US real estate lender S3 Capital has originated its first office-to-residential conversion loan, providing $102m (€89.8m) to Hershy Silberstein and Bluesky Builders for a 15-storey project in New York.
S3 Capital said the construction loan will finance the conversion of 311 West 43rd Street, a 168,299 gross sqft office building located between 8th and 9th Avenues in Midtown West.
The financing was arranged by Arrow Real Estate Advisors.
Shawn Safdie, head of origination at S3 Capital, said: “We’ve underwritten many office-to-residential conversions over the years, but this is the first where everything aligned. It starts with the sponsorship group, who we have developed a deep repeat relationship with.
“They’ve earned our trust by executing time and again. Combine that with one of Manhattan’s most supply-constrained submarkets and a building layout that’s ideal for a conversion project, and the decision to pursue this deal was easy.”
Meir Landau, CFO at Bluesky Builders, said: “S3 Capital always impresses us with their flexibility and speed to close. This transaction was time-sensitive and the S3 team went above and beyond to accommodate our needs.
“We come back to S3 time and time again because they truly understand construction which consistently enables us to execute more efficiently.”
Robert Schwartz, managing principal at S3 Capital, said: “We have always believed that public-private partnerships are the best way to stimulate housing development.
Schwartz added that the 467-m program, which provides property tax incentives for converting non-residential buildings into affordable rental housing in New York City, is a “pragmatic solution that is directly alleviating the shortage of rental units here in Manhattan”.
Morris Betesh, founder and managing partner of Arrow Real Estate Advisors, said: “311 West 43rd required the Arrow Real Estate Advisors team to bring all of those disciplines together at once, and our expertise rests squarely at that intersection.
“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.”
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