Presented By: Meridian Capital Group
Witnick Running Strong With Three Acquisitions and a Refinance Arranged by Meridian
By Meridian Capital Group June 7, 2017 9:23 amreprints
Despite the ongoing pricing disconnect between buyers and sellers, Witnick Real Estate Partners’ Isaac Abraham and Rami Ben-Yehuda are focused on expanding the company’s footprint in Brooklyn and beyond. Working with Shamir Seidman of Meridian Capital Group, they closed on three purchases and a refinancing in the first 45 days of 2017.
We caught up with them to discuss their strategy for success, as well as other markets piquing their interest.
Tell us about the four deals you recently closed.
ABRAHAM: All four were multifamily deals: the 32-unit, four building portfolio at 242-248 Bainbridge Street in Stuyvesant Heights; the 24-unit elevator building at 2342 Atlantic Avenue in Crown Heights; the eight-unit corner building at 220 East 23rd Street in North Flatbush; and the seven-unit mixed-use building at 567 Vanderbilt Avenue, which includes one 575 square foot retail space, in Prospect Heights. All offered great opportunities for value enhancement.
SEIDMAN: Meridian procured over $16 million from various lenders to acquire three of the properties and to refinance 567 Vanderbilt Avenue. The lenders ran the gamut: Capital One through Freddie Mac’s Small Balance Loan program, a streamlined low-cost financing option for acquiring or refinancing multifamily properties; Customers Bank and Northfield Bank, both community banks; and, a national direct lender. Each transaction had specific nuances, and we worked closely with the Witnick team to identify which aspects of the loan structure were most important for each deal. Meridian then made a market among the most competitive lenders in each space and tailored the financing according to Winick’s investment strategy.
In which Brooklyn markets do you see the most momentum?
ABRAHAM: We’ve seen a big shift in tenant appetite away from apartments in Williamsburg, East Williamsburg and Bushwick because of the L train shutdown. As a result, residents are instead filling in neighborhoods like Bedford-Stuyvesant and moving deeper into South Crown Heights, Prospect Lefferts Gardens and North Flatbush. We’re also seeing lots of activity in Sunset Park because of the new, large big-box retailers, such as Saks Off Fifth and Bed Bath & Beyond as well as new office and creative space in the pipeline.
SEIDMAN: On the lending side, every opportunity is different and every lender has a specific checklist. There’s still strong interest in all asset types across Brooklyn, and, when properly marketed, each deal attracts multiple lenders. However, there’s a fine line between lenders’ desire for rent-stabilized and free-market assets, which they are less excited about. Rent-stabilized properties are as strong as ever, due to below-market rents and certainty of cash flow.
Since Witnick was founded, you have been very focused on Brooklyn. Where else in the city do you see potential?
ABRAHAM: We started buying in Brooklyn in the middle of 2014. However, we’ve achieved efficiency of scale from a management perspective and critical mass in the market. Now we have our sights on western Queens and Northern Manhattan, where we’re making heavy offers in places like just off the 125th Street retail corridor. There’s also a lot of opportunity on the Queens side of Cornell Tech’s campus on Roosevelt Island. Startups from the campus and research and development will be strong drivers of investment activity there.
What is your investment sweet spot?
ABRAHAM: Over the past three years, we targeted $40 million in new acquisitions. We’ve achieved close to double that. Now we have enough equity to invest another $80 million to $100 million in a shorter timeframe. However, we’re waiting for pricing to adjust until sellers are more in touch with value in the current market. Witnick was created with a long-term investment horizon so our key to growth is being disciplined investors and not losing sight of key metrics. Our sweet spot today is multifamily and mixed-use in the $5 million to $15 million range. We’re also interested in redevelopment and buying buildings with FAR that allows us to hedge against the slow adjustment to pricing of existing structures.
Once you make an investment, what is your strategy for driving value?
BEN-YEHUDA: We’re very keen on technology. For instance, we’ll install security cameras and access control systems that allow us to remotely open the door when work needs to be performed and monitor foot traffic. We have energy management platforms that measure building temperature and control the boilers to better manage energy consumption and reduce waste. These technologies and others allow us to more efficiently manage our portfolio remotely. We also improve the properties from the amenity side with the goal of creating an improved lifestyle for tenants. That may mean adding safety features, bike and storage rooms, decks or yard areas. It’s all about the overall experience.
As you’ve expanded, how have you managed growth at your company?
BEN-YEHUDA: When we started in mid-2014, it was just me and Isaac. Our company has since grown to a team of seven, and we’re looking to further hire professionals as our company expands. We’ve already switched offices three times since we started, and now we’re ready to move into a bigger space again.
What are some of the trends you’re watching out for over the rest of the year?
SEIDMAN: I am anticipating potential adjustments to, or the removal of, restrictive bank regulations as well as interest rate increases by the Fed.
BEN-YEHUDA: Interest rates, new product coming to market, and absorption rates, which affect our underwriting for new assets, as well as growth rates and rent guidelines.
Have any markets surprised you since starting the business?
ABRAHAM: Washington Heights and Inwood, which are beautiful neighborhoods with good access to transportation. We hadn’t been paying attention to those markets as we focused on Brooklyn. Now we see properties on the market and what they’re transacting for is surprising. We are looking to acquire in these markets now. We’re also keeping an eye on East New York, which will see a lot of redevelopment in response to Mayor de Blasio’s rezoning efforts, but it will take time for product to be built up and for improvements to be reflected in the neighborhood.