New York – At a time of steeply rising materials costs, condominiums may be the only product type to pencil out when it comes to building multifamily projects in some markets.
A joint venture between LCOR Residential, LLC, and a West Coast pension fund bought the 225 East 34th St. site for condo development in June 2005 and closed on the $159.4 million in construction financing in March. During that time, construction costs shot up 15 percent to 18 percent, said David Sigman, senior vice president of LCOR.
“Luckily, the sales market [for condos] was going up at the same time, so the numbers worked out OK,” he said. “This is still one of the more cost-effective projects in the city.”
LCOR has begun pre-sales for the 12-story, 191-condo development. The studios and one- to three-bedroom units range from 540 square feet to 1,700 square feet in size and are expected to sell for between $2.90 and $3.35 per square foot, putting prices between $500,000 and $2.5 million per unit. The project also includes three stories of office space.
“Our strategy in Manhattan is to focus on a market with a lot of rental product,” said Sigman. After doing some analysis, Sigman determined that there are many young people renting in the area who want to own.
To appeal more to this demographic, the LCOR condos will offer all the amenities available in comparable rental housing, such as doorman services, outdoor terraces, and catering.
HSBC Securities (USA) was the lead lender for the construction financing, with the Union Labor Life Insurance Co. as co-lead lender. The three-year loan has a floating rate set at 150 to 200 basis points above the London InterBank Offered Rate, according to Richard Bassuk, president of brokerage firm The Singer and Bassuk Organization (SBO).
A portion of the proceeds from this transaction will repay a $45.3 million bridge loan provided by Bank of America.
To lower the development cost and increase density, LCOR used the city’s tax abatement program and inclusionary housing bonus program. The housing bonus, which requires the developer to help create affordable housing nearby, allowed LCOR to add two more stories of condos (totaling 30,000 square feet) to the development.
This is LCOR’s first condo construction project, and it is expected to be completed in summer 2007. SBO also helped arrange $208 million in construction financing for a second LCOR condo development here. LCOR had previously converted apartments into condos in the Washington, D.C., area.