Multi-Housing News featured an article by Chris Mavros, managing director, principal & CFO. Below is an excerpt:
For the past few years, investors with a position in New York City multifamily properties have been on a roll, thanks to the dwindling number of units that were still subject to onerous rent control regulations. But their joy was dashed this summer when controversial new laws instituted rent control on a permanent basis. The new rules also gave cities throughout New York State the ability to opt into rent stabilization programs.
The caps, which affect about 1 million apartments in New York City alone, spurred landlords to file a federal suit that argues rent stabilization laws “effect a physical taking of property in violation of the Constitution’s Takings Clause,” a violation of the Constitution’s Fifth Amendment.
TAKE A DEEPER LOOK
This illustrates the need for multifamily investors to go beyond the basics—like the condition of a property and its current rent rolls—and put themselves in the shoes of a lender when they look at an opportunity. Multifamily investors should also think about the political climate, and other issues that may not always appear on a standard checklist. A borrower wants to show projections that predict a steady cash flow, but curveballs like this can disrupt their plans.
Geography is another important issue. Consider two Florida cities: Miami and Fort Myers. There’s a lot of multifamily housing in both, but Miami is a mature market, while Fort Myers is one of the state’s fastest-growing cities. Investing in Fort Myers could offer bigger returns, since the demand for multifamily is still on a steep growth curve, but will it flame out? In contrast, a mature, congested city like Miami offers a long track record and will likely continue to exhibit growing demand, even if it’s at a constrained pace. But the returns are likely to be lower than what Fort Myers offers.
Another choice is whether to invest in a luxury building or a “workforce” one. A luxury development will probably command higher rents, and perhaps steeper increases. But if you’re in an area that already has stiff rent control guidelines, it may be safer to invest in workforce properties since tenants are likely to stay put, even if there’s a recession. Click here to read more.
A northern N.J.-based commercial real estate investment firm, Case concentrates on transactions in the $2.5 million to $50 million range for transitional properties in the New York metro area and south Florida, as well as the Northeast and Mid-Atlantic regions. Case is active as a high-yield private lender; a financier of transitional properties; a purchaser of performing, sub- and non-performing debt; and a mezzanine and equity investor. Funds can be deployed as real estate debt purchases, bridge and acquisition loans or rescue and restructure capital. Case is one of the leading bridge lenders in New Jersey, New York and Florida.