Princeton Club of NYC on Life Support After Defaulting on Mortgage

(Bloomberg) -- The Princeton Club of New York, a midtown oasis for Ivy League alumni, could soon be without a home after $40 million in mortgage debt went into default and is being sold to the highest bidder.

The ten-story private club, which includes two restaurants, banquet space, squash courts and 58 guest rooms, is running low on cash after being closed for 15 months during the pandemic and losing about one-third of its 6,000 dues-paying members, according to people familiar with the club’s operations. 

The storied club has tried to raise more capital, enlist Princeton University’s help and even explore a sale, but so far nothing has worked. After receiving six months of forbearance on its $39.3 million debt from lender Sterling National Bank that ended in September, the club is now in default and the bank has enlisted Newmark Group Inc. to sell the note by the end of November, two of the people said. 

Representatives of Sterling, Newmark and the Princeton Club all declined to comment. Princeton University didn’t immediately respond to a request for comment.

Unlike other midtown-based Ivy League alumni clubs, many of which are situated nearby in an area known as “Clubhouse Row,” the Princeton Club of New York has no financial relationship with the New Jersey-based university, one of the richest in the nation with an endowment of $27 billion. In contrast, the Cornell Club on East 44th Street has been owned by Cornell University since 1986. 

The club’s plight mirrors what many of Manhattan’s hospitality venues have faced during the pandemic, which shuttered restaurants and hotels and emptied out office buildings. With workers and tourists staying home, midtown was a ghost town for months and the recovery has been slow as companies cautiously call employees back. 

The Princeton Club carries an Ivy League pedigree that most venues lack, playing host to Wall Street bankers, white-shoe lawyers and other high-powered alumni for decades. The club, which had four previous homes before settling into its current location on 15 W. 43rd St. in 1963, traces its origins back to 1866. In 2019, annual dues for members living in New York City ranged from $350 for recent alumni to $3,255 for those 15 years or more past graduation.

Newmark’s marketing material for the debt -- which includes a mortgage loan and a credit line mortgage -- advertises a “trophy property” in Times Square. Sterling in April announced it would combine with Webster Financial Corp. in a $5.9 billion deal that is slated to close in the fourth quarter. 

In an investor call in July, Sterling Chief Executive Officer Jack Kopnisky was asked if the bank was considering selling any loans before the deal closed. Kopnisky, who will serve as executive chairman of the combined entity, replied that there was “nothing of significance” on its books.  

The Princeton Club accepts affiliate members from other elite universities, like Williams College and Georgetown University. Still, its annual operating expenses -- mortgage payments, real estate taxes, labor and other costs total about $15 million a year, a person familiar with the club’s budget said. 

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