Repost:
Whoever is complaining that the new rent laws hurts him is either a liar or sucks at underwriting his deals.
Any existing owner being hurt by this is just using it as an excuse for bad buys in the last few years. RGB rents have only gone up by fractional amounts the last 5 years, less than 2% a year, so one cannot complain about the caps on rent increases. IAIs are almost impossible to do except on turnover. MCIs get capped now, sure, but if it’s the difference between a 4% annual increase and a 2% is what is blowing up a deal, then the operator didn’t have enough cushion to start with.
And as for unit turnover and deregulation… do you know how hard this is to do now? From 2012-2017 something like 5,000 units a year were deregulated in NYC. That’s a fair number, I guess, but one cannot make the case that we’re going to see a wave of defaults simply because those 5,000 units no longer get deregulated.
What we’re going to see is that people who bought in 2015-2018 on the back of cheap debt and the assumption they could buy-out or evict tenants, getting their positions wiped out and blaming the new rent regs for their bad decision making. As far as tenant protection goes, the writing was on the wall a long time ago. It’s not easy, at all, to buy out tenants these days. There were approximately 966,000 rent stabilized apartments in NYC in 2017 (exc. rent controlled units); there were 3,517 that deregulated. That is .36% – even if you assume that many owners couldn’t or wouldn’t want to deregulate, you are still looking at minimal turnover. People made fortunes doing this in Brooklyn in the early 2000’s because with cheap buyouts and shady eviction practices they were getting 10-20% turnover. That just does not happen any more. Anyone who has underwrote to try and achieve that in the last half decade, deserves what they’re getting.
If ///// is such an operator then he should leave the industry, not NYC. A lot of the LP money in the community is raised on the basis of shoddy and unrealistic assumptions. Perhaps these laws will just put an end to that. And obviously, 99% of the “crocodile” tears are from those who like cheap talk but don’t even own a broom closet in a RGB building (or any building).
