Phoenix Realty Closes $96M Low-Income Buy

[IMGCAP(1)]NEW YORK CITY-Phoenix Realty Group has closed on its acquisition and renovation of 362 low-income apartments for a total cost of $96 million. All of the apartments will be preserved as affordable housing, and 95% of the apartments will be subsidized with long-term Section 8 contracts from the US Department of Housing and Urban Development.

The property’s seller, Bedford Stuyvesant Restoration Corp., had sought a developer aligned with this mission for several years and agreed to sell this portfolio to PRG because of “their commitment to meeting our goals–stabilizing and revitalizing the portfolio while preserving the affordable housing,” says Colvin Grannum, president of BSRC, in a prepared statement.

[IMGCAP(2)]A source close to the transaction tells GlobeSt.com that the properties included are mostly along Albany Avenue as well as Kingston Avenue, Decatur Avenue, McDonough Street and Herkimer Street. “This acquisition represents our mission to invest in housing critical to the economic vitality of New York City and other major urban areas nationwide,” explains Ron Orgel, a Phoenix Realty Group managing director, in a prepared statement. “Most developers would opt out of the rent restrictions and seek higher-income tenants who could pay more in rent. However, we believe that the preservation of affordable housing is fully worth the tremendous effort and commitment that complicated projects like this require.”

[IMGCAP(3)]The sales transaction of the portfolio required intense cooperation among all parties. Heidi Burkhart, senior director of Eastern Consolidated, arranged the details of public and private financing. Financing for two of the properties included the restructuring of their existing mortgages through HUD’s mark-to-market program, and the third property included the repurchase and extension of a ground lease that was sold to the city. In addition, the total purchase price included the settling of payables owed by the properties.

“This assignment was a truly an extraordinary one taking over two years to complete, and I am proud to have been a part of it,” Burkhart says. “BSRC’s main concern throughout the whole process was to preserve the housing.”BSRC always had the community’s best interest as their primary goal, she continues, noting that with PRG’s acquisition, “that commitment will remain intact.”

Others instrumental in the transaction included Eastern Consolidated financial analyst Scott Ellard, attorney Joe Lynch of Nixon Peabody LLP and teams from Wachovia Bank and Citibank to provide construction and permanent financing for the project. Architects involved in the renovation include Meltzer Mandel Architects and Robert Gaskin Architects.

PRG worked closely with the former director of Multifamily Housing for HUD in the New York region, Deborah VanAmerongen, who is now the New York State Housing Commissioner. Financing for the acquisition includes tax-credit equity from PRG, tax-exempt bonds and subsidies from the New York City Housing Development Corp., and tax abatements and subsidies from the New York City Department of Housing Preservation and Development.

“The cooperation of the City and HUD were critical to making this transaction happen,” says Keith Rosenthal, president of PRG, in a prepared statement. “They put forth a tremendous effort to work with us to meet the needs of these properties and the hundreds of families that live there.”

The $30 million rehabilitation comes under the direction of PRG Bedford Stuyvesant Partners, a joint venture of Phoenix Realty Group and Shinda Management of New York. Over the next two years, each building is receiving new kitchens, baths, flooring, lighting, roofing, boilers, lobbies, balconies, windows and landscaping. “No tenants will be displaced during the renovations,” explains Chris Bramwell, VP of development for Shinda, in a statement. “To keep families together, each building will set aside hospitality suites so anyone living in a unit being renovated will have access to kitchens and bathrooms.” Construction on all three properties will be done by MDG Design & Construction.