The tightening of underwriting standards and of the availability of capital seems not to have affected sales of residential apartment buildings across the five boroughs, as some had feared.

The Katz family is the owner of two prize residential apartment houses on Park Avenue, including the 20-story, 116-unit rental building at 737 Park Ave. at the corner of East 71st Street. Last week, a joint venture of BlackRock Realty Advisors (a partner with Tishman Speyer in the purchase of Stuyvesant Town and Peter Cooper Village last year) and investor Patrick Freyberg entered into a contract to purchase the 19-story, 190,227-square-foot rental apartment building located at the corner of East 61st Street from the Katz family trust. The building is across the street from the Loews Regency Hotel. The joint venture is paying about $212.5 million for the 139-unit building, which has approximately 8,000 square feet of professional space. According to real estate sources, the joint venture plans to make substantial renovations and maintain the property as a rental building.

Last month, CDP/PSP Stonehenge Partners closed on the acquisition of a 90,000-square-foot residential rental building at 330 E. 63rd St. The 60-year-old building, on the south side of 63rd Street between First and Second avenues, has a total of 93 units. The purchaser, Stonehenge Partners (with other investors), currently owns and manages more than 2,000 rental units in Manhattan. Its partner in the purchase is Cadim, a division of the Caisse de depot et placement du Quebec, and a member of the Caisse’s real estate group.

“As soon as we started buying multifamily real estate in the mid-1990s, we immediately realized the benefits of owning rental buildings in a city where occupancy levels are always close to 100% and people from around the world have a burning desire to live,” the managing partner and co-founder of Stonehenge Partners, Ofer Yardeni, said. “We truly believe that owning apartment buildings in Manhattan is as secure as owning U.S. treasuries with upside in value creation.”

Furthermore, Mr. Yardeni said: “We recognize that the New York City economy is very strong right now with over 100,000 new jobs being created and robust business expansion. These market conditions coupled with the elimination of the 421-A tax abatement program, the conversion of thousands of rental units to condominiums, and the lack of new rental construction, has created the ‘perfect storm’ for apartment building owners in Manhattan. We believe that residential rents will continue to reach new record highs with continued demand to both work and live in Manhattan. We also believe that with so much foreign and domestic capital being deployed for multifamily investments in Manhattan, cap rate compression will continue.”

As previously reported, a joint venture of Maurice Mann and African Israel Investment Ltd., a company controlled by billionaire Lev Leviev, in March closed on the purchase of the Apthorp, the 12-story full-block building at 2201-2219 Broadway, built in 1908. The joint venture paid $426 million plus $30 million in related costs for the 163-unit complex, or about $2.4 million an apartment, the highest price every recorded for an apartment sale in America.

The investment broker who handled the sale, Douglas Harmon, senior managing director of Eastdil Secured, said: “Luxury Manhattan residential rental properties such as the Apthorp rarely are put up for sale. Investors forget that five years ago, and for many years before then, if one or two residential deals of $50 million hit the market it would be unusual. The complications of owning and managing residential real estate in the metro areas, including filing with governmental authorities, have been a significant barrier to entry for global capital. Nowadays, expertise is bought, learned, or ignored as more residential product of size hits the market. Just as in other asset classes every month or so there appears new and eager buyers from a broader deeper global capital market.”

In addition to the Apthorp, Maurice Mann is the owner of the only residential rental building on Gramercy Park, at 36 Gramercy Park. His investment partnership purchased the building about four years ago, when apartments were renting for $40 a square foot. During his recent appearance on my television show, he said that many of the units have been combined into larger units renting for more than $100 a square foot.

With rents approaching record levels, many real estate investors prefer to maintain the buildings as rentals as opposed to converting to condominium or cooperative ownership. “From a tax perspective, it doesn’t make sense to convert a rental building to condominium in today’s market with so much rental growth,” Mr. Yardeni said. “Holding onto a ‘trophy’ rental building and riding out the future growth in the rental market will allow owners to benefit from capital gains tax versus ordinary income tax that these owners would incur in a conversion.”

The president of Metropolitan Valuation Services, Steven Schleider, said the economists “had it wrong. All during 2006 pundits were saying how the high monthly cost of condominium ownership relative to rental rates indicated a disconnect in advance of a steep downward market pricing correction in for-sale apartments. We now see evidence it’s not that ownership costs were too high, but rather that rental rates were too low.”

“Over the past few years, we’ve seen a marked decrease in the vacancy rate for rental properties in Manhattan,” the chief operating officer of Citi Habitats, Gary Malin, noted. “Several factors contributed to this condition, namely the huge increase in the number of condominium projects and the conversion to condos of thousands of rental units. Many people forget that 75% of the housing market in New York City is rental property. With very low vacancy rates and record-high rents, rental properties are now an attractive option for many developers.”

He added: “We have even noticed a trend with condo buyers, once interested in flipping their purchase, are now holding their property and renting, because of the low inventory and high rents. This trend will remain strong.”

In 2005, a joint venture of developer Gary Barnett’s Extell Development and a real estate investment fund, Westbrook Partners, paid about $130 million for the 25-story, 348,000-square-foot rental building at 301 W. 53rd St. at Eighth Avenue. In May, Westbrook purchased Extell’s interest in the building. According to real estate sources, the joint venture had originally planned to convert the building to condominiums, and instead decided to market the building for sale to investors.

Real estate investment trusts continue to pursue ownership of residential rental buildings. Last month, the REIT Archstone-Smith announced it agreed to pay $170 million for the 31-story, 261-unit rental building at 303 E. 83rd St. on the northeast corner of Second Avenue, the Camargue.

The seller is a joint venture of Lloyd Goldman and Emmes & Co., which purchased the building in 1994 for $34 million.

Also in June, another REIT, Equity Residential, paid about $178 million to the Portnof family for four rental buildings on the Upper West Side. The four buildings are located at 41 W. 86th St., 228 W. 71st St., 238 W. 71st St., and 52 W. 77th St.

A number of residential buildings have recently traded hands at record prices.

In May, a joint venture headed by Urban American Management and a number of prominent local real estate investors agreed to pay about $250 million for a portfolio of about 2,000 rental apartments from the LeFrak Organization. These apartments are located in Brooklyn, Queens, and Staten Island.

Last year, a joint venture of Israel-based Brack Capital Real Estate and Westbrook Partners purchased the 293,000-square-foot residential rental apartment building at 240 E. 27th St., also known as 463-479 Second Ave. It paid about $158 million for the building, which has 324 rental apartments, a 7,000-square-foot Duane Reade, and 200 public garage spaces. According to real estate sources, the joint venture recently sold the property for more than $210 million.

Eastern Consolidated is marketing for sale the Devonshire House, a pre-war residential rental apartment building in Greenwich Village built by architect Emory Roth in 1928. The 131 rental units comprise 118,135 square feet at 28 E. 10th St. Eastern also serves as the investment broker for the Intervest portfolio of 24 properties located in Manhattan, the Bronx, and Queens. The portfolio contains a total of 900 apartments, 89 retail stores, and 13 professional and commercial units.

The senior partner at Massey Knakal Realty Services, Tim King, said, “The appeal of multi-family product is directly tied to the law of supply and demand. As the demographic shifts affecting our city continues to see more and more population growth. The demand for housing also rises. Owners of these properties see them as a stable source of revenue. Vacancy rates are at an all time low and multi-family product that is well maintained will generate increased cash flow every year.”

I concur with Mr. Yardeni when he says: “We are very bullish on the rental market in Manhattan and believe that rents and asset prices will continue to grow.”

Mr. Stoler, a contributing editor to The New York Sun, is a television and radio broadcaster and senior principal at a real estate investment fund. He can be reached at mstoler@newyorkrealestatetv.com.