The Real Deal New York

Blackstone nears deal to buy Kips Bay Court for $620M

900-unit former Mitchell-Lama complex is now entirely market-rate

August 17, 2016 03:05PM
By Mark Maurer Twitter_logo_blue copy

Kips Bay Court (inset: Johnathan Gray)

Kips Bay Court and Jonathan Gray

Blackstone Group is finalizing a deal to purchase the 894-unit market-rate rental complex Kips Bay Court for $620 million, or nearly $700,000 per unit, The Real Deal has learned. The transaction would be the city’s largest multifamily deal so far this year.

Phipps Houses, an affordable housing developer, has owned the eight buildings, clustered between East 26th and 29th streets east of Second Avenue, since developing them in 1975. The complex, earlier known as Henry Phipps Plaza West, was constructed under the state’s Mitchell-Lama housing program, which caps profits and rents. It exited the program more than a decade ago, and is now entirely market-rate.

Sources familiar with the negotiations said Kips Bay Court is expected to go under contract in the next week.

A CBRE team led by Darcy Stacom began marketing the complex for sale earlier this summer. An offering memorandum obtained by TRD in June states that the projected net operating income for 2017 is about $23.9 million, but that could grow to $41.6 million per year by 2027.

Though Section 8 tenants occupy close to 40 percent of Kips Bay Court’s units, those federally subsidized apartments bring in nearly market-rate rents.

Since 2004, the number of Section 8 apartments has decreased from 651 to 344. The offering memo projects that by 2027, a landlord could reasonably expect just 69 to remain — just 8 percent of the complex.

A spokesperson for Blackstone declined to comment, while representatives for CBRE and Phipps Houses, led by Adam Weinstein, could not be immediately reached for comment.

Blackstone made the two largest multifamily purchases of 2015 – Stuyvesant Town-Peter Cooper Village with Invanhoe Cambridge for $5.3 billion and the Caiola portfolio with Fairstead Capital for $690 million.

So far this year, the largest closed multifamily deal is Savoy Park, which Fairstead Capital purchased for $315 million in July. Other large pending multifamily deals include Rockpoint Group’s purchase of 63 and 67 Wall Street for $430 million and Isaac Kassirer’s purchase of the Dawnay Day portfolio for north of $350 million.

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