Sponsor’s - The Real Deal · 2015. 12. 2. · Sponsor Equity (10%) $11,082,400 $37.23 $36,576 3.50% Total Sources $316,640,000 $1,064 $1,045,017 100.00% Uses of Capital Amount Per

JLL

This is a confidential memorandum intended solely for your limited use and benefit in determining whether you desire to express any further interest in the financing of 160 East 48th Street (“The Buchanan” or the “Property”) This memorandum has been reviewed by representatives of Madison Realty Capital (the “Sponsor”). It contains selected information pertaining to the Property and does not purport to be all-inclusive or to contain all of the information that prospective investors may desire. It should be noted that all financial projections are provided for general reference purposes only in that they are based on assumptions relating to the general economy, competition, and other factors beyond the control of Sponsor and, therefore, are subject to material variation. Additional information and an opportunity to inspect the Property and plans will be made available to interested and qualified investors. Neither Sponsor, Jones Lang LaSalle, nor any of their respective officers nor employees have made any representation or warranty, expressed or implied, as to the accuracy or completeness of this memorandum or any of its contents, and no legal commitments or obligations shall arise by reason of this memorandum or any of its contents.

Sponsor expressly reserves the right, at its sole discretion, to reject any or all expressions of interest or offers to invest in the Property and/or to terminate discussions with any entity at any time with or without notice. Sponsor shall have no legal commitment or obligation to any entity reviewing this memorandum or making an offer to invest in the Property unless and until a written agreement satisfactory to Sponsor has been fully executed, delivered, and approved by Sponsor and any conditions to Sponsor’s obligations thereunder have been satisfied or waived. By receipt of this memorandum, you agree that this memorandum and its contents are of a confidential nature, that you will hold and treat it in the strictest confidence, and that you will not disclose this memorandum or any of its contents to any other entity without the prior written authorization of Sponsor, nor will you use this memorandum or any of its contents in any fashion or manner detrimental to the interest of Sponsor or Jones Lang LaSalle. It is essential that all parties to real estate transactions be aware of the health, liability and economic impact of environmental factors on real estate. Jones Lang LaSalle does not conduct investigations or analyses of environmental matters and, accordingly, urges its clients to retain qualified environmental professionals to determine whether hazardous or toxic wastes or substances (such as asbestos, PCBs, and other contaminants or petrochemical products stored in underground tanks) or other undesirable materials or conditions are present at the Property and, if so, whether any health danger or other liability exists. Such substances may have been used in the construction or operation of buildings or may be present as a result of previous activities at the Property. Various laws and regulations have been enacted at the federal, state and local levels dealing with the use, storage, handling, removal, transport, and disposal of toxic or hazardous wastes and substances. Depending upon past, current, and proposed uses of the Property, it may be prudent to retain an environmental expert to conduct a site investigation and/or building inspection. If such substances exist or are contemplated to be used at the Property, special governmental approvals or permits may be required. In addition, the cost of removal and disposal of such materials may be substantial. Consequently, legal counsel and technical experts should be consulted where these substances are or may be present.

No representation or warranty is being made by Sponsor or Jones Lang LaSalle with respect to the Property’s compliance with any applicable statutes, laws, ordinances, rules, regulations, requirements and/or codes (collectively, the “Laws”). It is expressly understood that it is the responsibility of any prospective investor to investigate whether or not the Property is in compliance with the Laws and such prospective investor will be relying strictly and solely upon its own inspections and examinations and the advice and counsel of its own consultants, agents, legal counsel and officers with respect to the condition of the Property and its compliance with the Laws.

Disclaimer 2

THE BUCHANAN

NEW YORK, NY

-

VALUE-ADD JOINT VENTURE EQUITY OPPORTUNITY

IN MANHATTAN’S MIDTOWN EAST NEIGHBORHOOD

Executive Summary

Sponsor Overview

Property Overview

Project Overview

Market Overview

Appendix: Floor Plans

5

14

21

26

33

49

5

6 JLL Section 1: Executive summary

JLL, engaged as exclusive advisor to Madison Realty Capital (“MRC” or the “Sponsor”), is pleased to request

proposals for $99.7 million in joint venture equity to facilitate the acquisition and repositioning of The Buchanan

(the “Property”), a 16-story, 289 unit pre-war rental building that includes four office suites and approximately

13,648 square feet of prime retail space. The Property is located on Third Avenue, between 47th and 48th Street in

Manhattan’s Midtown East neighborhood.

Built in 1928 and owned by a family trust since 1959, the Property is a 297,703 gross square foot mixed-use complex consisting of five

separate interconnected mid-rise towers surrounding a large garden courtyard. The Property contains 289 residential units, 69% of

which are market rate, 25% rent stabilized, and 6% rent controlled. The unit mix consists of 31 large studios (437 square feet), 197

one bedroom units (752 square feet), 60 two bedroom units (1,205 square feet), and one three bedroom unit (1,533 square feet) with

ceiling heights of approximately 9’3’’ and outdoor terraces for penthouse units. The Property also includes 13,648 square feet of retail

space, 2,524 square feet of office space and 139,000 square feet of excess development rights.

Given existing inefficiencies such as oversized unit layouts, elevated operating expense levels, and in-place rents well below market

rates, the investment presents an opportunity to acquire an underperforming multi-family mixed-use Property located within a highly

desirable and liquid submarket with significant growth potential. Following the acquisition, the Sponsor will implement a detailed

business plan that involves the following:

• Renovating and reconfiguring 100% of the market rate units as they become vacant

• Pursuing 51 tenant buyouts of rent stabilized units (targeting 56% of the 91 rent regulated units over a 3 year period), and then

renovating and reconfiguring each unit

• Implementing a building wide capital improvement plan to enhance operating efficiencies and marketability of the Property

• Repositioning the existing office space into retail

• Re-leasing the existing retail space at market

• Conducting a feasibility study to assess further development potential or explore the possibility of a sale of the excess air rights

The residential space is currently 93% occupied and is expected to be 87% occupied at close as free market units roll during the

contract period, allowing the Sponsor to immediately begin renovations on 37 units

Property Snapshot

Address: 160 East 48th Street

Location: Midtown East,

New York, NY

Floors: 16

Residential Units: 289

Fair Market Units: 198

Rent Stabilized Units: 73

Rent Controlled Units: 18

Commercial Units: 14

Property Gross SF: 297,703

Commercial Net SF*: 16,172

*Includes 13,648 SF of retail and 2,524 SF of office

7 JLL



The Sponsor is requesting a $99.7 million joint-venture equity investment with a five year target hold. The

limited partner will be contributing 90% of the required equity.

Equity Request

Closing Date 2/11/2016

Closing Date Extension Option 3/14/16

Total Costs $316,640,000

Equity Request $99,741,600

Investment Ratio 90% / 10%

Investment Term 5 Years

Sources & Uses

Sources of Capital Amount Per GSF Per Unit % of Total

Debt $205,816,000 $691.35 $679,261 65.00%

Equity $110,824,000 $372.26 $365,756 35.00%

LP Equity (90%) $99,741,600 $335.04 $329,180 31.50%

Sponsor Equity (10%) $11,082,400 $37.23 $36,576 3.50%

Total Sources $316,640,000 $1,064 $1,045,017 100.00%

Uses of Capital Amount Per GSF Per Unit % of Total

Purchase Price $270,000,000 $906.94 $891,089 85.27%

Closing Costs $1,620,000 $5.42 $5,347 0.51%

Sponsor Acquisiton Fee $4,050,000 $13.60 $13,366 1.28%

Unit Renovations $18,000,000 $60.46 $59,406 5.68%

General CapEx $3,000,000 $10.08 $9,901 0.95%

Contingency (5%) $1,100,000 $3.69 $3,630 0.35%

Soft Costs $3,570,000 $11.99 $11,782 1.13%

Tenant Buyout Costs $4,180,000 $14.02 $13,795 1.32%

Financing Costs $9,020,000 $30.30 $29,769 2.85%

Interest Reserve $2,100,000 $7.05 $6,931 0.66%

Total Uses $316,640,000 $1,064 $1,045,017 100.00%

8 JLL



Exit Analysis

2021 EGI $25,588,189 $25,588,189 $25,588,189 25,588,189 25,588,189

(Less: Operating Expenses) ($6,357,376) ($6,357,376) ($6,357,376) ($6,357,376) ($6,357,376)

2021 NOI $19,230,812 $19,230,812 $19,230,812 $19,230,812 $19,230,812

Exit Cap Rate 3.75% 4.00% 4.25% 4.50% 4.75%

Gross Sales Proceeds $512,822,000 $480,770,000 $452,490,000 $427,351,000 $404,859,000

(Less: Sales Costs) ($20,512,880) ($19,230,800) ($18,099,600) ($17,094,040) ($16,194,360)

Net Sales Proceeds $492,309,120 $461,539,200 $434,390,400 $410,256,960 $388,664,640

Net CF $38,801,141 $38,801,141 $38,801,141 $38,801,141 $38,801,141

Less: Senior Debt Repayment ($205,959,889) ($205,959,889) ($205,959,889) ($205,959,889) ($205,959,889)

Less: Equity ($110,810,000) ($110,810,000) ($110,810,000) ($110,810,000) ($110,810,000)

Net Profit

Net Profit $214,340,371 $183,570,451 $156,421,651 $132,288,211 $110,695,891

Deal Level IRR 25.2% 22.8% 20.4% 18.1% 15.9%

Deal Level Multiple 2.93x 2.66x 2.41x 2.19x 2.00x

9 JLL


Section 1: Executive summary

Project Budget

Acquisition Costs Amount Per GSF Per Unit % of Total

Purchase price $270,000,000 $906.94 $891,089 85.27%

Closing Costs $5,665,000 $19.03 $18,696 1.79%

Total Acquisition Costs $275,665,000 $925.97 $909,785 87.06%

Hard Costs

General Capex $3,000,000 $10.08 $9,901 0.95%

Renovations $18,000,000 $60.46 $59,406 5.68%

Contingency $1,100,000 $3.69 $3,630 0.35%

Total Hard Costs $22,100,000 $74.24 $72,937 6.98%

Soft Costs

Legal & Prof. Fees $150,000 $0.50 $495.05 0.05%

Architects & Engineering $280,000 $0.95 $924 0.09%

Project Manager $250,000 $0.84 $825 0.08%

General Overhead $100,000 $0.34 $330 0.03%

Inspections & Testing $70,000 $0.24 $231 0.02%

Marketing $100,000 $0.34 $330 0.03%

Interior Design $40,000 $0.12 $132 0.01%

Permits & Fees/Expeditor $110,000 $0.38 $363 0.04%

Developer Fee $1,110,000 $3.71 $3,663 0.35%

Violations $30,000 $0.10 $99 0.01%

Leasing Costs $1,230,000 $4.12 $4,059 0.39%

Contingency $110,000 $0.37 $363 0.03%

Total Soft Costs $3,580,000 $12.01 $11,815 1.13%

0.00%

Buyout Costs $4,175,000 $14.02 $13,779 1.32%

Financing Costs

Lender Legal $150,000 $0.50 $495 0.05%

Title Insurance $410,000 $1.38 $1,353 0.13%

Lender Origination Fee $2,060,000 $6.92 $6,799 0.65%

Debt & Equity Brokerage Fee $2,060,000 $6.92 $6,799 0.65%

Mortgage Recording Tax $4,340,000 $14.58 $14,323 1.37%

Interest Reserve $2,100,000 $7.05 $6,931 0.66%

Total Financing Costs $11,120,000 $37.35 $36,700 3.51%

Total Costs $316,640,000 $1,064 $1,045,017 100.00%

10 JLL


Section 1: Executive summary

The Sponsor plans to close on the asset in Q1 2016 and sell the Property in Q1 2021 upon full recognition of operating

expense savings and revenue growth. The Sponsor anticipates the Property will generate an NOI of approximately $19.2

million at exit, representing an 148% increase over in-place NOI.

In Place

Year Ending 2016 2017 2018 2019 2020 2021

Project Year 0 1 2 3 4 5

Number of Buyouts 0 16 17 18 - -

Number of FM Renovations 0 196 2 - - -

Total Units Renovated 0 212 231 249 249 249

Revenues

Residential Rental Income $11,595,135 $10,254,585 $17,676,803 $19,653,385 $21,025,282 $22,272,460

Commercial Rental Income $1,999,819 $1,925,486 $2,036,839 $2,630,436 $3,562,527 $3,747,776

Reimbursable Income $180,678 $180,678 $148,907 $151,485 $202,727 $214,679

Other Income $30,000 $40,000 $154,500 $159,135 $163,909 $168,826

Total Gross Income $13,805,631 $12,400,749 $20,017,050 $22,594,442 $24,954,445 $26,403,742

Residential Vacancy ($276,113) $0 $0 ($308,062) ($56,746) ($445,449)

Commercial Vacancy $0 $0 $0 $0 ($76,959) ($106,066)

Collection Loss $0 ($124,007) ($200,170) ($225,944) ($249,544) ($264,037)

Total Effective Gross Income $13,529,519 $12,276,742 $19,816,879 $22,060,435 $24,571,195 $25,588,189

Operating Expenses

Real Estate Taxes ($2,898,263) ($3,031,960) ($3,131,846) ($3,220,307) ($3,497,269) ($3,781,340)

Insurance ($141,873) ($141,873) ($146,129) ($150,513) ($155,029) ($159,680)

Fuel / Gas / Steam ($307,263) ($307,263) ($316,480) ($325,975) ($335,754) ($345,827)

Electric ($329,981) ($229,981) ($156,880) ($111,586) ($114,934) ($118,382)

Water & Sewer ($208,746) ($208,746) ($215,008) ($221,459) ($228,102) ($234,945)

Payroll & Burden ($1,262,267) ($1,262,267) ($1,300,135) ($821,131) ($459,502) ($473,287)

Repairs & Maintenance ($151,500) ($151,500) ($156,045) ($160,726) ($165,548) ($170,515)

General & Administrative ($37,875) ($37,875) ($39,011) ($40,182) ($41,387) ($42,629)

Reserves ($60,600) ($60,600) ($62,418) ($64,291) ($66,219) ($68,206)

Legal / Professional ($65,000) ($60,600) ($62,418) ($64,291) ($66,219) ($68,206)

Elevator ($75,000) ($75,000) ($77,250) ($79,568) ($81,955) ($84,413)

Other ($37,584) ($37,584) ($38,711) ($39,873) ($41,069) ($42,301)

Management ($202,118) ($202,118) ($594,506) ($661,813) ($737,136) ($767,646)

Total Operating Expenses ($5,778,070) ($5,807,367) ($6,296,840) ($5,961,713) ($5,990,123) ($6,357,376)

Net Operating Income $7,751,449 $6,469,374 $13,520,039 $16,098,722 $18,581,072 $19,230,812

Yield On Cost 2.9% 2.0% 4.3% 5.1% 5.9% 6.1%

Upside Through Unit Reconfigurations

The Property’s apartments are not currently configured to

maximize rental income, creating an opportunity to significantly

increase rents by adding bedrooms across each unit line. While

three bedroom units across the Property’s competitive set are on

average 258 square feet larger than the Property’s two bedroom

units, they command rents in excess of $9,300 per month,

representing a 36% pricing premium to the Property’s largest units.

This same rental premium also exists between the Property’s one

bedroom units and comparable two bedroom units in the market

which are on average only 76 square feet larger. With a target

demographic of young families and professionals seeking two and

three bedroom apartments that offer close proximity to the Midtown

office district, the UN headquarters and Grand Central, there exists

an excellent opportunity to capitalize on these pricing premiums

without incurring major renovation costs.

Immediate Commencement of Renovations

There will be 37 vacant residential units at closing, thereby

allowing the Sponsor to immediately commence renovations. All

198 market rate units will roll within the first 18 months post

closing. In addition, the Sponsor plans to reposition 2,524 square

feet of` office space into retail that is either vacant or occupied by

month-to-month leases. Lastly, there is 1,200 square feet of retail

space that is currently occupied by month-to-month tenants at

below market rent levels.

Attractive Project Returns

The Project is expected to generate equity returns of $156.4

million upon a sale in 2021. This corresponds to a deal level IRR

of 20.4%, a yield on cost of 6.1%, and an equity multiple of

2.41x.

Favorable Rent Restricted Rental Levels

On average, “rent stabilized” tenants currently pay $2,470 a month

for two bedroom units and $1,931 a month for one bedroom units.

With an average of over $70,000 of renovations planned per unit,

the majority of these units will cross the legal rent threshold,

allowing the Sponsor to charge market rent one year from

renovation. Furthermore, “rent controlled” tenants currently pay

$3,013 a month for two bedroom units and $2,018 a month for one

bedroom units, which is even higher than the in place rent

stabilized tenants. With the Sponsor only planning to execute

buyout agreements with 56% of the rent stabilized tenants, these

extremely high in-place rents significantly improve the probabilities

of successfully buying out tenants quickly.

Relevant Sponsorship Experience

The Property will benefit from an experienced Sponsor who has

completed over 300 debt and equity transactions with a face value

of $4.0 billion in the multifamily, retail, office and light industrial

sectors. In the last five years, the Sponsor has acquired in excess

of $1.1 billion worth of real estate. The Sponsor has a proven track

record of successfully executing similar business plans throughout

a number of investment opportunities, more specifically, executing

a strategy almost identical to that of the Project. 361 East 50th

Street, is a mixed-use elevator building located a few blocks from

the Property. The Sponsor has fully renovated and reconfigured 28

out of 44 apartments and increased the residential rent roll by 64%

within the first year of ownership.

Additional Value From Air Rights

The Property has approximately 139,000 square feet of un-used

development rights that have not been monetized in the

investment return analysis.

Section 1: Executive summary JLL 11

Prime Retail

The Property is perfectly positioned in Midtown East, with nearly

200’ of frontage along Third Avenue plus 145’ of frontage on both

47th and 48th Street. As a result of the neighborhood’s established

and sophisticated residential population, there are a plethora of

convenient shopping and dining options. Second and Third

Avenues in the immediate vicinity of the Buchanan are populated

with a wide range of supermarkets, pharmacies, restaurants and

nightclubs. Some of Manhattan’s most celebrated gourmet

restaurants are located in the neighborhood, catering to the

discerning palates of the international community. The Property’s

retail component presents a reliable income stream augmented

with near-term upside potential. The Property’s retailers enjoy a

significant captive demand base while tenants are provided with

the convenience of in-house retail. All of the Property’s retail suites

are located along high-volume Third Avenue, with the exception of

The Sea Fire Grill, which is located along East 48th Street.

12 Section 1: Executive summary JLL

Booming Rental Market

The Property will greatly benefit from the positive rental market

fundamentals and the limited amount of newly renovated units in

Midtown East. The East Side of Manhattan has historically

maintained value due to its long-established reputation and

convenience. Rents remain strong within the area as exemplified

by an average increase of 6% year-over-year for 1-bedroom units.

With a current vacancy rate of just 1.54%, Midtown East is poised

for additional growth in prevailing rental rates. Significant barriers

to entry will preserve this acutely low vacancy rate, with high

construction cost, strict zoning regulations, a lack of developable

sites, and soaring land costs all contributing to the dearth of new

rental development. Rents for Manhattan as a whole are also

performing exceptionally well. In July 2015 median Manhattan

rental prices were the second highest on record.

Primary Residential Location

The Property enjoys one of the most sought after residential

locations in all of Manhattan. Located in the Turtle Bay

neighborhood in Midtown East, the Property is proximate to

various upscale and affordable eateries, small shops, bars, parks,

as well as the United Nation Headquarters. Furthermore, the

Property is conveniently located blocks from Grand Central

Terminal, providing residents with easy access to neighboring

boroughs and other areas of Manhattan. The median household

income in Midtown East is $122,136, on par with Manhattan’s most

exclusive neighborhoods. This elite population includes a vital mix

of young professionals, working diplomats, empty nesters and

families who enjoy a favorable combination of convenience and

international flavor provided by the neighborhood.

13 JLL


The offering to invest in the Property is being distributed exclusively by JLL to a select group of qualified institutional investors. The

prospective investor(s) will be selected by the Sponsor in consultation with JLL at its sole discretion. For more information on this

transaction, please contact:

Jones Lang LaSalle Equity Placement Contacts

Aaron Appel

Managing Director

Capital Markets Group

[email protected]

+1 212 812 6459

+1 917 797 1253 (cell)

Mark Fisher

Senior Vice President


[email protected]

+1 212 812 5966

+1 914 740 3808 (cell)

Jonathan Schwartz



[email protected]

+1 212 812 6567

+1 516 672 1247 (cell)

Mason Powell

Associate


[email protected]

+1 212 812 6447

+1 202 669 0519 (cell)

Patrick Cotter

Analyst


[email protected]

+1 212 812 5967

+1 240 997 4977

14

15 JLL


Madison Realty Capital (MRC)

Madison Realty Capital is a leading real estate investment management firm based in Manhattan, New York. Through the firm’s

vertically integrated structure, MRC has closed in excess of $4.0 billion of real estate debt and equity transactions in the multifamily,

retail, office and industrial sectors. The firm was co-founded by Brian Shatz and Joshua Zegen in 2004 to pursue U.S. real estate

investment opportunities in the middle market. MRC aims to provide institutional investors with superior risk-adjusted returns with

downside principal protection.

Brian Shatz

Managing Principal, Co-Founder

Mr. Shatz co-founded Madison Realty Capital in 2004 and is responsible for risk and portfolio management, raising institutional

capital, and asset management. Since MRC's inception, Mr. Shatz has closed real estate transactions totaling in excess of $4.0

billion. Mr. Shatz serves on several investment committees related to both the debt and equity platforms. Prior to co-founding MRC,

he established Bluegrass Growth Fund Partners, LLC, a private investment fund which focused on investing in structured equity and

debt investments for U.S. public companies. Mr. Shatz began his career at BlackRock where he worked closely with fixed income

portfolio managers and developed institutional client relationships with some of the country's largest pension funds. Mr. Shatz

graduated cum laude from Brandeis University with a Bachelor of Arts degree in economics.

Joshua Zegen

Managing Principal, Co-Founder

Mr. Zegen co-founded Madison Realty Capital in 2004 and is responsible for overseeing the origination and structuring of all of

MRC's investment activities, as well as raising institutional capital and portfolio management. Since MRC's inception, Mr. Zegen

has closed real estate transactions totaling in excess of $4.0 billion. At the firm, Mr. Zegen serves on several investment

committees related to both the debt and equity platforms. Prior to founding MRC, he founded and was president of Alpine

Commercial Capital, a mortgage advisory firm that successfully closed over $500 million in real estate financings. Prior to forming

Alpine, Mr. Zegen was an investment banker in Salomon Smith Barney's financial sponsors/private equity group where he focused

on leveraged buyouts, equity and debt financings, mergers and acquisitions and private placement transactions. He began his

career as an analyst in Merrill Lynch's debt capital markets division where he executed both mortgage backed and asset backed

debt offerings. He is a co-founder and board member of The New York Private Equity Network ("NYPEN"). Mr. Zegen graduated

cum laude from Brandeis University with a Bachelor of Arts degree in economics.

Section 2: Sponsor overview

16 JLL



Recent MRC Deals

Address Residential Units Commercial Units Buildable SF

361 East 50th Street,

New York, NY 43 7 101,050

157 Suffolk Street,

New York, NY 33 2 22,398

65 North 6th Street,

Brooklyn, NY 24 0 37,700

143-145 West 4th Street,

New York, NY 26 0 21,364

885 Park Avenue,


150 West 84th Street,

New York, NY 20 0 13,260

409-413 Broadway,


1 Hanson Place,


392 Clinton Avenue,


283-285 Graham Avenue,


1419 8th Avenue,

New York, NY 14 1 12,068

350 5th Street,


14 53rd Street / Whale Square,


78 Prospect Park West,


65 North 6th Street 157 Suffolk Street 247 East 28th Street

The Sponsor has acquired 35 assets and sold 10 assets throughout New York City since 2011. The acquired

properties have been value-add multi-family opportunities with grade level retail that have required some degree of

renovation in order to drive rents. Assets include both existing buildings and select development opportunities. The

following represents a subset of the most recently acquired assets and realized deals.

(1) Full track record to be furnished upon request.

17 JLL


Executive Summary

On July 16th, 2014 an affiliate of Madison Realty Capital (“MRC”) closed on the acquisition of a six-story 55,501 SF mixed-use

elevator building (the “Property”) for $40.20 MM. At acquisition, the Property contained 43 residential units1, 7 commercial units and

an additional 45,549 SF of air-rights. The Property is located at 361 East 50th Street within the Midtown East / Turtle Bay

neighborhood of Manhattan and has 85 feet of frontage along East 50th Street and 150 feet of frontage along 1st Avenue.

Business Plan

The business plan was to reposition the Property as a premier luxury residential rental building, capture market rents and drive Net

Operating Income by:

• Renovating and reconfiguring units as they turn into high-end apartments.

• Repositioning and re-leasing retail units upon vacancy at market rents to maximize commercial rental income.

• Pursuing tenant buyouts to capture market rents.

• Enhancing the overall marketability of the Property through a vigorous capex program geared toward minimizing

operating costs and improving the common space and overall curb appeal.

• Conducting a feasibility study to assess further the development potential on top of the existing structure.

(1) A combined unit was divided to bring the current residential unit count to 44

Execution

After closing on the acquisition, MRC immediately began executing on its business plan. Since acquiring the asset MRC has;

• Executed buyout agreements with 9 stabilized tenants at an average cost of roughly $38,000. The average in-place

rent for these stabilized tenants was $1,954.

• Renovated and reconfigured 28 apartments at an average cost of roughly $68,600 per unit. MRC

was able to add at least one bedroom to each unit.

• Leased up all renovated units at market rents ranging from $78 PSF to $97 PSF.


18 JLL



The next three slides provide before and after floor plans for 361 East 50th Street. The scale of interior work shown in these floor

plans will be similar to the business plan that will be executed at the Buchanan.

Relevant Transaction Experience:

361 East 50th Street Case Study

19 JLL





20 JLL





21

22 JLL


Section 3: Property overview

Property Description

The Property is a mixed-use elevator building located on Third Avenue extending from East 47th Street to East 48th Street. The building

has 200’ of frontage along the avenue and 145’ of frontage along each of the side streets. There are two entry points that lead into a large

open-air, landscaped courtyard. Residential units are stacked in 5 towers, each serviced by two elevators, one passenger and one service,

and with four units per floor.

The 16-story building, which totals 297,703 gross square feet was constructed in 1928 and offers generous layouts and ceiling heights at

approximately 9’3’’. Residential unit interiors feature pre-war moldings and hardwood floors, and a portion of the units have recently been

renovated with stainless steel appliances, Silestone Kensho kitchen countertops, brushed chrome Kohler bathroom and kitchen fixtures,

and marble bathrooms. Fireplaces are featured in upper floor residences beginning on the 11th floor and nearly 25% of the units contain

functional wood burning fireplaces. The full cellar is currently underutilized with only a portion allocated to commercial use and the balance

used as a laundry room and storage.

At the two entrance points are doormen stations which allow for the drop-off of deliveries and laundry services. The penthouse units include

private outdoor terraces which look over the courtyard. The Property also has 139,097 square feet of additional unused air rights. The

residential unit mix consists of oversized studios, one-bedroom, two-bedroom, and three-bedroom apartments. The commercial portion of

the property includes a portion of the basement and the first floor and is currently occupied by 10 retail tenants and 4 office tenants. The

retail tenancy includes 2 month-to-month tenants, while all 4 office tenants are currently occupying the space on a month-to-month basis.

The retail space is currently 100% occupied with tenants including a restaurant, nail salon, electronics store, and former Capital One bank

branch which has gone dark. The Capital One space totals 3,825 SF and the tenant is current on all rent. The average in-place retail rent is

$138 PSF, representing a significant discount to market.

Residential Unit Type Total Avg. Rent % of Total

Free Market 198 $3,936 69%

Rent Stabilized 73 $2,038 25%

Rent Controlled 18 $2,163 6%

Total Residential Units 289 $3,259 100%

Residential Unit Mix Current Avg. Rent At Exit

0 BR 31 $2,226 31

1 BR 197 $3,057 54

1.5 BR - - 23

2 BR 60 $4,412 77

2.5 BR - - 48

3 BR 1 - 56

Total 289 $3,259 289

Commercial Unit Mix Current Avg. Rent At Exit

Office 4 $47 -

Retail 10 $138 14

Total 14 $124 14

23 JLL


Section 3: Property overview

Site Overview

The Property is a 297,703 gross square foot mixed-use apartment building with 298 residential units, 4 office units, and 10 retail units,

prominently located in the heart of Midtown East, Manhattan, with nearly 200’ of frontage along Third Avenue and 145’ of frontage

along both 47th and 48th Street. The site benefits from its close proximity to the City’s corporate core, Grand Central and the United

Nations Headquarters, which are all just a few blocks away. Located within .25 miles of seven different subway lines, residents are

provided easy access to the rest of Manhattan and neighboring boroughs.

JLL 24 Section 3:Location Overview

Background Rent control regulations were first introduced by the federal government during World War II. New York State chose to continue

this legislation in 1947, intended as a temporary measure to prevent dramatically increasing rents following the war. The laws

were modified and replaced in 1969 by rent stabilization regulations. Over the past decades, the regulations have been revised

and extended numerous times, most recently in July 1997.

Both rent control and rent stabilization guidelines establish the increase in rent that can be charged for a vacant apartment and

for a lease that is renewed by the same tenant. A tenant in an apartment subject to rent control or stabilization cannot be evicted

except under extraordinary circumstances. In general, these laws affect apartment buildings with more than six apartments and

those which receive any of a number of City sponsored real estate tax abatements and/or tax exemptions.

Applicability Generally, most residential units in apartment buildings in New York City with six or more units that were built before February 1,

1974 are subject to rent-stabilization regulations. Residential units in New York City buildings that were built before February

1947 and have been occupied by the same tenant continuously since before July 1, 1971 are subject to the more stringent rent-

control regulations.

Approximately 1.057 million or 48.2% of the rental stock in New York City as of 2014 are subject to rent control or rent

stabilization laws, which is a decrease from the 70 percent subject to restrictions during the early 1990’s. Of this 1.057 million

rental apartments, approximately 27,000 apartments (2014 Housing and Vacancy Survey) remain under the protection of rent

control laws, a 6.55 percent decrease since 2005.

Tenant Renewal Rights The rent-stabilization regulations generally restrict the rights of landlords to evict tenants, except on specific grounds as allowed

by law. For units subject to rent-stabilization, leases must be entered into and renewed for one-year or two-year terms, at the

tenant's choice.

Rental Increases for Rent-Stabilized Apartments Degradation Threshold Every rent-stabilized apartment has a "legal rent", which is the maximum rent that the landlord is allowed to charge for the apartment. The legal rent increases from time to time due to permissible adjustments that are described below. If the landlord chooses to rent an apartment for less than the legal rent, the legal rent remains in effect and is used as the basis for future allowable rents (the difference between the legal rent and the actual rent is referred to as "preferential rent"). Allowable Rental Increases on Renewal Leases The New York City Rent Guidelines Board sets the maximum allowable one-year and two-year rental increases above previous legal rents for renewal leases commencing during each fiscal year between October 1 and September 30. For the fiscal year of October 1, 2015 through September 30, 2016, the maximum allowable renewal lease rental increases are as follows: • One-year leases: 0.0% • Two-year leases: 2.0%

Queens Borough Performing Arts Center

Museum of the Moving Image

Section 3: Property overview 24 JLL

JLL 25 Section 3:Location Overview

Allowable Rental Increases on Vacant Unit Leases Tenants renting a rent-stabilized apartment for the first time have the option of either a one-year or two-year lease. The maximum allowable legal rent for a new lease on a vacant unit is equal to the last legal rent plus the sum of the following: • For a two-year lease, a vacancy increase of 20%; for a one-year lease, a vacancy increase equal to 18% less the

difference between the guideline percentages applicable to one-year and two-year renewal leases for the current fiscal year. For the fiscal year from October 1, 2015 through September 30, 2016, the difference between the applicable percentages is 2.25% (4.50% - 2.25%); therefore the allowable vacancy increase for a one-year lease is 17.75%.

• If the landlord did not collect a permanent vacancy increase within eight years of the new vacancy lease, in addition to the vacancy increase described in Item 1, the landlord is entitled to an additional vacancy increase equal to 0.6% multiplied by the number of years since the collection of the last permanent increase.

• If the previous legal rent was less then $300 per month, in addition to the vacancy increases described in Items 1 and 2, the landlord is entitled to increase the rent an additional $100 per month.

• If the previous legal rent was between $300 and $500 per month, the landlord is entitled to collect a vacancy increase equal to the greater of: (a) the combined vacancy increases described in Items 1 and 2 or (b) $100 per month.

Allowable Rental Increases Due to Individual Apartment Improvements ( IAI ) If a landlord makes an improvement (including installing a new appliance) to a vacant rent-stabilized apartment, the legal rent of

the unit is increased by 1/40th of the cost of the improvement, including installation (or 1/60th in buildings with more than 35

units). If the landlord makes any such improvement to a leased apartment, written consent of the tenant is required in order for

the legal rent to be increased.

Allowable Rental Increases Due to Major Capital Improvement s (MCI) If a landlord makes a qualified building-wide capital improvement, the legal rents of all apartments in the building are increased

by an aggregate amount from 1/84th to 1/96th of the cost of the improvement, including installation, with the increases being

allocated to the individual apartments based on the number of rooms in each. Rental increases due to major capital

improvements must be approved by the New York State Division of Housing and Community Renewal before they become

effective.

Decontrol of Rent Stabilized Apartments If an apartment is vacated and the legal rent reaches a level of $2,700 per month or more (including the effect of allowable

increases as described above), then the apartment is no longer subject to rent-stabilization regulations.

If the legal rent of an occupied apartment reaches a level of $2,000 per month or more and the tenants‘ federal adjusted gross

income, as reported on their New York State Income Tax returns, have been in excess of $175,000 for each of the two preceding

calendar years, then the apartment is no longer subject to rent stabilization regulations.

Queens Borough Performing Arts Center

Museum of the Moving Image

Section 3: Property overview 25 JLL

26

27 JLL


Section 4: Project overview

The chart summarizes the in-place unit count, in-place rents, proforma unit count post renovation/buyout, and un-trended proforma

rents post renovation/buyout.

*Assumed 1.00% growth for Rent Stabilized and Rent Controlled units through exit

In - Place At Exit (2019)

Average SF Total SF # of Units % of Total Monthly Rent # of Units % of Total Monthly Rent Avg % Rent Growth

Free Market

0 BR 433 9,949 23 7.96% $2,539 26 9.00% $3,905 53.8%

1 BR 753 102,458 136 47.06% $3,632 23 7.96% $5,237 44.2%

1.5 BR 0 0 0 0.00% $0 23 7.96% $5,382 0.0%

2 BR 1,194 45,360 38 13.15% $5,716 73 25.26% $6,733 17.8%

2.5 BR 0 0 0 0.00% $0 48 16.61% $7,442 0.0%

3 BR 1,533 1,533 1 0.35% $9,000 56 19.38% $10,550 17.2%

Subtotal 866 159,300 198 68.51% $4,209 249 86.16% $5,631 33.8%

Rent Stabilized

0 BR 454 3,176 7 2.42% $1,585 4 1.38% $1,665 5.1%

1 BR 758 35,633 47 16.26% $1,931 17 5.88% $2,029 5.1%

1.5 BR 0 0 0 0.00% $0 0 0.00% $0 0.0%

2 BR 1,225 23,266 19 6.57% $2,470 1 0.35% $2,596 5.1%

2.5 BR 0 0 0 0.00% $0 0 0.00% $0 0.0%

3 BR 0 0 0 0.00% $0 0 0.00% $0 0.0%

Subtotal 917 62,075 73 25.26% $2,115 22 7.61% $2,223 5.1%

Rent Controlled

0 BR 435 435 1 0.35% $1,645 1 0.35% $1,729 5.1%

1 BR 715 10,008 14 4.84% $2,018 14 4.84% $2,121 5.1%

1.5 BR 0 0 0 0.00% $0 0 0.00% $0 0.0%

2 BR 1,216 3,647 3 1.04% $3,013 3 1.04% $3,167 5.1%

2.5 BR 0 0 0 0.00% $0 0 0.00% $0 0.0%

3 BR 0 0 0 0.00% $0 0 0.00% $0 0.0%

Subtotal 836 14,090 18 6.23% $2,264 18 6.23% $2,379 5.1%

Total / WAV 878 235,465 289 100.00% $3,541 289 100.00% $4,538 28.2%

Commercial

Office 631 2,524 4 28.57% $7,792 4 28.57% $31,550 304.9%

Retail 1,365 13,648 10 71.43% $156,860 10 71.43% $303,179 93.3%

Total / WAV 1,250 16,172 14 100.00% $133,595 14 100.00% $260,785 95.2%

28 JLL



The Sponsor plans to renovate and reconfigure the residential units and anticipates adding an additional bedroom to the majority of the lines

in order to maximize the apartment layouts and capitalize on market rents. The Sponsor will also initiate a capital expenditure program that

will include upgrading the elevators, courtyard, gym, storage, bike storage, hallway corridors, electric, plumbing, intercom and other

mechanical equipment totaling approximately $3,000,000 in hard costs. Unit downtime from renovations will average 5 months. Unit

renovations will total $18,000,000 and will range from a low of $39,000 per unit to a high of $112,000 per unit. The average renovation cost

will be $72,300 per unit, or $90 per square foot. In addition, the Sponsor has budgeted $1,100,000 in total hard costs contingencies.

Renovation Costs Projected Market Rent

Line # of Units Current

Layout

Rooms

Added

Converted

Layout Average SF

Floor 1 -

Floor 5

Floor 6 -

Floor 10

Floor 11 -

Floor 16

Cost of

Renovation Per

Unit

A 14 2.0 BR 1.0 BR 3.0 BR 1,260 $9,000 $9,075 $9,185 $112,000

B 15 2.0 BR 1.0 BR 3.0 BR 1,073 $9,000 $9,075 $9,185 $104,000

C 10 0.0 BR 0.0 BR 0.0 BR 444 $3,200 $3,275 $3,385 $39,000

D 12 1.0 BR 1.5 BR 2.5 BR 835 $6,250 $6,325 $6,435 $78,000

E 13 1.0 BR 1.0 BR 2.0 BR 767 $5,600 $5,675 $5,785 $70,000

F 12 1.0 BR 1.0 BR 2.0 BR 778 $5,600 $5,675 $5,785 $70,000

G 12 1.0 BR 1.0 BR 2.0 BR 667 $5,600 $5,675 $5,785 $60,000

H 10 1.0 BR 0.0 BR 1.0 BR 693 $4,250 $4,325 $4,435 $62,000

J 12 1.0 BR 1.5 BR 2.5 BR 835 $6,250 $6,325 $6,435 $75,000

K 12 1.0 BR 0.5 BR 1.5 BR 690 $4,500 $4,575 $4,685 $62,000

L 13 1.0 BR 1.5 BR 2.5 BR 844 $6,275 $6,350 $6,460 $80,000

M 11 1.0 BR 0.5 BR 1.5 BR 689 $4,500 $4,575 $4,685 $62,000

N 12 1.0 BR 0.0 BR 1.0 BR 693 $4,250 $4,325 $4,435 $62,000

O 10 1.0 BR 1.0 BR 2.0 BR 667 $5,600 $5,675 $5,785 $60,000

P 12 1.0 BR 1.0 BR 2.0 BR 778 $5,600 $5,675 $5,785 $70,000

Q 13 1.0 BR 1.0 BR 2.0 BR 770 $5,600 $5,675 $5,785 $70,000

R 12 1.0 BR 1.5 BR 2.5 BR 849 $6,250 $6,325 $6,435 $78,000

S 15 0.0 BR 0.0 BR 0.0 BR 433 $3,200 $3,275 $3,385 $39,000

T 13 2.0 BR 1.0 BR 3.0 BR 1,117 $9,000 $9,075 $9,185 $104,000

U 14 2.0 BR 1.0 BR 3.0 BR 1,260 $9,000 $9,075 $9,185 $112,000

Total 247 $18,000,000

* Excludes units 8LM & 13CD. No bedrooms will be added to these units

* Some units have already been renovated and will not need full renovation cost

29 JLL



Quarterly

Expiration Total Vacant Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Units Expiring 198 37 0 9 71 75 4 0 1 1

% Expiring 100.00% 18.69% 0.00% 4.55% 35.86% 37.88% 2.02% 0.00% 0.51% 0.51%

Cum % Expiring 18.69% 18.69% 23.23% 59.09% 96.97% 98.99% 98.99% 99.49% 100.00%

0.0 BR 23 6 0 1 6 10 0 0 0 0

1.0 BR 136 23 0 6 52 50 4 0 1 0

2.0 BR 38 7 0 2 13 15 0 0 0 1

3.0 BR 1 1 0 0 0 0 0 0 0 0

Semi Annual

Expiration Total Vacant 7/31/2015 1/31/2016 7/31/2016 1/31/2017 7/31/2017

Units Expiring 198 37 0 80 79 1 1

% Expiring 100.00% 18.69% 0.00% 40.40% 39.90% 0.51% 0.51%

Cum % Expiring 18.69% 18.69% 59.09% 98.99% 99.49% 100.00%

0.0 BR 23 6 0 7 10 0 0

1.0 BR 136 23 0 58 54 1 0

2.0 BR 38 7 0 15 15 0 1

3.0 BR 1 1 0 0 0 0 0

Rent Stabilized Unit Buyout Schedule & Estimated Buyout Costs

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

2/28/2017 2/28/2018 2/28/2019 2/29/2020 2/28/2021 2/28/2022 2/28/2023 2/29/2024 2/28/2025 2/28/2026

Number of Buyouts 16 17 18 - - - - - - -

Number of FM Renovations 196 2 - - - - - - - -

Total Renovations 212 19 18 - - - - - - -

Cumulative Renovations 212 231 249 249 249 249 249 249 249 249

% Renovated 85.1% 92.8% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Annual Buyout Cost $625,000 $1,950,000 $1,600,000 - - - - - - -

100% of the market rate units leases expire by Q3 2017. The Sponsor also plans to buyout a total of 51 of the rent stabilized units in

the first three years and convert said units to market rate units. Below is a lease expiration schedule for the market rate units and a

rent stabilized buyout schedule.

30 JLL



Commercial Overview

The Property’s commercial portion is comprised of 14 total units including 4 professional office suites and 10 retail units.

Office

Tenant

Lease

Expiration

Total

SF

Current Current

Annual

Rent

Current Market Market Market

Extension

Option

Monthly

Rent

Rent

PSF

Monthly

Rent

Annual

Rent

Rent

PSF SHUM CC MD &

LAUCHANGO 11/30/2016 None 663 $3,000 $36,000 $54 $8,288 $99,450 $150

RAUL CACERES 11/30/2016 None 718 $2,192 $59,856 $86 $8,975 $107,700 $150

MABLE MERCER

FOUNDATION 11/30/2016 None 718 $2,600 $48,000 $69 $8,975 $107,700 $150

VACANT - None 425 - - - $5,313 $63,750 $150

Subtotal / WAV 2,524 $7,792 $143,856 $58 $31,550 $378,600 $150

Retail

Tenant

Lease

Expiration

Total

SF

Current Current

Annual

Rent

Current Market Market Market

Extension

Option

Monthly

Rent

Rent

PSF

Monthly

Rent

Annual

Rent

Rent

PSF

AP & SS RESTAURANT

GROUP LLC 10/30/2026

(1) 5-year

option after

2026

3,450 $25,000 $300,000 $87 $71,875 $862,500 $250

FLORA LOUIS INC 7/31/2017 None 660 $15,988 $191,860 $291 $16,500 $198,000 $300

SEIGO RETAIL

CORPORATION 3/31/2017

None

Remaining 438 $10,160 $121,918 $278 $10,950 $131,400 $300

762 FOOD CORPORATION 4/30/2018 None 1,850 $19,467 $233,603 $126 $38,542 $462,500 $250

764 3RD AVE. LIQUORS

INC 10/31/2019

None

Remaining 650 $11,608 $139,300 $214 $16,250 $195,000 $300

STAY CONNECTED, INC 4/30/2022 None 850 $11,935 $143,222 $168 $21,250 $255,000 $300

NANCY YOON JEWELRY

CORPORATION MTM None 150 $2,806 $33,666 $224 $3,750 $45,000 $300

FASHION FAIRLY NAILS

SPA, INC 7/31/2024 None 725 $12,500 $150,000 $207 $18,125 $217,500 $300

JIN PANG SHON MTM None 1,050 $7,000 $84,000 $80 $26,250 $315,000 $300

CAPITAL

ONE\GREENPOINT BANK 9/30/2017

(2) 5-year

options after

2017

3,825 $40,396 $484,750 $127 $79,688 $956,250 $250

Subtotal / WAV 13,648 $156,860 $1,882,319 $138 $303,179 $3,638,150 $267

31 JLL



Commercial Rollover Schedule

Year 2016 2017 2018 2019 2020

Expiring Square Feet 1,200 4,923 1,850 650 -

Expiring Rent PSF $152 $232 $126 $214 -

$152

$232

$126

$214

$168

$50

$70

$90

$110

$130

$150

$170

$190

$210

$230

$250

0

1,000

2,000

3,000

4,000

5,000

6,000

2016 2017 2018 2019 2020 2021 2022

Expiring Square Feet Expiring Rent PSF

There is 8,623 square feet of commercial space expiring by 2019. Two of the current tenants have month-to-month leases, and the

Sponsor plans to convert the existing office space into retail in order to fully capitalize on market rate rents.

32 JLL


The Sponsor has identified two opportunities to significantly reduce operating expenses over the 5 year term of the

investment:

Phase I:

At closing, the Sponsor will generate $1.8 million in cost savings through improved property management oversight. The initial

costs savings will be partially offset by a planned increase in management fees, which will be set to a market rate of 3.0% of EGI

(currently 1.8% of EGI).

Phase II:

Electricity: The Sponsor will submeter each of the units in order to pass through electrical costs to tenants. Work on the

electrical systems will begin upon acquisition and phase in over 4 years as units become renovated. Full cost savings for

electricity are expected to be achieved in Year 4.

Payroll & Burden: Payroll & burden expenses are inflated due to a union labor contract that expires in 2018. Following the

contract expiration in April 2018, the Sponsor anticipates converting the building to a non-union building, reducing headcount and

resetting wages.


Fuel / Gas / Steam: Adjusted to reflect boiler conversion and update (market est. at ~$1,000 per unit)

Water & Sewer: Adjusted, reflects 2014 Water Sewer Charge less $117K savings from RPZ backflow preventer installation which

should be complete by January 2016

Repairs & Maintenance: Actual includes unit renovation costs and other expenses which are part of capex (interior painting, etc.)

Legal / Professional: Excludes leasing commissions and local law 11 work, which is non-recurring and below the line

OpEx Savings

In-Place EGI $13,529,519

Operating Expenses TTM July 2015 Adjusted OpEx Cost Savings

Real Estate Taxes $2,898,263 $2,898,263 -

Insurance $120,499 $141,873 ($21,374)

Fuel / Gas / Steam $491,487 $307,263 $184,224

Electric $337,897 $329,981 $7,916

Water & Sewer $326,165 $208,746 $117,419

Payroll & Burden $1,262,267 $1,262,267 -

Repairs & Maintenance $1,338,706 $151,500 $1,187,206

General & Administrative $72,789 $37,875 $34,914

Reserves - $60,600 ($60,600)

Legal / Professional $401,731 $65,000 $336,731

Elevator $84,077 $75,000 $9,077

Other $46,369 $37,584 $8,786

Management $202,118 $202,118 -

Total Operating Expenses $7,582,369 $5,778,070 $1,804,300

33

Located on one of the world’s largest natural harbors, New

York City is the most populous city in the United States with

approximately 8.2 million residents and is also the most

densely populated major city with a land area of just over

300 square miles. With almost 800 languages spoken by its

residents, New York is truly a global city and the most

linguistically diverse city in the world. Known as a global

financial center, New York City combines the offices of 168

banks from 50 countries, and 18 of the top 20 foreign

branches of international banks have their U.S. headquarters

in New York City. New York is also the most visited city in

the United States for both domestic and international

travelers, with 56 million visitors totaling $41.3 billion of

direct spending in 2014. Over the past ten years, the number

of total visitors in New York City has increased by more than

50% and direct visitor spending has increased by more than

100%.

Manhattan overview

The borough of Manhattan, or New York County, forms the

central political, financial and cultural core of New York City and

is the economic engine for the Greater New York region. With a

population of more than 1.6 million and a land area of 23 square

miles, Manhattan is New York City’s most densely populated

borough with nearly 70,000 residents per square mile. More than

75 percent of New York City’s employees work in Manhattan

home to the Midtown and Downtown business districts.

Manhattan is the wealthiest county in the United States with per

capita personal income of $62,498 versus the national average of

$32,283, and its median household income of $69,659 exceeds

the national median by more than $11,000.

Manhattan is regarded as the commercial, economic and cultural

center of the United States and is home to numerous famous

landmarks and cultural attractions, such as the Metropolitan

Museum of Art, Times Square and the United Nations. Various

colleges and universities are located within the borough,

including Columbia University and New York University both of

which rank among the top 50 universities in the world, according

to the Times Higher Education World University Rankings.

Tourism

Both domestic and international tourism generate significant

income for New York City and particularly the borough of

Manhattan. New York was ranked 7th amongst the “20 Most

Visited Cities in the World” by Forbes magazine in 2014, with

major tourist destinations in New York City including Times

Square, the Empire State Building, Rockefeller Center and

Central Park. The number of both domestic and international

visitors to New York City increased in nine of the past 10 years,

with only 2009 experiencing a drop during the deepest part of the

recession. The number of visitors and total direct spending

increased by more than 50% and 100%, respectively, over the

past ten years to 55.8 million in 2014, meeting the visitors targets

initialed outlined by Mayor Bloomberg in 2006.

Although international tourists account for less than 22% of

visitors and spend slightly less on average than domestic visitors

($210 per day versus $230), the longer average length of stay of

international tourists (7 nights versus 2.7 nights for domestic

visitors) increases their spending share.

Kansas City skyline

View of Midtown Manhattan from the north

Section 5: Market overview JLL 34

Employment and Economic Overview

The overall New York City economy is recovering strongly with

2.7% employment growth year-over-year as of December 2014,

led by the professional and business services sector, which

averaged year-over-year employment growth of 4.7% – which

exceeds the 3.7% growth reached during the peak of the last

expansion. Although the financial services have had to adapt to

increased regulatory scrutiny and changing markets, the

accounting, consulting and technology sectors are still expected

to grow over the next year. Unemployment in New York City has

dropped from a high of 9.6% in 2010, to 6.4% as of January

2015, with Manhattan holding the lowest unemployment rate of

the five boroughs at 5.2% nearly 40 bps below the national

average. Much of the decline in unemployment was due to the

strong growth in the private sector which has seen six straight

years of employment gains.

With a gross domestic product of $1.38 trillion in 2013, New York

City has the largest regional economy in the United States by and

the second largest city economy in the world after Tokyo, Japan.

New York City is a premier headquarters location for leading

global financial services companies as well as a diversified base

of service sector firms including law, accounting, advertising and

management.

New York City is home to more corporate headquarters than any

other city in the country, with the vast majority located in

Manhattan. Midtown Manhattan is the largest central business

district in the United States and holds the nation’s greatest

concentration of Fortune 500 companies, including J.P. Morgan

Chase, Citigroup, MetLife, Pfizer and Morgan Stanley.

35 Section 5: Market overview

While the financial, insurance, health care and real estate

industries form the backbone of New York City’s economy, the

city is an important center for mass media, journalism and

publishing as well as the preeminent arts center in country, with

creative industries such as advertising, new media, fashion and

design representing a rapidly increasing number of jobs in the

city.

One of the world’s leading commercial centers, Midtown is home

to corporate headquarters across multiple industries, including

fashion (Saks Incorporated, Calvin Klein, Polo Ralph Lauren and

Ann Taylor), communications (Viacom and Univision

Communications), publishing (Simon & Schuster and McGraw-

Hill) and media (CBS Corporation, NBC Universal, The New York

Times Company and Thomson Reuters).

New York City has also received a strong boost with the

emergence of “Silicon Alley,” named for the emergence and

concentration of internet and media companies in Manhattan.

Over the past two years, Midtown South has diversified an

already solid base of tenancy to become New York’s defacto

home of internet giants and tech start-ups. Heavyweights such as

Google and Apple, alongside hundreds of new tech start-ups,

have received billions of dollars in funding. This story is proven

not only by the quality of firms who have chosen to do business in

New York City, but also by their ambitious plans for growth.

JLL

The Property is located in the center of Midtown East,

Manhattan, which is bounded by 42nd and 53rd Streets,

Lexington Avenue and the East River. Despite its

convenient, central Manhattan location, Midtown East is an

enticing, community-oriented New York neighborhood, and

one of the most desirable places to live in New York City.

Midtown East’s diverse housing stock is attracting a more

sophisticated crowd that includes young professionals and

families. Originally a boatyard that protected ships from the East

River winds, the neighborhood is now one of the wealthiest, yet

affordable neighborhoods in Manhattan. The area contains a

plethora of upscale restaurants, affordable eateries and high-rise

buildings that tower over small shops and bars. Housing prices

range from affordable rentals to multi-million dollar penthouses.

Young singles and young families are increasingly moving to

Midtown East’s residential areas, attracted by the neighborhood's

numerous public parks and proximity to Grand Central Station

and the United Nations Headquarters. The neighborhood offers

both convenience and lifestyle optionality, while the Property,

perfectly located at its center, sits at a central junction point for

the rest of New York City.


International Community

The United Nations Headquarters complex, situated along the

East River between 42nd and 48th Streets, represents the

world’s largest and most prominent center of diplomatic activity.

The UN has created a thriving international community that has

been established in the area since the 1950s, creating a

permanent demand base for quality restaurants, hotels, schools,

retail shops, and upscale living accommodations. The Property

currently has several in-place tenants who hold United Nations

related jobs. The spending power of these foreign residents has

expanded dramatically in recent years, a result of the strength of

foreign currencies. This amplified spending power has a direct

impact on the property, increasing achievable apartment rents

while augmenting demand for retail services.

Shopping & Dining

As a result of the neighborhood’s established and sophisticated

residential population, convenient shopping and dining options

abound. Second and Third Avenues in the immediate vicinity of

the Property are populated with a wide range of supermarkets,

pharmacies, restaurants and nightclubs. Some of Manhattan’s

most celebrated gourmet restaurants are located in the

neighborhood, catering to the discerning palates of the

international community. Notable examples include Sushi

Yasuda, Sparks Steak House, Patroon, The Palm and Palm Too,

Marchi’s, Pampano, Blair Perrone, Rosa Mexicano, Zarela, and,

of course, Nino’s Positano. JLL 36 JLL

Demographics

The median household income in the Midtown East neighborhood

is $122,136, on par with Manhattan’s most exclusive

neighborhoods. This elite population includes a vital mix of young

professionals, working diplomats, empty nesters and families who

enjoy the favorable combination of convenience and international

flavor provided by the neighborhood.

Transportation

The area offers convenient access to all areas of the City as well

as to Westchester and Connecticut. The 4, 5, and 6 trains provide

express service from Grand Central to the Upper East Side,

Union Square, Downtown, and Brooklyn. Grand Central also

offers access to commuter railroad lines and the cross-town 7

and Shuttle trains, which provide convenient access to additional

subway lines and regional transportation terminals including Port

Authority and Penn Station. The 7-train provides additional

access to Queens, the growing Long Island City Market and Citi

Field. In coming years, the 7-train will provide access to the

development at Hudson Yards.


Neighborhood Amenities

The property’s central Midtown location places it within walking

distance of many of New York’s most celebrated cultural and

entertainment destinations. Highlights include the Museum of

Modern Art, Fifth Avenue boutiques, Central Park, the New York

Public Library, and the Broadway Theatre District. While these

nearby attractions benefit all residents of the property, they are

particularly appealing to suburban residents using the Property

as a pied-a-terre. Similarly, sophisticated individuals and young

families residing in other parts of the country or the world will find

the Property to be a convenient location for a Manhattan

apartment, serving as an ideal home base from which to explore

the greatest city on earth. The property’s delightful old world

charm appeals precisely to this demographic, capturing the

romance and history of Old New York.

Parks & Recreation

Located just two blocks east, the United Nations Sculpture

Garden is accessible via 47th or 48th Street, and is the largest

park in the area, an integral part of the United Nations

Headquarters complex. Key features include an expansive lawn,

a refined sculpture and rose garden, and views of the East River,

the Queensboro Bridge, and the United Nations Buildings,

making it the perfect setting for residents of the Property to reflect

and relax. Between First and Second Avenues, 47th Street

becomes a pleasant tree-lined promenade known as Dag

Hammarskjold Plaza. The Plaza is the most popular route for

pedestrians traveling between the UN and Midtown, adding

convenience for the property’s residents while enhancing

exposure for the Property’s retail tenants.

JLL 37 JLL

38 JLL Section 5: Market overview

39 JLL


Section 5: Market overview

40 JLL


The High-End Resale Market

The New York City economy continues to perform above expectations. Housing prices in Manhattan have held up much better than the

national average, and sales activity has picked up and remains strong. Manhattan housing prices continued to press higher in 2015,

driven primarily by low inventory and seven consecutive quarters of year-over-year sales growth. In particular, the luxury market showed

the most price gains as more development product has begun to close in this sector of the market. The average sales price and average

price per square foot of all Manhattan apartments increased 15% and 12% respectively year-over-year. The number of sales that closed

at or above the list price at time of contract rose to 46%, the highest level reached since 52% in the third quarter of 2008, indicative of the

robust demand for product in the market. In addition, days on the market, a measure of the number of days from the original list date, fell

by roughly 16% to 49 days from the prior year quarter as languishing listings were sold off.

Market Forces

The reasons for the Manhattan market’s upward trend, despite the national housing market’s sluggish growth, are as follows:

1. Land constraints: Unlike virtually every other metropolitan or suburban market in America, Manhattan remains severely land-

constrained. New construction starts relative to existing housing stock has remained at relatively low levels, despite ever-growing

demand. This stability in new supply helps to keep inventory in check. Nationally, housing starts rose 33% from 1.5 million units in 2000

to 2.0 million by 2005 and have since declined significantly to approximately 1,174,000 in 2015, which is reflective of the dislocation in the

for-sale housing market since the economic downturn. This is in direct contrast to Manhattan’s residential inventory levels, particularly in

the high-end market, where demand continues to outstrip supply.

2. Strong demand: Manhattan continues to experience greater demand than all other residential markets in the country. This is due in

part to the strength of the Manhattan economy, particularly at the high-end with strong bonuses on Wall Street and record high-income

job creation. Additionally, Wall Street is posting record earnings and there is stable growth in the hedge fund and private equity markets.

Market demand is also driven in part by a strong demand for Manhattan real estate from national and international buyers. Manhattan is

perceived as a “winner take all” city within the global economy, which is reflected in the continually strong demand exhibited both

nationally and internationally for Manhattan condominiums.


41 JLL


The Rental Market

The East Side of Manhattan has historically maintained value due to its long-established reputation and convenience. Rents remain

strong within the area as exemplified by an average increase of 6% year-over-year for 1-bedroom units. With a current vacancy

rate of just 1.54%, Midtown East is poised for additional growth in prevailing rental rates. Significant barriers to entry will preserve

this acutely low vacancy rate, with high construction cost, strict zoning regulations, a lack of developable sites, and soaring land

costs all contributing to the dearth of new rental development. Rents for Manhattan as a whole are also performing exceptionally

well. In July 2015 median Manhattan rental prices were the second highest on record.

Section 4: Market overview Section 5: Market overview

42 JLL


The Buchanan

Monterey at Park

The Nash

Murray Hill Tower

The Metropolis River Tower

Address 160 East 48th Street 30 Park Avenue 222 East 39th Street 245 East 40th Street 150 East 44th Street 420 East 54th Street

Year Built 1929 1955 1971 1972 2000 1982

Lot Size (SF) 29,120 17,485 11,932 22,178 11,207 28,308

Building Size (SF) 297,703 236,397 128,741 387,671 352,725 413,233

Floors 15 20 25 36 52 37

FAR 15 10 10 10 12 10

Units 289 237 191 273 360 323

Average Floorplan

(SF/Rent)

Studio

1 BR

2 BR

3 BR

438 / $3,200

709 / $4,250

769 / $5,600

1,209 / $9,000

- / $3,097

- / $4,382

- / $6,456

- / -

- / $3,175

- / $4,170

- / $5,465

- / $8,000

506-576 / $3,535

753-853/ $4,470

1,118-1,137 / $6,360

- / -

- / $3,463

- / $4,412

- / $6,063

- / -

- / -

566-990 / $4,637

1,061-1,343 / $6,107

1,643-3,066 / $9,760

Commercial Space (SF) 16,200 0 7,600 1,215 8,080 272

Fitness Center No Yes Yes Yes Yes Yes

Common Space / Lounge Yes No Yes Yes Yes Yes

Subways (within .25 miles) 4,5,6,E,M,7,S 6 None None 4,5,6,7,S None


2 3 4 5 6 1

43 JLL



44 JLL


The Retail Market

The Third Avenue retail corridor is also considered an attractive retail location due to its close proximity to Midtown Manhattan and

to the numerous high-end office and residential rental properties, as well as the luxury condo developments and hotels located

within the neighborhood. On lower Fifth Avenue from 42nd to 49th Streets, the asking rental rate increased to $1,238 per square

foot during the first quarter of 2015 from $1,057 per square foot, a solid increase from one year ago. By way of comparison, asking

rental rates on the lower section of Fifth Avenue were only $458 per square foot five years ago and have more than doubled since

then. The availability rate registered 24.6% at the close of the first quarter, down from 26.2% one year ago. At 580 Fifth Avenue, a

new lease was completed by cosmetics giant Sephora, which will be relocating across the street and further south from its current

location at 597 Fifth Avenue.

In another top-tier market along Madison Avenue, (from East 57th to East 72nd Streets), asking rents averaged $1,584 per square

foot, up moderately from $1,466 per square foot, an 8.0% rise from last year. Of note, the average asking rent has increased in

each of the last six quarters, however the average asking rent dipped slightly from year-end 2014 when it registered $1,602 psf.

The availability rate remained unchanged at 13.0% at the close of the first quarter 2015 from year-end 2014. New commitments

were announced including high-end fashion brand Brioni which leased 5,200 sf at the Carlton House redevelopment, 680 Madison

Avenue. Additionally, British woman’s designer L.K. Bennett leased 2,562 sf for its first Manhattan store at 655 Madison Avenue in

the former Brian Atwood sublease space. New space additions included the Nespresso store at 761 Madison Avenue and Frey

Wille’s sublease space at 624 Madison Avenue.


45 JLL



Midtown East Retail Market Comparables

Address Primary Use Size Monthly Rent Rent PSF

904 Second Avenue Retail 404 $8,500 $252

142 East 49th Street Retail 550 $9,500 $207

830 3rd Avenue Retail 900 $22,500 $300

369 Lexington Avenue Retail 500 $15,000 $360

Average 589 $13,875 $280

46 JLL



Apartment & Mixed-Use Building Sales Comps

Address Date Year Built Sales Price Size (GSF) Units Price per SF

420 East 54th Street In Contract 1982 $390,000,000 412,961 323 $944

341-343 East 62nd Street 9/10/2015 1910 $12,870,755 11,900 17 $1,082

31-37 East 31st Street 9/10/2015 1914 $82,431,000 91,500 92 $901

312 East 30th Street 9/10/2015 1986 $50,956,406 47,820 67 $1,066

1 Mitchell Place 7/2/2015 1927 $138,850,000 143,033 181 $971

301 East 21st Street 5/8/2015 1930 $167,500,000 185,196 199 $904

30 Park Avenue 3/12/2015 1955 $194,000,000 205,245 237 $945

425-429 3rd Avenue 2/10/2015 1967 $68,250,000 66,403 102 $1,028

200 East 82nd Street 12/30/2014 1980 $218,000,000 205,254 223 $1,062

Average 152,146 160 $989

The Buchanan $270,000,000 297,703 298 $906

47 JLL


The Office Market

As one of the best performing office markets in the United States, Midtown Manhattan continues to ride an upward economic

growth trend that also generates residential demand in the immediate area. The Midtown office leasing market is as strong as it

has been since the peak of the last cycle and well positioned for rental rate growth. Key statistics are as follows:

• Midtown asking rents have increased at a rate of 7.6% per annum over the past 3-years and increased 7.3% over the past 12

months. This trend is expected by many to accelerate.

• The Taking Rent Index has hit 97% (from 89% 12 months ago) indicating that landlords are getting their asking rents and are

going to make large increases shortly.

• Leasing activity over the 12 months of 17 million square feet is the second highest over the past decade and is outpacing last

year’s activity by 20%.

• Availability rate is at its lowest point since 2007 and is continuing to fall.

• Absorption over the past 12 months was a positive 3.71 million square feet, second highest in the past 10 years only to 2010.

• All of these metrics point in the right direction – indicating a strengthening Midtown leasing market.


48 JLL


The offering to invest in the Property is being distributed exclusively by JLL to a select group of qualified institutional investors. The

prospective investor(s) will be selected by the Sponsor in consultation with JLL at its sole discretion. For more information on this

transaction, please contact:

Jones Lang LaSalle Equity Placement Contacts

Aaron Appel

Managing Director


[email protected]

+1 212 812 6459

+1 917 797 1253 (cell)

Mark Fisher



[email protected]

+1 212 812 5966

+1 914 740 3808 (cell)

Jonathan Schwartz



[email protected]

+1 212 812 6567

+1 516 672 1247 (cell)

Mason Powell

Associate


[email protected]

+1 212 812 6447

+1 202 669 0519 (cell)

Patrick Cotter

Analyst


[email protected]

+1 212 812 5967

+1 240 997 4977

49

50 JLL


Section 6: Appendix: floor plans

51 JLL



52 JLL



53 JLL



Documents

Sponsor’s - The Real Deal · 2015. 12. 2. · Sponsor Equity (10%) $11,082,400 $37.23 $36,576 3.50% Total Sources $316,640,000 $1,064 $1,045,017 100.00% Uses of Capital Amount Per