Yellowstone Secures $203M for Manhattan Office-to-Residential Conversion
The Candler Building was constructed between 1912 and 1913.
Manhattan-based private equity firm Yellowstone Real Estate Investments has secured $203 million in financing to support the office-to-residential conversion of the Candler Building, a 25-story office building located at 221 W. 41st St. Plans call for the property to be converted into 176 units of market-rate and affordable housing.
Naftali Credit Partners structured the financing package and will provide a $36 million mezzanine loan for the project. BHI, the U.S. branch of Bank Hapoalim, B.M., is providing a $167 million senior loan. The funds refinance existing bridge debt and subsidize hard costs, soft costs and related expenses associated with the conversion, according to Naftali Credit Partners, a subsidiary of Naftali Group.
Built between 1912 and 1913, the building is located steps from Times Square. Yellowstone acquired the building in 2022 and initially planned to redevelop the asset as a hotel before deciding to pursue a mixed-use residential project. The retail component is anchored by Smartech, which operates Tm:rw, a 20,000-square-foot experiential retail space spanning three stories.
READ ALSO: How the Nation’s Largest Office-to-Residential Conversion Came to Life
Using New York City’s 467-m tax incentive program, 25 percent of the apartments will be affordable housing and the remainder will be market-rate units. The tax abatement is an incentive to encourage developers to convert commercial buildings to residential properties. The units are expected to range from studios to two-bedroom layouts.
Yellowstone has other conversion projects in the works. In March 2025, Yellowstone filed plans to convert a 26-story office building at 1730 Broadway, also known as 1740 Broadway, into 422 residential units. Yellowstone acquired the building, located between West 55th and West 56th streets, in 2024 from Blackstone for nearly $186 million. The firm also plans to convert the Watson Hotel at 440 W. 57th St. into a 249-unit apartment building, according to Crain’s New York Business.
NYC tops the conversion trend
A new RentCafe.com report states New York continues to lead the U.S. office-to-residential conversion trend, with 16,358 units in the pipeline. The report notes conversions are hitting record levels, with 90,300 units in different stages of development nationwide. By comparison, Washington, D.C., has 8,479 units planned, followed by Chicago with 4,360 and Los Angeles with 4,340.
In one of the latest Manhattan conversion projects, Broad Street Development, in partnership with PCCP and One Investment Management, secured a $175 million loan from Derby Lane Partners for an office-to-residential adaptive reuse project at 80 Broad St. The team plans to transform the 400,000-square-foot Maritime Building into a 326-unit rental property.
Last month, GFP Real Estate received a $191.5 million construction loan from Derby Lane for the conversion of 40 Exchange Place, a 20-story tower that will be transformed into 382 residential units. In 2025, GFP teamed with Metro Loft and Rockwood Capital to complete the country’s largest office-to-residential conversion with SoMA, which turned a 1.1 million-square-foot office asset into a 1,320-unit multifamily community.
Milestone deal for Naftali
For Naftali Credit Partners, the transaction with Yellowstone for the Candler Building at 221 W. 41st St., marks the 10th deal of its second opportunistic debt fund. Glenn Grimaldi, CEO of Naftali Credit Partners, said in a prepared statement the financing package brings the firm’s total investment since launch to approximately $300 million. The alternative lending firm focuses on deploying capital to strong sponsors and high-quality real estate projects in New York City, South Florida and other gateway markets.
In January, Naftali provided a mezzanine loan to RJ Capital Holdings as part of a $125 million refinancing package for the development of a 10-story, 241-unit luxury condominium development at 70-28 Grand Central Parkway in the Forest Hills section of Queens, N.Y. Madison Realty provided the senior loan. It was the ninth transaction from Naftali’s second opportunistic fund.
