Developer Hershy Silberstein has sealed $102 million of construction financing to execute an office-to-residential conversion of the Press Building in Manhattan\u2019s Hell\u2019s Kitchen, Commercial Observer can first report.<\/p>\n
S3 Capital<\/a> supplied the loan for Silberstein\u2019s planned transformation of 311 West 43rd Street in partnership with his general contractor firm Blue Sky Builders<\/a> into 160 apartments and 39,712 rentable square feet of commercial space. The deal, which closed Monday, marks the first office-to-resi deal for S3 after originating a number of multifamily construction loans across the country.\u00a0<\/p>\n SEE ALSO: Setting the Pace: A Day in the Life of North Bridge\u2019s John Lewis<\/a><\/p>\n \u201cWe\u2019ve underwritten many office-to-residential conversions over the years, but this is the first where everything aligned,\u201d Shawn Safdie, head of origination at S3. \u201cIt starts with the sponsorship group, who we have developed a deep repeat relationship with.\u201d<\/p>\n Safdie added that the transaction was attractive due to the property\u2019s location in \u201cone of Manhattan\u2019s most supply-constrained submarkets\u201d coupled with \u201ca building layout that\u2019s ideal for a conversion project.\u201d\u00a0<\/p>\n Located west of Times Square on 43rd Street between Eighth and Ninth avenues in Midtown West, the 15-story Press Building was acquired by DivcoWest Real Estate Investments from Billy Macklowe\u2019s William Macklowe Company in December 2018 for $131 million, CO previously reported<\/a>. WeWork signed<\/a> a 66,000 square-foot lease in the 168,299-gross-square-foot office building in late 2016 before vacating<\/a> the space along with 39 other underperforming locations in late 2022. Japanese restaurant and lounge Fushimi currently leases the ground-floor space.<\/p>\n David Werner, who has executed a number of office-to-resi conversions around Manhattan, was in contract<\/a> to purchase 311 West 43rd Street for around $40 million in April, according to The Real Deal. The deal never went through, however, and Silberstein recently acquired the property for an undisclosed purchase price, according to S3.\u00a0<\/p>\n The Midtown West area of Manhattan has delivered 4.5 percent annual rent growth over the last five years with a vacancy rate of 3.5 percent in that period, according to S3. The conversion will benefit from the 467-m tax abatement program since 25 percent of the units will be set aside for people earning an average of 80 percent of area median income.<\/p>\n \u201cWe have always believed that public-private partnerships are the best way to stimulate housing development,\u201d Robert Schwartz, managing principal at S3 Capital, said in a statement. \u201cThe 467-m program is a pragmatic solution that is directly alleviating the shortage of rental units here in Manhattan.\u201d<\/p>\n Meir Landau, chief financial officer at Blue Sky Builders, said in a statement S3 Capital was well suited for the \u201ctime sensitive\u201d transaction\u201d given its experience with construction financing and \u201ctheir flexibility and speed to close.\u201d<\/p>\n