FOR IMMEDIATE RELEASE

NEW YORK, NY – November 19, 2014 – The dollar volume of New York City multifamily sales totaled $8.1 billion in the first three quarters of 2014, and the multifamily market could end the year with dollar volume as high as $12 billion, Shimon Shkury, president of Ariel Property Advisors, said at the 6th Annual NYC Real Estate Expo held recently at the New York Hilton.

Mr. Shkury presented a snapshot of the multifamily market and distributed Ariel Property Advisors’ Multifamily Quarter in Review: NYC Q3 2014 during the firm’s Multifamily Morning at the Expo. As part of the program, he also moderated a panel discussion with Multifamily Dealmakers — Jason Muss, President and Chief Executive Officer of Muss Development, and Daniel Wiener, Director of Investments and Commercial Operations of Chestnut Holdings of New York.

Multifamily dollar volume jumped 54 percent in the first three quarters of 2014 compared to the first three quarters of 2013, Mr. Shkury said, adding that during this same period transaction volume increased 25 percent to 578 and the total number of properties sold rose 17 percent to 924.

“The smaller increase in transaction volume compared to the larger increase in dollar volume tells us that many of the deals this year have been larger, institutional deals,” Mr. Shkury said.

Mr. Shkury noted that multifamily pricing has taken off significantly since the beginning of 2013 and that several multifamily properties throughout the city nearly doubled in value from 2012 to 2014. New development, strong rents, and an influx of capital were cited as the main drivers behind the price jump.

The average price per square foot for multifamily buildings in Manhattan increased from $500 per square foot at the beginning of 2013 to $800 per square foot today, Mr. Shkury said. During this same period, cap rates in Manhattan fell to 4 percent on average with value-add assets trading for a cap rate of below 3 percent. He noted that some multifamily buildings in Manhattan are being repositioned as high-end rentals, condo conversions, or as shares for students and young professionals.

Manhattan rents have stabilized at an average $60 per square foot and renters today are gravitating to luxury buildings in the outer boroughs. Mr. Shkury said new luxury buildings at 45-46 Pearson Street in Long Island City and 388 Bridge Street in Downtown Brooklyn are renting for $56 per square foot and $54 per square foot, respectively.

In the development market, Mr. Shkury said the dollar volume of development site sales in Manhattan increased 53 percent year-over-year to $3.2 billion. The luxury condo market is pushing up land prices in Manhattan where the price per buildable square foot for development sites rose 23 percent year-over-year to $560 and prime sites are selling for more than $1,000 per buildable square foot.

Moving forward, Mr. Shkury said positive indicators for the multifamily market include falling oil prices, local job growth and job diversification, the tight housing inventory, the city’s reputation as a safe haven for capital, and more equity in deals. He also highlighted some concerns including uncertainty over the mayor’s housing plan, rent increases for rent stabilized buildings, the sustainability of the luxury market, rents leveling off, and interest rates.

Jason Muss discussed the high rise residential project his firm is developing in the Sheepshead Bay section of Brooklyn. Muss Development will operate the condominiums on the top floors of the high rise, and AvalonBay will operate the rental apartments on the lower floors.

Mr. Muss said 95 percent of the new residential development in Brooklyn is north of Prospect Park, which means there is little competition for new product in Sheepshead Bay, a neighborhood he finds desirable because land is less costly, it’s near subway transportation, and buyers in the area need housing but may not be able to afford Downtown Brooklyn or Manhattan. Over a 12-year-period, Muss Development built 930 condominium units at Oceana in nearby Brighton Beach.

In addition to new construction, Mr. Muss said that his firm is always looking to invest in existing multifamily buildings and noted that even though cap rates on existing buildings are lower than on new construction, there is less risk and fewer challenges than with ground-up development.

Mr. Wiener said his family-owned company focuses on workforce housing. “We provide good quality, safe housing for workforce tenants,” Mr. Wiener said. He noted that Chestnut’s buildings have a vacancy rate of less than 1 percent and a turnover rate of less than 3 percent.

Chestnut Holdings began investing in the Bronx in the 1990s because the company wanted to buy buildings close to Manhattan and near public transportation, Mr. Wiener said, adding that buyers are investing in the Bronx because it offers higher yields.

Mr. Wiener said that while multifamily buildings in the Bronx present less financial risk, they have more operating risk, which means owners have to manage the buildings effectively or hire a good third party operator. Banks are eager to lend to good operators in the outer boroughs, he said, and that terms on 5-7-10 year rates have been favorable, in the 3 percent range.