The flip is making a comeback

The trend is rarer than in the pre-recession days, but is gaining steam
By Ed Lieber | January 04, 2011 03:10PM

Eastern Consolidated’s David Schectman and 55 Mercer Street (building photo source: PropertyShark)

A couple of recent real estate flips in New York City mark the beginning of an emerging trend that, sources said, is going to gain momentum as 2011 progresses and the economy continues to recover. 

Flipping is “absolutely” gaining momentum, said David Schechtman, a principal and senior director at Eastern Consolidated, adding that it started up again in the second half of 2010.

The term flipping loosely refers to when an investor buys a contract or a property and within a short time after closing on it, resells the contract or property for a profit.

In Early December 2010, developer Craig Nassi, CEO of BCN Development, unloaded the former Midtown offices of the Jewish Daily Forward to a Los Angeles-based entity called NYC Hotel 33 LLC for $20 million in a quick flip after buying the property the same day from the long-time owners. He bought the building in May 2010 for $18.5 million.

Nassi said people have been approaching him for a flip of his property at 184 Joralemon, a residence hall of Brooklyn Law School in Brooklyn Heights which reportedly signed a contract to sell to Nassi for $12 million, the Wall Street Journal reported last week.

“We just contracted for it and because it’s delivered vacant and it’s on an amazing block in a market that has little to no 700- to1,000-square-foot condo units, we have had many people approach us for a flip, but none that are attractive enough at this time. We’re looking forward to converting it ourselves and benefiting from the low basis we are acquiring it for,” he said via e-mail.

Eastern Consolidated was hired to flip the sale contract for 55 Mercer Street, a 16,000-square-foot former theater and residential building, which it did in less than 30 days to a privately owned firm. The deal closed Oct. 4, 2010 for $10 million, according to records from the New York Department of Finance. Ronald Solarz and Eric Anton from Eastern Consolidated told the Observer it was a pre-recessionary price. Contract prices are not public information.

Aaron Jungreis, president and founder of the Rosewood Realty Group, agreed about flipping gaining some momentum, but said that profits were not as large as they had been three to four years ago.

Years back, before the recession, he said he could sell a $45 million property in a week for a $10 million spread. “It doesn’t happen anymore — the spreads are thinner.” Flipping a $10 million building for $12 million is more in line with today’s activity, he said. 

But, flipping is nowhere near as common as it was about five years ago. Jungreis, an experienced flipper, noted that if he did 50 deals in 2005, 10 to 20 percent would have been flipped; now, out of 50 deals, 3 to 5 percent likely would be flipped.