Five Brooklyn Rental Props Change Hands
Last month the Bassuk family sold a portfolio of 14 residential properties in Brooklyn and Queens for $118 million to a joint venture between Bronstein Properties and JP Morgan Asset Management. The group of five Brooklyn buildings, which included 136 Hicks Street (above) as well as rentals in Bay Ridge and Midwood, had been marketed…
Last month the Bassuk family sold a portfolio of 14 residential properties in Brooklyn and Queens for $118 million to a joint venture between Bronstein Properties and JP Morgan Asset Management. The group of five Brooklyn buildings, which included 136 Hicks Street (above) as well as rentals in Bay Ridge and Midwood, had been marketed as a group for $35 million. Until now we never considered selling the properties, but the dynamics of the current market made the deal very attractive, said Richard Bassuk, one of the many heirs to the portfolio. Indeed. The entire portfolio consisted of 943 apartments for a total of 841,000 square feet. The cap rate (basically the projected annual income divided by price) was about 5 percent. Hasn’t JP Morgan ever heard of Treasury bonds!
943-Unit Multifamily Portfolio Trades for $118M [Globe Street]
Photo by Scott Bintner for Property Shark
I posted this in the Forum a while ago as I think that these comments from Steve Roth at Vornado are the representative of the drivers for why we are seeing commercial cap rates go where they are going. He’s not the be all and end all of real estate but it’s interesting to see the views of soemone with billions at stake. This view has to be a factor in support for the housing market broadly.
“Vornado Realty Trust Chief Executive
Officer Steven Roth comments on his aborted attempt to buy Equity
Office Properties Trust, the largest U.S. office building owner.
He spoke Monday at Citigroup Inc.’s 2007 Global Property CEO
Conference.
On why he pursued Equity Office:
“There’s a socioeconomic trend in America toward the three,
four, five dominant coastal cities. If anything, that is an
accelerating change. We believe that the improvement and the
growth and the dynamism of cities like New York or Washington or
northern California or southern California, those cities are
accelerating in importance and growth and prospects, relative to
the rest of the country, at a fairly significant rate. That is a
socioeconomic trend that we see no sign of changing. We want to
grow in those cities.
“There is an amazing trend that I’ve never seen in my
career, and I’m probably older than everybody in this room, that
replacement costs of these assets is rising at a very accelerating
rate, maybe in New York from $700 to $800 a square foot to $1,200
or $1,300 a foot or more.
“Towers in these cities are franchise assets which are
becoming more and more scarce and impossible to replace, a)
because the locations are running out, and b) because the
replacement costs are accelerating so quickly.
“Dynamics of the current market”, code for “get out while the getting’s good”.
It says they asked $35mm for the five Brooklyn properties – this sale also included an additional 9 Queens properties.
so they asked $35mm and got $118mm? stunned.
5 cap could be a perfectly fine investment if, as is probably the case here, there are many elderly rent control tenants whose attrition will signficantly increase the cap rate.
I’ve always asked myself who could possibly afford to buy at a five cap, and now I know.
http://www.netgainrealestate.com/index.php?q=safe_cap_rate