Episode 39: A Tale of Two Cities: NYC Real Estate in 2026

Key Takeaways

• Brooklyn development sites are outpricing most of Manhattan. Williamsburg, Greenpoint and core western Brooklyn are clearing above $600 per buildable square foot — higher than 95 percent of the Manhattan development market. A Union Street site off Grand Army Plaza traded at roughly $650 per buildable foot.
• Rent stabilized value destruction is now measurable on a comp sheet. IPRG sold a 20-unit building on a 50-foot lot in a prime Brooklyn location for $1.3 million. Cap rates that priced at four and a half percent before 2019 now clear closer to ten, with values down 60 to 70 percent on some assets.
• Two buyers are behind nearly every above-market comp: 1031 exchange buyers and overseas funds, with substantial capital arriving from Japan. They pay five and a half to six caps where the rest of the market needs roughly a full point more. Most 1031 buyers are in exchanges because they sold to an overseas fund in the first place.
• Extend and pretend is breaking. Lenders are increasingly forcing short sales rather than modifying maturing loans. One property that sold for $9.2 million seven years ago, with $5.5 million of acquisition debt, recently hit the comps at $4.5 million.
• Vacancy inside stabilized buildings is compounding. It is now routine to find five to eight vacant apartments in a 20 to 30 unit building. Renting them loses money, and leaving them empty loses money.
• Condo conversion rarely solves it. In mid-to-south Brooklyn the high water mark for comps is around $1,000 per square foot against roughly $300 per foot of construction cost, before accounting for time, developer return, and the risk that the rules change before the project finishes.
• Documentation has become the asset. Owners who discarded renovation records cannot prove how a $5,000 rent was legally reached, which is now the central question in any diligence process.
• Office has recovered fully. Rents that fell from the $70–$85 range into the $20s and $30s are back at historic highs after office-to-residential conversions pulled supply off the market.

Terms Used in This Episode

Rent stabilization

A New York regulatory framework that caps annual rent increases and grants tenants a right to lease renewal. Roughly half of New York City’s apartments are stabilized.

HSTPA (Housing Stability and Tenant Protection Act of 2019)

New York State legislation that eliminated vacancy decontrol, sharply limited individual apartment improvement increases, and made deregulation of a stabilized unit possible only in rare circumstances. Referred to throughout this episode as “the 2019 laws.”

IAI (Individual Apartment Improvement)

Capital work performed inside a single apartment. Before 2019, documented IAI spending permitted a permanent rent increase. Owners had to demonstrate the amount spent to claim the increase.

Four year lookback

A former statutory limit restricting how far back a rent overcharge claim could examine an apartment’s rent history. Its removal means owners can be asked to substantiate rents established many years earlier.

DHCR (New York State Division of Housing and Community Renewal)

The state agency that administers rent regulation, including substantial rehabilitation exemption applications and rent overcharge proceedings.

Substantial rehabilitation (sub-rehab)

A DHCR exemption removing a building from rent stabilization where an owner has replaced substantially all building systems in a building that was substandard or seriously deteriorated. Generally presumed where the building was at least 80 percent vacant when work commenced.

Cap rate

Net operating income divided by purchase price. A lower cap rate means a higher price for the same income.

Negative leverage

A purchase where the going-in cap rate is below the interest rate on the debt, so borrowing reduces rather than increases the cash-on-cash return.

Price per buildable square foot

The standard metric for valuing a development site: purchase price divided by the total floor area permitted by zoning.

1031 exchange

A provision of the Internal Revenue Code allowing capital gains tax deferral when sale proceeds are reinvested in like-kind real property within statutory deadlines. The deadlines make 1031 buyers price-insensitive relative to the broader market.

DSCR (Debt Service Coverage Ratio)

Net operating income divided by annual debt service. A loan that “doesn’t cover” fails its DSCR requirement.

Extend and pretend

Modifying and extending a maturing loan the borrower cannot refinance, rather than foreclosing, so the lender avoids recognizing the loss.

Two over one

A three-family building configured as a two-bedroom duplex over a one-bedroom unit, or similar — a common small Brooklyn investment property.

Reset basis

The lower cost basis a new buyer acquires after a distressed sale has wiped out the prior owner’s equity, allowing the asset to perform at the new price.

Chapters

• 00:00 — Introduction
• 01:21 — A Tale of Two Cities
• 02:22 — What Is Selling at All-Time Highs
• 04:16 — How Interest Rates Are Actually Affecting Values
• 05:13 — Price Per Buildable Foot: Brooklyn Versus Manhattan
• 07:56 — The International Bid: Japanese Capital and 1031 Buyers
• 10:47 — Why Foreign Capital Will Not Touch Tertiary Markets
• 12:26 — The Headlines Versus What Is Happening on the Ground
• 14:03 — Rent Stabilized Value Destruction: 20 Units for $1.3 Million
• 16:12 — Distress, Short Sales, and the End of Extend and Pretend
• 18:30 — Sellers Coming Off the Sidelines
• 19:22 — The Vacant Apartment Problem
• 20:53 — Condo Conversion Math and Regulatory Risk
• 22:00 — Substantial Rehabilitation, DHCR, and the Pascal Affidavit
• 24:15 — Politics, Tenant Organizing, and the Industry Response
• 32:51 — Individual Apartment Improvements: Buying Paperwork
• 34:44 — Office: Back From the Dead
• 36:16 — Closing

Full Transcript

Lightly edited for readability. Speaker names, entity names and figures have been corrected against the recording.

Introduction 00:00

Derek Bestreich: Welcome back. We’re here at The Real Estate Roundtable with IPRG. There was a bit of a break, but we’re back into it. It’s August of 2026, and I’m joined by Adam Lobel.

Adam Lobel: Hello, Derek.

Derek Bestreich: Welcome, Adam. And Luke Sproviero. We need nicknames for you guys. Anyway, this is Derek Bestreich, and we’re here to talk about what we’re seeing in the New York City real estate market in the summer of 2026. How are you guys doing?

Luke Sproviero: Doing well. Trying to keep busy and find the product that people are buying — because, as I’m sure we’ll get into, there are things a lot of people are looking to buy and things not a lot of people are looking to buy. Trying to stay out of the city as much as I can. It’s not the best place to be in the hot summer.

Derek Bestreich: A lot of people get out of town on the weekends. It’s a strange season in the city. Adam, how about yourself?

Adam Lobel: Good. We’ve been having a really good summer. Heading down to St. Louis tonight for my dad’s 75th birthday, celebrating with family. It’s been relatively active and we’re staying busy.

A Tale of Two Cities 01:21

Derek Bestreich: Sales have been pretty strong. Activity has been strong. We closed out a lot of properties in the first half of the year and we have a great-looking pipeline going into the second half.

Not to get too detailed on our own activity, but at a high level, it feels like New York is a tale of two cities when it comes to real estate. On one hand there’s so much going well in terms of values and on the ownership side of the business — the market is performing very, very strongly on some levels. And on the other hand, you see a lot of distress, a lot of problems, and a lot of serious concerns people have throughout the market. I want to weigh those two sides.

What Is Selling at All-Time Highs 02:22

Luke Sproviero: I can jump off a little bit. If we’re talking about asset classes that are selling, it does feel strange, because there are certain investment assets — development sites, free market buildings — that are selling for, in my opinion, all-time highs. Development throughout where we focus in Brooklyn is definitely at all-time highs. Adam can speak to Manhattan, but what we’re seeing is very, very strong sales.

Those are people building multifamily. A lot of these guys, if the price is right, are building rentals — if they can build 99 units, they’re definitely building rentals. And then you have condo developers paying astronomical numbers for land sites, and they’re doing that because they believe they’ll be selling those condos into a very hot residential market. That’s the only reason they’d pay that price.

And then the townhouse conversion deals, which are a big part of our business — those are very easy to sell. There are tons of buyers, and that’s an exit to homeowners. You can see all the condo sales and the finished townhouse sales, and they’re ridiculously high. Every day it’s another sale for a number we can’t believe.

And then obviously the rent stabilized buildings, and the buildings that have some free market and some rent stabilized — those are really down in value. So it really is a split between those asset classes.

How Interest Rates Are Actually Affecting Values 04:16

Derek Bestreich: On the valuation side — when you say free market buildings are selling at all-time highs, that’s really been a function of the rental market.

Luke Sproviero: There’s one thing holding them back, which is holding everyone back: interest rates. These would be going for even more absurd prices if rates were low.

Derek Bestreich: I’m not sure that’s true, though. If you’re seeing all-time highs across free market, mixed use, development and user product — how can you say interest rates are holding it back? Fundamentally I hear you, because if rates were three and a half percent like they were a few years ago we’d be looking at a completely different ball game. But the truth is we’re in a higher rate environment than we’ve seen.

Luke Sproviero: A hundred percent. It’s not affecting development — you’re right, price per buildable is the highest it’s ever been.

Price Per Buildable Foot: Brooklyn Versus Manhattan 05:13

Adam Lobel: You’re also talking specifically about Brooklyn-based development sites and condo-type locations. I wouldn’t say price per buildable square foot in Manhattan is at an all-time high — it’s actually down from its highs, because the cost of development is a lot higher and the way the tax incentives for developers are structured isn’t as strong.

So pricing in Brooklyn — call it Williamsburg, Greenpoint, or core western Brooklyn neighborhoods — is selling for a higher price per buildable square foot than 95 percent of the Manhattan market in terms of development.

Luke Sproviero: On the great Manhattan stuff you see crazy prices. Where someone could sell a condo on the Upper East Side, or Tribeca — those prices are crazy.

Adam Lobel: Yes, but the price per buildable there is around $400 per buildable square foot. And you’re seeing over $600 per buildable square foot in good Brooklyn locations, because you’re not competing with the elevator-and-amenity type of product.

Derek Bestreich: There was a comp this week in Brooklyn for a site on Union Street right off Grand Army Plaza. I think that sold for $650 a foot.

Luke Sproviero: That’s a big number. We all know what Union Street is — there’s a lot of traffic on that stretch. It’s not the place I’d probably do that, but it’s a big number. On a map it’s very good.

Derek Bestreich: On a map, it’s good.

Luke Sproviero: To answer what you were asking about interest rates: for development, it’s definitely not affecting it. And for the homeownership product, maybe these people aren’t getting a lot of financing — it’s not affecting it, because the prices for homes and for development are higher than they were when rates were low in these prime Brooklyn markets.

Where it is affecting things is the renovated free market product. It’s free market, it’s great, but buyers need higher going-in cap rates because of where rates are. If rates were three and a half, they wouldn’t be trying to get so close to a seven cap or a six and a half cap.

Derek Bestreich: So you’re saying the finished product is going for great prices overall, and the rental market is doing great, but value is suffering because buyers need a cash-on-cash return that factors in a cost of capital around six and a half percent.

Luke Sproviero: Right. That multifamily we have a ton of activity on in Park Slope, for example — everyone is trying to get as close to a seven cap as they can because they don’t want negative leverage. That would be different if rates were lower. There’s still a ton of momentum, people want to buy it because it’s the best product to buy, but they can’t pay historic prices when rates are around 6.8 percent.

The International Bid: Japanese Capital and 1031 Buyers 07:56

Adam Lobel: The big trend over the last two years or so has been finding the obscure international buyer. They have different tax benefits — accelerated depreciation, for instance. And there’s a ton of money coming from Japan. Numerous brokers are repping these buyers, bringing different family offices into Manhattan in particular and exiting every single syndication deal. Those are the exits, because those buyers pay a five and a half to six cap, where the rest of the market is probably a full point higher on that type of product.

Derek Bestreich: So these foreign investors are paying five and a half to six caps because they have overseas benefits.

Luke Sproviero: Everyone’s trying to get them to pay less than a six, but yes — they’re getting deals done around five and a half.

Adam Lobel: It has to be squeaky clean. Perfect paperwork, very clean, renovated, cash flowing assets with a small amount of retail. That’s what they’re buying.

Derek Bestreich: So is that the best asset in the market right now — clean, renovated, cash flowing properties? Or are they suffering from the interest rate issue Luke described?

Luke Sproviero: They’re not suffering, they’re performing very well. Rents are high, they’re free market, they’re easy. Where the difficulty is, is exiting. Everyone knows the Japanese funds, and if you have someone in a 1031 you’ll hit a nice price if you can get them to buy your property. But the normal buyer isn’t looking to take on negative leverage, so their cap rates are affected and it’s hard to exit. If someone buys a deal, it’s really hard to make money and exit right now once you account for the cost to buy the building, the renovation, your fees and your waterfall.

Derek Bestreich: What are these Japanese buyers borrowing at in Japan?

Luke Sproviero: I don’t know. My guess, for what they’re paying in New York, is they’re probably borrowing around two and a half percent — but that’s a guess.

Derek Bestreich: I was going to say two and a half to three and a half.

Adam Lobel: You’re also seeing — and I don’t know this deeply, it’s from what I’m reading — the yen weakening significantly and the dollar getting much stronger against it. So I think there’s going to be an additional influx of Japanese investors into the New York City market. And I think the trend of renovated multifamily in good locations continues, because last year they weren’t looking to buy in Brooklyn and now they are. You’re starting to see them target the best locations in Brooklyn, the western neighborhoods.

Derek Bestreich: What about locations that are a little less than the best?

Adam Lobel: I’m not sure those international buyers are going to be buying there in the short term.

Luke Sproviero: You had Carlyle buying out there, but they’re obviously not really buying much anymore. These funds we’ve seen — 99 percent of people in a 1031 or an overseas fund are targeting really good locations.

Why Foreign Capital Will Not Touch Tertiary Markets 10:47

Adam Lobel: We’ve shown them properties that were perfect on paper — checked every single box. And then when they came to look at it, there was graffiti on the adjacent property, or someone sleeping on the street. They didn’t buy it because of that. So I think it’s going to take some time for the tertiary markets to see the benefit of the influx of foreign capital. But I do think core locations benefit going forward, with real exits for professional investors.

Luke Sproviero: The exits are out there. You have to get lucky and find the right buyer. Any big exit where someone says “that’s a nice exit” — it’s to a Japanese fund or a 1031 buyer. And you have to get lucky with the 1031 buyers, they’re seeing a lot of product.

Derek Bestreich: And the 1031 buyers exist because of the Japanese buyers.

Luke Sproviero: All the 1031 buyers are in 1031s because they probably exited to them.

Derek Bestreich: Two guys in a 1031 from Japanese buyers.

Luke Sproviero: That’s the case for any above-market comp you see right now — it’s a 1031 buyer, and they’re going to buy the right product. I was looking at comps the other day: someone sold a retail condo in the city and bought a two-over-one in prime Brooklyn. They paid a big number, but it’s core, great tenant, good building. They flock to that. Right now, A locations are the win.

The Headlines Versus What Is Happening on the Ground 12:26

Derek Bestreich: On X and online, in real estate circles, you hear so many people complaining about socialism, the rent freeze, the office to protect tenants. For people who aren’t here in New York, it seems like nothing but doom and gloom in terms of the business news.

But on the ground, we’re seeing families continue to buy houses at very high prices. Office leasing is up. Rents are up year over year. We have all these people continuing to buy into New York. So what’s the thinking behind all of that? People still love to be in New York. And the Mamdani situation isn’t new at this point — the primary was over a year ago now.

Luke Sproviero: The thing it’s really affecting — obviously he’s targeting landlords, so that hasn’t been great. But what he’s targeting is the rent stabilized stock. That’s really what they’re going after. They’re looking to own those properties.

Derek Bestreich: But why are people continuing to pay so much, and continuing to buy in New York? You said to me yesterday that these free market mixed-use buildings are in extreme demand and you think people are overpaying for them. People can’t get enough of the product type. So why?

Luke Sproviero: There’s a story: New York is always going to be good, this is a good time to buy, it’s only going to get better, these small free market buildings have extreme rent growth. There’s a story there.

What’s crazy to me is all the news you just mentioned. I go home and see relatives and they say, “Oh my God, you live in New York.” People outside who don’t live here think everyone who lives here is crazy. And it’s nuts, because everyone continues to invest. People are buying condos, buying mixed-use buildings, buying free market buildings, building development sites. From the outside looking in it’s booming, it’s ridiculous.

Rent Stabilized Value Destruction: 20 Units for $1.3 Million 14:03

Luke Sproviero: But there are a lot of negative things going on. And the negative buildings, the rent stabilized buildings, are getting hit harder. We just sold a 20-unit in a prime location for $1.3 million.

Derek Bestreich: A 20-unit building.

Luke Sproviero: That’s insane. If you bought a two-over-one in a good location for $1.3, you stole it. And this is a 20-unit building.

Derek Bestreich: If you bought a piece of land, a one-family, a two-family, a two-over-one — any small piece of real estate on a 25-foot lot or less. What can you buy for $1.3 in New York at this point? And here we sold a 50-footer with 20 units.

Adam Lobel: You can’t even buy a two-bedroom in Hoboken for $1.3 million. You could definitely buy a nice one-bedroom.

Derek Bestreich: So it’s equivalent to a one-bedroom in Jersey.

Adam Lobel: Would you rather own 20 rent stabilized apartments in Park Slope? It depends what your business plan is.

Luke Sproviero: The rent stabilized stock is getting hit so hard and it’s only going to get worse. I think we could see the motivation to make it even worse from the people in power. It’s two sides, and these people are getting hurt — and that’s where you don’t have the buyers. There aren’t people jumping in to buy rent stabilized buildings unless there’s a real story.

Derek Bestreich: I disagree. I don’t think it’s an issue of buyers. I think buyers will buy these properties, and want to buy them, and like the idea of the basis for the long term.

Distress, Short Sales, and the End of Extend and Pretend 16:12

Derek Bestreich: I think the issue is that you don’t have sellers willing to sell where buyers expect to be buying, or you have banks unwilling to do a short sale — because it may not even be the operator’s decision at this point.

We just saw a property sell in Brooklyn where the guy paid $9.2 million and borrowed $5.5 million at acquisition, about seven years ago. It just hit the comps at $4.5 million. The operator’s equity got wiped out, and the bank sold it at a short sale. Now you have fresh capital coming in — a new buyer who gets a reset basis at a price that makes sense to him.

Luke Sproviero: That’s a good point. You do have to have sellers willing to sell at those prices. And people are. You see a lot of these big families — when I started as a broker we used to call these people all the time and they didn’t sell. Now they’re selling.

Adam Lobel: At the time you could have sold for a four and a half cap, and now it’s like a ten cap. Values have been depressed 60 to 70 percent on some of these.

Derek Bestreich: The thing I think is interesting, that we’re starting to see for the first time, is these forced sales and short sales. For years it was extend and pretend. The loan would come due, the owner would go to the bank and say it doesn’t cover for DSCR, or the bank would want a paydown and the owner didn’t have the money — so they’d just modify, extend, and everything kept moving. The owner keeps making the mortgage payments, or they come up with a workout, maybe interest only, some adjustment.

But now we’re starting to see deals actually hit where the bank knows the asset is worth less than the loan amount, and they want their money back. They don’t want to continue the extend and pretend, assuming they’re even getting the debt serviced.

We have one going on in the office right now that I was talking about yesterday. The broker was hired by the seller, but the bank is the one losing money on the loan balance — so he’s negotiating his fee with the bank. It turns from dealing with the borrower to dealing with the lender. But regardless, the deal is happening.

Sellers Coming Off the Sidelines 18:30

Luke Sproviero: You’re also seeing sales on big rent stabilized buildings where it’s the seller selling. They have tons of equity even at these prices, and they’re selling just to sell. There was a big package in the Bronx where an owner sold his entire portfolio — big elevator buildings, five in a row that sold, at 60 a door, 40 a door, 50 a door. Those are insane prices. And he had equity in there; he barely had mortgages. He could have sold for way, way more years ago. So he comes out of the woodwork to sell now. There are people like this. They’re probably selling for real reasons — retiring, whatever. There are real reasons to sell real estate that aren’t about maximizing your exit.

The Vacant Apartment Problem 19:22

Adam Lobel: Or he doesn’t want to deal with the tenants and the violations and the headaches.

One of the other things I’m starting to see is that after the 2019 laws, they clamped down on any upside in rent stabilized apartments. So landlords just aren’t renting them out — they’re sitting on vacant apartments. More and more as the years go on, they accumulate more vacant apartments in the building.

Recently we’ve been looking at a lot of hybrid properties where there are five to seven or eight vacant apartments in a 20 or 30 unit building. The landlord’s cash flow is decreasing, it’s barely covering at this point, and he’s asking, “What do I do?” He’s really asking for advice. And it’s — I don’t know, you could rent to a friend or a friendly and hope for better days, or you just leave it vacant. It’s really a shame what’s happened to those types of owners.

Derek Bestreich: They don’t know what to do with these apartment buildings. I was in a 20-unit two weeks ago — I think 13 are vacant. The owner wants to get the rest vacant because he thinks there’s a condo conversion opportunity.

Condo Conversion Math and Regulatory Risk 20:53

Derek Bestreich: We went through the whole condo conversion play, and the condo sellout prices for a multifamily walk-up building aren’t great. It’s going to cost a ton of money to get there. Once you discount for the developer’s expected return, the cost of construction, the amount of time it takes, and your sellout values — the price of the property just wasn’t great. Meanwhile it’s a 20-unit, so his tax bill is something like $100,000 a year, and he has to keep feeding the taxes, the insurance, the water. And he’s not collecting rent.

Adam Lobel: And who’s to say the Attorney General is going to approve these condo tax lot subdivisions in the future, to redact out rent stabilized units for conversion? There’s an inherent risk in doing that today, because it’s not a bulletproof process.

If you’re taking a 20-unit, turning it into six apartments, going floor-throughs, making them three or four bedrooms, and trying to sell — depending on the location, call it $1,500 to $2,000 a foot plus. This wasn’t that kind of location.

Derek Bestreich: This was mid to south Brooklyn, where the high water mark for comps is $1,000 a foot. And I don’t think you can get $1,000 a foot for a tenement building converted to condos. So you have to buy the building right.

Adam Lobel: It’s $300 a foot to make any money on it. There’s a lot of inherent risk in doing it, and it costs a lot of money. And who’s to say that in two years, when you finish the project, Albany hasn’t struck it down or passed some additional law disabling the ability to do it. They’re getting rid of sub-rehab. You can’t renovate.

Substantial Rehabilitation, DHCR, and the Pascal Affidavit 22:00

Luke Sproviero: To be clear: anytime you’re deregulating apartments, or taking rent stabilized units and trying to make them free market, they’re just going to not answer, or reject. Look at the Spitzer case, look at the substantial rehabilitation lawsuits. If you’re attempting to do that, in any fashion, it’s going to be delay, delay, delay — or just no.

Derek Bestreich: Or change the rules. They’ve delayed Spitzer for two years on what seems to be a pretty clear-cut law.

[Editor’s note: Spitzer Enterprises has been seeking DHCR approval to non-renew six rent-stabilized leases at 985 Fifth Avenue in order to demolish and replace the building, a project that already holds Landmarks Preservation Commission approval. Demolition is one of the narrow statutory exceptions to a stabilized tenant’s right to lease renewal. After roughly 26 months without a determination, Eliot Spitzer sued the agency in state court in July 2026, alleging intentional delay. This is a demolition proceeding rather than a substantial rehabilitation application — two separate DHCR processes that are often discussed together because both are paths out of rent stabilization.]

Luke Sproviero: Very clear. And you have rent stabilized tenants holding up an entire development.

Derek Bestreich: And DHCR isn’t ruling on it.

Luke Sproviero: They’re just taking their time.

Derek Bestreich: How many millions of dollars are sitting there waiting, because DHCR won’t rule on whether those tenants have to be relocated?

Luke Sproviero: They don’t want someone to take an entire building and make it market-rate condos. Anytime you’re doing that they don’t want to do it. And they’ve proven they’ll just change the rules.

Derek Bestreich: They have changed the rules based on backdoor, closed-door meetings, apparently — based on that affidavit from the former DHCR commissioner, Woody Pascal. Backroom dealings, changing the rules without any public debate or knowledge. And then here’s how things work now.

Adam Lobel: I feel awful for the people who bought in 2018 and 2019 and basically got their entire equity wiped out. Rates changed, laws changed — those people just lost everything.

What you’re seeing now is that a lot of those forced sales are behind us, because of the five-year debt cycles. A lot of it, not all of it, was on extend and pretend, which is why you’re still seeing it circulate a little. But you saw a lot of foreclosures and bankruptcies over the last two years. It’s been gut-wrenching for people in this industry. The normal person working in tech or finance or marketing, or working as a nurse — they’re not privy to any of this, because they’re living in a different world than what we’re seeing. It’s abysmal what’s been done to some of these landlords.

Politics, Tenant Organizing, and the Industry Response 24:15

Luke Sproviero: You mentioned there are two sides to all this. We’ve talked about the assets that are selling, that everyone’s gravitating toward — you see the comps on PincusCo and Traded and all of it, and it’s a lot of the same stuff. And everyone in the business understands what’s going on with rent stabilized.

But what we need to be aware of is what’s going on with Mamdani and the politics here. The whole administration is against landlords. From the outside looking in, he’s doing really, really well. People who aren’t landlords like him. He’s got the Knicks. All of this is going in his direction — nothing bad has happened yet. He’s doing well. And meanwhile he’s targeting landlords, and that’s getting way worse.

People need to wake up and think: this guy is actually doing really well, and he’s going to be perceived to be doing well. So how much worse is it going to get for landlords, if he does well and gets reelected, or someone else comes in behind him?

Derek Bestreich: And you have to take these people seriously, because they take themselves seriously. There’s that film the administration just posted, the Union of Pinnacle Tenants documentary with Cea Weaver. Well made, 15 minutes long. The opening scene is her sitting there reading The Great Rent Wars, with a stack of books on the coffee table next to her — and if you zoom in, it’s all rent strike history and organizing theory. These are old ideas, and they are actually implementing them.

Luke Sproviero: They’re implementing everything. They’re coming out with all this content, these videos. They’re attacking. They’re fighting very well. It’s coming across, and they’re winning. It’s working.

And the landlords — we get invited to these events. Pay five thousand dollars and play golf. And we say, should we do it? So-and-so is going to be there, let’s do it. But nobody is doing these events to talk about the fight. How are we going to overcome this? How do we get somebody in who changes things? What’s the fight going to be? It’s never about that. And everything they’re doing is hitting on all angles, and it’s working.

Even the free supermarkets. Anyone who knows business or knows numbers says, how is this going to work? Free food — someone’s paying for it. You already hear stories of people going in, getting free food, then flipping it and selling it for a profit.

But think about the business angle. Say he opens ten of these and each loses $20 million a year. That’s $200 million. That’s literally nothing for New York. He knows it’s going to fail. He’s going to keep it open, keep people working in there, keep the food coming, and everyone’s going to love it. He takes a $200 million hit a year, which is absolutely nothing, and all of a sudden the socialist movement is working. Everyone says it’s working — because he took a $200 million hit for ten stores that doesn’t move the needle.

Adam Lobel: The reality is that the tenants supporting these initiatives don’t realize the ramifications for everyone else in the market — that everyone else’s rents are higher because of some of them.

Luke Sproviero: It’s a business move. He knows the supermarkets aren’t going to work, but every other state is going to say, look at this, why does New York have free grocery stores? There are a lot of these plays happening. What is the real estate industry doing to combat any of it?

Derek Bestreich: That’s what’s frustrating. We all agree there are all these vacant apartments, you can’t raise the rents, there’s a rent freeze, the taxes, the utilities, the interest rates, and the buildings are worth nothing. And you go on X and it’s an echo chamber of the same ideas over and over. But you’re right — nothing is actually happening.

Luke Sproviero: What happens at the real estate events? We have the sushi, we have the drinks, you pay all that money, and then nothing gets done.

Derek Bestreich: Nothing gets done. You go to schmooze and have fun, get the drinks and the sushi.

Luke Sproviero: Play the golf. But nothing’s being organized. And the funds being raised aren’t going back into anything that helps the real estate industry.

Derek Bestreich: I think you’d better hunker down and get patient. If you want to own these apartment buildings you’d better be a high-water-mark landlord — just be a good operator, keep the violations off if you can, and let it ride. Hope that in 10 or 20 years these laws change or something loosens up.

Everyone’s been talking about the vacancy increase forever. I think you’ll get it, but it’s not going to be what you think. It’s not going to be a market reset like California.

Luke Sproviero: They’re not going to sign off on that. Anytime you’re increasing rents on below-market apartments, that’s what they’ll do.

Derek Bestreich: Another thing — the industry has been beating this drum about all these vacant apartments. You want to bring down rents and improve affordability, add to the supply. We’re here, we’re waiting for you. And they know. It’s so obvious, they know. They just don’t want to allow it to happen.

Adam Lobel: The city could easily restructure the incentives for development.

Derek Bestreich: They’d probably prefer the buildings sit vacant and you feed the taxes, feed the meter. And now you have the rent gouging hearings, and these rent-impairing violations, new violations where tenants don’t have to pay rent. They’re trying to organize tenant unions — that’s what the whole video that just came out was about.

I got an email from the mayor’s office showing the video. It looks really good. It kind of gets you excited even though I don’t agree with anything in it. There’s a narrator, it’s really beautifully done. And then there are other links, and you click and it says “talk to tenants.”

Luke Sproviero: They’re organizing.

Derek Bestreich: They’re organizing for tenants not to pay rent. Meanwhile, landlords are sitting on vacant units not collecting rent, and now you’re going to start dealing with your occupied units not paying rent either.

Luke Sproviero: And meanwhile those landlords are going to these events having the sushi, saying “this sucks,” and not doing anything about it.

Adam Lobel: You’re seeing more and more rent overcharge cases. Recently we saw one from a rent stabilized tenant claiming they’re being overcharged — which was basically a first for us — and they have a pretty clear DHCR history showing no overcharge. The landlord’s going to win that case. But it’s interesting. These tenant protection units are starting to have a real impact.

Derek Bestreich: More bankruptcies being filed. And the mayor’s office already tried to get community groups to purchase the Pinnacle portfolio. That didn’t end up happening — they negotiated with Summit for millions in repairs. But when it happens in the future on a smaller scale, they’re definitely going to get community organizations to purchase these properties. Tenant-run buildings. I think they’ll wipe out the taxes so those groups don’t have to pay real estate taxes — they’ll pay insurance, water and heat, but they’ll have a completely different operating structure than regular property owners have to deal with.

It’s about as bad as it can get in terms of multi-housing. And even the individual apartment improvements, these so-called free market apartments in a rent stabilized building — that has become super tough. And it’s really unfortunate. These are beautiful apartments that were renovated 10 or 15 years ago.

Individual Apartment Improvements: You Are Buying Paperwork 32:51

Luke Sproviero: Remember, the state said you don’t need to keep your records past four years — throw them out. And now what are they doing?

Derek Bestreich: They changed the law. Now there’s no four-year lookback.

Luke Sproviero: So now nobody has this paperwork.

Derek Bestreich: But what you did have to do was demonstrate how much you spent in order to take the increase. That was the deal — you spend a certain amount, you get a certain amount of increase. Now, in 2026, we go to market these buildings for sale and we say, “Hey client, where are the checks? Show us what you spent.” And it’s, “I don’t have them.” Okay, great. So we’re marketing this building with these $5,000 rents — but how did we get to $5,000? Where’s the proof?

Adam Lobel: You’re not even buying the bricks anymore. You’re buying paperwork. And for most of the owners, they don’t have it.

And even if you bought what you thought was a free market building — and the bank thought it was free market, and all the tenants think it’s free market — if there’s a problem with a tenant, or they go to one of these meetups and realize they can make a claim, and the landlord doesn’t have perfect paperwork, the landlord’s in trouble. And there are no ramifications for tenants who claim these rent overcharges.

Derek Bestreich: They can get a major payday.

Adam Lobel: They get a payday, and the landlord has to step up and start spending on legal fees.

Derek Bestreich: I don’t think most tenants know about that yet, but they will — as the mayor’s office continues to blast out this pro-tenant, talk-to-tenants, unionize messaging. Tenants will know. And then these properties fall into bankruptcy.

Office: Back From the Dead 34:44

Luke Sproviero: I don’t want to make it all doom and gloom. The reason this is important to discuss is that there really are two sides, and there’s still a huge part of the investment cycle that’s really good.

Adam Lobel: Talk about rising from the ashes. Office buildings — you mentioned this earlier — the office asset type is doing phenomenally right now. They also took a lot of supply off the table.

Derek Bestreich: I saw Ruby Schron in our building. He’s a big office building landlord, and he’s the landlord of our building. He said to me that all this office-to-residential conversion, all this office space removed from the market, has been phenomenal for office leases.

Adam Lobel: The office market got rocked the hardest by COVID. Buildings were trading for like $300 a foot in Manhattan. Rents went from $70, $80, $85 a foot down to $30 or $20. And now it’s back at historic highs, because of exactly what you just mentioned. That asset type in particular continues to perform excellently.

And also the return to office. My buddy works at Google — it’s a tech company, he should be able to work from home, but they’re making him come in now so there’s camaraderie and so you can build a company.

Derek Bestreich: There have been a bunch of big leases that have hit the wire. Anthropic, Snap — I saw this week.

Closing 36:16

Luke Sproviero: This goes back to the whole Mamdani thing and how it’s working. Think about it — everything else, people are still willing to work here, live here, pay here, buy here. So where is it negative? Why, as a landlord, do we think this is going to go horribly and only be a four-year thing? This could be an eight-year thing.

Derek Bestreich: It’s going to be much longer than eight years at this point, and it’s going to take a while. The capitalists who say this is destined to fail — it’s going to take a while to work its way through, and for people to see the effects.

But let’s leave it there. I think we covered a ton. We’ve got to save some fodder for future episodes so we don’t fizzle out on this again. Thanks, everyone.

About IPRG. Founded in 2016, IPRG is a broker-owned investment sales and retail leasing firm specializing in multifamily, mixed-use and development properties throughout New York City, with over $4 billion in sales. Contact the team for a valuation or market discussion.

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