Capstone buys Garden City office loan at 54 cents on the dollar

Capstone Equities bought the nonperforming loan on Garden City Plaza, a 600,000-square-foot office complex in Garden City, N.Y., for $51 million. The price is about 54 cents per dollar of the $95 million loan, which Bank of America had held.

Maxim Capital supplied $41 million of note-on-note financing, about 80% of Capstone's cost. The debt is written against the note Capstone now owns, not the property. Iron Hound Management's Chris Herron and Jack Casper negotiated the financing. Newmark's Brett Siegel, Josh King and Adam Spies advised Capstone on the note purchase, Commercial Observer first reported.

For debt allocators, the leverage is the key term: Maxim is in for 80% of Capstone's purchase price, so its recovery depends on where the note resolves against a 54-cent basis. A payoff, refinancing or sale above that basis would cover both positions. One at or below it would not.

Garden City Plaza comprises 100 through 400 Garden City Plaza in Nassau County and is owned by Treeline Properties, which remains in the deal. The note sale was cooperative. The complex sits next to Simon Properties' Roosevelt Field Mall, the 11th-largest mall in the U.S., according to Commercial Observer.

Josh Zamir, Capstone's founder, said the purchase, including due diligence, closed in two weeks. He described the firm's method this way: “We buy at a discount and work collaboratively with the borrower to find a solution or tax-advantageous strategy, partnering with them.”

Garden City Plaza is Capstone's 50th deal and its second in the Garden City area. Last week the firm refinanced Franklin Plaza, a four-building, 488,835-square-foot office complex at 1205 to 1325 Franklin Avenue on Long Island, with a $43 million loan from Goldman Sachs. Capstone had earlier bought the nonperforming note on that property.