From left: Esplanade’s David Scharf, iStar’s Jay Sugarman and 47 East 34th Street (building photo source: PropertyShark)
Esplanade Capital is in the final stages of a compromise deal to sell its embattled BridgeStreet hotel property at 47 East 34th Street, which iStar Financial foreclosed on in January.
Manhattan-based iStar, which in 2010 rejected offers of more than $60 million to buy out the debt on the property, would likely take a slight haircut to pay off $84 million in loans and other fees, sources said. The property is currently licensed to BridgeStreet, but sources said the building, located between Park and Madison avenues, could be used for condominium units or a combination of uses.
“Working closely with iStar, which has been diligent and extremely cooperative, we are now near a resolution that should benefit all parties,” David Scharf, managing member of Esplanade, said in an e-mailed statement. “Nobody will get what they ideally wanted — which is normal in a matter like this, but nobody will walk away empty-handed either, and that’s the nature of a smart, sound compromise.”
He added: “Because we have not finalized a deal we will not discuss details… The future use of the property is under consideration.”
As The Real Deal previously reported, iStar filed suit in March 2010 to foreclose on the 36-story tower alleging that Esplanade defaulted on more than $76 million in loans. Esplanade counter-sued alleging that iStar engaged in a scheme with Dublin-based Sorrento Asset Management, the parent company of BridgeStreet, to take over the property and cut Esplanade out of the picture.
A state Supreme Court judge last month ruled in favor of iStar and dismissed claims by Esplanade that the lender attempted a predatory scheme to steal the property from them.
After failing to evict BridgeStreet from the building, the developers leased the building out to Herndon, Va.-based BridgeStreet, which operates an extended-stay hotel property at the building. According to court documents filed in December, BridgeStreet received an extension on its existing lease to remain at the property through the end of 2011 for a monthly rent of $400,000.
“BridgeStreet has a license to operate the building at 47 East 34th Street and will continue to operate the building under this license,” said BridgeStreet spokesperson Kelly Murphy, in an e-mail.
Among the disputed issues at the property was whether it would continue to operate as an extended-stay, because Esplanade lawyers noted that the building was scheduled to receive 421-a benefits if it operated as a condo.
Officials at iStar declined to comment.