NYC multifamily sales boomed, but party could be over

UPDATED Feb. 1, 2023, 3:43 p.m.

New York City’s multifamily market had a banner 2022, but higher interest rates figure to slow things down this year.

The sector accumulated $16 billion in total dollar volume last year — numbers last seen in 2016, according to a report by Ariel Property Advisors. Deals for multifamily properties accounted for almost 42 percent of the city’s $38.4 billion in investment activity.

Residential buildings with at least 10 units accounted for $13.2 billion in investment sales, an increase of 57 percent from 2021. Some 506 deals for 809 multifamily properties closed last year, up 27 percent and 5 percent, respectively.

Transaction volume peaked last May when more than 60 deals were consummated and dollar volume reached its apex in June at nearly $2 billion.

About 76 percent of the money spent was for market-rate properties or those that qualified for the expired 421a tax break, as they were seen as a hedge against inflation.

The explosion in dollar and transaction volume was consistent across Manhattan, Brooklyn, the Bronx and Queens. Three of the four boroughs saw both metrics peak during the second quarter of last year.

Manhattan accumulated $7.21 billion in deals last year, a 154 percent jump from 2021 and its best year since 2015. The borough had 137 multifamily transactions, only a 17 percent increase from the previous year, indicating that the average deal size in 2022 was much larger.

The city’s two biggest multifamily transactions last year were in Manhattan.

Blackstone bought the 899-unit, 773,000-square-foot luxury residential property at 8 Spruce Street in the Financial District for $930 million and Josh Gotlib and Meyer Orbach’s GO Partners acquired a pair of luxury apartment buildings at 616-626 First Avenue in Murray Hill for $837 million.

Gotlib’s Black Spruce Management and Blackstone were two of the top three multifamily buyers by dollar amount last year, acquiring almost 3,000 units for a combined $2.98 billion.

Brooklyn had a record $3.78 billion in multifamily sales — $150 million more than the record set in 2021. The borough’s 161 deals were the most since 2016 and represented an increase of 45 percent from the previous year.

Brooklyn had a record $3.78 billion in multifamily sales — $150 million more than the record set in 2021. The borough’s 161 deals were the most since 2016 and represented an increase of 45 percent from the previous year.

Leading the way in Brooklyn was Avanath Capital Management’s $315 million purchase of 38 Sixth Avenue and 535 Carlton Avenue in Prospect Heights. In second place was A&E Real Estate Holdings’ $249 million acquisition of LeFrak’s 14-building, 1.2-million-square-foot, 1,200-unit portfolio in Gravesend and Sheepshead Bay.

A&E was one of the city’s most active multifamily players last year, buying more than 3,100 units across 21 properties for $1.07 billion.

The Bronx had $1.1 billion in dollar volume and 89 multifamily transactions, which represented increases of 16 percent and 10 percent, respectively. It was the borough’s best year in both categories since 2018.

The Bronx had the city’s largest affordable housing deal, as a joint venture between Gilbane Development, Systima Capital Management, ELH Management and TerreAlto acquired four Section 8 projects and a development site for $107.5 million.

Queens had $700 million in multifamily dollar volume, a 45 percent increase from 2021 and its highest total since 2018. The borough also notched a record 71 multifamily deals, up by 65 percent from the prior year.

A&E again set the pace with a $130 million acquisition of the four-building, 1,060-unit, 820,000-square-foot Cunningham Heights complex in Queens Village.

The past year highlighted a trend of private equity firms investing in multifamily properties. Along with Blackstone, companies like KKR and Carlyle Group were active in the sector.

KKR picked up 651 units for $415 million, including the 365-unit rental tower at 80 DeKalb Avenue in Downtown Brooklyn for $190 million. Carlyle nabbed 13 properties in seven deals last year as part of a strategy to build a $500 million portfolio of small multifamily buildings in Brooklyn.

But the second half of 2022 showed that the city’s multifamily market could be in for a slowdown in dealmaking. Dollar volume in the second half of last year fell by 12 percent and transaction volume dropped by 23 percent from the first half as the cost of debt doubled in just one year.

The multifamily market could experience more distress this year than last, according to the report, as mortgages for predominantly rent-stabilized properties issued before changes to New York’s rent law in 2019 near maturity — meaning that borrowers will have to sell or refinance.

Correction: An earlier version of this story omitted one of the buyers of 616-626 First Avenue and misstated the name of the purchasing entity.