Joint Venture Pulls Trigger on $50M Brooklyn Portfolio Sale

NEW YORK CITY – Alcion Ventures and Alchemy Ventures has pulled the trigger on the sale of its 92,000-square-foot portfolio in Brooklyn, dubbed the BKL9N. The assemblage is comprised of 80% free-market units and is on the auction block for $50 million. B6 Real Estate Advisors is leading the marketing effort.

Bids are steadily rolling in from local operators and national institutions for the portfolio, which is attributed to the droves of investors hungry for free-market assets since the New York State Legislature enacted rent regulation in June.

BKL9N properties are clustered together in North Brooklyn, an area of the borough that has served as the poster child for nationwide urban renewal and slated for continued rental growth over the next five years, DJ Johnston, partner & managing director at B6 Real Estate Advisors tells GlobeSt.com.

“The market has been extremely receptive of the portfolio,” Johnston said. “It is striking a chord, considering today’s market conditions.”

And with free-market units gaining increased popularity, values are expected to increase moderately over the next 12 to 24 months. Cap rates are not expected to contract amid the change, but market-rate rents are expected to increase due to the lack of supply coming from newly renovated units, particularly in parts of Central Brooklyn where rents are still relatively low compared to NYC averages. Also, if there are any interest rate hikes and increased taxes, it could tip values taxes, according to Johnston.

Property locations include 216 Macon St.; 475 Hancock St.;1050 Lafayette Ave.; 788 Madison St., 790 Madison St.; 442 Decatur St.; 223 Bainbridge St.; 45 Kingston Ave. and 910 Prospect Place. And all of them are located within close proximity to the J, Z, A and C trains.

Out of the portfolio’s $3.4 million gross income, $2.7 million of the revenue is derived from its free market-rate units. On a 10-year average with interest rates on debt ranging from 3.5 to 4 percent, cash-on-cash yields are projected to deliver an 8% return.

There are 27 rent-stabilized units in the portfolio and 35 are in locations that allow a new owner to create new units at market-rate levels upon rollover of the existing rent-stabilized tenants. Thus far, 75 percent of the units have been renovated, including upgrades to common areas and roof and mechanical systems.

Buildings within the portfolio are located within a two-mile radius of each other, which is ideal for lower operational expenses and increased cash flow due to the scale and concentration of the assets. On six of the nine properties are 2A or 2B tax classifications that fix real estate tax costs.