ZG Capital, Rialto sign $120M rehab loan with ACRES Capital for office in Midtown East

ZG Capital Partners and Rialto Capital Management through the entity Park 53rd Owner LLC as borrower signed a rehab construction loan with lender ACRES Capital through the entity Acres Realty Funding, Inc. valued at $120 million for the office building (O9) at 45 East 53rd Street in Midtown East, Manhattan.
The deal closed on July 15, 2022 and was recorded on September 7, 2022. The prior lender was First Horizon Bank which held debt that had an original loan amount of $90 million. The property has 112,933 square feet of built space according to PincusCo analysis of city data. The loan price per built square foot is $1,062 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 owner bought the property on July 15, 2022, for $102.5 million. The signatory for ZG Capital Partners and Rialto Capital Management was Babak Zar. The signatory for ACRES Capital was Jaclyn Jesperger. This is a rehab and acquisition loan, composed of $56.6 million acquisition loan, $37.7 million building loan and $25.7 million project loan.

Prior sales and revenue

The 112,933-square-foot property generated revenue of $6.9 million or $61 per square foot, according to the most recent income and expense figures.

The property

The 45 East 53rd Street parcel has frontage of 80 feet and is 100 feet deep with a total lot size of 8,033 square feet. The zoning is C5-2.5 which allows for up to 12 times floor area ratio (FAR) for commercial The city-designated market value for the property in 2022 is $52.8 million.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the property since September of 2020. In addition, according to city public data, the property has not received any significant violations 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 82 percent of the 61.5 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 4.2 times the average sales volume among other neighborhoods with $1.4 billion in sales volume in the last two years and is the 9th highest in Manhattan. For development, Midtown East is the 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 block

On this tax block, PincusCo has identified the owners of eight of the 22 commercial properties representing 1,464,268 square feet of the 2,302,217 square feet. The largest owner is Tishman Speyer, followed by Korein family and then Shvo.
There are no active new building construction projects on this tax block.

The majority, or 89 percent of the 2.2 million square feet of built space are office buildings, with retail buildings next occupying 6 percent of the space.

The borrower

The PincusCo database currently indicates that ZG Capital Partners owned at least four commercial properties in New York City with 552,589 square feet and a city-determined market value of $161.4 million. (Market value is typically about 50% of actual value.) Within the portfolio, the bulk, or 86 percent of the 552,589 square feet of built space are office properties, with retail properties next occupying 10 percent of the space. They are all located in Manhattan.
The PincusCo database currently indicates that Rialto Capital Management owned at least two commercial properties in New York City with 118,813 square feet and a city-determined market value of $53.9 million. (Market value is typically about 50% of actual value.) The portfolio has $5 million in debt, borrowed from Signature Bank. Within the portfolio, the bulk, or 95 percent of the 118,813 square feet of built space are office properties, with walkup properties next occupying 5 percent of the space. The bulk, or 95 percent of the built space, is in Manhattan, with Brooklyn next at 5 percent of the space.

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