Joseph Beninati’s Bauhouse Group is seeking an $80 million mezzanine loan to fund his troubled residential skyscraper project at 3 Sutton Place, according to investor documents reviewed by The Real Deal.
The upcoming tower at 426-432 East 58th Street, which is facing fierce resistance from area residents, is now slated to be 68 stories tall — down from 80 stories in August. The total project size is slated to be 286,000 square feet, with condos slated to be priced between $5 million and $6 million. That’s according to a letter sent to potential lenders by the Carlton Group, which is trying to arrange financing for Bauhouse.
Sources said that Beninati has approached developers such as Michael Stern of JDS Development Group to partner up with him on the project. A source familiar with JDS said that though Stern had a preliminary discussion about the project, talks did not progress past that point. Reached for comment Friday, a JDS spokesperson said the firm was “definitively not involved” with the project. Douglas Elliman chair Howard Lorber is acting as a consultant on the project, according to the letter. A spokesperson for Lorber couldn’t be immediately reached for comment, and a spokesperson for Elliman declined to comment.
Bauhouse assembled the site and the necessary air rights for about $70 million, city records show. According to the letter, the project’s total pre-development costs will be $231 million, which includes a $71 million first mortgage, the $80 million mezzanine loan, and $80 million of equity. Total construction costs are slated to be $526 million, which includes $120 million in EB-5 funds.
Foster + Partners is slated to design the tower, according to previous news reports, but there was no mention of Foster in the letter. Representatives for Bauhouse declined to comment, as did representatives for Carlton.
Bauhouse has struggled to secure financing for the tower. In August, he told the New York Times that he had been searching for a joint-venture partner for months, and if one “doesn’t show up, I’ll have no choice but to sell.” Adding to his woes are area residents, who have formed an alliance against the project and accused Beninati of misleading them about the project’s size.
The Real Deal reported Thursday that local lenders are becoming far more wary of financing high-end condo projects, given what they see as a double-whammy of oversupply and a slowdown in luxury sales.
There are a limited number of providers for high-end projects, “especially if the ask is a high loan balance of more than $100 million,” said David Eyzenberg, a principal in the capital markets group at Avison Young. “Structured capital in the form of mezzanine debt and preferred equity will continue to plug the capital gap,” but new sources of funding, including EB-5 and private operating companies, will join the established sources of capital in the space, he said.
Source: The Real Deal