Property Grunt

Monday, February 26, 2007

Face Value: Creaming in their jeans over Queens!

I would like to announce a mission shift of this blog which is an implementation of a new feature called Face Value. The objective of Face Value is to analyze the locations of real estate listings and present as much information about the listing's surroundings. In the near future I plan on adding on a financial analysis portion of this feature but for now this will simply be an analysis of the location and what it offers. I just want to remind people that I am not an appraiser so this analysis is based on my experiences in real estate, from researching other sources and from walking around the neighborhood.

For this particular evolution I will be focusing on Queens. As some of you may know there was an entry in Curbed titled the Curbed Roundtable: The Year of Queens?

Do I think this will be the Year of Queens? Well, they have been talking about Queens being the second coming for the real estate market for sometime and there is potential for this area. So on February 18th, 2007 I hit the streets of Queens to get the rundown.

The Q23 bus ride was quite uneventful and I got the chance to do some sight seeing which included a lot of beautiful homes in this area of Queens. In all honesty, I felt the bus route was out of place in this area since the area felt quite suburban.

Yes. There is a Williamsburg in Queens.

I found the building pictured on Massey Knakal's website. I just want to give a heads up that I do not work for them and I have never even been inside this building. This is their description.

100-07 Metropolitan Avenue, Forest Hills, NY (On Metropolitan Avenue between 70th Avenue and 71st Avenue.) Mixed-Use Investment Buildings,Outer BoroughsThe subject is located on Metropolitan Avenue, between 70th Avenue and 71st Ave. (Continental) in the heart of a charming and lively commercial area abounding with restaurants, shops and a movie theater. The area is greatly benefiting from additional commercial projects in the vicinity (e.g. Shops at Atlas Park and a proposed retail mall at Metropolitan Ave. and Woodhaven Blvd.). The property consists of a retail unit of approximately 1600 SF leased until February, 2010 and two residential units. Perfect for a 1031 or a long term investor, who would benefit from the higher rents he will get at retail lease expiration (current rents are approx. 20-30% below market value).

ASKING PRICE: $1,400,000

Massey Knakal states that the zoning for this building is a R3-2 and C1-2 Overlay.

According to the Zoning Handbook, the R3- 2 code are general residence districts which means it allows an array of housing models which include small multi-famiyl apartment houses and two family residences. C1-2 Overlay are districts that are mapped as commerical overlays with residential districts. They are mapped along the streets that serve the local retail needs and are found in low and medium density areas.

Now the number "2" is important because that code allows more flexibilty in uses which include funeral homes and repair services.

As I was walking around, I did see some Mom and Pop type restaurants and pubs. Like the one pictured above. Pictured below is a high end Italian restaurant that has been around for about 3 years which is something your most likely to see in the Upper West Side of Manhattan.

Now here's where it gets a little interesting.

Yes. A CVS. It appears Duane Reade has yet to get their meathooks into this area. Now remember when I mentioned how the number "2"? plays a signifigant role in the zoning? This is why.

This area is populated with gas stations and businesses associated with auto repair and maintenance. Why? Because this is a high traffice area due to its close proximity to Woodhaven Boulevard and the Long Island Expressway. In fact across the property is a Sunoco station. What I also noticed was the presence of national banks in the area which also sprout up where the traffic is. Another kicker was this.

Yup. That is a Home Depot. Well, at least one in the embryonic stages of being built. Why would a big box want to be around this area? Once again, it is the traffic and accessibility to the LIE. I think what made Home Depot snatch this area was because of the density of homes in the area. Whether it is due to wear and tear or asthetic reasons, homes need to be repair or renovated. But what really threw me for a loop were the following businesses I found where 100-07 Metropolitan Ave is located smack dab between them.



The presences of these two business are very signifigant since they do not simply setup shop anywhere. They do their market research which probably brought them to the same conclusions as those gas stations and auto shops in the area. Lots of auto traffic. Which makes that flashy singage really handy to attract costumers.
McDonald's is a fast food business that is ideal for cars. People can use the drive through or park their cars to grab a meal to go. Now when I think of Sizzler , I do not think of high end dining. I've been a Sizzler twice in my life, the first with some high school friends and then with my sister who declared that the cusine was like eating a salt lick and forbid me to ever go to one ever again. However there appears to be a demographic in this area that enjoys this type of high sodium, high carbodydrate cookery.
Now as nutty as Jeffrey Chodorow is, I do not see him being crazy enough to open up a restaurant with a Sizzler and McDonald's in the same area since they cater to a certain demographic that purchases their products which are not Jeff's crowd. So these two businesses may serve as a barrier to entry for others future pioneers of nouveau cusine.
Now mind you, I am not writing this listing off. There is a profit to be made on this property, however there are certains aspects one needs to be aware of. What makes the area valuable is the traffic. There are a ton of cars coming throught the area, that is why certain businesses have gravitated toward that area. In a way it is smaller version of Queens Boulevard just without being called the Boulevard of death.
As I have stated before there is a bunch of gas stations and an auto repair shops. These types of businesses, particularly gas stations can be potential brownfields. Underneath those gas stations have enormous tanks below them to store gas. Now if, god forbid, something happens to those tanks you have a potential enviornmental issue. Repair shops and Lube replacement shops are no different. They all accumulate some type of waste and need to dispose of it properly. If they don't, well residents are going to have some problems.
Another issue is transportation. There is no subway line in this area. You need a car or you have to rely on the buses. From there you can get dropped off at 71st Continental Ave and take the subway or LIRR. Depending on outside factors and your timing you could be looking at a very long commute. When I was there I was waiting for about fifteen minutes for the bus. It seemed like ages with the arctic wind blowing in my face.
This area is a huge goldmine but it depends on what type of business you want to attract with that listing. As stated before, anything automotive is a good bet in the area. The landlords that have these types of businesses leasing to them are ensured a good stable cashflow.
Is this building a good deal? I don't know since I haven't done a proforma or seen the comparables for other properties. I do know if you want to develop something you might have issues with your neighbors since the building shares ajoining walls with its neighbors.
With rents shooting up in Brooklyn and Manhattan it is possible that the next migration of young people will come to this area and drive up the value of the area.
What I think would make this more property valuable is creating an assemblage and buying out all the other adjoing buildings on the block. Then either selling the whole shebang or just treating it as an investment property.
As I have stated before, if you live there you need a car or rely on the bus system. Perhaps I am biased since I have always traveled by subway but I find taking the train alot quicker than the bus. And I sure as hell don't want to get a car. Considering how gas prices are starting to kick up, having a car might become a burden. Let's not forget parking.
Could this become the next Williamsburg? It is possible that a convoy of hipsters from Brooklyn could set up their homes here since there is no where else to go? Let's what happens in a year.