In October of 2013, I had the honor of being interviewed for the commercial real estate section of the New York Times. Vivian Marino of the Times asked about my career, especially the work I’ve done with East River Partners. Since the interview was conducted nearly 5 years ago, I thought it would be a good time to give updates on the topics Vivian and I discussed.
First, Vivian wanted to know about East River Partners and what we do. What I told Vivian still stands true today. We redevelop buildings – often doing gut-renovations but we have also moved into ground-up construction and acquiring existing buildings to hold. Much of the work we’ve done has been in the nice of four-and-five-story scale in Brooklyn and Manhattan’s brownstone neighborhoods. Our projects are generally geared toward middle-class buyers, and are affordable for a lot of families by New York standards. Moving forward we are even more focused on building product that is affordable to a larger section of the NYC’s population.
ERP’s investment process was also a topic for discussion. At the time, we had just one $12 million fund with many financial investors. Today, we have invested two fully-discretionary private equity funds and we’ve made many acquisitions outside the fund. All told we’ve done transactions valued at several hundred million dollars. Our investment process has evolved a bit – we’re more focused than ever on avoiding investments that come with challenges that we think will be hard to overcome.
I continue to find development of residential properties in NYC to be interesting. In New York, you have to move quickly when you come across a good opportunity. There are usually two components to putting together a successful project: first, the intellectual competition for the best design and program for the building and second, the unwavering commitment to execution of the business plan. Without both elements, NYC is too competitive to succeed.
My personal living situation also came up in the interview. Vivian asked if I was living in a project I developed, and the answer was no. At the time, we were renting a condo in the Upper West Side. Today, we still haven’t moved into one of our own projects but we continue to be on the lookout for a project that we can build and live in.
ERP Projects in 2013
At the time of the 2013 interview, we were working on 8 projects. Two had been completed, two were almost complete, and four were in the pipeline. Since then, I’m proud to say that we’ve completed all the projects we were working on then and have started many others. Our newest project is a condominium in Prospect Heights, Brooklyn that we will bein marketing in May 2018. It’s almost completed and looks amazing so we’re excited to invite the buyers who will soon call it home in to view it.
The real estate market in NYC is ever-changing. The White House administration passed new tax laws that make homeowners unable to deduct most of the their real estate taxes and and mortgage interest. That made home ownership in NYC less attractive financially as compared to renting. Also, rental are oversupplied right now and rents are suffering. Finally, interest rates have gone up, making home ownership more expensive. But despite that we’re still very excited.
On the positive side, the euphoria among developers competing for land has subsided and prices have adjusted to where we think returns on investment are sustainable and account for the negatives mentioned above. Construction has slowed down a bit and costs are stable and predictable. Lenders have scaled back leverage and made experience as a developer matter again. So all these things have made for a stable market for homes in NYC and we look forward to continuing to build homes for the future generation of New Yorkers.