What's Happening in Westchester | The Stoler Report-New York's Business Report

What's Happening in Westchester | The Stoler Report-New York's Business Report

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♪ [Theme Music] ♪ ♪ [Theme Music] ♪ >>> Michael: Ooooh, you little apple over here. Are you shiny or dull? You are very shiny when it comes to the area of Westchester. Lots of things are happening in Westchester. But I'm not a maven on everything. So instead of me, I asked for the help of my friend Andrew, to bring together a group of three individuals to talk about developments taking place in Westchester. My guests include, we have two Trinity College people. So, the younger Trinity College graduate, okay? Stuart

MacKenzie, who is a vice-president at CBRE. Hailing from Shaker Heights in Ohio, the steel capital of the world, Jonathan Gertman, who has been here before, who is the vice president of development for NRP Group. And last but not least, Andrew Weisz, who happens to be my executive producer today, and executive vice-president at the RPW Group. So how many years has RPW been involved with Westchester? >>> Andrew: Over 30 years. And we came off a period in the ‘60s

and ‘70s of what we've now call overdevelopment of office product. And since that time, up until I would say the early 2000s, Westchester saw virtually no new development. And in the last 10 to 15 years, with folks like Jonathan and Stuart involved in a lot of the transactions, we've seen an incredible amount of, compared to essentially none, an incredible amount of multi-family development. We've seen all the major hospitals come into the county. We've seen

entities like Regeneron expand tremendously, and a diversification of uses. Wegmans is now in the county. And adaptive reuses sprinkled throughout the county. So, it's been a pretty fascinating sort of last decade. And there's quite a, quite a bit coming in the pipeline as well.

>>> Michael: So how do you and your family decide to leave the, not leave, to expand from basically the office business to the, the residential market? >>> Andrew: You know, we've owned a lot of product in the county for a long time. What is the future? And we, we feel that the future is really diversification of uses and turning what are more suburban 9 to 5 complexes into 24/7 communities. So, we partnered with, with Jonathan and, and, and the NRP Group, and we're building 303 units in, in White Plains, in a more suburban part of, of, of White Plains, although you are close to, you know, you're a 10-minute ride from downtown, and you have Wegmans.

>>> Michael: With regard to that, are you going to have a accessibility, a bus to take people downtown, or? >>> Andrew: So the office complex had a shuttle to the train and it really works very well because folks that get on the, get on, off the train and come to the site, get dropped off and then that same bus can pick up those folks and take them to the train can take them to Wegmans, Lifetime Fitness, downtown White Plains. Our buildings are typically larger in size, north of three to 400,000 square feet. So, we offer, at this site in particular, we offer a daycare center. We offer full fitness center with, with, with

instructors. We have a, a cafeteria, a sundry shop. You know, we expect that some of the residential tenants will benefit from those. >>> Michael: So, here's the question that anyone can answer, but I want you to answer, and I want thoughts over here. With the change of working from home today, what effect do you see that with regards to your office space? The reduction. You don't -- you may not need as much space. People are working with

different transition. >>> Andrew: So, I mean, we've seen from the very beginning of the pandemic, occupancy in the suburbs was much higher than New York City. And I, I attribute that primarily to driving to work, versus taking man trip-- mass transit people feel more comfortable in their own car. And there's just, there's more space. So, we're now, I would say on average about 65 to 70% occupied.

>>> Michael: In the office -- >>> Andrew: In the office buildings in the suburbs. Our building in Midtown is still below 50%. So, you know, we've, we've come back quicker. And I would say on average, we've had some tenants that have downsized, but we've also had many tenants that have done very well through COVID, that are expanding. So net, net, I think, you know, we're, we're sort of

fairly stable pre-COVID. And I think, you know, Westchester longer term has, you know, we've seen a tremendous amount of migration to the suburbs residentially. And we think that that will, that office will follow. >>> Michael: With regard to that, what effect has the pandemic had on investment sales of office properties? >>> Stuart: There's been a very few trades, I'd say, overall. There's been one big trade this year, White Plains Plaza in downtown White Plains. That was to Argent who was already in

town. But besides that, there hasn't been a lot of office trades. Right now with rising interest rates, we're generally telling buyers to -- or sellers I should say, to hold off. We need to get some stability in the debt markets before buyers can get comfortable actually chasing these deals.

>>> Michael: So, what are you selling in the residential world, or the land deal as we, we've, we might say? >>> Stuart: The residential world, obviously the suburbs have been a very big benefactor from the pandemic. We've seen a lot of millennials coming out of the city, settling in places like Westchester, New Jersey, Fairfield County. Westchester obviously has probably the best accessibility to New York City. And, and for that reason, that's why guys like NRP, RPW are continuing to build in Westchester County. We, we see Westchester County as still a safe Haven for most investors looking to invest in the suburbs. >>> Michael: So why Westchester? I know you're in New Jersey, but why do you like wa-- seems to have significant involvement in Westchester? >>> Jonathan: Sure. I, you know, obviously million-person county

with one of the highest average incomes in the country. We found some great partners. My first introduction of Westchester County was one of the nastiest zoning fights of the decade of the odds.

>>> Michael: Probably if you went to Nassau County, you'd make, you'd say that's easy to compare. >>> Jonathan: Probably. Yes. You know, and, and what a lot of cities did is they sort of around 2010 after the financial crisis, embraced the idea of mixed use and growth. So, what was, you know, historically a benefit-- the market that was attractive because of barriers to entry, still very true. You actually saw growth and you see competition and then people actually sort of wanting a better, a better product, and people want to live there. And we like to compete in that

environment. >>> Michael: So, the question is, you're opening up with Jonathan this building in September. Okay? And then you are also working on another property. What are the rents compared in Westchester to New York City to different parts, maybe Brooklyn, Queens, Manhattan, that's one question. And the and the second question is what is the age of the person renting? Okay? You know, that's an important factor.

>>> Andrew: Jonathan, you wanna? >>> Jonathan: Yeah. Sure. I can speak to it. And in just broad terms, I know you'll, you'll know all the granularity, but you know, it's two years ago, a great ranked, if you could get 350 a foot per month. Right? So. I dunno if you'd like to-- >>> Michael: $42. >>> Jonathan: $42 in New York City terms. You were, I mean,

that was top of the market. And now we see, you know, top of the market is 48 and more, and there've been tremendous -- >>> Michael: -- substantial. >>> Jonathan: Yes. The middle is still in that 36 to 42. And, and then of course it varies depending on where you are, et cetera. >>> Michael: I did a show on Long Island a couple of months ago, and I had the people from the Beachwood Property and they've one property out in Westbury, where they're getting close to $70. >>> Jonathan: Sure.

>>> Michael: Okay? They're $20 above the mark. >>> Jonathan: Right. And you have absolutely zero supply. They're probably the only building right there. >>> Michael: It's a very luxury building with a luxury amenities near everything. >>> Jonathan: Right. And it's probably a hundred units or

something. I mean, it just, you cannot get the supply in Long Island. And the age is, I mean, it's across the board obviously, but you know, we think it's like 35 to 42? It is right where -- >>> Michael: So, wait, so I have a 35-year-old person over here who works in the suburbs. >>> Jonathan: Yup.

>>> Michael: How about living in Westchester? >>> Jonathan: Well, my wife's a city girl, so she can't drive. So, until this, till the self-driving car revolution arrives, we're, we're here in the city at least. >>> Michael: Good way to hedge the answer. Okay? [Jonathan laughs] And what about you? Where do you live? >>> Stuart: I live in New York City. So, I'm a little bit younger than these guys. So, I have some time. >>> Michael: Okay. So, you live in New York City. So, you take

the commute to Westchester, or do you spend more time in Manhattan also? >>> Stuart: I spend probably most of my time between New Jersey and Stamford, Connecticut. >>> Michael: So, when we're talking about Stamford, which is not too far from Westchester, how do you look at that market? >>> Andrew: I mean, Stamford residentially has just exploded. You have the whole Harbor Point area where you have a couple thousand units that have come up in the last, you know, 5 to 10 years. And the train state, you know, everything close to the

train has done very, very well. We acquired an office building, actually right in the middle of COVID, a couple blocks from the train. So, I think Stamford residentially has been, has been a great story. And on the more commercial side, everything

transit oriented has done well. As you get farther away from the CBD, those assets have, have struggled. But I think long-term, you have an incredible mass of people living now in downtown Stamford, and there's only more, more coming. So long-term, we like Stamford a lot. >>> Jonathan: We'd like to be in Stamford. We're working on

something in Stamford. It's a little too preliminary to talk about, but. >>> Michael: What about New Rochelle? Which basically was the lead in development and made it easy for developers to go into. >>> Jonathan: Yeah, no, they have, and they are, and buildings are, I mean, what's -- you know, part of what I always remind people when, you know, especially in the market, because you start to get some of the old style pushback is, a lot of this is anticipatory. I mean, only over the last two years, you're actually seeing deliveries. Right? I mean, we

had New Rochelle started a process in 2012, 13, to do their form-based code. The first buildings really didn't start construction until 16, 17. So RXR opened the first building maybe two years ago now. And now you have maybe three, four other

buildings that are opening, have opened, or opening just in the last six months. It's really just starting to happen. They're getting the rents. They're getting that, you know, mid to, you know, growing forties rents. And each of these downtowns, you know, New Rochelle, White Plains, Yonkers, you need 5,000 people there to have it there, there, or more, right, to get that activity that you see on the streets of Stamford. >>> Michael: Which cities in Westchester are the greatest opportunities in the future for development for new, new housing, for adaptive reuse? We were talking about you, you have HSS in your facility. We just mentioned the two office

buildings that have been vacant for years, for three or four years now, being acquired by New York Cornell for ambulatory surgery and so on. >>> Andrew: Yeah. I mean, I think the big sort of cities that get a lot of the coverage and have done a frankly, a very good job and have been pro development, I would say are New Rochelle, White Plains and Yonkers. And then -- >>> Michael: It's interesting. New Rochelle, White Plains and Yonkers. It's like saying Yonkers in a different manner. Yonkers, maybe 20 years ago, you know, the first development on the water. But even on the water, you know, it's there're

different parts of Yonkers. And people think of downtown Yonkers near the train. That's one section. Then you take Ridge Hill, which is a separate section. So. >>> Andrew: I mean, they've, they've come a long way. And then you have sort of across the county, you have sprinklings on the west side, Irvington, Tarrytown. You've seen some

developments on the water, on the east side Harrison has been, you know, very active. And you know, as we were talking about before, towns like Mount Vernon and Portchester that I think long-term, I love the dynamics there. I mean, they're close to the city, they have a dynamic downtown, you know, those are areas that we'd love to see more development. But they're tough to, you know, they're tough to get approved and, and, and difficult to move forward. So. >>> Stuart: And by the way that the next frontier right now, you know, New Rochelle has obviously seen a lot of development over the last two years. White Plains has a very large construction pipeline. They have at least a couple of thousand units.

There's a few new buildings going up currently. Lenora's project and Mitchell, should deliver in the next couple of months. There's another building next to the train station, which is the Alaska State Pension Fund, which has programs. So,

there's a lot more happening in White Plains. >>> Michael: Do you see some old office buildings in White Plains, which, which, which can be 30, 40, 50 years of age, being knocked down to, to make use of new high rise buildings or other purposes? >>> Stuart: Yeah, I can think of two. I can think of GDC's building and 440 Hamilton, which is the old AT&T building. >>> Michael: What are they doing with them? >>> Stuart: So, the old AT&T building is currently under construction. The GDC building has already been converted. And

those are two former office buildings. >>> Michael: And there they will converted to residential rental? >>> Stuart: Yep. >>> Michael: And what about the for-sale market? >>> Andrew: Essentially non-existent, I'd say, right? >>> Jonathan: In terms of homes -- home sales? >>> Andrew: Oh, home sales. >>> Jonathan: You know, it's not anything the three of us are the most expert in. But the supply has been -- it's the same story, right? There's been no supply and prices have, you know, went through the roof.

>>> Michael: People want to own a piece of the rock as they would, you know, they, they, they liked to have some property that they would own. And if you look, you know, before you moved to Brooklyn, I remember when they had the groundbreaking in Williamsburg for L+M's property and Shefa's crossing, nobody was over there. But people who bought did very well. Okay? And I'd say, you know, people of your generation, are people that you know buying today? >>> Andrew: I think what's been very interesting with COVID is, pre-COVID, everyone was looking for density. You weren't looking for the back country, five-acre, you know, estate with landscaping costs and snow removal. I think with COVID,

people started to look for more space. So, the homes that weren't selling, that had quite a bit of land now sell, and everything else came with it. So, I have a lot of friends that have moved out of the city and have bought homes. And you know,

they're going to, you know, an open house on a Sunday, and there's 50 cars lined up and that continues today. Although I do think it's slowing down a little bit. I mean, the market for single family homes has been just -- incredible.

>>> Jonathan: Every generation thinks the next is some alien species, right? The millennials were never going to buy, they were never going to have kid-- 90 some percent of kids today are born to millennials. So, it just, it happened at a different rate. And certainly, during COVID, you know, people accelerated that decision. >>> Michael: In the same vein that Andrew has just said that people want larger properties. Are, are you seeing in your development and your developments and what you're working on, builders building larger apartments? Okay? Or also providing certain special amenities to the properties, which would be helpful? Okay? A working space, you know, lounges or other things? >>> Jonathan: Sure. So, we, I mean, we've definitely skewed

bigger. We were already kind of doing it. You know, we never got into micro units. That always seemed like the first domino that was going to fall. There was a term, but, dens, you know, we love one-bedroom dens. A work from home space. You know, place for just that extra space that you -- we love that. >>> Michael: Okay. So, you're, you're saying that the

developments that are taking place in Westchester today seem larger, because people are using, working from home and other purposes. >>> Jonathan: For sure. >>> Michael: Okay? And what, and in addition to having like what you have with the bus, tat you are able to go to Lifetime Fitness and other places, what about amenities within the facility? Okay? Like a separate clubhouse, a, you know, a gym, other amenities? So. >>> Jonathan: All those things. Pool, gyms. I mean, and that's -- >>> Michael: Squash -- squash court for him? >>> Jonathan: Unfortunately, we haven't done one yet, but we should. >>> Andrew: That's next.

>>> Jonathan: I think that's part of the, to me, the virtuous cycle, when you actually let development happen is, you get competition. So, we actually need to like, think about, you know, a competitive landscape. >>> Michael: Because I think the competitive landscape is important. You know, certain people are gonna say, look, if I'm here, I might as well have the capability, if there is a squash court, or if there's a racketball, I mean, tennis is one. The, the other situation probably what you would gear to

when you're 55 and older properties is, pickleball, which has become a -- >>> Jonathan: Become huge. We haven't done a pickleball court in New York -- in Manchester yet. >>> Andrew: And I also think, you know, there's obviously been so much transit-oriented development and the project we're doing at 1133 Westchester Avenue is more of a suburban setting where we have existing walking trails for example. It sets, sits on the Maple Moor Golf Course. So, it provides people an opportunity to be outside and to be amongst nature. And I think now with what we've experienced with COVID, that, that is, you know, a driver.

>>> Michael: Let's, you know, we bring up transit-oriented, let's talk about the retail facilities at these transit-oriented places. What type of retail do you have? >>> Jonathan: We do not have a retail presence in the developments for doing that. >>> Andrew: There, there is a lot of new development, but it's all sort of, as Jonathan said, come online in the last sort of 24 months. So, I think we're still waiting for that re-- the

resurgence of retail and we're still missing the foot traffic to really have a robust retail frankly, in any of the major cities. But it's coming. It's coming and we're seeing -- >>> Michael: I mean, White Plains was the heavy retail going back many years ago. Where is the heavy retail in the transit-oriented? Yonkers is not really heavy retail. I mean, it's smaller amenities, you know, maybe coffee shops, maybe a couple of restaurants. It's nothing. >>> Jonathan: I mean, that's great. That'll be awesome.

That's, that's what you're going to get. I mean, there's no malls being built and -- I mean Rye Ridge. >>> Andrew: Yeah. I mean, you had the -- the Westchester Mall, you had White Plains, you had the Galleria Mall. >>> Michael: White Plains Mall has closed. >>> Andrew: White Plains Mall's closed. So that all needs to be

re-imagined and will be, and it is being re-imagined. But it just, it takes time. >>> Jonathan: And you're seeing, like, you're seeing, I see a Cava everywhere. I see a Dig Inn and I see Sweetgreens. So, you

know, this, the, you know, the fast casual trend is there. I mean, that's, it's going to be in the food. And -- >>> Andrew: I also think that you take like a Harrison, for example, Avalon just opened their, their new residential project right on the train. And they have, I want to say between 10 and 15,000 feet of retail that I think is in the process of being leased, but along main street there, you have a lot of restaurants that have weathered the pandemic and are now flourishing. Now they have the outdoor seating they can house

twice as many diners as before. So, the people that stayed and have done well will only do better. And now there's an opportunity for some new blood to come in as well. So, I think retail long-term will be, will do well, but we're in a period of transition.

>>> Michael: What about hospitality? You're selling any hotels? I noticed -- >>> Stuart: No. We don't focus on hospitality. But -- >>> Michael: But there have been some sales. >>> Stuart: There have been. There have been.

Some of that traffic is starting to come back from what I know. But I do want to touch on the more transit-oriented centers. So, you think about New Rochelle, Yonkers, White Plains -- those cities in general were actually hit pretty hard during the pandemic. It's, it's come back a lot in the last few months. So to Andrew's point, to Jonathan's

point, we're still waiting for that foot traffic to come back for the retail to start to catch on. >>> Michale: What about Armonk, you know? I mean IBM country over one time. What about -- anything happening there? >>> Jonathan: If I could fill it, I would lease it -- [laughs] I would love to. I mean, you know, it's still Westchester County. I mean, you still have this very high barrier to entry in terms of the regulatory and approval environment. I mean the --

>>> Michael: What about Rye Brook, you know, Larchmont, Mamaroneck? >>> Stuart: They're tough towns. >>> Michae: They're tough towns? >>> Stuart: Now we sold a deal in Bronxville, New York last year for Avalon. We actually got Goldman Sachs out to the suburbs. Which is great. And now we set up a price per unit record, but stuff like that doesn't exist. It took them over

20 years to build that. And we doubt that anyone will get any kind of traction trying to build that again. Trying to replace that location next to the train station in downtown Bronxville, which is one of the wealthiest towns in the nation, with some of the best school systems. So, it's, it's, it's tough. It's

tough. >>> Michael: Where do you think that the best opportunities are? All three of you? >>> Jonathan: You know, if you can build it in Long Island, right? That has a lot of complications, even if you could get the approvals in terms of taxes and sort of state regulations that have come into play. I think New Jersey is, northern New Jersey is, is the most dynamic market. In terms of capital markets, you know, ability to build the, you know, regulatory environment, I mean, you're still in greater New York area, but I, I think it's -- >>> Michael: So, you feel that -- >>> Jonathan: You know, they have less home rule. They have

-- obligations, or they have to, you know, the talents have to build affordable housing. So, they have to approve developments. There's a lot that's sort of works in an investor's favor there. You know, Westchester, we're just starting to see sort of what the capital markets want to do there. It's, the rents have been great and obviously it's, you know, it's Westchester. So, you know -- >>> Michael: So, you, you -- >>> Jonathan: We love Westchester.

>>> Michael: You touched on a subject that I always bring out. Affordable housing. >>> Jonathan: Yes. >>> Michael: Okay? You have people working in the community where, okay, $42 is still expensive [Jonathan chuckles] per square foot for a person to live. Okay? How, you know, especially if they work in the hospital, especially they work in industries. I mean, Montefiore is the biggest employer up in Westchester. People don't realize, the

magnitude of the people. What are you doing, or what are the requirements with regard to affordable housing in the two new projects that you're working on? >>> Andrew: So typically for market rate projects, you're seeing a 10% affordable component and that can vary based on, you know, incentives. So -- >>> Michael: So, 10% of the units being ones, twos, threes, or whatever -- >>> Andrew: -- proportional.

>>> Michael: Proportional over there. >>> Andrew: Correct. And you know, then you're seeing -- >>> Michael: And what, why would the rent be -- if Jonathan brought up the $42 a square foot for the market rate, what would the affordable, normally -- >>> Jonathan: 20 to 24 -- 60 to 80% AMI.

>>> Michael: Now are you protected like in New York City, once you get it, you can't be thrown out basically? >>> Jonathan: I mean, there, they are perpetually affordable units. Yeah. So, then there's some, like if you, if your income grows, like there's some flexibility, but it's, you know, versus the time of lease. And I -- we started as an affordable housing developer. It's half of our business still. It's near and dear to my heart. You know, one of the, I would say one of

the silver linings of the pandemic has been this recognition that, hey, there are these people who we call essential workers now, who we rely on, and we need to like take care of them. And the sort of definition of who is essential has greatly expanded and, you know, rightfully so. So, it's not just, you know, cops and firefighters, it's teachers, deli workers, municipal employees.

>>> Michael: It's - >>> Andrew: And frankly, very positive is obviously we need more affordable housing. But from a higher level, the feedback we would get from employers is our people have nowhere to live. They can't afford a million dollar home. So, while it's still not affordable, I think when you compare what what's being built in Westchester compared to places like New York City, there's -- it gives people an opportunity they didn't have before. And so, when we have companies on tours looking at office space, what we see now is they have a map with the office buildings they are going to see and circled is where are the multifamily developments. So, that never happened before because they just didn't exist.

>>> Jonathan: You asked the question -- what's Westchester versus New York City? And we never answered the New York City part, which we're now, you know, is back to 7 -- 70, 80, $90 a foot or more. >>> Michael: It's too prohibitive. I mean, you really can't afford it. But if I look at all my crystal apples, I'd say that it's definitely shiny for Westchester. And it's great to see three young guys involved in developing in Westchester. And I'd like to thank Stuart, Jonathan and Andrew, and I'll see you next week.

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2022-04-30 15:13

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