Interviews Lev Mavashev Founder and Principal Alpha Realty

0:00 Speaker 2 Good morning.

0:00 Speaker 1 This is Michael Stola for the Stolar real Estate Report on the Cats Roundtable. This morning, I have Lev Mavshiv, who is the founder and principal of Alpha Realty, a top investment sales brokerage firm specializing in the sale of multi family mixed use properties throughout New York City. Lev and his team at Alpha Realty have established a remarkable

0:20 track record in the mid market multi family space, broken over three billion dollars of sales since they were established in twenty fourteen.

0:29 Speaker 2 Good morning, Michael, thanks for coming.

0:31 Speaker 1 So what’s that you know? The reason I bring up that you’re a Brooklyn boy? You came over from Russia.

0:38 Speaker 3 From Uzbekistan, Yes, and then knew it, came here when I was seven years old, And would you were straight to Brooklyn? Grew up in Brooklyn, went to college not too far through college.

0:47 Speaker 2 Didn’t you go to Statna also years?

0:51 Speaker 3 I went to high school in so now Tottenville High School. Yes, but yeah a few years, three years and then back to Brooklyn and they got married and now I live in Brooklyn.

1:01 Speaker 1 Okay, So tell me what’s what’s happening today in Brooklyn? How are investment sales doing.

1:08 Speaker 3 I’ll tell you what. There’s a lot of things transpiring in the market right now. I mean the market is definitely challenging. Prices are down, velocity, transaction volume is down. There. There are really two there are really two factors that are really kind of posing a challenge to the market right now. A it’s the higher cost of capital, both

1:30 on the data and equity side. You know obviously, you know rates being six seven percent now versus three percent fifteen sixteen months ago. And B it’s a tough regulatory environment right now. The city ain’t making it easier. And it’s I’m talking about the multi family in general, and it’s it’s it’s kind of broadening a negative sentimental ard multifamily.

1:54 Speaker 1 So let’s talk about that with regard to the the the go course, you know, the low cost like.

2:04 Speaker 3 Rent stabilized stuff, right yeah, I so rent stabilized product you know these pre war rent stabilized buildings there. It’s a real challenge right now. Pricing is down. Pricing is down like fifty percent across the board. It doesn’t matter whether I’m selling rent stabilized building on the Upper East Side or whether I’m you know, selling in Brooklyn or

2:28 the Bronx. Rent stabilized is a tough product, you know, you know, you tell me, how do you value? How do you value an investment that continually has negative cash flow or decreasing cash flow? You know, yeah, you know you could buy it a seven cap now, but what’s going to be tomorrow? Operating costs? I’m telling you, from

2:45 what I’m seeing out there, buyers are are having a hard time with this product. You know, operating costs keep on rising and you have a cap on income. You know, yeah, they approved the three percent increase, but it’s a joke from.

2:57 Speaker 1 What they’re out there. Spill could go up significantly higher than that. Right.

3:03 Speaker 3 Insurance in the Burrows is now anywhere from one thousand to twelve hundred unit right now.

3:08 Speaker 2 What about good cause?

3:12 Speaker 3 Good Cause? Yeah, it’s it’s posing a huge risk, not only to the rent stabilized well not doesn’t apply to the rent stable stuf, but for the free market product. It’s it’s people are are are you know, they’re having a hard time on the writing that risk. I personally think you know, the governor, she gave a clear thumbs

3:30 down to good Cause of ction a couple of weeks ago. She totally vetoed a bill to extend the four twenty. She is pro extending the four twenty in construction deadline, but she gave a clear no as soon as they attached as soon as the legislators attached the good cause of ction to it. Okay, So I think she’s very

3:48 clear about being anti good cause of fiction.

3:50 Speaker 2 What about the warehousing?

3:51 Speaker 3 Aboutpartments, Yeah, there’s a lot of counts out there, anywhere from fifty to I think eighty thousand and units are now being held vacant. I think a lot of guys, a lot of landlords I’m speaking to, they’re just finding it easier to keep them vacant that renting it out.

4:08 What do you what do you do with a unit that hasn’t you know, we’re attendant’s been there for thirty forty years. Rent rent is about eight hundred dollars. What do you what do you do with that unit? You can’t, you can’t take any increases, there’s no incentive to put work into it, and and you know, release the unit

4:22 at market. So yeah, it’s it’s I think it’s a housing policy.

4:30 Speaker 2 So who’s buying in Brooklyn and the the Burrows.

4:34 Speaker 3 It depends on the product. Type. Within multifamily, there’s various products, various product types, anything from rent stabilized to free market to you know, new construction tax debated deals for rent stabilized stuff. It’s uh, it’s your local, local private investors.

4:54 They have more of a long term perspective and outlook on things they’re finding opportunity to they haven’t seen in the last ten to fifteen years. They have more patient capital, so they’ll they’ll they’ll buy it. They’ll they’ll pick up another couple of hundred units because they own already a couple of hundred units. Whatever it is in Brooklyn or

5:10 Queens and Bronx, it’s it’s all these buyers of rent stableized stuff are our local private investors that own in the area.

5:18 Speaker 1 And I believe when you and I spoke, you said to me that they are also some foreign investors.

5:22 Speaker 3 Yes, so foreigners are coming here and we’re mostly selling them like a lot of these newly constructed buildings, like the seventy thirty product. They’re Yeah, they seem to be active in that space right now, the fair market, the free market buildings in Manhattan. They want more prime Manhattan good products. They’re not buying their rent stable ized stuff.

5:41 Depending on the product, it’s a different it’s a different pool of buyers. The private equity backed operators and syndicators don’t seem to be so active right now. There’s hardly any syndicators active right now. Again, it’s it’s it’s I think a lot of that capital’s in the sideline. They’re also institutional stuff. The institutions are chasing better yield right now.

6:03 But it looks like the local private investors and families are are being the most competitive right now. Again, that’s probably because they have patient capital and the long term outlook and stuff.

6:12 Speaker 1 What about Connee Island and Brighton Beach area, A lot of the developments are taking away.

6:16 Speaker 3 A lot of developments are taking place there. Yeah. Where, Yeah, we’re seeing we’re doing a couple of luxury like newly constructed luxury buildings out there expiring for twenty one eight. Deals are gaining a lot of interest right now. There’s a lot of development happening there. So yeah, and there’s the strong rental demand honestly anywhere. I don’t know if

6:36 you read another another record breaking season four New York rents.

6:41 Speaker 2 I mean, rents are going up to levels that no one expected tremendously.

6:44 Speaker 3 What about Dumbo, Dumbo another super prime location. We’re getting a lot of interests from We’re getting a lot of interests from foreigners and family offices there. People want to buy stuff there. Again, it depends on the product they want to buy, more free market, more luxury type product there.

7:02 Speaker 2 What about development sites?

7:08 Speaker 3 Development sites? I feel I came to a screeching halt due to you know, they don’t have clarity. First of all, site without four already in place is like almost not trading, or it’s being unwritten, so tied to a point where you know, only option is to do condo sales. So that’s how they’re underwriting this type of stuff. But even

7:29 sites with four twenty a’s already in place, again, it’s challenging. People are not sure if they’re going to hit the construction deadline come twenty twenty six.

7:36 Speaker 1 What about the conversions of office buildings into rental apartments. What’s your thoughts on that.

7:43 Speaker 3 I’m hearing they’re easier said than done.

7:46 Speaker 1 They’re they’re I think much easier said than done.

7:50 Speaker 2 I mean the loss.

7:51 Speaker 1 Factor that you have significantly coupled with you have to buy out all the tenants you know exactly.

7:56 Speaker 3 In general, office buildings are not right. They’re not They were never built for Rezzi. However, I think this is where the government could step in if if with the right incentive, I think you’ll get the private You’ll get the private sector to do whatever it takes.

8:08 Speaker 1 This is like the low Manhattan but they were great incentives and people went in there and they bought buildings at the.

8:13 Speaker 2 Low prizes and had twenty years no taxes exactly.

8:16 Speaker 3 That’s listen. I think the government has to do a lot of they want to create more housing.

8:20 Speaker 2 What about the banks?

8:21 Speaker 1 Are they interested in financing deals or are they also interested in selling their loans? Today?

8:28 Speaker 3 There are there are there they’re financing deals. Look, I think the fears around all these regional banks collapsing somewhat eased. Yes, you know, Signature and First Republic really took really took a lot of you know banks that financed these multi family deals in the boroughs out of the market. But you know, we have banks. Regional banks are lending. You

8:49 know NYCB and Valley are still lending. A few others were doing deals with I think people again, people are more like they feel a little more secure that there’s not a regional banking collisse.

9:01 Speaker 1 Okay, but many of the owners now have to put up additional equity in the deal.

9:05 Speaker 3 It’s correct, Yes, on the reef, it’s for sure. Oh that’s yes. I’m seeing that a lot right now. If they’re not selling, and there are instances where where you know, where we go out to market, we’re not getting the or we are getting bids with the bids are getting you know, are below debt and are Yeah, sellers are

9:20 for so they’re either selling and just taking a loss whatever it is, or they’re or they’re just opting to refly and it’s a cash and ref Yeah, they’re coming up with more equity. The challenges if they want to put up more equity or just take a haircut and sell.

9:31 You know.

9:32 Speaker 2 Now, what do you think of that Borough Park?

9:35 Speaker 3 What do I feel the burrows the borders seem to always be expanding, right, Yeah, it’s it’s growing. It’s a it’s a world within itself. It’s a community within the community. We we’ve we’ve done a lot. Yeah, we sold a lot of stuff on the avenue, the thirteenth Avenue, Utric it’s its own market. Yeah, I wouldn’t I wouldn’t price

9:55 a Borough park. It’s a whole different pricing for a Boro park. Yeah.

9:58 Speaker 1 Okay, so when you were on my TV show, I always have my crystal apple. When do you see it turning shiny? Okay, right now it’s still a little blurry, or maybe more than a little blurry. When do you see it better?

10:13 Speaker 3 So it’s definitely still blurry. But I have to say, based on the activity we’ve been having the last few months, we’re doing a lot of deals and and a lot of stuff going on in the market right now, I think it’s going to translate to a lot of activity.

10:29 I’m not sure about pricing. I think pricing is still going to stay. I think pricing levels are still going to stay, maybe even decrease, but I think we’re going to see a lot more transactions and activity in the third and fourth quarter.

10:38 Speaker 1 Okay, I’d like to thank you to come to the Stolar report on the Cats around time, but thanks again

10:43 Speaker 3 Here, thank you Mike