September New York City Multifamily Transactions Decline

By Jeffrey Steele, Contributing Writer

New York—A modest decline was witnessed in New York City multifamily transactions during September, according to Ariel Property Advisors’ Multifamily Month in Review: New York City. The report revealed 45 transactions took place during the month, a dip from the robust August figure of 62 transactions.

Here’s how the city’s boroughs fared during the final month of the third quarter.

Queens: “It’s not a trend, but Queens had a big month,” Ariel Property Advisors president Shimon Shkury tells MHN. “Queens usually has the fewest number of transactions, but it’s becoming a lot more transactional. There are a number of institutional investors and institutional equity funds selling in Queens in the next three to six months.”

Brooklyn: Though Brooklyn experienced a dip in transactions in the month, Ariel Property Advisors continues to see it as a strong player in multifamily.

“It slowed down in general, but many of the new construction [projects] built as condominiums in the last five years, which were mostly in northern Brooklyn, were kept as high-end rentals,” Shkury says. “We’re seeing residential rental investors purchasing these and making relatively good yields. Many of these transactions will be finalized by the end of the year.”

The Bronx: “We’ve seen a lot of fee-simply transactions, which we will see more of,” Shkury says. “Some investors who purchased in 2005 though 2007 can finally see some return on their equity, and are choosing to exit. We think the next few months will be very strong for the Bronx as well, based on the relatively higher yield as compared to the other boroughs.”

Northern Manhattan: This area was characterized by a modest year-over-year gain in transactions, as well as a significant uptick in pricing, which continued a trend. “We’ve seen some cap rate compressions, and seen multiples averaging more than 10 times by the end of the year,” Shkury reports. “There is a tremendous amount of development, mostly public development from the likes of Columbia University, and a lot of commercial development, which helps rents and makes buildings with upside even more desirable. Compared with Manhattan, we’re talking about very attractive pricing.”

Manhattan. Manhattan is customarily led by institutional purchases, and not enough of them took place in September to avoid a decline.

“What’s really interesting here is the clear preference by institutions and REITs to buy core assets at prices of about $1,000 a foot, significantly higher than what they were willing to buy those assets for in 2009 or 2010,” Shkury observed. “That tells us the strength of the residential rental market in Manhattan today versus two or three years ago.”

In spite of the declines experienced in September, Ariel Property Advisors is forecasting a big fourth quarter this year, based on potential capital gains increases in 2013. “We’re expecting a lot of closings,” Shkury says. “They’re already in the pipeline, and already under contract.”