New Empire signs $156.2M construction loan with Fortress for 137-unit development in Midtown East

Bentley Zhao’s New Empire Corp. through the entity Lex 47th Property Owner LLC as borrower signed a new construction loan with lender Fortress Investment Group through the entity Fortress Credit Corp. valued at $156.2 million for the midblock development building at 131-141 East 47th Street in Midtown East, Manhattan.
The deal closed on May 16, 2022 and was recorded on June 16, 2022. The prior lender was Emerald Creek Capital which held debt that had an original loan amount of $50 million.
The owner bought the property on December 12, 2019, for $115 million. The signatory for New Empire Corp. was Patrick Zhu. The signatory for Fortress Investment Group was Constantine M. Dakolias.

The property

The 131-141 East 47th Street parcel has frontage of 105 feet and is 100 feet deep with a total lot size of 10,545 square feet. The zoning is C5-2.5 which allows for up to 12 times floor area ratio (FAR) for commercial. The city-designated market value for the property in 2022 is $13.4 million. The most recent loan totaled $50 million and was provided by Emerald Creek Capital on December 12, 2019.

Violations and lawsuits

The property was involved in one lawsuit and zero bankruptcies over the past two years. The suit was a $1.5 million money judgment concerning filed on April 20, 2021, by Bentley Zhao against Hopson Development Holdings. In addition, according to city public data, the property has received $30,000 in ECB penalties and $31,230 in OATH penalties in the last year.

Development

On these lots, there is one active new building construction project for a 137-unit, 151,836-square-foot R-2 building. The project was developed by Bentley Zhao with plans filed March 28, 2016 and permitted August 12, 2021.

The neighborhood

In Midtown East, the majority, or 77 percent of the 65.7 million square feet of commercial built space are office buildings, with residential elevator buildings next occupying 8 percent of the space. In sales, Midtown East has 4 times the average sales volume among other neighborhoods with $1.1 billion in sales volume in the last two years and is the 10th highest in Manhattan. For development, Midtown East has 4 times the average amount of major developments relative to other neighborhoods and is the 4th highest in Manhattan. It had 3.6 million square feet of commercial and multi-family construction under development in the last two years, which represents 6 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of seven of the 61 commercial properties representing 826,949 square feet of the 2,158,101 square feet. The largest owner is C-III Capital Partners, followed by USAA Real Estate and then AEW Capital Management. There is one active new building construction project totaling 151,836 square feet. It is a 137-unit, 151,836-square-foot R-2 building developed by Bentley Zhao with plans filed March 28, 2016 and permitted August 12, 2021.

The majority, or 64 percent of the 887,831 square feet of built space are hotel buildings, with residential elevator buildings next occupying 34 percent of the space.

The borrower

The PincusCo database currently indicates that New Empire Corp. owned at least eight commercial properties with 301,439 square feet and a city-determined market value of $42 million. (Market value is typically about 50% of actual value.) The portfolio has $139.3 million in debt, with top three lenders as Popular Bank, Axos Bank, and WhiteHorse Capital respectively. Within the portfolio, the bulk, or 94 percent of the 301,439 square feet of built space are elevator properties, with specialty properties next occupying 6 percent of the space. The bulk, or 58 percent of the built space, is in Brooklyn, with Queens next at 36 percent of the space.

Surrounding

Within a 400-foot radius of 131-141 East 47th Street, PincusCo identified 14 commercial real estate items of interests occurred over the past 24 months.
Of those 14 items, five were for major renovation including a certificate of occupancy change. They were three permit applications with a total initial cost of $2.8 million and two permits with a total initial cost of $15.7 million. The most recent of these five items was the filing on April 22, 2022 for a one-square-foot E building with zero residential units at 767 Third Avenue.
Of those 14 items, four were sales above $5 million totaling $273.2 million. The most recent of the four was Timeshare Acquisitions which bought the 92,501-square-foot, four-unit hotel (H3) on 501 Lexington Avenue for $41.4 million from Roger Smith Hotel on February 25, 2022.
Of those 14 items, five were loans above $5 million totaling $325.4 million. The most recent of the five was Timeshare Acquisitions which borrowed $34 million from Western Alliance Bank secured by the 92,501-square-foot, four-unit hotel (H3) on 501 Lexington Avenue on February 25, 2022.

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