Canvas Property Group, a New York-based multifamily owner and operator that focuses exclusively on its hometown, is seeing a strong recovery for apartment properties as tenant demand rises.
And despite a historically tumultuous year and a half, founder Robert Morgenstern told Real Estate Capital USA he believes New York real estate’s best days are ahead. “[The pandemic] was effectively an 18-month hiatus people took from New York City. We’re now back on cycle,” Morgenstern said.
Canvas Property Group owns and operates more than 1,500 apartment units across New York City and will continue this theme as it expands its portfolio. The firm focuses on neighborhoods with proven track records of steady rent growth, rather than trying to bet on which area will be trendy soon. High-quality buildings are a focus as well.
“I have generally bought in neighborhoods that have been ascending or are strong as opposed to being out on the vanguard,” Morgenstern said.
Canvas Property Group works with a variety of lenders including debt funds and federal mortgage agencies like Fannie Mae and Freddie Mac. Yet, the firm aims to source most of its debt from local New York City community banks where they have business accounts.
“Certainly, the agencies have played a part [and] we do borrow from them whenever possible,” Morgenstern said. “Depending on the state of the deal, after it’s stabilized, we will go to either a debt fund or community banks. But given the option, we borrow as much as we can from the community banks.”
The company aims to put into place a unique structure for each transaction, with Morgenstern noting he doesn’t go into a transaction with a set idea on what leverage should be. “I don’t think there is a one size fits all,” he said. “We look at each deal separate from each other and try to execute the best we can.”
Big Apple comeback
Morgenstern told Real Estate Capital USA he is very pleased with New York City’s residential comeback so far. While the retail and office markets are struggling to find their footing in a post-covid world, apartment leasing is settling back into its pre-pandemic patterns.
“Demand has just taken off. People are still not back at their offices but residentially, especially in locations that have better neighborhoods, a number of people stormed back into the city starting in April,” he said. “We’re back on the cycle – with a break – but the demand is up.”
On the supply side, Morgenstern thinks a combination of slowing of tax abatements for new developments as well as the potential for new rent stabilization measures will, ironically, lead to overall rent growth for the city as a whole. “New York real estate I think will undergo a strong two years as it relates to rent growth, despite there being some rent control because there are no tax abatements and new development is stopping because they changed the rent laws. The supply is almost gone, I think that will drive more capital into New York to buy [existing real estate].”