Up-Close with Matthew Pestronk, Post Brothers at NJ Apartment Summit
NEWARK, NJ — CapRE’s Eighth Annual New Jersey Apartment Summit was a full day of in-depth analysis and networking focusing on the most salient trends and topics in the Garden State’s multi-family arena. The crowning panel to close the day, CapRE Takeaway: The Impact of Smart Buildings in 2019, What Have We Learned Today? And, What Should We Know Going Forward? featured a roster of local movers and shakers synthesizing analyzing the major themes of the day. Among them was Matthew Pestronk, President of Post Brothers. Below, we highlight the part of a brief back-and-forth between Pestronk and Moderator Brian Klebash, Founder & CEO of CapRE.
Klebash: Matt at Post, you’re in several states now. Were you net buyers overall?
Pestronk: We are. I’d say, we were probably this year, neutral. But that’s not related to where we are. It’s more about the timing of the market. Because we sort of bought some portfolios where we really intended to get at a couple of the assets and shed the ones that we didn’t intend to hold.
I think, overall, we are still very bullish. We are looking at acquisitions that we can perform on. I don’t think that what has happened this past year reflects what we think about some of the things we want to focus on. We’re going to focus on our bread and butter, which is the redevelopment of existing buildings and actually doing some ground up on projects we have a high degree of confidence on.
Klebash: So you’re doing more value add in New Jersey?
Pestronk: We’re going to be doing more ground up. But we have projects in the pipeline that are conversions of existing buildings. Though we bought them at such a good basis that it just made sense, we’re kind of finding that ground-up development makes more sense for us because we’re an operator. We do our own design, we own our structure management and our own leasing management, and that allows us to kind of profit in more areas of the budget than if you buy say 80% of the project and have to [give] 20% to a company. Value add for has been gut renovations. So we’re buying building’s shells and taking it down to that.
Klebash: What are you converting?
Pestronk: We’re converting a 400,000 square foot warehouse in an opportunity zone. We went under contract to that prior to the tax bill, in 2016. And it’s Philadelphia, so this is familiar, but it took about 15 months for zoning in that project and by the time that it came out, we had a zoning contingency in our contract so in 2018, it looks great now actually. We’re sitting on a building that is ready to go, and we have a structured loan closing in two weeks, for a 285-unit property in an opportunity zone.
Klebash: Tell me about the interest in New Jersey. You’re based in Philadelphia, a Pennsylvania company. So what attracted you to New Jersey?
Pestronk: We had kind of a head start by building best-in-class assets in markets that weren’t necessarily [major] locations. When we compete it’s with the product. So we started in Northwest Philadelphia, and we built the best product in the city at that time, even though it wasn’t in the best location. But we were still getting rents. It was a valuable proposition for renters who wanted something really nice but didn’t mind not being in the best part of the city.
So we looked at New Jersey as kind of, we’re not going to buy in Manhattan and pay top dollar to do that. But we can also buy, for instance, on the Gold Coast and offer that top-of-the-line product at a discount to Manhattan. And there’s a lot wealth in those areas. That’s how we kind of see New Jersey as a whole. There’s so much wealth in certain areas where you’re a little far from Manhattan but you can command rents that are not the same but if you’ve got a product that’s really nice, at a pretty good discount.
For more coverage of this panel, check out a previous CapRE Insider Report: Net Buyer or Net Seller? New Jersey Multi-Family Titans Give Snapshots of Current Activity at Apartment Summit