Hybrid Marketing Key to 350 Unit, NYC Portfolio Sale for $91,900,000
8/7/2017
The New York Multifamily team of Marcus & Millichap has successfully liquidated the multifamily assets of a family estate in a series of carefully crafted transactions to four separate investors. Peter Von Der Ahe, Joe Koicim, Seth Glasser, Michael Fusco, Jake Kahn, and Danny Handweiler marketed the portfolio–a sprawling package of 350 rental units across the Bronx, Manhattan, and Harlem— with a novel hybrid approach that ultimately allowed the family to unlock the maximum value of $91,900,000 for their properties.
Two-Pronged Approach
The “BMH 350” Portfolio consisted of seven buildings in Manhattan, the Bronx and Harlem that had been acquired over nearly 50 years. The brokerage team worked to speedily execute the disposition, aligning several stakeholders’ interests in a seamless process that will ensure family’s legacy will live on. Any owner who holds a portfolio of properties for four-plus decades should expect a significant return on that investment. At the New York Multifamily team of Marcus & Millichap, we look at our work as a responsibility, to help our clients get the most out of a portfolio sale.
The portfolio included properties in the Bronx, Manhattan (south of 96th) and Harlem. The Bronx assets: 105 East 177th Street, 2151 Davidson Avenue, 831 Bartholdi Street, and 3520 Dekalb Avenue. The Harlem and Manhattan Assets: 1975 Adam C. Powell Boulevard, 336 West 95th Street, and 345 East 92nd Street.
Any portfolio disposition presents challenges based on location, ownership objectives, and the phase of the real estate cycle. At certain points in the market, sellers receive a premium for portfolio sales, while at others, sellers maximize value by selling assets individually.
After marketing the portfolio in its entirety as well as the buildings individually, the brokerage team opted for a hybrid of the two approaches and closed the transactions for approximately $92 million in just six months.
Over time, ownership had developed management processes and economies fit for the size of the portfolio. Therefore being left with only a portion of the portfolio was not the desired outcome. As such, the negotiation, due diligence and execution had to be perfectly timed and coordinated.
Speed and Surety
Balancing the pros and cons of selling the properties as a package or individually, the brokers’ chosen hybrid approach helped sellers achieve their financial goals, but increased the precision needed to execute documents with many parties simultaneously.
Because all members of the family were not involved in day-to-day ownership, the NYM team had to educate sellers about the distinct New York City multifamily market in addition to providing advisory services. Leveraging their extensive experience in middle-market multifamily real estate sales, the brokerage team was able to locate four enthusiastic buyers and complete a prudent due diligence process quickly. This allowed the family to exit its investment at or above market rate, in defiance of New York City multifamily market conditions.
Categorized as “mid-market” multifamily assets, each of these buildings fit squarely into New York Multifamily’s niche area of specialization. In a highly competitive asset class for NYC brokers, New York Multifamily was hired to broker this deal, not only for their specialization, but because of their high level of capability and in-depth knowledge of each borough. This appealed to ownership because of their geographic expertise, coverage, and boots-on-the-ground approach.
Four Buyers, Four Business Plans
Within 14 days, the NYM team was able to generate several immediate offers for the entire portfolio. Those initial offers served as a baseline as ownership then explored selling the properties individually. As a result, ownership choose a hybrid path for the sale; selecting a portfolio bid for the Bronx assets only, and selling to individual buyers for Harlem, the Upper East Side, and Upper West Side respectively. This proved to be the best combination of price and execution.
The buyer pool ranged from foreign capital sources, institutional investors, and local private families. As a result, the sellers had many options. The brokerage team had to speak to each type of potential buyer and create a relatable narrative for why these investments made sense at each price point. In the end, a diverse group of buyers each managed to strategically expand their portfolios in the New York City neighborhoods of their choosing.
A Financial Legacy & Significant Footprint
The BMH-350 portfolio offered investors an opportunity to establish a significant footprint in the metropolis in one transaction. In the end, New York Multifamily was able to identify the right buyers to help its client beat the offers made on the portfolio as a whole, while also closing the separate deals in a timely fashion to help the clients avoid managing just a portion of the portfolio.
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