Pure Arb: Taking Brownstones Condo in Harlem

interior
The New York Times reports a rash of brownstone conversions in Harlem—mostly by folks from further downtown, who buy up dilapidated homes and cut them up into smaller spaces; condos in "unexceptional" buildings can sell for as high as $1.6 million. A few buildings on St. Nicholas Ave have been titled "The Rockwell Condominium" after former nearby resident Norman Rockwell, as if symbolic of the American dream real estate developers are pitching to potential buyers. Some residents, like stay-at-home dad Ray Franks, worry the conversions could alter the feeling of brownstone neighborhoods. But for now, in an area with landmark protections are few and price per square foot is king, economics are carrying the day:

The logic of condominium development from the developer's point of view is fairly simple. The slices of the pie are worth more than the entire pie, said Christa Giesecke, a German-born architect who lives on West 149th Street and is renovating her second condominium project. In the current market, the value of a condo apartment is far higher than the value of a rental unit, and a condominium brownstone can be worth more than single-family residences.

This arbitrage is what we've been saying for a while will fuel the next stage of the Brooklyn brownstone boom.
Going Condo in Harlem [NY Times]

Comments

I think we've already been seeing this happen in Brooklyn. It's pretty obvious that the relative affordability of an individual unit makes it more salable than the whole, and when people are willing to pay $600k for a portion of something that would have sold for $1.2m - $1.4m I think the opportunity for obscene profits is pretty obvious. Small developers haven't been announcing this from the roof tops the way the because of the inevitable increase in competition that would ensue.

A lot of people would qualify for an aquisiton and renovaton loan that would allow them to buy a $1.2 - $1.4 million dollar brownstone in Fort Greene or Clinton Hill, spend $200k renovating it, and then sell each of the units for $600k each. Who wouldn't want to make $800k - $1.0m for a year of work?

Posted by: Shahn Andersen at February 6, 2006 9:33 AM

ah, the new soho. wish it felt that way for us.

on the opposite end of the spectrum, I noticed a brownstone on 5th avenue listed at 3.3 million, which as far as I know would be a record. If it's the house I am thinking of it's a quick flip job by a couple who would be a great asset to the neighborhood.

Posted by: anon at February 6, 2006 10:29 AM

It's not nearly that easy.

Prices in Harlem, like most of Brooklyn, have skyrocketed in the last year. Townhouse shells go for at least a million.

Too late to make the big bucks unless you bought when prices were still cheap!

Posted by: Aristotle at February 6, 2006 10:31 AM

It's happening more and more in Browmstone Brooklyn. On my block of St Marks Ave in Prospect Heights, there's a 3-story being converted to condos (with a massive buildout in rear, blocking the neighbors' light and views); also, a coop (go figure) conversion of a 4-story on the corner of St Marks and Carlton. Reminds me of the go-go speculative 1980s -- and subsequent crash.

Posted by: Anon at February 6, 2006 12:28 PM

Won't this trend eventually drive up the prices on 1-2 fam brownstones in areas like Park Slope.

This is why I'm sitting on mine for the long haul.

Posted by: Miguel at February 6, 2006 1:28 PM

The cost of construction, not to mention legal/regulatory costs and time spent on a project, make the profits reasonable for the risk taken. If you think taking advantage of an opportunity to provide housing that people can afford is a bad thing, then I am curious about what other solutions are more viable? And don't say rent control -- it just results in negative investment in properties as landlords let buildings go to pot.

Posted by: Anonymous at February 6, 2006 2:37 PM

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Posted by: Anonymous at February 6, 2006 2:37 PM

I think this is a great idea for all concerned. I know lots of people who would love to buy a place in brownstone bklyn but can't afford a whole bldg & just want a piece of one.

Even if it is more expensive per sq.ft. than buying a whole townhouse, it's more attainable to more people, and that's good. Something for everybody.

Posted by: Anonymous at February 6, 2006 2:59 PM

I am in the process of converting two separate four family brownstones, so I am aware of the risks and rewards. This type of conversion may provide more units for purchase, but it is changing one type of housing into another, unless a two family is converted into a four family, no new housing is really are created.

Posted by: Shahn Andersen at February 6, 2006 3:08 PM

I agree with 2:59.

One can debate the merits of this type of conversion, but for many people (myself included), it's the ony way to get in at all.

Posted by: gloworm at February 6, 2006 5:30 PM

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February 6, 2006

Pure Arb: Taking Brownstones Condo in Harlem

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