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January 28, 2014
Why Aren't You Using the Jobs Act?
If you still think the Jobs Act is Steve Jobs' memoir, you may be missing out on cold, hard cash. The government has made general solicitation easier by allowing funds to advertise for investors, so here are two investmentcompanies happy to let you know they're looking.
1) East River Partners
Joe Cohen and Jody Kriss did just fine with their first discretionary fund, raising $20M through accredited investors and co-investment. With that, they were able to do five acquisitions and then rehab or build boutique, high-quality, family-friendly condos and rentals from three to 15 units, mostly in Brooklyn. They timed their launch right, as property values and consumers' taste for quality combined to raise their Brooklyn unit sales from $800/SF to as much as $1,400/SF today. Now they're turning to bigger deals. They can't say how big their second fund will go—only that ERP Fund II will be bigger than the last. And they'd love to do two or three acquisitions a quarter. East River has also grown from three employees in 2010 to nine, and they plan to add more this year.
Now they're working on a four-unit project at 432 10th St in Park Slope (above), citing South Slope's emergence as a family destination (YMCA, schools, and stellar transportation). They're also doing 15 units in Brooklyn's Fort Greene, as the area has exploded with 11 subway lines, the Brooklyn Academy of Music, Atlantic Yards, and a push eastward from Carroll Gardens, Cobble Hill, and Park Slope. Joe and Jody are devoting equal attention to Manhattan's supply-constrained neighborhoods, renovating the floors above a synagogue at 415 E 6th St into three lofts, plus an UWS project. They hope to find hole-in-the-doughnut sites or move into emerging neighborhoods for the second fund's projects—think Gowanus between Carroll Gardens and Park Slope.
2) Procida Advisors
Billy Procida (snapped yesterday) runs a single discretionary fund with no expiration. This is his third, launched in 2011, and he hasn't missed a dividend in 13 years (this year's will be 15%). The former developer digs using the money he manages (he's the primary investor) to finance others' projects rather than developing his own; he still gets to weigh in but no longer has 150 people on his payroll. Billy invests in anything within 100 miles of his Englewood Cliffs, NJ, home base. Beyond the industry go-to housing sector (he's recently invested in 20 townhomes in the Rockaways and $150M on three-bed, two-bath houses with Ryan in NJ), he's already hedging against the next recession with construction yards, charter schools, and mental health facilities, all of which he views as recession proof.
Who's Buying Loans
Because loans secured by multifamily assets are in high demand, many institutional investors that bought multifamily portfolios from community banks in '07, '08, and '09—many no closer to owning them than when they purchased the loans—are selling individual loans to private investors, Besen Group's Jonathan Horn tells us. NY and NJ loans entail a long legal process for loan-to-own investors, and private investors are more patient. The funds that are selling may not have achieved the across-the-board 30% returns for which they'd hoped, but they got high teens on some and exceeded expectations on others, as NY and NJ properties held their value through the recession. Meanwhile, national banks continue to sell portfolios of notes.
Here is Besen's open workspace in Red Bank, NJ. The company is taking its note sales prowess to Europe, having been retained by European banks to sell notes totaling an unpaid principal balance of more than €300M to US-based banks and funds. That includes an assignment to sell a Belgian bank's performing-loan portfolio secured by assets in Romania, Slovakia, the Czech Republic, and Poland. Jonathan says the bank is exiting markets beyond its country's borders, just as US banks returned to a local focus in '08 and '09.
Apartment Buildings Sold Jumped 19% in 2013
The number of multifamily buildings sold in NYC jumped 19% to 1,230 from 2012 to 2013, and the dollar volume increased 4% to $8.9B, Ariel Property Advisors'Multifamily Year in Review: NYC shows. Ariel president Shimon Shkury (snapped with Madison Realty Capital's Michael Stoler) says NYC multifamily assets saw aggressively higher prices as demand—driven by rising rents and low interest rates—continued to outpace supply. The most significant pricing gains occurred in Northern Manhattan and Brooklyn, where cap rates declined by more than 100 bps. Volume dipped in Manhattan, while sales in the other submarkets surged above $1B, suggesting that some investors typically focused on Manhattan are exploring less-expensive offerings. Northern Manhattan's dollar volume hit $1.6B—more than double 2012 and the second-highest dollar volume in the city—and Queens' jumped 214% to $1.1B. For a copy of our sponsor's Multifamily Year in Review 2013, click here.
Every party is a pre-Grammy party if it happens before the Grammys. So these parties from last week fit the bill. Gotham Org COO Christopher Jaskiewicz (chair of the Greater New York Construction User Council) and Chanel Zeisel flank Art Assets' Barbara Koz Paley at the GNYCUC's New Year party Thursday night at Extell's International Gem Tower.
We also snapped A. Esteban & Co's Ryan Gibbard and AKF's Jared Donnamiller, Phil Simone, and Mark Richter.
And at AREW's winter networking event Thursday at Time Warner Center's Stone Rose Lounge, we snapped Meridian Capital Group's Jonathan Stern and Adrienne Stephens (with Syska Hennessy's Kristin Liu), whose firm just did a pair of deals in Queens: a $7.8M mortgage for a 90-unit apartment building on 34th Road and a $7M loan for a 60-unit building on Skillman Avenue. AREW's next event is a Feb. 4 lunch keynoted by Rudin Management's Samantha Rudin.
What to Do During a Snow Storm
Sure, when the governor declares a state of emergency, you could leave work early to get the bread and milk and take shelter at home. Us? Last Tuesday, we opted for the Olympic trials of Broken-Snowboard Tobogganing in Prospect Park. We made a new friend, too, as Clarion Partners' Sabrina Martin, out for a leisurely stroll to enjoy the balmy weather, happened upon us just before Bisnow reporter Amanda Metcalf started this record-setting downhill run. Extra points for the dismount. (Special thanks to our friend Margaret Lewis for interviewing us for a change.)
Escape Real Estate Summit
Bisnow is gathering the top under-40ish developers/investors from around the country in Miami this April at its Escape Ascent retreat. At Ascent, next-gen real estate leaders will be organized to share ideas and best practices in intimate groups, learn from experts outside the industry, and build bonds through mutual experiences, like jet packing, a tennis round robin, and kayaking. Click here and learn how to be considered for the gathering.