NEW YORK CITY-With plans to create the world’s largest Ferris wheel and a new waterfront arts & cultural district, strong commercial real estate development is underway on Staten Island’s North Shore—and institutional investors are taking note. Recognizing the demand for housing here, Madison Realty Capital has taken ownership of 224 Richmond Terrace, a 60,000-square-foot, 40-unit multifamily property situated just a half mile south of the Staten Island Ferry in the borough’s burgeoning St. George neighborhood, GlobeSt.com has learned exclusively.
The firm – which specializes in flexible debt and equity financing for middle-market transactions throughout the US – is known for its recent push into distressed multifamily note buys, as evidenced by its recent purchase of 385 Union Ave. in Williamsburg. Marking its first foray on the Island, Madison previously purchased the non-performing first mortgage on the condominium property for $8.4 million, approximately 66% of the unpaid principal balance and 52% of the payoff balance including interest from Bank of New York Mellon, has now taken title by completing foreclosure proceedings.
Joshua Zegen, co-founder and managing member of Madison Realty Capital, tells GlobeSt.com that as a buyer of distressed assets, the company is always looking for “significant” discount-to-value opportunities, and St. George is showing potential. “When I went out there for the first time, I had some familiarity with Staten Island,” he says, noting that the developer of the building, Leib Puretz, constructed several condominium projects in the borough, but went in “at the wrong time,” Zegen says.
“The cost basis that he went in for was so high that he wasn’t able to make these deals work,” he says, explaining that original owner defaulted on its construction finance, after which the original lender filed a foreclosure action. “He really put a ton of money into various developments in this submarket and really had some major problems because his cost basis, whether it look too long or it was too high, for whatever reason, the project that we bought really the debt in itself was around $13 million of principal balance. What was owed with the past due interest was $16 million, and the total cost basis was $20 million. That’s a pretty high number. Units today are selling between $350 and $425 a foot, and we came in at a significantly lower basis.”
Now that Madison paid $8.4 million for the debt at a discount-to-replacement cost, Zegen says the company is planning to convert the former condos into a rental complex. The 11-story project – known as “The View” – is substantially complete, but Zegen says improvements will be made, and amenities like a gym and community center will be added.
The building also features 5,000 square feet of retail space at the base. To handle the marketing efforts, Casandra Properties has been tapped as the leasing agent for the residential units and retail.
Due to the early nature of the process, asking rents for the one- and two-bedroom units were not decided yet, but Zegen says the building is class A in nature. “It is very similar to product you’d find in Williamsburg, and I think that was the original vision of this developer,” he says. He looked at the waterfront views the way I look at the waterfront views, and this was really the cheapest waterfront product in the five boroughs.”
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