Vince Prezioso, Licensed RE Salesperson at The Corcoran Group, spoke with Design 2147 CEO Sisto Martello about what’s happening in Queens real estate right now, from land pricing and rent-stabilized buildings to the City of Yes and where the borough is headed. Here are some of the highlights.
Q: Is the Queens market still hot?
A: The Queens market is very hot, Sisto, but there’s a lot of nuance to that word hot right now, because priced well, priced fairly, sellers and buyers, there’s a huge distance with a lot of properties. The cost of money is high, so underwriting is very disciplined. It has to make sense. Do the tax benefits make sense? Does the developer qualify for tax benefits like ICAPS or 45X? If the package makes sense, the buyers will transact.
Q: We’re currently working on a complex site together. What makes that property so difficult to sell?
A: Besides issues with debt, there are issues of different zoning, three zoning districts, on a triangular piece of property. FAA regulations – It’s in a flight path by the airport, so there’s a lot of complexity to that property. My job as a broker is to create certainty for the buyer. That’s not easy. How can I convince a buyer that a project that looks very complex and uncertain is certain? That involves speaking with Design 2147, obtaining a zoning analysis, developing a deep understanding of the zoning details, engaging a land use attorney, and seeking a zoning increase.
Q: How did a nearby zoning map change end up helping that deal?
A: That was the map change that took place a block away. That was for much of the neighborhood. And we were right outside the change made in 2014, so the neighborhood was obviously moving in that direction. And that’s where we’re headed. This shows our land use attorney that the city has already been amenable to upzoning this area, which is good for us.
Q: There’s a lot of confusion around the City of Yes. What was it actually designed to do?
A: Well, I try to give the best understanding of what the City of Yes is. It was designed, for the most part, to increase residential units by eliminating parking mandates and building parking spots for a certain number of units. Once the parking mandate is gone and you can build a lot more, you don’t have to worry about spending all that money on parking. Now, also enhancing residential units in transit zones, low-density transit zones, and wide streets. That’s really what City of Yes was designed for, and it’s been really helpful.
Q: How does that compare to the way the city approached housing and zoning under the previous administrations?
A: Well, I feel like philosophically we’ve turned the corner, because even during Michael Bloomberg’s era and Bill de Blasio’s era, there was always talk about housing, but there was always the fear of gentrification. They’d find an area and say, “We need to put housing here, but if we put housing, it’s going to enhance the property values, the area’s going to get gentrified.” Now it’s more like, “We need 300 units here, and if we can’t build them here, then where are we going to put them?” So now it’s more of a direct focus on housing and more lenient in terms of approving zoning applications.
Q: There’s been talk of foreclosures coming for rent-stabilized buildings. What changed?
A: Well, since the HSTPA, the Tenant Protection Act, passed in 2019, it got rid of all the vacancy increases. So basically, if you bought a rent-stabilized building pre-2019 as an investor, you underwrote it based on deregulation. So now you have a note maturing. You paid $14 million, the building is worth $9 million or $7 million. You want to refinance, but you can’t. Now there are no rental increases with stabilized buildings either, and expenses have gone up. So there’s a huge problem out here right now.
Q: If owners can’t refinance and can’t raise rents, who ends up taking on these buildings?
A: That’s the problem, with cash, with a building that’s been underwater for 10 years. Everything’s cyclical. I do believe that this rent stabilization process has to crash, because it’s so inefficient. It’s so backward. It has to crash, just like any inefficient process does.
Q: What does it actually take to sell a rent-stabilized building today?
A: Rent-stabilized buildings, even good ones, are so complex and difficult to sell in this environment. I have buildings now in Sunnyside, which I mentioned to you, two semi-attached ten-family units, 12 of which are free-market. That’s actually very good, but there’s a huge caveat. All the investors who are interested in buying these properties want IAI paperwork from 20 years ago. They want canceled checks. If you replaced the kitchen in 2005, they want to see the payment. They want all the documents, very specific. They want to trace the unit’s process of going from stabilization to out-of-stabilization, because if they can’t, they are taking on the risk that the unit was illegally deregulated. So I’ve been in a battle right now with these buildings to create certainty for a few different investors I’m dealing with. Fortunately, the owners are pretty good; they have a lot of their documentation. It’s in a garage in multiple bins, and they have to sift through it. It’s a lot of work. But you’re creating certainty that this unit has evolved from stabilization to apartment improvements to vacancy increases. The HCR, the 2011 threshold, was when the legal rent crossed $2,000. We have units documented with a 2009 rent of $1,700, a vacancy, and a 20% increase. You’ll never really prove it 100%; that’s really difficult, but you have to make your case, basically like a lawyer, showing how these units have evolved through stabilization.
Q: How much does a building’s rental history affect its value at sale?
A: If the units are all occupied at premium market rents, this is the best-case scenario; the owner will get the best price. If this is a stabilized building with low legal rents, or even a free-market building with low rents, or if there are non-paying tenants, then securing a strong price will be an uphill battle.
Q: What about buyers who purchased during the cheap money years? How are they doing now?
A: Well, even the last cycle, when money was cheap, in 2021, 2022, on the residential side, a lot of those buyers who bought during that time and are selling now are selling at a loss. The math doesn’t pencil out.
Q: Heading into the fall, what’s happening with inventory and land?
A: Right now, land is hot. And I believe that’s because of what’s happening in the city, the demand for housing, the political environment. Developers in good areas are looking for property they can build on, buy at a good price, and use to claim a tax benefit. Small buildings are hot too. I recently closed on an 8,000-square-foot property in a great neighborhood in Flushing. It was the only large lot available there, a two-family knockdown. It sold for almost $3 million. They’re going to put three-family units on it, right by Kissena Park.
Q: How has the free-market multi-family segment held up?
A: You have a tale of so many different markets. Right now, the multi-family market in Queens is not always hot, but it stays hot for the most part. It goes from warm to hot. Everybody’s looking for the three-family, the four-family, anything free-market. Those deals always transact cash. Free-market units have consistently increased in value over the years. I’ve been in Astoria for 10 years, so it’s gone up. It may have taken a little dip early in the COVID times, when nobody knew what was going on, and then it came roaring back. I just sold a beautiful four-family in great condition by Astoria Park for $1.95 million. It was the third-highest sale in its class to transact in Astoria at that time, and this was only a few months ago. Free market, four-family, and it transacted just under a 5 cap, too. In Astoria, you’ll get that.
Q: Where in Queens is land still available for these kinds of deals?
A: Queens is geographically the largest borough. If you’re going to find some land, you’re going to find it probably in Queens, especially in Jamaica and the Rockaways.
Q: What’s your approach to working with other experts on a deal like this?
A: Since you mentioned that, I have to give a shout to Chris Cavorti, my partner on that listing. Chris is a brilliant broker. When I started in real estate, I thought, “Okay, it’s my job to know everything.” And then I realized there’s no way I’m ever going to know everything. So now my job is to answer what I can, verify the questions I’m being asked, and find the right expert to get the best answer. Chris and I needed to talk to Sisto and get the zoning analysis. That’s a perfect example.
Q: Looking ahead, where do you think Queens is going? Will affordable housing push development beyond the usual hot spots like Long Island City and Williamsburg?
A: I think that in Queens, the rents are very strong, but they’re also significantly less than in Manhattan or Brooklyn. I think there’s still a lot of value to living in Queens. I used to refer to where I live, the Ditmars side of Astoria, as New York City’s best-kept secret. Easy transportation, a quick ride to 59th and Lex, great restaurants. I park my car on the street, which is unheard of for New York City. Astoria Park is right there. The Rowan went up in 2022, and now The Rowan 2 is going up, another 50 units. The Sophie on Steinway Street, all these boutique buildings. Vernon Boulevard boomed. Actually, below 21st Street in Astoria has absolutely boomed over the past six years. New buildings, new buildings, 45th Street. Sunnyside, Woodside, they’re the slow and steady growers. Flushing is its own little sub-market, 60 to 70% Asian, a lot of foreign money. That’s an economic center. The soccer stadium’s going up. And the airport, right? $19 billion going into JFK, $8 billion into LaGuardia. LaGuardia went from the worst-ranked airport in the US to the 1st-ranked airport in the US. It’s gorgeous and easy to get to. These are great examples of where Queens is headed.
