SoHo retail center reemerges from bankruptcy with loan

Real Estate Weekly, Jan 15, 2003

718 Broadway lies in the heart of the NoHo/SoHo retail corridor, one of the metropolitan area's most desirable retail markets. But that didn't stop the property from facing a very grim future after its owners were forced to file for bankruptcy and were void of capital to refinance.

Yet, thanks to the efforts of AFC Realty Capital and its willingness to provide capital to secure a loan, the 10,000-SF retail center was able to receive the necessary financing and reemerge as a prime retail destination.

The property, a commercial cooperative unit, had been owned and occupied by NoHo's Unique Clothing Warehouse Realty, Inc. since 1980. Due to a declining retail market for several years, NoHo Unique was forced to close its store and the owning entity to file for bankruptcy, indicated Arthur Fefferman, president of the Manhattan-based real estate investment firm.

"The owner went out of business in the early 1990s and subsequently leased the space to two prominent retailers--Jimmy Jazz and Ricky's," says Fefferman. "Because of business challenges, they were eventually forced to file for bankruptcy.

AFC Realty immediately faced its first hurdle, Fefferman recalls. While most lenders recognized the strong value of the property, many were hesitant to make a loan due to the owner's current bankrupt status. "Due to regulations which penalize banks for financing borrowers in or just out of bankruptcy, institutions generally have a reluctancy to lend in situations where bankruptcy is a factor," comments Fefferman.

Thankfully, the owners had AFC's trademark for providing innovative financing techniques at their disposal. With a property value in the range of $6 million, AFC was very confident it could arrange the $3.6 million in financing required to save the property. So sure, the firm decided to provide capital which would guarantee a portion of the loan and help appease lender's indecision.