Blue Owl Capital, UIP Hand Navy Yard Apartment Building To Lender

One of the first apartment buildings from Navy Yard’s early 2000s redevelopment wave has been taken over by its lender.

Torchlight is now the owner of the 266-unit Onyx On First building at 1100 First St. SE, a result of the bankruptcy proceedings of the prior owner, Onyx Owner LLC.

Blue Owl Capital is the majority owner in Onyx Owner LLC, and Urban Investment Partners is the minority owner. 

Torchlight acquired the ground lease in lieu of foreclosure for $98.8M, according to documents filed with the D.C. Recorder of Deeds on Tuesday. It paid with a credit bid, according to bankruptcy records. 

UIP, Torchlight and Blue Owl Capital didn't immediately respond to Bisnow's requests for comment. 

Onyx Owner LLC filed for Chapter 11 bankruptcy protection in Delaware at the end of last year. As part of those proceedings, Eastdil Secured was selected to market the property in November — a process that resulted in the selection of Torchlight to purchase the property. The judge approved the sale last Wednesday.

An affiliate of Torchlight provided a $47.5M loan for the property in May 2021, a loan that Onyx Owner LLC defaulted on last September, according to court documents. 

Eastdil began marketing the property in December and reached out to 8,500 prospective buyers upon launching the search, according to court filings. 

In February, Torchlight was selected to purchase the asset through a credit bid. 

The bankruptcy filings cite pandemic-era tenant protection measures as the overarching reason for the property’s financial distress. Several landlords have told Bisnow they are facing millions of dollars in unpaid rent that are putting properties at risk of foreclosure. 

“The Covid-19 pandemic and the associated tenant protection measures were catastrophic to the Debtor,” one of the filings says. “As an increasing percentage of the Property’s residents were unable to pay their rental obligations as they came due, the Debtor was not able to take action against non-paying tenants.” 

The filings said the property was unable to reestablish on-time payment and rent-collection rates, which led to “increasing operating losses that decreased the available cash needed to fund critical payments and upkeep of the Property.”

The cash shortfalls have become more dire in light of recent events at the property that have necessitated additional investment, including two fires and multiple security instances, it said. 

In an attempt to get the financial situation and management in order, UIP transferred all management responsibilities to Greystar in April. But the property continued to rack up past-due debt, including with vendors who have threatened to sue. 

Greystar gave its resignation notice in October.

“As of the Petition Date, the Debtor has been unable to identify and engage a successor management company for the Property and otherwise establish a sustainable path to manage the near-term cash obligations, thus necessitating the filing of the Chapter 11 Case to protect its assets as well as the safety of the Property’s residents,” the filing said. 

The building started construction in 2006 and delivered in 2009. 

UIP was selected by Onyx residents to purchase the building under the Tenant Opportunity to Purchase Act, completing the acquisition through Onyx Owner LLC in 2018, paying $95.5M.

Immediately after the deal, UIP, along with equity partner Atalaya — which was acquired by Blue Owl in September — sold the fee interest in the property and entered into a ground lease with Safety, Income & Growth Inc., Bisnow reported at the time.

The office building next door to Onyx, 100 M St. SE, was also just purchased by its senior lender. Onward Investors acquired the 225K SF property for $54M, Bisnow reported earlier this month.

UPDATE, MARCH 20, 10:15 A.M. ET: This article has been updated to include the owner of the ground, which is now under lease to Torchlight.