Using Meier to Sell Brooklyn to Manhattanites
Are Manhattanites ready to pay Manhattan prices for an apartment in Brooklyn, albeit one designed by arguably the biggest brand name architect in town, Richard Meier? It’s too early to tell, but Mario Procida, the developer behind On Prospect Park is betting a lot of money that the answer is yes. As his brother puts…
Are Manhattanites ready to pay Manhattan prices for an apartment in Brooklyn, albeit one designed by arguably the biggest brand name architect in town, Richard Meier? It’s too early to tell, but Mario Procida, the developer behind On Prospect Park is betting a lot of money that the answer is yes. As his brother puts it, “There are always 100 rich people who will pay for a piece of fine art…Mario’s got the only piece of fine art in Brooklyn.” Since opening for business in late October, somewhere north of 12 units (or about 10 percent of the inventory) have been sold. Asking prices are around $1,200 a foot, an untested milestone for the borough. Procida says his costs are well over $700 a foot and The Times estimates that he would have trouble breaking even at $850 a foot. Clearly sales haven’t been as fast as hoped, but, to be fair, the building is not complete yet and most people have a hard time with “the vision thing.” In his targeting of Manhattan buyers, the developer has gone so far as to locate the building’s sales office in Tribeca. Other developers question this strategy: “I think the Brooklyn buyer is a Brooklynite,” says a partner from the Clarett Group, which is building the Forte high-rise on Fulton Street in Fort Greene. Do you think OPP is going to sell out at or near the current asking prices? And to do so, will it have to be mostly Manhattanites doing the buying?
Betting on Star Power [NY Times]
Photo by Tracy Collins
The Bronx is a best bet. The housing in much of the Bronx is of a much higher quality than Brooklyn – Thousands of apartment buildings were constructed as middle-class residences during the 1920s. Subway service in th Bronx is also excellent. Distant parts of Brooklyn will never take off without major investment in new service – but virtually all of the Bronx is 45 minutes or less from Midtown, where everyone works these days.
Rent regulations obviously make it difficult to get the parasites out, but it’s not impossible.
Let’s not forget the Bronx has the most parkland per capita.
Want to make a good long term investment? Buy a Art Deco apartment building on the Grand Concourse.
I agree that GAP is a pain to cross and the building is overpriced, but to suggest that there are “tenements” on that side of the street means you clearly haven’t spent much time on Eastern Parkway in the last 15 years….
Queens is already starting to take off.
Brooklyn is the next Manhattan! I wonder what borough will be the next Brooklyn?
Kel at 8:49, as someone who bought a “nice house” and is in the middle of difficult renovations, I for one can completely understand if some people have no interest in owning an old house. For some people, an old house to constantly tinker with is heaven, and for some it would be their biggest nightmare.
Maybe, but that’s a cumulative, not annualized return. When you take the geometric mean of the return over the three years the project has taken, your annualized return is 100% at best and 50% at worst.
That’s the real difference between a Manhattan developer and a Brooklyn Developer. In Brooklyn, we are happy to make profits of $200 a square foot. In Manhattan, and in developments by Manhattan developers like this one, it pains the developer to consider having to sell for $1200 a square foot when his costs are around $800 a square foot. To make a paltry $400 a square foot on a project of this size is an insult that must be hard for the developer to bear. If this were Manhattan, his costs may have been $1200 a squre foot, but he would be selling for $2000 a squre foot in a building like this.
This is a bit of an oversimplification, but a 200,000 square foot project that costs $800 a square foot to build would have total costs of $160 million. Usually you would reduce the gross square footage by 10-15% for hallways and non-sellable space, but this building seems to be pretty efficient in its space usage, so we’ll put that number at 5% and subtract 10,000 square feet from the sellable amount. 190,000 square feet at $1200 a square foot equals a gross sellout of $228m. I’m guessing that he’s including his marketing costs in his cost estimate of “over $700” (let’s say $800 to make it easy). This would make his net profit $68m. Now traditionally on projects of this size, the bank will require 20% developer cash into the project or $43m. With 20% of his own money in the project he will make $68m on his invesmtnet of $43m or a roughly 150% ROI (return on investment). If he has a good track record with his bank and solid financials or decided to use mezzanine financing, he could do the project with as little as 10% into the project, making his total invesment as little as $22.8 and his ROI around 300%.
So people are betting prices will rise from 1200USD to 1500USD shortly?
No way!!
My problem with this building is the location, its on the “wrong” side of eastern parkway to be asking those types of prices. Id expect it to be on the other side, right on the park or at least with direct views. The website is disceptive in my opinion, in terms of proximity to Prospect Park. That said, the finishes are lovely and the glass walls are amazing. But no way Id pay that price on that side of the street with the large number of tenement housing.