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.
No comments:
Post a Comment