New York City, Bloomberg, Manhattan discussed on Meet the Press
In business with Barry ritholtz on Bloomberg radio. My special guest today is Francis reimbursed. He is a real estate developer an author of literary agent and a philanthropist. He's the founder of time equities one of the larger real estate developers here in Manhattan in New York City, perhaps he is best known as the creator of the residential co op his autobiography is risk game. Self portrait of an entrepreneur Francis. Green burger welcome to Bloomberg. Thanks, very, so I'm kind of fascinated by your background and your history, and we're gonna get into a lot of the details. But the obvious question what sparked your interest in in real estate coming from a background working in the book? Business was pretty intuitive. I I remember this day. I was walking down the streets looking at buildings looking at architecture thinking about built environments and thinking about real estate in New York. And realized that I had some sort of a visceral connection with it. That defied my background or any particular typically logical connection with my past. So in your book risk game. You wrote something that stayed with me, quote, the real estate industry has created far more bankruptcies than billionaires, unquote. Explain that, well, I think. If you look around New York, and I was walking here past for instance. Harry math close gallery on Park Avenue. Harry who I know is a mixed career. He's had some incredible successes. But he's had some incredible failures all in New York City real estate. So it's about timing. It's about risks. And it's about what you choose to do or not do. So let's talk about timing and risks. You bought a piece of land down at fifty west street back in the nineteen eighty s with the plan to either develop it or redevelop in the future, and then that piece of property lived through September eleventh and the great financial crisis. Tell us a little bit about your history with fifty west. Okay. Actually when I bought it. I wasn't thinking of redeveloping it. I was thinking of it more as an income property, and it was fully leased. I think it made about a ten percent return. So it it looked like something I could just hold onto and over time watch rents go up and hopefully expenses keep stable and growing income and growing value around. In in the nineties. We lost some tenants and. New York was just beginning to think about downtown as a mixed use environment. I mean that was very non-residential back in the day. Right. Very non-residential although battery park already existed, and there was something older Giuliani plan which offered tax benefits. If you converted commercial properties to residential. So we were actually started to convert part of the building. And was I think one of the first. Properties to qualify under that plan. By nineteen by two thousand and five we may be converted half the building. But there was a lot of major work that we need to consider. And we realized that the sighting of the building was such that if a hot demolished it and build a new building would be extraordinarily views from the apartment. So we began to study that as an option, and you spend a lot of money on architects, just even thinking about this, right? We spent you know, one of the surprises. When you go into development is land is expensive. Well, preparing plans is very expensive and we develop full plans for the building which at that point was to be a hotel and condominium apartment complex. But our plans got interrupted by the course of events. In the financial world. So let's talk a little bit about that. Here's a building that you're racing to meet the deadline for certain tax advantages. You've already built the foundation. You've sunk a lot of the main support beams. But you haven't started building the building itself and then September fifteenth. Oh, eight Leman brothers collapses into bankruptcy. And I think you were talking about a five hundred million dollar financing for the whole project from start to finish. What did the collapse of Lehman Brothers due to that development? Well, I recognized almost immediately that building into that kind of financial environment would be disastrous. So I made the decision very quickly to pull the plug halt development. And wait for a better day. In other words, not actually give up the property, but hey, let's postpone this project until credit freeze up. Bit credit freeze up and credit is only one part of the equation, if it's for sale housing the way, this was condominiums there had to be a willing market to buy it. Because otherwise, you might have the financing, but you have to pay it back, right? Next sense. So, but that ran into a problem almost immediately didn't it. Yes. I had a little misunderstanding with with the Bank who had financed. The foundation construction for me. Even though I told them what I was doing. And they seem to concur. All of a sudden in January. They sent me a letter saying I was in default because my loan required me to continue building. No matter what. And of course, I called him and said, are you crazy? Anyway, I don't really know what was going on within a couple of weeks. They backed off. And we we negotiated the agreement to allow for the interim period that would be needed until the market was was suitable in both from financing point of view as well as a buying point. And how did the building ultimately turn out? Well, it turned out very very well coming up. We continue our conversation with.