevelopment of the 450-bed NYU Langone Center.

FAQs about this Offering

A non-performing loan is a loan where the borrower has defaulted. Commercial loans are considered to be non performing if the debtor has made zero payments of interest or principal within 90 days or is 90 days past due. An NPL can be purchased at a fraction of its original value, giving investors favorable terms after foreclosure such as potentially high cash flow and overall return due to acquiring at such a discount.

Specifically, this investment is an LP equity investment into the property (that can be visually viewed in the “Financials and Structure” section). The Sponsor recently purchasedwill be purchasing the non performing loan, andthen will foreclose on the borrower who defaulted on their first-mortgage loan; therefore, the Sponsor will take over the Pproperty. The Sponsor will be foreclosing under a Uniform Commercial Code foreclosure. The UCC is the national legal framework that governs commercial business transactions.The Sponsor will use Article 9 which allows a public or private nonjudicial auction of secured real estate collateral, like the property in this investment. For lenders, enacting a foreclosure, a UCC property sale is the final stage in the process before asset recovery 1.

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