NYC Office-to-Resi Conversion Gets Record Construction Loan
This is the nation's largest-ever project of its kind.
Madison Realty Capital has originated $720 million in construction financing for a joint venture between Metro Loft Developers and David Werner Real Estate Investments to convert the Pfizer’s former headquarters and an adjoining building in Manhattan into a 1,602-unit multifamily property. It is the largest loan for an office-to-residential conversion in New York City to date, and will also be the nation’s biggest conversion project upon completion.
The joint venture is transforming the former corporate headquarters at 235 E. 42nd St. and the connected building at 219 E. 42nd St. into a luxury rental community with 25 percent of the apartments to be designated affordable under the city’s Affordable Housing from Commercial Tax Incentives Benefits program. The combined property will include more than 100,000 square feet of amenities and approximately 30,000 square feet of ground-floor retail space.
READ ALSO: MHN Asks: Are Office-to-Residential Conversions Taking Flight?
Construction of the mixed-use property in the Midtown East section of Manhattan is underway and expected to be completed by the fourth quarter of 2027. The residences in both buildings will feature custom built-in kitchens with premium appliances, stone countertops, bespoke bathrooms with deep soaking tubs, in-unit washer/dryers and integrated smart home technology.
‘One-stop shop’ for loan
In an interview with Multi-Housing News, Josh Zegen, managing principal & co-founder of Madison Realty Capital, described the loan as “a typical construction facility with three to five years total duration.”
The historic deal was arranged by IPA Capital Markets, a division of Marcus & Millichap specializing in capital markets for major private and institutional clients. Max Herzog, Marko Kazanjian, Andrew Cohen and Max Hulsh secured the financing with Madison, a New York City-based real estate private equity firm. Madison and its affiliates manage $22.1 billion in assets on behalf of global institutional investors. Since 2004, the company has completed more than $53.7 billion in transactions.
No details were provided but Herzog stated the IPA Capital Markets team was able to facilitate a competitive financing process for the project sponsors.
Zegen said being a “one-stop shop” that could provide a whole loan helped his firm get the deal. “It was very important to the borrower to have a whole loan here and not deal with multiple parties. We were able to provide that; to provide a customized financing at $720 million,” Zegen told MHN.
The project had previously received two loans from Northwind Group, a Manhattan-based private equity firm run by Ran Eliasaf. In January, Northwind provided a $135 million first-mortgage loan secured by the fee interest in 235 E. 42nd St. to the joint venture. The firm had provided a $75 million first-mortgage loan to the JV for 219 W. 42nd St. in August 2024. Last month, Northwind provided DWREI and Metro Loft with a $90 million senior first-mortgage loan for the planned conversion of 675 Third Ave., a 32-story Midtown East office building, into approximately 430 rental units.
Track record and tax Abatement
Zegen said it is the first deal his firm has done with Nathan Berman’s Metro Loft Developers and DWREI. Metro Loft has substantial experience in office-to-residential conversions and is involved in several high-profile projects in Manhattan including transforming 25 Water St., a former 22-story office building now known as SoMA, into a 32-story luxury tower. That project is being built alongside partners GFP Real Estate and Rockwood Capital. It is currently the largest U.S. conversion with about 1,300 units.
Zegen cited Berman’s track record of executing complex office-to-residential conversions in New York City combined with DWREI’s deep experience with high-profile institutional assets as two reasons for his firm providing the financing to the joint venture. The project’s location, efficient use of space in the unit layouts and implementation of New York State’s new 467-m tax abatement program were also important, he said. By making at least 25 percent of the units affordable, the developers can receive tax incentives up to 90 percent for as long as 35 years.
Legal teams cited
Fried Frank acted as counsel to the joint venture for the transaction. The Fried Frank team was led by real estate partner Michael J. Werner, and included real estate associates Julian Henry and Loren Naftali, and real estate law clerk Maddie Dorfman.
Kriss & Feuerstein, led by Jerry Feuerstein, represented the lender.
