ABO Developments - Fall 2013 - (Page 6)

Bronstein Properties BY S T E V E N C U T L E R R ecounting the story of the steep and steady growth of Bronstein Properties, which specializes in acquiring and operating apartment buildings throughout the metropolitan New York City area, managing partner Barry Rudofsky presented ABO members with a primer on the right way to structure and finance property deals, based on lessons learned over his 25 years co-managing the company with partner Scott Silverman and founder Albert Bronstein. “How that growth was financed is a sort of parable of what has happened in the business in the last 15 or 20 years,” said ABO executive director Dan Margulies introducing Mr. Rudofsky at an ABO luncheon on June 12. Based in Forest Hills, Q ueens, Bronstein Properties operates some 130 properties containing approximately 8,500 units in upscale and emerging neighborhoods in the boroughs of New York City and Westchester. The company also manages professional and retail units in New York and Florida. When Rudofsky joined his father-in-law Al Bronstein’s real estate company in 1989, it had about 1000 units in mostly six-story corner elevator buildings in Queens. “In those days,” explained Rudofsky, “property owners were much less efficient in increasing rents. Rents were almost uniformly about 60 percent of the market, held down by rent regulation. We would wait for vacancies, renovate the units and bring those rents up to market while doing any needed building-wide major capital improvements, which entitled us to additional increases in rents and some tax benefits as well.” 6 | A B O D E V E L O P ME NTS • www.abogny.com Growing a Property Management Company With and Without Other People’s Money Their investment strategy was typical for those days and straightforward, said Rudofsky: buy a building, get a five-year balloon mortgage for approximately 75 percent of the purchase price and use family money for the other 25 percent. Taking advantage of rent regulations they would be able to increase the rents at a level above inflation. Then, in years four and five, they would pull out most or all of their cash and use it to buy the next deal. “This allowed us to continue to own the property,” explained Rudofsky, “take out additional dividends, gain from any additional appreciation and after a couple of years have no real capital investment left in the building.” By 2003 the partners managed to double the size of the portfolio by adding a building or two a year and expanded their geographic reach to Brooklyn and Upper Manhattan. A New Investment Model for a New Era It was a winning strategy, until, Rudofsky recalled, “by 2004 the strategy seemed to falter. Bidding on properties using our old model we were not competitive.” While losing buying opportunities during that period was disheartening, it inspired the partners to reexamine their investment strategy and discover the formula that would enable them to expand their portfolio and business to a whole new level. “My father-in-law is one of the most forward-looking individuals I’ve ever met,” said Rudofsky. “He didn’t take the attitude that these guys are idiots and the market is going to punish them, but he challenged us to look to see what it was these other people were doing that made them more competitive in the marketplace.” http://www.abogny.com

Table of Contents for the Digital Edition of ABO Developments - Fall 2013

A Message from ABO Executive Director Dan Margulies
Bronstein Properties
Summer Cocktail Party
NGBS Certification
Building Renovation Issues
Index of Advertisers

ABO Developments - Fall 2013