The Real Deal New York

Rent-regulation crackdown is “definitely” impacting multifamily sales: Treetop’s Mermelstein

Multifamily investor sees more concern from buyers, but no impact on pricing
By Rich Bockmann | February 08, 2018 03:00PM

Adam Mermelstein and Shimon Shkury

Officials delivered a message to the city’s multifamily owners last year with the convictions of landlords like Steve Croman and Daniel Melamed who had been accused of harassing rent-regulated tenants to increase property values.

Now it appears that, to at least some degree, the increased oversight is having an impact on the investment-sales market.

“I don’t know that we’ve seen an actual decrease in pricing because of it, but there’s definitely more of a concern in the marketplace,” Adam Mermelstein, managing member of Treetop Development, said Thursday morning during a panel discussion hosted by Ariel Property Advisors.

Mermelstein said he’s seen escrow requirements increase on sales and more concern over regulators like the state’s Tenant Protection Unit randomly selecting buildings for audit.

“We’ve been more sellers in the last two years – rather than buyers – and in selling properties we’ve definitely seen it having an impact on some of our sales,” he said.

An investigation helmed by the TPU, for example, led to a $500,000 settlement last year between the state Attorney General’s office and Icon Realty Management related to charges of tenant harassment.

As for the overall multifamily market in 2017, Ariel Property president Shimon Shkury said dollar volume had dropped 48 percent from the previous year to $7.22 billion.

Pricing, he said, softened in core Manhattan but grew by an average of 7 percent in Northern Manhattan and the outer boroughs, particularly in neighborhoods along the 7 Train subway line in Queens, where rental fundamentals remain strong.

“We think that the volume of transactions will be higher than 2017,” Shkury said. “In terms of pricing, we think that pricing will stay flat with very specific submarkets – very similar to ’17 – where prices could actually go up a bit just because of growth areas.”