Clipper Equity’s sprawling Flatbush apartment complex is hitting the market and the seller is hoping to get $425 million, sources said.
The Brooklyn developer is putting its 2,494-unit, 21-acre Flatbush Gardens development up for sale after owning it for over 15 years. The apartments are rent-stabilized and 38 percent are rented at preferential rents, averaging 25 percent below the legal rents, according to marketing materials.
The sale could be among the largest multifamily deals in Brooklyn in recent years, reflecting both the size of the portfolio and the growing interest in real estate away from the urban core. In recent years, some developers have bet on Flatbush as the next frontier for new development as high rents and limited supply have left tenants with few affordable options.
The downside of rent-stabilized buildings is that the 2019 revision to the law governing them made it nearly impossible to substantially increase rents — including preferential rents — and eliminated the law’s sunset. Last week, a state agency proposed regulations that would narrow or eliminate the few remaining ways to raise rents in these buildings.
Adam Spies (Cushman & Wakefield)
One key feature of Flatbush Gardens is its 1.7 million square feet in available floor-area ratio, which allows a buyer to almost double the property’s rentable area. The property’s annualized 2021 base rent revenue totaled $40.3 million, while the net effective rent was $25.12 per square foot, according to a report filed with the Securities and Exchange Commission.
Adam Spies and Adam Doneger of Cuhman & Wakefield are marketing the property.
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In May 2020, Clipper Equity secured a $329 million loan on the Flatbush Gardens from New York Community Bank. The loan matures in 2032 and has a low interest rate: 3.1 percent.
The Flatbush property is about 97 percent occupied. Clipper has invested $43 million into it in the past four years, according to marketing materials.
Clipper Equity, founded by David Bistricer, bought the housing project in 2005 for $138.2 million from a California pension fund. At the time of the sale, the complex had thousands of housing violations, an issue that has dogged the property for years. This summer residents protested the conditions of the complex, claiming it is unsanitary and mismanaged.
The listing, however, does not signal an end to Bistricer’s ambitions in Flatbush. Clipper Equity recently filed plans to build two residential buildings at the site of a landmarked former Sears. The two buildings would total 456,000 square feet and have 650 units.