Over the last few months, RXR Realty CEO Scott Rechler has been working on what he calls “Project Kodak” — a strategy of separating older, obsolete office buildings from a younger product that can still pull the tenants and rents to thrive.
“It’s really more now like a trifurcation,” Rechler said on the latest episode of TRD’s podcast Deconstruct. “There’s the Class A, brand new buildings, which are still doing $150-200 a foot in rents. There’s the competitively obsolete buildings that you really can’t rent. And then there’s everything in between.”
TRD’s Deconstruct chatted with Rechler about the distress office owners are seeing in the market, whether the Fed’s recent rate pause will lift the gates on investment sales and why he’s pegged multifamily as the next shoe to drop.
“This is going to be the Achilles heel of this commercial real estate downturn,” he said of the multifamily market. “Everyone’s focused on the office because it’s sexy, it’s big cities. There’s been a record level of multifamily investments made in 2021. All these loans were done in that low to no interest rate paradigm.”
Rechler also discussed the benefits of running a non-traded company, compared to a public real estate investment trust at a time when REITs are struggling with dipping stock prices. The FTSE Nareit stock index, a benchmark for the performance of U.S. REITs, is down roughly 14 percent over the past year, compared to the S&P 500’s 11 percent return.
Listen to the full episode now on Apple, Spotify, Pandora, Stitcher and on TheRealDeal.com now.
The episode also marks Deconstruct’s final episode of Season 2, as we take a break for the summer. Tune into Season 3 on August 28 and until then, send all pitches, ideas and feedback to podcasts@therealdeal.com.
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