Related Said to Sell NYC’s Monterey for $250 Million
Related Cos. agreed to sell one of its biggest Manhattan apartment towers to real estate investor Rubin Schron, a partial owner of the Woolworth Building, according to two people with knowledge of the deal.
Schron’s Cammeby’s International Group is in contract to acquire the Monterey, a 521-unit property on East 96th Street, for about $250 million, according the people, who asked not to be named because the transaction is private. It would be the largest sale of a Manhattan multifamily building this year, according to data from Real Capital Analytics Inc.
Investors are clamoring to buy Manhattan residential properties as rents are poised to surpass their 2006 peak and condos are selling before they’re completed. The dollar volume of apartment building sales more than doubled last year to $9.1 billion, Real Capital data show. The average capitalization rate, a measure of investment yield that declines as prices rise, reached a six-year low of 4.4 percent in the first quarter of 2012 and hovered near there all year, the firm said.
“Manhattan, high-quality, institutional, residential, rental real estate never goes out of favor,” said Doug Harmon, senior managing director at Eastdil Secured LLC, the deal’s broker. Interest in the Monterey ranged from international investors and pension funds to condominium developers, he said.
“Because of Monterey’s size, spacious apartments, spectacular views and full amenity package, it priced equally well to converters as it did to the rental-building buyers,” Harmon said.
Joanna Rose, a spokeswoman for New York-based Related, declined to comment on the transaction. Schron didn’t respond to a voice mail left with his assistant at his New York office.
The Monterey, completed in 1992, is a so-called 80/20 building, in which 80 percent of the apartments are rented at market rate and the others are reserved for lower-income tenants, according to the New York City Department of Housing Preservation and Development. At the Monterey, the income limit for the cheaper units is 80 percent of the area’s median, or $68,700 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. At the Monterey, the mortgage financed with tax- exempt bonds matures in November 2019, meaning that 20 percent of the units must remain affordable until then, unless the debt is paid early.
The building had also received 15 years of property-tax abatements that ended in 2009, according to the city housing department.
While a new owner would have the option to prepay the mortgage and end the affordable set-aside, current tenants in those units would be protected until they move out.
Market-rate apartments advertised for rent at the Monterey range from $2,795 for a studio to $5,900 for a two-bedroom unit. The 32-story tower includes such amenities as a pool, landscaped rooftop and fitness center, according its website.
Manhattan’s median monthly apartment rent climbed 4.7 percent in the 12 months through February to $3,190, or $75 short of its 2006 peak, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report. Rents will probably reach a record this year as tenant demand outstrips a limited supply of new units, according to Jonathan Miller, president of New York-based Miller Samuel.
Investors emboldened by a reduced inventory of homes for sale also are acquiring buildings for potential condo conversions.
The Chetrit Group agreed to pay $1.1 billion in January for the U.S. headquarters of Sony Corp. on Madison Avenue. The property was marketed as being suitable for a mix of condos, retail, hotel and offices, Harmon, who brokered the deal, said at the time.
Cammeby’s, in a joint venture with the Witkoff Group, owns the bottom 28 floors of the landmark Woolworth Building in lower Manhattan. Last year, they sold the upper floors of the 57-story tower for $68 million to a partnership of condo developers that plans to convert the space into 40 luxury units, according to Real Capital.
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