Lender takes over leasehold of KPG’s office project in Greenwich Village

KPG Funds has lost control of the redevelopment of its Greenwich Village office after the lender took over the leasehold on the property.

Thorofare, through an entity affiliated with his REIT, acquired the 99-year leasehold 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-storey building into a boutique Class A office and retail property.

KPG signed the long-term lease with its 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 ‘ugliest building in the world’, required the 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 occupancy certificate Pincus Cowho first reported about the takeover.

The building, located between Sixth and Seventh Avenues, was put on the market earlier this year by a JLL team with an asking price of about $50 million. But financial pressure soon followed. In June, the Salvation Army filed a non-payment lawsuit in Manhattan Housing Court, alleging that KPG had failed to pay two-quarters of the 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 intervene.

The lender’s move to take control is a familiar one in today’s tight office market, where rising interest rates and leasing headwinds have put pressure on even well-capitalized developers. KPG, led by Gregory Kraut and Rod Kritsberg, gambled on the New York office market when other landlords defaulted and handed over the keys.

KPG sought to convert outdated Class B and Class C buildings into luxury boutique offices. It focused on areas such as Soho, Tribeca and Greenwich Village, where office supply is limited. But the company faces increasing 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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