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Jones Lang LaSalle (“JLL) has been exclusively retained to facilitate the sale of The Nathaniel, located at 138 E 12th Street, New York, NY (the “Property”), a 9-story, 85-unit mixed-use property in East Village with an 18,000 SF grocery store leased to Westside Market. The Property represents a rare opportunity to purchase an institutional asset with upside in the short term. The Property’s unparalleled location near Union Square provides easy commutes throughout the city via 8 MTA train lines and offers the confluence of trendy East Village with classy Gramercy Park. The next owner can drive rents without renovations as there is an 18% spread between in-place preferential rents and maximum legal rents.
Needle in a Haystack
The Nathaniel is the “needle in a haystack” of tenement buildings in East Village as it offers Class A units and amenities yet benefits from the confluence of East Village and Gramercy Park.
Ability to Push Rents
The top comp in Union Square (2 blocks away) is currently achieving $7,000/month and $143/SF, which represents a 31% rent premium to The Nathaniel. Also, there is an 18% spread between in-place preferential rents and maximum legal rents.
The existing 9th floor, approximately 8,000 SF, is currently a “shell” and can be easily converted to standard units or dorm style units. Also, there is an opportunity to develop 20,000 ZSF as penthouse floors as well as relocate the existing bike room to add approximately 500 SF of ground floor retail space.
The average household income of in-place tenants is $389,000 suggesting that rents can be pushed at least 10%.
Unregulated Units in 2025
100% of units are market rate today; however, when the 421a abatement expires in June 2025, there will be no limit on renewal rent growth allowing the buyer to blend to a higher rent growth.
Outsized Cash on Cash
Due to the 421-A abatement in years 1-3 coupled with the higher going in yield attributable to the ground lease, the property can generate high cash on cash returns if capital expenditures are limited.
In addition to organic demand from working adults, there are over 75,000 students nearby across six higher education institutions all of which lack purpose-built student housing, thus providing the next owner the opportunity to capture this demand through a repositioning or master lease.