Black Spruce records $837M purchase of JDS Developments’ American Copper rental in Murray Hill

Black Spruce Management through the entity Ah American Copper LLC paid $837 million to JDS Development Group through the entity 616 First Avenue LLC for 761-unit American Copper Buildings at 616-626 First Avenue in Murray Hill, Manhattan.
The deal closed on March 1, 2022 and was recorded on March 14, 2022. The property has 922,828 square feet of built space according to PincusCo analysis of city data. The sale price per built square foot is $906 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)
The seller bought the property on February 4, 2013, for $172.1 million. The signatory for JDS Development Group was Michael Stern. The signatory for Black Spruce Management was Joshua Gotlib. Bloomberg first reported on the sale in December when the property went into contract. It reported the brokers were Adam Spies and Doug Harmon of Cushman & Wakefield.

The acquisition was financed with a $611.5 million senior loan originated by JPMorgan Chase.

Prior sales and revenue

Prior to this transaction, PincusCo has records that the buyer Black Spruce Management purchased 65 properties in 48 transactions for a total of $442.8 million and sold one property in one transaction for a total of $7.9 million over the past 24 months.
The seller JDS Development Group had not purchased any other properties and sold two properties in two transactions for a total of $22.5 million over the same time period. The former owners according to the Department of Housing Preservation and Development includes Daniel Stern, head officer and John Macgowan, officer. The business entities are Firstservice Residential and 616 First Avenue Llc. The 922,828-square-foot property generated revenue of $49.8 million or $54 per square foot, according to the most recent income and expense figures.

The property

The 616-626 First Avenue parcel has frontage of 197 feet and is 192 feet deep with a total lot size of 45,190 square feet. The zoning is C4-6 which allows for up to 3.4 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The property has a 421A exemption that started in 2019 and expires in 2039. The city-designated market value for the property in 2022 is $295.2 million.The property has a city-determined energy rating of 36 out of 100.

Violations and lawsuits

The property was involved in one lawsuit and zero bankruptcies over the past two years. The suit was a $2 million money judgment concerning a construction cost filed on September 29, 2021, by D&D Electric Construction Company against JDS Development Group. In addition, according to city public data, the property has received four housing violations in the last year.

Development

For the tax lot building, it received its initial certificate of occupancy on November 25, 2016. The project was developed by Michael Stern with plans filed April 2, 2013 and permitted December 17, 2014.

The neighborhood

In Murray Hill, the majority, or 66 percent of the 15.8 million square feet of built space are residential elevator buildings, with office buildings next occupying 16 percent of the space. In sales, Murray Hill has had very little sales volume relative to other neighborhoods with $89.5 million in sales volume in the last two years. For development, Murray Hill has had very little major development activity relative to other neighborhoods.It had 95,534 square feet of commercial and multi-family construction under development in the last two years, which represents 0.60 percent of the neighborhood’s built space.

The block

The majority, or 91 percent of the 1 million square feet of built space are residential elevator buildings, with specialty buildings next occupying 9 percent of the space.

The buyer

The PincusCo database currently indicates that Black Spruce Management owned at least 111 commercial properties with 2,185,172 square feet and a city-determined market value of $375.7 million. (Market value is typically about 50% of actual value.) The portfolio has $346.8 million in debt, with top three lenders as Signature Bank, New York Community Bank, and Arbor Realty Trust respectively. Within the portfolio, the bulk, or 55 percent of the 2,185,172 square feet of built space are residential elevator properties, with residential walkup properties next occupying 43 percent of the space. The bulk, or 81 percent of the built space, is in Manhattan, with Queens next at 18 percent of the space.

Surrounding

PincusCo has not identified any commercial real estate items of interest within a 400-foot radius of 616-626 First Avenue that occurred over the past 24 months.

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