Stillwater buys $12.6M note secured by Empire Management’s Midtown East office building

Stillwater Asset Management through the entity LBC2 Trust bought a note with an original principal of $12.625 million from Webster Bank secured by Empire Management’s midblock office building at 226 East 54th Street in Midtown East, Manhattan.
The deal closed on March 16, 2022 and was recorded on March 29, 2022. The prior lender was Webster Bank which held debt that had an original loan amount of $12.625 million. Fred Ohebshalom, of Empire, signed for the 2018 loan with Sterling National Bank, which was acquired by Webster Bank on February 1, 2022.

This is Stillwater’s second purchase in the city. Almost exactly a year ago, on March 11, 2021, Stillwater through LBC2 Trust bought a note from U.S. Bank with an original principal of $14.8 million secured by Pineapple Hospitality Company’s hotel in Hudson Yards.

The property has 31,105 square feet of built space and 19,130 square feet of additional air rights for a total buildable of 50,210 square feet according to PincusCo analysis of city data.
The owner bought the property on August 1, 2016, for $7.3 million. The sale of the note includes a collateralization agreement with Pacific Western Bank, meaning Stillwater borrowed money from Pacific Western to buy the note.

Prior sales and revenue

The 31,105-square-foot property generated revenue of $1.6 million or $52 per square foot, according to the most recent income and expense figures.

The property

The 226 East 54th Street parcel has frontage of 50 feet and is 100 feet deep with a total lot size of 5,021 square feet. The zoning is C1-9 which allows for up to 2 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 $7.2 million.

Violations and lawsuits

The property was not involved in any lawsuits or bankruptcies in the past years. In addition, according to city public data, the property has received two DOB violations, $3,125 in ECB penalties, and $7,405 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 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 three of the 19 commercial properties representing 560,446 square feet of the 802,176 square feet. The largest owner is Ceruzzi Properties, followed by Sol Goldman Investments and then Debra Kalimian. There are two active new building construction projects totaling 287,685 square feet. The largest is a 130-unit, 245,946-square-foot R-2 building developed by Shaz Mossanen with plans filed October 28, 2015 and permitted September 27, 2018. The second largest is a 29-unit, 41,739-square-foot R-2 building developed by Abraham Lokshin with plans filed November 13, 2019 and it has not been permitted yet.

The majority, or 64 percent of the 918,545 square feet of built space are office buildings, with residential elevator buildings next occupying 19 percent of the space.

The borrower

The PincusCo database currently indicates that Empire Management owned at least 12 commercial properties with 581,234 square feet and a city-determined market value of $133 million. (Market value is typically about 50% of actual value.) The portfolio has $198.7 million in debt, with top three lenders as New York Community Bank, Santander Bank, and Dime Community Bank respectively. Within the portfolio, the bulk, or 66 percent of the 581,234 square feet of built space are residential elevator properties, with hotel properties next occupying 22 percent of the space. They are all located in Manhattan.

Surrounding

Within a 400-foot radius of 226 East 54th Street, Pincusco identified 11 commercial real estate items of interests occurred over the past 24 months.
Of those 11 items, two were for major renovation including a certificate of occupancy change. They were one permit applications with a total initial cost of $450,000 and one initial temporary certificate of occupancy issuance for a project that initially costed $600,000. The most recent of these two items was the filing on March 11, 2022 for a 554,180-square-foot office (B) building with no residential units at 885 Third Avenue.
One of those 11 items was a sale which Columbus Properties bought the 1,321,050-square-foot, 10-unit office building (O4) on 909 3rd Avenue for $191.7 million from 601W Companies on June 21, 2021.
Of those 11 items, eight were loans above $5 million totaling $729 million. The most recent of the eight was Empire Management which borrowed $7.6 million from New York Community Bank secured by the 16,920-square-foot, 20-unit rental (C7) on 226 East 53rd Street on September 27, 2021.

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