Related's LIC deed-in-lieu toodle-ooo

The Real Deal 

Developer and partner BentallGreenOak negotiating deed-in-lieu of foreclosure

The mantra that millennials wanted to “work where they live” drew some of New York’s biggest developers across the East River in the late 2010s to build Instagrammable offices in hot Queens and Brooklyn neighborhoods.

Today many of those offices remain empty, and now some developers are conceding that the gold rush never materialized. 

Case in point: Related Companies’ fund management arm and its partner BentallGreenOak are ready to walk away from the Point LIC, a small campus of converted warehouses in Long Island City that sit mostly vacant after six years. 

The developers have defaulted on their mortgage for the pair of seven-story buildings in the neighborhood’s Hunter’s Point section, sources told The Real Deal. Their lender, mortgage REIT BrightSpire Capital, is looking to sell the non-performing loans, and sources said the borrowers have agreed to hand the keys to the Point over to whoever buys the debt through a deed-in-lieu of foreclosure.

Representatives for Related Fund Management and BentallGreenOak did not respond to requests for comment. A spokesperson for BrightSpire — known until 2021 as Colony Credit Real Estate — declined to comment.

The mortgages on the two buildings total around $150 million, and BrightSpire will look to recoup as much of that as possible.

It’s the latest sign of distress in the office market, as high interest rates and a continued transition to hybrid work expose struggling investments.

Related and BenatallGreenOak paid nearly $104 million in 2016 to buy the two properties: a 130,000-square-foot former oil storage warehouse at 2100 49th Avenue, dubbed the Paragon Building, and a 220,000-square-foot building across the Long Island Expressway at 2109 Borden Avenue called the Blanchard Building.

The new owners spent $45 million overhauling the properties, building new entrances and lobbies, upgrading building systems and installing amenities like cafes and outdoor spaces that were all the rage for offices designed to attract a millennial workforce.