After bringing in USAA Real Estate Co. as an equity partner, Madison Realty Capital closed on the purchase of a 16-story Midtown East rental building known as the Buchanan for $270 million.
Madison entered contract on the 297,700-square-foot property late last year, when it was looking for a joint-venture partner to provide $100 million in equity for the purchase and to renovate it, The Real Deal reported.
The building at 160 East 48th Street, also known as 760-774 Third Avenue, has 289 apartments and includes retail and office space. Of the rental units, 198 are market-rate, 73 rent-stabilized and 18 rent-controlled.
TRD reported that Madison, a Midtown East-based real estate investment firm led by Josh Zegen and Brian Shatz, plans to buy out 51 of the rent-stabilized tenants, according to marketing materials. The 2,500-square-foot office will be converted to retail and the firm will re-lease the 13,600 square feet of existing retail.
Zegen told the Wall Street Journal that in addition to upgrading apartments, the new owners will increase rent on the retail space after the current lease expires. He said market retail rents are $250 to $300 a square foot, which is much higher than what current tenants are paying, according to the Journal.
The building, which also has an internal courtyard, has 140,000 square feet of air rights, according to the Journal.
The repositioning and financing costs for the Buchanan will run about $41 million, according to the market materials.
USAA, which has about $15 billion in assets under management, partnered with Waterman Interests to buy two Garment District office properties last year for $118 million.
CBRE’s Darcy Stacom, Paul Leibowitz, Dave Krantz and Carl Shorett represented the seller in the deal, while a JLL team led by Aaron Appel, Mark Fisher and Jonathan Schwartz marketed the stake on the buyer’s behalf.
Rao & Rao LLC, which is based in Harrison, N.Y., and is affiliated with estate of real estate investor Bernard Kayden, owned the property since 1959. In 2009, the Leona M. and Harry B. Charitable Trust, long run by legendary landlord Harry Helmsley and then by his widow Leona Helmsley, sold its 32 percent fee interest in the property to Rao & Rao for $41.6 million.