The Real Deal New York

CIM in talks with iStar on BridgeStreet tower

April 13, 2011 08:33AM
By David Jones

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From left: Esplanade’s David Scharf, iStar’s Jay Sugarman and 47 East 34th Street (building photo source: PropertyShark)

CIM Group is in talks with Esplanade Capital and iStar Financial to buy 47 East 34th Street, the troubled mixed-use tower that is currently leased to corporate housing provider Bridgestreet Worldwide.

Istar has been shopping the $84 million in debt on the foreclosed property for months and was engaged in talks with an undisclosed buyer in February,

but that deal has since collapsed and the lender recently entered discussions with CIM while preparing to place the building on the auction block.

CIM, the Los Angeles-based investment firm, led by founder Richard Ressler, has been on something of a buying spree in New York, scooping up the debt at two iStar projects, William Beaver House and Trump Soho. The firm would not divulge any details on these negotiations.

“CIM’s policy is not to comment on rumors or speculation in the market,” a spokesperson said. “Once we have consummated a deal, our policy is to confirm public facts.”

Sources would not say how much CIM would pay for the debt, but in 2010 iStar turned down two offers of more than $60 million for the debt.

Sources familiar with the discussions say that if CIM agrees to buy the property, it will like be stuck with BridgeStreet until 2012, but noted that the corporate housing firm is making a profit at the site and would be a solid tenant until the expiration of a court-ordered lease.

“Why try to lease up that building when you can keep it leased with BridgeStreet?” the source said. “The payout is not immediate. I assume [CIM] is going to sit on this for a couple of years and condo it out.”

The building was the subject of a complex and some say questionable financial arrangement involving Esplanade Capital, a Manhattan-based developer led by David Scharf and Jay Eisenstadt. In 2007, Esplanade borrowed $76.1 million from iStar to develop the property and also entered into a $96.7 million bulk sale agreement to sell the property to Sorrento Asset Management, a Dublin-based firm that owns BridgeStreet.

Esplanade filed a $150 million suit against iStar alleging the lender conspired with Sorrento to let Bridgestreet continue to operate the extended-stay hotel under a separate deal, but a state Supreme Court judge sided with the lender, arguing that Sorrento stood to lose too much to engage in such a scheme.

Esplanade filed an appeal in March to have the Yates decision overturned, to block the foreclosure by iStar and to have Bridgestreet evicted from the premises.

Meanwhile, iStar filed to have a judgment entered against Ireland-based investors Bryan Turley, Darina Heavey, John P.B. Ryan and Ken Healy, who guaranteed the loan at 47 East 34th Street. Scharf and Eisenstadt are already facing a possible judgment as well as Kevin and Donald O’Sullivan, who are principals at Time Square Construction & Development.

Esplanade is involved in a separate foreclosure case at the S48, a 43-story hotel and condominium at 306 West 48th Street, where BridgeStreet was scheduled to operate an extended-stay property as well. 

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