Watermark as tenant signs $10.6M ground lease with Joyland for conversions in Gramercy

Watermark Capital Group as tenant through the entity Three One Three LLC signed a $10.6 million, 99-year ground lease with landlord Joyland Group through the entity 317 East 17th Street LLC for the specialty building (I1) at 313 East 17th Street in Gramercy, Manhattan and three-unit specialty building (I4) at 321 East 17th Street in Gramercy, Manhattan. The expected use is cash flowing.

On these lots, there are two active major alteration construction projects for a total of 96 units, the larger being M01159579, for an 87-unit, 73,469 square-foot residential (R-2) building. The project was submitted by Borough Developers and filed by Shimon Kleinman with plans filed December 27, 2024 and it has not been permitted yet.
The deal closed on December 19, 2024 and was recorded on January 16, 2025. The two properties have 77,499 square feet of built space and 5,478 square feet of additional air rights for a total buildable of 78,488 square feet according to a PincusCo analysis of city data. The sale price per built square foot is $136 and the price per buildable square foot is $134 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.)
The signatory for Joyland Group was Joel Wertzberger. The signatory for Watermark Capital Group was Meir D. Tabak. This is a 99-year ground lease for the two properties.

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 313 East 17th Street.

Prior sales and revenue

Prior to this transaction, PincusCo has records that the buyer Watermark Capital Group purchased 14 properties in nine transactions for a total of $131 million and sold one property in one transaction for a total of $4 million over the past 24 months.
The seller Joyland Group purchased five properties in five transactions for a total of $114.9 million and had not sold any properties over the same time period.

The property

The specialty building in Gramercy has 77,499 square feet of built space and 5,478 square feet of additional air rights for a total buildable of 78,488 square feet according to a PincusCo analysis of city data. The parcel has frontage of 104 feet and is 106 feet deep with a total lot size of 11,024 square feet. The zoning is R8A which allows for up to 6.02 times floor area ratio (FAR) for residential with inclusionary housing. The city-designated market value for the property in 2022 is $16.5 million. The most recent loan totaled $27.5 million and was provided by G4 Capital Partners on December 16, 2024.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the properties for the past 24 months. In addition, according to city public data, the properties have received three DOB violations in the last year.

Development

The neighborhood

In Gramercy, The bulk, or 31 percent of the 11.3 million square feet of commercial built space are elevator buildings, with specialty buildings next occupying 24 percent of the space. In sales, Gramercy has 2.1 times the average sales volume among other neighborhoods with $553.6 million in sales volume in the last two years and is the 20th highest in Manhattan. For development, Gramercy has 1.9 times the average amount of major developments relative to other neighborhoods and is the 19th highest in Manhattan. It had 2.1 million square feet of commercial and multi-family construction under development in the last two years, which represents 19 percent of the neighborhood’s built space.

The block

On the tax block of 313 East 17th Street, PincusCo has identified the owners of 11 of the 14 commercial properties representing 486,313 square feet of the 505,155 square feet. The largest owner is Nyu Langone Hospitals, followed by Croman Real Estate and then Joyland Group.
On the tax block, there were three new building construction projects totaling 135,201 square feet. The largest is a 40-unit, 55,340 square-foot residential (R-2) building submitted by CIM Group and filed by David Wellspring with plans filed September 7, 2018 and it has not been permitted yet. The second largest is a 50-unit, 55,321 square-foot residential (R-2) building submitted by Minrav Development and filed by Yehuda Mor with plans filed February 10, 2021 and permitted October 15, 2024.

The majority, or 83 percent of the 505,155 square feet of built space are specialty buildings, with walkup buildings next occupying 17 percent of the space.

The seller

The PincusCo database currently indicates that Joyland Group owned at least eight commercial properties with 405 residential units in New York City with 149,280 square feet and a city-determined market value of $23.2 million. (Market value is typically about 50% of actual value.) The portfolio has $151.8 million in debt, with top three lenders as iCross Capital, Cross River Bank, and G4 Capital Partners respectively. Within the portfolio, the bulk, or 52 percent of the 149,280 square feet of built space are specialty properties, with O3 properties next occupying 44 percent of the space. The bulk, or 52 percent of the built space, is in Manhattan, with Bronx next at 44 percent of the space.

The buyer

The PincusCo database currently indicates that Watermark Capital Group owned at least 137 commercial properties with 1,588 residential units in New York City with 1,579,051 square feet and a city-determined market value of $303.9 million. (Market value is typically about 50% of actual value.) The portfolio has $221.5 million in debt, with top three lenders as Slate Property Group, BridgeCity Capital, and Signature Bank respectively. Within the portfolio, the bulk, or 52 percent of the 1,579,051 square feet of built space are walkup properties, with elevator properties next occupying 19 percent of the space. The bulk, or 94 percent of the built space, is in Brooklyn, with Queens next at 6 percent of the space.

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