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Varsity Letters: Chris Lee and Matt Salem on KKR’s Debt Strategies

Global investment firm Kohlberg Kravis Roberts & Co. was founded in 1976—so the story goes—when Henry Kravis and George Roberts dined together at (the now defunct) Joe and Rose restaurant on Third Avenue between East 46th and East 47th Streets. Today, KKR has $168 billion in assets under management (as of Dec.31, 2017).

The firm has had a private equity real estate strategy in place since 1981, but more recently it is being recognized as an increasingly powerful force in the debt space,  too.

The firm has two debt strategies; KKR Real Estate Finance Trust (KREF)—an externally managed real estate investment trust (REIT) that originates senior commercial mortgage loans—and KKR Real Estate Credit Opportunity Partners (RECOP), which purchases junior tranches of commercial mortgage-backed securities.

“What takes several people years to build, in terms of size and breadth, they’ve accomplished in a couple of years,” said A.J. Sfarra, a managing director at Wells Fargo Securities. “They’ve raised a $1 billion B-piece fund and a mortgage REIT.”

KREF currently has a total market capitalization of $1.1 billion and a total portfolio size of $2.5 billion. It originated $1.5 billion of loans last year alone—$800 million in the tristate area—playing in the large loan, transitional and value-add space and competing with private lenders such as Square Mile Capital Management, Blackstone and TPG.

In November of last year, it raised a $1.1 billion fund for its RECOP strategy and is the most active buyer of CMBS B-pieces in the market, with an impressive 35 percent of market share. In 2017, it bought junior tranches on 12 deals, comprising $10.9 billion in principal balance. For all transactions,  KKR satisfied either a portion or the entire risk retention requirement, retaining $949 million in face value of the bonds.

Chris Lee and Matt Salem, the firm’s co-heads of real estate credit, lead KKR’s debt business from the company’s headquarters at 9 West 57th Street between Fifth Avenue and Avenue of the Americas.

A “frustrated Cowboys fan,” Lee hails from Dallas. After studying economics at Emory University he got his industry start with a summer internship at J.P. Morgan Chase Securities, which then led to him to join Goldman Sachs’ commercial mortgage group as an analyst in 1990. He remained there until 2009 when he moved to Apollo Global Management, then to KKR in 2012.

“I like the competitive nature of it, where you’re out competing every day against very savvy investors to create transactions,” Lee—who turns 40 next month—said of his draw to commercial real estate. “I also like the personalities in real estate. You meet a lot of colorful people, and it’s one of the industries where you continuously interact, whether on the finance side or the development side.”

Jeff Fastov, a senior managing director at Square Mile Capital Management, was co-head of lending at Goldman Sachs when the young Lee joined the bulge-bracket bank, and Lee’s first boss out of college. “His raw intelligence is immediately apparent, and he’s incredibly personable and well-liked,” Fastov said of his protégé. “So when you put these two [attributes] together he’s a formidable competitor because people really like to do business with him.”

Salem, 44, is also a New York City transplant. A Kansas City native (and die-hard Kansas Jayhawks fan), he studied economics at Bates College in Maine and—bucking the traditional route of most Wall Street programs—moved back home after college instead to seek employment.

After “being turned down a bunch of times,” by local banks in his hometown, Salem took a job at Midland Loan Services in 1996. Its platform was growing and it was hiring college kids to assist in its expansion, he recalled. Three years later, he took a position at Travelers Insurance—owned by Citigroup at the time—and moved to New York City. It was there that Salem was tasked with investing in high-yield real estate debt and early mezzanine loans, before segwaying—serendipitously, perhaps—into buying CMBS B-pieces.

When Citi sold Travelers, Salem tried the sell side out for size, working at Morgan Stanley, before joining Goldman Sachs in 2006 as a CMBS trader and ultimately running CMBS trading for the investment bank through the crisis. In 2011, he joined Rialto Capital Management to build out its performing businesses, including high-yield lending platforms—such as preferred equity and mezzanine loans—as well as CMBS B-piece investing.

mattandchris 149 Varsity Letters: Chris Lee and Matt Salem on KKRs Debt Strategies
Matt Salem. Yvonne Albinowski/For Commercial Observer

Meanwhile, over at KKR, Lee and KKR’s head of real estate, Ralph Rosenberg, were planning the next iteration of the firm’s real estate business.

“When I got here in 2012 we were figuring out where we wanted to start the business, so we started it in opportunistic real estate because we thought that would be the area we could differentiate ourselves the most,” Lee said. “The goal was to have an integrated business as a solutions provider where we could provide both equity and debt.”

KKR raised its first equity value-add fund—the $1.5 billion KKR Real Estate Partners Americas, or REPA—at the end of 2013. (“We bought a number of hotels in that fund as the hospitality recovery was starting to take hold,” Lee said. “So a lot of it was a buy-fix-sell strategy where we were buying assets that had broken capital structures or broken operations, fixing them then selling them.”) And it raised its $2 billion successor, REPA II, last year.

But Lee and Rosenberg wanted to further expand the business that KKR had evolved to include a credit business. They already knew that Salem was the man for the job.

“Matt had demonstrated the ability to lead and manage a team,” Lee said. “Rialto had a very active business across multiple products and we had very complementary skills. There was a view that we’d be able to do one plus one equals three if we put our different backgrounds together.”

Salem joined KKR, along with nine members of his Rialto team, in 2014.

“I thought it was an absolutely perfect move for him,” Sfarra said of Salem’s move to KKR, “and in way I couldn’t see him anyplace else. KKR is a world-class organization and he fits that mold perfectly.”

Since then, Lee and Salem have been off to the races, finding opportunity in the heightened regulatory environment and leveraging off KKR’s existing infrastructure.

“We both had a very consistent view of where the market opportunity was, and that was direct, transitional lending,” Salem said. “We didn’t think the banks were in a place to commit that capital anymore, and we thought that we had a different approach in being fully integrated into a global asset manager, and being able to draw not only from an experienced bench of private equity and credit professionals but also from those focused on real estate equity within our own team.

“We think like property owners and we can be flexible,” Salem continued. “So there was a great opportunity to commit capital both from a relative value perspective for our investors as well as differentiating ourselves in the market to our clients who are borrowers and property owners.”

KKR’s lending portfolio is heavily weighted toward office and multifamily assets (the opposite is true for hotels, which comprise less than 5 percent of KKR’s business) and it’s carving out a niche for itself in value-add plays in acquisitions as well as construction loan take-outs where leasing is taking longer than expected.

“We have tremendous range in our business,” Lee said. “This year we’ve quoted loans from $40 million up to $400 million and from Libor plus mid-200s to Libor plus 400. Borrowers are buying different properties and executing different business plans so being able to deliver a range of solutions across what they’re doing in their platform helps us to build that relationship and have more connectivity with them, as well as provide us with a better opportunity to prove our experience.”

Recent transactions include a $180 million loan on PIMCO and Zeller’s Fifth Street Towers—a 1.1-million-square-foot Class-A building in downtown Minneapolis. Like most of KKR’s loans, the deal included an initial funding component, in this case $130 million in upfront funding and $52 million in future funding. PIMCO purchased the building in 2015 and had implemented its business plan with some success but leasing was a little slower than expected and—midway through its business plan—it didn’t have access to additional capital to continue to lease the property. KKR stepped in, refinanced the existing loan and gave PIMCO the capital and runway to lease the building up further, closing the deal within three weeks.

The financing was arranged by Eastdil Secured, which has worked with KKR on multiple transactions.

“Chris can understand risks in a transaction very quickly,” said Grant Frankel, a managing director at Eastdil. “He’s very good at understanding the transactions where it makes sense to stretch, and which ones have the quantitative or qualitative intangibles that—as a lender—you may be willing to push a little harder on. He has a very good sense for that.”

Frankel said that the KKR team is easy to work with, too. “Chris and Matt’s originators are very collegial, very smart and they are all pleasant people,” he said. “They’ve built a really good culture. We [at Eastdil] have a similar culture from a collegiality perspective, so it works well.”

Closer to home, KKR made an inventory loan on the Zaha Hadid-designed apartments at 520 West 28th Street to Related Companies. The $200 million loan was collateralized by the property’s 30 remaining condos that were unsold at the time.

“It’s a very special project,” said Greg Gushee, an executive vice president at Related. “KKR quickly understood the structure, the value and our business plan and were extremely flexible in structuring something that would allow us to pursue that plan.”

Flexibility is one of Salem and Lee’s key selling points in making KKR stand out from the herd, Gushee said.  “Some lenders get very fixated on their loan documents when there’s a twist or turn in a deal,” Gushee said. “Chris just says, ‘Okay. Let’s see what makes sense to do here…’ He’s always flexible and open to doing what makes sense for the asset.”  

And, “they can come up with a structure very quickly, get a term sheet to you within days and they can close within 30 days, easily,” Gushee said. “[KKR is] the place to go if you want great execution. They look at the situation and they can customize the solution.” 

Like everyone else in the debt space today, KKR is having to compete with a variety of capital sources for deals.

“It’s competitive, we wouldn’t argue with that, but it’s still a relationship business and it comes down to how you can help your borrower achieve their goal,” Lee said. “A lot of our borrowers aren’t looking to finance a property that is already stabilized; they’re looking for help to execute a business plan. Because we execute a lot of these business plans ourselves we can be very constructive in helping them to solve a capital issue.”

And while relationships are important, so are the cost of funds—something that definitely works to KKR’s advantage.

“Being part of a global asset management firm is extremely helpful for us and we think we have top-tier cost of capital in terms of what we receive from our lending counterparties,” Lee said. “We also have other ways to enhance returns because we have access to different tools at our disposal in terms of the way we finance ourselves, through our capital markets team and our $45 billion corporate credit business. A lot of those synergies accrue to the benefit of our company, KREF, and its shareholders. But that’s how you compete—on borrower experience and on price.”

Salem sees KKR’s speed of execution as the biggest differentiator in its segment of the market: “We’re a small team and not as rigid as [other lenders] so you don’t have to go through layers and layers of investment committee approvals and bank processes to get things changed if business plans evolve,” he said. “Things change in these buildings and they need flexibility and a lender that’s going to be able to work with them through these changes.”

KKR’s other vertical in its debt business, CMBS B-piece buying, has Salem’s name written all over it as a veteran in the space. Most recently, at Rialto, Salem had led a dominant team in the space.

The opportunity was driven by Dodd-Frank and risk retention regulations in the CMBS fixed-rate conduit market, specifically the carve-out that allows banks to pass some of  their risk retention to a third-party purchaser. 

mattandchris 058 Varsity Letters: Chris Lee and Matt Salem on KKRs Debt Strategies
Chris Lee. Yvonne Albinowski/For Commercial Observer

“We thought it was a great opportunity because the banks weren’t going to want to hold that risk and we have the expertise to do it,” Salem explained. “We can create a retention vehicle with our relationships with like-minded, long-dated investors. Combining the institutional client base of KKR with our broad internal underwriting resources across private equity, corporate credit and real estate works well. We draw from all these resources and do all of the underwriting and diligence, which makes us very credible investors in the space.”

Sfarra has known Salem for 15 years. He first met Salem when he was at Citi and buying B-pieces from Wells Fargo. Sfarra hired Salem at Morgan Stanley and sold him B-pieces at Rialto and KKR. Additionally, Wells Fargo took KREF mortgage REIT public last year, leading the underwriting group. “He’s been a B-piece buyer, he’s been a colleague, he’s been a client and he’s a really good friend as well,” Sfarra said.

Further cementing their relationship, Wells Fargo also sold KKR its very first B-piece. “We’re really thrilled to support their business,” Sfarra said. “What they’ve done is built a really successful B-piece business in a really short period of time and the only way you can really do that is by having the capital to do it and by having great relationships. Their word is their bond so people want to transact with them and they’re very smart guys.”

Fastov met Salem when he was on the mortgage desk at Goldman Sachs. “He’s an incredibly smart guy, and very straightforward,” he said. “The B-piece business is one part real estate and one part capital markets which is why he’s so effective at buying CMBS B-pieces because you need both of these skills.”

And while KREF and RECOP continue to have success, so does KKR’s real estate equity business. The opportunity has evolved since 2011 from investing in broken capital structures coming out of post-crisis distress to more thematic investing, with KKR finding macro themes of interest and applying them through the real estate sector.

It also presents opportunities to lend to some of its competitors in the debt space.

Square Mile and KKR teamed up last June on a California office deal, with Square Mile providing a $92 million loan for KKR’s acquisition of 180 Grand—a 15-story, 279,000-square foot-office building located in the Lake Merritt submarket of Downtown Oakland.

“There was a lot of trust that we could deliver on the terms we offered and that we’d focus on what mattered in the transaction,” Fastov said. “When we agreed to do the deal together, Chris said, ‘Let’s stay in touch if there are any real issues in the documentation,’ and guess what? There were none. It’s an example of KKR doing a lot of different things, just as we are, and there are opportunities to be lenders to each other.”

Maybe it’s that out-of-state charm, but—as well as being highly respected deal counterparties—Lee and Salem are known for being all around good people and family guys.

Frankel describes Lee as “a good guy, smart and pretty cerebral. He’s a straight shooter and just a pleasant person you enjoy doing business with.”

“I get Chris’ holiday card every year and his kids are exceedingly cute. If Matt would send me his holiday cards I could comment there, but he doesn’t. So…that’s an issue,” Fastov said, laughing.

As for the future of KKR’s real estate credit business, “I think there’s a lot of growth ahead of us,” Salem said. “We’re one of the newer businesses at KKR. The firm views real estate and real estate credit as strategically important and a growth initiative, and so we’ll have resources and capital available to us to grow.” O.K., KKR.

Source: commercial

Selina Targets LA as Key to US Expansion

Selina, a hybrid hospitality and lifestyle company that has made a name for itself in Latin America, is eyeing California as the next major region where it wants to set up shop.

Billing itself as one part WeWork, one part Burning Man, the platform buys existing hotel properties and, in addition to the usual amenities, like housekeeping and food and beverage services, offers wellness and classes, from foreign language instruction to surfing and lessons (depending on the locale) geared toward, the “digital nomad, family on vacation, adventurous backpacker, or surfer looking for paradise.”

co selina3 Selina Targets LA as Key to US Expansion
Selina bills itself as one-part WeWork. Courtesy of Selina.

“There shouldn’t be a differentiation between one-star, three-star and five-star offerings. Someone coming with a backpack could stay and afford it … [and] somebody that wants to travel for $200 and $300 a night can stay as well and everybody is going to be dressed the same and interact in the common area,” Steven O’Hayon, the head of business development at Selina, told Commercial Observer in an exclusive interview outlining the company’s West Coast plans. “That was the initial vision of the whole model we were building. The goal was to eliminate all the language that a traditional hotel uses and create a product for an entire generation of people that doesn’t really matter what social class they come from, but how they see the world and how they want to live their life.”

For a company focused on such a Kumbaya vision of travel and leisure, its business development plans are extremely Type A. Founded in 2015, Selina currently operates 22 properties in Latin America and the Caribbean and plans on opening around 15 additional ones in the next year. Current locations Panama, Costa Rica, Colombia, Guatemala, Nicaragua, Ecuador and Mexico and range from the urban setting of Mexico City to the rainforests of Costa Rica. Each Selina property has between 150 and 500 beds, with nightly prices ranging from $100 to $500.

By 2020, Selina hopes to have over 54,000 operating beds across the world and has set its sights on the U.S. and Europe for ongoing expansion efforts.

coselinasteven Selina Targets LA as Key to US Expansion
“There shouldn’t be a differentiation between one-star, three-star and five-star offerings,” says Steve O’Hayon. Courtesy of Selina.

Selina will open its first U.S. property at the historic Tower Hotel in Little Havana in Miami this September. As the Miami Herald reported last week, it will be the area’s first boutique hotel. The Barlington Group, which owns several properties in the neighborhood, partnered with Selina in order to redevelop the property to appeal to the public’s growing desire for experiential travel as well as social connection—not of the digital kind—by becoming part of the Selina “tribe.”

The variations within Los Angeles and the Golden State are a major draw for Selina, which is headquartered in Manhattan. Currently scouting locations in hipster-haven Silverlake, quirky Venice, urbane West Hollywood and Downtown Los Angeles, Selina is aiming to open four or five locations in the metropolitan area. Further down the road? Expansion into diverse regions the state is known for, from the deserts of Joshua Tree to winegrowing regions up the coast.

“We see California as being the most supportive market for us in the U.S.,” O’Hayon said. In the next five years, its goal is to have “8,000 to 10,000 beds in the state.”

“L.A. has become our base for that, so we are initially scouting locations in L.A. to build up a strong presence and conjoining everything together,” he said. “We can have a surf experience in Venice, and a really cool creative experience in L.A. and then in San Francisco something different.”

Source: commercial

Sterling Flips High-End Rodeo Drive Property in $110M Sale to LVMH

Sterling Organization, a private equity firm based in Palm Beach, Fla., doubled its money on the sale of a 7,634-square-foot parcel at 456 N. Rodeo Drive  in Beverly Hills. Sterling netted a cool $110 million for the property—which includes a 6,200-square-foot vacant single-story building and a 1,500-square-foot parking lot between Santa Monica Boulevard and Brighton Way—in the heart of the so-called “Golden Triangle,” one of the country’s most sought-after locations for luxury retail, according to an official release from Sterling. Last week’s sale came a mere day after Sterling closed its purchase of the property from The Karl B. Schurz Trust (Schurz Trust) for $55 million.

The purchaser of the property, a subsidiary of Paris-based, multinational conglomerate LVMH originally considered  leasing space at the property, but the company alternatively expressed an immediate interest in acquiring it. LVMH, which counts Louis Vuitton and Loewe among its portfolio of upscale brands, owns two other stores in the area at 319-323 North Rodeo Drive and 420 North Rodeo Drive, according to The Wall Street Journal, which broke the news of the sale.

LVMH declined to comment on the purchase.

Sterling’s acquisition of the property resulted from a highly structured off-market transaction, when it signed a 30-year ground lease with rights to purchase on Oct. 26, 2017.

Last week’s sale transferred the 456 N. Rodeo Drive  property to the luxury goods behemoth for approximately $17,750 per square foot.

Retail agent Robert Cohen, a vice chairman at RKF in Los Angeles, commenting on the deal, said the move for LVMH was a “very smart move” and part of an overall trend of European retailers investing in brick-and-mortar real estate in top U.S. shopping districts.

“This is a trend we’ve seen more and more of, which is personified on Rodeo Drive for several reasons, the least of which is that it’s only three-blocks long, an easy market and low-density. These retailers don’t have to worry about offices, residential or hotels, which is more difficult,” he said.

“Rents have gone up historically. It’s held its value. Europeans are very smart because they have not only the ability but they understand buying is better long-term than leasing. You control your own destiny.” (This is a trend that WSJ recently noted in Manhattan.)

Cohen pointed out that while $17,000-plus a square foot is high considering the comparables, over time, it works out to make good business sense. Average asking rents per per square foot on Rodeo Drive ranges from $600 to $1,000, Cohen said, so, say, over 20 years, the price paid averages $850 per foot. “You’re at the middle of the market, but now you own the property. Not only are you not paying rent, but you have an asset that is increasing in value,” he said.

Indeed. Rents on this stretch of Rodeo Drive, home to luxury retailers including Hermes, Chanel, Celine, Tiffany & Co. and Givenchy, rank among the highest in the nation. Retail rents on Rodeo Drive were $875 per square foot in 2017, according to statistics from Cushman & Wakefield’s 2017 year-end Los Angeles retail report, making the locale the second-highest in the nation. (Upper Fifth Avenue—49th Street to 60th Streets—in New York City still dominates, the C&W data indicate, closing 2017 at $2,982 per square foot.)

Negotiations for 456 N. Rodeo Drive began in July 2017 between Jonathan Mendis, Sterling’s senior vice president of investments for the Western United States, Brian Kosoy, Sterling’s president and CEO, and the trustee for Schurz Trust. The months of negotiations culminated in the October 2017 ground lease execution and purchase of the fee interest.

“When a circumstance presents itself to acquire a Rodeo Drive property, you aggressively pursue it, regardless of the complications involved in getting a deal done,” Kosoy said in prepare remarks. “This was a win-win-win for all three parties involved with each securing what they desired. The deal round-tripped a lot faster than we projected, and we are extremely pleased with the exceptional financial results we were able to provide to our investor partners.”

Kosoy told Commercial Observer his firm flipped the property because it felt it was in the best interest of its investor partners.

“Part of the opportunity in the commercial real estate sector pertaining to retail is that the passive observer, analysts, as well as much of the media, seem to repeatedly throw the baby out with the bathwater,” Kosoy said. “There are many areas that are immune to the woes of retailers today and Rodeo Drive is one of them. Great retail real estate is not under assault as many believe.”

He foresees Rodeo Drive real estate going in only one direction value wise: higher. “Continued limited and static supply and high demand assures such,” Kosoy said.

Cohen concurred, calling Sterling’s flip, “a brilliant play.”

“It’s an amazing story,” he added. “From a real estate perspective, they tied this up to a ground lease with an option to purchase, obviously purchased, it and to turn this around in a day and sell it, to basically double your money— that shows how voracious an appetite some of these people— these retailers have for real estate.”

Source: commercial

Lightstone Pays $60 Million for LIC Hilton

Lightstone Group has purchased a Hilton Garden Inn at 29-21 41st Avenue in Long Island City for $60 million, according to property records filed with the city today.  

Lightstone took out a $35 million mortgage from Western Alliance Bank to purchase the property, records show. A spokesman for the developer didn’t immediately return a request for comment.

A group of investors that includes Sagamore Capital and Ranger Properties sold the hotel. They bought the 6,700-square-foot site it sits upon for the bargain basement price of $6.3 million in 2010.

The 16-story, 183-key hotel was completed and opened in 2015, Brownstoner reported at the time.

The Hilton will be Lighstone’s fourth hotel in New York City, after developing millennial-focused Moxy hotels at 485 7th Avenue, 105 West 28th Street and 112 East 11th Street. And it’s not Lighstone’s only property in the neighborhood. In November 2017, the firm finished a 428-unit residential tower, the ARC, at 30-02 39th Avenue.

Source: commercial

Gary Barnett’s Extell Selling Off West 54th Street Site for Roughly $200M

Gary Barnett’s Extell Development Company is selling off a parcel on West 54th Street that is zoned for residential condominiums, Yoron Cohen of Colliers International, who is marketing the site, told Commercial Observer.

In particular, Cohen believes the 288,000-square-foot zoned site at 211 West 54th Street between Seventh Avenue and Broadway is prime for pied-a-terres in the 600- to 1,000-square-foot range, with an average price of $2,800 per square foot. There are “a lot of large units [in the area], but [you] don’t have a lot of pied-a-terre units,” he said.

“We think the highest and best use in this point of the market is residential,” the broker said. “It could be commercial if it was in huge demand.” And because the plot is “irregular,” meaning not rectangular, it lends itself better to “a residential scheme,” he noted.

Cohen said that there is no asking price, but he expects the site to sell in the ballpark of $200 million.

When Extell bought the site, it was bigger—more like 300,000 square feet— and was part of a big assemblage on the block. It had an address of 1710 Broadway and was going to be a commercial building. Those plans have been abandoned, Cohen said, because Barnett couldn’t convince all of the property owners to sell their sites. So “now he’s going to break it up and sell it piecemeal,” Cohen said. Extell is retaining some of the air rights at 211 West 54th Street to apply to its other sites, rendering the plot smaller.

Colliers gave it a street address, he said, as that’s “more applicable for a residential building.”

There is an empty building at the site, which a buyer would demolish. Colliers’ executive summary calls for a residential building with retail at the base and a few office floors, but at the end of the day the buyer can do what he or she wants.

Barnett didn’t immediately respond with a comment.

Cohen is marketing the site with colleagues Richard Baxter, Scott Latham, Jason Gold, Ameet Amin and Stephen Shapiro.

Source: commercial

Lightstone Group Finalizes $51M Deal for Bronx Apartment Buildings

Midtown-based Lightstone Group completed a purchase of four multi-family properties in various neighborhoods in the Bronx on Friday for $50.6 million from Belmar Realty Corp., Commercial Observer has learned.

The developer bought 105 East 177th Street, 2151 Davidson Avenue, 831 Bartholdi Street and 3520 Dekalb Avenue, which collectively have 266 apartments, according to information provided by Marcus & Millichap.

All of the buildings are fully rent-stabilized, save for the 122-unit 831 Bartholdi Street, which is completely free market. The portfolio sold at a 4 percent capitalization rate and deal was $50,000 above its asking price.

“This is a great opportunity for the seller to take advantage of today’s marketplace, and sell to a fantastic buyer in one transaction above the asking price,” said Seth Glasser of Marcus & Millichap, who represented the buyer and the seller with colleagues Peter Von Der Ahe, Joseph Koicim and Michael Fusco.

The Real Deal reported in January that the deal was in contract.

Lightstone Group is looking to upgrade the properties and hold on to them for a medium to long term because they “believe in the appreciation of the assets,” Glasser said.

Belmar Realty also put three other Manhattan properties on the market as part of the same portfolio, 336 West 95th Street on the Upper West Side, 345 East 92nd Street on the Upper East Side and 1975 Adam Clayton Powell Boulevard in Harlem.

The 20-unit property at 1975 Adam Clayton Powell Boulevard in already in contract, Glasser said, before declining to provide the buyer or the price of the sale. The asking price for that building was $5.7 million.

Source: commercial

Google Closes $2.4B Acquisition of Chelsea Market

Google, which already occupies a significant portion of the 1.2-million-square-foot Chelsea Market building, has sealed a deal to buy the mixed-use property from Jamestown for $2.4 billion. The transaction was finalized today, according to a press release from Jamestown.

Jamestown will continue to manage the retail and food hall at Chelsea Market, a former Nabisco factory at 75 Ninth Avenue that occupies the full block between Ninth and 10th Avenues and West 15th and West 16th Streets, the release indicates. And according to The Wall Street Journal, Jamestown will retain the branding rights and intellectual property connected to the Chelsea Market name outside of Manhattan.

“For Jamestown, this is the highest-profile example to date of our unique approach to creating value, but it’s consistent with transformative projects we’ve successfully undertaken across the country,” Michael Phillips, the president of Jamestown, said in a statement. “It’s a combination of identifying underutilized locations, creative and visionary repositioning, value-creating management, rigorous financial analysis and patience.”

Jamestown purchased a 75 percent stake in Chelsea Market in 2003 for $280 million, according to property records. Then it bought out its partners in 2011, spending a total of $795 million, records indicate. Office tenants in 75 Ninth Avenue include Google in 400,000 square feet, as well as Major League Baseball and the Food Network.

Google has been growing its footprint in Chelsea. In 2010, the tech giant bought 111 Eighth Avenue from Jamestown, Taconic Investment Partners and the New York State Common Retirement Fund for $1.77 billion. That property, which houses Google’s headquarters, is across from Chelsea Market. Last year Google expanded by 60,000 square feet to 240,000 square feet at 85 10th Avenue between West 15th and West 16th Streets, as CO previously reported. And at Pier 57, Google plans to tack on 70,000 square feet for offices and 50,000 square feet for public engagement space to the 250,000 square feet it has already leased.

Google, a unit of Alphabet Inc., said in an official statement: “This purchase further solidifies our commitment to New York, and we believe the Manhattan Chelsea Market will continue to be a great home for us and a vital part of the neighborhood and community.”

Cushman & Wakefield‘s Douglas Harmon, Adam Spies, and Kevin Donner represented Jamestown in the deal. Harmon declined to comment. Darcy Stacom of CBRE represented Google. Stacom’s assistant said the broker is on vacation.

Source: commercial

Thor, Premier Equities Sell Three-Story Meatpacking Retail Condo for $87M

Thor Equities and Premier Equities have closed a deal to sell their three-story retail condominium at 412 West 14th Street for $87 million, sources with knowledge of the deal told Commercial Observer.

The buyer is Union Investment, the investment arm of DZ Bank, as The Real Deal reported last month when the deal was in contract.

Lexus leases the entire 16,500-square-foot condo, plus 5,500-square-foot rooftop at the property between Ninth Avenue and Washington Street via a 10-year deal that expires in April 2024, the sources said. The luxury carmaker is still building out the space for a concept store.

Cushman & Wakefield’s Adam Spies, Kevin Donner and Marcella Fasulo represented Thor and Premier. A spokesman for Thor declined to comment, as did Spies. A Premier representative wasn’t immediately reachable. RKF’s Brian Segall represented the buyer. Segall declined to comment.

Premier and Thor bought the commercial condo in April 2012 for $18 million.

Source: commercial

Gatsby Enterprises Buys Harlem Commercial Building for $19.5M

Real estate investor Nader Ohebshalom’s Gatsby Enterprises has acquired a Harlem office and retail building at 75 West 125th Street from owner and sole tenant Carver Federal Savings Bank for nearly $19.5 million, Commercial Observer has learned.

Gatsby is paying just shy of $700 per square foot for the four-story, 27,933-square-foot property between Fifth and Lenox Avenues, which currently houses Carver Federal Savings Bank’s headquarters in its office portion and a bank branch in its ground-floor retail space. The two sides entered contract late last year and closed on the transaction on Feb. 22, according to sources with knowledge of the deal.

The bank is expected to vacate its offices at the building before the end of this year but maintain its retail presence on the ground floor by leasing back the space, sources said. The arrangement allows Gatsby to re-tenant the office space at higher rents while removing the risk of having to find a new street-level tenant in a challenging retail environment.

In addition, the Harlem property features unused development rights that take its total buildable square footage to around 70,500 square feet, the sources added—enabling Ohebshalom’s firm to potentially redevelop the site into a larger building in the future.

Gatsby was represented by broker Joshua Nazar of Venture Capital Properties, while a Colliers International team of Eric Yarbo, Christopher Turner and Sam Hamlin represented Carver.

Representatives for both Colliers and Venture Capital Properties confirmed the transaction but declined further comment. Neither Gatsby nor Carver Federal Savings Bank returned requests for comment.

Source: commercial

Anbau Plotting Condos at Verizon Parking Garage Site in Hamilton Heights

Residential development firm Anbau has acquired two adjacent parking garages at 620 West 153rd Street in the Hamilton Heights section of Upper Manhattan for $22.5 million with the goal of building residential condominiums on the site, Commercial Observer has learned.

Anbau closed on its purchase of the two-story garages between Broadway and Riverside Drive earlier this month after entering contract late last year. The seller, Verizon, has been using the facilities to park and house its service vehicles.

Having finalized its acquisition of the site, which features approximately 150,000 buildable square feet, the NoMad-based development firm has drawn up plans for two luxury residential condo buildings, designed by architecture firm DXA Studio, that will be connected via a landscaped courtyard and feature views of the Hudson River.

“We see [Hamilton Heights] as the next logical emerging neighborhood,” Anbau Founder and President Stephen Glascock told Commercial Observer. He cited how prices have “shot up substantially” for both condos and rentals in areas like the Manhattanville section of West Harlem, to the south of Hamilton Heights.

Glascock said the two planned condo buildings would likely hold around 150 units combined, with prices for the all-market-rate units likely to range from below $1 million to up to $3 million. Anbau, which financed its acquisition of the site with a pre-construction bridge loan from Goldman Sachs, expects to begin work on the project within the next six months with a view to completing the development in the next two to three years, he added.

Anbau will also provide parking for Verizon and its service vehicles at the property, Glascock said, with those accommodations to be separate from the parking provided to residents at the condo development.

Representatives for Verizon could not be reached for comment.

Verizon had retained Cushman & Wakefield’s Bob Knakal, Josh Kuriloff, Jonathan Hageman and Patrick Yannotta to market the property. Anbau had no broker in the deal.

Knakal told CO that C&W received “extremely robust budding activity on the property” from prospective buyers, which he attributed to “the positive changes that the [Hamilton Heights] neighborhood has experienced over the last 10 to 20 years.”

“It’s a very desirable location,” Knakal said, pointing to rising interest in the market for Upper Manhattan development sites at large—including at 4109 Broadway in Washington Heights, where C&W has been retained to sell a four-story church building with nearly 90,000 buildable square feet on behalf of Christ Church, United Methodist of New York City.

That property will likely be converted into residential condos as well, Knakal added, noting that developers are increasingly looking uptown to take advantage of lower land costs “that make it a lot more feasible to build condos”—particularly at a price point more appealing to prospective residential buyers.

Glascock agreed, noting that the Anbau “can pass on that low land cost to translate to lower prices for condos” at its new site and that the firm believes there is “strong demand” for units in the $1-million to $3-million range that will be served by the new Hamilton Heights development.

Anbau specializes primarily in the Manhattan condo market, with recent projects including Citizen360, an 84-unit SHoP Architects-designed building at 360 East 89th Street in Yorkville, and 207W79, a 19-unit Upper West Side property at 207 West 79th Street designed by Morris Adjmi Architects.

The firm also owns several multifamily rental properties in the borough; in December 2017, Anbau acquired two five-story buildings holding a combined 22 apartments at 53-55 First Avenue in the East Village for $16.2 million.

Source: commercial