Equity Residential downgraded its outlook for its New York City rental portfolio, saying revenue growth may actually be negative next year.
It’s the second time this year executives at the real estate investment trust have drastically chopped revenue projections in New York City. At the beginning of the year, the REIT projected same-store revenues to hit 3.75 percent in 2016. But in the second quarter, it lowered that target to 1.5 percent for the year.
On the company’s third-quarter earnings call Wednesday, chief operating officer David Santee told analysts that New York is the REIT’s worst-performing market, and that looking forward to 2017 there is “a high probability of revenue growth turning negative during the year.”
Increased supply and wavering demand from a struggling financial services sector, he said, were having an impact. It would be the first time same-store revenues were down for the REIT in New York since 2010, when they dropped 1.3 percent.
When pressed for more specifics, director of investor relations Marty McKenna replied, “I think we probably said all we intend to say at this juncture.”
Despite slumping revenue, Equity in March picked up the 120-unit Atelier Williamsburg rental building at 239 North 9th Street for $79.7 million.
Properties along the Upper West Side and down through West Chelsea, Santee noted on the call, perform the weakest in Equity’s New York City portfolio.
Executives also said they’re keeping a close eye on the state’s new law banning tenants from advertising illegal short-term rentals on sites like Airbnb.
“I guess I would say that the legislation that occurred in New York City is a benefit to us,” Santee said.
“Historically, the . . . city would fine the building owners if any transient rentals were discovered,” he added. “On the other hand they do allow sharing as long as the owner is in occupancy. So I’m not really sure how that gets policed.”
Equity Residential has a pilot program with Airbnb at one property it owns in California, but said it was put in place for the purpose of transparency and control, and the company doesn’t look at the program as a money maker.
In August, residents at the company’s 259-unit Hudson Crossing at 400 West 37th Street filed a lawsuit accusing the REIT of “defiantly” flouting state law and running an “illegal makeshift hotel” at the property.
Gov. Andrew Cuomo last week signed into law a bill the state legislature passed in June that will impose fines of up to $7,500 per incident on those who advertise illegal short-term rentals.
The San Francisco-based Airbnb, which is valued at $30 billion, fired back with a federal lawsuit naming state Attorney General Eric Schneiderman, Mayor Bill de Blasio and the City of New York as defendants.
On his 75th birthday in September, chairman Sam Zell was the keynote speaker at a real estate conference that turned awkward when an attendee became irate at comments made by interviewer Peter Linneman that were perceived to be racist.
Correction: A previous version of this post incorrectly stated Equity Residential was predicting negative revenue growth in New York for 2016. The projection was, in fact, for 2017.