Mixed-use Soho properties sell for $18M

A 27,750-square-foot mixed-use retail and residential property in Soho tenanted by retailers Nike, Sportswear USA and sportswear retailer Surface to Air, has changed hands in a transaction valued at $18 million, David Schechtman, executive managing director at Eastern Consolidated, told The Real Deal today.

The properties, at 21 and 25-27 Mercer Street, which feature 10 residential units (five of which were delivered vacant and five leased), were asking $20 million and sold to East End Capital, a New York City-based real estate investment firm headed by Jonathon Yormak and David Peretz, March 22. The seller is Aion Partners, a real estate investment fund headquartered on East 44th Street.

“We have owned the buildings for about five years,” said Jackie Renton, a principal at Aion. “Nike has been a fantastic tenant for us at 21 Mercer since they opened in 2008 and we recently signed a long-term lease with French clothing company, Surface to Air at 27 Mercer. With the retail-stabilized [units], we saw an opportunity to take advantage of the tremendous enthusiasm from the investment community for well-located retail and residential assets. We achieved our target pricing and plan to reinvest the capital into some of our other Soho assets.”

Schechtman represented the seller and procured the buyer alongside Chairman and CEO Peter Hauspurg, senior director Lipa Lieberman and Gary Meese.

The property includes a five-story mixed-use loft building at 25 Mercer Street and the three-story 27 Mercer Street. The ground-floor retail condominium at 21 Mercer was also included in the sale.

“The stellar location of this property drove strong investor interest,” Schechtman said, calling the Soho location, between Grand and Howard streets “sexy.” He added: “This part of Soho is tremendously undervalued, but people are waking up and realizing that Soho does stretch all the way to Canal.”

Schechtman also pointed out the in-place income stemming from various leases at the property, including the five occupied residential units, which are all under some form of rent regulation. It is possible that the remainder of the 10 residential units at the building could be sold off separately.

The average rent in place for the occupied units is $2,346 per month or $19.62 per square foot, according to an offering plan provided by Eastern – a clear upside opportunity. Those rates are more than 100 percent below market rate, the plan indicates.

“The acquisition offers the rare opportunity for a buyer to own prime Soho retail and residential units that are ripe for conversion,” he said.”[The sale] is a phenomenal sign that we’ve returned to aggressive pricing.”

While Nike’s lease expires later this year, Toto’s remains valid through 2014 and Surface to Air’s continues through 2022. The high-profile retail tenants at the property all have five-year extension options on their leases, Lieberman added.

East End Capital was not immediately available for comment.