It finally happened—a nearly double digit capitalization rate on a recent multi-family trade in NYC. Two contiguous Upper Manhattan properties recently traded for $5.8 million (or $8.3 million less than the $14.1 million purchase price in 2017) representing a 9% cap rate, according to press reports. The other metrics are equally astonishing: $120 price per sq. ft., 5.7x gross rent multiple and approximately $95,000 per unit.
The reason for the heavy discount is clear to anyone following the space as the June 2019 rent laws (a.k.a. HSTPA) radically turned valuations both upside-down and inside-out for rent stabilized properties. Still, these metrics are disconcerting and potentially signal more trouble ahead for rent stabilized property owners. Don’t blame it on poor management either: ownership was no neophyte. The seller is a third generation owner/operator with a career that spans more than 30 years and includes the purchase, development and management of more than 150 properties in NYC, New Jersey and Florida, according to his website.
Of course, there could be more to the story that neither press reports nor public records are picking up, but what are your thoughts, do you expect cap rates to continue to climb for this asset class? What about the location of the assets, how much would it have mattered from a cap rate perspective if the buildings were south of 96th Street in Manhattan or in a lesser Bronx location?
Website Source: Wexcor Capital pays $5.8M to Barberry Rose for two walkups in Washington Heights. (2024, January 11). PincusCo. https://www.pincusco.com/wexcor-capital-pays-5-8m-to-barberry-rose-for-two-walkups-in-washington-heights/ Wexcor Capital Purchases Washington Heights Apartment Building For $5.8M – Mann Report. (2024, January 3). https://www.mannpublications.com/mannreport/2024/01/03/wexcor-capital-purchases-washington-heights-apartment-building-for-5-8m/
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