Blackstone Finalizing Deal to Buy Kips Bay Court for $620M

The buyer in last year's largest New York City multifamily transaction will also top this year's charts when the deal closes.
Kips Bay Court in New York City

Kips Bay Court in New York City

New YorkThe Blackstone Group is finalizing a deal to acquire Kips Bay Court, an 894-unit market-rate rental property owned since 1975 by affordable housing developer Phipps Houses. The purchase price for the eight-building complex between 26th and 29th streets east of Second Avenue is $620 million, or almost $700,000 per unit. The acquisition would be the largest multifamily transaction in New York City in 2016.

The largest closed multifamily deal up to this point has been Fairstead Capital‘s $315 million purchase of Savoy Park in July. Other sizable pending multifamily deals include Rockpoint Group‘s purchase of 63 and 67 Wall St. for $430 million and Isaac Kassirer’s acquisition of the Dawnay Day portfolio for more than $350 million.

Blackstone made the two biggest multifamily acquisitions of 2015: Stuyvesant Town-Peter Cooper Village with Ivanhoe Cambridge for $5.3 billion and the Caiola portfolio with Fairstead Capital for $690 million.

Developed by Phipps Houses at 520 Second Ave., Kips Bay Court features studio, one-, two and three-bedroom apartments. Rental rates this year have ranged from $2,720 to $6,507 per month. Common-area amenities include a fitness center, a tennis court, a children’s playroom, laundry facilities, a rooftop terrace, covered parking, controlled access and a doorman.

Individual residences feature central air conditioning and high-speed Internet access. The mixed-use building features 19,550 square feet of retail space.

The property was earlier called Henry Phipps Plaza West. It was built under the state’s Mitchell-Lama housing program, which caps profits and rents, but left the program more than 10 years ago. The complex is currently entirely market rate.

Forty percent of the units in Kips Bay Court are occupied by Section 8 tenants. But those federally subsidized apartments deliver rents that are nearly market rate.

A CBRE team overseen by Darcy Stacom commenced marketing the property for sale earlier in the summer. An offering memorandum stated the projected net operating income for 2017 is about $23.9 million, but could surge to as much as $41.6 million per year within 10 years.

The number of Section 8 apartments has fallen from 651 to 344 in the past dozen years. The offering memo forecasts that just 69 could remain by 2027, a number that represents just 8 percent of the complex.

Image courtesy of Kips Bay Court