Sunday, November 9, 2014

Crown Heights Corner Buy & Hold Just Sold: 70 New York Avenue

One of the absolute best buy & hold properties available in all of Brooklyn this year has closed.  70 New York Avenue is a hefty little corner piece at Pacific Street, just off of Nostrand Avenue.  A 22' by 90' building with 8 apartments used as 3 bedrooms, this is 8,000 square feet of pre-war Crown Heights corner goodness.  All stabilized units grossing very little at the moment, but with massive potential.  People act like real estate is so complicated, but price per bedroom is one of the simplest, most important metrics in all of town.  And the Crown Heights area has seen a huge increase in that metric.  These real estate investment funds run around town with highfalutin categories like "value plus", which are really just fancy institutional ways of saying "raise the rent".  And based on all kinds of comps, including even the most generic modern renovation just down the street at 1329 Pacific Street, rents in these apartments have the capacity to triple:

That's right, 2 years ago someone paid $1.5M for a smaller property on this block that was an SRO in need of a gut at 1329 Pacific.

So, "investors" - if that is your real name! - please check your gripes at the door about the current rent roll on 70 New York Avenue.  This property sold a few weeks ago for $1.725M, or barely over $200/sqft.  People are paying $200 per buildable square foot over here, like 906 Prospect Place.  And that's just a vacant lot full of dirt!  Wouldn't you rather buy actual bones for $200 a foot than something you had to spend another hundreds of dollars a foot do develop?  Different strokes for different folks, we know - but if you claim to be a buy & hold investor and didn't take a stab at this one, it's more of a "Whatchu talkin' 'bout, Willis?!" situation.

We watched a few different folks who should've bought this property whiff.  However, someone did score big over here, and on another corner 8-Family right across the street.  Now people that hated on this one are calling us about smaller properties on way worse blocks for the same price.  SMH.

What makes the New York Avenue corner play so genius is the sweet spot between rental income potential that's super profitable for the owner, even at a relative market value for the tenants.  You Chicken Littles keep telling us, "It can't keep going up and up and up" - and it doesn't have to!  We're talking big upside at existing market rents.  Have you seen the price per bedroom rates one stop west on Franklin Avenue recently?  They can easily exceed $1,200 for the right product, and can often reach $1,600.  Whereas 70 New York Avenue is a 12-cap at $1,000/BR.  That is a great range to play with.  This is the next 706 Classon Avenue, and you ain't even know it!

Pro's:  hefty corner spot full of windows just off the next tree ring in Crown Heights growth, huge upside potential, extra-long floorplate, 3BR apartments, one of the best buy & holds in Brooklyn all year, wasn't even all cash

Con's:  gone already, work to be done, stabilized rents are low, crazy high GRM at existing rents, barely marketed, no pics inside, hard to finance and took non-contingent deal, another woulda/coulda/didn't notch on a lot of investors' belts 

Ideally:  this is a slam dunk anywhere under $2M.  We've received off-market offers higher than this on smaller 8-Families in way less preferable locations.

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