Aareal Capital Funds Olmstead’s Latest Garment District Buy
Aareal Capital Corporation provided a $60 million loan to New York-based Olmstead Properties and the green real estate firm Jonathan Rose Companies to help fund their purchase of a 12-story office and retail building at 240 West 40th Street, Commercial Observer has learned.
The new owners bought the roughly 160,000-square-foot Garment District building from a partnership between AEW Capital Management and the rapidly growing real estate services firm DTZ for $85 million on May 5.
Olmstead, which owns and manages six other buildings in a three-block radius of the property, plans to upgrade 240 West 40th Street with a new lobby, elevator systems, HVAC and other lease-up improvements, said the company’s president, Samuel Rosenblatt. Those upgrades bring the total cost to just over $100 million, he said.
“Our plan is to completely renovate the property combining our expertise in the neighborhood with Jonathan Rose’s expertise in the ‘greenification’ of buildings,” Mr. Rosenblatt told CO.
The new sponsors put in a significant amount of equity and brought in third, unnamed, institutional partner to help finance their investment, he said. New York-based debt and equity broker Estreich & Company arranged the financing.
The trendy fashion label DKNY occupies the building’s 11th floor, which it uses for showrooms and back-office space. DKNY’s lease there expires in July 2016, according to recent reports.
“Estreich & Company did a fantastic job with the financing,” Mr. Rosenblatt said. “It was an interesting assignment for them and Aareal, since potentially Donna Karan will stay in the building, potentially Donna Karen will leave the building.”
The building’s ground-floor retail tenants include Dunkin’ Donuts, Popeyes Louisiana Kitchen, Boi Noodle House and Guy & Gallard.
The property, which sits between Seventh and Eighth Avenues, was completed in 1923.
Representatives for Aareal Capital Corporation were unavailable for comment.