Tuesday, October 29, 2013

Huge 16-Family in Contract in Crown Heights: 1054 Park Place

When you want a blue-chip King Kong buy & hold property in brownstone Brooklyn, the pickings are almost as slim these days as they are in the end-user townhouse market.  Everyone and their mom ostensibly wants to steal a property all cash (or less), and is only willing to do the deal if it's a steal.  And sellers ostensibly want every last penny they can get for their asset.  (Go figure, right?)  And thus begins the push and pull of the free market.  It's a tug of war.  Who will win?  When we saw this monster 16-Family in an amazingly beautiful & historic section of Crown Heights, across from Brower Park, we knew it was worth a look.  1054 Park Place was asking $2.924M.  Low ball offers quickly came in, and we're told last week that one of them stuck.  We're told the property is now in contract at $2.2M.  Now, don't EXPECT your low ball offer to stick; but when it does, it's a beautiful thing.

Keep in mind that $2.2M is the price range of another under-marketed fixer-upper town house that's barely 4,000 sqft a few blocks west, also on Park Place, in Prospect Heights.  We'll take a look at that one tomorrow.  For now, let's see what $2.2M can do in one of Crown Heights' niftiest little pockets.  1054 Park Place is grossing $208K/year currently, which is way under market, but still a healthy dose of cash flow.  It's a monster 40' x 96' on a mega-deep 140' lot.  The building narrows in the back, so we're hesitant to call it a full 15,000 sqft, but you gain a ton of windows back there on the unattached side.  No matter how you cut it, it's well below $200/sqft, which is the typical "regardless of condition" price that most investors walk around with for property of this caliber or worse.  This is the big-boy version of another gem just down the block that was available for as little as $1.6M recently, just weeks after people complained to us that they couldn't get it for $1.8M.  The outside is stunning, the park's across the street, the Children's Museum is too.  The housing stock all around it is great.  The mechanicals have been fairly well updated & maintained...

The apartments have good floors and a few decent details like these ceilings...

The roof is in bad shape, but affordable to fix.  And with skyline views like these, also overlooking a park, we see a real G putting a few roof decks up here for the top floor tenants, or common space.

There's one staircase and 4 apartments per floor, so the back apartments have a quirky narrow lay-out to the front of them.  But the space and the upside is there.  We see this thing grossing $240K/year before ya know it - which will make everyone go, "That's better than 10 GRM!"  Right, so where were you when this was available for months?  A top broker at a top firm told us last week, "$2.2M??  I would've bought that!"  So where were you when it was all going down?  Before you go flipping out and underwriting this as better than an 8-cap within a year at our estimates, keep in mind one of the major rubs on the property is the high property taxes, currently over $39K.  Next year's estimates are significantly lower (beats us), but that's one of the major drawbacks to calculating this cap rate by the standard rough & ready means.  Get your numbers right, or you may not see the forest for the trees.  Another flagship buy & hold in Crown Heights?  Yes, please!

Pro's:  stunning on the outside, fell to a great price, huge, full of rent roll upside, across from a park, mechanicals in decent shape

Con's:  gone already, a bit grimy on the inside, roof needs work, takes repositioning to maximize, may be a beast to manage

Ideally:  candidate for buy & hold of the year

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