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Category ArchiveShaun Riney

Slow Season: NYC’s Investment Sales Brokers Are Optimistic Despite a Challenging 2017

Two thousand seventeen “was still good—it just wasn’t great.”

Those are the comforting words that Aaron Jungreis, the co-founder and president of brokerage Rosewood Realty Group, offered to Commercial Observer last week when asked about the state of the New York City investment sales market.

Yet one could be forgiven for considering that a rather optimistic assessment, given how the numbers depict a commercial property market that has experienced a significant downturn since the halcyon days of 2015.

Two years after eclipsing an all-time high of $80 billion, total commercial real estate investment sales in the city fell just shy of $35 billion in 2017, according to a recent Cushman & Wakefield report on the state of the New York City real estate market. Transaction volume (the total number of property sales across the city) fell more than 30 percent in that time, and perhaps most damningly—after nearly a decade of unrepentant property value appreciation in the wake of the Great Recession—the average price per square foot for Manhattan commercial real estate sales (excluding the blighted retail market) fell for the first time since 2010, to the tune of 5 percent.

Even the outer boroughs—which have emerged to an unprecedented extent as viable markets in their own right—saw a 17 percent decline in the number of properties sold and a 27 percent dip in dollar volume (albeit from a record high of $18.2 billion in 2016) to $13.3 billion, per the C&W report. And while property values in the boroughs continued to climb last year, Robert Knakal, C&W’s chairman of New York investment sales, warned of “contagion” from the slipping Manhattan market leaking into the property markets of Brooklyn, Queens and the Bronx.

Numbers aside, talk to the commercial real estate brokers who are taking the calls and making the deals, and they’ll virtually all agree that the market for New York City real estate simply isn’t anywhere near the frothy peak of a few years ago, when one could procure buyers galore for virtually any parcel or property that hit the market. But despite this slowdown, most investment sales brokers are trying to paint a more positive picture of a market in a state of correction—with property values and transactions still at relatively high levels historically and signs of strengthening conditions heading into, and during the early part of, 2018.

“It’s still a good market,” Jungreis said. “The fundamentals are still strong, and people still want to come to New York. I just think we’re so spoiled with the market having gone up and up. I’m really not that concerned.”

Jungreis and other brokers who are active in the multifamily investment sales market attributed lower deal and dollar volumes to headwinds that have hindered investor appetite for both rent-regulated and market-rate residential buildings, as well as development sites that would have proven attractive for ground-up residential projects in years past.

Rent-stabilized properties have long been considered among the safest investments in New York City real estate due to their high occupancy rates and embedded upside once units become deregulated and landlords are able to charge higher, market-rate rents. But thanks to the de Blasio administration, multiple sources said, a more stringent regulatory environment has made it increasingly difficult for landlords to realize that upside and has consequently dampened investor enthusiasm for the asset class.

“De Blasio has won; the perceived upside is locked, and [property] taxes are going up every year,” Marcus & Millichap’s Shaun Riney, one of the brokerage’s leading Brooklyn-focused investment sales brokers, said of the market for rent-stabilized multifamily properties. “To keep up with the Joneses, you have to vacate units. That’s the dilemma [investors] have—you have to believe people are going to leave [their units] unless you’re a long-term investor, and long-term investors aren’t the ones paying 20 times the rent roll [for buildings].”

Chad Sinsheimer, a senior director at Eastern Consolidated, echoed the sentiment—noting that prospective buyers have become “a lot more passive and cautious in buying stabilized properties” due to regulations that have made it harder for landlords to approach tenants about buyouts and “unlock that upside” at rent-stabilized properties. “With all these tenant harassment lawsuits and headlines, there’s a little bit of fear on behalf of these landlords now,” he said. “They don’t know how long they’re going to be stuck with these tenants.”

While describing rent-stabilized assets as “still the darling of the market,” Bestreich Realty Group Founder and President Derek Bestreich cited the “administrative burden” of landlords having to deal with “layers and layers of government bureaucracy overseeing everything you do.”

“For owners, it’s like you’re guilty until you’re proven innocent—it’s evolved into a ‘gotcha’ type of environment where owners are on the defense, even if they’re operating their buildings admirably. It puts a bad taste in investors’ mouths,” the investment sales broker said. “People want to be able to grow the value and make a return, and I think there’s less confidence in their ability to do that nowadays.”

Beyond heightened regulatory scrutiny, Bestreich pointed to shifting fundamentals that have meant “cap rates have gone up, prices have dropped and there’s less demand [from buyers] than there was in the past” for multifamily assets. “Five or six years ago, I’d have 100 buyers wanting to buy a rent-stabilized building, while today I’d have 20,” he said. “There’s far less demand, but still enough that prices haven’t come down a whole lot.”

But like other brokers, Bestreich stressed that the market is still performing well overall despite having lost some steam. “We’re coming off a period where rents grew for so many years and interest rates dropped, and that combination led to really high property values,” he said. “Today, property values are still high; rents have dipped in a lot of areas from their peak, but there’s been such tremendous rent growth over the last seven years that, for rents to pull back 10 percent, I don’t find that to be an earth-shattering thing.”

Flat to falling rents are arguably the biggest issue facing the city’s market-rate rental properties—a condition exacerbated by the sheer number of free-market units that have arrived across the city in recent years, through developments like the swaths of luxury high-rise buildings that have cropped up in neighborhoods like Williamsburg and Downtown Brooklyn, in Brooklyn, and Long Island City, Queens.

As Jeffrey Levine, the chairman of Douglaston Development, told CO, the city is now experiencing a market-rate rental supply glut that was partially exacerbated by developers rushing to take advantage of the 421a tax abatement prior to its expiry in 2016.

“You had an abundance of product going into the ground, primarily in Downtown Brooklyn and Long Island City, and that product is now being delivered to the market and creating a real distortion in the marketplace,” Levine said. That dynamic, coupled with high construction costs and land prices that “have not yet fallen sufficiently,” has made it “very hard to pencil new [rental] development in the five boroughs,” he added—even with the new Affordable New York housing plan designed to replace 421a.

Landlords are now resorting to handing out tenant concessions, such as months’ worth of free rent periods, to attract renters to their buildings, further affecting investor appetite for market-rate properties as well as development sites that would house ground-up rental projects.

“There are a lot of amenitized buildings [on the market], and there are only so many young people who can pay $6,000 a month to split up a three-bedroom [apartment]. That’s why you’re seeing these concessions spike,” Sinsheimer said of the luxury rental space, noting that it’s not uncommon to see landlords dole out two to four months of free rent at some buildings, depending on the length of lease.

As such, developers are now targeting certain asset classes that are perhaps underserved in certain areas of the city. While the ultra-luxury residential condominium market’s recent travails have been well documented, brokers are finding strong demand for condo projects in outer-borough neighborhoods like Williamsburg and Long Island City—traditionally rental market strongholds with relatively low for-sale inventories, and areas where condos would sell at a price point more reasonable than that of, say, Billionaires’ Row in Midtown Manhattan.

Marcus & Millichap broker Jakub Nowak said that his team has seen an increase in land sales in Queens driven by “a surprising uptick in activity” from condo developers. “Any residential development site that my team is selling in Long Island City at the top level, the bidders are all condo developers,” Nowak added.

Bestreich, meanwhile, cited a similar trend in areas of Brooklyn: “Well-located development sites in Williamsburg, we can’t keep that stuff off the market,” he said, pointing to “seven to nine” parcels sold by his firm in the north Brooklyn neighborhood in the last several months that he said will virtually all become condo projects. “There’s so much concern over the L train shutting down, but condo developers are saying, ‘Let me buy something now, and when I’ve built it in two years, the L train won’t be an issue anymore.’ ”

Across other asset classes, the retail apocalypse has been highlighted ad nauseam, while the market for trophy office properties has also taken a hit in the wake of the record-breaking deals for Class A Manhattan properties seen in 2015 and 2016. On a recent conference call discussing Cushman & Wakefield’s 2017 real estate market statistics, Knakal noted that declining retail property values have made it difficult to find buyers for mixed-use properties with a retail component. His colleague Douglas Harmon—co-chair of C&W’s capital markets division and one of the city’s top brokers in the market for major trophy properties—pointed to a lack of such major deals in 2017 as a key contributing factor to the investment sales market’s declining dollar volumes.

But other asset classes, such as industrial properties, are booming to an unprecedented extent. Industrial assets are in enormous demand given the rise of the increasingly influential e-commerce sector and the relative scarcity of warehouse and manufacturing properties remaining in the five boroughs (particularly in more central, well-located areas with access to bridges and highways).

“Industrial has probably been the most exciting asset class in the past year and a half,” Eastern Consolidated Senior Director Andrew Sasson said. “There’s not a ton of industrial buildings in the city that have 25-foot-high ceilings and that are being kept for that use, or can be repositioned as distribution centers.”

Likewise, Marcus & Millichap’s Nowak noted that as “so much of the legacy industrial space in New York City has been repurposed in recent years”—usually either redeveloped as loft-like office and light manufacturing buildings targeting creatively minded tenants or razed to make way for new residential projects—the supply-constrained industrial market has “benefited tremendously.”

All things considered, investment sales market participants are now dealing with an altogether spottier market than they have in recent years. But overall sentiment is the market remains in a position of strength, with many noting a pickup in activity toward the end of 2017 and macroeconomic developments—particularly the passage of the Trump administration’s business-friendly tax reform bill—as reasons for optimism.

“In December of 2016, I was not enthusiastic about 2017,” said David Schechtman, a senior executive managing director at Meridian Investment Sales. “In December of 2017, I felt excited to get back to my desk on the 2nd or 3rd of January, and I haven’t been proven wrong.”

As Schechtman pointed out, the market may very well be getting its legs back as property owners come to terms with the correction that has taken place, and as the discrepancy between the prices that sellers seek and prospective buyers are willing to pay—commonly cited as another reason for the drop-off in investment sales—is reconciled.

“It’s a very difficult environment when, each day for several years, you’re reading as an owner that your property is worth more,” he said. “It takes time for an owner to recognize that they may be selling below the zenith. Not every deal is going to set a new benchmark—for many assets, the high-water mark has been hit—and as long as the seller is willing to receive below that, there will be a buyer.”

Source: commercial

CRE Tech Startup Falkon Sets Sights High With New Off-Market Listings Platform

Having launched last year as a database of on-market commercial property listings across New York City, Falkon officially announced its new off-market listings platform this week—a tool that the platform’s founder, Ashkán Zandieh, hopes will bring greater efficiency and transparency to the city’s property investment sales market.

The startup has thus far relied on on-market listings to serve as what Zandieh described as “the Streeteasy of commercial real estate investment sales,” (referring to the residential real estate listings portal) with around 1,000 active listings valued at a combined $100 billion, he said. Now, the company is looking to expand its influence via a database of off-market listings—predominantly multifamily and mixed-use properties that have not been widely publicized or marketed for sale by property owners or brokers.

“Selling multifamily, mixed-use real estate in New York City is super complicated and complex, and no one is really harnessing technology to make it quicker, easier and ultimately cheaper,” said Zandieh, a former broker at ABS Partners Real Estate who also runs prop-tech networking and advocacy organization RE:Tech.

Zandieh hopes the off-market listings database of Falkon, which is free to use and makes all of its revenue through advertising, will increase the company’s total number of listings “by 200 percent,” or up to 3,000 properties, by the end of this year, he said. Zandieh added that most of the site’s listings, which remain overwhelmingly on-market, are priced the “mid-market” range of $5 million to $50 million—though properties listed anywhere from $600,000 to north of $100 million have been featured.

“Our end goal is to have every single investment sales opportunity in the city of New York on our platform,” he said.

Falkon claims that it attracted more than 20,000 visitors to its website and mobile app from around the world over the first six months of this year—“including active members in the U.K., China, Germany and more looking for real estate investment opportunities in New York City,” the company said in a press release announcing the off-market launch—and Zandieh said his goal is to reach “100,000 subscribers by next year.”

Falkon undoubtedly has lofty goals for itself, considering it focuses on one of the most complicated and high-stakes realms of the real estate business. Thus far, few prop-tech startups have been able to penetrate the world of investment sales dealmaking; those that have, such as the CoStar Group-owned marketplace LoopNet, have often received less-than-rave reviews from market participants.

“I’m all for technology helping everything, but the information [on these sites] gets dated really fast, and I don’t know how they can keep up with how quickly things change,” Marcus & Millichap’s Shaun Riney, one of the firm’s top-producing Brooklyn multifamily market dealmakers, said of property listings sites like LoopNet. “As soon as these websites get stale, people stop looking at them.”

While representatives for LoopNet declined to provide comment for this story, Zandieh said he was aware of the concern over “stale” listings on online marketplaces. “We don’t allow listings to remain stale on our platform,” he said, though he declined to disclose the frequency with which Falkon updates the listings on its site.

“What I can disclose is that it’s advantageous to the listing agent or broker to update that information regularly, to keep their status active,” he added.

Other brokers who spoke to Commercial Observer expressed concerns over the nature of marketing off-market listings through platforms like Falkon. Some worried that doing so would leave their listings open to be poached by other brokers, while others said that publicizing off-market properties online would defeat the appeal of such “whisper” listings—that of the low-key, diamond-in-the-rough investment opportunity that not everyone has had a crack at on the open market.

“As soon as a listing lists on a listings platform, it becomes on-market,” said Derek Bestreich, the president of brokerage Bestreich Realty Group. “Investors don’t like on-market as much—it feels like everyone has had the chance to see [the listing] and it does feel shopped around. But they love a true, off-market whisper listing.”

Bestreich noted that off-market deals can often provide value for investors compared to on-market deals, because “the more exposure a property gets, the more people have the chance to bid on it, and therefore the price goes up.”

He added, however, that off-market listings “in some cases sell for more than on-market [ones] because investors don’t want the stigma of buying a building that people have already seen.” And that, Bestreich said, is a problem with an online marketplace devoted to off-market listings. “The problem with this platform is it’s the internet—it’s the noisiest thing of all,” he said.

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Ashkán Zandieh. Photo: Falkon

Zandieh dismissed such concerns, saying that Falkon simply looks to bring further efficiency to what he described as the time-consuming, ineffective means through which off-market listings are typically pitched.

“If [brokers] love data entry and wasting their time cold-calling people, then by all means they can continue,” Zandieh said. “Instead of them cold-calling and having a hit rate of 5 percent, we’ve automated the entire process and helped the broker increase their hit rate and their reach. We have higher visibility than any broker does.” (It is too early to tell what brokers’ hit rate will be using Falkon.)

But Falkon, Zandieh stressed, is not designed and does not seek to take up the role of the commercial real estate broker in the dealmaking process. He noted that the platform only permits “exclusive” off-market listings, tied to an exclusive listing broker, and does not allow its users to post “open” listings, which are not beholden to any single broker and could lead to conflicts as sellers chase the highest price.

“An open listing is not an off-market listing,” he said. “It bastardizes the entire process. It’s not the Wild West anymore; you have to have an exclusive agreement between the seller and the broker [on Falkon].” Zandieh added that his platform “aim[s] to provide protection for the agent,” citing his own background as a broker by trade.

Falkon’s off-market marketplace also does not openly disclose the specific addresses of its listings nor sensitive financial information, such as rent rolls, about the properties in question—issues raised by brokers when discussing the platform and whether it protects the various stakeholders at play.

Zandieh said Falkon seeks to “protect all sides” of the dealmaking equation—buyers, sellers and brokers—through a listing verification process that can take up to 48 hours and requests an array of information about the property in question: asking price, net operating income, unit count, and other considerations.

“We go after publicly available information, and after that, it’s just hard work—going through hours and hours of paperwork, automating our own data set and making it a living, breathing organism so it can be implemented and used to market real estate,” he said.

Among the brokerages who have subscribed to the vision that Zandieh is offering is Cushman & Wakefield. James Nelson, a vice chairman at C&W and the brokerage’s top-ranked investment sales broker last year, described Falkon as “a powerful, yet surprisingly easy-to-use tool built specifically for real estate professionals.”

“It takes into account the way we work and only provides information we actually need,” Nelson said in a statement. “Falkon makes it easier than ever to research and sell real estate and we’re excited to deploy this across our investment sales team.”

Other tech-based real estate startups have shown that there is a market for the service that Falkon is looking to provide. Brevitas, a San Francisco-based company that launched two years ago and went live with its own online listings platform in early 2016, now has 5,000 listings across the country and 15,000 members who use the site. Like Falkon, Brevitas is free to use, though co-founder and chief executive officer Ardian Zagari told CO the company is looking to roll out a paid “premium” version in the coming months.

If you want to build a listings platform, you’re going to get compared to LoopNet immediately,” Zagari said. “What we realized is there’s a ton of deal flow that takes place off-market. We basically just digitized how [brokers] did business; they have full control over who has access to all of their deal information, and they can open it up to a wider audience and market.”

Unlike Falkon, Brevitas initially started as an exclusively off-market listings platform, before eventually opening up to on-market listings earlier this year in an effort to receive more business from major brokerages like CBRE and JLL. “We realized that if we wanted the big brokerages [involved], we needed listed deals,” Zagari said.

Brevitas has also seized the opportunity to become what Zagari termed a “back-end software solution” for its brokerage clientele, who can use Brevitas’ platform to disseminate marketing emails and communicate with buyers, sellers and other brokers.

But as a listings marketplace, Zagari said he was familiar with many of the concerns floated about prospect of marketing and transacting real estate online—from brokers worrying they’ll get circumvented, to apprehension about sharing property data online, to ensuring listings information is up-to-date and still relevant.

“I think that in general, the commercial real estate space and the people who are in the market might be a little more hesitant to adopt new technology,” he said. Zagari added that more recently, however, “the overall sentiment I’m hearing from brokers and principals is that they’re much more open [to using tech-based methods]. There’s a ton of value in being more efficient, rather than sticking to the normal way of doing business.”

Mariel Ebrahimi, the co-founder and CEO of real estate technology conference series DisruptCRE, said that while Falkon “is certainly not the first” company seeking to become a one-stop marketplace for transacting real estate, its position as a New York City-specific platform makes it unique.

Still, Ebrahimi has reservations about real estate players’ willingness to take the most essential and sensitive aspect of their business online—particularly with tens of millions of dollars at stake.

“This is still an industry that comes, on the investment side, with a hefty price tag,” she said. “The people who are transacting in this space are still going to be your seasoned real estate professionals who, if they’re going to make an investment, will talk to their broker of 20 years to guide them through the investment. Are they going to spend $10 million through a website? I don’t know about that.”


Source: commercial

City of Goldman: The Mysterious Developer Who’s Transforming Brooklyn

Standing 23 stories and 250 feet tall, the William Vale Hotel towers over North Williamsburg, dwarfing virtually every other structure in proximity—a fact that affords the hotel panoramic, 360-degree views of New York City from its rooftop cocktail bar, Westlight, which attracts droves of young, sharply dressed New Yorkers who willingly stand in line to sip its $16 cocktails.

One person who, by all accounts, wouldn’t be caught dead drinking at the William Vale is the man who built it.

Yoel Goldman is a member of Brooklyn’s ultra-Orthodox Satmar Hasidic Jewish community—a sect that doesn’t usually go for rooftop outings. But that didn’t stop Goldman and his partner on the William Vale project, Zelig Weiss of Riverside Developers, from knowing that a 183-key luxury hotel on the corner of North 12th Street and Wythe Avenue with a sleek design and the right food and beverage offerings would be a roaring success.

“We can talk about what it is to go to a cool bar and have a cool restaurant, even though he doesn’t spend any time in cool bars at all,” said Eran Chen, the founder and executive director of architecture firm ODA New York and a frequent collaborator of Goldman’s (albeit not on the William Vale). “His feel and understanding of that context, and his thirst for knowledge and information, is huge. I was surprised, and consistently surprised, by his knowledge of what’s going on—what’s cool and what’s hip and what’s done in other places. And that’s been brought to the table in conversations.”

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The William Vale Hotel in Williamsburg.

The opening of the William Vale last year represented a pinnacle for Goldman and his real estate firm, All Year Management. Having spent much of the 2000s gradually acquiring modestly sized multifamily properties across still-gestating Brooklyn neighborhoods like Crown Heights and Prospect Heights—often partnering with equity investors from the Satmar community—Goldman parlayed early success into a buying spree in the years following the financial crisis in 2008. His business plan, according to partners and collaborators, sought to capitalize on plummeted property values and Brooklyn’s promise as a burgeoning residential destination.

“He was one of our top two buyers in the early years of the recovery,” said Marcus & Millichap broker Shaun Riney, who specializes in the Brooklyn multifamily investment sales market. “Most of what he was buying was 20 units and less in these emerging neighborhoods. [All Year was] buying when no one else was buying. They were the ones cutting checks when you couldn’t get financing—when these neighborhoods looked nothing like they do today.”

Gradually, Goldman built a portfolio that now includes no less than 150 properties, the large majority of them residential and in Brooklyn. In the past several years, he’s pivoted toward more ambitious, ground-up projects like the William Vale and a massive residential development on the former Rheingold Brewery site in Bushwick that promises to bring more than 900 new rental units to the neighborhood. Having had the foresight to profit from Brooklyn’s relentless gentrification into a core market, Goldman is now facilitating that transformation as a builder.

In turn, Goldman, who has yet to reach 40 years of age and who one would be hard-pressed to find a photo of online (All Year Management did not return multiple requests for comment for this article), is only furthering his own status as one of New York City’s most active and influential real estate players—a devoutly religious man of modest means whose ambitious plans are reshaping the very face of Brooklyn.

“I think he’s transitioned from a very secure kind of business [as a multifamily landlord] to not only developing but developing new typologies,” said Chen, whose firm is designing the Rheingold Brewery project, as well as Goldman’s under-construction residential tower at 436 Albee Square in Downtown Brooklyn and a planned hotel on Bedford Avenue in Crown Heights.

“He’s attracted to bringing innovations to places that are underestimated and underdeveloped currently,” Chen said. “Anybody can buy land in Manhattan, but to buy 1 million square feet in Bushwick three years ago, when it still is to some degree not a mainstream place for high-end living, was a bold move.”

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The William Vale Hotel in Williamsburg.

To help fund the William Vale and the Rheingold Brewery project, among his other developments, Goldman has issued roughly 1.7 billion shekels, or $485 million, in low-interest, publicly traded bonds on Israel’s  Tel Aviv Stock Exchange. The bonds are backed by a portfolio of All Year’s New York real estate assets—the sorts of cash-generating, income-producing rental and hotel properties that Israeli institutional investors love to buy debt in.

Goldman, likewise, has shown an enthusiasm for the Israeli bond market as a vehicle to raise funds at cheap borrowing costs. With nearly $500 million in debt traded in Tel Aviv, All Year is one of the largest issuers among U.S.-based real estate companies to have completed bond offerings in Tel Aviv—a group that includes the likes of Related Companies, Lightstone Group and Extell Development Co., as well as more modest multifamily landlords like Spencer Equity Group, led by Goldman collaborator and fellow Hasidic community member Joel Gluck.

While not all of Goldman’s real estate assets are tied up in the holding portfolio backing the bonds, roughly three-quarters of them are—and those holdings have a combined equity value of around $480 million and a total asset value of nearly $1.5 billion, according to Israeli financial filings. Goldman does not own all of the assets in their entirety; to the contrary, he has partners on many of them, such as the William Vale. Still, for a man yet to hit 40 years of age, he has managed to build an impressive business out of virtually nothing.

Unlike some in the Hasidic real estate investment community, Goldman did not rely on family connections or inherited funds for his entrée into real estate. Rather, he got his start at a very early age—sometime around his late-teens and early-20s, according to people who have worked with Goldman—through partnering with investors in the Satmar community to acquire and renovate small apartment buildings. (Like many in his community, however, Goldman was also married with children at a young age and by that point trying to earn a living for his family. Goldman’s youngest child was just born earlier this month, according to sources close to him.)

The work could be hands-on, with Goldman often laboring alongside subcontractors on the nitty-gritty of renovating properties. But he was able to stake his claim in the years leading up to the Great Recession, which prompted Goldman into action.

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Rendering of 436 Albee Square in Downtown Brooklyn. Image: ODA

“These are guys who are opportunistic investors—they had a clear vision and saw opportunity and upside,” Derek Bestreich, the president of commercial brokerage Bestreich Realty Group and a former Marcus & Millichap broker, said of working with Goldman and his team at All Year Management. “They were able to take advantage of [the market] well in advance of that vision materializing. They saw the changes happening in Brooklyn and saw where things were going.”

The business model was simple: buy an undervalued building in a not-yet-gentrified neighborhood, fix up and renovate the property, charge higher rents for a better product and, as property values climb, refinance and reap the benefits (though seldom, if ever, sell).

“He was successful at executing his business plan,” Riney said, describing Goldman’s approach as done in the spirit of “If you build it, they will come.”

“They were buying 15 to 20 buildings a year, renovating these properties, refinancing them and doing it all over again,” he said. “As they were buying these properties, the rents were going through the roof. It was the right timing and the right location.”

Bestreich said that around the turn of the decade, Goldman and his associates were “the best buyers” a broker could ask for. “When they wanted something, they would pay the most, and they were the most hassle-free buyers imaginable,” he noted. “They would move really fast and get things done.”

He recalled one Prospect Heights building that “had all sorts of issues” including New York City Department of Buildings violations, cracked plumbing pipes and a crumbling façade. “I walked Yoel and his team through, and they looked at that stuff, but they didn’t acknowledge it,” Bestreich recalled. “He took me outside and said, ‘We’ll pay this price,’ and it was under contract two or three days later.” (All Year Management acquired the building, 690 Prospect Place, for a little over $1 million in 2011, according to city property records.)

“They knew where the market was going. We kicked up deal after deal after deal, and they gobbled it up time and time again,” Bestreich added. “They would pay the most—nobody else was going to pay what they were going to pay—and it turned out to be so true. Nobody knew it at the time, but they were so smart.”

Today, Goldman’s team at All Year and its sister contracting firm, Brooklyn GC, is said to number anywhere from 50 to 100 people—with Goldman’s empire far from a one-man operation.

Sources spoke at length about the caliber and competence of the people who work for Goldman, and they role they have played in building up his business. While many are members of the Satmar community, Goldman is also said to employ those of different religious persuasions in executive positions.

“He’s the head of the organization and the ultimate dealmaker and money guy, but he’s got a great team and network of really smart guys handling everything related to his business,” Bestreich said. “It’s not only him, and he would never say it’s only him.”

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Rendering of 123 Melrose Street in Bushwick. Image: ODA

Talk to those who have known or worked with Goldman and one gets the impression of a charismatic figure for whom real estate is everything. Standing over six feet and decked out in traditional Hasidic garb, words like “presence” and “gravitas” come up when discussing Goldman, as does an appreciation for the man’s acumen and understanding for the way the business works.

“He looks at every single real estate project as a knot that needs to be untangled,” said Gary Katz from alternative lending firm Downtown Capital Partners, a frequent partner of Goldman’s. “He loves looking at a building and seeing how he can get more value out of it. He looks at everything as a problem he can solve.”

Riney described him as “an extremely humble, inquisitive, optimistic, visionary type of dude,” and said he believes intellectual challenges are what drive Goldman as a businessman. “I think people love to work with him. He has a smile on his face at all times and loves doing this—he lights up when he’s talking about [real estate]. It’s an outlet to exercise his mind.”

Goldman’s pivot into the realm of ground-up development was motivated by a couple of factors, sources said, including making the best and most efficient use of All Year’s resources and searching for greater value than could be found in a now-inflated Brooklyn investment sales market.

“If you’re doing a one-off transaction and trying to add 500 units to your portfolio, there are two ways to do it: one big project or you buy 50 10-unit buildings,” Riney said, recalling a conversation he had with Goldman on the matter. “His comment was, ‘I don’t have time to go to 50 closings and deal with 50 brokers and 50 attorneys.’ It’s too much of a headache; they literally have to focus on bigger projects.”

Bestreich noted that, in his estimation, All Year’s move into more ambitious development projects “is not a far-fetched transformation,” but “a logical next step” for a firm that has found its bread-and-butter market oversaturated in recent years.

“They were buying small buildings, renovating them, adding value and carrying out their vision—and then the market started to pick up, a lot of buyers started entering the market and doing the same thing,” Bestreich said. “Prices went up, and it became more expensive, and they weren’t able to do the same deals they were able to do previously. They had to find efficiencies, and that turned out to be in bigger deals.”

Over the past five years, All Year has partnered with Weiss’ Riverside Developers on the William Vale, Joel Gluck’s Spencer Equity on projects including the Albee Square development and, until an acrimonious and litigious split a couple of years ago, developer Toby MoskovitsHeritage Equity Partners on a number of developments, including Moskovits’ Brooklyn Generator office project at 25 Kent Avenue in Williamsburg. (Moskovits declined to comment for this story.)

And in July, The Real Deal reported that Goldman was teaming with Kevin Maloney’s Property Markets Group—the developer of the supertall Steinway Tower on Billionaires’ Row—and the Hakim Organization to acquire a Gowanus development site for $50 million.

In addition to funds raised on the Israeli bond market, All Year also relies on financing from alternative lenders like Downtown Capital Partners and Madison Realty Capital—which earlier this year provided a $270 million construction loan on the Rheingold Brewery project—to fund its operations and activities. Sources said Goldman is happy to accommodate the higher borrowing costs associated with such lenders in exchange for greater flexibility to withdraw funds.

That flexibility enables All Year and Brooklyn GC to pay their subcontractors on time and often finish work ahead of schedule—a commitment to efficiency that, along with a zero-tolerance approach to construction or safety violations, collaborators consider a secret to Goldman’s success.

“He once told me, ‘Gary, on a spreadsheet, [finishing a project early by] three or six months looks like nothing,’ ” Downtown Capital Partners’ Katz recalled. “ ‘But if you finish a rental building in June of 2008 instead of September or October of 2008 [after the onset of the financial crisis], that’s the difference between a profit and a loss.’ ”

8 c bloomimages City of Goldman: The Mysterious Developer Whos Transforming Brooklyn
Rendering of 123 Melrose Street in Bushwick. Image: ODA

According to Israeli financial disclosures, Goldman’s assets have only appreciated in appraised value since he first tapped the Tel Aviv Stock Exchange in 2014, as has the cash flow coming into his portfolio as projects like the William Vale and his new rental development at 1040 Dean Street in Crown Heights have come online. The portfolio backing All Year’s Israeli bond issuance features roughly 1,500 operating rental units; factor in Goldman’s assets not included in the portfolio, and that number ranges anywhere from 2,000 to 2,500 total residential units, sources said.

Goldman’s success has not come without controversy, however. In 2015, Crain’s New York Business reported that All Year had attempted to raise rents on tenants at a number of Crown Heights buildings it had acquired in 2014—a move that would have violated Department of Housing Preservation and Development affordable housing regulations. While All Year eventually withdrew the rent increases—telling Crain’s that the hikes were “erroneous”—the episode was portrayed as an example of New York City landlords attempting to skirt rent regulations in search of profit.

In June, housing advocacy group Stabilizing NYC named All Year on its list of 10 “target landlords” that it said had exhibited “predatory” behavior—a list that included the likes of convicted slumlord Steve Croman and notorious property owner Ved Parkash. (Curiously, as of early September, All Year had been removed from Stabilizing NYC’s list. The advocacy group did not return requests for comment on All Year’s inclusion and subsequent removal from the list.)

And there has also been controversy over Goldman’s affordable housing plans for his Rheingold Brewery development at 123 Melrose Street in Bushwick. In June, DNAInfo reported that All Year and fellow Rheingold developer Rabsky Group had backtracked on nonbinding commitments made by the site’s previous owners regarding the number of designated affordable apartments at the development—a decision that would drop the project’s affordable unit count by as many as 88 units.

In addition to the question of affordable housing at the Rheingold project, there is also anxiety over the very nature of the development—one that promises to change the very makeup of the neighborhood via more than 900 new apartments and an innovative, outside-the-box design by Chen’s ODA.

Nearby 123 Melrose Street, Goldman’s friend and fellow Hasidic community member Simon Dushinsky, of Rabsky Group, is planning his own sizable residential development on the Rheingold site at 10 Montieth Street—one also designed by ODA and slated to bring around 500 rental units to market. Work on both projects is underway, and with Goldman and Dushinsky set to bring roughly 1,500 brand new units to the heart of Bushwick in a couple of years, questions have been raised about whether the market will absorb such an influx of supply in a timely manner—particularly at a time when rents have shown marked signs of softening.

“If you look at the very short term, it’s definitely going to be too much, too soon,” Bestreich said of the influx of units promised by the Rheingold developments. “But I do think it’s going to fill in. Real estate is not a quick, short-term game…I’m sure from the outside looking in, maybe it’s too much. But from the inside, I can almost guarantee it’s going to be a very good deal and work out just how [Goldman] expects and wants it to.”

Riney said that, in his estimation, Goldman’s Rheingold plans and his other designs on the city are about taking the next step as a developer and businessman—rather than just putting up more buildings for the sake of it.

“If you meet the guy, he wants the challenge” he said. “He’s someone who is not in need of money; he truly believes he’s now at a level where he can influence an entire area, like a Walentas and Dumbo. He’s looking for bigger swaths of land so he can create something special.”


Source: commercial

After Three Decades, Brooklyn Heights Buildings Owner Sells to Sugar Hill Capital


Source: commercial