Friedman LLP recently hosted a real estate forum on "The Rise of Alternative Lending in Commercial Real Estate". The forum featured an interactive panel discussion composed of industry leaders who spoke about their firsthand experience with this increasingly popular source of funding. Watch the recap video below for forum highlights.
Featuring: John Catsimatidis of Red Apple Group, Michael Maturo of RXR Realty, Martin Nussbaum of Slate Property Group, Leor Siri of Silverstein Properties, Robyn Sorid of G4 Capital, Peter Sotoloff of Mack Real Estate Group, Michael Stoler of New York Real Estate TV, LLC and more.
From new tenant models to the bold promise of opportunity zones, a panel of top real estate financiers painted an optimistic picture of New York’s fast-changing development landscape at Friedman’s Real Estate Forum on November 29.
The annual panel convenes top players in the community to relate an insider perspective for Friedman clients and others who are investors, owners and builders.
With all the panelists reporting high deal volume, they noted the ancillary benefits of Amazon.com Inc’s pending establishment of a New York headquarters, as well as the potential yield of investments in federally recognized opportunity zones such as significant capital gains tax breaks.
“We are 100 percent laser-focused on the New York City market,” said Robyn Sorid, president and co-founder of G4 Capital, noting that it has rebounded more quickly from the credit crisis than secondary markets.
Michael Maturo, president of RXR Realty LLC, noted growing interest in the city from the tech sector. “We’re very bullish on Manhattan,” he said. Despite controversy around the range of incentives granted to lure Amazon, Maturo pointed out “they’re just going to continue to grow. It’s another layer of proof that the tech industry is coming into Manhattan and New York City in a big way.”
The panel, moderated by Real Estate TV’s Michael Stoler, had mixed views of the condominium market in light of federal tax reforms but generally saw opportunity in that sector.
“At this point in the credit cycle we’re being very careful, picking the best sponsors; we are finding opportunities where there are special situations,” said Sorid. “If we think everyone is looking at condos in a certain way we will take a nuanced look.”
With so much capital flowing into the market, panelist Martin Nussbaum, principal at Slate Property Group, said a key challenge was to make quick decisions while remaining judicious.
“There’s a tremendous amount of competition we’re seeing on anything we’re actively looking into,” he said.
The panelists discussed two of the biggest modern innovations in commercial and residential real estate: co-living, in which renters live in modest rooms with common spaces and amenities, such as health clubs and social events; and co-working, with such companies as WeWork taking up large leases to provide incremental space for start-ups, freelancers and other small business uses.
“We believe it’s an industry that’s here to stay,” said Maturo, whose company leases to WeWork. “We are embracing them as a partner.”
Leor Siri, CFO of Silverstein Properties, said his company created Silversuites as a higher-end short-term office provider, “the Four Seasons of office space for very selective tenants.” Companies that grow from these spaces, he said, tend to then lease entire floors in Silverstein’s World Trade Center towers.
But other panelists are steering clear, citing the need for above-market rents to make it feasible.
“We had to kill a deal because we couldn’t make the numbers work,” said Sorid.
Added Nussbaum “That’s not an asset class we are going to be lending on, period.”
As for co-living properties, Nussbaum said “Based on what I’m seeing in that space I don’t think it’s that sustainable,” since tenants in these spaces tend to be short-term.
In his presentation on opportunity zones, Steven Bokiess, leader of Friedman’s new practice group in that area, explained that there are 8,700 zones designated by the states and recognized by the federal government, encompassing 12 percent of the country, creating unprecedented opportunities for tax savings.
The benefits for investors are two-pronged, said Bokiess. “The first is the temporary deferral of realized capital gains until December 31, 2026. And the second is if the zone investment has been held for over 10 years, any appreciation completely avoids income tax.”
Maturo said RXR expects extensive participation: “We have a pipeline of over a billion dollars in these zones. We are going to be out of the gate very quickly on this.”
Keynote speaker John Catsimatidis, chairman and CEO of the Red Apple Group, who is marking his 50th year in the real estate business, also expressed optimism about New York real estate, discussing his own development of residential towers in Brooklyn’s Coney Island. The beachfront property was purchased via 1031 exchange funds, allowing reinvestment of property sale proceeds with capital gains taxes deferred.
“We believe we will fill the 425 apartments faster than anyone thinks,” he said, noting the seaside views, rare in the five boroughs. He expects upwardly mobile residents of Brooklyn and Queens to be drawn to the location.
Known for his chain of D’Agostno and Gristedes supermarkets, Catsimatidis noted that “you can’t be in the supermarket business without being in the real estate business.” The markets are increasingly serving as convenience stores in their surrounding communities, making key locations crucial. “If you don’t want to use Amazon, you are our customer.”
Friedman Co-Managing Partner Fred Berk, in his remarks, noted that the firm, consistent with New York’s business boom, has outgrown its Midtown headquarters and looking forward to new offices Downtown in the spring. “We’re lucky to be growing and hiring the best people,” he said.