Meridian Properties bought a pair of rent-stabilized buildings in Brooklyn for $35.25 million, despite several worries about how active the rent-stabilized market will be in the wake of all the new rent laws passed by the state, according to sources familiar with the deal.
The firm closed Friday on 441 Ocean Avenue and 1745 Caton Avenue, which are located about a block apart from each other in Prospect Park South. The Ocean Avenue building contains 87 units, and the Caton Avenue building contains 59 units. A partnership led by Andrew Glass sold the properties.
A Marcus and Millichap team of Matthew Fotis, Tyler Workman and Sebastian Altilio brokered the deal. The properties were under contract before state legislators passed all of the new rent laws, according to Fotis.
Fotis was happy with the price the buildings sold for despite the changes in Albany and thinks they would go for significantly less if he tried to sell them now.
“This transaction signifies one of the last fully rent-regulated building sales consummated before the change in rent laws,” Fotis said in a statement. “It is doubtful these buildings [would] trade at a cap rate this low in today’s climate. The new owners will hold these trophy assets long term, as they do most of their holdings.”
Mike Niamonitakis, chairman of Meridian Properties, said the firm was able to negotiate a discount for the two buildings based on the state’s new rent laws, which helped keep them interested in the properties. They had originally planned to try converting the buildings into co-ops but are putting those plans on hold under the new laws.
“It’ll take us a little longer to get to where we need to be,” Niamonitakis said, “but thank God we negotiated, up until the day before the closing, a reduction in the price.”
Glass did not respond to a request for comment.
New York’s multifamily market has already seen a significant slowdown so far this year, which brokers have attributed almost universally to uncertainty over what new rent laws state legislators would pass. When the laws themselves were passed in June, they were stricter than many in the real estate community had anticipated and placed severe limits on what landlords can do with and how much they can raise the rent in rent-stabilized units.
Other multifamily deals that have taken place recently include Camber Property Group’s and Belveron Partners’ $77 million purchase of 1133 Ogden Avenue in the Bronx and Zara Realty’s $80 million purchase of 140-60 Beech Avenue and 140-30 and 140-50 Ash Avenue in Flushing.