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Why NYC’s multifamily market just keeps getting hotter

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Multifamily investors face stiff competition for a portion of the city’s nearly two million market-price units.

Douglas Harmon, Chairman of Capital Markets at Cushman & Wakefield, said: “[But] Investors are having trouble finding deals and commodities are in short supply. ”

Still, many apartments have recently been sold, but most were already contracted before interest rates spiked.

At the end of September, Black Spruce Management paid Solow $387 million for a luxury rental building at 685 First Ave. sold by the JLL team. The 408 units were priced at $949,754 each, or $1,053 per square foot.

Black Spruce and Orbach Affordable Housing Solutions purchased six more luxury rental homes from Solow later this year, also sold by JLL. And in the spring, the same buyer paid his $837 million to buy the American Copper Building on the same First Avenue. Released by C&W.

Extremely high rents and limited supply have made unregulated residential buildings one of New York’s most sought-after properties.
Getty Images

Ofer Yardeni’s Stonehenge Partners paid Heller Realty $80 million to acquire 780 Greenwich St. in West Village in August.

The 88-unit building sold for $1,148 per foot, or $913,636 per unit.

Meanwhile, a 140-unit building at 15 Bridge Park Drive in Brooklyn was sold last month by RAL and Vanke to Goldman Sachs and Dermot for $90 million. The price equated to $642,856 per unit, or $65 per foot, also through C&W.

Darcy Stacombe, Chairman of Capital Markets at CBRE, which sold both 140 and 160 Riverside Blvd. On behalf of Equity Residential this summer. They were purchased by A&E Real Estate for $265.65 million and He for $415 million, respectively.

Exterior of 15 Bridge Park.
Goldman Sachs acquired 15 Bridge Park Drive in Brooklyn for $90 million.
RAL & Banke

Still, some buildings are on their way. Eric Michael Anton, director of Marcus & Milichup’s Global Capital Group, tells 515 Ninth Ave., The Life, that he’s pitching a fairly new project with 108 rental properties.

“These are large units with condo finishes,” he said, adding that prices are expected to exceed $90 million.

“More people are buying multi-family homes … because everyone thinks rents will continue to rise,” said Ran Eliasaf, managing partner at private equity group Northwind Group. . “But when they grow up, who can afford to borrow?”

Tenants in luxury buildings could see a 30% increase in rents from leases signed a year or two ago.

“More people are buying multifamily homes because … everyone thinks rents will continue to rise. But when they grow, who can afford to rent?”

Ran Eliasaf, managing partner of private equity group Northwind Group, said:

“Everyone getting their rent renewed is out of their minds,” said Jay Neveroff, partner and head of real estate at law firm Kramer Levin.

Even seasoned brokers are surprised by the new lease fees.

James Nelson, Head of Investment Sales at Avison Young, said: “We think of ourselves as aggressive [calculations] and, [owners] They say they have already owed them more and made no concessions. ”

The difference in rents and investor interest in free market buildings and stabilized real estate is that free market payers, retailers, building owners, and all taxpayers subsidize regulated apartments. It is entirely due to the rent laws that let

Exterior of 780 Greenwich Street
In August, an 88-unit condominium at 780 Greenwich Street sold for $80 million.
Stefano Giovannini

For apartments with stable rental agreements, the 2019 Rent Act allows for a rent increase of only $83 per month after refurbishing a vacant apartment. Spending cap is $15,000 per decade. But the actual cost he could range from $75,000 to $200,000, and the money he borrowed wouldn’t even cover his debt payments in that small increase, so the unit was left vacant and It’s “frozen in time,” Nelson says.

They argue that condominiums are now the only new development project that makes economic sense.

“Supply shortages are something that cannot be addressed without some form of tax incentive,” Harmon said. “New apartment complexes, for the most part, just don’t work without it.”

The same factor plagues market-priced land deals.

“Even if you sell the building, it’s not realistic to build a rental building without abatement,” said Bob Nakal, JLL’s capital markets chairman. “The supply of units has not increased, exacerbating upward pressure on rents.”

American copper building exterior.
The American Copper Building sold for $837 million this year.
Stefano Giovannini

That means a sharp drop in the number of new units hitting the market and even higher rents, which has investors drooling.

In Long Island City, Knakal sells 186 new Dutch homes at 37-05 30th St. to Slate Property Group. “This includes his 35 years of tax cuts, so we’re getting very good traction with it,” he said.

The 71-unit pre-war building at 2568 Broadway on the corner of W. 96th St. is 56% of the free market units and has a “remarkable” level of demand.

But Kunakal says the bidder is no longer a New Yorker. Buyers now tend to be from out of state.

“The law has exhausted New York family buyers,” Knakal said. “They are giving up on running the building.”

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