What's the Deal | 103-105 Macdougal St, New York: Sean Lefkovits & Davean Holdings' $50M Mixed-Use Value-Add Play
By Traded Media
Deal details
General
➡️ Address: 103-105 Macdougal St, New York, NY 10012
➡️ Deal makers: Sean Lefkovits / Davean Holdings / Meadow Partners
➡️ Acquisition: 2020 @ $22M
➡️ Sale: 2023 @ $50M
➡️ Financing: All cash
➡️ Broker / Agents: Avison Young – James Nelson & Brandon Polakoff (Acquisition - 2020) David Ash – Walker & Dunlop (Sale - 2023)
Multifamily
➡️ Units: 68
➡️ # of Units renovated: 57
➡️ Rent growth: 100%
Retail
➡️ Rentable SF: 5,000
➡️ Asking rent PSF: $150
➡️ Lease terms: 10 year
Q1. What attracted you to make this deal?
We are opportunistic and are sharply focused on value-add opportunities in prime Manhattan and Brooklyn locations. 103-105 Macdougal is one of the most prime locations in all of NYC. It is in the epicenter of NYU both for the residential and retail portion. It is very rare an opportunity like this comes around, and the only reason was because it was an Estate Sale. We believed the only way this deal could go wrong at this price was if NYU went out of business. We knew NYC was resilient and wasn’t going anywhere.
The vacant retail was our biggest risk, but again given it was right around the corner from NYU on one of the most foot trafficked blocks in all of Manhattan gave us conviction that it wasn’t a function of IF we would rent it, but WHEN. With our strong broker relationships, we were able to lease the space within 6 months of closing on the property.
Q2. How did you close this deal?
No lender would touch this property given the mix of high vacancy on both residential and retail components, plus the time of purchase was smack in the middle of COVID. This is why we decided to raise a blend of private cash and get a bridge money loan to close all cash in a one-day closing.
There are several strategic factors that contributed to being able to execute this deal swiftly, in the benefit of our investors and all parties. Timing of the market, as always, played a key role.
Very few buyers were able or willing to purchase at time, and lenders were on the sideline because no one knew where the market was going. Our strong relationship with the broker who presented the deal to the buyer with a $22M same day contract closing proved to be crucial. Certainty of execution was the biggest component to the Seller and we gave that level of comfort and assurance to both the Brokers at Avison Young as well as the Seller.
Q3. What were some of the strategies you used to enhance the property’s value?
The property was delivered with 65% of the apartments vacant, which allowed for immediate renovation of the vacant units. We finished renovating and renting them out within a 6-12 months period. Average rents in 4-bedroom units went from $4-5K to $9,5K. 1-bedrooms were going for $4,500 post renovation. After installing a much needed resident storage facility, virtual doorman for delivery and new washer / dryers both in the larger units and in the common areas, our leasing team was having to navigate bidding wars over the units.
Q4. What made this deal special?
Location, location, location. This property would never have hit the market if it was not for it being an Estate Sale. It is very rare to be able to purchase such an incredibly located multifamily building in NYC that has been in the family for 40+ years. Fast forward 3 years and we were able to beat our own underwriting estimates and lease-up periods for both the residential and retail components. This past Summer, we sold 103-105 Macdougal for $50M to a foreign family student housing buyer, more than double what we paid for just 3 years ago.
Q5. What are your key takeaways from this deal?
Flight to safety, both nationally, but more crucially internationally, has set in. And there’s very few assets and regions around the world considered ‘safer’ than prime NYC Real Estate. Still, when we bought it back in 2020, it wasn’t obvious, even less so a guarantee, that the market conditions were going to turn around any time soon. Our conviction in our abilities helped us focus on what we do best, creating value for the building and tenants while generating attractive returns for our investor base.
Q6. What are you planning for the next 12-24 months? What’s your investment criteria?
We are always active in every market. We are focused on purchasing larger multifamily properties in Manhattan. There have been fewer opportunities given the quick rise in rates, but we are seeing several attractive deals now that we have contracts on and looking to close shortly.
Q7. What advice would you give a CRE pro starting in the industry?
There is no better time to start than now. In general, I always tell everyone to start whatever it is they are thinking of doing, and just get started and not delay it. Everything will fall into place, but the hardest part is taking that first step. But especially in today’s tumultuous market, the timing is perfect because velocity is down and you will be learning in one of the most difficult real estate markets the New York City has ever endured. When the tide turns, and it will, you will be ready to pounce and take advantage of all the activity.
About Davean Holdings (learn more):
Davean Holdings is a New York City-based real estate investment firm focusing on executing value-add and opportunistic strategies. An owner, operator and developer of commercial real estate, the company actively manages investments on behalf of a global investor base.
The company was founded in 2017 by David Lloyd and Sean Lefkovits, who bring an extraordinary level of real estate knowledge and experience to the table. Prior to founding Davean Holdings, David and Sean completed over $2B in New York City real estate brokerage transactions. Their transactional experience, vast network and diverse skill sets have directly translated into successfully sourcing and repositioning real estate assets. Extremely hands-on and detail oriented, both managing principals are involved in every step of the acquisition and redevelopment process.
