NORTHEAST SNAPSHOT, MARCH 2008

Northern New Jersey Multifamily Market

Uranowitz

Despite recent sentiment about declining values and cap rate decompression, the multifamily sector in Northern New Jersey is actually on an upward tick — pricing is up, even substantially in some regions. For example, in Maplewood, the $13 million sale of the 88-unit Van Ness Apartments resulted in an average price of just under $150,000 per unit. Parkview Commons, a 38-unit upscale apartment building, in Teaneck, sold for $10.12 million at an unprecedented $266,000 per unit, our highest price-per-unit deal of the year.

Additionally, in high-barrier-to-entry locations, properties that have been owned by one family for generations are being placed on the market for the first time in order to capitalize on the ultra  premiums commanded by such rare product. Located in the affluent Summit area, New England Village, a 133-unit garden apartment complex, sold for $30 million. This property was family-built, owned and managed for more than 50 years. The multi-building complex contains a large percentage of spacious two- and three-bedroom apartments, as well as a pool and garage parking, all of which are quite unique for a property of that vintage.

Another trend has been multiple sales of a single property due to fast appreciation, close proximity to New  York City mass transit and a supply-constrained market. For example, Ridgewood Commons, a premier luxury mid-rise, elevator building in South Orange, sold this past summer for $12.3 million — the third sale of this property in the past 5 years, each with significant appreciation. This trend also stretches to urban markets. The $22 million sale of Parkwood Place, a seven building, 293-unit apartment complex in Newark, marks the second time the property has sold in 8 years, with a marked increase in value between the two transactions.

In terms of investment sales, Bergen County has been a tightly competitive market. There is a definite supply and demand imbalance, with demand far outstripping the rapidly dwindling amount of available property. Any time a seller decides to test the market, well-financed buyers act quickly and decisively to secure a winning bid.

Hudson County’s Gold Coast is another active market. In Union City, we have been averaging the sale of more than one building per-month. Jersey City is another active market with prices varying by as much as $100,000 per unit between neighborhoods. In addition, a significant amount of development has been occurring here because the city offers convenient access to Manhattan, while maintaining a comparable, but much more affordable, standard of living. Development was originally focused on the riverfront but is now spreading further inland.

Newark also has seen some recent growth. Recent developments like the Prudential Center have accelerated investor interest in the city, with strong occupancy levels and increasing rents also playing a major role. At the end of 2007, we completed two transactions worth approximately $30 million in the city that included 423 total units and 10 buildings within a month of each other.

In Harrison, the construction of the Harrison MetroCentre is expected to contribute enormously to new job growth and attract other new businesses to the area. The 135-acre, mixed-use urban development will eventually comprise 2.5 million square feet of office space and 1 million square feet of retail space, as well as approximately 3,500 housing units.

Looking ahead, indicators remain positive for the Northern New Jersey marketplace and the multifamily industry in general, notwithstanding the nervousness in the credit markets. As the volatility on Wall Street continues, the heated demand for investment real estate will continue to favor multifamily product.

Other investment opportunities simply are not offering an equivalent stable ROI, asset appreciation and tax advantages. The tumult in the credit markets should ease somewhat later this year or early 2009. However, the  liquidity and available capital that has kept the multifamily industry robust in 2007 should continue this year as rates will remain at historic levels. In all probability, the Northern New Jersey multifamily market is likely to continue to draw new investors, and sellers, to take advantage of unique and exciting new opportunities.

— Ken Uranowitz is the managing director of Gebroe-Hammer Associates

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