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EisnerAmper Blog

Building Success: An EisnerAmper Real Estate Blog

Market Forecast Highlights Changing Retail Trends, Explosion of Commercial and Residential Development in Manhattan

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November 14, 2015

By Greg Kubikowski, CPA

Kubikowski_GregAt the recent EisnerAmper Real Estate Private Equity Summit , the first panel of the day gave attendees an updated forecast for private equity real estate funds. Panelists shared some of the trends that are re-shaping the market:

  • A tremendous wave of capital is flowing into New York, which fits with its status as a premier market. Everyone wants to live in Manhattan or London, so residential development is becoming vogue.  The high-end condo market, for example, is very hot in New York and specifically in Manhattan. 
  • Commercial development continues to explode, especially from Hudson Yards to Lower Manhattan. The panel cautioned though that on the retail side, people are grossly underestimating the impact of e-commerce. E-commerce is disrupting the traditional distribution model, meaning that there will be fewer and fewer bricks-and-mortar operations needed. With the demographic shift, and younger generations’ embrace of all things technological, traditional retail will be decimated.


The trends seen in New York are being seen across the country, so the message applies beyond the five boroughs. One thing is more certain than ever in every market: It will be even more critical for developers and businesses to be able to anticipate and quickly respond to these shifting needs in the future.

Top Trends in the Manhattan Multifamily Market

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November 7, 2014

By Michael Benison, CPA, MST

We caught up with Peter Von Der Ahe, Senior VP of Investments at Marcus & Millichap, to get his insights on the market. Peter specializes in the Manhattan multifamily niche, and sees a number of trends changing the marketplace:

  • 2013 was a big year for transactions, with a lot of capital invested in the marketplace. 2014 will be one of the biggest years in terms of volume, as we have seen an increase in raised funds from a greater variety of sources. “Activity creates more activity,” as they say, and more money will continue to be raised. 
  • There are diverse sources of funding available from foreign investors, families and institutions from around the globe. It’s important to note that foreign investors have different objectives than domestic investors. Domestic investors desire capital return, while foreign investors may have additional investment objectives.
  • The multifamily market is the ideal sector to be working in because it has had consistent performance over the last few years. If the economy starts to decline, more investments will aggregate towards multifamily units.
  • There hasn’t been a dramatic increase in prices in comparison to the 2012 and 2013 levels. Interest rates are at all-time lows and prices are on the high side. Since there isn’t nearly enough supply of multifamily units in Manhattan, demand isn’t waning at all. 
  • Now is a great time to make moves in the market. For investors who are not selling or refinancing, now is a perfect opportunity to make a lateral move by trading to a better location or higher quality asset. Prices might be high, but there are significant investment opportunities.
  • 1031 Exchanges are very popular in the marketplace, as many new deals are being structured as 1031 transactions. However, there is the possibility that 1031 legislation will be removed at the end of the year. If this occurs, there will be a decreased number of asset sales as the deals become more expensive.

Somewhere Out There: Driving Deal Flow in a Picked-Over World

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October 31, 2014

 

By Michael Benison, CPA, MST

At the recent EisnerAmper Real Estate Private Equity Summit.  a panel session focused on deal flow included a discussion of trends in the Manhattan market. Some of the panelists suggested looking for off-market deals. The sheer volume of deals in the market might make it harder to attract funding from institutional investors. After all, institutions usually want to see deals of at least $50 million and a proven record of past performance. Other sources of investment include foreign investors, as many are looking to invest in the NY markets.  Another common approach to gain capital is joint ventures with equity partners. Asset management fees, production fees, and promotion fees are starting to decrease. More deals are also being done with a “pari passu” structure, where all parties involved have equal rights with existing shares.  The key to success is finding creative ways to stay in the marketplace.

One of the largest growing industries in New York City is the construction industry. The volume development of high rise luxury apartments and office towers will change the future Manhattan landscape.  That activity is creating a “big deal” environment with limited competition for debt and equity investors. With an abundant amount of lenders in the marketplace, there are opportunities to get funding at a large discount on replacement cost.  Prices on the value of these deals are high, but lending has increased significantly. Panelists also shared that core deals typically are borrowed at 50% or under, whereas value-add and mezzanine deals could be as high as 90% leveraged. While creating deals may require a little more creativity in the marketplace, there are still opportunities to be found.  

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