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Standard Buys Polyclinic Apts for $110.3M in Affordable Housing Preservation Play

Deal Guarantees Property Will Remain Affordable Housing for Next 30 Years
October 6, 2017
Standard Communities, the affordable housing division of Standard Property Company, has closed on its $110.25 acquisition of the Polyclinic Apartments located at 341 W. 50th St. in New York City from Starrett Corporation.

The buyer worked with the City to get Article XI funding and also brought low-cost, private and institutional capital into the deal using debt and equity structures, according to Scott Alter, co-founder of Standard Property Company. The company utilized neither Low Income Housing Tax Credits (LIHTC) nor any public funds in the transaction, he noted.

Citing the apartment building's high-demand location along 50th Street between 8th and 9th Avenues, Alter told CoStar News that the asset was at risk of turning to market-rate housing stock. The deal will keep the Midtown multifamily asset designated as affordable housing for more than 30 years, he added, calling the sale without using LIHTCs a win for the city, for residents and Standard Communities as a preservation specialist, especially in light of the current climate surrounding affordable housing given tax reform efforts.

"The big picture of affordable housing has been really affected by pending tax reform. The value of Low Income Housing Tax Credits have been reduced by the uncertainty that surrounds Federal tax policy going forward," said Alter. "Although the value of these credits has stabilized somewhat in recent months, they are still worth less than they were prior to the election. Tax Credit Investors are worried that tax reform could reduce their returns, so they are being more conservative in their assumptions given the lack of clarity. The uncertainty around tax reform brought a shock to the affordable housing system."

Purchasing Polyclinics Apartments marks the sixth transaction to preserve affordable housing that Standard Communities says it has closed this year without using public funds, totaling 1,025 apartment homes. Its parent company, Standard Property Co., owns more than 50 retail spaces and 10,000 residential units across the county, more than 7,000 of which are maintained as affordable housing.

Originally built as a hospital in the 1930's, the 11-story, 164,285-square-foot building was converted to multifamily units in 1979 and is comprised of one-, two- and three-bedroom apartments.

Of the 151 units at the building, 150 will be kept for low-income families. Those units will be covered under the U.S. Department of Housing's (HUD's) project-based Section 8 Housing Assistance Payments contract, which caps tenants' rental payments to 30 percent of their income. Standard Communities said in a release that the U.S. Department of Housing (HUD) assisted with many aspects of the transaction.

"Providing the tools that leverage private capital to preserve affordable housing represents the kind of effective public-private partnership that Secretary Carson and this administration have championed," noted Lynne Patton, HUD regional administrator for New York and New Jersey. "[The deal] will guarantee 150 affordable units in one of the nation's most expensive rental markets for years to come."

Shimon Shkury, Howard Arber, Shimon Mike Tortorici and Victor Sozio with Ariel Property Advisors brokered the sale.

Please see CoStar COMPS #4020920 for additional information on this transaction.

Diana Bell, New York City Market Reporter  CoStar Group   
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