Post Properties Exits NYC, Sells 2 M-F Assets for $270M

By Barbra Murray, Contributing Editor

Post Properties Inc. has bid adieu to the Big Apple with the disposition of Post Luminaria and Post Toscana, two luxury apartment communities featuring an aggregate 337 units in Manhattan. The multi-family REIT sold the assets to Magnum Real Estate Group for $270 million.

Post Luminaria

Times have changed. More than a decade ago, Post spent nearly $52 million to build Luminaria and $97 million to open Toscana.

“We believe those assets are worth more in a broadly marketed auction than they are in a public REIT portfolio and it’s good capital allocation to transact in this environment,” David P. Stockert, CEO of Post, said during the company’s first quarter 2014 earnings call in April. Post relied on Eastdil Secured to market the properties.

Post developed Luminaria and Toscana in a joint venture partnership with The Clarett Group in 2002 and 2003, respectively. Carrying the address of 385 First Ave. in Gramercy, the 20-story Post Luminaria, in which Post owned a 68 percent stake in a consolidated joint venture, features 138 residences and 9,400 square feet of retail space. Toscana sits on the Upper East Side at 389 E. 89th St., offering 199 units and 11,700 square feet of ground-level retail space in a 33-story tower.

“We think the timing of the sale is right, taking advantage of the favorable climate for capital and the resulting high demand for residential assets,” added during the earnings call. “It’s also advantageous to be selling now that the 421a tax abatement and associated rent restrictions are set to expire in roughly one year. And with the assets owned it’ll be simple. In that way, the assets are attractive to a broad pool of potential apartment and condo conversion buyers.”

Stockert hit the nail on the head; Magnum, pointing to the June 2015 expiration of the rent regulations, has announced that it plans to reposition Luminaria and Toscana as condominiums. It’s good timing, as the Manhattan condo market is thriving. According to a second-quarter report by Douglas Elliman Real Estate, year-over-year median condo prices increased 5.2 percent, closed sales increased 6.3 percent, the pace of the absorption rate went on the rise and the marketing time declined–all in the face of an inventory increase of 18 percent.

Post used a portion of the net proceeds from the sale of Luminaria and Toscana to prepay approximately $82.6 million of secured mortgage debt on the properties and $13 million in related prepayment premiums. And the REIT pocketed a total of $141 million of net cash proceeds on the deal. As noted in Post’s second quarter earnings report, the dispositions were part of the company’s strategy of recycling investment capital to finance investment and development of apartment communities.