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South Bronx buzz fizzles

A property at 265 Alexander Avenue is for sale on one of the few townhouse-lined streets in the Bronx.

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.