The New York condo market has nearly bottomed out, the commercial market in the city hasn’t even “tasted the pain that’s about to come” and, despite years of controversy, Coney Island will get redeveloped. Those were just some of the arguments that panelists made last night at The Real Deal’s 5th Annual Forum at Lincoln Center.
Leading economist Nouriel Roubini also said there may be a second wave of pain during the recession and noted that actual job losses are even worse than what unemployment numbers reveal because they don’t include the cutback in hours and wages that a lot of those who are still working have experienced.
Roubini — who earned the nickname Dr. Doom for his early predictions of an economic crisis — said that “labor income is crashing” and that a double-dip “W” shaped recovery is possible.
In addition to Roubini, panelists included powerbroker Dolly Lenz, the Corcoran Group CEO Pam Liebman, Coney Island developer Joe Sitt, Plaza developer Miki Naftali and Moody’s economist Mark Zandi. They spoke in front of a packed house of about 1,500 people at Alice Tully Hall, with Fox Business News anchor Brian Sullivan moderating.
On the residential New York front, Lenz, a vice chairman at Prudential Douglas Elliman, said the condo market has likely bottomed out. But she noted that the co-ops in the city have not hit bottom since boards are rejecting buyers who are paying prices they feel are too low.
Despite Roubini’s pessimism, Lenz and Liebman pointed out that high-end deals are being made again.
“The buyers have come back,” said Liebman, whose company recently sold Bernard Madoff’s Montauk beach house “above ask” in a bidding war. “We’re in a completely different place.”
Lenz said she knows of six sales above $25 million in the last two weeks, and said that she sold 34 units at struggling Upper West Side condo conversion the Apthorp in 31 days, above the bank’s release price. To help her clients get mortgages, Lenz said she has approached banks directly to forge new private banking relationships.
Roubini, a professor of economics at New York University whose recent celebrity has landed him a role in Oliver Stone’s upcoming movie “Wall Street 2,” said he expects home prices to fall another 7 to 10 percent nationwide over the next year.
While some foresee a “V-shaped” economic recovery, the economist holds a more dire view, predicting a more protracted recession, or “U-shaped” recovery due to the collapse of the banking system, coming mortgage foreclosures and, perhaps most importantly, job losses and cutbacks. He added that it’s even possible that there will be a “W-shaped” economic trajectory, meaning that there could be a second financial crisis ahead.
But Mark Zandi, the chief economist and cofounder of Moody’s Economy.com, had a different take. “New York’s recession is just about over,” he said, but added, “it’s going to be a slog.”
He agreed that hiring is at still a standstill, home prices will continue to fall, more foreclosures are in store nationwide and that banks will not begin extending credit again until they have “clarity.”
But, he said, there is reason for optimism. “Retail is firming,” he said. “Travel and tourism is picking up.”
Joe Sitt, the CEO of Thor Equities, echoed Roubini’s pessimistic viewpoint with regard to the commercial side of the market.
“The commercial market is just starting to feel its pain,” said Sitt, who has been engaged in a years-long struggle with the city over the redevelopment of Coney Island. “We haven’t even tasted the pain that’s about to come.”
Sitt stayed mostly mum about his plans for Coney Island, but did say he and Mayor Michael Bloomberg are close to an agreement.
“We’re starting to get on talking terms,” he said. “We will figure out a solution.”
Thanks to the economic slowdown, a mutually agreeable plan “will take more patience than Mayor Mike or myself would like,” he said, but he ultimately believes that “Coney Island will be a special place.”
In new residential developments, Lenz noted that “a lot of developers are in technical default,” with their banks adopting an “extend and pretend” strategy, hoping the problems will fix themselves. How long banks will continue to do that, she said, “is the one big question mark.”
The real opportunities for distressed opportunities haven’t yet arrived, she said, recalling that in the last major recession, she made four or five trips to Asia, selling 40 to 50 apartments at a time. “We’re not there yet,” she said.
Miki Naftali, the president and CEO of the Elad Group, the developer of The Plaza, said his company is poised to jump on those distressed opportunities.
He said his company is looking to acquire multi-family properties all over the country with cap rates of between 8.5 and 10.5 percent.
The company is also looking at additional “landmark properties” like The Plaza, he said, but now, “you need real equity.”
The “real opportunities” for distressed investing, he said, will occur in the next 12 to 18 months.