Note holder Yellowstone acquires Midtown East hotel with $234M judgment through auction

Note holder Yellowstone Real Estate Investments took control of the shuttered 697-unit Midtown East Maxwell hotel that has a $233.6 million judgment, through a foreclosure auction on October 16, winning with a bid of $140 million. Since it held debt totaling $233.6 million, there were no surplus funds.

The former owners in the foreclosure action were affiliates of Dune Real Estate Partners and Aynsley Capital, according to court records.

Yellowstone in April paid Blackstone Group $185.9 million for 1740 Broadway.

The auction was set through a notice of sale dated September 18, which noted the judgment at that time was $218 million.
State Supreme Court Justice Andrew Borrok on May 8, 2024, sided with lender Yellowstone Real Estate Investments, affirming a judgment of foreclosure and sale, that advanced the lender’s effort to take control of the closed hotel, at 541 Lexington Avenue, which spans the entire eastern block front of Lexington Avenue between 49th and 50th streets.  The referee is Howard W. Kingsley.

Case 653461/2022 LINK

Capstone and Highgate purchased the hotel in May 2018 based on a December 2017 contract, for $190 million, and obtained $170 million in senior financing from LoanCore at the time, yielding a relatively high 89.5 percent loan to value percentage. Joshua Zamir is the founder of Capstone Equities. The Real Deal reported in 2018 that Highgate was a partner on this property. Capstone and Highgate are not identified in the foreclosure complaint, and don’t appear to be involved in this action.

In March 2022, Yellowstone Real Estate Investments through the entity YS 541 Lexington Holdings LLC bought a note with an original principal of $170 million from LoanCore Capital secured by the hotel. That deal closed on March 9, 2022 and was recorded on April 5, 2022. The prior lender was LoanCore Capital which held debt that had an original loan amount of $170 million.

Yellowstone Real Estate Investments through the entity YS 541 Lexington Holdings LLC borrowed up to $90 million from Fortress Investment Group through the entity Fortress Credit Corp., secured by Yellowstone’s $170 million note, which is in turn secured by Capstone Equities 697-unit Maxwell Hotel at 541 Lexington Avenue, in Midtown East, Manhattan. The participation deal closed January 19, 2023, and was recorded on January 25, 2023.

The property

The hotel building in Midtown East has 317,496 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 200 feet and is 126 feet deep with a total lot size of 24,725 square feet. The lot is irregular. The zoning is C6-6 which allows for up to 15 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $99.2 million. The most recent loan totaled 0.0 and was provided by Yellowstone Real Estate Investments on March 9, 2022.

Prior sales and revenue

This property was sold for $182.9 million on May 9, 2018.

The 317,496-square-foot property generated revenue of $44.1 million or $139 per square foot, according to the most recent income and expense figures.

Violations and lawsuits

According to city public data, the property has received two DOB violations, $1,250 in ECB penalties, and $10,750 in OATH penalties in the last year.

The neighborhood

In Midtown East, The majority, or 81 percent of the 62.6 million square feet of commercial built space are office buildings, with hotel buildings next occupying 7 percent of the space. In sales, Midtown East has the 5th highest sale turnover among other neighborhoods in the city with $1.7 billion in sales volume in the last two years. For development, Midtown East is the 2nd most active neighborhood among other neighborhoods. It had 16.3 million square feet of commercial and multi-family construction under development in the last two years, which represents 26 percent of the neighborhood’s built space.

The surrounding

Within a 400-foot radius of 141 East 49 Street, PincusCo identified three commercial real estate items of interests occurred over the past 24 months. One of those three items was a sale which Consulate General Of The State Of Qatar bought two condo units in the 5,388-square-foot, 125-unit mixed-use building (RM) on 138 East 50th Street and one other property for $24.6 million from 50 Lex Development LLC on May 14, 2024. Of those three items, two were loans above $5 million totaling $106 million. The most recent of the two was Hersha Hospitality Trust in which borrowed $51 million from Monarch Alternative Capital secured by two condo units in the 63,668-square-foot, two-unit mixed-use building (RC) on 517 Lexington Avenue on September 7, 2023.

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