At the Juncture of Real Estate and Technology

Looking back at 2020, the street retail and hospitality industry are being decimated by the pandemic, office continues to face challenges unseen in decades, multifamily certainly feels the pain to some degree. Co-living concept though seems to weather the crisis surprisingly well. One of such concepts, Common, was able to raise $50M in series D funding this fall. Sources claim that a resilient occupancy level in the face of a global pandemic was one of the key reasons for the successful fundraising. So how did co-living pull it off? Some background information on co-living.  In a nutshell, co-living resident rents a bedroom in an apartment instead of the entire unit and shares the living space, kitchen and bathroom(s) with other renters. It differs from the traditional rental model in a few ways which can be grouped in three categories: Economics A slightly reduced rent compared to traditional studio in the same neighborhood A flexible lease term (3+ months) A roommate arrangeme...

I like Harlem, a lot! The neighborhood has beautiful tree-lined streets with gracious brownstones that resonate with the history of NYC. Historic landmarks like the Apollo Theater and many churches continue to enrich the culture in the area. It has some of the best Parks in the City including Marcus Garvey Park, St. Nicolas Park, and Central Park nearby. The neighborhood also has close access to some great schools like Columbia University and City College of New York. Major retail corridors along W 116 and W 125 streets are the “main” streets for the neighborhood. Nine subway lines, Metro North Railway and numerous bus options all make the area really convenient to access. And I will not forget so many soul food places, Amy Ruth’s on the W. 116th Street being one of my all-time favorites! I always ask people when was the last time they visited Harlem. If you have not done so lately, I encourage you to go and take a walk. It’s worth the time! From a business perspective, the rents and c...

A few friends of mine saw 421a surcharges on their rent and asked me if it’s legal for the landlord to raise rent that way. Well, the short answer is yes unfortunately. But there are three prerequisites to be met before your landlord can impose the surcharges on your rent. Here is some background information. 421a is a NYS tax incentive program and administered by HPD and DOF in New York City. The program provides property tax abatement (for a period of time) to real estate owners or developers who construct new residential buildings. In return, a portion of the residential units created will be set aside as affordable units and all units in the building will be subject to NYS rent regulation. Within the tax abatement period, the owner can raise rent up to a maximum amount set by the Rent Guideline Board (RGB). Historically, this maximum amount is around 1-1.5%, which is very small compared to the general rent movement in NYC. However, there is a special provision in 421a that...

Big tech firms like Google and Amazon are joining the fight in search of a permenant solution for affordable housing, a pressing issue for the real estate industry. As a promising answer for the crisis, modular construction is being chosen increasingly by developers because of its higher degree of quality, cost and schedule certainty. Here are some Q&As that I compiled based on my conservation with industry veteran, Doug Phil, CEO of Prefab Logic, a 2019 report by the consulting firm McKinsey & Co. and my own experience. 1. What is Modular Construction? A process in which building modules (often with MEP, fixtures and finishes) are prefabricated off-site in a factory, and delivered and installed on site. Foundations, podiums, horizontals, roof and central plants are typically completed by the on-site GC. The MEP components of the modules are usually terminated in a common corridor and will be finally tied into the building central plants by the on-site GC. 2. What is ...

In Part 5 of the series, I want to share eight (8) real cases on small lot developments, primarily in Harlem, a vibrant neighborhood in Upper Manhattan. Here is a summary of these cases along with their estimated returns. IRR was not calculated due to difficulty in estimating development cash flow as well as reversion value. Address Type Project Return Equity Multiple Devel o pment Yield 310 W 114 ground-up condo 32% 1.6x 215 W 122 ground-up condo 36% 1.8x 126 W 130 condo conversion 53% 313 W 121 ground-up condo 54% 145 W 123 ground-up rental 6.0% 255 W 136 rental conversion 5.9% 63 W 130 co-living conversion 5.9% 81 W 118 rental conversion* 5.3% 310 W 114 Ground-up condo: the site was a 26’x101’ vacant land in a mid-block lot on a narrow street in R7A zoning district. FAR: 4. The developer built a 7-story 8-unit boutique condo building with a 26’x67’ floor plate and an elevator. No front yard and 34’ backyard. Front and rear setback is 15’ and 10’, respectively. Total saleable s...

  This is Part 4 of the Small Lot Development series. I want to share some information on the financial aspect of small lot developments. Each deal is unique and it is hard to generalize on cost and profit. The information provided here will give you an idea how a project achieves profitability. Please try to focus on the process of how developers create “value” through the development instead of the numbers themselves. Here are two examples: one ground-up condo and the other one rental conversion. Example 1 (ground-up condo): Existing 20’x100’ vacant land in a mid-block lot on a narrow street in the R7A zoning district. FAR: 4. Zoning floor area: 8,000 SF The plan is to build a 6-story boutique condo building with a 20’x65’ floor plate. There will be 6 floor-through units and each unit has roughly 1,050 SF saleable space (81% efficiency). Gross floor area 9,300 SF (7,800 SF 6-story + 200 SF penthouse + 1,300 SF basement). Front and backyard is 5’ and 30’, respectively. ...