Property Grunt

Thursday, February 08, 2007

Starrett and Zillow: Double Shot!

Well this isn't a big surprise. Starrett City has just been sold. According to the New York Times an offer of 1.3 billion was accepted by the sellers.

It didn't even go as far as a second bid.

According to real estate executives, more than a half-dozen
bidders submitted
offers for Starrett City on Monday afternoon, ranging from
$600 million to more
than $1 billion.
The owners, led by Disque Dean, had
told bidders that a
select group would be asked to make a final and best
offer in the second round
of bidding. They had imposed a strict gag order,
which barred prospective buyers
from speaking to tenants or government
officials. The Dean family had promised
them that the second-round bidders
would be permitted to speak with affected
Executives who have
been briefed on the sale said that Berkshire
LLC, a partnership of David
Bistricer and Sam Levinson, wanted to short-circuit
the second round by
offering a premium bid of nearly $1.3 billion.

Already there has been alot of chatter that the affordability of those apartments will be in jeopardy. From Curbed to Gothamist all eyes are watching this deal and for good reason.

Government has a great deal of leverage over a new owner. The state holds a
$234.4 million, interest-free mortgage on the property. State and federal
officials could approve or reject a new owner. City officials would have to
approve any plans for large-scale development.

So basically Berkshire has their very own co-op board to contend with. And the fund doesn't end there.

Shaun Donovan, the city’s housing commissioner, said there was little
development potential at the complex without a lengthy public review.
“Because of limited market potential in the area,” he said, “we would expect
any new development to require unusually large government subsidies to be
economically feasible and that is unlikely to happen.”
Bertha Lewis,
executive director of New York Acorn, a community organizing group that has been
working with the local tenants’ association, said, “There is simply no way that
Berkshire can afford to pay $1.3 billion for Starrett City and still keep the
complex affordable.”
She added, “By offering to pay a quarter of a million
dollars per apartment, these developers are virtually guaranteeing that they
will raise rents, cut services and build market-rate housing in order to squeeze
a profit out of their wildly inflated offer.”

I still stand by my original entry on this matter which is that the buyers have no interest in doing any type of development, at least not at this moment. The power comes from the cash flow of the complex because it is guaranteed by the government. These sellers are not idiots and probably have a team of a special forces caliber to run the numbers and to figure out the best strategy for the Starret Housing while dealing with the barriers of entry of this property.

What I could see them doing is pulling a Met Life in the future when that area of Brooklyn completely gentrifies and then liquidate at next market cycle. Meanwhile they just collect their checks from the government. What could also happen is that the residences of Starret have no need for the subsidized housing and leave on their own accord. Which is pretty unlikely.


Amanda from Zillow gave me the rundown on some

new Zillow developments.

The first is a national overview of home values which they have broken down into various markets which they call Zindexes. First Zestimates now this. Their marketing department is starting to coast a bit. But then again, you don't alot options when you have to put Z's

What makes this quarterly report really hardcore is that have included a detailed blow by blow of 75 metropolitan areas. BADASS! I would love to hear from Jonathan Miller to see his take on these reports.

If you don't have the attention span to look over these reports, Zillow has a press release which lays out the facts. What I found quite amusing was that New York was neither the highest or least appreciating metropolitan area.

I think what is telling about Zillow's direction is this quote from their blog.

We get a lot of demand for the underlying data itself and the real estate
blogosphere is rabid in
new data
and producing incredible insights from it. So, we thought
we’d unleash the data and take advantage of the fact that there are a lot more
analysts out there than there are here at Zillow. As
foretold, how we’re providing the data is at least as important as
the data itself. So have some fun with the data, combine your local
knowledge and insights and share with the community.

Zillow is quite aware of their brand and the impact it has on the market. They realize that the fact that this data coming from them will put it into somewhat different. I do admire that because they are not trying to pull the old "we are above any type of bias." trick. I am curious to see how Propertyshark's bubble map fares.

Btw. Excuse the format. I am still experimenting with these new blogging features that were forced upon me.