Atlas Capital acquires 51% stake valued at $142.4M in Blackstone Manhattan rental portfolio

Atlas Capital Group through the entity ACI VI G10 Multifamily LLC acquired a 51 percent interest valued at $142.4 million in an 11-building Manhattan multifamily portfolio formerly owned by the Caiola family, which Blackstone Group and Fairstead purchased in 2015 for $486.9 million, as part of a larger $690 million purchase. The portfolio loan was sent to special servicing in February 2023, the Commercial Observer reported at the time.
The seller was Blackstone Group through the entity Bre Fsc Multifamily Mezz B Borrower LLC. This was an entity level acquisition, not a deed sale. It was not clear if Blackstone and Fairstead retained their interests. One industry source not familiar with the transactions speculated this was a preferred equity investment.

The properties include the 200-unit residential elevator building (D9) at 238 West 19th Street in Chelsea, Manhattan, 92-unit residential elevator building (D7) at 31 East 31st Street in Park Avenue South, Manhattan, and 69-unit residential elevator building (D7) at 449 East 83rd Street in Yorkville, Manhattan.

The deal closed on August 9, 2023 and was recorded on August 25, 2023. The 11 properties have 497,362 square feet of built space and 9,654 square feet of additional air rights according to a PincusCo analysis of city data. The sale price per built square foot is $286 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)
Blackstone Group and Fairstead bought these 11 properties in September 2015 for at total of $486.9 million as part of a $690 million purchase from the Caiola family of a 24 building portfolio.

Assuming the 51 percent value reflects the value of the entire 11 buildings, that would imply a steep loss in value from 2015. At that time, a 51 percent stake would be $248.3 million, so the current price of $142.4 million would reflect a 43 percent decline.
In 2019, Morgan Stanley originated a $364 million refinancing for the 11-building package, valuing them at the time at $542 million, the Commercial Observer reported at the time. The senior debt was packed into a single-asset CMBS. Only 25 units or about 4 percent are rent-regulated.

Because multiple properties have been transacted, some of the following sections will follow the property with the largest assessed value, which in this case, is the property on 238 West 19th Street.

Prior sales and revenue

Prior to this transaction, PincusCo has records that the buyer Atlas Capital Group purchased two properties in two transactions for a total of $506 million and sold one property in one transactions for a total of $11.5 million over the past 24 months.
The seller Blackstone Group purchased five properties in five transactions for a total of $1.1 billion and sold one properties in one transactions for a total of $320 million over the same time period. The former owners according to the Department of Housing Preservation and Development includes Rei Moya, head officer and Steven Gregware, site manager. The business entity is Bre Fsc Multifamily Borrower Llc.

The property

The residential elevator building with 200 residential units in Chelsea has 497,362 square feet of built space and 9,654 square feet of additional air rights according to a PincusCo analysis of city data. The parcel has frontage of 257 feet and is 92 feet deep with a total lot size of 23,732 square feet. The zoning is C6-2A which allows for up to 6 times floor area ratio (FAR) for commercial and up to 6.02 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $53.2 million. The most recent loan totaled $271.7 million and was provided by Morgan Stanley on August 7, 2019.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the properties for the past 24 months. In addition, according to city public data, the properties have received 10 DOB violations, $8,550 in ECB penalties, six housing violations, and $24,525 in OATH penalties in the last year.

Development

For the tax lot buildings, one out of the 11 buildings received a initial certificate of occupancy in the last ten years. There are no active new building construction projects or major alteration projects with initial costs more than $1 million on this tax lot.

The block

On the tax block of 238 West 19th Street, PincusCo has identified the owners of nine of the 27 commercial properties representing 237,079 square feet of the 487,874 square feet. The largest owner is William Gottlieb Real Estate, followed by Sidney Rubell and then Scharfman Organization.
There are no active new building construction projects on this tax block.

The majority, or 40 percent of the 487,874 square feet of built space are elevator buildings, with office buildings next occupying 24 percent of the space.

The seller

The PincusCo database currently indicates that Blackstone Group owned at least 54 commercial properties with 14,116 residential units in New York City with 16,690,584 square feet and a city-determined market value of $2.9 billion. (Market value is typically about 50% of actual value.) The portfolio has $1.3 billion in debt, with top three lenders as Morgan Stanley, Wells Fargo, and New York Life Insurance Company respectively. Within the portfolio, the bulk, or 91 percent of the 16,690,584 square feet of built space are elevator properties, with industrial properties next occupying 6 percent of the space. The bulk, or 81 percent of the built space, is in Manhattan, with Queens next at 15 percent of the space.

The buyer

The PincusCo database currently indicates that Atlas Capital Group owned at least four commercial properties with 911 residential units in New York City with 842,579 square feet and a city-determined market value of $151.1 million. (Market value is typically about 50% of actual value.) The portfolio has $606.4 million in debt, with top three lenders as Square Mile Capital Management, MF1 Capital, and Arbor Realty Trust respectively. Within the portfolio, the bulk, or 92 percent of the 842,579 square feet of built space are elevator properties, with office properties next occupying 8 percent of the space. The bulk, or 92 percent of the built space, is in Brooklyn, with Manhattan next at 8 percent of the space.

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