Jon Gray’s Blackstone Group has entered the fray that is Rialto’s foreclosure case against Jeff Sutton.
On Wednesday, Rialto filed a lawsuit against Sutton and his Wharton Properties alleging the landlord defaulted on an $8 million loan backing a retail property in the Flatiron District at 144 Fifth Avenue.
As part of the lawsuit, Rialto claimed that after Sutton defaulted in February 2024, he failed to forward rents collected at the property to the special servicer, thus triggering a bad boy guarantee.
After The Real Deal reported on the lawsuit and its allegations Thursday, a spokesperson for Blackstone sent a statement on the matter, requesting it be attributed as a joint statement between Rialto and Wharton Properties.
“Wharton Properties has provided the information which makes clear that there was no misappropriation of rents. Wharton and Rialto continue to work together to reach a resolution that benefits all parties involved,” the statement read.
Blackstone and Jeff Krasnoff’s Rialto Capital Advisors are partners in a joint venture that purchased a 20 percent stake in Signature Bank’s $17 billion loan pool after the FDIC took over the troubled bank in 2023, which is how they came to acquire Sutton’s loan.
Gray and Sutton are certainly acquainted with one another, and Blackstone’s involvement raises questions about how Rialto treats smaller mom-and-pop borrowers compared to larger, more influential ones.
Rialto sent Wharton a letter in October pointing out its obligation to forward the rents and notifying the landlord that its failure to do so triggered the guarantee.
The firm filed its lawsuit six months later, certainly enough time for both sides to clarify the issue. Representatives for Rialto and Blackstone did not respond when asked if Rialto would amend its complaint to remove the allegation of the misappropriated rents.
Many of Rialto’s borrowers have alleged the company manufactures reasons to declare a loan is in default and collect extra fees, few get an intervention from Blackstone acknowledging a misunderstanding.
Read more
Rialto comes at the King: Servicer moves to foreclose on Jeff Sutton
“Rapacious behavior”: Rialto wages war against Signature borrowers
