In this challenging financial climate, the developer of a 35-story hotel-condo in Herald Square is seeking more experienced partners to help foot the $100 million-plus bill, an official close to the deal said.
New Jersey-based Sunshine Developers bought the site at 309-311 Fifth Avenue at 31st Street, as well as adjoining air rights, for $50 million in late 2006, said Benjamin Bottner, investment sales associate at real estate advisors Marcus & Millichap, and a broker on the current deal. A year later, the developer demolished the five-story building on the site, and this year won city approval for an Ismael Leyva-designed building with a 212-room hotel and 39,000-square-foot residential building.
Sunshine Developers, who did not return a call for comment, is a relative newcomer to new construction and has found it difficult to obtain financing in the tighter lending climate, Bottner said. The main business for the principals of the development company is Victoria Classics, an international manufacturer and importer of textiles.
“The push behind the joint venture is a name on the project with a long track record that helps secure construction financing with the best possible terms,” Bottner said. “In today’s market it is next to impossible to get construction financing without a solid sponsor.”
The project could be altered, as well, he said, if the partner wanted that. The developer’s offering plan says it would consider converting it to a hotel only; a hotel with extended stay; residential only; or student housing.
The site is valued at $400 per buildable foot, said Ross Mezzo, office investment specialist at Marcus & Millichap. That would put the total value at $56.4 million for the 141,000 square feet of buildable space. The project would cost at least $43.6 million on top of that.
John Cicero, managing principal at commercial appraisal firm Miller Cicero, said that despite the general decline in real estate values from the credit crunch, the $400 per foot value was close to prices for similar sites in 2007.
“I think it is consistent to where it was a year ago,” he said.