Gary Katz’s Downtown Capital Partners is making a cheap bet on suburban offices.
The White Plains-based lender and investor acquired 100 Hillside Avenue, a 130,000-square-foot office complex in the Westchester County city that was formerly the home of French-based food giant Danone’s North American headquarters.
The property’s $23 million CMBS loan fell into distress around 2019, after Danone moved to a new headquarters and left the property mostly vacant.
In January, Downtown Capital acquired the loan for just $8.3 million and entered into a deed-in-lieu of foreclosure, allowing the firm to take control of the property, according to managing director Brian O’Flanagan.
Alfred Weissman Real Estate, the former owner of the property, will remain a general partner in the project, O’Flanagan said.
Downtown Capital tapped CPG Architects to modernize the building and surrounding space, including possibly adding a zen garden. The firm is eyeing a single tenant for occupancy, potentially a company in the healthcare space. Its plan is to own and hold the complex for the long-haul, O’Flanagan said.
Downtown Capital’s carrying costs will be about $85 per square foot until the property is leased.
Led by Gary Katz, the firm focuses on distress deals and special situations. It is perhaps best known in New York City real estate for being a primary lender to Yoel Goldman, the Brooklyn landlord whose All Year Holdings became one of the borough’s largest property owners before falling into bankruptcy last year.
The building hopes to attract tenants in a lackluster office market in Westchester County. The office vacancy rate in the county was 25.8 percent at the end of the first quarter, according to Newmark.
Net absorption, the difference between office space occupied versus office space vacated, totaled negative 234,407 square feet in the quarter. That was down from a positive 10,168 square feet a year earlier.
But some hospitals and healthcare providers have been taking up more space in the county. Last month, New York-Presbyterian Hospital acquired 1111 and 1129 Westchester Avenue for $83.5 million, or $228 per square foot.