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The US real estate developer Related Companies has borrowed $258m from the private equity group Blackstone to refurbish a Manhattan apartment building in a deal that signals confidence in New York’s luxury housing market, despite the pandemic.
The onset of coronavirus was tough on high-end New York property owners, as thousands of residents fled to the perceived safety of second homes in the Hamptons on Long Island, New England or Florida.
Trends in luxury rentals and sales are now improving in America’s most populous city, data show. Related, the developer behind Manhattan’s sprawling Hudson Yards project, plans to use the funds from Blackstone to renovate a rental building in the Tribeca neighbourhood and sell the apartments to wealthy residents and investors.
“New York City has shown incredible resiliency over the past year and a half, and we’re currently experiencing the strongest condo market in recent history,” Related chief executive Jeff Blau told the Financial Times.
Known as Truffles Tribeca, the building comprises two towers linked by a skybridge near the Hudson River. Related bought the complex for $260m in 2019, seeking to capitalise on the transformation of Tribeca from a faded commercial district into an expensive neighbourhood.
The company, founded by the billionaire developer Stephen Ross, has emptied the decade-old building in preparation for a gut renovation that will involve changing the interior and replacing the facade, according to people familiar with the Related’s plans.
“Lenders [were] clambering over themselves to participate in this opportunity,” said Jordan Roeschlaub, co-head of the structured finance group at Newmark, a real estate advisory firm that brokered the deal.
Those renovations will be financed by a construction loan from Blackstone. One of the world’s biggest real estate investors, the private equity group has a large presence in New York, capped by Stuyvesant Town and Peter Cooper Village, an 11,250-unit apartment complex that it bought in 2015.
Recent trends in New York’s real estate market could vindicate Blackstone’s decision to double down on urban property during the pandemic. “People right now are fleeing cities,” Blackstone chief operating officer Jon Gray said in October last year. “We think that will come back, but there’s an opportunity to invest in them at what could be attractive prices.”
Residential condominium and co-operative unit sales in the city rebounded in the second quarter of this year, with 3,417 closing in Manhattan, more than double the number in the same period last year. The estate agency Douglas Elliman said it marked the busiest three-month period since 2015.
Luxury rentals have also drawn new inhabitants. The architect Frank Gehry’s undulating downtown apartment tower was almost a third vacant during the depths of the pandemic, according to the building’s owner, Brookfield Asset Management. This month, the company added, the New York by Gehry building is 96 per cent occupied.