News

After selling out The Williams Club in its first appearance in New York last October, financial modeling solutions provider Real Estate Financial Modeling (REFM) is returning by popular demand to New York on Friday, April 9th.   REFM has tailored the agenda for the New York market by teaming with Massey Knakal Realty Services to provide attendees with the most up to date local multifamily market statistics and metrics over breakfast.  Massey Knakal Partner Shimon Shkury will be the keynote speaker of the event.

A native of Israel, Mr. Shkury entered the real estate industry in 2002, and after only 18 months in the industry, he was named a partner at Massey Knakal Realty Services. Leading the company’s expansion into Upper Manhattan and The Bronx, he has been involved in the sale of nearly $1.5 billion of commercial properties.

Bruce Kirsch will lead the training portion of the event.  Mr. Kirsch is the founder and principal of REFM, and instructs on real estate finance both for the Urban Land Institute and as faculty at Georgetown University.  A highly-acclaimed trainer, Mr. Kirsch previously worked in commercial brokerage and real estate investment in New York and Washington, DC.

The limited-seating event will take place on Friday, April 9th, 2010 at The Williams Club, 24 East 39th Street, New York. 

For more information and to sign up, visit www.getrefm.com.

In 2005, I wrote an article entitled “the Art of Pricing a Deal.” At that time, I stated the risks of overpricing a commercial property were that it ultimately led to a lower sales price and a loss of valuable time. Today, I have heard several theories that a property listing should be priced at 25-30% above its value, as a buyer wants to feel like he or she is receiving a steep discount. I think it’s time to dust off my old article, as properly pricing a commercial property listing is even more relevant today.

In the last two years, the average selling price of my commercial property listings has been under 12% from the original asking price. With today’s reduced asking prices, it would be even lower. Currently, I try and price my listings at even less of a spread: about 10% above where I expect them to trade. This seems to generate the most activity as buyers are focused on the best priced listings....

Click here to read full article.

Agents: James Nelson

The newly elected state assembly approved a Ten – Bill legislative package that is now before the NY State Senate.  This is the first step the newly elected Democratic majority has taken towards reforming the affordable housing system which they have been campaigning on.  If approved by the State Senate in June in it’s entirety it would have a monumental impact on the way affordable housing in New York is operated. 

Below, our Washington Heights and Inwood Director of Sales Robert Shapiro provides is a brief description of each of the State Assembly approved bills along with a brief description:

Bill A00465 – Prohibits an owner from adjusting the amount of the preferential rent, rent charged, and paid by the tenant which is less than the legal regulated rent for the housing accommodation, upon the renewal of a lease; only allows the owner to make such adjustments upon a vacancy which is not the result of the failure of the owner to maintain a habitable residence.

What it means:

If landlords have tenants they are giving preferential rents to, they will not be allowed to raise their rent to market rent upon renewal of the lease.   Only when the tenant vacates the unit will landlord be able to raise it to the registered rent.  This is true, even if landlord has the preferential lease riders that state otherwise. 

Impact:

This has more impact in Manhattan south of 96^th Street where free market rents tend to be much stronger than uptown and the boroughs

Bill A02002 - Amends the administrative code of the city of New York and the emergency tenant protection act of nineteen hundred seventy four, in relation to civil penalties imposed for violation of administrative orders or for harassment of tenants to obtain vacancy of a unit.

What it means

Increases the financial penalties for landlords who harass their tenants to get a vacancy.

Impact:

None if you don’t harass your tenants.

Bill A01928 - Establishes a methodology for determining major capital improvements (MCI) rent surcharges based on a seven year schedule; provides that such MCI’s shall be calculated as a rent surcharge and shall not become part of the base legal regulated rent by which increases are calculated, and requires the amount thereof to be separately designated and billed as such; codifies current practices regarding the annual 6% cap on MCI increases and the methodology for determining MCI surcharges on the number of rooms; requires that rent surcharges authorized for major capital improvements shall cease when the improvement has been recovered.

What it means:

Your MCI improvements will no longer be permanently affixed to the legal registered rent.  Instead they will be a separate charge which will be abolished upon the repayment of the improvement. Payments will be over a 7 year period.

Impact:

Removes motivation for landlords to make improvements to their buildings.  Ultimately it will lead New York City’s already old housing stock to not be updated.

Bill A00857 - Provides that in cities with a population of one million or more, the rent following the dissolution date of Mitchell-Lama developments shall be the last rent authorized for the affected dwelling

What it means:

When the property becomes subject to rent regulation, this bill would prohibit an owner from applying for a rent increase base on “unique and peculiar circumstances”.

Impact:

Eliminates what the city believes is a loop hole and it would  become more difficult to increase the rent on a unit that is coming out of the Mitchell-Lama program.  This will result in less motivation for owners and developers to own, operate or develop this asset class.

Bill A01688 - Removes provisions that prohibit cities of one million or more from strengthening rent regulation laws to provide more comprehensive coverage than state laws.

What it means:

Revokes the Urstadt Law which would allow local organizations, instead of the state , to be in control of rent regulation.

Impact:

Control of all rent regulation and affordable housing would be controlled on the local level.  The laws would most likely become much more favorable for the tenants. 

Bill A01685 - Relates to recovery of certain housing accommodations by a landlord; limits a landlord’s ability to take possession of units for their own primary residence, permit recovery of only one unit, and restrict such ability if the tenant has occupied the apartment for twenty or more years.

What it means:

Landlords will not be able to vacate an entire rent regulated building for their own dwelling. Instead they will only be allowed one unit of a tenant who has lived there less than 20 years

Impact:

City retains more rent regulated units in the case an owner wants to move back into his / her building.

Bill A01687 -Permits the declaration of an emergency pursuant to the EMPTA for rental housing accommodations located in buildings covered by a project based assistance contract pursuant to section 8 of the United States housing act of 1937.

What it means:

Any units that opt out of the section 8 program will become subject to rent regulation.

Impact:

Tenants of section 8 housing will receive rent and eviction protection from rent regulation.

Bill A00860 - Establishes deregulation income thresholds and deregulation rent thresholds for certain housing purposes.  Amends New York State’s rent regulation laws to adjust the “luxury decontrol” thresholds to account for inflation

What it means:

Increases the luxury decontrol from $2000 to $2,700 and the income threshold from $175,000 per year to $240,000.  Not only are these thresholds to be increased but they are also going to be tied to an index so that they reflect inflation.

Impact:

Landlords will have to wait longer and spend more to increase the registered rents to get them above the “luxury decontrol” level.  This will have more impact in prime neighborhoods where high free market rents are more achievable.   These will also be permanently tied to an inflationary index that will help keep apartments under rent regulation longer. 

Bill A01686 - Limits the amount of rent increase after the vacancy of a housing accommodation

What it means:
Reduces the vacancy bonus from 20% to 10% and only allows one vacancy bonus per calendar year. 

Impact:

It will become harder and  result in a potentially longer period in which landlords can reach the “luxury decontrol” level.  More impact will be felt in neighborhoods in which the market produces stronger residential rents (i.e. Manhattan south of 96^th Street)

Bill A2005 - Makes conforming technical changes to the New York City administrative code and the emergency tenant protection act relating to vacancy decontrol.

What it means:
Repeals vacancy decontrol on any unit that was rented on or after January 1, 2007 for less than $5,000 ($3,500 in Westchester, Nassau, & Rockland).

Impact:

Any unit in NYC that was decontrolled or was not under regulation that rented for less than $5,000 as of January 1, 2007 would become regulated. 

Agents: Robert Shapiro

From The Real Deal: 

Mayor Michael Bloomberg announced yesterday the extension of the J-51 Tax Benefit program, which helps owners maintain affordable housing.

Buildings eligible for the tax benefit program are multiple dwellings owned and operated by redevelopment companies that meet the city's "Article V" requirements and have a value of more than $40,000 per apartment. The only "Article V" building in the city that meets this criteria is Penn South, a large complex in Manhattan with more than 2,800 apartments, which has become a naturally occurring retirement community. The legislation enables residents to take advantage of the tax benefits to make repairs, update the building and ensure that apartments stay affordable for at least 15 years.

There's little positive news in the media today, but I have found one bright spot from a developer who is still reporting very strong sales. Kenneth Horn, from Alchemy Properties, is finishing two condominium projects this year at 125 West 21st Street (The Indigo Condominium) and 50 West 15th Street (The Oculus Condominium).

Neighborhoods: Chelsea/ Agents: James Nelson

Today’s commercial building sales market is a completely different animal than what it was prior to six or seven years ago. We’ve all been hearing negative press about the subprime meltdown/CMBS markets and how drastically it has been affecting financing. But how bad is the current market place for Manhattan income-producing properties? Are there any bright spots in today’s market? In actuality the correction in the financing markets has led to many positive trends for those who are in the market today and planning to be in it tomorrow. 

There is no doubt that the unprecedented growth from 2002 into 2007 was the greatest real estate market we have experienced. Early in 2002, after the market had come to screeching halt because the September 11^th terrorist attacks, the market catapulted into action. Fueled by a strong stable economy and historically low interest rates that kept getting lower at almost every Fed meeting, the demand for housing skyrocketed. Values of properties took off like never before. Like all hot investments of the day, people who really had no business in the real estate game jumped in for this “sure thing” investment. 

They started overpaying for properties, getting close to 90% financing (sometimes on projected incomes), refinancing a year later at even more inflated numbers or selling for a profit. It was too easy and too good to be true and, eventually, the music stopped. When it did, many were left without a seat. When the sub-prime borrowers started doing what they do best - not make payments on time - the lenders began to tighten their belts. So, now the rookie investors who thought they could just buy anything, hold it for a year and flip or refinance got caught in a bit of a pickle. Those who purchased development sites, shells, and condo conversion properties felt the squeeze the most. 

However, there are those that did find a seat and are still playing the game. The long- term residential multifamily owner has seemed to have weathered the storm quite well.  They have been the beneficiary of a strong rental market in Manhattan that continues to remain extremely stable. This has led them to strong profits as they achieve free market rents higher than they ever thought could have been achieved. 

Banks are in the business of lending and in today’s market it seems that they have found one asset they still want to lend on -  NYC, multifamily, residential, rent regulated product (with a preference on Manhattan and strong neighborhoods). However, the days of 90% financing are gone and banks are back to lending 65% to70% on actual income.  This is how business should be done, was done in the past and we are returning back to basic fundamentals.  The long-term owner has seen these times before and is used to putting down 30% to 40% equity to get into a deal.  In comparison to the previous cycle, today’s interest rates are significantly lower and much more attractive to these buyers.

Values have not dropped for this specific product type and have been trading on a relatively flat basis in 2008.  There is still demand and there are still sellers. Although all of the negative news has created a shortage of supply as discretionary sellers have not put their properties on the market. The buyer in today’s marketplace has a different profile than in our recent past. Today’s buyer is the type of organization that has other properties and has benefited from the strong increase in free market rents. They are often family-run businesses that have seen the good times and the bad. They saved up some cash in the piggy bank over the past couple of years, while paying down a large portion of their debt on the properties they own. They are in a perfect buying mode. NYC has plenty of these families and there are definitely enough of them to create a competitive bidding environment. 

Sellers in today’s market are motivated by many typical reasons but also including the sharp increase in costs.  These cost increases have led them to not being able to achieve the bottom line they would like to with all the same headaches of owning a multifamily property. They have seen their water bills rise 13.5% this year, taxes increase significantly and fuel costs spike. Fuel has been a major concern in 2008. Even though today a barrel of light sweet crude is down about 28% off its July 11^th high of $147, it is still about 60% higher than 2006 and 2007 levels. A stabilization in the oil market will help reassure our marketplace.

So a bright spot in today’s market is in the multifamily asset class. Because of the rent regulated status and significant upside banks are willing to lend and even compete to lend on these properties. They are lending at still historically low interest rates but at loan to value levels of 65% to70% (1.15 – 1.30 Debt Service Coverage Ratio). The buyers are long- time owners who have the capital because of the strength in the rental market and their long-term outlook to justify prices sellers are motivated to sell at. Sellers are motivated by many reasons including the recent uptick in expenses, which are making their bottom lines dwindle.

Looking forward to 2009 really depends on the lending environment. If banks will continue to lend on this asset class I expect a relatively flat and stable market. If the large banks can finish all their write-downs, raise new capital and begin pushing more money to the street for other assets, I expect the market to trend upwards as development options come back into play.  Many vulture funds (including Black Rock) are out there now looking to purchase bad debt from the larger financial institutions. Albeit at a significant discount, the influx of any capital and the capability to raise new capital will eventually trickle down and financing restrictions will ease. Interest rates will trend upwards and banks will become profitable again.  This ease will lead to the return of financing additional product types. 

Agents: Robert Shapiro

Neighborhoods: Westchester County, Staten Island/ Agents: John Barrett, Matthew Giordano

From Crain's NY:
"A divided community board gave the Bloomberg administration’s vision to redevelop the potholed streets of Willets Point a boost early Tuesday, voting 21 to 15 in favor of the plan to build housing, office space, a hotel and convention center on 61 acres in the Iron Triangle...

"'This is a historic moment,' said Tom McKnight, senior vice president of the city’s Economic Development Corp., just before the vote. 'This is a chance to put Willets Point on a new map.'”

Read full article.

Neighborhoods: Flushing

The Real Deal reports:
"Columbia University is poised to acquire a 15,000-square-foot city-owned Metropolitan Transportation Authority parcel on 131st Street in the footprint of its Manhattanville expansion plan.

The $3 million transfer, worth $200 per square foot, should occur some time in the spring of 2009, city Law Department spokeswoman Laura Postiglione said. The university will not pay the $3 million in cash, however, but will be credited for work performed at a park called Hudson River Piers that is under development in West Harlem, a source said....

Patrick O'Malley, director of sales in Manhattanville for brokerage Massey Knakal Realty Services, estimated that the property, which is zoned for manufacturing, would normally be worth between $250 and $300 per square foot. But he expected the holdout parcels to command prices far higher because of the looming eminent domain use. " 

Click here for full story.

Neighborhoods: Manhattanville