For many of us, following politics has taken up so much bandwidth in our lives over the past four years. We’ve gotten used to our daily fix of outrage, about how our side is going to save the world and the other side is going to destroy it.
Maybe the election of a new president means it’s a chance to move on. Maybe we can give some of that bandwidth back to other things.
Well, maybe that’s wishful thinking.
But in this issue, for our cover story at least, we go cold turkey on the partisan politics and their impact on real estate. The words “Trump” and “Biden” are not mentioned once in our 4,000 word cover piece.
We take you inside the story of 220 Central Park South, the world’s most profitable condo project ever. The 15-year journey, which netted developer Vornado more than $1 billion, encapsulates the best and worst of the blood sport that is real estate.
If not for the posh building, Vornado, one of New York City’s biggest landlords, and its cocksure CEO Steve Roth would have been nailed by the pandemic. Instead, during a third quarter earnings call recently, Roth said his real estate investment trust was “loaded” and finished comfortably in the black.
As Hiten Samtani and E.B. Solomont write, “the tower has seen it all: buyout battles with tenants, siege warfare with rival developers, a lavish construction purse courtesy of a foreign lender, guerrilla marketing and record-breaking deals.” That includes a $238 million condo sale that highlighted the city’s extreme inequality and its status as a magnet for the global superrich.
While some real estate players are known for what they build, others are known for what they own. And that’s the case with Joseph Tabak, the chairman of Princeton Real Estate Partners, who has had a hand in more than $13 billion worth of deals and has come to be known among his contemporaries as the “real estate doctor.” He’s also one of those real estate players that flies extremely under the radar, nearly invisible, which makes our rare sit-down interview a must-read.
Tabak’s unconventional approach to dealmaking emphasizes the terms of the deal, not the price. “Like my mother used to say, there’s a Polish lottery ticket: You win $1 million, and they pay it out to you a dollar a year for the rest of your life. All you end up with is $60,” he told us by way of illustration.
Meanwhile, in our Closing interview this month, we sit down with Spencer Rascoff, co-founder and former CEO of Zillow, arguably the most consequential residential tech startup of a generation (say what you will of the accuracy of its Zestimates). Last month, Rascoff, who is based in L.A., launched Pacaso, a startup that lets buyers purchase shares in second homes.
His business acumen came in part from his father, who was the tour manager for the Rolling Stones and was more into the bottom line than the bass line. “With 120,000 people cheering for the Rolling Stones, he would be whispering in my ear, saying, ‘Those fireworks cost $100,000, and they probably weren’t necessary, but Mick wanted them.’” Rascoff remembered. “He’d walk me through the P&L of every show.” See page 108.
All this dealmaking prowess is bound to come in handy in a market like this. (Make sure to check out our ranking of the top lawyers doing deals)
Even leaving aside the pandemic, there is the prospect of unstoppable wildfires, epic floods and other environmental risks that are starting to be priced into deals, with major asset managers pulling back from markets that are most vulnerable to climate change. Meanwhile, on the financial front, problems with CMBS loans — one of the culprits in the Great Recession — could have ripple effects. When giants like Starwood hand their keys back to lenders, it’s a sign of fallout yet to come.
And finally, since I’ve gone for nine paragraphs now without mentioning “Trump” or “Biden,” we do, in fact, have some post-election coverage. We look back on what four years of the first developer-in-chief has meant for the industry, what to expect from a Biden presidency going forward and what the future holds for the Trump Organization.
Of course, that doesn’t answer the biggest questions of them all: Will Jared and Ivanka move back to New York? Maybe a big house in a fancy Republican-leaning suburb outside the city? And will Trump head to Mar-a-Lago while he plans a 2024 run?
We’ll try to move on to other things, too. Enjoy the issue.