Historic Waterfront Mixed Use (Affordable Residential Rental/Office/Hotel/Retail) Development Opportunity, NYC

23-Apr-2021

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

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Projected capital structure: $3.2B ($1.1B equity / $2.1B debt 65% LTC)

5.6MM gsf (4,200 residential units, 2.4MM sf (50%) / student housing 300K sf (6%) / office 823K sf (16%) / life science facilities 610K sf (12%) / retail 252K sf (5%) / hotel 246K sf (5%) / entertainment complex 262K sf (5%) / parking 600K)

* Investment Opportunity: 1) 1st Phase – $100MM LP equity or preferred equity 2) $420MM LP equity – Phase1 & Phase2   

This is a high-quality private equity commercial real estate investment opportunity to co-invest with a multi-generational NYC real estate developer with a successful long-term track record in NYC acquisition and development.  Sponsor has built over fifty+ mixed-use commercial real estate projects in NYC.  The Sponsor has local NYC expertise and specializes in building large mixed-use residential rental developments in NYC on time and within budget. 

This is an affordable residential rental / student housing and mixed-use (office, life science, hotel, retail, entertainment, and parking) investment opportunity.  The Sponsor will acquire 5.6MM sf (11 parcels) to build a fully integrated community consisting of fourteen mixed use buildings and multiple community-based projects. The development is strategically located in a central NYC location right next to multiple mass transportation hubs (train station, highway, and bus) and provides easy access to midtown Manhattan business district, Westchester, and upstate NY. 

This property will have incredible views of the Manhattan skyline and unobstructed waterfront views.  This is a multi-phase six to eight-year community-based development project with enormous city-wide political support and worker union support.

The Last NYC Frontier and The Value Proposition The development in this northern frontier will attract students, young professionals, working families, and business travelers who commute to school or work, due to easy commutes to Manhattan while offering the value proposition of affordable housing rentals and high quality of life.  This prime location has an abundance of amenities with short Manhattan commutes, and great air and light quality with multiple waterfront pedestrian paths and parks.  There are also multiple NYC cultural attractions and entertainment complexes that provide millions in annual foot traffic.

This development project differentiates itself from existing competitive product mainly due to its unit mix which is composed (50%) of affordably priced 1-bedroom residential rentals for students and young families.  These residential units are affordable priced at $2,408 ($41rsf) that are great value for your money and efficiently sized (600sf). 

Economic Trends Favor Affordable Rentals / Student Housing Property Type as a Long-Term Investment This development is strategically encircled by over eleven academic institutions and educational facilities which draw demand (80,000+ university students) for student housing/affordable rentals from students, faculty, and visitors. This educational amenity also provides plentiful educational options for young working families.  There is a severe housing crisis in NYC.  The shortage in affordable housing stock has created strong long-term need for affordable rentals. 

As a mega-city NYC benefits from many positive long-term economic forces such as diverse job creation, student population growth, and international tourism, and business travel which will continue to lead to strong housing demand.  The demand for affordable housing product is expected to rise dramatically in the next five to 10 years in the NYC Metro area. 

Control of Land and Current Status:
The lead Sponsor will build a politically-endorsed and union-endorsed waterfront mixed use community-based development that is strategically located next to multiple mass transit hubs and in an increasingly popular location for residential and commercial development.  This development has strong political support and will receive a variance to increase the sites current as-of-right sf from 1.3MM ($174MM, $134sf) land value to an as-of-right re-zoning of 5.6MM ($340MM, $61sf).  

The pro-development city council will also allow a re-zoning to increase height limit for this project compared to surrounding properties and therefore provide superior air and light amenities to future rental residents and hotel guests.  In addition, the development of an entertainment complex and life science facilities will provide an invaluable amenity to local residents, workers, and transit commuters.   

Investor Equity or Preferred Equity Financing: The lead Sponsor for this deal has $40MM equity out of the initial $100MM equity in the project.  The Sponsor is looking for a long-term strategic equity partner ($420MM) to develop this historic waterfront community-based development project.  This very large 5.6MM sf development site is available for JV partnership.  This is an off-market opportunity because the site is secured (Sponsor has already assembled the 11 parcels with eight parcels out of eleven parcels currently in-contract with PSAs.) and is far along in assemblage, due diligence, design, and pre-development planning. 

The lead Sponsor will also consider LP equity or preferred equity of $100MM for Phase1.  This development project has full political support of local NYC politicians who are pro-development and want to encourage long term investment in the community and the creation of much needed affordable housing rentals.  This massive development also has full worker union support as it will bring thousands of very high paying construction jobs and may even qualify for union-financing and investments.  Construction will be completed in two stages over six to eight years.   

Current Land Value and Future Land Value: Current as-of-right sf is 1.3MM ($174MM appraised land value (Oct 2020), $134sf).  Valuation after property receives a variance and re-zoning is an increase in as-of-right to 5.6MM sf ($340MM land value, $61sf) *Will receive a brownfield tax credit of $250MM which makes land cost basis $0. Site also qualify for opportunity zone, 421A, and employment credit.

Total Hard ($411sf) / Soft Costs ($12sf): $2.4B – Phase 1: $1.4B 4MM sf 3-4 years / Phase2: $1B 1.2MM sf 3-4 years

ERM: 8.95x, Levered IRR: 23.3%, Total Profit to Investors: $3.65B, All-In Cost: $574.46 sf

Time line:  1) ASAP for Phase 1 $100MM LP equity or preferred equity   2) $420MM LP equity for Phase 1 & Phase2   

* This is a high-quality investment opportunity on the last prime waterfront in NYC near multiple mass transit options


Oxstones Real Estate www.Oxstones.com  CRE@Oxstones.com

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