Phoenix Realty Acquires Brooklyn Low-Income Portfolio for $96M, Plans $30M Rehab
- Feb 27, 2008
In a complex public-private transaction that took two years to put together, Phoenix Realty Group has acquired a 15-building, 362-unit portfolio of low-income apartment houses in Brooklyn from Bedford Stuyvesant Restoration Corp. for $96 million.PRG, a national real estate investment firm focusing on workforce and low-income housing, plans $30 million in renovations at the buildings in Brooklyn’s Bedford Stuyvesant neighborhood. The apartments will continue to be affordable housing with about 95 percent of the apartments being subsidized with long-term Section 8 contracts from the U.S. Department of Housing and Urban Development. “We believe that the preservation of affordable housing is fully worth the tremendous effort and commitment that complicated projects like this require,” Ron Orgel, PRG managing director, said in a release.PRG agreed to buy the portfolio from BSRC in 2005, after BSRC had spent several years seeking a developer that would agree to rehabilitate the housing and keep it affordable, noted Colvin Grannum, BSRC’s president.PRG worked with Deborah Van Amerongen, now the New York State Housing Commissioner and the former director of Multifamily Housing for HUD in the New York Region, to pull all the financing and subsidies together. Financing 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. Existing mortgages for two of the properties were restructured through HUD’s mark-to-market program, according to PRG. The third property involved repurchasing and selling a ground lease to New York City. The total purchase price included settling all payables owed by the properties.Helping all the parties navigate the deal was Heidi Burkhart, senior director of Eastern Consolidated; Scott Ellard, a financial analyst with Eastern Consolidated; and Joe Lynch, an attorney with Nixon Peabody L.L.P. Wachovia Bank and Citibank provided construction and permanent financing. Architects include Meltzer/Mandel Architects and Robert Gaskin Architects. Construction will be done by MDG Design & Construction.PRG Bedford Stuyvesant Partners, a joint venture of PRG and Shinda Management of New York, will oversee the rehabilitation. Over two years, each building will get new kitchens, baths, flooring, lighting, roofing, boilers, lobbies, balconies, windows and landscaping. Tenants will remain in the buildings. Chris Bramwell, vice president of development for Shinda, explained that there will be hospitality suites in each building under construction so families will have access to kitchens and bathrooms.The Brooklyn acquisition and rehabilitation project is consistent with PRG’s new strategy to shift from new construction to renovating existing buildings. Keith Rosenthal, PRG president, told CPN Jan. 30 that the firm was seeking properties that could be bought for less than replacement cost and near public transportation.The Jan. 30 story noted that PRG had closed two real estate private equity funds with a total of $470 million from institutional investors including New York State Common Retirement System, the New York City Employee Retirement System and TIAA-CREF Global Social and Community Investments. The Metropolitan Workforce Housing Fund focuses on New York City and the tri-state region of New York, New Jersey and Connecticut. The Genesis Workforce Housing Fund II concentrates on the Los Angeles area.CPN reported that those two funds brought PRG’s total urban fund capitalization to $750 million that will be leveraged to create $3.5 billion in projects including market-rate rental and for-sale housing, mixed-use properties, and commercial developments in urban and infill areas.