♪ [THEME MUSIC] ♪
>> MONEY, PEOPLE NEED MONEY FOR
REAL ESTATE, SO WHO IS PROVIDING
IT? THE BANKS,
THE INSURANCE COMPANIES?
IT'S A GROUP OF INDIVIDUAL
ENTITIES CALLED PRIVATE EQUITY
FUNDS.
THEY ARE GIVING IT, SO TODAY I
HAVE ASSEMBLED THIS GROUP OF
LEADERS AND FINANCIAL EXPERTS TO
TALK ABOUT WHERE THE MONEY IS,
WHAT ALTERNATIVE LENDERS ARE
DOING. MY GUESTS INCLUDE
JOSH ZEGEN CO-FOUNDER AND
CO-MANAGING DIRECTOR AT
MADISON REALTY CAPITAL.
ROBIN SORID, WHO IS THE
CO-FOUNDER AND ALSO
CO-MANAGING DIRECTOR AT
G4 CAPITAL PARTNERS.
PETER SOTOLOFF, WHO IS
ALSO CO-FOUNDER AND THE CHIEF
INVESTMENT OFFICER, MANAGING
DIRECTOR AT MACK
REAL ESTATE CREDIT STRATEGIES.
AND LAST BUT NOT LEAST,
COMING IN FROM BOCA RATON,
FLORIDA, TONY FINEMAN WHO IS THE
MANAGING DIRECTOR FOR EAST COAST
ORIGINATIONS AT ACORE CAPITAL.
HAS IT BEEN THIS COMPETITIVE?
>> THERE HAVE BEEN TIMES WHEN
IT'S BEEN THIS COMPETITIVE.
I WOULD SAY THIS IS AN EXTREMELY
COMPETITIVE TIME NOW.
>> IS IT THE BANKS?
IS IT YOUR FELLOW COMPATRIOTS
OVER HERE?
>> THERE IS A TON OF CAPITAL IN
OUR SPACE TODAY AND I THINK
THERE IS PLENTY OF DEALS BUT
THERE IS A LOT OF CAPITAL
CHASING THE DEALS.
>> JOSH SAID THE CAPITAL
IS OUT THERE BECAUSE THE
EQUITIES ARE NOT BEING USED.
WHAT WERE YOU TRYING TO SAY?
>> THE EQUITY MARKETS HAVE BEEN
NOT MUCH GOING ON IN THE EQUITY
SIDE OF THE BUSINESS AND PART OF
THAT IS BECAUSE TRANSACTION
VOLUME IS DOWN BECAUSE THERE
HAVE BEEN SO MANY DEBT FUNDS AND
THE NUMBER OF DEBT FUNDS ARE
PEOPLE LOOKING TO INSTEAD OF
SELLING PROPERTY, --
EQUITY, RECAPTURE AND HOLD
LONGER RATHER THAN SELLING TO A
MARKET THAT IS SO-SO.
WE ARE SEEING THAT IN OTHER
PARTS OF THE MARKET.
>> WHEN YOU HEAR SOMEBODY
LOOKING TO TAKE MORE CAPITAL
OUT, IT REMINDS ME OF THE
2006-2007.
WHEN PEOPLE TAKE TOO MUCH MONEY
OUT, THEY REALLY ARE -- THEY
DON'T LOOK AT THEIR PROPERTIES
AS WELL.
>> I HAVE BEEN THROUGH A NUMBER
OF CRISES INCLUDING THE MOST
RECENT 10 YEARS AGO.
I THINK I WILL DRAW SOME CLEAR
CONTRASTS.
I DO BELIEVE THERE ARE A NUMBER
OF NEW DEBT ENTRANCE TO THE
MARKET TYPICALLY HAPPENS WHEN
THOSE PARTIES CAN'T FIND EQUITY
DEALS THAT MAKE SENSE AND THEY
VIEW IT AS A SAFER OPTION.
UNLIKE THE PRIOR CRISIS WHEN YOU
HAVE A MISPRICING OF RISK OVER
LENDING, MISMATCHING OF ASSETS
AND LIABILITIES, THE EXCESSES WE
SAW IN THAT PART OF THE
FINANCIAL CRISIS ARE NOT HERE
TODAY.
I WOULD SAY WHAT HAS HAPPENED IS
YOU ARE SEEING BASICALLY A RACE
TO THE BOTTOM IN SPREAD.
YOU CAN'T BROADBRUSH THAT IN THE
MARKET WITH ALL TYPES OF LENDING
FOR CONSTRUCTION, HEAVY
TRANSITIONAL TO MODERATE
TRANSITIONAL VERSUS LIGHT
TRANSITIONAL.
THERE IS A VERY WIDE RANGE.
I THINK YOU HAVE TO DRAW
DISTINCTIONS BETWEEN WHAT IS
PERCEIVED AS THE DEGREE OF
DIFFICULTY AND THE BUSINESS
PLAN EXECUTION.
>> ARE WE SEEING MORE
FAMILIES GO IN.
AS I WAS SAYING A COUPLE SHOWS
AGO, THE FIVE MAJOR NEW YORK
FAMILIES-- ARE WE SEEING
FAMILIES SAYING THEY SHOULD
GET MORE INVOLVED WITH THIS.
THE FISCHER BROTHERS ARE
INVOLVED, YOU KNOW ARE AFAR.
>> YOU ARE SEEING A LOT OF
ENTRANCE INTO THE MARKET AT WHAT
I THINK IS DEEPER IN THE CAPITAL
THAN GUYS LIKE US WILL GO
BECAUSE THEY ARE HAVING A HARD
TIME FINDING EQUITY YIELDS THAT
WILL GET A RETURN ON.
THEY WILL LEND 85 OR 90%, WHILE
I CAN'T FIND EQUITY DEALS.
>> I THINK WHAT WE ARE SEEING.
WE ARE SEEING A LOT OF FAMILY
OFFICES SITTING ON LIQUIDITY
SAYING CAN WE PARTICIPATE?
CAN WE TAKE THE LAST OUT PEACE.
PEOPLE WILL BE OPPORTUNISTIC AND
SOMEWHAT AGNOSTIC.
IN TERMS OF THE NEW YORK MARKET,
I THINK THE NEW YORK MARKET IS
DIFFERENT THAN WHAT WE ARE
SEEING NATIONALLY AND THE NEW
YORK MARKET BECAUSE OF THE
INFLUX OF CAPITAL, IT IS A RACE
TO THE BOTTOM IN TERMS OF
PRICING AND SPONSORS.
SOME SPONSORS THAT SHOULD NOT BE
GETTING DEALS DONE STILL ARE.
I DON'T THINK ANY OF US ARE
FINANCING THE SPONSORS.
YOU WILL SEE SPONSORS WHO HAVE
2% OF THEIR OWN CAPITAL AND ARE
DOING $200 MILLION PROJECT.
THEY HAVE A GOOD CHANCE OF
GETTING CAPITAL BECAUSE THERE IS
SO MUCH COMING INTO THE MARKET
AND THAT'S WHAT WE THINK IS THE
SCARIEST PART AND IS THE ONLY
HANGOVER FROM THE PRIOR CREDIT
CRISIS WHERE WE SAW VERY LITTLE
CHECK ON WHAT VALUES WERE.
>> I HAD SOMEONE FROM THE
CARLYLE GROUP THAT HE PREFERS TO
DEAL WITH ALTERNATIVE LENDERS
BECAUSE IT'S EASIER.
YOU DON'T HAVE -- YOU ARE EASIER
TO DEAL WITH.
>> THE IMPLICATION THERE IS THAT
WE ARE CUTTING CORNERS.
TO ME WHAT IT IS IS THAT
REGULATED BANKS AND FINANCIAL
SOLUTIONS CAN'T MAKE --
ALWAYS MAKE RISK DECISIONS TO
LOOK PAST SOMETHING BECAUSE
THEY ARE STUCK.
>> I THINK THE COMMENT WAS
SAYING THAT I HAVE TO GIVE THE
SAME DOCUMENTATION BUT I DON'T
ALWAYS NEED EVERYTHING IN
CLOSING.
>> THERE IS TOLERANCE IF YOU
THINK YOU'RE NOT TAKING A RISK
BY NOT GETTING IT.
>> BECAUSE THE INDUSTRY GREW
THERE IS DIFFERENT SHADES OF THE
ALTERNATIVE LENDING UNIVERSE SO
YOU HAVE SOME AND WE ARE FOCUSED
ON SPECIAL SITUATIONS OR
CONSTRUCTION, THERE ARE SOME
THAT ARE LIGHT TRANSITIONAL THAT
WILL USE A CLO FACILITY AND THAT
BOX IS NOT A BANK, BUT IT'S MORE
OPEN.
IT DEPENDS ON HOW THE DEBT
FUNDS ARE LEVERAGING.
>> I ALSO THINK THE POINT IS YOU
CAN MAKE A DECISION TO TAKE A
RISK THAT A BANK MAY NOT BE ABLE
TO TAKE TO CLOSE.
THE DECISION IS NOT TO WEIGH
SOMETHING YOU THINK IS
IMPORTANT.
>> I WAS TALKING MORE ABOUT --
>> WE DO HAVE FLEXIBILITY.
THERE IS ALWAYS A SURPRISE.
THERE'S A MISCONCEPTION ABOUT
WHAT PRIVATE CAPITAL IS.
WE WANT THE SAME DOCUMENTATION
BUT WE JUST WANT TO BE MORE
NIMBLE OR ABLE TO ASSESS THE
ASSETS AS OPPOSED TO JUST THE
ASSET CLASS.
BECAUSE WE ARE BACKING UP TO
SECONDARY FINANCING, WE HAVE
SOME WINDOW BUT WE DO NEED THE
SAME DELIVERABLES AS A BANK
WOULD NEED ULTIMATELY.
WE ALSO HELP THE BORROWER.
WE DON'T GIVE THEM THE LIST AND
SAY WE NEED THIS BY X DAY.
WE HELP THEM CREATE ALL THE
FINANCIALS.
>> LENDER LIABILITY.
[LAUGHTER]
>> YOU ARE LEVERAGING THE LOAN.
YOU ARE TAKING IT TO ANOTHER
INSTITUTION TO MAKE SURE THEY
HAVE THE CORRECT DOCUMENTATION.
>> BUT WE ALSO DON'T HAVE THE
LUXURY OF JUST HAVING BORROWERS
WHO HAVE A PACKAGE READY TO GO.
I THINK IF WE ONLY TARGET A
GROUP OF BORROWERS WHO HAVE
AN INSTITUTIONAL PACKAGE BUT ONE
PRIVATE CAPITAL, YOU WILL LIMIT.
>> SOMEBODY COMING TO YOU, THEY
WORK FOR A COMPANY FOR A COUPLE
OF YEARS AND LEAVE AND THEY WANT
TO START THEIR OWN BUSINESS.
HOW DO YOU MAKE YOUR
DETERMINATION THAT YOU LIKE THAT
PERSON AND YOU WILL BET ON THAT
HORSE?
>> WE DON'T. WE'RE VERY SPECIFIC
ON WHO WE'RE DOING BUSINESS
WITH. WE ARE NOT LOOKING
TO -- THERE
IS ONLY DOWNSIDE IN LENDING.
OTHER BUSINESS PLANS HAVE THAT
TYPE OF MENTALITY WHERE THEY MAY
BE MORE FLEXIBLE.
WE STICK WITH PEOPLE THAT ARE
KNOWN WITH ASSETS.
THE OTHER THING FOR A LENDING
SHOP, FOR ALL OF US IT STARTS
WITH THE REAL ESTATE.
IS THIS AN ASSET THAT IF TIMES
GET IN TROUBLE IF THERE IS A
DISLOCATION OR CORRECTION, WOULD
WE WANT TO WORK THROUGH THOSE
ISSUES AT THAT BASIS, PERHAPS UP
TO AND INCLUDING ANOTHER
BUSINESS PLAN.
THAT IS SIMPLE AND AS BASIC AS
IT GETS.
>> IF YOU ARE NOT HAPPY WITH THE
ASSET GOING IN, YOU SHOULD NOT
DO THE LOAN.
WE ARE NOT AN OPPORTUNISTIC
LENDER.
OUR DOCUMENTS ARE SET UP,
EVERYTHING IS SET UP THAT IF THE
WORLD CHANGES OR OUR SPONSOR
FAILS, WE WILL TAKE BACK THAT
ASSET.
WE DO TAKE CHANCES ON NEW
SPONSORS BUT WE WON'T TAKE
CHANCES IN A VACUUM.
IF WE HAVE A SPONSOR WHO DOES
NOT HAVE THAT EXPERTISE, WE WILL
HELP PAIR THEM WITH WHO WE KNOW
HAS AN EXPERIENCE TO EXECUTE ON
THE BUSINESS PLAN.
OR OTHER CONSULTANTS.
AND SO WE WILL SEE NEW SPONSORS
WHO ARE ASSET DRIVEN. WE'LL
MAKE SURE IF THAT SPONSOR
DOES NOT HAVE THE EXPERIENCE
THAT WE WILL BRING A TEAM
TO THEM SO THEY CAN EXECUTE.
>> TALKING ABOUT ASSET DRIVEN
TODAY, WE HAVE A VARIETY OF
ASSETS.
ONE OF THEM IS THE CATEGORY
PEOPLE ARE SAYING IS THE DEBT
ASSETS.
WHICH IS RETAIL.
I THINK RETAIL IN SPECIFIC
MARKETS MAY BE HURTING.
IF YOU TAKE RETAIL,
IT IS VERY STRONG.
>> I THINK IT HAS BEEN PAINTED
WITH AN EXCEPTIONALLY NEGATIVE
BRUSH AND WE FRANKLY, YOU WILL
SEE THIS, WE HAVE NO RETAIL
EXPOSURE IN OUR LENDING BOOK,
BUT I DO BELIEVE THAT OUR
BUSINESSES DO NOT TAKE UNDUE
RISK WITH OUR PROFILE.
I THINK GREAT FORTUNES WILL BE
MADE WORKING THROUGH AND
ALREADY ARE THROUGH THE
REDEVELOPMENT OF THAT.
AS FAR AS THE LENDING BUSINESS
WE RUN, WE WILL HAVE SOME RETAIL
PART OF A MIXED USE VERSIONS.
WE PUT TOGETHER THE
CONSTRUCTION LOAN ON 20 TIMES
SQUARE.
THE NFL EXPERIENCE.
>> HERSHEY'S MADE THE RETAIL --
>> WE HAVE HAD FOR A LONG TIME
NEGATIVE VIEWS EVEN BEFORE IT
WAS WATERCOOLER TALK ON RETAIL
AND THAT'S EXPRESSED IN OUR
POISITIONS IN CREDIT
PERSPECTIVES.
THAT NOT TO SAY GREAT FORTUNES
WILL BE MADE FIGURING
ALTERNATIVES ON THE EQUITY SIDE
TO REPURPOSE RETAIL.
>> THERE IS A LOT OUT THERE.
GREAT FORTUNES WILL BE MADE AND
SOME PEOPLE THINK WILL MAKE THAT
THEY WILL MAKE GREAT FORTUNE
THEY WON'T BE ABLE TO.
>> THERE ARE A LOT OF SUBURBAN
RETAILERS SHOPPING CENTERS.
ONE OF THESE MOVES OUT OR A
MEN'S WEARHOUSE IS IN TROUBLE,
TOYS "R" US, THEY MOVE OUT OF
THE PROPERTY.
SOME OF THE DEALERS CHANGE OVER
THERE AND THEN YOU HAVE TO BET
YOUR HORSE.
YOU CAN BE HAPPY THAT IN YOUR
HORSE ON TARGET, NOT ON SEARS
TODAY.
IT DEPENDS ON THE TYPE OF
PROPERTY.
ANOTHER ASSET WHICH IS HIGHLY
EVOLVED TOWARDS THE
HOSPITALITY INDUSTRY.
YOU HAVE A LARGE PORTION.
YOU HAVE SOME HOSPITALITY.
AND I BELIEVE YOU DO
AS WELL.
>> WE'RE DOING HOSPITALITY AS
WELL.
>> YOU GOT IT IN THE BOROUGHS.
>> A VERY DEVELOPED MARKETS.
WE HAVE HAD HOSPITALITY
THAT ARE UNFLAGGED.
WE EXITED THE POSITION IN
WILLIAMSBURG WHICH WAS A
SUCCESSFUL EXIT.
THAT IS HARDER AND I THINK WE
ARE ALWAYS LOOKING FOR NEW
OPPORTUNITY.
THERE IS A LACK OF CAPITAL
COMING INTO HOSPITALITY.
ESPECIALLY HOSPITALITY
CONSTRUCTION FINANCING.
WE ARE VERY CAREFUL, BUT WE ARE
LOOKING AT IT.
>> THE HOSPITALITY IS BEING
AFFECTED BY THE AIRBNB BECAUSE
YOU ARE TAKING SUCH A LARGE
NUMBER.
>> I WOULD SAY IT'S MORE THAN
THAT.
IF YOU'RE SPEAKING ABOUT NEW
YORK, YOU HAVE HAD 16,000 NEW
ROOMS AND TO THE PAST FEW YEARS.
I THINK WE ARE DOING A GOOD JOB
OF ABSORBING THOSE, BUT THAT IS
EFFECTIVE AND WE HAVE BEEN
CAUTIOUS ON OUR CALLS.
>> THE 62 MILLION VISITORS,
THERE ARE NEEDS FOR THAT.
>> AS PETER WAS ALLUDING TO, THE
ABSORPTION IS FAIRLY EFFECTIVE
ON OCCUPANCY STANDPOINT.
THE RATE IS BEING MOVED.
>> AIRBNB, OTHER HOTELS
NEED TO BE STABILIZED, ETC.
>> WE ARE CAREFUL OF HOSPITALITY
ASSETS WHICH HAVE A LARGE
PERCENTAGE OF THEIR REVENUE
COMING FROM FOOD AND BEVERAGE.
WE HAVE SEEN INTERESTING
PROJECT.
A DISPROPORTIONATE AMOUNT OF
PRODUCTIONS ARE COMING FROM
REVENUE.
>> WHEN YOU ARE IN FOOD AND
BEVERAGE, YOU'RE IN THE
RESTAURANT BUSINESS.
AND A RESTAURANT BUSINESS WITH A
50% FAILURE RATE.
>> THAT'S HOW SPONSORS ARE
MAKING THEIR NUMBERS.
THEY ARE PROJECTING REVENUE.
YOU DO HAVE TO BE VERY CAUTIOUS.
WE ARE IN THE PROCESS OF CLOSING
JUST THE EAST COAST WE ARE
CLOSING THREE HOTEL LOANS.
YOU HAVE TO PICK AND CHOOSE AND
BE CAREFUL ABOUT BASIS.
YOU HAVE TO MAKE SURE YOU'RE
DEALING WITH THE RIGHT SPONSOR.
>> THERE'S A MISCONCEPTION
ABOUT CONDOS.
EVEN IF YOU TAKE INTO
CONSIDERATION GARY BARNETT'S NEW
PROPERTY IN DOWNTOWN BROOKLYN,
IT IS DOING WELL BECAUSE IT HAS
25-YEAR TAX ABATEMENT.
ALSO THERE IS A LOT OF RENTAL
APARTMENTS IN DOWNTOWN
BROOKLYN AND VERY FEW CONDOS.
HOW DO YOU LOOK AT THE CONDO
MARKET TODAY?
>> IT IS VERY BASIS DRIVEN.
THERE IS A LACK OF LIQUIDITY
AROUND CONSTRUCTION RELATED
FINANCING IN CONDOS.
ONE THING WE'VE BEEN ABLE TO DO
IS PROVIDE A WHOLE LOAN TO
DEVELOPERS WHERE WE PROVIDE THE
SENIOR, A LOT OF LENDERS ARE
TRYING TO PIECE IT TOGETHER
INTEGRATES A LOT OF COMPLEXITY
AND UNCERTAINTY.
WE HAVE BEEN ABLE TO DO A NUMBER
OF DEALS THAT FIT THAT PROFILE
RECENTLY.
>> THIS SPEAKS TO OUR PORTFOLIO,
WE HAVE A FAIR AMOUNT OF
CONSTRUCTION, 30% OF OUR BOOK.
WE ARE ONE-STOP SHOP IN TERMS OF
BEING ABLE TO PROVIDE THE
HOLISTIC SOLUTION.
OUR AVERAGE CONDOMINIUM LOAN IS
IN EXCESS OF $200 MILLION AND
FAR GREATER.
THE BASIS IS EVERYTHING.
WE LIKE COMMODITIZED PRODUCT,
VERSUS THE ULTRA WEALTHY
PRODUCTS THAT
WILL HAVE A NUMBER OF TOUCH
POINTS AS THE CYCLE MATURES AND
THERE IS COST AND SO WE LARGELY
AVOID THAT GIVEN THE PRICING OF
THAT WHERE WE CAN LOOK AT A
DOWNSIDE AS A RENTAL FALLBACK IF
THAT NEEDS TO HAPPEN.
ALSO WE ARE DEALING WITH
INSTITUTIONAL BORROWERS WHO HAVE
DEVELOPMENT EXPERIENCE WHO CAN
MANAGE THE PROPERTY.
ALSO WE WILL CREATE A MILESTONE
WHERE WE NEED TO DESPITE THEIR
EQUITY OBJECTIVES RETURN ON
EQUITY OBJECTIVES, IF WE NEED TO
PRODUCT TO RIGHT-SIZE THE LOAN
AT LOWER THAN IDEAL PRICES.
WE CAN FORCE THAT DISCUSSION TO
PROTECT OUR LOAN.
>> I THINK YOU HAVE A LENDER
BASIS DRIVEN VIEW AND THEN YOU
LOOK AT YOUR SPONSORS BASIS.
SOMETIMES THE LENDER IS GREAT
BUT THE SPONSOR WILL FAIL AND
YOU HAVE A CHOICE OF GOING
FORWARD AND SEEING IF THE
SPONSOR WILL PREVAIL AT MAKING
SURE YOU HAVE LEVERAGE SO THEY
START SELLING BELOW BASIS OR YOU
PASS ON THE PROJECT.
SOME WE HAVE GONE FORWARD IN
AREAS WHERE WE FEEL COMFORTABLE
BUT WE HAVE HAD ONE THAT MUST
SELL AT X PER CENT.
WE THINK THAT'S VERY IMPORTANT.
WE ARE STILL DOING CONDOS.
>> WE DO THE SAME THING WITH
RESPECT TO HOW WE STRUCTURE THE
LOANS.
WE ARE NOT ADVERSE TO CONDOS.
IT IS THE SAME ANSWER WITH
RESPECT TO ALL THE PRODUCTS.
WE ARE ALL DOING HOTELS BUT YOU
HAVE TO BE CAREFUL.
SAME THING WITH CONDOS.
>> EMERGING NEIGHBORHOODS.
PEOPLE ARE SAYING, WE HAVE
FERRIES NOW.
IF YOU ARE NOT RIGHT NEAR IT,
YOU HAVE A TRAIN THAT WILL TAKE
YOU TWO HOURS TO GET YOU.
>> DEPENDS ON WHAT YOUR
DEFINITION OF EMERGING
NEIGHBORHOOD.
IF IT'S TRULY AN EMERGING
NEIGHBORHOOD, IT'S TOUGH BECAUSE
YOU REALLY ARE SPECULATING.
>> THEY CAN MAKE A LOT OF MONEY
AND MAKE SHARP SHOTS, WE ARE IN
MARKETS IN 24/7 CITIES WHERE THE
LIQUIDITY WANTS TO BE.
WHERE THE DEMAND IS AND RETURNS
AFTER A CYCLE AND YOU HAVE THE
SOPHISTICATION LEVEL OF THE
SPONSORS.
>> THE LARGEST CITY IN THE STATE
OF NEW JERSEY IS NEWARK.
THERE ARE CERTAIN THINGS TAKING
PLACE IN NEWARK,
BUT THE IRONY IS
THAT THEY JUST HAD THE TOPPING
OFF CEREMONY FOR RECTOR STREET.
IT STARTED ABOUT SEVEN YEARS AGO
AND IT IS TAKEN IN THAT LONG TO
BUILD THE FIRST NEW RESIDENTIAL
RENTAL BUILDING IN 50 YEARS.
>> AND NOW IT HAS EMERGED.
>> THE QUESTION IS HOW DO YOU
LOOK AT CERTAIN DIFFERENT
MARKETS LIKE NEWARK OR JERSEY
CITY, LONG ISLAND CITY WHICH WE
WERE TALKING ABOUT WHICH HAVE AN
ENORMOUS NUMBER OF HOTELS AND
RENTAL APARTMENT BUILDINGS.
>> THAT WAS AN EXAMPLE WHERE
THERE WERE TONS OF RENTALS BUT
VERY LITTLE CONDO PRODUCT.
CONDOS ARE MOVING WELL BECAUSE
THERE ARE SO LITTLE PRODUCT OUT
THERE.
BROOKLYN IN GENERAL
ALSO HAD A LACK OF CONDOS
RELATIVE TO RENTALS.
THERE ARE AREAS.
MANHATTAN MAY HAVE HAD CONDOS IN
CERTAIN MARKETS BUT THERE ARE
POCKETS OF OPPORTUNITY IN THE
BOROUGHS.
>> WE WERE IN LONG ISLAND CITY
ON A LARGE DEVELOPMENT.
THERE WAS A LACK OF CONDOS AND
THEN WITHIN 12 MONTHS THERE WERE
NUMEROUS CONDO PROJECTS COMING
IN AT THE SAME TIME AND WE WERE
IN A DEVELOPMENT LOAN AND
CONSTRUCTION LENDERS BECAME MORE
CAREFUL BECAUSE THEY WERE ALL
COMING TO MARKET TO THE SAME
TIME IN THE PRICES WERE JUST
UNDER MANHATTAN AND MANHATTAN
STARTED DROPPING.
THE OPPORTUNITY IN LONG ISLAND
CITY WENT BACK TO RENTAL.
A NUMBER OF PROJECTS THAT ARE
CONDO DEVELOPMENT PLANS ARE NOT
GETTING FINANCED.
>> I THINK YOU WILL SEE A LOT OF
PAIN IN LONG ISLAND CITY.
IF PEOPLE ARE GIVEN THEIR
CONCESSIONS ON PRICING, THEY
WOULD MUCH RATHER LIVE IN
MANHATTAN AND I THINK YOU ARE
AWASH IN A LOT OF SUPPLY AND
HAVING THERE WILL BE POCKETS OF
DISTRESS DESPITE OVERTIME GIVEN
DEMOGRAPHICS, PEOPLE WILL SHIFT
AND THAT WILL BE ABSORBED.
UNDERCAPITALIZED SPONSORS WHO
CAN'T AFFORD TO MAKE THE
CONCESSIONS THAT NEED TO BE MADE
TO FILL THOSE UNITS, I THINK YOU
WILL SEE SOME DISTRESS AS THE
CYCLE MATURES.
>> HOW DO YOU SEE THE SUBURBAN
OFFICE MARKET?
YOU DID A DEAL RECENTLY IN
STAMFORD.
I'M TALKING ABOUT IN GENERAL
ABOUT THE SUBURBAN OFFICE
MARKET.
IN 30 YEARS, WESTCHESTER HAD NOT
SEEN RENT INCREASES.
IF YOUR BASIS IS WHAT YOU'RE
SAYING IS FINE, HOW DO YOU LOOK
AT IT?
A LOT OF PEOPLE LOOKING AT THE
BASIS AND AT THE KEY TODAY.
TRANSIT ORIENTED DEVELOPMENT IS
IMPORTANT.
IF IT COULD BE REPURPOSED,
TAKING THE OFFICE BUILDING AND
MAKING IT A RESIDENTIAL THING
WHICH HAS HAPPENED QUITE A BIT
IN WESTCHESTER.
IT WAS WRITTEN UP IN THE WALL
STREET JOURNAL.
IF YOU ARE TAKING CERTAIN
MARKETS, THE OFFICE MARKET IS --
>> YOU HAVE TO BE CAREFUL.
YOU HAVE TO GET VERY SMART IN
THAT MARKET.
THAT MARKET MOVES DIFFERENTLY
THAN THE NEW YORK MARKETS WHICH
WE ALL LIVE AND BREATHE AND ARE
ON TOP OF.
>> NOW YOU OPERATE IN LONG
ISLAND.
>> THAT IS DIFFERENT.
>> HOW DO YOU LOOK
AT THAT MARKET?
BECAUSE IT'S DIFFERENT ONE.
>> WE HAVE AN OFFICE THAT
ALLOWED US TO DO LARGE TOWNHOME
DEVELOPMENT NEXT TO OUR
OFFICE. WE WERE WATCHING THAT
MARKET.
WHEN I WAS SPEAKING ABOUT THE
SUBURBAN OFFICE,
GENERICALLY, THOSE ARE MARKETS
THAT MOVE NOT NECESSARILY
CONSISTENTLY WITH THE METRO
MARKET WE ARE SPENDING TIME IN.
IN ROSALYN, WE KNEW THERE
WAS A NEED FOR EMPTY-NESTERS OR
YOUNG COUPLES COMING FROM THE
CITY FOR LIVING THAT WAS REALLY
URBAN LIVING THAT DID NOT EXIST
BEFORE AND THAT PROJECT HAS
BEEN SUCCESSFUL.
WE TOOK AN EQUITY STAKE AS WELL.
FOR US TO LEND ON A PROJECT LIKE
THAT WOULD BE VERY CHALLENGING
BECAUSE THERE WAS NOTHING ELSE
IN THE MARKET LIKE THAT.
WE BELIEVED IN THE THESIS AND
SPONSOR IN THE FIRST -- WERE
LARGELY SOLD OUT.
>> FROM A MACRO PERSPECTIVE,
VERY NEGATIVE VIEW IF YOU
LOOK AT DEMOGRAPHIC TRENDS.
MILLENNIAL WORKFORCE IS
LIVING AND WORKING IN CITIES.
WHEN YOU LOOK AT MICRO MARKETS.
WE GOT PAID OFF BY A LARGE LOAN
WE DID IN GREENSBORO AND THE
SILVER LINING NORTHERN VIRGINIA.
SPONSORS PROVEN EXECUTION OF
LEASING IT.
YOU HAVE GOVERNMENT DEFENSE,
SPENDING, THAT IS BEEN FILLING
THOSE BUILDINGS.
PLUS IT IS IN THE PER DIEM OR
THE -- GOVERNMENT
AGENCIES CAN LEASE
THAT AND IT WILL BE A VERY SOLID
BUILDING WITH TRANSIT ORIENTED
DEVELOPMENT CHARACTERISTICS.
THAT IS A TEXTBOOK WHERE PROVEN
SPONSOR, PROVEN LOCATION CAN
UNDERCUT THE MARKET GIVEN THE
SPONSORS BASIS.
THAT'S A GREAT SUBURBAN OFFICE
STORY.
TALKING ABOUT MACRO TRENDS,
SUBURBAN OFFICE HAS NOT
RECOVERED FROM PRIOR CYCLE
PRICING RELATIVE TO THE PRIOR
CYCLE.
>> I WAS JOKING WITH
A FLORIDIAN BEFORE SINCE HE
COMMUTES ON THE PLANE.
ALL OF YOU HAVE EXPOSURE IN
FLORIDA EXCEPT YOU.
HOW DO YOU FEEL ABOUT THE
FLORIDA MARKET?
>> SAME WAY I FEEL ABOUT ALL
THESE MARKETS.
THERE ARE SUBMARKETS, MICRO
MARKETS.
THERE ARE DEALS THAT MAKE SENSE.
ALL OF US LEND ON THE BASIS.
I DON'T THINK YOU CAN BROADEN
BRUSH -- YOU CAN BROAD BRUSH
FOR SURE. BUT WE PURSUE A
VERY SMALL PERCENTAGE.
MY POINT TO YOU IS WHEN YOU SAY
HOW I FEEL ABOUT FLORIDA, WE
TURNED DOWN A LOT OF DEALS
IN FLORIDA BUT WE ARE DOING
THEM.
IT DEPENDS ON THE SPECIFIC DEAL.
THERE ARE PARTS YOU HAVE TO BE
CAREFUL ABOUT.
THE CONDO MARKET IN MIAMI IS
FAIRLY FROTHY.
IT'S HARD TO FIND A DEAL IN
MIAMI WHERE THERE IS A BASIS
THAT MAKES SENSE.
>> WE JUST GOT PAID OFF TWO
LARGE PROJECTS, BUT WE ENTERED
INTO BOCA BUT WE LIKE THE GROWTH
PROFILE AND TRAJECTORY
DEMOGRAPHICALLY.
THE NEW TAX LAW PROMULGATES
THINGS FOR A MARKET LIKE
FLORIDA.
IT IS PROJECT SPONSOR SPECIFIC
THAT REALLY THE REAL ESTATE
LOCATIONS.
>> A LOT OF BANKS PULLED OUT OF
THE MARKETS.
THERE IS AN OPPORTUNITY AND
BECOMING 24/7 MARKET IN TERMS OF
MIAMI.
THERE SEEMS LIKE IS A LOT MORE
MOMENTUM BECAUSE AS A LOCAL
MARKET IN GENERAL.
>> THAT'S A GOOD POINT.
THERE ARE SOME MARKET LIKE FORT
LAUDERDALE THAT ARE VERY
POSITIVE TRENDS.
YOU COULD ALSO GET HURT.
>> IN GENERAL I WOULD SAY THERE
IS MONEY OUT THERE BUT THE KEY
IS BASIS DRIVEN, SPONSOR
DRIVEN AND ALSO RISK REWARD.
IT IS A GOOD THING WE HAVE THE
ALTERNATIVE LENDERS BECAUSE
THAT'S THE MAJOR PLAYERS TODAY
IN THE MARKET.
I WOULD LIKE TO THANK JOSH,
ROBYN, PETER AND TONY.
SEE YOU NEXT WEEK.
♪ [THEME MUSIC] ♪
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