Editor’s note: ‘Strange’ money floods NYC

Stuart Elliott
Stuart Elliott

These are strange days, indeed. And they’re seeing lots of “strange” money, too.

The amount of investment capital pouring into New York City real estate is increasingly coming from non-traditional sources — from crowdfunding to the Chinese — even as traditional banks continue to shy away from risky bets.

Money is moving at the speed of the Internet, across borders. And it’s not going unnoticed by top New York players.

“Real estate guys have to get used to the fact that we’re seeing a lot of strange capital in our market,” Starwood Capital chief Barry Sternlicht said last month.

As reporter E.B. Solomont writes in our main cover story (see page 38), the depth and breadth of the money seeking shelter in New York is enormous. Real estate is functioning as a Swiss bank account for the world’s wealthiest.

Last month, during a trip to Shanghai — where The Real Deal is planning to hold a property showcase in the fall — I was told that the next opportunity for investors in China would be crowdfunding.

Crowdfunding, of course, allows the ordinary investor to put small amounts into deals in a way that real estate traditionally doesn’t allow for. The prospect of widely opening up investment to a population of 1.3 billion seems pretty staggering, if it’s actually realized.

After all, 1 billion people can’t be wrong. Unless, of course, they flood the market with too much capital, it forms a bubble and then pops. But we don’t seem quite there yet.

And, on the plus side, the traditional banks that had a hand in the last bust are looking downright disciplined this time around. But chances are that the next bust is not going to be prompted by the same smoking gun.

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One thing is for sure though: that the upper end of the residential market is hitting levels never seen before. New York’s first-ever $100 million home sold last month, at condo tower One57. Meanwhile, the price record for a co-op sale has been broken three times in the last year, and two of the buyers were foreign.

As I write in my other editor’s note this month (for our annual Data Book), there’s pricing for the global elite, and then there’s pricing for everyone else.

In many ways, New York is really a “tale of three cities.” Mayor de Blasio, who campaigned around the idea of a “tale of two cities,” was missing the ultra-wealthy, global jet-setting crew, who are in a different class from the merely rich. (This is explored in the Data Book, our farmer’s almanac of New York real estate, which is included with this issue.)

Another concern, meanwhile, is that with all these blockbuster deals grabbing headlines, the true state of the overall market is being obscured.

As appraiser Jonathan Miller told us, “one percent of the market is getting 99 percent of the eyeballs. We’re zeroing in on the wrong things, things that are shiny and sparkle.”

It’s easy to get caught up in fever dreams of excess wealth, but it’s important to drill down and examine the facts. That’s exactly what we do in a number of our stories this issue.

On page 74, we take a look at the surprising number of rental units coming to market in Manhattan and Brooklyn this year. While much of the industry’s focus has been on a possible oversupply of high-end condos, the number of rental units in Manhattan is expected to jump 25 percent this year and double in 2016. In Brooklyn, the number is set to increase 120 percent this year compared to last.

On the commercial side, we take a look at how New York’s “Big Four” brokerages might expand to the “Big Five” or “Big Six” (see page 50).  We also rank building sales brokers (page 52), examine the strong performance of REITs (page 88), look at the surge in development in Southeast Queens (page 46), and go behind the scenes with the developer who’s remaking the South Street Seaport, but running into community opposition (page 60).

Enjoy the Data Book and the issue.