The Real Deal’s Jen Benepe attended the Real Estate Board of New York’s annual banquet last month and spoke to some of the biggest names in the business about the 2009 market, distressed asset funds, the impact of the Bernie Madoff scandal on New York City real estate and more. Industry experts predicted a difficult year before the market rebounds.
Log on to www.therealdeal.com to see the full segment and to access the archives. Every week, The Real Deal posts a new edition of the Webcast, which features exclusive interviews with industry insiders.
The Real Deal: What are your views on 2009?
Steven Spinola: We’ve got 2,300 people coming here tonight, which is phenomenal in this economic climate. Maybe that’s a sign.
Stephen Ross: Being a real estate developer today is like an oxymoron … Today to say you’re going to go out and develop something … I think anybody who told you that … is smoking dope or something.
Darcy Stacom: I have a new saying … I borrowed it kind of from Sam Zell, which is his ‘Stay alive till ’95.’ I’ve got ‘Keep it lean ’til 13’… I just think that’s when we’ll finally be coming out of it.
Robert Knakal: Clearly the market has been challenging, particularly since Sept. 15 … [But] we believe that in 2009, people are going to look more favorably at real estate as an investment class.
TRD: Will federal government support for commercial loans help real estate in New York?
Ross: I think it’ll help development … You have all this expiring debt on perfectly good properties and today it’s a question of the lack of liquidity in the markets or the lack of confidence, and you have to be able to provide the ability to refinance properties.
TRD: How do we know [federal money will] be applied to the CMBS situation, and how do we know that it’ll improve liquidity for the commercial market?
Spinola: I can’t believe that the second $350 billion that is coming out of TARP will not have requirements connected to it about getting the money back out into the private sector.
TRD: You [had been planning to] start buying property in the spring of 2009 with [your firm’s new $300 million distressed asset fund]. Has that timeline changed at all?
Douglas Durst: It’s probably been pushed back a bit … The financing markets have stopped, so it’s very difficult to do anything right now.
TRD: As one of the oldest real estate companies in New York City, are you looking to start up any distressed funds?
William Rudin: I’m glad you say I’m not one of the oldest real estate developers in the city … but no, we’re not looking to do a distressed fund. But we will keep our eyes and ears open for opportunities.
TRD: Have sellers and buyers become more realistic about pricing yet?
Diane Ramirez: Our lower end, under $2 million, they’re absolutely there and they’re together. I think as you go up into $6 million and $10 million and above, it’s going to be a little bit slower for them to come together.
Jacky Teplitzky: Today, one of my Russian buyers … calls me up and says, ‘so Jacky, what should I buy?’ And I said, ‘look, 15 Central Park West, you had to spend $7,000, $6,000 per square foot, suddenly I’m seeing $3,500 per square foot, $4,000 per square foot.’
TRD: Which retailers are still taking space in the down market?
Faith Hope Consolo: What we’re seeing is a continued surge in fine restaurants, affordable fashion … and a lot of beauty accessories … I still think that after the second or third quarter we’ll be OK.
TRD: What kind of impact has the Madoff scandal had on New York City real estate?
Teplitzky: I had actually a very sad story. Two sets of parents helping their darling kids to get a $1 million apartment. Suddenly, three days after, no phone calls from [them] … I knew something was wrong … the lawyer said both families had invested with Mr. Madoff. So, therefore, the deal is off.
TRD: Are you hearing that happening a lot with other brokers?
Teplitzky: Yes. I actually think that Bernie Madoff has affected New York real estate even more than the stock market.
TRD: You were a vice president at ABC, deputy chairman of the National Endowment of the Arts and art adviser to Vice President
TRD: You were a vice president at ABC, deputy chairman of the National Endowment of the Arts and art adviser to Vice President Walter Mondale, among other things. So does that prior experience lend itself well to what you’re doing now?
Mary Ann Tighe: The amazing thing is that everything that came before, once I learned the basics of real estate, proved useful to me … I was hard to intimidate, even as a neophyte.
TRD: Do you think the market is close to the bottom yet?
Bruce Mosler: I think that we’re close to approaching the bottom of not just the subprime crisis but a crisis of confidence in our financial system. I think it’s going to take another quarter or two.
Spinola: We’re going to see serious problems over the next year … [But] I think New York is still the place that people want to live and work …
[W]e have to make sure that New York City is ready to recapture the job growth and recapture residents when people have a little more confidence than what they have right now.
Compiled by Sara Polsky