Not so fast, vultures: Multifamily among better “food groups” poised to weather pandemic

Latest TRD Talks Live delves into challenges multifamily market now faces

TRD NATIONAL /
Apr.April 08, 2020 02:00 PM


Lightstone’s David Lichtenstein would like to make one thing clear: Not all property classes are in immediate peril.

“Read my lips: You are not going to see distress in multifamily,” he said during a TRD Talks Live panel discussion on Tuesday.

“Everybody listening who thinks ‘this is my opportunity to sharpen my claws. I’m a hedge fund, and I’m going to find a lot of great deals in New York,’ let me disabuse you of this opportunity,” he said. “In the short, foreseeable future, you are not going to see distress in multifamily.”

Lichtenstein, along with Slate Property Group’s David Schwartz and MetroLoft’s Nathan Berman discussed how the multifamily market is faring during the coronavirus crisis. When the panel’s moderator, reporter Georgia Kromrei, asked if some firms will see distressed multifamily as an exciting opportunity, the speakers agreed that for now, most properties are stable. Lichtenstein said that of all “the food groups,” multifamily is the best positioned, given that tenants are, for the most part, continuing to pay rent, and banks are still working with owners — though that could change if the crisis stretches beyond six to nine months.

The exceptions, of course, are owners who were overleveraged before the pandemic hit, Schwartz said. He noted that he’s seen interest from parties who haven’t invested in New York since 2014.

“There are going to be a lot of people coming from the sidelines looking for opportunities,” Schwartz said.

Lichtenstein added that multifamily properties on the Israeli bond market are being “irrationally traded down.”

“If you want to pick up some cheap New York City multifamilies, buy the bonds,” he said.

The multifamily sector, though, is the target of recent statewide policies aimed at delivering relief to struggling renters. Landlords are barred from evicting tenants for non-payment of rent through mid-June. State legislators are seeking to extend that timeline for another six months. State Sen. Michael Gianaris has also proposed a bill seeking to suspend rent and mortgage payments for 90 days.

Though the industry has increasingly been at odds with Albany, Schwartz said the crisis could provide an opportunity to find common ground.

“I think that we’re going to see a huge need coming out of this for affordable housing,” Schwartz said. “Hopefully that’s an arena in which the advocates and the developers and the elected officials can work together.”

Lichtenstein said that perhaps tenants who negotiate with their landlords over their inability to pay full rent because they lost their job will come out of the crisis thinking landlords are “real human beings.”

“Whenever you demonize an entire class of people, bad things happen,” he said. “You know, when you demonize a race, a sexual preference, those aren’t good things, and it’s not the American way. This is an opportunity for people to say, ‘hey, landlords acted in a very nice way. They are compassionate. They worked with people. They did as much as they can,’” he said. “And maybe they’ll discover that landlords really are human beings like everybody else.”

Berman said he’s less optimistic.

“I doubt very much that anytime soon, landlords will get any sympathy from anybody,” he said. “In the case of affordable housing and lower-income housing, we’re taking a lion’s share of people’s income. Even though we have expenses, we have our mortgages, we have businesses to run. People view that as not a positive thing. The New York legislature unfortunately is of that mindset, and I don’t know that coronavirus isn’t going to exacerbate that problem.”

Write to Kathryn Brenzel at [email protected]


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