Clockwise from top left: 871 Grand Street, 392 St. Marks Avenue, 607 Franklin Avenue and 600 Park Place in Brooklyn (Credit: Google Maps; iStock)
Not all coronavirus-impacted real estate deals need to go to court, after all.
After the pandemic slammed the brakes on All Year Management’s sale of a 74-building, $346 million multifamily portfolio to investor David Werner in May, the parties negotiated for nearly two months in efforts to salvage the deal. The new transaction is slightly smaller than before, and significantly more complex.
Under the new agreement, Werner has agreed to acquire 68 buildings for about $302 million, according to a disclosure Yoel Goldman’s All Year filed Wednesday with the Tel Aviv Stock Exchange. The deal would be executed in two stages: 45 properties will be sold for $176.6 million in late July, and the remaining 23 will be sold for $125.8 million in November.
The $15 million deposit Werner had paid for the original deal will go towards a $21.5 million deposit on stage one of the deal, and the buyer will put up another $1 million deposit for the second stage of the transaction.
The new deal also gives Werner, a prolific syndicator within the Borough Park Orthodox community, the option to pay for a portion of the transaction with a preferred equity stake, with a maximum value of $17.3 million for stage one and $12.3 million for stage two. The preferred equity will mature in June 2021 — with two 12-month extension options — and carry an initial interest rate of 6 percent.
The parties also agreed to split tax payments on the transaction 50-50, according to the disclosure.
All Year expects positive cash flow from the deal, after debt payments and transaction costs, to total about $53 million — $28 million in stage one and $25 million in stage two. If Werner opts for the maximum amount of preferred equity, without exercising extension options, Goldman’s firm expects to see $35 million in positive cash flow from the deal this year and another $19 million next June.
All Year declined to comment.
Contact Kevin Sun at ks@therealdeal.com.
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