Madison Realty pays $22M for Williamsburg rental

Six-story building at 385 Union Avenue was originally planned as a condo

Midtown-based investment firm Madison Realty Capital paid $21.55 million for a 47-unit apartment building at 385 Union Avenue in Williamsburg. It is the firm’s second acquisition of a residential property in the neighborhood this year.

Madison Realty bought the defaulted note on the six-story, 53,000-square-foot building from City National Bank, according to Joshua Zegen, managing member of Madison Realty. At the same time, Madison Realty negotiated to buy the deed from the building’s developers: Anshel Friedman, Pincus Freund and Joseph Freund. The entire transaction closed on May 10, but has not yet appeared in public records.

Friedman and the Freunds had originally planned to sell the units as condominiums. But they defaulted on their loan in 2009, and the bank filed to foreclose the next year.

City National had taken over the loan from the original lender, a failed bank, through the Federal Deposit Insurance Corporation, city records show.

Madison Realty paid a total of $21.55 million for the discounted note and the deed, less than the cost of constructing a new ground-up building on the site, Zegen said.

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Nearly all of the building’s 23 one-bedrooms and 24 two-bedrooms have since been rented out, Zegen said, but average rents there are in the “high $30s” per square foot, below the market rate of about $48 per foot.

“Rents in the building are below market,” he said, because “the property had a cloud over it for the last couple of years.”

Madison Realty plans to operate the property as a rental and raise rents to market rates as leases expire, Zegen said.

The building, between Ainslie and Powers streets, is two blocks from a vacant lot where the Chetrit Group filed plans in March to build a 14-story rental at 502 Metropolitan Avenue.

The first building Madison Realty purchased in Williamsburg was the 20-unit 409-413 Broadway, where they purchased the debt in December and took title to the property in February, city records show.

Friedman and the Freunds could not immediately be reached for comment.