Public REITs no longer “between a dog and a fire hydrant,” Vornado’s Fascitelli says

TRD New York /
Nov.November 18, 2010 08:09 PM
From left: James Stuckey, dean of the NYU Schack Institute of Real Estate and Michael Fascitelli, CEO of Vornado Realty Trust; Panelists from left: Larry Silverstein, Michael Fascitelli, Willliam Mack, Marc Holliday and Bill Rudin

“Sometimes being a REIT felt like being between a dog and a fire hydrant,” Vornado Realty Trust CEO Michael Fascitelli said this afternoon, reflecting on the past couple of years in the industry before a packed ballroom at the Waldorf-Astoria hotel, and pausing for effect.

But no longer.

While public real estate investment trusts suffered significant losses in the immediate aftermath of the real estate crash, they’ve bounced back with impressive vigor, Fascitelli said. Plus, he offered as proof, there were very few bankruptcies.

Speaking on a panel at NYU’s Schack Institute of Real Estate’s annual conference on capital markets, Fascitelli was joined by Marc Holliday, who said that life is pretty good over at SL Green right now. “We’re having one of our best years,” he said. The public REIT structure is “liquid, transparent… I think more and more that’s what investors want these days.”

Sitting between the two REIT titans was William Mack, chairman and founder of Area Property Partners, with the trio flanked on either side by developer Larry Silverstein and William Rudin, president of Rudin Management.

“It’s scary being between two developers and two REITs,” Mack quipped.

Soon after, moderator Jimmy Kuhn, president of Newmark Knight Frank, stepped up the pressure by inquiring about the panelists’ worst regrets of the latest real estate cycle, catching several of the industry’s biggest stars noticeably off-guard.

“Anything you bought in 2006, 2007, maybe 2005… probably, given the benefit of hindsight, you wouldn’t have bought today,” Mack said, adding that it was “a stroke of luck” that he hadn’t won the bidding on Stuyvesant Town and Peter Cooper Village in 2006, which faced a foreclosure auction before a special servicer reached a deal with mezzanine lenders last month. “Of course, we had a different plan for it [than Tishman Speyer], but nothing could have stopped what happened,” he said.

Fascitelli, meanwhile, said he wished he had bought more securities on the cheap around March of 2009. Holliday said SL Green should have sold more equity when its stock was up and bought more back when it was down.

Going forward, Larry Silverstein is looking at some vacant land opportunities, and noted that it’s “very tough to buy income-producing properties in New York,” particularly because “once anything of consequence becomes available…a deluge of buyers” emerges to bid.

Perhaps that’s frustrating for developers, but it’s great for New York City, Silverstein said, giving much of the credit for the city’s real estate pull to Mayor Michael Bloomberg. “We’ve been blessed, Jimmy, to have Michael Bloomberg as our mayor… it’s nothing short of extraordinary.”

Bloomberg “gets it,” Rudin added, though he noted that as he spoke, the mayor was announcing thousands of layoffs in an effort to balance the budget.

The panel ended with a note of caution.

“This cycle, this downturn, wasn’t about oversupply. It was about the economy and about our tenants,” Rudin said, alluding to some apparently less-than-kosher business practices that had allegedly been going on within his walls. “If we did some of the things our tenants did, we’d be out of business.”

And New York City may be the “Golden Apple,” as the panel was titled, but “New York is not alone” as a real estate market, Mack said. “It is related to the entire world.” In the city’s slowly recovering commercial real estate market, “we’re nursing along the problem. The patient is still in bed.”


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