KPG Funds has lost control of its Greenwich Village office redevelopment after its lender took over the leasehold on the property.
Thorofare, through an entity tied to its REIT, acquired the 99-year ground lease at 132 West 14th Street in a deal valued at $27.7 million, property records show. The deal marks the end of a troubled chapter for KPG, which had ambitious plans to convert the aging, seven-story building into a boutique Class A office and retail property.
KPG signed the long-term ground lease with the owner, The Salvation Army, in 2021 for $22.1 million, and a year later secured a $34.5 million construction loan from Thorofare for an overhaul estimated to cost $55 million.
The redevelopment of the property, once dubbed the “world’s ugliest building,” called for demolition of the front and rear facades, along with the addition of new steel structures. The project was nearing completion but had yet to receive a new certificate of occupancy, according to PincusCo, which first reported on the acquisition.
The building, located between Sixth and Seventh avenues, was marketed earlier this year by a JLL team with an asking price of roughly $50 million. But financial strain soon followed. In June, the Salvation Army filed a nonpayment case in Manhattan housing court, alleging KPG had failed to pay two quarters’ worth of ground rent totaling $162,500. The court issued a default judgment in favor of the Salvation Army in August, paving the way for Thorofare to step in.
The lender’s move to assume control is a familiar one in today’s tightening office market, where rising interest rates and leasing headwinds have squeezed even well-capitalized developers. KPG, led by Gregory Kraut and Rod Kritsberg, bet on the NYC office market as other landlords began defaulting and handing over keys.
KPG sought to convert aging Class B and Class C buildings into high-end boutique offices. It focused on areas such as Soho, Tribeca and Greenwich Village, where office supply is limited. But the firm has faced mounting challenges as demand for new office space remains uneven across the city.
Representatives for Thorofare and KPG did not immediately respond to requests for comment.
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