Press

Daniel Geiger | October 17, 2019 02:05 PM 

It’s over for Joe Sitt at 545 Madison Ave. 

The landlord behind Thor Equities, who controlled the 17-story, 140,000- square-foot office and retail building through a ground lease, was booted Tuesday as the building’s operator, losing his multimillion-dollar investment in the property in the process.

Marx Realty, the building’s underlying owner, is taking it over and renovating it in the style of other successful property makeovers it has completed in recent years. 

“We want to infuse this building with the kind of hospitality vibe that we have done in our other buildings,” said Craig Deitelzweig, president and CEO of Marx Realty. “It’s such a great boutique, clublike building to begin with. We’re going to enhance that.”

Deitelzweig said the firm likely will spend $10 million on upgrades in the coming months. He added that he expects the building, where vacancies grew under Sitt’s management, to be full again by early 2021. 

Marx Realty completed a similar turnaround of 708 Third Ave., a 1931-vintage building it owns at East 44th Street. Marx rebranded the building under the moniker 10 Grand Central last year. With that new address, Marx renovated it and added hotel-like amenities including a concierge, a doorman-serviced entrance, a lounge and an outdoor terrace for tenants. There’s even a soundtrack and signature scent in common areas.

The building is now fetching some of the highest rents on Third Avenue, in the $80s per square foot and beyond. Rents on Third Avenue typically top out in the $70 range.

“I think that Marx is really good at knowing what today’s tenants are looking for,” Deitelzweig said. 

In 2013 Sitt’s real estate firm paid $53 million for the ground lease at 545 Madison Ave., according to property records. A ground lease allows an investor to run a property. As 545 Madison Ave. lost tenants, however, Thor fell behind on its ground rent. And in July, Marx began eviction proceedings against the firm in Civil Court.

In total, Thor failed to pay more than half a million dollars in rent, Marx Realty claimed, and it accrued $1.6 million in unpaid real estate taxes to the city, another breach of its ground lease.

Thor’s lenders also were hurt financially by the investment. Thor had a $30 million securitized mortgage serviced by LNR that was wiped out by the eviction. Another real estate investment firm, Waterman Interests, extended Thor a roughly $5 million mezzanine loan on the property that also now will go unpaid because of the eviction. 

Deitelzweig said Thor had poorly managed the property in recent months as it began to sense the building was slipping away. 

“It’s a real strain on the building to go through that,” he said. “Given the situation, they weren’t doing anything to enhance the building. We’ve met with all the tenants and let them know we’re going to do the right thing for the property.”

Thor declined to comment.