The Real Deal New York

Experts see steep rise in deadbeat renters

December 03, 2009 01:41PM
By Adam Pincus

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From left: Kevin Davis, partner at Area Property Partners; Mason Sleeper, principal with the real estate investment firm Praedium Group; Tim Wang, vice president at ING Clarion

The percent of residential apartment dwellers in the city who are not paying their rent has as much as quadrupled since the market weakened last year, industry leaders on a panel discussing multi-family properties said today.

“Collections, especially in New York City, have become more of an issue,” said Mark Stern, senior vice president at Waterton Residential, a Chicago-based building owner and operator. His firm is planning on making acquisitions in New York City.

“[They are] going from the 5 percent range to now 10 or 20 percent in collections, which makes a difference on the bottom line,” he said.

Mason Sleeper, a principal with the real estate investment firm Praedium Group, said he has seen a similar distress in the market.

“You have your collection issue which is increasingly creeping up to becoming a little bit of a problem,” he said.

They were speaking on a panel that also included Kevin Davis, partner of Area Property Partners; Tim Wang, vice president at ING Clarion and Max Herzog, senior vice president at CB Richard Ellis. The panel, moderated by Mike Kelly, president of Caldera Asset Management, was part of a day-long forum covering multi-family real estate organized by GreenPearl.

The panelists generally agreed that nationally there would be rental price declines in the near term, and do not expect increases until late 2010 or 2011.

Turning to building sales, they said most of the properties available for purchase nationwide are low quality, but there are bright spots for the market. Higher quality buildings that were offered for sale at auction have drawn large numbers of bidders that in instances bid up the price.

Wang said when that happens, it appears buyers are valuing the properties based on cost per unit as opposed to a rate of return, which has become the industry standard during the downturn.

“We lost a few deals because we were outbid,” Wang said. “Most are using price per pound and dollar per unit.”

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