David Werner Flips 300 East 42nd Street to CSC Real Estate

CSC Real Estate has bought the office portion of 300 East 42nd Street from David Werner and plans to convert most of it to 135 rental apartments, sources told Commercial Observer. 

Werner had only recently agreed to buy the building for $52 million from the lender, Fortress Investment Group, and may have flipped it for the same amount, sources said.

Led by brothers Sal and Alberto Smeke, CSC intends to use New York’s new 467m program for the conversion of the middle floors of the 18-story building, while leaving current office tenants in place, according to sources.

The Promote first reported the deal.

Built in 1964 on the entire eastern side of Second Avenue between East 41st and 42nd streets, 300 East 42nd Street has narrow floor plates that are ideal for residential use without the need to add light or air shafts. The city’s new as-of-right zoning will enable the upper and lower floor office tenants to remain in place while having dedicated, separate lobbies and elevator banks for the office and residential uses.

Mexico-based CSC, a current client of Ran Eliasef’s Northwind Group, has already closed on a $45 million senior loan from Northwind, through Northwind’s debt fund focused on real estate credit investments in major gateway urban markets for acquisition and conversion. The financing was arranged by Morris Betesh of Arrow Real Estate Advisors. 

“We identified an opportunity to originate this loan at a favorable basis, representing a 75 percent discount to the prior ownership’s cost basis for a project that is zoned as-of-right, with no need to relocate tenants, and a clean path to conversion capitalizing on the experience we gained lending on similar assets in New York City,” Eliasaf, founder and managing partner of Northwind, said in a statement.

CSC, which has an office in New York, has previously purchased several assets around the city and upgraded them. These include a former Catholic church and elementary school in Harlem that was renovated and leased to a charter school as well as renovations of apartment and retail properties at 1403 Second Avenue, on 10th Avenue in Hell’s Kitchen, 8th Avenue in Chelsea and on Greenpoint Avenue in Brooklyn, along with some hotel renovations. In Mexico, CSC has developed several mixed-use towers.   

CSC and Werner did not return calls and emails for comment.

The 237,470-square-foot 300 East 42nd was purchased in 2019 by Keith Rubenstein’s Somerset Partners and Meadow Partners for $122.5 million with a $110 million loan from Fortress. CannonDesign quickly leased 17,000 square feet on the second floor and the Consulate of Jamaica leased 43,000 square feet on the third, fourth and fifth floors. And then the pandemic hit and no other deals were signed.  

Fortress worked out a friendly Uniform Commercial Code foreclosure and marketed the building through Andrew Scandalios of JLL. Werner contracted to buy it in February and quickly agreed to flip it to CSC while keeping the retail portion for himself.

Sources told CO that all the transfers to and from Werner have closed.

Werner and Nathan Berman’s Metro Loft Management are converting the former Pfizer offices on the opposite corner of Second Avenue to residential.