UDR Comes to Manhattan with $260M Buy

NEW YORK CITY-In a multifamily acquisition nearly twice the size of last week’s $140-million deal by LaSalle Investment Management for the Sagamore, UDR is entering the Manhattan market. The Denver-based apartment REIT said late Wednesday afternoon it has agreed to buy the 493-unit 10 Hanover Square from the Witkoff Group for $260.8 million, or about $484,000 per unit.  Douglas Harmon of Eastdil Secured advised the sellers in both deals.

At one time the corporate headquarters of Goldman Sachs, the rental apartment tower is changing hands via the assumption of an existing $192-million mortgage, the issuance of approximately $64.3 million of operating partnership units and approximately $4.5 million in cash, according to UDR. The fixed-rate mortgage is interest-only until the end of next year and matures in 2015, according to a release. According to city property records, the loan was made through Eurohypo AG.

Witkoff CEO Steve Witkoff says in a release that his company’s decision to receive nearly all of its equity in the form of operating partnership units in UDR “confirms our beliefs in the management team and their ability to create significant long-term value for its shareholders.” He adds that the Financial District neighborhood of 10 Hanover has continued to see “significant transformation” since his company originally began converting the property to apartments. 

UDR’s portfolio as of Dec. 31, 2010 ran to 59,614 apartment units, located mainly in the West, Southeast and Southwest. Prior to the 10 Hanover deal, which is expected to close after UDR assumes the $192-million mortgage on the property, the REIT’s only foray into the Northeast was the Boston market, where it owns Garrison Square as well as five suburban properties.

The expansion of UDR into Manhattan “reflects our desire to own and operate apartment homes in markets that have the best growth prospects based on favorable job formation and low home affordability,” Tom Toomey, president and CEO of UDR, says in a release. “With total revenue per home of $3,000 per month and only six years following the completion of a major redevelopment, the acquisition of 10 Hanover will further enhance the overall quality of our portfolio.”

Also known as 10 Pearl St. and 76 Water St., the 23-story 10 Hanover was built in 1969 as an office tower. Along with Goldman Sachs, Kidder Peabody at one time made its home there.

The Witkoff Group bought the property from Helmsley Enterprises for $15 million in 1996 and began redeveloping it as residential space nine years later. It also contains the 28,000-square-foot Xtreme Gym New York fitness center along with Fresco on the Go Restaurant, The Original Soupman Restaurant, Apple Bank and Starbucks for a total of 41,650 square feet of retail.

UDR’s acquisition of 10 Hanover is the second nine-figure multifamily acquisition in Manhattan in less than a week. It also unseats LaSalle’s acquisition of the 265-unit Sagamore at 189 W. 89th St. as the priciest apartment buy in Manhattan over the past year, although the per-unit price of $528,000 on the Sagamore was higher.

In March of last year, Equity Residential closed on its $142.7-million purchase of the 293-unit Longacre House at 305 W. 50th St. from Macklowe Properties, according to Real Capital Analytics data. Equity’s Longacre buy followed its acquisitions of two other Macklowe residential assets, both of which closed in January 2010: the 323-unit RiverTower at 420 E. 54th St. for $181.5 million and the 294-unit 777 Sixth Ave. for $150.8 million.