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How Low Can It Go? Finding Value In New York City Apartment Building Sales

February 6, 2024

By Shimon Shkury, Ariel Property Advisors

How Low Can It Go? Finding Value In New York City Apartment Building Sales

Originally Published in Forbes | February 6, 2024 | By Shimon Shkury at Ariel Property Advisors

Headshot of Shimon Shkury, founder of Ariel Property Advisors`

Higher interest rates, regulations and bank closures contributed to a 52% drop in New York City apartment building sales to $7.4 billion in 2023 compared to 2022, according to Ariel Property Advisors’ Multifamily Year in Review New York City.


The dollar volume of multifamily sales fell 52% from 2022 to 2023.

Last year, New York City only saw nine multifamily transactions above $100 million, the lowest number in the past decade, excluding the anomaly of 2020. Of the nine $100 million plus deals, three were for free market buildings and six for affordable housing.

Total New York City Multifamily Sales 2010 to 2023

In 2023, New York City saw the lowest multifamily dollar volume in over 10 years, except for 2020 during the Covid-19 pandemic.

Rent Stabilized Market: Higher Cost of Capital + Regulations = Discounted Transactions

In the multifamily pie, rent stabilized apartment buildings accounted for 18% of the total, which is half of the percentage share sold in the years before 2019.

What happened? The Housing Stability and Tenant Protection Act (HSTPA) of 2019 eliminated an owner’s ability to increase rents to keep up with rising operating costs and capital expenses, even after long-term tenants move out. Without an incentive to invest in buildings, these assets are falling into disrepair and thousands of units are remaining vacant.

Regulations combined with the higher cost of capital resulted in a decline in values for rent-stabilized assets in 2023, which saw prices drop from their peak in 2018 in all submarkets except for Manhattan below 96th Street, which saw peak pricing in 2016.

Rent Stabilized Values in 2023 Dropped Citywide From Peak Pricing*

* Peak Pricing for RS in Manhattan below 96th Street 2016; other submarkets 2018.

Buyers for rent-stabilized housing are private family offices with a long-term investment horizon. They are finding value in the much lower basis for these assets and in their belief that regulations have to change at some point. One step in the right direction is state legislation approved in 2022, allowing some larger rent-stabilized multifamily assets to be converted into affordable housing. However, the pace is slow for this initiative as each plan requires City agency approval.

Free Market Apartment Buildings: Sought After Asset in Supply-Constrained Market

Predominantly free market properties accounted for 48% of the multifamily dollar volume, illustrating how in a supply constrained market, unregulated buildings serve as a great inflation hedge and are sought after by every investor type—institutions, private capital and international investors.

However, high interest rates also damaged values in this sector. As a result, many owners who considered selling took a wait and see approach in 2023, with the exception of three types of discretionary sellers:

  • Family owned business/estates that needed liquidity
  • Developers who had better use for their equity in other parts of their business
  • Maturing funds or expiring 421A benefits or both

Valuations in free market multifamily were mixed as we can see in the chart below.

Free Market Values in 2023 Compared to Peak Pricing

Values of free market multifamily buildings sold in 2023 stayed stable in Brooklyn, the Bronx and Queens.

Clients are telling us that 2024 will most likely be more transactional as sellers and buyers of free market buildings might finally be willing to transact when mortgage rates fall.

Mission-Driven Equity Boosts Affordable Housing

The affordable housing subsegment did well in 2023 accounting for 35% of the multifamily pie. Major contributors to the strength in affordable housing transactions include New York City’s interest in preserving existing affordable housing and the availability of mission-driven equity interested in investing in this sector.

Victor Sozio, Founding Partner for Ariel Property Advisors, observed that affordable housing’s dominance last year was driven by prominent transactions including Nuveen’s nearly $1 billion partial purchase of the OMNI portfolio including 72 properties (tax lots) spread across 5,900 units, and Vistria’s $174 million investment in a portfolio with 1,290 units across five rent stabilized buildings. Two other significant affordable deals, both arranged by Ariel Property Advisors, included Tredway’s $150 million purchase of the Sea Park Portfolio, comprised of three former Mitchell Lama elevator buildings with a total of 818 units and a development site, and Goldman Sachs/Asland’s $45.2 million purchase of the Heighliner Portfolio comprised of five assets, 334 residential units, and several community focused retailers.

“What you're continuing to see is more buckets of capital and equity interested in the affordable segment of the market,” Sozio said on a recent Coffee & Cap Rates podcast. “Affordable assets are attractive because owners have tools to work with that enable them to create real value while also serving a social utility purpose and preserving affordable housing. The local government is willing to work with these investors and extend new tax benefits and vouchers, so we've seen the appetite and depth of interest in this product continue to grow.”

Breakdown of multifamily sales in 2023.

Signature Bank Failure Cast a Shadow on the Market

Banks were among the casualties of Fed’s rapid rate hikes as customers rushed to withdraw deposits, leading to the closure of multiple banks in the first half of 2023. Among them was Signature Bank, one of the most active multifamily lenders in New York City, which shut its doors in March.

The effect of the closure was twofold—capital stayed on the sidelines to bid on the $30+ billion in the FDIC loan pools, and multifamily buildings in New York City faced a liquidity crunch. The FDIC handled the sale of the loans and retained a substantial 95% equity interest in the entities servicing the rent-stabilized pools, a topic I examined in a previous Forbes article.

Matt Dzbanek, a Senior Director in Capital Services at Ariel, noted on the podcast how the spike in Treasury rates impacted the investment sales market last year. “We saw situations where in the 60 to 90 days it took to close a loan, rates would increase (in some cases over 75 bps over the course of underwriting), which would completely change the economics of the deal. So, while we were able to get deals done last year, now that rates are more stable, we’re a lot more optimistic moving forward.”

Financing and Capital in the New Year

For 2024, we anticipate a number of positive developments in the financial sector. The Fed has stopped increasing interest rates and signaled to the market that they will reduce rates this year. With that, we could see an increase in transaction activity and potentially an increase in capital chasing the predominantly New York City Signature loan portfolio.

Institutional capital has taken over for private lenders in New York City for specific assets, with entities like Blackstone, KKR, Apollo, Starwood, Ares, Brookfield, RXR, SL Green and others raising capital to navigate the challenging lending environment. Any retreat in lending is poised to further elevate the presence of private credit in the market.

Foreign investors surged back into New York City’s sales market in 2023. This remarkable growth is credited to rising financing costs and limited availability, prompting cash-buying foreign investors to compete effectively. The Canada Pension Plan Investment Board notably helped fund Blackstone’s $1.2 billion bid for a 20% stake in $17 billion in Signature loans for retail, market-rate multifamily, and office properties. Optimistically, 2024 looks poised for continued international investment success.

Dzbanek concurred that his team is seeing new players enter the market. “We're in discussions with the number of banks as well as private lenders who are looking to enter either the New York or the U.S. market for the first time,” Dzbanek said. “A lot of people who have fresh capital are looking to deploy it because they see opportunities. Since the beginning of the year, we've seen a real pick up activity and we're seeing a lot more transactions start to progress.”

The Role of Legislation in New York City’s Housing Shortage

New York City continues to grapple with a housing shortage due to the absence of legislation encouraging new development. According to the latest statistics from The Regional Plan Association, there is a projected deficit of 473,000 units by 2032, necessitating the production of around 60,000 units annually to address the shortfall. However, in the previous year, only around 11,000 units were constructed.

As the 2024 New York State legislative session begins this year, we are hopeful that a 421a alternative gets approved to encourage new residential development along with reforms on FAR caps and zoning regulations to facilitate office-to-residential conversions.

Until lawmakers get behind housing policies advocated by Mayor Eric Adams and Governor Kathy Hochul, demand for apartments will far outstrip the supply, which will continue to put upward pressure on rents.

The full Multifamily Year in Review New York City 2023 report is available here. Click the link below to listen to the Coffee & Cap Rates podcast Multifamily Year in Review 2023 featuring host Shimon Shkury and guests Victor Sozio and Matt Dzbanek.

More information is available from Shimon Shkury at 212.544.9500 ext.11 or e-mail

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