$28M pre-foreclosure at two Meatpacking buildings owned by Delshah Capital
58-60 Ninth Avenue (Credit - Cyclomedia)
UPDATED 11:55 a.m., July 18, 2024: The special servicer for a $28 million loan secured by two retail buildings in the Meatpacking District, 58-60 Ninth Avenue and 69 Gansevoort Street, owned by Michael Shah’s Delshah Capital, filed a pre-foreclosure action yesterday in Manhattan federal court, alleging the loan was in a maturity default.
Case LINK
Retail property values have generally declined from 2017, when this loan was given, and interest rates are much higher, making refinancing more challenging.
Delshah Capital was able to sell a nearby property that was also under financial pressure. It sold the hotel 55 Gansevoort to RH, the former Restoration Hardware, for $57.7 million as part of a structured deal through a bankruptcy.
According to source familiar with the litigation, the properties have been in distress since tenants vacated each location. Free People exited its lease at 60 Ninth Avenue and J. Crew filed for bankruptcy in May 2020 and vacated its location at 69 Gansevoort Street. Delshah re-leased 60 9th avenue to Chelsea Wines, and according to a source, they quickly defaulted on their lease and never fully opened.
“[Delshah] received an extension proposal from the lender that [Delshah] found uneconomical with the properties continuing to remain vacant. That being said, [Delshah has] made significant progress working with K-Star and expect[s] to reach an amicable resolution with a full lender payoff,” the source said.
Delshah Capital bought 69 Gansevoort Street, located between Washington Street and Ninth Avenue, for $8.6 million in August 2012, and eight months later bought 58-60 Ninth Avenue for $18.2 million in April 2013.
Then on August 4, 2017, Cantor Commercial Real Estate lent Delshah Capital $28 million secured by these properties, after which the loan was securitized. In addition, 60 Ninth Avenue was the subject of a state, then federal civil action related to nonpayment of rent during Covid by Free People, a subsidiary of Urban Outfitters.
K-Star Asset Management is the special servicer for the CMBS loan.
The properties
The mixed-use building 58-60 Ninth Avenue with three residential units has 7,719 square feet of built space according to a PincusCo analysis of city data. The parcel has two buildings with frontage of 34 feet and is 100 feet deep with a total lot size of 3,413 square feet. The zoning is C6-2A which allows for up to 6 times floor area ratio (FAR) for commercial and up to 6.02 times FAR for residential with inclusionary housing. The property is in the Gansevoort Market Historic District. The city-designated market value for the property in 2022 is $6.9 million.
The retail building at 69 Gansevoort Street has 3,007 square feet of built space and 7,090 square feet of additional air rights for a total buildable of 10,100 square feet according to a PincusCo analysis of city data. The parcel has frontage of 25 feet and is 80 feet deep with a total lot size of 2,020 square feet. The zoning is M1-5 which allows for up to 5 times floor area ratio (FAR) for manufacturing. The property is in the Gansevoort Market Historic District. The city-designated market value for the property in 2022 is $3.2 million.
The owner
The PincusCo database currently indicates that Delshah Capital owned at least 38 commercial properties with 592 residential units in New York City with 684,308 square feet and a city-determined market value of $149.2 million. (Market value is typically about 50% of actual value.) The portfolio has $511.7 million in debt, with top three lenders as Arbor Realty Trust, Apollo Global Management, and Signature Bank respectively. Within the portfolio, the bulk, or 41 percent of the 684,308 square feet of built space are walkup properties, with elevator properties next occupying 39 percent of the space. The bulk, or 59 percent of the built space, is in Manhattan, with Brooklyn next at 41 percent of the space.
The owners according to the Department of Housing Preservation and Development includes Michael Shah, head officer and Alena Shcharbakova, agent. The business entities are Delshah 60 Ninth Llc and Delshah 60 Ninth Llc.
The surrounding
Within a 400-foot radius of 58 Ninth Avenue, PincusCo identified four commercial real estate items of interests occurred over the past 24 months. Of those four items, four were loans above $5 million totaling $123 million. The most recent of the four was Winter Management in which borrowed $14 million from Apple Bank for Savings secured by the 37,400-square-foot, 11-unit office building (O5) on 408 West 14th Street on June 15, 2023.
Updated with a comment.
Direct link to the property’s ACRIS page.