Source: Mets owners' office park to be reclaimed

A Hauppauge office park owned by a fund controlled by Mets owners Fred Wilpon and Saul Katz will be turned over to its creditors after more than a year of missed mortgage payments, a person familiar with the matter said Monday.

An investment fund established by Sterling American Property Inc. purchased the Woodlands Office Park for $20.2 million in 2006 before the real estate bubble burst. The property -- with three buildings totaling 127,676 square feet of office space -- was appraised last year at $9.6 million while the owners still owed $12.5 million, according to a report by Trepp, a service that provides information on commercial-mortgage-backed securities. A spokesman for Sterling declined to comment.

"I have nothing to say about this," said Philip Wachtler, Wilpon's son-in-law, who is co-founder and principal of the Farmingdale-based Wachtler Knopf Equities Llc, which manages the building.

Wachtler referred questions to Sterling general counsel Gregory Nero. In a written statement, Nero said that Sterling American Property IV Lp, the real estate fund that owns the buildings, continues to be a successful real estate fund and that it had informed investors that the "small equity investment of this one asset -- the Woodlands Office Park -- had been reduced to zero and would not have any material impact on the fund's returns or performance."

The real estate trouble comes as Wilpon and Katz face a $1-billion suit stemming from their investments in swindler Bernard Madoff's Ponzi scheme. Trustee Irving Picard alleges that they had reason to suspect that Madoff was committing fraud. Wilpon and Katz have denied any wrongdoing.

In September 2009, the occupancy at Woodlands Office Park fell to 48 percent from 69 percent, according to Trepp's figures. Trepp reported that mortgage payments stopped in 2010 while Wilpon and Katz tried to negotiate a mortgage modification with the creditors, a trust established by JPMorgan that sold shares in this and other properties.

Phil D'Avanzo, the buildings' leasing agent at Cushman & Wakefield, said the problems leasing the buildings were a "market issue" and that the resolution was "an ongoing process," but he did not elaborate, and declined to comment further.

News of the transfer was first reported Monday in The Wall Street Journal.

Monday afternoon one of the three concrete and glass buildings on Veterans Memorial Highway was dark, the doors locked with menus stuffed into them. The parking lot in front of the building was empty. The two others were more active.

People coming and going from one of the buildings said they hadn't heard about the complex changing hands and seemed surprised by the news.

Melissa Checo, 39, an office manager for one of the tenants, Eating Disorder Associates, said she had not heard anything official nor received any notifications from the landlord in the mail. "As far as we know, we haven't heard anything," Checo said.

Memorial Sloan Kettering Cancer Center, which has offices in the complex, would still have the same lease terms if the property were foreclosed, said the medical center's spokeswoman, Christine Hickey.

"We have not been notified of any changes to the lease," she said.

Net cash flow at the building during the first months of 2009 was $373,388 while annual debt service was about $1 million, according to Trepp.

With Keiko Morris