A new real estate investment trust opened shop this week, seeking to raise $50 million from investors online. It plans to use the money on some of the most sought after properties in the world: New York apartments.
NY Residential REIT is a “blind pool,” meaning it owns no assets and is courting investors on the strength of its management team to purchase properties once it has funds. It’s springing to life partly from Manhattan’s growing supply of costly apartments, and partly from a Securities and Exchange Commission rule making it easier for small companies to access capital.
The REIT -- whose advisers include Ryan Serhant, a real estate broker who stars on Bravo’s “Million Dollar Listing New York” -- plans to seek out Manhattan residential properties that can be rented out for income, according to a May 1 filing with the SEC. Acquisition targets would include small multifamily properties, single-family homes, condominiums and assets “available from sellers who are distressed or face time-sensitive deadlines,” according to the filing.
“There were a number of developments built three to four years ago that are just coming to market, and there are going to be developers looking to unload assets at prices we may find attractive,” said Jesse Stein, chief executive officer of Commencement Capital LLC, the company created to manage and operate NY Residential REIT.
JOBS Act
The REIT’s relatively quick founding is made possible by the 2012 Jumpstart Our Business Startups Act, or JOBS Act, which loosened rules for budding businesses to advertise and solicit funds from a wider range of investors. In 2015, the SEC offered some added liberation, allowing startups to raise as much as $50 million in a 12-month period. NY Residential REIT joins a growing list of companies, including Fundrise LLC and Realty Mogul Co., that have used those rules to target individual real estate investors.
“Manhattan is one of the most sought after real estate markets in the world, but 99 percent of people can’t really participate,” said Stein, 38, who previously founded real estate technology company ETRE Financial. “Unless you’re a multimillionaire or unless you’re an institution, you probably don’t have the means to buy property for investment.”
NY Residential REIT may refurbish and sell some real estate. It may also buy properties in exchange for equity in the REIT, allowing sellers to defer capital-gains taxes on the transactions, which may be appealing to longtime owners of New York real estate, said Jonathan Morris, the REIT’s president.
The median price of Manhattan condos and co-ops in the first quarter was $1.1 million, a 3.3 percent decline from a year ago, as new-development properties accounted for a smaller share of all sales, according to a report by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. The number of completed deals climbed less than 1 percent to 2,892, while inventory jumped 6.6 percent to 5,867 listings on the market at the end of March.
“It’s a strong buyer’s market right now, and there are a lot of amazing opportunities out there,” said Serhant, the TV star and broker with Nest Seekers International who is helping NY Residential REIT find deals, particularly for properties under $3 million that have piled on to the market. ”Any time there’s an influx of surplus -- like in Tribeca right now -- you have the ability as a buyer to negotiate. ”