East 42nd Street office building to be converted to apartments

There’s a major new player, and a new plan, for 300 E. 42nd St., an 18-story, 235,000 square-foot office and retail building which investor David Werner was reported to be buying at a deep discount.

Although not yet posted in public records, the purchase closed last Wednesday for $52 million, as expected — less than half the property’s last sale price in 2019.

But the twist is that Werner is flipping most of the building for a partial residential conversion, while keeping its valuable 7,300 square feet of retail for himself.

The conversion project will first come to life with a $45 million, pre-development acquisition loan from Ran Eliasaf’s private equity firm Northwind Group. The loan also closed last week. A  construction loan is likely nine months to a year away.

Northwind a few years ago provided a $313 million construction loan to revive the then-stalled 125  Greenwich St. condo tower and has been a very active lender on the development scene.

Eliasaf declined to identify Werner’s flipee. Nor would he confirm what residential-market sources told Realty Check — that the new owner of most of the building is CSC, a real estate investment firm specializing in the redevelopment and repositioning of distressed assets.

CSC’s New York City projects include the adaptive reuse of a former Catholic church at 2045 Madison Ave. in East Harlem, and the conversion of a decayed hostel into the hip Riff Chelsea Hotel at 397 Eighth Ave. in Chelsea.

Eliasaf did share that the plan at 300 E. 42nd St. is to leave about 90,000 square feet  on higher floors, which are mainly leased to diplomatic and government tenants,  as offices.

But more than 93,000 vacant square feet will be converted to 135 rental apartments, Eliasaf said. The project will likely  enjoy a tax abatement under the state’s 467-m program to facilitate residential conversions, in exchange for earmarking 20% of units as affordable.

Eliasaf noted, “The ability to deliver mostly free-market new supply is very attractive, especially in Midtown.”

The building at 300 E. 42nd St. stands diagonally across the Second Avenue intersection from two former Pfizer buildings that are being converted into a city-high 1,600 rental apartments. Werner is a partner in that ambitious project with Nathan Berman’s MetroLoft.