3Eleven (311 11th Ave) – Hudson Yards Skyscraper Multifamily Case Study

3Eleven (311 11th Ave)

1. Asset Overview

• Property Type & Class: 60-story Class A high-rise multifamily tower, delivered in 2023 (opened May 2023). Constructed with a reinforced concrete superstructure and glass façade, the building features extensive amenities and high-end finishes.

• Location: 311 11th Avenue, at West 29th Street on the border of West Chelsea and Hudson Yards in Manhattan. Prime location near major employers (Google, Amazon, BlackRock, etc.) and attractions (High Line park, Hudson Yards shopping).

• Unit Count: 938 rental apartments (approximately 703 market-rate units and 235 affordable units under NYC’s inclusionary housing/421-a program). Unit mix comprises studio, one-bedroom, and two-bedroom layouts. (The affordable units are income-restricted: 10% at 40% AMI, 10% at 60% AMI, 5% at 120% AMI.)

• Building Size: ~940,000 SF of gross building area (including ~60,000 SF of luxury amenity spaces and ~15,000 SF of ground-floor retail). Average unit size is roughly ~1,000 SF gross. Ceiling heights are above standard, and all units include in-unit washer/dryers and high-end appliances.

• Developer / Sponsor: Douglaston Development (developer/GP) in partnership with Ares Management (major equity investor). The project was a ground-up development on a 99-year ground lease signed in 2018. Construction began in 2019 and the building was completed in 2023.

2. Development Cost and Loan Summary

• Total Development Cost: Approximately $600 million was invested to develop 3Eleven (construction from 2019 to 2023). The project benefits from a 35-year 421-a tax abatement, reducing property taxes in exchange for the affordable housing component.

• Refinancing & Loan Package: In mid-2024, the sponsors refinanced with a $560 million debt packaget. This included a $500 million senior CMBS loan (single-asset CMBS, NYC Trust 2024-3ELV) co-originated by Goldman Sachs (60%) and Wells Fargo (40%), plus a $60 million mezzanine loan.

• Loan-to-Value (LTV): The $560M financing represents roughly 60% LTV on the appraised value (~$930 million) of the property. (The senior $500M mortgage alone equates to ~54% LTV, implying a ~$930M value or ~$991K per unit valuation.)

• Interest Rate & Term: The senior loan carries a floating interest rate (initial ~6% per annum) with a two-year term plus three × 1-year extension options (up to 5 years total). The loan is interest-only (IO) for the entire term, with the borrower required to purchase an interest rate cap. The mezzanine debt likely carries a higher rate (assumed high single-digits).

• Debt Service & Structure: Monthly debt service is interest-only, roughly $2.5 million on the senior loan (at ~6% interest) plus an estimated ~$0.5 million on the mezzanine loan – totaling approximately $3.0 million per month in combined debt payments. The refinance proceeds retired the prior $415M construction loan and funded a $115.5M cash equity recapitalization to the sponsors(a cash-out, reflecting value creation).

• Loan Covenants: The CMBS loan was structured with debt yield and DSCR tests typical for single-asset CMBS. Notably, the deal was underwritten at a 7.4% debt yield (NOI/loan) and a stressed DSCR of ~0.84× (Fitch’s stressed scenario), reflecting the interest-only, ground lease burden and conservative assumptions. The presence of the ground lease ($7.8M/yr rent) and initial lease-up concessions were key considerations in underwriting.

Table: 3Eleven Refinance Loan Terms & Metrics

Loan Amount (Senior + Mezz)	Total LTV (on $930M value)	Interest Rate	Term (Initial + Ext.)	Amortization	Debt Service
$560 million (=$500M + $60M)	~60% LTV	Floating ~6.0% initial(SOFR-based)	2 + 3 × 1-yr extensions	Interest-Only (no amort.)	~$3.0M/month IO (approx.)

3. Unit Mix and Rent Roll

The property offers a mix of studio, one-bedroom, and two-bedroom apartments, catering to young professionals and couples in the tech and finance sectors. Below is a breakdown of the unit mix, asking rents vs. effective rents, and rent per square foot. (Market-rate units are the focus, as affordable units have income-capped rents.)

Table: 3Eleven Unit Mix, Rents, and Net Effective Rent/SF (Market-Rate Units)

Unit Type	Count	Avg. Unit SF	Asking Rent (Monthly)	Effective Rent (Monthly)<br>Net of Concessions	Effective Rent<br>$/SF (Annual)
Studio	~250	~500 SF	~$5,000	~$4,300 (with concession)	~$103/SF/yr
1 Bedroom	~500	~700 SF	~$6,000	~$5,150 (with concession)	~$88/SF/yr
2 Bedroom	~180	~1,000 SF	~$8,500–$10,000	~$7,300–$8,600 (with concession)	~$88/SF/yr
3 Bedroom (Penthouse)<sup>1</sup>	<10	~1,600 SF	~$25,000	~$21,500 (with concession)	~$161/SF/yr
Total/Average	938 units	~800–1,000 SF avg	–	–	–

Select top-floor penthouse units; not part of initial lease-up but later released at ultra-luxury price points.

• Initial Lease-Up Concessions: During initial lease-up, management offered 2 months free on a 14-month lease(equivalent to ~14% rent reduction) to attract tenants. This concession is reflected in the effective rentsabove. For example, a 1BR asking ~$6,000 would net down to ~$5,150 effective. These generous concessions “gave everything needed to close deals” and helped jump-start absorption.

• Asking vs. Effective Rents: The asking rents shown are gross face rents for market-rate units. The effective rentsaccount for the free-rent concession. As lease-up completed and occupancy stabilized near 98–99%, concessions are expected to burn off, closing the gap between effective and face rents. Current market-rate rents at 3Eleven range from about $5,000 for studios up to $10,000 for larger two-bedrooms, with an average market rent around $7,661 per month.

• Rent per Square Foot: Net effective rents equate to roughly $85–$105 per SF per year for market-rate units, in line with Hudson Yards luxury rental norms. For instance, 1BR units average ~$90/SF/year (net), which is above the broader Manhattan average (mid-$70s/SF, see benchmarking below).

4. Absorption and Vacancy Trends

3Eleven’s lease-up velocity has been strong, reflecting high demand for new luxury rentals in Manhattan. Leasing commenced in August 2022 when the first units came online, and the building was substantially delivered by May 2023. The timeline below outlines the absorption and occupancy trajectory:

• Rapid Absorption: Within the first ~12 months of leasing, 3Eleven achieved stabilized occupancy. By June 2024, the property was 97.9% leased (approx. 98% physical occupancy), effectively reaching stabilization. In total, it took roughly 1 year from initial occupancy to lease ~938 units – an absorption rate of about 75–80 units per month on average during the peak leasing period.

• Vacancy Trajectory: As shown in the chart, the property’s vacancy rate plunged from 100% in mid-2023 to under 5% within ~6 months, and settled at a stable ~2% by mid-2024. The orange line (3Eleven) highlights this steep decline. By contrast, the overall Manhattan 4&5-Star market (blue line) had vacancy around 4–5% during the same period, and trending down slightly. 3Eleven’s lease-up significantly outperformed the submarket, quickly converging to essentially full occupancy (98%+) while the broader luxury market was ~95–96% occupied.

• Stabilized Vacancy: Management underwrites a normalized vacancy ~3% for the property long-term, in line with Manhattan luxury norms (i.e. ~97% economic occupancy). The current occupied rate is ~99% as of late 2024, with only a handful of units turning over at any given time. This low vacancy is supported by limited new supply in Manhattan and robust rental demand.

• Absorption Strategy: The quick lease-up was aided by upfront concessions (two months free) and targeted marketing to employees of nearby Hudson Yards corporations. Douglaston’s team noted that being one of very few new rental options in Manhattan at the time (“not a ton of new product…we’ve been doing very good”) allowed 3Eleven to fill units quickly despite its premium rents.

5. Financial Performance (Annualized)

Using the first 9 months of operations as a basis (mid-2023 through early 2024, during lease-up), we annualize the income and expenses to evaluate ongoing financial performance. All figures are normalized to a stabilized year basis.

Income & Expenses: With ~938 units and near-full occupancy, 3Eleven generates roughly $68–70 million in annual gross revenue (residential rent + retail + other income). Operating expenses (including maintenance, staffing, utilities, insurance, ground lease rent and net of tax abatement) are on the order of $25–27 million annually, yielding a projected NOI in the mid-$40 millions. The table below summarizes key per-unit and per-square-foot metrics:

Table: Annualized Income and Expense Metrics (Stabilized)

Metric (Annualized)	Per Unit	Per SF
Effective Gross Income (EGI)	~$72,500 per unit	~$75 per SF
Operating Expenses (incl. Ground Rent)	~$26,500 per unit	~$28 per SF
Net Operating Income (NOI)	~$46,000 per unit	~$47 per SF
Operating Expense Ratio	~37% of EGI	–
Debt Service (annual, IO)	~$35,000 per unit	~$36 per SF
NOI Margin	~63%	–
DSCR (NOI basis)	~1.3×	–
DSCR (Net Cash Flow basis)<sup>2</sup>	~1.0×	–
Occupancy Rate	~98–99%	–

Net Cash Flow (NCF) deducts capital reserves and ground lease payments from NOI. The NCF DSCR of ~1.0× indicates that after ground rent and reserves, cash flow just covers debt service – highlighting the importance of the 35-year tax abatement and rent growth for long-term debt coverage.

• Revenue: At stabilized levels, 3Eleven’s effective gross income is ~$68 million+ annually, which equates to about $72.5K per unit on average. This high per-unit revenue is driven by the luxury rent profile (averaging ~$7,600/month for market units) and the additional retail income (the 12–15K SF retail space is ~94% leased to a market/deli). Parking income (80 garage spaces) and amenity fees provide modest additional revenue.

• Operating Expenses: Total OPEX (including the $7.8M ground lease expense) is ~$25–27M annually. This equals roughly $26.5K per unit or $28/SF – a relatively high expense load, reflecting full-service amenities (doorman, multiple facilities staffed 8am-10pm), union labor, and NYC operating costs. However, note that property taxes are minimized by the 421-a abatement. Major expense components include property management (~3% of revenue), payroll for building staff (concierge, maintenance, security), utilities, repairs/maintenance, insurance, and ground rent. The operating expense ratio is ~37% of EGI (i.e., ~63% NOI margin), which is reasonable for a large NYC luxury tower (many Manhattan rentals operate ~35–40% expense ratios).

• Net Operating Income: Annualized NOI is on the order of $43–47 million, equating to ~$46K per unit. This implies a strong NOI margin (~60+%) thanks to high rents and the tax abatement. As lease-up concessions burn off, NOI is expected to increase slightly in the coming year. Current occupancy of ~99% also maximizes effective income.

• Debt Service Coverage: Based on NOI, the DSCR is roughly 1.3× for the new debt – in other words, NOI is about 1.3 times the annual debt service. However, after accounting for the ground lease payment and reserve escrows (reducing to true free cash flow, or “NCF”), the coverage is closer to 1.0×. The interest-only nature of the debt and the ground lease obligation mean the NCF DSCR is tight (~1.0–1.1×) initially. Lenders took comfort in the projected rent growth and the sponsors’ equity stake, but this low coverage underscores that any rise in interest rates or dip in NOI could require sponsor support. (Rating agencies stressed the loan with a debt yield of 7.4% and saw a stressed DSCR of 0.84×, illustrating the risk if cash flow fell short.)

• Capital Reserves: As part of the financing, reserves were set aside for outstanding landlord obligations and an earn-out escrow (~$4.5M. The ongoing capital expenditure reserve is assumed at ~$300 per unit annually (standard for new construction, given minimal immediate CapEx needs). These reserves have a minor impact on short-term NCF but are prudent for long-term maintenance.

6. Market Benchmarking Context

To put 3Eleven’s performance in context, we compare key metrics to the New York City (Manhattan) multifamily market, focusing on top-tier (4 & 5 Star) rental properties:

• Effective Rents (Per Unit & SF): Manhattan’s average asking rent hit ~$5,023 per month by late 2024, which equates to roughly $60K per year per unit (or about $75 per SF assuming 800 SF avg unit). 3Eleven’s market-rate units achieve $7,000–$8,000 per month on average, i.e. ~$85–$100 per SF – significantly higher than the city average. Even including affordable units, 3Eleven’s blended effective rent ($72K/unit/year) is ~20% above the Manhattan norm. This reflects the property’s luxury positioning and Hudson Yards premium. However, it’s worth noting that Manhattan rents overall grew ~5% year-over-year in 2024, and 3Eleven’s leasing benefited from this strong market uptick.

• Operating Expenses: For large Class A Manhattan properties, operating costs typically range from $25–$35 per SF/year (including real estate taxes, which often comprise ~1/3 of OPEX). 3Eleven’s $28/SF operating expense is in-line with other 4–5 Star high-rises, and actually lower on a net basis when considering the 421-a tax abatement (which saves millions per year in taxes). In comparable newer luxury buildings without abatements, property taxes alone can push OPEX above $30/SF. Thus, 3Eleven’s expense profile (excluding ground rent) is very competitive for its class. Its operating expense ratio (~37%) is also healthy relative to the typical 35–40% range for well-managed NYC multifamily assets.

• Occupancy/Vacancy Rates: Manhattan’s overall occupancy in stabilized multifamily is about 98.2% as of late 2024 – virtually the same as 3Eleven’s ~98–99%. Class A luxury buildings citywide saw high occupancy despite record rents, thanks to limited new supply. 3Eleven’s stabilized vacancy (~2%) is on par with the tight NYC market vacancy (~2–3% for top-tier buildings). During lease-up, 3Eleven outperformed typical absorption; many new projects take 12–18+ months to stabilize, and initial lease-up often involves elevated vacancy (5–10%) which 3Eleven quickly whittled down. The property’s ability to achieve sub-3% vacancy within a year is a strong result, indicating robust demand and effective leasing strategy.

• Market Valuation Metrics: Investment sale comparables for NYC multifamily show strong pricing even in a higher-rate environment. In 2023, Manhattan apartment buildings averaged about $722 per SF and around a 5.2% cap rate on NOI. Price per unit averaged roughly $500K–$600K (varying by location and asset class). By comparison, 3Eleven’s implied value is ~$989 per SF and ~$1.0 million per unit – well above market averages, reflecting its brand-new construction, luxury finishes, and 421-a tax benefits. Even relative to other 4-5 Star Manhattan high-rises, which might trade in the $700–$900/SF range and 4.5–5.0% cap rates, 3Eleven sits at the top end of the market on a unit and SF basis. This premium is partly due to Hudson Yards’ emergence as a coveted neighborhood and the building’s massive scale (which attracts institutional investors). It’s also influenced by the affordable housing component (tax abatement enhances cash flow, allowing a lower cap rate on market-rate portion).

7. Valuation Insight

Given the stabilized financials, we can derive an implied cap rate and value for 3Eleven, and benchmark it against the market:

• Implied Cap Rate: Using the annualized NOI of ~$45 million and the implied valuation of ~$930 million, the cap rate is ~4.8%. If we consider NOI before ground lease (adding back $7.8M, for ~$52.8M), the cap rate on a ground lease-adjusted basis would be lower, around ~4.0%. In essence, investors are pricing this asset at a sub-5% cap rate, which is slightly below the Manhattan average (~5.2% in 2023). This tight cap rate reflects the property’s trophy status, long-term tax abatement, and expectations of rent growth. It is in line with other new luxury Manhattan trades (4–5% caps are common for Class A multifamily in prime locations).

• Value per Unit: At $930M total value for 938 units, 3Eleven is valued around $991,000 per unit. This is roughly double the broader NYC average ($500K/unit) and well above even most Manhattan deals. However, considering the average market-rate rent ~$7,600/month, the value per unit is about 11–12 times gross rent(annualized). That Rent-to-Value multiple (~12×) is within a normal range (implies a ~4.5–5.0% yield). Many older Manhattan buildings trade at lower per-unit prices but also lower rents; 3Eleven’s high rent roll supports its ~$1M/unit valuation.

• Value per SF: The implied ~$990/SF valuation for 3Eleven is likewise higher than the Manhattan multifamily average (~$722/SF) by ~37%. Yet it can be justified by the premium rents ($/SF) and the fact that 3Eleven is essentially a turn-key core asset with minimal CapEx needs for years. For context, luxury condominium units in the Hudson Yards area sell for well above $1,500–$2,000/SF; at ~$990/SF, 3Eleven’s valuation as a rental reflects the cap-rate/yield requirement of investors, not a fundamental cost per SF issue.

• Exit Outlook: The current cap rate (~4.5–4.8%) is expected to compress slightly if interest rates decline, or expand if rates rise further. NYC rent growth projections (2–3% annually) and the step-up of ground lease rent in 2026 will influence future NOI. Benchmark vs. Market: Should 3Eleven be brought to market, it would likely command a cap rate at or below the NYC Class A average (perhaps ~4.25–4.75% range given the abatement shield on taxes). In dollar terms, a valuation of $950K–$1.05M per unit (>$1,000/SF) would be reasonable, putting the asset around $1.0 billion in value if marketed in a stabilized environment. This is consistent with the $930M appraisal; indeed, some reports have cited the tower “could be worth an estimated $930M” and potentially more as Hudson Yards matures.

In summary, 3Eleven (311 11th Ave) represents a blue-chip multifamily asset with strong cash flow and location fundamentals. Its initial performance has met pro forma expectations: rapid lease-up to ~99% occupancy, effective rents in the top 1% of the market, and solid NOI generation. The new financing at ~60% LTV provides modest leverage, though the ground lease and interest-only structure keep the true DSCR thin, a point to monitor. Market-wise, the property is a standout performer, exceeding city benchmarks in rent levels while matching the market’s low vacancy and operating efficiency. The implied valuation metrics (cap rate, $/unit) underscore its trophy nature. Investors and lenders will view 3Eleven as a bellwether for the high-end NYC rental market – combining public-sector incentives (421-a) with private capital to deliver much-needed housing at the upper end of the quality spectrum.

Sources:

• Kroll Bond Rating Agency (KBRA) report via Commercial Observer and Bisnow (refinance details, occupancy)

• Traded NYC and Multi-Housing News (financial package, project cost, rent roll)

• Bisnow “Inside 3Eleven” (lease-up insights, concessions, amenities)

• Yardi Matrix & NYC market data (average rents, occupancy, sale comps)

• MMCG Database

• CMBS Financial Statements