Team Effort Creates $18 Million Brooklyn Multifamily Sale For Win-Win Scenario
9/11/2019
In the first half of 2019, the future of New York City’s rent laws was up in the air. Building owners weren’t sure if state-wide rent caps and strict regulations were going to be implemented. The internet was full of articles about real estate doomsday scenarios and what these new “anti-landlord” laws could mean for owners and their future profits. This cloud of uncertainty had the potential to derail certain real estate deals.
The sale of 800 Ave. H in Brooklyn required an expert team that could find the right buyer in this real estate landscape and help the seller accomplish their goal, which was to sell this building and re-invest in triple-net assets for more cash flow.
The New York Multifamily team closed on this Brooklyn asset — a $18,000,000 building of 67 units — in early summer 2019. Here’s how the deal came together and how it was a win-win for both the buyer and the seller.
Making an Exchange for the Seller
The seller’s main goal with this transaction was to do a tax-deferred exchange and “exchange” 800 Ave. H for a triple-net asset. The seller was hoping to invest in a property that would require fewer management responsibilities but would still increase cash flow.
A triple-net asset (NNN) is typically a commercial building. It’s leased on a long-term basis to a credit tenant. One of the many benefits for the owner is that these NNN assets require much less work and management. The landlord isn’t responsible for the building’s operations, maintenance, or expenses.
The seller chose the New York Multifamily team because of their strong presence in all of the city’s boroughs, their ability to locate buyers who were specifically looking for properties like 800 Ave. H, and their expertise in NNN assets. Plus, the New York Multifamily team had recently handled a $112 million exchange into triple-net assets for one of the seller’s acquaintances. The seller was impressed by this successful transaction and wanted New York Multifamily on their side.
Because they knew that wanted to exchange for a triple-net asset, another aspect about New York Multifamily that stood out to the buyer was their exclusive access to these types of investments across the country that other real estate firms can’t offer.
The Challenges of an Uncertain Market
The owner was looking to sell 800 Ave H. because the constant management that owning a building like this required was starting to take a toll. They were seeking a way to reduce their management responsibilities while also increasing cash flow. This transaction required a team that could help the owner sell the building while simultaneously helping them find the right triple-net asset to invest in.
Being able to find the right buyer at the right time was key. The potential buyer had to be willing to pay the $19 million list price for this type of building when the future of New York City’s rent laws was uncertain. Most of the market wasn’t interested in an investment like this at the time because they weren’t sure how much the new laws would limit their return on investment. It was a challenge that New York Multifamily handled with ease. Because of their large network, they were able to find a buyer who was looking to exchange a piece of land for a building just like 800 Ave. H.
A Win-win for the Buyer and the Seller
New York Multifamily found the new buyer for 800 Ave. H through their vast network. The team was already aware that this buyer was looking to sell a piece of land that wasn’t making them much money. New York Multifamily’s team had been regularly communicating with the buyer, so they understood exactly what this investor was looking for. For sales like this, owners must find a team that can connect with buyers in all of the boroughs and submarkets to the same extent that they would within a local, five-block radius. This is why we say “brokerage is a VERB.”
As mentioned above, the buyer was hoping to sell a piece of land where they were seeing no cash flow or return. The buyer was hoping to complete a 1031 exchange and “exchange” their land for a new property that offered a better return.
The sale of 800 Ave. H went under contract in May 2019, just one month before the new rent laws passed, and the New York Multifamily team was still able to seal the deal. Because the buyer was specifically searching for a new property not necessarily from an investment standpoint, but to defer a large amount of taxes, this deal made sense for all parties involved. It was a win-win scenario.
The seller used the money from the sale to invest in a NNN asset as planned. Now, they have their personal time back because they don’t have to spend time managing a property every day. Plus, they’ve also increased their annual cash flow by about 20-30%.
Interested in learning more about this deal or how we can help you enjoy maximum return on your investment in a multifamily property? Contact us today or call 212.430.5114.
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