Midtown dorm deal revitalizes local college.

A unique partnership will provide 500 desperately needed dorm rooms for Marymount Manhattan College students while netting developer Arun Bhatia 42 luxury residences on the upper 15 floors of a new, 46-story Midtown high rise.

The mid-block project on 55th Street, to be constructed just east of 919 Third Avenue, was designed by noted architect Costas Kondylis. 'The building on top of a building' provides for entirely separate entrances, lobbies and elevators to serve the two uses of the 170,000 square-foot sliver.

Marymount Manhattan College will own its 70 percent, comprising 120,000 square feet, as a condominium interest.

When 231-235 East 55th Street is opened for occupancy in the fall of 2001, it will provide Marymount with a long-term solution for the students who have been housed in four different locations in three boroughs. Currently, students live at the St. George in Brooklyn, on Roosevelt Island, at the 92nd Street Y and in another Manhattan location.

The urban school itself is located at 221 East 71st Street and serves a diverse student body. Of its 2,500 students, President Regina Peruggi said 45 percent are of African-American and Latino heritage, while their ages span from 18 to 75.

But over the last ten years, drawn by the resurgence and safety of New York City, its out of town population has swelled from 70 to 500. To accommodate them, the college has had to scramble for sleeping space and transportation, and contend with continuously rising rents.

President Peruggi said the new building is a great investment and will become an outstanding asset for the institution.

"The project did a lot for us," she said. The new dormitory will create an instant campus environment for the out-of-town students by grouping them in a stable, new building in a safe neighborhood close to the school.

Plus, the college administration won't have to contend with four different buildings, the varying ownership, payments, shuttle services and staffs.

The financing also converts "unstable rent payments and transforms them to stable debt service," Peruggi added.

Construction will be financed by a combination of the Dormitory Authority of the State of New York and private financing obtained by Bhatia.

The Dormitory Authority previously collaborated on a public/private construction for CUNY at the former B. Altman's site, but this is the first time it has done so for a residence project for an independent college.

The legal work was intricate and time consuming, the parties said, as all the various systems and parts of the building had to be covered within the financing and sales contracts.

But for Marymount, it took even longer to find the site. In 1997, a friend of the college introduced President Peruggi to developer Jack Rudin, who in turn introduced them to broker Joseph A. Grotto, chairman of Joseph A. Grotto & Associates.

"We had helped before on some sensitive matters and he had the faith and confidence that we could get the job done," said Grotto of the Rudin introduction.

But to fulfill his mission, he and his son, Joseph A. Grotto Jr., went on an exhausting search of dozens of sites over approximately 18 months. That's because the college's overtures were consistently shuffled aside when private developers stepped up to pay more.

"It was complicated by the obvious: they had no money to put down for a dormitory space, and the need was tremendous because the kids were spread off over various locations," said Grotto Sr. "They wanted to stay in Manhattan, and it would have been ducky to stay in walking distance."

The end result would also have to provide a student with a place to live for about $550 to $600 a month -- roughly $1,000 less than a current market studio apartment in a doorman building.

They nearly had a site on 42nd Street which would have integrated nicely with Marymount's main out-of-town draws: strong theater arts and communications programs. But it was lost to another developer.

Then Grotto called Robert I. Shapiro, a broker with City Center Real Estate who is often involved with distinctive but quiet deals that involve transferable development rights.

"For the college to survive, they needed the dormitory,." said Shapiro. "New York is a hot place to go to college. They don't want to go to a place with ivy growing on the wall -- they want a place where the arts are. Where is a theater program going to be, in the boondocks?"

Shapiro had worked with Bhatia on the development of The Strand at 500 West 43rd Street -- which was also designed by Kondylis -- and most recently on a midtown assemblage that was resold to a hotel group.

"He's a very savvy developer," observed Kondylis.

Since 1980, Bhatia has developed $319 million in new hi-rise cooperative and condominium buildings, and rehabilitated and sold over 1,000 units in New York. These include The Park East at 233 East 86th Street, and The Dunhill at 401 East 84th Street. He also rehabbed and rented 750 units in a landmarked Philadelphia tower.

Shapiro was familiar with the 55th Street site which Bhatia had assembled, hoping to create his own extended stay hotel. The site's C6-7 zoning allows such a project a 15 FAR -- 50 percent more building than what would be permitted for a straight residential use.

But the CMBS (Collateralized Mortgage Backed Securities) market had tanked in the summer of 1998, and bankers started looking askance at financing for both hotels and extended stay products.

City zoning, however, provides that a project for community use also qualifies for the extra FAR. Shapiro thought Marymount's needs could be fulfilled within the developer's project, and provide the zoning text tweak to get construction off the ground and the building over the nearby rooftops.

"Marymount had looked at upteen different things," Shapiro recalled. "This [was] a better mousetrap."

The idea clicked for Bhatia, who could keep the most valuable top floors with their views; and the location pleased Marymount's board, which recognized the students could walk or easily take city buses back and forth from school, and would be centrally located in a great lively neighborhood close to shopping and an easy jaunt to the theaters.

Negotiations began in January 1999, and a contract was signed in July 1999. The law firm of Greenberg Traurig represented Marymount Manhattan College, while Willkie Fan Gallagher represented Arun Bhatia Development.

By creating the condominium interest, Marymount was able to obtain New York State Dormitory Authority financing, plus, as a not-for-profit, its portion of the building can be exempted from city real estate taxes.

The college also hired JP Morgan, which was represented by the law firm of Orrick Herrington & Sutcliffe, to assist them with the structuring of the Dormitory Authority transaction. Jones Day Reavis & Pogue represented the Dormitory Authority, one of the largest sellers of municipal bonds in the country. "Any borrower can come to the Authority at any stage of the development," explained Gregory Lipitz, a financial analyst for the Dormitory Authority. "Marymount came to us at the end of the process and they knew what the plan of finance would look like."

The college also obtained credit enhancement from the Asset Guaranty Insurance Company, which agreed to insure the bonds.

It took approximately six months to get all the paperwork done for the straight tax-exempt bond sale financing, which encompasses the restructuring of other Marymount debt. It was completed in December for a total of $57 million, of which $39.483 million is directed to this project. The net interest cost representing the blended rate for the bonds is 6.18 percent.

At the request of Asset Guaranty, the Dormitory Authority will act on behalf of Marymount Manhattan as the owner's rep during the construction. HRH Construction has been hired by Bhatia as the construction manager.

"The unique characteristic was that the private developer will build the building and sell to Marymount the condominium interest in 33 floors," said Lipitz. The parties currently hold title as tenants in common which will be converted to the appropriate condominium interest.

"The trick of the deal is that [the price] was not computed on cost per FAR, but cost per bed," explained Shapiro. "The configuration of the building was such that it allowed for the maximum number of dormitory rooms."

Kondylis is recognized for his skill in designing modern yet classic structures with superb apartment layouts. Among his designed projects under construction are Donald J. Trump's Trump World Tower, the. Brodsky/Lehrer BridgeTower Place, and Silverstein Properties' River Place.

"It's a building on top of a building," explained Kondylis of this one, which will be fully sprinklered throughout. "[Bhatia] allows us to do a very nice building. He is very meticulous, very hands on."

Most dorm rooms will have two bedrooms with a shared central study, small kitchenette and bathroom. There will be additional lecture rooms, student lounges, a health club and of course, wiring for computers. The lobby will have a 24-hour security attendant, and according to the college, there will be two resident directors and one Resident Assistant (RA) for each 30 students.

Bhatia's top 15 floors will consist of a variety of terraced luxury apartments and penthouses. "The upper part is so high off the ground it has great, all around views," said Kondylis. The residents will be serviced by an express elevator from their own private doormanned lobby and traditional, canvas canopied entryway.

"It's a tiny narrow building and he's really done a job with organizing the space for us," said President Peruggi.

Overall, it appears as a simple structure, with several slight setbacks as the tower rises. The entrance facade is also set back from the streetwall, creating a small courtyard effect. "It's a slender tall building with an elegant silhouette," Kondylis said.

The outside will be clad in a peach pastel brick, "that gives it a soft and warm glow," explained the architect. "The rest is glass, with metallic silver mullions."

Ground breaking is scheduled to take place on April 11th, the day before the Real Estate Board of New York announces the winners of its annual Deal of the Year awards. Brokers Shapiro, Grotto and his son, Joseph A. Grotto Jr., are all previous award recipients. This time, the trio is competing in this deal against a dozen other 1999 deals.

But win or lose, said Shapiro, "[Soon] the kids will have a new building. They are going to live better than most New Yorkers."