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NEW YORK CITY—AvalonBay Communities has agreed to sell interests in five Manhattan multifamily complexes to a joint venture with an institutional client of the real estate investment manager Invesco Real Estate. AvalonBay will retain a 20% interest and serve as the property manager of the assets.
The transaction includes the contribution of its fee ownership of Avalon Morningside Park (One Morningside Drive), Avalon Bowery Place I (11 E. 1st St.), and Avalon Bowery Place II (22 E. 1st St.), and its leasehold interest in Avalon West Chelsea (282 Eleventh Ave.) and AVA High Line (525 W. 29th St.) The five properties comprise 1,301 apartments and approximately 58,000 square feet of retail space located in Manhattan. The aggregate asset valuation is approximately $760 million and is expected to close before the end of the year.
The newly formed joint venture plans to utilize secured financing at a loan to value ratio of approximately 50%. The Arlington-based, publicly traded REIT that invests in apartments plans to use the estimated net proceeds of approximately $460 million from the sale for general corporate purposes, including acquisitions, development and redevelopment.
“This transaction brings us closer to achieving our long-term geographic portfolio allocation goals and allows us to maintain our brand and operating presence in Manhattan, while monetizing a significant portion of our investment in these assets,” says Matt Birenbaum, AvalonBay’s chief investment officer.
A Cushman & Wakefield team led by Doug Harmon, Adam Spies and Josh King handled the negotiations and were the only brokers involved in the deal.
AvalonBay will update its full year 2018 financial guidance to reflect the expected impacts of this transaction. The company stock opened at $177.22 on Friday. In its 10-Q quarterly report for the period ended June 30, 2018, the real estate investment trust had revenue of $569,239 million compared to the year-over-year, three-month period ended June 30, 2017 of $530,512 million.
In a note of local history, a colorful article in Curbed published on April 19, 2017 reported how the site of Avalon Bowery Place tells a vivid New York story. The apartments are located where once a hotel that served soldiers from the Civil War stood. The property later became a saloon of ill-repute, often raided by the police and frequented by prostitutes, and others suffering from misfortunes, which led to its nickname “Suicide Hall.” After the business closed, the building became a low-rent hotel. From the 1960s a women’s artist cooperative occupied the building for 40 years. The Curbed article finally notes that in 2005, the structure was demolished and the luxury multifamily was built in its place. The Avalon Bowery Place is shown in the image provided by PropertyShark.
AvalonBay’s website shows 11 New York City properties. The company owns or holds ownership interest in 287 apartment communities, totaling 84,043 apartment homes in 12 states and in Washington, DC.
Betsy Kim is the bureau chief, East Coast, and New York City reporter for Real Estate Forum and GlobeSt.com. As a lawyer and journalist, Betsy has worked as the director of editorial and content for LexisNexis Lawyers.com, a TV/multi-media journalist for NBC and CBS affiliated TV stations in the Midwest, and an associate producer at Court TV.
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