One On One With Jeffrey Levine | The Stoler Report-New York's Business Report

One On One With Jeffrey Levine | The Stoler Report-New York's Business Report

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♪ [Theme Music] ♪ ♪ [Theme Music] ♪ >>> Michael: I still remember the date in December. I think it was December 9th of 2001. I was taping the Stoler Report at Shallots Kosher Restaurant on 55th Street. And one of my

guests was Jeff Levine. And so much has happened over the past 20 years. So, I'm very happy to have a one-on-one with Jeff Levine to talk to me about the real estate market, his views on the world, and what it is. So, Jeff, let's talk about the evolution over the last 20 years. Especially since you have two members of the family who were young members then, who are actively involved in your business today. >>> Jeff: Obviously, you know, it's very funny that we're talking about December of 2001. Now 12 years later, at the 20

year, memorial of the tragic events of 9/11. And New York City has had a number of ups and downs over the course of those 20 years. And if you do any business in New York City, you had to ride those waves. So, riding waves, I guess I become a surfer. Because riding the waves is a very important aspect of staying afloat, if I can use another pun, in the New York City real estate market. You know, you mentioned that

back 20 years ago, we had come from a gala for one of the, I think it was New York City-- New York State Affordable Housing Group, extensively the number of affordable housing developers. Many of us are still involved. And I was doing quite a bit of affordable housing in those days, which was for me very beneficial. Because as you know, I started my business after I graduated City College architecture. I worked for a developer. I went into my own business at the age of 25 years old. I didn't have much capital, but I had some

chutzpah, and I did contracting for developers who were already working with city programs for affordable housing, such as the vacant building program and the participation loan program. And I became adept at the contracting of those buildings. And I then started to respond to RPS on my own account and became the developer those projects. Along the way, I veer off. After 9/11, frankly, I had a project that became very

cool, which we called the Cameo, was my first market rate residential project, up on 50th Street. And I was actually starting to rent up in the fourth quarter of, 20-- of 2001, and I thought I was -- -- I thought I would no way be renting apartments in that city at that time, where we had a psychology of fear, after those attacks and exitus of jobs seem to be on the horizon. But the fact of the matter is, whether I was lucky that city came back in a fantastic way. Actually, Morgan Stanley bought a building from Lehman up on 50th and Broadway. And in a short time, in that fourth quarter of ‘01, I leased up my entire building, partially due to that, partially due to the fact that a number of residents who had been living Downtown, the Financial District, wanted to escape the toxicity, which was apparent after the collapse of the trade center. And we rented up the building very quickly. I was able to refinance and my woe is at the moment seemed to be behind me. With that, I got a real shot of adrenaline about

the future of New York City and I began to buy sites for development in a very aggressive way. You may recall, it was shortly after that, that I bought the piece of the waterfront at Williamsburg, Brooklyn, which we resolved and developed over 2,500 units there, over these last 20 years. We also made our first foray into the, what is now called the Hudson Yards area, which wasn't yet the Hudson Yards, which was basically the freight yards, where I used to actually load trucks as a kid when I was going to City College at night. And I built the Ohm in that aftermath. By the time I finished the Ohm, we got caught in that second down draft back in 2008, 2009, the Lehman collapsed. But again,

better be lucky than smart. And the bottom line is, even though rents plummeted, as they did recently on next down cycle, the COVID 19 pandemic, rents plummeted, but interest rates also plummeted. And I like to say we made more money by accident than on purpose. Because it would be wonderful

have we hit our target rents, but we didn't. But the debt service because of the fed controlling costs of interest rates to bring that to the economy after the tragic events of 9/11 was basically free money and has continued to be so. Which has been a boom of course, as you and I know, to the real estate business, but it also can be a burden going forward. >>> Michael: You know, you bring up two things. You talk about Williamsburg, which I want you to continue to talk about. And I also want you to talk about the Hudson Yards. Because when you created the building Ohm, many people said, is he out of his mind? It was an area that nobody was there.

There was no related, there was no shopping center. There was nothing. >>> Jeff: So, no Highline. [laughs]

>>> Michael: No Highline and everything. Let's talk about what's your thoughts today of the far west side, that neighborhood and so on. And where do you think the opportunities? And then I'd really like you to discuss Williamsburg and Greenpoint. Okay? Two other areas that you've been involved with more. >>> Jeff: Absolutely. As you know, demographics has always

been an extremely important part of the real estate business. You know, we're baby boomers, and the baby boomers has been described as what the pig-- the python, I think it is. And the reality is that our housing needs, our shopping needs, our social needs that kind of dictated the economy for the past 40 years or 50 years. There's new generation today. You know, whether the millennials, which I guess would be referred to as GenX, they are beginning to, I think they've actually started to outnumber the, the baby boom generation, and their needs for housing are different than ours was. When I went to the Hudson Yards, you know, back at the time of 2008 and we're starting the seven, delivered in nine, I went there because I had been building very successfully in the West Chelsea area. And while that area is now known as

the Hudson Yards, West Chelsea and the west side, pretty much moves up to there. So, I think I would consider 34th Street to be the demarcation-- demarcation point of what is the end of West Chelsea. And I have been very successful, if you remember, going back to post '01, I bought a piece that had actually fallen into distress at the 23rd Street. We did a very successful condo there, which -- >>> Michael: Which started as a rental, if I remember.

>>> Jeff: -- as a rental. And we flipped the switch to turn it into a condo. Because the market had caught fire up until obviously that the bark of 2007 and eight, but we very successfully delivered that job, through '05 and '06. I

love that West Chelsea market. I saw that the galleries were moving north from 23rd street up to the 30s, and I saw it as an opportunity to strike that same demographic that next generation millennials who wants to be in Manhattan, who love what West Chelsea, Meatpacking District had to offer in the way of social amenities, dining selections, galleries to work. So, you know, now that section of Hudson Yards with the advent of, you know, related is magnificent project, has really taken off. You know, we suffered greatly through COVID and as much as many people, when the leases were expiring, chose to vacate their premises and move either to summer houses or summer rentals or parents' houses, to work remotely. But I have to tell you, since the vaccine came onto the scene, we've seen a resurgence of rentals like I've never seen before. Where huge--

getting huge increases in our rents. Our occupancy in the Hudson Yards area, which had fallen to less than 80% as the virus was at its peak, and that will essentially be in the third and fourth quarters of 20. Once we turn the corner into 21, we had the vaccine, we're a hundred percent occupied and rents higher than we've ever seen before. So, New

York is, where rentals are concerned, absolutely coming back with a vengeance. >>> Michael: Aren't you building something now in Hell's Kitchen? >>> Jeff: Oh, yeah. Our, our experience in West Chelsea slash Hudson Yards, our success there motivated us to make another deal with the family of the property that we did the, old one, 30th street, we have an entire block front on 29th street from, on 11th avenue from 29th and 30th street, where we're building a 60 story, approximately 1 million square foot, 940 affordable New York state tax debated mixed income apartment building with 30% affordable units. And we're very excited about the prospects. As I'm sure you

know, and you have, you know, the -- post office, which is kind of -- Facebook, as we understand, and you know, Amazon is talking about renting more space. I believe that you have almost 20 million square feet of class A office space leased to AAA tenants, you know, like Wells Fargo, like Coach, all within short walking distance of our soon to be completed West 29th street property, our already operating 30th street property. And where I believe that in this post pandemic environment, where commutation has become certainly in the short term more difficult, because people are hesitant to take public transportation. More cars on the road. Congestion has become a problem. I think we'll start

to see congestion pricing in New York City very soon as well. All of that means that being within walking distance to all of those jobs will be of great value come these next few years. >>> Michael: You've been involved with affordable housing for many years. How has the affordable housing changed in New York? And how do you see with the new changes in administration the affordable housing affect in New York City? >>> Jeff: Well, affordable housing has evolved over the years from initially being focused on low income and moderate income renters. There still is a focus. Although community seemed to be want to focus today more on the low and extremely low income categories. Because as you know, we've had, certainly during this pandemic and these last few years, a serious problem with the homeless community here in New York City. And we are working with a

number of not-for-profits and social service organization. Be it Phipps houses or breaking ground or Catholic charities, to bring both supportive and social service to these properties for those people who need help getting back on their feet. So, the, the HPD is doing a great job for our society, HDC as well. I think you may know that our organization

recently was watching enough to be designated a project known as Vital Brooklyn over the Kingsboro psychiatric facility in Brooklyn, and working with the state right now to build a large number of, project is over a million square feet, a large number of both supportive and shelter housing, and association with services. In that case, with breaking ground, we've partnered with Alyssa -- the -- organization. And we're excited about that project coming up. >>> Michael: And with the baby boomer, one area that you were involved with heavily twenty-five years ago and continuing to be involved with is the senior housing. Let's talk about your thoughts on senior housing.

>>> Jeff: Well, you know, senior housing is a good business and that there are high barriers to entry. You know, senior housing is both housing, is hospitality. ‘Cause there's, you know, both housekeeping and dining services are a part of it. And of course, it's healthcare where depending upon the level of service, be independent, assisted or memory care, there is a healthcare component as well. So that means a large number of employees. It means,

you know, having, to have the mass to do it effectively, affordably and properly. In New York, as you remember years ago, we built the two largest independent assisted living facilities with Atria, one in Kew Gardens, one in Riverdale. At some point, we sold out to Atria. We continue to own and operate those facilities. And we went

into the business in a much bigger way out in the Arizona area, where we have an office and we have been building independent assisted living continuously for the past 25 years. In New York, we continue to build senior housing typically in association with state programs like the -- and state programs that provide section eight vouchers, to build housing, not so much with health services, but with social services. >>> Michael: Let's talk about your thoughts about Staten Island and the Bronx. The Bronx, you've been into for many, many years. >>> Jeff: Well, we've been in all boroughs. You know, my office initially was in Queens and we have our development office here in Manhattan. And I think you know

that we're currently also involved with the New York City Housing Authority. We were designated the development through a lease and a partnership with NYCHA of Linden Houses, which I'm very proud to be a part of, because as you may recall, I lived at the Linden Houses as a child in Brooklyn. And I'm thrilled to be associated with its renovation and it's being put up to speed to be a quality housing for the next generation. Staten Island, we have worked through the years. We actually, in addition to building the Staten Island Jewish Community Center, we built an independent assisted living and association with Met council -- Jewish, poverty, in Seaview. And then we also built under the -- program, a seniors facility there. We're actually have recently submitted, along with

Monsignor Sullivan and Catholic charities, to provide services in partnership with us, to do the Stapleton project, which is in Staten Island as well. So, we're very excited about working in all five of the boroughs of New York City. >>> Michael: Let's talk about the evolution of Williamsburg, from the beginning your involvement, to the current day in Williamsburg. >>> Jeff: My father actually was born and raised as a child, in Williamsburg, may he rest in peace. And when I went there, he thought I was crazy. But as you know, I had also

been involved building in Williamsburg with the New York City housing partnership. Back in the early days, I was there for very familiar with what was going on at Williamsburg. Williamsburg had always been a bedroom community for those immigrants who were living in the more affordable areas of Williamsburg, and Greenpoint, and working essentially in Manhattan, whether it be as building maintenance workers, rest of whatever the case may be. So, there was always a housing stock there. There were always buildings that were

suitable for renovation and occupation by the next generation of young people. And we saw that, you may recall, that the waterfront Brooklyn for many years was an abandoned, really a waste, garbage handling facility. I think it was waste management that was operating in. And the

people in the community established something called NAG. I think it was neighborhood against garbage, neighbors against garbage, and they wanted to get rid of the recycling facilities that cluttered up the waterfront over fifth, sixth and seventh street, east of Kent onto the river. They would have liked to see parks. But the city under the Bloomberg administration saw very clearly that one way to get out of a housing crisis was to build housing. They developed what was called the inclusionary--

the voluntary inclusionary zoning bonus program. We were more or less a pilot for that. And we built on the waterfront, building affordable housing for the community, in addition to market rate for sale housing, as well as rental housing. And we were very successful. The community loved what we did there. They did get the city to condemn a portion of the

property to create a legacy park. So, I think we're very good -- -- struck there, which allowed the community to get to some degree what it wanted. And this is to get the benefit of both with more market rate housing, which is highly in demand, as well as affordable housing. >>> Michael: Let's talk a little bit about the hospitality market. You've been, as we said, you've been in the hospitality market and the seniors, let's talk about the regular hotel market. Because you were involved also going back to the initial Gansevoort.

>>> Jeff: Yes. As you know, I built the first Gansevoort Meatpacking as a contractor, by the time the Meatpacking in a park area-- excuse me, -- what Park Avenue was going to be built, I no longer did third-party construction. But I had forged a great relationship with the -- and we negotiated a partnership and I, we built a project together. And we also did another project in Shoreditch in London, my first overseas project, where we built something called the Curtain in the Shoreditch section, which bear similarities to kind of Meatpacking slash Lower East Side, it's where, where all the hipsters were, it's where techies went. And both of those projects were very successful.

Fortunately for me, I sold out one through a buy sell, and the other through a sale lease back, prior to COVID. So needless to say anybody who's in the hospitality knows that the pandemic has been what I guess I've called a category killer for the hospitality business. But in general, I've lost my flavor, so to speak, for hospitality, not so much because of the cycles that we've experienced, but frankly speaking, I think technology has made it very difficult in my opinion, to be in the commodity hotel business. But

the reality is that anybody can go online and they can book an Airbnb, they can look at hotel tonight, they can look at kayak, they could get any one, Travelocity, priceline.com and they can find a room that is as cheap as humanly possible in a moment's notice. So, when you're facing a system like that, I don't think there's a lot of room for price power. There is a market that I think has life, which is the luxury hotel market. You know, products like Four Seasons. And I see Bill Gates just -- Four Seasons. So, I guess my

thinking, it must be in line with his, but the Amman Hotel, you know, some of these higher end luxury brands where people who have more disposable income are making decisions based upon wants, rather than financial needs, I think that's an area where there may continue to be opportunity. But it's not something that I have an appetite for. >>> Michael: Young people come to you. What do you tell them?

Where are the opportunities today, especially in light of COVID, in light of people working from the home, where are the opportunities in real estate for a young person? >>> Jeff: No, it's really -- I tell young people who want to be in real estate two things that real estate is a very cyclical business. When the economy is good and people need offices and people need homes and people need apartments and people need retail, there's lots of business and everybody is busy and everybody can make a buck. On the other hand, when things go bad, there's no place to hide. Because if there's a glut of office space, nobody's building office space. Even as

we speak right here in New York, as you know, we've just gone through a retail apocalypse as they've called it. We're also seeing a glut of office space. I think vacancy in New York is like 80%. I don't anticipate-- and obviously the condo market had an abundance of product and is taking a very long time to sell out, far more modest prices than people had hoped they would sell out for. Even though there's more activity, it's pent up activity as a result of people being unable to go out and purchase units as a result of the pandemic. So, I'd be very concerned about the

cycles. I say, if you don't have the stomach to endure the ups and downs of the loss of income, I would consider another industry. That's the first thing I tell everybody. You have to have the ability to take the aggravation of a cyclic market. And the next question is, well, you know, would I tell young people to go to places where you have the magic, you know, ingredients, which is growth? Yes. I mean, the reality is, you know, the good news is you see in New York over the last decade has grown, but I think four or 500,000 people from 8 million to 8 million six, that's positive. But there are other areas where there is even more significant population growth. Be it down in the Southeast and

the Carolinas or out in the, you know, the Phoenix are, where there's huge population growth. Where there's population growth, there's always need and demand. So I-- those would be my first two. Now, obviously for myself, look, my children, as you know, Benjamin and Jessica are in the business with me. Jessica, primarily working in her

affordable portfolio. Ben, on the market rate. I don't want them moving away from me. Fortunately for me, I've sustained myself through cycles and we can afford to stay here until the market comes back. That's not to say we aren't

doing business, because we are also building, we've gone through zoning to build a new multi-family building over in North Scottsdale in Phoenix. We actually own a piece of property in Peoria where we'll go through the approval process and so rezoned, to build a, what you and I might call from New York -- apartments, two story buildings on a 16 acre site. Probably we have 250 units all in, which we're already talking. We haven't even gotten our permits yet. Taiwan semiconductor is building an excess of, I don't know, 5 million square feet of facilities to redo semiconductors out there. Because the government out there in Phoenix and the town of Peoria, actually this in Phoenix, the facility, has a very accommodating attitude towards that kind of growth. >>> Michael: So, Jeff, we've been together many times with many shows, with many discussions, we've both seen the ups and downs, and I'm very happy that you joined me today on this special edition of the Stoler Report. Wishing you and

your family a wonderful new year happy and healthy new year -- to everyone and see you soon. Thanks again. >>> Jeff: Always a pleasure to speak to you. Feel well. ♪ [Theme Music] ♪

2021-10-11 16:02

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