July 27, 2017
The rents are likely to rise a lot at 316 E. 55th St., a recently-sold apartment building in the Sutton Place neighborhood of Midtown Manhattan.
The final closing price was $17 million for the 41-unit building. That works out to a price of $415,000 per unit or $678 per square foot, with a capitalization rate of just 2%. (The capitalization rate represents the income from a property as a percentage of the sale price. A cap rate of 3% is low, even for New York City. A cap rate of just 2% is very, very rare.)
“The property provides substantial opportunity for revenue growth, as in place rents are only 40% of market. The buyer plans to implement a significant renovation program, substantially raise revenues and capitalize on the un-tapped potential of the property,” said Clint Olsen executive managing director of Cushman & Wakefield.
All 41 apartments are protected by New York’s rent regulations. Of those, seven are owner-occupied or vacant. Just renovating these seven apartments and raising the rents to market levels could increase the annual income from the building by more than $100,000 a year. Another 27 apartments are larger “alcove” studios with 550 square feet of space that present an opportunity for conversion to one-bedroom apartments as they become vacant.
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