Noam Shemel signs 99-year ground lease valued at $10.2M at two mixed-use properties in Chelsea

Noam Shemel through the entity Kasin West Chelsea, LLC as tenant signed a 99-year ground lease valued at $10.2 million with Patrick McElhone of Houston Street Capital Partners through the entity Grendel Co. as landlord for three-unit mixed-use building (S3) at 132 West 23rd Street in Chelsea, Manhattan and three-unit mixed-use building (S3) at 134 West 23rd Street in Chelsea, Manhattan.
The deal closed on July 26, 2022 and was recorded on August 15, 2022. The two properties have 10,692 square feet of built space and 22,631 square feet of additional air rights for a total buildable of 33,336 square feet according to PincusCo analysis of city data. The sale price per built square foot is $958 and the price per buildable square foot is $307 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.)
This is a 99-year ground lease composed of a first term of 49 years and two options for 25 years each. The lease includes a right of first refusal. McElhone’s LinkedIn says he is partner at Houston Street Capital Partners, however Houston Street Capital and PDM Fund are not affiliated with this project.

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 132 West 23rd Street.

Prior sales and revenue

The owners according to the Department of Housing Preservation and Development includes Bernard McElhone, head officer and Denise Shirley, officer. The business entities are Tri-Star Equities and Grendel Company. The two properties with a total of 10,692 square feet of built space generated revenue of $470,020 per year or $44 per square foot. The sale price per square foot was $959.

The property

The 132 West 23rd Street parcel has frontage of 18 feet and is 98 feet deep with a total lot size of 1,852 square feet. The zoning is C6-3X which allows for up to 6 times floor area ratio (FAR) for commercial and up to 6.02 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $3.4 million.
The 134 West 23rd Street parcel has frontage of 18 feet and is 98 feet deep with a total lot size of 1,852 square feet. The zoning is C6-3X which allows for up to 6 times floor area ratio (FAR) for commercial and up to 6.02 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $3.4 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 $1,850 in OATH penalties in the last year.

Development

There are no active new building construction projects or major alteration projects with initial costs more than $5 million on this tax lot.

The neighborhood

In Chelsea, the bulk, or 35 percent of the 52.5 million square feet of commercial built space are office buildings, with elevator buildings next occupying 28 percent of the space. In sales, Chelsea has the 2nd highest sale turnover among other neighborhoods in the city with $2.7 billion in sales volume in the last two years. For development, Chelsea has 2.1 times the average amount of major developments relative to other neighborhoods and is the 13th highest in Manhattan. It had 2.2 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 mixed-use buildings in the past 12 months.

The block

On the tax block of 132 West 23rd Street, PincusCo has identified the owners of four of the 25 commercial properties representing 57,455 square feet of the 420,985 square feet. The largest owner is Aimco, followed by Hildreth Real Estate Advisors and then William Gottlieb Real Estate.
There is one active new building construction project totaling 43,866 square feet. It is a 30-unit, 43,866-square-foot R-2 building developed by David Rizzuto with plans filed December 15, 2016 and permitted February 5, 2019.

The majority, or 47 percent of the 363,812 square feet of built space are retail buildings, with elevator buildings next occupying 42 percent of the space.

Surrounding

Within a 400-foot radius of 132 West 23rd Street, PincusCo identified seven commercial real estate items of interests occurred over the past 24 months.
Of those seven items, one was in new building development. It was a new building permit application filed on October 1, 2021 for a 22,042-square-foot R-2 building with 26 residential units at 170 West 22nd Street.
Of those seven items, two were sales above $5 million totaling $324.4 million. The most recent of the two was AKAM Living Services which bought one condo unit in the 10,276-square-foot, 101-unit mixed-use building (RM) on 133 West 22nd Street for $8.6 million from RoundSquare Development on May 26, 2021.
Of those seven items, four were loans above $5 million totaling $436 million. The most recent of the four was Aimco which borrowed $16.5 million from JLL secured by the 48,539-square-foot, 44-unit rental (D7) on 118 West 23rd Street on June 30, 2022.
Correction: Houston Street Capital Partners and PDM Funds are not affiliated with this project.

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