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Deals & Dealmakers

The three sides of Time Equities’ Francis Greenburger

Time Equities founder and CEO Francis Greenburger has led a successful 51-year career in commercial real estate, proving himself as one of the top investors, thought leaders, and trailblazers in the country.

Today, his internationally recognized firm owns over 25 million square feet of residential, industrial, office, and retail in 29 states, Canada, Germany, and the Netherlands.

But there’s another side to the humble and modest professional.

He also chairs Sanford J. Greenburger Associates, a literary agency representing some of the most successful writers of our time, and founded the Greenburger Center for Social and Criminal Justice, which advocates for needed reforms in the criminal justice system.

Greenburger, who recently released a memoir, Risk Game: Self Portrait of an Entrepreneur, last week sat down with EisnerAmper managing director Harry Dublinsky at The Deal Flow Network’s inaugural Real Estate Forum to discuss his personal, professional, and philanthropic lives.

The forum was held at The New York Bar Association Building in Midtown, drawing a mix of more than 230 family offices and real estate investors around the city. The organization was founded by MFR Equity president and Madison Commercial Real Estate Services director Moshe Rosenbaum and The Quest Organization president Michael F. Rosenblatt.


Dublinsky: As a teenager working closely with your late father in his literary agency, what motivated you to get started in the real estate business in the 1960s?

Greenburger: My father was encouraging me to follow in his footsteps and devote myself to the publishing business, but I felt that I had broader interests.

I remember walking down Fifth Avenue one day, looking at some buildings and cataloging, almost unknowingly, a lot of the locations around New York. I’d say to myself, “46th and Sixth” and see the buildings.

My interest started with this photographic, architectural impression of New York and of the different locations in the city.

Dublinsky: Can you share an interesting anecdote from your memoir about your representation of famous author James Patterson?

Greenburger: Jim was probably one of my very first clients. His manuscript came in “over the transom,” which means there was no referral. I read it, I liked it, and I had it submitted to 36 publishers before I sold it — in fact, the 36th publisher had rejected it earlier.

I certainly can take responsibility for getting him started with my doggedness.

It was after his second or third book when he called me up one day and said, “Francis, I keep reading about you in the newspapers and your real estate things. I’m not really comfortable in having someone represent me who’s not devoted full time to my interests.” I replied, “Jim, I think I’m doing a great job for you.” He said, “No, you have to make up your mind, either real estate or me.” I let him know quickly after that real estate had won.

Dublinsky: What are your thoughts on the state of the U.S. economy over the past eight years of the Obama Administration?

Greenburger: Both numerically and anecdotally, my experience has been very positive. I just got back from Kansas City — I’ve been in that market for about 15 years, and when we got there, it was not doing well at all.

I talked to numerous people [during my trip], from investment sales brokers all the way to my taxi driver. Things are definitely looking good in Kansas City. There is a lot of new business coming in, even in the adjacent St. Joseph, which was a down-and-out industrial city.

There’s a lot of positive momentum, and I see this a lot throughout the Midwest. We own property in all the Midwestern states, and that speaks to the strength of what’s going on.

Dublinsky: How is Time Equities identifying and taking advantage of opportunistic investments?

Greenburger: We’re certainly opportunistic in our approach and very return sensitive. When we look at investments, we’re long-term owners—so I want to make sure it’s sustainable over the long-term, and I’m not just looking just to trade a short-term trend that may or may not be there. If it’s not there, I could be in trouble.

So we look for things that are sustainable relative to the debt markets over the long term. That makes places where there are sub-5, sub-4, or sub-3 returns difficult for us. We’d rather take a little more risk on the location or perceived risk … that’s one of our criteria.

If we’re doing added-value deals … we really want to buy the cap rate that exists on the existing occupancy. We’ll work hard to improve it, but we don’t want to be out on a limb if we can’t improve it. We can bet that it won’t go down.

We buy a lot of suburban office, for instance, that is 60 or 65 percent occupied and work to improve it and often do. But I want to make sure it’s sustainable at my going-in occupancy.

On development deals, our approach isn’t a lot different than most people’s. We’re looking for 2x to 2.25x on up-front equity, and that’s usually over a three- or four-year time frame.

Obviously, if it’s longer — like a five-year project — you want to have that 2x expand to reflect the time frame.

It’s not magic, but strong discipline on cash flow and making sure what we own is something we can pay our bank and colleagues market rates as they fluctuate over the long term.

Dublinsky: How about retail?

Greenburger: Retail is an interesting area for us right now, because the market is discounting retail, relative to the e-commerce threat, in a very significant way. We find we’re able to buy very strong yields depending on the type. In terms of cap rate, from 9% to as high as 12% in some instances.

We’ve been acquiring some major malls — we bought two so far this year, another closing shortly — from REITs who are being told by Wall Street that if they want their stock prices to improve, they have to offer some strategy around the retail. And it varies. Some of the REITs are selling their Midwest assets. Some are selling their West Coast assets because they’re not over 500,000 square feet.

So everyone has a different definition, and we find some very good properties at very strong yields.

We do know about e-commerce, but we think the market is over-discounting it. Right now, depending on the statistic you look at, e-commerce is six to 12 percent of total retail sales, which would surprise most people — you’d think it were 30, 40, or 50 percent.

Sure, there will be growth, but on the other hand… you can’t go to dinner on the Internet, you can’t go to the movies on the Internet, you can’t get your hair done on the Internet, and you can’t go to urgent care on the Internet.

There’s a whole category of retail that is not even susceptible to e-commerce. And then you see e-commerce crossing back into bricks and mortar. … [Bricks and mortar] is here, and that’s why we’re very bullish on it.

Dublinsky: You’re also investing in the Netherlands. Can you tell us what opportunity you see there?

Greenburger: We have a tradition of going into markets that are in the end of sustained recessions. We did that in Canada, certainly did that in the U.S., and we did it in Berlin.

Holland is in that situation. They’re coming out of it now [in which the] financial and banking situation was very poor. It was hard to finance certain classes of real estate assets and really became a buyer’s market. For that reason, we went in, and the first portfolio we bought was about a year ago.

We’ve taken a substantial position there, and we’re buying 70% to 75% occupied properties with yields of nine to 10 percent unlevered on day one. So it’s a similar bet to what we’re making here.

In Europe, real estate usually trades 100 to 200 basis points lower than the U.S., so an eight to 10 percent in Europe is unheard of. Interest rates, incidentally, are in the 2s.

Dublinsky: Time Equities is completing its premier ground-up development of a 64-story condo at 50 West Street in Lower Manhattan. Please tell us more.

Greenburger: 50 West has a long history — I bought it in 1982 as a loft building, and ran it as a loft building until about 2003.

We converted part of it into live-work lofts, and it was actually one of the first projects to become a live-work project under the so-called Giuliani plan for Downtown, where you can have mixed-use in a way you couldn’t Uptown.

About 2005, we figured we had to convert the entire thing or we could redevelop it and have the opportunity to buy significant air rights. … Ultimately, we convinced ourselves that it was the right way to go.

We began the development in 2007; we had a loan that permitted us to acquire the air rights and begin the foundations. The idea was we were going to roll a construction loan after that.

Well, you all know September 2008 wasn’t a good time. We had started our foundation, but I had stopped it in October because I figured the worst thing that could possibly happen is own a partially built to fully built building in the middle of one of the worst financial disasters that we’d ever seen.

Five years or so, we had to carry the building at an enormous cost to us, probably running us $4 million a year in interest and taxes. [Our bankers] wanted the loan paid down because they were under pressure from their bank regulators, so we stepped up and did to the best of our ability. So it was a very heavy lift.

We did this for five years and then finally could see where the supply in New York would be absorbed.

That was August 2012, and that would be the magic point. We decided to move ahead, and it took a while for the banks to understand our logic and for the market to get ripe. But eventually we pulled it together.

We were one of the early buildings in this cycle, which has benefited us a great deal. We’re significantly pre-sold at this point and happy to have a lot of money to pay back the banks and our investors. Our profits will come as we finish and sell off the rest of the building.

Dublinsky: Tell us some of the lessons you’ve learned on the way.

Greenburger: Make hay when there’s sunshine, and carry a large umbrella — by which I mean, ours is a cyclical business, and as sure as I’m sitting here, there will be cycles in the future.

When conditions are right, you have to respond, because that’s when some of your greatest opportunities are. But you have to have enough reserves, cash, and liquidity so that when things turn against you — and they will — you can somehow pull your way through. As Sam Zell said in ‘89, “Survive until ‘95.” I don’t know when it’s going to happen next, but again, we’ll survive.

Dublinsky: You have a very large network of strategic partners and a dynamic equity base comprised of individual investors and financial institutions. What are the key attributes they should be looking for in investing with a sponsor?

Greenburger: I often feel like I am of like experience and mind to investors who sometimes invest with us, because I diversify some of my real estate investments into hedge funds and other private equity sources.

I have an approach: first of all, sponsors’ equity. I’d like to see the sponsor of whatever hedge fund I’m investing in having a very significant investment—I’m happiest when they have at least 20 percent. We structure our investment offerings so that we always put in 20 percent of our own or our immediate affiliates’ money… it’s a good sign they’re not just thinking about making a deal with OPM.

I [also] try to meet everyone I invest with, and I want to be impressed with their intelligence and business plan. And I don’t like to invest in mega funds, because I find they become about something other than the individual sponsor or sponsors that are behind it. I find it more appealing to be able to connect with the intelligence and thinking behind the investments. I also have another phrase, “I bet on jockeys, not horses.”

Dublinsky: After Election Day, the focus will turn to the 2017 mayoral election. What should the next mayor do to help New York City?

Greenburger: [New York City] actually has a lot of the same issues as the rest of the country does, but is actually handling them better.

There’s a social agenda that the entire country has to face up to, and we have to make sure that people who are not benefiting from the economy are motivated to be part of the system. Because if they check out of the system, they become dangerous.

Then all of us who enjoy a middle-class or upper-class life don’t want to live the way they do in Mexico — sending kids to school in an armored car and having bodyguards surrounding them at all times. That’s not the country I want to live in.

We have to make sure there is some balance, and our current mayor has done well on education, with strong initiatives to improve our schools.

I obviously think public education is the future of our democracy. [However], he’s managed to mess up his affordable housing stuff because of his dispute with Gov. Cuomo. … We need to continue those social initiatives to keep the city as a leader in social equality throughout the country.

The other thing that needs to be addressed, in my view, is figuring out the tax abatement problem. Because affordable housing initiative can’t go forward without it — the economics don’t work. Also, my view is that the real estate assessment issue in New York is a mess. I’ve spoken to the mayor about it, and he actually acknowledged it and said, “Look, it’s the hottest issue around for a politician to touch, and in my second term, I’m going to try to take it on.”

We need better assessment policies that are less weighted one way or another and make them more equal and uniform.

Dublinsky: As we conclude, I’d like to ask you about something near and dear to your heart. Please tell us about the mission of the Greenburger Center for Social and Criminal Justice.

Greenburger: I think there are two things that people who have less resources are [concerned with]: one is economic equality and the other is the criminal justice system. Because frankly, it impacts them to some degree more than the middle class and upper class.

We all know the statistics: One in three black Americans will be incarcerated in their lifetime. That’s a problem. They have to believe in the justice of the system, and that’s not the case today. That’s why you see rioting where police seem to have acted in an inappropriate way. Whether or not they did, there’s a presumption now that the police are not treating people fairly, [as is] the whole justice system.

And again, that goes against the stability of our country and the stability of our democracy. That’s why it’s so important and why we have to do a better job.

In 1950s, there were 550,000 mental health beds; the population has doubled, but there are 35,000 [beds]. We closed 95 percent of the mental hospitals and we opened no new ones. Where did all those folks go?

We had a vision that somehow they would be okay returning to the communities with pharmacological drugs — well, it didn’t work.

Today there are 1.1 million people incarcerated, in jail, mentally ill. Basically, we closed the hospitals and put them in jail. That’s not the America I think we all believe in. So, we’ve got work to do.

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