Mark Seruya of KSR Capital: 5 Questions

It’s been about a month since Mark Seruya joined KSR Capital and took on a role as a senior managing director at the firm, but he’s already making moves in the commercial real estate investment world.

Seruya was previously a senior managing director at the now-defunct investment bank Bear Stearns and a co-founder of Sage Wealth Management, a private wealth management team within Morgan Stanley.

In his new role at KSR Capital — the investment arm of Kassin Sabbagh Realty — Seruya focuses on strengthening KSR’s investment platform and accelerating capital deployment for high-net-worth investors and family offices, according to KSR Capital.

Alongside firm partners Abraham Kassin and Morris Sabbagh, Seruya reviews and structures deal flows, focusing specifically on off-market investment opportunities in New York and the tri-state area.

Brooklyn is also a soft spot for the KSR Capital team, as Seruya and Kassin — first cousins — grew up in the borough and know the market well, Seruya said. But the firm is also interested in Manhattan, and potentially even cities in Florida, where “markets are also very strong,” he added.

Seruya spoke with Commercial Observer earlier this month to discuss his new role at KSR Capital, the firm’s investment in office properties in Manhattan, and his thoughts on the city’s incoming mayor.

This interview has been edited for length and clarity.

Commercial Observer: How is your new role at KSR Capital going? What are your main responsibilities?

Mark Seruya: It’s going very well. First of all, KSR is my family. I have a family member who runs it. Abraham Kassin and Morris Sabbagh asked me to come on to lead their capital formation group, which simply means that I’m responsible for raising money for the various deals that KSR is investing in with well-known general partners both in the tri-state area and other parts of the country. 

I bring 40 years of experience in investing in real estate, as well as running a team, both at Bear Stearns and Morgan Stanley, where I oversaw about $3 billion to $4 billion in client assets. I was in charge of also raising money and selecting investments for clients. So I have a lot of experience in the investment world.

What made you want to join KSR, besides the family aspect?

KSR is a very unique firm. They’re approximately 120 to 150 individuals, and a very, very entrepreneurial firm. They are very aggressive, and they sit in a very good seat, in that they see a lot of off-market deals through various people in our community and people that they know in New York and the tri-state area. And with what’s going on in New York right now, there are lots of opportunities for both U.S. and global investors to take advantage of some of the distressed situations that are in New York.

I also want to really highlight KSR’s ability to bring off-market deals, and KSR’s ability to really be street smart on how to negotiate deals that benefit both the seller and the buyer. They’re a very nimble firm. I came from a place that had over 120,000 employees. So when you go to a firm that’s only 100 to 150 employees, it’s very refreshing. And they are very nimble and very opportunistic. And the leaders of the firm — Kassin and Sabbagh — are great leaders, and they have a very hands-on approach to real estate investing and how they deal with their clients.

On the topic of foreign capital, where is foreign money in New York City coming from?

My experience with foreign investors over the past 40 years spans the globe. Foreign investors look at the U.S. — and especially New York — as a key, high-quality real estate market that they always want to have exposure to. The interest rates and capitalization rates that they receive, say in Japan, are much lower than they are in the U.S. So the difference in yield between what they can get in Japan versus what they can get in the U.S., it’s much greater here, and they continue to want to diversify their holdings out of their country. 

And, now, over the past year or so, the dollar has fallen versus major currencies, and that makes it a more attractive entry point for foreign investors to come into the market.

Foreign investors are very key to certain asset classes in real estate — particularly multifamily and industrial — so those two asset classes within real estate continue to have strong demand for foreign investments.

KSR has invested in a few Midtown office buildings recently. How is NYC’s office market looking right now, compared to retail and multifamily?

Retail, after many, many years of being in the doldrums, is extremely, extremely strong right now — actually, white hot. In my experience in both public markets and the private markets, the pendulum always goes too far to the left or the right, meaning negative or positive. And, when it gets too far left or to the right, that leads to opportunities. 

So, many investors who were fortunate enough to take advantage of the big swing in retail are being rewarded right now. And, now, in New York, it’s very difficult to find prime space, so retail is extremely strong. 

Multifamily also remains strong. There’s an extreme shortage of rental apartments in New York City, and multifamily as an asset class is extremely attractive to all investors.

As far as office is concerned, office has also been put into the retail class that people are shying away from. However, we find at KSR that there’s basically no Class A office space available. In Class B, rents are beginning to stabilize and actually move up. 

And what people may or may not be focusing on is that this big rush to convert office to residential is reducing the supply of office in the market. So, what’s happening is that rent concessions are coming down, and that will eventually lead to rent increases and the market starting to recover. So, at KSR, we find the office market to be extremely attractive, and we’re very opportunistic at KSR to take advantage of what’s going on in the office market.

KSR is also getting involved in shopping centers. There’s strong demand for shopping centers up and down the Eastern Seaboard. Foreign investors and offshore investors have a key interest in stable cash flows. We’re also looking at industrial properties and secondary and tertiary markets, which are also very attractive. Those are the areas that we’re looking at right now.

How do you expect the incoming Mamdani mayoral administration will impact CRE deals in New York City?

We at KSR and myself have 40 years of seeing various mayors come into New York City and people being concerned about what this mayor is going to bring to the city for business and for real estate. We, as a firm, welcome the opportunity to work with the Mamdani administration to help them achieve their economic goals. We also agree with the administration that affordability in New York is difficult, and how we get to that solution is yet to be determined. 

But, obviously, the more affordable housing that we have, the more spending income people will have, and the more spending income people have, that improves the economy. Look, it’s not going to be easy for him, but we welcome the opportunity to work with the Mamdani administration, just like we would welcome work with any of the administrations coming in. … 

Are there going to be bad headlines? Absolutely. Does it mean that it’s going to be a disaster for New York? Probably not. Our hope is that he’s successful in making New York a great place to live and the economy to continue to grow.

Isabelle Durso can be reached at idurso@commercialobserver.com.