Private equity real estate firm Madison Realty Capital has teamed up with multifamily investor Arel Capital to purchase a mixed-use building in Queens, New York for $135.5 million, the firms announced Wednesday.
This is the first partnership for the New York-based firms, which bought the property, called Saxon Hall, from developer Treetop Development. The seller purchased Saxon Hall (pictured) in 2013 for $85.3 million, according to local media reports. Built in 1960, the 503,000 square foot building comprises 419 residential rental units, 3,842 square feet of commercial space and a full-service parking garage at 62-60 99th Street in Rego Park, Queens.
“We've seen a lot of opportunity in Queens recently given that pricing has become so expensive for rentals in Manhattan and Brooklyn, and it's been pushing people a little further out to transportation-centered locations,” Josh Zegen, Madison's co-founder, told PERE. “We were able to buy an existing building with a substantial renovation plan to make it more in tune with today's modern standards. We think it can be enough of a discount to other markets for young professionals and families looking for more space.”
Capital for Madison's stake came from the firm's first discretionary equity fund, Madison Realty Capital Equity Fund I. PERE understands that the firm launched the value-added vehicle at the end of January with a $300 million target to invest across property types. The firm has a 20 percent gross internal rate of return target for the vehicle, and is under contract or has closed five deals so far, including Saxon Hall. Other purchases with capital from the fund include The Buchanan, a 17-story mixed-use building in Manhattan. PERE previously reported that the firm entered into contract for The Buchanan at the end of 2015, then subsequently formed a joint venture with USAA Real Estate to buy the building, located at 160 East 48th Street, for $270 million.
Madison closed its third institutional real estate debt investment vehicle in May on $695 million. PERE understands that many investors in the debt fund have committed or plan to commit to the equity vehicle. Madison originally entered the Queens market through two lending deals, which gave the firm exposure to opportunities in the New York submarket.
The firm currently has $3 billion of assets under management.