Word of Mouth

Good Time Management Provides Competitive Advantage

Mon, 06 May 2013 15:08:00 GMT

The average person performs at only about 50% of their capacity and the primary productivity drag is poor time management. Here are some tips to improve your efficiency.

•Be intentional. Success is predicated on making choices that provide control over time. Plan. Be thoughtful about what activities to perform. Without proactively creating a time management protocol, you leave too much to chance.

•Prioritize. Make a list of all the activities you perform. Next, identify the activities that should be assigned to others and transition them. Now take the remaining tasks, list them in order of importance and estimate how much time each one takes each week or day.

•Schedule. Plug your tasks into your work hours. Schedule higher priority activities first so if you run out of time and cannot finish an activity, it will be a low priority. Second, input the schedule on an electronic (with reminders) calendar such as Outlook. Lastly, small tasks may not need to be scheduled as they can be done during idle time.

•Time block. I have found that creating hour-long "power blocks" of time is a great way to stay focused, be efficient and create an environment free of interruptions and distractions. For example, report/document review, making or returning calls/e-mails, employee meetings or cold calling can all be done in distinct time blocks. During the block, ignore incoming e-mails, phone calls or peers and stay solely focused on the task at hand. Amazingly, individual work interruptions can cause a 5-15 minute loss of productivity and that is why reducing interruptions is a great way to manage your time.

•Create boundaries. Set acceptable and manageable limits to relationships, projects and technology. Many people do not want to set boundaries because they have a hard time saying "no".Be honest with yourself and others and only commit to acceptable limits. This may mean closing your door, not answering a ringing phone or saying "no" to meetings or committees.

Remember, time management can provide you with a competitive advantage.

Mark Schnurman is Director of Sales and Training at Eastern Consolidated. He is a veteran sales manager and coach with diverse sales management, training, recruiting, strategy and coaching experience in real estate and financial services. He also authors a regular business column for the Star Ledger.

The Changing City: "The Els - Sixth Avenue"

Wed, 10 Apr 2013 21:38:00 GMT

The Sixth Avenue El opened in June 1878 and ran from Rector Street and Trinity Place, going one block west on Murray Street, then up West Broadway to West 3rd Street and up Sixth Avenue (prior to it being named “Avenue of the Americas") and ending at 59th Street. It connected with the Ninth Avenue El with a shuttle stub to Eighth Avenue.

From its beginning, the line was criticized for being noisey and for dropping oil and other debris on pedestrians walking below. In addition, the structure which was never reinforced, was in danger of sagging since it was not constructed to carry all the weight that it did and was beginning to suffer from metal fatigue. With the support of commercial interests, the City finally dismantled it in 1938 and was replaced by the IND 6th Avenue subway line which opened between 1936 and 1940.

One of the greatest controversies surrounding the history of the Sixth Avenue El relates to what happened to the steel. For many years, the story was that the scrap was sold to Japan and was used to build armaments which were used against us in World War II. These rumors persisted since the metal was sold to a west coast exporter. Although there were testimonies from both the Manhattan Borough President and from the Harris Structural Steel Company stating that none of the steel ever reached Japan, there are many who lived during this period and still believe that it did.

The midtown zoning which varies from an FAR of 10 to an FAR of 15 has always been favorable to developers of commercial buildings especially from 42nd Street to the East 50s especially in the Rockefeller Center area. The residential properties in the Village have a low FAR of 3.44 which maintains the character of the neighborhood.

Next in The Changing City Series: The Ninth Avenue El

Marcia Rose Yawitz is Senior Director and Principal at Eastern Consolidated. With over forty years of real estate experience, she has sold in excess of one billion dollars of investment grade real estate.

Improve Your Emotional Intelligence

Mon, 18 Mar 2013 21:46:00 GMT

Want to be more successful? Work on improving your emotional intelligence which is more critical to success than technical skills and intellectual horsepower. Emotional intelligence requires a high degree of introspection and its four main tenets are:

• Self-awareness. Recognize your feelings and the causes.
• Self-management. Regulate your emotions, feelings and impulses.
• Social awareness. Read situations and other people’s feelings and emotions.
• Relationship management. Work effectively with others.

Ok. Now what? Here are some tips for improving your emotional intelligence and the results you get in your career and life:

• Understand your wiring. The physical affects the mental state. Stand up, smile and move around and start to feel better.
• Know yourself. Fight or flight response from the brain. Know your triggers and intentionally decide how to react.
• Don’t react in the moment. Take pause and react dispassionately. Frustration and anger cause a loss of clarity.
• Have an end in mind. Know what you want from a situation and have a plan to get it.
• Control your ego. Do what is in your best interest, not your ego’s. Your ego will recover, but the relationship and deal may not.
• Consciously read situations. Know when to be assertive (closing) and when to step back.

Finally, Define key activities. Schedule. Act.

Mark Schnurman is Sales Manager at Eastern Consolidated. He is a veteran sales manager and coach with diverse sales management, training, recruiting, strategy and coaching experience in real estate and financial services. He also authors a regular business column for the Star Ledger.

The Changing City: The "Els - Third Avenue"

Sat, 16 Mar 2013 04:00:00 GMT

The Third Avenue El which opened in 1878 ran from Lower Manhattan to the Bronx. It was the last of the elevatored train lines to remain after the Second, Sixth and Ninth Avenue Els were demolished. The original intention was to keep it operable until the Second Avenue Subway was completed. The main portion of the line was finally torn down on May 12, 1955 due to pressures from the real estate industry especially after the opening of the Socony-Mobil Building at 150 East 42nd St.

There was something both exotic and terrifying walking under the El on Third Avenue with shops of every kind and beggars lurking on the streets. A major hangout for college students of my generation was Joe King’s Rathskeller near the 18th Street station. There was no checking of ages then and we spent our evenings drinking beer and carving our initials into the wooden tables and walls. How different and innocent were the times.

Third Avenue’s zoning has always appealed to developers with the lowest FAR in the downtown areas from Cooper Square to East 13th Street and increasing to a 10 FAR. The midtown areas enjoy a 15 FAR from East 39th Street to East 55th Street. All of the areas permit both commercial and residential development, except for East 72nd and East 79th Streets which are residentially zoned. The construction boom began in the 60s, with both tall commercial and residential towers along the avenue, many with plaza bonuses and air rights transfers which allowed for the additional height. The Bowery and the area north of 96th Street have remained somewhat unchanged. However, after 2000, The Bowery itself began to gentrify and attract new development.

Next in The Changing City: The Sixth Avenue El

Marcia Rose Yawitz is Senior Director and Principal at Eastern Consolidated. With over forty years of real estate experience, she has sold in excess of one billion dollars of investment grade real estate.

The Changing City, Part II, "The Els"

Tue, 05 Mar 2013 16:04:00 GMT

Many of us are far too young to remember the elevatored train lines which traversed Manhattan, though we are all familiar with the above ground lines in Brooklyn, Queens and The Bronx. In Manhattan, there were four major lines which ran on Second, Third, Sixth and Ninth Avenues in addition to the shuttle routes on 34th and 42nd Streets. In November 1886, the lines carried more than three million passengers. Initially, the routes were steam powered and the fare was five cents. The five-cent fare remained in place on all New York City bus and train lines until 1948 when it was increased to ten cents.

The completion of the electrification of the lines was done in 1903 and in the same year, the system was leased to the Interborough Rapid Transit System (IRT) for 999 years. The stations were generally of wooden construction with pot belly stoves which heated the buildings. Most of the stations had stained glass windows and the stairways from the street were in the Victorian style and made of ornately crafted wrought iron.

The Second Avenue El

The Second Avenue subway was opened to the public on March 2nd, 1880 and ended service on June 13, 1942. The line ran from City Hall north to Second Avenue at East 129th Street, where it joined the Third Avenue El and went on to the Bronx. The route was not completely on Second Avenue but ran along Division and Allen Street until East Houston Street where it ran on First Avenue until East 23rd Street and then north on Second Avenue.

The Second Avenue subway has been under consideration even before the demolition of the El and is scheduled to open in 2016. The construction of the new subway lines has disturbed not only traffic patterns on the avenue as well as loss of business to the retail establishments, but the noise and dirt from the construction has angered residents of the areas bordering the construction.

Even before the El was demolished, large residential buildings were constructed on 2nd Avenue, with their entrances to the residential portion of the buildings on the side streets and the retail stores on the avenue. The area enjoys favorable zoning ranging from a low of a 4 FAR in the East Village portion south of East 13th Street to a 10FAR to East 96th Street after which the FAR diminishes to 3.4.

Next in The Changing City Series: The Third Avenue El

The Changing City: Influencing Factors, Part I

Wed, 20 Feb 2013 22:24:00 GMT

The New York City skyline was primarily composed of church steeples until the invention of the passenger elevator and the use of steel skeleton construction in buildings. Land values, which were based on how much you could build area-wise in a five- or six-story building, were now being valued on how high you could build on, as small as, a 20-foot wide plot. The zoning laws of 1916 eventually changed that as did the Sliver Laws (prohibiting construction of tall buildings which are on lots of 45’ wide or less).

The invention of the elevator (and the later developed safety devices preventing the elevator from falling by Elisha Otis in 1852) made it possible to carry passengers. The original elevator was steam powered, but in 1880, the German inventor, Werner von Siemens, applied electric power to elevators and in 1903 the use of the gearless traction elevator allowed the elevator to serve commercial buildings of 100 stories or more.

The second major invention was the use of steel for the structure. Prior to that stone and brick were the choice in construction. However, the higher you wanted to go, the thicker the walls would have to be on the lower levels in order to support the upper levels, reducing the square footage of the lower levels. The steel-skeleton structures were now able to maintain the support for the upper stories without the need for greater support from the lower stories. The first “skyscrapers” were built around Park Row and were eight and nine stories high, small buildings by today’s standards, but remarkable in those early days.

One can tell in which decade an apartment building was constructed. Original luxury buildings constructed prior to World War I are only 12 stories high and those in the 1920s are generally 15 or more stories high plus a penthouse. The prime reason for the 12-story height limitation was the fire regulations at that time affecting residential buildings and the fear that neither ladders nor fire hoses could reach residents of the upper floors. A zoning law passed in 1929 permitted high residential towers, such as The Beresford, The San Remo, The Majestic and the El Dorado on Central Park West, to be constructed on plots greater than 30,000 square feet. Thus again changing the New York skyline.

Next in The Changing City Series: “How the Demise of the Els Changed the City”

Marcia Rose Yawitz is Senior Director and Principal at Eastern Consolidated. She is a veteran real estate professional with over forty years in the industry. While at Eastern, she has sold in excess of one billion dollars of investment grade real estate.

Why Real Estate Taxes Don't Always Follow the Real Estate Market Values

Wed, 06 Feb 2013 05:00:00 GMT

Few topics draw the ire of landlords, coop and condo owners more than property taxes. One would readily assume that in New York City real estate-related taxes rose in 2006 and 2007 but then fell in 2008 through 2010. A quick look at the tax collections data shows that indeed real property transfer taxes as well as mortgage recording taxes did just that in those years. However, real property taxes along with commercial rent tax collections both increased steadily from 2006 through 2011 as shown in the chart below.

Source: NYC Office of Management and Budget

The steadiness in the commercial rent tax is somewhat surprising but it illustrates how healthy the base of office occupancy has been over these last few years despite the increase in availability and the decline in asking rents. Note also that most leases have “escalation clauses” that dictates that the lessee pay a higher rent every few years. These increases in commercial rent tax collections are largely due to these built-in escalations.

Property taxes have risen even more steadily for two reasons: the building stock and tax base has expanded over the last decade, and the City has increased property assessments every year despite market conditions. This does not seem fair, but the chart below shows how the New York City Department of Finance phased in assessment increases over the last few years.

Source: NYC Department of Finance

Eastern Consolidated’s forthcoming report on property taxes looks at taxes levied on residential properties on a per-square-foot basis. The findings are illuminating. The most glaring finding is that on a per-square-foot basis, cooperative buildings do not necessarily pay lower taxes than rental buildings as so many have assumed over the years. Moreover, similar properties on the same street have often paid vastly different property taxes. The study draws a number of conclusions, the biggest of which is that more research is warranted. The study is due to be released on soon.

Predictions for 2013 - Unpredictability is the Rule

Tue, 15 Jan 2013 16:05:00 GMT

Given how well New York City’s economy has fared over the last two years in spite of the fact that Wall Street still does not seem able to shake off its hangover from the financial crisis, it should be easy to look into the crystal ball and forecast what will happen in 2013. But this is New York City and unpredictability seems to be the rule. The unexpected Superstorm Sandy is just the latest.

That said, we maintain an optimistic outlook for the year. To put the future in perspective, let’s recap the highlights of 2012. First, New York City added close to 75,000 jobs in 2012 through November. While December’s data could show a decline, the level of jobs in New York City is 70,000 jobs above the peak employment in 2008. More importantly, nearly every industry is adding jobs. Wall Street employment has been flat, but even this is surprising given all of the notices of layoffs in the industry. The tourism numbers keep going up: more than 52 million visitors came to New York City in 2012. These travelers have kept hoteliers, restaurants, retailers, Broadway producers and others very busy. Finally, commercial property sales ended the year on a banner note as nearly $12 billion in sales closed in Manhattan in the fourth quarter, the highest since 2007 when the second quarter neared $20 billion.

The heavy activity in the fourth quarter was due to investors’ motivation to close deals before the capital gains tax went up. This flurry of activity the last few weeks will likely take away significant volume in 2013, but investors are still eager to invest in New York City.

Why? First, it’s clear that owners prefer owning well-located bricks to owning paper. The stock market does not offer the cashflow that real estate does, and the uncertainty in the economy has created significant volatility in the Dow Jones over the last few years. Also, investors want to get capital into the real estate market and start projects in a low interest rate environment. That said, the most active sector for investors seeking “high-powered yields” will be condominium development, particularly in the outer boroughs — a shift from the post-Lehman years, when investors rushed to buy up multi-family properties and trophy office assets. In Brooklyn, for example, the area around the new Barclay’s Center is buzzing with opportunity.

This means that investors and brokers have to do more homework, but the payoff could be huge given the growth in development in the boroughs. Even after Sandy, Brooklyn remains a sought-after market, and the desirability of its myriad neighborhoods keeps steadily expanding.

Peter Hauspurg is the Chairman and CEO of Eastern Consolidated, the nation’s largest single- office real estate commercial property sales firm in the U.S. with several billion in annual sales, primarily in the New York metropolitan and Tri-State area. Mr. Hauspurg and his partner, President Daun Paris, founded the firm in 1981 and have been creating some of the most significant deals to dot the New York City skyline ever since.

The Mood at ICSC

Thu, 06 Dec 2012 00:05:00 GMT

The mood was hectic--laced with cautious optimism. Owners, tenants, developers and brokers were buzzing about with urgency as the year-end deadline for the lower capital gains rate filled the air.

This year there I received many more inquiries from retail tenants hoping to purchase property or retail condos rather than lease. Many of the attendees were more eager to consider year-end deals in the hopes of securing a discount in price for the ability to close in less than the 15 business days left in 2012.

It was a fast-paced show!

Adelaide Polsinelli is Senior Director at Eastern Consolidated and head of its new Retail Sales Group. In her 26 years of extensive experience as one of New York City’s most active real estate brokers, she has sold over 880 properties, totaling more than $8 billion in sales. Ms. Polsinelli is a regular columnist for the Commercial Observer and is frequently cited in the Press.

Eastern Consolidated Leads in Retail Sales

Wed, 07 Nov 2012 16:16:00 GMT

Following a quarter that saw the largest retail property sale in recent history – the retail at the World Trade Center – the volume of retail property sales declined from $778 million to $280 million in the third quarter. Yet the number of transactions jumped from 18 to 29 in the quarter. That said, the fourth quarter of 2012 will go down in history as the highest quarter for retail property sales. Not only will the volume of retail property sales this quarter dwarf those of the last three or more years, but the average price paid will likely exceed $5,000 per square foot.

Eastern has always had a strong retail sales focus, but given the demands of the marketplace we are now offering an additional level of service when many of our clients are looking for experienced advice. We’ve appointed industry veteran Senior Director Adelaide Polsinelli to lead our new Retail Sales Group and have hired six new brokers to focus on new business opportunities in the retail arena. The Group will provide sales brokerage, advisory, research, financial structuring and marketing services.

Some of our current retail exclusives include the sale of the retail co-op at 237 Lafayette Street currently occupied by BLK-DNM, an international designer men’s and women’s apparel retailer; the master lease on the ground floor retail units at 301 East 64th Street currently occupied by Gourmet Garage and H&R Block; and the prime Tribeca retail condo occupied by MEGU Japanese Restaurant at 62-66 Thomas Street. Our most recent sale was the 8,354 square foot retail condo at 57-63 Greene Street in Manhattan’s sought-after SoHo neighborhood currently occupied by Bang & Olufsen, the global audio systems retailer and by Cyrus Company and Raul Carrasco, two home furnishing companies.

To hear more about our current retail deals, stop by our booth #563 at the upcoming ICSC convention in New York on December 3-4.

Daun Paris is President of Eastern Consolidated. Over the past three decades, she has served at the helm as a visionary who has helped the firm become the highly regarded investment services industry leader it is today, with over $4 billion in annual sales.

New York Total Debt Per Capita ... Staggering

Thu, 11 Oct 2012 19:32:00 GMT

The total federal debt level recently passed the $16 trillion level garnering the attention of the media who set off the requisite alarm bells. This sounds astonishing -- $16 trillion! Keeping score of the U.S. debt per capita puts the total debt burden at $51,000 per person which, ironically, is exactly what the U.S. median household income averaged over 2006 – 2010 according to the most recent Census figures.

Here in New York City, we are fortunate to work and live under the auspices of other debt issuing agencies – too many to list here. These authorities have racked up their own debt at either the state or local level. So what is the debt burden per capita for New York City residents? That sounds like a simple question but the answer is a bit complicated. Here is the breakdown:

As per the New York State Comptroller’s most recent annual report on State, Public Authority and Local Government Debt (March 2012), New York public authority debt at the state level totaled $125 billion. This debt is from 30 different state authorities including Dormitory Authority, Battery Park City Authority, Long Island Power Authority as well as smaller authorities. Technically, these are all state authorities and their debt is “owned” by everyone who lives in the state, but most of this debt is backed by steady revenue sources such as rents and PILOT payments in Battery Park City buildings to use an example. Whether or not one were to consider this the taxpayer’s burden, this debt per capita works out to $8,740. According to the State Comptroller’s report, the total true “State-related debt” outstanding is $63.87 billion as of March 2012. This debt includes general obligation bonds as well as debt from the Transitional Finance Authority, Sales Tax Receivable Corporation and other “corporations” backed by taxes. This state-related debt yields a total per capita debt obligation for New York State residents of $3,280.

The City Comptroller’s Office also issues an annual fiscal report. Its latest report showed that the total debt outstanding for New York City was $73.4 billion. This puts the per capita debt burden at $8,750 making it the highest debt burden of all the largest cities (the next highest was Chicago with less than $6,000 per capita according to the City Comptroller’s Office).

Note that this too does not include debt from four separate authorities include the Municipal Water Finance Authority, NYC Housing Development Authority, NYC Industrial Development Authority/Capital Resource Corporation and NYC Health and Hospitals Corporation. The debt from these authorities, which are backed by revenue sources similar to the structure of the Battery Park City Authority, is another $41 billion. This debt equates to another $5,023 per capita which would put the total city debt burden per capita at $13,927.

Separately, two major state public authorities debt could be considered for this analysis: the MTA debt and the Port Authority debt. Both authorities’ debts are backed by a steady stream of revenues from riders, bridges, tunnels and airports. The MTA total debt of $23.6 billion equates to $1,210 per capita for all residents of New York State. The Port Authority debt net of investments owned is $16.3 billion which yields a per capita debt obligation of $690 for all New York and New Jersey state residents.

Given the complexity of the debt issuing authorities and what is backed by a restricted revenue stream and what is paid for by taxes, we have created the table below to capture all of the numbers.

Entity	Total Debt	Population	Debt per capita
Federal	$16 trillion	311.6 million	$51,350
State	$64 billion	19.5 million	$3,280
Other State Public Authorities	$63 billion	19.5 million	$3,240
New York City	$73.4 million	8.4 million	$8,750
NYC Public Authorities	$41.4 billion	8.2 million	$5,020
Metropolitan Transportation Authority	$23.63 billion	19.5 million	$1,210
Port Authority of NY and NJ	$19.5 billion	28.3 million*	$690
Total not including public authorities			$63,380
Total including public authorities			$73,540

*Includes New Jersey state residents

Source: Eastern Consolidated, NYS Comptroller’s Office, NYC Comptroller’s Office, Census Bureau

The conservative estimate of the debt burden for New York City residents is $63,380 per capita ($51,350+$3,280+$8,750). The more comprehensive total is $73,540 per capita. This sounds daunting but it should be viewed with an optimistic outlook given that New York City’s economy is recovering at a rapid rate. While many fear the “fiscal cliff” that may come in January 2013, it is premature to assume that the next president and Congress will not try to address the fiscal crisis that will help the U.S. economy pick up steam in the next year or two. Until then, we can only hope for the best.

Barbara Byrne Denham directs the Research Center at Eastern Consolidated and is the Editor of its three quarterly newsletters The MetroGrid Report, Manhattan Economic Indicators, and the Manhattan Commercial Property Sales Report; the monthly NYC Employment Alert; as well as a series of research reports, all of which are regularly cited in the Press.

Finally, Some Good News!

Mon, 17 Sep 2012 04:00:00 GMT

Wall Street has been plagued with uncertainty for four years now. After Lehman Brothers went under and Merrill Lynch was sold in a fire sale to Bank of America, Wall Street shed 28,000 jobs over two years starting in 2008. It started to resume growth in 2010, adding 12,200 jobs over the next two years. But then continued uncertainty from the European debt crisis put a halt on growth and 4,500 more jobs were lost. Even as recently as June, the status of the industry was unknown as the Dodd-Frank regulations were still vague and Europe was still issuing troubling reports, especially from Spain and Italy.

But in the last two weeks that has changed. Not only have European leaders agreed to the outlined plan for the European Stability Mechanism (E.S.M.) – a permanent bail-out fund that works like the International Monetary Fund – but Germany’s Constitutional Court ruled that Germany could contribute to the bailout fund. The takeaway from these developments is that the continent is unified on its bail-out intentions. The E.S.M. replaces the temporary European Financial Stability Facility, both of which were designed to be a “firewall” to contain the debt crisis.

As if that weren’t enough good news, the Fed announced last Friday that it would buy large quantities of mortgage bonds and other assets to help improve the job market. The S&P 500 jumped. It has climbed more than 4% since the start of September. For the year, the S&P is up over 16%. What could go wrong now?

Well, it will take some time before these positive developments register serious job growth. Europe still needs to iron out the details of the E.S.M., including a more centralized banking system; many European countries are still operating under austerity measures and many companies are waiting to see who will win the November election and whether or not the next elected officials will lead us off the “fiscal cliff” by letting the current tax cuts expire and instituting spending cuts. Even on Monday, the New York Times reported that third quarter profits for many companies would be lower due to weakness in worldwide demand.

In sum, things are looking brighter and there is much to be optimistic about. As interest rates both here and especially abroad continue to fall, Wall Street should start to add jobs in the next three or so months which will boost New York City’s economy, generate demand for office space and raise property values. It may take as many as six months to see sustained growth on Wall Street and higher profits, but what is most reassuring is that so much of the uncertainty that has hampered the industry appears to have lifted.

Keeping the Faith: Are We Re-Entering a Bubble?

Mon, 06 Aug 2012 04:00:00 GMT

Conventional wisdom suggests that the New York real estate investment market might be re-entering a bubble, especially within the ultra-hot submarkets like SoHo and Chelsea, and especially for today’s most favored asset types – retail driven properties, development sites, and elevator apartment buildings. We consider a bubble to be defined by pricing that doesn’t correspond to fundamentals; more precisely, bubbles are large volumes of trades that are not in keeping with intrinsic values. In the national economy, many fear we have entered a no-growth era reminiscent of Japan’s “lost decade,” and on the global front, the contagion prospect of a long-lasting European depression looms large. As pricing in Manhattan commercial real estate continues to eclipse pre-Lehman levels and we routinely see 4% cap rate deals, it is the volume component that most challenges the bubble concept in today’s market.

As any of my colleagues at Eastern Consolidated might tell you, there is simply not enough quality product in the marketplace today to begin to meet investor demand. I am constantly fielding calls from frustrated investors asking me why I am not bringing them better deals, why they haven’t been privy to the “diamond in the rough” offerings. These buyers are realistic regarding pricing and well-capitalized – but there just is not enough product that meets their expectations of quality.

Take a look at today’s transactional volume: In the 2nd Quarter of this year, commercial property sales volume totaled $6.1 billion, roughly the same as it was in the 1st Quarter. Contrast this with the 2nd Quarter of 2007, when commercial property sales volume reached just shy of $20 million.[1]

Many recessions begin with a flight to quality. In New York, we flew there, planted a flag and set up camp. Despite that almost total retrenchment in volume experienced in 2009, investors have not decamped – the flight to quality remains the dominant paradigm. Our market is almost entirely characterized by opportunistic and value add capital that requires top quality locations, solid infrastructure and often repositioning potential. While cheap debt is available, investor equity is filling up a much larger portion of the capital stack and driving the bus toward opportunistic and value add strategies.

Globally in 2011, it was the closed-end real estate private equity funds that focused on major markets in North America that raised the most capital, raising $28.1 billion last year, more than three times what was raised for Europe or for Asia[2]. Many of these funds are characterized by foreign capital with a major New York real estate strategy, and almost all of them have a value-add or an opportunistic mandate. With not enough product to meet the enormous influx of investor capital, the supply constraint creates upward pricing pressure that often ignores the underwriting limitations of in-place income. Does this alone amount to a present bubble?

Other arguments against the bubble concept: (1) while unemployment nationally appears stuck, hovering over 8.0% for 42 months, job growth in New York has been exceptionally strong in 2012[1], (2) truly, debt is staggeringly cheap, but over-levering is by far the exception not the rule, and finally (3) rents have largely rebounded in retail and especially in multi-family. Most residential firms currently report apartment vacancy rates to be roughly 1.0%.

I was talking with a friend over the weekend who runs the New York office of a European-based private equity firm. When he was graduating from college in Virginia fifteen years ago, he recalled being torn between competing job offers in Virginia and New York. In his calculus, the Virginia job paid far better in the near term after cost of living adjustments, but the New York job was more compelling in the long term. If he was willing to suffer through a few lean start-up years, the career trajectory would yield much better monetary results in New York than in other markets. Like the Manhattan apartment renter confronting 1% vacancy rates, investors clearly want to be here, and are willing to pay dearly for the privilege. Like the private equity manager, the investor willing to bet on New York’s long term growth must bring his or her own talents and deploy those talents into the right opportunities. In addition, they’ve got to have at least a little faith in the face of a never-ending stream of bleak headlines.

Marion T. Jones is a Director at Eastern Consolidated and works with Senior Director and Principal David Schechtman to service lenders, special servicers, owners and buyers alike.

[1] Eastern Consolidated Manhattan Economic Indicators Report – 2Q12

[2] Preqin Report, January 5^th 2012

It's a Great Time to be a New Yorker

Tue, 24 Jul 2012 04:00:00 GMT

This quarter’s commercial property statistics were flat for the quarter. Total sales volume of $6.1 billion was near the same as in the first quarter of 2012 which was significantly lower than the prior two quarters. Peter Hauspurg, quoted in the Wall Street Journal last Monday, says that buyers are eager to invest but owners do not want to relinquish their properties. In short, everyone wants to own property in New York City. Why not, the City has set itself apart from the rest of the U.S. as well as other cosmopolitan cities around the world in ways that many of us know, and finally, the media is catching on about.

Two journalists recently covered New York’s success: Greg David in his column titled Bloomberg’s NYC jobs Miracle; Exaggeration? Maybe Not. We may be biased about this column because he nicely cites Eastern Consolidated’s employment statistics, but few in the media have addressed how the City’s employment growth is the strongest in more than 40 years and is visibly outperforming the U.S. He mentions how New York has barely shown any effect from the European crisis, and he credits Bloomberg for the City’s success. How has this been possible given that New York was considered the headquarters for the recent banking crisis?

In another column in last Sunday’s New York Times titled Our Newly Lush Life,
Frank Bruni discusses how green the City has grown over the last decade – literally, with trees and such. More specifically, he cites the success of the High Line, the Brooklyn Bridge Park, Riverside South and other efforts to invest in parks that have improved the City’s quality of life over the years. “While so much of American life right now is attended by the specter of decline, many cities are blossoming, with New York providing crucial inspiration.” Bruni too credits Bloomberg by saying Bloomberg embraced “the belief that a City could and should be beautiful and well designed.”

Anyone who has lived here for more than 10 years would agree with these two columns and would recognize how far New York City has come. More and more tourists come here to enjoy everything that New York has to offer and many can stay in the more than 13,000 new hotel rooms built over the last five years. These tourists visit the Highline, our parks and many museums. They also shop along our avenues buying everything from Apple iPads to Juicy Couture jeans. Indeed, our retail industry has added more jobs than any other industry since 2009. The industry with the second highest growth? Restaurants.

Many often cite the higher rents and business costs to New York City as restraining the office sector from growing faster, but rents have remained low over the last few years and employers are hesitant to cut jobs or shift operations outside the City when they know the City’s labor pool is stronger than the suburbs and other cities. So many young people want to study or work in New York City because they too can enjoy the City’s culture and nightlife, of course.

In short, it is a good time to be a New Yorker. The outlook today looks as favorable as it ever has, which is why property owners want to hold on to their prized assets and why demand from buyers is so high. Prices reflect this strong demand, but until they get much higher, owners are not likely to budge.

Going Back to Brooklyn

Mon, 11 Jun 2012 21:49:00 GMT

Many years ago there was a book about going back to Brooklyn. Unfortunately, it was written in the wrong time, and now many people are going back. Areas that had been virtually abandoned are now “hot” again and properties are being snapped up at extraordinary prices.

Once again, we are seeing bidding wars especially for the brownstones for which the borough is noted. We have seen the rise of Williamsburg, Ft. Greene, Clinton Hill, Brooklyn Heights, Borum Hill , Carol Gardens, Park Slope and Prospect Heights areas, all of which are within easy commuting distance to Manhattan. But what about the other areas. The demand is now moving to Red Hook and Prospect Park South. The Russian community is moving north from Brighton Beach and are purchasing the magnificent turn-of-the-century homes in Midwood and Flatbush. Bedford Stuyvesant/OceanHill which borders on Clinton Hill is turning around with many new retail stores on Fulton Street.

Investment grade properties such as multi-family, retail and office are in demand. Retail hubs such as the Flatbush/Nostrand Avenue section, the area around Macy’s, are once again leasing up rapidly with major chains. Many of the downtown office buildings have been converted to residential rentals and condos to satisfy the needs of young people moving to Brooklyn. In the 1980s, when the conversion laws changed, many of the apartment buildings along Eastern Parkway, Ocean Avenue and Ocean Parkway were converted. The low rents that once existed have been rising as vacancies occur and younger singles and families move to Brooklyn. The ethnicity in many areas has changed; for example, Sunset Park now has the third largest Asian population in the country after Chinatown and San Francisco.

The GRM (Gross Rent Multiple) has been increasing and we predict that it will continue to rise. Brooklyn is once again the place to invest in.