Bronx Real Estate Investors Now Play The Waiting Game
The Bronx is no longer a well-kept secret. It has been the fastest-growing borough for real estate investment for more than a year. Now all the early investors who saw the borough’s potential need is time.
“A lot of people were looking to what’s next, part from a speculation standpoint, and part from just the path and logic of where people will move to live next,” Hornig Capital Partners Managing Partner Daren Hornig said. “Over the last two years, pricing in the Bronx has significantly spiked.”
In the first half of 2017, the Bronx was the only borough in New York City that had more real estate sales transactions than the second half of 2016, according to Ariel Property Advisors, a sign that as real estate deals become harder to come by elsewhere, more funds are looking north to the city's fourth-most-populous borough for opportunities.
Hornig said that was good and bad: good if you already own, bad if you are an opportunistic investor looking for below-market deals without much competition. The market is fully attuned to the Bronx as a place for real estate capital.
"All kinds of good, positive things are happening in the Bronx," JRT Realty Executive Managing Director Ellen Israel said. "It's got the most upside in New York."
The Bruckner Building, which Hornig co-owns with Savanna, and where Bisnow is hosting the Bronx State of the Market on Sept. 14, is a perfect example of that upside. When Savanna and Hornig bought it in 2015, it was 100% occupied, but many of the tenants had stopped paying rent and there were squatters living illegally in parts of the building.
The landlords have embarked on a multimillion-dollar renovation project, Hornig said, which included taking the building down to 40% occupancy. It is now over 60% leased to a mix of tech tenants, light manufacturers and media companies, and Hornig expects it to be fully leased by the end of 2018.
Even if the Bruckner Building is able to lease up, the Bronx still does not have close to the draw for daytime workers and apartment hunters as its borough cousins. It is hard to pinpoint exactly when the street activity will catch up to the real estate activity.
"It takes time," Israel said. "We have to bring in some more tenants, we have to bring in more retail. You just need to get tenants who are going to create the buzz, just like WeWork did in Astoria. It’ll happen. It's just a matter of time."
The inflection point people point to is the delivery of Somerset Partners and The Chetrit Group's massive mixed-use project in Mott Haven, one that will include 1,300 market-rate apartments and broke ground this spring.
"When [Somerset and Chetrit's apartments] rent up, and hit the numbers they suggested, that will be the proof of the pudding," Taconic Investment Partners Vice President Dan McInerney said. "Some people are making big bets, some of them are really attractive projects, and we’re excited to watch them develop."
Before that inflection point hits, McInerney's firm, which bought the 1,400-unit, 114-building Eastchester Heights complex 10 years ago, will continue to seek out value-add, workforce housing investments. Taconic has partnered with an institutional fund to make more acquisitions of scale for existing housing stock, and could look to start developing in the Bronx down the road, McInerney sald.
"Looking at Bushwick, Bed-Stuy, Crown Heights, people are getting priced out of those neighborhoods, and they’re going to move," McInerney said. "People really believe in this borough, they’re putting their money where their mouth is."
