Blackstone alleges $140M in loan defaults at resi conversion of landmarked McGraw-Hill

Blackstone Group through its loan subservicer Rialto Capital Advisors alleged in two related court filings this week that loans with a combined original principal totaling $140 million and secured by the McGraw-Hill Building at 330 West 42nd Street in Hell’s Kitchen, Manhattan, were in default. Blackstone acquired both loan when it purchased a loan portfolio of the shuttered Signature Bank.
The two cases were filed in Manhattan State Supreme Court. The first and larger filing, dated July 16, was to foreclose on a $115 million mortgage Signature Bank provided in May 2019. The second, filed yesterday, was seeking a money judgment for a $25 million construction loan Signature Bank gave in February 2022, but was not seeking a foreclosure.
Pre-foreclosure 850248/2024 LINK
Money judgment LINK

The lender identified Alex Schwartz of ASI Management as a guarantor of the $115 million loan, and Shlomo Wyler as guarantor for the $25 million loan. Alex Schwartz was the signatory on the $25 million loan.
Court records represent the position on one party and are not necessarily accurate or complete. Guarantors can be added or removed after the initial loan is made, and at times that is not reflected in court records. The borrowers have not yet responded in either case.

The developers plan to convert the landmarked building into 224 residential units through job number M00645436. Rialto Capital Advisors is subservicer for Blackstone Group.

The lender alleges a total of $29,169,341.30, is due on a construction loan given in February 2022 that had an original principal of $25 million.

According to the complaint, “Signature agreed to make a loan to Borrower in the original principal amount of $25,000,000 pursuant to that certain Building Loan Agreement between Signature and Borrower effective as of February 23, 2022… Borrower defaulted on its obligations under the Note by failing to make monthly payments of Interest (as defined in the Note) commencing on the October 10, 2023 Payment Due Date and continuing thereafter on each Payment Due Date including, the May 10, 2024 Payment Due Date… In addition to the Interest Payment Default, Borrower also defaulted on its obligations under the Note by failing to remit to Plaintiff on the Maturity Date of May 17, 2024.”

The New York Post reported in March 2023 that the conversion to residential of floors 12 to 34 was moving ahead with Resolution Real Estate involved as asset manager.

The property

The office building in Garment District has 552,775 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 130 feet and is 197 feet deep with a total lot size of 27,975 square feet. The lot is irregular. The zoning is C6-7 which allows for up to 15 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The property is in the Individual Landmark. The city-designated market value for the property in 2022 is $144.7 million. The most recent loan totaled $25 million and was provided by Signature Bank on February 23, 2022.

Prior sales and revenue

The 552,775-square-foot property generated revenue of $32.6 million or $59 per square foot, according to the most recent income and expense figures.

Violations and lawsuits

According to city public data, the property has received one DOB violation and $4,700 in OATH penalties in the last year.

The neighborhood

In Garment District, The majority, or 69 percent of the 52.3 million square feet of commercial built space are office buildings, with hotel buildings next occupying 13 percent of the space. In sales, Garment District has near average sales volume among other neighborhoods with $542.4 million in sales volume in the last two years and is the 16th highest in Manhattan. For development, Garment District is the 4th most active neighborhood among other neighborhoods. It had 6.8 million square feet of commercial and multi-family construction under development in the last two years, which represents 13 percent of the neighborhood’s built space.

The surrounding

Within a 400-foot radius of 330 West 42nd Street, PincusCo identified seven commercial real estate items of interests occurred over the past 24 months. Of those seven items, two were sales above $5 million totaling $32 million. The most recent of the two was iPark which bought one condo unit in the 555-unit mixed-use building (RM) on 350 West 42nd Street for $12 million from HUBB NYC on February 7, 2024. Of those seven items, five were loans above $5 million totaling $184.7 million. The most recent of the five was Project Renewal in which borrowed $11.8 million from Community Preservation Corporation secured by the 107,679-square-foot, one-unit industrial (N9) on 351 West 42nd Street on July 16, 2024.

Direct link to the property’s ACRIS page and link to DOB NOW portal.