East 3rd Street
Magnus Capital is in the final stages of an exclusive, off-market negotiation to acquire the Property. In anticipation of the final purchase agreement being issued in the coming days, Magnus is seeking a firm expression of interest from investors to participate in this offering.
The draft contract and associated transaction agreements can be reviewed in the ‘Supporting Documents’ tab of the Offering Page and/or are available upon request. Magnus does not expect there to be material changes to these documents and thus encourages investors to use them as the basis of any questions they have.
The subject property is comprised of two contiguous buildings containing 47 residential units located at 73 – 75 East 3rd Street in the East Village neighborhood of Manhattan, New York.
The asset is currently owned by an overseas investor and has mismanaged the property. These errors provide Sponsor an opportunity to add value to the property.
BUSINESS PLAN HIGHLIGHTS
The Sponsor has underwritten a value-add business plan that will address these opportunities and reposition the asset as an upmarket rental:
Cosmetic Unit Upgrades: Primary emphasis on bathrooms, secondary emphasis on paint, trim and lighting packages.
Duplexed Units: Combine two basement units with the parlor-level units above to form two (2) two-bedroom, two-bathroom units.
Rent Roll Optimization: Converting month-to-month tenancies to traditional 12 or 24 month leases to reduce cash flow volatility.
Add Building Amenities: Installation of rooftop cabana with solar canopy. Install virtual doorman service and package lockers for ease of guest entry and accepting FedEx / UPS deliveries. Laundry facility to be installed at each stair landing by utilizing unused shaftways.
Improve Curb Appeal: Upgrade facade and other areas with new lighting, paint, and pull packages.
Please see below for supplemental notes to the Business Plan.
1) Below Market Rents
In place rents at the property are approximately 27% below true market value, creating a significant opportunity to increase rental revenue through targeted unit upgrades. This renovation budget is reflected in the total project cost.
2) Existing Lease Terms
Approximately 50% of the current leases are on a month-to-month term, creating unnecessary volatility in monthly revenues. It is almost unheard of for such a condition to exist in a neighborhood as strong as the East Village.
The Sponsor will harmonize the rent roll so that at least 90% of leases are on standard lease terms, usually between twelve to twenty-four months. This proactive management of the rent roll will provide (a) a more predictable source of rental revenue each month, (b) more accuracy in timing rental increases, and (c) an opportunity for more leasing activity during the busier months.
3) Historical Use of the Property
In previous years, the current ownership has been cited by the City of New York for code violations, specifically for their use of the property for non-residential purposes. The Sponsor has conducted its due diligence of the matter and has identified proprietary means to ensure that such historical issues will not affect its own business plan going forward. The cost of this due diligence and related filings required with the City of New York are reflected in the project budget.
“Boasting the best of, well, everything, the East Village’s inexhaustible grid of beyond-hip bars, bookshops, cafes, clubs, and galleries cater to even the most exacting tastes. As stylish as it is, the East Village preserves a laid-back attitude so even outsiders feel welcome when in this classic New York City neighborhood. From early morning to late-late night, the East Village brims with activity for socialites and scaliwags alike.”
– Airbnb.com (https://www.airbnb.com/locations/new-york/east-village)
“The neighborhood with the highest concentration of bars in the city (if not the world) scores off the charts in all the expected areas: retail diversity, restaurant density, proximity to nightlife, and desirability to the creative classes, with only schools and affordability truly lacking. With a typical two-bedroom running at about $3,300 per month, it’s expensive. But thanks to nearby NYU, the East Village has more income and ethnic diversity than most of its neighbors.”