One On One With Kent Swig | The Stoler Report-New York's Business Report

One On One With Kent Swig | The Stoler Report-New York's Business Report

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♪ [Theme Music] ♪ ♪ [Theme Music] ♪ >>> Michael: Wow! It's hard to believe that it's many years since Kent Swig joined with me on the first season of the Stoler Report, which debut in November of 2001. So today I'm fortunate to have Kent Swig, who has a variety of titles and a variety of companies, to talk about his view on the state of the real estate market in New York City and around the nation. Kent, thanks for joining me today. >>> Kent: It's a pleasure, Michael. It's good to see you

always. >>> Michael: What's the major involvements of the Swig company and real estate around the country, especially in California and New York? >>> Kent: The Swig company is based in San Francisco, where I'm originally from. And we have about 10 million square feet of office space around the country, plus or minus about 5 million square feet in Manhattan, and the balances in San Francisco, Los Angeles, and a few other strategic cities.

Here in New York, we have the Grace Building is about 1.5 million square feet, on 42nd street. Next door was our latest project. We bought the former HBO building, and that building now about 400,000 feet houses Bank of America. And

they in addition, took about 162,000 square feet of the Grace Building. So, we've got quite a presence now with Bank of America. >>> Michael: Okay. So, with regard to the Grace Building and the HBO building, which now houses Bank of America, what is the real percentage of people who have returned to work? You know, we're here in September of 2000 and 21. >>> Ken: That's something that we're looking at right now after Labor Day. And we're just beginning to see that. As you know, we're also into the, the holiday season at the moment.

So, we're, we're starting to gauge and see where we're going. But typically, the city has been plus or minus about 30% going and climbing up higher about 35% in some areas. Interestingly enough right now, the real estate community of businesses, whether they're brokerage firms or architecture firms or other types of real estate ownership firms, the occupancy is pushing close to 80%. So, the one thing that the, the real estate community is doing is they are, they're actually walking the walk and not just talking the talk. So,

they are back and they are working and contributing to New York's economy. >>> Michael: So, when we're talking about the real estate world, let's also talk about some of the other entities. Let's talk about Tate-- Tiara holdings, Brown Harris Stevens. Okay? Where do you, where do you see the for sale market and the rental market and the residential world? >>> Kent: In the past year, you know, with COVID, let's say 2020, it was obviously a very, very difficult time for any real estate company. And particularly, the brokerage companies, because no space was allowed to be shown. You could have some virtual tours, but it was a very brutal year.

Interestingly, since about January 15th of 2021, the marketplace has become very, very active. It first started with one bedroom and studio apartments, throughout both Manhattan and the balance of the city, and became very, very active. Which basically is telling us that that New York City residents, we're seeing an opportunity to actually get on the merry-go-round, if you will, for their first purchase of an apartment. Apartments went down in value, plus or minus 20, 25% or so during the COVID peak time. And, and, and

the local community here found that as an opportunity, as opposed to a problem. And, and so studios and one bedrooms became very, very active in, in terms of sales, followed by all the other categories of apartments, other than some of the very large apartments for a while, and that now is back. So, -- you know, record setting activity level on all fronts. And particularly so on the apartments over $4 million. The activity level is, has been as strong as

it has been in the past 20 to 25 years. >>> Michael: Where do you see the future of developments? And at one time you were the king of FiDi -- do we would say. Do we see FiDi growing, continuing, or do we see other areas with the increase in the opportunities? >>> Kent: A couple of things. One, in the, in the FiDi marketplace, financial district in, in Lower Manhattan, yes, I see that continuing on, and, and, and very much linked to new project development. And the sale of existing product that's out of the marketplace is our, the key demographic of population and what people had thought, or at least just anticipated during the COVID period of time, was that the population actually in New York City was declining. And quite

the opposite occurred. The, the, the census that has just occurred in 2020 was in the middle of the COVID. So, anybody not living in New York City was not counted in New York City. And yet the population had increased rather substantially over a period of time. So that's, that's a very, very important demographic. And -- than that I think bodes well for the new project development. One thing going on in New York,

COVID accepted for a moment, is that we have a scarcity of apartments for the population in this city. And there, there needs to be continued growth. We also need affordable housing, certainly. But what's happening in, in now in the, in the sales of existing condo development, new condo development is, a very, very active marketplace is going on. Again, prices went down, but the, the thing that that's particularly good for New York City is that the amount of money, just gross money going into New York City in apartments, shows a very, very strong appreciation and confidence by the buying public in New York City. So, whether apartment, you know, is trading at 20% less or 15% less, when somebody is putting in 4, 5, 10, 20, $60 million of money into an apartment, that tells you their confidence. They're

not doing it to collect us. They're doing it to live in and to be an active participant in New York City. So, I find that very, very satisfying right now with what's happening. >>> Michael: Let's talk about Helmsley Spear, another company you own and have an involvement.

>>> Kent: So, Helmsley Spear, as you know, is the oldest continuously operating real estate company in America. It was established in 1866. It has had a venerable, wonderful history. Over time, it, it declined at, at a point. I was able to purchase the company in October of 2007. Today we have our headquarters at 444 Madison Avenue. We're in 16,000 square feet. It does, you know, co-tenancy for some of my other

companies. We're up to 35 agents right now and climbing. And we have some extraordinary people who are sitting with us, and we're, we're doing very, very well. One of the things that was a benefit to us in the COVID environment while businesses business itself was difficult, we were able to grow and, and feed off of some of the problems that the other firms were having. So, we were able to hire a lot of new people, top executives and brokers in our company. And, and we're growing.

>>> Michael: With regard to that, let's discuss what's really happening with the leasing market. Okay? In the, A, B and C buildings, as they would say. >>> Kent: First of all, the vacancy rate, plus or minus, we're looking at about 17%, which is availability rate. So that's on the higher side certainly than we've seen in a long, long time. The sublet component of the availability market reached almost 30% at one point during COVID. It has

declined back to probably 24%, somewhere in there. So that's a very positive thing. There is a lot of direct space. What's happening on the component of, or the market segment of the, A class A, class B, class C, is a little bit different. The class

A office building right now, office buildings right now are doing very well. The rents are being continually paid. Occupancy of the actual space had declined, but we're starting to see a lot of tenants coming back into the marketplace. The expectation post Labor Day for very much higher occupancy in New York City and particularly in the class A buildings I think is, is put off a little bit. One, we're in the Jewish holidays. So, we're not going to be able

to see really when that occupancy gears back. And of course, we're in the middle of a problem with the Delta variant. So, I think that's going to delay some of the intense occupancy that was, that was expected to come back. Now, the class B and C are slightly different. And that is directly related to a unique event, if you will, that we're, that we're seeing in the marketplace. And that is that, people have worked from home for over the past year or so, and many people are finding, and these are more class B and C tenants, because I think the A tenants are a slightly different category. What we're finding is that, that the

tenants themselves, the actual workers, are enjoying working from home. They're saving a lot of money in -- in commuting. They're saving an enormous amount of time in commuting and they don't have to pay for the clothing, for office and they don't have to pay for the lunch at the expense of being in, in the New York City marketplace. And, and we're finding that some of those people would actually rather have a pay cut than return back full-time at work. I don't think that's going to be a permanent situation. But certainly right

now, it's, it's, it's impacting the marketplace a bit. And I would say more on the C, class C side and maybe a class B side, where, where tenants are smaller and they are able to do some work, because they're, they're not big institutional type tenants. I think that changes over time. If you ask a person like David Sterner, he thinks that it's going to be a big influence and then the marketplace on a continued basis. I'm not sure I agree to the length of time as David or other people. But it is a noticeable event that, that

we've got a -- for the first time, we've got an employee-- employment shortage. We, we, we have not enough workers really to fill the jobs that are going on. And, and I think that's, that's a unique thing that, that America is experiencing right now. >>> Michael: So, here's the question. Is it a good time for a tenant to being negotiating a lease? Is it a tenant opportunity or is, or is it a landlord opportunity, or both? >>> Kent: Well, I would say we're, we're much more favoring a tenant right now than we are a landlord. The face rent for

many of the leases that are going on right now are, are, are being pushed by the landlords to try to keep a fairly high rate, because especially for anybody that has recently purchased a building in the past three years or so, they need to get a high rate. So, the giveaway to lower that effective rent is, is in the marketplace, which is free rent and, and obviously work. If you take work for instance, the cost of goods today is, is on an higher elevated basis right now. When we were in COVID, people thought gee supplies

will be building up, inventory of products will be building up. It's just not so. COVID hit everybody across the board. It didn't distinguish between types of industry. So, the construction industry for construction materials was impacted particularly, difficult, because the supply chain was disrupted. That's going to take 6, 8, 9 months to fill back up. So, costs are expensive. Are you seeing landlord packages over a hundred dollars a foot? Yes, because it's pretty expensive to build space. Are you seeing free rent on a ten-year basis up to a year? Yes. So, is it a

good time as the tenant to go back into the marketplace now and, and, and, and lease space? I would say yes. Particularly in the B and C buildings, I think that you can find great subletting opportunities that are, have not been available like this in the past. So, if you are a tenant looking and expecting to do business over the next decade, now would be a good time to lock in, lock in your rates. And I believe that that the inventory will start to be absorbed. So, the timing would be now. >>> Michael: Okay. With regard to that you own a company or

have an interest in a company called Falcon Pacific Construction. Let's talk about you, your involvement with the construction and how you see the construction in light of what you just said about the office market. >>> Kent: Construction costs are high right now. So, anybody that had proforma in a new building to take a look at a year ago are going to find themselves in a different marketplace and they're going to have to reprice what's going on. If you're buying land and in today's world, land prices have declined a bit. So, between the construction prices

and the land price decline, I think the balance is probably similar to where you were a while back. If on the other hand, you purchased land a couple of years ago, and you had priced a building to build at that time, you're going to find that that your overall job costs are going to be much higher. It's impacted because of labor. It's impacted because of the materials themselves. As an example, a sheet of plywood a couple years ago, it was over a little over $35 per board. Today, we're looking at 75, $76 per board. I don't think that's

going to be a permanent situation, but that's a doubling of cost. So, you know, there, there, there is a shortage in the supply chain right now, and, and it's difficult to underwrite the deals the way they used to be -- So, everything has to be repriced right now. In terms of our construction company itself, Falcon Pacific, we are doing both interiors and ground up. We have two projects on the ground up that we're expecting to build on 30 West 38th street. Both are hotels. One is 22 story hotel. And the other is a 24 story hotels. And they are both in the process of closing out their construction loans. Those loans were

available before, but no longer, you know, that everything is being repriced. >>> Michael: You know, we were talking before about COVID. Tell me about Venmos and your COVID involvement with Venmos, what that is.

>>> Kent: It is a health and wellness company. And, and that company are, are working on a couple, a couple devices, one of which is a thermoscan unit. We've got thermoscan units that can do, you know, we put in offices, and office buildings where you can go in with a turnstile that automatically reads your temperature and then will open up the, the, the, the turnstile, so you can gain entry. It'll do the same with, with, you know, door entry at, for tenants and et cetera. And one of the things that, you know, we're finding that's important, because COVID does not seem to be going away and, and, and this also includes flu season and other things going forward, is that, that the health and wellness of the working population is very, very important. So thermoscan

temperature readings are one element. We're just working on technology right now, which is very interesting. And, and that is that by coughing, if you will, into this thermoscan unit, it will give you a pretty immediate read on if you have any issues, you know, flu, COVID, other issues. And there there's technology now where it can these thermoscan units, can, we have not implemented this, but we're in the process -- they can also read your blood oxygenation level. So, if

you have poor oxygenation of your blood, that's an indication that you may have COVID or other things. So, there, there, there are a lot of new pieces to this. We're looking at doing this with the hotels, for instance. Because people want to know who's been in their hotel room or not. So yes, you have a card swipe. So, you've got some security there.

But by putting these thermoscan units on hotel room doors that work directly with the gate-- and the entrance to the rooms with the cards swipe, you can find out who's been in the room, only authorized people can be in the room, and every single person that's gone in has been screened to determine their health. And I think this is something that we're going to see on a permanent basis going forward, you know, throughout the world. You know, there, there, the air purification very, very important. Bringing in fresh

air is very important. So, there's a lot of things going on. There are other things that we're starting to get involved with, which is an application that can be sprayed on all surfaces, which basically for up to one year can eliminate any kind of COVID, any kind of-- any kind of virus, any kind of problems like that. So, the technology leap that's been

going on in the United States is really extraordinary with what, what will be available. And I think incumbent upon all employees right now, employers, I should say right now, and hoteliers and restaurants and others, where anytime the public is in is health and wellness. It's going to be one of the first premier situations of concern for, for, for our, our United States population and the restaurant world.

>>> Michael: So, I have a question I I've noticed in, in the rags and other things, including your posts, your bio, you've been involved with crypto. Let's talk about the world of cryptocurrency, which my sons love and speculate, and their father says I'm too old to figure it out. >>> Kent: First of all -- yes, I'm involved in a cryptocurrency company. And my partner and I had bought a company that, that was trading 3 billion shares, or 3 billion tokens, I should say, in the marketplace. Unfortunately, the

prior owners did not secure the, the coin itself and there was some misappropriation and, and some basic fraud with that. So, we closed that coin down. What we're doing now is we're reissuing a brand new coin. And that will be given over to all people who have-- can you show proof that they owned a coin prior to a certain date when the fraud was committed and we're offering a free coin in a new company, called Dignity, and, and, and this is an extraordinary thing. I think we're, we're very much on the cutting edge. Number one, we're

based in the United States, right? So, there's, plus or minus, 280 cryptocurrencies. Very few if any are based in the United States. We're based in the United States. We have gold backing our coin, that's sitting in Arizona, and Nevada, we have over a hundred billion dollars of gold backing available for us. We've allocated 6 billion to back our 3 billion coins. Those, those minds and, and, and some

tailings on the outside, we have a lien on them. So, we have United States lane. The goal is in the United States and it's fully secured. Third, we are offering a dividend,

which never has happened really with, with a cryptocurrency. We're, we're, we're, we're offering a dividend of an investment fund that we're tying into the coin and we're offering 15% of all profits from our investment company to be given to coin holders as a dividend. The other thing that we're doing, which is quite unique is that we're voluntary-- voluntarily filing with the SEC. We are asking for regulation. And the reason for that is that I don't think that

any individual or an owner or an issuer of a coin should be making the rules of what one should and should not do. This is the SEC's job. So, we're going to be among the first coins in the United States that will voluntarily be going to the SEC and getting regulation on our coin. So, I think the

unique thing about what we're doing is that we're applying old business world ethics and, and, and efficiencies and transparency to the cryptocurrency world, which is very much operating as the wild, wild west. And I think that's, that's a very unique thing. And, and, you know, then, and nobody else seems to be doing that. >>> Michael: Okay. You know, many people who were graduating

college wanting to get involved with real estate were stymied because of COVID. Where are the opportunities in the future for real estate? >>> Kent: First of all, think there are many opportunities in real estate, both residentially, retail, and office space. And, and I think what's really interesting is what's happening right now with the juxtaposition of corporate America and the technology companies. So corporate America is considering hybrid working times, right? So, you could maybe work from home two days a week and work in the office three days a week. And why can they do that? They're saying,

because of technology, because of Zoom, because of other technology that's available. And yet, which is the irony of all this, when you look at the technology companies, what are they doing? They're expanding across the board in hard fixed real estate assets. So, Google, which has announced 10,000 new jobs, all of which are going to be in offices. Amazon bought the Lord and Taylor, the old Lord and Taylor building from WeWork. Facebook took 1.7 million square feet at the Hudson Yards, which they've not yet occupied. And the middle of

COVID in July of 2020, they took an additional 750,000 square feet at the Farley office building and a yet to be developed building. So, the actual, Assano, big, big company, took 300,000 square feet in San Francisco in my family's new building at 633 Folsom. So, you're looking at the technology companies who are doubling down and taking more hard fixed assets, while the corporate America is saying, gee, you know, maybe because of technology, we don't have to have as much office space. I think that's going to correct itself very quickly. And I, so I do believe that there's a, there's a good opportunity for young people to get involved in real estate. Everybody is still gonna live

somewhere. Period. Everybody is going to shop somewhere. I don't think all online shopping is going to exist. So, retail is, is changing its form. Yes. But we're going to end up with smaller mom and pop shops, which is going to, I think, add to the quality of life in New York City. There'll be smaller,

you know, shoeshine stores, there'll be juice, there'll be, there'll be pastries -- of flower shops, sunglasses, et cetera. Because many things that you're not going to buy online. So, prices may decline a little bit in the retail market, but the -- will still be there. So, I'm optimistic for people who want to get into the real estate business. It's

a good business to be in. >>> Michael: So, you know, it's been many years and many discussions and involvements, and I'm happy to see that people say we're both survivors and we continue to grow and excel in the future. And I like to say, only the best for the new year, only the best in all your endeavors. And thanks again for being here on the Stoler Report.

>>> Kent: It's a pleasure, Michael. Thank you very much. ♪ [Theme Music] ♪

2021-10-02 13:33

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