Cheshire Group, Sterling Equities form venture to buy co-ops, condos.

The Cheshire Group and Sterling Equities have formed a new venture to acquire cash-producing cooperative and condominium units throughout New York City and its suburbs.

The two firms plan to invest $50 million over the next two years in the acquisition program. Sterling will inject capital from Sterling American Properties II L.P., a $150 million real estate investment fund.

Two purchases have already taken place, according to Susan Hewitt, Cheshire's president. Cheshire acquired 326 cooperative apartments in 12 buildings in Southern Westchester and Rockland counties from Hudson Palisades Associates; nd 17 co-ops were purchased at 2711 Henry Hudson Parkway in the exclusive Riverdale section of The Bronx from Henry Hudson Equities.

The acquisitions mark a new direction for Cheshire, noted Hewitt - from a company primarily involved in purchasing non-performing underlying co-op mortgages and revitalizing deteriorated buildings to a major investor in well-functioning co-ops with positive cash-flows.

"Since its founding in 1993, Cheshire has pioneered the co-op 'white knight' business, buying and restructuring more than $38 million in underlying mortgages debt because of sponsor default," she said. "Now, we have embarked on a new program of acquiring performing shares from solvent sponsors. With the help of funding from Sterling American Properties II, we expect this new aspect of our business to grow substantially over the next two years."

In conjunction with various third-party partners, Great Neck, NY-based Sterling Equities has acquired more than 6,700 residential apartments and developed about three million square feet of commercial property in major metropolitan areas around the U.S., according to Vice President Thomas Osterman.

This does not include assets acquired by Sterling American Property L.P., its first investment fund, which, together with co-investors, made 10 investments totalling $2 billion in real estate assets in 45 states before its investment period ended in 1995.

"Our new investment fund, Sterling American Property II L.P., is currently acquiring multi-family, office, retail and industrial properties throughout the U.S. with purchase prices ranging from $10 to $100 million," said Osterman.

The Cheshire Group is a Manhattan-based investment firm specializing in restructuring underlying co-op loans, and the acquisition, sales and marketing of unsold cooperative and condominium apartments.

In addition to the new acquisitions in the northern suburbs and in Riverdale, the firm and its affiliates also own unsold co-op shares throughout Manhattan, Queens, Brooklyn and Staten Island, and is in contract for additional apartments in Hartsdale, NY.