MAG Partners Buys Ground Lease for Manhattan Apartment Project
Retail building on 8th Ave. to be demolished for mixed-income apartments.
MAG Partners has purchased for $64M a 99-year ground lease from Penn South for a site on Eighth Avenue where it plans to develop a mixed-income apartment building in a joint venture with equity player Safanad.
The partners are planning to build 188 units of affordable housing at the site at 335 Eighth Avenue. The new building will feature ground-floor commercial space, including a grocery.
Penn South, a 10-building mixed-income co-op complex—official known as Mutual Redevelopment Houses—between West 23rd and West 29th Streets in Manhattan, decided last year not to endeavor to obtain loans for what it called major capital repairs to the aging building at 335 Eighth Ave.
“The co-op was faced with a decision to make,” said Ryan Dziedziech, general manager of Penn South, in a statement. “Either we seek additional very costly loans in order to address major capital repairs to this two-story aging commercial building or enter into a long-term ground lease with a responsible developer who will demolish the existing building and build an affordable, quality housing that will blend into the fabric of the community and guarantee our limited equity co-op cash flow for many years to come.”
With leases for several tenants at the retail building expiring at the end of 2022—including Gristedes, Midtown Tennis Club, Asylum Comedy Club and McDonald’s—Penn South opted to sell the ground lease.
MAG Partners is planning to build a seven-story, 200K SF apartment building. Demolition of the existing building will begin in the first quarter of this year, with construction on the apartment building to begin in Q3.
Mutual Redevelopment Houses said it will use proceeds from the sale of the ground lease to make capital improvements on the other buildings in Penn South and to provide additional services to the 5,000 co-op residents.
The co-op owner estimated that the 99-year deal will contribute up to $750M to the co-op during the term of the lease.
The existing building at 335 Eighth Avenue is either a landmark or an eyesore, depending on your opinion of its somewhat unusual architecture. The windowless two-story structure is topped off by what appears to be an inflated canvas roof surrounded by 10-foot-high fencing.
The building is surrounded by the more traditional red-brick apartment buildings of the co-op.