Home News Flats at East Bank apartments hitting the market in wake of developer Scott Wolstein’s death

Flats at East Bank apartments hitting the market in wake of developer Scott Wolstein’s death

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A waterfront apartment complex on Flats East Bank in downtown Cleveland hit the market this week. The project’s mezzanine lender is taking foreclosure action.

The future of collective housing with a total of 240 units Flat at East Bank, is in flux in the wake of the death of developer Scott Ulstein. Walstein, 69 died in maysix months after being diagnosed with an advanced cancer that quickly robbed him of his ability to speak.

Now, Institutional Property Advisors Midwest, a division of Marcus & Millichap’s real estate brokerage firm, is preparing to put East Bank’s flats up for sale. Meanwhile, one lender is moving to assert control if a compelling takeover offer fails.

This property has no official asking price and also includes indoor parking and 60,000 square feet of ground floor retail. But IPA Midwest is aiming for his nearly $100 million. This is enough to pay off his $96 million in first mortgage and mezzanine debt on public records.

“This is a catalytic project,” said Daniel Burkons, executive managing director of IPA Midwest’s multifamily team. “For investors who are interested in Cleveland but have never been here before, it is a gateway to making large investments in the highest quality properties possible and really being at the center of it all.”

Burkons, along with colleagues Michael Barron and Joshua Wintermute, are working on the listing with the help of the IPA Midwest retail team. 91% of his apartment is rented, with an average rent of $2,107 per month. The retail store is 94% leased to tenants such as Punchbowl Social, Big Bang Piano Bar, Rum Runners and ESPN Cleveland.

It is unclear whether the reason for the early stage foreclosure was due to default or more technical, such as the death of the guarantor.

New York mezzanine lender Axonic Capital LLC did not respond to a request for an interview.

Mezzanine finance bridges the gap between real estate debt and equity. Loan collateral is not real estate. Alternatively, in the event of default, the lender can take over the borrower’s shares in the company that owns the property.

So when Ulstein restructured the project’s debt by lending $15 million to his East Bank apartment in May 2021, Axonic got the chance to step into its owner’s shoes. Axonic then has to make debt repayments on his $81 million first mortgage offered by Apollo Commercial Real Estate Finance Inc., a New York-based real estate investment trust.

Such a process that takes place outside the court system is known as a Uniform Commercial Foreclosure. Axonic will be able to bid on collateral, which is 100% equity in the limited liability company that owns the project, in a public auction set for January 12, 2023, according to an offering distributed this week by JLL Securities.

According to marketing materials, “interests will be put up for sale and sold to the highest bidder…at the front door of the New York County Supreme Court building” and through remote bidding via video conferencing. JLL’s capital in New York No member of the market team was contacted by phone regarding the sale.

Bercons said the goal is to find a buyer for the property by mid-January, negating the need for a stock auction. Working together, he manages his father’s estate and seeks to position the next phase. 23 Acre Flat District to move forward.

“Selling this property is a solid property, a way to come in and take some chips off the table and focus on everything else,” Bercons said of the apartment.

Months after Scott Wolstein’s death, the East Bank flat’s tenants mobilize online Complaining about maintenance and asking for a change of management. In September, large real estate management firm Greystar entered to replace his NRP Group in Cleveland.

A July 15th letter distributed to tenants read, “The owner is a Class A apartment in Cleveland working around the clock to get things back to the way they should be for you, our resident. “Part of this problem stems from the illness and death of Scott Walstein, who ran the business almost single-handedly for ownership.”

Burkons hopes the building, which opened in 2015, will attract attention from out-of-town buyers who would normally bypass Cleveland. He believes there is an opportunity for the new owners to make modest upgrades that might allow the rent to rise slightly.

“This is a riverside, a lakeshore,” Burkons said. “This is one of the most happening restaurant entertainment scenes in Northeast Ohio, literally downstairs and out the door. … No more places. No more construction.”

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