A premium exists, but you need to hunt it down…

Justify the Premium

One block in the right or wrong direction can sway value by 20%, especially in neighborhoods like Bedford-Stuyvesant. While most investors underwrote this as a cap rate deal, there was demand from local investors that could underwrite this as short term cash flow plus an opportunity to occupy as an end-user down the line. This allowed Matthews™ to compress cap rates by about 100 bps to a 6.3% cap, down from the neighborhood average of 7.3%. As local specialists for the last 15 years, the Matthews™ agents knew exactly what blocks warrant these premiums and where values might start to fall off.

 

Hunt Down the Premium

Don’t be lazy, always call the neighbors! When launching a new listing, several call lists are built. These lists include buyers of comparable sales over the last 2 years, recorded bidders on similar current/ historical listings, and all owners within a 5-block radius of the subject. 50% of the time our top buyer will come from one of these 3 lists, but you need to allocate the time to make these calls, which can take weeks to execute properly. A single broker doesn’t have the time / resources to make 500+ calls in the span of 2 weeks, which is why we always staff our assignments appropriately. In this case, the buyer of Kosciusko was related to a purchaser of a similar building 2 blocks away. That buyer introduced us to his friend, who ultimately ended up outbidding the rest of the market. That one phone call earned our client an extra $100,000.

 

If you are selling a building in NYC, you should absolutely know who is staffed to the assignment and what is their role. Broker commissions are large enough to support a team of executors, but are you getting the value you deserve, and is each member of the brokerage is properly incentivized for the work that is expected of them. Ask these questions and you might realize it’s better to pay a little bit more in fee to pay for a firm that will 10x that margin in net sales price.