Face to Face with L&L Holding Co's Robert Lapidus Part 3

October 03, 2018

EisnerAmper Partner Lisa Knee interviews Robert Lapidus of L&L Holding Co. in the third part of this exclusive Bisnow TV feature. They discuss foreign investors' flight to quality product, the importance of design, investing in New York's "Downtown North," and CMBS uncertainty.


Transcript

Lisa Knee: We're here today with Robert Lapidus President and Chief Investment Officer of L&L Holdings Co. Rob thank you so much for sharing the afternoon with us on this beautiful day.

Rob Lapidus: Pleasure, we're not wearing coats but we're cold.

 

LK: There’re no walls.

RL: Yes that's true.

LK: You just mentioned that you guys are in New York and you and all your properties are in New York City have you thought about looking outside of New York City or even outside of New York State?

RL: Well when we're standing in cold weather like this I always think about Miami but I think that's more for a personal perspective, our competitive advantages in New York City we are known players here we know all the players here we know how to get things done whether it's through government relations, building department relations, we know the tenants we know the brokers we know the systems, you know how things are, so our competitive advantage is the strongest in this market. This is probably the best market in the United States and if you have a competitive advantage in the best market in a trillion dollar market 400 million square feet this is really where we want to focus more of our attention, who knows what the future may hold but there's a lot for us to do here in New York so we're focused on New York City.

We own two buildings downtown, 195 Broadway and 222 Broadway, right across the street from each other we call that part of Downtown North and that's the area with all the investment capital is taking place where the transportation hubs are and where a lot of this activity is happening. The transportation really transformed downtown and made it made it a positive experience traveling down there as opposed to the old style it's almost like a third world experience now within the transportation hubs downtown clearly as you know is on fire in a good way, all the infrastructure is being invested there in New York City. People want new product so another aspect why downtown is doing well is as you said Larry, new product, so World Trade Center and Hudson Yards that's really what the new product is even if those weren't considered main and main locations in the past I think that tenants today are interested in new product new design architecture that type of space and it's available there but in general we're very bullish on downtown certainly that part of downtown and what we've seen is almost like a transformation from the old economy to the new economy tenants who used to be in let’s say 195 Broadway. There were tenants like Thompson financial and Morgan Stanley and Holland&Knight and now we have you know Omnicom and Gucci and Nobu so you actually see the old economy versus new economy right in front of you and so again you create the product for them downtown, is certainly getting its share of quality tenants in the quality buildings.

LK: With the increasing interest rates in this environment how difficult is it right now to get financing on a once-in-a-lifetime portfolio like a Jehovah's Witness in Brooklyn?

RL: The financing markets ebb and flow all the time there's a big psychology component around it obviously the CMBS market is a little bit it's not that it stopped but it's more expensive now to do it because in that world people take down a loan and have to sell it out to someone else and there's more uncertainty around that, but I think with lending it always comes around to really good sponsorship and good products that are capitalized intelligently so regardless of the market conditions I think top tier owners and developers with top-tier projects will get the financing. It might be a little bit more expensive, but the market tells you what the cost will be, but you can get it done in markets that are growing extremely quickly when people who maybe shouldn't be involved in real estate development deals are doing it in getting financing well that stops in a situation like this which is probably a good thing, but we’ll conceive projects by top-tier owners that are well capitalized in good locations I think get financed through any market condition.

LK: What do you see with them in L&L Holdings Co., do you use foreign capital as investments and what are you seeing now with what's going on in the world are you worried about foreign investments in the United States?

RL: You know it's really interesting what's happening in the world right now it's really a dichotomy everything that we're worried about here in the U.S. is actually much worse overseas. So there's this flight to quality with foreign investor so clearly we have you know Middle Eastern oil prices around thirty dollars a share, what's going on with China, all of the dislocation in the Middle East, the Sunni-Shia, the Arab-Israeli, all the conflicts there it's all really bad, but what happens in New York we're investors we’re owners in New York City, New York is always a place where foreign capital wants to be because it's safe. The U.S. still has a rule of law that in New York City you can always sell irrespective market conditions in the worst market you can sell, it's a very liquid market so although some people are pulling back. There are other people if they have an allocation for real estate they want to be where it's safe at the end of the day. Just like debt securing equity for good projects I think it sort of goes to those who have the capability to execute.

LK: You talk about market timing, you very recently sold a ninety eight point six percent stake in Metropolitan Tower.

RL: Approximately.

LK: Approximately, to Mitsubishi can you talk about the timing of that and what made you dispose of that property or portion of the property?

RL: Well we're still in the deal our part near BlackRock had a fund life issue and so was there time to exit and so as we typically do we're long-term owners so we think about owning real estate for long periods of time but we need to create liquidity for our capital partners and that's what we did here so we went through a process created liquidity and we brought in a new partner. It’s Mitsubishi Corporation and Green Oak, they started a new core plus fund, the Green Oak is managing Mitsubishi and their long-term holders so I guess trouble in China hasn't been adversely affecting our ability to do deals with Japanese investors and so it's all good we'll continue to own it. They have a long-term view they're interested in investing capital in the building and we have a lot of activity going on already which is great.

About Lisa Knee

Lisa Knee is a Tax Partner and Co-Leader of the national Real Estate practice and leader for the national Real Estate Private Equity Group with expertise in the hotel, real estate, financial services, aviation and restaurant sectors and is a member of AICPA, New York State Society of Certified Public Accountants and the New York State Bar Association.

* Required


More Videos in This Series