Landlord Loses UES Grocery Condo to Foreclosure

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Despite grocery-anchored retail properties’ increasing popularity, some owners are still losing buildings to lenders.

Through an affiliate, lender MetLife took back the keys at 188 East 64th Street on the Upper East Side through a deed in lieu of foreclosure, Crain’s reported. Real estate firm Gateside Corporation gave up both two units in the deal, a commercial condominium and a parking garage.

The deal valued the two units — located at The Royale luxury condo complex — at $44.1 million. The property is also addressed at 1066 Third Avenue.

It’s unclear what sparked the foreclosure proceedings; MetLife declined to comment to the publication, while Gateside did not immediately respond to a request for comment. Through an affiliate, MetLife issued more than $58 million in loans at the property since 2017.

Gateside’s ownership of the condos dates back to at least 1989, according to the Commercial Observer.

The Royale’s valet parking garage comprises one of the units, but the other one is the property’s ground-floor retail space. Grocery chain Morton Williams occupies 22,000 square feet of the berth, while optometrist Optyx has 2,000 square feet, according to CoStar.

The deed transfer doesn’t appear to relate to the 43-story luxury building that sits above the parking garage and retail space. The residential portion of the building includes amenities such as a health club, an entertainment lounge and a bike room; a one-bedroom unit is listed at $1.5 million.

Grocery-anchored properties are not insulated from commercial distress, but they are one of the hottest commodities in the industry today.

An investment group led by TPG including PSP Investments, La Caisse and Norges Bank

Investment Management acquired operator Echo Realty at a roughly $2 billion valuation. The company counts more than 230 retail centers in its portfolio, many anchored by grocery stores.

Prior to that, Bain Capital Real Estate and 11North Partners’ joint venture acquired five open-air retail centers for approximately $300 million, a portfolio covering 757,000 square feet, which is 93 percent occupied and is filled by major tenants like Walmart, Costco and Trader Joe’s.

— Holden Walter-Warner