3eleven, a recently constructed, nearly 1,000-unit multifamily building next to Hudson Yards, could soon land $560M in new financing, another sign that debt markets have opened up for prime New York City properties.
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The vast majority — $500M — of the financing, originated by Goldman Sachs and Wells Fargo, is being sold as a single-asset CMBS loan, according to a Kroll Bond Rating Agency report.
Goldman is providing 60% of the debt and Wells Fargo is chipping in the other 40% of the mortgage, which would value the building at $930M, or $991K per unit.
The loan, along with $60M of mezzanine debt, allows developers Douglaston Development and Ares Management to retire the project's $415M construction loan, as well as pay closing costs, fund reserves for outstanding landlord obligations and a $4.5M earnout escrow. The joint venture will also return $115.5M of equity to the sponsors, according to KBRA's analysis.
The underlying property is a 60-story tower that sits on the border of the Hudson Yards and Chelsea at 311 11th Ave. It has 60K SF of amenity space, including a fitness center, music rooms, pet care and grooming facilities, an outdoor pool and coworking space.
The building has 938 units of housing, of which 235 are affordable under the Mandatory Inclusionary Housing and Affordable New York housing programs. Ten percent of the units are restricted to those making up to 40% of the area median income, another 10% are income-restricted at 60% AMI and 5% are capped at 120% AMI.
The residential portion of the property delivered last May and was 98% leased as of June. The base has 12K SF of retail space, which is 94% leased to a Heavenly Market and Deli, according to KBRA. It also has 186 parking spaces.
The single-asset, single-borrower loan would trade as NYC Trust 2024-3ELV. It would be broken into five classes, including a $273M Class A, which KBRA expects to give a AAA rating. The two-year floating rate loan also includes three one-year extensions. KBRA pegs its initial interest rate at just over 6%, and Douglaston and Ares are required to buy a rate cap.
The loan is expected to close July 26. Spokespeople for Ares and Douglaston declined to comment.
The developers are also subject to a 99-year ground lease, which they signed in November 2018. Douglaston and Ares are paying $7.8M a year, which is set to increase by 12% in 2026 and 8% in 2026.
Douglaston rezoned the site from manufacturing to residential, and it was originally proposed as a 1.1M SF, two-tower project alongside 606 West 30th St. On a tour of the building last year, Douglaston executives told Bisnow they were marketing the building to the workers at Google, Amazon, BlackRock and L’Oreal, all of which have large offices in Hudson Yards a block away.
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