MEPT commits $100m to New York project

The $5.31 billion open-ended real estate fund plans to develop a 165-unit high-rise apartment building in New York City.

The Multi-Employer Property Trust (MEPT), a Washington DC-based open-ended commingled real estate fund, announced today that it has committed more than $100 million in equity to develop a 35-story, 165-unit apartment building at 309 Fifth Avenue in Manhattan.

The fund, which is backed by more than 360 public employee and corporate pension plans, will be a majority owner of the property, which is located between East 31st and East 32nd streets and will total 122,000 square feet, including 10,400 square feet of ground-floor and basement-level retail. Real estate investment advisor Bentall Kennedy, on behalf of MEPT, will work with developer Urban Development Partners, general contractor Lend Lease and SLCE Architects to develop the project, which is expected to begin construction in the next few weeks and is slated for completion in September 2013.

So far in 2011, MEPT has invested a total of $1.25 billion in acquisitions and developments in the US, of which nearly 40 percent was located in the New York-New Jersey market. Last month, the fund acquired a 1.1 million-square-foot Class A office building in Jersey City, New Jersey, from Brookfield Office Properties for $377.5 billion. “MEPT expects its acquisition activity over the next 12 months to moderate somewhat, but the New York market remains a key target,” said a company spokeswoman.

The fund, whose portfolio consists of 150 investments in 30 major metropolitan markets across the US, owns five properties with a total net asset value of $700 million in the New York market, including The Octagon Apartments, a 500-unit development that MEPT completed in 2006, on New York’s Roosevelt Island. Additionally, the fund built two other apartment projects in New York during the late 1990s, but those were later sold.

David Antonelli, executive vice president at Bentall Kennedy, pointed to current market conditions as supporting new construction, as a limited development pipeline and positive net absorption of existing apartment inventory are expected to drive down vacancy rates and fuel strong rent growth. “We believe demand for new apartments will remain strong for the foreseeable future due to demographic and economic trends,” he explained, citing  an overall decline in homeownership rates and the large population of ‘Echo Boomers’ – 19 to 34 year olds – who are likely to be renters.

Meanwhile, MEPT is actively seeking multifamily development opportunities in other major US markets. The fund currently is developing a project in Seattle and is considering other ventures in Chicago, Minneapolis and Los Angeles, according to Marty Standiford, senior vice president at Bentall Kennedy. “Our near-term focus continues to be on acquiring multifamily assets in urban markets, grocery-anchored retail centres in urban in-fill or established suburban neighbourhoods and high-quality CBD office properties,” he said.