What's the Deal | David Gleitman & TARGO Capital Partners Acquire East Village Portfolio From Kushners

➡️ Market: East Village
➡️ Acquisition Price: $50,750,000
➡️ Asset Type: Multifamily Portfolio
➡️ Buyer: TARGO Capital Partners
➡️ Seller: Kushner Companies
➡️ Square Footage: 59,475
➡️ Price Per Square Foot: $958
➡️ Units: 110
➡️ Price Per  Unit: $518,182

What drew you to buy the East Village Portfolio?

We are experts on the best residential neighborhoods in downtown Manhattan. This deal aligned with our target demographic and location and the price of the portfolio was very attractive. These middle-market multifamily buildings in the East Village fit perfectly into TARGO’s thesis as we already have a footprint in those neighborhoods so we canroll them up into the existing operations. We also knew that Kushner was a real seller because they were selling other buildings in their portfolio. Kushner is an institutional player and kept the buildings well-maintained making this a solid long-term hold and management play. While it’s fully leased, we have identified inefficiencies’ where we can add value on the expense management side. The key here is to buy yourself into an almost double-digit cash-on-cash yield as a result of high leverage at a low cost of debt and an attractive in-going cap rate of 6%.

 

How did you secure financing for the portfolio?

The package of 110 apartments across 6 buildings came with an assumable CMBS loan from 2019. In today's environment, there’s a lot of value to legacy debt with favorable terms. In our case, the loan is interest only until 2029 at 3.7%.
 

What excited you most about this deal?

This was our largest deal to date. We’ve previously closed on ~$20 million deals with ~20-30 units, but now we’re buying 110 units for $57 million. The scale of the deal is exciting and from an operations perspective takes us to the next level. In addition, dealing with a sophisticated and veteran counterpart such as Kushner elevates the team’s performance. In any transaction, it is key for us to represent TARGO in line with our values. Reputation is key in this business, and we have now repeatedly demonstrated to be a reliable, knowledgeable, fast, and problem solving oriented counterparty. This deal further proved that we don’t mess around and are here to stay in New York.
 

What are TARGO’s investment criteria?

TARGO is a New York City niche player. We look for middle-market multifamily and mixed-use buildings and focus on predominantly free-market properties with good in-place cash flow or value add potential in the most sought after residential neighborhoods in Downtown Manhattan, particularly West Village, Soho, Chelsea, Tribeca, Nolita, Lower East Side, and East Village. We target a very specific tenancy demographics. Mostly students and young professionals in their 20’s and early 30’s areliving in these areas, and our goal is to provide a contemporary resident experience catered to the needs of our target group. The East Village is the epicenter for that given everything it has to offer culturally, coupled with access to transportation and its vicinity to NYU. Ever since I moved to New York I have only lived in those neighborhoods, and I know them very well. These neighborhoods maintain a constant, strong, and steady demand pipeline from folks who move to New York every year for either work or studies. They live a few years in our “starter apartments” in the East Village and hopefully, at some point, they move on to another TARGO property as they get promoted and their income increases. If you own great locations, manage them properly, and can add value along the way, then you are adequately positioned to reap the benefits of owning real estate in New York City long term.
 

What is TARGO planning for the next 12-24 months?

The firm is doubling down on its pursuit of assets in New York, with a persistent interest in the neighborhoods mentioned earlier. As we grow, our operational efficiency increases as well, which makes onboarding and managing new buildings much more streamlined. We are coming off two years of rapid growth on the acquisition front. The current challenge is executing on our current projects while continuing to institutionalize the platform and acquire new assets. We have both the capital and goal to buy another $100 million of real estate in 2024, and are convinced that the market will allow us to get there. With this portfolio acquisition, we now own and operate 250 apartments, a handful of stores, across roughly 20 buildings. We are fully integrated at this point, and perform all operational functions in-house, including property management, leasing administration, and construction oversight. We try to control every aspect of the deal possible to mitigate risk in our investments and remain accountable.

How did you begin your real estate career?

In 2010, fresh out of college, I started to work for PGIM in Munich, where I’m originally from, and after four years of work experience, I decided to transition to New York City. In 2014, I moved to New York to pursue my MBA at NYU Stern School of Business, with the goal to use the two years at NYU to build my network and gain a foothold in New York’s real estate industry. 10 years later I’m still in New York and my business and experience have evolved over the years. After business school, I worked for a small to medium-sized development firm called Megalith Capital Management where I was thrown into the deep end and learned what it takes to build buildings from the ground up in NYC. Coming from an LP background at PGIM to the trenches of New York City development was a drastic shift but propelled the development of my skill set and business acumen nonetheless. Eventually, I was hired by Emanuel Stern to join his private real estate investment platform, Tall Pines Capital. I led acquisitions for a little over a year until I ventured out on my own to start TARGO Capital Partners. I’ve always wanted to make it on my own in New York City, and decided in January of 2020 to make the jump. Thinking about ways of how I could differentiate myself, I decided to leverage on my capital relationships in Germany and created an investment product that catered to their specific needs.The value proposition has worked out and over the past 2.5 years we purchased approx. $200 million of New York City real estate in prime neighborhoods. While the Germany-US axis will always remain a key differentiator for TARGO, we have purchased properties together with domestic and other international non-German capital sources and continue to diversify our capital base.

What advice would you give a CRE pro starting in the industry?

Especially for people looking to work in acquisitions, my number one advice is to master your technical skillset and perfect the craft of underwriting and financial analysis. Hustle hard, especially if you’re in a major market like New York with few connections or little experience, and show your dedication and willingness to work hard.

 

Traded Student Ambassador Program

This interview was conducted through Traded’s Student Ambassador Program in collaboration with Thomas DeRuvo of Rutgers University.

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