Urban American lists portion of controversial Upper Manhattan $940M portfolio

In what may be a sign of economic strains stemming from a controversial $940 million Manhattan apartment package acquired during the market’s boom, the private equity-backed residential landlord Urban American Management brought to market this week a small piece of that portfolio, The Real Deal has learned.

New Jersey-based Urban American and its private equity partner City Investment Fund offered for sale the 64-unit apartment building at 1890-1894 Lexington Avenue and an adjacent vacant site with 51,185 square feet of development rights, according to a private listing from the brokerage firm Brookfield Financial Real Estate Group New York.

The offering for the East Harlem sites located between 117th and 118th streets, is not yet public and has not been posted on real estate data websites such as CoStar Group. There was no asking price for the property.

Urban American and City Investment Fund purchased the building in 2007 as part of the portfolio of nearly 4,000 units of former Mitchell-Lama, rent-regulated apartments in Manhattan that included 3333 Broadway, between 133rd and 135th streets. It was the second largest apartment purchase in Manhattan at the time, after the purchase of Stuyvesant Town and Peter Cooper Village in 2006.

Urban American, whose CEO is Philip Eisenberg, said in a statement through a spokesperson that the sale was not driven by economic reasons, and no additional portion of the portfolio are slated for sale.

“Urban American’s general business plan embraces the concept of purchasing buildings that are in need of improvement, improving them and selling them at the proper opportunity to generate the best results for our investors,” the statement said, and continued, “Over the last several years we have purchased over 17,000 apartments and sold approximately 6,000 in the ordinary course of business.”

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Eric Anton, a managing partner at Brookfield who is identified as one of several brokers on the listing, did not respond to a call seeking comment. A representative at City Investment Fund declined to comment. The property is part of the U.S. Housing and Urban Development’s Section 8 program, proving affordable rents to tenants, the listing says.

Amit Doshi, an executive director at brokerage Besen & Associates, who was not familiar with the listing but is active in the multi-family marketplace, said many private equity-backed firms have been selling properties because they could not get the returns they hoped for, even after in instances refinancing properties with lower debt.

“Sometimes they decide that no matter what they do there is no way to make a [decent] rate of return,” he said.

But in other cases, owners are selling because funds need to turn over investments and pay out investors, and it was impossible to know from the outside, he said.

The 2007 purchase drew headlines because housing advocates worried that more affordable apartment units would be lost because the new owners would try to increase rents. But as the market soured, a number of private equity-backed firms such as Pinnacle Group and SG2 Properties began selling their holdings, others lost them to partners and some like Vantage Properties lost some buildings outright to lenders. (note: clarification appended)

Urban American is accelerating a process of selling properties. In 2011 it sold just over $22 million in properties, while so far in 2012 it has sold $98.7 million in buildings such as a portfolio that includes 200 East 18th Street in Brooklyn, to Shamah Properties, an analysis of CoStar reveals. All Urban American’s previous sales were marketed by either Massey Knakal Realty Services or Rosewood Realty Group, CoStar records show.