2. Leading By Example with MaryAnne Gilmartin

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's your host, James Nelson.

Welcome back everyone to our second welcome show. Now this is James Nelson, your host of Real Estate Investing Live from New York. Already getting really great reviews from our last show featuring that interview with Bruce Ratner. Just spectacular. Very inspirational. And now we're going to be interviewing Marianne Gilmartin, his CEO of Forest City Ratner very shortly. And you'll get some incredible insight from her as well in those years and now what she is up to these days at work, her new company L Mag. But before we get to that, let's talk about the week in review powered by the Daily Beat. So in this past week, Sam Chang's McSAM Hotel Group has signed a 99 year ground lease at 777-8th Ave. The site will allow for the development of 50,000 square feet of buildable and the ground rent for the property was a reported $1.4 million a year. He plans a 200 key hotel on the site elsewhere. And this was actually after he said he was going to be retiring from the business. This happened to be Sam Chang's second deal of the week in that he had also acquired a vacant development site at 150 West 48th street from the Rockefeller Group for $140 million. According to commercial observer Ann Cranes McSAM is planning to build a 276,000 square foot hotel in the lot. So that definitely seemed like a brief retirement for as recent finances that occurred, Flank has secured an $84 million loan from Colony Capital to refinance their 360 Wythe Avenue in Williamsburg. That includes 25,000 square feet of retail, 46,000 square feet of office space and around 18,000 square feet of residential. This retires the $60 million acquisition and construction financing provided by bank of the Ozarks. Elsewhere, RXR Realty has secured a $228 million loan from Nuveen to finance 530,000 square feet of office space at 500 35th Avenue. This new debt will retire their $200 million in previous debt from Morgan Stanley and it also includes an $18.8 million project loan which will come in good use because that happens to be where Avis and Young were going to be moving our New York offices there. So we look forward to that. Chartreat Organization has also separately secured a $160 million loan from Loan Corp. For its $181.5 million purchase of 1 Whitehall street, according to the Commercial Observer. Lastly, CW Realty has acquired a Williamsburg assemblage from multiple sellers for around $39 million. So that is New York. And now one last looking at the New York metro area. After 15 years, the dream Mall has finally become a reality. The development will eventually feature 3 million square feet of stores, water slides, a caviar bar and an indoor ski slope. And 555 is introducing the American Dream in Chapters. So look forward to checking that out and seeing what it is all about. Now we're going to have a brief break from our sponsors and we'll be right back for that interview with Marianne Gilmartin.

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.

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Voice America Business Network so now it's time for our Investor Spotlight here on Real Estate investing live from New York. Thrilled to today to have Marianne gilmartin who is CEO of L&L Mag, a New York based real estate development company she founded with David Levinson and Robert Lapidus. And prior to L&L Mag, Marianne served as president and CEO of four City Ratner companies. Marianne is also a civic leader in New York serving as member on the Brooklyn Academy of Music Vice Chair for New York Public Radio. Always great to see a radio fan with us today and on rebny. Throughout her career Marianne has has been recognized as a top professional in her field and was honored in 2017 with REBNY's prestigious Bernie Mendick Lifetime Leadership Award. She's made Multiple appearances on Craine's New York Business List of Top 50 Most Powerful Women and also on the commercial observers power 100 list. So, Marianne, really fabulous to have you on the show with us today.

It's a pleasure to be here.

Perfect. So before we get into real estate, tell us a little bit about where you grew up. Was your family in real estate? Is this something you ever thought about in your early days?

I was born in Rockaway, Queens, and I grew up with two sisters with whom I'm very close. My mother and my father left when I was very young, and so we moved out of Rockaway, had a stint in Woodstock, New York. My mother was a hippie.

Wow.

And she married a man who navigated foreign flagships up and down the Hudson River. So our lives were between Yonkers and Rensselaer. So it was an enabling moment for my mother to return back to Woodstock and try to relive her glory days.

They didn't name you Sunflower or anything like that?

No. We had nicknames, and I think my mother did chain me to a fence once to protest a nuclear power plant in northern New York.

That might have been good preparation for being a developer. Right? Certainly use the old playbook.

Good, good. So when it came time to go to university, I ended up at Fordham University. Frankly, I mortgaged myself off to the university that gave me the most money and had a great run at Fordham, graduated from there, and applied for urban fellowships in New York, which was, under Mayor Koch, the only real recruitment tool to bring young people into the public sector before heading off to the private sector. And so the idea was that you had a stipend and were on sort of a fellowship scholarship model where you were paid by a different office in this. And so it was right after the fiscal crisis. None of the agencies had any money to hire people. Urban fellows were sought after, and you got to interview commissioners and decide which commissioner you wanted to work for. And so all of this was new to me, and I had no inkling of real estate or real estate development. I was on my way to law school and, frankly, wanted to fight for the rights of juveniles in the justice system. I ended up winning two fellowships, and I interviewed all these commissioners, as was recommended to us. And to be honest with you, the city was a D, and the place was a mess. And I remember going to all the agencies with whom I wanted to affiliate myself, and they would say things like, we're going to put your desk in the hall. The rodent problem's under control. It'll only get to about 95 in the peak of the summer. And I thought, this is horrible. I Mean, I went to school in the Bronx, but this was an altogether different matter. I walked into the Public Development Corporation, which is now known as the Economic Development Corporation. There was air conditioning and carpet. There was a president, not a commissioner. There was a reception desk, and I had an office. All of this was wildly appealing to me because I had two fellowships. So I thought, you know, rather than sweat it out for the summer, I'll hang out in economic development, and then in September, I'll go to the agency of my dreams. And it was there that I discovered that I had real estate in my veins, a great love for it and some ability to wrap my head around it. And that was an agency at the time where anybody who wanted to go into real estate would want to work in economic development at that agency because it was known for cutting red tape and getting things done. You found yourself in front of the biggest developers in New York, and they were out asking you these looming questions about what should we do with this swath of land on the Hudson River? And so at my very tender age, I was exposed to a ton of deal flow, and all of the major players didn't feel entitled to be in the room, but was in the room. And that's where I met Bruce Ratner.

Wow. So what were some of those? And I want to get back to your early days with Bruce, who is also on our show. So fantastic now to have the. Yes, the rest of the story, but the Junior Center. So you're early time at the edc. What were some of the major public work projects that you were working on?

So I was actually very focused on College Point and the industrial parks in College Point. One of my projects involved a squatter that was living where the New York City police officer's toe pound was supposed to be. And so there was a trailer with a man dressed in a dress, about 80 years old with 10 dogs, and we couldn't get him off the property. And there was no way that the project could move forward unless the squatter was evicted. And I remember again, in these early days of not knowing what I didn't know and thinking, I'll just go down there and speak to him. And I had this famous interaction with this crazy squatter on a parcel of industrial land in College Point and convinced him to take his dogs, his guns and his belongings and vacate the site. Wow.

So how did you. There had to be a story there. I mean, how did you bring some dog treats or maybe a steak and throw it to the left before you?

Quite remarkable. I Think it was the audacity of thinking that you could just have a conversation and that nobody had thought to actually speak to the guy. And, you know, there was letters and all sorts of aggressive overtures made. And I thought, if he will meet me, you know, halfway, literally we could have a conversation. And he turned out to just want to be treated with decency and humanity, I think. And again, it was this sort of innocent. This is why I value the rookie generally in everything that we do. Sometimes, you know, we're all stuck inside a box. And the perspective that's the winning perspective is that which is out outside the box, looking in with kind of a fresh look. But we were working on South Ferry and Riverwalk, which was a big project on the east side that involved related that was highly controversial. The Hudson river was still reeling from the artificial reefs and the idea of building the Westway project. So these are days when real estate was a completely different game in New York. But it still was fraught with all sorts of issues around politics and community and environment. And so it was a very, very good way to indoctrinate me into the work that would be before me as my career kind of unfolded. But it was just an incredible experience because you really got to see the nexus between the political environment, the economy, and the built environment. And I don't think I could have gotten better training for real estate. But I eventually migrated into the retention stuff, the corporate retention, because Koch, as you might recall, was very interested in keeping companies in New York when it was expensive to do in New York City. Brooklyn was created as a third central business district and companies were fleeing to New Jersey and as far as Texas to save money. And Koch had this famous campaign where he was nailing the Holland Tunnel closed to stop companies from exiting New York. So I became part of the team that negotiated with companies when they were thinking about relocating outside of New York City. That was great fun. It was quantitative and qualitative work. And Bear Stearns was thinking about leaving Newark and ultimately ended up building a building in Brooklyn. And I was on the public side of that transaction, sitting across from Bruce Ratner, negotiating the job retention program for the employees in Brooklyn that would benefit from the incentives the city was prepared to give to Bruce and to the company to locate there.

So that was the REAP program that they had established at the time. Is there what would become known as that?

Yeah, and there were a lot of discretionary tools at the time. So we developed a specific Bear Stearns training program where they onboarded a lot of folks from the community as part of their own workforce training. And these were the days when you could actually invent solutions that were very specific to the needs of the company and the community.

And so I like the sound of that. Maybe we need to return to those days of rational thinking. So you left the public sector to go over to the private sector. I mean, did you ever think about maybe political aspirations or moving up or. It was time to make the move.

So Mayor Dinkins took office and I would go over to city hall, as was customary, to brief him. Carl Weisbrod was the head of the agency. I enjoyed working for Carl, who, you know, later became the city planning commissioner. But I started to get the sense that the priorities had shifted and there would be a different approach to economic development and the business community in New York. And I had been there for seven years. And there's a point in government where you decide, are you going to be a civil servant and a trusted public servant or are you going to use it and pivot? And I realized that I could do the very same thing I was doing in government, but move over to the private side. Do it at the same scale, but actually pay back my student loans, make some money and have the same fun, but do it with a different lens. And once I realized that that was available to me and Bruce expressed an interest in talking to me, I made the move. And it was really quite seamless because in many ways, Bruce's recruitment philosophy was, if you're going to build large public private partnerships, the best training ground for that is in fact in economic development. So there were a number of us that came from the public sector and moved over to the private sector.

Really, really smart and incredible experience there. So when you started off at Forest City, what was your initial role again?

Having sat across from Bruce and his team in putting metrotech together. The natural assignment was for me to try to create the next buildings in downtown Brooklyn. Because Metro Tech was a large scale development and they were putting buildings together year over year and we were trying to find the next opportunity for a ground up development on the parcel. And so I put the fire department transaction, which was the headquarters for the fire department built in downtown Brooklyn as part of the government's commitment to changing that downtown area. That was my first ground up development.

I've got to stop you there because you sourced the opportunity. And yes, you had a lot of experience about dealing with companies and with government, but did you have any real estate experience? Had you ever been involved in a ground up development? How did you learn your real estate chop, so to speak?

There's that. The brilliant thing about Bruce is that he really ran a company where we were young and scrappy and enthusiastic. And, you know, this is a business, as you know, that you learn by doing. And so you can't possibly take a class in graduate school and learn how to build a building. You can't even watch it from the sidelines. You have to get in there, roll up your sleeves and do it. And so that really is where I cut my teeth. I had done some leasing for Bruce on 80 Main Lane and the Herald Tribune building, which, which was next to where the New York Times building would be built. So I had two assets in Manhattan that Bruce owned that I was leasing. So I was comfortable and familiar with brokers and doing transactions. But I really wanted to build something. And the fire department was my first project. What was great about the company is that there were seasoned professionals on the construction side that were there that I could learn from. But Bruce was just, you know, willing to hand it over to you. And to say that your job is to manage the pro forma, make sure that the, the costs and the revenues come out the way that they look like on this piece of paper. And you've got to get yourself brokers and we have to figure out how to fill the building. And we need an anchor tenant. And so, you know, therein became this quest where I started heavily working with different real estate brokers to try to find a way to land the tenant. And this was the day when you could actually use a public tenant to launch a building that was sponsored by the government. I mean, even today there'd be a lot of hooting and hollering if the government, you know, invested in the infrastructure to put a project like Metrotech together. And then the government came in and leased one of the buildings. But back in the day, this was an opportunity to create a new central business district. And critical mass was everything. And so again, I did work on the Bear Stearns transaction. I did work on elements of that. But again, from the public sector, you're not looking at construction costs, you're not dealing with leases. And so the leasing stuff I had some experience in, but this was my first ground up opportunity.

Wow. So a lot of the listeners to our show are aspiring real estate investors. And maybe they're already in the business, but maybe they do come from outside, maybe they are in the public sector. I still find it remarkable, and I know Bruce is a really special individual to have that approach, but a Lot of these larger shops, unless if you have a master's degree, unless if you have several years of experience, it's really tough to break into a larger firm. So that was an incredible opportunity for you. Also as a woman in the business, and I don't know what the makeup of Bruce's office was at the time, but the industry at the time, and even unfortunately today a pretty male dominated industry. Did you have any reservations or thoughts when you were breaking in as to.

What it takes to be a decent real estate developer? I'll say this, we're going back to the late 80s. Most of my colleagues were flocking to the Internet. The idea of being a real estate developer was one step above a car salesman. It's not as glamorous a gig as people view it now. Real estate's now. Everybody wants to be a real estate developer. And I see resumes today that they're objects of beauty from the cradle. It's almost as if people have put together and curated a resume to set themselves up to be the most incredible real estate developer that ever lived. And the qualifications are remarkable, but you need to get transactional experience and you need to actually build things. And so that's where the rubber meets the road. And Bruce, to his credit, ran a meritocracy. He was, he was a big believer in the best man or woman for the job. And he bet on people. And he taught me that it's really great people that build great things. And so I think he believed that the government drill of doing anything inside government and accomplishing an incentive package or a retention deal for a large company or putting together an industrial park in Queens, these kinds of things involved so much blocking and tackle and, and collaborating that he really believed that if somebody was really successful in that realm, they could take all of those skill sets and translate them into the work he needed you to do. He himself was a consumer affairs commissioner and so he was an accidental developer himself. And so when you can learn from the best and you're following a path that's not dissimilar, we were kindred spirits and our first love was office buildings. And then of course, we were all about reinvention. So as the office market market hit a rough patch, we invented a retail program for big box retail. I was right at the table in the executive conference room doing that with Bruce. And so much of my learning came through doing, but doing in a place where there was tremendous deal flow and an ability to be really creative. You just need to defend your thinking in the most Ferocious of ways. And if you could do that, you could get the audience and you could likely get the equity. It was very hard to say no to Bruce Ratner. And getting Bruce to yes was really the hard part. And from there, usually things happened the way that we wanted them to.

Right. And after that, not to mention, I think it was 50 ground up projects throughout New York. I mean, unbelievable. And office retail and some of the most prolific residential towers in the city as well.

And an arena to boot. I mean, if you think about it, when you're a developer, you are what you and many of us have to make this tough choice. Am I a residential developer or am I a commercial developer? And at Forest City, we had the great benefit of building a bunch of different things. And so we decided we wanted to put a hotel on top of our 42nd street retail project. And we recognized that nobody else could do that because the government couldn't just let another developer build a hotel. And we went and pitched the idea. We went to our parent company in Cleveland and they said, well, what do you guys know about hotels? And we said, we've been studying the market and here's what we know. And we became instant experts. And we built two very successful hotels, the Battery Park City Embassy and the hotel on 42nd Street. And we did that without ever having built one before. Same thing with an arena. I mean, most of us, you build one arena in a lifetime, right? It's not a business where you could roll out a whole portfolio of arenas. But we become subject matter experts. But it's partly because we are really good at problem solving, good on data, and good at knowing how to put pull the right people in at the right time.

It still blows my mind because not only were there 50 ground up projects, not to say that I'm sure there were some challenges along the way, but you had some incredible successes. And you said with these two hotels, building a hotel and operating is a very, very specialized business. In fact, I even take it outside the typical real estate asset class domain. Unbelievable to hear that you were able to figure out, were there partners along the way and were you reaching out to others in the industry or as.

Far as Citi's balance sheet, this is a public company at the time, which was really a family business dressed up in a public company dress. This was not a REIT. There wasn't even that many REITs in the 90s to speak of. But this was really a family business that went to the public markets for its equity and the stock was in the high 60s we were making a lot of money and there wasn't this sort of angst and anxiety around product types. We knew we'd be renting rooms every night and that it wasn't going to be an easy business. But we actually brought in a management company that brought no equity, you know, Hilton and Embassy Suites. And we took the risk to build it and to operate it. And then what we did do is recognize it is a tough business. And we found the right time to exit and we exited. We sold the downtown hotel to Goldman Sachs and we made a great exit on the Midtown hotel and then made the decision that if we were hotels in our projects, we would carve that part out and let somebody else take the risk. But it wasn't because we got hurt. It was mostly because you realized this is a different kind of a business. But we were able to dabble in it and make great returns for the shareholders. And everybody ended up very, very pleased.

You ended up. We know how the end of the movie happened at Forest City and you were CEO. So, so what happened in between and at this point, how big was the company and how did you, I mean, what were the other roles that you fulfilled on your path to CEO? Because again, for many of the listeners on the show, they might be at some of these larger companies and figuring out what is the upside potential. What was your story in the climb to CEO?

The first thing I'll say is I never had my eye on the corner office. I just was looking for real deal flight and ability to always learn and grow. And I think that's important for people because often it's the people who are constantly focused on where they're going to end up and what's in it for them that end up being the most frustrated and dissatisfied with the result. Again, you have to work in a place where there's an appreciation for skill, capability and leadership. I happen to be fortunate enough to be in that organization. Bruce has two daughters. I was benefiting from the fact that neither of those daughters wanted to be in the real estate business. So even though I was working in a family dynasty, I wasn't up against a family business in New York. There was nobody in the way. I don't know if I consciously knew that. I just know that I wasn't dealing with family dynamic on a day to day basis, which in real estate in New York is a reality. So there was a clear path. But you know, there was a joke in the company that the closer you got to the corner office, the hotter the seat Got. And so, you know, it got more intense because we knew we were really, you know, it got for Bruce. He surrounded himself with really, really strong people and we knew what our job was. And so as I worked my way into the management part of the organization, I had a partner. He and I ran the business together. We kind of divided the kingdom where when Pacific Atlantic Yards came along, Jim Stuckey did Atlantic Yards and I did everything else. And that allowed me to build a New York Times building, build New York by Geary, run the office portfolio at Metro Tech, do all the leasing. So I was both a developer and an operator. And that was a tremendous opportunity for me to not just deliver the long term value creation proposition on a high quality asset leased and ready to stabilize, but actually to take the portfolio and lease and release that space over and over again. So I had a team of people that were skilled in many, many different areas. And in many ways it was because Atlantic Yards just sucked the life out of the company for the first five years. And there was. I said, I think I should be the everything but girl. I should do everything but this project, and you and Jim Stuckey should run that project. And that is in fact, what happened for a number of years. But that gave me an enormous birth, really, to grow as a manager and as a leader, a developer and an operator. And there came a moment when Bruce called me into his office and said, there's going to be a change and I like you to take over the project. And I thought, if you build a building like the New York Times building, with Renzo Piano and the New York Times as a partner, you're fortunate enough to go on and build New York by Geary. Over 900 units of multifamily rental, which is almost the residential equivalent of the icon that is the New York Times building. You ask yourself, like, what could I possibly do next that could be as exciting and as interesting and it's a problem. I mean, it's a champagne problem, but it's a problem. Yeah. So when Bruce called me into his office, I thought, this is sort of a calling, right? This is the uber example of everything it takes to build large scale complex development projects in a place like New York. I knew I was ready. I think Bruce knew more than I did. I was concerned because this is a project that just was chock full of everything, including opposition that had committed to sue and create Ajita early and often. And they kept to that promise. And so I was walking into the belly of the beast.

You were thinking back to your Days.

Of working with the squad or with the dogs.

Exactly. And so in 2007, I took over that project, and for 12 years, that became like a child to me. I nurtured it. A lot of the buildings do become like children because they require that patient nurturing, but at the same time, an incredible sense of urgency, because time is everything. It was probably during my work on Atlantic Yards and Pacific park that Bruce started to see in me the leader that he wanted for the future and beyond his days of CEO and president. So he came to me after we finally closed the project and put the arena into the ground. And these were battles and challenges like no other. I mean, Bruce and I together would admit the fear, the concern, the difficulty, but. But to put $500 million into the dirt in a project where you had not a single vertical building to show for it and enter the Great Recession, have opposition that essentially just was running the clock down, knowing that at the end of the year, In December of 2009, if the arena had not started construction the way in which we were financing it, the loophole in the IRS tax law would close, and we would no longer be able to finance that building. So. So we closed the transaction in the last possible day in December. So we went right to the edge of the cliff, and Bruce and I had a pact that we would sweat it out with each other. We would talk about our fears with each other, but we would never, ever let them see us sweat. So we managed a group of 50 people with a certain audacity and ferocity that needed to be. And I think through that ring of fire on the other end, Bruce said to me, I want you to run the company.

Wow.

Wow. And then I did what probably is a bit bizarre, which I tried to talk him out of it because we had such an incredible partnership that I thought, why would I screw with it? I mean, it's so good. And I didn't feel like I needed to be in the corner office. In fact, I had the better job because it wasn't about my ego. But he really took all the shots, and he got the glory, but he also got the grief. And I was given a very, very wide spot. And so he had tremendous confidence in my ability, and I loved working with him. So I really tried to talk him out of it, and in his mind, it was time. And I said to him, nobody's ever taken Bruce Ratner's job, and I'm not sure that I want to be the one to do it. So we started on a path of transition And I think the most challenging part of my career was that moment of taking the baton from Bruce and not wanting to be a lesser CEO and leader than he. I was given the great benefit of having him still in the company as a chairman. But it was a transition that wasn't easy because you might recall that whenever anybody talked about what we were doing at the time, Farsi was a $12 billion company and we were 40% of that balance sheet in New York. Anytime anybody wrote about the company, it would say Bruce C. Ratner. And then somewhere down in the middle of the article it would talk about Forest City. But he was a cult of personality. And so I didn't want to be Bruce Ratner. I didn't want to try to mimic his style and his vision. But I knew that he was this formidable presence in real estate in my life and I wanted to not disappoint him and I wanted to continue on his legacy. And I think the thing I am most proud of is that for the five years we were able to jumpstart the residential part of Pacific park with the introduction of Greenland as a financial partner. Cornell Technion was a. Was one of my first big wins as CEO. And then finally the leadership and the people in the company, they stayed with us. I was able to retain talent and grow talent and keep the organization in tip top shape until such time as they decided to go the direction of a reit. And that's when I had in my head the news flash that this was not going to be the kind of company that built great complicated projects like Pacific Park. That this was a company that was going to be a very strong operating company company. And the days of building large scale ground up development were probably behind us. And that happened two years before the company was sold to Brookfield. But even with that, I was able to partner with Bruce mentally and emotionally so that he could understand that I wanted to find my next big move and have his support and not have it be done in a way where I left anybody feeling like I didn't support everyone. Everything that the company was trying to do.

Well, you definitely accomplished that. And what an amazing story. And I was thinking of all the firsts and the largest, was it modular tower as well. I mean, just such an amazing project. But I'm thinking still, but that December, I guess 31st, you're probably, like you said, at a deadline. So what was the key to your success? To close that deal and then to see it through. Maybe.

I mean, what I'm going to call it My Zuzu moment. So it's like anything. It's a very complicated situation that you can distill down to one of the most simplest things, which is really tenacity and staying addicted to hope. That evening, in trying to close that deal, we lost an $86 million letter of credit. It lost its way from Cleveland to New York. It had to be in its original form or the government wouldn't take it. We were hitting a deadline because the bond desks would not be open for the holidays after December 20th. Something. We were on the very, very end of the year for all of the trading desks that would sell these bonds that the market would buy. We were in the recession. I mean, this was 2009. Nobody knew if these bonds would even sell. We had Goldman Sachs telling us that they thought we could stand it up, but that there may be more equity required. So we had everything, all these headwinds. We finally get everything where it needs to be, and we need to close with the government to really seal the deal. And we lose a letter of credit. And we have probably 50 lawyers at Skadden Orbs. It's nighttime. There was an outage, which, if you go back and look at this night, it would tell you the night of the night in question, because there was absolutely no ability to use your BlackBerry in New York City. And obviously, this is a bizarre thing, because we were all in BlackBerry and there was no service. The system was down. The RIM system was down. And so there was no communication ability because there was some storm. So because of the storm, the UPS got backed up. And so UPS was a mess. Somebody put it in UPS, not FedEx. And we were in, you know, a moment of truth. And we had the government in one room trying to convince them that they should be able to take a fax copy of this letter of credit. We had all sorts of people scurrying about trying to track it. And I sent somebody out to Maspeth, Queens, to go find the letter of credit. And then I remembered that one of the law firms we worked with represented ups, and he was in the Caribbean for his holiday. I asked for his cloak and dagger, and I asked if he could help get me to somebody at ups. I needed to open up the facility. Wow. And I'm not making this up. And we opened up the UPS facility in Maspeth, Queens. There were thousands and thousands of documents. We found the letter of credit at 3 in the morning.

Oh, my gosh.

And we all stuck around, and we closed the deal that next morning. And I would tell you that I created this playbook where people were looking at like, she's lost her mind. There's absolutely no way this is going to happen. And we even had a plane on the tarmac at Teterboro in the event that we had to try to get back to Cleveland to reissue the letter of credit and make it back in time. But the timing was such when the bank opened that we would never make it. But that was going to be the Hail Mary. And so that I was so convinced that if we just opened up the UPS facility, we would find this letter of credit. And there was a gentleman sitting outside in a car. And when they found the letter of credit, you know, he came, you know, running back to the office at Skadden with this letter of credit. And so this was all my concern. But it's kind of like thinking you could talk to the squatter. Like, sometimes you've got to go places where other people aren't going to go. And I think at that moment, Bruce knew that he had his succession plan, because.

What an incredible story.

Well, the reason I called Zuzu was I was supposed to be out shopping for Zuzu pets for my daughter, because for Christmas, remember, Zuzus were the whole rage. And instead of shopping for Zuzu's, I was shopping for evs.

Wow.

Wow. You heard it here on the Voice America network. Okay.

Okay.

So that's unbelievable. So I want to talk a little bit about what you're doing now at L and L Mag. And here you have made the transition to residential, and this was very entrepreneurial to come and do something new. So what prompted that, as opposed to going to another one of the. Well, L and L, obviously very established, but what prompted this move?

It gets back to my dilemma. After building, building a couple of great buildings, which is if you want to up your game, the question is, what's next? And I felt a sense of I really ought to do something, that I can control my brand and I can build the kinds of buildings I want to build. Which is to say you can build beautiful ground up buildings of all types in New York City. You can build them with people and for people that look like the city we live in. And doing all of that, you can deliver great value for your partners, your investors, and for the communities in which you build. That sounds like simple, but it's not. It's not the way the game works in New York. So I don't want to build commoditized product. I want to build different types of buildings in all areas of the city and I think it should be built by people that know the communities they're building in. And so I want to kind of disrupt a little bit and I want the team to look a little different than the usual suspects. And so with that in mind, I set out to find places where I could shore up my capabilities. Knowing at Forest City always had a balance sheet and it's important to know what you had and what you wouldn't have anymore. So upon my departure I knew I needed somebody who could help put the capital together. So in a very strategic way I went to the parent company and to Bruce. I explained what I wanted to do with their complete blessing. I paid attention to a number of the things that were pressing inside of Forest City and at the same time I planned for my departure and I took a group of people with me that I believed I could build a company around. And that all happened on January 22, two years ago this January. I am really aligned with David and Rob because they're doing all the repositioning. So any asset that's repositioned is L and L. Anything that's ground up, whether it's office or residential or mixed use is L and L Mag. So they're obviously investors in my company, but we're co located together. We're collaborating beautifully. My team is working on Terminal, for example, a terminal warehouse project on the far west side. So we are cross pollinating the talent but at the same time we're two independent platforms and I have a real identity in L&L mag that I want to continue to nurture and I want it to become its own brand. Obviously L and L is an incredible organization and L and L Holding has already a foothold in this marketplace. That is remarkable. And that's what I want L and L Mag to have. So I feel protective of the new brand and at the same time I have the entire infrastructure and platform of L and L to leverage in everything that I do. So our first transaction within 12 months of forming the company is 28th street where we're building a 450 unit multifamily residential building across from FIT. We are partners with a large landowner in Queens, right adjacent to where Amazon was supposed to go. And we are working on a district wide rezoning for the that parcel and the area around it. That harkens back to my economic development days. So it's both public development and private development. It's really, really exciting. And we're working on the terminal warehouse project and then we're in pursuit of two other opportunities that are quite exciting and hopefully by the time this airs, we will have landed at least one, if not two of them. And again, the platform can do both multifamily and commercial. And so as I told you, my first land love is office. And that's where David Levinson and I really have a commonality because we really love this notion of building boutique office buildings and high quality 21st century performing buildings in New York, which is what this city needs to be a global city going forward. Wow.

Well, it's been amazing to watch. And again, just in two short years, not only to start this, this new venture, but then to have two projects underway, more to come. I mean, just so fantastic to watch. We only have a minute or two left, but would love for our listeners on the show, if you had advice out there for the aspiring investor, someone starting out, what would you say to them?

I'll give you the developer quest I think is a three legged stool. I think good developers know construction, marketing or financing. And I think that if you nail one of those three and you're really good at the debt and equity, or you're really good at the leasing and the marketing, or you're strong on construction, you can develop a mastery of the other two. But just to focus on what do I do first? How do I get into a business like this? Pick one of those three major areas and then become adept in that area and then you can leverage that expertise and get yourself into the world of the other two components. It is the best job in the world, if you ask me. Just because you're touching all of these amazing disciplines and you are core to the, to the overall effort. So I love what I do. It's all that I know. And I would say don't underestimate the power of the people involved in what we do and connections and relationships. And I don't mean in the networking sense, I mean you are, your word is your bond and that, you know, reputations take a lifetime to build and an instant to destroy. And it turns out that if you are a person of integrity and you're good at what you do and you keep your word and you're a decent humanoid, it matters in the business that we do. So real estate is a much more elevated game than it was when I started. And so I think it's a really important profession in our city because the built environment is what makes New York City an amazing place. So we have a duty and we ought to think of ourselves as civic builders, not just builders. For profit. And if you can do that, I think New York's an incredible canvas.

Well, that is incredible, incredible advice. And I'm also gonna. I know our listeners are gonna remember that story of tracking down the US Postal office in the Caribbean. And tenacity, I think, is what you said, and that was always my grandfather's advice to me, is that stick to itiveness. So this has been a really fantastic. Thank you so much for joining us on the show.

I'm honored that you had me here. And the podcast is important because it gives people an opportunity to learn a lot. And so I commend you for your efforts to pull the right people in the room to have the conversation. So thank you.

Wonderful. So please stick with us for the break. This is James Nelson. I'm your host of Real Estate Investing Live from New York on the Voice America Network. We'll be right back.

Welcome back to Real Estate Investing Live from New York.

I am your host, James Nelson. And it's now time for our Real Estate Fundamentals Corner. And we are here with NYU Professor Derek Aiken, who teaches a class on real estate underwriting. And he's not just a professor, but he's also CIO of a real estate fund here in New York and is also a really cool guy because he has a yellow Mustang.

What year is that, Derek?

Thank you, James. It's a 1970.

Is that a hardtop or a convertible?

Yeah, actually, it's a convertible. And the word on the street is it's not just a piece because apparently I have air conditioning in a convertible, which apparently back in 1970.

So you have both.

You have the top up, but you.

Can still get the ac.

That's great. Street legal also, I hope, right? No nitro or anything illegal.

No nitro. It's got the seatbelts. And if some rich broker from Old Greenwich ever wants to throw a high bid in there, I'm happy to offer.

There we go. Derek, you teach a course on how to underwrite real estate. A lot of our investors are starting out in the business. They're looking how to get their arms around a transaction at its simplest form. What is real estate underwriting?

Yeah, sure. I teach a class called Real Estate Finance and Investments over at nyu. The class is really the foundation of the entire program. You have a construction arm and you have a finance arm. Regardless of which side you end up on, you take this as kind of a core curriculum. The course starts out giving students a broad swath of financial background, discussing time value of money, why we make Investments, understanding the concepts of compounding and discounting and really getting into then ultimately real estate as an investment class and starting to break down what it means to be underwriting a piece of real estate. Getting into, what are the underlying assumptions that I feel comfortable with on this particular investment? Ultimately determining something called irr, which is internal rate of return and ultimately defined a couple different ways. One of which is taking the risk free rate of return plus the risk premium for a specific investment. What is all that.

For your fund?

Because you look at investments all the time and try to make a decision whether or not it's worthwhile to pursue or not. The first thing you're going to do is you're going to underwrite the transaction. Part of that is putting in assumptions and I'm sure the, the sponsor who's looking to raise money for this is going to have their own set of projections. When you talk about your approach, what are your first steps when you're running numbers on a transaction?

Yeah, those are good questions. Of course, the sponsor being in my situation, for our fund, our partner, we typically are the LP or the limited partner. And so we've got day to day operator that generally runs the majority of the real estate. My phone will ring with various opportunities, various sponsors out there. Our fund is particularly focused in the five boroughs in New York. Those are the sponsors that I speak with. I'll get a call from a sponsor on a deal in Crown Heights or Bushwick or the Financial District and he'll, or she'll have kind of looked at the investment and put together a business plan and they'll walk me through, hey, this is a 20 unit building on the Upper east side and it's primarily fair market or it's got a component of rent stabilization to it. And this is what we think we could do over a two or a three year period and really get into how they see the future of what we call the cash flow pro forma of this investment.

You're making projections and these models as you mentioned, typically whether they run five years or 10 years, there's the life of the investment. And through that period you're going to have to make assumptions on what's going to happen to the rents, do they grow, what happens to the expenses and really solving for that stream of cash flow over the life of the investment. And then ultimately when there's a capital.

Event, whether you're selling the property or whether you're refinancing and then bringing that.

Back to today, what is that worth?

I believe you said A risk adjusted.

Return with my money today is that broadest sense.

That is it in a nutshell. Once you understand from either the sponsor's perspective or yours, what that five or six or three year period of time looks like and what those cash flows of that property may or may not ultimately generate, you then can start to develop an opinion of value based on whatever your required rate of return is that you would like to have on that particular investment. That's getting back to the IRR that we were talking about before. Let's just say that you're an investor and you're in a value add fund, which is in fact what our investment pool is. You have a required return of perhaps 15%. You say if my IRR is 15%, I cannot afford to pay more than a certain dollar amount for a property based on those underwritten cash flows that we're projecting out into the future. Of course, you can see how if one investor has a different risk profile than another investor, or if one investor sees a specific investment as less or more risky than another investor, that investor may end up applying a different required rate of return for that same piece of real estate and therefore coming up with a different price that they're able to pay for it.

Perfect. Well, Derek, that certainly helps set the stage for us and for the rest of the show.

And I know we're going to have.

You come back in future shows to talk about some of the terminology and principles for real estate underwriting. So we're going to take a quick break. This is James Nelson again.

I'm your host of Real Estate Investing.

Live from New York.

A different approach to putting our clients first. Avis and Young's Tri State Investment Sales Group sells multifamily office, retail, development and specialty sales throughout the New York metro area. As experienced thought leaders in our industry, our 35 member group is available to help you make informed investment decisions by advising you on your current holdings or identifying new opportunities in the marketplace. Our one unified team is built on an industry unique platform which promotes unparalleled collaboration and teamwork. We share core values of hard work, integrity and expertise. We put our clients first providing tailor made strategies to achieve superior results. Please Visit us at aytristateinvestmentsales.com and follow us on Twitter, LinkedIn and Instagram amesnelsonnyc to learn more.

When it comes to business, you'll find the experts here. Voice America Business Network.

Okay, so now before we wrap up the show, we're going to be taking a couple questions and these questions have.

Been.

Sourced from our Tri State Investment Sale group here in New York. And we're really lucky to have Juanise Mickels here with us who is going to be reading off some of the questions. And you all in the future will have the ability to email in to have your Questions read@jnradiovisonyoung.com so please email in your questions. So Juaniz, what do we have have from the team this week?

Hi James. Mitch Levine asks what's going to save the multi family market here in New York.

Mitch, it's a great question. I wish I had a great answer for you. But for those of our listeners who are outside of New York, maybe you have not heard the news, but the state just came out in with sweeping rent reform and as a result a million housing units have been permanently regulated. You see some other states following suit now with California talking about their own reform. Oregon had done this previously. So Mitch, it's a pretty complicated answer in that not all of these properties are the same. Some are fully regulated, some have some fair market units. So on one hand you could embrace the affordability like Invesco did along with L and M and they actually took a fair market portfolio and they made it affordable. So that's one way, I think there's another way to focus on some of the fair market units. But as far as with other regulated product out there, I think time will tell. What's happened now is you no longer have the ability to deregulate units to charge a market rent. So now it's back to basics. You really need to make sure that these buildings cash flow and because every year the only increases that you will get will be coming from the rent guidelines board. So for all our listeners, really important when you buy into a new city, you really need to understand if there's any rules, guidelines, but this one, Mitch, I think it's going to take a while to sort out. What's the next question we have?

Gabby Simon asks what asset class do you personally like for investors? Investment.

Okay, so this is like picking your favorite child. Clearly based on what I just said on multifamily, it does sound pretty bleak. But you can be a contrarian and sometimes, especially if you subscribe to the Warren Buffett school of investing, sometimes when there is fear in the market, that can be the best time to invest. But, but I gotta say I would still be really cautious with these new rules and waiting to see all this shake out. So I would actually say because I like the contrarian investment, I like retail. Right now because it's been hit so hard where in New York in some cases rents have been cut in half or even a third and meanwhile the cap rates have expanded where a couple years ago, and so maybe you were buying at a 3% return on a future hopeful rent. Now today, in some cases you're getting 4 and a half, 5, 6% returns at today's rent. But I think it's really important that when you're investing in retail, it has to be E commerce proof. And I like rents that are service retailers that are service service oriented. We're working on an assignment right now downtown where We've got a FedEx ground, we've got a Bright Horizon School, a salon, a karate studio. I mean those are the kind of tenants that are going to be around. So if you really want to take that concept to the next level, we also have what's called covered land plays where you might have a strip of retail, but it has future development potential. And maybe, maybe it's encumbered right now and you don't build it today, but you have that potential in the future. But it really is dependent on what your investment outlook is. Are you a long term investor? Are you looking to raise money from investors and make a quick return? But I think right now, as far as asset classes, if I was making a bet, it would be on retail right now.

And I have one, one last question for you. What's the best way to find properties for sale?

Okay, great question. And yes, we have listings that are offered out there as do other brokerage firms. And the aggregators right now are on LoopNet, Costar and there are a lot of listing platforms now that have populated. Crexi is another one. So they're out there. That being said, commercial is not like residential. It's not an overly efficient market where you can just look online and find everything. Oftentimes it's calling brokers, asking what they're working on. In many cases listings are off market as opposed to on market. And so it's really dependent on you all to pick up the phone, make the calls, don't wait for the broker to call you call the broker and say you're out there looking. And in some cases you see a building, you like call the owner, right? And so it really is important if you want to be a successful investor to be proactive, not reactive. So Wendy's really appreciate your coming on the show. Look forward to you coming back in the weeks to follow. And remember to email janradiovisonyoung.com so we can continue to field your questions in the future. And that's it for this week.

Thank you again.

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 page, 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.