Real Estate Weekly
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Opinion

OPINION: The inside views that had our readers talking last year

The following are excerpts from our most-read opinion pieces of 2019. You can submit your views to editor@rew-online.com for consideration. To see these and other insider commentaries in full, visit
www.rew-online.com

There are certain uncertainties a
developer just canʼt live with
— Ed Kalikow, president, Kalikow Group

I have been in real estate my entire life. I am the third-generation president and CEO of the Kalikow Group, which owns and or manages more than 6,000 apartments, condominiums and co-ops in New York City, Nassau & Suffolk.

Ed Kalikow

I grew up in the business, working as a laborer during summers for my father at our construction sites. I care about the properties we own and maintain as well as the people who live in them.

We recently undertook a parapet and roof replacement project with the expectation of being able to recover a six percent return on our investment based on our current rent roll with a major capital improvement (MCI) increase.

While our application was pending for over one year, the new legislation retroactively reduced the six percent to percet percent, back to 2012.

Perhaps I would have explored other options had I known of this retroactive application.

Already the unintended consequences of this poorly drafted law are beginning to show: workers who were engaged by landlords to improve their apartments have begun to be laid off.

Newly vacant apartments, now with very low rents, are being held vacant. While real estate taxes, water and sewer rates, labor and insurance costs continue to rise, the ability to pay for complying with NYC additional regulations – which we would happily do – has been compromised with minimal guideline increases and the HTSPA.

With all means of generating additional income stripped away, the City continues to impose additional regulations on landlords dealing with parapet maintenance, elevator safety, gas inspections and more.

As a landlord who takes pride in my assets, it feels like my property is no longer my own.

For years now I have moved the majority of my development activity outside of New York. I can’t continue to operate in an environment with no certainty.

Construction industry push for
diversity a good start

— Clark Peña, Construction Workforce Project

A recently announced diversity initiative by the Associated General Contractors of America is an encouraging step forward.

Clark Peña

However, open shop workers in New York City need much more support from our elected officials in order to achieve real gains for men and women of color in our industry.

As this becomes a hotter topic for construction industry stakeholders, politicians need to pay more attention to how policies are impacting these workers and why additional training and workforce development resources are needed to continue advancing the ball.

As new developments continue to spring up in Manhattan, Brooklyn, Queens and the Bronx, the jobs these projects create should go to local residents. And by overwhelmingly employing workers from local communities, the open shop helps achieve this goal.

To ensure more workers in New York can access the benefits of the open shop, the public sector needs to promote its expansion and secure more opportunities for local workers.

Skirting the issues could cost Soho
its retail crown
— Adelaide Polsinelli, vice chair, Compass

When it comes to retail, Soho has long been the Bohemian sister to the more buttoned-up Madison Avenue, but frankly, she’s in need of a makeover.

Adelaide Polsinelli

It’s been 50 years since Soho was zoned and, back then, the regulations were weighted towards protecting a declining manufacturing sector and growing artists community.

Today, there are 51,000 jobs in the neighborhood, one quarter of them in the “creative” industries with the rest in office, retail, accommodation, food and other non-industrial sectors.

There are currently 5,000 apartments in SoHo/NoHo and one third of them are registered with the city as artist lofts, another third are legal homes under the Loft Law and the remainder are regular apartments with no occupancy restrictions.

Over the years, there have been tweaks and changes that altered the definition of artist, grandfathered in non-artists and legalized legal successors. In all honestly, I don’t think there are any real statistics for the number of true artists living and working in a Soho loft today.

But the biggest change Soho has seen in the past few years has been the organic growth of a thriving retail hub. The neighborhood’s lax zoning has created an eclectic mix of e-commerce startups like The Mango Store, neighborhood bookstores like Housing Works and powerhouse brands like Nike, Amazon and Apple.

Ironically, this retail metropolis emerged despite zoning that prohibits it.

Yet when they hear the word “rezoning” it’s the locals who are first to call foul, claiming it’s all a guise to displace them from their homes, bulldoze the Cast Iron lofts to make way for glass and steel skyscrapers and run artists out of Soho.

I think of rezoning as quite the opposite when it comes to this historic neighborhood.

True real estate legacy is strengthening
the fabric of our communities
— Francis Greenburger, chairman & CEO, Time Equities

Real estate executives often leave behind impressive legacies in the form of grand structures that give shape to a city’s skyline and stand for decades on end.

Francis Greenburger

And we ourselves are fortunate — because as we build these structures, and as we set about populating them with residents, workers and shoppers — we are also building our own careers and enjoying the material benefits deriving from our projects.

That’s why it is comforting to realize that many C-level real estate executives you know look beyond his or her narrow self-interest — and devote a portion of their time and energy to community building and not-for-profit endeavors.

While there’s no shortage of worthy causes, I think efforts to support education especially align with the ethos of the real estate industry.

I think it reflects well on the real estate community to be supporting such programs — and to be building a spirit of hope and confidence among our city’s young people.

In fact, though less visible, I’d say it’s a legacy greater in value than shaping the city’s skyline.

How to deregulate regulated units
— Andrew Levine & Josh Lipton, Invictus Property Advisors

June 15, 2019 may come to be remembered as doomsday by the New York City real estate community.

Andrew Levine

Seemingly overnight and without much forewarning, lawmakers passed pro-tenant bills and sweeping regulations governing rent stabilized units. Nearly every mechanism used by building owners to deregulate units are now null and void.

Multi-family purchasers in New York City who bought assets in the last 3-5 years could not have accounted for such drastic legislative risk.

As capitalization rates for rent regulated buildings are projected to spike, certain property owners may have lost 30-35 percent in value literally overnight.

A saving grace of sorts for building owners: the new act does not affect Substantial Rehabilitation as a basis for deregulation.

Josh Lipton

That is, if 75 percent of the building-wide systems (i.e., there are a total of 17 building systems, including, among others, plumbing, heating, fire escapes, elevators, kitchens, bathrooms, pointing or exterior surface repair) are completely replaced when the building is 80 percent vacant, units subject to rent stabilization can be deemed permanently exempt and converted to free market status.

In addition to at least 13 of the 17 building systems that need to be upgraded, all ceilings, flooring and plasterboard or wall surfaces in common areas must be replaced; and ceiling, wall and floor surfaces in apartments, if not replaced, must be made as new as determined by DHCR.

From a valuation perspective, buildings that are at least 80 percent vacant will likely begin trading at a significant premium if they can qualify for the building-wide system improvements.

How the SLA hurts New York Cityʼs
restaurant industry
— Steve Rappaport, Sinvin Realty

The restaurant business is New York is thriving. Fueled by media attention, going to dinner is a cultural phenomenon. It’s a bright spot in a difficult leasing environment, “experiential retail” at its best.

Steve Rappaport

Amazon can’t yet replace the sensibility of eating in an atmospheric spot. Perhaps some day there will be drones dropping off meals and attendant virtual reality environments. Until then, restaurants large and small can continue to buzz.

However, there are troubles in the hospitality world.

The rise in the minimum wage provides much needed help for workers, but also takes a significant toll on restaurant owners.

A discussion of why the state can’t step in and help entrepreneurs struggling to carry the burden of social welfare, is for another article.

This article focuses on the disastrous implications of the New York State Liquor Authority’s massive bureaucratic slowdown to process liquor license applications and issue liquor licenses.

The results of this seemingly systematic slowdown are often tragic. Wages are lost for hundreds of restaurant workers; from chefs to line cooks to busboys, front of house managers to bartenders and wait staff.

There are numerous instances of restaurants closing before they can open. Investments are lost, dreams shattered.

Those involved in the hospitality business must organize.

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