Friday, December 19, 2014

Crown Heights Losing Its Mind: 672 St. Marks Avenue





Back before Halloween, we tried to warn that some big contracts were coming down the pipeline.  Among them, this unique 27' wide gem at 672 St. Marks Avenue.  While people are still hating on full-sized fixer-uppers pre-market for under $2.5M in Fort Greene, over in Crown Heights this 5-unit townhouse off of Nostrand Avenue closes for $2.9M.






Even one of the foremost local experts for the area said 6 months ago, "This is one of my favorite blocks in CHN, with a lot of architectural gems on it, but it’s a long way from a 3 million dollar block, no matter how fabulous the house is. That price is just greedy."

Another commenter added, "Price would be a game changer for the neighborhood and not many want to be the buyer who pays the highest price to date. Did I say needs lots of work?"

The highest price for a house on this block up until now was the 20' wide 627 St. Marks Avenue for $1.9M earlier this year, one of the highest ever in Crown Heights...




No wonder we were all about the Platinum Member fixer-upper at 660 St. Marks Avenue for under a million the year before...




But $2.9M?!?  Not in Brooklyn Heights, or Prospect Heights, y'all.  This is squarely in Crown Heights.  What does this say about the market??  Is the glass half-full or half-empty?  Is this $90K "under asking price" or the hands-down record for a townhouse in Crown Heights by almost a million dollars?  The answer...

It's both!!

Like we saw yesterday, 672 St. Marks Avenue narrows in the back which means 3-exposures, although giving up some of that monstrous 27' x 80' footprint on the top 3 floors in exchange.  Still... Worth it!  Even at this price, the estimated 7,500 sqft (the listing calls it that, and on only 3 floors?) is still under $400/sqft.  Try finding bones this unique for that cheap anywhere else in Brooklyn.  Heck, it's not even finished yet and this house still shines.  Can't wait until it twankles & glistens...




140 foot lot?  You don't see that everyday!  Even the backyard has a backyard at this house...




"25 rooms" up in this??  Jeezy said it best.




What's the move?  Who knows?  Even if you sell these as condos for a million a floor (lofty expecations), we can already hear everyone griping that you'll have to put a million into it and then there's zero meat on the bone.  So is this just the juiciest end-user piece you ever saw?  There's no rhyme or reason to some prices for premier flagship properties like these.  All the more reason we were happy to sink our teeth into 669 St. Marks Avenue across the street with the driveway & the two story carriage house...





"Hottest thing in the lot, that there mine."  And 672's pricing is among the many reasons why we thought it was okay to "overpay" for 669.

Now, hindsight is 20/20, but if you were in right place & the right time to pick up 672 St. Marks last year for the $1.1M cash it traded for, you'd really be flipping bricks.  "36 a thousand times, I'm doin' somersaults / Do it right & you can leave your whole summer off."

Let's sit back and think about this again.  $2.9M in Crown Heights!  Sure, the house is huge and unique, but it's not finished.  And this is a price people were too chicken to pay on a vacant 5-story 5-unit corner gem with parking in Clinton Hill!!




Just goes to show that premier properties will command premier prices, even east of Franklin Avenue.  But still, $2.9M for a fixer-upper in Crown Heights, no matter how sensational the house, is a shocker.  Where do we go next, Brooklyn?  We have officially seen it all.


Pro's:  uniquely huge townhouse with killer details on a great block, curb appeal, delivered vacant, ppsf isn't the worst, 

Con's:  record-breaking price, work to be done, where's the upside?, what's the move?

Ideally:  try to keep it in perspective, but feel free to lose your mind over this pricing



Thursday, December 18, 2014

Pro-Cro Price Jump: 557 St. Johns Place





A few months ago, we were super excited to hear about this off-market 6-Family on the same block as Franklin Park on the edge between Prospect Heights and Crown Heights.  Especially since it was being pitched as delivered vacant.  Sure, it's only 3 stories, but it IS 20' x 65' on a 131' lot and zoned to build as many as 10,000 sqft.  And did we mention, they can deliver it vacant?  So whether you buy & hold it or develop the heck out of it, there's upside to play with right out the box.  1BR's in the front and 2BR's in the back, depending on how you play it.  And you'll really have something.

But "developers" and "investors" who covet what others are doing are always pessimistic about doing what who they're coveting is doing.  Sounds crazy, we know.  It's like the opposite of "Everyone else is doing it, why can't we?"  They hated on the possibilities of expanding this building at 557, even though they salivate over expanded buildings right around the corner at 790 Classon Avenue...





Or 524 St. Johns...




Granted, those are larger pieces, but still.  Our architect/designer/contractor guy Eli of 242 Gates Avenue glory said that 8,000 sqft on 5 stories plus a penthouse would be feasible and the highest & best use for 557 St. Johns.  The investors said you'd need to add an elevator at that point; Eli says you wouldn't.  But don't take Eli's word for it.  He's only the sole person to bring $3M east of Classon for a townhouse, and a handful of other killer renovations selling in "fringe areas" for top dollar.  Oh, and he also expanded multiple stories onto this garage just east of Classon...




So it's nice to have someone actually doing it on deck to keep these can't-do investors in check.  Investors love the can't-do attitude.  They love having a problem for every solution.  And the best part of all is they get to hide behind that attitude under the guise of shrewdness.  But when we heard some investors notorious for bottom feeding had offers just under $2M and just over $2M on 557 St. Johns, we knew there'd be someone willing to pay more, so we had to take a look ourselves.    What we found was solid bones, some run-of-the-mill dated interior, and plenty of potential...






Beating the bottom-feeder price on this building didn't seem tough.  Like many of the best extra-deep buildings - including 711 Sterling Place, 245 Martense Street, and 1020 Park Place - 557 St. Johns narrows in the back allowing for windows on the side which mean more light & air for more bedrooms.  And you already know (or at least you certainly should) that price per bedroom is the most important metric in valuation for property in Brooklyn.  However, the trade off is, especially on a building that starts out at 20' and narrows significantly, you get a pretty skinny floor plate in the back...






Of course that too is a gift horse that's easy to look in the mouth.  When a building has a huge extension, it makes folks go, "But look how small the backyard is!"  So there's always a trade off.  Do you want more house and a smaller yard, or more yard and less house?  Do you want extra windows and bedrooms on the unattached side, or a wider floor plate and only 2 exposures?  You probably want your cake & eat it too.

How bad is $220/bsf with actual bones when a bombed-out garage across the street sold for $177/bsf this year at 564-570 St. Johns Place?




On top of all this upside on 557, they even had the other investor due diligence deal-breaker... the DHCR reports for the property.  In hand at the showing, with multiple free market apartments...




So with an offer in at $2.1M from bottom-feeders, and an increased asking price of $2.4M, we asked the owner what number got a deal done.  We were told $2.2M cash.  They insisted that got it done, so we shook on it.  We brought a buyer who offered $2.2M cash.  The offer was accepted & signed, and the buyer was awaiting a contract.  Then - without even a courtesy call to the buyer - the owner decided instead to list with a commercial broker in Manhattan who doesn't even market properties openly.  The new asking price?  $2.9M

Anybody can tell anyone any price that sounds higher.  Delivering that price is another story.  We don't doubt they'll land over $2.2M now, but there's that pesky six-figure commission now getting in the way.  If the trade off for listing the property was a ton of experience and exposure, we'd be on board.  However...

Let this be a lesson to sellers and buyers alike.  Buyers, just 'cause you find an off-market seller, it doesn't mean they want to sell to you and only you.  They've got a right to more money if it's out there and they ain't afraid to go after it.  Sellers, just 'cause a broker says a price higher than anyone else has told you, doesn't mean they'll net you a penny more or do it anytime soon.  They may net you the same price or less months later, but it's worth a shot.  It's a market y'all.  A tug of war between buyers and sellers, and nobody owes anybody anything.


Pro's:  location, extra-deep lot & zoning allows for a ton of buildable sqft, delivered vacant, was available off-market once upon a time

Con's:  as-is cap rate of 2%, now on market with a price jump of 32% from accepted offer 2 months ago, work to be done and money to be spent to optimize it, falling up the stairs situation

Ideally:  a totally interesting deal at the right price.  A huge waste of time at the wrong price.



Tuesday, December 16, 2014

Closings of Note: Crown Heights Gets Over $3M





Buy & hold investors are heading as far east as Albany Avenue to pick up this hefty 13-unit building at 1097 Prospect Place.  At over 40' wide and over 15,000/sqft, this property didn't sell overnight at its asking price of $3.25M.  However it did close last month for $3.05M, or $200/sqft.  A 3-cap deep in Crown Heights around the corner from the projects?  Investors will do what they have to do to get big buy & holds these days.  Can't wait to see how close to $3M the much smaller 672 St. Marks Avenue managed to achieve.




Over in Ditmas, the big-bad "hedgefund" boogie-man that every likes to blame for the run up in Brooklyn's prices, after picking up over $100M in Brooklyn properties in barely 2 years - they've unloaded another one.  They're not in sales formation quite yet, but supposedly Ditmas wasn't worth hanging on to without a cluster of other properties there like they have in other neighborhoods.  777 Rugby Road, purchased last year for $1.055M, sells this year for basically full asking price of $1.33M.  That's that single-family Victorian living for ya.  And before you go trying to count their money and figure out how much they put into it and is ~$300K gross profits really worth it after fees etc, don't forget they've moved other pieces already for much more drastic returns.  Like when they turned 857 Park Place around within one year without doing anything significant to it, for a $400K profit.  If your "bad beats" are still grossing 30% returns in under a year, that ain't bad.





But you don't have to be a $200M+ international REIT to get a little real estate empire cooking in Brooklyn.  Even in Fort Greene.  All it takes is a decent income, a few hundred thousand (okay, that's not easy), and two eyes.  We told you this year that 460 Carlton Avenue was Fort Greene's most affordable listing.  And who listened?  None other than the buyers from Manhattan who picked up the same house around the corner at 365 Cumberland Street which we called precisely one year prior "Fort Greene's Most Affordable 3-Family".  Cumberland sold for $1.43M, 460 Carlton sold last month for $1.61M with just over $600K down.  The deal so nice, they bought it twice.  Now there are 2 others available over here in Atlantic Commons off-market and pre-market for $1.7M-$1.9M.





Why's a 3-Family built in the 1990's with rental income, a tennis court, and a parking space such a good value at $1.6M?  Because you can cross the street to Newswalk and spend $1.925M for a condo with $1,500+/month maintenance fees.  535 Dean Street, #707 closed last month.  Just another $1,000+/sqft notch on Brooklyn's belt.  Buyers from Fort Greene also picked up #317 in this building for $1.745M last month.





But you true blue ballers don't wanna live in loft condo across Atlantic Avenue to be next to Fort Greene, do you?  And you certainly don't wanna live in a generic 1990's construction 3-Family either.  So step on into real Fort Greene luxury on one of everyone's favorite (there's only 2) blocks in the neighborhood.  128 South Oxford is a 12.5' wide single family.  Good luck fitting a couch through the door at this little gem.  Listed for $2.65M, it sold last month for $2.525M.  AKA, way over $1,000 sqft for a townhouse.  Buyers put a million down to make it happen.  Last week, clowns with less than a million down tried to hate on a 20' wide four-story around the corner from here pre-market for even less than this, but don't even know what the real Fort Greene market is like.





Remind us why $1.6M in Fort Greene for a 3-Fam is such a steal?  Oh, cause come on down to Park Slope and see what $1.6M gets you.  But go long.  Go south.  Keep going... until you get to 321 12th Street where this tiny little 18' x 35' 3-story frame house in need of work closed for $1.6M with $500K down to buyers from the Upper East Side.  Ouch!  Is that the one the unicorn hunters were waiting for?





Or maybe it was this brick beauty in Windsor Terrace at 561 Prospect Avenue?  Closed for $1.665M with over $300K down last month to buyers from Chelsea.  Maybe this was the unicorn they had in mind.  Feel free to hate on the 1960's construction, the Queens-esque facade, and the generic interior.  But it *does* have parking!






Over in Clinton Hill, as $1,000/sqft sweeps west for condos, the 1BR's are approaching $1M.  It's all mathematics.  This groundfloor gem at the Cathedral Condominiums (albethey right on Atlantic Avenue) listed for $795K.  555 Washington Avenue, #1D sold last month for $895K to a buyer from Williamsburg.





We've always gotta smile when pro's and novices tell us the Brooklyn real estate market is cooling down.  Poor Park Slope can't even get full asking price for 415 3rd Street??  Poor thing listed for $4.25M and sold last month for a paltry $4.2M.  Extra wide and extra deep, is there even meat on the bone for condos at this price?  No investor we know would think so, but that doesn't mean they're not out there.  All it takes is one buyer, you don't need a bidding war on every listing.  Besides, remember when $4M got you this in Park Slope...?




Well, now it gets you this...




When Park Slope is surpassing $4M, is it okay for Bed-Stuy, Crown Heights, and Lefferts to poke across $2M??  Or come on down to Crown Heights to see what a million gets you...




How about this one story auto repair garage in "the hood"?  800 Park Place sold last month for $1M.





Or when Park Slope's got you down, go deeper into Greenwood where 266 17th Street closed last month for just over $1.2M.  20' x 30' on 3-stories in underwhelming condition.  That's the supply & demand going on in the streets right now.






Or follow folks from a Pro-Cro condo over to this 16' wide brownstone across the streets from the projects on the Bed-Stuy end of Clinton Hill.  When the owners brought us over to take a look, we were pleasantly surprised at the quality of the details and how manageable the width is as a double duplex or triplex over garden rental.  420 Lafayette Avenue closed for $1.55M last month with about 50% down.  Not exactly what everyone with that kind of money down has in mind, but a great relative value in this market if the location isn't a deal-breaker.





But not everything is priced through the roof.  You've gotta go far out and look at some gnarly product to get under $1M these days.  We toured 268a Kosciuszko Street in Brooklyn as a FSBO for $725K this summer.  It closed for that price last month with less than $250K down.



Friday, December 12, 2014

Another Crown Heights Listing Over $2M: 1193 Bergen Street




It sent relative shockwaves through the market last year when a Crown Heights renovation 1234 Dean Street hit the market for $2.195M.  Weren't these the same houses that couldn't get $1.5M or even $1M not long ago?  That house later closed for $1.85M, and had offers even higher if it were a 2-Family.  The owners of this stone castle at 1193 Bergen Street around the corner were watching attentively.  They also saw 1294 Dean Street list for $2M and sell for $1.8M this year too.  Now, at the end of "the fall buying season", 1193 Bergen has been on the market for $2.3M.  With an open house tomorrow, it's easy to go see Crown Heights historic living in all its glory...









With the cool barrel-front on the facade, all kinds of detail inside, and some modern upgrades to kitchen and bath, this house has a right to command premier pricing for Crown Heights...






Much like 160 Bainbridge, this house is great and special, but not triple mint.  Will that stop it from surpassing $2M in this market?  It didn't stop 160 Bainbridge.  Is this house really worth a million more than 1134 Bergen Street after just one year?  Only time - and the market - will tell.  But if one of the next-best houses to yours just sold for $2.2M, you might be asking $2.3M too.  So were see where they're coming from on 1193 Bergen.

Even if this house sells for 20% off asking price, then we're right back to the ~$1.85M range, the asking price that was so shocking on 22 Arlington Place and 196 Hancock Street earlier this year, both of which closed over $2M.  The secret is way out on this corridor of Crown Heights.  "Nostrand is too far" doesn't roll off the tongue like it used to.  And a listing like this is a cool house at a price that's another sign of the times.


Pro's: unique castle-like curb appeal, full of original details, some modern upgrades, 3-Family with great rental income potential

Con's:  asking a lot, December is a tough time to get top dollar, interior's not everyone's taste, just over 17' wide, gnarly backyard

Ideally:  A- house asking an A+ price with little competition in its caliber.  It's crazy that after just a year, we can't even afford our own neighborhood.  Very interested to see what number makes it happen for this house.



Thursday, December 11, 2014

Another Crown Heights Building Breaks $2M: 80 New York Avenue





We already saw killer end-user townhomes this week in Lefferts and Bed-Stuy going over $2M, now let's take a look at what's fetching over $2M in Crown Heights.  80 New York Avenue is a massive 10,000+ square foot corner 8-Family property, a 25' x 105' building, with windows and upside for days.  It came out asking $2.6M this year and closes this month for $2.3M.  We told would-be buyers & so-called "investors" that this building - the sister play to the smaller, cheaper 70 New York Avenue across the street - is one of the best buy & hold opportunities in all of Brooklyn.  But if it's not a 6-cap right out the gates, these novice buyers don't wanna touch it.  Only problem is, for every 6-cap in town, there's a dozen or more buyers who'd be happy to take it at a 5-cap.  And buildings in better parts of Brooklyn just a mile or two west trade as low as 4-caps.  So, while nobody's in a rush to give an investor their twenty dollar bill in exchange for three 5's in this market, savvy buyers are paying up for bedrooms, windows, and upside...




We can already hear them clamoring, "But this is an 8-Family building, you can't compare it to a 1-4 Family townhouse."  Ahhh, but can't we?  This is obviously not an apples to apples comparison to the townhomes in these "emerging neighborhoods" commanding over $2M, but comparing a few features of the two does illustrate why these buy & holds are so attractive.  The as-is earnings of 80 New York Avenue make it sound extremely frothy no matter how you slice it.  The building sold for 24 times rent roll.  That's a big difference from the 10-12 GRM buyers still think they can shop for in this market.  Also, the as-is cap rate is a paltry 1.8%.  Even buyers in prime Manhattan can scoff at that.  The property grosses less than $95K/year.  Heck, our 3-Family limestone around the corner that's less than half the size already grosses more than that.  And, finally, 80 New York Avenue is full of rent stabilized tenants.  Not all rent stabilization is created equal, but these are the nuances that send the novices running for the hills.

The key to 80 New York Avenue is its upside.  Not sure if you're tried to rent a decent 3BR apartment in Brooklyn recently, but the price per bedroom metric is as high as its ever been.  And the most rapid rental growth is seen in "fringes" like Crown Heights.  The NYTimes covered how hard $1,000/BR was for recent grads to find "rooms" divided by curtains in the East Village:


 
NYTimes even gave a whole interactive diagram on how to evenly divide rent among 3 uneven rooms:




This is how strategic individuals paying $750-$1,500/month for a room in a 3-bedroom share have to be, but some fancy-pants investors don't even apply this much strategy to investments that gross them over $20K/month.  At a modest $825/BR, this building grosses more than that.

80 New York Avenue's 3-5 year trajectory compares favorably to the townhomes and ground-up developments sites that trade for around the same price.  When semi-finished & finished end-user townhomes between 3,000-4,000 sqft that won't gross over $100K/year in the near future are breaking records between $2M-$2.5M, then 10,000+ sqft buildings with eight 3BR apartments that could easily gross over $250K/year sound like a bargain for the same price.  8-cap here we come!

Or, if you speak price per square foot, we're talking about pretty cute corner bones for under $220/sqft in a neighborhood where last year's $425/sqft is over $550/sqft today in townhomes, and even higher on condos.  Heck, dirt around the corner at 906 Prospect Place sold for $3.5M, or ~$150/buildable square foot.  So buying corner bones at $220/sqft is really attractive when it costs barely more than the dirt:




While 80 NY Ave is by no means as amazing as 1502 Bedford Avenue, which closed for $2.075 in January 2013, gutted, and refinanced for $4.5M later that year...




...we're in a different market since even then.  However, the game plan on these "emerging" corner 8-Fam's is pretty much the same.  With 8-Family Bed-Stuy beauties the size of 70 & 80 NY Ave or larger going for $2.5M-$4.5M on and off market, these more affordable Crown Heights apartment buildings sandwiched between beautiful brownstone & limestone blocks just off of Nostrand Avenue make for a relative value and buy & hold winners in the near-term.  Tomorrow we'll take a peek right around the corner at what $2M+ looks like in townhomes in Crown Heights.



Pro's:  huge corner 8-Fam with 3BR apartments, decent curb appeal, full of windows, barely more than a top notch townhouse costs, under $250/sqft, all about the upside

Con's:  as-is rent roll is way below market with stabilization, purchase couldn't be low-balled, over $2M is certainly a lot of money in general, lots of work & repositioning to be done, won't happen overnight, had to be cash or non-contingent to win the deal

Ideally:  a true winner for a savvy buyer.  Medium-sized fish should have been taking a stab at the big fish potential return on this one.


Tuesday, December 9, 2014

Another Bed-Stuy House Breaks $2M: 160 Bainbridge Street




This just in, Bed-Stuy is up 55,000% in the past 120 years!  A house once conveyed for $4,000 in the 1890's was back on the market this year and crushing those old-timey numbers from 1894!
 



Back before Halloween, we tried to tolja' that some big contracts were brewing on townhomes in Brooklyn.  And yesterday we took a look at a really special one in an "emerging" neighborhood breezing past $2M in Lefferts Garden.  Today we look at another house that got over $2M in Bed-Stuy.  160 Bainbridge Street has been sell-curious for a while now.  We first saw the house over a year ago, and were sure it was a flagship stunner from day one.  Wood detail for days, all in great shape...








The house sure cleans up nice in pictures, and there are few upgrades, but it's not 100% mint either.  A few generic upgrades (although a great improvement over 40-60 year old deferred maintenance) and a few minor details like greenish paint and Home Expo looking jacuzzi take the presentation of the house down just a few notches for that right out the box end-user buyer.  But we're splitting hairs over A+ & A- at this point.












Prices have escalated so quickly that the seller's previous "F.U." number from last year had become market value by this year.  Listed for $1.99M in July, the house closed last month for $2.2M to a buyer from Park Slope with just over a million down.  And is it any surprise?  This house can keep up with any in Park Slope in terms of curb appeal and quality.  The developer who built it in 1892 started his career in Williamsburg (not known for its great architecture) on frame houses, then did lots of development in the "Eastern District" of Bed-Stuy & Lefferts in brick, limestone, and brownstone.  He passed away at his home on Fenimore Street in Lefferts in 1908.  Only generations later did you ballers deem these eastern neighborhoods quarantined ghettos forever.  Back then, you could cop these houses with $500 down on $4,000, now they'd rent for more than that in a month.  Times sure have changed.




So to recap, you think Park Slope is the only place in Brooklyn worth living, and this buyer from Park Slope just jumped ship for the Utica stop in Stuyvesant Heights in Bed-Stuy because....??  Maybe because this is a $3M+ house in Park Slope and they didn't want a mortgage over $7,000/month?  Maybe they couldn't afford over $2.2M and this is simply one of the best places in Brooklyn to spend it?  Or what boogie-man do you believe in??  Is this a lending bubble 'cause rates are so low?  Did cash-buyer hedge funds like Dixon run the prices up on you?  Or is this just supply and demand?  Where's a better $2.2M in town?

Perhaps this is why an even slicker renovation in west Bed-Stuy at 101 Hancock Street listed for $2.45M and is bound to wrap up over asking price soon...






If you missed why Bed-Stuy's flagships can command over $2M, you probably didn't know that Clinton Hill's flagships can command over $3M, like 384 Vanderbilt Avenue and 102 Gates.

And over in Park Slope, they're dropping almost $2M on condos like 272 St. Marks Avenue, #1R:






That condo closed last month to buyers from the West Village for $1.85M with some $500K down.  So that's the trickle-down economics of Brooklyn these days.  Buyers leave the West Village for a condo in Park Slope for $1.85M with $500K down, while another leaves Park Slope for a townhouse in Bed-Stuy for $2.2M with $1M down.  Call it a bubble if you wanna, but the money simply has nowhere else to go!


Pro's:  full-sized 2-Family with amazing details & killer curb appeal on a great block, flagship property, express train nearby

Con's:  certainly a lot of money, a few subpar upgrades, not totally mint, further out than people wanna go

Ideally:  Bed-Stuy wasn't a different planet from Park Slope over 100 years ago, and not all buyers think it is today either