🔒Amid strong multifamily demand, Long Island investor expands CT portfolio with $6.7M Hartford apartment purchase

Long Island real estate investor Shlomo “Sam” Sarot expanded his Hartford portfolio in early July with the $6.7 million purchase of an 80-unit apartment building in the city’s Asylum Hill neighborhood. The acquisition brings the number of Connecticut apartments owned by 39-year-old Sarot and his partners to more than 400 units, primarily in the Hartford area. He began investing in the state four years ago. “My investors know I sweat over the properties,” Sarot said. “I’m there all the time. I hand-pick the deals.” Sarot earlier this month bought the 90,337-square-foot Hartford apartment building at 57-59 Sumner St., from a Montvale, New Jersey-based limited liability company tied to North Point Management. North Point paid nearly $4 million for the property in 2015, and spent about $2 million on renovations, Sarot said. The eight-story building — known as the Sumner House — hosts a mix of studio, one- and two-bedroom flats, with a single, three-bedroom penthouse.

Sarot said he funded the acquisition with equity and investor capital. He expects to spend about $1 million more over the next 16 months to renovate parts of the building not reached by the previous owner, including a basement parking garage. “It’s way under market value,” Sarot said of his purchase. Steve Pappas, of Hartford-based Chozick Realty, listed the property. Sales of apartment buildings with that many units are somewhat rare in Hartford, Pappas said. Rick Chozick, the firm’s president, secured the buyer. The Sumner House is a unique, steel-framed building made of concrete block and interior brick veneer. Its units, Pappas said, were divided into condos several years ago to take advantage of the city’s property tax laws. Hartford has the state’s only bifurcated property-tax system, in which commercial property owners pay a higher tax rate than residential homeowners. Throughout all of Connecticut, taxable property is assessed at 70% of its fair market value — except in the city of Hartford. Residential properties in Hartford — including condos — are currently assessed at only 36.75% of fair market value. That reduces the tax burden on residential properties by more than half. However, apartment buildings with four or more units are assessed at the higher commercial property tax rate, unless they have condo status. At 68.95 mills, Hartford has the highest property tax rate of any municipality in the state.

Robust market

Demand for rental investment properties in Greater Hartford continues to trend upward, and interest in the Sumner Street building was “solid,” Pappas said. The property closed about a month after it was listed, he said. “Really, any decent property with a solid (rate of return, or cap rate) is going to have solid interest, and Hartford is no different,” Pappas said. In May, the average asking rent in the Hartford area rose to $1,777, after five straight months of growth, according to a recent report by commercial real estate tracker CoStar. Rent for Hartford area apartments increased 2.5% in the first five months of the year, compared to 1.5% nationally, according to CoStar. Despite the increase, the growth rate has slowed compared to previous years. Hartford area rents rose 3% during the first five months of each of the past three years, according to CoStar. The slower growth pace likely reflects the active construction pipeline: more than 2,000 Hartford area apartment units were built last year, with an additional 2,200 units still underway, according to CoStar. Even with the added inventory, apartment vacancy rates in Greater Hartford are expected to fall below 5% this year, CoStar said.

Bigger deals

The Sumner House is Sarot’s largest property acquisition to date, but he has made other significant purchases. He got his start in Connecticut in 2021, with a $2 million purchase of 30 units in West Hartford’s Westwood Condominiums. In early 2023, an investment team led by Sarot paid nearly $4 million for a 160-year-old former hotel near downtown Hartford, at 385 Main St., that long ago had been converted into 28 apartments and three storefronts. Sarot said he has subsequently spent more than $1 million on repairs and renovations. Later in 2023, Sarot paid $3.4 million for three adjacent north Hartford apartment buildings with a combined 42 units. In June, he closed an $840,000 purchase of eight apartment units in three buildings on Prospect Street in Hartford, right on the West Hartford border. Sarot said he was drawn to Connecticut by the relatively affordable investment opportunities and the potential to add value through renovations and hands-on management. Now, Sarot is turning his attention to larger deals. He’s exploring the conversion of a senior living facility into roughly 200 apartments and working to finalize the purchase of another apartment complex of similar size. Both prospective deals are in Greater Hartford, he said.