By Konrad Putzier
With rents rising to record levels, Upper Manhattan has seen a flurry of multifamily deals in recent months.
New Jersey-based Treetop Development is one of the driving forces behind the neighborhood’s latest investment boom.
The company recently bought three adjacent multifamily buildings and a vacant lot at 2261-2273 Adam Clayton Powell Jr. Boulevard between 133rd and 134th Streets for $11.25 million from Sugar Hill Capital Partners. The buildings contain 41 rental apartments and six commercial units.
According to brokerage firm Ariel Property Advisors, 70 multifamily buildings in Northern Manhattan traded hands in the second quarter for a total of $327.9 million — a 26 percent increase year-over-year. In July, a further 22 buildings sold for a total of $110.7 million.
“The (Harlem) market is very strong and keeps going at a very quick pace,” said Peter Vanderpool of brokerage Cignature Realty, who represented Treetop in its most recent deal.
“The west side has always been the better area with higher rents,” he added. “However, we are getting to the point where the east side is catching up.”
Treetop is cashing in on the boom. It recently completed the sale of four rental buildings with 82 apartments on 116th Street to E&M Associates for $29 million. Aaron Jungreis of Rosewood Realty Group brokered that deal. Treetop had originally bought the buildings in 2012 with Latus Partners, and had since renovated the common areas and 15 of the apartments.
“These buildings followed the same recipe for success that we continue to rely on in neighborhoods stretching from 96th Street to Inwood,” said Adam Mermelstein, a Treetop principal.
“We instituted a significant capital improvement program upgrading common areas, lobby and hallways. We also renovated 15 homes and all the retail store fronts. The end result was high quality middle-class housing and occupancy levels near 100 percent. The high performance level made these buildings attractive to investors and generated a very positive profit margin from the sale.” Since May, Treetop Development has sold nearly 300 units in 18 buildings throughout northern Manhattan and Upper Harlem.
Holley Drakeford of commercial brokerage Giscombe Realty Group explained that Upper Manhattan’s rental boom is driven in part by a strong retail market.
The area has recently attracted a growing number of clothing boutiques, as well as large chains like Banana Republic and Bed, Bath and Beyond.
“It’s going crazy. We are looking at cap rates around three percent, sometimes even lower,” Drakeford said. “(Investors) are betting on a boom.”
Meanwhile, investors like Treetop Development expect to continue to expand their portfolio in emerging neighborhoods in Central Harlem, Washington Heights and Inwood.
Treetop is currently in contract on over 400 units in these locations where, it says, it will institute its successful improvement program to renovate and upgrade properties and “advance these neighborhoods while still maintaining affordability.ˮ
Mermelstein said, “We are set to add hundreds more homes in the months ahead and are aggressively looking to buy even more assets in these locations.
“By following a similar path of acquiring value-added properties in these untapped residential areas, completing important renovations and reintroducing the homes at market-rate rents, we can continue to address the growing housing affordability issue for New York City’s middle-class and working families who are increasingly being squeezed out of apartment options due to escalating rents and stagnant incomes.”