Jenel Management signs $88M refi loan with Aareal Capital for hotel, retail in Garment District

Jenel Management through the entity 34th Hotel Ventures LLC as borrower signed a refi loan with lender Aareal Capital through the entity Aareal Capital Corporation valued at $88 million for two properties including the 348-unit hotel building (H2) at 218 West 35th Street and the retail building (K4) at 223 West 34th Street in Garment District, Manhattan.
The deal closed on December 28, 2022 and was recorded on January 13, 2023. The prior lender was Aareal Capital which held debt that had an original loan amount of $92 million. The two properties have 262,522 square feet of built space and 78,623 square feet of additional air rights according to PincusCo analysis of city data. The loan price per built square foot is $335 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 signatory for Jenel Management was Jack Dushey. The signatory for Aareal Capital was Asish Thallur and Jeffrey Pascale. As part of this modification, Jenel made a $4 million prepayment.

Because multiple properties have been transacted, some of the following sections will follow the property with the largest assessed value, which in this case, is the property on 218 West 35th Street.

Prior sales and revenue

Out of the two properties, one with a total of 262,522 square feet of built space generated revenue of $9.9 million per year.

The property

The 218 West 35th Street parcel has frontage of 75 feet and is 98 feet deep with a total lot size of 7,357 square feet. The zoning is M1-6 which allows for up to 10 times floor area ratio (FAR) for manufacturing The city-designated market value for the property in 2022 is $69.4 million.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the properties since September of 2020. In addition, according to city public data, the properties have received one DOB violation and $5,530 in OATH penalties in the last year.

The neighborhood

In Garment District, the majority, or 70 percent of the 52.2 million square feet of commercial built space are office buildings, with hotel buildings next occupying 12 percent of the space. In sales, Garment District has 2.7 times the average sales volume among other neighborhoods with $931.3 million in sales volume in the last two years and is the 15th highest in Manhattan. For development, Garment District has 1.9 times the average amount of major developments relative to other neighborhoods and is the 15th highest in Manhattan. It had 2 million square feet of commercial and multi-family construction under development in the last two years, which represents 4 percent of the neighborhood’s built space. There was one pre-foreclosure suit filed among other hotel buildings in the past 12 months.

The block

On the tax block of 218 West 35th Street, PincusCo has identified the owners of 11 of the 27 commercial properties representing 400,761 square feet of the 2,262,329 square feet. The largest owner is Vornado Realty Trust, followed by Solil Management and then Shel Capital.
On the tax block, there were five new building construction projects totaling 273,414 square feet. The largest is a 300-unit, 157,517-square-foot R-1 building developed by Meyer Chetrit with plans filed April 5, 2016 and permitted August 21, 2017. The second largest is a 180-unit, 45,026-square-foot R-1 building developed by Isaac Hager with plans filed January 6, 2014 and it has not been permitted yet.

The majority, or 75 percent of the 2.3 million square feet of built space are office buildings, with hotel buildings next occupying 16 percent of the space.

The borrower

The PincusCo database currently indicates that Jenel Management owned at least 16 commercial properties in New York City with 616,077 square feet and a city-determined market value of $131.3 million. (Market value is typically about 50% of actual value.) The portfolio has $390.8 million in debt, with top three lenders as H.I.G. Capital, Signature Bank, and Santander Bank respectively. Within the portfolio, the bulk, or 54 percent of the 616,077 square feet of built space are elevator properties, with retail properties next occupying 38 percent of the space. The bulk, or 60 percent of the built space, is in Brooklyn, with Queens next at 30 percent of the space.

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