August 27, 2012
NEW YORK CITY-A partnership led by SL Green Realty Corp. will develop a second high-rise dormitory for Pace University in Lower Manhattan. The joint venture, which also includes Israel-based Harel Insurance and Finance Group and locally based Naftali Group, will convey a long-term ground lease condominium interest to Pace when the 30-story tower at 33 Beekman St. is completed in 2015.
For SL Green and for the university, the project follows up a 24-story dorm, scheduled to open next year, being developed at nearby 180 Broadway in partnership with Jeff Sutton. It’s also the latest in the REIT’s series of JVs with Harel.
“Our recent experience with Pace on the 180 Broadway project has demonstrated that we can work well with the university’s administration to create a superior living experience for its students,” Andrew Mathias, SL Green president, says in a statement. “And once again, we have chosen to continue our successful collaboration with the Harel Group, the fourth such venture we’ve done together.” Harel holds a 49% interest in the project, according to a release from the company, while SL Green and Naftali control the remaining 51%.
Adds Gadi Ben-Haim, head of real estate at Harel, “The student dorm market in Manhattan is a stable market characterized by significantly lower supply than demand, and a particularly high occupancy rate. These statistics helped the partnership formulate a transaction that generates an above average return with potential for significant increase in value.” Harel is projecting a 7% return on the project, according to a release.
With approximately 700 dorm rooms, plus a ground floor of school-related space, the 33 Beekman project takes the place of what was originally intended to be a hotel. City property records show that developer Sam Chang paid about $22 million for the parcel in 2007, and sold it to Brookline, MA-based Jiten Hotel Management for $15.7 million last year. The JV announced Thursday by SL Green includes acquisition of the fee interest in the parcel for an undisclosed sum.
David Falk and Kyle Ciminelli from Newmark Grubb Knight Frank represented Pace in the transaction. Gary Goodman, partner and head of the New York real estate group at SNR Denton, led the legal team representing lender Landesbank Hessen-Thüringen Girozentrale, while Fried, Frank, Harris, Shriver & Jacobson LLP was the lead counsel for the borrower and guarantor. Additionally, Jack Bart, Ross Moskowitz, Michel Evanusa and Trevor Adler of Stroock & Stroock & Lavan were the attorneys for Pace University and SL Green used the law firm of Haynes and Boone–specifically, attorneys Noah Shapiro and Russ Rabinovich–for the lease and most of the transaction documents, as well as Ganfer & Shore attorneys Matthew Leeds and Jonathan Marden for the condominium documents.
Reuters reported that the 33 Beekman dorm, which is being designed by Gene Kaufman Architect PC, will cost $112 million to build. A spokesman for SL Green says the REIT has no comment as yet on projected costs.
Separately, SL Green said Thursday that it would redeem four million shares of its 7.675% Series C cumulative redeemable preferred stock, out of a total of 11.7 million Series C shares. The shares will be redeemed at $25 each, according to the REIT.