Silverstone prices Brooklyn lease-up risk with preferred equity

Silverstone Partners has put preferred equity to work on a Brooklyn lease-up, closing an investment to recapitalize One Sunset, a newly built 187-unit, 14-story apartment building in Greenwood Heights, according to IREI. The capital, invested through a partnership with Related Fund Management, is meant to carry the property through lease-up and stabilization.

One Sunset was built under the final iteration of the Affordable New York (421-a) program, with 25 percent of its units designated affordable, and its sponsors—described by Silverstone as a co-sponsorship between two prominent local developers—have put significant equity into the project, which Silverstone says credit-enhances the preferred position. The building’s mix of one-, two- and three-bedroom apartments offers 360-degree views that take in the Brooklyn waterfront.

Manoj Ramprakash, Silverstone’s managing partner and founder, said in the announcement, “By maintaining a flexible mandate, we can navigate the capital stack to capture the best relative value and structure, which this transaction perfectly demonstrates.”

The class A label describes the building, while the preferred equity position prices the execution risk. A 421-a building with 187 units to lease and a quarter of its rents restricted carries execution risk a stabilized comparable does not, and sponsor equity beneath the preferred position gives it a cushion. Multifamily capital is splitting into two markets, one for stabilized assets and one for lease-up risk, and Silverstone is getting paid to stand on the lease-up side. The repricing that matters for One Sunset will happen at the leasing finish line, not at this closing.