Impact of rent regulation changes on Building Sales

David Goldsmith

All Powerful Moderator
Staff member
About 8 months ago, right after the Housing Security and Tenant Protection Act of 2019 had passed, I posted elsewhere:

"I've been fielding calls from clients since Friday about the impact of the Rent Regulation changes passed in Albany on Friday, and here is my takeaway of the immediate affects: A shocking amount of buyers currently in contract to buy multi-family buildings are planning on walking away from their deposits to get out of their deals. One I spoke to who is in contract to buy 5 deals is planning on walking away from approx $1.5 million in contract deposits (he says he'll sue to get the deposits back even though he has absolutely no just cause just to see if he can recoup any funds by simply being a nuisance). Pretty much everyone agrees that there is no longer any upside, and everyone was buying these based on upside. Now, they are all going a little overboard and saying they are now "worthless," but that's obviously a bit of hyperbole. However, things most probably will go back to the way they were before the 1993 changes. That means that rather than buying for upside, there has to be cash-on-cash returns. So, a couple of years ago they were trading at 3% Cap Rate. A couple of months ago they were trading at 4.5 - 5/% cap rate. But back in 1992 they were trading at %8 to 12% Cap Rate. There is a building I have been marketing in Woodside that would have traded for close to $3 million a few years ago. Since February, the offers we have gotten were between $1.9 million and $2.2 million. But now if things go back to the old ways, the cap rates would indicate a value of under $1.5 million. The second thing which has occurred is the impact on renovations/contractors. Since the renovation increases have been capped at $15,000 no matter what the landlord actually spends, and lowered from 6% of the amount spent to 2% of the amount spent, everyone is cancelling projects. I spoke with one contractor who had 5 jobs scheduled to start this week and had all of them cancelled. He has about 40 people working for him and now none of them have work starting this week. https://www.cityandstateny.com/arti...rs-strike-sweeping-deal-rent-regulations.html "

But more recently we've seen prices actually come down, the market stabilize:

https://www.wsj.com/articles/buyers...l-slams-new-york-apartment-values-11580817601

Some disinformation in this article:
"“This is bad news for a city and state already facing down big budget gaps,” Mr. Whelan said Monday, arguing that a “fire sale” of regulated buildings would mean lower valuations and thus less money in the form of property taxes collected by the city."
Valuations going down doesn't impact the amount of Real Estate Taxes New York City collects. The City decides how much money it wants to collect from Real Estate Taxes and Assessed Valuations merely decides how the bills are apportioned.

However the real takeaway from the article is now that both buyers and sellers have adjusted to a new reality in terms of prices, the speculators which defined the market are being replaced with the long term owners who were always the bread and butter of the deals on these types of properties. Is it possible that in the long run returning to a less disruptive and speculative market could be healthier for our business?
 

David Goldsmith

All Powerful Moderator
Staff member

Multifamily market still struggles with political risk
Despite lower prices for buildings, investors are still wary of Albany

Multifamily investment sales have yet to recover from the impact of last year’s momentous rent-law reform, continuing the slump through the first quarter of 2020.

First quarter investment sales of multifamily properties over $2.5 million have reached about $741 million so far in 2020, compared to $1 billion in the first quarter of 2019 — which already reflected a slowdown in multifamily sales in anticipation of the Housing Stability and Tenant Protection Act of 2019 that upended the business model of many landlords, according to Real Capital Analytics. The first quarter of 2018 saw $1.5 billion in such sales.

“Even though the law went into effect in June, last year, in the aggregate, the sales volume dropped off by almost a third,” said James Nelson, principal and head of tri-state investment sales at Avison Young. “Once we knew the rules, we had an immediate impact on pricing, especially on the regulated properties that you can’t decontrol.”

The new rent regulation ran speculators out of the market and drove down prices of regulated multifamily buildings for bargain hunters with longer-term strategies, but overall sales haven’t picked up because of continued political uncertainty during the current legislative session, according to Nelson.

“The fair market had concern about good cause eviction,” said Nelson, referring to the bill championed by state Sen. Julia Salazar that bans the eviction of tenants in any building who refuse to pay “unreasonable” rent hikes — which landlord groups say is tantamount to universal rent control.

“We have not seen an uptick in the investment sales market because, notwithstanding the slowdown in the last six months of last year, the market is still trying to deal with what’s going to happen regarding rent stabilization, control and the political environment, whether friendly or not,” said Arthur Mirante, principal and tri-state president at Avison Young.

The continuing political uncertainty is driving investors to look to places that don’t have the same rent regulation as New York City – cities like Atlanta, Dallas, Nashville, and the state of Florida, said Mirante.
 

David Goldsmith

All Powerful Moderator
Staff member
From unthinkable to reality: Cheap NYC apartments sit vacant
Landlords explain why even affordable units are empty

Sharon Redhead, a second-generation landlord in East Flatbush, is having second thoughts about continuing the family business.
She blames not Covid, but the state’s rent law.
Redhead’s father immigrated to New York from the Caribbean in the 1970s and bought buildings out of tax foreclosure. Her family eventually accumulated 100 apartments — many of them rent-stabilized — and landlord-friendly regulations helped keep them profitable.

When units were vacated, Redhead made upgrades, such as installing modern appliances, to attract tenants willing to pay more than the $850 per month that her unrenovated rent-stabilized apartments fetched.
It was good business: Before the rent law was changed last year, she could raise rents to cover renovation costs and improve her family’s assets at the same time. Market-rate apartments in her part of Brooklyn could fetch $1,500, Redhead said.

Now she has several rent-stabilized apartments sitting vacant, with no plans to renovate them, and has turned away apartment-hunters. Last year’s legislative changes have her rethinking the future.
“We’re having a family meeting this week to discuss getting out of the landlord business,” Redhead said. “But if I sold now, the only people that would buy are private equity groups.” (Those firms have yet to start gobbling up multifamily buildings at heavy discounts, although some have called that inevitable.)

For now, few are selling, though their properties may be troubled.
The vacancy rate in New York has soared since the onset of the pandemic. Landlord groups don’t blame Covid as much as they do the new law’s limits on how much landlords can be reimbursed for renovations. Some landlords also say they are reluctant to fill vacant apartments because they think state legislators might change the law in their favor.

“You live in hope that owners and managers will help politicians come to the realization that this doesn’t work for anybody,” said Joyce Holland, who currently has two vacancies out of the eight units she owns in Hamilton Heights. “So what owners are doing is keeping the apartments vacant, and not doing renovations.”

Smaller landlords are not the only ones who have considered putting the brakes on renovating and renting out apartments.
A month after last year’s changes to the law, Blackstone Group announced that it was halting renovations at Stuyvesant Town.

Its practice of keeping apartments vacant — which some call warehousing — soon came to light, although the firm later said it was renovating and leasing apartments as usual. According to numerous other multifamily property owners, however, warehousing is now widespread.

On top of the rent law’s reduction in financial incentive, demand for New York City apartments fell when some 420,000 people left the city during peak Covid. One analysis found the Manhattan rental vacancy rate hit an all-time high of 4.3 percent in July.

But the Community Housing Improvement Project reported an even greater vacancy spike for apartments with rents of less than $2,000. The group, which represents landlords of mostly rent-stabilized properties, found in a survey that the vacancy rate has risen to 7.1 percent in August from 3.1 percent in February. The data was aggregated from 70 survey responses, about half from owners of more than 500 units.

It is not clear how much is attributable to reduced demand or warehousing, and whether rent-stabilized units have lost what the New York Times in 2017 called their “mythical” status. “It is the holy grail of New York City living,” began an article about clever ways to find one.

Landlords wishing to shed properties may present an opportunity for city programs, affordable housing developers and tenant groups to step in and “serve as a safety net,” said Moses Gates, the Regional Planning Association’s vice president for housing and neighborhood planning.

“If a landlord wants out of a building, it’s really only a matter of negotiating over price,” he said.
Although more apartments may be empty now, landlords do not intend to let them crumble.
“No one is going to let their asset deteriorate,” said Redhead. “For the most part what they need is updating. If you need structural repairs, that’s a whole different ball game.”
 

David Goldsmith

All Powerful Moderator
Staff member
In 2020, The Pandemic Kicked NYC Landlords When They Were Already Down As the curtains fall on a harsh year for New York City’s real estate market, its investors are bracing for the pain to extend well into next year even as some glimmers of hope emerge.

The city is on pace to see $8.4B in building sales volume in 2020, a nearly 70% drop off the 10-year average, per Avison Young’s latest data. That figure represents a 50% decrease from last year.
Pricing and values are another matter — brokers point to reductions of as much as 30% in some cases, as well as their growing concerns that investors are turning their backs on the city in favor of more business-friendly parts of the country.
“The landlords already were taking a bloodbath on their valuations,” Meridian Capital Group Managing Director Shallini Mehra said, pointing to rent reform legislation that was passed by the state government last year.
She said most buyers who closed on multifamily assets during the coronavirus pandemic got an extra 2% to 10% off the price. Now, the general feeling among investors is that prices have further to fall.
“We have a lot of landlords who bought in the last five to seven years, and there is a certain amount of devaluation that has gone on," Mehra said. "Maybe they want to exit the New York City market and they just want to be in other markets because of the rent laws or they’ve just decided to cut their losses."
Mehra closed on a deal to sell a six-story apartment building at 5 West 91st St. for $20M this month. The building originally came to market asking $34M before the new rent laws were passed last summer and the health crisis affected the city.
“There are a lot of [buyers] sitting on a lot of cash looking to take advantage of lower pricing,” she said.

Though brokers said much of the year has been spent trying to salvage deals with renegotiations and trying to soothe skittish buyers and sellers, 2020 hasn't been completely devoid of sales.
Amazon paid $978M to WeWork for the former Lord & Taylor Building on Fifth Avenue, and 601W Cos. dropped $952.5M on SL Green’s 410 10th Ave. Munich RE closed on its $900M purchase of 330 Madison Ave. from the Abu Dhabi Investment Authority.
Still, Avison Young Head of Tri-State Investment Sales James Nelson said that, on the whole, some of the investment sales pricing in the city hasn’t been seen in a decade.
“Ten years ago, the 10-year treasury was at 2.6%. Today it's under 1%,” he said. "If you can lock in good 10-year financing, the cash on cash returns you can get today, I haven’t seen them in my 22-year career."
“If you take the second quarter and the third quarter and you compare it to 2019, the price of land dropped 30%, multifamily was [down] 29%, office and retail [down] 24%," Nelson added. "The only thing we have to compare this to is 2009, when sales volume dropped 90% from 2007.”
Newmark Capital Markets Debt and Structured Finance co-Head Dustin Stolly said borrowers who have a "fighting chance" are being given more time in the form of forbearance.
“The distress will be situational and asset-specific," he said. "It will take a while for it to pop its head up. There's plenty of capital in the system."

Though President-elect Joe Biden's victory and the vaccine rollout have been shots in the arm for New York City and the panic phase of the crisis has passed, brokers agreed there is still a ways to go before activity and prices return to their pre-pandemic levels.
“It was a year in which the pandemic converted a 53-monthlong correction in investment sales from a volume correction to a value correction,” said JLL New York Investment Sales Chairman Bob Knakal, adding that October 2015 is when the bull market officially ended.
Buyers offered less and sellers have balked at their offers this year, so Knakal expects this sales volume to hit a cyclical low in 2020.
“I thought the savings and loan crisis was the worst thing I ever saw, and that was only 47 months," he said. "This is 62 months now and not over yet."
Knakal said he sees rays of sunshine in the luxury residential market's recent uptick, which could bode well for the coming months. Overall, he says Manhattan values have taken a bigger hit than the outer boroughs, likely because it has seen the largest drop in population.
B6 Real Estate Advisors Senior Managing Director D.J. Johnson, who handles the firm’s Brooklyn business, says there has been an increase in transactions this month as the market has begun to find its footing. There were around 25 transactions over $1.5M per month in the third quarter, he said, but that figure will be closer to 50 in December.

He recently sold 617 Johnson Ave., a 15K SF warehouse on the border of East Williamsburg and Bushwick, for roughly $500 per SF, which he said shows the resiliency of that particular asset type.
“What we’re starting to see is confidence in the market,” he said, adding that price drops on properties will vary significantly. In some cases, there is no discount, and in others, it could be as much as 30%.
He noted the investment sales market has been hit by increasing taxes, rent reform and now the health crisis. As businesses start to stabilize, he said he expects the city to begin to recover.
“The biggest hurdle out of the pandemic was price discovery, investors knowing what they are underwriting against,” he said. "It's not that they are expending higher-yield debt so low; it’s that they just don’t know what cash flow is like. It’s been a big learning experience these last six months trying to figure out how to price."
 

David Goldsmith

All Powerful Moderator
Staff member
In 2020, The Pandemic Kicked NYC Landlords When They Were Already Down As the curtains fall on a harsh year for New York City’s real estate market, its investors are bracing for the pain to extend well into next year even as some glimmers of hope emerge.
The city is on pace to see $8.4B in building sales volume in 2020, a nearly 70% drop off the 10-year average, per Avison Young’s latest data. That figure represents a 50% decrease from last year.
Pricing and values are another matter — brokers point to reductions of as much as 30% in some cases, as well as their growing concerns that investors are turning their backs on the city in favor of more business-friendly parts of the country.
“The landlords already were taking a bloodbath on their valuations,” Meridian Capital Group Managing Director Shallini Mehra said, pointing to rent reform legislation that was passed by the state government last year.
She said most buyers who closed on multifamily assets during the coronavirus pandemic got an extra 2% to 10% off the price. Now, the general feeling among investors is that prices have further to fall.
“We have a lot of landlords who bought in the last five to seven years, and there is a certain amount of devaluation that has gone on," Mehra said. "Maybe they want to exit the New York City market and they just want to be in other markets because of the rent laws or they’ve just decided to cut their losses."
Mehra closed on a deal to sell a six-story apartment building at 5 West 91st St. for $20M this month. The building originally came to market asking $34M before the new rent laws were passed last summer and the health crisis affected the city.
“There are a lot of [buyers] sitting on a lot of cash looking to take advantage of lower pricing,” she said.

Though brokers said much of the year has been spent trying to salvage deals with renegotiations and trying to soothe skittish buyers and sellers, 2020 hasn't been completely devoid of sales.
Amazon paid $978M to WeWork for the former Lord & Taylor Building on Fifth Avenue, and 601W Cos. dropped $952.5M on SL Green’s 410 10th Ave. Munich RE closed on its $900M purchase of 330 Madison Ave. from the Abu Dhabi Investment Authority.
Still, Avison Young Head of Tri-State Investment Sales James Nelson said that, on the whole, some of the investment sales pricing in the city hasn’t been seen in a decade.
“Ten years ago, the 10-year treasury was at 2.6%. Today it's under 1%,” he said. "If you can lock in good 10-year financing, the cash on cash returns you can get today, I haven’t seen them in my 22-year career."
“If you take the second quarter and the third quarter and you compare it to 2019, the price of land dropped 30%, multifamily was [down] 29%, office and retail [down] 24%," Nelson added. "The only thing we have to compare this to is 2009, when sales volume dropped 90% from 2007.”
Newmark Capital Markets Debt and Structured Finance co-Head Dustin Stolly said borrowers who have a "fighting chance" are being given more time in the form of forbearance.
“The distress will be situational and asset-specific," he said. "It will take a while for it to pop its head up. There's plenty of capital in the system."
Though President-elect Joe Biden's victory and the vaccine rollout have been shots in the arm for New York City and the panic phase of the crisis has passed, brokers agreed there is still a ways to go before activity and prices return to their pre-pandemic levels.
“It was a year in which the pandemic converted a 53-monthlong correction in investment sales from a volume correction to a value correction,” said JLL New York Investment Sales Chairman Bob Knakal, adding that October 2015 is when the bull market officially ended.
Buyers offered less and sellers have balked at their offers this year, so Knakal expects this sales volume to hit a cyclical low in 2020.
“I thought the savings and loan crisis was the worst thing I ever saw, and that was only 47 months," he said. "This is 62 months now and not over yet."
Knakal said he sees rays of sunshine in the luxury residential market's recent uptick, which could bode well for the coming months. Overall, he says Manhattan values have taken a bigger hit than the outer boroughs, likely because it has seen the largest drop in population.
B6 Real Estate Advisors Senior Managing Director D.J. Johnson, who handles the firm’s Brooklyn business, says there has been an increase in transactions this month as the market has begun to find its footing. There were around 25 transactions over $1.5M per month in the third quarter, he said, but that figure will be closer to 50 in December.

He recently sold 617 Johnson Ave., a 15K SF warehouse on the border of East Williamsburg and Bushwick, for roughly $500 per SF, which he said shows the resiliency of that particular asset type.
“What we’re starting to see is confidence in the market,” he said, adding that price drops on properties will vary significantly. In some cases, there is no discount, and in others, it could be as much as 30%.
He noted the investment sales market has been hit by increasing taxes, rent reform and now the health crisis. As businesses start to stabilize, he said he expects the city to begin to recover.
“The biggest hurdle out of the pandemic was price discovery, investors knowing what they are underwriting against,” he said. "It's not that they are expending higher-yield debt so low; it’s that they just don’t know what cash flow is like. It’s been a big learning experience these last six months trying to figure out how to price."
 

John Walkup

Talking Manhattan on UrbanDigs.com
“The biggest hurdle out of the pandemic was price discovery, investors knowing what they are underwriting against,” he said. "It's not that they are expending higher-yield debt so low; it’s that they just don’t know what cash flow is like. It’s been a big learning experience these last six months trying to figure out how to price."

--> But now we know what the low-water mark is for cash flow now. I have to think that creates a world of opportunity for smart money.
 

David Goldsmith

All Powerful Moderator
Staff member
Four bankrupt Brooklyn rentals look to escape rent regulation
Neglected buildings could return to market-rate after substantial repairs

Four bankrupt rent-stabilized apartment buildings in Clinton Hill could have a path to deregulation, thanks to an obscure exemption intended to repair run-down properties.
Rosenberg & Estis, the attorneys for the bankrupt properties, filed an adversary proceeding on Jan. 7, arguing that because the previous owner rehabilitated the buildings in 2002, 46 of their total 128 units should be deregulated.

A little-used “substantial rehabilitation” provision allows landlords to deregulate units — even, at least theoretically, under the new rent law — if a building is found to be dilapidated, and 75 percent of the building-wide systems are completely replaced.

In October 2019, the buildings at 27-29 Putnam Avenue, 423-427 Grand Avenue, 429-435 Grand Avenue and 88-100 Downing Street, known as the Grand Putnam Portfolio, filed for Chapter 11 bankruptcy in New York’s bankruptcy court in the Southern District.
According to DelShah Capital vice president Justin Amirian, who submitted a March 2020 affidavit in the case, the cashflow from the properties couldn’t cover the monthly expenses. DelShah, a private equity firm led by Michael Shah, acquired the $29.3 million debt for the buildings in 2018.

Amirian said the 2019 rent law is partly to blame, and made raising rents nearly impossible. But some residents also refused to pay rent. The owner, meanwhile, still had to pay credits to tenants from a 2019 settlement with the New York Attorney General for inflating rents, serving improper evictions and pressuring tenants to take buyouts.
Attorneys for the plaintiffs declined to comment.

The market for rent-regulated apartments was already bad, and the coronavirus had made lenders even more hesitant, according to Amirian. Finding new financing while Chapter 11 proceedings continued would be nearly impossible and would surely come with terms “so onerous” they would amount to a “loan to own” arrangement, he said. The next week, Judge Robert Grossman granted debtor-in-possession financing.

Now, the attorneys are hoping that the rehabilitation provision will help right the properties’ finances for good.
At the bankrupt Clinton Hill buildings, the alleged rehabilitation was completed in 2002, aided by a state tax benefit as well as federal low-interest loans for deteriorated multifamily buildings, overseen by Housing Preservation and Development, to renovate 46 of the units in exchange for setting them aside for lower-income tenants.

When that program expired, those units should have left rent-regulation, attorneys for the buildings argued, and they should be able to raise the rents when the current tenants leave.
What the provision entails — replacing a building’s plumbing, heating, gas supply, electrical wiring, intercoms, windows, roof, elevators and painting or exterior façade — often amounts to a significant expense. That’s usually a strong deterrent for landlords, said attorney Michelle Maratto Itkowitz, whose firm Itkowitz PLLC specializes in residential landlord and tenant litigation. In recent years, hundreds of hopeful landlords have called her to ask if their buildings could be freed from rent regulation, and she has turned nearly all of them away.

Meeting the exemption’s standard is very high, Itkowitz said. Buildings must typically be empty before the rehabilitation, and the project must be meticulously documented. But it’s possible that because the new rent law greatly reduced the financial incentive to improve buildings, landlords will hunt for novel ways to deregulate apartments, especially if their financing was based on future revenue increases.

The success of that aim, in the Brooklyn properties’ case, now depends on attorneys for New York City and New York State, who have until Feb. 11 to file motions to abstain or intervene in the case.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
In 2020, The Pandemic Kicked NYC Landlords When They Were Already Down As the curtains fall on a harsh year for New York City’s real estate market, its investors are bracing for the pain to extend well into next year even as some glimmers of hope emerge.

The city is on pace to see $8.4B in building sales volume in 2020, a nearly 70% drop off the 10-year average, per Avison Young’s latest data. That figure represents a 50% decrease from last year.
Pricing and values are another matter — brokers point to reductions of as much as 30% in some cases, as well as their growing concerns that investors are turning their backs on the city in favor of more business-friendly parts of the country.
“The landlords already were taking a bloodbath on their valuations,” Meridian Capital Group Managing Director Shallini Mehra said, pointing to rent reform legislation that was passed by the state government last year.
She said most buyers who closed on multifamily assets during the coronavirus pandemic got an extra 2% to 10% off the price. Now, the general feeling among investors is that prices have further to fall.
“We have a lot of landlords who bought in the last five to seven years, and there is a certain amount of devaluation that has gone on," Mehra said. "Maybe they want to exit the New York City market and they just want to be in other markets because of the rent laws or they’ve just decided to cut their losses."
Mehra closed on a deal to sell a six-story apartment building at 5 West 91st St. for $20M this month. The building originally came to market asking $34M before the new rent laws were passed last summer and the health crisis affected the city.
“There are a lot of [buyers] sitting on a lot of cash looking to take advantage of lower pricing,” she said.

Though brokers said much of the year has been spent trying to salvage deals with renegotiations and trying to soothe skittish buyers and sellers, 2020 hasn't been completely devoid of sales.
Amazon paid $978M to WeWork for the former Lord & Taylor Building on Fifth Avenue, and 601W Cos. dropped $952.5M on SL Green’s 410 10th Ave. Munich RE closed on its $900M purchase of 330 Madison Ave. from the Abu Dhabi Investment Authority.
Still, Avison Young Head of Tri-State Investment Sales James Nelson said that, on the whole, some of the investment sales pricing in the city hasn’t been seen in a decade.
“Ten years ago, the 10-year treasury was at 2.6%. Today it's under 1%,” he said. "If you can lock in good 10-year financing, the cash on cash returns you can get today, I haven’t seen them in my 22-year career."
“If you take the second quarter and the third quarter and you compare it to 2019, the price of land dropped 30%, multifamily was [down] 29%, office and retail [down] 24%," Nelson added. "The only thing we have to compare this to is 2009, when sales volume dropped 90% from 2007.”
Newmark Capital Markets Debt and Structured Finance co-Head Dustin Stolly said borrowers who have a "fighting chance" are being given more time in the form of forbearance.
“The distress will be situational and asset-specific," he said. "It will take a while for it to pop its head up. There's plenty of capital in the system."

Though President-elect Joe Biden's victory and the vaccine rollout have been shots in the arm for New York City and the panic phase of the crisis has passed, brokers agreed there is still a ways to go before activity and prices return to their pre-pandemic levels.
“It was a year in which the pandemic converted a 53-monthlong correction in investment sales from a volume correction to a value correction,” said JLL New York Investment Sales Chairman Bob Knakal, adding that October 2015 is when the bull market officially ended.
Buyers offered less and sellers have balked at their offers this year, so Knakal expects this sales volume to hit a cyclical low in 2020.
“I thought the savings and loan crisis was the worst thing I ever saw, and that was only 47 months," he said. "This is 62 months now and not over yet."
Knakal said he sees rays of sunshine in the luxury residential market's recent uptick, which could bode well for the coming months. Overall, he says Manhattan values have taken a bigger hit than the outer boroughs, likely because it has seen the largest drop in population.
B6 Real Estate Advisors Senior Managing Director D.J. Johnson, who handles the firm’s Brooklyn business, says there has been an increase in transactions this month as the market has begun to find its footing. There were around 25 transactions over $1.5M per month in the third quarter, he said, but that figure will be closer to 50 in December.

He recently sold 617 Johnson Ave., a 15K SF warehouse on the border of East Williamsburg and Bushwick, for roughly $500 per SF, which he said shows the resiliency of that particular asset type.
“What we’re starting to see is confidence in the market,” he said, adding that price drops on properties will vary significantly. In some cases, there is no discount, and in others, it could be as much as 30%.
He noted the investment sales market has been hit by increasing taxes, rent reform and now the health crisis. As businesses start to stabilize, he said he expects the city to begin to recover.
“The biggest hurdle out of the pandemic was price discovery, investors knowing what they are underwriting against,” he said. "It's not that they are expending higher-yield debt so low; it’s that they just don’t know what cash flow is like. It’s been a big learning experience these last six months trying to figure out how to price."
Interesting to hear Knakal describe it as 62 month cycle. Price discovery will be very challenging this cycle with sales vol down so much. Good and bad I suppose. As our markets open back up to buyers that were sidelined, luxury will find it's legs
 

John Walkup

Talking Manhattan on UrbanDigs.com
“The biggest hurdle out of the pandemic was price discovery, investors knowing what they are underwriting against,” he said. "It's not that they are expending higher-yield debt so low; it’s that they just don’t know what cash flow is like. It’s been a big learning experience these last six months trying to figure out how to price."

--> this is exactly the problem that uncertainty brings. It's not that you don't have a sense of value, it's that you can't trust it anymore.
 
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