Developer Hershy Silberstein's planned office-to-residential project at 311 West 43rd Street has landed a $102 million construction loan in a submarket that hosts strong multifamily fundamentals.
Along with Silberstein, his Blue Sky Builders general contracting firm is leading the transformation efforts that will turn the property into 160 residential units with mixed-use space.
S3 Capital is supplying the loan, as this marks the lender's first-ever office-to-resi conversion it's been a part of. Arrow Real Estate Advisors arranged the financing.
The site is located in Midtown West, which S3 Capital refers to as one of Manhattan's top supply-constrained submarkets, with a 3.5 percent vacancy rate and 4.5 percent annual rent growth posted over the past half-decade.
Along with the residential units, the developers plan to add 39,712 square feet of commercial space, which has already been leased until 2036 to three tenants. Of the units, 25 percent will be set aside for those making an average of 80 percent of the area's median income.
"Successfully financing an office-to-residential conversion in NYC requires a deep understanding of floor plans, existing tenancy, zoning, tax, and the capital markets. 311 West 43rd required the ArrowREA team to bring all of those disciplines together at once, and our expertise rests squarely at that intersection," said Morris Betesh, founder and managing partner of Arrow Real Estate, in a statement.
"We were able to identify a lender who had the sophistication and expertise to structure a thoughtful solution for the borrower, and we are excited to see the project come to life."
The financing from S3 Capital appears to align with its RE Credit Fund III, with the final close coming in last month at $1.3 billion, bringing loan origination capacity to roughly $4.3 billion. The fund is looking to capitalize on multifamily developments in areas that host tight supply.
S3 Capital said it will continue to look for opportunities impacted by the housing shortage nationally.
Blue Sky's project and development portfolio currently shows 20 sites, located mostly across Brooklyn and the Bronx. It does not include 311 West 43rd Street.
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