$17 Million Long Island Industrial/Office Preferred Equity Workout: Strategic Enforcement and Collateral Recovery

A $17 million mixed-use industrial and office asset in Long Island City underwent a complex preferred equity workout following a collapse in office leasing momentum. While the industrial component was fully leased, the office portion remained largely vacant, eroding NOI and diminishing the investment’s value. The property—encumbered by a 99-year ground lease—faced mounting performance challenges as the broader New York office market softened.

When payments became delinquent and the investment lost its value cushion, a preferred equity enforcement action was initiated. This led to a series of high-stakes negotiations that transformed a distressed position into a profitable outcome. The sponsor’s bankruptcy filing became a pivotal moment: it provided the opportunity to drive a settlement that secured new collateral, cash payments, and confessions of judgment that strengthened the lender’s recovery rights.

The result was a fully restructured position backed by additional real estate security and new guarantor pledges. Loan payments resumed, the relationship with the borrower group was reestablished, and the lender ultimately achieved a full recovery of principal plus an above-expected return.

This workout illustrates the value of disciplined enforcement paired with collaborative negotiation—leveraging legal strategy, structured settlements, and clear communication to protect and enhance value in complex preferred equity positions.