In the winter of 2008, the world economy was collapsing, and real estate crashed. I thought then that it was a rare opportunity that would never present itself again during our lifetime. My plan was to relocate to the Southeast to get a better understanding of the market, which at that time I believed presented the best opportunity for real estate entrepreneurs. But life took its course. I went back to Israel and did not really jump on the bandwagon until 2012. That wasn't a bad time to invest, and I did focus on Atlanta in the Southeast. But I always felt remorse for missing out and not “nailing it” when I had the opportunity.
And then came COVID. Oscar Wilde wrote: "To Err Once is Human, To Err Twice is Careless". Opportunity knocked again and I was determined to not repeat the same mistake twice. This time was easier because I had less on my mind, and I was more established in the field. And so, without wasting any time, I moved to Manhattan. I started developing relationships with top real estate brokers and informed all my contacts that I was in town. To be frank, there were not many opportunities like in 2008. The memory of the crash was still fresh and those who experienced it knew that the wheel would keep spinning and eventually things would change. Also, unlike 2008, Government made sure that no property was going to be foreclosed on because of a loan default. However, some thought that the world had changed for good. On one hand there were, and there still are, sellers who believed that Manhattan was doomed because everyone moved elsewhere, that people would never work again in offices. On the buying side were those who thought that this was temporary, and that Manhattan would come back with a bang. Or as Manhattan’s real estate old and wise say: “Don't Bet Against New York City”.
Apocalyptic! That is a good description of New York City at that time. The streets were empty, it was freezing cold, and snow was piling up. You could walk for blocks and not see an open coffee shop. And if one was open, you could not sit in it. Just get your coffee and get out. Not to mention the cold and dark nights after sunset in a city that was notorious for nightlife. Like in The Prohibition there were few speakeasys. But you had to be connected and fatalistic to walk in. The city was gloomy, cold, boarded up and empty.
I say that those who spent the winter of 2020 in NYC deserve a war medal for fighting in the trenches... I have many NYC "war stories" which I will always remember, but the bottom line was that the effort was worthwhile, and I think that I did not make the same mistake twice. The number of transactions and the scope was by far the best I have ever had and since for me real estate is both my profession and passion, I enjoyed every minute of muddling in NYC trenches. Below are some of the deals that we closed during that time.
40 Broad was positioned well to acquire properties in Manhattan. We had funds on call and had less competition in New York. Foreigners were banned from entering the US, many locals left the city, and many buildings were half empty. Eviction moratorium was in place and many tenants stopped paying rent. So, there were less buyers and more stressed properties.
GREI was also busy in GA. We sold one property and bought another in Buckhead, which by coincidence many consider as "The Manhattan of Atlanta".
100 west 93rd St.
We bought 111 units in this 280-unit Condominium. A total of almost 100,000 sf. The plan is to upgrade and gradually sell Rent Stabilized units that can legally be deregulated (421A).
2647-2649 Broadway
This is a beautiful almost empty typical West Side building on Broadway between West 100th & 101st. It consists of 27 residential units with a large ground level retail space. Seven units are Rent Stabilized, the rest are Free Market. We're in contract with a plan to upgrade, rent and hold.
409-413 East 84th St.
A two-building complex with 48 units in the neighborhood of Yorkville. About half are Free Market and most Rent Stabilized units are roughly at market rents. The plan is to upgrade, rent and hold.
162- 164 East 82nd St.
We bought the note for a two-building complex with 37 units in the heart of the Upper East Side. The property has convenient access to local amenities, top tier schools, and three subway stations. 32 of the units have been renovated by the previous owner in addition to the common areas.
French Quarter, Buckhead
A 23-unit building. The previous landlord upgraded the interior, and most units are high standard and furnished. When pandemic hit the building became completely vacant and stayed this way for more than a year. The plan is to upgrade the exterior and occupy the units quickly with corporate tenants that are now returning to the Buckhead office area.
I think that many types of real estate investments present an opportunity these days. Hospitality is coming back. High demand for resorts and hotels is evident even though international travel is still low. Senior Living is coming back with adjustments as the population keeps getting older. Student Housing is coming back as Universities and Colleges open doors again. The Biden Administration’s plans for free pre-K and community college education didn’t go unnoticed by investment firms and REITs. Offices will come back soon too. Give it time. I am not so sure about Retail which was in a bad state even before the Pandemic. The vague future of Retail is matched by the rise in logistics real estate. E-commerce has changed this segment drastically.
As for NYC, I personally see an opportunity in Condo Conversions. The New York market is predominantly a Multifamily rental market burden with limitations, and it is a regulatory nightmare. NYC tenant protectionists made it difficult to convert Multifamily properties into Condos after June 2019. As always, populistic legislation begins with a good cause and ends as the worst regulation. As a result, the number of Condo Conversions in NYC dropped to all time low and mostly hurt tenants.
During the Pandemic, many tenants left their apartments. This left many buildings vacant for the first time in many years. Converting these buildings into condos would allow landlords to sell or rehab these properties and inject new blood into poor and crumbling prewar Walkups with outdated infrastructure. These have no place in a modern city. Opportunistic Politicians may fight it for the wrong reasons. Yet, a city that cares for the welfare of tenants would encourage such trend and help entrepreneurs with incentives to modernize the city and add more apartments. This may be a unique opportunity for the city to update the urban infrastructure and local dwellings. For those who are interested in reading further, please click on the below link that will refer you to a relevant recent study by The Steven L. Newman Real Estate Institute at Baruch College, City University of New York, my alma mater, who were kind enough to allow me to use graphs from their research.
Source: The data was provided by the NY Attorney General Office, and the graphics were created by the Steven L. Newman Real Estate Institute at Baruch College.
Wishing you all a cool summer!
This publication is personal and not for general circulation. It does not form part of any offer or recommendation. It does not take into consideration investment objectives, financial situation or needs of any specific person. Prior to committing to an investment, please seek advice from a licensed professional regarding the suitability of the product for you and read the relevant product offer documents, including the risk disclosures, If you do not wish to seek financial advice, please consider carefully whether the product is suitable for you.
Comentarios