Real Estate Outlook from the Experts
Earlier this month, some luminaries of the real estate world met for a panel discussion at Club 101 at an event co-hosted by EisnerAmper, “Real Estate Outlook: 2014 and Beyond.” The program began with a panel discussion featuring former NYS Governor David A. Paterson; Steven C. Witkoff, Chairman and CEO of the Witkoff Group; Mitchell E. Rudin, CEO of Brookfield Office Properties; and Glenn J. Rufrano, Chairman and CEO of O’Conner Capital Partners. Moderators included EisnerAmper’s own Kenneth Weissenberg, Tax Partner and Co-Head of the National Real Estate Practice; and Jeff Moerdler, Esq., Member of Mintz Levin and Commissioner of the Port Authority of NY and NJ. Over 200 real estate principles and professionals were in attendance at the program, which was organized by EisnerAmper’s Harry Dublinsky.
The opening question was directed to Governor Paterson by Jeff Moerdler, who asked how the Governor thought newly elected Mayor Bill DeBlasio would change the landscape for real estate in New York, particularly real estate development. The former Governor expressed hope that New York would not follow the White House’s example of, in his words, offering “continuous poetry and not enough execution.” He further explained that the continuous injection of money by the Fed into our economy has created a “house of cards.”
The entire panel was later asked what suggestions they had for the newly elected Mayor. The general view of the group is that they’re all hoping he rides inside the wake of current Mayor Mike Bloomberg. Considering the safety of the city is a top priority, the panel all seemed to be content and relieved with DeBlasio’s appointment of Bill Bratton for Chief of Police. They recalled the ‘80s and ‘90s where New York saw high crime rates and, obviously, no one wants New York to regress to those times. Governor Paterson also offered that Mayor DeBlasio should think of the future outside his term. Glenn Rufrano commented that the real estate community knows how to create wealth which should be rewarded and that Mayor DeBlasio shouldn’t forget that.
Jeff Moerdler asked Mitch Rudin to discuss his Brookfield Place development (formerly the World Financial Center) and how its retail space would compete with existing nearby retail locations. Rudin’s response was that Brookfield Place is “complementary” to the competitors and will bring in luxury retail tenants. The development was facilitated by the relinquishment of approximately 4 million square feet of space by Bank of America and Merrill Lynch. He reiterated that the development had a “terrific year” with over a million square feet of office space having been leased. He further explained that the demographic composition of NYC was changing and that there was a migration of tenants west and downtown and that his development possessed the requisite amenities to support major tenants and the current live-work-play lifestyle desired by young professionals. Downtown is no longer the price alternative, it is a demographic alternative, he explained.
Glenn Rufrano discussed residential development in the City. Glenn provided insight on Long Island City, one of O’Conner’s development locations, as demographically young and appealing for its quick train ride into the city. He also discussed Manhattan developments which have become a “pied a terre” for foreign investors.
Steve Witkoff provided his take on the West Side development. Witkoff agreed with Rudin’s statements about using waterfront to attract new tenants with new developments. He explained that he is in fact active on the west side with a couple of residential developments in the area and other developments in the works. Witkoff also sang Mayor Bloomberg’s praises as having done an amazing job for the industry. He also expressed concern with the onerous restrictions of Dodd-Frank and its negative impact on NYC. Governor Paterson later agreed with Mr. Witkoff on the Dodd-Frank issue.
Jeff Moerdler offered some of his own opinions as well, specifically as they relate to NYC airports and the need for improvement in order to increase capacity of air transportation for both consumers and cargo.
Governor Paterson and Steve Witkoff offered their opinions on EB-5 foreign investment, a government program created in the early ‘90s by Congress to stimulate foreign investment in new business enterprises in order to provide investors a method for obtaining US citizenship. They reiterated, EB-5 is a solid program, which can provide economic stimulus to fund real estate projects, and is a way for immigrant families to obtain U.S. citizenship. They also explained that, just like anything else, there exists the potential for fraud whereby an unscrupulous EB-5 operator could potentially defraud the foreign investors.
The second half of the conference featured Barry Lieberman, Chairman of Eastern Property Assets, interviewing Bruce Mosler, Chairman, Global Brokerage, Cushman & Wakefield. The two discussed the southerly and westerly migration of tenants as discussed by the earlier panel. Mosler confirmed the changing dynamic of midtown-south and downtown due to new developments such as Brookfield Place and the like. Landlords are seeking the live-work-play environment for a younger work force who want to live in the city. He pointed out that the key to the success of these new developments is their improved infrastructure and larger, more efficient floor-plates. His view is that midtown (in the future) will have the greatest challenge if landlords don’t reinvest in their properties. “Green” properties are also preferred by the marketplace, and these days LEED certification is a must in order to keep and attract tenants.
It was interesting to hear the viewpoints of these professionals who all seemed to agree on the various issues. Discussions certainly didn’t lead to any fiery debates. The consensus is, the NYC market dynamic is changing with tenant movement both southerly and westerly due primarily to new and improved developments impacting the office, retail, and residential tenancies in traditional markets. All seem to have some apprehension over Mayor DeBlasio and hope that he continues on Bloomberg’s path. One could also feel a sense of concern to some degree over crime and safety, and all echoed their sigh of relief over the appointment of Bill Bratton for Police Chief. It’s fair to say that what’s to come in the next few years should be interesting.