Africa Israel Said to Sell NYC Apartment Tower to Waterton

Africa Israel USA, billionaire Lev Leviev’s U.S. real estate unit, agreed to sell 88 Leonard, a luxury apartment building in Manhattan’s TriBeCa neighborhood, in a deal the company values at about $222 million.

Waterton Associates LLC, a Chicago-based investment firm that owns and operates more than 15,000 apartments nationwide, is in contract to purchase the 352-unit tower, according to a person with knowledge of the transaction, who asked not to be named because the details are private. Tamir Kazaz, chief executive officer of the U.S. division of Tel Aviv-based Africa-Israel Investments Ltd., declined to comment on the buyer.

“It’s a good deal for us and a good deal for the buyer,” Kazaz said in a telephone interview from New York. “The buyers are sophisticated real estate investors with tremendous experience in management of rental apartments, which I trust will continue to increase the value of this asset.”

Demand for Manhattan apartments is climbing as the city’s rental market tightens. Rents increased 7.4 percent in the first quarter from a year earlier and newly signed leases more than doubled amid an improving job market, according to appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate. The borough’s apartment vacancy rate in May was the lowest in almost five years, brokerage Citi Habitats said.

Brooklyn Deal

Waterton Associates entered the New York market in December, when it bought the senior construction loan and mezzanine debt on downtown Brooklyn’s 271-unit Addison apartment complex. The firm’s co-founder, David Schwartz, said in a March interview that the company would also “take a run at” bidding on 88 Leonard.

Schwartz declined to comment in an e-mail today, saying the firm does not discuss transactions until they have closed.

In the next 60 days, Africa Israel will sell 49 percent of its stake in the property for $37 million. Six months later, the company will sell its remaining share for about $17 million. The purchaser will also pay off a $24 million mezzanine loan on the building and assume a $132 million senior mortgage, Kazaz said.

Africa Israel values the deal at about $222 million after the realization of a $14 million before-tax profit and the subtraction of about $7 million in closing costs, according to a corporate filing yesterday with the Israel Securities Authority.

Reducing Debt

The company has been working to restructure and refinance more than $1.5 billion in debt from its boom-time real estate acquisitions in the U.S. Selling 88 Leonard and having the buyer assume its debt on the property reduces Africa Israel’s burden by $156 million, according to the filing.

“After this transaction, our debt will be $250 million on our books,” Kazaz said.

Africa Israel completed construction of 88 Leonard in 2007. One-bedroom apartments in the building, which has such amenities as an outdoor whirlpool and a billiards lounge, rent for as much as $4,300 a month, according to the property manager’s website. Two-bedroom units command as much as $6,000 a month.

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