Esplanade Capital is in the final stages of a compromise deal to sell its embattled BridgeStreet hotel property at 47 East 34th Street, which iStar Financial foreclosed on in January, according to an article by David Jones yesterday at therealdeal.com.

"Manhattan-based iStar, which in 2010 rejected offers of more than $60 million to buy out the debt on the property, would likely take a slight haircut to pay off $84 million in loans and other fees, sources said. The property is currently licensed to BridgeStreet, but sources said the building, located between Park and Madison avenues, could be used for condominium units or a combination of uses," the article said.

iStar filed suit in March 2010 to foreclose on the 36-story tower, which was designed by H. Thomas O'Hara, alleging that Esplanade defaulted on more than $76 million in loans. Esplanade counter-sued, the article said, "alleging that iStar engaged in a scheme with Dublin-based Sorrento Asset Management, the parent company of BridgeStreet, to take over the property and cut Esplanade out of the picture. A state Supreme Court judge last month ruled in favor of iStar and dismissed claims by Esplanade that the lender attempted a predatory scheme to steal the property from them."

"After failing to evict BridgeStreet from the building," the article continued, "the developers leased the building out to Herndon, Va.-based BridgeStreet, which operates a 110-unit extended-stay hotel property at the building. According to court documents filed in December, BridgeStreet received an extension on its existing lease to remain at the property through the end of 2011 for a monthly rent of $400,000. 'BridgeStreet has a license to operate the building at 47 East 34th Street and will continue to operate the building under this license,' said BridgeStreet spokesperson Kelly Murphy, in an e-mail."

Esplanade lawyers noted that the building was scheduled to receive 421-a benefits if it operated as a condo, according to the article, which added that David Scharf, managing member of Esplanade, said that "Working closely with iStar, which has been diligent and extremely cooperative, we are now near a resolution that should benefit all parties," and "Nobody will get what they ideally wanted - which is normal in a matter like this, but nobody will walk away empty-handed either, and that's the nature of a smart, sound compromise."

"Because we have not finalized a deal," the added, "we will not discuss details....The future use of the property is under consideration."

BridgeStreet Worldwide is an international corporate housing provider, and it was acquired in 2007 by Sorrento Asset Management, a Dublin-based, privately held, investment group.