18.7.12
[Update] Caveat Emptor...
Todays Full Story below is less of a story and more of a listing. 79-89 Avenue D was originally listed by Eastern Consolidated back in May, with a very ambitious asking price of $22.5M. We picked up on this and applied our Cubed Advisory back-of-the-napkin-estimate system to the listing. By our quick numbers, the site would not be able to support an asking price of anything over $20M at the very high end.
Eastern Consolidated seems to have got the message from the market (since they didn't ask us!) and dropped the price a full 17% to $18.5M.
This is obviously a far more workable ask. The next few months will determine just how workable it is. The Arabella 101 at 101 Avenue D just started leasing- that means instant and very relatable comps that will surely be the basis of the model for 79-89 Avenue D.
Full Story
Eastern Consolidated seems to have got the message from the market (since they didn't ask us!) and dropped the price a full 17% to $18.5M.
This is obviously a far more workable ask. The next few months will determine just how workable it is. The Arabella 101 at 101 Avenue D just started leasing- that means instant and very relatable comps that will surely be the basis of the model for 79-89 Avenue D.
Full Story
Labels: affordable housing, development, East Village, Eastern Consolidated, multifamily
22.5.12
Caveat Emptor...
...or why it pays to do a little due diligence.
Call it the Facebook IPO mindset or just some very optimistic marketing, but the development site described in the Full Story below, would appear to be over reaching what is reasonable.
Located at 79-89 Avenue D and currently occupied by a one story Rite Aid, Eastern Consolidated has put a price tag on the property of $22.5M. The site clearly has a large footprint and a (locally) impressive buildable SF of around 72k. This number swells to 96kSF buildable when 20% of the residential floor area is designated low income.
The problem is in the location. Similar to 109 Gold Street that we previously blogged about, 79-89 Avenue D is sitting across the street from a public housing project. In this case it is the Jacob Riis Houses. These buildings will limit the rent potential of units built on the site and will kill all but the most bargain priced condo development.
We have been putting our 'Cubed Advisory back-of-the-napkin-estimate' technique to this one as a multifamily rental and just aren't seeing a $/SF rent that will make the asking price make sense. With residential rents in the micro area facing the Jacob Riis houses struggling to get out of the $45/SF range, an all market rate building could expect to bring in around $2.6M annually or $2.9M with a blend of low income and market rate- an increase made less viable when the cost of construction is factored in. With that kind of income backed up against a very rough construction cost, the land barely touches a useful value of $10M. That is under $140/SF buildable, which is not coincidentally close to what Eastern Consolidated quotes as nearby comps (for properties not facing a housing project). But, it certainly is nowhere near the $234/SF buildable asking price for the bonused model or $311/SF buildable as of right.
What this site, does have going for it is it's footprint. With typical lots in the area being 2500SF, the 13kSF footprint of 79-89 Avenue D has the ability to support a very large retail space. In fact it currently is one and is probably making over $800k a year in rent from it already. It is this potential for a large retail space/spaces that can command a higher rent than residential (~$62/SF on the block) and contribute a little over 30% to the rent roll that will allow bids for this site to approach what Eastern Consolidated is asking. Again, the 'Cubed Advisory back-of-the-napkin-estimate' would figure the land could command a price of $20M as a ground floor retail development with housing above. Still 10% below the ask.
All that remains to be seen now is whether the site languishes pending a market dictated price chop. Of course if some smart developer with plans to change the micro market of Avenue D can find an underwriter willing to prop up the financial model, well- that could work too.
Full Story
Call it the Facebook IPO mindset or just some very optimistic marketing, but the development site described in the Full Story below, would appear to be over reaching what is reasonable.
Located at 79-89 Avenue D and currently occupied by a one story Rite Aid, Eastern Consolidated has put a price tag on the property of $22.5M. The site clearly has a large footprint and a (locally) impressive buildable SF of around 72k. This number swells to 96kSF buildable when 20% of the residential floor area is designated low income.
The problem is in the location. Similar to 109 Gold Street that we previously blogged about, 79-89 Avenue D is sitting across the street from a public housing project. In this case it is the Jacob Riis Houses. These buildings will limit the rent potential of units built on the site and will kill all but the most bargain priced condo development.
We have been putting our 'Cubed Advisory back-of-the-napkin-estimate' technique to this one as a multifamily rental and just aren't seeing a $/SF rent that will make the asking price make sense. With residential rents in the micro area facing the Jacob Riis houses struggling to get out of the $45/SF range, an all market rate building could expect to bring in around $2.6M annually or $2.9M with a blend of low income and market rate- an increase made less viable when the cost of construction is factored in. With that kind of income backed up against a very rough construction cost, the land barely touches a useful value of $10M. That is under $140/SF buildable, which is not coincidentally close to what Eastern Consolidated quotes as nearby comps (for properties not facing a housing project). But, it certainly is nowhere near the $234/SF buildable asking price for the bonused model or $311/SF buildable as of right.
What this site, does have going for it is it's footprint. With typical lots in the area being 2500SF, the 13kSF footprint of 79-89 Avenue D has the ability to support a very large retail space. In fact it currently is one and is probably making over $800k a year in rent from it already. It is this potential for a large retail space/spaces that can command a higher rent than residential (~$62/SF on the block) and contribute a little over 30% to the rent roll that will allow bids for this site to approach what Eastern Consolidated is asking. Again, the 'Cubed Advisory back-of-the-napkin-estimate' would figure the land could command a price of $20M as a ground floor retail development with housing above. Still 10% below the ask.
All that remains to be seen now is whether the site languishes pending a market dictated price chop. Of course if some smart developer with plans to change the micro market of Avenue D can find an underwriter willing to prop up the financial model, well- that could work too.
Full Story
Labels: affordable housing, development, East Village, Eastern Consolidated, multifamily
21.2.12
Credit Where Credit is Due...
Tax credit that is.
The Full Story below relates the story of two solid organizations doing some development work for a good cause. A hundred+ year old and currently vacant school building in East Harlem is scheduled to be turned into 10kSF of community arts space as well as 90-100 affordable housing units by Artspace and El Barrio’s Operation Fightback.
Reuse of abandoned buildings... redevelopment through repurposing space... supporting the arts within a community- three things that we are fully in support of at Cubed Advisory.
As with all real estate stories, the real magic is in the math.
Based on the stated $50M budget, the project is likely coming in at a weighted $/unit of $440k and very reasonable $500-550/SF built. All good numbers, but tough to make work with the affordable housing rents of $500-$1100/mo. It becomes much more workable by the fact that the project is going to get $24M in low income tax credits as well as historic structure tax credits and arts credits. There is no word on what the city will be transferring the building to the organizations for, but one can be sure it would count as a credit.
So- who is now thinking they want to open a non-profit?
Labels: affordable housing, Artspace, East Harlem, El Barrio's Operation Fightback, redevelopment, tax credits
15.2.12
Going Big AND Going Home- In Brooklyn
At Cubed Advisory, we tend to make a lot of noise about the low hanging fruit that currently is the multifamily market. Steiner NYC seems to agree and aren't fooling around about it picking it. As the Full Story below notes, the Steiner family is taking four oversize lots on the border of Fort Greene and Boerum Hill and building 'The Hub'- 720 units on 52 floors.
Can anyone think of a similarly elephantine project out there right now? And no, failed condos converted to rental don't count.
The Steiner's picked up the properties for $30M which works out to a jaw dropping $63 per buildable foot. Combined with the preferential financing available for building 20% of the units as inclusionary housing, it would seem that the project is starting off on a very sound financial foundation.
Not having a full zoning analysis on tap for this particular assemblage, we are wondering just how they are going to get 720 units from 419kSF (LA*FAR10-50kSF retail) without zoning bonuses. But if the Steiner's can buy land at $63/SF buildable, we'll trust that they have the other aspects of the project stitched up.
Labels: affordable housing, Boerum Hill, development, Fort Greene, lots, Steiner NYC, The Hub
13.2.12
One of These Things is Not Like the Others
It is a well known fact right now, that in New York real estate the easy money is in multifamily rental. As the Full Story below points out though, there may be even easier money in the affordable housing subclass. Between federal and city tax credit assistance programs, federal low income housing tax credits and the Community Reinvestment Act, there is a great deal of incentives available to help improve the bottom line of such developments. But how are the numbers quoted in the Full Story related to a baseline such as $/built unit?
It looks like this:
L+M Development:
Affordable Housing Preservation Fund- $100M over 1300 units = $77k/unit
Phipps Houses Group:
Units developed since 2007- $650M over 2000 units = $325k/unit
Hobbs Court- $125M over 134 units = $932k/unit
Fordham Bedford Housing Corp
Serviam Gardens- $46M over 243 units = $189k/unit
Clearly L+M's fund numbers are low being strictly reno. Fordham seems a little light at $189k/unit. But what happened at Hobbs Court? $932k/unit development cost? Someone needs to check the published unit count or stop finishing units in gold leaf.
Labels: affordable housing, Fordham Bedford Housing, L+M Development, multifamily, Phipps Houses Group