A Fort Greene/Downtown Brooklyn tower sells at a discount. A warning for future Atlantic Yards/Pacific Park towers?

Rendering via StreetEasy

In a 5/4/20 article, The Real Deal reported on the sale of a new rental tower (completed 2018) at the wedge-shaped intersection of Flatbush Avenue and Fulton Street, where Downtown Brooklyn meets Fort Greene:

Goldman Sachs is buying one of Downtown Brooklyn’s newly-completed apartment towers at a steep discount — the bank’s first big New York City purchase as it revives its once-active real estate platform.
The bank is in contract to buy the 19-story 1 Flatbush Avenue building from Slate Property Group and Meadow Partners for about $100 million, sources familiar with the transaction told The Real Deal. That’s quite a haircut from the $150 million price tag the sellers were aiming for when the property hit the market last year.

Whether that's full haircut or not remains unclear.

As one commenter said on Twitter, it may be that the original price included the building's 25,000 square feet of retail, wrapping around both Fulton Street and Flatbush Avenue. Even so, that wasn't worth one-third of the price of the 183-unit market-rate rental building.

One contrast: the 363-unit 461 Dean Street, with half the units market-rate rentals and half income-restricted affordable units, sold in 2018 for $156 million, below construction costs.

Not just coronavirus

The Real Deal last November reported that the "decision to sell is being driven by Meadow Partners’ timeline for its private equity funds." That decision was made before the coronavirus crisis, of course. Still, as the price indicates, it's hard not to think the market has changed.

It's unclear how fully 1 Flatbush has been rented. StreetEasy cites 6 active rentals, 1 in-contract rental, and 103 previous rentals. But other units may have been rented outside the StreetEasy platform.

Rental incentives, and questions about new towers

According to StreetEasy, currently available units offer one month free on a 13-month lease. That's not atypical among new construction in and around Downtown Brooklyn.

But surely the market for high-rise living near transit in New York City has been undermined, in the short-term at least, by the coronavirus crisis.

That raises questions about the market for new towers in the Atlantic Yards/Pacific Park project. In the next year or two, the demand for market-rate units, at least, is likely diminished, though it's possible that affordable units--at least ones in the lower-income "bands"--will remain attractive.

However, the buildings new under construction, much less the ones slated to start later this year and beyond, won't open for at least two years, which, under an optimistic scenario, would be after a vaccine or other medical breakthroughs are achieved.

So real-estate investors may calculate some rebound. That said, it's likely a certain chunk of good-paying office jobs will have moved from New York/Brooklyn offices to be done remotely, so the demand for residential real estate could go down.

1 Flatbush's selling points, seen in a new light

And now some of the advantage of the location and high-rise nature of the building have turned into risks, given the challenges of density during the coronavirus crisis. From the building's web site:

In the heart of Downtown Brooklyn rises 1 Flatbush, a new rental development envisioned for the stylish New Yorker seeking a peaceful retreat in the middle of the action. The stunning warehouse inspired 19-story skyscraper, designed by the award-winning firm Hill West Architects, offers a designer collection of studio, one, and two-bedroom residences just one stop outside Manhattan

The amenity package, like that in other buildings, surely seems less attractive:

To all of this added a full site of premium amenities including an attended lobby and state-of-the-art fitness centers, as well as thoughtfully designed community spaces, including the billiards room, co-working space, and landscaped roof deck with stunning city views.

Similarly, the description of the neighborhood:

1 Flatbush Avenue is located in the vibrant Downtown Brooklyn neighborhood, with shopping, diverse restaurants, and unique experiences in every direction. The neighborhood boasts local cultural institutions such as the Brooklyn Academy of Music and the popular Alamo Drafthouse Cinema, as well as playing host to national sports teams and international entertainment acts at Barclays Center. Sample the area’s dining options in an afternoon at Gotham Market Food Hall, or take your time exploring Downtown Brooklyn’s many restaurants, from the trendiest espresso at Baba Cool or French comfort food at Bacchus, to oysters and drinks at Grand Army or an evening of eclectic cocktails at Hollow Nickel. Manhattan is just one stop away with the BQR subway lines from Dekalb Avenue, and the rest of the city is easily accessible, with virtually every subway line in the city and the LIRR minutes away at Atlantic Avenue.

Available units

As the screenshot below shows, from the 1 Flatbush web site, the building has a studio for $2,725 monthly rent, one-bedrooms starting at $3,485, and two bedrooms starting at $4,385.