Barone Management Launching First Fund To Buy New York Assets
Amid concerns about investors fleeing New York City for more tax-friendly states, one developer is banking on a swift local recovery and launching a fund to snap up assets.
“Do the taxes suck here? Sure, but they were like that before. Is the political environment challenging? Sure, but that was the case pre-Covid,” Barone Management principal Scott Barone told Bisnow in an interview this week.
His company is launching a fund next week with a $40M target raise to invest in commercial and residential real estate assets in the New York metropolitan area.
“This city will find a way to turn lemons into lemonade, just look at its track record," Barone said. "New York has got hit, but we are absolute geniuses about reinventing ourselves.”
Barone Management, a 22-year-old integrated development, construction and management firm, built the Arlo Hudson Square, a 320-key hotel on Hudson Street, and Marriott Fairfield Central Park, a 220-room hotel on West 58th Street.
In all, it has developed around 1M SF and over $500M in properties in the city. Right now, the company is building a 68K SF building for Renaissance Charter School in Elmhurst, Queens, which is one of five charter schools in its development portfolio.
Barone said he has never taken on outside investors beyond limited friends and family, but after successfully crowdfunding $6.5M for the school deal in Elmhurst, he was convinced a fund was worth the effort. Barone said he will now be looking for land deals or substantial renovation and will likely steer clear of hotels and retail assets in favor of multifamily and charter school projects.
“We’re active in the charter school space and it feels like a really good place to be, the social impact investing that we’re doing means we’re doing good while doing well,” Barone said, adding that over the summer the company acquired two development sites for new charter schools.
“This is a resurgent city, but if you look at where we are now, if we are not at the bottom, we are within 5% of the bottom in either direction,” he said. “It will stay there for a window of time — six to 18 months — because there are certain businesses that were hammered by this pandemic.”
The fund would close out in between five and seven years, and would only take sums of over $400K. Barone expects some high net worth individuals, family offices and some institutional money will sign up. Many commercial real estate players are anxious about New York City appearing unattractive to investors long-term, with concerns about an “anti-development” sentiment within communities and a fraught political climate.
In Manhattan, the average price per SF on multifamily and mixed-use properties plummeted 15% in the last quarter of 2020, as sellers dropped prices and deals started moving. Office availability is above 15% in Manhattan, and rentals prices have dropped 15% as well.