Yellowstone buys $170M note secured by Capstone Equities’ Maxwell Hotel in Midtown East

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 Capstone Equities’s 697-unit Maxwell Hotel building at 541 Lexington Avenue in Midtown East, Manhattan.
The 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.
The property has 317,496 square feet of built space according to PincusCo analysis of city data.
This is for the 697-unit Maxwell Hotel, formerly the W New York. 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.

PincusCo reported that Yellowstone last month took control of a Times Square office property from EPIC UK through a deed-in-lieu after Yellowstone bought the debt with an original principal of $150 million in November 2021.

Prior sales and revenue

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 property

The 541 Lexington Avenue 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.

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 six DOB violations, $3,750 in ECB 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. There was one pre-foreclosure suit filed among other hotel buildings in the past 12 months.

The block

On this tax block, PincusCo has identified the owners of two of the nine commercial properties representing 119,465 square feet of the 2,559,475 square feet. The two identified owners are 12.18. Investment Management and Metropolitan Transportation Authority. There is one active new building construction project totaling 216,171 square feet. It is a 124-unit, 216,171-square-foot R-2 building developed by Kenneth Cartelli with plans filed June 16, 2014 and permitted April 7, 2016.

The majority, or 50 percent of the 1 million square feet of built space are office buildings, with hotel buildings next occupying 45 percent of the space.

The borrower

The PincusCo database currently indicates that Capstone Equities owned at least two commercial properties with 144,762 square feet and a city-determined market value of $58 million. (Market value is typically about 50% of actual value.) The portfolio has $41 million in debt, borrowed from Aareal Capital. Within the portfolio, all identified are hotel properties. They are all located in Manhattan.

Surrounding

Within a 400-foot radius of 541 Lexington Avenue, Pincusco identified nine commercial real estate items of interests occurred over the past 24 months.
Of those nine items, one was for major renovation including a certificate of occupancy change. It was a permit application filed on February 3, 2022 for the $350,000 renovation of 331,181-square-foot R-2 building with 307 residential units at 569 Lexington Avenue.
Of those nine items, three were sales above $5 million totaling $192.8 million. The most recent of the three was Hawkins Way Capital which bought one commercial condo unit in the 389,683-square-foot, two-unit hotel (RH) on 569 Lexington Avenue for $146 million from RLJ Lodging Trust on January 6, 2022.
Of those nine items, five were loans above $5 million totaling $882.4 million. The most recent of the five was Hawkins Way Capital which borrowed $119 million from G4 Capital Partners secured by one condo unit in the 389,683-square-foot, two-unit hotel (RH) on 569 Lexington Avenue on January 6, 2022.

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