VALLEY STREAM, NY-Hawthorne Court, a distressed 90-unit  condominium project just over the Queens border in Nassau County, will be converted into high-end rentals, GlobeSt.com has learned. Zeus Capital Managers, a European real estate fund, has acquired the multifamily property at 125 South Cottage St. from Manhattan-based Community Preservation Corp. for $23.5 million following the purchase of the project’s existing loan at a significant discount, according to company chairman Ed Rotter. 

“One of the difficulties we found was acquiring any institutional product in the New York-Metropolitan Area at least at a reasonable cap rate, and Nassau County is one of the toughest places to build,” he tells GlobeSt.com, noting that the lack of land and difficulty of getting approvals “really constrained” new building opportunities, and dwindling supply of existing product made finding new acquisitions equally as tough. “The age of most of the apartments that were built in Nassau were built before 1979 and there are very few institutional high quality products. We saw the opportunity here in terms of taking a broken condominium that was built to high quality specs and convert it into a high-end rental.”

The project – originally constructed by the Dennis Organization – is 95% completed and contains 100,000 rentable square feet. Amenities include underground parking, a tenant’s lounge, a fitness center and landscaped courtyard. The property is also four blocks from the Valley Stream Long Island Rail Road Station, which Rotter says will be an attractive feature for renters looking for “quality product” outside city limits. 

“It will be targeting people that live in Nassau County as well as people that live there and work in New York City,” he says. “The fact that it is on the metro line makes it very appealing. It is only a 30 minute commute.” 

And even though the building already has a gym and resident lounge, Zeus Capital will now upgrade and improve the units with new features as part of the acquisition. “We are going to continue to finish up the landscaping of the courtyard and put some additional amenities out there too,” Rotter adds.

Based on rental demand on the Island, the company anticipates rental rates to exceed 3% to 4% by the time the project improvements are complete.  “As a result, we also expect very attractive returns for our investors,” he says.