Blackstone, Rialto Claim McGraw Hill Owner Defaulted on $140M Debt

Blackstone entities and Rialto Capital Advisors, through a venture, filed to foreclose on the McGraw-Hill Building, claiming its owner defaulted on a mortgage that the team acquired in the Signature Bank loan sale.

The filing alleges Deco Tower Associates quit making payments on a $115 million loan tied to the Art-Deco building and guaranteed by Philadelphia-based investor Alex Schwartz, then failed to pay off the debt when it came due in May, PincusCo first reported.

The Blackstone-Rialto team also filed a separate suit claiming the owner entity defaulted on a $25 million construction loan Schwartz signed for. The loan was made as McGraw-Hill’s owners were toying with a residential conversion of the property.

That suit seeks a monetary judgment for $29 million, plus interest at a default rate of 24 percent.

A Blackstone spokesperson said the firm continues “to engage with borrowers to find the best resolutions possible.”

A spokesperson for Rialto declined to comment. Schwartz, who heads ASI Management, was not immediately available to comment.

The foreclosure filing may throw a wrench in the long-standing plans to rework the historic building at 330 West 42nd Street.

Years ago, Deco Tower Associates considered converting the top half of the blue-green landmark to residential. The firm aimed to get the city’s approval by late 2019 and start building in January 2020.

Presumably, the pandemic delayed things. It wasn’t until October 2022 that asset manager Resolution Real Estate confirmed that conversion was still on the table, and SLCE Architects had gotten on board.

In March 2023, Resolution’s Gerard Nocera told the New York Post the team had “cleared all the hurdles” to conversion.

That is, until mortgage payments became a problem.

Deco Tower quit making payments on the $115 million loan in October, about seven months after lender Signature Bank collapsed. The owner fell delinquent on the $25 million construction loan the same month.

At the time, Signature Bank’s commercial real estate loans were in Federal Deposit Insurance Corporation receivership. Some borrowers have reported a break-down in communication during the period.

In mid-December, the FDIC awarded Rialto, two Blackstone affiliates and the Canada Pension Plan Investment Board, a 20 percent stake in a venture holding Signature’s CRE portfolio, which did not include its rent-regulated loans.

Several borrowers have claimed after that transfer, servicing deteriorated. One owner of a Staten Island shopping center sued Rialto this spring, claiming it fabricated a default after failing to respond to multiple inquiries about an extension.

Deco Tower Associates has yet to file a response to either of the Blackstone-Rialto venture’s lawsuits.

Meanwhile, the venture in January was marketing about $1.8 billion of the Signature Bank loan book, most of them backed by apartment buildings. Maverick Real Estate Partners picked up $247 million of the debt in February. The loans are backed by retail properties, market-rate multifamily and office buildings.

It’s unclear if the Blackstone venture has closed any other sales since.

This article has been updated to include a comment from a Blackstone spokesperson.