Blackstone to finance $620M Kips Bay Court buy with Fannie Mae loan

Existing $200M mortgage part of “low-leverage” plan under core-plus fund
By Mark Maurer | August 23, 2016 12:58PM

Kips Bay Courts and Blackstone's Jonathan Gray

Kips Bay Court and Blackstone Group’s Jonathan Gray

To finance its $620 million purchase of Kips Bay Court, Blackstone Group plans to assume the existing $200.1 million Fannie Mae mortgage and will not seek additional debt, sources told The Real Deal.

Wells Fargo Bank provided the 10-year loan on the eight-building, 894-unit rental complex in 2013, replacing a $90 million Freddie Mac loan from M&T Bank from 2004, property records show. Wells Fargo had originated the loan and passed it on to Fannie Mae.

Late last week, Blackstone officially entered contract to Buy Kips Bay Court from affordable housing developer Phipps Houses for nearly $700,000 per unit, sources said. TRD first reported last Wednesday that Blackstone was finalizing the acquisition.

The deal, which would become the largest New York City multifamily transaction of the year when it closes, marks Blackstone’s deeper dive into residential rental assets.

A source familiar with the negotiations said the purchase will be “low-leveraged” given that it’s being made through its core-plus fund. Blackstone used the same fund to purchase Stuyvesant Town-Peter Cooper Village last year for $5.3 billion, in partnership with Ivanhoe Cambridge.  For that deal, the partners secured a $2.7 billion Fannie Mae acquisition loan from Wells Fargo.

Kips Bay Court was built in 1975 under the state’s Mitchell-Lama housing program and exited the program more than a decade ago. All of the apartments are free-market, though Section 8 tenants occupy close to 40 percent of the units. Those federally subsidized apartments bring in nearly market-rate rents.

Sources said Blackstone has had not any discussions with the city regarding preservation of the units.

A spokesperson for Blackstone declined to comment, while a representative for the New York City Department of Housing Preservation and Development could not be immediately reached.

Blackstone, whose real estate department is led by Jonathan Gray, had $103.2 billion in total real estate assets at the end of the second quarter, SEC filings show.