Invictus Property Advisors

Invictus Property Advisors is pleased to announce the sale of a mixed-use elevator building in Gramercy for $5,300,000. Newly developed in 2016, the property is exempt from Good Cause Eviction (GCE) and offers immediate upside with no tax abatement and under-market free-market rents. The in-place retail is occupied by a publicly traded medical laboratory tenant with a $15.60 billion market cap, leased for another five years.

Our marketing efforts resulted in nineteen written offers within four weeks and twelve property tours. The property sold above asking price, with metrics of $817 per sq. ft., $757k per unit, a 12x GRM, and a 4.8% cap rate. We are projecting a stabilized cap rate of 7% in years 2-3.

Our team represented a family that owned the property since 1997. This is the first sale of four properties we are handling in Manhattan for ownership. While certain legislative headwinds are concerning to investors of multifamily and mixed-use properties, assets in prime locations with a true value-add narrative remain competitive.

Contact us for the full offering memorandum on this deal or to hear more about our available inventory.

At Invictus Property Advisors, we've been collaborating with various industry experts to stay ahead of the curve regarding New York's Good Cause Eviction Law.

We understand the impact of legislative changes on your investments and are here to help navigate these changes. Please find our updated Key Highlights and FAQs attached.

Here’s what’s new in our latest guide:

Exemptions Explained: Post-2009 Constructions: Understand how the certificate of occupancy (CO) and temporary certificate of occupancy (TCO) exemptions apply to buildings constructed after 2009.

Annual Rent Resets: Stay updated as we await DHCR's guidance on the issuance of CPI numbers, which will dictate the annual rent increase caps.

Contesting Rent Increases: Learn how to leverage comparisons with similar rental units to justify increases above the Good Cause Eviction (GCE) law limits.

Concessions and Net Effective Rents: Clarification on how concessions are treated and the best practices for applying "net effective rents."

Penalties for Overcharging: Understand the financial repercussions and legal implications of exceeding regulated rent increases.

Definition of Ownership: A detailed explanation on how owning more than 10 units affects your obligations under the GCE law.

For further inquiries and to receive the full report, reach out to us at [email protected] or call (212) 596-7574.

Attention: NYC Property Owners & Investors

April 2024 marks a significant shift in New York City's real estate landscape due to the enactment of the Good Cause Eviction Law. This legislation introduces pivotal changes in property management and investment strategies that impact multifamily and mixed-use properties.

Please proceed to review the comprehensive analysis of the new law's initial implications, comprehend the limitations on rent increases, exemptions, and strategic insights to mitigate impacts. We have essential takeaways and advice tailored for you.

For further details or specific queries, please do not hesitate to contact our team.

A few highlights and points to be familiar with:

1. There will be a cap on the amount you can increase the rent on your free market tenants. That amount is the lesser of: (i) 10% and (ii) 5% plus the rate of inflation. If, for example, you have a free market tenant paying $2,000, you will only be able to increase that amount by approximately 7.5%-10%, or to no more than $2,200.

2. If you own 10 units or fewer, you are exempt from this cap on rent increases and can charge your free market tenants whatever the market will bear.

3. There is also an exemption for luxury apartments and you can increase by whatever the market will bear. These rental amounts are: $5,846 for a studio, $6,005 (one bedroom), $6,742 (two bedroom) and $8,413 (three bedroom).

4. Any newly constructed building (built in 2009 or later) with free market tenants is exempt from the cap on rent increases for a period of thirty (30) years.

FAQS

When does the new law regarding good cause eviction take effect?

Immediately, you are bound by the new law and the cap on rental increases assuming you do not benefit from one of the exemptions described above.

One of my free market tenants has been in the building for twelve (12) years and I have been providing her a discounted rent—can I now increase that rent to market?

No, you are subject to the allowed increases under the new rules assuming that tenant is still in place. Upon vacancy of that unit, you can increase that rent to whatever the market will bear for the new incoming tenant.

I own 19 apartments across three buildings, each in a separate LLC, and I have two partners who are also members of the LLCs—we each have a 1/3 interest in the properties. Do I fall under the exemption of 10 units or fewer?

It isn’t clear yet how the law will define ownership and whether they will take into account shared ownership structures in defining units owned. We believe the law will be interpreted in a way that is unfavorable to owners and in this case, we believe each of the three members of the LLCs will be deemed to own more than 10 units and subject to the rental caps under good cause eviction.

How will the new good cause eviction impact the value of my properties?

We are awaiting city/state officials to advise whether additional filings and paperwork will be required similar to DHCR filings for rent stabilized properties. There may also be mandatory filings regarding total units owned. Any additional paperwork and filings would increase the costs associated with owning and operating in NYC. In addition, a cap on free market rents a.k.a. universal rent control is likely to be underwritten by investors and banks less favorably and you can expect a greater discount and higher cap rates used in the underwriting. Properties with free market tenants that have not maximized those rents over the years and become stuck with entrenched tenants that are below market are likely to suffer the most in terms of value.

Can I do anything now to minimize the impact of the law?

First, we suggest determining whether you fall into any of the exemptions and are in a position to ignore the new good cause eviction rules. If you are subject to the rules, consider reviewing all of the rents for your free market tenants and determine whether they are below market and, if so, by how much? Given that you can reset the rent upon tenant turnover, determine whether any of the current tenants wish to leave voluntarily and whether others are substantially below market and warrant a buyout if you are in a position to do so. Of course, like a rent stabilized tenant, there is no tenant obligation to accept a buyout and this path forward is far from a sure thing.

Questions? Contact our team at (212) 596-7574.

We are pleased to announce the recent sale of two contiguous multifamily buildings located on East 105th Street in East Harlem. The properties were sold for $4.8 million. The transaction metrics included $391 per square foot, $300,000 per unit, a cap rate of 7.1%, and a gross rent multiplier of 11x. The sale included a seller-financed portion through a promissory note. The properties feature fourteen free market units and two rent-stabilized units.

In the current market, maintaining transparent and compliant documentation is crucial, especially concerning the deregulation of units following the Housing Stability and Tenant Protection Act of 2019. Our team is dedicated to conducting detailed reviews of Department of Housing and Community Renewal (DHCR) records, leases, and individual apartment improvements (IAIs) and major capital improvements (MCIs) to ensure that rents are reconciled accurately before we initiate marketing. This meticulous preparation facilitates a smooth transaction process for all involved parties.

For more updates on market insights and successful transactions, stay connected with Invictus Property Advisors.

In the closing weeks of 2023, Invictus Property Advisors closed two off-market transactions, amidst a broader market downturn. The sales totaled $3.4 million. The first was a mixed-use building in East Williamsburg, Brooklyn with occupied rent stabilized units and vacant retail spaces. The second was a contract assignment delivered vacant in Ridgewood, Queens offering a substantial rehabilitation opportunity.

Both investments are impacted by a shifting legislative environment, influenced by the Governor’s signing of S298OC in late December. Specifically, the bill establishes a methodology for calculating legal regulated rent when combining two or more vacant apartments and revises the process for claiming exemption from rent stabilization due to substantial rehabilitation, requiring approval from DHCR. These amendments aim to fill gaps left by the HSTPA of 2019, enhancing laws that protect tenants.

Only time will tell what the market’s response will be to Albany's rent law amendments. Invictus Property Advisors remains on the pulse of changing legislation and forthcoming case law. Reach out to us to understand how these developments might influence your asset's value and marketability.

Good Cause Eviction May Be Coming to a Neighborhood Near You

On January 3, New York legislators open up the 2024 session and there is a lot at stake. There is a pending showdown between developers, landlords and real estate investors on the one side and tenant advocacy groups on the other. If Governor Hochul wants a deal allowing for multifamily development to resume, she may have to concede the passage of “good cause” eviction at the state level as a quid pro quo for the developer-friendly 421a tax incentive. Such a deal would be a Pyrrhic victory with tremendous cost to the greater housing sector in New York City?

Read more here about the proposed “good cause” eviction legislation a.k.a., universal rent control in NY.

The Dilemma Albany Faces: Quid Pro Quo-Good Cause Eviction for 421a - Lipton's Tea If Governor Hochul wants a deal allowing for multifamily development to resume, she may have to concede the passage of “good cause” eviction.

NYC Investors: The Case For Buying Rent Stabilized Multi-Family Properties

We know, we know…buying multi-family properties comprised of mostly rent stabilized units with nominal rental upside and increasing expenses in an elevated interest rate environment can’t possibly make any sense. However, we think it is time investors revisit the asset class and there are several reasons why. A steady and predictable income at historically favorable cap rates with future cap rate compression on the horizon with declining interest rates and potential landlord-friendly amendments to the 2019 HSTPA law are a few reasons.

The Case for Buying Rent-Stabilized Multi-Family Properties - Lipton's Tea Should you buy a rent-stabilized multi-family property in NYC?

Invictus Property Advisors is pleased to announce the successful transaction of a vacant, six-unit, multifamily building on Jefferson Avenue in Bushwick, Brooklyn. The property was sold for $2.2 million (or $415 per square foot), and due to the extended width of the asset (i.e. 28’) with air shafts in the middle, the buyer is planning to undertake a substantial rehabilitation to convert the apartments into large three (3) and four (4) bedroom apartments.

With recent legal changes in substantial rehabilitation, including stricter system replacement requirements and the elimination of the 80% vacancy presumption, this transaction is at the forefront of a shifting investment landscape. These updates signal new opportunities and challenges in property development and investment strategies in New York City.

Stay connected for more market insights and successful closings from Invictus Property Advisors.

Warning! If You Own Commercial Real Estate, Wall Street is Coming for You

Wall Street isn’t always right, but when a trend emerges on the street, it pays to take notice. And the latest trend should send chills down your back if you own commercial real estate in the United States. Firms such as Cohen & Steers, Goldman Sachs, and EQT Exeter, among others, are raising billions of dollars to target distressed assets and those slumping in value. The volume of distressed commercial real estate grew by $8 billion in the second quarter, according to data provider MSCI Real Assets. Commercial property values have fallen by 10%-15% from their peak in the third quarter of 2022 and are expected to drop another 10%, according to Rich Hill, head of real-estate strategy for Cohen & Steers. And it isn’t just the well-documented office market suffering steep declines: multi-family and mall operators have seen their properties decline in value and are now more vulnerable than ever as they face refinancing at much higher rates.

Warning! If You Own Commercial Real Estate, Wall Street is Coming for You - Lipton's Tea Wall Street isn’t always right, but when a trend emerges on the street, it pays to take notice. And the latest trend should send chills down your back if you…

Invictus Property Advisors is pleased to announce the closing of the “Blue Flame” buildings adjacent to the Columbia University Expansion Project at 523-525 West 125th Street in Manhattanville. The two (2) three-story buildings were owned by the same partnership for over 50 years. Invictus was retained on an exclusive basis to market the property, which was delivered vacant and required a full gut renovation. In total, the buildings offered 13,605 square feet above grade and 19,436 buildable square feet with approximately 50’ of frontage on West 125th Street between Amsterdam Avenue and Old Broadway.

The properties fell into a certified opportunity zone in an R7A / C2-4 zoning district in the 125th Street special purpose district. The assets appealed to a wide array of buyers: end-users, value-add investors, as well as student housing, rental, and condo developers. We determined early in the valuation process that converting the asset to residential would not be the highest and best use because the buildings were built-full to the lot-line. As a result, we focused our efforts on finding a non-profit or end-user who have, in the past, paid premiums for comparable assets. We enjoyed working through the challenges of this marketing assignment which included 421A expiring prior to contract ex*****on and interest rates doubling during an extended close period requested by sellers for tax optimization reasons.

The purchaser will surely benefit from the proximity of the buildings to the 6.8 million square foot expansion project which is on track to be fully completed by 2026. The campus is expected to attract of 4,000 students, faculty and staff each day and the area has already seen a significant increase in foot traffic and appreciation of surrounding properties in the immediate area.

Local Law 97 Adds to Already Burdened Landlords in NYC

For those unfamiliar, Local Law 97 requires buildings larger than 25,000 square feet to meet emissions (with stricter limits in 2030). Failure to comply means a $268 fine for every metric ton of CO2 emitted, a jaw-dropping amount when considering all eligible buildings.

Local Law 97 Adds to Already Burdened Landlords in NYC - Lipton's Tea Local Law 97 could end up being the tipping point that pushes owners over the edge.

Are We on the Brink of a Major Recession?

If you’ve been following the news, you could be forgiven for having no idea if the US economy is on the brink of a recession, in the midst of one, or humming along nicely. Perhaps we should start with a widely accepted definition of a recession but the trouble is that too is easier said than done.

The common definition of a recession is two consecutive quarters of negative growth in gross domestic product (GDP) but it’s flawed as it’s backward-looking as opposed to predictive. It would be like placing your bets on Sunday’s football game the following Monday morning. Turns out that the formal arbiter of calling a recession is the National Bureau of Economic Research (NBER) and they use ambiguous language such as a “significant decline” in economic activity taking into account employment, GDP and consumer spending figures in order to make the call.

But this too isn’t terribly helpful, and the two definitions can conflict creating confusion and keeping everyone befuddled.

Several somewhat quirky indicators reveal the answer…

US Economy: Predicting Recession with Key Indicators Learn the essential indicators that could forecast a US economic recession, from the inverted yield curve to the fascinating Champagne Index. Stay informed and make cautious investment decisions.

Invictus Property Advisors is pleased to announce the closing of a vacant conversion and development opportunity in Crown Heights. The asset is a vacant four-story brownstone and was sold with DOB approved plans to expand the building horizontally and extend it in the rear. The project was partially stalled, which required our team to provide purchasers with a comprehensive due diligence overview of the work that was completed to date.

The extra-wide lot of 30’ and length of 107’ appealed to a wide array of developers. In addition, the certificate of occupancy classified the property as four (4) units ensuring investors that the rent regulation rules did not apply. The transaction closed at a sales price of $2.475MM, equating to $687 per square foot or $349 per buildable square foot.

The acquisition entity that purchased the asset plans on maximizing the bedroom count to obtain a premium rent per net square foot. The group that completed this transaction recognized the value in the efficient layouts, and plans to transform the property into a vibrant, shared living space.

Time for NYC’s Real Estate Industry to Take Back the Narrative

Like an elite Navy Seal team toiling under the cover of darkness, members of the NY State Assembly reconvened on Tuesday, June 20, 2023, to wrap up some unfinished business. That unfinished business included passing several real estate-related matters that will impact owners and tenants alike albeit the impact will be immediate for the former and delayed for the latter.

One of the bills addresses legal rents for so-called “Frankenstein” apartments that involve either the merging or sub-dividing of rent-stabilized apartments. Rather than charging a “first rent,” owners must keep rents for any newly formed apartment(s) at the same aggregate amount previously being charged. Other bills passed are designed to further restrict landlords (i.e., impediments on de-regulating apartments through “substantial rehabilitation,” more cumbersome rules involving record retention/rent registration, and imposing a more punitive definition of fraud on property owners). All that’s left is for Governor Hochul to sign these into law and, if she does, no doubt lawsuits contesting these new laws will follow but the damage will be done. Though lawmakers say they are merely seeking to clarify the 2019 rent law and its application going forward, the policies seem vindictive and ultimately self-defeating, making the much-needed increase in affordable housing for millions of New Yorkers a pipedream. Expect the 60,000 rent-stabilized apartments currently being warehoused by owners to grow substantially. With onerous DHCR look-back periods and retention record requirements, tenants have been armed for battle and incentivized to question their current rents (even those they have been paying for years). Tenant-initiated lawsuits for fraud and overcharges will rise, arrears will climb, and deferred maintenance and much-needed building capex will be shelved. Chaos will ensue but at least Albany will have its Pyrrhic victory.

We can blame those lawmakers in Albany pushing this through (and we should as it is short-sighted and bad policy) but like an erratic kite with no direction, legislators seem to move in whatever direction the current political winds take them. We know that and, so, to some extent, NYC’s real estate industry shares in some of the blame for these newly passed bills. The industry’s stakeholders have lost control of the narrative and failed to convince average New Yorkers of their importance and the value proposition they bring to the table. The focus should be on winning the hearts and minds of ordinary New Yorkers. Take back the narrative.

https://joshlipton.com/ny-state-assembly-real-estate-bills-implications-challenges/

NY State Assembly's Real Estate Bills: Implications and Challenges The significant real estate bills passed by NY State Assembly, addressing rent stabilization, landlord restrictions, and affordable housing.

Every now and again someone comes along who changes the status quo and has a grand old time doing it. Someone liberated from societal constructs who truly doesn’t give a $h!t about what is thought or said of them. Or, as Steve Jobs once described in 1997, “the crazy ones, the misfits, the rebels, the troublemakers…the ones who see things differently…[and who are] not fond of rules…crazy enough to think they can change the world” and sometimes do.

From all accounts in this terrific article in The Real Deal by Hiten Satami, Sam Zell was one such man.

Read our take on our blog here: www.joshlipton.com



📖📚

Invictus Property Advisors is honored to welcome our summer interns, each representing excellence from their respective academic institutions. Joining us are:

Michael Daniel Canosa, College of Charleston

Joseph Canosa, University of Miami

Justin Hertz, Indiana University

Joseph Curtis Juengerkes, Princeton University

Wade Korbel, University of Oregon

James Wheaton O'Hagan, Trinity College

Each individual brings unique insights and expertise to our firm. We look forward to their contributions and the shared journey of professional growth in the forthcoming months.

Invictus Property Advisors ("Invictus") closes a development site in Cypress Hills, East New York for $3,450,000 (or $95 per BSF). The 100’ x 100’, corner site was delivered with 421A and MTA approvals and DOB approved plans for a thirty-nine (39) unit mixed-use building with four (4) ground floor retail units and thirty-five (35) residential apartments. The total buildable square footage was 36,000 BSF, of which 5,825 was designated for mandatory inclusionary housing (MIH). Invictus handled the sale off-market and targeted developers who were seeking out 421A approved sites that had footing in the ground prior to the June 2022 deadline.

Since the expiration of 421A and lack of clarity around any plan to renew the tax abatement, our team has witnessed first-hand the immediate drop-off in demand for land in rental locations. As policy makers in Albany continue to weigh the cost and benefits of renewing the program, the supply of new rental housing has decreased dramatically, driving up free market rents throughout the city. The housing crisis in NYC is further exacerbated by an estimated 40,000-80,000 rent stabilized rental apartments remaining dormant (i.e., vacant) due to the lack of incentives in place to rent units with low legal rents as a result of the law changes (i.e. HSTPA-2019). Due to these factors, we are witnessing developers of new rental product and owners of free market units underwriting higher exits and lower cap rates on unencumbered income streams.

Invictus Property Advisors and Stav complete $3.75 million sale of 48 Somers St. - Read More here: https://nyrej.com/invictus-and-stav-complete-3-75-million-sale-of-48-somers-st

Unlocking Doors: A Good Name But a Plan that Falls Short

The first step in fixing any issue is recognizing that there is a problem in the first place. According to an internal state housing agency memo, New York City has the makings of an affordable housing crisis with more than 61,000 vacant rent-stabilized apartments in 2021 (probably much higher now). Mayor Eric Adams seems to have a plan; it isn’t a good one and the approach is the equivalent of putting a band-aid on a gaping wound, but it’s a plan bound to fail nonetheless. It is called Unlocking Doors—a $10 million program that provides $25,000 for repairs of 400 rent-stabilized apartments (less than 1% of the currently vacant rent-stabilized units) to house those experiencing, or on the brink of, homelessness.

To an outsider, this may seem like a good start for a pilot program, so what’s the problem? There are a few.



Read the full post here...

Unlocking Doors: A Good Name But a Plan that Falls Short Lipton's Tea The first step in fixing any issue is recognizing that there is a problem in the first place. According to an internal state housing agency memo, New York City has the makings of an affordable housing crisis with more than 61,000 vacant rent-stabilized apartments in 2021 (probably much....

Invictus Property Advisors announces the recent sale of a block-through development site on Somers and Fulton Streets in the Bedford Stuyvesant neighborhood of Brooklyn. The property, located within an Opportunity Zone and eligible for the 421A Tax Abatement (421A), attracted a significant amount of interest from developers looking to build rental product and comply with 421A by completing construction by June 15, 2026.

The site had DOB approved plans for 38,259 buildable square feet (BSF) and included a balanced mix of 27,692 SF for residential use, 4,872 SF for commercial use, and 5,696 SF for community facility space. This diverse blend of uses required a multifaceted marketing approach targeting developers that have previously built a wide array of uses, including non-profit and facility developers. The project was partially completed and had 50% of the foundation and 90% of the underpinning work in the ground and, as a result, our team was tasked with conveying this value proposition to active bidders. By having an organized due diligence package prior to going to market and providing the necessary documentation, the purchaser is able to continue and complete the project seamlessly. The sale resulted in a favorable deal for both the buyer and the seller at $98 per BSF on the approved plans or $143 per BSF on the ZFA.

We are actively trading land throughout NYC and are happy to share our thoughts on the current market. Reach out to learn more.

New York’s Lack of Affordable Housing is Serious But….Good Cause Eviction Isn’t The Answer

Call it good cause eviction or universal rent control, but the truth is a wretched legislative proposal by any name reeks just the same. A sincere and candid economist (preferably with one hand as President Truman liked them) will tell you that rent control is not a sound way to increase the amount of affordable housing as price ceilings create supply/demand disequilibrium. Sound economic theory be damned, however: the “give-them-what-they-want-and-then-some” Bernie Sanders has called for the need for “national rent control” while Alexandria Ocasio-Cortez—never one to be outdone—demanded “it’s time that we stop commodifying the housing market.”

Local judges, fortunately, are obligated to adhere to the rule of law and have ignored the politics on this issue. In cities in Upstate NY, judges are shooting down local measures aimed at limiting a landlord’s ability to increase free market rents on the rationale that cities simply don’t “have the power to draw a circle around [themselves]” and declare that “state laws won’t apply” to them. That’s sound legal reasoning for sure (as good cause eviction is not the law in NY). Sadly, however, the median household income in many of these cities is below $50,000 while free market rents have increased at a torrid pace (>50% at times) leaving many residents floundering on the brink of homelessness.

Rent control is in vogue because America’s housing market is increasingly unaffordable with real housing prices having doubled in NYC since 1970. Nationwide, 25% of renters spend over half their income on housing. Skyrocketing prices are the result of a demand-supply disequilibrium: housing demand across the US is outstripping supply by 370,000 units a year. Rent control is often presented as a solution to greedy landlords taking advantage of pinched renters—it takes aim at the landlord’s profits by limiting rents at below-market levels.

The problem of course is complicated and the fix isn’t simple. There has been a chronic lack of supply throughout the state but most notably in NYC. The issue is further exacerbated by the fact that nearly one third of all units are rent stabilized putting significant pricing pressure on the remaining available market rate units. Furthermore, the population has increased by 800,000 people over the past decade but only 200,000 new places have been created for them to live. This isn’t a baffling Millenium Problem on the scale of the Poincare Conjecture, the math here is easy: New York hasn’t built nearly enough. Housing cannot become more affordable without becoming more available…meaning we need more of it. And wishing or wanting developers to build without the right economic incentives is as ludicrous as expecting to run a sub 4-minute mile with a daily diet of Double Trouble Bacon Bites and a training regimen that involves streaming endless hours of Succession.

Good-Cause Eviction Keeps Dying in Court Cities across New York tried to put a bandage on their housing crises. Then came the lawsuits.