This time, if someone says the Bronx is burning, it’s because the real estate market is on fire.
Companies big and small are flooding into the once-troubled South Bronx at historic rates, an early sign that an area which long eluded gentrification may be getting its day in the spotlight.
“The last housing boom ran out of gas before it reached the Bronx,” said real estate appraiser Jonathan Miller of Miller Samuel. “But now, we’re finally at the cusp of something. The South Bronx is the natural next jumping-off point for people who are seeking out affordability.”
Investors are buying both existing multifamily buildings and vacant sites ripe for development, a sign that a wave of major renovations and new towers is coming to a neighborhood that was once a national symbol of urban blight from foreclosures, burned-out buildings, high crime rate, poverty and drugs.
Now investors are betting that what was once down is set to go way up.
"I didn't want to end up as the guy who says, 'I should have bought that 10 years ago,'" said Keith Rubenstein of Somerset Partners, a developer who is spearheading a massive new project on the South Bronx waterfront. "I want to be the guy that bought it. Now is the time."
The proof of the South Bronx boom is in the numbers.
Real estate speculators ponied up $2.39 billion for properties in the Bronx in 2014, a 39% increase from the previous year and a 55% bump from 2012, according to data from commercial real estate firm Ariel Property Advisors. Deals in the South Bronx, comprising neighborhoods such as Mott Haven, Morrisania, Melrose, Port Morris and Hunts Point, accounted for half that figure.
Multifamily sales are up a whopping 67% since a year ago and sales of development sites are up by 85%.
These are the kinds of numbers seen 10 years ago in neighborhoods such as the Lower East Side, which is now a boom town for wealthy foreigners and rich kids from the Midwest.
Not everyone thinks that’s a good thing for Jonas Bronck’s old stomping grounds.
“We’re seeing properties being bought up all over our neighborhoods and rents are already going up,” said Michael Kamber, director of the Bronx Documentary Center and a resident of Melrose. “I’ve seen this picture before — I got priced out of the Lower East Side and out of Dumbo — and it doesn’t end well for anyone except the wealthy.”
What’s driving the charge?
“The real estate market is full-fledged pandemonium,” said Amit Veeramachaneni of Vee Hospitality, an investor who recently shifted his focus from Long Island City to the South Bronx. “Now that Manhattan has almost doubled in price, Brooklyn and Queens are reaching prices that are beyond the grasp of everyday investors, too. The Bronx is the only place where you can get your foot in the door.”
Veeramachaneni recently snagged a 12-unit residential and retail building that had been in preforeclosure at 543 E. 137th St. and Saint Ann’s Ave., across the street from a housing project. Veeramachaneni renovated it from top to bottom, and is now renting out the units at above market rates — $1,550 for a three-bedroom, $1,350 for two-bedroom and $1,250 for a one-bedroom.
That’s still substantially below the median rents in Queens, for instance, where a one-bedroom goes for $2,528 a month and a three-bedroom goes for $4,507, but it’s a major uptick for the Bronx, where the blended average for an apartment was $954 in 2014.
“This is not something that I bought to fix up and flip in a year,” Veeramachaneni said. “This is something I believe in over the next 10 years. I’m getting in on the ground floor of something.”
Investors such as Veeramachaneni are already bidding up the price of multifamily rental buildings.
“When we were bidding on the property, we were paying 20% to 30% more than what a property across the street closed for just a few months earlier,” he said.
And more and more deals are happening every day.
Affordable housing developer the Arker Companies is planning a $70.5 million upgrade of an 18-building Morrisania portfolio it snagged for $85.5 million last year, for instance.
And real estate giant the Chetrit Group, owner of prime Manhattan properties like the Sony Building on Madison Ave., and Somerset recently went all in on the South Bronx when they purchased a 5-acre parcel, at 2401 Third Ave. and 101 Lincoln Ave., on an industrial stretch of the Harlem River. There are provisional plans to build as many as six 25-story towers with market-rate apartments and ground-floor retail space.
And Rubenstein’s aspirations for the neighborhood don’t stop there. He’s investing in new restaurants and even bought a brownstone to renovate on Alexander Ave.
“A lot of these projects are a long way off, but just knowing that they’re coming makes people more bullish on the area,” Veeramachaneni said. “It builds momentum.”
Local residents already struggling to keep afloat now worry that they won’t be able to stay in the neighborhood if the influx of capital pushes rents and prices up significantly.
“I’m very skeptical that this is actually going to benefit the people of the South Bronx,” Kamber said. “It’s going to benefit real estate investors for the most part. Developers are going to make a lot of money, prices are going to go up and the people that are here — some of whom are still among the poorest in the country — are going to be faced with rapidly increasing rents.”
Approximately 40% of residents of the South Bronx live below the federal poverty line, while 35% spend more than half their income on rent, according to a 2014 report by the Manhattan-based Institute for Children, Poverty, and Homelessness.
For his part, Rubenstein said those issues don’t really apply to his waterfront project, which has the backing of politicians such as Bronx Borough President Ruben Diaz.
“The beautiful thing about our project is we’re not displacing anybody,” he said. “It’s not like we’re tearing down old apartments and replacing low-income-producing buildings with high-income-producing buildings. We’re taking underutilized industrial land and turning it into prime residential housing. I think that benefits everyone.”
Not everyone will be able to afford to live there, but Rubenstein says the project will meet a need for housing for New Yorkers priced out of the other boroughs.
“There will be plenty of people that will be able to afford it and, unfortunately, there will be people that won’t be able to afford it,” he said.
But the project will likely have a ripple effect across the entire community. Kamber is concerned that the current residents of the Bronx will get left behind in the real estate shuffle, whether it directly affects their buildings or not, and that the neighborhood still won’t have the vital services that residents really need.
“Developers aren’t coming in here to build better schools, improve health care or start mentoring programs. They’re coming to make money,” he said.
There have been indications of urban regeneration in the Bronx for decades, but now that real estate’s big dogs are finally sniffing the neighborhood, confidence is high that this Bronx boom is for real, experts said.
“This is something that’s been trickling along for years,” said Phillip Morrow, president of SoBro, the South Bronx Overall Economic Development Corp. “It took nearly 20 years to prime the pump to get it going.”
Experts attribute the sudden real estate frenzy to one key fact: the borough’s dramatically improved crime rate.
In the borough’s 41st Precinct, best known by its nickname in the “Fort Apache, the Bronx” film, the murder rate has tumbled by 91% since 1990 — down from 44 to four last year, according to NYPD stats.
In the nearby 40th Precinct, which comprises much of Mott Haven, murders dropped from 72 to seven during the same period.
“I walk the streets there three or four times a week,” said Jason Gold, a Bronx specialist at Ariel. “I feel just as safe as I would in Manhattan.”
Many investors also have been capitalizing on the Bronx’s high foreclosure rate, which at one point was the highest in the city. Investors can enter projects at an extremely low cost basis when they buy out of foreclosure, they said.
“Investors come in, they close quickly and renovate,” said real estate broker Manny Pantiga of Pantiga Group. “It’s almost like a factory assembly line. It’s very efficient.”
And the foreclosure crisis isn’t over. The rate dropped 11.5% from a year ago, but it’s still 109% higher than it was in 2013, according to data provided to the Daily News by real estate website PropertyShark. That’s temporarily dragging down prices — but they won’t stay low for long.
“Rents and prices should begin to experience stabilization and growth,” said appraisal expert John McCullagh of R&M Appraisal Reports.
WHAT CAN YOU AFFORD?
There’s still time to get in on the ground floor of the South Bronx renaissance. Here’s a look at what your money will buy:
For less than $300,000, you can get this two-bedroom, one-bathroom co-op at 1100 Grand Concourse. It has an eat-in kitchen and oak floors. Ariela Heilman of Halstead Property has the listing.
$2,400 a month
For just $2,400, you can rent this renovated three-bedroom pad at 349 E. 138th St., which has a brand new bathroom and kitchen. Aaron Baird of Bohemia Realty has the listing.
For small time investors looking for an entry point into the Bronx market, there’s this four-story walk-up at 617 E. 179th St., which is asking $1.35 million. Cushman & Wakefield has the listing.
Wednesday, April 08, 2015