By Christopher Faherty
For years there was a buzz about the potential of a residential
boom in the South Bronx, but with the credit crunch making it nearly
impossible for small-scale investors to obtain financing in the area,
any sort of explosion appears to be on hold.
Local brokers said that while calls from potential homebuyers have
increased exponentially over the last few years, the neighborhood
they’ve dubbed SoBro still lacks an inventory of renovated properties
appealing to buyers seeking deals on the fringe. Now that financing for
small investors is scarce and pricey, a buildup is unlikely.
Properties in the shadow of the New Yankee Stadium have long been
targets of bold buyers and pioneer investors who epitomized the early
stages of the building boom in neighborhoods like Harlem and the edges
of Prospect Heights. The end of cheap financing means — at least for
now — they’ve largely missed the bus on the much-hyped southern portion
of SoBro.
Still, local brokers and investors said that SoBro’s
disproportionately low prices, proximity to Manhattan, and classic
architecture offer solid opportunities for flexible investors who are
able to wait out a dry spell.
Seeking potential
Closer to Midtown than most of Harlem, the South Bronx bursts at
the seams with warehouses reminiscent of Williamsburg and Red Hook.
It’s dotted with landmark-designated blocks throughout the
neighborhoods that make up the southern tip of SoBro — Mott Haven, Port
Morris and parts of the Grand Concourse. Public officials love to talk
up the area’s potential, but even as the city has spurred some
commercial and residential building, the small-scale residential
development that pulls buyers from outside the area remains scarce.
It wasn’t until this year that construction finished on what
officials called the first privately financed condominium ever built in
Mott Haven, a five-story converted print shop of 11 loft spaces called
the Bronx Bricks.
“In the five years I’ve been in Mott Haven the most calls I’ve
gotten have been from people looking to buy lofts,” the owner of Key
Real Estate Services, Allison Jaffe, said. “But there are just not that
many here.”
The Bronx Bricks lofts were put on the market at the end of July
2007, and all of the units have been sold except for one. Prices — from
$395,000 for a second-floor, roughly 1,200-square-foot loft to $795,000
for a top-floor loft nearly twice the size — were previously
inconceivable in the neighborhood.
The Bronx Bricks success story has prompted other investors to
follow suit. Alexis McSween, a graduate student at New York
University’s Schack Institute of Real Estate, was first drawn to SoBro
while completing a market feasibility report on a building in the area.
She recently went into contract to buy a warehouse space on Bruckner
Boulevard in Port Morris, just to the east of Mott Haven, for $867,000.
McSween and her partner, a retired Bronx detective, Curtis Whitehead,
plan to convert it into 13 loft units, with a laundry room, storage
space and a private gym.
McSween said she tried to attract big money to the project, but in
the end partnered with investors familiar with the gentrification of
the neighborhood. While confident the project will come to fruition,
she said it’s difficult to nail down the financing needed to convert
the warehouse. She said some banks require that she pre-sell 50 percent
of the units, and others will only underwrite the loan if the project
is presented as a rental, with an option to convert to condos in the
future.
“I really like the neighborhood, and the numbers will work with renting anyway,” she said.
Buzz on Alexander Avenue
Investors and homeowners living on or near Alexander Avenue in Mott
Haven, one of the few townhouse-lined streets in all of the Bronx, are
abuzz over eight new properties that recently hit the market.
The properties, which make up about half of the homes in a
three-block corridor, were recently put on the market after local
landlord John Carney died earlier this year, listing agent Adrian
Thompkins said. While Thompkins, of Corcoran, described Carney as a
wonderful man, he said the properties had fallen into disrepair, and
said locals are excited about the prospect of new buyers and
renovations.
Since the Carney properties, which are selling for between $499,000
and $569,000, are highly sought after, the highest bids have come from
buyers interested in the homes as residences and not investments, a
common thread among available townhouses on or near Alexander Avenue.
While long-term investments, such as apartment buildings with
rent-controlled tenants, have been widely available, Thompkins said few
people had looked to flip properties.
But leading up to the credit crisis, brokers said an increasing
number of investors had shown interest in flipping homes near Alexander
Avenue. One such flipper got flopped.
Inna Sobel, an investor whose portfolio is largely comprised of
rental properties in West Harlem, paid $400,000 for a run-down but
federally landmarked two-family townhouse on Alexander Avenue just over
two years ago. She learned quickly that the property was in bad shape
and needed major renovations. Sobel and her husband decided to build
two condos, a duplex and a triplex on the site rather than renovate the
property and rent it out, she said.
Sobel sat on the properties, while she and her husband concentrated
on other projects. Now, unable to borrow from cautious banks, Sobel,
who said she will still turn a profit on the investment, is selling a
number of her Harlem properties to finance a $300,000 renovation of the
Alexander Avenue location.
“It’s very difficult to borrow money right now,” she said. “You
have to sell some properties in order to sell other properties. We’ll
sell the ones in Harlem that are maxed out.”
Home flipping didn’t skip over SoBro during the building boom,
brokers said. But compared to other fringe neighborhoods across the
city, it contributed less to gentrification.
Much of SoBro’s residential housing is made up of row houses
originally constructed as low-income housing. During the boom,
investors bought up these properties, performed what Jaffe describes as
“shoddy” renovations, and then resold them as investment opportunities.
Since the credit crisis hit, brokers say these types of investments
have stopped dead in their tracks, and local families who had bought
the properties are stuck with mortgages they can’t afford.
Lourdes Cartagena, a broker at Fillmore Real Estate, said that
while many of these buyers are seeing foreclosure on their mortgages,
others are turning to city programs for assistance.
Other SoBro properties, such as the spacious, high-ceilinged
apartments along the Grand Concourse in the western section of the
neighborhood, present another issue that has kept investors away.
While the properties can be found at comparative steals compared to
other fringe neighborhoods — Cartagena said a 1,600-square-foot
apartment sells for between $250,000 and $300,000 — almost all are
condominiums that require buyers to also be residents. In addition,
most home buyers are looking for newly renovated apartments — which
most along the Grand Concourse are not.
Also in the area, since many co-ops have rules prohibitive to
investors looking to renovate and flip units, many of these investments
remain untapped.
