CIM Group has reached a deal with HFZ Capital Group to invest up to $85 million in the developer’s planned 32-story condominium project at 303 East 51st Street, the site of a fatal 2008 crane accident, The Real Deal has learned.
Israel’s Polar Investment, a public company affiliated with HFZ, disclosed in a Jan. 16 filing with the Tel Aviv Stock Exchange that it had reached a definitive agreement with CIM, a Los Angeles-based private equity firm, to help fund the project, allowing the struggling Polar to avoid future financial commitments. Though HFZ is involved in the deal, only Polar, as a public company, must make routine disclosures with securities regulators.
The project site, between First and Second avenues, currently houses an 18-story concrete structure erected by the project’s initial developer, East 51st Street Development LLC, whose principal was James Kennelly (note: correction appended). The entity halted construction in March 2008 when a construction crane toppled over, killing seven and crushing an adjacent building. Three months after the accident, the Department of Buildings revoked Kennelly’s building permit.
Ziel Feldman, Polar’s chairman and the founder of HFZ, pledged to buy the note on the property for $38 million in October 2009. Since then, he has been acquiring neighboring plots of land and wrestling with DOB to obtain a permit to start work again.
A representative for HFZ told The Real Deal today that the Department of Buildings approved an application for a permit to resume construction, but city building records reveal that a stop work order still exists on the site. DOB issued a permit for the temporary installation of a standpipe system on Jan. 12, according to city records. A DOB spokesperson could not immediately be reached for comment.
Polar said it expects to receive about $17 million — or 84 percent of its share of the investment, to be split with another partner — when the CIM deal closes, with additional funds subject to a profit sharing deal that has yet to be worked out, according to the filing, which The Real Deal had translated from Hebrew. Polar anticipates tapping the balance, about $3 million, when the project is completed and the units are sold, beginning in 2014, the filing says.
Though the deal is not yet finalized, the agreement provides that CIM will hand over an additional payment of $33.8 million when the transaction closes, which is set for Feb. 29, the filing says. The agreement is contingent on financing and approval from what the filing referred to as “planning authorities in the U.S.,” it says.
HFZ’s plans for the site include a mix of 115 studios and one-, two-, three- and four-bedroom units ranging from 700 to 5,500 square feet and priced at more than $1,600 per square foot, with an emphasis on larger units. The tower will also have 10,348 square feet of ground-floor retail space, a 60-space underground parking garage, a fitness club and a pool, as The Real Deal previously reported.
Representatives for HFZ declined to discuss the transaction, and a spokesperson for CIM declined to comment, citing the company’s policy of not discussing transactions before they close.