1. How Bruce Ratner Became One of New York City's Top Developers

Welcome. This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis & Young's Tri State investment Sales Group. In this program, you'll learn about the world of commercial real estate and find out why it is one of the largest investment opportunities in New York and around the world. Now here is your host, James Nelson. Welcome everyone to the first ever show of real estate Investing. Live from New York, this is James Nelson, your host. I am so excited to be bringing this show to you. We're going to teach you everything you need to know about investing in commercial real estate. We've got an incredible first show lined up where I'm going to be interviewing Bruce Ratner shortly. But before we get to that, let's give you a weekly New York City review powered by the Daily Beat. In this week, top sales included L and M Development partner and Invesco Real Estate's $1.2 billion acquisition of the 2,800 unit portion of Brookfield's Putnam portfolio. The buyers secured around 823 million in financing from Wells Fargo. This was made possible by a Article 11 property tax abatement where 30% of the units will remain affordable. Elsewhere, ZG Capital Partners has entered into contract to acquire 2417 Third Avenue in Mott Haven from Savannah and Horn Capital for 65 million. Savannah and Hornig paid 30.6 million for the property in 2015 and then made a subsequent $12 million. Capital improvement in real estate meets politics Opportunity Zones haven't lived up to the hype yet in that a new report by Nova Gradic said that out of the 103 Opportunity Zone funds have raised just 3 billion of the total 22.7 billion fund managers had anticipated. This was after Treasury Secretary Steve Mnchin had said that he thought that this program could raise up to 100 billion of private capital in real estate. Meets Tech SoftBank COO Marcelo Claure will take over the helmet WeWork his comment was that in the Wall Street Journal was that Softbank has made an $18.5 billion commitment, which in context is the size of the GDP of Bolivia. And lastly in leasing, Uber has officially inked a deal for 307,000ft at 3 World Trade Center. Asking rents in that building hover in the 80s and low 90s. And now a quick word from our sponsors and then we'll get to the interview.

Hi, I'm Mark Rose, Global CEO of Avis and Young, the world's fastest growing real estate services firm. And we are proud supporters of Voice America. With over 5,000 professionals in 120 offices in 20 countries, Avis and Young delivers local expertise in partnership with global reach. Because we are principally owned, Avis and Young prioritizes client success over shareholder profits through our open architecture. Our firm's experts provide value added client centric investment, sales, leasing, advisory, management and financing services to clients across the office, retail, industrial, multifamily and hospitality sectors. Our culture is the bedrock for collaboration that enables each assignment to benefit from the collective intelligence garnered from a company wide database. Partnership Performance Learn how we deliver different@avisonyoung.com to learn more.

To launch our first ever show, I'm thrilled to have Bruce Ratner join us. Bruce is a true legend in the industry and visionary. He's had a hand in some of the largest New York City developments, including the Barclays arena in his Pacific Park 4 million square foot planned development. Since he co founded Forest City Ratner in 1985, his company has built around 50 ground up projects in the city, including New York's tallest modular tower, the New York times building, the 16 acre metro tech office complex, and a Frank Gehry apartment tower, just to name a few. He was even an owner of the Brooklyn Nets until as of late. Above all, he's someone who gives back, most notably as chairman of the Museum of Jewish Heritage and is also on the board of Sloan Kettery and Weill Cornell. Bruce, thanks so much for joining us today.

Thank you for having me. Very nice of you.

So Bruce, tell us a little bit about your childhood. I know you grew up in Cleveland. I believe your family was in the cement business. Did you ever think about going into the family business? Did you ever. Did you pour any concrete along the way, so to speak?

Well, what happened was my father, first of all, you're right, I grew up in Cleveland and that people say you can take the person out of Cleveland, but you can't take Cleveland out of the person. So I'm still got a bit of Cleveland in me.

There you go.

I left when I was 18.

The show was. Was there a show Cleveland Rocks? Is that.

Yes, there was, yes. There's also something called the Full Cleveland, which is a leisure suit and white box. So there's also that part of Cleveland. At any rate. So I grew up in Clevel. My father was born overseas in a little town in northeastern Poland, which was then Russia, called Bialystok. It was partly. It was in Eastern Europe, obviously. And he came here when he was 20 years old in 1920 and it was one of the last groups of Eastern European immigrants to get to the United States. And he was not educated. He had a fourth grade education. And he started actually interesting enough by working on a construction job, carrying water for bricklink layers. And then he eventually he wound up going into the coal business, selling coal. And he had a truck. I guess I wasn't there, but he had a truck and eventually people stopped using coal. So he went into the building supply business and he sold brick and block and also concrete. And that was his business and it was a small to mid sized business. But unfortunately he was sick for much of my growing up and he died when I was 16. I had an older brother and so I think he would have wanted us to maybe take over the business. But when he passed away, there really wasn't much of a business left by the time we were of age to run a business. So there really wasn't that option. And I don't know that we would have wanted to go into that business anyhow. It was a very hard business. You know, I used to work since I was 12 years old. I'd work in the back of the yard loading trucks and you know, driving trucks and learning how to weld and.

Driving trucks at 12?

I wouldn't say 12. At 14 though, I was driving trucks. Yes, in the back of the yard, you know, and they used to fix the truck. So I'd watch, I learned how to weld and I kind of liked it. I always liked to work and I would like to even do physical labor. Not even do. I would do physical labor and I would know all the drivers. It was kind of for a kid who, you know, grew up in Ohio seeing cars and trucks and watching construction. I was also the 50s and there were a lot of home builders happening. My father primarily supplied home builders. So like Levittowns houses. I remember the sign on the houses that he would supply brick to. They said 5999. That's $5999 for a house. After the war, some of them went up to 7900. That was a bigger house. The houses were probably 1200 to 1500 square feet. And they were row after row, much like the original Levittown. There were veterans really buying homes. So that's the era I grew up with. And so it was 1961 when he passed away. I was in high school and so I really didn't have a business to go into, which was fine. I'd never kind and went to college. And I was pretty good at Math and sciences and primarily took courses in math and science. And then my brother was a couple years older than I was and he was at law school at Columbia. And I wanted, I guess, be with him. I kind of followed a lot of things he did. So I went to Columbia Law School. After going to undergraduate, I was at Harvard in Boston. And I didn't know what I wanted to. I didn't really want to be a lawyer, but I did go to law school. So law schools finished and it was during the Vietnam era. And Columbia was a very progressive, in today's language, maybe people call it radical. And I had a very progressive fellow students. And they took over. We took over buildings. And I was not part of the taking over of buildings, but I was what one would describe as probably left, not necessarily radical, but today we'd call me probably progressive. And so I. I decided I didn't want to be a lawyer. And I. Right after passing the bar, one of the professors called me and said, bruce, would you like to run a neighborhood office in Queens? And the neighborhood office, lawyer, you know, the young lawyer running a neighborhood office for the city of New York. He had taken a year off and was running an agency in the city government under a program called Model Cities, which was a progressive program during the Johnson era. And so I did that and I had no particular idea what I was going to do with the rest of my life. So I'll tell you that first chapter and you can ask me some details of that. It certainly wasn't real estate. I'm not out of any choice. I didn't know anything about real estate because my dad was a. Was building supplies, but he was not a builder. I had cousins, which is where the name Forest City comes from, who were originally in the lumber business. And they eventually went into the retail mall development or retail shopping center business. So I was. That's not my immediate family. They're cousins of mine and I eventually became partners with them. So there wasn't really a family business to go into for me.

Right. So growing up, did you have any exposure to real estate if it was your cousins who were off doing?

No, not really. As I say, I was always good at math and stuff. So when I finally decided to go in real estate, that helped me a lot. No, but I didn't actually have any real experience in real estate. I will say my father, just before he died, bought a lot of land in Cleveland with a partner who had a lot of money and unfortunately died. And so this partner was left without my father to Run it and eventually he sold it and whatever. So the only exposure, I guess was there wasn't really. I guess he owned some land when we died in Cleveland, but that's it, pretty much.

So that work ethic that you learned at a very early age, that has stuck with you throughout your career, and would you say that that's one of the keys to your success?

Well, so as you know, when we were walking in here, we're here at CUNY and I was watching students in the classroom. I said, I'm so glad I'm not a student. I'm so glad I'm not a student. I always did okay at school. I did fine in school. But I can't say that I love sitting in the classroom, even though I did teach for a while. But I love to work, is the truth. I always like to work. I always like to work. I like to work in my dad's office and I always like to work just like so, you know, I wouldn't say I'm necessarily a workaholic because I believe in a balanced life. And I would say that to everybody in the office when I leave, whatever time, 7, 7:30, whatever time, I don't want to see anybody here. I don't want you working past 7, 7:30. I don't want you working weekends. You need to have a balanced life. And any business or even when I ran an agency in the city, it was always about balance in your life, that work is not the most important thing. Even though I enjoy working, it just isn't. You need to have a life that has many components to it besides just work.

Very, very true and great advice as a teacher. Did you enjoy that imparting knowledge on others? And has that stuck with you as well as you grew a company?

Thank you. That's a really good question because I love to teach. In fact, my real goal was this. So I worked for the city for. Essentially, I taught for five years. I worked for the city of New York for seven years. And I loved working for the city. And I was Consumer affairs commissioner for four of those years, strangely enough. But the teaching, I actually enjoyed teaching a lot. And my colleague goal. When I decided to go into business, I'm probably jumping ahead a little bit. I was close to 40 years old. I had never been in this business before. My goal was to earn 130,000. I don't know why I picked that number $130,000 a year as passive income so I could teach the rest of my life and quit. And I got myself Eight years to do that. Eight years. I will figure out how to earn passive income so that I could really teach the rest of my life. And I did. Probably. Of all the things that I've probably done, I think I enjoy teaching the most, frankly.

That's wonderful to hear. So this was. Well, I want to talk about your work in the public sector as well. So going from public to the private sector was certainly, I'm sure, an adjustment, but it probably also gave you incredible insight because I remember hearing you speak when I started in the business close to 20 years ago, and I remember when you spoke to the audience, you said, any good project takes at least 10 years to accomplish. So having that knowledge of the public sector and as they call public private partnerships. Talk a little bit about that experience in making the transition.

Sure. Let me go a little bit backwards because something happened which was Ed Koch, the mayor of the City of New York. People may not have heard of him, it's been a while ago, but he was a great mayor in the City of New York. I think most people have heard of Ed Koch. So I was very fortunate. I was hired by Ed Koch at age 32 to run the Consumer affairs department of the City of New York, which had a lot of responsibilities, weights and measures, supermarkets. And so. And that was my area of expertise was happened to be, you know, credit consumer, consumer items and so on and so forth, making sure people protected from fraud. And I was only 32 years old and the agency had 400 people in it. So now I'm 32 years old, just about to turn 33, and I have to run something that has 300 to 400 people in it. Wow. So. So I learned I'm not naturally, I don't think particularly good at management, but at 32, 33 years old, I had to start managing something. So I had to manage something which was large, relatively large. I mean, it's not huge, but for someone who doesn't have too much experience in that. So what happened was I began to see, after four years of, you know, my fourth year, that I was kind of running this agency like a business, just like I watched my dad run his business, which was much smaller. But I was, you know, learning management principles. I went to the American Management association, took some courses there, short courses for three weeks or six weeks, whatever it was, and I got interested in how to run things. And I'm not naturally necessarily good at running things, but I learned. So I said to myself, at the end of the four years, I was 37 years old, actually, and I said, you know what, Bruce? You're really kind of running a business. So now I've got to make some money. You've got two kids in school, you don't have a lot of money and you've got to figure out how to earn more money. And so that's when I decided it could have been honestly widgets that I'd gone to, it could have been any business. And just I said to myself, oil and gas is to Texas as real estate is to New York. And so it's going to be real estate. And I just made that decision. And I rented 100 sublet, 110 square feet in the Flatiron Building because I loved that building, the way it looked, very proud. I rented sublet from someone who had a bigger space and I made my desk out of a chair out of a rather a door with, you know, like you used to in college. And I just started getting pro formas from real estate companies like yours that would have setups. And again, it was the early days of computers and I was pretty good at computers. And I learned what is today Excel was then called VisiCalc. It was the equivalent of Excel. And then there was a company called Lotus123. So I learned how to do that before people were really doing that. And I would make, I would call them stretch sheets, but spreadsheets in that old fashioned paper. And I would do it and I would be able to, which wasn't being done then take a set up and then project it out for 10 or 15 years. That was not really done then. And so I was able to kind of determine what a building would look like. And I would get one after another, one after another, one after another. And I finally found some buildings that I thought I could syndicate because I didn't have money. I thought I had to raise money. So I really got into the business. It could, as I said, it could have been widgets. I just knew I was, you know, okay at sort of organizing things and I knew a lot of people and I was good enough at numbers. So I just decided that this is what I was going to do next. And when I think about it, I had two young children, I had about nine months of what's called leave time. Leave time is in the city when you worked overtime, even if you were a commissioner, I was a commissioner of an agency, you got credit for it. So I had worked so many extra hours over the four years that I had nine months that they continued to pay me after I left I don't know what I was thinking here I have two children who were, I guess, 6 and 4, and I leave a decent income to take a chance on something. I don't know what I was thinking. If I had failed, I don't know what I would have done. I was a lawyer, but I found out as a lawyer, I'd never practiced law in any conventional sense. And I realized that when I talked to law firms, they had no interest in me. Oh, you can be off counsel if you bring money in. But I had no ability to do that, so I really didn't realize it. But I put myself and my family, maybe in potential harm's way. And so, anyhow, so that's how it got started. In a flatiron building, 110 square feet. On a card table. On a card. Well, actually, the door. You hit the door at least the door. Yes.

Talk about a leap of faith. And if I'm not mistaken, your first acquisition ever was Metrotech. Is that. Well, it would become Metrotech. Okay. Because that would be. Yes, we'll get to that.

Not only that. So syndication was. This was 1983, and syndication was a big deal then, primarily because of tax laws. So you would do syndications. By the way, the tax rate. The last. The highest bracket was 90%. Wow. In 1983. So that people were looking for, you know, ways to create losses out of depreciation.

So you buy apartment buildings here in New York or. What were you buying?

There were syndications. Everyone was doing syndications, all the brokerage firms and so on. Kidder Peabody. Syndication was being done like crazy. And there were tax syndications where there was a tax advantage, because if you got depreciation, got the deduction, eventually the rate went to 80%, the last bracket. So people would shield income through depreciation. And there were special lords you would go to that would be able to do that. And so that is how I started.

What was the first deal as far as.

What was the. So the first building I looked at in a serious way was the Cable Building, which is on the corner of Houston and Lafayette. It's where the Angelica Theater is here.

Oh, it's a beautiful building.

It's a beautiful building. It was $10 million.

What year was this?

This would be 1983.

Okay, $10 million. Today, that building is probably easily worth.

Yes.

100 million to it. Probably more.

Yes, probably so. But the problem with it was I started. I started. You know, I had some. I would go to experts, and it turned out that you couldn't Bring it up to fire code if you were going to. They had an open staircase beautifully, had an open staircase that went up all 10 stories. It had all been closed and it was too messy for me. So I wound up buying, syndicating the Herald Tribune building, which happens to be between 40th and 41st, on between 8th and 7th and it's next to where the New York Times building is actually because that area had been declared by the city as an area where they wanted to build office buildings and Entertainment, now called 42nd Street. So the Reuters building and all those buildings weren't there. But the idea was to convert that area. It was, you know, it was basically peep shows and off color theaters and so on. So the city wanted to tear all that down and build a merchandise mart, which was supposed to be the Kennedys along with what is today Titian Spire. We're going to do a merchandise mart right next door. So I figured this area is going to grow. And so I syndicated my first building and I started the syndication. There were 36 units to be sold at $125,000 a piece. And I got about halfway there. Friends, family, people I knew and I couldn't sell anymore. So I went to this young man who was a syndicator. His name was Steve Ross. Oh wow. I've related now. He was around my age, a few years older, and someone introduced me to him, we became friends and he syndicated the second half of the building for me, the second half of units. So he was able to sell half of them. I sold half of them. All of a sudden I found out I was now partner for the building, cost $11 million. It was 200,000 square feet, 50 bucks a foot. I had my first syndication.

That's how I started to think about it. That was really amazing that you still had what, 15, 20 investors who were willing to hand over their money. And yes, they were getting enormous tax benefits. So maybe you'd say that they weren't overly concerned whether or not this would be successful or not. But still, they're entrusting you with this money. You've never done a real estate project before, so how did you make the argument that you could actually perform?

So there were two things. One thing was that I had related companies. Wasn't big then, but people knew it as a syndicator. And second, I got my cousins, Forest City, the company in Cleveland, which was a real estate development company, as individuals, to be my general partners. They, they weren't, they didn't. They were investors really. So by them being the investors. Plus I had a reputation in the city as Consumer Affairs Commission, which is different, obviously, but credibility. I knew a lot of people and I think related. And the tax, the tax aspects were very important to people. So, you know, it's a good question. Maybe I was a good salesman for 15 minutes of my life, I guess, maybe.

Was it a successful project?

It was a successful project. It went up. Here's what happened. It went up to value of around $40 million relatively quickly. Then the 87, 89, 90 happened, and we sold it for maybe a $4 million profit, $5 million profit. But that was fine.

But it did its job.

It did what it had to do. Yes.

So how many more years passed then when you took on Metrotech?

I syndicated one other building on 32nd Street. And then I began to realize what happened is the tax law got changed in 86, and you really couldn't do tax indications anymore. And it wasn't a business I loved. It was all about raising money. It didn't take any creativity. And what began to happen is a lot of buildings began to get sold and bought by bigger companies. And I realized I don't have the kind of money without syndicating to buy a building. And, you know, nowadays there's lots of investment firms to raise money for you. But that was not the case that I knew of. Maybe it was. I just didn't know it. And so what happened was I had a friend who was in a law firm, and his specialty was really, actually, he represented Donald Trump in the development of the Hyatt Hotel. And out of that, by the way, out of that Hyatt Hotel development, the city created a lot of the incentives to develop in the city because you couldn't those days, you couldn'tyou couldn't make things work. You could not make the numbers work on development easily at all. So the city had all kinds of incentives. A lot of incentives were developed around that building. The city wanted that Hyatt building. So his name was Michael Balcon, the lawyer.

And he's still around.

He's still around. Ackerman. Yeah.

Great guy.

Exactly. I'm still friends with Michael, so. So I actually joined his law firm of counsel as well as doing my syndication. And Michael then said, you know, I have this. I represent Polytechnic University, and they are going to leave the city of New York and Brooklyn. Not and Brooklyn, they were located in Brooklyn unless the city agrees to let them build a Silicon Valley type of project right in downtown Brooklyn. Now, you have to understand, this was 1984. And while the economy was pretty good then, there was no development in Brooklyn. There was minimal development in the city. And just to give you a sense of the numbers, because I sort of pay attention, we all do employment numbers. The city of New York in 1960 something had three and a half million people employed in it, not by the city, but three and a half million workers were employed in New York City. In 2008, before the Great Recession, we still only had 3.5 million people employed. So for a period of 40 years, there was no job growth in the city. In fact, some years it went down to 3.3. It jogged between 3.5 million and 3.3 million and maybe it hit 3.6 at one point. By the way, today there's 4.6 million people employed in the city of New York. We've gained 800,000 to a million jobs in nine years. So that tells you what's really happening to the city. And can you imagine though, for 40 years there was no job growth. There was some job drop sometimes and some back. So there was not a lot of development going on. So Metrotech, So to get to Metrotech, so Polytechnic said, we're leaving downtown Brooklyn in the city of New York unless the city allows us to build a Silicon Valley. So Belkin comes to me and he says, bruce, it's zoned for a million square feet. You ought to talk to him. No one's interested in building Brooklyn and especially Silicon Valley.

And had you done ground up at this point?

I had not done ground up, no.

And you're already talking about building at least a million square feet or maybe one.

Well, at least that was the original idea. So that I knew I could not do myself that finally I woke up and said, bruce, you took a big chance before you did. Okay, I didn't get. I certainly got, you know.

Did you have a real table by then or. No, we're still good.

Yeah. No, no, I was, you know, it was. I made not a bloody fortune, but I was very comfortable then. I was kind of had achieved that goal that I described before, but I think I decided I'd keep going, not to. So I kept going. And so Michael Belkin was good enough to show me the Polytechnic project. So I went to talk to the president and so on and so forth. And I remember I wrote to my cousins in Ohio who had a development company. I typed it out on that, an old fashioned electric typewriter. I call it old fashioned, but a three page memo on why I thought this project would be Good. And so they were not in New York City and they knew me obviously well and somehow trusted me. And they became my partner and primarily I'd say financial partner really. And I like to give them lots of credit because I like to say had it not been for them, I'd be doing one story walk ups. So they were kind and they were my partner, financial partner primarily, but really even development partners for 30 years. And so we were in some sense off and running, but it was extremely difficult. So the first conclusion I came to was Silicon Valley is not going to work. We don't have millions of technology engineers here. We don't have. This is not a manufacturing place to do chips and too expensive deploys and so on. So I went to them and said, look, city is losing jobs like crazy. Employers are leaving, particularly back office jobs so people can call centers are going to go to North Dakota, financial services are going to go to New Jersey and other places in Connecticut. And you're losing jobs like crazy. Like crazy. And you need a place that's inexpensive for companies that decide that they want to keep their operations here to be able to afford it, much as northern New Jersey had become. And so, so I came up with the idea of doing back office space, what today we call back office space. The nice name is administrative space or operation space. So I came up with that idea and I had, we went ahead and had it rezoned for 4 million square feet plus it's a very, it's 20 some acres.

And that didn't just happen overnight. I mean, yes, it did not happen overnight.

Required a full u lerp. It required condemnation. We wound up settling with, you know, all the people who never went to full litigation.

This was 16 acres. I mean, this is a lot of.

Correct. Yes, it was. And so we designed, you know, office buildings for back office. And it was a new concept in the city. And something amazing happened. In fact, I ran into Steve Spinola. Steve Spinola was formerly, for those who don't know, head of the real estate board in New York. Before that he headed our economic development agency in the city. I went to this guy, Steve Spinola and he was working with us to help get this thing zoned. And so is the administration. And lo and behold, there was a piece of land in downtown Brooklyn Heights, in downtown Brooklyn Heights. And Steve said, if you can find E.F. hoton was a company that was going to take that site and build an office building there. The first office building that would have been built in Brooklyn in a quarter of a century. And they went bankrupt. So the city never got that tenant. So I had a friend from law school who worked at Morgan Stanley. And I'd heard that Morgan Stanley was looking to move all their operations out of New York City to northern New Jersey. Lose probably 1500 jobs that was going on daily in New York. This company would leave 1,000 jobs, that company. And so what I did was I went to this friend, his name was Gerard. I went to him and said, we'd like to see if we could move Morgan Stanley to downtown Brooklyn. That was inconceivable. Morgan Stanley was a company that I think wouldn't even let someone with my ethnic background in those days in. And he was. He sent me to their head of facilities. And there ensued a year, year and a half of convincing Morgan Stanley to come to downtown Brooklyn. And that was a big deal in the city of New York. Then to get Morgan Stanley, that blue ribbon company, to come to downtown Brooklyn was almost inconceivable by anybody.

So how did you convince them? I'm sure it was maybe four. The rent was probably a little more attractive. But how were you able to make the case?

So what happened was the first meeting I went to, I told them the rent was $25 and they almost dropped the floor. Well, we're paying 1250 in New Jersey. So what happened was two things. One, the city agreed to give to create incentives for companies that would move, that would stay in the city but move to the Iarelle boroughs.

And that still exists today?

That still exists today, right? That's correct. That is correct. Certain amount of dollars per square foot you get if you wind up moving to the boroughs and you were going to move. You know, most of the companies were going to move out of the city and they stayed. And there were a number of other electricity incentives because we had. Our electricity prices were significantly higher than New Jersey or anywhere else. We used. I've always built only union. We used a different union than 32 BJ for operating the boroughs. And instead of being back then five and a half dollars a foot to operate the building, we got it down to three and a half dollars. That was $2 savings plus the reap plus. I also realized that when the facilities guy told me that it was 12 and a half dollars, it was a triple net rent. So our 25 in New York really turned out to be about 16 or 17. But we got it down to about 12 and we rented the space. They took approximately 300,000ft, all for their computers. They were putting their computers in that's how much space computers used to take. The floors were built at 15 foot heights and we had another two feet for the wires. So it was really like 15, 17ft high. And we built. The city wanted us to build and I wanted to build a maximum, far maximum building of square footage. So I built what today is measured as 700,000 square feet, 400,000 spec space, and 300,000 of Morgan Stanley. But what happened was Morgan Stanley had to get in within two years. They said their whole company will fall apart if they don't get their computers done. And we got financing from Barclays Bank. It was sort of a different Barclays than we know today. And they were just getting the construction lending business. The guy who did the deal was a wonderful man, 38 years old, whatever it was, and he made the commitment and unfortunately he had an accident and died. And all of a sudden we are about to start construction. We don't have a construction loan. They didn't want to do the deal. Barclays. It took the city and us six months to put that loan back together and to keep Morgan Stanley still on the hook for that period of time. It was terrible. It was beyond scary. And we had to start construction ahead of time. So we put $5 million of cash back then into digging the foundations and it was at risk. If we hadn't gotten a loan that would have been, I'd be out of business, clearly, I'd be written out of town. But we got it done and it was built in a little over two years, actually probably 18 months. Just to give you a sense, the cost was about what's called core and shell, which means a base building without all the finishes was about 60 to $80 a square foot. And today it's 10 times that. Yeah, it's probably 400 square foot for the corn shell.

And now it's in the hottest market, arguably in the U.S. wow, I've kind of monoled. Well, I mean, you could have just retired at that point and said, I've done what many would have looked to accomplish over the culmination of a lifetime. But one thing you did mention that I agree is the most important metric for a city's health is really that job growth number. And that is why New York. It continues to be a place where people want to live and work now. And Google has said they're going to add 1,000 jobs a year. You've got Facebook looking for a million square feet. You've got Amazon, who we originally sent packing in Queens. Now they're back Looking for space in Manhattan because people want to live and work here. You've done so many projects over the years and one of the best compliments I've heard is that each of these projects has its own identity. There's a lot of developers who, they've got a very cookie cutter approach and everything looks and feels the same here. You've spent so much time really thinking about what is the best design for the project and in the process you've worked with some of the most world renowned architects, including Gary Renzo Piano, just to name a few. So design, is that a passion of yours and how do you look at the development process?

It became a passion of mine. When I first developed. I really wasn't as confident of design, honestly. We always hired very good designers, but I didn't really understand the importance of good design. Why and good architect? Because if you look, if you're doing something for long term value, it is a huge add on. In other words, Chrysler, Chrysler Building has other issues. But some of our great buildings have held their value because of their architecture and because of their beautiful. The lever Building or 375 Park Avenue here in New York City for those. That's a beautiful Mies van der Rohe building. So you will really find that great buildings, great architects hold their value or increase in value much more substantially than something that's not well designed. So really for the last 15 years we have been very focused when we do a project on as good a design as we possibly can do. And it doesn't. The other thing is it doesn't cost that much more to do good design. It really doesn't. Whether it's Frank Gehry's building in downtown Manhattan that we built, not significantly at all. More costly, the New York Times building, not significantly. In fact, I would say didn't cost more. RENZO Piano Building the Arena, it was very expensive, but not because of the.

Design that was very cutting edge. What you, you did there as well.

It's a beautiful building. It's gotten very good reviews. Not for me to say it's beautiful. The reviews say it's beautiful and it is cutting edge for anything, let alone arena. So it always has turned out that when we have spent the money for good design, the projects have held their value enormously and not held their value increased in value. That's always been the case. So one thing for those who are building a few extra bucks makes a very big difference in value. Tremendous. You know, I went through, I'm not going to mention a Developer. But I went through one of our buildings, that, one of our residential buildings with a well known developer in the city. But he doesn't put a lot of money into the, into the, into the apartments. And when you walk through and he's doing those days, we're doing granite kinds of. Bruce, you're crazy. You know, what are you doing? Well, that building really has increased in value and rent every single year. It's in downtown and it's. We spent the money. And by the way, we have an affordable 30% or 20 in that building. 20%, I think. Affordable. We always have a rule if we're going to build affordable in a building. Same standard. If it's granite counters in the market rate, it's granite counters in the affordable. It just doesn't make that big economic difference. Honestly.

Do the right thing.

Do the right thing. Really important. And you know, we don't believe in the, you know, separate doors for affordable. It's just not what we want to do or do.

So talk about Atlantic Yards, which is now Pacific park and did it start with the Nets? How did this all happen? And I've heard that part of this was also the challenge and that maybe you were told, you know, Bruce, you don't know anything about basketball, you can't acquire an NBA team. And I guess you proved them wrong.

Well, so, so I don't know if I proved them wrong or right, but I will say this. So it was the people who don't write nice things about me keep saying, oh, we did it for, believe it or not, it was really started with the idea of bringing a sports team back to Brooklyn because when the Dodgers left in 57, moved in 58 people marked that as the beginning of the, the economic really downfall, if I may say of Brooklyn. It didn't stay that way. But they look at that as the marker period when Brooklyn started going downhill. And so whether it wasn't certainly the Dodgers that did it was a whole host of somewhat more complicated things going on in the city and in our country. But I really did it originally for that. And then like so many things, I jump into things, oh my God, God's a little more complicated.

Were you at least a basketball fan or no? Are you? You are now?

I am now. I'm absolutely a basketball fan.

Still a Nets fan.

And oh my goodness, they're looking pretty good this year. Nets fan. And they are looking good. And I feel great about it. I go, I have season tickets and I'm very stayed friendly with the group, the Russian group. Or Russian person that was my partner for many years and then sold it to.

Jay Z was part of this as well. Or how he's a big fan of Brooklyn also.

In the very beginning someone said Jay's interested in maybe purchasing part of a team.

So what's he like to do business with?

The best. He was wonderful. It was very. So I called him up and invited him out to come look at the site. We hadn't even started to build yet. And went to the top of the Williamsburg Savings bank building which is in downtown Brooklyn. It was the tallest building in Brooklyn at the time, in the pre depression era. And took him to the top and he pointed out I sold that building, by the way. Did you?

I did.

You sold it to Magic Johnson and Company?

Oh no, no, I'm sorry, I'm thinking of a different bank. But yes, close by the dime savings you sold.

Yes, yes. That was actually a great building too. Beautiful building. Now it's going to be high rise. So the Williamsburg Savings bank building. So Jay Z looked down, he said, marcy housing projects, which are, you know, what today is called nycha, New York City Housing Authority Building, Public housing. He said, that's where I grew up. And then he pointed across the street from the site, said this is where I sold records from. Apartment across the street. And I would sell records on the street. I will say the moment he walked out of his car, somehow a crowd formed around him. We went upside. And he's very mild manner and a lovely man and was a pleasure to really work with him. One of the honors of my life. And so now you're a music fan as well?

Now or no?

Well, I'm not very musically talented, but I, I certainly listen to his music. Actually someone gave me the lyrics of one of his songs and I looked at the lyrics. I had heard of Jay Z, but I don't think I ever really sort of knew that much. And of course there were a lot of words that I felt wouldn't be very appealing to maybe other investors or to the NBA. And then somebody told me there was something called radio versions of the same song that didn't have the words in it.

At any rate, that's what I told my 14 year old to play as well.

Yes, play the radio version, but anyhow, so it was a one wonderful partnership and he was a very, very good person always. We had a really nice relationship over all those years and he never, never hesitated for a minute to come out for a public meeting that we had to have or everything he's a very. He's a man with a lot of integrity and a very, very good person.

And that was really the driver for the project because it wasn't just the arena. There was 4 million square feet planned. And part of that was what became the tallest modular apartment tower ever in the city.

Yeah, so it was actually, it was 6,400 units of housing, which is about six and a half million square feet, plus the arena, which is about 750,000. Those are a little over seven and a half million square feet. And we knew it would always take a substantial period of time in the raw country. Misinterpretations as to how long it would take us. But then of course the great Recession hit and that really probably made it much more difficult to do what we had planned. But we did build the first tallest modular building in the world. We had a modular business that we created and it didn't work out. We lost money on it. I like to say you have to think of real estate as you're going to hit. It's almost like a curve, you know, you're going to hit some on the left hand side of the curve, which they don't work. That was the modular building. Modular construction does really work. We just didn't do it right. We had a partner who we were with who didn't do it right. But the actual system we created has been bought by someone who used to work for me and is doing very nicely now.

And I think it seems to make so much sense too. I mean, it's so challenging to build in the city. We're space constrained. The idea of bringing in and blocks.

It does, yeah, it is incredible. So we built that and the building's beautiful. It worked and has held up and so on. And we built four or five other buildings on that site. And then somewhere along the way, about 10 years ago, I sold my company because while my partners were Forest City, they were partners. I had my own company and I owned a certain percentage of the projects and they own another percentage. So. So about 10 years ago, my two daughters are not in the business and I realized that there would come a time when I wasn't going to be in the business. So I sold my business to Forest City about. Well now it's probably longer than 10 years ago and still continued to run my company as if it were a separate company. And then Forest City got sold about a year ago and so the project got sold with it. And so about a third of the buildings are built and the other 2/3 are in the process of being built. We had a Chinese partner along the way who was actually. We worked with very well.

It must be amazing to still be able to walk along the streets and see how you've been able to transform the skyline. So, just such an amazing story. So thinking back to when you first got in the business and many of our listeners, aspiring investors and thinking about how do they get into this? Where do they start? I mean, to think about doing a project of many million square feet. And yes, there was those earlier syndications, but what advice would you give to someone who wants to become an investor?

So it's very interesting. Just before coming here, I met with a young man who. A friend of mine's son, and he wants to go into the development business. He had run restaurants before, and he's a smart young man. I think it's critical to realize what you don't know and to be very humble about it. I mean, not that I'm humble, but people probably would or wouldn't call me that. But I always had a sense of what I didn't know, and I would talk to as many people as possible. So I was. I must have talked to half a dozen lawyers who did syndications. I looked at probably 30 buildings before I bought that first building, the Herald Tribune building. I interviewed many construction companies, talked to a lot of architects. I also did a lot of stuff myself. Even the arena, when we decided, for a bunch of reason, we couldn't do the original Geary arena because it included building four buildings around it at the same time. They were all attached. So we had to detach the buildings and build something that was just an arena alone. And we wound up switching architects. Not because Frank was too expensive. He's a friend and he doesn't. It wasn't an expense issue. It had to do with the four buildings around. So to make that building, the building without the four buildings around, fit on the site, I took home. This is, you know, whatever, 12, 14 years ago, I had everybody in my office give me 10 arenas, give me their dimensions. And at home over the weekend, I figured out which one was the best one to be the model for fitting in. So I always kept my hands involved in every aspect of it. And I like to say I'm not. I think I'm pretty good at delegating, but when there's a problem, I dig in. And so the thing is, you need to get. I don't want to say your hand is dirty because it's a not. That's the wrong expression. But you need to make sure to collect rents yourself sometime and see what it's like to collect a rent. You need to do leases and work with the lawyers and actually negotiate the leases. You need to work with the architects and be able to sort of hand sketch a layout yourself. You need to understand the dimensions of an office building, what, what the space from the elevator to the window are in residential, you have to know what layouts sell. You have to find out what other construction, what other developments going on. So once we decided we wanted to do this particular type of residential building, we wanted to do condominiums at one point. And I had people in my office go around, pull every single site in the city which had a construction fence around it or had any kind of permit. And we figured out that we better not build condominiums or we were going to wind up in competition with a lot of other companies. Of course, what happened was the 089, thank God we didn't build them. But we always did a lot of research. Research was critical to us. Job market stuff. I would look every single month at job growth in the city. So job growth was minimal. 10,000 jobs a year, 20,000. Sometimes it was negative. And I would project that against vacancies. So we would do a lot of the work ourselves. And you need to really understand the details of what's going on. The details are really important. I know in your business it's the same thing. You can't skip steps. And so I always immersed myself intensely in the numbers. I was always very aware of all the employment numbers, of whether or not people were moving in the city, moving out of the city, who was moving in the city, who was moving out of the city. We knew every single company that was thinking about moving out. So the knowing, really spending the hard time and understanding construction. I didn't come out of a construction background, but I really tried to understand it and the cost, how much it cost to build and coming up. But I was good at computer stuff. So our company's one of the first ones to be really computerized and so on. So it's. The details of understanding it are really important. And now I have to say I probably don't get as involved in the details, but I still like the details. If there's a problem, I'm in the details.

No. Well, it's fantastic advice to our listeners and you're a real inspiration.

Just want to add, I want to say one the of. So I tried to run a company that believed that people who worked there had to. I Used to say, you can't go home with the anxiety that you have in your stomach. I don't want you to go home with all that kind of anxiety. If the anxiety is caused by the people you work with, you can't go home that way. You need to be in an environment that's very comfortable. You don't feel threatened. And I understand if there's a business problem that's outside of us, sure, we're going to have anxiety. I don't want you to go home worrying about what's going on with respect to your fellow employees. So that's why I had rules. A rule was family and friends first and health number one, you need to take off. I never, in the very beginning, for years, until I got CFO who demanded it, I would not keep track of whether somebody. Some were. Took 10 days off or 20 days off. People did kind of. We didn't. We were informal. Our company, I always say our company, by the time I, you know, sold, and for four cities sold, 50% of the management were women. The head of the company, Maren Gilmartin, was a woman. One of the few, probably almost the only large development company that are women that headed it. And it wasn't because we had any kind of affirmative action. We ran a meritocracy and we were always 100% union. I happen to have. That's my views. The union is what made the middle class in New York City and in Long island and New Jersey, it is. It's the unions that created the pay scale. Now, people can say a lot of negative things about unions. They're not necessarily all. They're not. There's as many abuses in businesses as there are in unions. It's no different, really. It's people. And so I was, you know, again. And also, I didn't insist on it, but everybody wound up having nonprofit affiliations that they spent their other time with. So. And I probably a third of my time was always spent in the nonprofit world. And I. And it made for a company that was people work to get. We worked together for most people 20, 25 years. And. And in the entire time, I think the most amount of people we had in the development part of the company was probably. And management was probably 200 people. And so. And we have annual reunions and we get, you know, 200 people, 180 people show up. And I don't think in my entire time, the total number of employees, if you add them all together, was more than 300. Very few people left. And people have gone on from our company and gotten excellent jobs. And the most important thing I think is your employees, the people you work with are the most. You know, I once said when we had the arena, I said to the, I gave a little talk to the employees at the arena and I said, who's the most, when you open the doors, when we open the doors in the beginning of a day or evening, whatever it is, who's the most important person? And they all say, oh, the customer. I said, no, no, no, it's you. You're the most important person. And we had the, the employees at the arena trained by Disney. And you know, as I said, everything we did was union and I believe in that and I know people are critical of it. And it was very hard to compete, by the way, in the development world toward the last, you know, X years because we were all union. You know, people were building residential buildings that were non union, very hard to compete and we probably made lower returns because of it. But I will say it created an environment where we got, in my view, the very best employees and people. It was a family. We had a company that was like one large family. And so, and that to me and people from all walks of life, you know, ethnic backgrounds and so on. So that to me I think there's nothing more important than having a company where people that work there are treated fairly and feel a part of the it and you relate to in a personal. My door is always open. But it's true. I would walk around the office and I get calls still from people who used to work for me that need help in the healthcare area where I'm somewhat involved and getting connections and so on. And to me that's more important than the money. Frankly. The money was always, I can't say it wasn't important. It was important, but it never was. What never. I never aspired to be the richest person or it never mattered to me really that much. I was lucky and got fortunate, but it wasn't the important part of it.

This is a wonderful way to end and no question that your priorities have always been in the right place. And first things first. And I love what you had to talk about balance. And my last question here, which is one what you've already answered is the importance in giving back. And you're, you're an example for us all. So Bruce, thank you again for everything you've done for the industry and the city and for our listeners. This has been a incredible first show and really looking forward to the, the weeks ahead. So Bruce, thank you.

Congratulations on the show and I know it'll be a great success with you. I know it will be.

So thank you so much. Thank you for tuning in this week to real estate investing. Live from New York. Please join your host, James Nelson for another program next Tuesday at 7pm in New York, 4pm Pacific Time on the Voice America Business channel. All shows are rebroadcast Wednesday mornings at 7:00am Eastern Time, 4:00pm Pacific Time, as well as always on demand. We'll talk again next week.