How many buildings does Silverstone own?
We own and manage over 35 buildings. The buildings are located predominantly in Manhattan and Brooklyn. We have buildings that are as small as 10 units, and we’re under construction on buildings as large as 200 units. About 95 percent of the portfolio is rental, but we’ve recently started working on two or three new condo deals.
What are the biggest challenges of being a landlord in the city?
Financially, the biggest challenges we’re seeing are real estate taxes and insurance. Ever since Hurricane Sandy hit, insurance companies have gone crazy. Our insurance policies, both on the property side, and even more so on the construction side, are double. Also, the market is so strong that it’s becoming much more difficult to find deals that pencil out to the same returns that we’ve seen over the last four or five years.
We got lucky. It didn’t impact any of our buildings in any significant way.
How did you get into real estate?
I studied pre-med at SUNY Albany. I decided to take a year off before going to medical school. Just by chance, I ended up working for Wells Hill Partners, a real estate investment bank. I loved real estate so I bailed on my medical career.
How did you end up starting your own firm?
I worked in real estate investment banking for about three or four years and then I worked for a large family office firm called Atlantic Realty based in New Jersey. I went out on my own at the end of 2008. I have three partners — Josh Zegen, Brian Shatz and David Schwartz. We all grew up together.
What are the tools of the trade you couldn’t live without?
One really important tool for real estate people is Google Maps. I can sift through deals from my office by looking at the numbers peripherally and going on Google Maps to see them from the outside. Then I’ll go look at the good ones [in person].
What’s been your strangest tenant experience?
One of our rent-stabilized tenants — an elderly lady on the Lower East Side — used to have live fish delivered every other day. There would be an old man who would walk in with two buckets on his shoulders with live eel [in them]. One day he dropped his buckets and we had live eel all over our lobby.
Do you have other horror stories?
We had a tenant in Upper Manhattan who was running a gambling ring out of their duplex. They had slot machines, roulette tables, blackjack tables. It was unbelievable. The only reason we found out is that the police shut down the place. We ended up having to pay thousands of dollars in violations and it took us five months to evict them.
You said you started the company in 2008. Was it tough to launch during the recession?
We didn’t have any troubled assets, so the trouble for us was that no one was doing business. Once the economy started to thaw, we were able to focus on buying new stuff, whereas a lot of other people … were stuck working out their problems for two years.
What kinds of assets are you focused on acquiring?
Anything I’m looking at is going to have a heavy repositioning angle or a ground-up development opportunity. I want to be able to change the unit mix or change the feel of the building so that it becomes something new. What can I do to create value to that building so that when it’s completed, there’s a strong financial return? We’re [also] very focused in Brooklyn. The condo numbers are higher in Manhattan, but not so much higher that it justifies buying land or buildings at quadruple the cost.
Where does your capital come from?
It depends on the asset. We’ve successfully built a group of family and friends that have supported a big chunk of the business we’ve done so far. On larger transactions, we partner with institutional investors. And our transactions are getting larger.
You recently purchased a warehouse property in Dumbo for $25 million. What are your plans?
I don’t want to talk specifically about that deal until it’s closed.
You’re building a 170-unit rental project on North 6th Street in Williamsburg. Where are you in the process?
We’re doing foundation work now. It’s two buildings that share a courtyard, an entrance and amenity spaces. We’re in construction on the first phase right now. We hope it will be completed in the next 12 to 14 months. The other building will be two or three months behind it.
Do you have any other new projects?
We have a really exciting conversion project at 78 Irving Place on the corner of 19th Street. We’re planning on developing seven to eight ultra-high-end, full-floor condos.