The Real Deal New York

Nonprofit developer Phipps Houses puts 900-unit Kips Bay complex on market

CBRE’s Darcy Stacom has the listing, which some brokers believe could fetch up to $700M

June 16, 2016 03:50PM
By Adam Pincus and Mark Maurer

Kips Bay Courts

Kips Bay Court (inset: Adam Weinstein of Phipps Houses)

Phipps Houses, one of the city’s most storied affordable housing development firms, is putting its 894-unit Kips Bay Court complex on the market, several sources told The Real Deal

The majority of the units in the group of eight buildings located between 26th and 29th streets east of Second Avenue are occupied by free market tenants. Studio apartments start at $2,711 and three-bedroom units start at $6,426, according to the complex’s website.

At those figures, the Kips Bay Court_TRData LogoTINY complex could sell for between $600 million and $700 million, according to industry sources who asked not to be identified.

Adam Weinstein, president of Phipps Houses, declined to comment. Darcy Stacom, vice chairman with CBRE, has the listing, and also declined to comment. The offering memo was sent out about a week ago, one source said.

The tower’s addresses include 460 Second Avenue, 480 Second Avenue and 520 Second Avenue.

Phipps, also referred to as Phipps NY, was founded in 1905, and has developed and continues to own thousands of affordable housing units in New York City. In 1975, with the backing of dozens of individual investors, it constructed what was then known as Henry Phipps Plaza West, under the state’s Mitchell-Lama housing program, which caps profits and rents.

However, the state law allows projects to exit the program after 20 years, and following litigation from the investors, the project exited the Mitchell-Lama program in 2002.

But as part of an agreement to protect affordable housing, the developer struck a deal that kept qualifying tenants in the complex under the federal Section 8 program. Weinstein said in 2002 that approximately 70 to 80 percent of the tenants qualified.

The program requires tenants to pay 30 percent of their income as rent, with the U.S. Department of Housing and Urban Development paying the rest.

Today, approximately 520 units, or about 58 percent of the units, are not occupied by renters using the Section 8 vouchers. However, since the landlord can peg the Section 8 rents to market rents — and they typically are only about 10 percent below a free market figure, one insider familiar with the project said — the project is essentially a wholly free-market development.

Studios are about 375 square feet, so they rent for roughly $86 per square foot, while the three-bedrooms, which average about 1,100 square feet, rent for about $70 per square foot, according to an analysis by The Real Deal of figures on the complex’s website.

Phipps owns other large complexes in the area, such as Phipps Plaza South, and is developing a fully affordable project nearby at 325 East 25th Street.

The developer also owns stakes in sites that can be developed, with nearly 6,000 units in Cypress Hills, Rego Park, Far Rockaway and other neighborhoods, an industry source said.

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