$224 M. Drake Hotel Site Mortgage Up For Sale

breaksdrakehotel $224 M. Drake Hotel Site Mortgage Up For SaleIn an apparent effort to raise cash, the struggling iStar Financial has put its $224 million Drake Hotel site mortgage on the block, according to a knowledgeable source.

“They’re a mortgage REIT and they need cash,” said the source. “The development is not going anywhere today. It’s in default. It’s not paying interest currently.”

The development site in question is the plot bounded by 56th and 57th streets and Park Avenue, once home to the Drake Hotel. Macklowe Properties has long had plans to erect some sort of tower there—reports bounce back and forth between residential and office tower plans. Either way, the project looks increasingly unlikely to materialize. Real Estate Weekly recently reported that the development is being stymied by neighbors who refuse to sell Macklowe the last remaining parcels of the site. Moreover, Deutsche Bank is the lead agent in a foreclosure lawsuit for a $500 million-plus loan, which was secured by the development site.

iStar did not respond to a request for confirmation. But the firm could use the cash. iStar was trading on Tuesday afternoon at $1.42 a share, down from $25.75 at the beginning of the year.

Macklowe Properties, through a spokesman, declined to comment, as did Deutsche Bank.

But sources indicate that iStar, which is being represented by Cushman & Wakefield, will likely have to sell the mortgage at a discount.

“The appeal of the mortgage is it’s arguably the best site in Manhattan,” said a source.

drubinstein@observer.com