REBNY Head Notes RE Market Recovery Signs

The Long Island City Business Development Association's fourth annual real estate breakfast featured a speaker who presented the case for real estate interests forcefully. Steven Spinola, president of the Real Estate Board of New York, called the current situation "a time of uncertainty", with rents down and vacancies up, but was quick to note intimations of recovery, even as he warned of a continuing or even worsening slump. He was also forthright in his complaints about the city and state political situations, saying they didn't favor real estate and concluding that the general business situation is bound to be the worse for that. He was joined on a speakers' panel by George Hatzmann, managing director of Tishman Speyer, who covered his vast company's Long Island City activities, and Melina Starr, senior director of Prudential Douglas Elliman, who covered high-end residential matters on both sides of the East River.

Spinola spoke of an at-or-near-the-bottom feeling among residential and commercial real estate interests in New York at present. He had an anecdote about a residential firm that was languishing a few weeks ago, with no contract signings at the moment; and within a short time it had closed 22, an excellent achievement even in a prosperous period. He said foreclosures were down in number in New York, while they were soaring in Los Angeles and Miami—though he did note that twothirds of New York residents rent. What's more, trouble was probably averted among cooperative shareholders when co-op boards restricted over-financing, he said. But if the residential picture is hopeful, what of the commercial? Some $400 billion in mortgages are coming due in the next year, he said, and many businessmen are fearful they might not be able to refinance. Spinola said that commercial foreclosures could be many and hard-hitting.

He called the development of Queens Plaza utterly essential and added, "It's a great time to do it," thereby complimenting Hatzmann of Tishman Speyer, which has initiated the rebuilding with the great demolition and reconstruction project at the corner of Jackson Avenue and Queens Plaza South. In contrast, he expressed contempt for the New York state legislature, calling its latest budget "disgraceful". It comes in at $132 billion, an increase of $10 billion in just a year, he said. A decade ago, it was $76 billion. (He noted that New Jersey's budget was decreased.) Its federal stimulus package of $7 billion would be gone in a year or so, he added. Soak-the-rich is ever popular in Albany, he observed: the top 4 percent of money-earners are paying 55 percent of the state's taxes. He mentioned billionaire Tom Golisano, who apparently has had enough and won't be running for office in New York any more, having removed himself from the center of the state to Florida. Spinola predicted that other wealthy individuals would desert New York also.

He said that public employment rolls in New York state and city currently number more than a half million and public pension plans will ruin the economy at the rate they are going. He said that during the budget-making process he hoped for "substantial savings" from unions but found they "offered basically nothing" to the state government. He believes that those impinged upon by the state, real estate people being a prime example, should become more active and say they are tired of the "left wing policies" the state government advances. As for the city, he remembered its post-2001 fiscal crisis and the first-term mayor's 18 and one-half percent property tax increase, though not fondly. He did say that Mayor Michael Bloomberg was wise to put away much of the gained revenue for a rainy day—but that all got washed away in the current economic downpour.

Hatzmann recalled that Tishman Speyer closed the Queens Plaza demolition/ reconstruction deal last October, just after Lehman Brothers collapsed in bankruptcy. First order of business, of course was demolition of the 40-year old municipal garage. It has been leveled, and foundation work on what is to be a 659,000-square-foot office tower, containing 9,000 square feet of retail space, has been started. Hatzmann said that if work proceeds as planned through the summer, passersby (or No. 7 riders) would be able to "see steel" by autumn. Also according to plan, the entire operation should be ready for occupancy and business in just over two years, by June 2011. Hatzmann said his company has an option on the property across the street, so something could happen there, too. He was asked about rents in Manhattan and observed that they are still falling, though he saw them leveling off soon.