Latest / Masters in Business / Francis Greenburger Discusses Real-Estate Development (Podcast)

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Francis Greenburger Discusses Real-Estate Development (Podcast) · Masters in Business

0:02
Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.
0:07
Speaker 1: This week on the podcast, I have an extra special guest.
0:10
Speaker 1: His name is Francis Greenburger. He is perhaps best known
0:15
Speaker 1: for popularizing the idea of the cooperative as opposed to
0:20
Speaker 1: the condominium in residential real estate development. This is a
0:26
Speaker 1: really fascinating conversation if you're all interested in um real
0:31
Speaker 1: estate development, how projects move forward, some of the challenges
0:35
Speaker 1: in dealing with the market cycle and credit availability, and
0:39
Speaker 1: pretty much anything related to what could throw plans off
0:45
Speaker 1: for for building a a big building, You're gonna find
0:49
Speaker 1: this conversation to be absolutely fascinating. So, with no further ado,
0:54
Speaker 1: my conversation with Francis Greenburger. My special guest today is
1:02
Speaker 1: Francis Greenberger. He is a real estate developer, an author,
1:07
Speaker 1: a former literary agent, and a philanthropist. He is the
1:11
Speaker 1: founder of Time Equities, one of the larger real estate
1:15
Speaker 1: developers here in Manhattan and New York City. Perhaps he
1:19
Speaker 1: is best known as the creator of the residential co op.
1:24
Speaker 1: His autobiography is Risk Game Self Portrait of an Entrepreneur.
1:28
Speaker 1: Francis Greenberger. Welcome to Bloomberg. Thanks Berry, So I'm kind
1:33
Speaker 1: of fascinated by your background and your history, and we're
1:36
Speaker 1: gonna get into a lot of the details, but the
1:40
Speaker 1: obvious question, what sparked your interest in in real estate
1:45
Speaker 1: coming from a background working in the book business. It
1:49
Speaker 1: was pretty intuitive. I remember to this day, I was
1:53
Speaker 1: walking down the streets looking at buildings, looking at architecture,
1:58
Speaker 1: thinking about built environs, and thinking about real estate and
2:02
Speaker 1: New York and realized that I had some sort of
2:04
Speaker 1: visceral connection with it that defied my background or any
2:09
Speaker 1: particular particularly logical connection with my past. So in your
2:15
Speaker 1: book Risk Game, you wrote something that stayed with me.
2:18
Speaker 1: Quote the real estate industry has created far more bankruptcies
2:23
Speaker 1: than billionaires unquote. Explain that well, I think, uh, um,
2:29
Speaker 1: if if you look around New York and I was
2:32
Speaker 1: walking here or past, for instance, Harry Macklowe's gallery on
2:38
Speaker 1: Park Avenue, you know Harry, who I know is how
2:41
Speaker 1: has had a mixed career. He's had some incredible successes,
2:45
Speaker 1: but he's had some incredible failures, all in New York
2:49
Speaker 1: City real estate. So, uh, it's about timing, it's about risks, uh,
2:55
Speaker 1: and it's about what you choose to do or not do.
2:58
Speaker 1: So let's talk a little bit about timing and risks.
3:01
Speaker 1: You bought a piece of lands down at fifty West
3:05
Speaker 1: Street back in the eighties with the plan to either
3:09
Speaker 1: develop it or redevelop it in the future, and then
3:12
Speaker 1: that piece of property lived through September eleven and the
3:15
Speaker 1: Great Financial Crisis. Tell us a little bit about your
3:18
Speaker 1: history with fifty West. Okay, Actually, when I bought it,
3:22
Speaker 1: I wasn't thinking of redeveloping it. I was thinking of
3:24
Speaker 1: it more as an income property. And it was fully
3:27
Speaker 1: leased and I think it made about a ten percent return,
3:30
Speaker 1: So it looked like something I could just hold on
3:34
Speaker 1: to and over time watch rents go up and hopefully
3:38
Speaker 1: expenses keep stable and have growing income and growing value.
3:43
Speaker 1: Um around uh uh in the nineties, we lost some
3:48
Speaker 1: tenants and uh New York was just beginning to think
3:53
Speaker 1: about downtown as a mixed use environment. I mean that
3:56
Speaker 1: was very non residential back in the day, right, a
4:00
Speaker 1: non residential, although Battery Park already existed. And um there
4:05
Speaker 1: was something called the Giuliani Plan which offered tax benefits
4:09
Speaker 1: if you converted commercial properties to residential. So we were
4:13
Speaker 1: actually started to convert part of the building and was
4:18
Speaker 1: I think one of the first properties to qualify under
4:23
Speaker 1: that plan UM by nineteen. By two thousand and five,
4:28
Speaker 1: we had maybe converted half the building, but there was
4:31
Speaker 1: a lot of major work that we needed to consider,
4:35
Speaker 1: and we realized that the sighting of the building was
4:38
Speaker 1: such that if, if, ah, if we demolished it and
4:43
Speaker 1: build a new building, there would be extraordinary views available
4:46
Speaker 1: from the apartments. So we began to study that as
4:49
Speaker 1: an option. And you spend a lot of money on
4:52
Speaker 1: architects just even thinking about this, right, we spent you know,
4:56
Speaker 1: one of the surprises when you go into development is
4:59
Speaker 1: land as a expensive well, preparing plans is very expensive.
5:04
Speaker 1: And we developed full plans for the building, which at
5:07
Speaker 1: that point was to be a hotel and uh condominium
5:11
Speaker 1: apartment complex um, but our plans got interrupted by the
5:16
Speaker 1: course of events in the financial world. So let's talk
5:20
Speaker 1: a little bit about that. Here's a building that you're
5:23
Speaker 1: racing to meet the deadline for certain tax advantages. You've
5:27
Speaker 1: already built the foundation, you've sunk a lot of the
5:31
Speaker 1: main support beams, but you haven't started building the building itself.
5:35
Speaker 1: And then September eight, Lehman Brothers collapses into bankruptcy, and
5:41
Speaker 1: I think you were talking about a five million dollar
5:44
Speaker 1: financing for the whole project from start to finish. What
5:47
Speaker 1: did the collapse of Lehman Brothers due to that development? Well?
5:50
Speaker 1: I recognized almost immediately that building into that kind of
5:57
Speaker 1: financial environment would be a disastrous So I made the
6:02
Speaker 1: decision very quickly to pull the plug, halt development and
6:08
Speaker 1: wait for a better day. In other words, not actually
6:12
Speaker 1: give up the property, but hey, let's postpone this project
6:15
Speaker 1: until credit freeze up a bit. Credit freeze up, and
6:19
Speaker 1: credit is only one part of the equation. If it's
6:22
Speaker 1: for sale housing the way this was condominiums, there had
6:25
Speaker 1: to be a willing market to buy it, because otherwise
6:28
Speaker 1: you might have the financing, but you haven't wouldn't have
6:31
Speaker 1: a way to pay it back. Makes sense. So but
6:34
Speaker 1: that ran into a problem almost immediately, didn't it. Yes,
6:38
Speaker 1: I had a little misunderstanding with with the bank who
6:43
Speaker 1: had financed the foundation construction for me, uh even though
6:49
Speaker 1: I had told them what I was doing, and they
6:51
Speaker 1: seemed to concur all of a sudden. In January, they
6:55
Speaker 1: sent me a letter saying I was in default because
6:57
Speaker 1: my loan required me to continue building no matter what
7:04
Speaker 1: And of course I called him and crazy anyway, I
7:08
Speaker 1: don't really know what was going on. Within a couple
7:10
Speaker 1: of weeks they backed off and we renegotiated the agreement
7:16
Speaker 1: to allow for the interim period that would be needed
7:21
Speaker 1: until the market was was suitable and both from a
7:25
Speaker 1: financing point of view as well as a buying point
7:29
Speaker 1: And how did the building ultimately turn out? Well, it
7:32
Speaker 1: turned out very, very well. One of the things that
7:34
Speaker 1: I found so fascinating in your book Risk Game was
7:38
Speaker 1: how razor thin the margins were for building properties and
7:43
Speaker 1: the constant search for cash and financing. Is that a
7:48
Speaker 1: fair description of commercial real estate in the nineties seventies
7:51
Speaker 1: or generally, Well, I would say generally. And it also
8:00
Speaker 1: depends on the nature of what you're developing. So if
8:05
Speaker 1: you are in a generic kind of marketplace with generic ideas, uh,
8:14
Speaker 1: not surprisingly, competition is fierce and the margins are highly compressed.
8:19
Speaker 1: When you say generic marketplace, what are you referring to, Well,
8:24
Speaker 1: for example, New York City, which for the last ten
8:29
Speaker 1: or fifteen years has been considered or one of the
8:34
Speaker 1: best investment markets in the world. So capital from everywhere,
8:38
Speaker 1: every corner of the world wants to be here, so
8:41
Speaker 1: there's fierce competition and cap rates get compressed. However, at
8:46
Speaker 1: the same time, if you go to other regions of
8:50
Speaker 1: of of the United States or internationally, you'll find a
8:54
Speaker 1: different picture, market by market, submarket by submarket. Very very interesting.
9:00
Speaker 1: In one of the things I thought was fascinating heading
9:04
Speaker 1: into the financial crisis was a similar situation where a
9:08
Speaker 1: lot of global money was looking for returns. Much of
9:12
Speaker 1: it found its way to New York real estate development,
9:15
Speaker 1: and I heard a lot of real estate deal lawyers complain, Gee,
9:20
Speaker 1: the r O I s, the return on investments on
9:23
Speaker 1: all these projects seem to be getting more and more compressed.
9:27
Speaker 1: Is that a fair description of what was what you
9:30
Speaker 1: saw leading up to the O eight collapse? Uh? Very
9:35
Speaker 1: much so, although I have to say that it's not
9:38
Speaker 1: only leading up to the two thousand and eight collapse. Uh.
9:43
Speaker 1: It's prevalent in markets that are in great favor. Um.
9:49
Speaker 1: Uh really on a continuous basis. So um it's just
9:54
Speaker 1: that competitive. You know, if you go to Toronto today,
9:57
Speaker 1: which is one of the uh one one of the
10:02
Speaker 1: biggest development markets in North America has been probably for
10:05
Speaker 1: fifteen or twenty years, you'll find that um. The profit
10:11
Speaker 1: margins on development are around twelve that's probably half of
10:16
Speaker 1: what it would be even in New York. Really it's
10:20
Speaker 1: that tight. So one of the things that was so
10:23
Speaker 1: surprising about the financial crisis from a real estate perspective
10:29
Speaker 1: I had I have always thought of developers as being
10:34
Speaker 1: somewhat countercyclical and somewhat opportunistic. After a crash, they love
10:39
Speaker 1: to go looking for um high quality buildings and high
10:43
Speaker 1: quality plots for development that have fallen on hard times
10:47
Speaker 1: and are much less expensive than they normally would would be.
10:52
Speaker 1: And there seems to be a tendency of them throttling
10:55
Speaker 1: back as the economy begins to overheat and interest rates rise.
11:00
Speaker 1: I don't know if we really saw a lot of
11:02
Speaker 1: that in that oh let's call it oh one to
11:05
Speaker 1: oh eight cycle. Am I looking at it with a
11:09
Speaker 1: that with a biased perspective? Or was that unusual versus
11:13
Speaker 1: prior cycles where developers seem to be savvier, they seem
11:18
Speaker 1: to be the smart money. Well, I think that it's
11:24
Speaker 1: not all developers, or I think I think the world
11:29
Speaker 1: divides itself, and there is a tendency when the sun shines,
11:35
Speaker 1: when money is available for many developers to move forward.
11:40
Speaker 1: There are other UH developers, and I can think of
11:44
Speaker 1: a couple in New York, for example, the Durst family,
11:48
Speaker 1: who were intergenerational and used to thinking over long periods
11:54
Speaker 1: of time. And I remember that in post the collapse
11:59
Speaker 1: of TOO as in eight they started looking around and
12:03
Speaker 1: buying when nobody else was. So of course, you also
12:07
Speaker 1: have to have very deep pockets because in these countercyclical
12:12
Speaker 1: times banks are not necessarily willing participants. So often you
12:18
Speaker 1: either have to have very very good banking relationships or
12:23
Speaker 1: you have to be able to buy with your own
12:25
Speaker 1: resources on all cash basis and then hope to finance
12:29
Speaker 1: at a later time. So uh, I think the vast
12:34
Speaker 1: part of the development crowd sort of follows the money UH.
12:41
Speaker 1: And then there's a group that's UH exceptional who are
12:46
Speaker 1: more countercyclical. Hmm. Interesting. Let's talk a little bit about
12:50
Speaker 1: the innovation that is the cooperative. How did you come
12:55
Speaker 1: to recognize this legal structure as superior to others and
13:00
Speaker 1: and tell us a little bit about that development. So
13:04
Speaker 1: you mentioned that I invented the co op, which isn't true. Okay,
13:08
Speaker 1: co op existed long before popularized the co op. I
13:14
Speaker 1: did what what co ops? Prior to when I got involved,
13:18
Speaker 1: which was in the late seventies, were really familiar at
13:24
Speaker 1: two ends of the spectrum. Either park Avenue very expensive
13:28
Speaker 1: apartments were many of those were co op buildings, or interestingly,
13:34
Speaker 1: there were some low income or limited profit UH co
13:39
Speaker 1: ops that were created for UH people who could only
13:43
Speaker 1: afford minimum really really affordable housing UH done in co
13:49
Speaker 1: op form. Those were done some some unions created those
13:52
Speaker 1: that housing. Some some were government UH and some were
13:56
Speaker 1: other not for profit groups. But in between or of
14:00
Speaker 1: middle class housing UH. It was not yet popular, and
14:04
Speaker 1: I recognized that both UH buildings in the boroughs, for instance,
14:12
Speaker 1: a large complex that I undertook in Brooklyn and elsewhere
14:15
Speaker 1: UH would be suitable for home ownership. And I also
14:20
Speaker 1: recognized that there were secondary buildings, some non elevated in
14:25
Speaker 1: very good locations in Manhattan, for instance in Greenwich Village
14:28
Speaker 1: that would be very desirable and people would be interested
14:32
Speaker 1: in owning. So it was really seeing a broader market
14:37
Speaker 1: for co ops as opposed to actually UH inventing the
14:41
Speaker 1: first one. Your dad was a literary agent and worked
14:45
Speaker 1: with quite a few very famous authors. How did you
14:50
Speaker 1: find UH that business? What was that like? Well? It was.
14:55
Speaker 1: It was very much in my family and in my blood.
14:58
Speaker 1: So I grew up among publishers writers UM and some
15:02
Speaker 1: pretty famous writers and some pretty famous writers Stephen King,
15:06
Speaker 1: James Patterson, Dan Brown. These are household names, aren't they. Yeah,
15:11
Speaker 1: some of the some of those came well after my
15:14
Speaker 1: father died, more during my tenure. UM, but yeah, they were,
15:21
Speaker 1: they were. They were very much part of my growing
15:24
Speaker 1: up and and and my consciousness. How long did you
15:27
Speaker 1: actually work as an as an agent? Well, I worked
15:32
Speaker 1: actively for about a decade UM and uh, um, sort
15:37
Speaker 1: of fifty fifty with my real estate activities, and then
15:41
Speaker 1: I then I cut back the agency work. It's probably
15:45
Speaker 1: I still own the agency today. It's probably five percent
15:48
Speaker 1: or less of my time. So back then it seemed
15:51
Speaker 1: that authors did not really get a great deal out
15:56
Speaker 1: of out of the publishers. UM. Was the business really
16:00
Speaker 1: all that lopsided back then? What was it like? Well,
16:04
Speaker 1: I think UM publishing was evolving, Distribution of paperbacks was
16:13
Speaker 1: getting wider, book club distribution was strengthening. So the revenues
16:19
Speaker 1: that a very successful author could command were growing, and
16:23
Speaker 1: you saw a leap frogging of the value of brand
16:27
Speaker 1: name authors during that period. So so let me give
16:31
Speaker 1: you an example of something from your book that I
16:34
Speaker 1: found astonishing. Uh, your office represented Stephen King and his
16:41
Speaker 1: prior deals when you first brought him on limited his
16:45
Speaker 1: annual royalties to ten thousand dollars a year. So even
16:50
Speaker 1: if he owned earned much more than that, it would
16:53
Speaker 1: get spread out over time. That seems like a terrible deal. Well,
16:59
Speaker 1: I have to correct a couple of things. We only
17:01
Speaker 1: work with Stephen for a moment in time because uh,
17:06
Speaker 1: certain issues that came up in his mind regarding conflicts
17:12
Speaker 1: that he felt we had with other clients. But before
17:15
Speaker 1: we represented and he was working directly with Double Day
17:20
Speaker 1: and in the UH in the seventies, theoretically in a
17:25
Speaker 1: way to help authors, because we didn't have income averaging.
17:32
Speaker 1: So if you earned a lot of money one year,
17:33
Speaker 1: you'd pay a very high rate of income tax, and
17:36
Speaker 1: if you owed earn less the next year, Um, you
17:40
Speaker 1: couldn't balance the two years. I think later on in
17:43
Speaker 1: tax legislation you could do that, but anyway at that time,
17:47
Speaker 1: so publishers and authors created this sort of maximum earning
17:52
Speaker 1: concept that they put in contracts purportedly to help the authors.
17:57
Speaker 1: But um, what happened in Stephen King's case is that
18:00
Speaker 1: his earnings were so enormous that what seemed like a
18:05
Speaker 1: reasonable annual amount initially became a hundred year payout for
18:12
Speaker 1: for what what what what? The earnings were as a
18:14
Speaker 1: result of the success of his books. And you did
18:17
Speaker 1: a couple of other very big books. I remember Bronx
18:20
Speaker 1: Zoo about the New York Yankees, and the G Spot
18:24
Speaker 1: book just went berserk, that became a global bestseller. To
18:29
Speaker 1: tell us about that, well, I represented a psychologist, popular
18:34
Speaker 1: psychologist from California, man named George Bach, and he had
18:40
Speaker 1: he often stayed with me in New York when he
18:41
Speaker 1: was here, and he had just come back from a
18:43
Speaker 1: sexology conference where the author of The G Spot, Beverly Whipple,
18:49
Speaker 1: had made a presentation about her research and theories. And
18:53
Speaker 1: he said to me, look, Francis, you should get a
18:55
Speaker 1: hold of her and uh um, she should write a book.
18:59
Speaker 1: So I said, uh, okay, I've never heard of the
19:04
Speaker 1: G Spot. Uh. I decided that I felt it was
19:08
Speaker 1: more appropriate to have a woman and a woman agent
19:10
Speaker 1: in my office pursue it with her, which she did,
19:14
Speaker 1: and we signed her up and the rest is history,
19:18
Speaker 1: and that's sold just huge amounts in all around the world,
19:21
Speaker 1: all around the world. I have to go back to
19:24
Speaker 1: the nineteen seventies really where you cut your teeth in
19:27
Speaker 1: real estate. What was it like trying to develop real
19:31
Speaker 1: estate when interest rates were double digit and there seemed
19:35
Speaker 1: to be a lot of impediments to getting anything done
19:39
Speaker 1: In New York City. Well, in the early eighties, I
19:41
Speaker 1: was undertaking my first renovation. It was a building in
19:46
Speaker 1: Brooklyn Heights actually, and uh, I watched the prime rate
19:52
Speaker 1: soar all the way. I remember it hit eighteen or
19:55
Speaker 1: nineteen percent, but it was astronomic and actually it was
19:59
Speaker 1: an invert he did yield curve. So the long rates
20:02
Speaker 1: were lower. You could borrow five year money at about
20:06
Speaker 1: fourteen point seven five mortgage money um. And what we
20:11
Speaker 1: did in those days the bank had a way that
20:14
Speaker 1: you could buy the rate down. You paid them a
20:15
Speaker 1: certain amount up front, so the homeowner would get a
20:20
Speaker 1: mortgage at twelve and three quarters percent, which in that
20:24
Speaker 1: crazy environment seemed like a good rate. And so that
20:28
Speaker 1: was how we went about selling some of our units.
20:32
Speaker 1: The rest we ended up renting and selling a few
20:35
Speaker 1: years later when the market stabilized. So the regulatory environment,
20:41
Speaker 1: the sort of nimby thing that we still see today.
20:45
Speaker 1: The not in my backyard issue was that a big
20:48
Speaker 1: problem in the seventies or eight and eighties, or were
20:50
Speaker 1: people sort of open minded about development is good, it's
20:54
Speaker 1: an economic increase and it creates more housing. Well, I
20:58
Speaker 1: think the people are are flexible, but there is an
21:03
Speaker 1: mbie kind of mentality, particularly depending on the type of
21:08
Speaker 1: housing that's being created. We undertook to build a major
21:12
Speaker 1: project in in Brooklyn, in downtown Brooklyn, and when I
21:17
Speaker 1: proudly told the borough president that we were including a
21:20
Speaker 1: major component of affordable housing, he said, no way, not
21:25
Speaker 1: in that neighborhood. I couldn't believe my ears that UM
21:30
Speaker 1: that this UH, this politician, politician was was not favoring
21:37
Speaker 1: affordable housing. UM eventually overcame that because I explained that
21:44
Speaker 1: it was being co sponsored by the Actors Fund UH
21:51
Speaker 1: and that some of the people, some of the people
21:53
Speaker 1: there would be formally homeless people, but some of the
21:57
Speaker 1: other people were going to be retired actors who or
22:00
Speaker 1: UH needed needed housing, and that somehow made it more
22:04
Speaker 1: politically acceptable. Quite quite interesting. So in New York we've
22:09
Speaker 1: seen a huge number of these very tall buildings going up.
22:14
Speaker 1: What do you think about the state of of real
22:17
Speaker 1: estate commercial real estate development today. Well, I think in
22:22
Speaker 1: in in terms of for sale for sale housing, the
22:26
Speaker 1: market is bifurcreated. Um. If it's housing that is at
22:33
Speaker 1: a low price point, which for New York City means
22:36
Speaker 1: below three million, there's still a reasonably active market. The
22:43
Speaker 1: super luxury market has cooled off dramatically, and I would
22:48
Speaker 1: say that this is not a time that I would
22:52
Speaker 1: want to be building super luxury housing. And I think
22:55
Speaker 1: some of the projects that are sort of caught in
22:58
Speaker 1: the middle right now that are being built are going
23:00
Speaker 1: to have trouble selling their selling their units. So that
23:04
Speaker 1: space very much boomed for a while during the post
23:08
Speaker 1: credit crisis recovery. It seemed it was scraping along and
23:12
Speaker 1: then it just exploded. Did we over build? Did the
23:15
Speaker 1: prices just get too silly? What what seems to be
23:18
Speaker 1: the issue there? And those tend to be cash purchases,
23:21
Speaker 1: not mortgage properties. Well, I think, especially in the higher end,
23:25
Speaker 1: is that fair. I don't think that that's necessarily true.
23:28
Speaker 1: I think it's mixed, uh problem, maybe half cash and
23:33
Speaker 1: half financing. Uh, you know. I think it was a
23:36
Speaker 1: confluence of events which are often what occurs, and those
23:40
Speaker 1: events or a combination of increased supply a misperception of
23:45
Speaker 1: the depth of demand. So you know, people see a
23:49
Speaker 1: few apartments or you know, a hundred apartments being sold
23:53
Speaker 1: at a certain price point, and developers extrapolate that into
23:57
Speaker 1: being a market for a thousand or two thousand. So
24:00
Speaker 1: often under the market system, we really don't know when
24:03
Speaker 1: we've oversupplied the market until we still thinks stopped selling.
24:08
Speaker 1: And the other factor, which I think is coming into
24:13
Speaker 1: play now, is that as a result of the tax
24:17
Speaker 1: legislation that was recently passed UH, New York and some
24:23
Speaker 1: other UH states that may be high service states but
24:27
Speaker 1: have to have high taxes to support them are in
24:30
Speaker 1: disfavor UH. And I'm sure that's in the minds of
24:34
Speaker 1: of some wealthy people who are thinking of locating here.
24:38
Speaker 1: We're talking about salt state and local tax deductions which
24:41
Speaker 1: got capped UM at a pretty low level, which is
24:45
Speaker 1: heard in New York, California. I would guess Chicago and Boston. UH.
24:50
Speaker 1: I think those are all on the list, and there
24:52
Speaker 1: are others UM. I also recall reading you you would
24:57
Speaker 1: referenced LLCs more easily by condos versus co ops in
25:02
Speaker 1: order to UM in many ways provide some degree of
25:06
Speaker 1: privacy for whoever the owner is. UM. Are we still
25:10
Speaker 1: seeing a lot of LLC purchases of of along those
25:14
Speaker 1: ways for for those purposes? Or has there was a
25:17
Speaker 1: giant New York Times article a couple of years ago
25:19
Speaker 1: about this, or has that trend kind of eased off? Well?
25:23
Speaker 1: I think ll c's exists for two reasons. In some
25:27
Speaker 1: cases it may be anonymity, but in other cases it's
25:30
Speaker 1: a simple legal protection against personal liability. UH. And many
25:36
Speaker 1: lawyers would advise their clients, regardless of of whether they're
25:40
Speaker 1: concerned about their identity or not, to purchase through what's
25:44
Speaker 1: called a single purpose ll C UM so liability to
25:49
Speaker 1: protect the household, or liability to protect the owner. In
25:52
Speaker 1: cases to protect the owner, I mean normally you have insurance, etcetera.
25:56
Speaker 1: But you know, God forbid some very very unexpected event occurs. UM,
26:03
Speaker 1: if it's owned by an LLC, you would be protected,
26:06
Speaker 1: Whereas if you owned it in your own name, you
26:08
Speaker 1: would be totally reliant on your insurance, which may be
26:11
Speaker 1: fully adequate. But UM, a very cautious lawyer would would
26:16
Speaker 1: recommend an LLC time Equities. Um, I know you focus
26:20
Speaker 1: a lot in Brooklyn and Manhattan. Are you outside of
26:23
Speaker 1: the New York area? Where else do you do you
26:26
Speaker 1: look to, uh do some construction and renovation? Well, actually,
26:29
Speaker 1: Time Equities is a very national and international company. We
26:33
Speaker 1: own property in thirty states. We own property in six
26:37
Speaker 1: countries US, Canada, Germany, Holland, Italy and one property in
26:43
Speaker 1: the Caribbean. And let's talk a little bit about the
26:46
Speaker 1: real estate cycle. Where are we here? Is this late
26:50
Speaker 1: cycle early cycle? It seems like there hasn't been a
26:53
Speaker 1: lot of supply coming to the market. That doesn't seem
26:55
Speaker 1: like a lot of existing homes have come up. How
26:59
Speaker 1: how are you looking at where we are in that
27:02
Speaker 1: in in that season? Well, I think real estate is
27:05
Speaker 1: always in two cycles. One is its own cycles supply
27:09
Speaker 1: and demand in a particular sub market, and the other is, uh,
27:14
Speaker 1: what's the financing market look like and what what is
27:18
Speaker 1: the ability of purchasers or renters to consume additional real estate?
27:25
Speaker 1: I think the economy generally bankers say we're in the
27:28
Speaker 1: tenth now eleventh inning of a nine inning game. Uh,
27:32
Speaker 1: and so we all sort of know that intuitively. Um,
27:35
Speaker 1: and that's of course a concern um UH. Different sub
27:40
Speaker 1: markets have different characteristics. We tend to be opportunistic and
27:47
Speaker 1: we look for properties that are underperforming in a given market. UH,
27:52
Speaker 1: and real estate tends to exist over long periods of time,
27:56
Speaker 1: so we don't think in twelve twenty four month segments.
28:00
Speaker 1: We think in five and ten years segments, so we
28:03
Speaker 1: could be in and out of the cycle within that
28:05
Speaker 1: period of time. So the credit cycle you referenced, I've
28:10
Speaker 1: heard lots and lots of people complain that they had
28:13
Speaker 1: to jump through all sorts of hoops to get a mortgage.
28:17
Speaker 1: If we're in the eleventh inning, we still seem to
28:20
Speaker 1: have fairly tight credit unless that's changed. How do you
28:24
Speaker 1: see us UM in terms of availability of credit, not
28:28
Speaker 1: necessarily price of credit, which is still pretty reasonable. I think.
28:32
Speaker 1: I think the again, the credit markets are bifecreated, and
28:36
Speaker 1: when people refer to the problems of getting mortgages, they're
28:39
Speaker 1: usually talking about UH markets, the market for home home mortgages,
28:46
Speaker 1: and they're the regulators. The government, reacting to the last crisis,
28:52
Speaker 1: which seemed to enfranchise too many borrowers, became very very restrictive.
28:58
Speaker 1: I remember, as perhaps you did it. I think it
29:00
Speaker 1: was Bernanke who couldn't get a mortgage himself. UM uh
29:05
Speaker 1: in any case. UM. In the commercial the financing of
29:11
Speaker 1: income properties whatever their type, residential, office, industrial, the markets
29:16
Speaker 1: are pretty liquid uh and uh um. Although the market
29:21
Speaker 1: has has maintained a decent discipline, there is more flexibility
29:27
Speaker 1: now in things like uh repayment terms, so we're seeing
29:33
Speaker 1: a lot of interest only loans rather than self amortizing
29:38
Speaker 1: or ten year admortizing loans. These are on the commercial development.
29:42
Speaker 1: On the commercial income property side, we have been speaking
29:47
Speaker 1: with Francis Greenberger. He is the founder of Time Equities,
29:52
Speaker 1: real estate development company both nationally and around the world.
29:56
Speaker 1: If you enjoy this conversation, we'll be sure and come
29:59
Speaker 1: back and check out the podcast extras, where we keep
30:01
Speaker 1: the tape rolling and continue discussing all things real estate.
30:06
Speaker 1: We love your comments, feedback and suggestions right to us
30:10
Speaker 1: at m IB podcast at Bloomberg dot net. Check out
30:14
Speaker 1: my daily column on Bloomberg dot com. Follow me on
30:17
Speaker 1: Twitter at rit Halts. I'm Barry Hults. You're listening to
30:21
Speaker 1: Masters in Business on Bloomberg Radio. Welcome to the podcast, Francis,
30:35
Speaker 1: Thank you so much for doing this. I am a
30:38
Speaker 1: real estate junkie. I grew up in a household with
30:40
Speaker 1: a mom who was a real estate agent. It was
30:42
Speaker 1: always dinner table conversation, and I, as a person in finance,
30:48
Speaker 1: always paid close attention to what was going on in
30:50
Speaker 1: real estate if you were looking in the right place.
30:54
Speaker 1: As much as so many people said the financial crisis
30:57
Speaker 1: came out of nowhere, if you were looking at the
31:00
Speaker 1: right part of the real estate market, there were tons
31:02
Speaker 1: and tons of warning that uh, freight train was coming
31:05
Speaker 1: down at the tracks that everybody. I just think most
31:09
Speaker 1: people weren't looking in those spaces we're talking two Uh.
31:16
Speaker 1: I think it took certainly took me by surprise. Uh.
31:20
Speaker 1: And I think it wasn't a like most people who
31:24
Speaker 1: work in an industry. You might know a lot about
31:26
Speaker 1: your industry, but you don't necessarily know global finance as
31:30
Speaker 1: well as you might. I mean, we all take it
31:32
Speaker 1: into consideration, and the system was it was was really
31:39
Speaker 1: a banking and finance problem as opposed to a real
31:43
Speaker 1: estate problem. For for to say the least um. The
31:46
Speaker 1: other thing that took me by surprise. We have a
31:49
Speaker 1: president today who comes out of the real estate development sector.
31:54
Speaker 1: I was surprised that the twenty two thousand and seventeen
31:59
Speaker 1: tax code basically punished places like New York City and
32:03
Speaker 1: New York State by capping the state and local um taxes.
32:08
Speaker 1: That that was kind of shocking to me. I figured
32:11
Speaker 1: if anyone wouldn't want to do that, it would be
32:14
Speaker 1: President Trump. But he signed off on that. Well, I
32:17
Speaker 1: can tell you a funny story. Barry Uh Ronald Reagan
32:21
Speaker 1: made the same proposal, and a number of the major
32:25
Speaker 1: New York real estate families, led by Larry Tish, called
32:29
Speaker 1: an emergency meeting. They wanted to raise two million or
32:32
Speaker 1: five million overnight in order to fight the legislation that
32:35
Speaker 1: was being proposed. Same salt kind of UH provisions. And
32:41
Speaker 1: I went to that meeting and um Trump was there,
32:46
Speaker 1: and I think I was people kind of hemming and hawing,
32:49
Speaker 1: and I said, come on a sidewalk, cross us. A
32:51
Speaker 1: hundred thousand dollars are our whole portfolios are at risk here?
32:56
Speaker 1: And I immediately agreed to make a substantial contribution. And
33:01
Speaker 1: Trump was number two, and then the others fell in line.
33:05
Speaker 1: So we obviously had a very different point of view
33:07
Speaker 1: at that time. But if he has a good memory,
33:10
Speaker 1: he certainly knows that This is a pivotal issue that
33:13
Speaker 1: has existed over a long period of time. So yes,
33:15
Speaker 1: I was very surprised to see him not appreciate the
33:20
Speaker 1: importance of what was involved. It almost seems like it's
33:24
Speaker 1: um a red state payback to the blue states for
33:28
Speaker 1: not voting for him. I I don't know the thinking
33:31
Speaker 1: behind it. It's certainly doesn't raise a whole lot of
33:34
Speaker 1: money for the federal government. It's relatively modest in the
33:38
Speaker 1: scheme of things. I guess the high tax, high service
33:43
Speaker 1: states somehow offend the low tax, low service states. It's
33:47
Speaker 1: my best guest for that. Well, I think I think, uh,
33:52
Speaker 1: I mean, I have no particular knowledge. I think Trump
33:56
Speaker 1: has left the real estate world and violy become UM
34:03
Speaker 1: totally devoted to his political activities, and hum seems to
34:12
Speaker 1: have transferred all of his allegiances to the right wing base,
34:17
Speaker 1: which he credits with his election. I think he's probably
34:21
Speaker 1: right about that. So, so you mentioned that time Equities
34:24
Speaker 1: has not only gone to expanded to thirty states, but
34:28
Speaker 1: is now international. When did that um begin? What was
34:33
Speaker 1: that process? Like? I think the even though America may
34:37
Speaker 1: think of Canada as as as an extension of the us.
34:41
Speaker 1: They don't. I can assure you of that. Uh. And
34:44
Speaker 1: that was my first international investment, which I think was
34:47
Speaker 1: in you mentioned Toronto. Is that where it was? I
34:51
Speaker 1: know it was actually in uh in Montreal, Lovely city,
34:58
Speaker 1: lovely city. I've been dealing with a bro girl who
35:01
Speaker 1: was based in Montreal on the U S transaction which
35:04
Speaker 1: we completed, and he said, hey, you should come up
35:06
Speaker 1: here there there's some great pies, uh. And it's very inexpensive. UH.
35:12
Speaker 1: And I went up there and I had arranged a
35:15
Speaker 1: lunch with a bunch of developers, bankers, and and it
35:19
Speaker 1: would seemed very pleasant until we got to dessert, and
35:22
Speaker 1: then war broke out over the uh French English separatism
35:30
Speaker 1: uh in Montreal. So then I realized what the problem was. UH.
35:36
Speaker 1: And at that particular point in time that would have
35:38
Speaker 1: may have been ninety six or ninety seven, pricing did
35:41
Speaker 1: not really reflect, uh, the problems that were going on.
35:45
Speaker 1: But by night they did, and that's when I made
35:49
Speaker 1: my first purchase. So in other words, that um dual
35:53
Speaker 1: language mandate helped to drive real estate prices lower. Well,
35:59
Speaker 1: it was, it was, it was a confluence of events.
36:02
Speaker 1: There was an extended recession, UM but certainly uh, the
36:07
Speaker 1: fact that the anglophiles UH, led by the Seagram family
36:12
Speaker 1: had made a decision to pull out of of Montreal
36:15
Speaker 1: was not a positive. And in fact, the first property
36:18
Speaker 1: I bought was from Seagram, from a Seagram's owned entity. Uh.
36:25
Speaker 1: And what do you what do you think of Montreal today?
36:27
Speaker 1: You know, I think it's a fantastic city. I often
36:30
Speaker 1: say it's France and North America. Um and Uh, it's booming,
36:35
Speaker 1: It's got a great tech center uh um factor. Uh.
36:40
Speaker 1: I think it's a wonderful place. And some folks have
36:43
Speaker 1: said that um, Canada had come through the financial crisis
36:47
Speaker 1: without any of their banks blowing up. They have far
36:51
Speaker 1: fewer banks, a lot of concentration in the four or
36:54
Speaker 1: five largest banks, but a whole lot more regulation and
36:57
Speaker 1: a whole lot more oversight. The good news is their
37:01
Speaker 1: banks are all in pretty good shape. The bad news
37:03
Speaker 1: is a lot of people pointed Canadian real estate is
37:07
Speaker 1: one of the bigger bubbles in the world. What are
37:09
Speaker 1: your thoughts on that? Well, it's true that cap rates
37:13
Speaker 1: in Canada have compressed a great deal and I haven't
37:16
Speaker 1: been able to buy any new income property there for
37:20
Speaker 1: five or more years. So I certainly agree that the
37:24
Speaker 1: market is very expensive. Um Uh, does that mean it's
37:31
Speaker 1: a bubble? Maybe? I think Um. The bubble that's referred
37:37
Speaker 1: to is sometimes a construction boom in Toronto. Toronto has
37:44
Speaker 1: traditionally absorbed fifteen to twenty thousand new units a year,
37:48
Speaker 1: which is extraordinary, and they've been doing it for almost
37:51
Speaker 1: twenty years. Um. They have that much immigration to the city.
37:55
Speaker 1: They have that much immigration, both international as well as domestic.
38:00
Speaker 1: Um and people wonder how long can this continue without
38:05
Speaker 1: some sort of a breather. Since I started going to
38:09
Speaker 1: Vancouver for a conference about a decade ago, I just
38:13
Speaker 1: think that's a fantastic city. It's beautiful, the weather is nice,
38:18
Speaker 1: that people are nice, the architecture is great. It's right
38:21
Speaker 1: on the Bay. Some people have described that as a
38:25
Speaker 1: China induced bubble. A lot of folks out of China
38:29
Speaker 1: can get money out of the country to buy real estate,
38:32
Speaker 1: and they the locals complain about these see through towers.
38:36
Speaker 1: Brand new buildings go up, they're fully sold, nobody's living
38:40
Speaker 1: in them. What what do you see is happening in Vancouver. Well,
38:43
Speaker 1: the history of of the largest development project that I
38:47
Speaker 1: know of Vancouver was of course owned by Lee Kai Shing,
38:52
Speaker 1: who's perhaps the wealthiest person in in in Asia. I
38:58
Speaker 1: think he's Hong Kong based UM. He also owns ten
39:03
Speaker 1: percent of c ib C, one of Canada's largest banks,
39:07
Speaker 1: So so his presence UH and he's legendary. He's the
39:11
Speaker 1: war and buffet of of of Asia UM and certainly
39:15
Speaker 1: has a lot of investors UH and apartment owners who
39:20
Speaker 1: have followed him and who have bought the complexes that
39:25
Speaker 1: he that he's built there, and it's I haven't been
39:28
Speaker 1: there recently, but it's enormous UM. So there is a
39:32
Speaker 1: very close tie to to to China, to Asia UH.
39:36
Speaker 1: And of course it's it's convenient because you can fly
39:40
Speaker 1: fly there easily, being a West coast city. And I
39:43
Speaker 1: can imagine that today with with the Chinese UM currency controls,
39:49
Speaker 1: that that will affect the Vancouver market. In fact, I
39:52
Speaker 1: think I've read a little bit that it already has.
39:54
Speaker 1: But clearly the ability of the Chinese to buy outside
39:58
Speaker 1: their markets is being severely reduced and compromised at the moment.
40:03
Speaker 1: So you you mentioned you have UM investments in real
40:07
Speaker 1: estate outside of North America. Where where are you putting
40:12
Speaker 1: money to work in either Europe or South America or Asia.
40:15
Speaker 1: What what catches your fancy these days? Well, my most
40:18
Speaker 1: recent uh, there were really two places that I would
40:22
Speaker 1: think about first as Holland. Holland was at the end
40:26
Speaker 1: of a long recession about two or three years ago.
40:29
Speaker 1: Banks weren't lending and a lot of the local real
40:32
Speaker 1: estate companies were very compromised by the losses that they
40:36
Speaker 1: took during during a sustained recession. So real estate was
40:40
Speaker 1: very cheap in Holland and nobody had the ability to
40:44
Speaker 1: execute on it and buy it. So we have bought
40:47
Speaker 1: about twenty five or thirty office buildings there in the
40:50
Speaker 1: last two years. So that's been an area of great
40:53
Speaker 1: activity to us, and we've set up a small asset
40:57
Speaker 1: management office. So we're very very Netherlands centric um. In addition,
41:02
Speaker 1: we just began made an investment in Italy, which is
41:07
Speaker 1: working its way out of an enormous pile of of
41:10
Speaker 1: debt and issues in a similar contrarian play where where
41:14
Speaker 1: in Italy, Well, we bought what we did was we
41:18
Speaker 1: bought a portfolio of non performing loans that says that
41:22
Speaker 1: it was controlled by a Tuscan bank, So most of
41:25
Speaker 1: the loans are in and around Tuscany. There are worse
41:28
Speaker 1: places in the world to spend time if you're looking
41:31
Speaker 1: at Italy, are you looking at any of the other
41:34
Speaker 1: southern European countries that seemed to fall on hard times
41:38
Speaker 1: over the past a couple of years, Greece or Portugal
41:42
Speaker 1: or Spain. Well, we spend time looking at Spain. But
41:45
Speaker 1: we found that the tradition, the customs of the market
41:48
Speaker 1: are are less transparent there than we were used to. Uh.
41:53
Speaker 1: And so we we we were thinking closely about it
41:57
Speaker 1: and allied ourselves some local groups. Nothing came of it. Uh.
42:02
Speaker 1: It's funny you mentioned Greece. Uh. We were having a
42:06
Speaker 1: discussion about Greece just the other day. And we'll take
42:09
Speaker 1: a look. Portugal is obviously a country that's very much
42:13
Speaker 1: on the rise and has a lot of very positive
42:17
Speaker 1: um indicators. Uh. And I'd like to investigate it more,
42:22
Speaker 1: although I suspect the real estate there has already reflected
42:26
Speaker 1: the upturn in there economy. I would imagine that making
42:30
Speaker 1: an investment overseas, whether it's Canada or or Italy, is
42:36
Speaker 1: much more challenging than being in your own local backyard.
42:40
Speaker 1: How different are the legal rules? How different is the
42:44
Speaker 1: the business culture. What do you encounter when you try
42:48
Speaker 1: and bring what you've done in the United States overseas well?
42:53
Speaker 1: Clearly gaining a very very careful understanding of the legal
42:59
Speaker 1: structure as am important, uh, understanding the tax structure. Uh.
43:05
Speaker 1: And that's sort of the first steps that we take
43:07
Speaker 1: when we think about a country. We look, of course
43:10
Speaker 1: at sovereign risk, but we look at the legal and
43:13
Speaker 1: tax structure. I remember going to Poland and hum a
43:19
Speaker 1: lawyer there was lecturing me on how Poland had special
43:23
Speaker 1: laws that uh, non Polish citizens couldn't own speculative real estate,
43:30
Speaker 1: and then he spent two hours explaining how to get
43:33
Speaker 1: around it, and I said, well, you don't. I don't
43:35
Speaker 1: really like to get around things if if I'm not
43:37
Speaker 1: welcome here, thank you. Uh. And I can then can
43:42
Speaker 1: continue to concentrate on Germany, which certainly has lots of rules,
43:47
Speaker 1: but it's pretty transparent. It's transparent. Uh. So you have
43:50
Speaker 1: to you have to understand each each market uh and
43:55
Speaker 1: uh um, study it and and understand what you're getting into.
44:00
Speaker 1: Not too long ago, I was sort of shocked at
44:02
Speaker 1: how relatively inexpensive Berlin was compared to the rest of
44:07
Speaker 1: the rest of Europe. Where where are you investing in Germany? Well,
44:11
Speaker 1: I started investing in Berlin and about two thousand three,
44:15
Speaker 1: two thousand four UM, and actually ran into a publishing
44:19
Speaker 1: friend when I was at a publishing convention in Frankfort,
44:23
Speaker 1: and he said, you like real estate, go to Berlin.
44:26
Speaker 1: They're giving it away and they were, so I bought
44:30
Speaker 1: as much as I could find. UM that made sense
44:34
Speaker 1: UH in sort of the two thousand four to two
44:36
Speaker 1: thousand ten twelve period. But now the market, just like Canada,
44:41
Speaker 1: has become a very very favorite investment market. Prices have
44:45
Speaker 1: escalated and we're not able to buy UH properties they
44:50
Speaker 1: are at at at good spreads. We're happy to have
44:53
Speaker 1: the ones that we do and they're very very much
44:55
Speaker 1: more valuable than they were when we bought them. And you, guys,
44:58
Speaker 1: time equity is not much of a flipper. If you
45:01
Speaker 1: buy a property at a good price and it appreciates,
45:05
Speaker 1: but it's throwing off income, you would my understanding as
45:09
Speaker 1: you prefer to hold onto those. We were very cash
45:11
Speaker 1: flow oriented, so we we UH we we sort of
45:15
Speaker 1: built our business based on having a very strong amount
45:20
Speaker 1: of cash flow because when you're in the flipping business,
45:22
Speaker 1: or totally in the for sale business. Uh, you're a
45:26
Speaker 1: victim of markets. And what do you do when the
45:28
Speaker 1: markets go south? If if you're running an income business,
45:32
Speaker 1: a rental business, you know that there's going to be
45:35
Speaker 1: income there through thick and thin. It may vary to
45:37
Speaker 1: one degree or another, but you're not going to suddenly
45:41
Speaker 1: have the tap go dry. You speaking of taps, you
45:45
Speaker 1: mentioned the Dutch. I think most of Holland is below
45:49
Speaker 1: sea level, and they have some pretty extensive um structural
45:54
Speaker 1: engineering to keep water out even if we see sea
46:00
Speaker 1: level uh go up. There was a piece in the
46:03
Speaker 1: New York Times not too long ago about the threats
46:07
Speaker 1: to certain coastal cities in the United States UM, and
46:11
Speaker 1: that the insurance industry has been raising rates if you're
46:16
Speaker 1: anywhere near either a hurricane zone or a rising waters
46:21
Speaker 1: um situation. How do you see the potential threat of
46:25
Speaker 1: rising ocean levels UM relative to real estate investment? Well,
46:32
Speaker 1: it's certainly probably the greatest disruption that the business faces. Uh.
46:40
Speaker 1: We read every day, whether it's special sections in the
46:43
Speaker 1: New York Times or there was a report out this morning. Uh.
46:46
Speaker 1: And notwithstanding that, politically, the administration has decided that the
46:51
Speaker 1: problem doesn't exist or shouldn't be referred to. It's clearly
46:54
Speaker 1: a major problem, and it's coming and it's coming quickly
46:58
Speaker 1: at time Equities. We've had a department a sustainability probably
47:02
Speaker 1: for ten years, so it's certainly an issue that we
47:04
Speaker 1: pay attention to. Um. It's not a simple one. Uhum.
47:09
Speaker 1: And how you manage the risk in different situations requires
47:15
Speaker 1: uh complex point of view. Um. It's funny. I spent
47:21
Speaker 1: the summer talking to my wife about our house, our
47:23
Speaker 1: beach house on Long Island, and uh do we sell
47:27
Speaker 1: it and move inland? What do we do? And of
47:29
Speaker 1: course it's problematic because we enjoy being there and our
47:32
Speaker 1: family members and friends do. But when do you pack
47:37
Speaker 1: your bags and run? Uh? It's complicated. So if you
47:42
Speaker 1: were that that raises an interesting question. If you were
47:45
Speaker 1: shopping for a new beach house today, would you buy
47:48
Speaker 1: a place in let's say, the beach Front in Miami
47:52
Speaker 1: or or even the Hampton's Is that something you would
47:55
Speaker 1: be reluctant to put a big investment into. I would
47:58
Speaker 1: certainly be reluctant. Uh and uh uh. The problem is,
48:04
Speaker 1: of course, the place that I have is attached to
48:06
Speaker 1: a lot of memories I've had it for twenty years,
48:08
Speaker 1: the kids grew up there, and how do you separate
48:11
Speaker 1: from it? But the problem with every real estate transaction
48:15
Speaker 1: is you just described it. It's more than bricks and mortar, right,
48:23
Speaker 1: So I know I only have you for so much time,
48:25
Speaker 1: And I have a bunch of more questions to get to, UM,
48:29
Speaker 1: including my favorite questions I ask all our guests, why
48:33
Speaker 1: don't we jump right into those and and see where
48:36
Speaker 1: they go? Tell us the most important thing that we
48:40
Speaker 1: don't know about you. Well, although I am transparent and candid, Uh,
48:50
Speaker 1: I also know how to keep a secret and do so.
48:54
Speaker 1: Tell us one no thank you? UM. Talk to me
48:58
Speaker 1: about your early men mentors who helped guide your career,
49:02
Speaker 1: be it in the literary agency space or in commercial
49:06
Speaker 1: real estate. Well, I was blessed with several extraordinary mentors. Uh.
49:11
Speaker 1: And these names won't mean anything to listeners, but UH.
49:16
Speaker 1: In in in the publishing business, UH, someone who in
49:21
Speaker 1: the industry is regarded as a giant. It was a
49:23
Speaker 1: German publisher named Roe volt And uh and he was
49:28
Speaker 1: almost like a second parent to me. UM. In the
49:31
Speaker 1: real estate business, there were two people Charlie Benninson, who
49:38
Speaker 1: is well known in the industry, uh, and certainly had
49:42
Speaker 1: a major influence on me in all respects. Uh. And
49:46
Speaker 1: there was a another man named Milton Newmark who was
49:50
Speaker 1: a real estate lawyer who also was a great mentor
49:54
Speaker 1: to me. Mentors are very very important to me. I
49:57
Speaker 1: feel like I've learned more from them than I have
49:59
Speaker 1: in uh in in academic studying makes uh makes some sense? Uh?
50:06
Speaker 1: What real estate developers, builders, investors influenced? How how you
50:13
Speaker 1: think about investing in the real estate space. Well, I
50:19
Speaker 1: I spent my entire career I always make an effort
50:24
Speaker 1: to listen to what other developers are doing, meet with them,
50:28
Speaker 1: read about them, uh, and learn from them. However, in
50:33
Speaker 1: the end, you have to make your own choices and decisions,
50:36
Speaker 1: and I feel I do it's informed by understanding the
50:39
Speaker 1: experience of others, but it's not determined by them. Fair
50:45
Speaker 1: fair enough, Uh, Let's talk about some books. What what
50:49
Speaker 1: do you enjoy reading? What are your favorite books, be
50:51
Speaker 1: they real estate, non real estate, fiction, non fiction. Well,
50:55
Speaker 1: I'm an avid reader. Uh. Sometimes I'm reading out real estate,
51:00
Speaker 1: sometimes I'm reading about history, biography. Uh. I think non
51:06
Speaker 1: real estate. Recent book that is now shockingly in my
51:11
Speaker 1: mind on the best seller list. I think it's number
51:14
Speaker 1: one is Sapiens, which is a history of mankind. It
51:18
Speaker 1: just shows you that there are an extraordinary number of
51:21
Speaker 1: sophisticated readers, a remarkable uh literary work and a remarkable
51:27
Speaker 1: history of mankind. Um, but I in real estate. It's
51:33
Speaker 1: been a few months. I read Sam's L's new book
51:37
Speaker 1: um uh and uh and thought that there were a
51:40
Speaker 1: number of interesting insights in it. I also read a
51:44
Speaker 1: book came out a few maybe maybe a year ago
51:47
Speaker 1: about all the development that Zeckendorff did in New York
51:50
Speaker 1: that I thought was extraordinarily good and an interesting history
51:53
Speaker 1: of New York real estate. The Sam Cell book is
51:56
Speaker 1: am I being too subtle? Is that the one exactly?
51:59
Speaker 1: And what is Zeckendorff developing my life? Develop my life exactly? Exactly?
52:06
Speaker 1: Terrific book. And it talks not only about Zakendorff himself,
52:11
Speaker 1: but about the whole era in which he was such
52:14
Speaker 1: a dominant figure. So you bring so much of a
52:17
Speaker 1: publishing background to to your personal reading, are you? Are
52:22
Speaker 1: you ever halfway through a book and you say I
52:25
Speaker 1: wish I would have found this book or the opposite,
52:28
Speaker 1: Who the hell published this crap? This is this is terrible.
52:31
Speaker 1: How does your background effects what you read? I mean,
52:34
Speaker 1: I I do look, I do look at at who
52:37
Speaker 1: publishes books, and to some degree it can inform the
52:41
Speaker 1: quality of it. But um, it's certainly not the soul criteria,
52:47
Speaker 1: but sort of interesting to me. Just like if I
52:50
Speaker 1: look at a building, I'm interested to know who developed it,
52:54
Speaker 1: I should also, of course, I left it out. I
52:57
Speaker 1: also read continuously the books that might or agency produces.
53:03
Speaker 1: Of course I read Dan Brown's book The Second Its
53:05
Speaker 1: rives and uh, and many of many of our other clients.
53:09
Speaker 1: Who else, Um, let's let's let me give you an
53:13
Speaker 1: opportunity for some um sh endless promotion of your current
53:16
Speaker 1: client roster. Who is uh? Do you find especially readable, compelling, fascinating? Well,
53:25
Speaker 1: i'd be concerned about would you defend any I would
53:30
Speaker 1: I would be I would be uh uh um. Here,
53:34
Speaker 1: I'll tell you a cute story. I got a new
53:37
Speaker 1: children's book the other day, and there is a there's
53:41
Speaker 1: an agent to our office who is a In addition
53:45
Speaker 1: to being an agent, she also writes books herself. And
53:48
Speaker 1: I didn't realize that it was so prolific, that she
53:50
Speaker 1: was so prolific. But if I understand what I got
53:54
Speaker 1: uh the other day. It's her fiftie book. So she's
53:58
Speaker 1: both a very very successful literary agent but also writes
54:03
Speaker 1: at midnight, I guess, and has produced an incredible um
54:07
Speaker 1: uh library of our own work. That's a lot, although
54:12
Speaker 1: kids books don't have a whole lot of texts, so
54:15
Speaker 1: maybe it's uh granted they were shorter books. So let's
54:19
Speaker 1: talk about real estate. What are you excited about these
54:22
Speaker 1: days in in the commercial real estate area? Well, uh,
54:29
Speaker 1: I'm I I'm excited about tilting our portfolio to a
54:34
Speaker 1: europe centric one. Um so um. Both our presence in
54:38
Speaker 1: Holland and now in Italy and exploring new places is
54:43
Speaker 1: something that that interests me a great deal. The other thing, uh,
54:48
Speaker 1: In in my career, I spent half half of it
54:52
Speaker 1: or more renovating half the world, but I hadn't done
54:58
Speaker 1: a lot of new development or new construct auction. Starting
55:01
Speaker 1: around twenty years ago or twenty or twenty five years ago,
55:05
Speaker 1: I got involved in new construction, uh, And I find
55:09
Speaker 1: that very challenging and very interesting. So I'm I'm happy
55:14
Speaker 1: to be engaged in doing that, and it's it's it's
55:18
Speaker 1: exciting to me, is it a different experience starting with
55:20
Speaker 1: a clean sheet presentation by an architect, as opposed to
55:25
Speaker 1: here's the existing structure, here's what we have to work around.
55:28
Speaker 1: They sound like two very different are completely different. In
55:31
Speaker 1: one case, you're correcting the mistakes that somebody made. In
55:35
Speaker 1: the other case, you're making your own mistakes. So what
55:37
Speaker 1: do you think is changing the most in commercial real estate?
55:41
Speaker 1: What what is going to be very different twenty years
55:44
Speaker 1: from now than than what developers are experiencing today. Well,
55:50
Speaker 1: I think as as as we were talking, when we
55:52
Speaker 1: came in, the nature of the workplace as as well
55:56
Speaker 1: as the nature of of where people live are are
56:00
Speaker 1: have got moved beyond programmatic needs, move beyond you know,
56:04
Speaker 1: space that you need for your work or for your
56:07
Speaker 1: for your living. And we're very much involved in what
56:10
Speaker 1: we call experiential moments. How how is the space experienced? What?
56:17
Speaker 1: What is? What is? What is the user experience? Uh?
56:21
Speaker 1: What do they want to encounter? And we're seeing dramatic
56:24
Speaker 1: changes uh in that that people want amnetized spaces where
56:29
Speaker 1: they can work in a different ways. As you were
56:32
Speaker 1: commenting as we were walking in about Bloomberg's right, you
56:36
Speaker 1: come into this building all the elevators take you to
56:39
Speaker 1: the sixth floor, which becomes the general lobby, And the
56:43
Speaker 1: thinking behind that is you just end up with these
56:45
Speaker 1: serendipitous interactions with people that you may not otherwise see
56:49
Speaker 1: if everybody just takes an elevator up to their own floor.
56:53
Speaker 1: And the whole idea of having um of food space
56:56
Speaker 1: and just it's a different design philosophy UM. And I
57:02
Speaker 1: like your use of the word experiential. It really is
57:05
Speaker 1: what it is. It's not just physical space. Someone has
57:09
Speaker 1: thought about flow and how people interact in the real world.
57:14
Speaker 1: And these days when we're retrofitting suburban office buildings, which
57:17
Speaker 1: we do a lot, or urban ones for that matter,
57:21
Speaker 1: we're now introducing major um amenity lounge spaces, coworking spaces,
57:28
Speaker 1: wellness spaces, uh and and food and beverage spaces. So
57:33
Speaker 1: they're almost become a little hotel like beyond UM the
57:39
Speaker 1: typical office situation. That's pretty interesting. So this is always
57:44
Speaker 1: an interesting question, and and I kind of have a
57:47
Speaker 1: sense of where you're gonna go with this from your book.
57:50
Speaker 1: Tell us about a time you failed and what you
57:52
Speaker 1: learned from the experience. Well, I fail all the time.
57:58
Speaker 1: I always say that I I don't bout about a thousand,
58:02
Speaker 1: A bout six fifty. That's pretty good, um so I
58:07
Speaker 1: think I think recently Hum, I don't know whether whether
58:12
Speaker 1: it's Bezos or somebody said, if you haven't failed continuously,
58:17
Speaker 1: you're not making progress. Um so Uhum, I have many,
58:25
Speaker 1: many mistakes or many issues that we deal with. Uh.
58:30
Speaker 1: And I think when when a business plan goes wrong,
58:34
Speaker 1: the important thing is to switch strategies quickly and either
58:39
Speaker 1: find a way to minimize your losses or if it's
58:43
Speaker 1: a market correction that you're subject to, perhaps putting it,
58:48
Speaker 1: extending the business plan time frame until markets recover, which,
58:55
Speaker 1: for instance, if it's a for sale project, going into
58:57
Speaker 1: a rental mode would be a way to do that.
59:01
Speaker 1: What do you do for fun outside of the world's
59:03
Speaker 1: a real estate I'm a big traveler, uh. I like
59:10
Speaker 1: new places. Um. Going to Copenhagen next week for the
59:13
Speaker 1: first first time. UM, be careful of the bicycles. It's
59:19
Speaker 1: a fascinating city. I spent a lot of time in Amsterdams,
59:22
Speaker 1: more bicycle dangerous than Amsterdam. UM. I have not been
59:27
Speaker 1: to Amstam, but I've been to Copenhagen, and even as
59:30
Speaker 1: many bikes are now in New York. It's just astonishing.
59:34
Speaker 1: You You really have to know the rules of the
59:36
Speaker 1: road and basically know that there may not be any rules,
59:39
Speaker 1: to just watch out my rules, get out of their way. Uh.
59:43
Speaker 1: I love my family like everybody does. I love my friends.
59:47
Speaker 1: I spent a lot of social time, and I'm also
59:50
Speaker 1: a tennis player and skier. Interesting if you had a
59:55
Speaker 1: millennial or a recent college grad come to you and
59:58
Speaker 1: say they were interested in a career in commercial real estate,
1:00:02
Speaker 1: what sort of advice would you give them? I would
1:00:06
Speaker 1: I would tell them to learn as much as they can,
1:00:09
Speaker 1: of course, h I would tell them to learn how
1:00:12
Speaker 1: to differentiate themselves and to see things, to try to
1:00:16
Speaker 1: see things that others don't. Because that's really as we
1:00:19
Speaker 1: discussed earlier, where the margins are you think like everybody else,
1:00:24
Speaker 1: margins are thin. And our final question, what is it
1:00:29
Speaker 1: that you know about the world of real estate today
1:00:32
Speaker 1: that you wish you knew thirty or forty years ago
1:00:34
Speaker 1: when you were really ramping up? Well, I've always had
1:00:39
Speaker 1: a sort of creative uh side visual sensitivity, But as
1:00:46
Speaker 1: I've gotten more and more into development, I realized that
1:00:50
Speaker 1: I really do have a very keen architectural sense and
1:00:55
Speaker 1: development as a teamwork. It's team between an architect and
1:00:59
Speaker 1: a developer. And if you bring that skill that way
1:01:03
Speaker 1: to see into things and and and to appreciate good
1:01:06
Speaker 1: architecture and also redirect architecture when it when it goes
1:01:11
Speaker 1: awry or it's not serving your program, that's a very
1:01:15
Speaker 1: beneficial relationship. And I've enjoyed my my working with the
1:01:20
Speaker 1: number of fantastic architects, including some of the starchitects of
1:01:24
Speaker 1: the world, so that that element of creativity is something
1:01:28
Speaker 1: that I discovered a little later in my career and
1:01:31
Speaker 1: would have perhaps like to have done it sooner. We
1:01:34
Speaker 1: have been speaking with Francis Greenberger. He is the founder
1:01:38
Speaker 1: of Time Equities UH International real estate development firm. If
1:01:44
Speaker 1: you enjoy this conversation, be sure and look up an
1:01:46
Speaker 1: inch or down an inch on Apple, iTunes, Bloomberg dot Com, Stitcher,
1:01:51
Speaker 1: Overcast wherever finer podcasts are sold, and you can see
1:01:55
Speaker 1: any of the previous two hundred and twenty five or
1:01:58
Speaker 1: so such conversations we've ad We love your comments, feedback
1:02:02
Speaker 1: and suggestions right to us at m IB podcast at
1:02:07
Speaker 1: Bloomberg dot net. I would be remiss if I did
1:02:10
Speaker 1: not thank the crack staff that helps put together these
1:02:12
Speaker 1: conversations each week. U Medina Parwana is my producer. Taylor
1:02:18
Speaker 1: Riggs is our booker. Attica val Bron is our project manager.
1:02:24
Speaker 1: Michael Batnick is our head of research. I'm Barry Retults.
1:02:28
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio