Madison Realty rescues Manhattan property from bankruptcy

The private equity real estate firm is offering $19 million in debtor-in-possession financing to the owner of a building in midtown Manhattan to save the property from Chapter 11 bankruptcy.

Madison Realty Capital, the New York-based real estate equity and debt manager, is closing on $19 million in debtor-in-possession (DIP) financing for a residential conversion project located at 11 E 36th Street in midtown Manhattan.  The DIP funding prevented a forced sale through the chapter 11 bankruptcy and will allow the borrower to keep the property, Madison Realty announced in a statement last week.

Proceeds of the first mortgage loan from MRC will be used to retire the previous debt, simplifying the capital stack and permitting the borrower to proceed with the sale of residential condominium units through the bankruptcy process.

“This deal is a perfect example of how fast flexible capital can really make a difference for the borrower.  The property was in chapter 11 bankruptcy, with a complicated capital stack, and was on the verge of being auctioned.  The borrower had an immediate need, and MRC’s ability to quickly supply the necessary financing will help unlock the value of a well-located condo conversion project with great potential” Josh Zegen, co-founder and managing principal of MRC, said in a statement.   

The 14-story, 68,727-square-foot property was originally an office building that was built in 1912.  The borrower redeveloped the property as a 66-unit residential condominium with 2 ground floor retail condominium units and 5,320 square feet of second-floor office space.  The upper-floor residential units feature 12.5-foot ceilings.

MRC is an institutionally-backed real estate private equity firm that pursues real estate equity and debt investments in the middle market.  Founded in 2004, MRC has invested in approximately $2.5 billion of transactions in the multifamily, retail, office and industrial sectors.