The Zarasai Group Ltd. דה זראסאי גרופ לטד החברה)" "(
הערכת שווי של נכס אשר זכויות החברה בו משועבדות לטובת מחזיקי :אגרות החוב סדרה ד' של החברה :אגרות החוב סדרה ד' של החברה
323 West 96th St. .1
הערכות השווי של נכסים זכויותאשר החברה בהם משועבדות משועבדות בהם לטובת מחזיקי אגרות החוב סדרה ה' של החברה :
86-06 35 Avenue .1 3647 Broadway .2 3657 Broadway .3 143 Linden Boulevard .4 Joralemon .5
A PPRAISAL REPORT Mr. Joel Wiener 323 West 96th Street New York, New York 10025
A Part 11 And Part 15-Story Elevator Serviced Mixed-Use Building
REQUESTED BY Joel Wiener c/o Zarasai Fund
The Pinnacle Group One Penn Plaza, Suite 4000 New York, NY 10119
DATE OF VALUE As Is: December 31, 2020
PREPARED BY
Michelle Zell, MAI Helen Peng, MAI Maren Lewis MRICS, AI-GRs
61-63 Crosby Street, Floor 3 New York, NY 10012
January 25, 2021
Mr. Joel Wiener c/o Zarasai Fund The Pinnacle Group One Penn Plaza, Suite 4000 New York, NY 10119
Re: Appraisal File No. JOB-2101119260 A Part 11 And Part 15-Story Elevator Serviced Mixed-Use Building 323 West 96th Street New York, New York 10025
Dear Mr. Wiener,
In accordance with your request, we have completed an appraisal of 323 West 96th Street for the purpose of advancing an opinion of the As Is Fair Value of the leasehold and a partial (50%) leased fee in the subject.
We have appraised the above referenced property, the conclusions of which are set forth in the attached appraisal report. This is an Appraisal Report that is intended to comply with the reporting requirements set forth under Standards Rule 2-2 of USPAP and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. In addition, this appraisal has been prepared in compliance with IFRS 13 (International Financial Reporting Standards 13-fair value measurement). The depth of analysis discussed in this report is specific to the needs of the client and for the intended use stated in the report.
The report is intended for use only by Zarasai Fund, its successors, assigns, and affiliates. The report is intended only for use in Zarasai Fund financial statements. The use by others is not intended by Bowery Valuation.
We consent to the inclusion of the valuation in its entirety within the Zarasai Fund USA Limited financial statements to be published in the Tel Aviv Stock Exchange.
The subject consists of a part 11-story and part 15-story, elevator-serviced multifamily building containing 173 residential units. The subject also contains approximately 600 square feet of ground floor office space. The building was constructed in 2003. Due to COVID and the declining market conditions, the subject has seen a shift from its historical low vacancy to a significant increase in vacant units. It is currently 72% occupied with 48 vacant, free market units. One unit is occupied rent free by the superintendent. In the 4th quarter of 2020, ownership began offering significantly below market rents to lease up vacant units. We are applying these low market rents to the vacant units in our analysis. The market rents we apply are significantly below the rent previously achieved pre-COVID. Thus, the subject will have substantial upside potential once the City recovers from the higher vacancy impact of COVID. The property contains 171,988± gross square feet above grade. Property amenities include a community laundry room, a gym, a playroom, and a community theatre room. The property is in good condition. It is located on the north side of West 96th Street between Riverside Drive and West End Avenue in the Upper West Side neighborhood of New York County, in the State of New York. The site contains a total land area of 0.402± acres / 17,500± square feet and is split zoned R8 Residential and R10 Residential within a C2-5 Commercial Overlay zone. It is identified on New York County Tax Maps as Block/Lot 1887 / 3.
The highest and best use of the subject is continued mixed-use. This conclusion is based on its zoning, physical characteristics, location, and forecasted economic conditions. Mr. Wiener Page 2 March 30, 2021
Our analyses, opinions and conclusions were developed, and this report has been prepared, in conformance with the Standards of Professional Practice and Code of Professional Ethics of the Appraisal Institute, the Uniform Standard of Professional Appraisal Practice (USPAP), and Title XI (with amendments) of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), and applicable state appraisal regulations. To report the assignment results, we use the Appraisal Report option of Standards Rule 2-2(a) of USPAP.
After carefully considering all available information and factors affecting value, our opinion is as follows:
Final Value Conclusion
Value Interest Appraised Date of Value Conclusion Fair Value of Leasehold Interest Leasehold Interest December 31, 2020 $67,100,000
Fair Value of 50% Interest in Leased Fee Leased Fee Interest December 31, 2020 $34,800,000
The global outbreak of the “novel coronavirus,” which has resulted in the COVID-19 pandemic, is presently affecting the US population and economy. The extent and magnitude of the direct or indirect effects of this event on the national and local economy, or real estate markets is indeterminate and not quantifiable as market evidence is still limited. The reader is cautioned, and reminded that the conclusions presented in this appraisal report are based on information available as of the effective date(s) of valuation indicated. Although we have made reasonable efforts to estimate the impact, due to the uncertainty in real estate and financial markets it is difficult to fully assess the effect. The appraiser makes no representation as to the effect on the subject property of this event, or any event, subsequent to the effective date of the appraisal.
The value conclusions are subject to the following Extraordinary Assumptions 1 that may affect the assignment results. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions.
• None.
The value conclusions are based on the following Hypothetical Conditions2 that may affect the assignment results.
• None.
1 The definition of Extraordinary Assumptions can be found in the Glossary of Terms, which is located in the Addenda.
2 The definition of Hypothetical Conditions can be found in the Glossary of Terms, which is located in the Addenda. Mr. Wiener Page 2 March 30, 2021
The opinion of value expressed herein is subject to the certification, assumptions and limiting conditions, and all other information contained in the following written appraisal report.
Sincerely,
Michelle Zell, MAI Maren Lewis Senior Vice President Vice President NY Cert. No. 46-49921 [email protected] [email protected] (917) 748-5387 (917) 533-3141
Helen Peng, MAI, MRICS, AI-GRS Director NY Cert. No. 46-8916 [email protected] (646) 226-3013
Summary of Salient Facts & Conclusions
The subject consists of a part 11-story and part 15-story, elevator-serviced multifamily building containing 173 residential units. It is currently 72% occupied with 48 vacant, free market units. One unit is occupied rent free by the superintendent. It contains 171,988± gross square feet above grade. Property amenities include a community laundry room, a gym, a playroom, and a community theatre room. The property is in good condition.
Salient Facts
Residential Units 173 Zoning split zoned R8 Residential and R10 Residential within a C2-5 Commercial Overlay
Year Built 2003 Flood Hazard Zone Zone X
Block/Lot 1887 / 3 Exposure Time 9-12 Months
Site Area (sq. ft./ acres) 17,500± SF/ 0.402± Property Rights Appraised Leasehold and a partial acres (50%) Leased Fee
GBA (sq. ft.) 171,988 Date of Inspection January 15, 2021
Date of Report March 30, 2021
Financial Indicators
Financial Indicators Total Per SF-GBA Effective Gross Income $8,042,552 $47 Stabilized Residential Occupancy 95% Expense Ratio 46% Net Operating Income $4,325,286 $25 Capitalization Rate 3.00% Income Approach Leasehold Interest $67,100,000 $390 Income Approach 50% of Interest in Leased Fee $34,800,000 $202
Final Value Conclusions
Value Interest Appraised Date of Value Conclusion Fair Value of Leasehold Interest Leasehold Interest December 31, 2020 $67,100,000
Fair Value of 50% Interest in Leased Fee Leased Fee Interest December 31, 2020 $34,800,000 The value conclusions are subject to the following Extraordinary Assumptions 3 that may affect the assignment results. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions.
• None.
The value conclusions are based on the following Hypothetical Conditions4 that may affect the assignment results.
• None.
The opinion of value expressed herein is subject to the certification, assumptions and limiting conditions, and all other information contained in the following written appraisal report.
3 The definition of Extraordinary Assumptions can be found in the Glossary of Terms, which is located in the Addenda.
4 The definition of Hypothetical Conditions can be found in the Glossary of Terms, which is located in the Addenda.
Table of Contents
Introduction...... 9 Purpose & Date of Value ...... 9 Identification of the Client ...... 9 Intended Use & User ...... 9 Property Rights Appraised ...... 9 Property History ...... 9 Exposure Time ...... 10 Definition of Fair Value ...... 10 Scope of the Appraisal ...... 11 General Assumptions ...... 11 Data Sources ...... 12 Neighborhood & Demographic Overview ...... 13 Upper West Side at a Glance ...... 13 Neighborhood ...... 14 Demographics ...... 15 Conclusion ...... 17 Zoning Summary ...... 18 R8 and R10A Zoning ...... 18 Assessed Values & Real Estate Taxes ...... 21 Tax Rates ...... 21 Site Description ...... 23 Description of Improvements ...... 25 Structural & Mechanical ...... 25 Layout & Finishes ...... 25 Building Condition ...... 26 Summary ...... 26 Submarket Analysis ...... 27 Highest & Best Use ...... 33 As Vacant ...... 33 As Improved ...... 33 Appraisal Valuation Process ...... 35 Income Approach ...... 36 Income Analysis ...... 36 Commercial Income ...... 43 Vacancy and Collection Loss ...... 45
Bowery Valuation JOB 2101119260
7
Effective Gross Income Summary ...... 45 Operating Expense Analysis ...... 46 Stabilized Income and Expenses ...... 50 Adjusted Proforma for Leasehold Valuation ...... 51 Historical and Projected Income and Expenses ...... 52 Income Capitalization ...... 53 COVID 19 Market Discussion for Value Conclusion ...... 57 Sales Comparison Approach ...... 59 Comparable Sales Outlines ...... 60 Valuation of Leased Fee Interest ...... 66 Valuation of Leasehold interest ...... 69 Reconciliation & Final Value Opinion ...... 71 Certification ...... 72 Addenda ...... 73 Contingent & Limiting Conditions ...... 74 Rent Roll & Financial Statements ...... 79 New York City Area Analysis ...... 83 Cushman & Wakefield Property Sales Report – Manhattan Q3 2020 ...... 97 Subject Property Photos ...... 106 Map Gallery ...... 112 Qualifications ...... 114 Licenses ...... 117
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8 Introduction
Introduction
Purpose & Date of Value
The purpose of the appraisal is provide an opinion of the As Is Fair Value of the Leasehold Interest and a partial Leased Fee Interest as of December 31, 2020.
Identification of the Client
Zarasai Fund has engaged Bowery Valuation and is our client for this assignment.
Intended Use & User
The Intended Use is for asset valuation with the intention of filing an Israeli Bond on the Tel Aviv Stock Exchange (TASE) and/or in connection with ongoing financial statement(s) and reporting(s) with the TASE. We consent to the inclusion of the valuation in its entirety within the Zarasai Fund USA Limited financial statements to be published in the Tel Aviv Stock Exchange.
The Intended User of the report is Zarasai Fund and its related entities, successors and/or assigns.
Property Rights Appraised
The subject is appraised on the basis of Leasehold Interest and a partial Leased Fee Interest.5
Property History
Prior to development, 323 West 96th Street was ground leased by the Leon Igel Trust and the Tarter Family LP to Boymelgreen Developers in the fall of 2000. Hudson Park NY LLC subsequently acquired the leasehold interest in July 2007 with the leased fee interest retained by ground lessor. As indicated below, Beacon NY LLC (an entity related to Zarasai) acquired 50% of the leasehold position.
Leasehold Acquisition
Address Block / Lot Sale Date Sale Price Grantor Grantee
323 West 96th Street 1887 / 3 1/20/2016 $27,000,000 The Igel Family 1991 Trust Beacon NY LLC
We were advised by our client that Beacon NY LLC is obligated to pay an additional $4MM (for the interest acquired in January 2016) if they acquire the other 50% interest in the leasehold within three years, which did not occur. Our opinion of value, at $34,800,000 is slightly above the acquisition price. However, this relationship is reasonable as this transaction is between two parties with prior business relations. Further, the terms of the agreement suggest additional consideration which totals an amount similar to our opinion. In addition, per the lease, the ground rent increases by 10% every five years. Finally, pre-COVID, market conditions were improving; however, have since declined during 2020, and we expect the impact of COVID to be temporary.
We appraised the subject interests one year ago at which point the value of the leasehold was $70.3M and the value of the 50% interest in the Fee was $34.5M. The decline in value for the leasehold is due to a decrease in NOI due to COVID (which we expect to be temporary), and the fact there is one year less remaining on the lease.
We are unaware of any options to purchase, bids, or offers of this asset. The lease is summarized on the following page:
5 The definition of Leasehold Interest and Leased Fee Interest can be found in the Glossary of Terms, which is located in the Addenda.
Bowery Valuation JOB 2101119260
9 Introduction
Lease Summary Lessor: Leon Igel Trust/Tarter Family LP (50%) / Beacon NY LLC (50%) Lessee: Beacon NY LLC
Term Commencement: 11/1/2000 Expiration: 10/31/2099
Terms: Absolute Net
Rent Schedule 11/1/2017 - 10/31/2020 $1,375,366 11/1/2020 - 10/31/2025 $1,512,903 11/1/2025 - 10/31/2030 $1,664,193 11/1/2030 - 10/31/2035 $1,830,612 11/1/2035 - 10/31/2040 $2,013,674 11/1/2040 - 10/31/2045 $2,215,041 11/1/2045 - 10/31/2049 $2,436,545 11/1/2049 - 10/31/2054 $2,700,000 11/1/2054 - 10/31/2059 $2,970,000 11/1/2059 - 10/31/2064 $3,267,000 11/1/2064 - 10/31/2069 $3,593,700 11/1/2069 - 10/30/2074 $3,953,070 11/1/2074 - 10/31/2079 $4,348,377 11/1/2079 - 10/31/2084 $4,783,215 11/1/2084 - 10/31/2089 $5,261,536 11/1/2089 - 10/31/2094 $5,787,690 11/1/2094 - 10/31/2099 $6,366,459
Exposure Time6
It is our opinion that a normal exposure time for the subject property is between nine and twelve months. This conclusion is predicated on interviews with brokers and other real estate industry sources and on information obtained in the verification process. The value reported herein presumes such an exposure time.
Definition of Fair Value
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (ie an exit price). That definition of fair value emphasis that fair value is a market-based measurement, not an entity-specific measurement. When measuring fair value, an entity uses the assumptions that market participants would use when pricing the asset or liability under current market conditions, including assumptions about risk. As a result, an entity’s intention to hold an asset or to settle or otherwise fulfil a liability is not relevant when measuring fair value. The IFRS explains that a fair value measurement requires an entity to determine the following:
a) the particular asset or liability being measured;
b) for a non-financial asset, the highest and best use of the asset and whether the asset is used in combination with other assets or on a stand-alone basis;
c) the market in which an orderly transaction would take place for the asset or liability; and
6 The definition of Exposure Time can be found in the Glossary of Terms, which is located in the Addenda.
Bowery Valuation JOB 2101119260
10 Introduction
d) the appropriate valuation technique(s) to use when measuring fair value. The valuation technique(s) used should maximise the use of relevant observable inputs and minimize unobservable inputs. Those inputs should be consistent with the inputs a market participant would use when pricing the asset or liability.
Scope of the Appraisal
Within the course of this assignment, we have:
• Inspected several apartment interiors, the building facade, exterior entrance, interior hallways, common areas, mechanical/electrical systems, and stairs of the subject property.
• Researched and investigated the location in terms of its economic activity, development patterns, and future trends and related their impact in the market.
• Determined the Highest and Best Use of the subject property based on an analysis of all relevant factors.
• Conducted a market survey of rent and vacancy levels of similar buildings.
• Analyzed the subject's operating expense history and projections, as well as expense reports of comparable properties, in order to accurately project the stabilized cash flow.
• Projected the net operating income under stabilized operation and applied a market-derived capitalization rate to develop an opinion of value by the income approach.
• Researched and analyzed sales of competitive assets and applied the techniques of the sales comparison approach in providing an opinion of value.
• Advanced an opinion of the As Is fair value of the identified interests.
General Assumptions
Various estimates of gross building area, number of apartments, and total livable area were furnished by the owner, client, and/or their agents. This opinion of value reported herein assumes that the data provided are the most recent and accurate.
We note that our appraisers are not experts in the following domains:
• Technical Environmental Inspections: No Environmental Site Assessment report was provided in conjunction with this appraisal. If a report is commissioned and there are any environmental issues uncovered, they could affect our opinion of value reported. We recommend the services of a professional engineer for this purpose.
• Zoning Ordinances: We recommend an appropriately qualified land use attorney if a definitive determination of compliance is required.
• Building Inspections: We recommend a building engineer or professional property inspector for the inspection. Any immediate expenditures that a trained professional may determine are needed, could affect our opinion of value reported.
• Easements, Encroachments, and Restrictions: We know of no deed restrictions, private or public, that further limit the subject property's use. The research required to determine whether or not such restrictions exist, however, is beyond the scope of this appraisal assignment. Deed restrictions are a legal matter and only a title examination by an attorney or Title Company can usually uncover such restrictive covenants. Thus, we recommend a title search to determine if any such restrictions do exist.
• Building Health and Fire Codes: Our valuation assumes there are no known code violations.
Bowery Valuation JOB 2101119260
11 Introduction
Data Sources
The data contained within this appraisal was compiled from market analysis utilizing the following sources (unless otherwise noted): NYC Department of Finance, NYC Department of Buildings, NYC Department of Planning Zoning & Land Use, Claritas, CoStar, Federal Reserve, and FEMA. The subject photos were taken by Pat Ippolito on January 15, 2021, while those used for the comparable rentals and sales were sourced from the public domain. When possible, we have confirmed the reported data with parties to the transactions or those who are intimately familiar with their critical details.
Resource Verification
Data Source/Verification: Site Size Public Record Excess/ Surplus Land Tax Map Gross Size/ Units Public Record Commercial SF N/A Residential SF Appraiser's Estimate; Inspection Number of Buildings Inspection Amenities Inspection Deferred Maintenance Inspection Income Data Owner; Market Forecast Expense Data Owner; Expense Comparables
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12 Neighborhood & Demographic Overview
Neighborhood & Demographic Overview
Upper West Side at a Glance
Source: Google Maps
The Upper West Side is a neighborhood in the New York City borough of Manhattan. Its boundaries are West 110th Street to the north, Central Park to the east, 59th Street to the south, and the Hudson River to the west.
The Upper West Side is primarily residential and is home to numerous stately pre-war cooperative and condominium facilities, elegant brownstones and recently constructed luxury high-rise condominium and rental apartment buildings. A major portion of the Upper West Side has been designated a Historic District and is considered a quiet, beautiful place to live with modern day amenities. Commercial corridors such as Broadway, Amsterdam Avenue, and Columbus Avenue are filled with bars, restaurants, and boutiques. On the west side is Riverside Park and to the east is Central Park. The following demographic profile, assembled by Environics Analytics, a nationally recognized compiler of demographic data, reflects the subject’s municipality and market. All values presented herein are estimates for 2020 and all figures presented are for the subject neighborhood unless stated otherwise.
Bowery Valuation JOB 2101119260
13 Neighborhood & Demographic Overview
2000 Area Census 2010 Census Change 2020 Est. Change 2025 Projected Change Population Upper West Side 203,991 203,770 -0.01% 204,337 0.03% 204,143 -0.02% Manhattan 1,537,201 1,585,873 0.31% 1,630,021 0.27% 1,642,453 0.15% Households Upper West Side 111,377 106,498 -0.45% 107,507 0.09% 107,658 0.03% Manhattan 738,646 763,846 0.34% 788,683 0.32% 795,702 0.18% Family Households Upper West Side 40,506 42,823 0.56% 43,111 0.07% 43,128 0.01% Manhattan 301,965 308,828 0.22% 316,807 0.26% 319,058 0.14%
Neighborhood
Housing
Households by Household Size
60% 50% HOUSEHOLDS 40% 107,507 30% AVG HOUSEHOLD SIZE 20% 1.85 10% 0%
1-Person 2-Person 3-Person 4-Person 5+
Upper West Side Manhattan
Owner Occupied Housing Units by Value
40% 30% 20% 10%
0% MEDIAN HOUSING VALUE
$1,348,363
Upper West Side Manhattan
Bowery Valuation JOB 2101119260
14 Neighborhood & Demographic Overview
Housing Units by Units in Structure
100% 80%
60% NEIGHBORHOOD HOUSING UNITS
40% 121,122 20%
0% COUNTY/CITY HOUSING UNITS Single 2 Units 3 - 4 Units 5 to 19 20+ Units Other Family Units 883,185
Upper West Side Manhattan
Housing Units by Year Structure Built
60% 50%
40% NEIGHBORHOOD MEDIAN YR STRUCTURE BUILT 30% 1940 20% 10% COUNTY/CITY MEDIAN YR STRUCTURE BUILT 0% < 1939 1940 - 1969 1970 - 1999 2000 + 1954
Upper West Side Manhattan
Demographics
Population
Population by Age
40% POPULATION
30% 204,338 20% MEDIAN AGE 10% 44 0% 0 -17 18 - 34 35 - 54 55+ AVERAGE AGE
Upper West Side Manhattan 44
Bowery Valuation JOB 2101119260
15 Neighborhood & Demographic Overview
Households by Household Income
50%
40%
30% MEDIAN HHI
20% $120,790
10% AVERAGE HHI 0% < $25K $25 - 49K $50 - 99K $100 - 149K $150K + $189,032
Upper West Side Manhattan
Employment & Transportation
Top 5 Employment Occupations in Neighborhood
21,742 Management
12,391 Arts/Design/Entertainment/Sports/Media
11,728 Sales/Related
10,841 Business/Financial Operations
9,839 Education/Training/Library
Travel Time to Work
50% 40% 30%
20% AVG TRAVEL TIME TO WORK 10% 0% 36 minutes
Less than 15 15 - 29 30 - 44 45 - 59 60 or more Minutes Minutes Minutes Minutes Minutes
Upper West Side Manhattan
Bowery Valuation JOB 2101119260
16 Neighborhood & Demographic Overview
Transport Mode to Work in Neighborhood
Public Transport 66.9%
Walked 10.6%
Worked at Home 8.9%
Drove Alone 5.5%
Other Means 3.9%
Bicycle 2.1%
Carpooled 2.0%
Transport Modes and Access
The Henry Hudson Parkway is on the western border of the neighborhood. Broadway is a major road that runs through the middle of the Upper West Side north to south.
Subway transportation is available along Broadway and Central Park West. The Nos. 1, 2, and 3 trains run along Broadway and the A, B, C, and D trains run along Central Park West. There are five different bus routes – the M5, M7, M10, M11, M104 buses – that go up and down the Upper West Side, and the M57 that goes up West End Avenue for 15 blocks in the neighborhood. Additionally, crosstown routes include the M66, M72, M79 SBS, M86 SBS, M96, M106. The M20 terminates at Lincoln Center.
The nearest major airports are LaGuardia Airport (9 mi.), John F. Kennedy International Airport (18.4 mi.), and Newark Liberty International Airport (26.8 mi).
Conclusion
The Upper West Side is conveniently located near linkages serving the employment centers of Manhattan and has many local cultural and educational attractions such as the Museum of Natural History, Lincoln Center for the Performing Arts, Columbia University, and Mt. Sinai St. Luke’s Hospital Center. Local residents also benefit from proximity to Central Park and Riverside Park, which flank the neighborhood on the east and west side, respectively. Development activity in the area is expected to continue and the subject is well positioned to benefit from the continued evolution of the neighborhood.
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17 Zoning Summary
Zoning Summary
The subject is split zoned R8 Residential and R10 Residential within a C2-5 Commercial Overlay zone. Below is a summary of the subject property's compliance with regard to use and bulk regulations.
R8 and R10A Zoning
Apartment buildings in R8 districts can range from mid-rise, eight- to ten-story buildings to much taller buildings set back from the street on large zoning lots. This high-density residential district is mapped along the Grand Concourse in the Bronx and on the edge of Brooklyn Heights. R8 districts are also widely mapped in Manhattan neighborhoods, such as Washington Heights. New buildings in R8 districts may be developed under either height factor regulations or the optional Quality Housing regulations that often reflect the older, pre-1961 neighborhood streetscape.
Height Factor Regulations
The floor area ratio (FAR) for height factor development in R8 districts ranges from 0.94 to 6.02; the open space ratio (OSR) ranges from 5.9 to 11.9. A taller building may be obtained by providing more open space. In the diagram, for example, 64% of the zoning lot with the 17-story building must be open space (6.02 FAR x 10.7 OSR). Thus, the maximum FAR is achievable only where the zoning lot is large enough to accommodate a practical building footprint as well as the required amount of open space. There are no absolute height limits; the building must be set within a sky exposure plane which, in R8 districts, begins at a height of 85 feet above the street line and then slopes inward over the zoning lot.
Off-street parking is required for only 40% of dwelling units since these districts are easily accessed by mass transit. It can be waived if 15 or fewer parking spaces are required or if the zoning lot is 10,000 square feet or less.
R8 Height Factor Regulations
Min. Required District FAR OSR Building Height Parking1 R8 0.94-6.02 5.9-11.9 Governed by sky exposure plane 40% of dwelling units
1 20% if zoning lot is between 10,001 and 15,000 sf; waived if zoning lot is 10,000 sf or less, or if 15 or fewer spaced required.
Quality Housing Regulations
The optional Quality Housing regulations in R8 districts utilize height limits to produce lower, high lot coverage buildings set at or near the street line. With floor area ratio (FAR) equal to or greater than can be achieved using R8 height factor regulations, the optional Quality Housing regulations produce new buildings in keeping with many of the city’s established neighborhoods.
The maximum FAR is 6.02, and the base height before setback is 60 to 80 feet with a maximum building height of 105 feet. On wide streets outside the Manhattan Core, the FAR rises to 7.2, and the base height before setback is 60 to 85 feet with a maximum building height of 120 feet. The street wall of the building must extend along the width of the zoning lot and at least 70% of the street wall must be within eight feet of the street line.
The area between a building’s street wall and the street line must be planted and the building must have interior amenities for residents pursuant to the Quality Housing Program.
Off-street parking requirements are the same as for height factor buildings: 40% of the dwelling units.
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18 Zoning Summary
R8 Quality Housing Option
Max Corner Lot Max Interior Lot Max Building Min. Required R8 Type Max FAR3 Coverage Coverage Base Height Height Parking4 Wide Street1 7.2 80% 70% 60-85 ft 120 ft 40% of dwelling units Narrow Street2 6.02 80% 70% 60-85 ft 105 ft 40% of dwelling units
1 Outside the Manhattan Core 2 Includes wide streets within the Manhattan Core 3 7.2 FAR with Inclusionary Housing designated area 4 20% if zoning lot is between 10,001 and 15,000; waived if zoning lot is 10,000 sf or less, or if 15 or fewer spaces required.
The Quality Housing contextual regulations, mandatory in R10A districts, typically produce the substantial apartment buildings set on the avenues and wide streets of Manhattan, such as West End Avenue and Broadway on the Upper West Side. Commercial districts which are R10A residential district equivalent, such as C4-6A districts on Broadway and C2-8A districts on some blocks of East 96th Street, are lined with large apartment houses with street level stores. Towers are not permitted in R10A districts.
Typical new buildings are 22-story apartment buildings with high lot coverage and street walls set at or near the street line. The floor area ratio (FAR) is 10.0. Residential and mixed buildings can receive a residential floor area bonus for the creation or preservation of affordable housing, on-site or off-site, pursuant to the Inclusionary Housing Program. The maximum base height before setback, which is 150 feet within 100 feet of a wide street and 125 feet on a narrow street, is designed to match the height of many older apartment buildings. Above the base height, the required minimum setback is 10 feet on a wide street and 15 feet on a narrow street. The maximum height of a building is 210 feet within 100 feet of a wide street and 185 feet beyond 100 feet of a wide street.
Off-street parking is not required in the Manhattan Core. Elsewhere, it is required for 40% of the dwelling units.
R10A General Residence District: Quality housing Regulations
Max Corner Max Interior Min. Required R10A1 Type Max FAR Lot Coverage Lot Coverage Base Height Max Building Height Parking3 Wide Street 10.02 100% 70% 125-150 ft 210 ft 40% of dwelling units4 Narrow Street 10.02 100% 70% 60-125 ft 185 ft 40% of dwelling units4
1 Commercial districts with an R10A residential district equivalent are C1-9A, C2-8A, C4-6A, C4-7A, C5-1A, C5-2A, and C6-4A 2 Up to 12.0 FAR with inclusionary Housing Program bonus 3 Waived in Manhattan Core 4 20% is zoning lot is between 10,001 and 15,000 sf; waived if the zoning lot is 10,000 sf or less, or if 15 or fewer spaces are required.
C1-1 through C1-5 and C2-1 through C2-5 districts are commercial overlays mapped within residence districts. Mapped along streets that serve local retail needs, they are found extensively throughout the city’s lower- and medium-density areas and occasionally in higher-density districts.
Typical retail uses include neighborhood grocery stores, restaurants, and beauty parlors. C2 districts permit a slightly wider range of uses, such as funeral homes and repair services. In mixed buildings, commercial uses are limited to one or two floors and must always be located below the residential use.
When commercial overlays are mapped in R1 through R5 districts, the maximum commercial floor area ratio (FAR) is 1.0; when mapped in R6 through R10 districts, the maximum commercial FAR is 2.0. Commercial buildings are subject to commercial bulk rules.
Overlay districts differ from other commercial districts in that residential bulk is governed by the residence district within which the overlay is mapped. All other commercial districts that permit residential use are assigned a specific residential district equivalent. Unless otherwise indicated on the zoning maps, the depth of overlay districts ranges from 100 to 200 feet.
Bowery Valuation JOB 2101119260
19 Zoning Summary
Generally, the lower the numerical suffix, the more off-street parking is required. For example, in C1-1 districts, typically mapped in outlying areas of the city, a large food store would require one parking space for every 100 square feet of floor area, whereas no parking is required in C1-5 districts, which are well served by mass transit.
C1 & C2 Commercial Overlay Districts
District Commercial FAR within R1-R5 Commercial FAR within R6-R10 Depth of Overlay District (in feet) C1-1 1.0 2.0 200 C1-2 1.0 2.0 150 C1-3 1.0 2.0 150 C1-4 1.0 2.0 100 C1-5 1.0 2.0 100 C2-1 1.0 2.0 150 C2-2 1.0 2.0 150 C2-3 1.0 2.0 150 C2-4 1.0 2.0 100 C2-5 1.0 2.0 100
Conformity
The subject is split zoned. Based on the maximum effective FAR (blended) of 8.01, 140,175 square feet of bulk development is permitted on the site. Thus, with 171,988 square feet of GBA above grade, the subject is a legal non-conforming (grandfathered) use. There is no encroachment of the structure of the property on the sidewalk or other property boundaries that we know of. Finally, the property conforms in terms of age, condition, and construction to surrounding improvements within the immediate neighborhood.
It should be noted that we are not experts in the interpretation of complex zoning ordinances. The determination of compliance, however, is beyond the scope of a real estate appraisal. We know of no deed restrictions, private or public, that further limit the subject's use. The research required to determine whether or not such restrictions exist, however, is beyond the scope of this appraisal assignment. Deed restrictions are a legal matter, and only a title examination by an attorney or title company can usually uncover such restrictive covenants. Thus, we recommend a title search to determine if any such restrictions do exist.
We have also included information pertinent to the Property’s zoning classification regarding the Reconstruction clause, including rebuildability:
According to the New York City Zoning Code: If a non-complying building or other structure is damaged or destroyed by any means, including any demolition, to the extent of 75 percent or more of its total floor area, such building may be reconstructed only in accordance with the applicable district bulk regulations, except in the case of a one- or two-family residence, such residence may be reconstructed provided that such reconstruction shall not create a new non-compliance nor increase the pre-existing degree of non-compliance with the applicable bulk regulations.
If the extent of such damage or destruction is less than 75% percent of the floor area and more than 25 percent of the perimeter walls of such existing building, and the replacement of any portion thereof, shall be considered a development.
In the event that any demolition, damage or destruction of an existing building other than one-or two-family residences produces an unsafe condition requiring a Department of Buildings order or permit for further demolition of floor area to remove or rectify the unsafe condition, and the aggregate floor area demolished, damaged or destroyed including that ordered or permitted by the Department of Buildings constitutes 75 percent of more of the total floor area of such building, then such building may be reconstructed only in accordance with the applicable district bulk regulations.
Bowery Valuation JOB 2101119260
20 Assessed Values & Real Estate Taxes
Assessed Values & Real Estate Taxes
The subject is designated on New York County Tax Maps as Block/Lot 1887 / 3. The current assessed value is shown below:
2021/22 Tentative Assessed Value
Actual Transitional Land $954,000 $954,000 Building + $14,859,000 + $16,475,130 Total $15,813,000 $17,429,130 Tax Rates
The City of New York has four tax categories for real property, of which the subject is currently considered Class 2. The following is a historical analysis of tax rates:
Real Estate Tax Rates
Year Class 1 Class 2 Class 3 Class 4 2008/2009 16.196 12.596 12.137 10.241 2009/2010 17.088 13.241 12.743 10.426 2010/2011 17.364 13.353 12.631 10.312 2011/2012 18.205 13.433 12.473 10.152 2012/2013 18.569 13.181 12.477 10.288 2013/2014 19.191 13.145 11.902 10.323 2014/2015 19.157 12.855 11.125 10.684 2015/2016 19.554 12.883 10.813 10.656 2016/2017 19.991 12.892 10.934 10.574 2017/2018 20.385 12.719 11.891 10.514 2018/2019 20.919 12.612 12.093 10.514 2019/2020 21.167 12.473 12.536 10.537 2020/2021 21.045 12.267 12.826 10.694
The 2020/2021 Class 2 tax rate is 12.267%, applied to the assessed value below.
2020/21 Tax Liability Forecast
Taxable Assessed Value $15,813,000 Tax Rate x 12.267% Tax Liability $1,939,781 Tax Liability Per SF $11.28 In order to support the forecasted real estate tax liability, we surveyed those of comparable mixed- use buildings in the area:
Bowery Valuation JOB 2101119260
21 Assessed Values & Real Estate Taxes
Competitive RE Tax Assessment
Comparable Year Built SF Taxes/SF 641 Columbus Avenue 1972 156,274 $11.27 2481 Broadway 1925 132,975 $9.04 400 Cathedral Parkway 1908 117,276 $10.67 2228 Broadway 2016 147,240 $15.54 20 West 86th Street 1929 103,112 $11.51 Min $9.04 Avg $11.61 Max $15.54
The comparables range from $9.04 to $15.54 per square foot and average $11.61 per square foot. The subject’s taxes of $11.28 per square foot fall within the market range and appear reasonable. Thus, we apply the current tax liability in our analysis.
Bowery Valuation JOB 2101119260
22 Site Description
Site Description
Location The subject is located on the north side of West 96th Street between Riverside Drive and West End Avenue in the Upper West Side neighborhood of New York County, in the State of New York.
Surrounding Uses It is located on a mixed-use block.
Site Area 0.402± acres./ 17,500± square feet
Shape Irregular
Frontage Street Frontage (ft) West 96th Street 175 feet
Topography Generally level
Drainage Assumed adequate
Access The primary access is from West 96th Street.
Bowery Valuation JOB 2101119260
23 Site Description
Paving All roads are paved with asphalt and are in satisfactory condition.
Street Drainage Street drainage is collected by gravity into the local sewer storm system mains.
Street Lighting Adequate
Utilities & Services Water/Sewer and Refuse – Municipal Police & Fire Protection – Municipal Gas & Electric – Con Edison
Hazardous Substances We observed no evidence of toxic or hazardous substances that require remediation during our inspection of the site.
Flood Hazard Status7 Located in "Zone X" on the National Flood Insurance Program Rate Map dated September 5, 2007 Community Panel #3604970086F. Flood zone X is a low- to moderate-risk area.
Conclusion The site is like others in the vicinity, and there are no negative external factors. Site is adequate for its current use.
7 The flood map can be found in the Map Gallery, which is in the Addenda.
Bowery Valuation JOB 2101119260
24 Description of Improvements
Description of Improvements
The subject consists of a part 11-story and part 15-story, elevator-serviced multifamily building containing 173 residential units. It is currently 72% occupied with 48 vacant units and 1 unit occupied rent free by the superintendent. It contains 171,988± gross square feet above grade. It was built in 2003.
Structural & Mechanical
Structural
Foundation Poured concrete
Structural System: Poured concrete/steel beams
Exterior Walls Granite façade on the first level with pre-cast concrete on the upper levels.
Roof Flat, built-up composition. There is a sun deck on the roof and private terraces for the penthouse units.
Windows Sliding thermopane windows in aluminum frames.
Mechanicals
Heating/ Five gas-fired boilers circulating hot water. All apartments have individual PTAC units Cooling Systems/ and the common areas are cooled by 20,000 and 30,000 BTU units located on level C1 Hot water (cellar) and the second floor.
Electric Circuit breakers, switches, lighting fixtures and outlets. The residential tenants are directly metered for electric by Con Edison.
Plumbing Copper.
Sprinklers Fully sprinklered.
Layout & Finishes
Interior Layout and Finish
Basement There are two full basement levels that house mechanical equipment (boiler, electric meters) and storage, as well as a laundry room, a children’s play room, a gym, a community theatre room, and the bottom floors of the townhouse units. There is a storage room with cages for tenant storage and a bicycle room.
Lobby/Common Areas The lobby and foyer are well-appointed with stone floors, paper and wood trim walls and decorative lighting. The common hallways are finished with carpeted floors and painted or papered walls with decorative lighting.
Laundry 15 washers and 16 dryers in the basement.
Stairwells The building has 3 stairwells extending from the basement to the roof. The townhouse units have interior stairwells, as do the duplex penthouse units.
Security Door locks and apartment buzzer/intercom entry system. 24/7 doorman building
Amenities A community laundry room, a gym, a playroom, and a community theatre room
Bowery Valuation JOB 2101119260
25 Description of Improvements
Parking None
Commercial Space 1 office space on the first floor
Unit Finishes
Baths Baths have ceramic tile floor and wainscot, painted sheetrock walls and ceilings, tub/shower or stall showers in units with multiple bathrooms, pedestal or vanity sinks and standard johns.
Kitchens Kitchens have wood floors, wood cabinets and granite countertops, stainless steel appliances, including 4-burner gas stove with oven, refrigerator, dishwasher, microwave, and stainless-steel sink.
Living area/Bedrooms Hardwood flooring in living areas. Painted sheetrock walls and ceilings.
Residential Unit Distribution Summary
Total Avg SF / Unit Unit Type No. of Units Rooms / Unit Rooms (Est.) Total Leasable SF Studio 28 2.0 56 506 14,168 One-Bedroom 93 3.0 279 646 60,078 Two-Bedroom 29 4.0 116 956 27,724 Duplex Penthouse 13 5.0 65 1,278 16,614 Townhouse 10 6.0 60 1,802 18,020 Totals/Average 173 576 790 136,604
Building Condition
Condition
Based on our inspection, the subject is in good condition. Constructed in 2003, periodic maintenance has occurred as necessary. Additionally, mechanical/electrical and structural systems are modern. Thus, this asset is in good condition relative to similar buildings in the area.
Deferred Maintenance
We did not receive a Physical Risk Report. Based on our inspection, which included a tour of the common areas, a selection of units, the mechanical areas, and roof there were no apparent adverse environmental conditions. Based on our site inspection, the subject is in good condition, and we did not notice any deferred maintenance.
Remaining Economic Life
The subject was constructed in 2003. Similar buildings have a typical economic life of 50 years and we forecast and effective age of 11 years with a remaining economic life of 39 years.
Summary
The subject is improved with a part 11 and part 15-story elevator serviced mixed-use building with 173 residential units. The subject improvements are considered to be in good condition overall and relatively well maintained and functional for its use.
The information contained in the sections entitled "Site Description" and "Building Description" was obtained from our field inspection on January 15, 2021, information provided by ownership, CoStar, RealQuest, and zoning and assessment records.
Bowery Valuation JOB 2101119260
26 Submarket Analysis
Submarket Analysis
Multifamily Submarket Analysis - Upper West Side
The information contained in this section was provided using Costar data as of 2020 Q3 for the Upper West Side Submarket.
Overview
With quiet streets, an abundance of private schools, and a picturesque location near Central Park, the Upper West Side is one of the most desirable neighborhoods in the country and average rents rank near the top of multifamily submarkets nationwide. Strong net absorption here has boosted occupancies in recent years, despite the addition of more than 1,500 new units since 2016. Over the past year, vacancies have risen sharply in the Upper West Side, starting with the 19Q4 delivery of more than 600 units at GID Development Group's massive Waterline Square development. The ongoing pandemic has played a role in stunting apartment demand here, as thousands of jobs have already been lost in New York City and renters are more likely to renew or flee the city rather than relocate. As a result, vacancies stood above 3% at the end of 20Q2.
The in-migration of families will continue to drive strong demand, as a relatively high proportion of units here have at least two bedrooms. Columbia's expansion in Morningside Heights is also helping drive demand to the northernmost reaches of the submarket. With a notable number of students and first-time renters living here, units in pre-war buildings should continue to see increased demand. It should be noted that as of 20Q3, Columbia University will fully institute remote learning for its Fall semester which may affect renter demand in the second half of the year. Rent growth has been solid over the past decade, with cumulative gains nearly reaching 20%. Rent growth reached a four-year high in 2018 and topped 2.5% in 2019. With lessening demand due to the coronavirus, landlords are already lowering rates during the peak rental season with annual rent growth in negative territory at the end of 2020 Q3.
Bowery Valuation JOB 2101119260
27 Submarket Analysis
Upper West Side QoQ Trend YoY Trend New York - NY QoQ Trend YoY Trend Effective Rent/Unit $4,452 -2.1% -4.9% $2,714 -1.6% -2.9% Vacancy Rate 4.41% 36 bps 205 bps 3.81% 37 bps 148 bps Average Price/Unit (L) $751,044 -1.6% -4.8% $392,973 -1.1% -2.8% Market Cap Rate 3.72% 0 bps 10 bps 4.49% 2 bps 4 bps
Supply & Demand
Throughout New York City, apartment fundamentals are being tested by mounting job losses, economic uncertainty, and work-from-anywhere capabilities due to the ongoing pandemic. Many New Yorkers will likely be staying put in their current living arrangements for the near future which will lead to declining levels of demand and increased vacancies. Tepid demand for new apartments has caused vacancies for Class A & B buildings to drift higher than the submarket average as more than 600 rental units at GID Development Group's Waterline Square Development delivered in 19Q4. Vacancies increased further, to 4.4%, at the end of 2020 Q3 as the health crisis blunted renter demand.
Demand on the Upper West Side should continue being driven largely by affluent families. With its ease of commuting, quiet side streets, excellent schools, proximity to Central Park, and premier cultural institutions, the Upper West Side has long been an enclave for larger households. The continued influx of affluent families has resulted in a spate of high-profile condo projects, but the rental market is also benefiting. Nearly 60% of families are renters, and that proportion has stayed stable even as incomes have risen. High prices and limited inventory relative to demand should help contain competition from condos. The cost to buy here is steep. High-end condos are far out of reach for most, with a median asking price of nearly $2,500/SF in neighborhoods like Central Park West.
Columbia's expansion in Morningside Heights should continue to drive demand to the northernmost reaches of the submarket. With a notable number of students and first-time renters living here, units in pre-war buildings should continue to see increased demand. However, with Columbia University fully instituting remote learning for the Fall semester, absorption levels may be unimpressive in the second half of 2020.
Absorption Share & Vacancy Rate Change in BPS 2.0% 5% 4.41% 205 1.5% 4%
1.0% 160 3% 2.36% 0.5%
2% 0.0%
1% -0.5% 36 -1.0% 0% '15 Q3 '16 Q3 '17 Q3 '18 Q3 '19 Q3 '20 Q3 Absorption as % of Inventory (L) Inventory Growth (L) Vacancy Rate (R) 1 Yr Rolling Avg. (R) 3 Yrs 1 Yr Quarterly
Bowery Valuation JOB 2101119260
28 Submarket Analysis
Rent
After finding room to grow, rent growth topped 2% in 2018, which was a four-year high, and was measured at about 3% in Class A & B properties. Rent growth was at an even better pace last year, topping 2.5%. Net absorption has consistently been positive over the past decade, and the main culprit for limited rent growth in past years was the abundance of new supply hitting the submarket. More than 600 units delivered in 2019 which has likely played a role in moderating rent growth during 20Q1. Tepid demand and increased vacancies likely played a larger role in the declining daily asking rents which led to negative annual rental growth measured in 2020 Q2 and Q3.
Some of the most expensive rents in New York City and the entire country can be found in the Upper West Side. At around $4,700/month, only the Lower West Side Submarket—which includes Soho, Greenwich Village, and Tribeca— has higher average rents. On a per square foot basis, rents average just under $6/SF across the submarket. Properties in the Class A & B segment, and especially in recent construction, rent for much higher than the submarket average. For example, average rents are nearly $10/SF at The Encore, a 256-unit luxury high-rise that opened in 2016. Expensive rents have not deterred demand at the property, which was nearly fully occupied in 20Q3.
Market & Submarket Rents - Delta Quarterly Rent Growth $5,000 $1,900
0.3% $4,452 0.2% $4,500 $1,850
0.0% -0.3%-0.2% $4,000 $1,800
-1.0% -1.0% $3,500 $1,750
-1.6% -1.7% $3,000 $1,700 $2,714 -2.1%
$2,500 $1,650 '15 Q3 '16 Q3 '17 Q3 '18 Q3 '19 Q3 '20 Q3 '19 Q3 '19 Q4 '20 Q1 '20 Q2 '20 Q3 Delta (R) New York - NY Upper West Side New York - NY Upper West Side
Construction & Future Supply
Building from the ground-up is no picnic in Manhattan, but the Upper West Side has added more inventory than most submarkets in this past cycle. The inventory has grown by more than 3,000 units since the start of 2010, a greater unit total compared to other Northern Manhattan neighborhoods like the Upper East Side and Harlem. More recently, about 600 units have delivered in 19Q4 alone and more than 300 units are underway as of 20Q3, though most are not expected to deliver until the end of 2021.
New supply will intensify competition for renters, and the roughly 650 units that came to market in 2019 is one of the largest inventory additions over the past decade. The majority of underway supply, both in the rental and for- sale market, is attributable to GID Development Group's massive Waterline Square development. The project will total 1,118 units, in a mix of rentals and condos, across three neighboring high-rises and move-ins commenced in 19Q4. The three properties are linked by The Waterline Club, a three-story fitness/leisure center and spa. The club is a boundary-pushing amenity that will include full-size tennis, squash, and basketball courts; a 25-meter pool, hot tub, and sauna; a bowling alley and game room; a screening room, and art and music studios; among other luxury offerings. Services for children and pets will also be provided.
Bowery Valuation JOB 2101119260
29 Submarket Analysis
Speaking to the success of new deliveries here, at 222W80, Friedland Properties constructed a 72-unit rental that opened in June 2018. The company secured two mortgage loans totaling $108 million from Wells Fargo in September 2015 to assist construction. The property largely targeted families with a unit mix of only two- and three- bedrooms. The community was 92% leased six months after opening. According to The New York Times, the majority of the leases were signed to families with children and empty nesters with rooms for children to visit. With rents ranging from $10,000/month to $25,000/month, the developer did not spare any expense on finishes that could compete with luxury condos.
Construction & Share of Inventory 1,800 3.5%
1,600 3.0% 1,400 2.5% 1,200
1,000 2.0%
800 1.5%
600 1.0% 400 0.5% 200
0 0.0% '15 '16 '17 '18 '19 '20 Under Construction Units Share of Inventory (R) Historical Avg. (R)
Capital Markets
Investment activity has boomed over the past decade. Transaction volume has surpassed $200 million in every year since the recession and reached a cyclical peak of more than $1.5 billion in 2018. Sales volume has been supported by investors targeting assets for conversions, as well as for long-term holds. The investment scene was relatively quiet in 2019, however, with about $280 million trading hands, the lowest total since 2010. Investment has declined further in 2020 with the coronavirus outbreak causing wide-scale financial disruptions. Even potential buyers that are relatively well-positioned may not be able to decipher a clear investment strategy until the pandemic is under control. Sales volume was already on a reduced pace, with about $17 million traded in 20Q1. Activity did increase in 20Q2 with $81 million trading hands. The sale of 166 W 75th Street for $37 million helped drive much of the activity in the second quarter. In perhaps a sign of the times, the building sold for 13% less than what was paid in 2013.
Bowery Valuation JOB 2101119260
30 Submarket Analysis
Transactions - Total Volume ($) and Transaction Count (#) $800 25
$700 Millions 20 $600
$500 15
$400
10 $300
$200 5 $100
$0 0 '15 Q3 '16 Q3 '17 Q3 '18 Q3 '19 Q3 '20 Q3 Sales Volume (L) # of Transactions (R)
Prior to the pandemic, repeat sales illustrated the broader trend of prices appreciating throughout this cycle. In March 2018, A&E Real Estate Holdings purchased the 414 units at Stonehenge Village for $287 million, or $693,000/unit, at a 3.5% cap rate. This is significantly more than the $100 million Stonehenge Partners paid for the property in May 2005. Additionally, in November 2016, Clipper Equity acquired the Brewster Luxury Apartments for $172.5 million (more than $1.6 million/unit)—76% above the asset's valuation when it changed hands in 2012. The property comprises 107 units and asking rents on currently listed units range from around $6/SF to $8.50/SF. This sale represented the highest price-per-unit sale in the New York metro for 2016.
Average Price/Unit (L) & Cap Rates (R) Annual Growth $850,000 4% 3.8%
3.79% 2.8% $800,000 3.72% 1.5% 3.62% $750,000
-0.5% $700,000
-2.8% $650,000
-4.8% $600,000 3% '15 Q3 '16 Q3 '17 Q3 '18 Q3 '19 Q3 '20 Q3 5 Yr 3 Yr 1 Yr Average Price/Unit (L) Cap Rate (R) Market Submarket
Bowery Valuation JOB 2101119260
31 Submarket Analysis
Conclusion
Due to a variety of factors such as: heavy job losses, unemployment benefits set to expire in the third quarter, and a cautious reopening plan, the ongoing health crisis has already disrupted New York City's multifamily market. Reports of missed rent payments in certain pockets of the city and a work-from-anywhere lifestyle are other underlying issues that may cause fundamentals to weaken further. The submarket drives demand from affluent residents, but over the last two quarters, demand has disappeared, and vacancy rates have expanded at a rapid rate. As such, rents are dropping at a rate that is outpacing many submarkets. Demand is expected to remain weak in the short term and rents will continue to drop into 2021; however, the submarket is well positioned for long term growth.
Bowery Valuation JOB 2101119260
32 Highest & Best Use
Highest & Best Use
In determining highest and best use, we have considered the current trends of supply and demand on the market, current zoning regulations and other possible restrictions, and Neighboring land uses.
It is to be recognized that in cases where a site has existing improvements on it, the highest and best use may be determined to be different from the existing use. The existing use will continue, however, unless and until land value in its highest and best use exceeds the total value of the property in its existing use.
In estimating highest and best use, alternative uses8, such as the legally permissible use, the physically possible use, the financially feasibility, and the highest and best use, are considered and tested for the subject site.
As Vacant
Legally Permissible The subject is split zoned R8 Residential and R10 Residential within a C2-5 Commercial Overlay, which permits residential and commercial uses as of right. Based on the maximum effective (blended) FAR of 8.01 and lot area of 17,500 square feet, 140,175 square feet of buildable area is permitted on site. There are no zoning changes anticipated and no easements or encroachments that preclude development.
Physically Possible The site contains 17,500 square feet. The size falls within the range of improved sites in the area. All necessary utilities are available, and the site appears functional for a variety of permitted uses.
Financially Feasible The subject is located within a predominantly mixed-use district, and there are new mixed-use properties in the neighborhood. Based on our analysis of the market, there is sufficient demand for mixed-use residential and commercial properties. Therefore, market conditions are such that mixed-use residential and commercial is feasible, as the value would sufficiently exceed the cost plus developer’s profit.
Maximally Productive/ All legally permissible, physically possible, and financially feasible uses of the site, as Highest and Best Use vacant, have been presented and examined. In conclusion, it is our opinion that the highest and best use of the subject, as vacant, is to develop a mixed-use residential and commercial property.
As Improved
Legally Permissible The subject is split zoned R8 Residential and R10 Residential within a C2-5 Commercial Overlay, which permits residential and commercial uses as of right. The subject is a part 11 and part 15-story elevator serviced mixed-use building. The subject is assumed to be legal with regards to bulk regulations and is legally conforming with regards to the allowable uses.
Physically Possible The subject is improved with a part 11 and part 15-story elevator serviced mixed-use building with 173 residential units. As noted above, the current improvements comply with current zoning. The subject improvements are considered to be in good condition overall and relatively well maintained and functional for its use.
Financially Feasible The subject is located within a predominantly mixed-use district, and there are new mixed-use buildings in the neighborhood. As improved, the subject is generating a positive net cash flow and an adequate return to the owners. Therefore, the current use is financially feasible.
8 The definitions of these alternative uses can be found in the Glossary of Terms, which is located in the Addenda.
Bowery Valuation JOB 2101119260
33 Highest & Best Use
Maximally Productive/ All legally permissible, physically possible, and financially feasible uses of the site, as Highest and Best Use improved, have been presented and examined.
It is our opinion that the highest and best use of the subject, as improved, given the current improvements is its current use as a part 11 and part 15-story elevator serviced mixed-use building.
Conclusion Based on the above analysis, continued residential use is concluded to be the highest and best use as improved.
Most Probable Buyer The most likely buyer is a large investor/owner of similar mixed-use buildings.
Bowery Valuation JOB 2101119260
34 Appraisal Valuation Process
Appraisal Valuation Process
The estimated values arrived at by the approaches to value used in this report are as follows:
The Cost Approach is based on the understanding that market participants relate value to cost. In the Cost Approach a property is valued based on a comparison with the cost to build a new or substitute property. The cost estimate is adjusted for all depreciation affecting the existing property. This approach traditionally reflects a good indicator of value when the improvements being appraised are new or close to new or when the property has unique or specialized improvements.
The Income Capitalization Approach reflects an analysis of a property’s capacity to generate future income and capitalizes the income into an indication of present value. This approach reflects the market’s perception of a relationship between a property’s potential income and its fair value. It is a strong indicator of value when market rents, vacancy rates, stabilized expenses, capitalization/discount rates are based on reliable market data. The two common valuation techniques associated with the Income Capitalization Approach are direct capitalization and the discounted cash flow (DCF) analysis, with one or both methods applied as appropriate. This approach is widely used in appraising income producing properties.
The Sales Comparison Approach assumes that an informed purchaser would pay no more for a property than the cost of acquiring another existing property with similar utility. This approach is reliable in an active market with sufficient sales data where few differences exist between the comparable sales and the subject, and the sales data collected is credible and accurate. Similar property types in competitive locations tend to sell within a consistent range, and this factor makes valuation on a per square foot and per unit basis a strong predictor of value. The Sales Comparison Approach is often relied upon for owner-user properties. For leased properties, this approach is more often considered as secondary support for the Income Approach.
Each approach applied is then reconciled to a final value conclusion after weighing the quantity and quality of data analyzed and the applicability of each approach to the subject property type.
Approaches to Value Applied
Approach Applicability to Subject Used in Assignment Cost Approach Not Applicable No Income Approach Applicable Yes Sales Approach Applicable Yes
The Cost Approach is not used as investors typically give nominal weight to this analysis if the asset is operating on a stabilized basis and its cost bears little relationship to the value. The exclusion of this approach is not considered to impact the reliability of the appraisal.
Bowery Valuation JOB 2101119260
35 Income Approach
Income Approach
In the Income Capitalization Approach, a property's capacity to generate future benefits is analyzed; the forecasted income is capitalized into an indication of present value. Definitions of commonly used measures of anticipated benefits are defined in the Glossary of Terms within the Addenda.
The income capitalization approach supports two methodologies: direct and yield capitalization. Investors in the local market typically utilize a direct capitalization when making investment decisions for this asset class, therefore we conclude that the direct capitalization method is appropriate to apply to the subject.
Income Analysis
Current Residential Rent Roll
323 West 96th Street contains 173 residential units, 48 of which are vacant and 1 of which is occupied by the superintendent. It is generating $6,266,572 of total annual residential income. The rent roll, included in the addenda, is summarized by unit type below. We note that this table only includes the occupied units.
In-Place Rent Roll Summary by Unit Type
No. of Unit Units Rental Range Per Month Total Annual Rent Avg. Rent Per Month Studio 27 $2,600 - $2,850 $887,510 $2,739 One-Bedroom 54 $3,225 - $4,275 $2,294,472 $3,541 Two-Bedroom 23 $3,950 - $6,100 $1,444,440 $5,233 Duplex Penthouse 13 $5,800 - $8,575 $1,067,210 $6,841 Townhouse 7 $5,400 - $8,300 $572,940 $6,821 Totals/Average 124 $6,266,572 $4,211 Of the rentable unit count (excluding the superintendent unit), 165 units are free market units and 7 are rent stabilized. The free market and rent stabilized unit rents are further summarized below.
Residential Rent Roll by Income Type
No. of Avg. Rent Per Income Type Units Rental Range Per Month Total Annual Rent Month Stabilized 7 $2,699 - $8,300 $397,192 $4,728 Employee 1 $0 - $0 $0 $0 Vacant 48 $0 - $0 $0 $0 Market 117 $2,600 - $8,575 $5,869,380 $4,180 Totals/Average 173 $6,266,572 $4,211 The average in-place monthly rent is $4,211. The contract rents are based on the following expense structure:
Landlord's Obligations: Water & sewer, refuse removal, common area electricity, cooking gas, heat, hot water and common area maintenance.
Tenant Obligations: Individually metered electricity.
Bowery Valuation JOB 2101119260
36 Income Approach
Comparable Rentals
In order to gauge the reasonableness of the contract rents, we have examined the following recent rental activity in the submarket:
Comparable Rentals
Address Units Year Built Studio Rent 1BR Rent 2BR Rent 3BR Rent 1. 720 Columbus Avenue - The Westmont 163 1986 $2,538 $2,994 $4,505 $6,512 2. 247 West 87th Street - The Montana 156 1984 $3,254 $4,073 $7,492 $8,538 3. 424 West End Avenue - West River House 230 1982 n/a $3,681 $5,753 $8,088 4. 189 West 89th Street - The Sagamore 265 1997 $2,544 $3,666 $5,922 n/a 5. 255 West 94th Street - The Lyric 285 2001 $3,152 $4,003 $5,893 $9,160 6. 212 West 91st Street - The Greystone 363 2008 $1,807 $3,339 $4,750 $10,075 Min $1,807 $2,994 $4,505 $6,512 Average $2,659 $3,626 $5,719 $8,474 Max $3,254 $4,073 $7,492 $10,075
Bowery Valuation JOB 2101119260
37 Income Approach
Rental 1: The Westmont, 720 Columbus Avenue
The Westmont is a 163-unit residential building on Colubmus Avenue between 95th and 96th Streets that was constructed in 1986. Building amenities include 24-hour doorman service, a fitness center, children’s playroom, shared roof deck, laundry, and recreational areas.
Rental 2: The Montana, 247 West 87th Street
The Montana is a 156-unit residential building on West 87th Street and Broadway that was constructed in 1984. Building amenities include 24-hour doorman service, a fitness center, children’s playroom, swimming pool, bike room and laundry facilities.
Bowery Valuation JOB 2101119260
38 Income Approach
Rental 3: West River House, 424 West End Avenue
The West River House is a 230-unit residential building on West End Avenue and West 81st Street that was constructed in 1982. Building amenities include 24-hour doorman service, a fitness center, children’s playroom, shared roof deck, and laundry facilities.
Rental 4: The Sagamore, 189 West 89th Street
The Sagamore is a 265-unit residential building on West 89th Street and Amsterdam Avenue that was constructed in 1997. Building amenities include 24-hour doorman service, a fitness center, children’s playroom, shared roof deck, and laundry facilities.
Bowery Valuation JOB 2101119260
39 Income Approach
Rental 5: The Lyric, 255 West 94th Street
The Lyric is a 285-unit residential building on West 94th Street and Broadway that was constructed in 2001. Building amenities include 24-hour doorman service, a fitness center, children’s playroom, shared roof deck, business center and internet lounge, and laundry facilities.
Rental 6: The Greystone, 212 West 91st Street
The Greystone is a 363-unit residential building on West 91st Street and Broadway that was constructed in 2008. Building amenities include 24-hour doorman service, a fitness center, children’s playroom, shared roof deck, business center and internet lounge, bike room, package room, media room, and laundry facilities
Bowery Valuation JOB 2101119260
40 Income Approach
Reconciliation
Important considerations in determining potential rental value include location, access to transportation and neighborhood amenities, and building design, amenities, and condition. The subject is in a desirable section of Upper West Side. The site has good access to mass transportation, and the block is appealing.
The comparables are all from within the subject’s general market area. The subject is generally comparable to the surveyed apartment buildings in most major regards, although adjustments are warranted. The subject, which was constructed in 2003, was generally found to be in excellent condition. The comparables were found to be generally in good to excellent condition, with several older comparables being marginally inferior to the subject.
Unit rent at the subject includes water and hot water. Tenants are directly metered for electric usage and pay for tenant-controlled air conditioning and interior lighting directly to the utility provider. Apartments feature wood floors throughout the living areas and kitchens, granite counter tops, wood cabinets, refrigerators, dish washers, microwaves, gas range/ovens, ceramic tile baths with pedestal sinks in the smaller units and both a ceramic tile and marble tile bath in the larger units containing two or more bedrooms. All of the comparables provide similar unit amenities, with the exception of Rental 3, which has fireplaces in the units.
In terms of building amenities, the subject is inferior when compared with the buildings surveyed. This is primarily due to extraordinary recreational facilities at several of the comparable properties, such as the inclusion of a pool, or on-site parking.
In terms of size, the subject's units are generally similar to somewhat smaller than the market, however, the subject's townhouse units have a significant portion of space below grade, which is inferior to all of the comparables. Townhouse units within rental buildings are rare in the subject's market and no truly comparable rental units were found.
Studio Units
The subject's studio units range from $2,600 to $2,850 per month with an average of $2,739 per month. The recently leased comparable studio units range from $1,807 to $3,254 per month with an average of $2,659 per month. The subject has a vacant studio unit that is being marketed for $2,875 per month with two months free rent as a concession. Based on the subject’s in-place rents, current asking rents, and the recent comparable range, we forecast a market rent for the subject's studio units of $2,600 per month. Ownership is currently offering two months of free rent on all vacant units. Thus, we will deduct two months of rent concessions from our value later in the analysis.
One-Bedroom Units
The subject's one-bedroom units range from $3,225 to $4,275 per month with an average of $3,541 per month. The recently leased comparable units range from $2,994 to $4,073 per month with an average of $3,626 per month. The subject has a vacant one-bedroom unit that is being marketed for $3,625 per month with two months free rent as a concession. Based on the subject’s in-place rents, current asking rents, and the recent comparable range, we forecast a market rent for the subject's one-bedroom units of $3,400 per month. Ownership is currently offering two months of free rent on all vacant units. Thus, we will deduct two months of rent concessions from our value later in the analysis.
Two-Bedroom Units
The subject's two-bedroom units range from $3,950 to $6,100 per month with an average of $5,233 per month. The recently leased comparable units range from $4,505 to $7,492 per month with an average of $5,719 per month. The subject has two vacant two-bedroom units that are being marketed for $5,275 and $6,050 per month, respectively, with two months free rent as a concession. Based on the subject’s in-place rents, current asking rents, and the recent comparable range, we forecast a market rent for the subject's two-bedroom units of $4,200 per month.
Bowery Valuation JOB 2101119260
41 Income Approach
Duplex Penthouse Units
The subject's duplex units range from $5,800 to $8,575 per month with an average of $6,841 per month. The recently leased comparable units range from $6,512 to $10,075 per month with an average of $8,474 per month. Based on the comparable range and the rents achieved at the subject, we forecast a market rent for the subject's duplex units of $5,200 per month.
Townhouse Units
The subject's townhouse units range from $5,400 to $8,300 per month with an average of $6,821 per month. The recently leased comparable units range from $6,512 to $10,075 per month with an average of $8,474 per month. The subject has a vacant 4-bedroom townhouse unit that is being marketed for $7,600 per month with two months free rent as a concession. Based on the subject’s in-place rents, current asking rents, and the recent comparable range, we forecast a market rent for the subject's townhouse units of $6,200 per month.
We note that our market rent projections reflect average rents within the building and it is expected that units will achieve slightly different rents based on their location within the building, varying levels of finish, layout, and amenities.
Market Rent Comparison
Bedroom Market Survey Subject Units Market Rent Studio Minimum $1,807 $2,600 Studio Average $2,659 $2,739 $2,600 Studio Maximum $3,254 $2,850 1 BD Minimum $2,994 $3,225 1 BD Average $3,626 $3,541 $3,400 1 BD Maximum $4,073 $4,275 2 BD Minimum $4,505 $3,950 2 BD Average $5,719 $5,233 $4,200 2 BD Maximum $7,492 $6,100 Duplex Minimum $6,512 $5,800 Duplex Average $8,474 $6,841 $5,200 Duplex Maximum $10,075 $8,575 4 BD Minimum $6,512 $5,400 4 BD Average $8,474 $6,821 $6,200 4 BD Maximum $10,075 $8,300 The in-place rents of the subject’s units are supported by the comparable survey. We note that the comparable survey represents recent leases over the last six months. Overall, the units are leased near market levels. The in place rent roll of $6,266,572 will be applied in our pro forma.
Vacant Units
The subject has 48 vacant free market units. We have applied our market rent conclusions to the vacant units. The total applied income for vacant units is $2,073,600 and the calculation is summarized below.
Vacant Unit Forecast
Unit Type Vacant Units Market Rent Annual Total Studio 1 $2,600 $31,200 One Bedroom 39 $3,400 $1,591,200 Two Bedroom 6 $4,200 $302,400 Townhouse 2 $6,200 $148,800 Total 48 $3,600 $2,073,600 Per month $172,800
Bowery Valuation JOB 2101119260
42 Income Approach
Pre-COVID, this market was extremely desirable and historically, the vacancy rate was very low. The free market vacant units could be leased within 10 months. Thus, assuming these units are leased over time, we deduct 6 months of rent loss from our final value (including one month broker fee). Ownership is currently offering 2 months of free rent; thus we also deduct 2 months of rent concessions on all vacant units. We will deduct the total rent loss from our final value.
Residential Rent Loss from Vacant Units
Annual Potential Income $2,073,600 Months Per Year ÷ 12 PGI Per Month $172,800 Months of Rent Loss (includes one month broker fee) × 6 Estimated Rent Loss $1,036,800 Rent concessions (2 months) + $345,600 Total Rent Loss $1,382,400
Potential Residential Income
Potential gross residential income is summarized by income type below.
Potential Gross Residential Income
Income Type Annual Rent Increase PGI Stabilized Units $397,192 x 1.00 = $397,192 Free Market Units $5,869,380 x 1.00 = $5,869,380 Vacant Free Market Units $2,073,600 x 1.00 = $2,073,600 Total $8,340,172 $8,340,172
Laundry Income
The subject has a laundry room that generates $50,400 annually. This lease was renegotiated in 2019. We will apply this amount to potential income.
Storage Income
The subject generates income through leasing basement storage lockers to its tenants. The income from storage was reported to be $8,460 and we will apply this to potential income.
Commercial Income
The subject contains one professional office unit with 600 square feet. Suite 2 is leased to Alan Felix, MD. According to the rent roll, the space generates $62,400 in annual income, which equates to $104 per square foot. The lease is summarized below.
Lease Rent Tenant Lease Start Expiration Annual Rent Area (SF) PSF Comments 5 year lease commencing in March Eliot Lebow, LCSW 3/1/2020 2/1/2025 $62,400 600 $104 2020, annual rent escalations each Feb of 2%. No reimbursements.
In order to determine if the lease is reasonable, we researched recently signed leases within the local market. Our survey is presented below.
Bowery Valuation JOB 2101119260
43 Income Approach
Comparable Office Leases
# Address Tenant Start Date Sq. Ft. Base Rent Comments 1 27 West 86th Street Office May-20 1,750 $85 Modified gross. Grade level space. 2 50 West 93rd Street Office May-19 522 $75 Modified gross. Grade level space. 3 833 Madison Avenue Office Dec-18 900 $113 Modified gross. 3rd floor space.
4 8 West 86th Street Office Mar-18 1,200 $80 Modified gross. Grade level space. 5 575 West End Avenue Office Mar-18 815 $75 Modified gross. Grade level space. Min 522 $75 Avg 1,037 $86 Max 1,750 $113
Rent Conclusion
The range of the retail rent comparables is from $75 to $113 per square foot, with an average of $86 per square foot. Rent for the subject’s office space is at $104 per square foot.
The current contract rent is within the range of the comparables. As a smaller sized space, a rent toward the higher end of the comparable range is reasonable for the subject. The contract rent is considered well supported and will be applied to potential income. The in-place rent is considered to be at market levels.
Bowery Valuation JOB 2101119260
44 Income Approach
Vacancy and Collection Loss
CoStar reports the current vacancy rate in Upper West Side is 4.41%. Pre-COVID, residential occupancy at the subject has historically been very high; however, due to the current environment, it is 72% with 48 vacant units. As we will deduct for lease up time and rent concessions for these units, stabilized vacancy and collection loss of 5.0% will be applied to the residential income.
CoStar reports office vacancy in the submarket at 2.2%. We forecast a stabilized 3.0% vacancy rate for the office income.
Effective Gross Income Summary
Effective Gross Income
Potential Residential Income $8,340,172 Potential Office Income $62,400 Storage Income $8,460 Laundry Income $50,400 Potential Gross Income $8,461,432 Less Residential V/C Loss @ 5% -$417,009 Less Commercial V/C Loss @ 3% -$1,872 Effective Gross Income $8,042,552
Bowery Valuation JOB 2101119260
45 Income Approach
Operating Expense Analysis
We were provided with the historical operating expenses for the subject property. Therefore, we analyzed the subject's historical operating expense and expense reports of comparable properties, in developing our forecast of operating expenses. The data, analyzed in terms of residential units and gross square footage, is presented below.
Comparable Expenses
Comparable: 1 2 3 4 Average GBA: 106,920 170,100 184,900 357,000 204,730 Units: 169 172 152 340 208
Operating Expenses Insurance $28,451 $83,703 $72,769 $199,160 $96,021 Utilities $142,528 $150,667 $141,977 $317,579 $188,188 Water & Sewer $56,647 $174,643 $159,065 $143,397 $133,438 Repairs & Maintenance $108,654 $452,055 $240,566 $732,277 $383,388 Payroll $861,595 $314,476 $611,277 $1,482,791 $817,535 Miscellaneous $63,827 $212,157 $88,798 $343,385 $177,042 Management $192,456 $114,605 $189,681 $1,043,241 $384,996 Total Operating Expenses $1,517,985 $1,714,463 $1,592,931 $4,605,215 $2,357,649
Operating Expenses PSF Insurance $0.27 $0.49 $0.39 $0.56 $0.43 Utilities $1.33 $0.89 $0.77 $0.89 $0.97 Water & Sewer $0.53 $1.03 $0.86 $0.40 $0.70 Repairs & Maintenance $1.02 $2.66 $1.30 $2.05 $1.76 Payroll $8.06 $1.85 $3.31 $4.15 $4.34 Miscellaneous $0.60 $1.25 $0.48 $0.96 $0.82 Management $1.80 $0.67 $1.03 $2.92 $1.61 Total Operating Expenses $14.20 $10.08 $8.62 $12.90 $11.45
Operating Expenses Per Unit Insurance $168 $487 $479 $586 $430 Utilities $843 $876 $934 $934 $897 Water & Sewer $335 $1,015 $1,046 $422 $705 Repairs & Maintenance $643 $2,628 $1,583 $2,154 $1,752 Payroll $5,098 $1,828 $4,022 $4,361 $3,827 Miscellaneous $378 $1,233 $584 $1,010 $801 Management $1,139 $666 $1,248 $3,068 $1,530 Total Operating Expenses $8,982 $9,968 $10,480 $13,545 $10,744
Bowery Valuation JOB 2101119260
46 Income Approach
Operating Expense History
Operating Expenses 2018 2019 2020 AVG Real Estate Taxes $1,996,831 $2,104,819 $2,140,236 $2,080,629 Insurance $76,703 $84,044 $92,865 $84,537 Utilities (Combined) $179,432 $199,513 $211,273 $196,739 Water and Sewer $76,159 $126,499 $171,080 $124,579 Repairs and Maintenance $164,434 $180,403 $145,024 $163,287 Payroll $715,746 $733,820 $737,229 $728,932 Miscellaneous $329,716 $179,213 $117,752 $208,894 Management $304,253 $316,124 $285,711 $302,029 Total Operating Expenses (Excl. Taxes) $1,846,443 $1,819,616 $1,760,935 $1,808,998
Operating Expenses PSF 2018 2019 2020 AVG Real Estate Taxes $11.61 $12.24 $12.44 $12.10 Insurance $0.45 $0.49 $0.54 $0.49 Utilities (Combined) $1.04 $1.16 $1.23 $1.14 Water and Sewer $0.44 $0.74 $0.99 $0.72 Repairs and Maintenance $0.96 $1.05 $0.84 $0.95 Payroll $4.16 $4.27 $4.29 $4.24 Miscellaneous $1.92 $1.04 $0.68 $1.21 Management $1.77 $1.84 $1.66 $1.76 Total Operating Expenses PSF (Excl. Taxes) $10.74 $10.58 $10.24 $10.52
Operating Expenses Per Unit 2018 2019 2020 AVG Real Estate Taxes $11,542 $12,167 $12,371 $12,027 Insurance $443 $486 $537 $489 Utilities (Combined) $1,037 $1,153 $1,221 $1,137 Water and Sewer $440 $731 $989 $720 Repairs and Maintenance $950 $1,043 $838 $944 Payroll $4,137 $4,242 $4,261 $4,213 Miscellaneous $1,906 $1,036 $681 $1,207 Management $1,759 $1,827 $1,652 $1,746 Total Operating Expenses Per Unit (Excl. Taxes) $10,673 $10,518 $10,179 $10,457
Bowery Valuation JOB 2101119260
47 Income Approach
Estimated Operating Expenses
Our stabilized annual expense forecast is presented:
Real Estate Taxes
As presented earlier, we forecasted the tax payment at $1,939,781 annually, or $11.28 per square foot.
Insurance
Per SF Summary 2018 2019 2020 Low Average High Subject $0.45 $0.49 $0.54 N/A Comparables $0.27 $0.43 $0.56 Appraiser $0.55 Insurance costs vary by the type of coverage. Costs are generally lower (on a per square foot basis) for larger buildings and for multi-building policies. Based on the information above, we have projected this expense at $0.55 per square foot, or $94,593 annually.
Utilities
Per SF Summary 2018 2019 2020 Low Average High Subject $1.04 $1.16 $1.23 Comparables $0.77 $0.97 $1.33
Appraiser $1.25 Tenants are responsible for cooking gas and in-unit electricity. The owner is responsible for common area electricity and heat. Based on the information above, we have projected this expense at $1.25 per square foot, or $214,985 annually.
Water and Sewer
Per Unit Summary 2018 2019 2020 Low Average High Subject $440 $731 $989 N/A Comparables $335 $705 $1,046 Appraiser $990 Based on the information above, we have projected this expense at $990 per unit, or $171,270 annually.
Repairs & Maintenance
Per SF Summary 2018 2019 2020 Low Average High Subject $0.96 $1.05 $0.84 N/A Comparables $1.02 $1.76 $2.66 Appraiser $0.90 This expense varies depending on building age, management philosophy, services provided, and accounting methodology. Some management companies expense items that are normally included as capital costs. In addition, repair and maintenance costs may change from year to year; in some cases, repairs that require attention may be postponed due to cash flow considerations. Based on the information above, we have projected this expense at $0.90 per square foot, or $154,789 annually.
Bowery Valuation JOB 2101119260
48 Income Approach
Payroll
Per Unit Summary 2018 2019 2020 Low Average High Subject $4,137 $4,242 $4,261 N/A Comparables $1,828 $3,827 $5,098 Appraiser $4,260 Payroll costs cover annual salaries for a full staff of superintendents, porters, and maintenance staff. Based on the information above, we have projected this expense at $4,260 per unit, or $736,980 annually.
Miscellaneous
Per SF Summary 2018 2019 2020 Low Average High Subject $1.92 $1.04 $0.68 N/A Comparables $0.48 $0.82 $1.25 Appraiser $0.75 This expense covers any other expenses not included in the above categories. Based on the information above, we have projected this expense at $0.75 per square foot, or $128,991 annually.
Replacement Reserves
This expense provides for the periodic replacement of building components that wear out more rapidly than the building itself and that must be replaced periodically during the building's economic life. We have projected this expense at $200 per unit, or $34,600 annually.
Management Fees
Per SF Summary 2018 2019 2020 Low Average High Subject $1.77 $1.84 $1.66 N/A Comparables $0.67 $1.61 $2.92 Appraiser $1.40 Typically, management fees for residential properties range from 2% to 6% of effective gross income. We have projected this expense at 3.00%, which equates to $241,277 annually, or $1.40 per square foot.
Total Operating Expenses Current Date – Net of Taxes
Per SF Summary 2018 2019 2020 Low Average High Subject $10.74 $10.58 $10.24 N/A Comparables $8.62 $11.45 $14.20 Appraiser $10.33 Per Unit Summary 2018 2019 2020 Low Average High Subject $10,673 $10,518 $10,179 N/A Comparables $8,982 $10,744 $13,545 Appraiser $10,274 Operating expenses, exclusive of real estate taxes, were forecasted at $10.33 per square foot and $10,274 per unit. Excluding real estate taxes, the comparables ranged from $8.62 to $14.20 per square foot and $8,982 to $13,545 per unit. Our forecast is within the comparable range on a per unit basis and on a per square foot basis. Additionally, it is logically placed in relation to the historical performance of the asset. Thus, this forecast is reasonable and will be applied in our valuation analysis.
Bowery Valuation JOB 2101119260
49 Income Approach
Stabilized Income and Expenses Pro Forma
Income Potential Residential Income $8,340,172 $48.49 $48,209 $1,668,034 Potential Office Income $62,400 $0.36 $361 $12,480 Storage Income $8,460 $0.05 $49 $1,692 Laundry Income $50,400 $0.29 $291 $10,080 Potential Gross Income $8,461,432 $49.20 $48,910 $1,692,286 Less Residential V/C Loss @ 5% -$417,009 -$2.42 -$2,410 -$83,402 Less Commercial V/C Loss @ 3% -$1,872 -$0.01 -$11 -$374 Effective Gross Income $8,042,552 $46.76 $46,489 $1,608,510 Operating Expenses Real Estate Taxes $1,939,781 $11.28 $11,213 $387,956 Insurance $94,593 $0.55 $547 $18,919 Utilities (Combined) $214,985 $1.25 $1,243 $42,997 Water & Sewer $171,270 $1.00 $990 $34,254 Repairs & Maintenance $154,789 $0.90 $895 $30,958 Payroll $736,980 $4.29 $4,260 $147,396 Miscellaneous $128,991 $0.75 $746 $25,798 Reserves $34,600 $0.20 $200 $6,920 Management $241,277 $1.40 $1,395 $48,255 Total Operating Expenses $3,717,266 $21.61 $21,487 $743,453 Total Expenses Excluding RE Taxes $1,777,485 $10.33 $10,274 $355,497
Net Operating Income $4,325,286 $25.15 $25,002 $865,057
Bowery Valuation JOB 2101119260
50 Income Approach
Adjusted Proforma for Leasehold Valuation
We also present the adjusted proforma for purposes of calculating the leasehold value later in the analysis (see Valuation of Leasehold Interest). The adjusted proforma considers the rent loss associated with the vacant units, presented earlier:
Residential Rent Loss from Vacant Units
Annual Potential Income $2,073,600 Months Per Year ÷ 12 PGI Per Month $172,800 Months of Rent Loss (includes one month broker fee) × 6 Estimated Rent Loss $1,036,800 Rent concessions (2 months) + $345,600 Total Rent Loss $1,382,400 Thus, the residential income is adjusted by the projected residential rent loss. The adjusted residential income is calculated:
Adjusted Residential Income
Potential Residential Income $8,340,172 Residential Rent Loss ($1,382,400) Adjusted Potential Residential Income $6,957,772
Adjusted Proforma (for purposes of calculating the leasehold value)
Pro Forma $ Per SF Per Unit Per Room Income Potential Residential Income $6,957,772 $40.45 $40,218 $1,391,554 Potential Office Income $62,400 $0.36 $361 $12,480 Storage Income $8,460 $0.05 $49 $1,692 Laundry Income $50,400 $0.29 $291 $10,080 Potential Gross Income $7,079,032 $41.16 $40,919 $1,415,806 Less Residential V/C Loss @ 5% -$347,889 -$2.02 -$2,011 -$69,578 Less Commercial V/C Loss @ 3% -$1,872 -$0.01 -$11 -$374 Effective Gross Income $6,729,272 $39.13 $38,898 $1,345,854 Operating Expenses Real Estate Taxes $1,939,781 $11.28 $11,213 $387,956 Insurance $94,593 $0.55 $547 $18,919 Utilities (Combined) $214,985 $1.25 $1,243 $42,997 Water & Sewer $171,270 $1.00 $990 $34,254 Repairs & Maintenance $154,789 $0.90 $895 $30,958 Payroll $736,980 $4.29 $4,260 $147,396 Miscellaneous $128,991 $0.75 $746 $25,798 Reserves $34,600 $0.20 $200 $6,920 Management $201,878 $1.17 $1,167 $40,376 Total Operating Expenses $3,677,867 $21.38 $21,259 $735,573 Total Expenses Excluding RE Taxes $1,738,087 $10.11 $10,047 $347,617
Net Operating Income $3,051,404 $17.74 $17,638 $610,281
Bowery Valuation JOB 2101119260
51 Income Approach
Historical and Projected Income and Expenses
Bowery Bowery Adjusted Stabilized 2018 2019 2020 Proforma Proforma Gross Revenue $7,606,332 $7,903,108 $7,142,759 $6,729,272 $8,461,432 Bowery Bowery Adjusted Stabilized Operating Expenses 2018 2019 2020 Proforma Proforma Real Estate Taxes $1,996,831 $2,104,819 $2,140,236 $1,939,781 $1,939,781 Insurance $76,703 $84,044 $92,865 $94,593 $94,593 Utilities (Combined) $179,432 $199,513 $211,273 $214,985 $214,985 Water and Sewer $76,159 $126,499 $171,080 $171,270 $171,270 Repairs and Maintenance $164,434 $180,403 $145,024 $154,789 $154,789 Payroll $715,746 $733,820 $737,229 $736,980 $736,980 Miscellaneous $329,716 $179,213 $117,752 $128,991 $128,991 Reserves $34,600 $34,600 Management $304,253 $316,124 $285,711 $201,878 $241,277 Total Operating Expenses (Excl. Taxes) $1,846,443 $1,819,616 $1,760,935 $1,738,087 $1,777,485
Bowery Bowery Adjusted Stabilized Operating Expenses PSF 2018 2019 2020 Proforma Proforma Real Estate Taxes $11.61 $12.24 $12.44 $11.28 $11.28 Insurance $0.45 $0.49 $0.54 $0.55 $0.55 Utilities (Combined) $1.04 $1.16 $1.23 $1.25 $1.25 Water and Sewer $0.44 $0.74 $0.99 $1.00 $1.00 Repairs and Maintenance $0.96 $1.05 $0.84 $0.90 $0.90 Payroll $4.16 $4.27 $4.29 $4.29 $4.29 Miscellaneous $1.92 $1.04 $0.68 $0.75 $0.75 Reserves $0.20 $0.20 Management $1.77 $1.84 $1.66 $1.17 $1.40 Total Operating Expenses PSF (Excl. Taxes) $10.74 $10.58 $10.24 $10.11 $10.33
Bowery Bowery Adjusted Stabilized Operating Expenses Per Unit 2018 2019 2020 Proforma Proforma Real Estate Taxes $11,542 $12,167 $12,371 $11,213 $11,213 Insurance $443 $486 $537 $547 $547 Utilities (Combined) $1,037 $1,153 $1,221 $1,243 $1,243 Water and Sewer $440 $731 $989 $990 $990 Repairs and Maintenance $950 $1,043 $838 $895 $895 Payroll $4,137 $4,242 $4,261 $4,260 $4,260 Miscellaneous $1,906 $1,036 $681 $746 $746 Reserves $200 $200 Management $1,759 $1,827 $1,652 $1,167 $1,395 Total Operating Expenses Per Unit (Excl. Taxes) $10,673 $10,518 $10,179 $10,047 $10,274
Bowery Valuation JOB 2101119260
52 Sales Comparison Approach
Income Capitalization
In developing an opinion of the overall capitalization rate required by an investor, we will apply several methods of analyses: (1) Band of Investment; (2) Comparable Capitalization Rates; (3) National Survey Responses; and (4) Personal Surveys.
Band of Investment Technique
We use the Band of Investment technique to estimate a capitalization rate that accounts for the combination of equity and prevailing financing. The rate developed is a weighted average, the weights being percentages of the total value, which are occupied by the mortgage and equity positions.
Mortgage Component
A survey of active lenders in the subject property's influencing market indicates that 25-year and 30-year mortgage commitments are typically 250 to 450 basis points above 10-year treasuries.
Survey of Competitive Rates
Survey of Competitive Rates Rate Federal Funds Rate 0.00%-0.25% 5-year CD 1.10%-1.60% 10-year Treasury Bond 1.10% 30-year Treasury Bond 1.82% Corporate Bonds (Moody's Seasoned AAA) 2.30% Source: Federal Reserve Statistical Release
Currently, 10-year treasuries are trading at 0.92% suggesting mortgage rates of roughly 3.25% to 5.25%. The current mortgage market indicates a competitive interest rate, as there is strong demand from mortgage lenders seeking stable multi-unit residential deals.
After surveying several commercial mortgage lenders, it is our opinion that a typical creditworthy purchaser could obtain financing from a lending source in an amount equal to 70% of value at an annual interest rate of 3.75% and a 30-year payout. Therefore, the mortgage constant is 5.560%.
Equity Component
As a stabilized income pro forma is expressed in constant dollars, an equity divided rate will be applied. The consensus of those actively engaged in the marketplace for apartment buildings is that Year 1 equity rates of return (based upon forecasting techniques and assumptions like those utilized herein) fall within a broad range, depending on numerous risk factors, including among others:
Location- the better the location, the lower the rate of return;
Physical Characteristics- the newer the property, the higher the quality of construction and finishes, and the better the design and layout of the physical structure, the lower the rate of return;
Degree of Growth Forecasted for Income and Expenses- the more aggressive and value enhancing the valuation assumptions, the higher the rate of return;
Amount of Equity Investment Required- the greater the required equity investment (that portion of the total acquisition cost not typically funded by conventional financing), the higher the rate of return;
Type of Investment- the riskier the perceived return on investment for a particular type of real estate, the higher the rate of return.
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53 Sales Comparison Approach
Applying an appropriate equity dividend rate to the mortgage equity technique is an integral part of the valuation process. As previously stated, the equity rate of return is sensitive to the risk associated with the property, whether it be location, income flows, functional or physical obsolescence, and most important of all, the economic climate. First, we look at national surveys to understand appropriate equity dividend rates. The latest Realty Rates survey indicates an average equity dividend rate of 11.03% and ranges from 6.20% to 14.99%.
Investor Surveys
Survey Type of Product Equity Dividend Rates Realty Rates National Apartment 6.20% - 14.99% Fourth Quarter - 2020 Market 11.03% avg
Based on our discussions with market participants, equity dividend rates for multi-unit residential real estate investments typically range from 2.00% to 10.00%, depending on the above noted factors.
We believe an investor in the subject property would accept an initial annual return of 5.0% in anticipation of a stable income flow and property appreciation over time. It should be emphasized that the equity dividend rate is not necessarily the same as an equity yield rate or true rate of return on equity capital. The equity dividend rate is an equity capitalization that reflects all benefits that can be recognized by the equity investor as of the date of purchase. We selected this rate based on the subject's location in a good residential area, and its good access and visibility. We summarize the mortgage and equity parameters utilized in our derivation of an overall capitalization rate.
Selected Loan Terms
Typical Loan Terms Value Mortgage Rate 3.75% Amortization Term (Years) 30 Number of Payments 360 Loan-to-Value Ratio (M) 70% Equity Ratio 30% Mortgage Constant 5.560%
Band of Investment
Band of Investment Value Loan-to-Value Ratio (M) 70% Mortgage Constant x 0.05560 Mortgage Component 3.8920%
Equity Ratio 30% Equity Dividend Rate x 5.00% Equity Component 1.5000%
Indicated Overall Rate 5.3920%
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Comparable Capitalization Rates
Comparable Capitalization Rates
# Address Sale Date Cap Rate 1 1 Christopher Street, New York, NY Dec-20 2.50% 2 5 West 91st Street, New York, NY Dec-20 2.40% 3 400 East 58th Street, New York, NY Sep-20 4.10% 4 1 Flatbush Avenue, Brooklyn, NY Jun-20 4.18% 5 10 East 29th Street, New York, NY Feb-20 3.44% Average 3.32% We analyzed sales of comparable assets within the subject’s periphery and they exhibit overall capitalization rates from 2.40% to 4.18% with an average of 3.32%. While some sales were placed on the market pre-COVID, all sold during 2020 with comparables 1 through 4 selling during the pandemic. The current low interest rates support relative stability in capitalization rates.
National Survey Responses
The PwC Real Estate and Situs – RERC Investor surveys summarize the expectations of institutional investors. As indicated, the going-in capitalization rates range from 3.50% to 8.00% with an average between 5.00% and 5.22%.
Investment Survey Yield Trends
Survey Type of Product Overall Cap Rate PwC National Apartment 3.50% - 8.00% Fourth Quarter - 2020 Market 5.22% avg Situs - R.E.R.C. National Apartment 4.30% - 6.50% Third Quarter - 2020 Market 5.00% avg
Capitalization Rate Conclusion
Overall capitalization rates are influenced by numerous factors, of which the most influential are: investors' perception of risk, the potential for net income growth, and the market for competitive assets. As indicated by the local comparable sales, assets in the submarket tend to trade for going-in returns toward the lower end of the national range.
In the 4th quarter of 2020, landlords began offering significantly below market rents to lease up vacant units. We are applying these low market rents to the vacant units in our analysis. The market rents we apply are significantly below the rent previously achieved prior to COVID. Thus, the subject will have substantial upside potential once the City recovers from the higher vacancy impact of COVID.
This presents a significant dilemma for appraisers, as the closed sales traded prior to the recent drops in asking rent. Thus, there is some inherent upside in the rents when they recover that is not reflected in the cap rates. In order to determine an appropriate cap rate for the in-place income, which includes the in place rent for all leased units, and these new low asking rents for all vacant units, we researched offering memorandums (OMs) from one listing, and two very recent sales (December 2020). For these assets, we analyzed the rent roll and applied the in place rent for all occupied units and our projection of market rent for the vacant units. We applied the current real estate taxes, the broker’s assumptions for the expenses (assuming they are reasonable), added a miscellaneous and reserves expense, and applied a market management fee of 3% of EGI. Note that this typically results in a cap rate lower than reported by the broker since they do not include some expenses that appraisers do. We summarize the three sales data below.
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55 Sales Comparison Approach
1. 47 St. Marks Place is currently on the market. The OM is available online and we confirmed the information with the listing broker. This building contains 8 residential units of which 3 are rent stabilized (RS) and 5 are free market. Five units are currently vacant including two RS units. The asset is on the market with an asking price of $6.1M and the broker has received offers around $5M. We analyzed the rent roll and applied our projection of these new low market rents to the vacant units. We then applied the broker’s expenses (which appear reasonable), and added a reserves expense of $200 per unit, and used a 3% management fee. Based on this analysis and using a value of $5M, the cap rate is 2.05%.
2. 5 West 91st Street, an elevator building on the Upper West Side, traded for $20M on December 10, 2020. This building contains 48 units of which 6 are vacant and 28 (58%) are rent stabilized. We applied the in- place rents for the occupied units, and low rents for the vacant units (below the in place rent for each unit type). We apply the expenses from the OM, adding in a reserves expense of $200/unit and apply 3% management fee, and the resulting cap rate is 2.42%.
3. 1 Christopher Street, a 127-unit building located in the West Village, traded in December 2020 for $95M. There are 17 rent stabilized and rent controlled units (13% of the total). The OM is pre-COVID, so the rent roll does not contain rents and vacancy as impacted by COVID. There are no listings for apartments on Streeteasy, but there are 12 units listed on Streeteasy from May through November 2020 which reflect rents that are approximately 10% below the rents on the rent roll. The actual rent is likely to be even lower than the rent listed on Streeteasy. We apply a 10% reduction to the rents listed in the OM, and a 3% vacancy factor. The building also contains 6 retail tenants and 3 doctor office tenants. We apply the full retail and office rent (even though it is likely some of the tenants have vacated or restructured the leases), and we apply a 10% vacancy and collection loss to the commercial space. We apply the broker’s expenses (noting that the building is Union and has very high payroll) and apply reserves of $200/unit and 3% management. The resulting cap rate is 2.52%. The cap rate per the pre-COVID OM is 3.18%.
Regarding a timeline for recovery, the chart below shows the amount of time if took for market rents to recover from the Great Financial Crisis (GFS). As indicated, it took 2 years for rents to bottom out, and then 4 years for rents to recover to the pre-recession highs.
In addition, we present how the decline in market rent compares to GFC and COVID. The impact of COVID appears to be leveling off. Considering there is a vaccine in distribution and the local market is anxious for life to return to normal, we expect that rents will level off, and will return to a more typical market rent in Summer 2022.
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56 Sales Comparison Approach
In terms of its position within the market range, it is our view that an investor would accept a return toward the low end to middle of the comparable range for the subject property. We emphasize that we have applied low market rents to the 48 vacant rent stabilized units and that they have upside that can be realized when the market improves. Further, the subject has been well maintained for many years. Thus, there will be fewer unforeseen costs for which ownership will not be able to recoup the investment through rent increases.
Balancing these factors, it is our view that a 3.00% overall rate would be required by an investor. We will also deduct leasing costs related to the vacant residential units. This deduction is discussed and calculated below.
Residential Leasing Costs
Historically, this market has been extremely desirable, and pre-COVID, the vacancy rate was very low. We assume that if marketed appropriately, the vacant units could be leased within 10 months. Thus, assuming these units are leased over time, we deduct 6 months of rent loss from our final value (including one month broker fee). Ownership is currently offering 2 months of free rent; thus we also deduct 2 months of rent concessions on all vacant residential units. The residential rent loss deduction is calculated below:
Residential Rent Loss from Vacant Units
Annual Potential Income $2,073,600 Months Per Year ÷ 12 PGI Per Month $172,800 Months of Rent Loss (includes one month broker fee) × 6 Estimated Rent Loss $1,036,800 Rent concessions (2 months) + $345,600 Total Rent Loss $1,382,400 COVID 19 Market Discussion for Value Conclusion
Given the pandemic and the related economic impact, we make a series of assumptions to reflect changes in the market, and these include extended lease-up times, rent concessions, and non-payment of rent given the potential for delays in leasing and collecting from tenants.
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57 Sales Comparison Approach
These one-time deductions and increased rates are meant to quantify some immediate and near-term disturbances, rather than speculate on longer-term impacts, of the crisis. These adjustments best reflect the market as of the valuation date and are partially informed by that of conversations with market participants, and expectations in the marketplace. The current situation warrants tailoring of assumptions to reflect adverse impact even if negative effects are not realized.
The value is calculated below:
Value Opinion Via the Income Capitalization Approach
Value Final Value (Rd) NOI $4,325,286 OAR 3.00% Indicated Value $144,176,191 Less Residential Rent Loss ($1,382,400) Current As Is Market Value Via the Income Capitalization December 31, 2020 $142,793,791 $143,000,000 Approach
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Sales Comparison Approach
In the Sales Comparison Approach, an opinion of Fair Value is provided by comparing the subject property to transactions of competitive assets. A major premise is the principle of substitution which holds Fair Value is directly related to the prices of comparable properties as a knowledgeable investor will pay no more for a substitute. The procedure involved in this Approach is to research the market for sales of improved properties which are comparable, select appropriate units of comparison, adjust the sale prices to the subject, and then reconcile the range of adjusted sale prices into an opinion of value. In order to analyze comparable sales, it is necessary to convert the sale prices to an appropriate unit of comparison, a process which facilitates price comparisons between properties of different sizes, and it also enables adjustment for qualitative differences. Since investors typically purchase mixed-use buildings in the subject's area in terms of value per square foot, we have applied this unit of comparison.
Comparable Sales Summary
# Address Sale Date SF / Units Sale Price Price Per SF Cap Rate 1 Flatbush Avenue, Brooklyn, 1 Jun-20 109,350 / 183 $101,350,000 $927 4.18% NY 10 East 29th Street, New York, 2 Feb-20 407,555 / 392 $380,600,000 $934 3.44% NY 800 Avenue of the Americas, 3 Apr-19 293,978 / 266 $237,500,000 $808 4.00% New York, NY 450 Washington Street, New 4 Feb-19 305,542 / 291 $260,000,000 $851 Not Reported York, NY 122 West 97th Street, New 5 Mar-18 503,511 / 414 $287,000,000 $570 3.50% York, NY 420 East 80th Street, New 6 Mar-18 112,204 / 155 $86,000,000 $766 3.18% York, NY
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59 Sales Comparison Approach
Comparable Sales Outlines
Comparable Sale 1
1 Flatbush Avenue, Brooklyn, NY Grantee 1FBBK Owner LLC Grantor One Flatbush Avenue Property LLC Document Number 2020000178555 GBA (SF) 109,350 Block/ Lot 2106 / 1202 NOI $4,236,430 Cap Rate 4.18% Units 183 Sale Date 6/10/2020 Site Area (SF) 12,482 Sale Price $101,350,000 Year Built 2018 Price Per SF $927
This is the sale of a 183-unit high rise apartment building, known as 1 Flatbush, located in Brooklyn, NY. The property, built in 2018, contains 109,350 square feet of GBA on 12,482 square feet of land. The building most recently sold for $101,350,000. The property is a newly constructed 19-story elevatored luxury mixed-use retail and residential building in Downtown Brooklyn. The residential and retail portions are divided into two separate condominiums and this is the sale of the residential portion only. Of the 183 residential units, 134 are market rate and 48 (or 26%) are affordable units. There is also one super's unit. The property's gross square footage if 160,372, with 109,350 square feet of residential space. The property is part of the Affordable New York program, which is a 35-year tax benefit and requires 26% of the units be affordable. Property amenities include a 24-hour concierge, fitness studio, yoga studio, gaming lounge, resident's lounge/co-working space, and landscaped roof deck with outdoor grills.
Comparable Sale 2
10 East 29th Street, New York, NY Grantee 10 East 29th Street Associates LLC Grantor Gateway Belvedere LLC Document Number 20200000070189 GBA (SF) 407,555 Block/ Lot 858 / 8 NOI $13,092,640 Cap Rate 3.44% Units 392 Sale Date 2/19/2020 Site Area (SF) 21,181 Sale Price $380,600,000 1998 and Year Built renovated in Price Per SF $934 2013
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60 Sales Comparison Approach
This is the sale of a 392-unit high rise apartment building, known as Instrata NoMad, located in New York, NY. The property, built in 1998 and renovated in 2013, contains 407,555 square feet of GBA on 21,181 square feet of land. The building most recently sold for $380,600,000. This 48-story luxury residential rental has 392 market rate apartments and the property was 98% occupied at the time of sale and there were no sale conditions. This was the largest multi-family building that sold post new rent laws passed in June 2019. Units range in size from studios to three bedrooms and feature hardwood floors, stone counters, stainless-steel appliances and washer/dryers. Property amenities include a 24-hour attended lobby, full-service concierge, pet spa, on-site parking, in-house laundry, elevators, roof deck and a fitness center. The asset does not benefit from a tax benefit. Reportedly, the cap rate was 3.44%. We were able to confirm the cap rate with CBRE. Remaining information was confirmed on Costar, news articles and public record.
Comparable Sale 3
800 Avenue of the Americas, New York, NY Grantee GS 800 6th, LLC Grantor Archstone Chelsea LP Document Number 2019000399706 GBA (SF) 293,978 Block/ Lot 829 / 1 NOI $9,500,000 Building to Land Ratio 15.67 Cap Rate 4.00% Units 266 Sale Date 4/10/2019 Site Area (SF) 18,762 Sale Price $237,500,000
Year Built 2003 Price Per SF $808
This is the sale of a 266-unit apartment building complex located in New York, NY. The property, built in 2003, contains 293,978 square feet of GBA on 18,762 square feet of land. The building most recently sold for $237,500,000. Property has 7 retail stores. Of the residential unit total, approximately 62 apartments are subject to rent stabilization. The property contains a roof deck and fitness center as well as a parking garage. This is an 80/20 building like the subject.
Comparable Sale 4
450 Washington Street, New York, NY Grantee RREF II 34 Desbrosses Owner LLC Grantor Truffles II LLC Document Number 2019000044772 GBA (SF) 305,542 Block/ Lot 224 / 1 NOI Not Reported Building to Land Ratio Cap Rate Not Reported Units 291 Sale Date 2/1/2019 Site Area (SF) 36,858 Sale Price $260,000,000
Year Built 2007 Price Per SF $851
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61 Sales Comparison Approach
This is the sale of a 291-unit high rise apartment building, known as Truffles Tribeca, located in New York, NY. The property, built in 2007, contains 305,542 square feet of GBA on 36,858 square feet of land. The building most recently sold for $260,000,000. The property consists of a pair of towers connected by a sky bridge and surrounding a private, gated courtyard. Additionally, the property is in the final year of a 421(A) tax exemption. Confirmed on Costar and the public record.
Comparable Sale 5
122 West 97th Street, New York, NY Grantee A&E Real Estate Holdings Grantor Stonehenge Partners Document Number 2018000117605 GBA (SF) 503,511 Block/ Lot 1851 / 8 NOI $10,045,000 Cap Rate 3.50% Units 414 Sale Date 3/30/2018 Site Area (SF) 69,605 Sale Price $287,000,000
Year Built 1968 Price Per SF $570
This is the sale of a 414-unit apartment building located in New York, NY. The property, built in 1968, contains 503,511 square feet of GBA on 69,605 square feet of land. The building most recently sold for $287,000,000. The unit mix is 157 one-bedroom units, 153 two-bedroom units, and 104 three-bedroom units. There are 6 grade level retail units.
Comparable Sale 6
420 East 80th Street, New York, NY Grantee Hampshire Properties Grantor Equity Residential Document Number 2018000106250 GBA (SF) 112,204 Block/ Lot 1559 / 0033 NOI $2,734,800 Cap Rate 3.18% Units 155 Sale Date 3/22/2018 Site Area (SF) 15,300 Sale Price $86,000,000 Year Built 1961 Price Per SF $766
This is the sale of a 155-unit apartment building located in New York, NY. The property, built in 1961, contains 112,204 square feet of GBA on 15,300 square feet of land. The building most recently sold for $86,000,000. The unit mix is 64 one-bedroom units, 87 two-bedroom units, and 4 three-bedroom units. The property was listed on the market for 3 months and was under contract for 2.5 months.
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62 Sales Comparison Approach
Comparable Sales Adjustment Grid
Sale No. Subject 1 2 3 4 5 6 Address: 323 West 96th Street, 1 Flatbush 10 East 29th 800 Avenue of 450 Washington 122 West 97th 420 East 80th New York, New York Avenue, Street, New the Americas, Street, New Street, New Street, New 10025 Brooklyn, NY York, NY New York, NY York, NY York, NY York, NY Sale Date: 6/10/2020 2/19/2020 4/10/2019 2/1/2019 3/30/2018 3/22/2018 No. SF 171,988 109,350 407,555 293,978 305,542 503,511 112,204 Sale Price $101,350,000 $380,600,000 $237,500,000 $260,000,000 $287,000,000 $86,000,000 Price Per SF $927 $934 $808 $851 $570 $766 Property Rights: Leased Fee Interest 0% 0% 0% 0% 0% 0% Financing Terms: None 0% 0% 0% 0% 0% 0% Conditions of Sale: None 0% 0% 0% 0% 0% 0% Market Conditions December 31, 2020 0% -10% -10% -10% -10% -10.0% Trended Price Per SF $927 $840 $727 $766 $513 $690 Location: Upper West Side 5% 0% 0% 0% 0% 0% Size: 171,988 0% 10% 10% 10% 10% 0% Income Potential: $25.22 10% 0% 10% 0% 0% 0% Utility: N/A 5% 0% 0% 0% 5% 5% Condition: Good -10% 0% 0% 0% 10% 10% Tax Benefit: None -3% 0% -3% -3% 0% 0% Total Adjustments 7% 10% 17% 7% 25% 15% Adjusted Price Per SF $992 $925 $851 $819 $641 $793 Unadjusted Adjusted Adjusted Low $570 Low $641 Low $641 High $934 High $992 High $992 Average $809 Average $837 Average $837 Median $829 Median $835 Median $835
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63 Sales Comparison Approach
Adjustments for the comparable sales have been considered based on comparison to the subject for financing terms, conditions of sale, market conditions (time), location, size, utility, and age/condition.
Property Rights Appraised The purpose of this adjustment is to account for differences in the property rights transferred with the sale. All sales represent similar leased fee interests. No property rights adjustments are required.
Financing The purpose of adjusting for financing terms is to determine cash equivalent sale prices for the comparable sales in accordance with the definition of market value for this report. No financing terms adjustments are required.
Conditions of Sale Conditions of sale refers to the motivations of the buyer and seller involved in a particular transaction. All sales are arm’s length, and no adjustments are required.
Market Conditions (Time) All sales took place between March 22, 2018 and June 10, 2020. According to the Cushman & Wakefield 3Q 2020 Property Sales report, the price per square foot of elevator residential properties in Manhattan decreased by 37% year over year, while the price per square foot of mixed-use properties dropped by 6% from year-end 2019.
Elevator Residential Buildings
Mixed-Use Properties
We also note that as expected, sales volume through Q3 of 2020 was down significantly in both categories. However, as we expect values to decline on a per unit basis, we make downward adjustments to all sales except for Sale 1, which closed in June 2020.
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64 Sales Comparison Approach
Location The subject property is located in Upper West Side in New York City. Sale 1 is in Downtown Brooklyn. As it is not in Manhattan it warrants an upward adjustment. The remaining sales do not warrant any adjustments. We base our location adjustments on the relative estimated median income in each zip code as compared to the subject’s.
Size This adjustment accounts for the difference in size between each of the comparables and the subject property. The sales range in size from
109,350 to 503,511 square feet, while the subject property contains 171,988 square feet. We note that there is an inverse relationship between size and price per square foot such that smaller buildings will sell for a
higher price per square foot and vice versa. Sales 2 through 5 are larger and are adjusted up to account for the difference in size.
Income Potential Sales 1 and 3 are 80/20 buildings whereby 20% of units must be rented to low-income households and below market rents. These sales were adjusted upwards for inferior income potential. The remaining sales have similar income potential to the subject and were not adjusted.
Utility This adjustment reflects building height or number of stories, land to building ratio, views, exterior appeal, and the interior finishes, design, and layout of each comparable as compared to the subject property. Comparable 1 was sold excluding the retail component. This sale warrants an upward adjustment. Comparables 5 and 6 were adjusted upward for inferior building amenities. The remaining comparables are similar mixed- use buildings with similar amenities. No adjustments were required.
Condition The subject property was constructed in 2003 and is in good condition overall. Sale 1 is new construction, built in 2018, and warrants a downward adjustment. Sales 5 and 6 were adjusted upward for their earlier construction.
Tax Benefit The subject does not have a tax benefit in place. Sales 1, 3 and 4 were adjusted down as they have a tax benefit in place.
After adjustments, the comparable sales exhibited a range between $641 and $992 per square foot with an average of $837 per square foot and a median of $835 per square foot. We note that there is a dearth of sales that have occurred during the pandemic. We emphasize Sales 1 and 6 as they are similar in size to the subject. These sales sold for $992 per square foot and $793 per square foot, respectively, post adjustments. Our opinion of market value is $840 per square foot. As discussed in the Income Approach, we have deducted residential leasing costs from our capitalized value.
Value Opinion via the Sales Comparison Approach
Date of Value Value Final Value (Rd) Concluded Value Per SF $840 SF 171,988 Indicated Value $144,469,920 Less Residential Rent Loss ($1,382,400) Current As Is Market Value via the Sales Comparison Approach December 31, 2020 $143,087,520 $143,000,000
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65 Valuation of Leased Fee Interest
Valuation of Leased Fee Interest
At the request of our client, we have advanced an opinion of the leased fee interest held by Beacon NY LLC. The lease9 is summarized:
Ground Lease Summary
Lessor: Leon Igel Trust/Tarter Family LP (50%) / Beacon NY LLC (50%) Lessee: Beacon NY LLC
Term Commencement: 11/1/2000 Expiration: 10/31/2099
Terms: Absolute Net
Rent Schedule 11/1/2017 - 10/31/2020 $1,375,366 11/1/2020 - 10/31/2025 $1,512,903 11/1/2025 - 10/31/2030 $1,664,193 11/1/2030 - 10/31/2035 $1,830,612 11/1/2035 - 10/31/2040 $2,013,674 11/1/2040 - 10/31/2045 $2,215,041 11/1/2045 - 10/31/2049 $2,436,545 11/1/2049 - 10/31/2054 $2,700,000 11/1/2054 - 10/31/2059 $2,970,000 11/1/2059 - 10/31/2064 $3,267,000 11/1/2064 - 10/31/2069 $3,593,700 11/1/2069 - 10/30/2074 $3,953,070 11/1/2074 - 10/31/2079 $4,348,377 11/1/2079 - 10/31/2084 $4,783,215 11/1/2084 - 10/31/2089 $5,261,536 11/1/2089 - 10/31/2094 $5,787,690 11/1/2094 - 10/31/2099 $6,366,459
In order to develop a view of the discount rate an investor would accept, we first consider the relative security of the cash flow, whereby the leasehold interest generates $4,325,286 of net income before the lease payment. Thus, it is our view that the payment is extremely secure, and an investor would accept a return near the safe rate. Along this line, 30-year Treasuries have ranged from 1.5% to 3.25% over the last few years. Due to the high level of security for the cash flow, we would accept a rate towards the low end of the national range.
Next, we must consider a premium is required since this investment is not as liquid as a Treasury, and the holding period is longer. Further, we look to broad market yields for multifamily investments which we reported earlier range from 5% to 10%, with national averages near the 6.5% to 7% range. At the same time, this range reflects overall property interests, while we are valuing a leased fee interest, whereby the operational risk is borne by the leasehold.
As a result, we expect an investor would accept a rate below the indicated range, with consideration to the baseline 30-year US Treasury Rate which is currently at 1.82%.
9 The lease payments are set through October 31, 2049, at which point the rent is reset based on fair market. We apply a market oriented ground rent of $2.7M in November 2049 (10% increase over the previous rent).
Bowery Valuation JOB 2101119260
66 Valuation of Leased Fee Interest
Though the investment is longer and less liquid than a US Treasury, other factors will more heavily influence an investor. Most importantly, the difference between this investment and a treasury bond is inflation protection offered by the contractual rent resets of 10% every five years, plus a mark-to-market reset in 2049. Regarding the latter reset, assuming broad interest rates increase, the value of the bonds would decrease. In contrast, inflation over a mid to long term would presumably affect the value of the site and the rent payment. As a result, though the required return might be higher, the income would follow, leading to value preservation. Though we have modeled a 10% rent increase on reset, this is a conservative forecast given a major movement of interest rates and inflation would suggest a much higher rent reset. According to the Federal Reserve (https://www.federalreserve.gov/releases/h15/), the spread between a 30-yr Treasury Bond and an inflation indexed bond is roughly 200 bps, suggesting a discount to the conventional yield is supported.
Further, we must consider the actual transactional activity whereby a 50% interest in the leased fee was acquired for $27MM, with the condition that an additional $4MM be paid to the seller on certain conditions 10. Finally, the Company has advised us that the owner of the other 50% share of the leased fee interest has offered his share at $45M, suggesting an implied yield of 2.25%.
Balancing these considerations, it is our view an investor would expect to achieve a 3.00% yield on the leased fee cash flow and the value of the entire leased fee interest is $77,600,000. Next, we allocated a 50% interest and considered a 10% discount since this is a partial interest with only partial control. The Fair Value is summarized:
Fair Value Summary
Leased Fee NPV Rate 3.00% NPV $77,645,418 Partial Interest x 50% Pro Rata Share of Ownership Interest $38,822,709 Less Discount for Marketability and Control x 90% Fair Value of 50% of Leased Fee Interest (Rd) $34,800,000
Fair Value of Leased Fee "As Is"
Approach Value Interest Appraised Date of Value Conclusion Income Approach Fair Value of Total Leased Fee Leased Fee Interest December 31, 2020 $77,600,000 Income Approach Fair Value of 50% Interest in Leased Fee Leased Fee Interest December 31, 2020 $34,800,000
10 The grantee of the 50% interest has agreed to pay the grantor $1M if they acquire the other 50% interest in leased fee within a specified period and $3MM if they execute a condo conversion.
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67 Valuation of Leased Fee Interest
Reconciliation of Leased Fee Value Underlying Site Value
As a reconciliation of our opinion of the leased fee value, we analyzed the value of the site “as if vacant” and unencumbered. We present comparable sales:
Sale Address Sale Date Sale Price Zoning Maximum Site Size Buildable Price PSF FAR Area of FAR 1 2686-2690 Broadway 8/5/2019 $44,000,000 R9A, R8B, EC-3, C1-5 7.168 10,789 77,336 $569 C6-2 and Hudson 2 527-531 West 36th Street 3/18/2019 $20,441,500 6.00 7,406 44,436 $460 Yards Special District R8A with a C1-5 3 1986-1998 2nd Avenue 12/12/2018 $28,793,000 6.02 16,342 98,379 $293 overlay
4 150 East 91st Street 8/14/2020 $30,353,680 C1-8X 9.70 5,033 48,820 $622
Min 6.00 5,033 44,436 $293 Max 9.70 16,342 98,379 $622 Average 7.22 9,893 67,243 $486 As summarized above, the land sales range from $293 to $622 per buildable square foot. The subject has a superior location to Comparables 2, 3 and 4. Sale 1 has a similar location but has a superior location for retail use due to its location on Broadway. Therefore, it is reasonable for the subject to be at the higher end of the range but below that of Comparable 1. Thus, our opinion is:
Value “As If Vacant”
Buildable Area 140,175 x Price PSF $550 Site Value Opinion (As if Vacant): $77,096,250 Site Value Opinion (As if Vacant RD): $77,000,000 The value “As if Vacant” is similar to our opinion of the leased fee interest, suggesting the reasonableness of the same.
Bowery Valuation JOB 2101119260
68 Valuation of Leased Fee Interest
Valuation of Leasehold interest
There is a ground lease which expires on November 1, 2099. The value of the leasehold is the net present value of the income stream (NOI minus the lease payment) through the remaining term.
Year 1: NOI is based on the Adjusted Proforma presented in the Income approach which reflects current occupancy.
Year 2: NOI is based on stabilized NOI presented in the Income Approach.
Year 3: We grow the NOI 3% annually (0% for year 2).
Ground Rent Reset: Note the lease payments are set through October 31, 2049, at which point the ground rent is reset based on fair market. We apply a market-oriented ground rent of $2.7M in November 2049 (10% increase over the previous rent).
Discount Rate: According to Situs, discount rates for residential properties average 6.5% in the 3Q2020. We apply a 7.25% discount rate to value the income stream. Based on the stability of the lease payments and the long-term lease, balanced with the risk associated with the rent reset in 2049, and the fact there is no reversionary value, a 7.25% discount rate is appropriate. The net income by year is presented below.
Leasehold Value Summary
Net Cashflow to Discount based on Period NOI Lease Payment Leasehold 7.25% Rate Discounted CF 1/1/2021 10/31/2021 $2,542,837 $1,260,752 $1,282,084 0.94334 $1,209,443 11/1/2021 10/31/2022 $4,325,286 $1,512,903 $2,812,383 0.87957 $2,473,694 11/1/2022 10/31/2023 $4,455,044 $1,512,903 $2,942,141 0.82011 $2,412,892 11/1/2023 10/31/2024 $4,588,696 $1,512,903 $3,075,793 0.76468 $2,351,983 11/1/2024 10/31/2025 $4,726,357 $1,512,903 $3,213,454 0.71298 $2,291,141 11/1/2025 10/31/2026 $4,868,147 $1,664,193 $3,203,954 0.66479 $2,129,946 11/1/2026 10/31/2027 $5,014,192 $1,664,193 $3,349,998 0.61985 $2,076,489 11/1/2027 10/31/2028 $5,164,617 $1,664,193 $3,500,424 0.57795 $2,023,059 11/1/2028 10/31/2029 $5,319,556 $1,664,193 $3,655,363 0.53888 $1,969,795 11/1/2029 10/31/2030 $5,479,143 $1,664,193 $3,814,949 0.50245 $1,916,823 11/1/2030 10/31/2031 $5,643,517 $1,830,612 $3,812,904 0.46849 $1,786,289 11/1/2031 10/31/2032 $5,812,822 $1,830,612 $3,982,210 0.43682 $1,739,493 11/1/2032 10/31/2033 $5,987,207 $1,830,612 $4,156,595 0.40729 $1,692,930 11/1/2033 10/31/2034 $6,166,823 $1,830,612 $4,336,211 0.37976 $1,646,700 11/1/2034 10/31/2035 $6,351,828 $1,830,612 $4,521,215 0.35408 $1,600,892 11/1/2035 10/31/2036 $6,542,383 $2,013,674 $4,528,709 0.33015 $1,495,147 11/1/2036 10/31/2037 $6,738,654 $2,013,674 $4,724,981 0.30783 $1,454,495 11/1/2037 10/31/2038 $6,940,814 $2,013,674 $4,927,140 0.28702 $1,414,196 11/1/2038 10/31/2039 $7,149,038 $2,013,674 $5,135,365 0.26762 $1,374,323 11/1/2039 10/31/2040 $7,363,509 $2,013,674 $5,349,836 0.24953 $1,334,937 11/1/2040 10/31/2041 $7,584,415 $2,215,041 $5,369,374 0.23266 $1,249,242 11/1/2041 10/31/2042 $7,811,947 $2,215,041 $5,596,906 0.21693 $1,214,154 11/1/2042 10/31/2043 $8,046,306 $2,215,041 $5,831,265 0.20227 $1,179,481 11/1/2043 10/31/2044 $8,287,695 $2,215,041 $6,072,654 0.18860 $1,145,274 11/1/2044 10/31/2045 $8,536,326 $2,215,041 $6,321,285 0.17585 $1,111,576 11/1/2045 10/31/2046 $8,792,415 $2,436,545 $6,355,870 0.16396 $1,042,105 11/1/2046 10/31/2047 $9,056,188 $2,436,545 $6,619,643 0.15288 $1,011,984 11/1/2047 10/31/2048 $9,327,873 $2,436,545 $6,891,328 0.14254 $982,301 11/1/2048 10/31/2049 $9,607,710 $2,436,545 $7,171,165 0.13291 $953,091 11/1/2049 10/31/2050 $9,895,941 $2,700,000 $7,195,941 0.12392 $891,733 11/1/2050 10/31/2051 $10,192,819 $2,700,000 $7,492,819 0.11554 $865,755 11/1/2051 10/31/2052 $10,498,604 $2,700,000 $7,798,604 0.10773 $840,174
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69 Valuation of Leased Fee Interest
Net Cashflow to Discount based on Period NOI Lease Payment Leasehold 7.25% Rate Discounted CF 11/1/2052 10/31/2053 $10,813,562 $2,700,000 $8,113,562 0.10045 $815,017 11/1/2053 10/31/2054 $11,137,969 $2,700,000 $8,437,969 0.09366 $790,307 11/1/2054 10/31/2055 $11,472,108 $2,970,000 $8,502,108 0.08733 $742,484 11/1/2055 10/31/2056 $11,816,271 $2,970,000 $8,846,271 0.08143 $720,317 11/1/2056 10/31/2057 $12,170,759 $2,970,000 $9,200,759 0.07592 $698,538 11/1/2057 10/31/2058 $12,535,882 $2,970,000 $9,565,882 0.07079 $677,164 11/1/2058 10/31/2059 $12,911,958 $2,970,000 $9,941,958 0.06600 $656,211 11/1/2059 10/31/2060 $13,299,317 $3,267,000 $10,032,317 0.06154 $617,413 11/1/2060 10/31/2061 $13,698,297 $3,267,000 $10,431,297 0.05738 $598,570 11/1/2061 10/31/2062 $14,109,246 $3,267,000 $10,842,246 0.05350 $580,095 11/1/2062 10/31/2063 $14,532,523 $3,267,000 $11,265,523 0.04989 $561,997 11/1/2063 10/31/2064 $14,968,499 $3,267,000 $11,701,499 0.04651 $544,285 11/1/2064 10/31/2065 $15,417,554 $3,593,700 $11,823,854 0.04337 $512,798 11/1/2065 10/31/2066 $15,880,080 $3,593,700 $12,286,380 0.04044 $496,837 11/1/2066 10/31/2067 $16,356,483 $3,593,700 $12,762,783 0.03770 $481,214 11/1/2067 10/31/2068 $16,847,177 $3,593,700 $13,253,477 0.03516 $465,935 11/1/2068 10/31/2069 $17,352,592 $3,593,700 $13,758,892 0.03278 $451,006 11/1/2069 10/31/2070 $17,873,170 $3,953,070 $13,920,100 0.03056 $425,445 11/1/2070 10/31/2071 $18,409,365 $3,953,070 $14,456,295 0.02850 $411,966 11/1/2071 10/31/2072 $18,961,646 $3,953,070 $15,008,576 0.02657 $398,792 11/1/2072 10/31/2073 $19,530,496 $3,953,070 $15,577,426 0.02477 $385,927 11/1/2073 10/31/2074 $20,116,410 $3,953,070 $16,163,340 0.02310 $373,373 11/1/2074 10/31/2075 $20,719,903 $4,348,377 $16,371,526 0.02154 $352,617 11/1/2075 10/31/2076 $21,341,500 $4,348,377 $16,993,123 0.02008 $341,264 11/1/2076 10/31/2077 $21,981,745 $4,348,377 $17,633,368 0.01872 $330,183 11/1/2077 10/31/2078 $22,641,197 $4,348,377 $18,292,820 0.01746 $319,377 11/1/2078 10/31/2079 $23,320,433 $4,348,377 $18,972,056 0.01628 $308,844 11/1/2079 10/31/2080 $24,020,046 $4,783,215 $19,236,831 0.01518 $291,986 11/1/2080 10/31/2081 $24,740,647 $4,783,215 $19,957,433 0.01415 $282,446 11/1/2081 10/31/2082 $25,482,867 $4,783,215 $20,699,652 0.01320 $273,147 11/1/2082 10/31/2083 $26,247,353 $4,783,215 $21,464,138 0.01230 $264,089 11/1/2083 10/31/2084 $27,034,773 $4,783,215 $22,251,559 0.01147 $255,270 11/1/2084 10/31/2085 $27,845,817 $5,261,536 $22,584,280 0.01070 $241,573 11/1/2085 10/31/2086 $28,681,191 $5,261,536 $23,419,655 0.00997 $233,574 11/1/2086 10/31/2087 $29,541,627 $5,261,536 $24,280,091 0.00930 $225,786 11/1/2087 10/31/2088 $30,427,876 $5,261,536 $25,166,340 0.00867 $218,208 11/1/2088 10/31/2089 $31,340,712 $5,261,536 $26,079,176 0.00808 $210,837 11/1/2089 10/31/2090 $32,280,933 $5,787,690 $26,493,244 0.00754 $199,706 11/1/2090 10/31/2091 $33,249,361 $5,787,690 $27,461,672 0.00703 $193,012 11/1/2091 10/31/2092 $34,246,842 $5,787,690 $28,459,152 0.00655 $186,502 11/1/2092 10/31/2093 $35,274,247 $5,787,690 $29,486,558 0.00611 $180,172 11/1/2093 10/31/2094 $36,332,475 $5,787,690 $30,544,785 0.00570 $174,022 11/1/2094 10/31/2095 $37,422,449 $6,366,459 $31,055,990 0.00531 $164,973 11/1/2095 10/31/2096 $38,545,123 $6,366,459 $32,178,664 0.00495 $159,382 11/1/2096 10/31/2097 $39,701,476 $6,366,459 $33,335,017 0.00462 $153,948 11/1/2097 10/31/2098 $40,892,521 $6,366,459 $34,526,062 0.00431 $148,670 11/1/2098 10/31/2099 $42,119,296 $6,366,459 $35,752,837 0.00401 $143,546
NPV $67,140,360 Rounded NPV: $67,100,000
Approach Value Interest Appraised Date of Value Conclusion Income Approach Fair Value of Leasehold Interest Leasehold Interest December 31, 2020 $67,100,000
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70 Reconciliation & Final Value Opinion
Reconciliation & Final Value Opinion
The estimated values arrived at by the approaches to value used in this report are as follows:
Market Value Opinion
Value Interest Appraised Date of Value Conclusion Fair Value of Leasehold Interest Leasehold Interest December 31, 2020 $67,100,000
Fair Value of 50% Interest in Leased Fee Leased Fee Interest December 31, 2020 $34,800,000
The Cost Approach is traditionally a good indicator of value when properties being appraised are new or close to new. 323 West 96th Street was constructed in 2003. The difficulty in estimating depreciation makes this a less reliable approach to value, however. Along this line, investors typically give nominal weight to this analysis. Therefore, as a result of the limited use of this approach, it has not been applied.
The Income Approach is considered to be a good indicator of value when market rents, stabilized expenses, capitalization rates, discount rates and vacancy rates are based on reliable market data. For our analysis, income and expenses were derived from actual and market figures and were considered reliable. Vacancy rates were based on a neighborhood survey and were considered to be reflective of market demand for the subject property. The capitalization and discount rates were derived from reliable market surveys of investor criteria.
The Sales Comparison Approach is considered a reliable indicator of value when few differences exist between the comparable sales and the subject, and the sales data collected is considered to be reliable and accurate. We analyzed the comparable sales on a price per unit basis. This approach produced a value which is similar to the value via the Income Approach. As the Income Approach more accurately reflects the current value since it is based on actual income and expenses, we will rely on this fair value conclusion only as secondary support for our Income Approach conclusion. Final Value Opinion
Value Interest Appraised Date of Value Conclusion Fair Value of Leasehold Interest Leasehold Interest December 31, 2020 $67,100,000
Fair Value of 50% Interest in Leased Fee Leased Fee Interest December 31, 2020 $34,800,000
The value conclusions are subject to the following Extraordinary Assumptions11 that may affect the assignment results. If the assumption is found to be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions.
• None.
The value conclusions are based on the following Hypothetical Conditions12 that may affect the assignment results.
• None.
The opinion of value expressed herein is subject to the certification, assumptions and limiting conditions, and all other information contained in the following written appraisal report.
11 The definition of Extraordinary Assumptions can be found in the Glossary of Terms, which is located in the Addenda.
12 The definition of Hypothetical Conditions can be found in the Glossary of Terms, which is located in the Addenda.
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71 Certification
Certification We certify to the best of our knowledge: • The statements of fact contained in this report are true and correct. • The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. • We have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved. • We have performed services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. • We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. • Our engagement in this assignment was not contingent upon developing or reporting predetermined results. • Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. • Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice and the current version of the FIRREA of 1989, including its Title XI regulations. • Pat Ippolito has made a personal inspection of the property that is the subject of this report on January 15, 2021. Michelle Zell, Helen Peng, and Maren Lewis did not make a personal inspection of the property that is the subject of this report. Michelle Zell has appraised and inspected the property previously. • No one provided significant real property appraisal assistance to the person signing this certification in the form of an inspection. • The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. • The reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. • As of the date of this report, Michelle Zell and Helen Peng have completed the continuing education program for Designated Members of the Appraisal Institute. • We have experience in appraising properties similar to the subject and are in compliance with the Competency Rule of USPAP.
Michelle Zell, MAI Maren Lewis Senior Vice President Vice President NY Cert. No. 46-49921 [email protected] [email protected] (917) 748-5387 (917) 533-3141
Helen Peng, MAI, MRICS, AI-GRS Director NY Cert. No. 46-8916 [email protected] (917) 533-3141
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Addenda
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Contingent & Limiting Conditions
1. Any legal description or plats reported herein are assumed to be accurate. Any sketches, surveys, plats, photographs, drawings or other exhibits are included only to assist the intended user to better understand and visualize the subject property, the environs, and the competitive data. We have made no survey of the property and assume no responsibility in connection with such matters.
2. The appraiser has not conducted any engineering or architectural surveys in connection with this appraisal assignment. Information reported pertaining to dimensions, sizes, and areas is either based on measurements taken by the appraiser or the appraiser’s staff or was obtained or taken from referenced sources and is considered reliable. No responsibility is assumed for the costs of preparation or for arranging geotechnical engineering, architectural, or other types of studies, surveys, or inspections that require the expertise of a qualified professional.
3. No responsibility is assumed for matters legal in nature. Title is assumed to be good and marketable and in fee simple unless otherwise stated in the report. The property is considered to be free and clear of existing liens, easements, restrictions, and encumbrances, except as stated.
4. Unless otherwise stated herein, it is assumed there are no encroachments or violations of any zoning or other regulations affecting the subject property and the utilization of the land and improvements is within the boundaries or property lines of the property described and that there are no trespasses or encroachments.
5. Bowery Real Estate Systems, Inc. assumes there are no private deed restrictions affecting the property which would limit the use of the subject property in any way.
6. It is assumed the subject property is not adversely affected by the potential of floods; unless otherwise stated herein.
7. It is assumed all water and sewer facilities (existing and proposed) are or will be in good working order and are or will be of sufficient size to adequately serve any proposed buildings.
8. Unless otherwise stated within the report, the depiction of the physical condition of the improvements described herein is based on visual inspection. No liability is assumed for the soundness of structural members since no engineering tests were conducted. No liability is assumed for the condition of mechanical equipment, plumbing, or electrical components, as complete tests were not made. No responsibility is assumed for hidden, unapparent or masked property conditions or characteristics that were not clearly apparent during our inspection.
9. If building improvements are present on the site, no significant evidence of termite damage or infestation was observed during our physical inspection, unless so stated in the report. No termite inspection report was available, unless so stated in the report. No responsibility is assumed for hidden damages or infestation.
10. Any proposed or incomplete improvements included in this report are assumed to be satisfactorily completed in a workmanlike manner or will be thus completed within a reasonable length of time according to plans and specifications submitted.
11. No responsibility is assumed for hidden defects or for conformity to specific governmental requirements, such as fire, building, safety, earthquake, or occupancy codes, except where specific professional or governmental inspections have been completed and reported in the appraisal report.
12. Responsible ownership and competent property management are assumed.
13. The appraisers assume no responsibility for any changes in economic or physical conditions which occur following the effective date of value within this report that would influence or potentially affect the analyses, opinions, or conclusions in the report. Any subsequent changes are beyond the scope of the report.
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14. The value estimates reported herein apply to the entire property. Any proration or division of the total into fractional interests will invalidate the value estimates, unless such proration or division of interests is set forth in the report.
15. Any division of the land and improvement values estimated herein is applicable only under the program of utilization shown. These separate valuations are invalidated by any other application.
16. Unless otherwise stated in the report, only the real property is considered, so no consideration is given to the value of personal property or equipment located on the premises or the costs of moving or relocating such personal property or equipment.
17. Unless otherwise stated, it is assumed that there are no subsurface oil, gas or other mineral deposits or subsurface rights of value involved in this appraisal, whether they are gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered; unless otherwise stated. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred.
18. Any projections of income and expenses, including the reversion at time of resale, are not predictions of the future. Rather, they are our best estimate of current market thinking of what future trends will be. No warranty or representation is made that these projections will materialize. The real estate market is constantly fluctuating and changing. It is not the task of an appraiser to estimate the conditions of a future real estate market, but rather to reflect what the investment community envisions for the future in terms of expectations of growth in rental rates, expenses, and supply and demand. The forecasts, projections, or operating estimates contained herein are based on current market conditions, anticipated short-term supply and demand factors, and a continued stable economy. These forecasts are, therefore, subject to changes with future conditions.
19. Unless subsoil opinions based upon engineering core borings were furnished, it is assumed there are no subsoil defects present, which would impair development of the land to its maximum permitted use or would render it more or less valuable. No responsibility is assumed for such conditions or for engineering which may be required to discover them.
20. Bowery Real Estate Systems, Inc. representatives are not experts in determining the presence or absence of hazardous substances, defined as all hazardous or toxic materials, wastes, pollutants or contaminants (including, but not limited to, asbestos, PCB, UFFI, or other raw materials or chemicals) used in construction or otherwise present on the property. We assume no responsibility for the studies or analyses which would be required to determine the presence or absence of such substances or for loss as a result of the presence of such substances. Appraisers are not qualified to detect such substances. The client is urged to retain an expert in this field.
21. We are not experts in determining the habitat for protected or endangered species, including, but not limited to, animal or plant life (such as bald eagles, gophers, tortoises, etc.) that may be present on the property. We assume no responsibility for the studies or analyses which would be required to determine the presence or absence of such species or for loss as a result of the presence of such species. The appraiser hereby reserves the right to alter, amend, revise, or rescind any of the value opinions based upon any subsequent endangered species impact studies, research, and investigation that may be provided.
22. No environmental impact studies were either requested or made in conjunction with this analysis. The appraiser hereby reserves the right to alter, amend, revise, or rescind any of the value opinions based upon any subsequent environmental impact studies, research, and investigation that may be provided.
23. The appraisal is based on the premise that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless otherwise stated in the report; further, that all applicable zoning, building, and use regulations and restrictions of all types have been complied with unless otherwise stated in the report; further, it is assumed that all required licenses, consents, permits, or other legislative or administrative authority, local, state, federal and/or private entity or organization have been or can be obtained or renewed for any use considered in the value estimate.
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24. Neither all nor any part of the contents of this report or copy thereof, shall be conveyed to the public through advertising, public relations, news, sales, or any other media, without the prior written consent and approval of the appraisers. This limitation pertains to any valuation conclusions, the identity of the analyst or the firm and any reference to the professional organization of which the appraiser is affiliated or to the designations thereof.
25. Although the appraiser has made, insofar as is practical, every effort to verify as factual and true all information and data set forth in this report, no responsibility is assumed for the accuracy of any information furnished the appraiser either by the client or others. If for any reason, future investigations should prove any data to be in substantial variance with that presented in this report, the appraiser reserves the right to alter or change any or all analyses, opinions, or conclusions and/or estimates of value.
26. If this report has been prepared in a so-called “public non-disclosure” state, real estate sales prices and other data, such as rents, prices, and financing, are not a matter of public record. If this is such a “non- disclosure” state, although extensive effort has been expended to verify pertinent data with buyers, sellers, brokers, lenders, lessors, lessees, and other sources considered reliable, it has not always been possible to independently verify all significant facts. In these instances, the appraiser may have relied on verification obtained and reported by appraisers outside of our office. Also, as necessary, assumptions and adjustments have been made based on comparisons and analyses using data in the report and on interviews with market participants. The information furnished by others is believed to be reliable, but no warranty is given for its accuracy.
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Leased Fee Cash Flow
Discount Factor Discounted Ground Rent @ 3% Year Ending Ground Rent 3.00% Discounted Ground Rent 10/31/21 1,260,752 0.9757 1,230,076 10/31/22 1,512,903 0.9473 1,433,099 10/31/23 1,512,903 0.9197 1,391,358 10/31/24 1,512,903 0.8929 1,350,833 10/31/25 1,512,903 0.8669 1,311,489 10/31/26 1,664,193 0.8416 1,400,619 10/31/27 1,664,193 0.8171 1,359,824 10/31/28 1,664,193 0.7933 1,320,217 10/31/29 1,664,193 0.7702 1,281,764 10/31/30 1,664,193 0.7478 1,244,431 10/31/31 1,830,612 0.7260 1,329,004 10/31/32 1,830,612 0.7048 1,290,295 10/31/33 1,830,612 0.6843 1,252,714 10/31/34 1,830,612 0.6644 1,216,227 10/31/35 1,830,612 0.6450 1,180,803 10/31/36 2,013,674 0.6262 1,261,052 10/31/37 2,013,674 0.6080 1,224,323 10/31/38 2,013,674 0.5903 1,188,663 10/31/39 2,013,674 0.5731 1,154,042 10/31/40 2,013,674 0.5564 1,120,429 10/31/41 2,215,041 0.5402 1,196,574 10/31/42 2,215,041 0.5245 1,161,722 10/31/43 2,215,041 0.5092 1,127,886 10/31/44 2,215,041 0.4944 1,095,035 10/31/45 2,215,041 0.4800 1,063,141 10/31/46 2,436,545 0.4660 1,135,393 10/31/47 2,436,545 0.4524 1,102,323 10/31/48 2,436,545 0.4392 1,070,217 10/31/49 2,436,545 0.4264 1,039,045 10/31/50 2,700,000 0.4140 1,117,858 10/31/51 2,700,000 0.4020 1,085,299 10/31/52 2,700,000 0.3903 1,053,688 10/31/53 2,700,000 0.3789 1,022,998 10/31/54 2,700,000 0.3679 993,202 10/31/55 2,970,000 0.3571 1,060,701 10/31/56 2,970,000 0.3467 1,029,807 10/31/57 2,970,000 0.3366 999,813 10/31/58 2,970,000 0.3268 970,692 10/31/59 2,970,000 0.3173 942,419 10/31/60 3,267,000 0.3081 1,006,467
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77 Addenda
Year Ending Ground Rent 3.00% Discounted Ground Rent
10/31/61 3,267,000 0.2991 977,153 10/31/62 3,267,000 0.2904 948,692 10/31/63 3,267,000 0.2819 921,060 10/31/64 3,267,000 0.2737 894,233 10/31/65 3,593,700 0.2657 955,006 10/31/66 3,593,700 0.2580 927,191 10/31/67 3,593,700 0.2505 900,185 10/31/68 3,593,700 0.2432 873,966 10/31/69 3,593,700 0.2361 848,511 10/31/70 3,953,070 0.2292 906,177 10/31/71 3,953,070 0.2226 879,783 10/31/72 3,953,070 0.2161 854,158 10/31/73 3,953,070 0.2098 829,280 10/31/74 3,953,070 0.2037 805,126 10/31/75 4,348,377 0.1977 859,843 10/31/76 4,348,377 0.1920 834,799 10/31/77 4,348,377 0.1864 810,485 10/31/78 4,348,377 0.1810 786,879 10/31/79 4,348,377 0.1757 763,960 10/31/80 4,783,215 0.1706 815,879 10/31/81 4,783,215 0.1656 792,116 10/31/82 4,783,215 0.1608 769,045 10/31/83 4,783,215 0.1561 746,645 10/31/84 4,783,215 0.1516 724,898 10/31/85 5,261,536 0.1471 774,163 10/31/86 5,261,536 0.1429 751,615 10/31/87 5,261,536 0.1387 729,723 10/31/88 5,261,536 0.1347 708,469 10/31/89 5,261,536 0.1307 687,834 10/31/90 5,787,690 0.1269 734,580 10/31/91 5,787,690 0.1232 713,184 10/31/92 5,787,690 0.1196 692,412 10/31/93 5,787,690 0.1162 672,245 10/31/94 5,787,690 0.1128 652,665 10/31/95 6,366,459 0.1095 697,021 10/31/96 6,366,459 0.1063 676,719 10/31/97 6,366,459 0.1032 657,009 10/31/98 6,366,459 0.1002 637,873 10/31/99 6,366,459 0.0973 619,294 Total 77,645,418
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Rent Roll & Financial Statements
# Unit # Rooms Bedroomst/Lease Status Monthly Rent Rent Per Room 1 201 3 1.0 Vacant $0.00 $0 2 202 3 1.0 Vacant $0.00 $0 3 203 3 1.0 Vacant $0.00 $0 4 204 3 1.0 Free Market $3,625.00 $1,208 5 205 4 2.0 Free Market $5,100.00 $1,275 6 206 3 1.0 Vacant $0.00 $0 7 207 3 1.0 Free Market $3,250.00 $1,083 8 208 3 1.0 Free Market $3,450.00 $1,150 9 209 3 1.0 Free Market $3,340.00 $1,113 10 210 2 0.0 Free Market $2,700.00 $1,350 11 211 4 2.0 Free Market $4,800.00 $1,200 12 212 2 0.0 Free Market $2,775.00 $1,388 13 213 2 0.0 Free Market $2,600.00 $1,300 14 214 4 2.0 Vacant $0.00 $0 15 301 3 1.0 Free Market $3,350.00 $1,117 16 302 3 1.0 Vacant $0.00 $0 17 303 3 1.0 Vacant $0.00 $0 18 304 3 1.0 Free Market $3,630.00 $1,210 19 305 4 2.0 Free Market $5,010.00 $1,253 20 306 3 1.0 Vacant $0.00 $0 21 307 3 1.0 Vacant $0.00 $0 22 308 3 1.0 Free Market $3,400.00 $1,133 23 309 3 1.0 Vacant $0.00 $0 24 310 2 0.0 Free Market $2,620.00 $1,310 25 311 4 2.0 Free Market $5,300.00 $1,325 26 312 2 0.0 Free Market $2,775.00 $1,388 27 313 2 0.0 Free Market $2,750.00 $1,375 28 314 3 1.0 Free Market $3,675.00 $1,225 29 315 4 2.0 Free Market $6,100.00 $1,525 30 401 3 1.0 Vacant $0.00 $0 31 402 3 1.0 Vacant $0.00 $0 32 403 3 1.0 Vacant $0.00 $0 33 404 3 1.0 Free Market $3,750.00 $1,250 34 405 4 2.0 Vacant $0.00 $0 35 406 3 1.0 Free Market $3,485.00 $1,162 36 407 3 1.0 Vacant $0.00 $0 37 408 3 1.0 Vacant $0.00 $0 38 409 3 1.0 Free Market $3,400.00 $1,133 39 410 2 0.0 Free Market $2,800.00 $1,400 40 411 4 2.0 Free Market $5,300.00 $1,325 41 412 2 0.0 Free Market $2,825.00 $1,413 42 413 2 0.0 Free Market $2,695.00 $1,348 43 414 3 1.0 Free Market $3,720.00 $1,240 44 415 4 2.0 Free Market $6,050.00 $1,513 45 501 3 1.0 Vacant $0.00 $0 46 502 3 1.0 Vacant $0.00 $0 47 503 3 1.0 Vacant $0.00 $0 48 504 3 1.0 Free Market $3,725.00 $1,242 49 505 4 2.0 Free Market $4,875.00 $1,219 50 506 3 1.0 Vacant $0.00 $0
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# Unit # Rooms Bedroomst/Lease Status Monthly Rent Rent Per Room 51 507 3 1.0 Free Market $3,475.00 $1,158 52 508 3 1.0 Vacant $0.00 $0 53 509 3 1.0 Free Market $3,350.00 $1,117 54 510 2 0.0 Free Market $2,625.00 $1,313 55 511 4 2.0 Free Market $5,075.00 $1,269 56 512 2 0.0 Free Market $2,700.00 $1,350 57 513 2 0.0 Free Market $2,675.00 $1,338 58 514 3 1.0 Vacant $0.00 $0 59 515 4 2.0 Free Market $5,425.00 $1,356 60 601 3 1.0 Free Market $3,375.00 $1,125 61 602 3 1.0 Free Market $3,375.00 $1,125 62 603 3 1.0 Vacant $0.00 $0 63 604 3 1.0 Vacant $0.00 $0 64 605 4 2.0 Vacant $0.00 $0 65 606 3 1.0 Free Market $3,225.00 $1,075 66 607 3 1.0 Free Market $3,450.00 $1,150 67 608 3 1.0 Free Market $3,775.00 $1,258 68 609 3 1.0 Free Market $3,600.00 $1,200 69 610 2 0.0 Free Market $2,725.00 $1,363 70 611 4 2.0 Free Market $5,100.00 $1,275 71 612 2 0.0 Free Market $2,725.00 $1,363 72 613 2 0.0 Stabilized $2,699.19 $1,350 73 614 3 1.0 Free Market $3,475.00 $1,158 74 615 4 2.0 Free Market $5,750.00 $1,438 75 701 3 1.0 Free Market $3,375.00 $1,125 76 702 3 1.0 Vacant $0.00 $0 77 703 3 1.0 Vacant $0.00 $0 78 704 3 1.0 Free Market $3,700.00 $1,233 79 705 4 2.0 Free Market $5,150.00 $1,288 80 706 3 1.0 Vacant $0.00 $0 81 707 3 1.0 Free Market $3,450.00 $1,150 82 708 3 1.0 Free Market $3,325.00 $1,108 83 709 3 1.0 Free Market $3,350.00 $1,117 84 710 2 0.0 Free Market $2,725.00 $1,363 85 711 4 2.0 Vacant $0.00 $0 86 712 2 0.0 Free Market $2,725.00 $1,363 87 713 2 0.0 Free Market $2,750.00 $1,375 88 714 3 1.0 Vacant $0.00 $0 89 715 4 2.0 Free Market $5,800.00 $1,450 90 801 3 1.0 Vacant $0.00 $0 91 802 3 1.0 Vacant $0.00 $0 92 803 3 1.0 Vacant $0.00 $0 93 804 3 1.0 Free Market $3,775.00 $1,258 94 805 4 2.0 Free Market $4,885.00 $1,221 95 806 3 1.0 Vacant $0.00 $0 96 807 3 1.0 Stabilized $3,575.00 $1,192 97 808 3 1.0 Free Market $3,515.00 $1,172 98 809 3 1.0 Free Market $3,550.00 $1,183 99 810 2 0.0 Free Market $2,750.00 $1,375 100 811 4 2.0 Free Market $5,500.00 $1,375
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# Unit # Rooms Bedroomst/Lease Status Monthly Rent Rent Per Room 101 812 2 0.0 Free Market $2,750.00 $1,375 102 813 2 0.0 Free Market $2,775.00 $1,388 103 814 3 1.0 Free Market $3,775.00 $1,258 104 815 4 2.0 Free Market $5,925.00 $1,481 105 901 3 1.0 Vacant $0.00 $0 106 902 3 1.0 Free Market $3,500.00 $1,167 107 903 3 1.0 Vacant $0.00 $0 108 904 3 1.0 Free Market $3,595.00 $1,198 109 905 4 2.0 Free Market $5,300.00 $1,325 110 906 3 1.0 Free Market $3,480.00 $1,160 111 907 3 1.0 Vacant $0.00 $0 112 908 3 1.0 Free Market $3,575.00 $1,192 113 909 3 1.0 Free Market $3,530.00 $1,177 114 910 2 0.0 Free Market $2,775.00 $1,388 115 911 4 2.0 Vacant $0.00 $0 116 912 2 0.0 Free Market $2,800.00 $1,400 117 913 2 0.0 Vacant $0.00 $0 118 914 3 1.0 Free Market $3,250.00 $1,083 119 915 4 2.0 Free Market $4,500.00 $1,125 120 1001 3 1.0 Vacant $0.00 $0 121 1002 3 1.0 Vacant $0.00 $0 122 1003 3 1.0 Vacant $0.00 $0 123 1004 3 1.0 Free Market $3,800.00 $1,267 124 1005 4 2.0 Vacant $0.00 $0 125 1006 3 1.0 Free Market $3,375.00 $1,125 126 1007 3 1.0 Free Market $3,475.00 $1,158 127 1008 3 1.0 Vacant $0.00 $0 128 1009 3 1.0 Free Market $3,450.00 $1,150 129 1010 2 0.0 Free Market $2,800.00 $1,400 130 1011 4 2.0 Free Market $5,500.00 $1,375 131 1012 3 1.0 Free Market $4,275.00 $1,425 132 1013 2 0.0 Free Market $2,795.00 $1,398 133 1014 3 1.0 Vacant $0.00 $0 134 1101 3 1.0 Free Market $3,800.00 $1,267 135 1102 3 1.0 Vacant $0.00 $0 136 1103 3 1.0 Free Market $3,350.00 $1,117 137 1104 3 1.0 Free Market $3,635.00 $1,212 138 1105 4 2.0 Free Market $5,075.00 $1,269 139 1201 3 1.0 Free Market $3,500.00 $1,167 140 1202 3 1.0 Stabilized $3,400.00 $1,133 141 1203 3 1.0 Free Market $3,650.00 $1,217 142 1204 3 1.0 Free Market $3,800.00 $1,267 143 1205 4 2.0 Free Market $4,900.00 $1,225 144 1301 3 1.0 Free Market $3,475.00 $1,158 145 1302 3 1.0 Free Market $3,635.00 $1,212 146 1303 3 1.0 Stabilized $3,791.03 $1,264 147 1304 3 1.0 Free Market $3,575.00 $1,192 148 1305 4 2.0 Stabilized $3,950.00 $988 149 PH1 5 3.0 Free Market $6,850.00 $1,370
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# Unit # Rooms Bedroomst/Lease Status Monthly Rent Rent Per Room 150 PH2 5 3.0 Free Market $6,600.00 $1,320 151 PH3 5 3.0 Free Market $6,100.00 $1,220 152 PH4 5 3.0 Free Market $6,700.00 $1,340 153 PH5 5 3.0 Stabilized $7,384.13 $1,477 154 PH6 5 3.0 Free Market $6,400.00 $1,280 155 PH7 5 3.0 Free Market $6,550.00 $1,310 156 PH8 5 3.0 Free Market $6,750.00 $1,350 157 PH9 5 3.0 Free Market $7,600.00 $1,520 158 PH10 2 0.0 Free Market $2,850.00 $1,425 159 PH11 5 3.0 Free Market $8,575.00 $1,715 160 PH12 5 3.0 Free Market $6,800.00 $1,360 161 PH13 5 3.0 Free Market $5,800.00 $1,160 162 PH14 5 3.0 Free Market $6,825.00 $1,365 163 TH101 6 4.0 Employee $0.00 $0 164 TH102 6 4.0 Free Market $7,250.00 $1,208 165 TH103 6 4.0 Free Market $7,070.00 $1,178 166 TH104 6 4.0 Free Market $5,700.00 $950 167 TH105 6 4.0 Free Market $7,250.00 $1,208 168 TH106 6 4.0 Free Market $6,775.00 $1,129 169 TH107 6 4.0 Vacant $0.00 $0 170 TH108 6 4.0 Vacant $0.00 $0 171 TH109 6 4.0 Stabilized $8,300.00 $1,383 172 TH110 6 4.0 Free Market $5,400.00 $900 173 ST1 2 0.0 Free Market $2,775.00 $1,388
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New York City Area Analysis
Overview
New York City and the surrounding area is a global center for finance, education, media, the arts, and increasingly tech. New York City consists of five boroughs: Manhattan, Brooklyn, Queens, the Bronx, and Staten Island, which together contain a population estimated at approximately 8.6 million.
Attribute Rating Description Employment Declining In contrast to the national picture, the City’s unemployment rate increased in June, from 18.3% in May to 20.4%. Over 900,000 fewer New Yorkers were working in June than in February. The unemployment rate remains elevated. Income Elevated but Varies NYC has elevated household income levels; however, they vary drastically by borough and neighborhood. Wage growth has slowed over the last few years. Population Decelerating Growth The population continues to increase in NYC; however, that growth has slowed down over the last five years.
Labor Market
Private sector jobs in New York City fell by 851,000 yoy to 3,218,200 in May 2020. Losses were widespread and occurred in leisure and hospitality (-317,600), trade, transportation, and utilities (-142,600), educational and health services (-117,100), professional and business services (-107,100), other services (-56,800), natural resources, mining, and construction (-55,500), financial activities (-23,400), manufacturing (-17,400), and information (-13,900).
Although still a near-record 20.9% below year-ago levels, the labor market data for May reflect a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it. The city's private sector rate of change (-20.9%) compares to a 20.2% drop for the state and a 12.8% decline for the nation. The city's seasonally adjusted unemployment rate was 18.3% in May 2020, an increase of 330 bps from April and a rise of 1,420 bps from May 2019. New York State's rate was 14.5% in May 2020.
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Unemployment Rate
Unemployment Rate by County 30%
25%
20%
15%
10%
5%
0% Jan '20 Feb '20 March '20 Apr '20 May '20 June '20 July '20 Aug '20 Sep '20 Queens Manhattan Staten Island Bronx NY-NJ Metro New York
Source: Bureau of Labor Statistics
Major Employers
According to the New York State Department of Labor, the ten largest private sector employers in New York City (in alphabetical order) are: American Airlines, Columbia University, JPMorgan Chase, Memorial Sloan Kettering Cancer Center, Morgan Stanley Children's Hospital, Mount Sinai Hospital, New York-Presbyterian Hospital, Nielsen Company, Northwell Health, Inc., and Verizon.
Economy
The City’s Real Gross City Product (GCP) grew 2.4% in Q4 2019 on an annualized basis, surpassing national economic growth, and up from 1.6% in the third quarter. The increased economic pace was led by a strong labor market and solid wage growth as measured by average hourly earnings. In addition, the job growth rate accelerated in Q4, led by the Professional & Business Services and Education & Health Services sectors; however, a number of sectors saw declines. The unemployment rate for New York City has dropped to a record low of 4.0%, which was also met twice in 2018. In addition, the unemployment rate has dropped in all five Boroughs; however, that has changed rapidly due to COVID-19, which has led to job losses in nearly all industries.
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U.S. GDP rose at a 2.1% annual rate in Q4 2019, matching the 2.1% growth rate in the previous quarter. The biggest contributor to GDP growth was a sharp decline in imports, and the largest drag on growth was a decline in inventory investment. Consumer spending contributed 1.2% to GDP growth, less than the 2.1% in Q3 2019. The decrease in consumer spending’s contribution was primarily driven by significant reductions in the purchase of durable and nondurable goods. Durable goods contribution dropped from 0.56% in Q3 2019 to 0.15% in Q4 2019. Similarly, nondurable goods contribution dropped from 0.53% in Q3 2019 to 0.11% in Q4 2019. The biggest contributor to GDP growth was an 8.7% drop in imports (a net positive for GDP) most likely due to tariffs on goods from China. Chinese’s exports of goods to the U.S. accounted for 21.2% of all U.S. imports in 2018 , which dropped to 18.1% in 2019. U.S. exports of goods to China dropped in 2019 due to tariffs imposed by China. Despite the reduction in exports for the year, in Q4 2019 exports to China rose likely as a conciliatory overture leading to the current agreement worked out between the US and China.. The result, a decrease in imports from China and a weaker decrease in exports led to this positive contribution to the US GDP. Government expenditures contributed 0.47% to GDP growth in the 4th quarter, of which 0.23% was federal and 0.23% were by state and local governments. Nondefense Federal government expenditure rose 1.6%, and defense spending grew 4.9% on an annualized basis in Q4 2019.
A continued slump in private investment deducted 1.08% from GDP growth after deducting 0.17% in Q3 2019 and 1.16% in Q2 2019. As a result, gross private investment dropped by 6.1% in Q4 2019 from the previous quarter. Two likely causes for the third consecutive quarterly decline in investment include the waning impact of the 2017 Tax Cuts and Jobs Act stimulus effect, and hesitation in the face of uncertainties over the path of trade negotiations. Finally, the U.S. inflation rate, as measured by the year-over-year change in the consumer price index rose 2.0% while the personal consumption expenditure (PCE) deflator rose 1.5% in Q4 2019. The PCE deflator is clearly below the Federal Reserve’s 2.0% target. NYC Real Gross City Product (GCP) and U.S. GDP
GCP (NYC) GDP (USA) 6%
5%
4%
3%
2%
1%
0%
-1%
-2% Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019 Source: CoStar
New York City Recovery Index
The NYC Recovery Index represents the combination of five sub-indices including Health, Transport & Mobility, Jobs, Real Estate, and Restaurant Reservations. As New York recovers from COVID-19, the shutdowns, and their economic repercussions, we expect each of these elements to return to pre-pandemic levels. To measure the pace of the recovery, we report indices for each component and sum them into an overall recovery index.
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New York City took more small steps towards a full economic recovery in the past week as a surge in pending home sales and more dining out helped boost the NYC Recovery Index to a reading of 55 out of 100. It’s the highest reading for the index, developed in partnership with NY1, since early March before the pandemic was officially declared. The Recovery Index jumped 7 points week-over-week, driven by gains in the real estate component, and while other metrics showed slight increases, most are still well-below their pre-pandemic levels. Despite an uptick in positive coronavirus cases over the past several weeks, especially in Brooklyn and Queens, new hospitalizations for the virus remained stable. Unemployment continues to be among the biggest factors holding back the city’s overall economic recovery. New York City’s unemployment rate was 14.1% in September, a decline from 16% in August. The job losses continue to concentrate in the leisure and hospitality sectors, where 225,888 people lost their jobs in September, but also in Professional Services, where 98,500 New Yorkers lost their job last month.
The residential real estate market continues to be one of the few bright spots in the New York City economy. Pending home sales, or homes under contract, regained strength from the prior week, rising 44% across all boroughs according to data from StreetEasy. Brooklyn, with a 64% increase in pending sales from the same period a year ago, continues to be the strongest part of the city, with Queens and Manhattan still showing robust activity.
The New York City rental markets for both apartments and commercial real estate, however, are both deeply compromised. According to data from Douglas Elliman and Miller Samuel, the number of apartments for rent in Manhattan tripled in September, with nearly 16,000 apartments sitting empty. According to the report, there were 15,963 apartments for rent in September, up from 5,299 a year earlier. The vacancy rate in Manhattan, which is typically 2% to 3%, is now nearly 6%.
Commuters are slowly coming back to public transportation in NYC, as the subway mobility index increased just under 1% last week. The return of public schools to in-person classes helped boost the index, but subway ridership is still 68% below the same period a year ago. Restaurant reservations, as measured by OpenTable, showed a slight increase last week, but cold, rainy weather limited the gains. Many restaurants are now allowing indoor dining at 25% capacity in addition to other safety measures, but the industry is suffering from a lack of tourists, business customers and overall demand. Restaurant reservations were down 75% from the same period last year, but up slightly from the week of October 3.
NYC Recovery Index 120
100
80
60
40
20
0 Jan Feb Feb Mar Apr May Jun Jul Aug Sep Oct
COVID-19 Hospitalizations Unemployment Claims Home Sales Subway Mobility Restaurant Reservations
Source: COVID-19 Hospitalizations (NYC DOHMH), Unemployment Insurance Claims (NYS DOL), Pending Home Sales (StreetEasy), Subway Turnstile Counts (MTA), OpenTable Reservations (OpenTable)
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Venture Capital
Total Venture capital (VC) investment in the New York metro area rose in Q4 2019 from a year ago (Chart 9) while the nation experienced a significant decline. Despite the year-over-year gains, according to the PwC/CB MoneyTree Report, quarterly weakened from the 3rd quarter of 2019 from $4.90 billion to $3.03 billion.. New York VC funding rounds in Q4included four rounds of over $100 million of which, one was in biotechnology (Nuvation Bio), two were in internet (Vroom and Riskified), and another was in software (Fabric). The NY metro area’s share of VC investment increased to 13.3% in Q4 2019 from 6.1% in Q4 2018. Similarly, the share of deals rose to 14.5% in Q4 2019 from 13.3% in Q4 2018. San Jose-San Francisco-Oakland, CA area’s share of VC investment dropped to 40.7% in Q4 2019 from 64.3% in Q4 2018.
Venture Capital Investment by Region New York-Newark, NY-NJ-CT-PA Los Angeles-Long Beach, CA $45
$40 Billions $35
$30
$25
$20
$15
$10
$5
$0 2015 2016 2017 2018 2019
Source: PwC MoneyTree
Social Factors
Population
As illustrated in the table below, the population of New York City is estimated at nearly 8.4 million as of early 2020. A breakdown of each borough (county) is presented below along with growth projections for the next five years. There is a clear trend; each of the boroughs are seeing their population growth decelerate. The Bronx and Brooklyn experienced the greatest growth since 2010, followed closely by Manhattan. Over the next five years, the Bronx and Staten Island are expected to lead the five boroughs in population growth. The City’s population is projected to total over 8.45 million by 2025.
Borough 2010 Census 2020 Est. % Change 2025 Est. % Change Bronx 1,385,108 1,433,991 0.35% 1,447,609 0.19% Brooklyn 2,504,700 2,581,803 0.30% 2,599,104 0.13% Manhattan 1,585,873 1,630,021 0.27% 1,642,453 0.15% Queens 2,230,722 2,274,931 0.20% 2,282,047 0.06% Staten Island 468,730 477,436 0.18% 481,413 0.17% New York City 8,175,133 8,398,182 0.27% 8,452,626 0.13% Source: Environics Analytics
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Source: Environics Analytics
Based on the Environics Analytics estimates, personal income levels increased significantly during the recent economic expansion. While income growth was realized throughout New York City, Brooklyn and Manhattan enjoyed the greatest benefit. Income growth is projected to continue, though it’s expected to slow significantly over the next five years. Manhattan has the highest average and median income levels, while the Bronx has the lowest levels overall.
Governmental Factors
New York City residents elect a mayor every four years. Additionally, there is a borough president for each of the five counties and a city council made up of 51 council members from the 51 districts throughout the city. Mayor Bill de Blasio is the 109th mayor of the City, the first Democrat to take the office in 20 years.
New York City has one of the highest costs of living in the U.S. This is partially due to high real estate taxes as well as high income taxes. In addition to paying New York State income taxes, residents must also pay New York City income taxes. As a result, residents have one of the highest tax burdens in the country. On the other hand, the City maintains a large park system and extensive shoreline, in addition to providing many of its residents affordable housing through the New York City Housing Authority (NYCHA). Further, it has maintained a welcoming policy regarding immigrants, which has contributed to its diversity and attracted workers and employee talent from around the world.
Zoning
The City also maintains stringent controls on zoning in the five boroughs. The City Planning Commission designates zoning districts that specify land usage, building density, height, and other property requirements. In addition, there are multiple historic districts throughout the city that limit the ability of an owner to make changes to the façade of a property and subject proposed building alterations to Landmarks approvals. Zoning has major implications for real estate development and property/land values throughout New York City.
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Rent Regulation Changes
One of the most significant influences on real estate by government in New York City are rent regulations. There are two types of rent regulations in New York City: rent control and rent stabilization. The original rent control dates to the 1940’s and was enacted to protect tenants from a housing shortage post-WWII. Today, rent stabilization is the more common of the two forms of rent regulations, affecting approximately 45% of New York City’s rental housing stock. Rent stabilization typically affects apartments in buildings with six or more units constructed between 1947 and 1973 (buildings constructed after 1974 can be rent stabilized if they receive tax benefits).
The rent stabilization laws have been modified multiple times and was dramatically updated in June 2019. Key changes in June 2019 include the elimination of vacancy decontrol and vacancy bonus. Prior to June 2019 a unit could be removed from rent-stabilization (referred to as destabilized or decontrolled) when the monthly price increased to over $2,774.76, when it became vacant. Now, this rule has been repealed and the new law also eliminates the rule whereby when a renter’s income exceeds $200,000, could decontrol a unit. Previously, when a unit became vacant, property owners could raise rents up to 20%, however, now this bonus has been eliminated.
Other major changes affecting the rent stabilization laws include changes to major capital improvements (MCI) and individual apartment improvements (IAI). These changes now more greatly restrict how much owners can increase rent after providing building wide or individual apartment improvements. The annual rent increase that landlords can charge tenants for major capital improvements decreased from 6% of the MCI cost to 2%. Further, the amount of spending on individual apartments will be capped at $15,000 over a 15-year period and now an owner can add 1/168 of the IAI to the rent (reduced from 1/40 previously). Additionally, for a tenant receiving a preferential rent the landlord will no longer be able to raise the rent to the full legal rent at lease renewal; this can only be achieved upon vacancy. The maximum rent increases for rent-controlled tenants will now be set at the average of the five most recent Rent Guidelines Board annual rent increases for one-year rent-stabilized renewals.
As the new laws only recently went into effect, there has been no transactional data to demonstrate the effect on real estate in New York City, however, prior to the changes in the law landlords were often able to achieve significant upside upon vacancy of below market rent stabilized units typically through a renovation program and the vacancy bonus. This upside potential has largely been eliminated as the vacancy bonus has disappeared and increases provided due to renovations are now significantly limited. Upside potential can be achieved through allowable annual increases set by the Rent Stabilization Guidelines Board. Historically, annual increases have typically ranged between 0% and 2.5%.
Environmental Influences
Land Area
As mentioned, New York City consists of five boroughs: Manhattan, Brooklyn, Queens, the Bronx and Staten Island, which together comprise a land area of 307 square miles. The boroughs are well connected via 57 bridges and 4 tunnels, thousands of highways, river ferries and the City’s subway system. Manhattan is an island, surrounded by the Hudson River and the East River with access via bridges and tunnels to Brooklyn and Queens, and multiple bridges connecting it to the Bronx. Staten Island is accessible via ferry and connects to Brooklyn via the Verrazano Bridge. New Jersey can be reached via two tunnels and the George Washington Bridge in upper Manhattan and multiple ferries.
Manhattan and many of the surrounding areas sit on bedrock, which is ideal for supporting the many high-rise buildings that define the City. As a result, Manhattan has the highest population density in the country with much of the housing stock in the form of rental apartments, condos and co-op units. On the other hand, Staten Island and some areas of Queens have more suburban-like neighborhoods with many single-family homes.
The New York City Parks Department maintains over 1,700 parks, playgrounds, and other facilities throughout New York City. The largest and most famous park is Central Park, which totals 843 acres in the center of Manhattan, extending from 59th Street to 110th Street, and from Fifth Avenue to Central Park West and serves the residents of the City and many tourists who visit its grounds every year.
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Transportation
In addition to operating and maintaining the series of bridges and tunnels connecting the City, the Port Authority of New York & New Jersey is also responsible for the three largest airports serving the New York area: John F. Kennedy International Airport in southern Queens, LaGuardia Airport in northern Queens, and Newark Airport in northern New Jersey. The Metropolitan Transit Authority (MTA) operates the New York areas network of commuter trains, subways, and buses, the largest mass transportation system in North America. The Subway system alone provided 1.7 billion trips in 2017. The system operates 24-hours a day and is an integral part of daily life for the clear majority of New Yorkers. Proximity to a subway stop can have a major positive impact on property values.
There are also two major commuter rail terminals in Manhattan and a regional bus terminal. Penn Station, which is the busiest train station in the country, is situated below Madison Square Garden, between 33rd and 31st Street and Seventh and Eighth Avenue and serves the Long Island Railroad and New Jersey Transit trains. Grand Central Terminal, located in Midtown between 42nd and 45th Streets and between Lexington and Vanderbilt Avenues, is the terminal for Metro North, a commuter line serving communities in Westchester, Putnam and Dutchess Counties, as well as southern Connecticut. The Port Authority Bus Terminal, located on 42nd Street and Eighth Avenue, serves commuters, primarily from New Jersey, entering the City. The NJ PATH line also has 6 stations in Manhattan, including the recently reopened and renovated PATH station at the World Trade Center in lower Manhattan.
Conclusion
Based on several positive data points, the general overall economy appeared strong heading into 2020; however, that has changed suddenly with the onset of COVID-19. The unemployment rate has jumped in all five boroughs; however, not all have been evenly affected by layoffs. The services sector, including retail, leisure and hospitality industries have been targeted, and are typically lower paid jobs. As such, areas with more affordable housing have largely been affected. Housing costs are expected to be a continuing issue for many, which could be a drag on the economy. Further, NYC receives a large portion of its revenue from retail taxes, which have been negatively affected by COVID. Over the long term, New York’s economy is expected to grow; however, it will see limited growth over the short term.
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Multifamily Market Analysis - New York - NY
The following report was created using CoStar data from the 2020 Q3 New York - NY Multifamily Market report.
Overview
Coming into 2020, the biggest question seemed to be if the market can maintain this momentum in light of the roughly 58,000 units that remained in the pipeline. The pandemic has answered this question with renter demand, construction starts, asking rents, and investment activity in decline as the market enters the final months of the year. The economic slowdown is concerning to the lending community, who may be weary to finance projects in areas that are either unproven or already have a glut of recently built inventory.
Future projects will likely have to adjust their lease-up expectations as well. The region's high proportion of white- collar jobs may make it somewhat economically resilient, but office-using employment in New York City has witnessed notable losses over the past six months. The number of renters looking to relocate is far less compared to a year ago, with many opting to renew and some relocating out of the city for the time being as some employers enact a work-from-anywhere virtual operation that will extend well into the new year. With projects still reaching completion amid softened demand, vacancies continued to rise entering the fourth quarter.
Rents continue to trend downward, as the number of available units rises while the number of willing renters remains lower than average. With rents trending downward, more properties offering increased concessions, and a bloated supply pipeline that is set to continue driving vacancies upward, it is not exactly an environment that lends itself to a lot of deal flow as the delta between buyers and sellers remains wide six months into the health crisis. Sales volume is on pace to decline from the more than $10 billion averaged annually over the past 10 years, with quarterly levels on par with totals witnessed at the end of the recession in 2010. If there is a bright spot, it is that sales volumes has increased from 2020 Q2 to 2020 Q3.
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New York - NY QoQ Trend YoY Trend National QoQ Trend YoY Trend Effective Rent/Unit $2,714 -1.6% -2.9% $1,364.5 -0.2% 0% Vacancy Rate 3.81% 37 bps 148 bps 6.79% -4 bps 63 bps Average Price/Unit (L) $392,973 -1.1% -2.8% $202,912 0.04% 1.4% Market Cap Rate 4.49% 2 bps 4 bps 5.58% -2 bps -8 bps
Source: CoStar
Supply & Demand
Entering 2020, vacancies have been pushed to near record lows as demand levels in the market remained strong despite a wave of supply hitting the market in recent years. The coronavirus pandemic, however, now presents an unexpected challenge for the New York apartment market. With roughly 58,000 units under construction at the start of the year, mild concern existed before the pandemic about demand continuing to keep pace with supply additions, but those worries have now been amplified.
Stay-at-home orders and apartment viewings being conducted virtually has blunted demand from March to May. Despite the metro entering its final phase of reopening as of mid-July, economic uncertainty remains. While the retail, dining, and hospitality sectors have witnessed the heaviest job losses, office-using employment has shrunk notably compared to a year ago as well. Additionally, some businesses have reduced salaries and available working hours. Some renters who have lost their jobs have relocated out of New York City for the time being, while others have opted to renew instead of relocate. The pandemic has also accelerated plans for renters who were already seeking a move out of the urban core. Absorption Share & Vacancy Rate Change in BPS 0.8% 5% 148 0.6% 3.81% 4%
0.4% 3% 2.33% 0.2% 85 2% 0.0%
1% -0.2% 37
-0.4% 0% '15 Q3 '16 Q3 '17 Q3 '18 Q3 '19 Q3 '20 Q3 Absorption as % of Inventory (L) Inventory Growth (L) 3 Yrs 1 Yr Quarterly Vacancy Rate (R) 1 Yr Rolling Avg. (R)
As a result of blunted demand, vacancies have risen considerably between January and the end of 2020 Q3. Looking ahead, vacancies are projected to continue trending upward as many projects continue to deliver and it may take more than five years for vacancies to reach pre-pandemic levels. Vacancies may increase further if the moratorium on evictions, which currently expire in December, leads to a rash of inventory hitting the market. Demand had also been spreading farther away from Manhattan and the traditional hotspots in the outer boroughs. Three of the metro's top five submarkets for net absorption in 2019—Hackensack/Teaneck, Greater Hudson County, and Yonkers/Mt. Vernon/New Rochelle—continue to be among the leaders in annual net absorption as of 2020 Q3. Suburban areas do not have face the same mass transit/density issues that are currently weakening their urban counterparts.
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350 Vacancy by Submarket - Change (bps)
300
250
200
150
100
50
0
-50
-100
Rents
Rent growth reached one of its highest two-year totals across 2018–19 but now faces it harshest challenge in over a decade. Since March, daily asking rents have continued to decline as demand has been blunted and units continue to sit on the market. Both Manhattan and Brooklyn have witnessed the largest drops in rent since March, while more suburban pockets of the metro, in New Jersey and Westchester County, have since stabilized. Speaking to the struggles of leasing units, the amount of buildings offering concessions continues to increase month-over-month. Typical concessions include months of free rents, gift cards, waiving of admin fees, and other discounts relative to the buildings. There have even been reports of renters receiving notable discounts just to renew their lease.
The Housing Stability Tenant Protection Act created much buzz and controversy when passed in June 2019. The legislation will surely limit rent growth potential in rent controlled units but might have the opposite effect on CoStar's same-store market-rate rent series. By making it more difficult to bring units out of rent stabilization, the new laws will effectively limit the market-rate inventory and decrease competition. While this may have boded well for owners of market-rate properties, the ongoing health crisis has put the idea to bed as market rate units continue to flood the market. Historical Rents & Delta Quarterly Rent Growth $3,000 $1,440 $2,714 $2,800 $1,420 0.3% 0.3% 0.2% 0.2% $2,600 $1,400 $2,400 0.0% 0.0% $2,200 $1,380 -0.2% -0.3% $2,000 $1,360 $1,800 $1,340 -1.0% $1,600 $1,364 $1,320 $1,400 -1.6% $1,200 $1,300 '15 Q3 '16 Q3 '17 Q3 '18 Q3 '19 Q3 '20 Q3 '19 Q3 '19 Q4 '20 Q1 '20 Q2 '20 Q3 Delta (R) National Market National New York - NY
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Rent growth has varied by submarket considerably. While rents have decreased -1.6% on a quarterly basis for the metro as a whole, there are plenty of submarkets that have outperformed that metric. However, many remain negative on a quarterly and annual basis. The submarkets seeing the largest declines in rent are those in Brooklyn and Manhattan, while more suburban parts of the metro have largely stabilized. The amount of properties offering concessions continue to rise month-over-month as owners try to do their best to spur interest.
2% Rent Growth by Submarket
0%
-2% -1.6%
-4%
-6%
-8%
-10%
Quarterly Rent Growth Annual Rent Growth
Construction & Future Supply
Although New York and New Jersey have lifted non-essential construction bans, the pandemic may likely delay the construction timelines of projects currently underway. Both states are mandating that social distancing be maintained on-site when possible and that worker shift times be staggered. With economic uncertainty prevalent, financial obstacles could also hold up scheduled timelines. The market's excellent fundamentals and growth prior to the pandemic have pushed developers out in full force, and nearly 56,000 units are under construction at the start of 20Q4. This number leads all metros in the country but is less daunting when viewed as a percentage of the existing inventory. The underway units represent about 4% of the existing inventory, which trails that of established markets like Boston, Washington, D.C., and Dallas. Development is concentrated on the periphery of Manhattan, in popular submarkets in Brooklyn and Queens, and in sections of New Jersey with strong transit options.
2020 Q3 witnessed almost 4,000 units deliver. August marked the completion of the Arches, Class B property featuring 430 units in the Bronx. Despite offering views of both the Harlem River and Manhattan skyline, and amenities like a yoga studio, game room, and an on-site café, the Arches is currently offering rent concessions as vacancies are becoming more difficult to fill. Long Island City is the centerpiece of the supply wave, with more than 5,000 units under construction. The majority of these apartments are concentrated within a half-mile radius of the Queensboro Plaza station, which offers a 15-minute commute to Midtown, a 20-minute commute to the new 7 line terminus at Hudson Yards, and a 25-minute commute to Lower Manhattan.
Development has also spread to New Jersey in the past cycle. More than 2,000 units are under construction in the Jersey City/Journal Square Submarket. The KRE Group's Journal Squared in Downtown Jersey City is one of the most prominent developments, adding 538 units in 2017 with an additional 700 units set to deliver next year. More than 2,700 units are also under construction in Greater Hudson County, where development has been clustered around the PATH station in Harrison.
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Construction & Share of Inventory 70 4.4%
60 4.2% Thousands 50 4.0%
40 3.8% 30
3.6% 20
3.4% 10
0 3.2% '15 Q3 '16 Q3 '17 Q3 '18 Q3 '19 Q3 '20 Q3 Under Construction Units Share of Inventory (R) Historical Avg. (R)
Capital Markets
Sales volume is already on pace to sharply decline in 2020, following a 10-year run of annual sales volume averaging more than $10 billion. Just over $3.5 billion traded hands through 2020 Q3 as the delta between buyers and sellers remains wide six months into the health crisis as rents continue trending downward, more properties offer increased concessions, and the supply pipeline remains bloated. Weakness in the market was apparent during 2020 Q3. In Brooklyn, American Realty Advisors sold its 62-unit property at 111 Kent Street for $45 million. The luxury rental building is located in Williamsburg, and the sale price reflects an $11 million dollar loss for ARA who purchased the property in 2012. In perhaps a sign of the difficulties facing all aspects of the multifamily market, a stalled residential conversion on Manhattan’s Upper East Side, at 305 E 61st St, sold for $51 million. The property was previously purchased in 2016 in an all cash transaction for $40 million, but failure to meet debt service payments resulted in the building being sold at auction. Transactions - Total Volume ($) and Transaction Count (#) $10,000 700
600 $8,000
Millions 500
$6,000 400
300 $4,000
200 $2,000 100
$0 0 '15 Q3 '16 Q1 '16 Q3 '17 Q1 '17 Q3 '18 Q1 '18 Q3 '19 Q1 '19 Q3 '20 Q1 '20 Q3 Total Volume (L) # of Transactions (R)
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Investment volume decline by 69% 20Q1 to 2020 Q2, but a few notable trades were still recorded in the midst of the pandemic. The two most expensive deals took place outside of New York City in suburban communities. In April, Ginsburg Development Companies acquired the 74-unit Stratus on the Hudson in Yonkers from RMS Companies for $39.5 million. In May, Autumn Drive LLC acquired the 216-unit Cascades at Tinton Falls from AvalonBay Communities for $64.9 million. Considering all the difficulties facing dense neighborhoods in New York City perhaps suburban submarkets will serve as a safe haven for investment capital.
Recently passed legislation will also contribute to less buildings transacting. The Housing Stability and Tenant Protection Act, passed in early June 2019, has resulted in landlords facing significant hurdles to de-stabilize units and evict tenants. The legislation will almost certainly lead to a reduction in value-add plays for assets with rent- stabilized units in their mix and the investment market is already feeling the effects. In one example, cited in a Wall Street Journal article, the asking price on an East Village property was slashed by 17% after the legislation passed. The listing brokers had been advertising the opportunity to double the building's monthly rental income through destabilization, but that is no longer a realistic goal. Sales volume in 2019 for Class D assets hit its lowest mark since 2013.
Nonetheless, New York will always attract investment, and investors have shifted their focus away from value-add plays. The supply wave has added plenty of institutional-grade assets to the inventory outside of Manhattan, several of which consist entirely of market-rate units. One of the largest single-asset transactions in 2019 was the April sale of Soho Lofts in Jersey City for $263.8 million. Mack-Cali acquired the 377-unit high-rise from AEW Capital Management at a 4.6% cap rate. Soho Lofts delivered in November 2017 and consists entirely of market-rate units. The asset was 99% occupied at the time of closing. Average Price/Unit (L) & Cap Rates (R) Annualized Growth
$420,000 5% 1.5%
$400,000 4.74%
$380,000
4.49% $360,000 4.45%
-1.1% $340,000
$320,000 -2.8%
$300,000 4% '15 Q3 '16 Q3 '17 Q3 '18 Q3 '19 Q3 '20 Q3 Average Price/Unit (L) Cap Rate (R) 3 Yrs 1 Yr Quarterly
Conclusion
The coronavirus pandemic has stressed fundamentals in the New York apartment market, following a near decade run of unimpeded growth. Impressive levels of absorption witnessed over the past four years played a major role in vacancy levels that were near record lows at the end of 2019. However, vacancy rates have expanded over the last quarter by 37 bps and 148 bps over the last year. Demand has slowed considerably for rents that are on the top end of the spectrum and in areas of the city that are more dense than others. For properties that are in lease up, landlords have increased concessions and are targeting occupancy at the expense of rent growth. Demand is expected to remain fall short of supply for the next year.
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Cushman & Wakefield Property Sales Report – Manhattan Q3 2020
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Subject Property Photos
All subject photos were taken on January 15, 2021.
Building Facade Building Facade
Subject Street Subject Street
Exterior Entrance Exterior Entrance*
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Typical Stairway Typical Hallway
Mail Area Elevators
Lobby Typical Kitchen
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Typical Kitchen Typical Kitchen
Typical Bathroom Typical Bathroom
Typical Bathroom Typical Bathroom
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Typical Apartment Interior Typical Apartment Interior
Typical Apartment Interior Typical Apartment Interior
Laundry Room Fitness Center
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Lounge Children’s Room
Electric Meters Heating System
Heating System Hot Water System
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Roof Outdoor Space
Theater Room Storage Area
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Map Gallery
Zoning Map
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Flood Map
Tax Map
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Qualifications
Helen Peng, MAI, MRICS, AI-GRS
Director
Experience
Helen Peng is a Director at Bowery Valuation who joined in February 2019. Helen has over 32 years of experience in real estate valuation. The majority of her career was spent at Bankers Trust/Deutsche Bank. The first few years of her career was spent at Chase Manhattan Bank as an Appraiser with the last few years spent as a Director at BBG in New York City with the responsibility of Quality Control Reviewer.
At Deutsche Bank, Helen was a Director where she handled consulting, due diligence and prescreening of deals for various areas of the bank. Responsibilities include assessment of the transaction, cash flow analysis, market research, site visits and review of structure and documentation. Helen has also evaluated and conducted due diligence on domestic and international portfolios. Portfolios comprised of distressed mortgages and real estate owned assets. Travels covered Japan, Taiwan, South Korea, Sweden, Italy, France, Canada, Mexico, Czech Republic and Germany.
In addition, in her role as a Review Appraiser she ordered and reviewed appraisals, provided market data as well as opine on values for all property types on national basis.
During her tenure at Chase Manhattan Bank, Helen was a Second Vice President and Senior Staff Appraiser. Her experience involves writing and reviewing reports for various property types including commercial, industrial, residential and retail. Property located in Metropolitan and Suburban New York.
Education
New York University Master of Science in Real Estate, Diploma in Real Estate Investment
University of Connecticut Bachelor of Science in Business Administration, Diploma in Real Estate and Urban Economic Studies
Certifications & Professional Designations
Appraisal Institute MAI, Designated Member AI-GRS Designated Member Former Faculty Member
Currently certified by the Appraisal Institute’s voluntary program of continuing education for its designated members.
Royal International Charter of MRICS, Designated Member Surveyors
CUNY - Baruch Former Faculty Member of Steven L. Newman Real Estate Institute
Certified General Real Estate New York (License #46000008916) Appraiser Florida (Certified General No. #RZ4138) Connecticut (License RDG.0001473) Georgia (Certified General No. 404728)
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Michelle Zell, MAI
Senior Vice President
Experience
Michelle Zell is a Senior Vice President at Bowery Valuation, who joined the firm in October 2019. She has worked in the real estate appraisal industry for 16 years.
Ms. Zell has appraised multi-family, condominium and cooperative apartment buildings, retail properties, office buildings, restaurants, industrial properties, hotels, and vacant land properties in New York, New Jersey, Connecticut, Pennsylvania, Texas, and Florida. Ms. Zell specializes in managing large portfolios, appraising large scale existing and proposed developments, appraisals for EB-5 financing, market studies, and appraisals for litigation and condemnation proceedings.
Ms. Zell performs and manages appraisals for Israeli bond issuances in excess of $1B, and has extensive experience with the Israeli bond market since 2012. She specializes in serving a liaison between the appraisers, the audit firms and the Israeli Security Authority.
Significant appraisal assignments include Peter Cooper Village/Stuyvesant Town, a rental apartment complex in New York City with 12,000 units, the condominium conversion of The Apthorp and the Belnord, two large scale prewar landmarked developments in Manhattan, 70 Pine Street, the 1M square foot former AIG headquarters converted to rental apartments, hotel, private club, restaurant and retail space, 701 7th Avenue, a proposed hotel and retail development located in Times Square and valued at $2B, market rent determination for Bell Works- the former Ball Labs in Holmdel, NJ, and multiple large developments for EB-5 financing including The Armature Works in Washington DC (a proposed mixed use retail, apartment and hotel development), 1 Journal Square (a proposed mixed use development in Jersey City), The Retail at Nassau Coliseum (proposed retail and entertainment complex adjacent to Nassau Coliseum), and Pacific Park (a proposed development of 15 land parcels to be developed with high rise residential, condominium, office and school buildings).
Before joining Bowery, Ms. Zell served as a Senior Appraiser at BBG (formerly Leitner Group) in New York City from 2003 through October 2019.
Education
Cornell University Bachelor of Science
Emory University Master of Public Health
Certifications & Professional Designations
Appraisal Institute MAI, Designated Member
Currently certified by the Appraisal Institute’s voluntary program of continuing education for its designated members.
Certified General Real Estate New York (#46-49921) Appraiser Florida (#RZ4135) Texas (#TX 1380938G)
Publications
Ms. Zell published an article about the mainstreaming of alternative lending in GlobeSt.com, dated August 5, 2019. https://www.globest.com/2019/08/05/the-mainstreaming-of-alternative-lending/
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Maren Lewis
Vice President
Experience
Maren Lewis is a Vice President at Bowery Valuation who joined the firm in October 2019. She has worked in the real estate appraisal industry for 3 years.
Ms. Lewis has appraised multifamily rental buildings, condo and cooperative buildings, developable land, ground up construction sites, retail properties, hotels and special-use properties, such as schools and other community facility properties primarily in the New York metro area.
Prior to joining Bowery, Ms. Lewis served as a Valuation Associate at BBG, Inc. based in New York City.
Prior to her time at BBG Inc., Ms. Lewis worked for the Hotel Finance Group at Credit Agricole Corporate and Investment Bank, formerly known as Credit Lyonnais, for 8 years as a Credit Analyst and Junior Relationship Manager. In this role, she prepared detailed credit recommendations to senior management, including designing and creating detailed financial projection models and assisting in the process to structure and execute corporate and asset-backed financing opportunities for single assets and hotel companies. Additionally, this role included arranging for all due diligence requirements and monitoring the financial performance on a monthly basis.
Prior to Credit Lyonnais, Ms. Lewis worked in the Kenneth Leventhal Real Estate Group at Ernst & Young, LLP. In this consulting group, she valued real estate portfolios and performed market studies, including research of economic and demographic trends, assessment of market supply and demand, interviews of market participants, and analysis of historical market and segment performance.
Education
Cornell University, School of Bachelor of Science with a focus on the hospitality industry and a concentration in Hotel Administration finance, 1997
Appraisal Institute Basic Appraisal Principles Basic Appraisal Procedures Real Estate Finance, Statistics and Valuation Modeling General Appraiser Market Analysis and Highest and Best Use General Appraiser Sales Comparison Approach General Appraiser Income Approach Part 1 General Appraiser Income Approach Part 2 General Appraiser Report Writing and Case Studies Using HP 12C Calculator Fair Housing, Fair Lending and Environmental Issues
McKissock General Appraiser Site Valuation & Cost Approach 2020-2021 15-Hour National USPAP Course
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Licenses
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Glossary of Terms
Unless otherwise noted, The Dictionary of Real Estate Appraisal, 6th edition (Chicago: Appraisal Institute, 2015) is the source of the following definitions.
As Is Market Value The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date, according to the Interagency Appraisal and Evaluation Guidelines (Federal Deposit Insurance Corporation: 2010). Note: The use of the “as is” phrase is specific to appraisal regulations pursuant to FIRREA applying to appraisals prepared for regulated lenders in the United States.
Condominium A multiunit structure, or a unit within such a structure, with a condominium form of ownership.
Deferred Maintenance Items of wear and tear on a property that should be fixed now to protect the value or income-producing ability of the property, such as a broken window, a dead tree, a leak in the roof, or a faulty roof that must be completely replaced. These items are almost always curable.
Depreciation A loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvements on the same date.
Direct Capitalization A method used to convert an estimate of a single year's net operating income expectancy into an indication of value in one direct step, either by dividing the income estimate by an appropriate rate or by multiplying the income estimate by an appropriate factor. This technique employs capitalization rates and multipliers extracted from sales. Only the first year's income is considered. Yield and value change are implied, but not identified overall. This method is most useful when the property is already operating on a stabilized basis, according to The Appraisal of Real Estate, 14th Edition (Appraisal Institute: 2013).
Discounted Cash Flow The procedure in which a discount rate is applied to a set of projected income streams and a reversion. The analysis specifics the quantity and timing of the reversion, and discounts each to its present value at a specified yield rate.
Effective Date (1) The date on which the appraisal or review applies. (2) In a lease document, the date upon which the lease goes into effect.
Effective Gross Income The anticipated income from all operations of real property adjusted for vacancy and collection losses.
Entrepreneurial Profit (1) A market-derived figure that represents the amount an entrepreneur receives for his or her contribution to a project and risk; the difference between the total cost of a property (cost of development) and its market value (property value after completion), which represents the entrepreneur’s compensation for the risk and expertise associated with development. An entrepreneur is motivated by the prospect of future value enhancement (i.e., the entrepreneurial incentive). An entrepreneur who successfully creates value through new development, expansion, renovation, or an innovative change of use is rewarded by entrepreneurial profit. Entrepreneurs may also fail and suffer losses. (2) In economics, the actual return on successful management practices, often identified with coordination, the fourth factor of production following land, labor, and capital; also called entrepreneurial return or entrepreneurial reward.
Equity Dividend The portion of net income that remains after debt service is paid; this is returned to the equity position.
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Excess Land Land that is not needed to serve or support the existing use. The highest and best use of the excess land may or may not be the same as the highest and best use of the improved parcel. Excess land has the potential to be sold separately and is valued separately. Dictionary of RE Appraisal, pp. 80-81.
Exposure Time (1) The time a property remains on the market. (2) The estimated length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal. Note: Exposure time is a retrospective.
Extraordinary Assumption An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions.
Fee Simple Interest Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.
Financial Feasibility An analysis to determine which of those uses deemed possible and legal can provide a net return to the owner of the site.
Gross Building Area Total floor area of a building, excluding unenclosed areas, measured from the exterior of the walls of the above grade area. This includes mezzanines and basements if and when typically included in the market area of the type of property involved.
Highest and Best Use (1) The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. (2) The use of an asset that maximizes its potential and that is possible, legally permissible, and financially feasible. The highest and best use may be for continuation of an asset’s existing use or for some alternative use. This is determined by the use that a market participant would have in mind for the asset when formulating the price that it would be willing to bid, according to David Parker’s International Valuation Standards (John Wiley & Sons, Ltd: 2016). (3) The highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future, according to the Uniform Appraisal Standards for Federal Land Acquisitions (The Appraisal Foundation: 2016).
Hypothetical Condition A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results but is used for the purpose of analysis.
Insurable Value A type of value for insurance purposes.
Leased Fee Interest The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires.
Leasehold Interest The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease.
Legally Permissible Use An investigation into existing zoning regulations, lease terms, and deed restrictions on the site to determine which uses are legally permitted.
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Liquidation Value (also The most probable price that a specified interest in real property should bring under known as Disposition Value) the following conditions: • Consummation of a sale within a short time period. • The property is subjected to market conditions prevailing as of the date of valuation. • Both the buyer and seller are acting prudently and knowledgeably. • The seller is under extreme compulsion to sell. • The buyer is typically motivated. • Both parties are acting in what they consider to be their best interests. • A normal marketing effort is not possible due to the brief exposure time. • Payment will be made in cash in US dollars or in terms of financial arrangements comparable thereto. • The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Marketing Time An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal.
Market Rent The most probable rent that property should bring in a competitive and open market reflecting the conditions and restrictions of a specified lease agreement, including the rental adjustment and revaluation, permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs).
Net Operating Income The anticipated net income remaining after all operating expenses are deducted from effective gross income.
Net Rentable Area For office or retail buildings, the tenant’s pro rata portion of the entire office floor, excluding elements of the building that penetrate through the floor to the areas below. The rentable area of a floor is computed by measuring to the inside finished surface of the dominant portion of the permanent building walls, excluding any major vertical penetrations of the floor. Alternatively, the amount of space on which the rent is based; calculated according to local practice.
Physically Possible Use An analysis to determine those uses of the subject which can be deemed physically possible.
Potential Gross Income The total potential income attributable to the real property at full occupancy before operating expenses are deducted. It may refer to the level of rental income prevailing in the market or that contractually determine by existing leases.
Property Rights Appraised The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires.
Prospective Opinion of A value opinion effective as of a specified future date. The term does not define a type Value of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.
Replacement Cost for The estimated cost, at current prices as of the effective date of valuation, of a substitute Insurance Purposes for the building being valued, using modern materials and current standards, design, and layout for insurance coverage purposes guaranteeing that damaged property is replaced with new property (i.e., depreciation is not deducted).
Replacement Costs The estimated cost to construct, at current prices as of a specific date, a substitute for a building or other improvements, using modern materials and current standards, design, and layout.
Bowery Valuation JOB 2101119260
120 Addenda
Reproduction Costs The estimated cost to construct, at current prices as of the effective date of the appraisal, an exact duplicate or replica of the building being appraised, using the same materials, construction standards, design, layout, and quality of workmanship and embodying all the deficiencies, super-adequacies, and obsolescence of the subject building.
Retrospective Value Opinion A value opinion effective as of a specified historical date. The term retrospective does not define a type of value. Instead, it identifies a value opinion as being effective at some specific prior date. Value as of a historical date is frequently sought in connection with property tax appeals, damage models, lease renegotiation, deficiency judgments, estate tax, and condemnation. Inclusion of the type of value with this term is appropriate, e.g., "retrospective market value opinion".
Reversion A lump-sum benefit an investor expects to receive upon the termination of the investment.
Stabilized Income (1) An estimate of income, either current or forecasted, that presumes the property is at stabilized occupancy. (2) The forecast of the subject property’s yearly average income (or average- equivalent income) expected for the economic life of the subject property. (3) Projected income that is subject to change but has been adjusted to reflect an equivalent, stable annual income.
Stabilized Occupancy (1) The occupancy of a property that would be expected at a particular point in time, considering its relative competitive strength and supply and demand conditions at the time, and presuming it is priced at market rent and has had reasonable market exposure. A property is at stabilized occupancy when it is capturing its appropriate share of market demand. (2) An expression of the average or typical occupancy that would be expected for a property over a specified projection period or over its economic life.
Surplus Land Land that is not currently needed to support the existing use but cannot be separated from the property and sold off for another use. Surplus land does not have an independent highest and best use and may or may not contribute value to the improved parcel. Dictionary of RE Appraisal, pp. 227-228.
Yield Capitalization The capitalization method used to convert future benefits into present value by discounting each future benefit at an appropriate yield rate. This method explicitly considers a series of cash flows (net income over a holding period) over time together with any reversion value or resale proceeds. Since this technique explicitly reflects the investment's income pattern, it is especially suited to multi-tenant properties with varying leasing schedules as well as properties that are not operating at stabilized occupancy, according to The Appraisal of Real Estate, 14th Edition (Appraisal Institute: 2013).
Bowery Valuation JOB 2101119260
121
86-06 35th Avenue # Unit Number # Rooms # Bedroom Comment Monthly Rent Rent/Room
1 001A 2 1 stab 1,095.67 $548 2 001B 2 0 vacant 0.00 $0 3 001C 5 3 stab 1,851.53 $370 4 001D 2 0 stab 1,568.25 $784 5 001E 4 2 stab 1,538.13 $385 6 001F 2 0 stab 1,327.18 $664 7 001G 1 0 stab 1,562.24 $1,562 8 001H 2 0 stab 1,550.00 $775 9 001J 4 2 stab 1,781.34 $445 10 001K 2 0 vacant 0.00 $0 11 001L 2 0 stab 1,716.30 $858 12 001M 3 1 stab 1,585.00 $528 13 001N 2 0 employee 0.00 $0 14 001O 3 1 stab 1,850.00 $617 15 001P 2 0 vacant 0.00 $0 16 002A 2 0 stab 1,550.00 $775 17 002B 2 0 stab 1,197.06 $599 18 002C 5 3 stab 1,784.30 $357 19 002D 2 0 stab 1,336.54 $668 20 002E 2 0 stab 1,071.41 $536 21 002F 2 0 stab 1,799.35 $900 22 002G 4 2 stab 1,769.83 $442 23 002H 1 0 stab 1,550.00 $1,550 24 002J 3 1 stab 1,674.12 $558 25 002K 3 1 stab 1,427.48 $476 26 002L 4 2 stab 1,198.31 $300 27 002M 3 1 stab 1,584.31 $528 28 002N 4 2 vacant 0.00 $0 29 002O 4 2 stab 1,403.79 $351 30 002P 2 0 stab 1,345.62 $673 31 003A 2 0 stab 1,486.25 $743 32 003B 2 0 stab 1,062.61 $531 33 003C 5 3 stab 1,416.98 $283 34 003D 2 0 stab 1,568.48 $784 35 003E 4 2 stab 2,132.45 $533 36 003F 3 1 stab 1,742.72 $581 37 003G 5 3 stab 2,131.50 $426 38 003H 2 0 stab 904.51 $452 39 003J 3 1 stab 1,850.00 $617 40 003K 2 0 stab 1,202.29 $601 41 003L 2 0 stab 1,075.02 $538 42 003M 2 0 stab 900.72 $450 43 003N 4 2 stab 2,126.88 $532 44 003O 4 2 stab 1,261.95 $315 45 003P 2 0 stab 1,420.06 $710 46 004A 2 1 stab 1,300.00 $650 47 004B 4 2 stab 1,200.46 $300 48 004C 4 2 stab 2,203.75 $551 49 004D 3 1 stab 1,772.12 $591 50 004E 2 0 stab 1,010.53 $505 51 004F 2 0 stab 1,201.15 $601 52 004G 4 2 stab 1,927.00 $482 53 004H 2 1 stab 1,502.07 $751 54 004J 4 2 stab 1,616.81 $404 55 004K 2 0 stab 1,229.84 $615 56 004L 3 1 stab 1,802.89 $601 57 004M 2 0 stab 1,232.84 $616 58 004N 4 2 stab 1,905.92 $476 59 004O 3 1 stab 1,347.16 $449 60 004P 2 0 stab 1,067.26 $534 61 005A 2 1 stab 1,109.05 $555 62 005B 3 1 stab 1,558.03 $519 63 005C 2 0 stab 1,526.79 $763 64 005D 2 0 stab 1,756.44 $878 65 005E 4 2 stab 1,196.49 $299 66 005F 3 1 stab 1,777.35 $592 67 005G 2 0 stab 1,122.75 $561 68 005H 2 0 stab 1,446.57 $723 69 005J 3 1 stab 1,158.85 $386 70 005K 3 1 stab 1,505.73 $502 71 005L 3 1 stab 1,321.27 $440 72 005M 3 1 stab 1,773.28 $591 73 005N 4 2 stab 1,572.54 $393 74 005O 2 0 stab 1,111.40 $556 75 005P 4 2 stab 1,988.33 $497 76 006A 2 1 stab 782.68 $391 77 006B 2 0 stab 1,190.64 $595 78 006C 4 2 stab 1,562.96 $391 79 006D 3 1 stab 1,370.88 $457 80 006E 4 2 stab 1,734.53 $434 81 006F 2 0 stab 853.73 $427 82 006G 3 1 stab 1,779.15 $593 83 006H 2 1 stab 1,516.07 $758 84 006J 3 1 stab 1,760.01 $587 85 006K 3 1 stab 1,500.77 $500 86 006L 4 2 stab 1,227.91 $307 87 006M 2 0 stab 1,247.71 $624 88 006N 4 2 stab 1,317.14 $329 89 006O 3 1 stab 1,682.36 $561 90 006P 4 2 stab 1,847.30 $462
Totals 255 83 $126,019 $494 Annual $1,512,224 Loss to Lease Min Y 2 2 2 2 2 A
$ PSF Per Unit Income Potential Residential Income $1,576,809 $18.94 $17,520 Laundry Income $9,600 $0.12 $107 Potential Gross Income $1,586,409 $19.06 $17,627 Less Residential V/C Loss @ 0.02 -$31,536 -$0.38 -$350 Effective Gross Income $1,554,873 $18.68 $17,276
Operating Expenses Real Estate Taxes $370,844 $4.46 $4,120 Insurance $49,943 $0.60 $555 Utilities $74,914 $0.90 $832 Water & Sewer $73,800 $0.89 $820 Repairs & Maintenance $41,619 $0.50 $462 Payroll $67,500 $0.81 $750 Reserves $18,000 $0.22 $200 Miscellaneous $12,486 $0.15 $139 Management Fees and Admin $46,646 $0.56 $518 Total Operating Expenses $755,752 $9.08 $8,397
Total Expenses Excluding RE Taxes $384,908 $4.62 $4,277
Net Operating Income $799,121 $9.60 $8,879 Operating Expense Ratio 49% Value Date Conclusion
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3647 Broadway
# Unit Number # Rooms # Bedroom Comment Monthly Rent Rent/Room 0 1 001B 6 4 stab 834.73 $139 2 001C 5 3 stab 2,674.00 $535 3 001D 4 2 cont 954.93 $239 4 001E 4 2 stab 1,321.31 $330 5 001F 4 2 stab 2,472.06 $618 6 001G 3 1 stab 1,973.65 $658 7 002A 6 4 stab 1,504.95 $251 8 002B 6 4 stab 1,185.08 $198 9 002C 5 3 stab 2,456.93 $491 10 002D 4 2 stab 1,543.43 $386 11 002E 4 2 stab 1,391.95 $348 12 002F 4 2 stab 1,508.85 $377 13 002G 3 1 stab 1,581.85 $527 14 002H 6 4 stab 3,778.51 $630 15 003A 6 4 stab 1,517.72 $253 16 003B 6 4 stab 1,096.17 $183 17 003C 5 3 vacant 0.00 $0 18 003D 4 2 stab 2,050.00 $513 19 003E 4 2 stab 1,032.19 $258 20 003F 4 2 cont 816.04 $204 21 003G 3 1 vacant 0.00 $0 22 003H 6 4 stab 3,406.74 $568 23 004A 6 4 stab 3,587.67 $598 24 004B 6 4 stab 2,188.25 $365 25 004C 5 3 stab 2,628.85 $526 26 004D 4 2 stab 2,535.00 $634 27 004E 4 2 stab 1,738.68 $435 28 004F 4 2 stab 2,717.45 $679 29 004G 3 1 stab 1,912.10 $637 30 004H 6 4 cont 1,283.03 $214 31 005A 6 4 cont 1,392.46 $232 32 005B 6 4 stab 3,434.74 $572 33 005C 5 3 stab 1,985.42 $397 34 005D 4 2 cont 2,441.12 $610 35 005E 4 2 cont 929.63 $232 36 005F 4 2 stab 2,713.59 $678 37 005G 3 1 stab 2,050.00 $683 38 005H 6 4 cont 1,253.81 $209 39 006A 6 4 stab 3,477.17 $580 40 006B 6 4 vacant 0.00 $0 41 006C 5 3 stab 1,055.39 $211 42 006D 4 2 stab 1,052.22 $263 43 006E 4 2 stab 936.11 $234 44 006F 4 2 stab 1,991.80 $498 45 006G 3 1 stab 804.89 $268 46 006H 6 4 stab 2,686.20 $448 47 007A 6 4 stab 1,580.29 $263 48 007B 6 4 cont 1,270.01 $212 49 007C 5 3 cont 1,204.63 $241 50 007D 4 2 stab 2,139.91 $535 51 007E 4 2 stab 2,767.19 $692 52 007F 4 2 stab 931.91 $233 53 007G 3 1 stab 1,803.13 $601 54 007H 6 4 stab 3,693.29 $616 55 008A 6 4 stab 3,305.87 $551 56 008B 6 4 stab 3,015.68 $503 57 008C 5 3 stab 1,171.42 $234 58 008D 4 2 stab 2,210.00 $553 59 008E 4 2 vacant 0.00 $0 60 008F 4 2 stab 955.93 $239 61 008G 3 1 stab 1,949.74 $650 62 008H 6 4 stab 3,107.33 $518 63 009A 6 4 stab 2,822.85 $470 64 009B 6 4 stab 2,939.39 $490 65 009C 5 3 stab 3,181.50 $636 66 009D 4 2 stab 2,471.00 $618 67 009E 4 2 stab 790.04 $198 68 009F 4 2 stab 2,195.00 $549 69 009G 3 1 stab 1,052.02 $351 70 009H 6 4 stab 1,322.27 $220 71 010A 6 4 stab 1,343.99 $224 72 010B 6 4 vacant 0.00 $0 73 010C 5 3 stab 2,946.88 $589 74 010D 4 2 stab 2,335.00 $584 75 010E 4 2 stab 1,174.69 $294 76 010F 4 2 stab 1,647.13 $412 77 010G 3 1 stab 1,980.04 $660 78 010H 6 4 stab 1,251.41 $209 bsmt employee
79 GC 5 3 stab 2,194.42 $439 80 GD 4 2 stab 1,721.22 $430 81 GE 4 2 stab 1,983.22 $496 82 GF 4 2 stab 2,570.28 $643 83 GG 3 1 stab 1,515.64 $505 ST1 Taco Bell 9,500.00 ST2 Tribeca Peds 7,000.00 ST3 ALDEA COUNSELING SERVICES L 2,711.87
Totals 388 222 $171,653 $442 Annual $2,059,834
$ PSF Per Unit Income Potential Residential Income $1,978,729 $16.05 $23,840 Retail Income $230,542 $1.87 $2,778 Laundry Income $15,600 $0.13 $188 Retail Reimbursement $20,268 $0.16 $244 Potential Gross Income $2,245,139 $18.21 $27,050 Less Residential V/C Loss @ 0.03 -$59,362 -$0.48 -$715 Less Commercial V/C Loss @ 0.02 -$5,016 -$0.04 -$60 Effective Gross Income $2,180,761 $17.68 $26,274
Operating Expenses Real Estate Taxes $444,538 $3.60 $5,356 Insurance $43,160 $0.35 $520 Utilities $108,516 $0.88 $1,307 Water & Sewer $85,075 $0.69 $1,025 Repairs & Maintenance $49,326 $0.40 $594 Payroll $124,500 $1.01 $1,500 Reserves $16,600 $0.13 $200 Miscellaneous $24,663 $0.20 $297 Management Fees and Admin $65,423 $0.53 $788 Total Operating Expenses $961,800 $7.80 $11,588
Total Expenses Excluding RE Taxes $517,262 $4.19 $6,232
Net Operating Income $1,218,961 $9.89 $14,686 Operating Expense Ratio 44%
Value Date Conclusion
Fair Value "As Is" December 31, 2020 $31,200,000 •
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143 Linden Boulevard
# Unit Number # Rooms # Bedroom Comment Monthly Rent Rent/Room 1 001A 4 2 employee 0.00 $0 2 001C 4 2 stab 1,790.79 $448 3 001D 3 1 stab 1,191.87 $397 4 001E 3 1 stab 983.00 $328 5 001F 3 1 stab 1,326.39 $442 6 001G 2 0 stab 726.71 $363 7 001H 4 2 stab 1,107.87 $277 8 001J 4 2 stab 1,355.59 $339 9 002A 4 2 stab 998.00 $250 10 002B 3 1 stab 1,230.00 $410 11 002C 3 1 stab 1,599.97 $533 12 002D 3 1 stab 1,070.90 $357 13 002E 3 1 stab 1,184.76 $395 14 002F 3 1 stab 1,640.00 $547 15 002G 3 1 stab 794.14 $265 16 002H 3 1 stab 1,140.78 $380 17 002J 4 2 stab 1,004.44 $251 18 003A 4 2 stab 1,216.50 $304 19 003B 3 1 stab 1,435.00 $478 20 003C 3 1 stab 974.07 $325 21 003D 3 1 stab 847.21 $282 22 003E 3 1 stab 1,618.93 $540 23 003F 3 1 stab 1,114.27 $371 24 003G 3 1 stab 977.95 $326 25 003H 3 1 stab 918.50 $306 26 003J 4 2 stab 926.68 $232 27 004A 4 2 stab 1,850.00 $463 28 004B 3 1 stab 1,600.00 $533 29 004C 3 1 stab 1,133.01 $378 30 004D 3 1 stab 790.87 $264 31 004E 3 1 stab 930.10 $310 32 004F 3 1 stab 904.98 $302 33 004G 3 1 stab 837.36 $279 34 004H 3 1 stab 1,014.17 $338 35 004J 4 2 stab 1,587.21 $397 36 005A 4 2 stab 1,072.03 $268 37 005B 3 1 stab 740.95 $247 38 005C 3 1 stab 1,435.00 $478 39 005D 3 1 stab 1,325.00 $442 40 005E 3 1 stab 1,126.41 $375 41 005F 3 1 stab 1,265.83 $422 42 005G 3 1 stab 1,222.15 $407 43 005H 3 1 stab 909.11 $303 44 005J 4 2 stab 1,877.75 $469 45 006A 4 2 stab 997.29 $249 46 006B 3 1 stab 1,031.24 $344 47 006C 3 1 stab 905.21 $302 48 006D 3 1 stab 1,146.27 $382 49 006E 3 1 stab 1,300.39 $433 50 006F 3 1 stab 1,588.75 $530 51 006G 3 1 stab 901.75 $301 52 006H 3 1 stab 907.97 $303 53 006J 4 2 stab 1,957.43 $489
Totals 172 66 $61,533 $358 Annual $738,391 $ PSF Per Unit Income Potential Residential Income $738,391 $12.32 $13,932 Laundry Income $0 $0.00 $0 Potential Gross Income $738,391 $12.32 $13,932 Less Residential V/C Loss @ 0.01 -$7,384 -$0.12 -$139 Effective Gross Income $731,007 $12.20 $13,793
Operating Expenses Real Estate Taxes $177,362 $2.96 $3,346 Insurance $26,962 $0.45 $509 Utilities $64,709 $1.08 $1,221 Water & Sewer $55,120 $0.92 $1,040 Repairs & Maintenance $20,971 $0.35 $396 Payroll $26,500 $0.44 $500 Reserves $10,600 $0.18 $200 Miscellaneous $5,992 $0.10 $113 Management Fees $21,930 $0.37 $414 Total Operating Expenses $410,146 $6.85 $7,739
Total Expenses Excluding RE Taxes $232,784 $3.89 $4,392
Net Operating Income $320,860 $5.36 $6,054 Operating Expense Ratio 56%
NOI $320,860 OAR 4.00% Indicated Value $8,021,510 Final Value Opinion (RD) $8,000,000
Value Date Conclusion
Fair Value "As Is" December 31, 2020 $8,000,000 •
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# Unit Number # Rooms # Bedroom Comment Monthly Rent Rent/Room 1 A001 4 2 stab 2,226.62 $557 2 A002 2 0 stab 1,895.00 $948 3 A003 3 1 vacant 0.00 $0 4 A004 3 1 vacant 0.00 $0 5 A005 2 0 stab 1,712.82 $856 6 A006 3 1 stab 2,514.26 $838 7 A007 4 2 stab 2,432.96 $608 8 A008 2 0 stab 2,200.00 $1,100 9 A009 3 1 stab 1,386.46 $462 10 A00A 3 1 vacant 0.00 $0 11 A00B 3 1 stab 1,894.38 $631 12 A00C 2 0 stab 847.93 $424 13 A00D 4 2 stab 889.59 $222 14 A00F 3 1 stab 2,275.00 $758 15 A010 3 1 stab 850.42 $283 16 A011 2 0 vacant 0.00 $0 17 A012 3 1 stab 2,524.05 $841 18 A014 4 2 stab 738.56 $185 19 A015 2 0 vacant 0.00 $0 20 A016 3 1 stab 1,990.00 $663 21 A017 2 0 cont 2,500.00 $1,250 22 A018 2 0 stab 2,131.50 $1,066 23 A019 3 1 stab 722.71 $241 24 A020 2 0 vacant 0.00 $0 25 A021 3 1 stab 1,869.50 $623 26 A022 3 1 stab 2,537.50 $846 27 A023 2 0 stab 1,880.17 $940 28 A024 3 1 stab 811.70 $271 29 A025 2 0 cont 830.11 $415 30 A026 2 0 vacant 0.00 $0 31 A027 3 1 stab 2,410.63 $804 32 A028 3 1 vacant 0.00 $0 33 A029 2 0 stab 1,848.02 $924 34 A030 3 1 vacant 0.00 $0 35 A19A 4 2 stab 851.09 $213 36 B00E 3 1 stab 633.90 $211 37 B00G 3 1 stab 3,241.66 $1,081 38 B031 4 2 vacant 0.00 $0 39 B032 2 0 stab 1,553.24 $777 40 B033 3 1 vacant 0.00 $0 41 B034 3 1 stab 921.81 $307 42 B035 2 0 stab 1,473.42 $737 43 B036 3 1 stab 790.42 $263 44 B037 4 2 stab 2,793.97 $698 45 B038 2 0 stab 1,979.25 $990 46 B039 3 1 vacant 0.00 $0 47 B040 2 0 stab 1,791.29 $896 48 B041 2 0 stab 2,106.13 $1,053 49 B042 2 0 cont 853.62 $427 50 B043 4 2 stab 2,025.97 $506 51 B044 4 2 vacant 0.00 $0 52 B045 3 1 stab 2,500.00 $833 53 B046 3 1 stab 2,091.00 $697 54 B047 2 0 stab 1,570.79 $785 55 B048 2 0 stab 720.55 $360 56 B049 4 2 stab 2,646.43 $662 57 B050 2 0 stab 1,496.05 $748 58 B051 2 0 stab 1,571.50 $786 59 B052 3 1 stab 1,122.98 $374 60 B053 3 1 stab 1,346.07 $449 61 B054 3 1 stab 2,537.50 $846 62 B055 4 2 stab 2,564.43 $641 63 B056 2 0 vacant 0.00 $0 64 B057 2 0 stab 1,696.90 $848 65 B058 3 1 stab 2,375.00 $792 66 B059 2 0 stab 2,070.60 $1,035 67 B060 2 0 stab 2,501.26 $1,251 68 C061 4 2 stab 2,129.14 $532 69 C062 2 0 stab 733.19 $367 70 C063 4 2 stab 2,341.76 $585 71 C064 4 2 stab 1,596.16 $399 72 C065 4 2 vacant 0.00 $0 73 C066 4 2 stab 2,723.47 $681 74 C067 4 2 stab 820.42 $205 75 C068 2 0 stab 553.00 $277 76 C069 3 1 stab 1,343.38 $448 77 C070 4 2 vacant 0.00 $0 78 C071 2 0 vacant 0.00 $0 79 C072 3 1 stab 889.71 $297 80 C073 3 1 stab 2,678.59 $893 81 C074 2 0 vacant 0.00 $0 82 C075 3 1 cont 682.94 $228 83 C076 2 0 stab 1,215.94 $608 84 C077 2 0 stab 950.55 $475 85 C078 2 0 vacant 0.00 $0 86 C079 4 2 stab 1,949.83 $487 87 C080 2 0 employee 0.00 $0 88 C081 4 2 stab 752.32 $188 89 C082 3 1 cont 606.38 $202 90 C083 2 0 stab 1,242.13 $621 91 C084 4 2 stab 788.22 $197 92 C085 4 2 stab 1,053.51 $263 93 C086 2 0 stab 1,583.42 $792 94 C087 4 2 stab 3,741.35 $935 95 C088 4 2 stab 691.18 $173 96 C089 2 0 stab 1,107.47 $554 97 C090 4 2 stab 2,799.95 $700 98 D091 4 2 stab 1,299.69 $325 99 D092 3 1 cont 499.34 $166 100 D093 3 1 stab 2,024.62 $675 101 D094 2 0 vacant 0.00 $0 102 D095 2 0 stab 978.08 $489 103 D096 4 2 stab 2,361.63 $590 104 D097 3 1 stab 2,093.45 $698 105 D098 3 1 stab 2,062.10 $687 106 D099 2 0 stab 1,950.00 $975 107 D100 2 0 cont 690.97 $345 108 D101 4 2 cont 1,011.38 $253 109 D102 3 1 stab 2,038.59 $680 110 D103 3 1 vacant 0.00 $0 111 D104 2 0 vacant 0.00 $0 112 D105 2 0 vacant 0.00 $0 113 D106 4 2 cont 995.10 $249 114 D107 3 1 stab 2,283.53 $761 115 D108 3 1 vacant 0.00 $0 116 D109 2 0 stab 1,950.00 $975 117 D110 2 0 stab 2,131.50 $1,066 118 D111 4 2 vacant 0.00 $0 119 D112 4 2 stab 2,870.88 $718 120 D112A 3 1 stab 2,436.00 $812 121 D114 2 0 vacant 0.00 $0 122 D115 2 0 stab 1,979.25 $990 123 E121 3 1 cont 868.34 $289 124 E122 2 0 stab 1,675.47 $838 125 E123 3 1 stab 2,811.06 $937 126 E124 2 0 stab 640.36 $320 127 E125 2 0 vacant 0.00 $0 128 E126 3 1 stab 2,486.75 $829 129 E127 4 2 stab 2,450.00 $613 130 E128 2 0 stab 2,233.00 $1,117 131 E129 4 2 stab 2,630.00 $658 132 E130 4 2 vacant 0.00 $0 133 E131 2 0 vacant 0.00 $0 134 E132 3 1 cont 852.65 $284 135 E133 3 1 stab 1,525.49 $508 136 E134 2 0 stab 1,786.55 $893 137 E135 2 0 stab 1,425.62 $713 138 E136 3 1 stab 2,456.95 $819 139 E137 2 0 stab 1,981.78 $991 140 E138 3 1 stab 2,240.74 $747 141 E139 3 1 stab 739.01 $246 142 E140 2 0 stab 703.94 $352 143 E141 3 1 stab 1,903.13 $634 144 E142 2 0 vacant 0.00 $0 145 E143 2 0 stab 2,008.94 $1,004 146 E144 3 1 stab 1,865.96 $622 147 E145 4 2 stab 2,620.61 $655 148 E146 2 0 cont 636.76 $318 149 E147 3 1 stab 860.21 $287 150 E148 2 0 stab 782.59 $391 151 E149 2 0 vacant 0.00 $0 152 E150 3 1 stab 2,689.75 $897 153 GR20 3 1 employee 0.00 $0 154 GR22 2 0 stab 888.48 $444 155 GR26 4 2 stab 1,008.31 $252 156 GR28 4 2 stab 1,613.37 $403 157 GR10-ST5 2 0 stab 691.98 $346
Totals 444 130 $207,455 $467 Annual $2,489,456
Commercial Summary Lease Start Monthly Rent Tenant SF Date Annual Rent Rent PSF Details Dogodog 576 7/1/2017 $4,480 $53,762 $93 Lease Expiration: 6/30/2022 Taxes: Landlord Electric: Tenant Insurance: Tenant Maint: Tenant Rent Increase: 3% annual Other: --- A&G River Deli 875 5/1/2009 $5,841 $70,098 $80 Lease Expiration: 4/30/2024 Taxes: 5% over 2008/2009 Electric: Tenant Insurance: Tenant Maint: Tenant Rent Increase: 3% annual Other: 5-yr option Heights Dropoff 600 4/1/2010 $3,193 $38,316 $64 Lease Expiration: 12/31/2023 Laundromat Taxes: 4% over 2008/2009 Electric: Tenant Insurance: Tenant Maint: Tenant Rent Increase: 3% annual Other: Tenant pays additional Water/Sewer reimbursement. Vinegar Hill Veterinary 680 6/1/2013 $3,641 $43,695 $64 Lease Expiration: 5/31/2018 Group Taxes: 5% over 2011/2012 MTM lease Electric: Tenant Insurance: Tenant Maint: Tenant Rent Increase: 3% annual Other: 5-yr option. Donut Shop 760 $3,250 $39,000 $51 Lease Expiration: New tenant starts 1/1/2021. Rent is 2500 for first 2 years then increases to 3250 then 3% annual increases. Taxes: Electric: Tenant Insurance: Tenant Maint: Tenant Rent Increase: 3% annual Other: 4 mos free. No TI A.M. Hair Art Inc. 630 12/1/2018 $3,395 $40,739 $65 Lease Expiration: 11/30/2025 Taxes: 5% over 2017/2018 Electric: Tenant Insurance: Tenant Maint: Tenant Rent Increase: 3% annual Other: Two 5-yr options. 3 month concession upon lease signing + 2 months after 6 months rent payments. Base year is 2017/2018 for the first year, then all subsequent years RE Tax base will 2018/2019. vacant 630 $3,250 $39,000 $62 Lease Expiration: Asking rent is 3600 Taxes: Electric: Tenant Insurance: Tenant Maint: Tenant Rent Increase: 3% annual Other: -- CLAYBRIEL LLC 714 12/1/2018 $4,297 $51,560 $72 Lease Expiration: 11/30/2023 Taxes: 5% over 2017/2018 Electric: Tenant Insurance: Tenant Maint: Tenant Rent Increase: 3% annual Other: One 5-yr and one 3-yr option. 4 month rent concession upon lease signing. Base year is 2017/2018 for the first year, then all subsequent years RE Tax base will 2018/2019. Min: 576 $3,193 $38,316 $51 Average: 683 $3,943 $47,312 $69 Max: 875 $5,841 $70,098 $93 Commercial Income 5,465 $31,347 $376,169 $69 $ PSF Per Unit Income Potential Residential Income$3,281,262$30.05$20,900 Commercial Income$376,169$3.44$2,396 Laundry Income $0 $0.00 $0 Commercial Reimbursements$73,468$0.67 $468 Misc. Income$12,000$0.11 $76 Unclassified Income $0 $0.00 $0 Potential Gross Income$3,742,899$34.28$23,840 Less Residential V/C Loss @ -0.02-$65,625-$0.60 -$418 Less Commercial V/C Loss @ 0.045-$20,774-$0.19 -$132 Effective Gross Income$3,656,500$33.48$23,290
Operating Expenses Real Estate Taxes$860,103$7.88$5,478 Insurance $85,176$0.78 $543 Utilities$109,200$1.00 $696 Water & Sewer$149,150$1.37 $950 Repairs & Maintenance$43,680$0.40 $278 Payroll$188,400$1.73$1,200 Reserves $31,400$0.29 $200 Miscellaneous $27,300$0.25 $174 Management Fees$109,695$1.00 $699 Total Operating Expenses$1,604,104$14.69$10,217
Total Expenses Excluding RE Taxes$744,001$6.81$4,739
Net Operating Income $2,052,396$18.79$13,073 Operating Expense Ratio 44%
NOI $2,052,396 OAR 3.75% Indicated Value $54,730,563 Rent loss for Vacant Units and $300K Cost to Cure -$1,090,681 Misc Adjustments -$70,650 Final Value Opinion (RD) $53,600,000
Value Date Conclusion
Fair Value "As Is" December 31, 2020 $53,600,000 •
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