October auction set for 697-unit Maxwell hotel with $218M judgment

A court-appointed referee set October 16, 2024, as the date to auction off the shuttered 697-unit Midtown East hotel, the Maxwell, at the New York State Supreme Court Building in Lower Manhattan. The auction was set through a notice of sale dated September 18, which noted the judgment 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.. However, even with the auction date, there are still avenues that would delay or block Yellowstone from gaining control. The defendants in the foreclosure action are affiliates of Dune Real Estate Partners and Aynsley Capital, according to court records. 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 $10,775 in OATH penalties in the last year.

There were no lawsuits or bankruptcies filed against the property for the past 24 months.

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 2nd highest sale turnover among other neighborhoods in the city with $3.5 billion in sales volume in the last two years. For development, Midtown East is the 2nd most active neighborhood among other neighborhoods. It had 16.5 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 block

On this tax block, PincusCo has identified the owners of two of the six commercial properties representing 436,961 square feet of the 1,005,331 square feet. The two identified owners are 12.18. Investment Management and Capstone Equities. On the tax block, there was one new building construction project filed totaling 216,171 square feet. It is a 124-unit, 216,171 square-foot residential (R-2) building submitted by Ceruzzi Properties and filed by Kenneth Cartelli with plans filed June 16, 2014 and permitted April 7, 2016.

The owner

The PincusCo database currently indicates that Capstone Equities owned at least six commercial properties in New York City with 956,191 square feet and a city-determined market value of $214 million. (Market value is typically about 50% of actual value.) The portfolio has $90.5 million in debt, with top three lenders as Argentic Investment Management, Aareal Capital, and Yellowstone Real Estate Investments respectively. Within the portfolio, the bulk, or 60 percent of the 956,191 square feet of built space are hotel properties, with office properties next occupying 40 percent of the space. The bulk, or 60 percent of the built space, is in Manhattan, with Brooklyn next at 40 percent of the space.

The owners according to the Department of Housing Preservation and Development includes Joshua Zamir, head officer and Brian Dunn, site manager. The business entity is Dch Lex Opco Sub Lp.

The surrounding

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Direct link to the property’s ACRIS page.