Manhattan isn’t the only New York City borough that’s seen an uptick in building sales this year. The city’s outer boroughs are seeing their own rebound in the investment sales market, though it’s more moderate in comparison.
For the first seven months of the year, sales volume is up in the outer boroughs 17 percent over the same period last year.
“Last year was a dead year,” said Marcia Rose Yawitz, senior director of Eastern Consolidated and a 23-year industry veteran. “It was the worst year we have ever had and it is just beginning to come back.”
According to PropertyShark, the outer boroughs saw more than 2,100 transactions (above the $100,000 marker) through July 29, the most recent date available, versus 1,800 during the same stretch in 2009. In Manhattan there were 326 transactions during this period in 2010, up from 217 during the same period last year. Brooklyn is leading the way, with more than half of those non-Manhattan sales.
Data provided by PropertyShark, Real Capital Analytics, the CoStar Group and Eastern Consolidated paint a largely encouraging picture of investment sales in the outer boroughs with a resumption of stalled development projects, an increase in the number of properties hitting the market, and loosened capital requirements by the banks.
“What we have seen so far is like musical chairs. Lenders chasing borrowers, borrowers chasing investors, investors chasing tenants, and so we are not sure who is in control,” said Adelaide Polsinelli, associate vice president at Marcus & Millichap. “In the fourth quarter, I think we can expect everyone to take a seat at the table.”
With the help of PropertyShark and RCA, The Real Deal put together a list of the top building sales in each of the outer boroughs so far this year.
Brooklyn sales activity has been in a league of its own — at least compared to the other outer boroughs. The borough registered 1,077 sales as of July. The top transaction — the $46 million purchase of a retail building at 496 Fulton Street in Downtown Brooklyn by Crown Acquisitions as part of the revamping of the Fulton Street Mall — helped boost Brooklyn’s average building sales price to $997,262, a 13 percent increase over 2009. The median sales price of $650,000 for the borough as a whole remains unchanged from last year.
Given such a vast and varied borough, each neighborhood in Brooklyn has a different story to tell — although multifamily dominates.
The office market remains small, with approximately 18 million square feet of space and just $1 billion in office building sales from 2003 through April. That said, the second-largest transaction in 2010 so far was the sale of the 76,000-square-foot office building by the Treeline Cos. at 205 Montague, the former Brooklyn Savings Bank, which was purchased for $33 million by Midtown Equities, headed by developer Joseph Cayre.
Tropical Emerald LLC rounded out the top three building transactions with its purchase of a retail building at 493 Fulton for $19.5 million.
Queens has racked up an impressive 660 transactions so far this year, which ranks it second behind Brooklyn in sales volume. The median sales price in the borough compared to last year has remained flat at about $665,000 per sale.
Aaron Jungreis, president of Rosewood Realty Group, has already closed eight deals this year in Queens, one of which registered as the third-largest transaction.
“From 2003 to 2006 I probably did 40 to 50 deals a year in all the boroughs and about four to five a year, or about 10 percent, in Queens. Now I am doubling that and 20 percent of my stuff is in Queens,” he said.
Leading the way was the monster $155 million deal involving the City University of New York Law School’s new campus, which closed in March and led all other deals by a huge margin. CUNY bought six floors — 260,000 square feet — of a Citigroup-owned building at 2 Court Square in Long Island City. The premium price paid by CUNY — $600 per square foot — has sparked the ire and aroused suspicion of some student groups who say the university overpaid for the space, according to the New York Times.
In the borough as a whole, Tom Donovan, a broker for Massey Knakal, said he is seeing multiple bidders on retail and multi-family properties but vacant reconstruction and reconversions are having problems being sold. “If [the property] is priced properly it is moving quickly but the contract period is taking longer. Buyers are taking longer on the due diligence and making sure that any of the subjective information is accurate,” he said.
The second-largest deal was Vintage Real Estate Organization’s $19 million acquisition of 135-35 Northern Boulevard in Flushing, also known as the RKO Plaza, from the developer Shaya Boymelgreen. The purchase of a 106-unit apartment building at 83-30 118th Street in Jamaica for $14.4 million by the Benedict Realty Group from SIMA Corp. rounded out the list. That deal was brokered by Rosewood’s Jungreis.
The first eight months of the year have not been good for Bronx investment sales.
The good news for the Bronx is that it topped its brethren in average and median sales prices, according to PropertyShark.
The average sales price there as of July was $1.4 million — a 34 percent increase over the average sales price in 2009. That was largely due to a smaller volume of sales (just 327, placing it well behind Brooklyn and Queens but still way ahead of Staten Island). A large transaction of roughly $54 million also helped buoy the borough’s average sales price.
The top three sales in the Bronx were all elevator apartment buildings in southwest Bronx.
In April, the Grant Avenue Owners Corporation acquired 1259 and 1275 Grant Avenue, two apartment buildings with a combined 190,000 square feet, for $53.63 million and bragging rights as this year’s largest transaction in the borough.
Ranking second was last month’s sale of the 456-unit Clinton Towers on Oakland Place for $35.5 million. It was bought by two LLCs — Clinton Oakland Towers and Clinton-178 Towers.
In April, Morrisania Apartments completed its acquisition of a 240,000-square-foot apartment building at 280 East 161st Street for $15 million, the third-largest transaction.
But the Bronx still has structural problems it needs to resolve before it can catch up to Brooklyn and Queens. According to Rosewood’s Jungreis, in addition to a glut of overleveraged buildings, part of the problem can be traced to the 1980s. “Almost every owner in Brooklyn lives in the borough, but the Bronx got abandoned,” he said. “People who own most of the buildings [in the Bronx] don’t live there and that is the stark reality of it. If you don’t live there you don’t take care of it as well.”
With a paltry 37 transactions, Staten Island has shown the least amount of activity this year, which makes any year-over-year evaluation tricky. There were 38 transactions in Staten Island over the same period last year. The median sales price increased to $495,000, up from $423,000 in 2009.
The top transaction to date was the sale of an 11,000–square-foot Walgreens retail building at 2191 Richmond Avenue, purchased by Richmond I LLC for $9.5 million in March. In the same month, Tompkins I LLC purchased another 11,000-square-foot retail building for $8.9 million at 570 Tompkins Avenue.
“The stuff with the really strong national tenants with long-term leases is going quick, but that ‘B’ and ‘C’ rated product has to be priced to sell or it will sit around and languish,” said Marcus & Millichap’s Scott Plasky who helped broker the 2191 Richmond and 570 Tompkins deals. Also in March, Victory Hospitality LLC finalized its acquisition of an 11,000-square-foot hotel at 535 North Gannon Avenue in North Island. The purchase price for the hotel was $2.8 million.