An affiliate of Penn-Florida Companies filed bankruptcy on its 101 Via Mizner apartment building in Boca Raton, warding off a foreclosure auction over a $145 million loan.
Via Mizner Owner I, the entity Penn-Florida uses for the 14-story, 366-unit building at 101 East Camino Real, is pursuing Chapter 11 reorganization. It listed $100 million to $500 million in assets and liabilities, according to property and court records. It filed for bankruptcy on Wednesday, the same day a Uniform Commercial Code auction was scheduled over Penn-Florida’s alleged loan default.
Blackstone Mortgage Trust is the lender and filed the UCC foreclosure last month after the loan matured.
Boca Raton-based Penn-Florida, founded and led by Mark A. Gensheimer, completed 101 Via Mizner in 2016. It paid $19 million for the 3.1-acre development site in 2013, taking out a $75 million construction loan in 2014 from HSBC, according to records. It refinanced the loan in subsequent years, including in 2021 with Blackstone Mortgage Trust, which bumped the amount to $195 million. Blackstone now holds a $145 million portion of the loan, meaning it sold the balance, according to Blackstone’s Securities and Exchange Commission report filed in October.
In a UCC auction, the interest in the entity that owns a building is sold, which gives the winning bidder control of the building. Filing for Chapter 11 reorganization prior to a foreclosure auction is a common strategy among landlords facing debt woes because it stops an auction from proceeding.
Penn-Florida said it filed for reorganization to “allow time for the refinancing to close.”
“The loan was in good standing at maturity with a refinance pending,” the firm said in a statement, adding that operation of 101 Via Mizner will continue normally.
Still, a Blackstone Mortgage Trust spokesperson said in a statement the firm is “surprised and disappointed the borrower chose to pursue this path.”
“We expect borrowers to honor the commitments they make under their agreements,” the spokesperson said, adding that the building is a “high-quality, well-located asset in a sector with strong fundamentals and capital markets liquidity.”
Penn-Florida, founded in 1987, has a 6 million-square-foot portfolio with another 2 million square feet in the development pipeline, according to its website. 101 Via Mizner is part of the firm’s marquee Via Mizner mixed-use project with a Jack Nicklaus-designed golf club and Mandarin Oriental-branded hotel and condo buildings that are under construction after yearslong delays.
The refinancing of 101 Via Mizner apartments is unrelated to the Mandarin Oriental construction, Penn-Florida said in its statement.
The firm also was hit in August with a lawsuit by Mandarin Oriental condo buyers over delays in completing the building, which was expected in June. In a court response, Penn-Florida argued that purchase agreements included a clause that buyers understand the developer isn’t “obligated to substantially” finish the project by the anticipated date.
South Florida’s multifamily market boomed from late 2020 through 2022 due to an influx of out-of-staters, prompting record demand and rent hikes. The market turned in the past two years due to elevated interest rates, skyrocketing insurance and record construction completions that tempered demand.
Elevated interest rates have hit multifamily landlords with maturing loans especially hard because refinancing costs now are much higher. Lenders and equity investors also have become more skittish.
At the same time, South Florida experienced a record 18,600 apartments completed last year, according to CoStar Group. That has landlords competing for tenants, prompting concessions. At 101 Via Mizner, prospective tenants can get one month of free rent and a reduction of the application fee to $99 from $500, according to the property’s website.