Multifamily Monday: Bronx Returns Are Beating Manhattan
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Vanity or money? For the former, invest in Manhattan. But if you're looking at dollar signs, the Bronx has the returns.
Rosewood Realty Group’s Michael Guttman has long been focused on Manhattan, Brooklyn, and Queens, where cap rates are low (5% or lower) nowadays. Any revenue projections there are in the literal sense of the word: based on the theory that any multifamily investment will make money within five years. The metrics, though, paint the Bronx as a better bet. Cap rates range from 6% to 8%; the price per door—$80k to $130k—is lower than elsewhere in the city; and gross rent multipliers range from 7x to 11x (versus 11x to 17x or higher in Manhattan, Brooklyn, and Queens). In short: the Bronx has the most room for growth, and Michael tells us that clients who are selling high in other boroughs are finding value by replacing those properties with Bronx buildings.
In Q2, Michael repped the buyer in a $40M sale of 10 buildings (331 units) in the Bronx’s Tremont section, including 968, 984, and 990 Bronx Park S (above). Though most of the buildings are rent-stabilized and Section 8, the investors willingly paid a premium ($121k per unit and 7.4 times the rent roll) because the value still penciled out. He also recently arranged the $7M sale of 78 units on Grand Avenue and the (five blocks from the intersection of Grand Concourse and Fordham Road), 154 apartments across four buildings near the James J. Peters VA Medical Center for $14.6M, and the $18M sale of 144 units on Pelham Parkway, where he says young pros are moving. (A Bronx Tale now involves fewer gangsters and more Hulu Plus subscriptions.)
As residents get priced out of Brooklyn and Queens, Bronx is the next stop, says GCP Capital’s David Sessa. Gentrification and retail momentum have turned around areas like the Grand Concourse and Pelham Parkway, and upscale neighborhoods have been in the Bronx all along, such as Riverdale (set apart from the rest by its location on a hill; it borders with Van Cortland Park, the Hudson, and Yonkers). Banks are happy to go to the northern borough, as well, he tells us, as long as the deal makes sense and is appraised. He’s negotiating two Bronx multifamily loans at 80% LTV, in line with the leverage available across New York City.