Related Cos., the New York developer founded by billionaire Stephen Ross, and a partner sold the luxury Sagamore apartment building on Manhattan’s Upper West Side as investor demand for multifamily properties surges.
The 265-unit building went under contract this month for $140 million, according to a person with knowledge of the bidding who asked not to be named because details of the transaction are private. The buyer is a unit of Chicago-based private-equity firm LaSalle Investment Management.
“With the sale of the Sagamore, we recognized an opportunity to both extract value for Related and our partners and to reinvest the capital into our acquisition and development initiatives,” Bruce Beal Jr., executive vice president of Related, said in an e-mailed statement. He declined to comment on the price for the 12-year-old building.
The deal is the largest by price for a Manhattan multifamily property since March, according to data from Real Capital Analytics Inc. in New York. Demand for apartments is climbing as the city’s rental market tightens. Leases almost tripled in the fourth quarter and median rents rose 1.7 percent from a year earlier to $2,950, appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said last month.
The sale generated interest among at least 15 “qualified” bidders, said Doug Harmon, senior managing director at Eastdil Secured LLC in New York, who represented Related and its joint venture partner for the Sagamore, the State Teachers Retirement System of Ohio.
“The depth and breadth of offers we received demonstrates the unwavering and aggressive support for New York City, luxury, multifamily rental product,” Harmon said.
Matt Jordan, senior vice president at LaSalle Investment Management, declined to comment. The company has also purchased multifamily properties in Los Angeles and Washington, D.C., in the past year, according to Real Capital.
The Sagamore, located on West 89th Street near Amsterdam Avenue, is a so-called 80/20 building, in which 80 percent of the apartments are rented at market rate and the other 20 percent are reserved for low-income tenants. Those renters must earn no more than 50 percent of area median income, according to guidelines on the website of the New York City Housing Development Corp. That limits the eligible income to about $39,000 for a family of four, according to the department.
Under the program, developers agree to set aside the affordable units in exchange for tax-exempt bonds to finance construction.
$2,995 for Studio
Market-rate apartments advertised for rent at the Sagamore range from $2,995 for an alcove studio to $3,550 for a one- bedroom, one bathroom unit, according to the property’s website. The building also features two-bedroom apartments with dining areas and home offices.
Average rents on the Upper West Side in January ranged from $1,778 for a studio to $5,795 for a three-bedroom apartment, according to brokerage Citi Habitats.
“The Upper West Side is co-op country,” Harmon said. “It’s a strong win to now own one of the very few, high-end luxury rental buildings in that tight submarket”.
The Sagamore, which includes a 17,000-square-foot (1,580 square-meter) parking garage and 8,000 square feet of retail space, has net operating income of about $7.5 million a year, according to the building’s sales offering plan.
The $140 million sale price is the largest for a Manhattan multifamily building since Chicago-based Equity Residential, the biggest publicly traded apartment owner in the U.S., bought Longacre House on West 50th Street for $142.7 million, according to Real Capital.
Triple Dollar Volume
The dollar volume of Manhattan apartment sales more than doubled in 2010 from a year earlier to $2.13 billion, according to Real Capital Analytics. About 100 properties changed hands, a 41 percent increase from 2009.
Manhattan apartment investors in 2010 were willing to pay an average of $305,679 per unit, or 22 percent more than what they agreed to pay in 2009. Nationally, multifamily investors paid about $111,743 per apartment unit, Real Capital said.
“It’s a significant sale,” Ben Thypin, an analyst at Real Capital, said of the Sagamore. “It’s trading at a fairly big price per unit, although it’s consistent with recent sales of this magnitude.
“It’s also a reflection of Manhattan being in much better shape than the rest of the country,” he said.
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