Rent roll analysis for New York City 1031 replacement candidates, checking regulated versus market rent, arrears, and lease rollover exposure.
A rent roll from a New York City seller needs a second read before it supports an identification decision. Regulated rent status, arrears, concessions, and upcoming lease expirations all change what a building is actually worth to the buyer, regardless of what the offering memorandum's income summary shows. We treat the seller's rent roll as a starting point for verification, not a finished number.
In a rent-stabilized New York City building, the legal regulated rent, the preferential rent a tenant is actually charged, and the rent shown as collected can be three different numbers on the same line. We reconcile each unit against its DHCR registration history so a buyer is underwriting the rent that will actually apply after turnover, not the higher legal rent that may never be collectible under current law.
Since the 2019 rent law changes, a preferential rent generally stays in place for the life of the tenancy rather than reverting to the legal rent at renewal, which changes projected upside on stabilized units more than many rent rolls disclose up front. A rent roll that shows a large gap between legal and preferential rent on many units should be underwritten to the lower figure, not the aspirational one.
Every unit on a candidate rent roll gets checked against the same set of questions before it factors into the identification decision.
We also flag units where the tenant of record does not match the name on file with DHCR, since an undisclosed sublet or occupancy change can affect both legal rent status and the building's actual collectible income.
Ground-floor retail and office tenants in New York City mixed-use buildings often carry percentage rent, escalation clauses tied to a fixed schedule, or expense pass-through language that a residential-style rent roll summary does not capture well. We pull the underlying lease abstract for any commercial unit rather than relying on the rent roll's single-line summary.
Vacant retail space is a common issue on New York City mixed-use rent rolls, and we model it as lost income rather than assuming a quick re-lease at the asking rent shown in the offering package. A unit that has sat vacant for an extended period at a stated asking rent well above nearby comparable leases should be treated as a downside case, not a placeholder for future upside.
Outer-borough industrial rent rolls raise a different issue: a Queens or Bronx warehouse building leased to two or three tenants on staggered terms can show a blended rent-per-square-foot figure that hides a below-market legacy lease sitting alongside a recently signed market-rate lease. We break the rent roll out lease by lease on a per-square-foot basis rather than accepting a blended average, since that legacy lease's rollover timing directly affects the building's near-term income trajectory.
Once the rent roll is reconciled, we summarize concentration risk, rollover exposure over the expected hold period, and any regulated-unit turnover assumptions in a short memo the taxpayer's advisor can review before the property goes on the written identification list. This keeps the decision tied to verified income rather than the seller's marketing numbers.
We also note any single tenant or small group of tenants representing an outsized share of a building's total income, since that concentration risk affects how the property should be weighed against other identification candidates even when the headline cap rate looks attractive.
A per-square-foot comparison across candidates helps the advisor see the tradeoff clearly: a Manhattan building with a heavily regulated unit mix might show a lower effective rent per square foot than a free-market building of similar size in Brooklyn or Queens, even though the Manhattan asset carries a higher purchase price per square foot. We present both figures side by side rather than a single blended yield number, since a candidate can look attractive on cap rate alone while actually underperforming on a rent-per-square-foot basis once regulation status is factored in.
Rent-stabilized units can have a legal regulated rent, a lower preferential rent the tenant actually pays, and a collected rent that reflects arrears or concessions. All three numbers matter for underwriting, and they are not interchangeable, so we always confirm which figure the seller's projected income is actually based on.
We typically review several years of registration filings for a stabilized building to spot inconsistent reporting or gaps that could signal an unresolved overcharge issue affecting the unit's future rent trajectory, and we flag any year where a unit's registered rent jumped in a way the lease history does not explain.
It does not affect 1031 eligibility, but it is a real financial exposure that should be priced into the deal or resolved before closing, since a finding against the owner can carry retroactive rent reductions and penalties that reduce the building's future income.
Vacant or below-market ground-floor retail carried at a projected rent that has not been achieved is the most common overstatement we find, since offering memoranda often show pro forma retail income rather than in-place income actually being collected.
Yes, if the seller provides DHCR filings and lease documents promptly. We prioritize candidates whose sellers can produce complete records quickly so the review does not become the bottleneck on the identification deadline, and we flag slow-responding sellers early so a backup candidate stays available.
Trailing twelve-month financial review for New York City 1031 replacement candidates, covering tax abatements, payroll, and Local Law costs.
Explore
Market comparable analysis for New York City 1031 exchanges: building a $/SF and cap-rate comp set across boroughs and asset classes.
ExploreLender preflight coordination for New York City 1031 exchanges: lining up replacement debt before the identification deadline hardens the list.
Explore
Boot calculation support for New York City 1031 exchanges: cash boot, mortgage boot, and debt-replacement math on leveraged five-borough sales.
Explore
Send the sale timing, property type, target replacement path, and questions already raised by your advisor team. We will respond with the next coordination steps.