October 19, 2020
Real Estate Daily Beat

MaryAnne Gilmartin lands financing for West Chelsea project

MaryAnne Gilmartin’s MAG Partners + Atalaya + Safanad + Qualitas have secured a $173 million construction loan from Madison Realty Capital for the development of 241 West 28th Street, CO first reported. Upon completion, the West Chelsea project will span 372,000 SF, and contain 479 apartments, plus a ground floor retail component. 

  • Why it matters: Some investors are stepping back from funding projects in New York City. Commercial-loan volume is down more than 50% this year as of early October, and no loans larger than $50 million from the five boroughs have been bundled into commercial mortgage securities in 2020, though there has been a handful of large single-asset, single-borrower deals, WSJ noted. More than $3 billion worth of loans backing commercial property in the city are delinquent, and loans in creditor negotiations total an additional $4 billion.
  • Dig Deeper: The three-year financing reportedly has a loan-to-cost ratio of 65 percent… 70 percent of the units will be market-rate and the rest will be designated affordable. The project benefits from a 35-year tax abatement.
  • Worth Noting: In 2018, L&L MAG signed a 99-year ground lease for the site. Now that the L&L MAG partnership has split, MaryAnne Gilmartin’s MAG Partners will be leading the development. [CO+WSJ+Trepp]

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October 16, 2020
Commercial Observer

MRC Provides $173M Construction Loan for MAG Partners’ West Chelsea Rental Project

A new rental tower is now fully set to rise in West Chelsea. 

Madison Realty Capital (MRC) just closed a $173 million construction loan for the development of 241 West 28th Street, Commercial Observer has learned. A joint venture between MaryAnne Gilmartin’s MAG Partners, Atalaya, Safanad and Australian investor Qualitas is developing the 479-unit project.

MRC provided the developers with a three-year financing at a 65 percent loan-to-cost. Jeff Rosen, a managing director at MAG Partners, led the financing on behalf of the sponsorship. Maverick Capital’s Adi Chugh negotiated the debt.

“This, in some ways, is a bet on New York, but it’s also a recognition of the resilience of the industry in the face of the pandemic,” Gilmartin told CO today.  “This project is one I’m particularly proud of, because it took so very much to get here. And while I’ve been involved in financings and closings that have been far more complex — from a real estate point of view — I can tell you that all of the externalities and the dynamics associated with the last six months have made this closing a real accomplishment. We are really appreciative of all the sponsorship, including Madison.”

In 2018, L&L MAG signed a 99-year ground lease for the West Chelsea site, with plans to build a 372,000-square-foot COOKFOX-designed property that included retail space on the ground floor. Now that the L&L MAG partnership has split, it’s MAG Partners who is leading the project and it marks MAG Partners’ first standalone deal.

When completed, 70 percent of 241 West 28th Street’s units will be market-rate and the rest will be designated affordable. The project also benefits from a 35-year tax abatement. With the construction financing now sealed, development will kick off next month, and the building is expected to be delivered in 2022. 

“We’re very excited to have closed this $173 million loan at a relatively low loan-to-cost with such an esteemed sponsorship group,” Zegen said. “This marquee 479-unit multifamily rental building, located within a few blocks of Hudson Yards and other prominent tech tenant expansions on the West Side, will be one of the only new multifamily rental projects built in Manhattan in the next few years. We were pleased to fill a void which would customarily be financed by conventional banks, and provide our flexibility, certainty and conviction.”

The deal is one of the few significant construction loans to close during COVID, and the sponsorship had to navigate the new debt playing field when selecting a lender. 

“One complexity was that the conventional lenders are just not showing up at the dance, they’re all frozen,” Gilmartin said. “The usual suspects for us weren’t available to commit, and didn’t believe they could go the distance with us because the future is so uncertain. So, there was a smaller group of prospective lenders. I love [MRC] because Josh and his team are in our business; not only are they lenders, but there are builders themselves. They know how to underwrite risk, and they understand value creation associated with development. 

“And that’s a rare thing in a lender,” Gilmartin added. “So, partly, it’s their DNA that brought them in and I think their staying power had a lot to do with how they’re hardwired. They were the perfect lending option for us, given the state of the city, the uncertainty, and for them it was all about the sponsorship, because they —like us — believe that this is a moment in time and that New York is going to come out of this.” 

The project is close to some buzzed-about projects, including Vornado’s redevelopment of the landmarked former post office at 421 Eighth Avenue. In August, Facebook inked a 730,000-square-foot deal for the entire office portion.

“West Chelsea was — pre-pandemic — one of the hottest locations in all of New York, and it’s a very difficult place to afford a multifamily building because land prices are extraordinarily high,” Gilmartin said. “If you were just doing a straight-up purchase of the dirt you’d never pencil out on a 70/30 [project]; it just would never make sense.”

Gilmartin said that Edison, which owns the land, did not want to part with its interest in the site, “so, we have here an opportunity to put online a beautiful, mid-block, 22-story asset, and it’s very difficult to imagine that anybody else is going to be able to do what we’re doing,” she said. “We’re building this project in the heart of the tech community and, even through the pandemic, Facebook, Apple, Google and Amazon have all doubled down on the city. We think this particular location is really the heart of where much of the city’s growth and prosperity will lie.” 

The deal represents Safanad’s first multifamily project in New York City. 

“This was a really unique opportunity for us to work with great partners and to make an investment in New York City residential but — more importantly — New York City in general,” Andrew Trickett, a partner at Safanad, told CO. “We looked at this project and its location, and this opportunity is a really great long-term bet on New York City. We’ve had a lot of headwinds flying around the marketplace today, but we have an enormous amount of faith in MaryAnne and her team’s ability to execute here.” 

The rental tower isn’t Atalaya’s first foray into the Nomad market. In 2018, the investment fund provided $65 million in preferred equity as part of a $315 million construction financing for Flag Luxury Properties’ Ritz-Carlton hotel at 1185 Broadway. 

For MRC’s part, it has been actively lending and investing through COVID-19. According to sources, the firm has raised more than $1 billion in capital since the beginning of the pandemic. 

MRC’s ability to approach deals as a lender but with an owner’s perspective was an ideal fit for the 28th Street project, Chugh said. 

“There’s an old saying that goes, ‘You cannot learn about roads from a road map. You can only learn about a road by traveling it,” he said. “And I think Josh is a perfect amalgamation of a lender who also is empathetic to the equity owner/ operator side of the business. When I am talking to Josh about a transaction, I’m talking to somebody who has a multi-dimensional understanding of the deal. He understands the deal from a finance perspective, and he understands the deal from a development perspective. He understands what is required for a developer to be successful, and then he creates a platform and a deal that gives them the tools to get there.”

As for what’s next for MAG Partners, Gilmartin has her hands full but is excited for the future. In July, she was appointed interim CEO of Mack-Cali, as reported by CO. 

“One of the really big milestones for me and my team on this project is that I have spun off out of my partnership with David Levinson and Robert Lapidus, which was a two-year success,” Gilmartin said. “I’ve spun off into MAG partners, which I own 100 percent, and this project came with me along with my other projects. So what’s really exciting about this building is that it’s a hallmark of MAG Partners, which is a 100 percent woman owned, ground-up development company. With this talented group of people that I took from Forest City, I created L&L MAG and now have spun out into MAG Partners, and 28th Street represents the first project of many.”

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December 10, 2018
The Real Deal

L&L MAG’s first development will be a 460-unit resi building in Chelsea

MaryAnne Gilmartin’s L&L MAG has inked a 99-year ground lease for Edison Properties’ 241 West 28th Street for about $7 million per year with gradual increases, according to sources familiar with the deal. This puts the total value of the deal in the range of $150 to $170 million, depending on the cap rate.

L&L is planning to build a 22-story, 460-unit residential project on the lot that will span roughly 372,000 square feet, Gilmartin said. The building will be split between 70 percent market-rate units and 30 percent affordable units and be developed through the Affordable New York program. It will include retail space on the ground floor and parking on the lower level, and COOKFOX will design it.

Gilmartin expects to have the building designed within a year and have the site ready for construction by the end of next year. Aaron Weaver of Level Investments brokered the deal for the developer.

This marks the first major deal for L&L MAG, which Gilmartin launched earlier this year with L&L partners David Levinson and Robert Lapidus after spending 23 years at Forest City. She has brought on Atalaya Capital Management and the Australian firm Qualitas as investment partners.

“For me, it became an opportunity to convince Edison that we were the best team, that we would produce a building of beauty and value,” Gilmartin said.

Young Kwon, managing director of Atalaya, said his company was interested in this project because of the location, the business partners and the chance to develop a multifamily building, noting that the deal “checked all our boxes.”

A Cushman & Wakefield team of Steve Kohn, Alex Hernandez and Alex Lapidus represented L&L MAG in bringing Atalaya and Qualitas on board.

Edison Properties had previously filed plans in 2014 to develop a 15-story residential building with 323 units on the site. The firm had purchased four properties on West 28th Street to create a 30,000-square-foot lot between 28th and 29th streets and Seventh and Eighth avenues.

Robert Scharf, executive vice president of real estate at Edison Properties, said in a statement that while L&L MAG wasn’t the highest bidder, the company’s project was still the best fit for the site.

“Although we received several higher offers, we chose to ground lease the property to L&L MAG because of the wonderful team that they have put together,” he said. “They have extensive experience developing some of the most outstanding and transformative projects in NYC.”

Edison Properties is based in New Jersey and is betting big on Newark with its Ironside project near the city’s Penn Station. The mixed-use building will have 290,000 square feet of workspaces and grabbed its first big tenant in the spring: Mars Wrigley Confectionery, which will relocate its headquarters from Chicago and take 150,000 square feet in the property.

L&L Holding made its own massive purchase in Chelsea recently with Normandy Real Estate, paying about $900 million for the neighborhood’s Terminal Stores warehouse in October. They are planning to turn the building into a property worth $1.8 billion, and are reportedly in talks to bring Allianz Real Estate of America into their partnership.

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