Crain's

Chelsea apt. building fetches $37M

January 4, 2013

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A seller’s desire to get a deal done before feared tax hikes took effect in the new year greased the rails for a speedy 45-day transaction. The off-market sale to Naftali Group was completed at a mere $500 per square foot.
The best real estate acquisitions in the city often get done under the radar. Just ask the Naftali Group, a real estate investment firm that recently paid $37 million for 245-259 W. 25th St., a six-story rental apartment building in Chelsea, in an off-market deal with the Haruvi family.

The price works out to just under $500 per square foot for the 75,000-square-foot building, far below the level that apartments typically trade at in Chelsea.

“We think $500 a foot is a very attractive price per pound,” said Victor Sigoura, a Naftali Group executive. “Condos trade in the area for $2,000 a foot.”

Mr. Sigoura said the firm often trolls neighborhoods where it is interested in investing and approaches landlords with unsolicited offers in the hope of quietly striking a deal without the usual escalating bids of an open auction.

What contributed to the discount in this case was the Naftali Group’s willingness to fast-track the deal in order to get it done before the end of 2012, a deadline that allowed the Haruvi family to avoid having to pay higher tax rates effective in the New Year.

“They were incentivized by the tax changes and that helped get us the price we got,” Mr. Sigoura said. “We moved very quickly, we entered into a contract and closed from start to finish in 45 days.”

The new owner plans to pour over $1 million in renovations, including work on the lobby and common corridors, in the property which is half a block west of the Chelsea outpost of upscale grocer, Whole Foods, a popular neighborhood amenity. Twenty two of the building’s 68 apartments are rent stabilized. Mr. Sigoura said his company plans to continue to operate the property as a rental for the foreseeable future.

“We think this a street where rents will continue to rise,” Mr. Sigoura said.