Shkury of Ariel kicks off 5th Annual N.Y.C. Real Estate Expo

More than 400 real estate professionals gathered to hear Shimon Shkury, president of Ariel Property Advisors, kick off the 5th Annual NYC Real Estate Expo with a presentation on Trends in the New York City Multifamily Market. The event was held October 8rd at the NY Hilton Midtown. Following his remarks, Shkury moderated a spirited panel discussion with multifamily dealmakers Daniel Benedict, Benedict Realty Group, LLC; Adam Mermelstein, Treetop Development, LLC; and Bennat Berger, BCB Properties, LLC, who own and manage multifamily properties in Queens, Manhattan, Upper Manhattan, Brooklyn, and New Jersey. In his presentation, Shkury said New York City multifamily dollar volume for the first three quarters totaled $5.4 billion, a 5% year-over-year increase; transaction volume totaled 462, a 2% year-over-year increase; and the number of buildings sold totaled 758, a 14% year-over-year increase. Shkury noted that high demand and low vacancy rates have pushed rents up which, when combined with record low interest rates, have led to higher prices for multifamily properties. The market is seeing record levels in four key metrics—the price per s/f, price per unit, cap rate, and gross rent multiple, especially in Manhattan below 96th St. He provided case studies of several buildings in Manhattan that were sold at the peak in 2007-08 and showed dramatically higher prices in recent 2013 sales. Benedict, who owns a portfolio of about 5,000 units throughout New York City, agreed that the market is strong, which he attributed to the city's reputation for being a safe harbor for investments. "I think the most critical point which has been keeping the market very, very strong is the enormous amount of capital which is flowing into New York City. The enormous amount of capital coming from all sources, international of course but even from here in America," Mr. Benedict said, adding that he's aware of funds flowing in from the UK, Switzerland, Canada, Israel, and Beirut. There are real estate investment opportunities throughout the city because "there are no bad areas in New York anymore," Mr. Benedict said. The market is stable and strong and strengthening in all neighborhoods including those like Bushwick and Bedford Stuyvesant, which may not have been desirable several years ago. Mermelstein, whose company has owned more than 5,000 residential units in New York City and New Jersey as well as a large national HUD portfolio, also noted that perceptions have changed in the last 15 years about Upper Manhattan above 96th St. and that the area is now attracting young professionals and artists looking for value. While Treetop Development is seeking to invest in buildings on the West Side between 100th and 135th Sts., Mermelstein said it's been difficult to find product in this area. As a result, he is now looking north to Inwood, which boasts parks and prewar buildings with large apartments that are ideal for shares. Additionally, about six months ago he bought a complex in Rego Park, Queens, a borough dominated by long-term owners. Berger's firm owns about 40 buildings in Manhattan and Brooklyn and he said he seeks out areas in North Brooklyn with good transportation that haven't been gentrified. "Brooklyn is just getting started and there's a lot of growth still to happen and we're going to continue to be aggressive," he said. Berger has invested in undermanaged buildings in South Williamsburg, which he calls the new Lower East Side or East Village, where properties had traded for $175-a-square-foot. Other investors, however, are discovering the neighborhood and recently a building in the area traded for $425 per s/f. Berger is renting renovated apartments in South Williamsburg to young people under the age of 26 for above $65 per s/f. South Williamsburg has tremendous subway access, Berger noted, with the Marcy Avenue station for the JMZ trains one stop away from Manhattan. He added that the four express trains that converge at the Franklin Avenue station were among the amenities that led him to invest in southwestern Crown Heights where he has bought buildings for under $200 per s/f and is now renting apartments for $47 per s/f. With the vacancy rate near zero in their buildings, the panelists said they have no trouble finding tenants and that some units rent even before renovations are completed. Benedict said he wasn't worried that the market would be glutted with new developments because the new buildings aren't targeting the middle class or working class, where there is an enormous demand. He also observed that while Brooklyn has been gentrifying rapidly, Queens has always had a strong middle class. In Queens, "You're not gentrifying the neighborhood, you're gentrifying the building, you're improving the building you're buying, renovating the lobby and the units, and creating value that way," he said. As for the future, the panelists said that while they believe rents may continue to rise, the increases won't be as dramatic as in recent years. Berger predicted that multifamily properties in Brooklyn would continue to command record prices in 2014, while Benedict said he believes prices will level off. The challenges cited ranged from an unexpected external event would disrupt the market to rising interest rates to the change in the mayoral administration.