The Real Deal New York

Delshah closes on $112M assemblage in Morningside Heights

Michael Shah plans to carve out 200 luxury rentals at 30 Morningside Drive

June 16, 2016 08:30AM
By E.B. Solomont

30 Morningside Drive (Inset: Michael Shah)

30 Morningside Drive (Inset: Michael Shah)

Five months after raising $102 million on the Israeli bond market, Michael Shah’s Delshah Capital scooped up five adjacent Beaux Arts buildings in Morningside Heights.

Delshah paid $111.5 million for the buildings at 30 Morningside Drive in what the developer told The Real Deal was the firm’s largest transaction to date. The seller was Mount Sinai St. Luke’s Hospital, which will relocate hospital services at the site, allowing Delshah to convert the properties into high-end rental apartments.

According to Shah, the company went into contract on the property last year, and spent the next several months negotiating details, such as its ongoing relationship with Mount Sinai, which will continue to occupy neighboring buildings within the same tax lot as 30 Morningside.

The deal closed Monday.

Earlier this year, Delshah raised more than $102 million by issuing bonds on the Tel Aviv Stock Exchange. The deal was backed by the landlord’s portfolio of New York City assets.

According to Shah, about $30 million of bond proceeds went into the acquisition, along with $20 million of developer equity. Bank of the Ozarks provided a $60 million first loan and Square Mile provided a $17.5 million mezzanine loan.

Delshah is currently in the process of submitting plans to the city’s Department of Buildings and Landmarks Preservation Commission; once plans are approved, the developer will look to raise $138 million in construction financing, Shah said.

Pending the necessary city approvals, Delshah plans to carve out 200 rental units on the site, which is located a block south of Columbia University and overlooking Morningside Park.

The company’s portfolio includes more than 1 million square feet, valued at $720 million, including 12 residential buildings with a total of 1,200 apartment, as well as six retail buildings.

At 30 Morningside, two of the five buildings are landmarked and Delshah plans to renovate the exterior of the buildings and upgrade the interior. “The whole development will be contextual; we can change the insides but the facades will stay the same,” Shah said.

He said the low basis paved the way for a rental development.

At 260,000 square feet, the site traded for $420 per foot. The total cost, including the acquisition and renovation, will be $250 million, or under $900 per foot, Shah said. “You can’t buy a building for less than that.”

Shah is also bullish on the area, and said 30 Morningside would compete with other high-end rentals in the neighborhood.

Enclave at the Cathedral, the Brodsky Organization’s 428-unit rental development at 400 West 113th Street, currently has studios through two-bedrooms, with prices ranging from $2,626 to $5,030 a month, according to StreetEasy.

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