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A private equity firm handed a 1,378-unit self-storage facility in Midwood, Brooklyn, over to its lender for $46.9 million, according to property records made public Thursday.
Equity Resource Investments (ERI) sold 1301 Avenue M to Heitman Capital Management ahead of a Uniform Commercial Code foreclosure auction set to take place on Feb. 29, according to Keen-Summit Capital Partners, which brokered the sale.
Safe N Lock Self Storage bought the parcel in 2017 for $19 million and completed construction of a 96,568-square-foot self-storage facility on it in 2020, according to public records and marketing materials.
ERI invested more than $73 million in Safe N Lock’s storage developments in the outer boroughs of New York City and other locations across the state. But the relationship between the two firms soured, and ERI is now suing Safe N Lock’s top executives for fraud, according to court documents.
As part of the alleged fraud, ERI claimed Safe N Lock misappropriated funds that helped cause their jointly owned properties — including 1301 Avenue M — to go into foreclosure in July.
ERI is seeking $3.7 million in damages related to breaches of contract and other relief yet to be determined, according to ERI’s complaint filed in New York Supreme Court in August.
A second 51,489-square-foot storage facility tied to both companies containing 1,177 units at 2036 Webster Avenue in the Bronx is still up for grabs in the upcoming auction. It was built in 2021 and is smaller than the Brooklyn facility.
Heitman put both properties on the auction block late last year after repossessing its equity interest in the companies that own them, a pair of limited liability companies tied to ERI.
Buffalo-based real estate investment trust Life Storage, formerly Uncle Bob’s Self Storage, has set up shop at both properties. Storage units at the two locations are 75 percent occupied, according to marketing material published ahead of the auction on Crexi.
Keen-Summit’s Harold Bordwin, Craig Fox and Anthony Cardillo arranged the deal for Heitman.
Bordwin said the UCC Article 9 auction, an alternate option for lenders to foreclose on a loan’s collateral instead of the loan itself, brought the sale to a swift conclusion compared to the lengthy mortgage foreclosure process.
“It’s a much more lender-friendly approach than a real estate foreclosure,” Bordwin said.
Representatives for ERI, Safe N Lock and Heitman did not immediately respond to requests for comment.
Abigail Nehring can be reached at anehring@commercialobserver.com.
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