Investment Group Eyes Conversion of 345 Seventh Ave

A contrarian bet on a Penn District office building failed to pay off, but the property could soon receive new life as housing.

A buyer venture including Katan Realty Group, Kohan Retail Investment Group and Forest Hills-based Ilya Mikhailov acquired 345 Seventh Avenue in Midtown Manhattan for $85 million, Crain’s reported. The price on the 25-story, 190,000-square-foot office building breaks down to $447 per square foot.

Katan announced the acquisition on Wednesday without revealing the seller. The answer to that question is mired in the legal weeds: Josh Rahmani and Ebi Khalili’s Empire Capital and Igal Namdar acquired the century-old office property in Midtown, along with three smaller buildings for $107 million in 2021.

Benefit Street provided a $78 million mortgage for the acquisition. In July, however, the lender initiated a Uniform Commercial Code foreclosure and scheduled an auction for September. The auction and foreclosure were canceled after an agreement was worked out, according to Katan.

Namdar and Empire Capital did not respond to requests for comment from Crain’s.

With a change in ownership comes a change in direction for the property, or so it appears. Isaac Katan, president of his eponymous firm, said the area was primed for “bringing thousands of residential units” and complementary of the city’s approach to zoning, without diving into any concrete details.

Interestingly, Namdar previously told the Commercial Observer that the city’s changes in zoning laws prohibited the developers from converting the property to residential.

The inclusion of Kohan in the group of buyers is particularly interesting, as the firm doesn’t appear to have any properties in New York and almost exclusively deals in the retail sector, focused on scavenging dying shopping malls. Kohan’s business model has often led to clashes with local officials and residents over the future of languishing properties.

This is the second time in a week where the prospect of an office-to-residential conversion was raised in Manhattan. Nathan Berman’s Metro Loft Management partnered with Ofer’s Quantum Pacific on an $88 million purchase of the building at 767 Third Avenue from Sage Realty. A conversion was made possible by New York’s City of Yes legislation.

— Holden Walter-Warner