February 26, 2008

• Total of 15 buildings have 362 units with over 300 families
• Tenants to remain in place during year-long renovation

New York City - In a move to help the city of New York preserve hundreds of low-income apartments located in the Bedford-Stuyvesant neighborhood of Brooklyn, national real estate firm Phoenix Realty Group has announced the acquisition and renovation of 362 low-income apartments for a total cost of $96 million. All of the apartments will be preserved as affordable housing, and 95% of the apartments will be subsidized with long-term Section 8 contracts from the U.S. Department of Housing and Urban Development (HUD).

"This acquisition represents our mission to invest in housing critical to the economic vitality of New York City and other major urban areas nationwide. Most developers would opt out of the rent restrictions and seek higher-income tenants who could pay more in rent," explained Ron Orgel, Phoenix Realty Group (PRG) managing director. "However, we believe that the preservation of affordable housing is fully worth the tremendous effort and commitment that complicated projects like this require."

The property's seller, Bedford Stuyvesant Restoration Corporation (BSRC), had sought a developer aligned with this mission for several years. "We agreed to sell this portfolio to PRG because of their commitment to meeting our goals – stabilizing and revitalizing the portfolio while preserving the affordable housing," said Colvin Grannum, president of BSRC. BSRC and PRG entered into a contract for the portfolio in 2005, with more than two years of work involved in lining up a multitude of requirements.

Securing Affordable Housing in Bedford-Stuyvesant

In one of the most complex affordable housing transactions of the past year, PRG worked closely with the former director of Multifamily Housing for HUD in the New York region, Deborah VanAmerongen, who is now the New York State Housing Commissioner. Financing for the acquisition includes tax-credit equity from PRG, tax-exempt bonds and subsidies from the New York City Housing Development Corporation, and tax abatements and subsidies from the New York City Department of Housing Preservation and Development.

"The cooperation of the City and HUD were critical to making this transaction happen," said Keith Rosenthal, president of PRG. "They put forth a tremendous effort to work with us to meet the needs of these properties and the hundreds of families that live there."

The $30-million rehabilitation comes under the direction of PRG Bedford-Stuyvesant Partners, a joint venture of Phoenix Realty Group and Shinda Management of New York. Over the next two years, each building is receiving new kitchens, baths, flooring, lighting, roofing, boilers, lobbies, balconies, windows and landscaping. "No tenants will be displaced during the renovations," explained Chris Bramwell, vice president of development for Shinda. "To keep families together, each building will set aside hospitality suites so anyone living in a unit being renovated will have access to kitchens and bathrooms." Construction on all three properties will be done by MDG Design & Construction.

Navigating an Intensely Complex Transaction

The sales transaction of the portfolio required intense cooperation among all parties. Heidi Burkhart, senior director of Eastern Consolidated, played a crucial role in coordinating efforts between PRG and BSRC as the details of public and private financing were carefully arranged.

Financing for two of the properties included the restructuring of their existing mortgages through HUD's mark-to-market program, and the third property included the repurchase and extension of a ground lease that was sold to the city. In addition, the total purchase price included the settling of payables owed by the properties.

"This assignment was truly an extraordinary one taking over two years to complete, and I am proud to have been a part of it," noted Ms. Burkhart. "BSRC's main concern throughout the whole process was to preserve the housing, rather than to capitalize on the opportunity to take the properties out of the affordable housing programs. BSRC always had the community's best interest as their primary goal, and with PRG's acquisition, that commitment will remain intact."

Others instrumental in the transaction included Eastern Consolidated financial analyst Scott Ellard, attorney Joe Lynch of Nixon Peabody LLP and teams from Wachovia Bank and Citibank to provide construction and permanent financing for the project. Architects involved in the renovation include Meltzer/Mandel Architects and Robert Gaskin Architects.

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Phoenix Realty Group (www.phoenixrg.com) is a national real estate investment firm providing capital and expertise to urban developers focused on middle-market, for-sale and rental housing; low-income tax-credit housing; and mixed-use and commercial projects. Phoenix Realty Group has attracted investments from many of America's leading pension funds, banks and insurance companies, and currently manages private equity and tax credit real estate funds that represent $3.5 billion in housing and commercial real estate.

Founded in 1981, Eastern Consolidated has emerged as one of the country's preeminent full-service real estate investment services firms, combining an unrivaled expertise in the greater New York marketplace with a worldwide roster of institutional and private investor clients. Over the years, it has been responsible for the acquisition, disposition and finance of all types of properties, including office and apartment buildings, lofts, factories, hotels, shopping centers, commercial and residential development sites, taxpayers, parking garages and lots, retail condominiums and air rights transfers.