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Multi-party agreement rescues Brooklyn co-op from bankruptcy.

Pursuing a model turnaround strategy to successfully rescue an insolvent Brooklyn co-op, Phoenix Four, Inc. has acquired the underlying mortgage note with a face value of $11 million and has restructured the debt. At the same time, Phoenix Four helped the owners' corporation to negotiate with the Resolution Trust Corporation (RTC) for the return of unsold shares to the corporation.

The announcement was made by Paul Schack, president of Strategic Resources Corporation, Phoenix Four's exclusive representative and investment advisor, and by James Hopkins, III, Strategic Resources' executive vice president.

It was also announced that Phoenix Four will provide additional funding to the cooperative corporation so that it can launch an ambitious renovation and marketing program to sell unsold shares representing vacant and rented apartments.

The $11 million face value underlying mortgage, secured by the 306-unit Seacrest Towers cooperative in Sheepshead Bay, in Brooklyn, NY, was acquired from a consortium of Far Eastern lending institutions comprised of Nat Capital Corporation and IBJ Leasing Hong Kong, Ltd.

Strategic also aided the co-op board's negotiations with the RTC for the return of the 189,195 unsold shares representing 232 unsold apartments.

"Typically, in distressed co-op situations the key pieces of the puzzle - the underlying mortgage and the unsold shares - end up being controlled by separate entities, each pulling in a different direction," Schack said. "We determined that the most effective course of action to put the co-op back on its feet would be to align these interests."

Strategic Resources capitalized on its real estate workout expertise to "deleverage" the co-op in this successful transaction. Before purchasing the mortgage, it negotiated with the cooperative to restructure the face value of the underlying mortgage from $11 million to $7.2 million. This "write down" served to bring the property in line with current market value and make both individually owned and unsold apartments salable.

Then, Strategic Resources assisted the co-op board in their negotiations with the RTC, which resulted in the return of unsold shares to the co-op. Strategic Resources has made it possible for the co-op to begin renovations and to professionally market the unsold apartments - key to returning the co-op to solvency.

Strategic Resources Corporation has announced it will aid the co-op in launching an intensive sales and marketing program to sell the remaining unsold apartments, Schack said. In addition, Strategic Resources will assist the cooperative in retaining a nationally known auction firm to sell vacant units. The cooperative will provide seller financing to potential purchasers. The first auction to expected to take place in early June.

Strategic Resources Corporation acts as the exclusive representative and investment advisor for Phoenix Four, Inc., a fund investing in under performing and non-performing mortgage debt instruments, secured by multi-unit residential and commercial real estate.
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Title Annotation:Seacrest Towers apartment cooperative, New York, New York
Publication:Real Estate Weekly
Date:Apr 27, 1994
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