Big Gains for Big Apple Multifamily Sales in 2011

In 2011, sales of New York City multifamily buildings jumped 33 percent above the previous year's totals, and year-over-year dollar volume grew by 43 percent.

Shimon Shkury

By Jeffrey Steele, Contributing Writer

New York—In 2011, sales of New York City multifamily buildings jumped 33 percent above the previous year‘s totals, and year-over-year dollar volume grew by 43 percent. These are among findings of a report called Multifamily Year in Review: New York City 2011 from Ariel Property Advisors, a New York City-based investment property sales firm with special expertise in the multifamily marketplace.

Transactions climbed from 392 in 2010 to 436 in 2011, the report stated. The number of buildings surged from 442 to 589, and the total dollar volume rose from $2.949 billion to $4.23 billion in gross consideration.

According to Ariel Property Advisors, the year was characterized by two trends: the return of institutional investors to the market, and an increase in portfolio sales. Fundamentals were among the factors underpinning these trends.

“Rents have been increasing steadily over the past 18 months, especially in Manhattan, but also throughout the boroughs,” Ariel Property Advisors president Shimon Shkury tells MHN. “People are more interested in renting.”

Other factors include the strength of the local economy, the job recovery that began in New York City around mid-year last year, and lower borrowing costs in 2011, compared with the 2007-to-2010 period, Shkury says. “They’re borrowing less, and making more on rent,” he adds. “The net result is positive.”

There’s a limit on the number of multifamily buildings available in New York City, and that too has enhanced demand, Shkury says. “As a real estate investor, you’re invested in hard assets. But if at any given time, you need liquidity, what are your chances of getting liquidity in not-so-good markets? Your opportunity to change that hard asset into liquid assets is better in New York City.

“Buyers are willing to pay premiums for buildings that will have to increase their rents in the near future, due to the lack of available new product,” he continued. “And lastly, one other aspect is the fact that . . . New York City is somewhat of a safe haven, a flight-to-quality type city, more so than other urban areas.”
The strongest gains for 2011 were registered in Manhattan south of 96th St., as well as in Brooklyn. Says Shkury: “In Manhattan south of 96th, the characteristics of the transactions were larger institutional investors—funds, pension funds, insurance companies—chasing low returns, but safe, hard assets. It’s essentially long-term institutional money looking for safety.”

Because there’s limited product available in Manhattan, Brooklyn is being seen as an alternative. The borough is attractive due to its proximity to Manhattan, and because of the rapid positive changes taking place in some neighborhoods.

Brooklyn is not generating interest from the same kind of investors interested in Manhattan, Shkury says. “You won’t find the prices and sizes in Brooklyn that you will in Manhattan, so you see less institutional capital running after deals. But you do see private money chasing deals,” he reports.

His prediction for 2012? “Transaction wise, it will be the same or better, and I lean toward better,” he says. “Rents are stabilizing upwards. Interest rates are staying low through the election. These two factors will help more transactions in the near future. Equity is available for these types of transactions.

Shkury knows the real thing to be asking.

“The question is: What will happen in 2013?”

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