FLANk Management is now converting 607 Hudson Street into apartments.
While scores of developers, partners and lenders took each other to court during the downturn — and tried to squeeze each other for more money — one Manhattan buyer and seller managed to keep the peace despite the economic roller coaster ride.
The deal involved 607 Hudson Street, a highly coveted spot at the corner of 12th Street in the West Village. The site, which was occupied by the non-profit VillageCare’s nursing home, went into contract in 2007. It didn’t close for almost four full years, but the deal emerged from the downturn with only minor scrapes.
Real estate insiders said the four-year contract was the longest purchase agreement in a straightforward real estate transaction they could recall.
Ira Nesenoff, the managing partner with law firm Nesenoff & Miltenberg, said in his 26 years in the business, he could not recall a straightforward contract that took longer than about six months to close — other than those drawn out by litigation or by design. Those longer contracts are sometimes needed because of a requirement to deliver a property vacant, obtain a zoning change or get approval from a judge on a sale.
“[But] absent exigent circumstances, four years in contract? I want to say that is almost a record,” he said.
The long saga started in 2006 — at the peak of the market, when recently developed condo conversions nearby like 142 West 10th Street were selling (on a blended basis) for as much as $1,500 per square foot.
VillageCare, which provides nursing home services in multiple locations in Manhattan, wanted to sell its Hudson Street site, which it had occupied since 1958. The proceeds would be used to finance and build a new, larger residential-care facility about 15 blocks south, at 214 West Houston Street.
“We needed to know the value of the property, because we needed to invest that in the new place,” said Louis Ganim, vice president of communications at VillageCare. “When we looked at selling it, it was going up in value every time we turned around.”
So, in 2006, executives at the nursing facility brought on James Nelson, a managing partner at Massey Knakal Realty Services, and listed the 48,100-square-foot, neo-Federal building for $39 million.
It didn’t take long to find an interested buyer in condo developer FLANk Management. Led by Michael Walsdorf, FLANk had successfully developed a condo just a few blocks away at 385 West 12th Street, where the real estate listings aggregator StreetEasy shows that the 12 units sold at an average of $1,891 per square foot.
In February 2007, Walsdorf signed a contract to buy the Hudson Street building, city records show.
“We found the right buyer who was committed to the area,” Nelson said.
There was just one sticky stipulation in the contract: The deal couldn’t officially close until VillageCare’s new building was ready. At that time, VillageCare anticipated that building would be ready in as little as two years, in 2008 or 2009, marketing materials showed.
FLANk put down a hefty 25 percent deposit, according to a source involved with the deal. (Usually a contract deposit is 10 percent, and sometimes just 5 percent.) “The deposit kept the buyer on the hook,” the insider noted.
Indeed, that deposit became especially crucial in keeping the deal together when the two-year construction schedule proved to be overly optimistic.
Delays pushed the completion out to this year.
The sale, therefore, closed in January at $33.4 million, city records show. While the contract price was not disclosed, the deal closed only a hair lower, a source said.
Another source familiar with the deal described the closing price as a minor reduction: “closer to 1 [percent] than 5 [percent].”
Through the four-year economic turmoil, the buyer and seller, unlike partners and lenders in many condo development projects undertaken during the downturn, managed to keep the peace. There were no lawsuits traded to get out of the deal or to renegotiate the price. No move akin to developer Donald Trump’s assertion in a 2008 lawsuit filed in Queens that the economic downturn was a “force majeure” event impacting his Trump International Hotel and Tower in Chicago, so he should not be personally liable for loans.
Finally, the new VillageCare Rehabilitation and Nursing Center was completed and received its temporary certificate of occupancy in early 2011, city Department of Building records show.
“Maybe at some point because of what was going on, because of the ‘Great Recession,’ maybe for a while it [looked like] it could fall apart, but I think now it’s clear it has worked out great for everybody,” said Ganim.
Currently, FLANk, which declined to comment for this article, is converting the building into apartments ranging from 3,300 square feet to 9,000 square feet, the Wall Street Journal reported. Brokers said that large family apartments of that size are in strong demand in that area.
“I still think there is a demand for large units in [the Village], if you don’t want to own a townhouse,” said Jon Capobianco, a senior vice president at residential brokerage Corcoran, who is not involved with the project.
As for VillageCare’s luck in getting the property sold and not having to cut the price much: “Real estate goes up and down. I don’t look at us as being fortunate, and I don’t look at us as being lucky. I look at us as having put together a really good deal,” Ganim said.