Yet another rent-stabilized apartment building sold for such a bargain that it raises the question: How low can prices go?
Held since the 1950s by a family firm, 610 West 204th Street in Manhattan traded to an Albanian couple for $3.8 million — just $79,000 per unit, according to Marco Lala, the broker on the deal.
That’s even lower than the paltry average for similar sales in the same neighborhood: $88,685, according to a first quarter report by Ariel Property Advisors.
The Inwood property was “not even distressed,” Lala said, pointing to a low level of violations for the 48-unit building.
The low-ball price instead reflects the market’s perception of rent-stabilized properties and the high mortgage rates being offered.
“There’s so much bad news and negativity,” Lala said. “All buyers are trying to use that to get a fair price.”
It didn’t hurt that the seller, identified in property records as Robert Miller, was a third-generation owner looking to retire, which gave the buyer some leverage.
Shimon Shkury, head of Ariel Property Advisors, said if owners aren’t selling their rent-stabilized assets because of an upcoming maturity, they’re selling to quit the business altogether.
“Owners are making strategic decisions to leave the rent-stabilized market,” Shkury said.
Lala said an upcoming mortgage maturity didn’t influence Miller’s decision to sell.
For the buyers, though, heightened interest rates limited what they could reasonably bid. Rates were about 3 or 4 percent when Miller took out his final mortgage on the property, in 2021. The new buyers borrowed at 7 percent interest, according to Lala.
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A higher cost of capital translates to lower sale prices and higher cap rates — the annual returns demanded by investors. The Inwood deal’s cap rate was 9 percent, and not because rents are high. Quite the opposite.
Units at 610 West 204th rent for $1,283 on average. Inwood’s average rent, which includes free-market apartments, was $2,899 in March, according to the Corcoran Report. That was 18 percent higher than a year before. Only SoHo recorded a greater jump.
But owners of rent-stabilized apartments will be able to raise rents by no more than 2.75 percent on one-year leases, starting in October.