The Henry T. Sloane Mansion, 18 East 68th St, New York, NY (Courtesy of Marcus & Millichap)  New York City is famous for trophy properties — and the billionaires who buy them. These properties tend to be massive posh penthouses like Stephen Schwarzman‘s Manhattan apartment once owned by John D. Rockefeller or grand old town houses teeming with history like the Duke-Semans mansion Carlos Slim Helu bought in 2010. The latest one to find a billionaire owner is the fabled Henry T. Sloane Mansion at 18 East 68th Street. Last week it became the property of industrialist scion Alexander Rovt and he didn’t buy it the old fashioned way.  Rovt, president of IBE Trade Corp. and worth $1.7 billion, snapped up the 36-foot wide Manhattan town house for roughly $33 million. It was a tremendous discount on the six-story Upper East Side manse, which had debuted on the sale block in 2008 asking $64 million. After no buyer surfaced, the property’s price reduced, and reduced, and reduced, the owners eventually defaulting on the loans. The last asking price was $37.9 million as it faced foreclosure auction. But Rovt didn’t actually buy the New York property, neither in a traditional home sale deal nor even technically at auction. He bought the bank note.  Rovt, a New York resident harking from the Ukraine, had his eye on the building for some time. “We had made offers over the last eight months, tried to negotiate on the purchase of the real estate and were unable to make a deal,” explains Matthew Lesser of Leslie J. Garfield & Company. Lesser, whom has sold a handful of properties for Rovt, was the billionaire’s real estate broker for the deal. “We then realized it was going to foreclosure auction and I guided him to try to buy the debt.”  What does “buy the debt” mean? The former owners, investors John R. Rice III and Joseph Ingrassia of Capstone Business Credit, had two outstanding loans on the Beaux-Arts manse: a first position loan with Madison Realty Capital and a significantly smaller second position loan with a Goldman Sachs affiliated lender. The total outstanding debt was close to $40 million. The company had bought the place for $20 million in 2007, with its six floors rented out as apartment units. Lesser, on behalf of the fertilizer tycoon, and Marcus & Millichap, an Encino, Calif.-based real estate investment services firm hired to strike a deal for the property and its debt, began hashing out a deal. Rovt agreed to purchase the first position loan for $33 million, assuming the role of lender foreclosing on Rice and Ingrassia.  “We started negotiating the sale the Friday before the [June 22] auction and then went through an intense process in which the attorneys had to go through about 1,000 pages of due diligence documents,” explains Lesser, who notes that it was an all-cash deal. “We closed about an hour before the auction on Wednesday so it was under the wire.”  Having just bailed out Capstone investors, Rovt walked into the foreclosure auction with the strong likelihood of assuming ownership. If a competing buyer were to come out of the woodwork at the foreclosure auction they would have to significantly outbid his newly acquired bank note, in which case he would be paid back for the property, or the property would become his. In other words Rovt became the entity holding the auction.  Peter Von Der Ahe, a vice president investments at Marcus & Millichap and one of the company’s associates arranging the deal, explains that the starting bid at auction was $1,000 and the “upset” price was $39 million, meaning only a bidder offering $39,001,000 could move ahead of the lenders (one of which was now Rovt) for ownership.  “By structuring it this way so that a buyer could come in and buy the senior mortgage, he was essentially at a little bit of an advantage because there’s nothing to say that the ‘lender’ can’t come in and make their own bid,” Von Der Ahe concedes. No one bid and within three minutes, Rovt could call himself the new Sloane Mansion owner. Since no one bid higher than his $33 million, the second mortgage note was wiped out without a cent recouped by the lender.  “Alex became the owner of the deed which means he had to take title and walked away from the auction with keys in hand,” says Lesser, noting that the 18,267-square foot, 30 room property will now undergo some serious renovations to both convert it back to a single-family residence and to restore the original details to the interiors. It’s a process likely to take years, especially given the building’s landmark status. Lesser says his client plans to use the Sloane Mansion for himself and his family as a private residence once that remodeling is complete.  The 36-foot wide Sloane Mansion’s interiors already include a wood-paneled ballroom bedecked in oil-painted murals, 17 fireplaces and an expansive winding marble staircase off the foyer. The limestone bedecked structure dates back to 1905, designed by renowned town house architect from the time, C.P.H. Gilbert, for wealthy upholsterer Henry T. Sloane. There’s also an elevator and a rooftop garden boasting views of Central Park.  Despite Rovt’s unconventional purchasing method, the Sloane Mansion is the latest in a series of pricey Manhattan town houses being bought and sold by billionaires. Sloane Lindemann Barnett, daughter of investing billionaire George Barnett, and her husband Roger Barnett of Beauty.com, are selling the Vanderbilt Mansion, another Upper East Side town house to Libet Johnson, heiress to the Johnson & Johnson family fortune, for roughly $48 million. It’s the most expensive town house sale since the demise of Lehman Bros. in 2008. In addition to his $44 million Duke-Semans purchase last summer, the world’s richest man, Carlos Slim Helu, recently snatched up Midtown’s Felissimo townhouse, once inhabited by Elizabeth Taylor, for $15.5 million.  For More Billionaire Real Estate, Check Out:  Billionaire Heiress Petra Ecclestone Buying $150 Million Spelling Manor
The fertilizer kingpin is the proud new owner of the famed Manhattan townhouse, thanks to a non-traditional deal that enabled him to purchase the debt instead of the property itself.