Urban Standard Capital Launches $100M Condo Conversion Fund Targeting New York Market

Urban Standard Capital, a New York-based real estate private equity manager, has launched a targeted $100 million fund to acquire unsold condominium units in New York City and potentially in other markets, the firm announced.

The fund is designed to address a specific market dislocation created by the COVID-19 pandemic, which has slowed condo sales and left many sponsors unable to meet a state-mandated sales threshold required to advance their conversion projects.

Fund Strategy and Market Rationale

Under a 2018 New York State law, a sponsor must sell 15% of the units in a proposed condo conversion before the project receives regulatory approval. The pandemic's dampening effect on condo sales has made that threshold difficult to reach for many developers.

"Many condo developers are sitting on product they can't sell at the moment," said Seth Weissman, founder of Urban Standard Capital. "[Meeting the 15% threshold] will enable sponsors to rent out the remaining unsold units in the interim to generate cash flow."

Urban Standard Capital is raising capital from institutional and high-net-worth investors to acquire unsold units at an estimated 25% to 30% discount to market value, according to Weissman. The firm intends to rent the acquired apartments in the near term to generate current income, then sell the units once market conditions recover.

"The cash flow from the rental income would be largely sheltered from depreciation and the capital gains would be long term," Weissman added.

Fund Size and Initial Deployment

The fund's initial target is $100 million, with the potential to expand the strategy through additional capital from Urban Standard Capital's existing base of high-net-worth and institutional investors. At launch, the fund is expected to be capable of acquiring approximately 50 units.

While the primary focus is New York City, the firm indicated the strategy could extend to other markets.

Firm Background and Existing Platform

The new fund is consistent with Urban Standard Capital's broader community-based approach to lending and investing. Weissman noted that the firm's lending business had received numerous inquiries from sponsors needing to refinance construction loans on condo projects and meet the 15% sales threshold — a pipeline that informed the fund's creation.

In addition to the new condo conversion fund, Urban Standard Capital invests through three discretionary private equity funds focused on credit, value-added repositioning, and ground-up development. The firm has also been an active lender at a time when banks and other institutions have pulled back from the market, according to Weissman.

On the lending side, Urban Standard Capital originates loans ranging from $5 million to $15 million. For value-added investments, the firm targets properties of eight to twenty units that require renovations or lease-up activity.

Weissman, who previously worked at Perry Capital and Goldman Sachs, started the firm as an equity investor focused on value-added deals in the Manhattan and Brooklyn markets. Approximately five years ago, Urban Standard Capital expanded into lending on the same asset types.