Multifamily Commercial Real Estate Sale for $35.3 Million
Four six-story elevator apartment buildings changed hands to the tune of $35.3 million last week, brokered by Rosewood Realty Group. That’s 324 units and four commercial spaces sold for “10.4 times the current rent roll,” reports the New York Real Estate Journal. The buildings are 715 St. Marks Avenue, 649 Empire Boulevard and 621 Lefferts…
Four six-story elevator apartment buildings changed hands to the tune of $35.3 million last week, brokered by Rosewood Realty Group. That’s 324 units and four commercial spaces sold for “10.4 times the current rent roll,” reports the New York Real Estate Journal. The buildings are 715 St. Marks Avenue, 649 Empire Boulevard and 621 Lefferts Avenue, in Crown Heights, and 114 Albemarle Road in Kensington, which the paper called “emerging neighborhoods.” “The seller is a family that owned the buildings for over 50 years,” Jungreis said, adding they were sold to another “very active” Brooklyn family, one that “will benefit from the fact that the former owners have left some delicious low hanging fruit for the new owners who will further enjoy appreciation of those assets.” We talked to Jungreis, who assured us that this won’t be a Stuyvesant Town situation, where longtime rent stabilized tenants worry they’ll lose their spots. “These are regular, normal, longterm holders. They’re two young guys in the family business, they just want to hold.”
Rosewood Realty Completes $35.3m Multifamily Portfolio Sale [NYREJ]
Photos from Property Shark.
I bought several neglected 100% rent regulated multifamily apartment buildings in Manhattan about ten years ago. It’s been a battle and it hasn’t been fun, but it’s payed off enormously since I’ve been able to buyout many of the longtime low rent regulated folks.
Unfortunately, many of the problems Sam talks about exist. I wish I could have a cordial relationship with all me tenants, but sadly several low rent nut jobs I can’t get rid of, make owning and operating the buildings rather unpleasant.
The rent laws allow the squatters to live cheap and drastically reduce the supply of decent, affordable housing in NYC.
Denton;
Also a good point, which Sam reinforces in his subsequent post. I think if you’re buying a r/c building in an area of modest incomes, relations with the tenants can be somewhat normal. I can envision the scenario that Sam is talking about, and in this case, “brass knuckle tactics” might be necessary, which is not my scene. I’d prefer to look in markets that are moderate-income, but have a long-term upside propect.
fsrq: you and I have different experiences with rental tenants. My experience is in expensive neighborhoods in Manhattan and in Brookilyn Heights/Cobble Hill where tenants really are pretty difficult and would be entombed in their apartments after death if the courts let them.
In less well-off areas I suppose it isn’t such a problem because the market rate and the r.c. rate are not that far off. But try prying someone out who pays $400 to $700 a month for a two or three-bedroom apartment in Brooklyn Heights or on the Upper West Side. Impossible. And there are lots and lots of those folks around. Some rent spare rooms in their apartments for more than they are paying in rent. technically illegal but they do it informally and get away with it.
benson, other people will also look at the age of the people living in RS apts ( so they know when they’ll die) and you’ll also want to know how flexible the previous LL was. Because an RS unit is supposed to be the primary residence yet many people who moved in young bought elsewhere but never gave up the great Manhattan apt. If the LL had the building for fifty years, like this one did, he’s probably making enuf money so he didn’t sweat it. If you just bought it, you have to be different. See what Tishman is doing in Cooper Village to get these kinds of renters out.
I have seen turnover of 20% in the 1st 18mo of ownership in more than 1 building, simply through normal moves and demanding that people pay the rent (quick dispose notices, etc…). After that tends to be about 5-10% a year based on normal moves, deaths, evictions, etc…
Yes Sam you are right, there are professional deadbeats (again why I say stay away from programs like Sec-8) who will go to court every time, make stuff up and continue living rent-free; but far more will give up much sooner when they realize you will pursue the case, not sign dumb stips and make them come to court over and over.
But yes – it requires patience, a digital camera (to prove repairs are not needed or completed) and meticulous paperwork.
But you are wrong that the majority of tenants in RS/RC buildings are slimeballs out to get over on the LL – most are hard working people who want a decent place to live and are rightly happy to take advantage of a law that makes it difficult to raise rents – however if you follow the law and pick the right opportunities there is plenty of upside in RS/RC housing – and you can be a human being at the same time.
Actually everything I said is true. I would change the word “bribe” to “greasing the right palms” that has a more business-as-usual sound to it, which is exactly what it is.
Renovating old rent regulated apartments is fine, but first you have to empty them out. That can be a looong waiting game.
All the cards will be stacked agaisnt you and tenants with free legal counsel such as retired teachers, civil servants, and ornery seniors with lawyers in the family will with hold their rent for every plaster bubble and sink chip. Pushovers are few and far between unless you are in an undesirable location in which case it hardly matters whether you have rent regulation or not.
FSRQ;
Thanks! Good advice. Your statements confirm my gut feeling that there is no need to rush in. In fact, my plan is to take some courses at NYU’s real estate institute, while keeping an eye on the market.
It is nearly impossible to make any $ for a long time if the multiple is over 10x (historically 7x or lower is what you really wanted) – but frankly that isnt the most important factor – the most important factor is current rents. If you find a decent building with room rents of less than $265 a room (assuming an ultimate market rate of around $350 a room), you can generally make money pretty quick (3-5yrs). Stay away from buildings with more than 15% Sec-8 or other welfare programs (they never move, dont work and will destroy your building fast).
Also you want buildings with lots of 3rm apartments (i.e. 1BR) – believe it or not, they will be the easiest to rent and command the highest room rents.
And as I said before you need tons of capital (it will cost $15-20G to renovate an apartment properly, plus you’ll need hundreds of thousands more for things like pointing, new elevators, new intercoms etc… – all things you can collect MCIs for and J-51s)
Personally I wouldn’t buy anything now (unless it is a real deal) because one thing Sam said is true – lots and lots of people have entered the market (including hedge funds in recent years) – who have no idea what they are doing (these things are labor intensive investments) and with the price of oil so high this winter (plus water and taxes also up) I predict there will be alot of selling coming over the next few years – which will bring cap rates and GRM to a more legitimate (non-speculative) place.
FSRQ;
OK, I get your point. I can’t really argue against your point, as I’ve never owned a RC building, and it sounds like you do. I’ve only owned small rental (2 family) buildings.
I am thinking of buying multi-family investment properties. So, given your experience, what would your recommend as a prudent rental multiplier, for rent-controlled and non rent-controlled buildings?
By the way, for the 2 family I owned I basically followed your philosophy. I continually improved my building. When one tenant moved out, I gut-rehabbed the place, and made a nice profit when I sold it.