An affiliate of property owner Icon Realty Management paid $18.5 million for three adjacent Upper West Side single-room occupancy buildings with a combined 365 units that had been used for years as an informal hotel. The purchase price was about half that offered by another buyer five years earlier. Much of the decline in value followed a May 2011 state law that bans renting rooms in Class A residential buildings for less than 30 days.
Insiders say there are hundreds of SRO properties where owners earned significant revenue through short-term rentals. Many of those properties might be brought to market, some say.
Icon, led by Terrence Lowenberg and Todd Cohen, closed on the purchase of the buildings at 342-350 West 71st Street, between West End Avenue and Riverside Drive, on March 15. The seller was Israel Ingberman’s J & J Hotel, which has owned the property since November 1970, city records show.
Icon and Ingberman did not respond to a request for comment.
The sale brokered by Besen’s Amit Doshi, Alexander Frants, and Glenn Raff, was not a straightforward transaction and was years in the making.
It began with long-time multi-family property investor Richard DeCesare signing a contract in August 2007 to buy the property for $35 million, DeCesare told The Real Deal. Over the years, the contract was modified and extended — and reduced. Ultimately, DeCesare held a contract to buy the property for $17.2 million. He sold that contract to Icon for $18.5 million, he said. As part of the transaction, he paid Ingberman, and Ingberman transferred the title to Icon.
As of the middle of last year, only 120 of the units were occupied SRO units. The remainder of the rooms was comprised of hotel units, vacant rooms and offices, marketing material from brokerage Besen & Associates said.
DeCesare’s original plan was to continue operating the hotel while he rehabilitated the properties and sold the units as condominiums. But the changes in the market and the hotel law forced a change in plans.
After the collapse of the real estate market, “prices plummeted,” DeCesare said. “The decreased valuation of SRO hotels in particular was exacerbated by the enactment of more restrictive laws proscribing the use of SRO buildings for transient rentals.”
The building, known to travelers as the Hotel Riverside Studios, was popular with European tourists who were used to the bathrooms in the hallways, DeCesare said.