Real estate investors and the folks that finance them are counting on big changes along Canal Street.
Last year, a group of buyers led by Elli Ausubel, purchased 351 Canal St., a five-story, roughly 25,000-square-foot retail and loft apartment building on the corner of Wooster Street for $24.8 million. Now the new owners are about to pour $17.3 million into renovating the fully vacant property on the bet that it can attract a major retailer to fill the ground floor space, and tenants for the high-priced rental apartments above.
The group just scored a bridge loan for that sum from Investors Bank in a deal arranged by the mortgage brokerage firm Eastern Union Funding. Among the improvements the owners are considering is knocking out the building’s second floor to create a grand ground-floor store space with 25-foot ceilings.
“They believe they can secure a marquee national retail tenant for this space,” said David Eisen, the broker at Eastern Union Funding who arranged the financing. “There are a lot of people banking right now that Canal is going to be the next big shopping corridor.”
Normally bridge loans, which are usually used to temporarily set up financing for an acquisition until plans can be made for longer term debt, carry a hefty interest rate. But Mr. Eisen said that Investors Bank lent to the project at 4.375% rate, a low rate that he said demonstrated the lender’s faith in the property’s potential.
“It was a real sign of confidence on behalf of the lender in both the borrower and also the way the neighborhood is poised to change,” Mr. Eisen said.
For years Canal Street has been seen as a shopping corridor with enviable foot traffic but one dominated by gritty stores that trade in discount—and bootleg—goods.
“Top-end retailers have been unwilling to go there,” said Michael Glanzberg, a principal at the SoHo-based retail leasing brokerage Sinvin.
But as SoHo rents have pushed higher, more stores are looking to peripheral areas like Canal Street for cheaper space. Real estate investors are banking that the area will one day be enveloped by SoHo, which is one of the city’s strongest shopping districts.
Jack Sitt, the son of the major retail landlord Joe Sitt for instance, earlier this year acquired a parking lot at Canal Street and Green Street, with plans to develop retail and possibly residential space on that parcel.
“I have been a naysayer in the past, but I do agree there’s a momentum,” Mr. Glanzberg said.