YL buys $95m portfolio.

Flush with condos from its purchase of soon-to-be converted rental property, The Sheffield, last January, YL Realty's focus on acquiring rental buildings continued last week with the $95 million acquisition of a residential portfolio from Sterling Equities. Consisting of ten Greenwich Village properties totaling approximately 254K s/f and an additional 27K s/f of retail space, the group of buildings, called the Clearwater Portfolio, is the firm's second purchase of rental assets in as many months after July's high profile acquisition of

The Related Companies' Columbus Green and Parc Place for $165 million.

Nathan Halegua and Marty Newman of Jonis Realty joined YL in the deal as joint venture partners, as did Serge Hoyda, who along with Kent Swig was a partner with YL Realty in the acquisition of The Sheffield.

Despite the current condo craze that has gripped the city, YL Realty, named for its founder and principal Yair Levy, has been eager to secure rental properties whose cash flow has the potential to fuel the firm's ongoing expansion. According to YL's vice president Daniel Deutsche, The Clearwater Portfolio offers just such an income stream and one that has the potential to grow when some of the rent stabilized apartments turn over and can command lofty market values. The portfolio also has the added bonus of air rights, which affords YL the opportunity to build additional floors on most of the buildings.

"It offers us a lot of possibilities and, at the very least, we can refinance it and pull money out in the future," Deutsche said. "Having rentals balances our portfolio."

Levy narrowly lost out on a recent bid to buy the Manhattan House, a 19-story, 587-unit rental apartment building that wound up being taken by real estate mogul, Richard Kalikow, for $636 million, a figure that breaks down into more than a million dollars per apartment; a record.

"We were in it to the end, but the price just went too high," Deutsche said.

With the added cash flow from his new acquisitions, Levy may have bulked up enough now so that no residential property is out of reach and may even be in a position to add commercial property to his holdings, Deutsche hinted. Deutsche admitted how hard it would be however to se cure properties in the commercial sector as prominent as The Sheffield, Columbus Green and Parc Place are in the residential market.

"The companies buying big commercial properties these days have the financial flexibility or wherewithal to buy into a 3 cap and wait it out until they can turn it around and get more," Deutsche said. "We're not taking risks like that right now."

Deutsche revealed that the firm hadn't ruled out the possibility of eventually converting its rental holdings in the future. After all, it isn't as if YL Realty hasn't tasted the heady spoils of the searing condo market. According to Deutsche, the firm's nearly complete ground up condo development, 71 Nassau Street, has enjoyed brisk presales. Located in the burgeoning vicinity of Columbus Circle, The Sheffield, which Levy bought for $418 million, is sure to follow suit, although the firm doesn't have a definitive plan for the building's residential, commercial and retail spaces yet.

"We're expecting The Sheffield to be ready sometime in 2006," Deutsche said.

"Right now the project is in slow motion because it takes a long time to go through the building plans, but 71 Nassau Street is a great barometer about the sales market for condos and so we have a great feeling about The Sheffield.

"In the time since we bought it at the beginning of the year, it has already appreciated from about $600 per square foot to around $850."