The Batterymarch Insider
In this issue:
New Construction Glut - Has it Started?
28 Chestnut Street - Another $10 Million Beacon Hill Single Family
3 Joy Street, unit 2 - Solid Value - Well Bought
196 Beacon Street, unit 3 - Seller Hits a Home Run - Well Sold
What’s Catching Our Eye
New Construction Glut – Has it Started?
We’ve been ringing the bell about what we see as a glut of new construction in high-end condominium units that will be flooding our market (see our report, “The Great Boston Building Boom”). Be advised - it’s starting.
In the Boston proper market (including the Seaport), of the 32 new condominium listings last week in MLS, 60% were new construction. The number jumps to 75% when you add in investor-owned units being offered for re-sale.
New construction developers often make aggressive deals with buyers who commit to buying condominium units before the projects are finished. This attracts investors who will generally rent the units to cover their carrying costs and hope to generate some positive cash flow, before they flip the units for what they hope will be a big capital gain.
With the sharp downturn in the rental market, investors sitting on their vacant units are thinking twice about committing capital to buy additional units when their current investments have not only stopped generating cash but are now consuming cash. We’re increasingly seeing investors sell these units at losses, a trend that we expect to continue. We remain concerned that weakness in the new construction market could spill over into the broader condominium market.
Single Family Market – Another $10,000,000+ Beacon Hill House
28 Chestnut Street was listed this week for $10,750,000. We haven’t been in the house, but judging from the pictures the next owner will likely do some updating. The cost of updating these properties can get very expensive very quickly, so the valuation needs to be well thought out. It looks like a great house, and being on the south side of Chestnut you get two car off street parking.
There was some notable single family activity over in the South End this week. The freshly renovated home at 21 Claremont Park traded for $5,100,000, off an asking price of $5,495,000, and 67 days on market. Down the street, 155 West Brookline, an older renovation but still very nice, changed hands for $3,475,000 after 70 days on market and an asking price of $3,889,000. And finally, we’re not surprised to report that the fully renovated single family at 170 West Brookline which we previously highlighted got a quick contract (24 days). The asking price was $6,350,000 and we suspect that the final price will be pretty close to asking.
Well Bought/Well Sold
3 Joy Street unit 2 – Well Bought
For nearly a century, the Appalachian Mountain Club called the buildings located at 3, 4, and 5 Joy Street on Beacon Hill home. In 2016, a group of investors bought the three buildings for $15,000,000 and proceeded to convert them into high-end condominiums. It’s not surprising that a top notch development team turned out a top notch product.
This week, unit 2 at 3 Joy Street, a 1,483 square foot 2 bedroom, sold for $2,500,000 ($1,685/sf), a 16% discount to the original asking price. Situated at the top of Beacon Hill and a half a block from the Boston Common, it’s a very good location. One drawback in our book is that getting there by car entails a convoluted trip around the State House – not a deal breaker. What wins us over is that these buildings back up to a rather large open area and get great sunlight. We see good relative value here, this one was - Well Bought.
196 Beacon Street unit 3 – Well Sold
Unit 3 at 196 Beacon Street sold this week for $4,450,000 ($1,711/sf) after just 72 days on the market. This is a relatively cookie cutter Back Bay 2,600 square foot 3 bedroom penthouse duplex with direct elevator access. The pros here are the expansive roof deck (with outdoor shower), two parking spaces (one garage and one outdoor), and most importantly the A+ location.
The con is the price for what appears to be a 20 year old renovation. The unit last traded in 2009 for $3,000,000 ($1,153/sf), which was all the money at the time, and as far as we can tell, aside from removing a rooftop hot tub, some fresh paint, and refinishing the floors the seller didn’t make any significant improvements – the unit is dated. The building was converted into condominiums back in 2000, so the mechanical systems are likely close to the end of their useful lives. Some serious money will probably be spent here to bring it up to snuff. The seller hit a home run, this unit was definitely – Well Sold.