Still Kings of the World
Matt Chaban Nov. 4, 2010, 3 p.m.
As if there were any doubt, New York is still it. This was the takeaway from some of this morning’s panels at the Bloomberg Real Estate Roundtable at the New York Public Library.
“There’s New York, and there’s New York, and…” said bad boy Billy Macklowe during one of eight panels. As his silence dragged on, people began to chuckle. Was he being funny, or just speaking the truth? “And D.C.,” Macklowe finally said. “We have some work there.”
It has long been the case that even during bad times, even during the worst times, New York was a good place to park one’s money in a building. “We’ve got a high barrier to entry and high replacement costs, so this a good place to go long term,” Richard LeFrak said during an earlier panel. “If I was someone with a lot of money [more chuckles] that is what I would do.”
He pointed to Houston, where rents have been basically the same for years because there is little to stop people from going in and just putting up another building next to one’s own. “You go there and they have all these beautiful buildings all lined up, and they’re all getting $25 per square foot. And that’s not going to change any time soon,” LeFrak said.
And yet at the same time he said that he had just picked up thousands of apartments in California, so go figure. “Again, these markets are not as good as New York,” LeFrak said, but when he could pick up the units for a six-and-a-half yield, run it through Fannie Mae down to four-and-a-half, how could he say no? “It’s very rare to get positive leverage without a lot of risk, especially in New York,” he said. “The market here is so transparent and there are so many sharks. It’s smarter here than in a lot of other places.”
Elie Hirschfield also said that he found himself surprised to be investing in New Jersey: “It’s so far from New York”–and while it wasn’t a monumental deal, there was still profit in it,” he said. Still: “I’m not afraid of New York City being attractive. People always need a place to go” — to live, to travel, to spend their money.
Is it any coincidence that even the panels that were not explicitly about New York–“Stimulating Commercial Real Estate,” “When and Where Is the Recovery Coming?” “Distressed Markets”–couldn’t stop discussing it?
That is why Fried Frank’s Jonathan Mechanic said people were willing to take lower returns on properties in the city, to get in while the getting is still good. “Any time you can get into a trophy on Park or in the Plaza district is good,” he said.
The sage David Levinson of L&L Holdings actually prefers downtown. (Gee, wonder where he got that idea?) Speaking of the World Trade Center, which he believes will anchor the area’s growth, he said, “These are new, they’re strong, there’s demand for that and corporations will go down there and sign them.
“New York is the most liquid market and people will always want to buy into that,” Levinson added.