rent apartment hoboken

♪♪ [theme music] ♪♪ >>>michael stoler: as wecelebrate the 800th broadcast we have tofigure out where is 2016 with regard to investmentsand the real estate market in new york and thesuburban areas? so i've assembled this group ofdynamic young real estate leaders. as i would call themthe next generation of real estate leaders to providetheir insight into 2016. my guests today includewill silverman who is the

managing director athodges ward elliott. amir hasid, who is theco-founder and the chief investment officer hapinvestments. adam hess who is a partnerat terracrg. peter von fer ahe who is asenior vice president at marcus & millichap. and last but notleast jason mair who is the director of the new yorkoffice for stan johnson company. so i have my crystal ball,i have my crystal apple and i don't know.

you know, will said to meit's a little murky over here. so is it murky? >>>will silverman: i don'tthink it's murky. i think what we've seenmichael is that for a while the market has beenaccelerating very obviously but there'ssomething in particular that's been happening asthe markets accelerated, which is that it isn't somuch that all property values have risen inlockstep.

i think one of the thingsthat's happened that a guy named matt adell oncepointed this out to me is that when the market goesup what's really happening is that the gap between the bestand the worst is narrowing. and the worst starts toprice like the best. and i think what we're startingto see is the separation of that. so the best is the stillattracting attention and attracting good tenantsand good buyers but the stuff that was gettingpriced as though it was

the best when it wasmediocre or worse is now starting to separateagain. >>>michael stoler: sohere's the question as i said i have fourinvestment people and i have one investor.how do you see it? >>>amir hasid: i thinkthat the market is going to be maybe it will takemore time to make this but this will happen in theright price and i think that more money will come fromdifferent places in the world.

that's europe that we cansee that people are looking to invest heresome more. so maybe it will take moretime because it's also different money anddifferent investor. they are not thataggressive as the new york market investment that areused to but i think 2016 would be a good year. >>>michael stoler: now,adam brought up a comment before when we were in thegreen room that he had

recently had done a largemultifamily deal at the end of the year and theinvestors were not from europe, they were not fromthe middle east. they were investors fromnew york city. >>>adam hess: yeah. they're investors from newyork city and they owned a lot of other real estatearound the country and their basic take was youknow they had disposed of a lot of their assets inthe rest of the country

and i think on the subjectof the market we take it for granted in new yorkcity because our market has been so good from 2010on. i mean we've come back somuch quicker than the rest of the world and the restof the country so i'm hearing people now notjust foreign investors, investors in the restunited states that are, you know, the marketsfinally started to come back. they've been able todispose of some of their

assets without taking toomuch of a bath and they're desperate to bring thatmoney into new york city. so i think, i mean, i hearall the time on all the different shows foreigninvestors foreign investors. you talk about the market. everyone's very nervous aboutwhat's happening. you know? are we going to have a bigslide down again because of what's happening inchina or what's happening in the middle east and ithink and i think that's

what you're saying is thatthe more that stuff happens around the worldthe more of a safe harbor it makes new york and morethat's going to continue to drive our market. i don't know if it's goingto, people are going to keep paying for caps but ithink the market's going to stay a good volume. >>>michael stoler: youknow, peter was saying you know part of the situation and ithink the general concept was

that people are taking longerto do a transaction. part of it relates to governmental, youknow, the h.c.r., the rent stabilization board,you know, other situations- >>>peter von der ahe:well, you know, people don't want to make amistake right now. people don't want to makea mistake. the market's gone up for five and half orsix years straight and they're- >>>michael stoler: lookyou can go write another book. >>>peter von der ahe: i know.it's time. it's actually time to

but you know people don'twant to make a mistake. i think there's just ageneral sense of you know we're in a certain part ofthe cycle. you know and as you pointout on there we noticed that also this year isthat if you look back on 2015 the diversity ofbuyers that we did deals with it was a much morediverse group than previous years and we havepeople who are you know big retail owners anddevelopers coming in and

making their firstmanhattan multi purchase you know office buildingguys. people who usually werejust doing ground up development who werelooking to diversify their portfolios and add somecash flow and so you know not only is the group morediverse but what's driving them is more diverse andwhat's you know what's the motivation behind theinvestments themselves. >>>michael stoler: nowpart of the motivation of

investments is tax lawsand you know one of the big things on the tax lawis the 1031 tax free exchange you know matchinga property over there and that's one of the, a lotof your business comes that way right? sohow do you see it? >>>jason mair: you know ithink as we went into the second half of 2015 westarted to catch a little bit of a headwind. we saw that theinstitutional reads like

american realty capital,realty income and inland had pulled back a lot. that affected our businesswhere you know i would say we were down about 14%. you know locally here innew york i mean again the transaction volume waslargely driven by the large family office,private investors and they picked up a lot of theslack and again on a national level we saw alittle bit of a pullback.

we were still able to youknow see a 14% growth overall you know hittingaround 3.5 billion dollars in sales overall again butthe projection models where we were on pace intothe beginning of 2015 put us at a higher level atthe end of the year. i look at you know goinginto 2016 as we're going to see a little bit of aspillover from 2015 into the first quarter anddepending on what litmus test i'm really going touse to look at 2016.

you know there's a lot offactors. if i take technical analysis vs.fundamental analysis. you know- >>>michael stoler: i likenapkin analysis. >>>jason mair: you knowagain, napkin analysis you know i think that interestrates does play a part and you know what's going onin the world does play a big part so you know therewere events that happened in 2008 that brought us to ahalt and caused a lot of damage. i think that those sameoutliers are still there.

that same event can occuragain so when we talk about transactions takinga little bit longer you know there's a reason forthat. you can't afford to be wrong when you knowthat you're at the tail end. >>>michael stoler: andrelating to that specifically is certain ofthe banks are saying to me, i was with a dynamicyoung president of a bank the other day and he says,i'm not worried about the period two years.

he says i'm worried whensomebody is taking out their money in a multifamilyspecifically. you know? they've taken the moneyout and it's four to five years, they'renon-recourse, they don't have to worry and fuelwent up by that time, insurance went up, realestate taxes went up and rents did not match thissituation. i'm worried about that andi think that analogy example and you knowespecially since you

brought up 2008 is like inthe big short, go see the big short and they say youknow people bought a building, then they refinancedit, they refinanced it. it's the same problem inthe taxi industry. the reason that we have aproblem in the taxi industry it's not thatthere's uber or lyft over there, it's that the peopleover leverage the situation. the over leveraging canhave an effect on the investment sales marketalso.

>>>peter von der ahe: wellwe've had a basically the recovery itself has beenall asset based. you know that's what's happening in thestock market right now. it's overvalued. it'scoming back and a little bit you're seeing this in thereal estate market where people i think are looking andthey're saying to themselves i want some ofthe fundamentals underneath the assets tocome back. you know it's probablywhat you're seeing in

other parts of the countrytoo. >>>jason mair: again, youknow, we're a flight to quality and safety. i mean the singletenant at least universed is backed by the credit ofthese major corporations so they're not you knowreally as exposed to the market fluctuations oflet's say or regulations as the same waymultifamily or development would be so you know withthat- >>>michael stoler: youknow cycles change.

we were talking about t.d.reducing the size of their branches. chase opening branchesbut a smaller situation but let's look at a situation. i remember when i wasdoing some financing let's say 15, 18 years ago witha favorite tenant. if you said the gap or yousaid banana republic. that was fine. it was credit. it was everything over there oryou know go back even further. sports authority, kmartand all the rest. what happened?

some of these businessesaren't going to be around. there's a change.the world changes. >>>will silverman: but michael,there's two things in that. one is there's a changingnature of retail because there's a new category ofretail store that hasn't previously existed, which is thebrand experience store. right? you've got stores now thatexist solely for the purpose of reinforcingbrands. you've got car dealershipsdoing it in the meat

packing district.you've got samsung. microsoft. you've also got stores where youcan't walk out with anything. you've got stores likewarby parker and bonobos. so there's entirely newcategories of stores- but there's an entirely newcategories of brand experience retail thatdidn't exist previously so while some of those groupsare contracting you've also got a lot of tenantsin the market that are just new tenants in existence let alonein this market. so i think

there have been some peoplethere to pick up that slack. >>>michael stoler: youhave investors from the middle east, ok, and fromeurope. when they come, when youdo as we would say proverbially a road showit's a similar thing that they do when they'remeeting with people, what do they ask you?what do they say? >>>amir hasid: so i agreewith what you said before about investing in newyork.

they're asking for a lessreturn because of the situations all over theworld so they look at new york as a safe market eventhough we saw 2008, even though there was everyoneknows there are cycles in real estates andeverything in life but they believe in the powerof new york because after 2008 if whoever came heresaw that the market was becoming very good veryquickly so now actually people believe more evenin new york market.

they want to invest more. >>>michael stoler: but youknow adam brought up before you know we weretalking about brooklyn multi-family apartments sellingat eight hundred a unit ok? eight hundred thousanddollars a unit. there's a question of whatrents. now i do believe thatmillennials coming into new york and people want to behere and everything's fine. if there's a slowdown inthe economy i'm not saying

a recession i'm justsaying a slowdown somebody who's earning x dollarsyou know who's a millennial you know andthey're paying for their share of an apartment youknow there's no more affordable apartments innew york city. it's a difficulty overthere. and you know certainpeople believe even when they buy something ateight hundred thousand dollars or a million onethat they can reconfigure

the apartment and get therents up there and everything but you haveregulations. you have other things. you know that may have alittle stymie effect on 2016. >>>adam hess: yeah i meani agree with what you're saying. i think that first of allwe have so many units coming onto the market rightnow. we have i think you said- >>>michael stoler:sixty thousand. sixty thousand residential.rental, rental, rental.

>>>adam hess: in brooklynalone we have in 2015 six thousand units coming ontothe market. so you know the showsabout what's going to happen in 2016 the onlything that really keeps me up at night is that numbersix thousand. and then when i drive downdean street by pacific park to my office andthere's 353 units coming on to the market so theabsorption is how those apartments get absorbed is whereit's all going to shake out.

if they're absorbed well ithink that you know we can keep coasting around alittle bit. if they're not absorbedand we have a glut in the market i mean that canripple over into multi-family. >>>michael stoler: sohere's a question. i mean, peter you live inwestchester correct? >>>peter von der ahe: inconnecticut. >>>michael stoler: inconnecticut. you've learnedconnecticut.

you've learned connecticutthat's the side of the- >>>will silverman: north. >>>michael stoler: north. >>>amir hasid: ok.i thought it was the opposite. >>>michael stoler:ok. he lives in brooklyn. ok. two brooklynites overhere. break myself here. >>>amir hasid: i'm notinvesting there so i don't- >>>michael stoler: butthat's part of my question. >>>adam hess: you're fiveyears too late.

>>>amir hasid: i know. >>>michael stoler: whatabout, what about, you are investing in jersey city. there are people who areinvesting in westchester today. people are investing inparts of connecticut. jersey has seen somerecent activity because of you know the governors andother people. where are, if you go to aninvestor and say you know i want to go to hoboken.

you think they're going tounderstand hoboken? >>>amir hasid: part ofthem will look at it as part of new york but ithink the most important and this is what we aresaying, i'm hearing and saying all of us here,it's taking more time to make a deal because youneed to believe in your deal and to see that as adeveloper i can say it, that it's was in rentaland condo. and it's really hard tofind rentals project today.

in part people will saythat it's impossible so if it's impossible yeah it'srisky because then you're gambling, then you'respeculating, you're thinking about the market,that it's the condo eight hundred thousand or one milliondollars it's still affordable. who knows what it will bein two years, three years. >>>michael stoler: now, you aremore involved in land sales and development but we havea general comment before that land sales pricing aredown. certain people said

they're down 10 to20%. is that what you?- >>>will silverman: i don'tknow that you can, i think it's probably tooidiosyncratic to particular sites becausethe nature of the way that land is priced is sosensitive to condominium sellouts that the math canget a little bit screwy so a site that's experiencingprice contraction from five hundred dollars afoot will experience it differently than one ofone thousand dollars a

foot but i think whateveryone agrees on is that the air is thinner at thetop and there were a lot of transactions that weretrading with one or two bidders ahead of the restof the pack and those couple bidders probablythought a year ago that they had a lot morecompany than they actually did and i think whateveryone is seeing is a lot of those peoplebecoming hip to the nature of the competition or lackthereof.

but that's not to say thatthere isn't still a demand for very premium stuff. i spent a week in chinalate this fall and all you heard when you went and wemet with 25 different investors there, all theywanted to talk about was new developmentopportunities in new york city. so there's still a lot ofdemand for prime stuff but it's got to be prime toyour point. people are saying and topeter's point earlier

people are saying if i'mgoing to pay these prices at this moment in themarket on what people believe to be the righthand side of the of the curve then i really needto be sure. >>>michael stoler: jason,you do mostly as you were saying before credit. you know sales of creditproperties and i diluted it a little bit by givingthe gaps story. where do you see themarket today?

what's the preferred asset? ok.is it the, are they very game on the c.v.s.'s, the pharmaciesover there? is it the banks? you know what's the typeof assets that you see investors reallyinterested in? >>>jason mair: i wouldtell you the quickest pullback, the most recentpullback we've seen was in the flat lease walgreensand c.v.s.'s. the pending walgreens riteaid merger. immediately we saw a cap ratesspike of fifty basis points.

i mean it was immediate. but again you know in newyork city and again you go internationally everybodywants to buy new york. they want to develop.he goes to asia, comes back, everybody says whatcan you get me? i still want to buildsomething. the retail in new yorkcity is probably the hottest thing i would sayglobally- >>>michael stoler: so whatabout the retail, not new

york city, let's say, newjersey is not under retailed. new york city is underretailed. new jersey retail. how do you see new jerseyretail? >>>jason mair: you know i lookat new jersey as one gigantic retail corridor. i mean route9, u.s. 1, route 17, route 4, route 202, i mean, route 22,it's just a recycling- >>>michael stoler: didyou work for aaa? >>>jason mair: but youknow it is a recycling of retail you know every tento fifteen miles and the

best corners and the bestlocations. you know new york cityagain the best retail corners in the boroughs,the best corners, the best locations, right outsideof a subway stop. the demand for that typeof product is always going to be insatiable though thelarger new york families that are repositioning retail,that are developing retail. you know we do somethingcalled the tenant market expansion report where wetrack the largest national

tenants and look wherethey're going. and again i was trying tomake a point before about you know starbucks andchipotle coming to kings highway in brooklyn andtheir projections were at seven hundred dollars afoot, starbucks was when they came to kingshighway. they're doing north of twentytwo hundred a foot in sales. chipotle again also underprojected their sales at about five hundred andfifty and i believe that

they crossed the twothousand dollars mark again in sales per squarefoot so when the national start to wake up to thefact that brooklyn is on fire not just indevelopment but in retail- >>>michael stoler: and all iwanted was the dollar stores ok? >>>jason mair: and againthey're expanding too in the boroughs. i mean deals,dollar general, have also expanded. we're seeing the, i'msorry to say it, we're starting to see the death of mom and popeven in the strip centers.

>>>michael stoler: youknow that's interesting. last week i took a walk onthe day of new year's eve and i walked on 1st avenue and ipassed across the street from stuyvesant town all ofthese mom and pops that existed. you know a mom and popdress shop. a hardware store and i'm saying to myself,they're not going to exist. i mean they're not goingto be able to pay the rent's over thecircumstance. now when you're selling,both of you, you know in

the multifamily withregard to the retail, how important is the retailcomponent of the building? >>>adam hess: i think thatpeter will agree with me but i think that that kindof depends on the buyer. i mean there's a lot ofbuyers that if the retail is good enough theirattitude is you know what, we'll deal with thetenant. it's fine. we understand we're already in thisrent stabilization game. or there is buyers thatare buying it purely for

they see the stability ofthe new york city rental market. people are always going towant to live there and if the retail is good and ican get it to turn over but i don't think there'sany one approach of going to go in and get theretail out. >>>peter von der ahe: ormaybe you can look at as the percentage of theincome. so if the retail is up toyou know 40% of income- >>>michael stoler: thenit's a different world.

>>>peter von der ahe: thenyou start to change the complexion of the buyer alittle bit but as long as you're below that amountit's more widely accepted. >>>michael stoler: youknow one area and i noticed the sales pitchthat came over the internet yesterday from somebody; thisis a to be built building. i was on 23rd street that somebodywas already pre-selling they had hired an investmentbroker to sell the retail component even before thebuilding was constructed.

are you seeing that?are you involved with that? >>>will silverman: that'snot an uncommon trend. i think we've seen thatfor some time because also it's just a way to stopthe clock ticking on your money- >>>michael stoler: sure. it'sgoing to save your construction. >>>will silverman: -and ithink your lender likes to see you doing that andlikes to see you taking that money and there's notthat much of a gap between the price you would get.

it's not like the retailinvestor needs to see the finished product in orderto understand it particularly if it'salready been leased. >>>michael stoler: no i'msaying this was not leased. >>>will silverman: ifyou're at a strong enough location i think peopleare comfortable with understanding where theunderwriting is. >>>michael stoler: amir? >>>amir hasid: i agreewith you.

we just did it in 123rdand 3rd avenue. we know developing but wesold the retail. >>>michael stoler: howmuch retail was there? how many square feet? >>>amir hasid: it's twelvethousand five hundred. >>>michael stoler: and whattype of tenant do you think?- >>>amir hasid: supermarket.i sold it to a supermarket. and then i get the bonusand i get two more floors and i secure part of the deal and iknow what is my outcome already

so. in this market in thesedays you have to take, this is the thing that youneed to be more creative about. >>>michael stoler: soyou're basically saying, which relates to thecomments over here, there's a necessity to bemore creative, a necessity to do a little more duediligence. also you have thegovernment control in other situations over there.now here's a question. you know a number of years, let's goback to pre-2008 when you were

all in the business in adifferent market. were you here? >>>amir hasid: in adifferent place. >>>michael stoler: no, you whereyou were in different place. at that time the privateequity funds and i was with one of them all we wantedwas multifamily apartments. ok? and then what happened waseverybody said that the bad private equity funds were tryingto get rid of the tenants. like stuy town, which wasnow recently sold. ok? and as i told someone, i knew itwas sold. they couldn't care.

it was the air rights andall the rest. do you see the private equitycompanies coming to you? to you? wanting to once again buymultifamily? >>>peter von der ahe: wellback then they used to send them a building andwe'd have a discussion, say what'd you think? and they'd say, you knowthis building's got too many free market tenants. send me something withmore stabilized.

and now i can send in thesame building and they'll say you know what thisbuilding has too many stabilized tenants, sendme something with more free market in it. >>>will silverman: whati've seen is we recently marketed a thousand unitportfolio in the bronx and what was interesting was alot of the big opportunity fund and value ad namesthat have not been in that business before, neitherthis cycle nor a prior

one, were kind of comingup and kicking the tires and really wanting to dig deepin understanding that market. it's an interesting gamethey're playing because what some of them aresaying is instead of engaging in this part ofthe game of like chasing the gentrification alongthe l train as it goes further east they want tochase the other side of it, which is where the peoplebeing gentrified out going and looking for affordableapartments and that's the bronx.

and a lot of it, it's likethe old joke of in a gold rush you want to be theguy selling shovels not panning for gold and it's sortof that kind of trade. right? and so we're starting tosee a lot of them start to look at it but it's not somuch about is it rent regulated or free marketbecause the reality especially in the bronx isthat so many of these tenants are effectivelyfree market because their rent is below what youcould legally charge

anyway but it's aboutthere being a really compelling investmentthesis that feels a little bit contrarian right nowand i think you are going to see many of themreturning to that sector. >>>adam hess: in brooklynfor the last couple of years me and my partnerofer cohen, we've been meeting with the hedgefunds, the institutional players for three or fouryears now. as soon as the lights wentback on in the market, the

banks turn the spigot backon, the hedge funds, institutional players,they're in our office and a couple years ago theywere only looking at the real prime sort ofbrooklyn neighborhoods. park slope, downtown brooklyn,carol-cobble-boerum, that area. now, i think the seachange is they have been coming in and you'rehearing these guys say bushwick and you'rehearing them say prospect-lefferts gardens,you know?

david kramer hudsoncompanies has a big project over there so ithink that's when you- >>>michael stoler: arethey saying, are they saying coney island andeast new york? >>>adam hess: i have notheard coney island and east new york yet but i'msure it's just a matter of time. it's going to get there. but i think that's the seachange is that they're coming in and they'relooking at all of brooklyn.

now i know this isprobably true in the parts of upper manhattan, thatpeople didn't used to look at washington heights. that these guys arelooking there now and they want to buy and they want to bein on multifamily absolutely. >>>michael stoler: so as alook at the apple i say i'm going to keep it onthe positive side. i'm not going to turn it overand i think 2016 looks pretty bright. there are circumstanceslike china and other

places that have an effecton all of the world but you know we have to seewhat happens in the future and i think that hopefullyas i celebrate my 800 maybe when i do my 850th you'llcome back and we'll talk again. i'd like to thank mr. willsilverman, amir hasid, adam hess, peter von derahe and jason mair and i'll see you next week andthank you for being here today.