It’s been a decade since Time Equities bought a building in its hometown.
That changed last week when the privately held real estate firm, which has 43M SF of assets under management worth roughly $6B and owns property in 37 U.S. states and seven countries, bought an apartment building in Brooklyn.
“It’s a natural place for us to do business, if we can find an economic way to do it,” Time Equities Chairman and CEO Francis Greenburger said. “Certainly, we’d like to, but it’s hard.”
323 E. 19th St., Time Equities’ first NYC multifamily acquisition since 2015.
When Time Equities finalized its purchase of the 38-unit, 100% rent-stabilized building at 323 E. 19th St. from Lightstone Management, it marked the Union Square-based firm’s first NYC buy since 2015.
The acquisition, which was financed with a $9.2M mortgage from M&T Bank, is “a little step into the water,” Greenburger said, positioning his firm as an “opportunistic buyer of existing income properties with strong cash flow characteristics,” Greenburger said.
Time Equities, which Greenburger founded in 1966, has been avoiding its hometown since it bought a Midwood apartment building for more than $50M in June 2015. It viewed the market as “overheated,” its head of equity told Commercial Observer in 2017.
Its recent investments have included shopping centers in upstate New York and in Michigan, student housing in Texas and the development of a 74-story residential condo building in Chicago.
Compared to those investments, buying a rent-stabilized apartment in Ditmas Park would seem like a risk — they are the exact type of buildings that have caused headaches for owners, leading to distress, bankruptcy and fire sales.
Some owners have sold buildings at 50% discounts as maintenance and insurance costs keep rising, while some have even sued their lenders in an attempt to force them to take back the keys. Many owners blame the 2019 Housing and Tenant Stability Protection Act for the current situation, which made it harder to raise rents and remove units from stabilization.
NYC’s rent-stabilized buildings, once seen as a safe bet for investors, have lost millions of dollars since the 2019 law’s passing, leaving landlords with little to no reserves for maintenance, a recent Bisnow investigation found.
But not everyone is thinking about rent-stabilized NYC apartments in the same way: like Time Equities, PH Realty and Rockledge have been snapping up units on the cheap.
There’s logic to taking the risk now, Greenburger said.
“I’m caught with two thoughts. On the one hand, the regulatory environment hasn’t improved,” Greenburger said. “On the other hand, we realized that from a value point of view, the cost to create these properties is much higher.”
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Francis Greenburger in 2013
There is no question of demand — the city has a record-low 1.4% housing vacancy rate. More acquisition opportunities could appear as landlords face unfavorable refinancing scenarios, particularly on rent-stabilized buildings, Greenburger said.
“Somebody’s got to write a check for the difference between the existing mortgage and the lower, new mortgage,” he said.
Time Equities purchased the Ditmas Park building for $13.1M. Santander Bank originated a $14.2M mortgage on the property in 2019, according to city property records.
“I can’t imagine that [the seller] didn’t take a financial loss,” Greenburger said. “I know this situation exists with multiple properties in New York.”
If rents don’t budge and operating costs stay where they are, Time Equities will survive with a very modest return, Greenburger said. But he’s hoping that, as a long-term owner, rents will improve over time.
“We’re obviously not avoiding [rent-stabilization], but the price has to be very attractive, and the circumstances have to be right,” he said. “But unfortunately, that means that the existing owners are losing their equity, or a lot of it.”
Time Equities is on the lookout for more deals where the pricing and fundamentals outweigh the regulatory risks, Greenburger said.
“We’re approaching them cautiously, but we did feel that this was an advantageous price,” he said. “Even though it’s for a reason.”
The purchase doesn’t necessarily mean pulling out of the other states where Time Equities does business, Greenburger said. The firm owns properties in 37 states, including a dozen acquisitions made in the past four months.
“I wouldn’t call it a shift back to New York,” he said. “This is a tilt.”