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The US subprime crisis, which peaked in 2008, triggered a global financial crisis that affected the property sector in many countries. But now, the real estate market in certain cities is recovering and experiencing positive growth. One hot spot is New York City. It is now a good time to invest in real estate in New York as the market is looking to grow in the next few years, according to Edward Mermelstein, managing partner of New York-based Rheem Bell & Mermelstein.
“Apart from the low barriers for any foreign buyer to buy US property, the long-term opportunity is extremely strong,” he says. “Investors will be buying at a time when the market is just starting to recover so there is a significant upside.”
Rheem Bell & Mermelstein is a multiservice real estate law firm with offices in New York and Moscow. Mermelstein is an attorney, broker and developer who has represented Eastern European oligarchs, politicians and corporations. He was in Malaysia recently to meet clients.
His experience covers all aspects of property law, including development, redevelopment, foreign investment, land use, purchase and sale agreements, commercial and residential lease, financing, title issues, subdivisions and litigation.
“Currently, New York is experiencing what you could call a boom in real estate,” he tells City & Country. “It applies not just to [the] commercial [market] but residential as well. This is obviously not reflected in other parts of the country but New York, specifically, is doing very well right now.”
As positive sentiments grow, some quarters are entering the market to take advantage of future appreciation in capital values. Mermelstein cites a recent transaction of an apartment building on 200, West 72nd Street, which was sold for US$200 million (RM607.4 million) or US$1,400 psf.
“This has set a price benchmark because previously, transactions were from US$500 psf to US$1,000 psf,” he says. “Many pension funds, real estate investment funds and other investment funds are now willing to pay for a very low current return, in expectation of strong capital appreciation in the coming years.”
It would be a good move to invest in New York property, especially the high-end market, because of the city’s classification as an international city, he explains. Moreover, it is a financial centre with diverse cultures and thriving entertainment offerings.
The areas that investors should consider are the Upper East Side, certain parts of Brooklyn such as Williamsburg, Park Slope and Dumbo, and the Upper West Side. In these areas, residential property values have increased over the past year, going up by 10% in Upper East Side, about 20% in the Brooklyn areas and 15% to 20% in Upper West Side.
“Rental rates for residential and commercial properties in certain parts of New York have been going up by 2% to 3% every quarter. This translates into 10% to 12% property appreciation on a yearly basis, based on the increase in income,” Mermelstein says.
His advice to Malaysian investors looking to get into the New York real estate market is to do their homework by reading up on the market they are interested in. Then, hiring a good attorney.
“I don’t recommend that you give the power of attorney to someone else. I always say, make sure you know what you’re buying, touch it, feel it, smell it, make sure you see and understand what you’re buying,” Mermelstein says. “Finally, make sure the broker you’re working with has a good reputation and is trustworthy. Get recommendations from several sources.”
Although Malaysians do not feature prominently in New York’s real estate market, Genting Bhd made the headlines when it was given approval to build and operate the casino at Aqueduct Racetrack in Queens.
In September 2010, Genting Malaysia’s subsidiary, Genting New York LLC, won a bid to become the developer and operator of a video lottery facility at the Aqueduct Racetrack in New York City. The racetrack covers 192 acres. The casino is slated to be opened in 4Q2011.
Last month, the Genting group — via another subsidiary, Bayfront 2011 Property LLC — bought a 13.9-acre parcel with a building that housed publishing firm The Miami Herald in downtown Miami, Florida, for US$236 million. The group plans to build a mixed-use development and call it Resorts World Miami.
Besides New York, Mermelstein says Washington DC and San Francisco are other places to watch. In Washington DC, the expansion of the government has resulted in more people looking for places to stay. San Francisco, meanwhile, is one of the larger cities in the US with a large Asian population that attracts Asian investors.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 864, June 27-July 3, 2011
