Submitted by Mark Zborovsky, Mar 31, 2007 18:51

It seems that in the recent purchases of large rental properties investors ignore the cash flow, and are buying the asset just hoping that over the years the market itself will increase the value of that asset - just because.

My company specializes in sales of large blocks of Sponsor Co-ops and Condos occupied by rent stabilized tenants with a 60%-65% discount from the market value. When these tenants move out, the apartments deregulate, become free market, and appreciate instantaneoulsly by 60%-65%.

The significant difference between the 2 types of investment is that with a regular rental building one HOPES that it will appreciate, when the appreciation of a block of rent stabilized Sponsor Units is ASSURED (because a certain number of tenants move every year). The current rate of deregulation (and the portfolio's immediate increase in value) is 3%-4% in Manhattan, and 6%-8% in outer Boroughs.

Mark Zborovsky

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