Breaking: Bed Stuy Brownstone, Former School, Fetches $1.585 Million at Auction

272-jefferson-avenue-071913

We hear from a well-placed tipster that the once-elaborate brownstone at 272 Jefferson Avenue sold at auction today for $1,585,000. The house was not a foreclosure; rather, the state of New York was getting rid of the property, which at one point had operated as an alternative school. Except for a few rooms on the parlor floor, very little was left of the original interiors, as can be seen on this Flickr page. Our tipster told us the buyer was Australian investment firm Dixon Advisory (or one of its related companies), which has been acquiring property in Brooklyn to rent. The minimum bid was set at $770,000. Do you think they got a good price?

99 Comment

  • no-permits

    dixon is the biggest chump in brooklyn right now.

  • Not a chump they are front running the market. They know prices are moving up and they got the money to buy
    And they want to buy some volume. Besides the building looks pretty nice from the outside corner building. Good light. Good size.
    And the interior. Looks like it has been well maintained. This was purchased at auction so there was a least one other buyer at close to that level.

  • MrHancock

    This goes to show how unimportant brokers are when the market is hot. Does anyone think Corcoran or Evans & Nye would have gotten a higher price?

    • BigGuy22

      To answer your question, YES a broker would have 100% gotten them more, doesn’t have to be evans or Corcoran, any competent broker on earth could set records today with the right plan. Imagine if every buyer in the market had an opportunity to purchase this building, PICTURE THIS there’s two open houses, once during the week, once on the weekend, the would be broker lists this for $1,550,000, theres 80 buyers through they all fall in love with the “charm of an old school house blah blah blah” and it has parking…I’d bet my life it’d sell $1.8+

      • MrHancock

        Every buyer in the market did have the opportunity to purchase this building. The auction was today.
        The building had auction signs all over it for weeks and was already covered on Brownstoner.

        So where were these 80 buyers today?

        • BigGuy22

          Do you really think that 80 end users would take off work and go to a crazy courthouse to bid on a house that everyone knows is gunna be bought up by cash investors? If 7 Arlington Pl closed for $1.7, also needed a gut basically and had no parking, location is comparable, then why wouldn’t this place sell for that? If the one on Jefferson Amzi Hill sold for $1.8 or the one on Decatur they also sold for $1.8 then why in the world would something like this not? Ive been to these auctions a number of times, you will never see more than a handful of end users there cuz they do not have the cash to compete. Banks or the city prefer a cash deal over a financed deal all day, even if its a 100k+ difference in the offer…CASH IS KING!!!!

          • Lots of people (end users) are paying cash for these houses. If someone thinks they’re gonna get a deal why wouldn’t they take off from work for a day and try to bid on this property.

          • I’m sorry BigGuy22, I’ve got to correct you here, 7 Arlington Pl was not a gut reno situation. It was in need of maybe a little restoration, but internally was very much intact, which is why it went for the price it did. It’s also on an off street, and even closer to transportation than Jefferson. And to compare the above Jefferson property to Amzi Hill’s property is rude! The above property is a gut reno. There is nothing worth saving internally here beyond the parlor floor (This is me being very generous here). Let’s be real. Look at the Flickr images then look at 593 Jefferson. Your talking apples and pizza. All the properties your mentioning are turn-key properties the above is not, unless you want to sleep in an office or a gym, because that is how this property has been configured. The only real benefit is that property has 3 separate entrances, a garage, and side light exposure.

          • I have to agree. Most end users are not showing up for an auction and the auction process takes financed offers off the table, which releases some of the pressure on the all cash buyers to up their bids. This house sold at a discount. If they could not renovate and rent it out at a profit, they would not have bought it.

        • The 80 potential buyers don’t live in the nabe and wouldn’t have seen the signs on the house plus they’re all working with Corcoran’s which would never steer them to an auction.

          • BigGuy22

            Excellent point! Even though they 100% should’ve steered them to this auction…A broker would of made 79k!!! they were offering 5% to an agent who provided a buyer.

          • BigGuy22

            An end user would have no chance against Dixon, Dixon has 250-500mil to spend, an end user who has $1.5-2mil care a lot more about 50k then Dixon does if it came down to that….

        • BigGuy22

          7 Arlington was turnkey?? you’re not serious…it needed everything from top to bottom. Everything was outdated. I was in there multiple times. Ill give you the other on Jefferson was a pretty awesome house, Decatur also needed some work. I get that this house needs work, but if those others sold for 250k more than this one, and this one has parking and is on a corner lot don’t see what the big fuss is about when comparing these buildings…

          • Well maybe to clarify, the allure of these brownstones, isn’t just about the exterior facade, which I feel like typically developers miss the mark on in marketing these homes. People who are interested in them typically want all of the internal bells and whistles, so what if they have to do some restoration work. For most it’s a comprise to buy a brownstone without these internal details. 7 Arlington had a lot of detail. Though you may have to make some upgrades, in a home in that condition it’s worth it to an end user. Also you are not have to change the use of the building in your renovation – From a Pizza hut to luxury home…lol. A developer in today’s world could give two craps about this kind of stuff. Also Jefferson has no yard because of that garage – Now that sucks in my opinion as an end user, but for a condo, it wouldn’t matter.

            I think the crazy thing in all of this Brownstone madness is that these neighborhoods exist because of DEVELOPERS. – Now who could imagine that today??? Crazy!

          • Cate

            “Everything was outdated.” The original plaster, old fireplaces, wood work, original floors and other period details are what make it so desirable. Just upgrade the mechanicals, don’t touch anything else.

          • Thanks Cate! I’m glad someone else realized how outlandish that statement was. I felt like i walked into the twilight zone for a second where large basis of the value in these homes had disappeared. The exterior is always a large seller, but we all know most desire all of those period details on the inside which is why we generally pay these crazy prices. But this home is for the most part missing that. Which is why I predict a gut reno. I wouldn’t place it in the same race as Amzi’s property or Arlington. and yes maybe you go without the central air, but Arlington def. turn-key over this property.

          • Omar you can only say people are paying crazy prices for brownstones if the price on a per square foot basis is higher than local condos. That maybe the case in some more established brooklyn neihhborhoods, where the price of houses with detailed interiors exceed condo prices. However in bedstuy all of these houses are selling cheaper than local condos. I can’t believe why time after time everyone is amazed by the price of bedstuy brownstones (and I could post this below anyone’s post). This house is priced 20% below local condos. Had it been sold in the free market it would have sold for 10% more.

          • bk333, the issue in this situation is the price relative to how much work we all realize has to be put into this property doesn’t add up as an investment property. The entire thing internally has to be rebuilt to make it a home or condo. Granted if you want to start a business here you would have less of a problem. The house was purchased as an investment property. When you crunch the numbers the risk in this volatile market does not add up. He could have purchased a place that needed a whole lot less work for less money in the same neighbor, or Carroll Garden surprisingly. As an end user it still would not have made as much sense, but end users have the right to go after pretty facades, smart developers should always be going by the numbers. Maybe he’ll rent the property for 15 years and try to flip the units as condos after that. I would imagine a developer would not want to be forced to hold onto a property for such a lengthy time just to actually reap any benefits, let alone just breaking even.

      • Big guy, why do u think they went the auction route if they could have gotten more (1.8M) with a broker?

  • As an investment property, I’m not sure they got a good deal.
    They’ll have to invest more $$ converting this to back to residential.
    If they do 4 floor thru apts and at $2,500/month rent, they’ll barely clear 100K annually.
    Seems like 15 years is a long time to get your initial invest back.

    • BigGuy22

      Dixons theory isn’t like most investors. If they make 500k on this off RR alone in 5 years lets say, its much better return for a hedge fund (which they basically are) then investing in stocks, bonds Etc…and if they sell it for a profit they’re in the $$ even more.

      • no-permits

        what makes you think they won’t leave the buildings empty? so far they haven’t done any work on any of their buildings.

        • BigGuy22

          I have experience with them. They are so insanely busy & for some reason don’t have many property managers. They are viewing at least 20-40 buildings a week, buying around 10 a month. they will renovate them and begin renting them out soon.

          • Leaving investment properties sitting empty doesn’t seem like a great business model to me. You’d think they’d want to convert/renovate right away to start making some of their money back.

          • no-permits

            halvewit, were you repsonding to me? dixon is not a landlord. “$500k” in rents is nothing and not even worth the hassle of maintenance. it seems that he has bigger plans/dreams of the market taking off. hes buying close to peak prices.

          • no-permits

            and by maintenance, i mean dealing with tenants and their repairs.

    • halvewit, I have to agree with you here. Unless they plan on churning out luxury condos here, from a developers standpoint their a bit late in the game. Waiting on rental income and accounting for how much will have to be put in for a full renovation, this doesn’t seem like the smartest move. Granted this property is in a prime location relative to transportation and on a very nice block.
      Side note just stopped in the bank today to discover, home loan interest rates are rising back up to where they were pre-crash now up at 5% from 3%. Not sure what this will mean long term, but the buyers market looks like it’s ending for the working class and entering it’s final developer geared area???

      Just saw a really nice property on Corcoran for $2million. If you didn’t get the memo before, you have now been PRICED out of Bed-Stuy. Time to move on to Queens now and drive up their market too :-)
      http://corcoran.com/nyc/Listings/Display/2772677
      Nice House overall, but a few poor choices in it’s renovation. They Sealed up parlor floor with that hideous white Sheetrock wall- WHYyyyyyy???
      I know they want that rental income as part of the pitch but, as we have learned from our dear Reno Dakota there are nicer more elegant, less permanent and less expensive ways to handle this. Come on guy’s it’s 2013, there’s no excuse for that.

      • Even if they do 4 luxury condos here, I really don’t think they’re going to get a great return.
        How much does a 3=bedrom condo in bed stuy go for? 600K? x4 = 2.4M
        Nope, not enough profit after renovation costs and changing CoO

      • “just stopped in the bank today to discover, home loan interest rates are rising back up”

        LOL! love that you went to the bank to get this info. Old school!
        bankrate dot com.

        • Lol. I was just there on personal visit. And just noticed one of those signs meant to lure you in to debt… It wasn’t very alluring having seen how low they could go :-) I’m missing those low rates already. I think we need another market crash… Just kidding, but kinda not really.

          • figured that. just busting your chops.
            i do all my banking in person. can’t stand online banking. I carry my savings passbook and coin jar to make my deposits.

          • Haha. Too funny. Our world has become way too disconnected with all of this wireless madness.

          • halvewit, you’ve got to checkout that property on Decatur I posted, Crazy everything – PRICE, Exterior, decent interior. $2Mil

  • MrHancock

    DIBS what do you think Dixon would pay for your old house today?

  • MrHancock

    What we really need to take from all this is that BK to the fullest is an idiot.

    “We constantly keep our ear to the streets for foreclosure opportunities, and many happen way behind the scenes. But 272 Jefferson Avenue is the best-marketed foreclosure auction property we’ve ever seen! With pictures and open houses before today’s auction, many were lurking for this huge corner gem. ”

    Best marketed foreclosure auction property ever? That’s because its not a foreclosure dummy. Is your “radar” broken? $100/hr and he doesn’t even know what a government surplus auction is.

    • LOL!
      i don’t get that site. they claim they’re the closest thing Brookln has to MLS, but they rarely have listings on there. It’s always houses that have already sold.

      • no-permits

        halvewit, we finally agree on something. does bk understand what the MLS is? the only time he posts sht is after it sells then he talks about “platinum members” getting first shot. no one pay bktothefullest any money for his “services” hes nothing more than an unlicensed agent who has good hindsight.

  • Chumps pay market price. Really. It’s nice to be able to buy a deal A below market deal sounds great that’s a strategy
    But sometimes it’s a strategy to buy at market. The right property. When the markets moving up and that’s not necessarily being a chump. Would you be a chump for buying a quality brownstone bought in Park Slope Cobble Hill Prospect Heights
    2 years ago. If that’s a chump. Then we need to redefine chump change

    • Are we ignoring how much work needs be done here. I mean at this rate you might as well say your paying 1.5million for some dirt and a lot. Plus at over a million dollars correct me if I’m wrong, but you’ll also get hit with mansion tax at the end of the year in addition to all of the regular transfer taxes. That is money that could be going into the complete rebuild that undoubtedly will take place here.

    • Sorry so, to answer your question the buyers hand during this bidding war definitely got ahead of his wallet and a bit too trigger happy. Too bad all of us don’t have that kind of money just lying around.

    • no-permits

      “Would you be a chump for buying a quality brownstone bought in Park Slope Cobble Hill Prospect Heights
      2 years ago.”

      if you overpayed, YES! but let’s not get off subject.: dixon is a chump and he’s paying top of market. he’s at open houses standing in line with 75 other people. the other thing is, in 5 years when he can sell (because thats the earliest he can sell), we will be beyond the peak and entering/or in another downturn.

  • At $1.585 million, they paid $323/square foot, which is not irrational in this market. Rents are what they are today, which is 8% higher than they were 1 year ago and rising. Long term, this is a solid investment. As long as the neighborhood continues to gain amenities that attract more middle class and affluent residents, rents will also rise. This purchase is also a bet on where the neighborhood is headed. If you think that values have peaked, then you should not invest. No one can say with any kind of certainty where the market is headed long term, but there are strong demographic trends at play in the brownstone Brooklyn neighborhoods and the neighborhoods close to Manhattan and with solid transportation options. The nicer parts of Bed Stuy have the potential to be as pricey as Prospect Heights, Park Slope and the other brownstone neighborhoods. Until that happens, the housing stock is a relative value by comparison and will continue to attract buyers who are priced out of those other neighborhoods (like me!) who, in turn, will pour money into the community, restore housing stock, frequent local restaurants and bars, and draw more businesses, which in turn attract more buyers and renters.

  • I agree local knowledge gained over a lifetime is very valuable But at 323 sqft for a vacant building that appears solid
    This is not a tear down Its a Fine looking corner brownstone w light and lots of possibilities. I think this is about demographics and a lack of supply that has helped push up prices forcing some buyers to seek sub 1000 sqft pricing And how things are changing in the areas surrounding downtown Brooklyn And the pace of change is very rapid Construction Costs of a new building in Brooklyn high and getting higher and the building process is complicated and fraught with potential pitfalls. This is not ground up construction Couldn’t two or three enterprising families pool resources buy something like this condo it for themselves and end up w something better than buying into one of the high rises on 4th avenue. Wouldn’t this be a better alternative ?

    • no-permits

      you can buy plenty of buildings for less than replacement cost. even in this market. $323 + $???/foot for renovation is not cheap. dixon will pay retail on renovation just like he’s paying for the buildings so we’re talking crazy numbers.

      • no-permits

        by retail, i mean homeowner prices, chump prices.

        • The fact is he caught up which is why the other bidders didn’t fight him any further. I wouldn’t be surprised if there were dummy bidders in the room, purposely pushing the price. It will be a while b4 he see’s a return on this one, hopefully there wont be another crash in the meantime.

          • no-permits

            dummy bidders? you mean people just went down there to fck with dixon? he was bidding against stroller pushing soccer moms who have never been to an auction in their life and got caught up in the action. this is TOPPPPP dollar for this type of property. the high price properties all have a ton of detail and this does not.

          • Omar your comments confuse me.

          • MrHancock

            that’s because you don’t speak jive

          • Hey talesofulysses sorry I left out a verb there, but no-permits completely understood where I was going with this. The ending fact is he overpaid for what he got in the current market, a projected future does not matter because no one here has a crystal ball. For all we know next year we could be at war with Korea and as a country end up in the worst financial place ever. At that price he could have purchased this house just perpendicular to Macon, which was only asking a million, and the scale of that house is much larger than this property and has a huge backyard, and also supposedly has a lot of period details inside. Or he could have purchased many other properties in better internal condition. Housing stock in Bed-Stuy is pretty good at the moment with at least 130 properties for sale right now. There’s no reason anyone with a brain and a calculator would pay this much for an investment property in this condition.

          • Gotta love those soccer moms, playing expensive practical jokes.

          • I have a brain and calculator and would pay that price if I was house hunting with that budget. Show me a better house under 323 $ psf

          • bk333, there’s a difference between an individual buying this as their primary home and an investment firm looking to generate $$$ with this.
            If someone saw this house and loved loved it and envisioned themselves living here with a few rentals to offset the mortgage, then it may be a good deal.

          • halvewit your being quite generous, but we all are entitled have what desire. As an end user with more of a 30yr plan verses 15 that might make more sense, even still I think that 1.5 would be overpaying for the condition this property is in. T
            here are still plenty of homes on the market bk333 that are better than this property and much less. I could pull up at 10 in under 5min. Maybe I should become broker at this rate…lol :-)

          • Yes, I was being very generous. That’s why I said someone has to love love this house. There are other houses out there without the headache of converting from school to residential use. Dealing with the violations, and renovating a huge house.

          • If you can only pull up 10, that’s still not bad. .. the 11th best deal in Brooklyn. I looked at all multifamily houses below $300 psf just now. There are very few in as good a location. There were a few which looked nice, but had no interior pics, so I’m imagining it’s not spectacular.

            They will profit short term. NYC will appreciate faster than other global cities, Brooklyn higher than other boroughs and bedstuy higher than other neighborhoods. .. bottom line.

          • bk333, I don’t know if one or two train stations away on the C Line merits that massive of a jump.

          • The 3 or 4 houses which are a stop or 2 on the c train are the ones I am calling comparable…. Everything else is an inferior location. The 3 or 4 comparibles, I would need to see in person due to lack of pics.

  • This country was built on speculation and risk. Clearly their business model is predicated on Bed Stuy becoming fort green in the not too distant future.

    • no-permits

      don’t say that. montrose morris will call you a racist.

      • Sadly this is true, it’s the reason all these brownstones even exist.

        • no-permits

          i don’t agree on that. these brownstones were not built on speculation.

          • Bed-Stuy properties were speculation properties constructed by developers. Granted sometimes here and there for the mega wealthy you my have a custom detached mansion, but most of the brownstones here were spec. This is easily verifiable, sorry to inform you Santa does not exist. This is no different than today’s world, the only difference is the choice of materials aren’t as nice.

          • The goal was to create a suburb of the city, and the first few years were very difficult for the people who moved here. There were no services – Fire, police, etc. This is all documented in the Brooklyn Eagle. Developers at times were forced to rent portions of these homes as well. This is not unlike today’s world. Then the city seemed like it was the place to be and these first Bed-Stuyer’s moved on and my family like many others took their place in the 1930′s & 40′s

          • no-permits

            i think we have a difference in opinion about what “speculation” is.

          • Cate

            A “spec” house just means any house built by a developer rather than the end user/eventual occupant.

      • Montrose Morris

        Don’t be an ass, no-permits. Bed Stuy could look like Fort Greene, which has a lot of black home ownership, as well as white. I happen to like mixed neighborhoods, I think it’s how people should live. What I don’t like is long time renters getting shoved out with no consideration of their contribution to the community, or any attempt to integrate them, as it were, into the new community, ie: truly affordable housing.

        And 90% of Bed Stuy was built by developers, between the 1870s and 1915 or so. So was most of Brownstone Brooklyn, including Park Slope. Omar is 100% correct.

  • I’m trying to get my head around this as an investment strategy for a big player. I’d always thought the 15x rent roll multiple rule was what smalltime R.E. investors went for, but that big players wanted a much sweeter rent multiple, like 10 or 12x. This is definitely 15X rent: say you get $2200 per floor in the current market, that’s $8800*12*15=$1.584M. And none of that is accounting for the money they’ll need to invest to get top rent for these places. It sounds like it’d be $250-300K to outfit this place as four high end 2br floorthroughs. Is this investment fund run by suckers, or do they have some long game I’m not understanding?

    • This investment fund is run by suckers.
      If they were really in tune to the brooklyn real estate market, they would have been snapping up properties in bed stuy and crown heights 5 years ago. Now they should be snapping up properties in East Flatbush (my prediction for the next ‘it’ nabe)

      • I agree about East Flatbush being full of upside potential, but I predict that it’s going to be where the rapidly growing Lubavitch orthodox community is going to spread. They’re already crossing Empire east of New York Ave. In a decade, I think the whole area directly east of Lefferts Gardens will see a major influx of orthodox development pushing in from crown heights.

        • Agree with you about East of NYAve as another area with potential but not because of the Jewish population. People are going to be priced out of PLG and start heading east.
          Another area that I can see being ‘discovered’ is Cypress Hills. There are some very cute frame houses there. I keep meaning to explore that area.

          Also, Sunset park west of the highway. Some blocks have great rows.

  • Amzi Hill

    272 was a spec house built in 1889 for developer builder W. R. Bell who often worked with an architect named Charles Mushlit.

  • Has Dixon put anything they’ve purchased back on the market or for rent? Would love to see the quality of the renovations.

  • Just a few points – I saw the building and did the math and here is what I came up with:
    The building was owned by the State of New York and they are required to sell to the highest bidder. The auction was well publicized and there were several open houses. The building needs everything – it has no usable kitchens, baths etc. All mechanicals will have to be redone. One could easily sink $250 – $300/sf into a mid-grade renovation on top of the $325/sf Dixon spent on the building. At these dollars you have in excess of $700K in costs for each floor-through unit. That mean that you’d have to sell each of four condo for close to $1M to make the deal make sense. As of today, if the building were in Park Slope or Fort Greene, that number would be achievable. Maybe Dixon thinks that in two years when construction is completed they can get that number in Bed/Stuy. My guess is that its possible but not likely.

    • Joe. The building looks structurally sound , it has water sewer electric. Sure you can spend 250 sqft or more. But I think if you are smart you can do this house for 100 sqft. And come out with something pretty good.

  • I fully agree that it can, and will be renovated for less…flippers are quietly making a fortune doing this everyday.