Gaia Real Estate Buys East Village Portfolio For $50M

50-58 East 3rd Street and Gaia Real Estate CEO Danny Fishman (LinkedIn)

Gaia Real Estate curtailed investments throughout the pandemic, preferring to watch asset prices drop so low in New York City that it would be fair to bet that they hit rock bottom.

As of last week, Danny Fishman got sick of waiting.

The Gaia CEO bought three neighboring apartment buildings at 50-58 East 3rd Street in the East Village for $ 49.5 million. That’s 14 percent less than when it last changed hands in 2016 for $ 58 million.

The purchase is part of Gaia’s three-year strategy to acquire distressed residential buildings as a long-term bet on the city’s recovery. The East Village acquisition is the Manhattan-based company’s first purchase on schedule. Fishman said the property’s discount was a large part of their bottom line.

In Gaia’s other investment markets, which include Atlanta, Houston, and Florida, apartment building prices have skyrocketed, driven by demand for a hot real estate market that has boosted building values ​​and lowered capitalization rates became.

“At the other end, in New York, we see hardship,” said Fishman. “Perhaps for the first time in years we will see that the yield from apartment buildings is higher than in the sun belt. It’s very attractive. “

The buildings at 50-58 East 3rd Street, which borders the eastern border of New York University, have historically been home to college students and young professionals. Both populations streamed back to New York in the spring and summer of 2021, driving up rents.

The large haircuts also reflect risks that Fishman sees as a product of recent policy changes.

In April of that year, the state raised taxes on the city’s higher-income earners, putting a drag on returns for an investor like Fishman.

Some units of the buildings are rent-stabilized, which rules out significant rent increases under the state’s 2019 Rental Act. The state eviction ban is likely to be extended, leaving landlords vulnerable to unpaid rents and relying on a tenant relief program that failed to introduce.

Fishman pointed out the possibility that the city’s next mayor may have more sympathy for real estate than his current one, Bill de Blasio.

Gaia is focused on acquiring more Resi buildings, especially those with work in progress or vacancies – opportunities for the company to buy low, upgrade, and rent higher. The company’s search includes the New York metropolitan area.

“You’re not betting long-term against New York,” Fishman said.

Contact Suzannah Cavanaugh