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Below 96th Street, Multifamily Remains Strong, While Mixed-Use Deals Become More Location-Dependent

The West Village, Manhattan

The New York multifamily market has seen an overall decline since the beginning of the year, with total dollar volume down 73% compared to December 2016, The Real Deal reports. But south of 96th Street, Marcus & Millichap first vice president of investments David Lloyd sees continued opportunity for investors looking to own a piece of the city.

“Multifamily has been relatively strong,” Lloyd said. “Things have come down a bit, but with multifamily, we have only seen prices go down 5% to 10% at most.”

What remains constant is the appetite in New York for value-add opportunities. While the majority of the inventory in this category is in upper Manhattan and the Bronx, Lloyd is still seeing investors seek out value-add further downtown, despite a much smaller selection.

“Investors are still looking aggressively for value-add deals and pricing remains strong for these opportunities,” he said. “Cap rates are still very low for prime Manhattan locations where there are business plans in place to achieve the upside.”

Lloyd’s team specializes in properties ranging from $10M to $150M, a bracket that attracts wealthy local and foreign investors seeking out Manhattan trophy properties. Demand for those deals has stayed strong, despite a general pullback in luxury and condo development.

"There are several buildings on the market now that wouldn’t have been on the market in a different part of the cycle," he said. “Sellers are starting to feel a shift and they are looking to maximize while rates are low and pricing is still strong. On the flip side, foreign investors and 1031 exchange buyers are now starting to see ideal trophy product come to market in prime Manhattan locations.”

It is a market that Lloyd knows well.

Marcus & Millichap first vice president of investments David Lloyd

In 2013, alongside partners Peter Von Der Ahe and Joe Koicim, Lloyd sold 78 Irving Place, a 15-unit multifamily trophy property in the exclusive Gramercy Park neighborhood for $17.9M. He later sold a building off Park Avenue at 118 East 93rd St. to a Canadian Investor for $39M and a prime elevator building on East 32nd Street for $52M.

Lloyd’s most recent trophy property is a six-story elevator building in the West Village. Built in 1940, 12 Perry St. has 21 residential units and 96 feet of retail frontage. The asking price is $32.7M, Real Estate Weekly reports.

The mixed-use property checks many of the boxes investors have for Manhattan assets.

“Investors continue to covet mixed-use assets and both the diversification of income and upside the retail portion brings,” Lloyd said.

The location off Seventh Avenue South, walking distance to major subway lines, makes 12 Perry the ideal building for more cautious investors and institutions. Vacancies have cropped up for mixed-use buildings that are removed from high-foot-traffic areas.

“If it’s not on the avenue or a main retail corridor, investors and lenders are shying away,” Lloyd said.

Unlike uptown and the boroughs, deals in Manhattan do not always follow larger trends and patterns. For Lloyd, it is the perfect creative challenge.

“Some of these deals, they are not as cookie cutter as some of the borough deals or uptown deals where it is just tied to one metric,” he said. “There is often a story involved, whether it is air rights, tax class, upside in the rents or adding more bedrooms. It’s what makes the market dynamic and the deals exciting.”

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