$113M Foreclosure Suit Filed At New York Developer's Wynwood Office
The developer of a recently completed Wynwood office building is at risk of losing control of the property after falling behind on mortgage payments, according to a foreclosure suit filed this week.
New York-based R&B Realty Group was sued Tuesday, with its lender claiming it hadn't made a payment since November on two mortgages totaling $113M tied to The Gateway at Wynwood.
A10 Capital originated the loans, securitized the debt into a CMBS trust and is acting as servicer, according to the suit. It is asking a judge to force a sale of the 14-story building, which was completed in December 2021.
Boise, Idaho-based A10 notified R&B Realty on Feb. 27, following three months of missed payments, that it was accelerating the loan and seeking full repayment of the debt, now totaling $102M, according to the suit.
The debt includes a $110M loan and a $3M loan that R&B secured last February to refinance the Gateway, which has 195K SF of offices, 25K SF of retail and a 512-car garage.
The CMBS loan hasn't been moved to special servicing despite the pending lawsuit. The debt primarily covers the Gateway property at 2916 N. Miami Ave. but also includes two small retail buildings at 2830 and 2834 N. Miami Ave.
Delaware-based Wilmington Trust, acting as the CMBS trustee, filed the suit in Miami-Dade circuit court on behalf of A10 and the other CMBS debtholders. The suit was first noted by property intelligence platform Vizzda.
The defendants, The Gateway at Wynwood LLC and 2830 Wynwood Properties LLC, include two R&B entities controlling the properties.
It also lists several tenants who signed leases at the property that the suit says may have a claim against the landlord, along with Blue Wave Communications, a Miramar-based technology contractor that the suit says filed a lien against the property on Jan. 11.
Wilmington Trust declined Bisnow’s request for comment, saying that the firm doesn’t comment on clients’ ongoing court cases. A10 Capital also declined to comment, and R&B Realty didn’t respond to a request for comment.
R&B Realty acquired the 1.1-acre Gateway site for $11.5M in 2016, property records indicate, and locked in a $76M construction loan for the building in January 2020.
The Gateway project was R&B Realty’s first major project in Miami, and it represented around 45% of the firm’s total portfolio value when the CMBS loan was issued, according to a DBRS Morningstar note from when the loan was securitized.
The largest tenant is e-commerce company OpenStore, which occupies 14K SF and signed for an additional 27K SF last February. Mindspace occupies 30K SF across the entire sixth floor, and Thoma Bravo signed a short-term deal for 21K SF while it waits for the delivery of its space at 830 Brickell in Miami’s financial district.
Morningstar pegged occupancy at around 66% in February 2023, and its researchers said that leasing had stalled.
“The sponsor has been unable to execute a new long-term lease since July 2022, which is partially due to the sponsor having insufficient funds for tenant improvements,” the Morningstar note says, adding that $11.5M of the debt was to be set aside for leasing efforts.
An online brochure from CBRE lists a little more than 32K SF of office space available, which would put occupancy around 84%.
Central Rock Gym signed for 10K SF in June to occupy some of the property’s ground-floor retail. The gym’s build-out is ongoing, and around 8K SF of ground-floor space remains available after BoConcept, a high-end furniture store, vacated the property.
Wynwood has seen a wave of development in recent years as the district, once dominated by industrial buildings, has become a cultural hub. The neighborhood has attracted office tenants looking to capitalize on its creative cachet, including Sony Music, Live Nation Entertainment and Spotify.
Asking rents in the area were at $81.74 per SF at the end of the fourth quarter, according to CBRE, significantly higher than the $70 per SF space at the Gateway is listed for online.
The Morningstar note says the area’s office inventory has nearly doubled in the last decade and that the 224K SF of office space that was under construction at the time amounted to 10% of the area’s total inventory.
“While The Gateway at Wynwood is a recently delivered property, the neighborhood is experiencing a significant increase in inventory, which could limit the upside typically associated with a newly constructed building,” the Morningstar analysis says. “The property could struggle to be attractive and retain tenants as new product continues to enter the market unless above market concessions are granted.”
