Why rent when you can buy and rent?

A Colorado-based business is shopping for apartment buildings in the Hudson Valley, but listings are hard to come by, industry observers say.

Apartment Investment & Management Co., a real estate investment trust in Denver, is looking to enter the market in the metro New York area, including Westchester, Rockland and Putnam counties. The publicly traded business operates about 1,700 properties in 47 states, the District of Columbia and Puerto Rico.

AIMCO is interested in the market because occupancy rates here are "substantially higher" than in other states, said Dan Margulies, senior vice president of Georgia Malone & Co., a Manhattan real estate broker working with the company.

"You can rent them in good times and bad," said Margulies, a Larchmont resident.

Finding an apartment building on the market, however, is a lot harder than finding an apartment, according to Arnold Goldstein, chairman of Samson Management, which owns buildings totaling 2,000 apartments in Tarrytown, White Plains, Greenburgh, Yonkers, Mamaroneck and Eastchester.

"There is no market because nobody's selling in Westchester," said Goldstein, who serves on the board of the Apartment Owners Advisory Council of the Building and Realty Institute of Westchester and the Mid-Hudson Region. Goldstein said the last acquisition his company made locally was in Yonkers, five years ago.

Margulies hopes the tax advantages of a REIT will lure some sellers out in the open. Building owners can take some or all of the sales price in the form of stock in the trust, which helps to defer capital gains taxes.

There are more than 150 buildings in Westchester with more than 50 apartments, Margulies said; fewer than 50 of those buildings have more than 100 apartments. Most apartment buildings are family-owned enterprises. Another REIT, Home Properties Inc. of Rochester, owns apartment property in Peekskill, Ossining and Croton-on-Hudson.

AIMCO is interested in rent-stabilized communities because it can project expected revenues several years into the future, Margulies said. Large companies like AIMCO, he added, have certain economies of scale that smaller operations do not.

Larger companies can negotiate better liability insurance rates than smaller ones, and computerized office systems can handle small buildings as easily as large ones. Bigger companies also have access to financing that smaller businesses do not, Margulies said. It's led to a trend of consolidation of ownership of such properties nationally.

"It's already started. This is a continuation of that," he said. "The fact is, size matters."

Prices of apartment buildings have doubled in 10 years, Goldstein said. REIT tax advantages could be attractive to some sellers, he said, but it's not the only alternative. Low interest rates have allowed owners to refinance and withdraw equity from their properties for investment in other areas, he said.

Profit margins have narrowed in recent years, Goldstein said.

"Today you're lucky to earn 5" percent, he said. "It's become a long-term investment, whereas one time you'd just hit the ground running."

Reach Jerry Gleeson at jgleeson@thejournalnews.com or 914-694-5026.

Copyright THE JOURNAL NEWS, December 26, 2003