Investor pays $180M for apartment building… in Midwood
Massive deal for former site of Vitagraph Studios comes as rising rents drive deal-hungry tenants to outer boroughs
By: Suzannah Cavanaugh
Dermot’s Stephen Benjamin with 1264 East 14th Street (Dermot Company, Vitagraphbk.com)
An investor looking to cash in on New York City’s hot rental market dropped $180 million on an apartment building last month — not in Hudson Yards or Sutton Place, but Midwood, Brooklyn.
The Dermot Company nabbed a 302-unit apartment building at 1277 East 14th Street in the Brooklyn neighborhood for the whopping sum late last month, records show. The sale is the largest in the borough so far this year and a testament to the feeling that rising rents will drive deal-seeking tenants to listings farther from the city center.
Seller Hampshire Properties bought the property for just $20 million back in 2014, when it was the site of a 90-year-old building once used by Vitagraph Studios, a silent film company, and later by NBC. In 2018, Hampshire took out a $92 million construction loan to develop an apartment building on the property.
The eight-story building, now known as The Vitagraph, sold for $471 per square foot, nearly a third above last year’s average of $357 for multifamily properties in Brooklyn, according to a report by Ariel Property Advisors.
By comparison, last year’s largest Brooklyn deal — the $1.8 billion portfolio sale of East New York’s 16-building Starrett City portfolio — was priced at about $217 per square foot.
But while Starrett City’s buyers picked up nearly 50-year-old assets, Dermot’s acquisition is a fresh-faced elevator building with a roof deck, lounge, business suite and gym.
The buildings’ relatively affordable rents could prove attractive as tenants scramble to find leases in the city’s increasingly competitive market. One-bedroom units currently list for around $2,900, on par with Brooklyn’s median rent price of $2,884 as of February, according to Douglas Elliman’s most recent report.
But appraiser Jonathan Miller, who authored the report, noted that rising rents citywide are pushing tenants who may have snagged a Covid discount on a Manhattan apartment last year to save money in the outer boroughs this year.
He added that while an ample pipeline of luxury apartments could slow rent increases for the top tier of the market, a lack of new affordable developments will likely raise prices for lower-cost rentals. For owners like Dermot, that’s a benefit.
“What we’re going to see potentially is more rent growth in the lower half of the market down the road than we will in the upper half of the market,” Miller said.
Still, Dermot will have to settle for stabilized rents on a portion of the buildings’ units. Hampshire received a 421a tax break to build the property, meaning 30 percent of its units must remain rent-regulated for the next three decades. Ninety-one of the building’s 302 units were offered in a 2020 housing lottery, with monthly rents ranging from $2,346 for a one-bedroom unit to $2,830 for a two-bedroom.