The Sit-Down

Large & In Charge: Eastern Consolidated’s Peter Hauspurg

To hear it from Eastern Consolidated Chairman Peter Hauspurg, the economy, and subsequently the New York’s real estate market, is in the 11th inning—and it’s a tie game. Why property values have hit the ceiling and cap rates can’t get any lower—and what he and his colleagues are doing to win the game.
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(Photo: Amanda Cohen)

He’s a horse-riding, tennis-playing, mountain-biking, party-throwing philanthropist. But it’s his three decades of tireless deal-making at the helm of the firm he and wife Daun Paris built from the ground up that makes Peter Hauspurg a true industry mainstay. “Deal-making is my passion,” he told The Commercial Observer last week, later admitting that he earned the nickname “Texas Pete” for his tendency to sometimes go “a little over the top.”

While tales of big deals and big parties draw big smiles from Eastern Consolidated’s chairman and CEO, his recent appointment as president of the Jewish Child Care Association shows another side. Mr. Hauspurg shared his thoughts on philanthropy, the economy, taxes, memorable deals, his kids, hobbies and rapper-cum-entrepreneur Snoop Dogg, among other subjects, and how they have impacted his life and career.

The Commercial Observer: You’ve worked with a lot of big-time guys. Who was the most memorable to work with?
Mr. Hauspurg: The most important influence in my career in real estate was probably Steve Green of SL Green. We were both ex-lawyers. I practiced for a little less than two years before I figured out that I just wasn’t cut out to be an attorney. I jumped the fence around 1979—a couple years after Steve Green sold a travel business and dipped into the building business in New York City. I’m the oldest of three brothers, and I never had an older brother, and Steve sort of became the older brother that I never had. He taught me basically everything to know about the B-building business, which was my book of business when I started, so we bonded right away. He’s a terrific guy. You can’t get a guy who’s more honest and more knowledgeable and more ethical than Steve. We did 468 and 470 Park Avenue South, 70 West 36th Street, where he built his famous squash court, 50 West 17th Street, 180 Madison Avenue and about a half a dozen other deals, which sort of became the bedrock of the SL Green B-building business, which he then of course took public. And the rest is history.

You were a tax attorney for a couple years. How do you view the city’s real estate tax?  
They’re confiscatory! They really are, and they aren’t helping build affordable housing at all. They’ve continued to go up dramatically, and you have a situation where new apartment buildings are being taxed at 25 to 30 percent the gross rent roll, which is three times that of the next metropolitan area in the United States. So the burden is gigantic, and what we’re also seeing is some of the 80/20 buildings that were tax-abated for 20 years are starting to run off their abatements now, and those owners are finding that when full taxes roll in, it’s basically wiping out their bottom line. So something should change—but will it? I doubt it. New York City needs the money, and it’s never going to give up on real estate as a source.

What’s your most memorable deal?

In 1994, I got a tip that the chairman of the pharmaceutical giant American Home Products, whose headquarters staff filled the entire 600,000 square feet at 685 Third Avenue, which they owned, had made the decision to move everyone in the building to a new site in New Jersey, closer to his home. At the time, we were also working with Leucadia [National] Corp. to find a building to buy to house one of their insurance subsidiaries. Before 685 ever hit the market, I approached American Home with a $50 million all-cash, 30-day-close offer from Leucadia, and we made a really fast deal at $80 per square foot—today, probably worth $800 per square foot. As part of our fee, I also got the right to take all the office furniture we could use, and we filled up our office with some pretty nice stuff. In the recession of the early ’90s, every little bit helped.

Talk about your firm’s focus and how it has changed: any surprises?    
We are 40 sales brokers, and we speak 12 languages besides English, so we reach into all the different ethnic neighborhoods that trade real estate in New York City. Manhattan is our main footprint, and we’re doing lots and lots in Brooklyn now. Queens has never been a real active trading borough; for whatever reason, the families just tend to keep their real estate for generations. But in Brooklyn they trade like playing cards, and certainly in Manhattan it does as well.

Williamsburg has been a giant surprise, but we’re almost over that hill, and now we just did a $200-a-buildable-foot land deal in Bushwick, which I never thought I’d see in my lifetime. So Brooklyn’s neighborhoods are spreading like wildfire. And if you had asked me 15 years ago if we would see the Lower East Side, or the [Meatpacking District] turn into one of the most popular areas in Midtown, I would have said you were crazy.

You were recently named president of the Jewish Child Care Association for a three-year term. What does this entail, and why was it important?  
Daun [Paris] and I are big believers that if you’ve been fortunate, you turn around and you give back, which some of my colleagues have done in fantastic ways and others have chosen to ignore. Our kids started volunteering there 15 years ago. It’s the second-oldest child care institution in the United States, and we have a $90 million budget and 1,100 employees, and we take care of 16,000 families that have fallen through basically every safety net that New York City and State have to offer.

What do your kids do?  
Philip is 27, and he’s out in L.A. at a social media/tech startup. And Alexandra is 26, and she has finished the second year of a four-year master’s in nutrition at NYU, so she’s living in the city, which is nice. I don’t think Phil will ever leave L.A. It’s in his blood. He works for a social media startup called Pheed, which is actually the first model they’ve had where someone can put their content on a channel and actually charge for that content. So if Snoop Dogg wanted to do a rap video for his million Twitter followers, but he wanted to make some money out of it, he could put it on a Pheed channel and charge $1.99 a month, or whatever he wants to charge.

Are you a Snoop Dogg fan?
Not particularly. But [Phil] is, and he just sent me a picture of the two of them together. Phil is a singer/songwriter in his part time, and somehow he and Snoop Dogg got together. But, no, he isn’t in my library.

How do you view this post-recession environment?  
In 2009, the sales business nationwide fell 90 percent, which, if only us, I think I would have jumped off a building. But it happened to all my colleagues, and that was horrendous. But we never thought we’d see the peaks of ’06 and ’07 again. I’ve been doing this 30 years, and I figured this was it. But believe it or not, starting in the second quarter of 2010, the market started appreciating on the order of 2 to 4 percent a month, and it has continued at that rate of increase up until now—to the point where we are 50 to 60 percent above the peaks of ’06 and ’07 in development land and in multifamily values, with cap rates being half of what they were at the peak, and retail condo and office buildings close to that as well.

How will the rest of the year pan out?  
That’s the million-dollar question. Somebody said, “Are we in the ninth inning yet?” and I said, “It feels like we’re in the 11th inning and it’s tied.” You can’t get more expensive than we are now, and you can’t get lower cap rates. We’ve never seen the amount of capital coming into New York City that has happened over the last couple years from all parts of the world. It really seems like New York City is regarded as the real estate treasury bill of the world.

The elephant in the room is interest rates. Once those things start ticking up a couple of points, then all of a sudden, values will start to head in the other direction. You listen to Obama and Bernanke, and they say this is going to continue for a while—but it can’t. This is a cyclical business, and we’ve really run up pretty high, so we expect some sort of correction soon.

What about investment sales performance so far this year?  
[Our] fourth quarter last year was unbelievable, like everybody’s, because of the change in the tax law, and it resulted in a first quarter that was less than normal. But it has picked up starting in April, and the amount of deals we have going forward is tremendous. The second quarter is stacking up to be probably triple the first quarter.

Rumor has it that your wife, Daun Paris, calls you “Texas Pete.” Why is that?  
She calls me that because I have a group of friends that call me that. I was a social chairman at my fraternity. They wouldn’t let me become president because my parties were the best, and that sort of continues throughout my career. So we’ve been fortunate to throw some great trips and parties, and they tend to be a little over-the-top and fun, so a group of my closest friends coined the Texas Pete term.

What are some hobbies outside of work?  
We call Bedford our home, even though during the week we live on the West Side. It’s like changing the world. I have a horse on a 4,800-acre reservation in Pound Ridge, which has hundreds of miles of trails, so I get together on Sundays with friends and we take the horses out—and Saturday is mountain bike day. Besides that, there’s fishing, and there’s also a great yoga crowd there with a lot of great teachers. It’s a really different world to live in, but you’re still only an hour from the belly of the beast.

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