Marathon acquires Churchill office building in Garment District through foreclosure

Lender Marathon Asset Management through the entity 263 W 34th Street Lender, LLC acquired the office building (O5) at 261 West 34th Street in the Garment District, Manhattan, through a foreclosure process. The former owner was Churchill Real Estate Holdings, and the transfer was recorded at $16 million. The defaulted loan was $52 million. The Real Deal reported on the transfer, noting Marathon said it and partners spent more than $90 on the development.
The deal closed on October 19, 2023 and was recorded on October 25, 2023.
The seller bought the property on December 17, 2015, for $31.7 million and completed the building in 2019. The signatory for Churchill Real Estate Holdings was the referree, Eric M. Zim. The signatory for Marathon Asset Management was Craig Thaler. The contract date was October 19, 2023. Churchill lost the property through the foreclosure 655493/2021.

Prior sales and revenue

Prior to this transaction, PincusCo has no record that the buyer Marathon Asset Management had purchased any other properties and has no record it sold any properties over the past 24 months.
The seller Churchill Real Estate Holdings had not purchased any other properties and sold four properties in four transactions for a total of $56.5 million over the same time period.

The property

The office building in Garment District has 35,111 square feet of built space and 43,454 square feet of additional air rights for a total buildable of 78,580 square feet according to a PincusCo analysis of city data. The parcel has frontage of 79 feet and is 98 feet deep with a total lot size of 7,858 square feet. The lot is irregular. The city-designated market value for the property in 2022 is $11 million.

Violations and lawsuits

The property was involved in one lawsuit and one bankruptcy over the past several years. The bankruptcy was filed on August 3, 2022, by Isaac Hager citing assets of $52 million. In addition, according to city public data, the property has received one DOB violation in the last year.

Development

For the tax lot building, it received its initial certificate of occupancy on October 8, 2019. On the lot, there is one active new building construction project for a 27,048 square-foot B building. The project was submitted by Churchill Real Estate Holdings and filed by Jake Borden with plans filed April 26, 2016 and permitted December 10, 2018.

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 1.6 times the average sales volume among other neighborhoods with $572 million in sales volume in the last two years and is the 25th highest in Manhattan. For development, Garment District is the 5th most active neighborhood among other neighborhoods. It had 6.2 million square feet of commercial and multi-family construction under development in the last two years, which represents 12 percent of the neighborhood’s built space. There was one pre-foreclosure suit filed among other office buildings in the past 12 months.

The block

On this tax block, PincusCo has identified the owners of 16 of the 27 commercial properties representing 948,897 square feet of the 2,262,329 square feet. The largest owner is Vornado Realty Trust, followed by Sol Goldman Investments and then Shel Capital.
On the tax block, there were four new building construction projects totaling 241,798 square feet. The largest is a 300-unit, 157,517 square-foot hotel/dormitory/shelter (R-1) building submitted by Chetrit Group and filed 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 hotel/dormitory/shelter (R-1) building submitted by Cornell Realty Management and filed 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 seller

The PincusCo database currently indicates that Churchill Real Estate Holdings owned at least nine commercial properties with 140 residential units in New York City with 221,372 square feet and a city-determined market value of $84.1 million. (Market value is typically about 50% of actual value.) The portfolio has $144.9 million in debt, with top three lenders as Square Mile Capital Management, Keysite Capital Partners, and Silver Point Capital respectively. Within the portfolio, the bulk, or 48 percent of the 221,372 square feet of built space are elevator properties, with office properties next occupying 29 percent of the space. They are all located in Manhattan.

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