Q&A With Marcus & Millichap’s Top-Producing Manhattan Multifamily Agent

Marcus & Millichap's Peter Von Der Ahe discusses what to expect for the Manhattan multifamily industry.

Since its founding in 1971, Marcus & Millichap has become the largest firm specializing in commercial real estate investment sales, financing, research and advisory services. In 2014, the firm closed 7,667 investment transactions for private and institutional investors, including transactions for shopping centers, office and industrial buildings, apartment properties, senior housing and student housing.

Peter Von Der AheOne area of specialization for the company is the multifamily market, and top-selling multifamily agent Peter Von Der Ahe, who has been with the company since 2002, took the time to chat with MHN about recent trends in the market, and what to expect going into 2016.

MHN: Give some background on your role and how it fits into the company.

Peter Von Der Ahe: As the most senior multifamily broker in the New York City office, I oversee a team that focuses specially on New York multifamily in Manhattan and the boroughs, and we cover what we define as the “middle market”—really it’s a crossover between where the private market meets the institutional market so that’s the segment of the market that we cover. We will transact or help sell anywhere from 100-110 properties, just our New York Multifamily team, this year.

MHN: What are some trends you’re seeing right now in the multifamily industry that affect the way you do business?

Von Der Ahe: The multifamily market on its own remains very robust. If you look at all the volatility across the world, investors are generally looking for security and stability. Multifamily, amongst all other commercial real estate assets, is one of the best inflation heads as well. So just as a sector, it’s doing very well. I don’t think anyone’s worried about interest rates significantly impacting the market anytime soon. Although they may rise slightly, I don’t think it’ll have a big impact on the market. The sector is doing well, and if you look at all the markets in the country where investors would like to be, I think nine out of 10 would say the supply/demand fundamentals, the possibility of future appreciations and all the other drivers of the market in New York would put this market on the top of most investors’ list.

We do have one cloud of uncertainty that overhangs our industry at this point and that is mainly caused by our politicians. There’s political uncertainty, there’s uncertainty of how to interpret the new rent regulation rules of 2015 and just a general thought process that depending on who holds the seat of mayor or governor or other elected officals, how they can in effect rewrite some of the rules by which players in the industry are adhering. So that is one aspect of uncertainty that impacts the industry. That said, I think you’re seeing the market divided into two different segments: you’ve got those that are predominantly rent-stabilized assets and then those whose apartments are mainly designated as free market. At a building that’s almost entirely free market, you really bypass the rules, regulations in effect, the communism, some of these “rent regs” impose on owners. In our market you can pick the product type that you want within the multifamily sector.

MHN: Have you seen any impact from the new rent regulations?

Von Der Ahe: Yes, I have. I’ve seen two things—one, I’ve seen an uptick in interest in properties that are mainly free market and two, on those that are rent stabilized, I think the overall business plan still remains intact and they have great upside in the future for investors who are looking at that product. Whereas 12 months ago, people looked at things once and moved toward a deal, now they are checking things twice—there may be a little pause, maybe there’s a slight revision to their projections on what they think they can get. So in that rent-stabilized category, you’re definitely seeing people take a second look and questioning their assumptions a little more diligently regarding growth.

MHN: Going into 2016, what do you see happening in the multifamily market? Do you think prices or occupancy rates will go up?

Von Der Ahe: I don’t think prices have actually gone up in the past 12 months. Maybe there has been a slight uptick, but it’s largely been a flat market this year. I’m expecting more of the same so far for next year.

MHN: Do you think the recent Blackstone Group acquisition of Stuyvesant Town-Peter Cooper Village (one of the largest multifamily transactions ever) says anything about what we can expect for the multifamily  market? Do you think this was a one-off transaction or will we be seeing more of these big transactions in the next couple of years?

Von Der Ahe: What I think is so ironic about the Stuyvesant Town purchase is that here we are, nine years after the original purchase of the properties for $5.4 billion and it was really the government that brought that deal down when they recast how the industry was to look at J-51 benefits. It was partly the government’s doing that brought that transaction down. [In 2007, residents filed a class action lawsuit against the community’s owners for improperly deregulating rent-stabilized units after receiving J-51 tax benefits. J-51 benefits encourage owners to refurbish and improve their properties while keeping rents regulated.]

And now almost 10 years later, the only reason the transaction occurred again was because the government got involved and basically regulated a big portion of the property. So I just think there’s an irony there about that transaction. But I think overall it just points to that you have a lot of Canadian money that’s in that purchase, Blackstone, and from a global perspective, there’s a big search for deals all over the world. You’ve got pockets of danger, uncertainty and low-growth, and housing, particularly multifamily housing and particularly this market, is looked at to be a good combination of safety and also return and appreciation in cash flow. That purchase was made with a very long-term view and ultimately they should do well with it.

The transaction is kind of off the charts in terms of its size, but anytime when you get that type of scale and when it becomes available, it’s going to be scooped up immediately.

MHN: Have you seen any change in the mix of investors for recent transactions? Has there been more interest from buyers outside of the United States?

Von Der Ahe: The biggest increase I’d say would be both for family office wanting to get into the space they may not have been in before. And when I say family office, I mean both foreign and domestic. That’s probably the biggest increase I’ve noticed in the past 12 months in terms of buyers.

MHN: Are there any challenges you see coming up for the multifamily market? Any supply/demand issues?

Von Der Ahe: I never think there’s enough supply. But I think the biggest challenge is we just have to watch the political landscape and as it relates to how the city is run, the safety issues and the legislation in terms of the cost of doing business here for businesses in general, all the way from restaurants to corporations, and as it impacts how owners run their multifamily properties. I think things continue to get more complex for owners, and if you add the complexity with the uncertainty through the legislation, that’s just an area of the business that we need to be aware of.

Image courtesy of New York Multifamily.