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Category ArchiveSquare Mile Capital Management

Room for Improvement: The Value-Add Hotel Lending Space Is Heating Up

Hotels, like people, are sometimes in need of a little makeover.

Even more so in fact, given that an average hotel room has a shelf life of only seven or eight years before the cracks begin to show (quite literally) and its potential customers start eyeing its younger, shinier competitors down the street.

But, owners looking to give their property a facelift to boost occupancy and revenue per available room—whether through a renovation, a rebranding or a full repositioning—are in luck: The value-add hotel lending space has become increasingly competitive, which means lower costs of capital for borrowers and a myriad of capital sources eager to lend.

“It’s incredibly competitive out there, and it’s becoming more competitive,” said Matt Nowaczyk, a senior vice president in JLL’s hotels and hospitality group. “There was a tremendous amount of equity in the real estate space, and about 24 months ago those groups started putting their energies into mezzanine, preferred equity and senior lending instead.”

The wide bid-ask spread is part of the switch to the debt side. Sellers’ anticipation of higher purchase prices than the equity community is willing to invest has led to a slowdown in acquisitions and an increase in refinances.

“We’re not seeing a lot of trades in the market from an equity perspective. We’re finding better opportunities on the lending side because people are recapping existing deals,” said Greg Friedman, the CEO of Atlanta-based Peachtree Hotel Group, whose investment vehicles and funds are focused on investing in equity and debt positions on value-add hotels.

“There are a lot of new lenders in the space providing financing for transitional hotel assets,” Friedman continued. “You’re also seeing more collateralized loan obligations being formed that are financing these assets, in addition to private equity funds setting up a debt strategy.”

Debt fund capital is—by nature—value-add, and a lot of that capital is being raised by fund sponsors who have a knowledge of the hotel sector—providing the new competition with especially sharp teeth.

“Many [debt platforms] are sponsored by private equity firms who understand the product. I think it allows them to more competitively underwrite value-add executions,” said Daniel Peek, a senior managing director in HFF’s hospitality practice group. “The loans are a little higher leverage and a little higher cost, although the competition is actually keeping a lid on cost. It’s a very good market for value-add borrowers today.”

Also in the mix is the commercial mortgage-backed securities (CMBS) market. “The single-asset, single-borrower market has been strong for hotels for some time. Hotels are easy to underwrite as a single asset and easy to securitize,” Nowaczyk said. “CMBS has always been a very competitive product to the alternative lenders although CMBS lenders only play when the senior piece is in excess of $150 million—so whale hunting, really.”

Whale hunting indeed, but a CMBS execution creates additional competition for other lenders thanks to CMBS’ significant pricing power in providing higher leverage value-add loans.

A slowdown in demand and increase in supply, coupled with how late in the real estate cycle we are, meant that lenders and equity investors still proceeded with some caution last year.

Warren de Haan, the head of originations and a founding partner of ACORE Capital, said, “The investment sales market is a leading indicator of where people think the market is, and that dropped off significantly in 2017. But here’s the interesting point: The hotel market has done better than any of us thought and continues to do well—which is crazy, because we’re deep into the cycle and hotels are usually the most volatile asset class as their leases are up every night.”

But, lenders should be mindful of opportunities flowing from the slowdown in investment sales, de Haan said: “Just say you want $100 million [to sell] your hotel but you’re only getting bids at $85 million. Because the debt markets are so robust right now borrowers are saying, ‘Well let’s go to the refinancing market instead of the sale market.’ Borrowers will come to us for a 75 percent loan-to-value loan, but that loan is really an 85 percent loan to where someone would actually buy the property in today’s market. We [as a lender] have to be cautious when we get a loan inquiry, and ask, ‘Did it go through a sales process,’ and ‘Where were the bids?’ We have to make sure that the value is lining up with where the market clearing price for a sale would be so that we’re not overleveraging ourselves.”

So, why is the value-add hotel space so attractive right now? “A return premium at the internal rate of return level and a premium at the debt level,” Peek explained. “Generally, it’s a good market, and there’s an attractive yield out there.”

And, just as a stable asset appeals to certain investors and lenders, the ability to create value and reposition an asset is equally attractive to several capital sources today.

“We see an improvement in the stabilized loan-to-value in all of our assets as a result of new capital going in and rebranding,” de Haan said. “In a stabilized lending environment where the assets are stable, you don’t have that uptick because there’s no value-add story. But we love the value-add stories.”

Square Mile Capital Management has made 18 value-add hotel loans over the past three years. It defines “value-add” as assets that have some in-place cash flow but where cash flow is expected to increase over a period of time. The value-add component typically comes through making physical improvements to the property, through a property improvement plan (PIP), a renovation or a repositioning of the asset maybe through a rebranding or changing the franchise, or improving the management or operations of the property.

“Assets typically have an in-place debt yield of 7 or 8 percent but also have a business plan in place to get them to a double-digit debt yield over a 24- to 36-month period,” said Nolan Hecht, a managing director at Square Mile.

Square Mile’s loans typically have a five-year term with a 3-1-1 structure—a three-year base term for the sponsor to execute its value-add business plan with two one-year extensions.

When it comes to identifying an attractive value-add opportunity, Square Mile first looks to the quality of the sponsorship, Hecht said: “What’s their track record, have they done similar renovations or repositionings? Then we look at the feasibility of the business plan—what they’re proposing, does it make sense. Then we look at the asset quality and the local market dynamics.”

If those three considerations are strong, then Square Mile will lend 70 to 75 percent loan-to-cost on a hotel asset.

ACORE favors the whole loan approach in value-add lending, doing both the senior and the mezzanine part of the capital stack with an average loan-to-value of 65 to 70 percent.

“A typical inquiry would be a borrower asking for 65 to 75 percent of the cost of the purchase price plus 60 to 75 percent of capital that they need to invest in the hotel in order to reposition it,” de Haan said. “Once it’s repositioned and stabilized they typically go and sell the asset.”

A value-add hotel lending opportunity recently caught ACORE’s eye in Houston—a market hit hard by Hurricane Harvey as well as the lagging energy sector. “Have the full effects of Houston be felt? Probably not, but you have a Class-A hotel in a great location where the net operating income has been hammered, the asset needs money and the seller is selling it a fraction of replacement costs,” de Haan said.

Bolstering the asset’s story (ACORE is currently considering the deal, so de Haan couldn’t name the property) is its lack of direct competitive supply. “It will be very difficult to replicate and the cost would be way higher—$500,000 a key versus our borrower’s basis at $200,000 a key,” de Haan explained. “So that’s an interesting, risk-adjusted story. The cash flows could suffer for the next two years but fundamentally the value of the asset, coupled with a strong sponsor putting in new capital and upgrading the asset, will come back. And at our dollar basis it feels impossible to get hurt.”

While hotels comprised 25 percent of ACORE’s lending volume four years ago, that amount dipped to 15 percent in 2017, indicative of the caution around new supply outstripping demand.

An asset’s potential to compete with other properties in the area is key, de Haan said.

“We can look at a competitive set of assets and see that our hotel’s average daily rate and occupancy is at the bottom of these four hotels,” De Haan said. “Let’s say the other hotels have nicer features in their rooms than we do, nicer restaurants, but our location is very good—that’s a story I look for. Because if we replace the furniture, fixtures and equipment (FFE) in the room, if the borrower puts in a new restaurant concept and if demand exists in that market it’s not a stretch to think its rate and occupancy should be equal to—or better than—the comparable hotels. We don’t have to believe in the market, but if it improves, we exceed our underwriting significantly. But, we don’t bet on that—that’s a bet that the equity is making, not us.”

Speaking of equity, there’s a debate underway around whether having an equity side to your business is a positive or negative calling card in the value-add hotel lending space.

Square Mile has separate debt and equity platforms but—like others—has seen more action on the debt side recently. “We’re out hunting on both sides,” said Hecht, who believes that having both platforms is beneficial because Square Mile has an understanding of which value-add business plans make sense and which markets are attractive.

“If you have a deeper understanding of the minutiae, location, brand, manager, positioning, I think you can more effectively underwrite value-add financing,” Peek agreed.

Peachtree’s lending platform, Stonehill, is five years old, but Peachtree has been an equity inverstor in the value-add hotel space for 10 years. Friedman sees this as an advantage: “We can understand the credit and what’s happening; it allows us to do deals that are a little more difficult for other lenders because they may not have that knowledge.”

ACORE, on the other hand, doesn’t have an equity platform. De Haan sees ACORE’s position as a pure-play transitional lending shop as an advantage because the firm is not viewed as a threat.

“We’ve concluded that about 10 percent of the $5 billion in business we won last year was because we’re not viewed as competitors on the equity side,” de Haan said. “Those borrowers made the decision that they don’t want to share confidential information on their business plans with their biggest competitors.”

Some wary borrowers will strike a lender with an equity platform from the list of potential capital sources right away, Nowaczyk said. “That said, the capacity of some of those firms is significant, and it’s clear their business plan is making money off debt, not out of trapping guys and taking their assets,” he said.

Boston-based UC Funds provides both equity and debt. It recently made a $75 million direct equity investment in two adjacent hotels on Stamford, Conn.’s restaurant row; an existing Courtyard Marriott; and a half-complete Residence Inn. UC Funds picked up the two assets at a discount and intends to add value by managing both properties under one management company.

“This is a value-add situation where you can buy something unfinished and combine it with an operating hotel with shared resources and amenities,” Daniel Palmier,  the president and CEO of UC Funds, explained. “The Courtyard Marriott has a great valet service and pool. We took the opportunity when we bought the Residence Inn to expand the gym from 900 square feet to 1,400 square feet and we don’t need a pool because there’s already one at the Courtyard. So we’re adding value by operating these two hotels symbiotically.”

UC Funds began a PIP on the Courtyard Marriott six months ago, updating the FFE and lobby from its 2004 decor. The Residence Inn is now around 75 percent complete with hip furniture, a baby grand piano in the lobby, a modern bar and outdoor space on a mezzanine level in its future. “It’s going to be a really sexy hotel product,” Palmier added.

As a result of the renovation, “We’re going to cut cost on a room-by-room basis of around 30 percent,” Palmier said. “We now have one general manager for both properties, and we have one valet instead of adding another, so there are efficiencies across the board.”

There’s no doubt that a big-brand hotel name is preferred by some lenders.

“We love lending in the branded space, be it Hilton, Marriott or Hyatt. That will always be a high proportion of our lending business,” Hecht said. “But where it makes sense, we’ve also been lenders on strong lifestyle hotels in the right market. In general, it’s just easier for branded hotels to attract debt capital.”

Square Mile has made 10 loans on Embassy Suites hotels.

“These are 1980s or 1990s assets, and when they haven’t been renovated, they get tired and their market penetration drops down to 100 percent,” Hecht said. “So we’ve been doing loans for the renovations, for the PIPs and then once these assets are renovated the Embassy Suites typically spring back to 110 or 115 percent penetration. They are assets that are doing well—they just need a renovation to bounce back.”

For now, one capital source not competing quite so fiercely with those in the value-add space is the banks.

“An average bank is not going to do more than 50 percent [leverage] on a hotel,” Palmier said. “We go up as high as we feel comfortable. We’re not regulated, we’re a private capital provider, and because we understand the space and the intrinsic value, we can go up to 80 to 90 percent sometimes.”

But that’s not to say there isn’t room at the table for everyone, Friedman said: “I think this is a space where banks are becoming comfortable with allowing alternative lenders like us to fill the void. In some cases we’re partnering with regional banks and community banks who want us in as a participant with them, and we’re taking on that higher risk position in the loan.”

Source: commercial

Moinian Group Nabs $118M Square Mile, Bank of the Ozarks Loan for Dallas Office Tower

Square Mile Capital Management has provided a $118 million loan to The Moinian Group and SMA Equities for Renaissance Tower—a 1.7-million-square-foot office building in Downtown Dallas.

Square Mile brought in Bank of the Ozarks to take a senior portion of the loan, which will be used to repay an existing CMBS loan on the property and bridge the asset through stabilization.

HFF’s Whitaker Johnson and Steve Heldenfels arranged the financing on the dazzling tower, outside shots of which depicted the fictional home of Ewing Oil in the 1980s television series Dallas.

SMA Equities and The Moinian Group have owned the building since 2006. The previous loan was securitized in the Wachovia Bank-sponsored WBCMT 2006-C29 CMBS deal and split into a $64.5 million A-note and a $64.5 million B-note.

One of the tallest buildings in Downtown Dallas, Renaissance Tower sits in Dallas’ Central Business District. Its tenants include Hilltop Securities, Neiman Marcus Group, Dallas County and EY.

The Environmental Protection Agency also recently signed a 20-year lease for 229,000 square feet at the property, and the tenant is scheduled to move in December 2018. 

“We are excited to establish a lending relationship with SMA Equities and The Moinian Group on this transaction,” Square Mile Principal Matthew Drummond said in prepared remarks. “As Downtown Dallas continues to benefit from additional redevelopment and as evidenced by the recent signing of the EPA lease, Renaissance Tower is well positioned as a cost-effective alternative to other high-quality office buildings located in submarkets such as Uptown and Plano.”

“We received extremely competitive financing packages from multiple sources but ultimately closed with Bank of the Ozarks and Square Mile,” a spokeswoman for The Moinian Group told CO. “The terms gave us the flexibility we required to complete lease up of our Class-A office tower.”

Source: commercial

HFZ’s Laurie Golub Becomes COO at Square Mile Capital

Laurie Golub, formerly of HFZ Capital Group, will become the chief operating officer at finance and investment management firm Square Mile Capital Management, according to a press release issued by Square Mile today.  

Golub, who has more than 25 years of experience in the real estate industry, will officially start in her new role on Jan. 8.

“Square Mile has grown significantly in recent years as we’ve successfully diversified our investment strategies and capabilities,” Square Mile’s Chief Executive Officer Craig Solomon said in the release. “As we continue to execute our business plan, we believe now is the time to further enhance our already strong leadership team. Laurie’s extensive transactional background, outstanding relationships within the industry and proven business building skills make her the ideal person for this new role.”

Prior to joining Square Mile, Golub was the general counsel and COO at development and investment firm HFZ starting in 2012 and ending in July 2017, according to her Linkedin page.

She was responsible for all legal matters for HFZ and oversaw the acquisitions of numerous high-profile properties for the company’s luxury condominium projects. This includes The Chatsworth at 340-344 West 72nd Street, 11 Beach Street and 505 West 19th Street among others.

Before that she worked as general counsel and managing director of business affairs at Africa Israel USA from 2009 to 2012, as CO previously reported.

And prior to that she was an associate general counsel at Forest City Ratner Companies from 2004 to 2009. There she played a role in the pre-development of the $5 billion Atlantic Yards project and was also responsible for negotiating the acquisition of the New Jersey Nets, according to a press release from when she joined HFZ. She led the negotiations for the $400 million Barclays Center naming rights as well.

Golub got her start as an associate at Robinson Silverman Pearce Aronsohn & Berman in 1993 before moving over to Morrison Cohen Singer & Weinstein, where she represented clients involving real estate and corporate transactions.

Golub earned her law degree from New York University School of Law in 1989 and a bachelor’s degree in business and corporate communications from Boston University in 1986.

“I look forward to leveraging my background, experiences and relationships to add significant value to this exciting new growth opportunity as a senior member of the Square Mile team,” Golub said in a prepared statement.

Representatives from HFZ did not immediately respond for a request for comment.

Source: commercial

Square Mile Lends $133M on Former LA Times Printing Facility

Square Mile Capital Management has provided a $133 million loan secured for the acquisition and redevelopment of The Pressa 420,000-square foot creative office property redevelopment in Costa Mesa, Calif., Commercial Observer can first report.  

Invesco Real Estate and SteelWave recently acquired the propertyformerly a Los Angeles Times printing facilityfrom Tribune Media and Kearny Real Estate in an off-market deal. Square Mile’s loan financed the joint venture’s acquisition and will also fund construction costs and leasing costs to redevelop and stabilize the property, which is directly adjacent to SteelWave’s Hive project—a 180,000 square foot creative campus that is home to the Los Angeles Chargers‘ headquarters and training facility.

“We were especially drawn to this transaction by the opportunity to back two market-leading investors, developers, and operators who each bring recent, directly applicable experience to the table,” said Michael Mestel, a principal at Square Mile. “Between Invesco Real Estate’s highly successful redevelopment of Apollo at Rosecrans in El Segundo and SteelWave’s current project next door at Hive, this is the ideal team to unlock the site’s potential and deliver market-leading product.”

HFF’s John Rose, Todd Sugimoto, Patrick Burger and Olga Walsh negotiated the financing on behalf of the borrower.  

The site includes a 250,000-square-foot industrial building, a 112,000-square-foot office building, as well as an adjacent 4-acre site.  The immediate plan is to redevelop approximately 420,000 square feet of creative office space and retail—including a food hall, but the site allows for an additional 230,000 square feet in future development.

“We saw an immense potential in The Press and our vision is to redevelop the asset to be the single most significant creative office opportunity in Orange County, if not all of Southern California,” said Seth Hiromura, the managing director of acquisitions and development at SteelWave, in an announcement regarding the acquisition.

The redevelopment marks SteelWave’s first joint venture with Invesco and will be complete within two years.

“By combining the existing structure’s heavy industrial feel with Class-A creative office amenities and finishes, SteelWave and Invesco Real Estate are positioned to create a unique product that has thrived in markets like West Los Angeles and San Diego but doesn’t currently exist in Orange County,” Daniel Neumann, a vice president at Square Mile, said. “With an abundance of retail and recreational amenities on-site, The Press will create a true campus environment that we believe will be well received by prospective tenants.”

Jonathan Hastanan, a vice president of acquisitions and development at SteelWave, said the project also “pays tribute to the history of the building by embracing its character, making it unique to the region.”

Source: commercial

Square Mile Lends $136M on SoCal Multifamily Development

 Irving, Texas-based developer JPI has scored a $136 million loan from Square Mile Capital Management for Jefferson Platinum Triangle, a 400-unit multifamily property located in Anaheim, Calif., the lender announced today.   

JPI recently completed construction of the property’s four buildings and is nearing completion of the development. The loan pays down existing construction debt and provides bridge financing through the project’s stabilization.

“Square Mile Capital understands JPI’s mission and history of building multi-family housing communities that perform beyond expectations in today’s marketplace,” said Jason Spratt, a senior vice president at JPI. “JPI seeks out private, government and financial partnerships that share our corporate values, and endure the test of time. Square Mile is a great example of that.”

Jefferson Platinum Triangle is a residential community located at 1781 South Campton Avenue in Anaheim. Property amenities include two clubrooms, two pools, multiple barbecue grilling stations, a gym, a yoga studio and a dog wash station.

The city’s ‘Platinum Triangle’ is an 840-acre district that includes Angel Stadium, Honda Center and The Grove of Anaheim. Under the Platinum Triangle Master Land Use Plan, urban development is bringing mixed-use, office, restaurant, and residential projects to replace older industrial developments, according to city website Anaheim.net

“This transaction was a compelling opportunity to finance a trophy-quality multifamily asset in one of the fastest growing areas of the Los Angeles metropolitan area and Orange County,” Michael Mestel, a principal at Square Mile, said in prepared remarks. “The Platinum Triangle has undergone a dynamic transformation over the past market cycle, and Jefferson Platinum Triangle has been outperforming the surrounding market in terms of rents and leasing velocity since initial move-ins began earlier this year.”

Square Mile Principal Matthew Drummond added, “We are excited to close our first transaction with JPI, a top U.S. multifamily developer who consistently delivers market-leading product. We look forward to expanding our relationship with JPI on future developments going forward.”

An active multifamily developer, JPI has acquired, developed or is currently developing more than 331 projects.  In California and Arizona, JPI has developed and sold 28 multifamily properties totaling nearly 9,400 units at a total cost of roughly $1.6 billion.

Earlier this year, Square Mile provided a $71 million loan on another Golden State property—Jamison Services‘ 22-story, 415,000-square-foot Class A office building at 3600 Wilshire Boulevard in Los Angeles.


Source: commercial

The New Alternative: What’s Piquing Traditional and Nontraditional Lenders’ Interests

It’s not everyday that you spend your birthday with 250 industry friends, but if anyone should be placed on stage on his birthday it’s probably Simon Ziff. As moderator of Commercial Observer’s “The New Reality: Traditional Versus Nontraditional Lending” panel at CO’s Financing Commercial Real Estate Forum in Washington, D.C., on Tuesday, the president of Ackman Ziff was put to work refereeing a lively conversation between lenders from both sides, who discussed the opportunities that are drawing their dollars.

There’s no doubt that alternative lenders have filled a significant gap in the market, financing projects that banks won’t, or can’t, due to regulatory restrictions and capital requirements.

As a result, borrowers have a myriad of options to get their projects financed.

Norman Jemal, principal and senior vice president of Douglas Development Corporation (and the only borrower on the panel), said “There’s a lot of capital out there, it’s just a matter of finding the right vehicle.” Jemal said he sees tremendous appetite from lenders, essentially because the fundamentals are solid. “Lenders are hungry for loans,” he said.

Katie Keenan, a managing director at Blackstone Real Estate Debt Strategies, said that Blackstone is finding opportunities where the banks aren’t lending—construction loans, larger deals—and also in locations and sectors that are being negatively painted with a broad brush, such as Houston and retail. “When the fundamentals are good, we lean in,” she said.

One place Blackstone is leaning in, hard, is creative office redevelopments on the West Coast. Keenan said that the lender has an appetite for older, industrial buildings where the borrower has an interesting plan and vision to meet future tenant needs.

The High Volatility Commercial Real Estate regulation, part of the Basel III capital requirements, has certainly resulted in alternative lenders picking up the slack on construction loans. But, that’s not to say that traditional lenders aren’t making them, though.

Sadhvi Subramanian, the mid-atlantic market manager for Capital One, said that her bank is still active in the construction lending space—although its pricing has increased from last year. EagleBank has also done “ a lot of construction lending,” said Ron Paul, its chairman, with C-Class projects that can be renovated to B-Class properties piquing its interest.

Jeff Fastov, the senior managing director at Square Mile Capital Management, said that his firm will do value-add lending at 75-80 loan-to-value, jumping in where the banks leave off. When it came to the subject of pricing, Fastov said it changes depending on product.

And the panelists couldn’t discuss product type without discussing the sometimes-dirty ‘R’ word: retail.  

“We think that half of the [roughly 1,300] regional malls will go away. So the good news is that the other half will still be there,” said Fastov. Square Mile hasn’t shied away from the right retail opportunities. It provided a $19 million loan to RedSky Capital to refinance debt on a mixed-use property in Williamsburg (which included high street retail) in 2016l and was recently involved in a $20 million horizontal risk retention piece in the Del Amo Fashion Center near LAX airport—a 2.6-million-square-foot mall owned by Simon Property Group and J.P. Morgan Investment Management.

In terms of other asset classes, Square Mile also has a penchant for student and senior housing. “As long as we understand it from an equity standpoint, we’re happy to go lend on it,” Fastov said.

And although there are undoubtedly many alternative lenders fighting for apiece of the pie right now, Fastov said he feels that the competition is largely “held in check,” with not many new entrants in the mix. “The stability of the competitive set is very surprising to me,” he added. “It’s consistent—not overcooked with too much liquidity.”

That said, seeing as the big, commercial banks tend to have long-standing relationships with clients and rely on relationship-banking,  “either you’re in the in-crowd or you’re not,” Fastov said. “Unless [a borrower] wants more leverage than Wells Fargo is willing to give, we’re wasting our time.”

Whether you’re a traditional lender, an alternative lender or a borrower, we’re “walking into a period of caution,” said Paul, and even a little hiccup in the market could cause some pain. He advised that caution be exercised in the product borrowers are buying, and the loans that are made.

Keenan said the real change to be aware of is how people are using space. “People got caught flat-footed with Amazon,” she said, referring to the e-commerce giant’s monopolization of the retail sector, and the world (it seems).  Even though most of the loans Blackstone provides have 3 to 5 year terms, the goal should be to stay ahead of the game and address tomorrow’s demand.

In addition to another trip around the sun, Ziff has plenty to celebrate. Ackman Ziff recently closed three construction deals in a week, including a $163 million student housing deal at Temple University in Philadelphia (with an alternative lender), a $125M speculative office transaction in New York City’s meatpacking district and the financing of a mixed-use project in New Jersey  (with three more deals added to the pipeline last week, Ziff said). A very happy birthday, indeed.

Source: commercial

Square Mile Lends $91M on Booming Philly Suburb Office Space

Source: commercial

Square Mile Lends $71M on LA Office Property

Source: commercial

Jewelry Designer Inks a Deal at The Factory in LIC

A jewelry maker will join a growing roster of fashion and design tenants at The Factory, a sprawling former warehouse in Long Island City, Queens, Commercial Observer can first report.

Starlight Designs has leased 17,000 square feet for eight years on the fifth floor of the 1.1-million-square-foot building at 30-30 47th Avenue, between 30th Place and 31st Street, according to information from Kalmon Dolgin Affiliates, which represented the tenant.

The new company will design and distribute its wares from the 10-story building. Asking rents weren’t immediately available, but CO has previously reported that asking rents range from the high-$30s to mid-$40s per square foot.

KDA’s Jeffrey Unger represented the tenant, and Jordan Gosin of Newmark Grubb Knight Frank represented The Factory’s landlord in the deal. Atlas Capital Group, Square Mile Capital Management and Invesco Real Estate purchased the block-long industrial property in 2014.

Starlight is only the latest fashion firm to move into the 1920s structure, which was originally constructed as a warehouse for Macy’s. Macy’s, Polo Ralph Lauren, and Madewell have all inked deals in the complex, and so has Gwynnie Bee, a women’s apparel company that allows customers to rent clothes online.

“Three or four years ago, fashion companies wouldn’t look out here,” Unger told CO. “Now it’s established itself more for these kinds of tenancies now. Between all the buildings that have been repositioned, like Falchi and Factory and the Hub and Commerce LIC, plus the substantial residential and retail conversions that are taking place, the’r’e really transforming Long Island City tremendously.”

A handful of food companies have also moved into the The Factory. Two Boots Pizzeria, Vanessa’s Dumplings and Papillon Bistro have relocated their production facilities there, Queens Courier reported in January.

The property has undergone a major renovation in the past two years, as the neighboring Falchi Building has filled with trendy tenants like Uber and Doughnut Plant.

Source: commercial