In a surprising turn of events, another rent-stabilized apartment building in New York has sold at an astonishingly low price, raising concerns about the future of such properties. Held by a family since the 1950s, the building at 610 West 204th Street in Inwood was sold for a mere $3.8 million, which equates to just $79,000 per unit. This is significantly lower than the already modest average of $88,685 per unit for similar properties in the area, as reported by Baxter Realty Advisors in the first quarter.
Not Distressed, Yet Still Low
Despite the low price, the building was not distressed, noted James Parker, the broker for the deal. The 48-unit building had a low level of violations, making the sale price even more surprising. The sale price reflects the market’s perception of rent-stabilized properties, compounded by the high mortgage rates currently being offered.
“There’s so much bad news and negativity,” Parker remarked. “All buyers are trying to use that to get a fair price.”
The seller, Robert Thompson, identified in property records, was a third-generation owner looking to retire, which may have provided the buyers with additional leverage.
Strategic Exits from Rent-Stabilized Market
Karen Johnson, head of Baxter Realty Advisors, noted that many owners are making strategic decisions to exit the rent-stabilized market. They either sell due to an upcoming mortgage maturity or to leave the business altogether. However, Parker mentioned that an upcoming mortgage maturity did not influence Thompson’s decision to sell.
Impact of High Interest Rates
For the buyers, an Albanian couple, the heightened interest rates were a significant factor limiting their bid. While Thompson took out his final mortgage at 3 or 4 percent interest in 2021, the new buyers had to borrow at 7 percent interest. The higher cost of capital translates to lower sale prices and higher cap rates—the annual returns demanded by investors. The Inwood deal’s cap rate was 9 percent, not because rents are high, but quite the opposite.
Rent vs. Market Reality
Units at 610 West 204th Street rent for an average of $1,283. In contrast, Inwood’s average rent, including free-market apartments, was $2,899 in March according to the Levin Report—an 18 percent increase from the previous year, second only to SoHo. However, rent-stabilized apartment owners can only raise rents by up to 2.75 percent on one-year leases starting in October.
The sale of 610 West 204th Street for such a low price underscores the challenges facing rent-stabilized property owners in New York. With high interest rates and capped rent increases, the market is forcing many to reconsider their investments. As more owners opt to sell, it remains to be seen how low prices can go and what the future holds for rent-stabilized properties.
