Business Leaders Ask: What Can We Expect in 2022? | The Stoler Report-New York's Business Report
♪ [Theme Music] ♪ ♪ [Theme Music] ♪ >>> Michael: We're aware it's by mentalists, that individual who is able to project the card that I had, that I was picking up. That was the person that Ralph and I were with for holiday celebration two weeks ago. I don't have mentalist today, but I have three business leaders providing their ideas of where they see 2022. Where are we going? My
guests include Joseph Pistilli, who is the chairman and CEO of Pistilli Realty Group and the chairman of the board of First Central Savings Bank. Abe Schlisselfeld, who's the managing partner of Marks Paneth. And last but not least, my mentalist buddy, Ralph Bumbaca, who is the president of the New York City region for TD Bank. So, Joseph, you're not the mentalist, you're just the guy who knows what to do with the years. You play a dual role. You're a banker on one
side, you are a real estate leader on the other side. Where do you see 2022? >>> Joseph: I think 22 is going to be a good year. I think for both sides, I think 22 is going to be a good year. I think on the financial service side or the banking side, I think things are going to do as well as they did in 21. I think from the financial service side, 21, most banks did very, very well.
I think they'll continue to do that. Investment opportunities in banking, obviously the smaller the bank, the opportunities are smaller than the larger institutions have, to diversify their investments. But I think in the long run, they'll do fine. On the real estate side, I think 22 is starting to show signs that more investments are going to take place in 22. I think people are getting a little bit more comfortable with what happened back in 19 when the regulations changed on our, on that side of the boat. But I do think that a lot of dissatisfied customers still remain very uneasy with how they're going to invest going forward.
>>> Michael: I mean, 2021, it should be the year of the bank mergers. Do you see more mergers taking place? >>> Joseph: I think the opportunity for mergers that taking place. You know, merging in the last few years has definitely changed from a multiple book and how emerges will look at 10, 12, 15, 20 years ago. That that whole process has changed a lot as well. So, I really think that
mergers are there sometimes not always for the right reasons. I still am a believer of a merger or an acquisition only serves a good purpose, not only for the purpose of growth, which is a good thing, but for the purpose of bringing something new into your, into the surviving institution. I think that sometimes they lose that, that mechanism. I think the
flagship, New York Community Bank, gives them that whole residential component, which is very important I think for them. And I think that the change of the CEO to Tom Cangemi, I think he's looking at different opportunities as well than just the entire commercial real estate investment for the bank. I think they're gonna -- I have a funny feeling he's gone to look to be turning -- I don't want to say turning it around, making changes in the bank itself, how it's, how it's business models look.
I, I think that's true for them. >>> Michael: Abe, what's happening in the world with taxes? Okay? It's the 1031. It's the retirement benefits. Where do you see the world with regard to, you know, Congress hasn't passed all this new acts. How do you look at your crystal ball, with regards to tax legislation? >>> Abe: You know, these last six months have been quite a ride in the tax planning world, with a lot of ups and downs and what ifs and possibilities coming out of Washington DC. And every time there was a rumor passed, I went running to there taxes -- So, the tax lawyers, state lawyers, it was a lot of activity that, that went on during the second half of 2021 with -- I'll use the word almost certainty at least that some people believe of something happening. And then long behold, there was a Christmas present given by Senator Manchin, where basically just killed everything. And it did force a lot of people to do things that
they probably should have done, but it got them to do a little quicker. Now we look forward to 2022. I think the general consensus in the tax professional community is that, in a midterm election year is going to be extremely hard to get at least any significant tax legislation done. Irrespective of whether the parties are there, or the numbers are there in DC. But in a midterm year, it's, it's really hard to get that type of significant legislation done. That being said, one thing I've learned over the years in DC is never say never, because they always seem to surprise us one way or another. But you know, specifically you mentioned the
1031s. Those are still alive and there was a lot of talk about those being taken away, thankfully for the real estate industry, is staying alive. Because 1031s are really a great way of, of keeping the real estate cycle moving without having people pay tax. There, there's this -- funny
way that they pay tax, but it, it, it invigorates a lot of the tangential services, such as the brokerage, and a lot of the other services that are aligned with the real estate industry, 1031s are really helpful there. >>> Michael: Ralph, you know, you, you run the, the metro region, New York City region for TD Bank. You deal with medium companies and certain large companies. So, I call them the middle market over there. How do you, how do you
see the difficulties of a middle-market company operating in these days? >>> Ralph: Overall, we're seeing a continued growth. Certainly loan demand is, is continuing to stay at a high level. The interest rate environment is certainly going to get interesting in that the fed has announced the three hikes, which bode well. I think the Joe's point about mergers and acquisitions, certainly this is a business of scale and we'll continue to see that on the banking front and taking market share. So, I see the banks continuing to be aggressive, both on the loan and client acquisition side, and certainly in the opportunities to, to merge operations, to create that level of scale that we need.
The interest rate environment is going to create that level of opportunity for us. Inflation obviously is also weighing on a lot of companies' minds, so how they're going to be able to, to maneuver through those through those obstacles. But in all, all ways I'm seeing it to be a positive outcome for 22, yet still a roller coaster ride. >>> Michael: So, I'm gonna ask each one of you to provide your thoughts on this. Where do you see the best opportunities in the different businesses that you operate? Joe, you're in the real estate business and you are in the banking business.
Where are the opportunities for a bank who's about to close to a billion dollars in size? >>> Joseph: I think depending on the type of business model you do, would relating to real estate lending. I don't, I, myself personally think that those opportunities for bank our size and even larger, is really to enter the non-conforming residential loan market. I think that's a very unique market. I think it's a market that goes after a very specific type of borrower, and provides a market share that isn't so -- I don't want to say rollercoaster ride, but I think it's a very different market. I think the commercial real estate side it is, it's a volume-based business. As Ralph said, rates are very, very low. Those rates are going to be
repricing. I think heavy investments on the financial side, when you're matching cap rates and LTVs and all sorts of factors to renew those loans in this market may be a lot different. So, I, I still see a bank like First Central, where we become a unique lender, and each lender is, is very different to the larger banks. But I see a lot of opportunity for a bank like us to continue to drive in that particular market that I just mentioned. >>> Michael: With regards to the residential real estate that you own, you have a couple of thousand units, do you see opportunities to purchase more units or do you think it's a time that you should sell them and, and take, take the money and figure out what to use them for, and your cryptocurrency, which is one of my questions also? >>> Joseph: You know, you know, Mike, I have been on your program many times and my views have changed in the past, you know, 10 years or so, even five years. My view on the commercial real estate market in New York, unfortunately, which I am heavily invested in the family business, what I'll call quality asset. We do take pride
in our, in our, in our ownership. We have very nice properties throughout the boroughs. But I do think that the new laws that have been acting in the last 24 months are the -- they're very problematic. I think, owners that purchase properties and we built them and clean them up and went into neighborhoods that were up and coming, that can be a quick reversal at any, at any time soon. There's such
legislation out there that is so preventive on being able to at least get rents that you need to operate in New York. And I think that -- we'll talk right now. Right? We have January 15th, we're supposed to see the lifting of the court system that is not helping to collect rents in, in housing. There's already bills being written to get passed by law, that in the event that is lifted, you still will not be able to get in court and collect rent for delinquent tenants, among array of other reasons why that can't happen. This is depressing the real estate market. Yes, as Abe
said, the 1031 does help you if you sold the property and that deferred tax burden is passed along. It does not change the fact that we deal with unions. It does not change the fact that raising energy prices that we need to deal with every day. And also, you have tenants that have low rents, that move out that automatically that should be an opportunity to at least bring that up to an 80, 85, even a 90% rate of what that market rent should be, even if it's not going to be 100%, or 110%, but it should be where it's reflective to where the market is. And then in New York City is very prohibitive. So, I really see that part of it not allowing real estate -- commercial real estate or residential commercial real estate, to appreciate at the level that its expenses are. I think that's a real problem. So, I
don't think it's the time to sell, ‘cause I don't think the prices are there to sell. But to take options in selling, I think that that's across a lot of people's minds. Look, there are people moving to red states and move further to that were operating a real estate business or any business for that matter is tremendously inviting, when you hear how they treat new business in different states across the United States. >>> Michael: Abe? >>> Abe: So, so first I want to follow up on something Joe said, ‘cause it's really an awesome point. And, and, and it almost hurts me to say this because, you know, I love New York City.
I'm a big believer in New York City, and I'm really hoping that with the new administration that it really will stopping a tidal wave of change to allow business to be more friendly. But you know, what, what we've been seeing a lot of is people selling in New York and doing 1031 exchanges for properties and in other areas such as the red states or other business friendly cities. So, it really is coming to a point now, unfortunately, where, you know, New York City is not dead like it was a year ago, but for the long time business owners, it's becoming harder and harder to, to, to -- at least rationalize it -- yourselves. So why you're continuing to not just do business in New York, but own property in New York, but to expand that footprint in New York and unless something is done soon, it's really going to start having some, some effects, you know, on the New York City market. You know, to specifically answer your question, now in our industry, what are we looking to do different in 2022? Tax and accounting compliance work is, is nothing fancy. And, you know, that that's not really
where the future of our industry is. It's about a lot of advisory work where we're getting to technology advisory and transactional advisory and flooded advisory work, working with, you know, real estate folks, such as, those that are here on the, on the calls, those that they service in the industry. And that's, that's, that's really been a feature of the accounting industry is going. And, you know, we have a good footprint in the New York real estate market. And if you, if you know your customer base and talk to your clients, advise them, and it's about, it's about educating your clients and working with them to make them more successful. >>> Michael: In the same vein, as I just said, you know, Joe, and Ralph, with regard the mergers, do you see more mergers taking place in the accounting profession? >>> Abe: Yeah. You know, what what's happened is, there's a
lot of M and A activity in accountant profession. And a lot of that has to do with, you know, not necessarily bigger is better, but, but inherently when, when you're able to provide more services to your clients and you know, you have that depth and breadth of service -- clients are a lot more sophisticated than they were 20 to 25 years ago. The whole business world's most sophisticated. And to the, and it costs a lot to be able to build that infrastructure, whether it's the technology, you know, the, the, the subject matter experts, it costs a lot of money and we can leverage on that as part of a larger organization, it makes a big difference. And then we, you know, when you layer on to that, how long does it get this talent shortage is going to go on for? I don't know. But it's something that's not just headline, it's something that's very real. You know, putting
aside those people that are leaving the various professions and doing a lot of things on their, on their own, it's, it's the younger -- kids, whatever they're called, coming out of school, there are a lot more driven, coming straight out of school than 10 years ago. >>> Joseph: We hear a lot about from tenant organizations and city council and all elected officials throughout the city and state and county about affordable housing. And affordable housing is a very good thing and it is necessary. But what I do believe that happened, and I go back to June 14th or 16th of 19, when the whole rent stabilization law pretty much went out the window, I do believe that the best affordable housing program that New York City, or New York state actually ever had, which created new housing, it created housing preservation, it created investment and it protected tenants, as well as allowed the opportunity to go into neighborhoods and, and rebuild those neighborhoods. And that was the rent stabilization program. They
took a program that completely worked for 30, 40, 50 years. There was nothing wrong with it. But was it perfect? Absolutely not. Was I -- happy? Absolutely not. But to take away good opportunity in the housing point, to replace it with quote unquote, a progressive thinking when there was no progress at all that took place in that change, created a bunch of lawsuits that have just crawled clouded the court system and people who are no longer proud of what they did. And I think that that is a sad, sad conclusion of what happened to that result and I don't, I don't wanna -- our elected officials and hopefully under the new mayor and new leadership that they reconsider at least bringing it back to some degree of what everyone knew that they were protected in their homes and their investments were protected as well. And I just wanted to make that point. >>> Michael: Okay. I'd like to address the next point to, to
Ralph and to Abe. How difficult is it for you to find the next generation of bankers? You know, years ago people said, I want to be a banker. I think it's hard. In the same situation, I know Abe you're having difficulties. All the professionals are having difficulties to get new people. Ralph, how do you insenticize, or how do you get people to join the banking world today? >>> Ralph: Banking is, is such a wonderful, wonderful profession and it requires a, you know, a good ongoing mentoring program to really draw that interest into what we do, how we do, how we make a difference within, for companies, for people's lives, for our communities. So
critical for that. So, it is a big challenge for us, but yet there are those with finance and business degrees that want to kind of learn the language of business, which is accounting. And then to practice it with finding financial solutions and really engineering within the banking sector to deliver for clients. So, while still challenging,
we, we are seeing a number of, of candidates come through that still have a passion to learn that. But I think more importantly, it's on us, those that are in the industry, to mentor them through to see what the potentials are and how to put their talents to good use. >>> Michael: Abe? >>> Abe: So, so we actually start the --work when they're still, still in school. You know, we're very -- as, as I'm sure a lot of industries are, we're very active on campus, getting, getting, getting to them when they're there -- freshmen, sophomore, junior years. Our intern program, which is probably accounts for 70 to 80% of our eventual staff. But they get hands on experience at the firm. They get to see what real life accounting is like. We get to
speak to them, you know, get them to feel real happy about the profession. But then the reality is, you know, along with the accounting part of it, they like to do the advisory work. I guess in the baking side, they'd like to do the accounting work, but the accounting side, they also like to touch a little bit on the, on the -- side and get involved with due diligence and things like that. No one wants to do the same thing everyday five days, you know, the entire year. Everyone wants to maybe do something that most of the time, but then see other things, whether it's due diligence. A lot of them like to get into technology advisory
side of things and, and try to do some of the other things that peak their interest, while at the same time progressing in their career. You know, years ago, you just, you just did your work and, you know, you moved up and that's it. It's, it's a whole different environment.
>>> Michael: With regard to that years ago, people worked five days a week in the office. Okay? So, so my question today is, as we go with another variant now, and it looks like each and every day or each, each and every six months, there's a change over there. Do you see people returning to the office full-time or are we going to see a situation that very few people will work from the office on Fridays and Mondays? Well, where you, where do you see that? Ralph? I think it's a big idea for TD, because most of your people haven't returned to the office.
>>> Ralph: Mike, we're going to see more of a transition, I think in what you outlined. So, periodically coming back to the office, kind of re-- you know, re getting acquainted again with that kind of an environment, that's going to be important. But for now, it'll, we'll eventually get to that hybrid type of an arrangement. But I do see long-term, if I was to make a prediction, we'd be more in the office than, than a, than an at home for what we do, how we do them, what needs to be done. We need to be out there with our clients, in the communities, delivering, our frontline, bankers that are in our retail network, still critical to support them. So, our interaction will be in the
community, in the office and, and interacting and really creating that culture that kind of really makes the difference for us everyday. >>> Michael: Quick question about digital. I brought up crypto, coinbase, all of these things. What's your thoughts, Abe? You know, people have to ask you and your clients, if they're hedging their bet with that, or are they being bigger gamblers? >>> Abe: So, so for starters, we don't accept payment in crypto. We [laughs] accept payment in regular dollars.
It's an interesting investment. I'm not a financial advisor. That being said, we, from an order perspective, as far as ordering the values as part of our risk profile factor, we do not audit any crypto companies, because it's hard to valuate. >>> Ralph: So, you know, where I'm landing right now is more on that blockchain technology. Those companies that are engaged in that ability and that speed of information and storage that really creates the value, for me, the underlying value, as opposed to someone's speculating and whether something is pegged to a certain value in and of itself. So, I think, I think you're going to see some challenges in the coin business, but the blockchain is here to stay and, and, and those companies that support that will do very well in this. >>> Michael: So here, here's the question. Pistilli owns
lots of real estate with small retailers. Have you decided to take cannabis or, or lounges for, for cannabis in your properties? >>> Joseph: No, we don't have any, and we haven't decided to do that. No. >>> Michael: Ralph, any discussion of the bank lending to people? Because it becomes approved on January 1st that you can open up lounges and you can have other things. The state is accepting it, but the federal government isn't. >>> Ralph: So when, you know, we're governed by federal rule and regulation. So, we will continue to adhere to those restrictions.
>>> Michael: Abe, what are you say-- >>> Abe: We're going -- contractor and until government makes it legal. It's, it's hard to judge. >>> Michael: You know, with like 30 seconds left, what do you want to see quickly for 2022? >>> Joseph: I'd like to see us be able to go back to some type of normalcy. I would like to hope that the entire pandemic and the solution to the pandemic and the whole psychological side, dealing with corona and the other viruses that are coming up with it, truly begin to, they get a handle on it and keeps us safe and sound. I think right now that's the most important thing that we could ask for. And I
think with that we'll be in better shape. >>> Michael: Abe? >>> Abe: You know, I've been hearing a line I use it a lot that, especially now with the uptick. You know, make sure you test negative and stay positive. And with that kind of a, a feeling going into 2022, hopefully we'll really have a resurgence and get as back to normal as we can. >>> Michael: Ralph with, with our mentalist over there and the -- of spades, where do you see it? >>> Ralph: So, with the new city administration coming in and mayor elect Adam surrounding himself with real high quality commissioners, I think the future looks bright for this city. I think a lot of the issues that have been plaguing this will be worked on and a combination of understanding and dealing with the virus and dealing with our issues that we're faced with here on the legislative front with good strong leadership, I think bodes very well for the city. I'm very optimistic, Mike.
>>> Michael: I'd like to thank my friend Joe, Abe and Ralph. Only good things in 2022. Only health for my friends and hope to see all of you face-to-face soon. See you next week. >>> Joseph: Thank you so much. Bye everybody.
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