CIM teams with Macklowe to take control of key NYC development site

CIM Group has teamed up with developer Harry Macklowe to help him regain control of a prime New York City development site.

The Los Angeles-based private equity real estate fund manager has signed a deal to purchase debt relating to Macklowe’s original $440 million purchase of Drake Hotel, which he demolished amid plans to redevelop the site into an office tower with retail, sources confirmed to PERE.

Media reports by Reuters and the Wall Street Journal added the deal would see CIM and Macklowe pay off about 10 creditors, with discounts ranging from 90 cents on the dollar to zero. A spokesman for CIM declined to comment.

Macklowe acquired the midtown Manhattan hotel, located on the corner of Park Avenue and 56th Street, in 2006. It was financed by a $675.3 million first mortgage from Deutsche Bank, according to data provider Real Capital Analytics. The bank sliced up the loan, selling it on to various lenders, including iStar Financial, which held the largest chunk.

Cushman & Wakefield had been marketing iStar’s $224 million note last November, RCA added, but pulled the offering after bids came in too low. A foreclosure suit had already been filed by Deutsche Bank, on behalf of lenders, in late 2008 after Macklowe defaulted on the loan.

Macklowe had planned to redevelop the Drake Hotel into an office tower with retail. According to a Real Deal report last year, Macklowe was widely believed to be trying to assemble seven buildings along 57th Street, to create a development site with frontage on 56th as well as 57th. The developer controlled just four.

The Wall Street Journal added The Blackstone Group was also making a bid for hospitality REIT Highland Hospitality Corp., buying a chunk of mezzanine debt with a face value of $320 million from Wachovia. Highland is seeking to restructure its $1.7 billion of debt, the report said.

Last July, Deustche Bank agreed to sell New York’s Worldwide Plaza to real estate investment firms RCG Longview and George Comfort & Sons for $605 million, after foreclosing on the former Macklowe office.

The bank took over the 1.8 million-square-foot office and six other landmark properties after Macklowe defaulted on the debt that financed his $7 billion acquisition of the buildings. The Worldwide Plaza was the last asset to be sold by the bank from the deal.