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NYC Opportunity Fund, LLC
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== Asset types == === Multi-family === * Manhattan offers exceptional value with average capitalization rates of 4.67%. This allows for positive leverage when mortgage rates are still widely available in the 3 percent range. * Residential rents are already recovering nicely. Concessions are burning off and landlords are returning to the 90% occupancy that they historically enjoyed. * That being said, net effective rents are still off 20-30% from before Covid. Rent growth over the next few years should be substantial. * Although multi-family pricing rose 4% to $742/SF in 2Q21 compared to the trailing 4 quarters, it is still 24% below 2018-2019 pricing offering considerable value '''Our multifamily strategy will be to invest in properties that are mostly or entirely fair market to take advantage of this rent recovery. Further, we will target tax protected classes or properties with tax abatements where real estate tax increases are capped.''' === Retail === * Retail offers similar opportunity with pricing dropping by 24% since the pandemic. * That being said residential neighborhoods have fared better than more touristy locations. According to the REBNY’s Spring 2021 Manhattan Retail Report, average asking rents dropped by less than 15% on the Upper East Side compared to rents in the Spring of 2019. * There will be even greater opportunities for high street retail, as the pendulum has surely swung too far as the drop in tourism has a major short term impact. For example, SoHo average asking rents have fallen by nearly 40% * The average price per square foot for Manhattan retail properties sold in 2Q21 rose 6 percent compared to the trailing 4-quarter average, which is a positive sign. The company’s retail strategy will be to buy significantly discounted or distressed vacant retail. The company will also look at occupied retail to take advantage of cap rates that have reached well into the 5% range and in some cases even higher. === Office === * Office properties have been the most surprising asset class. Sales values have increased since the pandemic, rising 8% from pre-pandemic levels. That being said, these averages were drawn over only 5 sales per quarter during the pandemic, compared to some of the pre-COVID quarters which had more than triple the amount of sales. * Although the 2Q21 availability rate of 19.2% represents a post-2000 high and net effective rents have dropped 10.8% from April 2020 to June 2021, we have already seen signs of stabilizing since March 2021, signaling that demand has incrementally risen. * There has no doubt been a flight to quality with 82.8% of the leasing activity happening at Trophy and Class A properties compared to a combined 72% pre-pandemic level. * 1.5 MSF of sublet space has already come off the market as companies rethink their plans. '''The company’s strategy is to invest in boutique offices in the most sought out neighborhoods, especially in within walking distance of good transportation. Opportunities will no doubt arise from owners who are facing high vacancy and are unable to refinance at their current levels.''' === Development === Although the fund will stay away from ground up development due to its inherent risks, it should be noted that the dearth of land sales will create a supply shortage in future years.
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