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| The Q, Not Beholden To Ethics Rules, Says Scam Is In the Air |
Okay. This is now officially ridiculous. There is absolutely NO way you can make a profit paying $44 million for a 200 unit building at 805 St. Mark's, diagonal the Brooklyn Children's Museum. You gots to do upkeep, maintenance, you gotta run the building. The name of the company that bought it is Swedish, called Akelius. Plenty of people already don't like their "business model." Expect nothing new here.
But here's the nutty part. The building was purchased for half that just two years ago by Freddy Sayegh of Burke Leighton. It's doubled in price in two years. AND Burke Leighton bought it from their cross-town rivals (buddies?) Pinnacle. You know, Pinnacle, another ethically challenged buyer who's part of a small cadre of big real estate players who've invested heavily in Central Brooklyn.
What's going on? The Q says...Ponzi. Forget all the obvious morally reprehensible stuff they do to make their properties whiter and richer. These guys all know one another. What's to stop them from saying, mafia style, you buy mine if I buy yours? Then it looks to the world like the "smart money" is willing to pay these massive valuations. And then we sell ONE MORE TIME. To someone who's NOT in the cabal. And all that back and forth that we spent turns into one big payday. We split the profits. Or, to make it look more kosher, you take this one, I'll take the next.
Seems like an effortless way to make millions in an overcooked market.
At the very least, we're way past prices that make sense for the old-school model of buy a property, improve it, create steady returns. They used to call it rent roll. Now, who knows what metric they're using? Maybe one of you finance heads can explain this to me.
6 comments:
I want to believe you for sheer entertainment value. But don't you have to be at least loosely affiliated with one cabal or another to buy a building like that? And I would think that anyone with the resources to entertain a major purchase of this sort would be savvy enough to sniff out a Ponzi scheme. Thoughts?
At $44,000,000, these guys paying approximately $220,000 per unit. One bedrooms in my building on Bedford near Fulton are going for $630,000. So it sounds like they're getting a good deal to me.
These guys'll come out ahead, even if they have to pay the present tenants $30-$50k for each unit to move.
Agreed. No Ponzi. More Fonzi than Ponzi.
Anon 5:36. You can't just take a 200 unit building of rent stabilized apartments and go coop or condo. It's a process, and you'd have to buy everyone out and warehouse til you meet the requirements. All you need is a few law-literate tenants and you'll have a hell of a time. In the old days (as Babs hipped me tonight) the tenants could band together and buy the building and take it coop. Or go in with the owner - a sponsor - with them getting sweet deals. You can't do any of that at $44 million. The only people with that kind of money for this sort of deal are, like the Swedes, a real estate investment vehicle using vast sums from other sources.
There is obviously something very fishy going on here. But no, you can't take that $220,000 unit cost at face value.
Buildings like this were going for low single digits just 10 years ago. And while home and apartment houses have jumped sometimes by 3 or 4 times, that's not 10 times. So either there's a Ponzi-Fonzi scheme, a bait and switch, a tricky-dick deal or SOMEthing going on.
I am not a financier. But here's what I know from experience. When the underlying asset that someone is buying is bought for a price not rooted in fundamentals or even in reasonable speculation, something has to give.
So either a bunch of smart people have just lot their smarts, or manipulation of some kind is taking place. It's not that uncommon to see a House of Cards fall. But the key, as we learned 7 years ago, is to not be left holding the bag.
If the least scrupulous of investors has simply taken the risk out of the equation by learning how NOT to be left holding the bag, well, then there's your answer to the question "how does a 200 unit rent-stabilized building become worth $44 million?"
Something else that doesn't make sense to me... if I've got that kind of money/credit to invest in property, why not buy one or two of those mega-ultra-super luxury apartments going up around Central Park? Seems like those places skyrocket in value every time they turn over. And I don't have to ever get my hands dirty with the kind of people who, you know, ewww, pay rent.
Unless you're a sleazeball who'd never get past the lobby in one of those palaces...
Can someone more real-estate savvy point out the flaw in my thinking?
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