The Full Nelson

95 Wall Street – First Time Domestic Buyers Dominate NYC Market

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There has been a lot of talk over the last few years about demand from foreign buyers. There is no doubt that we continue to see an influx of buyers from around the world. In fact, our website tracks hits from 131 countries around the world. Massey Knakal last tracked that 12% of the buyers came from overseas.

However a new breed of buyers has arrived in NYC – first time domestic buyers. They have been a dominate force as-of-late. These institutional and private buyers have come from California, Colorado, and even such exotic locations as Kansas. Many have substantial national portfolios. Now they have turned their attention to NYC to both diversify and take advantage of the strength of our market.

One of the most noticeable new players has been UDR, Inc. a Colorado based REIT. They have purchased a combined $1.2B in luxury residential apartments buildings, accounting for an astounding 7% of all NYC sales in the first three quarters of the year.

Their acquisitions have included the 709 unit Rivergate at 606 First Avenue for $443m; the 493 unit, 10 Hanover Square for $260m; the 120 unit 120 West 21st Street; and most recently, 95 Wall Street, the 507 unit rental building for $325m. These sales ranged from $600 to $800/SF

95 Wall Street, known as Dwell 95, was recently sold by The Moinian Group. According to UDR, the building was 93% occupied with average rents of $3,100/SF. By our estimates, this sold at around a 5% cap rate or about $550,000 per unit once the garage component was factored out.

UDR said they have capitalized on the buildings by immediately raising rents. They will benefit from a residential rental market which has less than a 2% vacancy rate and rents which have surpassed $100/SF in some prime buildings.

These purchases have fueled an enormous pick up in Manhattan elevator sales this year, which are up 23% from last year. The pricing is approaching peak 2007 levels, when the Apthorp sold for $990/SF and 206 East 95th Street sold for $770/SF.

UDR is not the only new NYC domestic buyer. California investment firm, CIM Group, has made headlines by investing in the Drake Site, 737 Park Avenue, The William Beaver House, The Trump Soho, and the senior debt at both 47 East 34th Street and a development site at Madison and East 33rd Street.

Another first time domestic buyer is the Kansas-based hotel and asset management firm Lodgeworks, which runs the Sierra Suites Hotel Collection and Aloft Hotels, among others. They recently purchased a development site at 45-47 West 38th Street for $16m or $381/BSF.

This new domestic demand is fueling the busiest quarter in sales since 1Q08. According to Massey Knakal's recently released 3Q11 Property Sales Report, Manhattan had 190 properties sales in 3Q11, which was within 25% of 2007's quarterly average of 250.

The challenge will now be for the brokerage community to continue to bring enough inventory to market to meet this new demand.

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