Impact of rent regulation changes on Building Sales

David Goldsmith

All Powerful Moderator
Staff member

Isaac Kassirer’s stuck with stabilized apartments — and rent strike​


Emerald Equity loses bid to pull South Bronx portfolio from regulation​


For landlords whose business model was flipping rent-regulated apartments to market rate, the 2019 rent law was crushing. The legislation closed most of those paths, dragging down the values of regulated buildings.
Some of their owners have called it quits. But others have soldiered on, trying new tactics to achieve the same result.

For one, Isaac Kassirer of Emerald Equity Group, a decision by the state last month proves that creativity isn’t enough to secure the market-rate conversions of yore.
In the late 2010s, Kassirer built up a sizable stack of stabilized assets. But the rent law brought trouble. Come December 2020, the indebted entities on more than a dozen Emerald buildings faced bankruptcy. And as of last year, the portfolio — previously 3,500 units — had shrunk by more than half.
In August 2020, Kassirer attempted to stanch the bleeding. He filed an application with the state’s Division of Homes and Community Renewal to see if six South Bronx buildings could be exempt from rent-regulation.

Kassirer argued that they had been renovated in 1991, qualifying them for the 30-year tax break known as J-51. The provision mandates that a landlord issue stabilized leases while getting the tax break. Kassirer asked the state to authorize the portfolio’s deregulation when J-51 expired last year.
Last month, the state denied the request.

HCR’s rent administrator George Nnochiri wrote in an order that each of the owner’s buildings had been rehabilitated under the city’s Urban Development Action Area Program. The incentive allows owners of buildings on land previously owned by the city to qualify for a 20-year tax break.

Nnochiri noted that the renovations had been completed via a government loan and under the state’s Private Housing Finance Law, those units are exempt from deregulation.
The decision applies to 1187 Anderson Avenue, 1191 Anderson Avenue, 1195 Anderson Avenue, 1220 Shakespeare Avenue, 1210 Woodycrest Avenue, and 1230 Woodycrest Avenue in the Highbridge section of the Bronx.
Kassirer said in an email that neither he nor Emerald Equity Group is affiliated with the Bronx properties in question. However, property records show Kassirer signed as the buyer for 1220 Shakespeare Avenue; 1187, 1191 and 1195 Anderson Avenue; 1210 Woodycrest Avenue and 1230 Woodycrest Avenue on Nov. 28, 2017.

Property records do not show any have since been sold.
Had Kassirer’s application been approved, renters in the buildings’ 272 units could have faced four-figure rent hikes and fierce competition from the open market.
But with one battle down, the renters are still waging a war for livable housing.
“The tenant association is happy about this huge victory,” said Julius Bennett, a tenant leader at 1230 Woodycrest Avenue. “But the happiness is not full.”
The buildings collectively have over 900 open violations and the city’s Department of Housing and Preservation has classified over a quarter of the infractions as “extremely hazardous.”
Tenants have complained of mice and roach infestations, leaking ceilings, mold, broken toilets and peeling lead paint, according to HPD.

And in December, residents of 1230 Woodycrest Avenue and 1220 Shakespeare Avenue received shutoff notices from Con Edison, signaling that the landlord had not paid the electric bill.
The tenants of 1230 Woodycrest, which has the most violations of the bunch, declared a rent strike Tuesday to pressure Kassirer to remedy the violations and pay Con Ed.
“The rent strike is going to go on for as long as I am old — and I’m 84,” said Bennett. “It’s going to go for as long as it takes to resolve this.”
A spokesperson for the tenants said the utility could shut off service in the common areas, which would prevent tenants from using the washer and dryer, intercom and elevator. A shutoff would also affect cooking gas and heat, the spokesperson said.

The law firm Kucker Marino Winiarsky & Bittens, which is listed as a contact for the buildings’ owner on the HCR decision, did not respond to a request for comment.
A representative for the firm previously commented on the Bronx buildings dispute on behalf of Emerald Equity Group, but later said he had done so incorrectly and had intended to send the statement on behalf of the LLCs listed as owners in the HCR filing. To his understanding, he said, neither Emerald nor Kassirer is affiliated with the properties.
 

David Goldsmith

All Powerful Moderator
Staff member

Rising interest rates will dampen city’s investment sales market this year​

Lingering effect of low rates, scramble to lock in deals will drive activity for only a few months, report predicts​

Activity in New York City’s investment sales market continued to rebound in the first quarter of 2022, but a slowdown could be on the horizon as rising rates drive up borrowers’ costs.
Dealmakers bought and sold 582 properties in the quarter, a year-over-year jump of 53 percent, according to a report by Ariel Property Advisors. Those transactions totaled $8.9 billion, a whopping 320 percent increase from the first quarter of last year and roughly in line with the first quarter of 2019.

Still, nearly half of those closings went into contract at the tail end of 2021, when the city saw a dramatic acceleration in investment sales, Ariel president Shimon Shkury said. The $15.6 billion worth of deals that closed in the fourth quarter — a three-year high — represented both an anomaly and a symptom of Covid’s lingering effects on the market, Shkury added, predicting that activity could slow in the second half of the year now that low pandemic-era interest rates are rising again.

“The first quarter marks a drastic change in the cost of debt and the expectation is that interest rates will continue to rise,” Shkury said. “As a result, we expect momentum to continue in the second quarter as both buyers and sellers rush to complete transactions, but we also expect the second half of the year to be somewhat slower.”
Investment in warehouses and other industrial properties have increased significantly, with 43 deals combining for $548 million, compared to just $164 million across 42 deals in the same period a year ago.
The multifamily market also continued to show signs of strength in the first quarter, with $3.2 billion worth of deals compared to $844 million a year ago.

Of the four boroughs covered in the report (Staten Island was excluded), Manhattan saw the largest year-over-year increases in deal and dollar volume, with 88 properties fetching $5.4 billion, a 676 percent increase from $696.4 million across just 39 deals in the first quarter of 2021. Those first-quarter figures paled in comparison to the fourth quarter, however, when 132 properties sold for a combined $8.5 billion.
The amount spent on multifamily properties citywide rose to $3.2 billion across 359 deals in the quarter, up from $843.7 million across 199 deals a year ago. In Manhattan, that number jumped 392 percent to $1.6 billion, from $329.4 million last year, while the number of deals increased 140 percent.
 

David Goldsmith

All Powerful Moderator
Staff member

BlackRock sells stabilized UWS rental for $90M after landmark designation​

West Side landlord Morris Schreiber bought the 125-unit building at 98 Riverside Drive​

Tenant complaints in New York renting are as common as gum on the sidewalk, but few buildings have a StreetEasy page dedicated to griping.
One Upper West Side property is special that way.

For more than eight years, tenants have flocked to a forum to gripe about unaddressed repairs, revolving-door tenancies, and “filthy common areas” in BlackRock’s purportedly luxury rental at 98 Riverside Drive. One labeled it “a derelict building that is not maintained.”
Now tenants will be bringing their complaints to a new owner: Morris Schreiber. This week, BlackRock, the landlord since 2008, sold the property to Schreiber for $90 million, records show.
BlackRock declined to comment on why it sold the building and Schreiber, whose portfolio is heavily concentrated on the Upper West Side, according to the site Who Owns What In NYC, could not be reached for comment.
However, property records offer clues to the investment firm’s motivation for selling — and the potential upside for the new landlord.
Two years ago, 98 Riverside Drive was given landmark status, which subjects the property to stricter regulation by the city. Such buildings are supposed to be kept in a state of good repair.
That means the building’s 34 open violations, colorfully detailed on StreetEasy as including “catastrophic floods” affecting multiple apartments, could be reported to the city’s Landmarks Preservation Commission.

That agency could then issue a warning letter, and if the owner failed to remedy the violations, it could face a hearing and then a civil penalty. BlackRock’s specialty is investing, not property management or navigating city bureaucracy, and the firm may have wanted to wash its hands of its Upper West Side headache.
Another caveat of landmarked properties is they are costlier to renovate.
Combining apartments is one of the last remaining ways landlords can significantly raise revenue from rent-regulated units since the passage of the 2019 rent law. A loophole in the rent law allows owners to turn two adjacent vacant apartments into one and set a new market-rate rent. A little less than half the units at 98 Riverside Drive are rent-stabilized.
Under BlackRock’s ownership, 98 Riverside Drive appears to have undergone eight unit combinations. The Real Deal records show the property as holding 133 units, but a press release circulated by JLL, which brokered the deal, lists the building as a 125-unit property.
Now, under the building’s landmark designation, any work requiring a Department of Buildings permit would need a separate sign-off by the Landmarks Preservation Commission, according to a spokesperson for the agency.
Stitching together neighboring apartments would likely fall under DOB purview. Thus, Schreiber would need to obtain a certificate of no effect — a document confirming the proposed work is interior and won’t affect the protected exterior of the building — from the LPC before the Buildings Department can approve the project.
Squeezing extra revenue from stabilized units would have been an uphill battle for BlackRock, but the building still holds profit potential for its new owner.
Data from the Department of Finance lists the property’s tentative assessed value as nearly $32.2 million for the 2023 fiscal year. That’s 27 percent above the previous fiscal year and 12 percent higher than the building’s value before the 2019 rent law.
Astronomical rent growth in the city of late will likely drive revenue higher, compensating for the 2-4 percent rent bump the rent guidelines board is considering for stabilized units.
Plus, if the building’s alleged history of “revolving door” tenancies still holds true, there could be frequent opportunities for rent resets.
 

David Goldsmith

All Powerful Moderator
Staff member

David Goldsmith

All Powerful Moderator
Staff member

In rare move, Steve Croman looks to sell large apartment portfolio​

Notorious landlord asking $120M for 14 buildings in and around East Village​


Aside from his history of scandals, Steve Croman is known for rarely — if ever — selling his apartment buildings. But now, the landlord plans to do just that.
Croman is looking to offload 14 apartment buildings in and around the East Village for more than $120 million, The Real Deal has learned.

He’s the latest in a group of old-line New York landlords who have moved to part ways with their properties in recent months as fallout from the state’s 2019 rent-regulation overhaul has combined with demand from investors eager to get in on the city’s recovery.

But unlike investments that were suddenly strained when state lawmakers limited landlords’ ability to raise rents on regulated apartments, the properties Croman is offering are almost entirely free-market.

The 14 buildings are all small walk-ups that hold a combined 102 units, collectively covering more than 80,000 square feet, according to a marketing brochure from Marcus & Millichap.

Property records show Croman acquired the buildings between 2005 and 2014 for at least $35 million. The offering price for the portfolio is $121 million.
Sources believe the landlord has put other buildings up for sale. Croman did not immediately respond to a request for comment.
Croman — whose 9300 Realty at once owned more than 150 buildings in the city — is infamous for his allegedly predatory treatment of tenants. For years, he was accused of harassing rent-stabilized renters so his company could deregulate their apartments and rent them at higher rates.

Croman went to jail on a one-year sentence in 2017 after pleading guilty to mortgage fraud charges.
Apart from the scandals, Croman is also known as a longtime owner who rarely sells his properties. But he’s one of many similar investors who have chosen to do so in recent months after finding the regulatory environment unfavorable.

Hold Croman in contempt over Kips Bay rentals: receiver

Appointee says landlord “has laughed at the court order for 2 months”​

In a ranking of the most frustrating jobs in real estate, being a receiver for Steve Croman’s apartment buildings would be right up there.
According to the one appointed for his four contiguous properties at 208-214 East 25th Street, the landlord — whose name in news stories is never far from the word notorious — has continued to collect rent but has not passed it along to her.

Moreover, receiver Haley Greenberg told judge Francis A. Kahn III in an Aug. 18 letter, he hasn’t turned over all of his tenants’ security deposits or the building’s records. She wants Kahn to hold Croman in contempt.
Greenberg added that she would “like to avoid having the former tenants bring lawsuits” over security deposits that were not returned after they vacated the Kips Bay building.
The judge had appointed the receiver to the four buildings with 85 rental units in May after Maverick Real Estate Partners brought a foreclosure action against Croman one year ago.

While the dispute over a $25 million loan acquired by Maverick has unfolded in court, past tenants have been left to wonder how they will recover their security deposits, and current ones about where to send their rent checks.
One of the tenants, who asked to remain anonymous, said her bank accounts became overdrawn one month when the receiver and the property manager, Centennial Properties NY, both debited her accounts. Centennial has since returned the payment, the tenant said.
Centennial sent notices to other tenants asking for rent even after the receiver was appointed, court filings show. “Your client is ignoring court orders and improperly threatening tenants,” Greenberg wrote in June to one of Croman’s attorneys.
In another message, the receiver said, “Your client has now laughed at the court order for almost two months.”
Representatives for Croman, who was banned from managing his real estate portfolio after pleading guilty to a felony in 2017, disputed the receiver’s claims.
“Our client has never been in contempt of any court order,” said attorney Terrence Oved, who accused a Maverick Real Estate Partners affiliate of putting the receiver up to the contempt request.
An attorney for Maverick declined to comment.
 

David Goldsmith

All Powerful Moderator
Staff member

Kushners look to sell big piece of Manhattan apartment holdings​

New Jersey-based firm continues pivot to suburban multifamily​

Kushner Companies is looking to sell a sizable chunk of its Manhattan apartment portfolio as the family firm continues its shift to the suburbs.
The New Jersey-based company has put 18 buildings with more than 325 units in Greenwich Village up for sale. The properties account for about a third of the firm’s multifamily portfolio in Manhattan, according to Real Capital Analytics.

It’s one of the biggest offerings from the Kushners since the family sold 666 Fifth Avenue to Brookfield Asset Management in 2018 and pivoted toward building a sprawling suburban multifamily portfolio in Maryland, Virginia and the firm’s home state of New Jersey, among other places.

Representatives for Kushner Companies did not immediately respond to requests for comment.

The offering is split into two portfolios. One is a group of 11 buildings in the East Village with 197 units. The asking price wasn’t available, but marketing materials from Meridian Investment Sales show the properties carry $85.5 million in debt.
The teaser notes that the seven-year, interest-only mortgage has a fixed interest rate of 3.34 percent and is assumable by a buyer — a feature that’s become especially valuable in a market chilled by high interest rates.
KKR, for example, recently purchased a Philadelphia multifamily complex at a record-setting price of $357 million — a deal that was only possible because the private equity firm could assume the low-cost debt in place.

The second Kushner portfolio consists of seven buildings in the East Village and West Village with 129 units. Marketing materials from Marcus & Millichap list the asking price at $58 million.
The Kushners began investing in Manhattan rentals around 2012, and at one point the company was reportedly the second-largest owner of apartment buildings on the Lower East Side, behind Steve Croman.
The firm began selling out of New York around 2017 when Jared Kushner left to become a senior adviser in the Trump White House. Since then, the company has poured its money into suburban multifamily assets, where it first made its name.
In its latest move, Kushner launched a hostile takeover bid of New Jersey’s Veris Residential real estate investment trust.
 

David Goldsmith

All Powerful Moderator
Staff member
Wafra sells East Village’s The Nathaniel for $57M

Investment firm takes roughly 42 percent loss on 138 East 12th Street​

The Wafra Group is taking one on the chin for an East Village mixed-use property it purchased seven years ago.
The investment firm sold The Nathaniel at 138 East 12th Street to The Westover Companies for $56.8 million, roughly 42 percent less than the $98.3 million it paid for the luxury rental building in 2015. The deal works out to about $838 per square foot. Crain’s was first to report on the transaction.

It’s not clear why the property sold for more than $40 million less than its previous sale price. Wafra has not responded to a request for comment.
A JLL team consisting of Steve Rutman and Rob Hinckley brokered the transaction, Traded reported. A separate JLL team consisting of Steven Klein and Jamie Leachman represented Westover in acquiring $26.9 million in financing for the purchase. There’s no information on the acquisition financing.

The 68,000-square-foot development was built in 2014 on the corner of East 12th Street and Third Avenue in the East Village. The nine-story property features 85 units across roughly 50,000 rentable square feet and an 18,000-square-foot Westside Market grocery store on the building’s ground floor.
This marks the Pennsylvania-based Westover Companies’ first purchase in New York City. The property owner and management company’s portfolio includes about 15,000 units in more than 70 locations along the East Coast in states such as Pennsylvania, New Jersey, Maryland and Florida.
Westover also manages about 2 million square feet of retail and commercial across eight shopping centers and 11 office buildings in the Philadelphia area.

Among the firm’s recent acquisitions include a $79 million purchase last December of a 240-unit apartment complex in Dania Beach, Florida and a $55 million deal in 2019 for a 331-unit multifamily property in Westchester, Florida.
 

David Goldsmith

All Powerful Moderator
Staff member
Gee, who pointed out the risks 3 years ago?

Uptown landlord Sugar Hill Capital faces another foreclosure​

Filing from lender comes as owner faces similar action on Washington Heights property​

Another building acquired by David Schwartz’s Sugar Hill Capital Partners near the height of the multifamily market in the late 2010s is now in the crosshairs of its lender.
U.S. Bank, as a trustee for CMBS bondholders, wants to foreclose on the six-story, 23-unit property at 121 West 116th Street in Harlem, alleging in a complaint that Sugar Hill is in default on a $4.9 million loan after failing to make payments since July.
The complaint names an entity connected to Sugar Hill and several current and former employees of the firm as guarantors on the loan, including Schwartz and former principal Alex Friedman, who co-founded Sugar Hill with Schwartz in 2009 but is no longer with the company.
An affiliate of Long Island-based Arbor Realty Trust, provided the loan in 2018, according to the complaint, the same year records show Sugar Hill acquired the building for $7.5 million. The debt was assigned to the CMBS trust in 2020 and a notice of default was issued in September of last year after the borrower had not made payments for three straight months, the complaint alleges. CW Capital is special servicer on the loan.

Sugar Hill Capital declined to comment.
The 18,000-square-foot building was acquired by Sugar Hill as part of a $250 million portfolio deal in 2018 for 53 Harlem apartment buildings owned by Irving Langer’s E&M Management. The deal came during the boom years of the city’s multifamily market, before changes to state rent laws limited landlords’ ability to raise rents on stabilized apartments.
Now signs of distress are emerging for owners of stabilized apartments as interest rates remain high and billions of dollars in debt on multifamily properties is set to come due in the next two years.
The foreclosure filing comes as Sugar Hill is facing a similar action on a 54-unit property at 4300 Broadway in Washington Heights, where it allegedly fell behind on a $16 million mortgage and has failed to make loan payments since August.
 

David Goldsmith

All Powerful Moderator
Staff member

David Goldsmith

All Powerful Moderator
Staff member
It's not Rent Stabilization causing landlords problems.

Chetrit stumbles again on $225M multifamily loan​

Queens buildings’ debt, due in four months, delinquent for second time
Chetrit Group’s Meyer Chetrit along with a rendering of 150-13 89th Avenue (left) and 152-09 88th Avenue (right) (Getty, Google Maps, Goldstein, Hill and West Architects)

FEB 27, 2023, 6:07 PM
By
For the second time in three months, the Chetrit Group fell behind on a $225 million loan covering 640 multifamily units in Jamaica, Queens. That mortgage comes due in July.
The loan servicer previously marked the Parkhill City debt, backed by 150-11 89th and 152-09 88th avenues, 30 days delinquent in November, according to Trepp.

Chetrit paid off those arrears in December, but didn’t stay current for long. Chetrit is again more than 30 days past due, according to Morningstar data.
The firm’s missed payment was largely responsible for the multifamily sector’s national delinquency rate rising nearly half a percentage point to 2.3 percent in February, according to the rating agency KBRA. Fewer than 1 percent of KBRA-rated rental properties were delinquent in October.

Chetrit was squeezed by occupancy struggles and a floating-rate loan made expensive by the Federal Reserve’s rampant rate increases.
The firm secured the debt from Starwood Capital and BMO in June 2021 to refinance its redevelopment of the shuttered Mary Immaculate Hospital.
Commentary by the servicer noted that Chetrit attributed its payment problems to a difficult lease-up during Covid. The firm wrapped up construction on the larger 17-story building in 2020, the pandemic’s first year, according to Architect Magazine.

Sign Up for the New York Weekly Newsletter​

SIGN UP
By signing up, you agree to TheRealDeal Terms of Use and acknowledge the data practices in our Privacy Policy.
Occupancy reached 95 percent in the third quarter of 2022, according to Morningstar. But revenue fell 24 percent below underwriting as taxes and payroll expenses jumped 79 percent.

The developer told its servicer it was also waiting on a tax abatement from a nearby building that should be finished by the middle of this year, according to Morningstar.
When Chetrit picked up the $225 million mortgage, it also scored a $40 million construction loan to build another 107-unit rental building on the former hospital site. Last summer, New York Yimby reported the development at 88-20 153rd Street should be finished by the winter of 2024.
With the Parkhill City loan due this summer, though, Chetrit does not have time on its side.

 

David Goldsmith

All Powerful Moderator
Staff member

Taconic takes big loss on Bronx portfolio​

InterVest paid $60M, 40% off, for 14 properties
Taconic Investment Partners is taking a substantial loss on a portfolio of Bronx multifamily properties.
The firm sold a 14-building portfolio — largely centered in the Fordham Heights neighborhood — to InterVest Capital Partners for $60 million, Crain’s reported. InterVest, funded by the sovereign wealth fund of Kuwait, was the buyer of the portfolio of 5- and 6-story walk-up and elevator rental buildings that were a part of a roughly $100 million play by Taconic.

Taconic, run by Paul Pariser and Charles Bendit, assembled the portfolio through two purchases in 2018. At the beginning of the year, Taconic entered into contract to buy a dozen properties from Related Companies and New York City pension funds for $70 million. That portfolio consisted of 368 rent-stabilized apartments.
Later in the year, an affordable housing joint venture from Taconic and Clarion Partners picked up a pair of buildings in Concourse for $27.8 million. City Skyline Realty was the seller of those buildings, which housed 131 rent-stabilized apartments.

A year after the purchases, state lawmakers titled rent regulations in favor of tenants. At the time of the policy shift, Taconic owned 2,000 rent-stabilized apartments, most in the Bronx.
“We’ll be cutting back significantly on improvements to individual apartments’ living experience,” Bendit said at the time. “They may be more affordable, but not as nice to live in.”

At the 16-unit 2543 Decatur Avenue, it doesn’t appear a single unit has been leased since 2017, according to StreetEasy. Commercial building values have also taken a hit more generally speaking from the pandemic.
A representative for Taconic did not immediately respond to a request for comment from The Real Deal. A Newmark team led by Adam Spies and Adam Doneger brokered the sale.

Elsewhere, Taconic was part of a joint venture that recently sold a pair of retail condos on the Lower East Side to an entity connected to Coral Gables-based Amerant Bank for $24.4 million. The units are part of the 15-story, 185,000-square-foot building in the Essex Crossing mixed-use development.
 

David Goldsmith

All Powerful Moderator
Staff member

Investor accuses Kushner of botching Brooklyn Heights venture​

Lawsuit attacks alleged mismanagement of luxury townhouse bet

Fix-and-flip? More like a fix-and-flop.
An investor in Kushner Companies’ Brooklyn Heights portfolio is now coming after the firm in a fiery complaint.

The investor, identified only as BLS Holdco LLC, filed a lawsuit Tuesday against Kushner and its CEO Laurent Morali, alleging that they mismanaged the redevelopment and kept it in the dark about the properties’ financial and legal issues.
“We are disappointed by the fact that this particular investment wasn’t as successful as expected,” a Kushner company representative told The Real Deal. Valuations were hurt by a lawsuit brought by tenant watchdog group Housing Rights Initiative, added the spokesperson, who said that BLS Holdco’s claims were without merit.

The dispute centers around six former Brooklyn Law School dorms that Kushner, a real estate investment firm founded by Charlie Kushner, acquired for $36.5 million in 2014, with plans to convert three of the properties into luxury single-family homes and rent the other three out as apartment buildings.
BLS Holdco claims it provided the project with over $10 million in equity, according to the lawsuit, which was first reported by PincusCo.
Now, nearly a decade later, BLS Holdco alleges Kushner’s “atrocious financial performance” on the townhouses reduced its investment to “a wipeout,” and that the net asset value of the three multifamily properties is now “close to zero.”
One reason for the allegedly lackluster returns on the apartment buildings was changes to state rent laws that limited landlords’ ability to raise rents on rent-stabilized units. BLS Holdco claims it was informed by Kushner that only seven of the 77 units in the three buildings were subject to rent stabilization and that the remaining 70 could be rented at market rates.

After renovating the buildings, the investor alleges, Kushner failed to re-register the units with the state Division of Housing and Community Renewal, which the plaintiff says would have allowed the units to be deregulated under the rent laws at the time.

“Instead, Kushner simply ignored all regulatory steps and treated the units … as free-market units from the start,” the complaint alleges.
In 2018, Kushner agreed to pay $100,000 to tenants in one of the buildings, 89 Hicks Street, after being sued for overcharging rents and deregulating units. In 2020, a judge granted class-action status to a lawsuit brought by tenants in the other buildings.
In this week’s complaint, BLS Holdco claimed it would not have invested in the venture had it been aware that all of the units would be rent-stabilized.
“At no time and in no manner, not even in investor disclosures of potential ‘deal risks,’ did Kushner raise the possibility that the remaining 70 units could be subject to rent stabilization,” the suit states.

As for the townhouses, BLS Holdco claims that mounting debt, cost overruns including “poor workmanship by the general contractor and poor oversight by Kushner” and their eventual sale at “fire sale” prices resulted in a net loss.

“In sum,” the complaint states, “during one of the most robust real estate cycles in recent history, Kushner lost over $13 million on the redevelopment of the townhouses.”

 

David Goldsmith

All Powerful Moderator
Staff member

NYC investment sales plummet 36% in 2023​

Dollar volume around half of the first six months of 2022

The peak of this high interest rate era may be nigh, but its impact on investment sales will reverberate for years to come.
Investment sales in New York City dropped at least 36 percent year-over-year in the first half of 2023, Crain’s reported. The data comes courtesy of Ariel Property Advisors, which added that the dollar volume of investment sales was nearly half of what it was in the same period last year.

There was some improvement from a challenging first quarter to the second. In the multifamily market, the dollar volume of deals between quarters more than tripled, from $1.1 billion in the first quarter to $3.9 billion in the second quarter.
In general, however, asset classes didn’t see the same volume of investment sales activity in the first half of the year compared to a year ago, when the Federal Reserve was only beginning its interest rate hike to battle inflation. The scorecard for the various asset types: industrial (down 63 percent), special purpose (down 52 percent), office (down 48 percent), multifamily (down 41 percent) and retail/hotels (down 36 percent).

“Sellers who do not need to sell today are just not,” Ariel Property Advisors founder Shimon Shkury told the outlet.

The sharp rise in interest rates has slowed transaction activity in markets across the nation, and in New York, the lapse of the 421a tax break has specifically hindered multifamily transactions and development.

environment may be on the horizon. Inflation slowed to 3 percent last month, its slowest rate in two years, which could affect the result of the Fed’s meeting this week over a possible interest rate hike after taking the month off from raises.


And while the legislature couldn’t figure out a replacement for 421a one year after its lapse, Gov. Kathy Hochul launched a workaround in Gowanus last week, though its impact may be limited.

 

David Goldsmith

All Powerful Moderator
Staff member
Or perhaps the problem was predatory equity having sales based on harassing Rent Stabilized tenants and forcing them out.


Six anxious months later, Signature loan sale at hand​

Rent-stabilized landlords have heard nothing on the fate of their debt

Nearly six months after Signature Bank bit the dust, the highly anticipated sale of its $35 billion commercial real estate loan book — feared to be “toxic” for its rent-stabilized component — is about to begin.
Newmark is expected to start marketing those loans in early September, Trepp wrote in a recent update. Industry insiders corroborated the time frame.

The brokerage has been tight-lipped on the impending sale. It did not return a request for comment.
The outcome will offer an unprecedented line of sight into rent-stabilized buildings, an asset class that is at least struggling, and at worst is in a catastrophic downward spiral.

Signature’s multifamily loan book totals $19.5 billion, of which $11 billion is rent-stabilized. If the Federal Deposit Insurance Corporation shares the sales figure for the deal — which history signals it should — it will pull back the veil on how far valuations have fallen.
Anecdotes from brokers suggest rent-stabilized valuations have dropped anywhere from 20 percent to 45 percent. Shimon Shkury, who heads Ariel Property Advisors, said three rent-stabilized buildings that traded in the first half of 2023 all sold for about a 30 percent discount.
The problem stems from a 2019 state law that severely limited rent increases on rent-stabilized apartments, followed by a surge in interest rates and landlords’ expenses. But beyond individual building or portfolio sales, data on the impact of the law’s effect on building valuations have been scant.

The balance sheets of publicly traded banks that lend to rent-stabilized buildings offer an incomplete picture. Lenders are reluctant to write down bad debts, particularly on the heels of this year’s bank failures. And borrowers will typically cut every expense possible before showing a distressed hand to their bank.

The FDIC is expected to tap its Great Recession playbook in the Signature sale, and acquire the loans in ventures with third-party investors, the Trepp post reported. The FDIC would retain an equity stake and offer interest-free financing; the private investors would kick in capital for a slice of the pie.
The research firm’s blog post last week is perhaps the most insight owners have had into the sale process. For the most part, the industry has relied on rumors.
Some insiders expect the FDIC to offload the loans to a third party, which in turn would sell them to others. Private equity is expected to step in on the buy-side.
The uncertainty has bred anxiety among the defunct bank’s rent-stabilized borrowers. These landlords are waiting to see how their loans will be affected down the road by a sale and the expected valuation reset. Owners with a fast-approaching maturity date will find out first.
“None of the loan holders have been kept in the loop,” said Jay Martin, executive director of the Community Housing Improvement Program, a landlord group.

 

David Goldsmith

All Powerful Moderator
Staff member

NYC multifamily transactions slowed to two-year low​

Q3 counted $1.6B traded, 40% drop from 2022: Ariel Property Advisors

Pesky interest rate rises continue to rattle New York City’s multifamily market, sinking transactions during the third quarter.
There were 227 multifamily transactions from July to September for a total $1.6 billion in sales, according to data from New York-based Ariel Property Advisors reported by Crain’s.

The transaction volume marked the slowest quarter of the year. It also represented a 40 percent decrease in deals made year-over-year.
The dollar volume drop was even more pronounced, a decrease of 58 percent from last year’s third quarter. Not only was it the lowest quarterly dollar volume this year, but it was also the lowest dollar volume since the first quarter of 2021, before the Federal Reserve began hiking interest rates to combat inflation.

Almost four out of every five deals that closed last quarter were for properties with market-rate units or existing 421a exemptions. Only 16 percent of the traded multifamily properties were rent-stabilized and a mere 4 percent were affordable housing properties.

Despite the slowdown, Ariel president Shimon Shkury touted the fundamentals of market-rate and 421 properties to Crain’s. Relaxed regulations about raising rents, particularly on market-rate properties, appear to be making those properties more enticing to investors.

The two largest deals of the quarter in terms of dollar volume were Pacific Urban Investors’ $185 million acquisition of 130 West 15th Street in Chelsea and the NYU Grossman School of Medicine’s $210 million purchase of 377 East 33rd Street in Kips Bay.

The slowdown in the multifamily market this year was widely expected after the Fed began raising interest rates. The sales volume in the sector last year was $16 billion, but things started slowing down during the second half of the year. That slowdown will likely continue until the Fed decides to cut interest rates, which it may not be poised to do anytime soon.
 
Top