Capstone Equities acquires Penn Plaza hotel from Mitchell Holdings that had $41M debt

Capstone Equities through the entity 1921 West 31st Street Funding LLC acquired from Mitchell Holdings through the entity Life Hotel Pref LLC a hotel building (H3) at 19 West 31st Street in Penn Plaza, Manhattan that had $41 million in debt.
Capstone Equities bought the debt with an original principal of $41 million, from lender Deutsche bank in December 2022, as PincusCo reported at the time. Mitchell lost a suit filed against insurers for Covid loses, but appealed, and that appeal is pending. No lender filed a foreclosure case in state court.

It was unclear why the transfer value in city property records was only $11,865,265.
The deal closed on June 15, 2023 and was recorded on June 21, 2023. The property has 37,213 square feet of built space and 11,821 square feet of additional air rights for a total buildable of 49,050 square feet according to a PincusCo analysis of city data. The loan price per built square foot is $1,101 and the price per buildable square foot is $835 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)
The seller bought the property on June 3, 2016, for $40.2 million. This is an entity level transaction, not a deed.

Prior sales and revenue

Prior to this transaction, PincusCo has no record that the buyer Capstone Equities had purchased any other properties and has no record it sold any properties over the past 24 months.
The seller Mitchell Holdings had not purchased any other properties and had not sold any properties over the same time period. The former owners according to the Department of Housing Preservation and Development includes David Mitchell, head officer and Geoffrey Mills, agent. The business entities are Gam Hospitality and Life Hotel One Llc.

The property

The hotel building in Penn Plaza has 37,213 square feet of built space and 11,821 square feet of additional air rights for a total buildable of 49,050 square feet according to a PincusCo analysis of city data. The parcel has frontage of 50 feet and is 98 feet deep with a total lot size of 4,905 square feet. The zoning is C6-4 which allows for up to 10 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $10.5 million. The most recent loan totaled 0.0 and was provided by Capstone Equities on December 30, 2022.

Violations and lawsuits

According to city public data, the property has received $500 in ECB penalties and $2,750 in OATH penalties in the last year.

Development

For the tax lot building, it received its initial certificate of occupancy on June 22, 2018. There are no active new building construction projects or major alteration projects with initial costs more than $1 million on this tax lot.

The neighborhood

In Penn Plaza, The majority, or 76 percent of the 20.4 million square feet of commercial built space are office buildings, with hotel buildings next occupying 8 percent of the space. In sales, Penn Plaza has the 40th highest sale turnover among other neighborhoods in Manhattan with $56.8 million in sales volume in the last two years. For development, Penn Plaza has 2.7 times the average amount of major developments relative to other neighborhoods and is the 12th highest in Manhattan. It had 2.8 million square feet of commercial and multi-family construction under development in the last two years, which represents 14 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of 14 of the 28 commercial properties representing 1,406,759 square feet of the 1,746,232 square feet. The largest owner is Uikun Lee and then Torkian Group.
On the tax block, there were two new building construction projects totaling 76,850 square feet. The largest is a 27-unit, 59,149 square-foot residential (R-2) building submitted by Cottonwood Management and filed by Alex Shing with plans filed June 28, 2017 and it has not been permitted yet. The second largest is a 37-unit, 17,701 square-foot hotel/dormitory/shelter (R-1) building submitted by Raizada Vaid with plans filed March 20, 2015 and it has not been permitted yet.

The majority, or 79 percent of the 1.7 million square feet of built space are office buildings, with retail buildings next occupying 8 percent of the space.

The seller

The PincusCo database currently indicates that Mitchell Holdings owned at least one commercial property in New York City with 37,213 square feet and a city-determined market value of $10.5 million. (Market value is typically about 50% of actual value.) The portfolio consists of at least a single hotel property. It is located in Manhattan.

The buyer

The PincusCo database currently indicates that Capstone Equities owned at least three commercial properties in New York City with 462,258 square feet and a city-determined market value of $142.5 million. (Market value is typically about 50% of actual value.) The portfolio has $41 million in debt, borrowed from Aareal Capital and Yellowstone Real Estate Investments. Within the portfolio, all identified are hotel properties. They are all located in Manhattan.

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