Robert Rosenthal, Founder of Hampshire Properties' affiliate Northlink Capital, joined the Real Estate Daily Beat for an interview. We discussed the advantages of ground-up development, the firm's condo project at 251 West 91st Street, and other topics.
Daily Beat: Which market do you see as the most opportunistic for multi-family assets?
Robert Rosenthal: That's a very good question because prices have gone crazy outside of New York. Cap rates have compressed by a full basis point in almost every market since August of 2020. The Sunbelt has the highest demand, which requires investors to bake in tremendous revenue growth. We'll see where it goes, but Florida and Texas are majorly competitive markets.
Daily Beat: Where can you find yield? Three caps don’t leave too much of a margin for error!
Robert Rosenthal: I always say when you get to three, you're getting closer to zero. When interest rates go up, you can have a problem.
A few months ago, one would argue that New York, California, and the Midwest were places where perhaps you had the opportunity to get into the market where the demand wasn't as intense – cap rates were a bit higher, but that's slowly but surely creeping down again.
Daily Beat: So I guess that's why you've been active on the development side particularly with a recent acquisition of a site in Miami Beach?
Robert Rosenthal: We have seen that there's more of an opportunistic story in Miami regarding land, which I think can be attributed to two reasons. Number one development is always riskier because it's a piece of land versus a physical rental building, so there’s not as many possible buyers. Secondly, one can make the argument that you're building to a higher yield than what you're buying to an existing building.
The one that you reference is a condo site. It's a unique piece of property on Collins Avenue, but we're also buying another larger multi-family site in South Florida. It's a market that we've always liked, but the focus there is more on the ground-up development versus the income producing side.
Daily Beat: When it comes to the various sectors, you appear pretty asset agnostic. In this environment, with many people shying away from retail and office, where are you seeing the best opportunities insofar as asset class is concerned?
Robert Rosenthal: Historically one would say that multi-family is the safest and most opportunistic area. We've never shied away from office or retail. With that being said, we are seeing a lot more opportunities with ground-up development. If we can buy land for the right price, we certainly have a much higher yield to cost given today's market.
Ultimately office and retail might be something worth taking another stronger look at moving forward. I'm not going to give my predictions because it's very easy to be on the wrong side of the argument either way.
Daily Beat: How’s your large office development (Con-Ed site) on Kent Avenue in Williamsburg coming along?
Robert Rosenthal: We're currently going through ULURP, and ultimately by the time we are able to start construction, the demand will be there. If you see what's going on in North & South Brooklyn, especially along the waterfront, there's just tons of residential growth there and it would seem to be an obvious compliment to the overall neighborhood.
Daily Beat: There are still gaping vacancies at Heritage Equity Partners' project nearby. These office submarkets are very tough in this environment.
Robert Rosenthal: You know where we're sitting today is a completely different world than it was obviously a year and a half ago, but one has to believe that New York will bounce back.
Daily Beat: Northlink Capital and Adam America just recently topped out Era, a 136,639-SF boutique condo building with 57 residences designed by ODA on Manhattan’s Upper West Side. Can you please speak to the development?
Robert Rosenthal: The project recently topped out and is called Era – it was born out of me living on the Upper West Side. The partners at Adam America actually live nearby and we were friends before we became business partners.
The location was a unique corner and I saw growth coming from the sixties to the seventies, to the eighties, and then ultimately to the nineties. We were able to grow it from its existing density to a much larger project, which caters to the need for larger type units within the Upper West Side. We are just starting to launch sales and have seen great reaction to it.
Daily Beat: What segment of the luxury market does the project focus on?
Robert Rosenthal: The average price range is probably in the $2,300 per SF range. We're certainly building a very luxury product, with ODA being the architect. I think both architecturally and what the building itself will offer will be one of its kind in the neighborhood.
Daily Beat: Absorption in the luxury market has been tremendous in 2021. Are you still concerned about excess inventory?
Robert Rosenthal: The Upper West Side is a location that's family friendly and has all the infrastructure you need. We've seen that the Upper West Side – more than other areas – certainly can absorb a large condo inventory. There are many residents that start off as young couples and then start growing their family and see the neighborhood as a place they want to settle.
We feel our site is in a great location and it has all the trimmings of what a true living experience in the city offers. The retail at 91st Street is amazing – you're right by the Equinox and SoulCycle. It's also in an area where you are close to the park and the train. Our rooftop pool is also something that until now didn't exist in the neighborhood.
*The interview has been edited and condensed for clarity.