Thousands of who’s who in New York real estate descended on the Hilton Hotel on January 17 to commemorate the Real Estate Board of New York’s 112th anniversary. An exclusive, invitation-only cocktail party started off a night of industry power brokers mingling with politic bigwigs, including a parade of the 2009 mayoral candidates.
Tickets to the event were $900 each and the crowd was suitably dressed to impress, creating a sea of tuxedos dotted with the occasional elegant gown, like the navy Armani worn by Faith Hope Consolo. But the mood was somber at moments.
The gala took place the same day that Merrill Lynch announced its worst earnings quarter in four years, and days after Citigroup announced a jaw-dropping fourth-quarter loss of $9.83 billion, adding more fuel to worsening fears that the mortgage meltdown has triggered a recession that will hurt real estate sales, even in the so-called “insulated” New York City market.
“Sales will be leveling off,” said Frederick Peters, president of Warburg Realty, on line to check his coat. “The first two quarters won’t be so good, and prices may be down.”
“This is an interesting time to have the event,” said a commercial real estate finance executive. “No one is smiling except the Goldman [Sachs] guys–or it’s the alcohol,” he noted. He declined to be idenitified because he works for a major firm that”got burned” this year.
A sampling of big real estate players on hand included: Bob Knakal, chairman of Massey Knakal; Sandy Lindenbaum, of Kramer, Levin, Naftalis, and Frankel; Douglas Durst; Jon Mechanic of Fried, Frank, Harris, who received the Kenneth R. Gerrety Humanitarian Award; Francis Greenburger, CEO of Time Equities Inc.; Mark Shaw, executive vice president for strategic planning at Extell Development Co.; Darren Hornig, Dwelling Quest’s founder; Pam Liebman, president of the Corcoran Group; Jerry and Rob Speyer of Tishman Speyer; and Bruce Mosler, CEO of Cushman & Wakefield and recipient of the Louis Smadbeck broker recognition award.
A perennial observation about awards ceremonies: Attendees often pay little attention to them, even though they pull out all the stops to be there. In this case, officials on the dais as usual tried in vain to shush the talkers in the crowd, to little avail.
But more difficult to talk over was New York City council member Melinda Katz’s rendition of “America the Beautiful,” proving that patriotism trumps bad manners.
Still, the country’s economic health was clearly on the minds of the guests.
David Baxter, a member of the Cushman & Wakefield team that sold 666 Fifth Avenue in December 2006 for $1.8 billion, the highest amount ever paid for a single building in the U.S, said he is “cautiously optimistic,” about next year.
“Pricing is off 5 to 10 percent, depending on the area,” he said. Nevertheless, he added: “there is still tremendous demand.”
Bob Knakal said he thinks the devalued dollar will continue to help New York real estate in the coming year. “People are talking about deals,” he noted.
When asked to comment on the economic outlook for 2008, Steve Ross, chairman of the Related Companies, said, “I have two words for 2008: troubled waters.”
Joseph Moinian, who was with his tall son Mitchell Moinian (his second eldest, and a sophomore at New York University) said, “It’s going to be a great year for the Moinian Group.”
Is he poised to buy while everyone else loses their buildings? “For the right situation, yes,” Moinian said. “But while all the other diehards are busy getting their act together, we’re delivering amazing product to the market, like the W Hotel, and Atelier,” he said.
“It’s still early in the game to predict, and there has been no slowdown in leasing activity,” said William Rudin, president of Rudin Management. “Things went up too fast and too quickly,” he said of the last few years. The current market is more realistic, with more appropriate lending standards. ‘We don’t overleverage as a company,” he noted.
Will he capitalize on some of the fire sales coming up in 2008? Rudin is less likely to go after a building with a “5 to 6 percent cap [rate],” he said. By contrast, his St. Vincent’s development in the West Village is a “long-term play that has complexity,” he noted.
“From a broker’s perspective, [the declining economy means] they’re going to need us now more than ever,” said Lisa Maysonet, senior vice president at Prudential Douglas Elliman. “Before, the properties would almost sell themselves, but now you need real deal makers.”
Tamir Shemesh, a managing director at Elliman, said he is still bullish on 2008.
He noted that despite the talk, overall bonuses on Wall Street surpassed total 2006 bonuses at the biggest investment banks, and foreign money continues to drive business. “We lost a bidding war with a buyer from Spain” for a $2.3 million property, he noted.
Edward Andron of Leebar Management, a building management company, said the coming year was going to include “a budget crunch, and a tightening of our belts.” The net effect: “There will be a lot more for foreigners to snap up, but it will also be more competitive.”