Hal Fetner Steers Family Business Around Distress and New York Politics

Now Fetner’s son Alex is in his third year at Fetner Properties after a successful stint at Eastdil Secured and other commercial real estate outfits, meaning that the company will be providing housing for years to come.

“My grandpa came here from Eastern Europe as a carpenter, did really well for himself, and then lost all his money during the Depression,” Fetner told Commercial Observer during an interview last week. “My father grew up in the Bronx as a very poor boy and was a hustler — worked hard and did well for himself. … On a Saturday morning, when my friends were out playing baseball, soccer or football or whatever, almost every Saturday morning I was going into the city with my dad to mop floors, clean bathrooms, clean apartments. I’d get home around 2 and then I could go out and play.”

Growing up, Fetner spent several years in mortgage banking. However, he was inspired to go into public service by family friend Birch Bayh, a U.S. senator from Indiana from 1963 to 1981 who famously authored two constitutional amendments and pulled Ted Kennedy from the wreckage of a plane crash.

Although Fetner would pursue government work while in law school and spend three years as a clerk for the special prosecutor for the State of New York, he ultimately put the dream on hold after his father died suddenly in the late 1980s.

“So, at the age of 28, I took over a family business and spent the first two or three years just figuring out what direction we were going to take the company,” Fetner said. “This is now 1990, 1991, you have the Resolution Trust Corporation days where banks were failing, and the one thing we did do was take some of our cash and buy some of these nonperforming loans and assets.”

One of the first multifamily acquisitions for Fetner during this time of distress was at East 94th Street and First Avenue in Manhattan

“I looked at my sisters and my mom. I said, ‘We can keep the cash in the bank or we can go and buy this.’ My father hated land banking and my mom said, ‘Why are we doing this?’… But at $2.8 million [$20 per square foot], I was like, ‘Alright, I think we should do this.’ About five, six, seven months later, a piece of property sold on 91st for about $70 a foot. That was the beginning of really taking the company in a whole different direction.”

Fetner broke with his father’s wisdom not simply because he saw that the housing market would pick up steam uptown in the coming years, but also because it wasn’t far from the grounds where the late paterfamilias chose to develop around East 89th Street and York Avenue. But, mostly, Fetner was following his instincts.

“This was 100 percent gut,” Fetner admitted. “I make a lot of decisions by gut. And, more often than not, I’m right.”

Much of what Fetner does today, however, is not something his father would necessarily disapprove of. The firm has been working over the last several years to build a 23-story, 171-unit multifamily building at 266 West 96th Street, complete with an affordable housing component consisting mostly of three-bedroom apartments and furnished studios.

It’s been under development for the last nine years. Fetner Properties only recently opened the leasing office, which Fetner said shows how patient the company is in terms of seeing a return.

Another project is in NoMad and known as The Epic. Completed in 2007, it features 400 luxury rental units, with the first three floors leased to the American Cancer Society and the friary for the Franciscan Friars of Holy Name.

With over 30 years building and managing multifamily assets in Manhattan and elsewhere, Fetner finds starting new projects at this time challenging for the same reasons everyone else does: interest rates and labor costs.

“The challenge is the amount of equity, it’s access to capital. Some of my earlier deals, we were able to take capital invested in the property to develop the asset, lease it up, refinance it, and probably get most of your capital out in approximately four, four and a half years,” Fetner said.

But being a family business has meant that Fetner Properties can sit on an investment as long necessary to see a return, whereas a fund would need a faster payback. In that, Fetner Properties finds more freedom than some other investors. Plus, it affords the company time and resources to up its sustainability game.

Fetner’s journey into the sustainability aspect of housing began on a train ride with cousins Douglas and Jody Durst, who would often be on the same commute from Westchester. At the time the three were commuting together, the Durst Organization was building 4 Times Square, an office building that was more or less the first of its kind in terms of green infrastructure. The building was completed in 1999.

“I was fascinated with it and I was like, well, ‘How do you do this with residential?’ ” Fetner said. “That started a whole conversation with them about residential, and then the very, very first green building request for proposals came in Battery Park.”

We should do this together, Fetner suggested to the Dursts.

While Durst and Fetner lost the bid for the project, the two companies did work together for a while starting in 2007.

“The Durst family and Fetner family go back a long time, to my father’s generation and Hal’s father’s generation. They were mostly in the concrete business,” Douglas Durst told CO. “We built a couple of buildings, but then it became clear that two developers, no matter how good of friends they are, they have different opinions, and we split up about 10 years ago. … It was better to remain friends than to try and remain partners.”

Fetner would eventually also start incorporating sustainability measures on his own, including low-flow toilets, strategically placed windows and other sustainable features in buildings starting with The Victory on West 41st Street and 10th Avenue.

“Three of our new buildings are variable refrigerant flow type systems [which have] much higher capital cost upfront, but far, far more efficient, and a lot lower operating costs for the residents,” Fetner said. “There are certain developers that are like, ‘Well, why am I going to do that because the residents are getting the savings?’ Right. But we’re able to tell our residents we think you’re going to pay less to live in this unit than somebody else’s because it’s going to cost a lot less to heat and cool. But, more importantly, it’s a very sustainable type system.”

Fetner has also been phasing out gas in new construction, favoring all-electric cooking appliances and induction stoves — which are not only better for the environment but highly sought after by discerning cooks.

The Victory was recently sold to Empire State Realty Trust, which purchased a majority stake in 2021 before buying Fetner out of his remaining interest. ESRT also bought 345 East 94th Street as part of the same deal at the end of March. The two were valued at about $307 million in 2021, according to The Real Deal.

The funding from those two buildings will help Fetner continue with construction on The Bold, a 27-story residential building in Long Island City, Queens, and The Italic, a 49-story building nearby that will add a combined 527 units to the western Queens enclave.

Meanwhile, Fetner is in contract to buy two rent-stabilized buildings, something he generally would not consider in these times — changes to state law made in 2019 make it much more difficult to raise stabilized rents following renovations — if not for the fact that he expects to get them below the cost of demolition and replacement.

“We’re seeing construction prices going up,” he said. “I don’t know how much more construction we’ll be able to do in New York, but we don’t want to abandon New York. And so we are actually looking at some rent-
stabilized units.”

Even though Fetner’s years in public service are behind him, he still keeps an ear to the ground, listening for footfall in Albany about negotiations regarding a renewal or replacement of 421a, a state tax abatement that can encourage construction and bring some relief to the housing shortage.

While Fetner believes Mayor Eric Adams and Gov. Kathy Hochul are pushing to get a new tax abatement that will make it profitable for the private sector to create housing, he sees legislators using 421a as a “hostage” to getting good cause eviction through the door.

Good cause eviction would prevent landlords from hiking rent above a 3 percent increase unless they can prove to a judge that it’s what is needed for the financial well-being of the owner or the building. Properties with less than four units are exempt, and landlords can still evict a tenant who hasn’t paid rent, has damaged the property, or has used the apartment illegally.

But a 421a replacement, in Fetner’s view, will prevent the need for evictions because, by increasing housing supply, it would lead to less demand for apartments and cheaper rents.

“You’ve got a lot more people demanding apartments and less supply, which is driving prices up. And, so, to me, it’s a little bit nerve-wracking,” Fetner said. “I’m hoping that people start getting realistic and recognize that we do need to create more housing, and that if you want a good cause eviction, then it’s got to be something where investors coming into New Yorker aren’t saying, ‘Why would I invest in New York if you’re telling me that my rate of growth is going to be limited to 3 percent?’ And that is still not going to stop residents from being evicted if they don’t pay their rent.”

Fetner also said that the Real Estate Board of New York is doing the best it can in the current political climate, but it’s an uphill battle.

“I’m a big cheerleader for REBNY and [REBNY President] Jim Whelan, and he has assembled an amazing team. You can be the smartest man in the room, but when people don’t want to listen to you, you can’t make somebody listen to reason,” Fetner said. “When the politics get in the way of reasonableness, when the politics get in the way of just looking at the facts… There’s just so much REBNY you can do. We’re currently creating housing on a per capita basis below Indianapolis. This is not nice.”

To spell out how bad the housing crisis appears to Fetner, he explained that 266 West 96th Street’s 77 units recently drew 100,000 applications through the city’s online affordable housing portal.

“That’s just, that’s a sin. That’s just a sad commentary on where we are right at this moment.”

Mark Hallum can be reached at mhallum@commercialobserver.com.