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April 28, 2014
Multifamily Monday: 48,000 Applications for 98 Apartments
It's more likely Derek Jeter will win rookie of the year than it is for a New Yorker in need to get affordable housing. Capital One's Laura Bailey tells us Broadway Housing Communities' 124-unit development in Harlem's Sugar Hill drew 48,000 applications for the 98 affordable units.
On Thursday, Mayor de Blasio will announce his plan for 200,000 units of affordable housing in NYC. That follows Community Preservation Corp's commitment this month of $200M for 3,500 affordable units statewide. And yet demand is rising. Another affordable project Laura is involved in drew over 40,000 apps recently. That has become typical, says Laura (above), adding that there always was a supply-demand imbalance, but NYC no longer is treading water.
NYU Furman Center's Moelis Institute for Affordable Housing Policy and Capital One have just completed a study on the affordable housing landscape, and institute director Max Weselcouch (above) tells us one million NYC households pay 30% of their income on rent and almost 600,000 pay more than half their income. Citywide, rents went up 11% from 2005 to 2012 while income went up 2%. That means middle-income folks are struggling, too.
But it's not just a public policy game. De Blasio's plan will include incentives, of course. Private investors can make an acceptable ROI, Max says. And then there are nonprofit developers, as well, like Broadway Housing Communities, whose Sugar Hill development at at St. Nicholas and 155th (above) will deliver soon and for which Capital One provided financing.
Buyers Willing to Look Anywhere
Condo buyers are hopscotching among neighborhoods more than ever, says Douglas Elliman's Frances Katzen, whom we snapped in her 51st and Madison office. One client who lives in SoHo now, for instance, doesn't want to be in Tribeca just to the south, so Frances is showing her around the West Village and even the UES's Carnegie Hill. And the finance guys renting in Midtown are ready to buy in Gramercy and Flatiron.
While some had never considered Chelsea, a longtime favorite of the gay community, buyers, including families, are happy to live in the neighborhood that the art galleries and the High Line have built. One of Frances' clients initially excluded Chelsea, but she recently sold him a unit in 520 W 19th (which we snapped, above). Frances also says the UES east of Lexington no longer is the less desirable alternative among the Uppers. Valuation is changing as the Second Avenue subway gets closer to reality, she says. Plus condo and co-op boards there aren't as tough to get past, and the lower prices allow more flexibility for families to renovate into multiple bedrooms.
Frances and her Douglas Elliman colleagues also are marketing 35XV at 35 W 15th St, ready for occupancy this fall. Few know about Alchemy's first foray into high-end residential because of its midblock location between three neighborhoods: Greenwich Village, Union Square, and Chelsea. But the midblock location also means insane views, she says. (Plus, every day feels like a hug.) She started repping the building six weeks ago and has raised it from half to 72% sold.
Large Deals Dominate Q1
Institutional deals led the charge of NYC multifamily sales in Q1, prompting impressive year-over-year gains in all metrics, according to Ariel Property Advisors president Shimon Shkury (snapped at Bisnow's recent NYC Multifamily Summit with colleagues Aryeh Orlofsky, Daniel Tropp, and Ivan Petrovic). Transactions rose 51% to 160, building volume increased 61% to 293, and dollar volume jumped 167% to $2.5B, the firm's Multifamily Quarter in Review: Q1 2014 shows. Brooklyn posted the strongest gains, with year-over-year sales jumping 200% to 120 and dollar volume soaring 445% to $768M. Manhattan dollar volume increased 156% to $878M. Pricing advanced considerably year-over-year, with gains in all metrics in every submarket covered in the report. Ariel's contract signings and bidding activity indicate that Q1 trends will continue. For a copy of our sponsor's report, click here.
Who Buys Value-Added Buildings?
Value-add is all the rage among multifamily investors, but once they add the value, who's buying? Megalith Capital Managment CEO Sam Sidhu told us Friday that his company, which has built a $300M portfolio of NYC properties in just three years, typically holds assets for three to seven years. So Megalith leaves a little meat on the bones—a little value left to add—for future owners. That might mean locking in a seven-year loan at today's rates for a buyer to assume in three years. Or maybe Megalith will renovate just some of the units, whatever it can get to during its medium-term hold.
There always are long-term investors out there to buy from Megalith, Sam says. In fact, its funds are opportunistic precisely because it's too difficult to compete for top-performing assets with longer-term holders. For the past two years, "opportunistic" has meant development. Megalith has three shovel-ready projects now. It bought the 6 Cortland Alley site last summer when Sam pegged Northeast Tribeca as emerging. Now it's become a prime submarket (they grow up so quickly—cherish your neighborhoods), and Megalith and Imperial Development Group are building four full-floor condos (3,750 SF each, big enough for four bedrooms) and a two-story penthouse. The planned building is rendered above.
The company also is starting on two Dumbo projects it bought in March 2013 from the Jehovah's Witnesses (before Kushner and RFR made their move there). Megalith and Urban Realty Partners will convert a warehouse on Water Street near Jay into 15 condos, adding a penthouse floor, and will break ground on 105 apartments (rendered above), the first new-construction apartments in Dumbo in a while. Sam expects the rentals to benefit from the Brooklyn Tech Triangle, the conversion of the rest of the Witnesses' Watchtower complex into creative office, and the northward extension of Brooklyn Bridge Park. With land prices so high, Megalith is switching back to acquisitions and expects to add $150M to its portfolio by the end of 2015.
Michael Weiss contributed to this issue.
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