Here’s what Brooklyn’s multifamily players fear most

Akelius, Heller Realty execs and lenders speak of rising interest rates, "recycled deals"

From left: TerraCRG's Adam Hess, Heller Realty's Josh Heller, Akelius' Kunal Chothani, Novel Property Group's Andrew Miller, M&T Bank's Matthew Petrula and Flushing Bank's Frank Korzekwinski (credit: TerraCRG)
From left: TerraCRG's Adam Hess, Heller Realty's Josh Heller, Akelius' Kunal Chothani, Novel Property Group's Andrew Miller, M&T Bank's Matthew Petrula and Flushing Bank's Frank Korzekwinski (credit: TerraCRG)

The Brooklyn real estate market has several bogeymen, and on Wednesday, some of the borough’s leading multifamily investors and lenders discussed the ones that trouble them most.

Matthew Petrula of M&T Bank, speaking at TerraCRG’s Only Brooklyn summit at BAM, said “interest rate risk is something that keeps me up at night.” Federal Reserve chief Janet Yellen has indicated short-term interest rates are likely to go up in coming months, which would make borrowing money a more expensive prospect for developers.

Frank Korzekwinski of Flushing Bank criticized Albany’s intervention in building violations — the Cuomo administration, he said, has been pressuring banks to crack down on landlords for building violations.

Both lenders said that banks’ standards hadn’t changed much over the past year. “Lenders are still looking for an 8 percent debt yield,” Petrula said, but with rising property prices pushing down cap rates, it had been harder to make such deals work for borrowers.

Sign Up for the undefined Newsletter

The buyers on the panel — Kunal Chothani of Akelius Real Estate Management, Josh Heller of Heller Realty and Andrew Miller of Novel Property Ventures – have been particularly active in acquiring multifamily portfolios in the borough in the past year. Chothani, however, said that so far in 2016 he has become pickier in taking on a deal and sees a bevy of “recycled deals,” or a drop in asking prices for some rental buildings that have been sitting on the market.

As for international impact, Chothani noted that fear of Britain’s potential departure from the E.U. could hurt the London market but help the New York City market as buyers could flock to a competing city.

Earlier this month, citing a “perfect storm” of the 421a expiration and potential oversupply of multifamily, TerraCRG’s CEO Ofer Cohen said Brooklyn investment sales had dropped more than 65 percent this year. But the panelists insisted the borough’s multifamily market continues to be stable. Hess referred to Chothani and Miller as “miracle workers,” joking that they “got Swedes and Australians to buy hundreds and hundreds of units in Crown Heights.”