Silverback Development is partnering with a private family to build a $100 million condominium project in Gramercy Park.
Josh Schuster, who founded Silverback last year, said the real estate investment firm and the site’s current owner plan to erect an 80,000-square-foot, 145-foot tall, 13-story building that will house about 65 units at East 21st Street and Second Avenue. The partners are aiming to break ground on the building next year and finish by 2020 at an anticipated cost of $100 million and a sellout of $150 million.
Three-quarters of the units will be priced at less than $2.5 million, Schuster said, in order to try to cater to price-sensitive buyers, as the market for high-end apartments has weakened amid growing supply.
Another financial cushion comes thanks to the below-market cost of the land. Schuster’s partner, a family he said wished to remain unnamed, purchased 359 Second Ave. in 2013 and the neighboring buildings 351 and 353-357 Second Ave. in 2015 when prices were lower. Together they paid $32.75 million for the three buildings, according to city records.
The partnership also purchased about 8,200 square feet of air rights from neighboring properties. Schuster declined to reveal the exact sum paid for the additional development rights but said they cost between $2.5 million and $3.3 million.
Silverback plans to pump enough money into the project to help it secure a construction loan, then manage the design and development of the building and sales of the units. In return it will get a share of the projected $50 million of profits.
“We’re seeing land prices that still haven’t dropped, construction prices that remain high and no tax incentives for developers,” Schuster said. “Coupled with that you have depreciating rents and condo prices and slower sales. But through this joint venture we’ve created an attractive deal structure.”
Crain’s has identified partnering with landowners who bought property at lower prices as a good moneymaking strategy for investors this year.
The bulk of the new building will feature one-bedroom and studio units, but it will be laid out to allow Silverback to combine the units during construction if the market for bigger, more expensive apartments rebounds, Schuster said.
“We’re going to build the property so the layouts can be adjusted,” he said. “We’re not sure the larger units will come back, but we want to be flexible if that’s what is in demand at the time of delivery.”