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Oct 13, 2020

Wheatfield properties in big mortgage lose two-thirds of value

Three Niagara County commercial properties owned by developer Nick Sinatra and members of the Nanula family have lost two-thirds of their value because of plummeting revenues, potentially putting the future of a $23 million mortgage backing the properties at risk.

The two commercial office complexes comprising the Woodlands Corporate Center, along with an industrial property at 7049 Williams Road – all in Wheatfield – were originally valued by an appraiser at $33.2 million in April 2015. That was shortly before Sinatra and the Nanulas’ Nanco Enterprises borrowed $23.3 million from an arm of Five Mile Capital Partners of Stamford, Conn., to refinance an existing loan.

But that loan has been troubled almost from the start, according to reports from research firm Trepp LLC and ratings agency KBRA, noting a history of delinquencies and “watchlist” concerns dating back to the first quarter of 2016 – just half a year after it was originated.

It’s more than 60 days late in payments and now faces “imminent default,” with a special servicer handling the loan and hiring attorneys “to proceed with enforcement of remedies,” while also talking with the borrowers “regarding a potential resolution,” according to Trepp.

The current balance is $22.6 million. But a new appraisal sought by the lender earlier this year and just reported by Trepp cut the value of the three properties to just $11.1 million – less than half of the loan balance and just one-third of the original appraisal.

The properties’ net operating income had totaled $2.1 million when the loan was packaged and sold to investors five years ago, but is now just $1 million.

“The subject is unable to cover both debt service and operating expenses,” according to the special servicer commentary cited by Trepp. “The borrower previously submitted a loan modification proposal which was rejected by lender.”

The property owners declined comment, referring questions to the Henley Group, a Massachusetts-based commercial loan workout specialist that they hired to help them.

Henley co-founder and principal David Goldfisher said the properties’ rents used to be much higher, well above market rate, but had to be lowered sharply “for a whole bunch of real estate reasons,” including threats by tenants to leave.

“That’s what’s caused the heartburn,” he said, adding that Sinatra and the Nanulas “have every intention of keeping the property” that they purchased in 2015 from Calamar.

The properties include 176,686 square feet of office space at Woodlands East and Woodlands West, with a variety of tenants, plus 35,346 square feet of industrial space on Williams that is occupied by Silipos Inc. through 2028.

Woodlands East is located at 3829 and 3949 Forest Parkway, while Woodlands West is at 3780, 3784, 3790, 3794 and 3799 Commerce Court. The Williams Road site was built in 1999, while Woodlands West was constructed in 2000 and Woodlands East in 2007.

In all, they’re 85% full, but Woodlands West – the biggest of the three at 104,060 square feet – is less than half occupied, according to Trepp data.

Current tenants for that building include the Visiting Nursing Association, Lanspar Technologies, Pro Training Basketball, Occidental Chemical Corp. and Heritage Christian Services, Trepp reported. The Woodlands East hosts Calamar Construction Management, TDG Transit, Incom Manufacturing, Grelak Mechanical and Rocky Mountain Capital Management.

Published by The Buffalo News

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