Small lot development - Part 5
In Part 5 of the series, I want to share eight (8) real cases on small lot developments, primarily in Harlem, a vibrant neighborhood in Upper Manhattan. Here is a summary of these cases along with their estimated returns. IRR was not calculated due to difficulty in estimating development cash flow as well as reversion value.
310 W 114
Ground-up condo: the site was a 26’x101’ vacant land in a mid-block lot on a narrow street in R7A zoning district. FAR: 4. The developer built a 7-story 8-unit boutique condo building with a 26’x67’ floor plate and an elevator. No front yard and 34’ backyard. Front and rear setback is 15’ and 10’, respectively. Total saleable space: 9,879 SF. Total gross floor area (including basement): 12,555 SF.The 1st floor unit is a duplex with roughly 550 SF recreational space/home office in the windowed basement and a 26’x34’ private backyard. On 2nd/3rd/4th/5th floors, there is a 1-bedroom apartment on each floor facing the backyard. The front portion of the 2nd/3rd floors and the 4th/5th floors each forms a 3-bedroom duplex unit. The entire 6th/7th floors form a penthouse duplex unit with a 8’x26’ private roof terrace. There is a common roof deck accessible for all residents in the building. There are also storage spaces in the basement deeded to each unit.
Condo sales: according to DOF records, the total sellout for the building is $9M (several units are not sold yet, listing price was used in those cases), roughly $966 PSF (excluding basement area). Net condo sale proceeds (with 5% expenses factored in) are roughly $8.6M.
Land purchase: according to DOF records, the developer purchased the land in 2014 for $1.5M.
Development and construction cost: typical D&C cost on ground-up condo is roughly $400 PSF on gross floor areas. The building has 12,555 SF gross floor area according to its filed drawings with DOB. So the development and construction is around $5M.
Total project cost: $6.5M (land purchase and D&C combined).
Profit: the project made $2.1M profit or 32% simple percentage return.
Project loan: per DOF records the developer took out a $3M project loan.
Equity: equity investment made up the remaining cost, which is roughly $3.5M.
Return: the development delivered $2.1M profit on $3.5M equity investment, an impressive 60% return for the investor(s)!
215 W 122
Ground-up condo: the site was a 22’x101’ vacant land in a mid-block lot on a narrow street in R7A zoning district. FAR: 4. The developer built a 6-story 6-unit boutique condo building with a 22’x64’ floor plate and an elevator. Front and backyard is 6’ and 30’, respectively. No setback required. Total saleable space: 7,499 SF. Total gross floor area (including basement): 10,019 SF.
The 1st floor unit is a 2-bedroom duplex apartment with a 500 SF recreational space/home office in the windowed basement and a 660 SF private backyard. The 2nd through 5rd floors have a 2-bedroom floor-through apartment on each floor. The 6th floor unit is a duplex 3-bedroom apartment with a 200 SF penthouse bedroom and a private roof deck. A common roof deck is provided for all residents in the building.
Condo sales: according to DOF records, the total sellout for the building is $7.93M, roughly $1,133 PSF (excluding basement area). Net condo sale proceeds (with 5% expenses factored in) are roughly $7.5M.
Land purchase: according to DOF records, the developer purchased the land in 2015 for $1.5M.
Development and construction cost: typical D&C cost on ground-up condo is roughly $400 PSF on gross floor areas. The building has 10,019 SF gross floor areas according to its filed drawings with DOB. So the development and construction is around $4M.
Total project cost: $5.5M (land purchase and D&C combined).
Profit: the project made $2M profit or 36% simple percentage return.
Project loan: per DOF records the developer took out a $3.1M project loan.
Equity: equity investment made up the remaining cost, which is roughly $2.4M.
Return: the development delivered $2M profit with $2.4M equity investment, an impressive 83% return for the investor(s)!
126 W 130
Condo conversion: an original 4-story SRO with 13 units in a mid-block lot on a narrow street in the R7-2 zoning district. FAR: 3.44. It was built in the 1900’s with a roughly 17’ x 50’ footprint on a 17’ x 100’ lot. The developer added a 5th floor and extended the structure for about 14’. The building was converted into a 3-unit boutique condo. Front and backyard is 6’ and 30’, respectively. Total saleable space: 6,207 SF. Total gross floor area (including basement): 6,725 SF.
The basement/1st/2nd floors together form a 3-bedroom triplex unit with a 17’x30’ private backyard and roughly 600 SF recreational space/home office in the windowed basement. The 3rd floor is a 1-bedroom floor-through unit. And the 4th/5th/PH floors form a 4-bedroom triplex unit with two unique 17’x20’ private roof decks (one facing the street and one facing the backyard separated by a penthouse bedroom).
Condo sales: according to DOF records, the total sellout for the building is $6.4M, roughly $1,148 PSF (excluding basement area). Net condo sale proceeds (with 5% expenses factored in) are roughly $6.1M.
Acquisition: according to DOF records, the developer purchased the property in 2017 for $1.6M.
Development and construction cost: typical D&C cost on luxury condo conversion is roughly $350 PSF on gross floor area. The building has 6,725 SF gross floor area according to its filed drawings with DOB. So the development and construction is around $2.4M.
Total project cost: $4M (acquisition and D&C combined).
Profit: the project made $2.1M profit or 53% simple percentage return.
313 W 121
Ground-up condo: the site was a 25’x101’ vacant land in a mid-block lot on a narrow street in R7A zoning district. FAR: 4. The developer built a 8-story 6-unit boutique condo building with a 25’x55’ floor plate and an elevator. Front and backyard is 15’ and 30’, respectively. No front setback (because of 15’ front yard) and 10’ rear setback. Total saleable space: 7,843 SF. Total gross floor area (including basement): 11,617 SF.
The 1st and 2nd floors form a duplex unit with a 30’x25’ private backyard. The 3rd through 6th floors have one floor-through unit each floor. The 7th/8thPH floors form a triplex unit with a 25’x10’ terrace and a roughly 300 SF private roof deck. The floor-through units are 2-bedroom apartments and the duplex and triplex units are 3-bedroom apartments.
Condo sales: according to DOF records, the total sellout for the building is $8.1M (several units are not sold yet, listing price was used in those cases), roughly $1,030 PSF. Net condo sale proceeds (with 5% expenses factored in) are roughly $7.7M.
Land purchase: according to DOF records, the owner obtained the site along with an adjacent building with minimum cost in 2000. Assuming a carrying cost of $15,000/year for 20 years, the land cost is roughly $0.3M.
Development and construction cost: typical D&C cost on ground-up rental is roughly $400 PSF on gross floor area. The building has 11,617 SF gross floor area according to its filed drawings with DOB. So the development and construction is around $4.7M.
Total project cost: $5M (acquisition and D&C combined).
Profit: the project made $2.7M profit or 54% simple percentage return.
145 W 123
Ground-up rental: the site was a 21’x101’ vacant land in a mid-block lot on a narrow street in R7-2 zoning district. FAR: 3.44. The developer built a 6-story 12-unit rental property with a 21’x71’ floor plate and an elevator. There is no front yard and a 30’ backyard. No setback required for buildings under 60’. The large floor plate violated the maximum lot coverage of 65% in R7-2 district. However, the development was able to go above 65% by merging with an adjacent zoning lot which is a condo building with a smaller footprint. Total gross floor area (including basement): 10,602 SF
The 1st floor has a studio and a 2-bedroom duplex apartment. The 1st floor duplex unit has a bedroom in the windowed basement and a large private backyard. The 2nd through 6th floors have two 1-bedroom apartments on each floor. There is a large roof deck available for all residents in the building.
Rental income: current rents are around $1,995 for a studio, $2,800 for a 1-bedroom and $3,600 for a 2-bedroom. NOI (including a 5% vacancy and 25% operating expenses): $287,237.
Land purchase: according to DOF records, the developer purchased the land in 2010 at a very favorable basis of $0.6M.
Development and construction cost: typical D&C cost on ground-up rental is roughly $400 PSF on gross floor areas. The building has gross floor areas of 10,602 SF according to its filed drawings with DOB. So the development and construction is around $4.2M.
Total project cost: $4.8M (acquisition and D&C combined).
126 W 130
Condo conversion: an original 4-story SRO with 13 units in a mid-block lot on a narrow street in the R7-2 zoning district. FAR: 3.44. It was built in the 1900’s with a roughly 17’ x 50’ footprint on a 17’ x 100’ lot. The developer added a 5th floor and extended the structure for about 14’. The building was converted into a 3-unit boutique condo. Front and backyard is 6’ and 30’, respectively. Total saleable space: 6,207 SF. Total gross floor area (including basement): 6,725 SF.
The basement/1st/2nd floors together form a 3-bedroom triplex unit with a 17’x30’ private backyard and roughly 600 SF recreational space/home office in the windowed basement. The 3rd floor is a 1-bedroom floor-through unit. And the 4th/5th/PH floors form a 4-bedroom triplex unit with two unique 17’x20’ private roof decks (one facing the street and one facing the backyard separated by a penthouse bedroom).
Condo sales: according to DOF records, the total sellout for the building is $6.4M, roughly $1,148 PSF (excluding basement area). Net condo sale proceeds (with 5% expenses factored in) are roughly $6.1M.
Acquisition: according to DOF records, the developer purchased the property in 2017 for $1.6M.
Development and construction cost: typical D&C cost on luxury condo conversion is roughly $350 PSF on gross floor area. The building has 6,725 SF gross floor area according to its filed drawings with DOB. So the development and construction is around $2.4M.
Total project cost: $4M (acquisition and D&C combined).
Profit: the project made $2.1M profit or 53% simple percentage return.
313 W 121
Ground-up condo: the site was a 25’x101’ vacant land in a mid-block lot on a narrow street in R7A zoning district. FAR: 4. The developer built a 8-story 6-unit boutique condo building with a 25’x55’ floor plate and an elevator. Front and backyard is 15’ and 30’, respectively. No front setback (because of 15’ front yard) and 10’ rear setback. Total saleable space: 7,843 SF. Total gross floor area (including basement): 11,617 SF.
The 1st and 2nd floors form a duplex unit with a 30’x25’ private backyard. The 3rd through 6th floors have one floor-through unit each floor. The 7th/8thPH floors form a triplex unit with a 25’x10’ terrace and a roughly 300 SF private roof deck. The floor-through units are 2-bedroom apartments and the duplex and triplex units are 3-bedroom apartments.
Condo sales: according to DOF records, the total sellout for the building is $8.1M (several units are not sold yet, listing price was used in those cases), roughly $1,030 PSF. Net condo sale proceeds (with 5% expenses factored in) are roughly $7.7M.
Land purchase: according to DOF records, the owner obtained the site along with an adjacent building with minimum cost in 2000. Assuming a carrying cost of $15,000/year for 20 years, the land cost is roughly $0.3M.
Development and construction cost: typical D&C cost on ground-up rental is roughly $400 PSF on gross floor area. The building has 11,617 SF gross floor area according to its filed drawings with DOB. So the development and construction is around $4.7M.
Total project cost: $5M (acquisition and D&C combined).
Profit: the project made $2.7M profit or 54% simple percentage return.
145 W 123
Ground-up rental: the site was a 21’x101’ vacant land in a mid-block lot on a narrow street in R7-2 zoning district. FAR: 3.44. The developer built a 6-story 12-unit rental property with a 21’x71’ floor plate and an elevator. There is no front yard and a 30’ backyard. No setback required for buildings under 60’. The large floor plate violated the maximum lot coverage of 65% in R7-2 district. However, the development was able to go above 65% by merging with an adjacent zoning lot which is a condo building with a smaller footprint. Total gross floor area (including basement): 10,602 SF
The 1st floor has a studio and a 2-bedroom duplex apartment. The 1st floor duplex unit has a bedroom in the windowed basement and a large private backyard. The 2nd through 6th floors have two 1-bedroom apartments on each floor. There is a large roof deck available for all residents in the building.
Rental income: current rents are around $1,995 for a studio, $2,800 for a 1-bedroom and $3,600 for a 2-bedroom. NOI (including a 5% vacancy and 25% operating expenses): $287,237.
Land purchase: according to DOF records, the developer purchased the land in 2010 at a very favorable basis of $0.6M.
Development and construction cost: typical D&C cost on ground-up rental is roughly $400 PSF on gross floor areas. The building has gross floor areas of 10,602 SF according to its filed drawings with DOB. So the development and construction is around $4.2M.
Total project cost: $4.8M (acquisition and D&C combined).
Development yield (NOI/project cost): 6.0%.
255 W 136
Rental conversion: an original 4-story SRO with 11 units in a mid-block lot on a narrow street in the R7-2 zoning district. FAR: 3.44. It was built in the 1910’s with a roughly 16’ x 50’ footprint on a 16’ x 100’ lot. Front and backyard measures 6’ and 44’, respectively. The developer did not pursue enlargement and converted the building into an 8-unit rental. Total gross floor area (including basement): 4,000 SF
The 1st and 2nd floors have a studio and a 1-bedroom apartment on each floor. The 3rd and 4th have two 1-bedroom apartments on each floor. The 1-bedroom on the 1st floor has a 16’x44’ private backyard.
255 W 136
Rental conversion: an original 4-story SRO with 11 units in a mid-block lot on a narrow street in the R7-2 zoning district. FAR: 3.44. It was built in the 1910’s with a roughly 16’ x 50’ footprint on a 16’ x 100’ lot. Front and backyard measures 6’ and 44’, respectively. The developer did not pursue enlargement and converted the building into an 8-unit rental. Total gross floor area (including basement): 4,000 SF
The 1st and 2nd floors have a studio and a 1-bedroom apartment on each floor. The 3rd and 4th have two 1-bedroom apartments on each floor. The 1-bedroom on the 1st floor has a 16’x44’ private backyard.
Rental income: current rents are around $1,750 for a studio, and $2,195 for a 1-bedroom. NOI (including a 5% vacancy and 25% operating expenses): $142,529.
Acquisition: according to DOF records, the developer purchased the building in 2010 at a favorable basis of $1.3M.
Development and construction cost: typical D&C cost on rental conversion without enlargement and elevator is roughly $275 PSF on gross floor area. The building has 4,000 SF gross floor areas according to its filed drawings with DOB. So the development and construction is around $1.1M.
Total project cost: $2.4M (acquisition and D&C combined).
Development yield (NOI/project cost): 5.9%.
63 W 130
Acquisition: according to DOF records, the developer purchased the building in 2010 at a favorable basis of $1.3M.
Development and construction cost: typical D&C cost on rental conversion without enlargement and elevator is roughly $275 PSF on gross floor area. The building has 4,000 SF gross floor areas according to its filed drawings with DOB. So the development and construction is around $1.1M.
Total project cost: $2.4M (acquisition and D&C combined).
Development yield (NOI/project cost): 5.9%.
63 W 130
Co-living conversion: an original 5-story SRO with 13 units in a mid-block lot on a narrow street in the R7-2 zoning district. FAR: 3.44. It was built in the 1910’s with a roughly 20’x46’ footprint on a 20’x100’ lot. The property was converted into a 2-family dwelling with 21 bedrooms and an elevator. As part of the conversion, the developer added a 6th story and extended the structure for about 12’. The final floor plate is 20’x58’. Front and back yard measures 8’ and 34’, respectively. Total gross floor area (including basement): 8,071 SF.
The first unit occupies the 1st/2nd/3rd floors with an interior staircase. The 1st floor has a common kitchen facing the street and 2 bedrooms facing the backyard. The 2nd and 3rd floor each has 4 bedrooms, 2 facing the street and 2 facing the backyard. The second unit occupies the 4th/5th/6th floors with similar configuration (with the exception that the 4th floor has 3 bedrooms).
Amenities include a private elevator to the second unit, resident lounge and laundry room in the basement, outdoor garden in the backyard, and a roof deck with Manhattan view.
Income: average rent for a bedroom at pre-pandemic level was $1,850/month. Due to the pandemic, its rent has reduced roughly 10% (the least expensive bedroom went from $1,640 in 2019 to $1,500 currently). NOI (including a 5% vacancy and 25% operating expenses): $298,951.
Acquisition: according to DOF records, the developer purchased the building in 2015 for $1.85M.
Development and construction cost: typical D&C cost on rental conversion with enlargement and elevator is roughly $400 PSF on gross floor area. The building has 8,071 SF gross floor area according to its filed drawings with DOB. So the development and construction is around $3.23M.
Total project cost: $5.1M (acquisition and D&C combined).
Development yield (NOI/project cost): 5.9%.
Project loan: per DOF records the developer took out a $3.1M project loan.
Equity: equity investment made up the remaining cost, which is roughly $2M.
81 W 118 (*under construction)
Rental conversion: the original building was a 4-story church property in a mid-block lot on a narrow street in the R7-2 zoning district. FAR: 3.44. It was built in the 1900’s with a roughly 20’ x 56’ footprint on a 20’ x 101’ lot. Front and backyard measures 5’ and 40’, respectively. The developer filed the plan with DOB to add two floors (5th and 6th) and convert the building into a 10-unit rental property. Please note the building can only rise up to 60’ per Sliver Law. Total gross floor area: 7,931.
The 1st and 2nd floors have a railway-style apartment on each floor. The 3rd through 6th have two 1-bedroom apartments on each floor. The developer also created a 225 SF recreational space in the backyard to meet the Quality Housing Program requirements. There is an existing fire escape in the back of the building and the development proposed to add another fire escape in the front as a 2nd means of egress for units facing the street.
Assumed Income: current rents in the same area are around $2,700 for a 1-bedroom apartment. NOI (including a 5% vacancy and 25% operating expenses): $230,850.
Acquisition: according to DOF records, the developer purchased the building in 2020 for $2M.
Development and construction cost: typical D&C cost on rental conversion with enlargement is roughly $300 PSF on gross floor area. The building has 7,931 SF gross floor area according to its filed drawings with DOB. So the development and construction is around $2.4M.
Total project cost: $4.4M (acquisition and D&C combined).
Development yield (NOI/project cost): 5.3%.
Project loan: per DOF records the developer took out a $3M project loan.
Equity: equity investment made up the remaining cost, which is roughly $1.4M.
The first unit occupies the 1st/2nd/3rd floors with an interior staircase. The 1st floor has a common kitchen facing the street and 2 bedrooms facing the backyard. The 2nd and 3rd floor each has 4 bedrooms, 2 facing the street and 2 facing the backyard. The second unit occupies the 4th/5th/6th floors with similar configuration (with the exception that the 4th floor has 3 bedrooms).
Amenities include a private elevator to the second unit, resident lounge and laundry room in the basement, outdoor garden in the backyard, and a roof deck with Manhattan view.
Income: average rent for a bedroom at pre-pandemic level was $1,850/month. Due to the pandemic, its rent has reduced roughly 10% (the least expensive bedroom went from $1,640 in 2019 to $1,500 currently). NOI (including a 5% vacancy and 25% operating expenses): $298,951.
Acquisition: according to DOF records, the developer purchased the building in 2015 for $1.85M.
Development and construction cost: typical D&C cost on rental conversion with enlargement and elevator is roughly $400 PSF on gross floor area. The building has 8,071 SF gross floor area according to its filed drawings with DOB. So the development and construction is around $3.23M.
Total project cost: $5.1M (acquisition and D&C combined).
Development yield (NOI/project cost): 5.9%.
Project loan: per DOF records the developer took out a $3.1M project loan.
Equity: equity investment made up the remaining cost, which is roughly $2M.
81 W 118 (*under construction)
Rental conversion: the original building was a 4-story church property in a mid-block lot on a narrow street in the R7-2 zoning district. FAR: 3.44. It was built in the 1900’s with a roughly 20’ x 56’ footprint on a 20’ x 101’ lot. Front and backyard measures 5’ and 40’, respectively. The developer filed the plan with DOB to add two floors (5th and 6th) and convert the building into a 10-unit rental property. Please note the building can only rise up to 60’ per Sliver Law. Total gross floor area: 7,931.
The 1st and 2nd floors have a railway-style apartment on each floor. The 3rd through 6th have two 1-bedroom apartments on each floor. The developer also created a 225 SF recreational space in the backyard to meet the Quality Housing Program requirements. There is an existing fire escape in the back of the building and the development proposed to add another fire escape in the front as a 2nd means of egress for units facing the street.
Assumed Income: current rents in the same area are around $2,700 for a 1-bedroom apartment. NOI (including a 5% vacancy and 25% operating expenses): $230,850.
Acquisition: according to DOF records, the developer purchased the building in 2020 for $2M.
Development and construction cost: typical D&C cost on rental conversion with enlargement is roughly $300 PSF on gross floor area. The building has 7,931 SF gross floor area according to its filed drawings with DOB. So the development and construction is around $2.4M.
Total project cost: $4.4M (acquisition and D&C combined).
Development yield (NOI/project cost): 5.3%.
Project loan: per DOF records the developer took out a $3M project loan.
Equity: equity investment made up the remaining cost, which is roughly $1.4M.
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