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Mom and pop in business as investors cash out

By Al Barbarino

A citywide property sales rebound is being led by spectacular performance in Northern Manhattan.

But the real opportunity for investors lies in the boroughs, executives at Massey Knakal said during the firm’s 2012 Mid-Year Property Sales Meeting this week (Tuesday).

During the first half of 2012, citywide dollar volume increased 14 percent to $14.4 billion; and property sales increased 29 percent to 1,310, according to Massey Knakal data.

Though Manhattan sales jumped 30 percent to 386, total dollar volume increased just 4 percent to $11.2 billion.

But in Northern Manhattan, what VP of Sales Rob Shapiro called “one of the brightest spots in the Manhattan market,” dollar volume tripled, jumping to $441 million; and property volume, at 118, nearly doubled.

“Manhattan is back,” said Paul J. Massey, CEO and founding partner. “Northern Manhattan is on fire.”

The exceptional growth in Northern Manhattan, where multifamily buildings accounted for 43 percent of dollar volume, is being fueled in large part by deleveraging by institutional investors who bought at the peak of the market, Shapiro said.

Rob Shapiro

They are now being “forced to take their medicine,” giving up their assets to “mom and pop,” and moving on to the next opportunity.

“As loans come due and returns are not what their partners expected, investors are happy to get out while they can and return the money,” Shapiro said.

But the most profitable opportunities for multifamily properties lie in the boroughs, where “cash-on-cash return is through the roof,” said partner James P. Nelson.

The contrast between pricing and cap rates at four comparable properties located in the boroughs is nearly startling when compared with Manhattan, Nelson demonstrated at the meeting.

A multifamily property at 163-167 Ludlow Street in Manhattan sold at $650 psf, with a 4.3 percent cap rate.

But 371 Etna Street in Brooklyn, for example, priced at $122 psf, with a 7.1 percent cap rate. In the Bronx, 3291 Hull Ave. and 308 East 209th Street priced at $79 psf, with an 8 percent cap rate.

“I think we’re going to look back on this window of time and see that this was the time to buy in the boroughs,” Nelson said.  “You can buy a lot more real estate when you’re targeting the boroughs.”

James P. Nelson

As expected, citywide performance in 2012 is outpacing last year’s, Massey said.  Annualized sales are on track to break $28 billion, beating last year’s $27 billion; the number of sales, annualized at 2,620, is set to break last year’s 2,222; and there has been an increase in land sales, which so far this year have made up 19 percent of total sales, compared with ten percent last year.

The one shortcoming is supply, which has not picked up as anticipated, but is expected to do so in Q3 and Q4, Massey said.

In Brooklyn, dollar volume jumped 60 percent to $1.5 billion; in the Bronx, it jumped 48 percent to $383 million; Queens dollar volume increased 36 percent, to $539 million.

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