B6 Real Estate Partners has been exclusively retained to arrange for the sale of a 9 Buildings Brooklyn Portfolio: 216 Macon Street - 475 Hancock Street - 1050 Lafayette Avenue - 788 Madison Street - 790 Madison Street - 442 Decatur Street - 223 Bainbridge Street - 45 Kingston Avenue - 910 Prospect Place.
80% FREE MARKET INCOME - The package offers $3.4M in gross income, $2.77M of which is derived from free market units. With the recent passing of the rent reform bill, demand will increase for the limited supply of free market units. In effect, we anticipate free market rents will increase, particularly in lower basis areas like Bedford-Stuyvesant and Crown Heights, where current rents are 30-40% below the borough average.
NO REQUIRED CAPITAL EXPENDITURE - 75% of the 113 units have been renovated, and substantial improvements have been made to common areas, roofs, and mechanicals. A new investor will benefit from a passive operation in the mid-term, while recognizing natural neighborhood appreciation and a growing rent roll over time.
HIGH CASH ON CASH YIELD - Multiple term sheets from active lenders suggest interest rates between 3.3% and 4%, depending on lender type and preferred LTV. Moderate leverage from active commercial banks suggest 7.5% Cash on Cash returns over a 10-year period, with a projected IRR of 15%, assuming an exit value at a 5% cap in year 10. Reference our data room for our 10-year post debt service analysis.
ABILITY TO REDUCE OPERATING EXPENSES - This portfolio offers the ability to keep management overhead and operating expenses low. The concentrated density of the portfolio will create efficiencies in how the properties are managed and maintained. In addition, 8 of the 9 buildings have centralized boilers, presenting the ability to sub-meter and transfer heating costs to tenants, potentially cutting expenses by as much as 10%.
TAX PROTECTION - 6 of the 9 properties possess the coveted 2A or 2B Tax Classification. Under this tax class, municipal law limits the increase in annual real estate tax assessed values to 8% per year and no more than 30% over 5 years, further promoting the longevity of a healthy expense ratio.
TRANSIT ORIENTED PORTFOLIO - Each building is located within a short walk to major subway lines. The J , Z subway line runs along Broadway on the border of Bedford-Stuyvesant and Bushwick, with access to Williamsburg in under 10 minutes and Essex Street (Manhattan) in 15 minutes. The A , C subway lines run along Fulton Street on the border of Crown Heights and Bedford-Stuyvesant, with access to Downtown Brooklyn in 10 minutes and Fulton Center (Manhattan) in 15 minutes.
MAXIMUM LIGHT AND AIR - Each building was carefully selected to maximize rent per square foot. All buildings within the portfolio benefit from interior air shafts, that offer light and air to bedrooms and living areas. Some of the larger units can be manipulated to add bedrooms, further maximizing rents.
75% OF RS UNITS CAN BE RECONFIGURED - One way to increase RS rents is through the reconfiguration of a unit. By changing the envelope of an apartment, you can register as a new unit with the DHCR, establishing a new legal rent at first lease-out. If a RS unit becomes available, a new buyer will have the option to reconfigure with the neighboring market rate unit and increase legal rents to market levels.
SUBSTANTIAL BASEMENT SPACE - Each building offers clean, dry, and unused basement space. With high ceilings, the basements can be converted to amenity, common area, or duplex space. As the market matures, this space can maximize returns for co-living, condo conversion, or high-end rental use.