Brooklyn Rental Projects Attracting Big Investors

The title of the New York Times article “A Rental Market Surge in Brooklyn” will come as no surprise to anyone who’s been paying attention to the market on this side of the river this year. The Gray Lady takes the recent sale of 111 Kent Avenue–a stalled condo project that a developer bought for $24.6 million in 2011, spent $8 million finishing up and leasing (for up to $70 a foot!), and then flipped for $55.5 million, or a whopping $895,000 per unit–as the poster child for a trend that’s seen investors gobbling up condo projects that ran out of steam before the market collapsed in 2008 and 2009 to convert them into rentals. “In 2006 and 2007, any condominium you put on the market sold, and now the same thing is happening with rentals,” said Dave Maundrell of apartmentsandlofts.com. In addition to rising rents (the article cites a 10 percent rise in 2010, 7 percent in 2011 and predicts a similar rise over the next year and a half), the economics of many of these deals are boosted by the J-51 tax abatements that developers used to get for creating new housing in most parts of Brooklyn as well as the difficulty that many potential condo buyers are still having getting financing. “Any time people build condominiums and the market doesn’t support it, there is a shift to rentals — that is not a new phenomenon,” said Woody Heller of the brokerage firm Studley which handled the sale of 111 Kent Avenue. “What is new is that we are seeing this happen in Brooklyn.” The Times article cites the sales of 75 Clinton Street and 175 Kent Avenue for $50.8 million and $76 million, respectively, as additional examples of the trend.
A Rental Market Surge in Brooklyn [NY Times]