Yellowstone Secures $203M Loan for Office-to-Resi Conversion

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Isaac Hera may no longer be pursuing a hotel project at the Candler Building in Times Square, but he still has plenty of support from lenders.

Yellowstone Real Estate Investments secured $203 million in debt for the office-to-residential conversion of 220 West 42nd Street, the Commercial Observer reported. Bank Hapoalim’s U.S. lending arm provided the debt, while Naftali Credit Partners tacked on $36 million in mezzanine debt.

An IPA Capital Markets team including Max Herzog, Marko Kazanjian and Andrew Cohen arranged the debt.

The plan is to turn the 25-story office building into a 221,000-square-foot multifamily building with 176 units and 18,000 square feet of retail space. The developer intends to tap into the 467m affordable housing conversion program, which requires at least 44 of the units to be designated affordable.

Two years ago, Yellowstone filed plans for a 265-key hotel at the site, which would have occupied the vacant upper floors of the existing mixed-use building. It’s unclear why Yellowstone dropped its hotel plan, though it wouldn’t be surprising if it was linked to the 2021-implemented requirement for developers to secure special permits for hotel projects, which chilled development in the sector.

Yellowstone pivoted from hotel plans to a residential project in August, the New York Business Journal reported.

Yellowstone acquired the property in 2022 via a deed-in-lieu of foreclosure that valued the property at $161.1 million. UK-based investment firm EPIC had owned the property since 2012, when it acquired it from Paramount Group for $261 million. Months before Yellowstone’s acquisition, it purchased the $150 million loan that M&T Bank issued in 2017 to refinance the historic building.

In recent years,the property was used to house nearly 1,100 migrants with a right to shelter.

— Holden Walter-Warner