The transaction provides the hospital with long-term revenue, generates the capital for a renovation, and at the same time allows the hospital to avoid selling off a valuable piece of real estate.
The buyer will pay $1 million in annual rent for first 22 years, when the rent increases to $2 million, with other adjustments over time. Every 25 years there will be a fair market value assessment of the property. There is a $13 million upfront payment to the hospital.
The building, which mostly consists of studios and one-bedroom units, will be remodeled with new floors, kitchens, and bathrooms. Stonehenge Partners believes that the small unit size would keep living costs low and make the building an appealing option for Columbia students.
They expect the building to attract a variety of residents, including older undergraduate students and graduated students interested in living close to campus in a newly renovated building.
The deal appealed to the St. Luke's-Roosevelt board because it did not want to completely lose control of the asset. Many developers looked at the building with architects and engineers. The proposed deal was complex, and the hospital's board carefully weighed the financial strength of the developers and their offers' financial benefit to the hospital.
The hospital had other residential space at 515 West 59th Street, and relocated about 65% of the tenants to that building.
When demolitions and renovations are completed at 501 West 113th Street, the building will have 96 units and two commercial units on the ground floor, all generating income for St. Luke's-Roosevelt and its development partners.
The renovations will take approximately two years to complete.
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