At the Juncture of Real Estate and Technology

   I recently read a study done by Nancy Packes Signature Marketing Services on data showing New Yorkers leaving the city based on USPS change address requests (from March to October) and its impact on apartment rents in the city.  You can find the study here . There are three interesting findings from the research I found very insightful, which might help answer when rents in NYC will rise again.   The 1st insightful finding helps answer the question: how many people left the city?  Below is a summary table I put together based on the study.  It shows that temporary address change requests with an address outside of NYC are roughly 97,361.  These requests are mostly from affluent New Yorkers with a second home somewhere else.  They typically own in the city and are less likely trying to sell under the pandemic conditions.  It’s very likely that they will return once the coronavirus gets under control.   The other number that ...

  Following my past  post , I thought it would be interesting to look into co-living development.  Co-living startups, like Starcity, own and develop most of their properties, while other brands like Bungalow signs long-term master lease. Common, a NYC-based brand, chooses to be a third-party manager to help owners design, market, lease, and manage their residential properties for co-living renters. Its target demographic is mostly people in their early 30’s with a medium income of $70,000. Currently its branded properties spread across 11 cities in the US, and in NYC alone it serves 12 neighborhoods. One of Common’s first properties in NYC is located in Harlem, a neighborhood in Upper Manhattan.  The property is in a mid-block lot on a narrow street in the R7-2 zoning district.  FAR: 3.44.  It was built in the 1910's with a footprint of 20-ft by 46-ft on a 20-ft by 100-ft lot.  An original 5-story SRO with 13-unit was converted into a 2-family dwell...

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...