BH3, Capstone Buy Savanna’s 141 Willoughby via Foreclosure

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BH3 Management and Capstone Equities closed on 141 Willoughby Street and have major plans to reposition the vacant office tower in Downtown Brooklyn.

The joint venture acquired the 24-story, 400,000-square-foot building from Savanna through a foreclosure and is now seeking to convert part of the tower into 200 residential units.

The developers plan to add both market-rate and affordable housing with residences spanning studios all the way up to three bedrooms. Only floors two through seven of the 24-story building will consist of office space.

The conversion is expected to start in 2026.

Savanna bought the site for $28 million in 2014. About seven years later, the developer finally nabbed $264 million in construction financing, a major coup at the time given the lack of office demand during Covid. PIMCO provided the senior debt, and CarVal Investors added the mezzanine loan, according to the Commercial Observer.

Savanna bet corporate tenants would trickle into Downtown Brooklyn. But since the tower’s completion in 2023, it has remained vacant.

Savanna defaulted on its senior loan and Joshua Zamir’s Capstone swooped in to purchase the debt from PIMCO and BH3 Management pitched in equity, The Promote reported. Capstone initiated a non-judicial foreclosure. An auction date was set for June. The lender appears to have made a credit bid using its existing debt to acquire the property.

The Willoughby Street office building wasn’t Savanna’s only recent loss. Last year, it offloaded 360 Lexington Avenue for $65 million; it purchased the 270,000-square-foot office and retail property in 2019 for $180 million. Savanna also faced foreclosure last year at 521 Fifth Avenue, a 39-story, 460,000-square-foot office tower.

Now, the firm is down another office building, and the property won’t be solely office space for long.

“141 Willoughby Street presents a truly unique blank slate upon which to reimagine a newly developed institutional-grade asset,” said Adam Falk of BH3 Management.