Thursday, June 21, 2018
Madison Realty Capital Provides $55M for Bed-Stuy Mixed-Use Development
Madison Realty Capital has provided a $55 million first mortgage construction loan to facilitate the completion of a planned interconnected three-building mixed-use condominium project at 948 Myrtle Avenue in Bedford-Stuyvesant, Brooklyn, the firm announced yesterday.
The loan refinances and replaces existing debt on the development and will go toward the completion of the 214,487-square-foot project as well as fund any additional costs, according to a press release from MRC. A spokesman for the company declined to provide the name of the borrower, although a source with knowledge of the deal confirmed to Commercial Observer it was landlord Isaac Schwartz, the owner of Pacific Management.
"This opportunity came to MRC because of our existing relationship with the borrower and their confidence in our ability to rapidly and successfully execute our lending transactions," Josh Zegen, the co-founder and managing principal of MRC, said in a prepared statement. "We're pleased to once again deliver financing to this quality sponsor and eager to see the completion of this development, which will bring much needed new residential and retail offerings to the Bedford-Stuyvesant neighborhood."
The Real Deal was the first to report on the deal.
In December 2017, MRC provided a $15 million, floating-rate bridge loan to Cornell Realty Management to help finance the early stages of the development, which will include retail frontage along Vernon, Throop and Myrtle Avenues, as CO first reported. At the time of the bridge financing, Zegen told CO that MRC's typical gap loan earns an interest rate between 8 and 11 percent and range from one to three years.
Cornell purchased the three vacant lots on which the project stands in December 2014 for $16.5 million, funding the purchase with a $13 million loan from Hudson Capital Realty, according to New York City Department of Finance records. The development sits on three adjacent sites encompassing a 30,000-square-foot lot—at 936 Myrtle Avenue, 948 Myrtle Avenue and at 258-264 Throop Avenue.
Two of the three buildings will be nine stories tall and comprise 77 condo units across 118,746 square feet and will house a 20,300-square-foot ground-floor retail condo. The third building will rise five stories and comprise 24 affordable rental units, including five studio apartments, seven one-bedroom units and 12 two-bedroom units, according to MRC.
New York City Department of Buildings permits issued in October 2017 and property records detail a six-story project that will include rental and condo units, ground-floor retail as well as a 59-space subterranean parking garage—which will be located below the two interconnected sites that will host the nine-story portion of the development, according to information from MRC.
The developer has completed all demolition, excavation and foundation work and plans to officially finish construction within the next two years, according to information from MRC.
Schwartz is also pursuing approval for additional floor area ratio through NYC Housing Preservation and Development's Inclusionary Housing program and the Food Retail Expansion to Support Health program, which financially incentivizes the use of grocery tenants.
In December 2017, Zegen told CO that the condos will be aimed squarely at serving Bed-Stuy's Hasidic community.
"Given that their average family is very large, there is a need for more housing for the community," Zegen said at the time. "It's not subject to…the condo market's" regular ups and downs.
Zegen acknowledged then that rising prices coupled with the growth of the Hasidic community have pushed Hasids to expand their residential footprint beyond their traditional South Williamsburg stomping grounds.
The market "is pushing the community further and further," Zegen said. "For them, they want to be around their own community." Special considerations in developing condo for Hasidic communities include apartments with more bedrooms and multiple kitchens for religious meals, Zegen said last year.
Cornell Realty could not immediately be reached for comment. MRC declined to comment beyond the press release. An official at Pacific Management said Schwartz was not immediately available for comment.
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