P
H Realty is bucking the trend of New York City landlords fleeing rent-stabilized housing by acquiring a $180 million portfolio of 1,300 units in Ditmas Park, Washington Heights, and Brighton Beach. The value-add firm partnered with Alma Realty, Rockledge CRE, and an unnamed pension fund to close on the deal last week. The seller was veteran multifamily investor Sentinel Real Estate.

    The portfolio is 85% rent-stabilized, which means revenues are effectively capped on those units. PH Realty scored the properties at a 60% discount to what Sentinel paid between 2015 and 2019. Despite the discount, the deal is considered a contrarian bet as landlords are generally scrambling to offload their rent-stabilized stock.

    PH Realty plans to renovate apartments to boost occupancy and produce modest returns. The investor aims to operate the properties as responsible local landlords rather than focusing on increasing revenue. The portfolio is 90% occupied, with vacancies split between market-rate and rent-stabilized units.

    To finance the deal, PH Realty took out two bridge loans totaling $120 million at a rate of about 7%. The team plans to refinance with agency debt when renovations are complete and interest rates are lower. However, this doesn't address the mismatch between flatlined revenue and ever-growing expenses.

    PH Realty's Peter Hungerford hopes that changes on the city level will ease the pressures of rising expenses. He identified property taxes and insurance as potential areas for improvement, which are currently the biggest headaches for rent-stabilized owners. Hungerford also floated the idea of a revamped rent guidelines board to help increase revenue.