Annaly, Blackstone Kick Off New Relationship with Gusto

Will a new institutional purchase offer opportunity for growth?

250 W.19th St.,Manhattan

By Gail Kalinoski, Contributing Editor

Annaly Commercial Real Estate Group, a wholly-owned subsidiary of Annaly Capital Management, Inc., provided $592 million in financing for Blackstone and Fairstead Capital’s purchase of a 24-building multi-family portfolio in New York City.

An affiliate of Blackstone Real Estate Partners VIII and Fairstead Capital recently announced they had acquired the portfolio of nearly 1,000 units in the Chelsea and Upper East Side neighborhoods of Manhattan for $690 million. In one of the largest individual residential asset sales in New York in a decade, the joint venture purchased the mid-rise properties from the Caiola family. The buildings were managed by B&L Management Co., which specializes in developing and managing multi-family buildings in New York City. The firm was founded by the late Benny Caiola in 1980 and is now owned by his wife and four children.

It was the first deal Annaly has made with Blackstone, a private equity giant with vast real estate holdings. Annaly said it capitalized on Blackstone’s strong relationship with the institutional commercial real estate origination team that recently joined Annaly from GE Capital Real Estate. Annaly announced in May that Jeffrey Thompson and his team was joining the firm to expand its commercial real estate group and institutional origination platform. Thompson now serves as co-head of Annaly’s commercial real estate platform along with Annaly executives Michael Quinn and Robert Restrick.

“This transaction is another example of the progress we are making in growing our commercial real estate business through high quality institutional relationships,” Kevin Keyes, president & incoming CEO of Annaly, said in a prepared statement. “We will continue to utilize our balance sheet as a strategic advantage as we built out our commercial real estate platform.”

“While this is our first commercial transaction with Annaly, we look forward to growing the relationship based on the quality of execution,” Michael Lascher, a managing director in the Real Estate group and the Global Head of Real Estate Debt Capital Markets of Blackstone, added in a prepared statement.

The Commercial Observer reported Meridian Capital Group Senior Managing Director Drew Anderman arranged the five-year loan, noting it has a Libor-based floating rate and interest-only payments. The report was confirmed to the publication by Will Blodgett, a principal at Fairstead, which is a real estate investment and management firm specializing in New York City multi-family properties.

The new owners plan to upgrade the portfolio by making improvements to the common areas, adding new amenities and renovating apartments, which were built in the 1970s and 1980s. The largest building in the portfolio contains 200 units and is located at 250 W. 19th St., according to a Bloomberg report.

Wilkie Farr & Gallagher L.L.P. represented B&L Management Co. in the transaction. The deal was handled by partners Gordon Caplan and David Drewes and associates Justin Elliott and Jacob Moss.

Vacancy levels in New York City apartment buildings are at historic levels with nearly non-existent availability in all five boroughs, according to Marcus & Millichap’s New York Apartment Research Report for the Third Quarter, 2015. The report noted the demand has spurred multi-family development with completion dates scheduled through 2018 and has also seen investors taking advantage of the low interest rates to buy and current owners to refinance.

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