How has this market been performing recently? Let's take a look at the statistics with regard to both volume and value. 

Over the past two years, we have seen significant increases in the sale of multi-family properties: In 2009, there were $1.25 billion sale transactions in New York City, consisting of 433 buildings with a total 9,839 apartment units. These sales included both elevator and walk-up properties. Unlike anywhere else in the country, buildings with or without elevators are two very distinct types of assets that are tracked separately and perform differently. 

Sales volume rose to $2.33 billion in 2010, an 86 percent increase. If we annualize the activity thus far in 2011, activity in the multi-family is expected to be $2.36 billion, up just slightly from 2010 figures. Since 2009, the dollar volume of multi-family properties has represented 31 percent of all property sales citywide. 

We believe that first quarter activity was muted by a tremendous 4Q10 which "stole" some activity that normally would have occurred in 1Q11. (Lenders wanting to clean up balance sheets by year's end, and discretionary sellers who were trying to beat an expected increase in capital gains rates created the frantic year-end activity.) Therefore, we expect 2011 total volume to exceed 2010 volume by 30 percent to 40 percent. 

Clearly, in the multi-family sector, there has been a trend toward larger transactions as the average price of an apartment building in New York has gone from $2.9 million in 2009 to $4.3 million in 2010, a 48 percent increase. Thus far in 2011, the average price has risen to about $4.7 million. 

In 2009 there were 433 multi-family buildings sold. This figure increased by 25 percent to 543 in 2010. Thus far in 2011, there has been a disappointing 127 buildings sold which, if annualized, would produce a reduction of 6 percent below last year's totals. With dollar volume increasing the way it did, this reduction in the number of buildings sold reinforces that more expensive properties are being sold. Since 2009, the number of multi-family buildings sold has represented 17 percent of all properties sold citywide. 

The number of total units in the buildings that have sold has increased from 9,839 in 2009 to 16,208 in 2010, a 65 percent increase. Similar to the number of properties sold, the number of units transferred in 1Q11 was 3,681 which, if annualized would result in 14,724 units sold, nearly 10 percent below 2010 totals. 

If we disaggregate the two main food groups within the multi-family sector, we see a significant difference in the performance of elevator and walk-up properties. 

In the elevator sector, we saw just $600 million of sale transactions in 2009 which increased to $1.54 billion in 2010, a 157 percent increase. Thus far in 1Q11, we have seen about $331 million in sales which, if annualized, would represent about a 14 percent reduction from 2010 totals. 

In the elevator sector, 87 buildings were sold in 2009 versus 126 sold in 2010, an increase of 45 percent. In 1Q11 there have been 26 sales which, if annualized, would produce 104 sales this year, a 17 percent reduction from 2010 totals. 

In 2009, the properties sold contained 4,801 apartment units. This figure increased to 8,848 in 2010, a whopping 84 percent increase. In 1Q11, there were 1,833 units sold which, if annualized would produce a 2011 total about 17 percent below 2010 levels.

The average price per square foot of elevator properties sold in 2009 was $165. In 2010, this average increased by 6 percent to $175. In 1Q11, the average has been $227 per square foot. 

The average price per unit in 2009 was $164,000. In 2010, this average decreased to $132,000. This average exploded to about $273,000 per unit in 1Q11, primarily due to some remarkable sales in the Manhattan submarket. 

Capitalization rates, while varying widely submarket to submarket, averaged 6.19 percent in 2009 and expanded to a 6.4 percent average in 2010, an increase of 21 basis points. This is consistent with our theory that value bottomed in 2010 (not 2009 as many casual and not-so-casual observers of the market believe) and is now poised to correct. Thus far in 2011, in the elevator sector, cap rates have averaged 5.53 percent, a compression of 87 basis points from 2010 averages. We expect this trend to continue, particularly in Manhattan where condo conversion underwritings are beginning to take place again (more on this below). 

On the gross rent multiple front, which also vary greatly submarket to submarket, the average GRM in 2009 was 9.83 citywide which decreased to 9 in 2010, a decrease of nearly a full multiple. Thus far in 1Q11, the average GRM has been 10.9 citywide, representing an increase of nearly two multiples from the 2010 average. It is clear that values are rising in this sector aided by a significant supply/demand imbalance and an interest rate environment which is at or near historic lows. 

In the walk-up sector, we saw activity in 2009 hit $653 million in sales volume with 346 buildings selling containing a total of 5,038 apartment units. The $653 million in sales volume increased to $788 million in 2010, a 21 percent increase. In 1Q11, there were $260 million in sales which, if annualized, would show a total volume in excess of $1 billion, representing a 32 percent increase over 2010 totals. 

In terms of number of units sold, there were 5,038 units sold in 2009 which increased to 7,360 in 2010, a 46 percent increase over the 2009 total. Thus far in 1Q11, there have been 1,848 units sold which, if annualized, will be approximately the same number of units sold that we saw in 2010. 

The average price per square foot in the walk-up sector was $218 in 2009 which increased to $220 in 2010, a one percent increase. Thus far in 2011, the average has been $241 per square foot reflecting an increase of 10 percent over 2010 levels. 

The average price per unit sold in 2009 was approximately $176,000. This decreased to $153,000 in 2010, a 13 percent reduction. In 1Q11, the average price has rebounded to $176,000, a 15 percent increase over 2010 levels and back to where it was in 2009. 

With regard to capitalization rates, in 2009 the average cap on a walk-up building citywide was 6.66 percent. This grew to 7.05 percent in 2010, a 39 basis point increase. Thus far in 2011, the average cap on a walk-up building has compressed to 6.7 percent, a decrease of 35 basis points from 2010 levels. 

With regard to gross rent multiples, the average in 2009 was 9.83 which dropped to 9.08 in 2010, a decrease of three-quarters of a multiple. Thus far in 2011, the average GRM has surprisingly dropped to 8.6 reflecting nearly a half multiple reduction from 2010 levels. We believe this drop is due to the composition of properties sold relative to location, not necessarily reflecting a value shift. 

While demand remains very high for multi-family properties in New York City and the availability of financing is very strong, there are several things to keep an eye on as rent regulation comes up for renewal on June 15th of this year. 

Legislators are busy trying to craft an agreement that would include addressing several key housing issues in addition to the existing rent regulation laws. These include the expiration of 421-a tax benefits and the uncertainty caused by the recent Roberts decision regarding the deregulation of units in buildings receiving J-51 tax benefits. 

Most observers of the multi-family market believe that rent regulation will be renewed on essentially the same terms presently in place. While Governor Andrew Cuomo has called for a "strengthening of the rent laws," he has provided no specifics on what strengthening actually means. 

The New York State Assembly (with the overwhelming support of the City Council) has passed several bills which would, among other things, increase the levels for high-rent deregulation from $2,000 per month to $3,000 per month and would increase the level that a regulated tenant would have to earn for high-income or "luxury" deregulation from $175,000 annually to $300,000 annually. 

No matter how you view it, it is comical to think that the same policy makers within the City Council and State Assembly who believe that the "millionaire's tax" on anyone making over $200,000 per year should remain in effect are the same people who need to be protected by rent regulation which is, effectively, a form of public assistance. 

As I have stated in many articles I have written about rent regulation, it is a horrible system that inefficiently misallocates our housing stock. Most elected officials refer to rent regulation as an "affordable housing program" and it so obviously nothing of the sort. It simply hands a taxpayer funded subsidy to people who happen to be in the right place at the right time. There is no means testing involved and no one knows how much people who are receiving rent subsidies are actually earning or what their economic availability actually is. 

At a time when elected officials are scouring budgets for government waste, fraud and abuse, it is a joke that the subsidies continue to get handed out without any qualifications necessary to receive the benefits. There is no way to make rational sense of such a system. Why not hand out welfare checks to anyone whose last name begins with "W"? That would make about as much sense. 

As I have written in this column previously, reinstituting of the 421-a tax benefit program,  in one form or another, is necessary to continue to have our much-needed new housing stock delivered to market. There has been a substantial decline in the creation of affordable units due to the elimination of this program. While the headlines of articles containing misguided perspectives may refer to wealthy ballplayers or captains of industry that are receiving these benefits, the articles always fail to mention that at some point the recipients of these temporary benefits will be paying the full amount of taxes. In many cases, these new developments would not have proceeded in the absence of the 421-a program. 

Additionally, thousands of units of affordable housing units have been created in neighborhoods in desperate need of such housing based upon the demand for the certificates which are created when these buildings are developed. Reinstating the 421-a benefits program, in one form or another, is critical. 

The other item which is likely to get rolled into the rent regulation extension negotiation is a solution to the J-51 issues. The Roberts decision, essentially, said that even though 13 years of standard operating procedure ratified by two governmental agencies had been in effect, they were incorrect in their interpretation of the rules. 

The Department of Housing and Community Renewal ratified the decontrolling of units in buildings receiving J-51 benefits and the department of Housing Preservation and Development, which enforced the J-51 program, agreed that it was correct to deregulate units in buildings receiving J-51 benefits. The court's decision in the Roberts case stated that deregulating units in buildings receiving these tax benefits was not legal. 

The decision disastrously, however, did not give any other direction in terms of how to deal with these units. That question will likely be settled by years of litigation and several other courts, or a legislative solution is required to remove this uncertainty. The most reasonable and equitable solution would appear to be allowing the owners who received these benefits to pay them back to the city and continue to rent the decontrolled units to the tenants who signed up for, and are able to pay, the new free market rents. 

Doing this would allow the city to recoup a significant sum of money at a time when this resource is desperately needed. It would also eliminate a senseless, random windfall for tenants who do not need it.

As we can see, the multi-family market is one which is highly dependent upon legislation and regulation. Generally, market dynamics are looking very positive in terms of volume and value. Both have been trending in the right direction. Let's hope that policy makers don't throw a wrench into the system with legislation that could have significantly negative implications for the market.     

rknakal@masseyknakal.com

Robert Knakal is the chairman and founding partner of Massey Knakal Realty services and in his career has brokered the sale of more then 1,125 properties, having a market value in excess of $7 billion. 

The apartment sector's proponents argue that recent gains reflect a structural shift in the housing landscape, with millions of young American families now disabused of the notion that homeownership is always preferable to renting, and embodied in a long-term policy retrenchment from mortgage subsidies and market-making. In support of this thesis, advocates can point to data showing a surge in rental households and a corresponding decline in the homeownership rate. Between early 2006 and late 2010, the renter pool in the United States increased by more than 10 percent, at a faster pace than household formation or rental supply.

The descriptors of the apartment rebound offer a compelling but ultimately incomplete picture of an exceptionally mutable housing market. There is no doubt that national apartment trends are outdistancing an ownership market that remains mired in its own localized recession. Still, investors must proceed deliberately, remaining cognizant of risks to their baseline expectations. While conditions in the apartment sector warrant a sanguine assessment, investors and lenders alike must guard against the potential for unabated enthusiasm to inflate prices and erode lending standards to the detriment of long-term stability.

A Cyclical or Structural Shift in Demand

Underpinning apartment investment gains, fundamentals have improved markedly from their lows during the depths of the recession. Axiometrics reported last month that effective rents increased by 0.8 percent between February and March, 5 percent higher than a year earlier. Driving rent growth, occupancy has tightened across the country, reaching 93.5 percent in the March report. Major markets - New York, Long Island, San Francisco and Boston among them - each now enjoy occupancy rates above 95 percent.

The fundamentals gains in the apartment sector are a function of exceptional growth in the number of renter households and a relative paucity of new inventory. In some markets where the shadow inventory of condos for rent or reconversions might have threatened a sharp expansion of the supply curve, rising demand has nonetheless resulted in positive net absorption. Miami is a case in point, where Axiometrics reports a vacancy rate below 4 percent, while Las Vegas and Phoenix attest to the more basic intuition, with condos undermining the apartment sector.

With the exception of a few markets where particularly weak employment trends and the weight of the housing market have limited household formation, apartment markets are performing well even if removed from the coasts. Will the current tightness in rental outcomes persist, justifying further increases in prices? On one side of the equation, there is little question that supply will respond to rising cash flow; an increase in development, however small, is already a factor in the apartment market. As new units come online, some of the upward pressure on rentswill ease. The potential for overbuilding may be kept in check by more cautious bank lenders and by their regulators, who will invariably point to still-record high default rates on banks' construction loans.

While the supply response lags the market, the demand side of the fundamentals equation is the more challenging source of uncertainty. Rental demand has been very strong as compared to the rate of job growth during the recovery. But charting its forward path introduces a degree of forecasting error. At the heart of the projection, housing tenure bias involves a complex interaction between the availability of credit and equity, expectations of relative rental and ownership costs,

and behavioral factors. While a complete discussion of tenure choice is outside the scope of this column, suffice it to say that households will tend towards renting if there is an expectation that real house prices will decline in future periods, as has been the case in  recent years.

Whether the relative bias in favor of renting will persist once house prices normalize will depend in large part on the availability and cost of mortgage credit and the behavioral characteristics of younger households on the cusp of ownership. The former is in the realm of policy; the latter, a dimension of the American psyche that economists will struggle to forecast. While housing finance reform suggests that homeownership will become a more costly proposition in the coming years, investors must also concede a cyclical element to the current strength of renter demand.

In a continuation from this week's column, next week's Lead Indicator will address the implications of housing finance reform for the apartment outlook.

schandan@rcanalytics.com 

Sam Chandan, Ph.D., is global chief economist of Real Capital Analytics and an adjunct professor at the Wharton School.

Hollywood's finest rabble-rousers gathered with Brooklyn's haute-hipster crowd at Soho House to watch the premiere of Sun City Picture House, the inspiring documentary of the building of the first movie theater in Haiti since the devastating earthquake of 2010. The film debuted at the Tribeca Film Festival as part of the Shorts: One for All series with a favorable response, and what better way to celebrate such success than with a few drinks?

Cut to the Bulgari and Vanity Fair after-party at the Soho House library, where the party was already in full swing by the time The Observer arrived. DJ Bouji spun tunes such as the Bangles, Violent Femmes, Mad Con and the Police in the dimly lit room. Guests ate mini cheese flat breads with duck pate and drank copious amounts of Champagne in the ever-crowded bar. The library was accessorized with photos from Haiti during the building of the theater, and the Bryn Mooser and David Darg film played on a continuous loop that partygoers watched over and over as they spoke about the film. Co-hosts Olivia Wilde and Paul Haggis worked the room, chatting with guests such as Samantha Mathis, Justin Long and Kelly Bensimon. Ms. Wilde, newly separated from her husband, filmmaker Prince Tao Ruspoli, sported a new fringe and wore a black floor-length A.L.C. dress as she stood on a glass table toasting the picture. "I'm so proud to be a producer of Sun City Picture House," Ms. Wilde said. "From its conception, I wanted to be a part of it." Ms. Wilde, daughter of veteran producers Leslie and Andrew Cockburn, has admitted in the past that her family background has given her a "strong journalistic streak."

She shortly turned the mike over to Mr. Mooser, who quipped, "I'll take the chair just because I'm scared of that table."

The film, which follows a young Haitian man's quest to complete the theater in only four days, is a testament to the Haitian will to survive, as well as the power of film.

"The big, important thing was to say, 'We want to build you a community center that also works as a school and is also a movie theater, and we're gonna do it and do it really fast, like totally gonzo style,'" said Mr. Mooser, a musician and artist who was once engaged to actress Maria Bello.

"Bryn and I were both involved in the construction of the theater and the production of the movie," said Mr. Darg, Mr. Mooser's partner in filming. "The whole film was made in the evenings after long days of doing relief work."

Turning the tables on the filmmakers, we asked, what are their favorite films?

"I really love The Thin Red Line, a Terrence Malick movie," Mr. Mooser said.

"It's like the most beautiful movie that's ever been made in the history of mankind," Mr. Mooser continued. He then became thoughtful and said, "But really, it's really quiet and beautiful and extraordinary, so that movie inspires me."

"Trains, Planes and Automobiles is my favorite film of all time," Mr. Darg said. "Not one of the cinematic greats, but still."

Looking to modify his answer, Mr. Darg turned to his wife, Naomi, for assistance.

"What's my favorite movie?" he asked.

"Oh, Trains, Planes and Automobiles. It depicts his life."

"David is always showing movies, he carries a projector with him," said Operation Blessing International's president, Bill Horan. "I've seen him project cartoons on tent walls in Darfur, and the kids always go crazy."

Other partygoers volunteered, free of shame, old favorites as their favorite movie.

"My automatic response is a movie I loved as a child," said Mr. Mooser's girlfriend, actress Dawn Olivieri. "I always say I've never rented a movie this many times in a row so I have to say it's my favorite movie-it's this animated movie called The Last Unicorn. I was in love with this movie."

Mr. Haggis, despite being an Oscar-winning filmmaker for Crash and Million Dollar Baby, declined to play the game. "Oh, I don't do that because I'm always wrong."

Mr. Horan volunteered his favorite film, though, by his own admission, it dated him.

"Dr. Zhivago, but I'm an old man," Mr. Horan said with a laugh. Ben Stiller cut in to tell us how impressed he was with the work Mr. Horan and Operation Blessing has done.

At the end of the night, Mr. Mooser returned to The Observer to give us his card and make one more point: "In many ways, Tribeca is the perfect fit for Sun City Picture House, because this festival was built out of a disaster. It rose out of the ashes, and our movie theater grows out of those same ashes, you know?"

For $15.5 million, you can have this mini-mansion from Sotheby's and its river views from all 11 rooms.

Four bedrooms, five full baths, library, gardens out front and in the back, five fireplaces, a roof deck and an "English basement" with staff apartment and separate entrace are included.

And nothing says "paradise" like the sweet, sweet aroma of the East River. 

SLIDESHOW: 3 Riverview Terrace >>

"Four hundred thousand meals a day are served at the Food Bank," Stewart said. "It really is a remarkable organization."

The Food Bank For New York City's fundraiser also served as a platform to honor committed members of the organization for their dedication to the hunger-relief cause. Among those recognized were Lucy Cabrera, Ph.D., President and CEO of the Food Bank who will retire in May after 23 years of service.

"You challenge us to give more, to do more, to say more, to fight hunger," said Co-Chair Mario Batali. "I believe when I started coming to this event about 11 years ago we made somewhere in the neighborhood of $250,000. Tonight I can tell you we're probably going to break $1.4 million. That's all [fellow co-chair] Susan [Cahn] and Lucy. You showed us that we can make a difference and we hope to carry on the legacy."

Celebrity chef Rachael Ray particularly enjoyed the meal, albeit with a touch of poignance: "When you're at an event like this you try to imagine what it's like to be hungry and it makes you ten times more grateful for eating anything," Rachael Ray said.

That's not to say that guests were unable to pinpoint a few guilty pleasures, or in Mr. Batali's case, guilt-free pleasures.

"I feel no guilt at all about pleasure, to be quite frank with you," said Mr. Batali, who donned orange crocs for the evening in support of the food bank's signature color. "I've just come off of two weeks of vacation and I probably had a piña colada every morning."
And the confessions kept coming. Designer and self-proclaimed ice cream "whore" Isaac Mizrahi prefers mint chocolate chip, actor Dominic Fumusa admitted to a "strange addiction to Jujyfruits," and when hung-over, the only thing Sarah McLachlan wants to see is a McDonald's Filet-o-Fish. (We thought she was an animal-rights type!)

Noticeably absent from the event was ardent supporter Stanley Tucci who, according to Batali, was "in London filming a movie and sending dirty text messages as we speak." Still, Tucci sent his support by means of technology and it was announced that he would match every thousand dollar pledge and above for ten minutes. Pledges could be sent via text message and were displayed for all in that strangely shaped room to see.

"Literally, we couldn't be worse than if we were in a line," Mr. Stewart said. "This is maybe the dumbest fucking shape I've ever seen for a banquet hall in my life. But I mean that with all due respect to Chelsea Piers and to the piano that is always here."

cnolan@observer.com

The four-story townhouse includes a number of unique and valuable features, a good thing considering the home's landmark designation leaves little room for alterations: four brick hearth fireplaces (plus two additional fireplaces can be recovered), four bedrooms, 4.5 baths, a finished basement, an office area and a 400-square-foot private garden.

For the meager sum of $5.6 million, this gorgeous piece of property could be yours.

SLIDESHOW: A Piece of the Past in Tribeca

SLIDESHOW: Your Own Private Kingdom