Judge orders foreclosure auction for Garment District building with $41M loan

A New York State Supreme Court judge ordered a foreclosure auction for the 71,180-square-foot Garment District office building at 29 West 35th Street, which secures a defaulted $41 million loan, in a ruling handed down April 12, 2024, but only published Tuesday in court records. The sale is set to occur within the next six months, but no auction date has been scheduled.

The special servicer, LNR Partners, on behalf of bondholders of the commercial mortgage-backed security Series 2019-BNK19, filed a pre-foreclosure action against the property’s owners, Paul Shapour Sohayegh and Roni Movahedian, who operate Empire State Equities, in January 2022.
Case 850026/2022 LINK

Court filings represent the position of one party and are not necessarily accurate or complete. A significant number of office buildings in Manhattan have been sold at a discount or at auction due to a large decline in values since Covid.

The current judgment is $57.6 million, the court records show.

The Real Deal reported in March 2023 that LNR Partners was seeking a judgment of foreclosure and sale at the building, and that the owners had previously faced foreclosure in 2010 after defaulting on a $29.2 million loan during the 2008-2009 downturn, but ending up stabilizing the building.

Sohayegh and Movahedian purchased the building in July 2007 for $30 million, and after several refinancings, through the entities American Equites LLC and United Group LLC, took out a $41 million loan in May 2019 from Wells Fargo, which packaged it into the CMBS structure.

The property

The office building in Garment District has 71,180 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 65 feet and is 98 feet deep with a total lot size of 6,419 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 $11.4 million.

Prior sales and revenue

The 71,180-square-foot property generated revenue of $2.2 million or $31 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 $2,565 in OATH penalties in the last year.

The neighborhood

In Garment District, The majority, or 69 percent of the 51.8 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 near average sales volume among other neighborhoods with $482.1 million in sales volume in the last two years and is the 18th highest in Manhattan. For development, Garment District is the 5th most active neighborhood among other neighborhoods. It had 7.3 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 15 of the 33 commercial properties representing 864,110 square feet of the 1,436,912 square feet. The largest owner is Aju Hotels Investments, followed by Aron Rosenberg and then BLDG Management. There are no active new building construction projects on this tax block.

The surrounding

Within a 400-foot radius of 33 West 35 Street, PincusCo identified eight commercial real estate items of interests occurred over the past 24 months. One of those eight items was a sale which Elite Group International NY bought two condo units in the 3,805-square-foot, 57-unit mixed-use building (RC) on 35 West 36th St and one other property for $5.5 million from Hidrock Properties on May 24, 2023. Of those eight items, seven were loans above $5 million totaling $194.4 million. The most recent of the seven was Rockbridge Capital in which borrowed $28.5 million from BankUnited secured by the 55,000-square-foot, one-unit hotel (H3) on 57 West 35th Street on May 13, 2024.

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