Customer Spotlight: NYC CRE Investor on Growth Strategy, Rent Regulations
A conversation with…
Abe Horowitz, Dupont USA Realty
Abe Horowitz is a Brooklyn-based multifamily & commercial real estate investor. We recently caught up with Abe to talk about how he started out in the business, whether NYC’s new rent regulation laws have impacted his portfolio, and his strategy for future growth in CRE.
Abe, tell us how you started out in real estate investing, and what your portfolio looks like today.
I started investing in multifamily real estate in 2000, acquiring smaller buildings consisting of 6-8 units each in the Bushwick and Prospect Heights neighborhoods. I primarily seek out value-add assets – some of them quite dilapidated – and then invest in the properties to reinvigorate them and bring them up to the standards of today’s NYC rental market. In more recent years, I shifted my focus onto commercial & industrial properties. Today, the portfolio is over 15 multifamily buildings, and over 2 million square feet of office & industrial space. I used to self-manage my properties, but now have given them over to 3rd party management partners.
When you started out, how did you finance the acquisitions?
Because I am often looking at distressed or “turnaround” properties, where there is an opportunity to improve and grow the NOI significantly, I typically use bridge financing from a bank or hard money lender to complete an acquisition.
Where does Greystone come in?
Once a property is stabilized and renovated, I put the asset on a path to permanent financing. Greystone’s small loan platform is a great fit for my portfolio and typical property, and I started refinancing assets with Greystone in 2015. The hands-on approach, transparency, and guidance I receive from both my broker (Jay Steinberg at Watermark) and my Greystone relationship manager (Anthony Cristi) have been a staple to significantly grow my business over the last several years.
Two benefits over bank financing that I find helpful are higher proceeds and the option for an interest-only product on a lower-leverage deal, which helps with monthly cash flow.
What has been one of your greatest challenges in building your portfolio?
My greatest challenge to date has been finding the right deal. There is a lot of hype in the market, and it’s always evolving. With a turnaround strategy, you need to be very conservative on your projections and get in at a good basis in order to be prepared for whatever is coming in the market. I never took on more than I could handle – and approached investing very cautiously.
Have the new rent regulation laws in NYC impacted your portfolio, or do you think it will in the future?
It hasn’t impacted my portfolio much – I never buy on strictly potential. I look at what the cash flow is today, not just on future rents. Some buildings I bought were totally vacant and ready to be repositioned immediately, without having to be subject to guessing market conditions in 2-3 years down the road. I reserve money every year for capital improvements.
I think what you will probably see is some landlords may make more “basic” improvements versus “nicer” improvements over time, as a result of the new laws.
Can you share a tip for new CRE investors getting started in the business?
I would urge an investor to really understand their market and their tenants and learn the trade. Real estate is a hospitality business, and I think managing units myself in the beginning really enabled me to get to know what tenants want. Simply said, they want a comfortable space to call their home, with nice living conditions, and by offering them that, it eliminates the tensions that can arise between landlord & tenant.
That’s great advice. Anything else to add?
On the investing side, buy conservatively; invest conservatively. I wouldn’t stretch yourself too thin or take on too much risk at the same time.
And I have found once you surpass 50 units, it becomes more difficult to self-manage. Work with partners that you trust.