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Largest portfolio since 2008 hits market: Eastern’s Schechtman on Insights from TRD

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During the real estate boom, buyers such as Vantage Properties and Urban American snapped up large multi-family portfolios, and real estate moguls like Harry Macklowe made eye-popping office building acquisitions.

With the downturn, that activity largely stopped as overall sales declined and financing large deals became even more difficult.

Yet in recent weeks, two significant portfolios have been brought to market, signaling a shift in expectations, brokers said, but bringing risks as well.

“There is a real belief that pricing has returned in many instances,” David Schechtman, senior director at Eastern Consolidated, said in the latest edition of Insights from The Real Deal (see video above).

The larger portfolio, asking $276 million, is a package of 26 mostly residential properties owned by landlord Steven Croman, which is being marketed by Massey Knakal Realty Services. The other is a smaller collection of six mixed-use properties and a parking lot on the Upper East Side owned by the estate of Arthur Brown, listed by Schechtman for $26 million. The six walk-up buildings have 45 apartments and seven retail locations along First and Second avenues.

The 26-building Croman portfolio is being offered as a single package or in 16 smaller groupings. As a package, it is believed to be the most expensive portfolio put on the market since the downturn began in 2008, several brokers said.
“These are mature assets that are turnkey and probably have, give or take, 20 to 25 percent more upside,” Croman said. “We have done a lot of work on these, we have done the heavy lifting.” He said he would use proceeds from individual sales or a bulk sale to buy new properties, in what is referred to as a 1031 exchange.

Croman, who said he owns approximately 100 buildings in New York City, is considered by brokers to be an aggressive landlord who maximizes the value of his properties before returning them to the market, meaning it was unlikely a buyer could expect to improve rental income substantially from what he has achieved.

The Croman portfolio is concentrated on the East Side in neighborhoods such as Kips Bay, Gramercy Park and the East Village.

Schechtman said there were risks with bringing such a large portfolio to market today, as real estate sales activity remains soft.

“I think the two greatest risks are one, finding financing and two, the amount of equity you are going to put up,” he said.

Others were skeptical Croman would be able to achieve the $276 million asked.

Timour Shafran, an investment sales broker at Capin & Associates, speculated that European investors anticipating a decline in the euro might pay such a relatively high amount, as an investment strategy. But he did not think local investors would pay anywhere near that much.

“Short of that, I don’t see anyone stepping up to the plate to pay this number,” he said.

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