28: Resilience - Scott Rechler on How to Overcome a Crisis

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Welcome. This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis and 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 to show number 28. This is your host, James Nelson of Real Estate Investing Live from New York. And as we all get through these challenging times, really pleased to have with us Scott Rechler today for an interview. And he has certainly been at the forefront providing incredible leadership. Scott has had an incredible career, both in the private sector as well as positions that he has held in the public realm. So really fantastic to have him on the show and give us some inspiration to persevere through these difficult times. So with that, we're going to take a quick break from our sponsors and we'll be right back for that interview with Scott. We'll be right back. And now it's time for our Investor spotlight. And with us today, thrilled to have with us Scott Rechler, who is CEO and chairman of RXR Realty and former vice chairman of the Port Authority of New York and New Jersey, current chairman of the Regional Plant association, member of the MTA board, and also has done a tremendous job giving back some, serving as a board member for the 911 memorial, the drum Major Institute, amongst many others. So, Scott, thank you so much for joining us today.

Yeah, thanks for having me. I appreciate it.

And I want to give you a special thanks for everything that you've been doing for the industry and for New York during these challenging times. You just, you've been, your leadership has really been such an inspiration in helping us get through these difficult times. So I wanted to go back a little bit talking about your story and how you have dealt with crisis and overcoming challenges in the past. I know that you grew up in a real estate family and so maybe you could talk a little bit about those early days. Did you learn anything from your parents, your grandparents about dealing with challenges and even crises in the past?

Yeah. Thanks. And again, I'm glad to be here and share some insights. It's interesting when I think back, I came into the real estate industry in 1989 and it was right when we had the real estate industry was going through what I would say is one of his generational crises for the industry, which was the savings and loans crisis and was sort of what led to that early downturn for the overall economy through the early 90s. And it was a transformative moment for real estate because after sort of decades from Post World War II of having operating real estate as a local business relationship based business, parochial project by project, we went into this crisis and then came out of it a very different business that was much more institutional, much more about leveraging the public markets, public debt markets, securitization. And so it was really transformative. So coming in, in the heat of a crisis and then working in my family business and helping us navigate through that crisis and positioning us for, to ultimately go public on the other side of that and then and start growing was sort of. My father used to teach me, was my PhD from post grad school. I was at NYU grad school. But before that, after that and then it's just, you know, so you, you learn a certain psyche in that you keep pushing, you got to have tenacity and that there's going to be challenges in downturns or any other crisis that you face. But you got to be optimistic and you got to just keep pushing through those challenges and find your way and navigate it. Because the world changes with each dynamic. And so as things change, you got to change the, your strategy to try to grab the current, to take you in the right direction.

That's fantastic. And I know you also, you have incredible experience and record of working alongside the community and working in the public arena. Was that something that was instilled in you at an early age? Was your family involved in government as well? Or how did you not involve in government?

But again, being from a business that is based on the health and vitality of your community, which real estate is. My family has always been very active in making sure that our communities remain strong. And so it was sort of in my blood to sort of take a very heavy interest and sort of, I think it's sort of symbiotic which, that I view that, you know, when our community is strong, our business is strong, we're strong, our neighbors are strong. And so that, you know, I look at it as it's all sort of part of the same formula and that it's a connected tissue that you really can't operate with if it isn't all operating at full pace. And you know, we have a saying that says sort of foundationally at our company, which is doing good and doing well means doing better. And you know, that means that doing better means everyone needs to do better. And if everyone does better, you do better. But you're not going to do well unless everyone's doing better.

That's fantastic. And I would imagine, certainly the public sector really benefits from your experience on the private side and really partnering. So talking about another incredible challenge and how you were able to persevere, maybe talk about coming back from 9 11, maybe from a business perspective, but also the time that you spent at the Port Authority and rebuilding the World Trade center.

Yeah. So 911 was obviously an extraordinary and horrific time for the city and in so many ways also set the path for where the city is today. And I had a strange relationship. I actually watched the first plane fly into the first tower and watched the second plane and was down there for that whole experience. And I remember coming up from downtown, walking up, and everyone's covered in soot and there's F15s flying over the city, and, you know, people had their cell phones to their ears, but they weren't working. And it was probably the one time in my life where I really questioned whether or not I was going to even actually make it home. Because you didn't know. You knew just. There was just so many rumors of planes in the air and where this was going. But this. It was tremendous uncertainty. And I always have this vision that sticks in my head is, was this young woman standing in the middle, I think it was Madison Avenue at the time, screaming, daddy, Daddy, Daddy, Pointing where the smoke was, coming up where the World Trade center was. And these two other women who obviously were strangers, were holding her like she was their own child and caring for her. And it was a moment of time that made me really think about what makes New York New York, which is that when things get tough, we come together as a community. And while there's so much diversity in different people from different places, it all seems to disappear, those differences when we are challenged as a community. And so that's something that has stuck with me. And then through the years, I worked on being obviously engaged with downtown. And then in 2011, the governor asked me to take over as vice chairman of the Port Authority. And really, at the time, the World Trade center had. All the work had stopped. There was infighting amongst all the different stakeholders. There was no budget, there was no timeline. And he said to me, this is supposed to be a symbol of freedom, a symbol of hope and a symbol of government effectiveness. And instead we have this site that is a symbol of total ineffectiveness and almost a sense of irresponsibility, and we need to turn it around. And so that was what I was tasked to do and got very deep into it. And you realize when you start working on that project, the people, the men and the women, the construction, everyone that worked on that project viewed this different than any other project. This was a mission for them too. And the level of dedication and commitment of all the men and women that worked on that project was extraordinary. And you know, and the challenge is that that dealt with it were obvious, right? I mean, this was a sacred site where so many men and women lost their lives. It's a site that was publicly owned and yet there was private partners on some of it. It was had an agency that has held by run by two states, New York and New Jersey. So you had those stakeholders in the mix. You had the city and the state. So there were just so many different stakeholders. And so, you know, the big part of my role was to come in and help build bridges of understanding, to get the people on the same page, communicate, put aside the, you know, any parochial political issues or agendas, be sensitive to the families that lost their loved ones there and their issues, but also be, you know, realistic and thinking through some of the commercial implications of rebuilding Lower Manhattan and what it means to our state and our country. And so it was. It was difficult to say the least, but in many ways it was a very enlightening, rewarding process. And now I'm vice chair of the 911 Memorial Museum and Memorial. So I'm still very engaged there with Mike Bloomberg as chairman. And you see, there's a lot of similarities today to some of the feelings that we felt post 911 and what the whole museum is about, right? Which is that after 911 we thought we were attacked. We were attacked from something outside. And we had. It took so many lives. And there was a sense of shock and sense of uncertainty that existed to our whole community, sense of mourning for all the loved ones and neighbors that were lost during that period of time. But there was also coming together as I described earlier. And that's what the museum's about, right? Which is how do we take moments of like this and build resilience? How do we take moments like this to build stronger communities, to find our way to, you know, cross over the horrific experiences we went through and come out better on the other side, but at the same time respect the memory of what happened and learn the lessons of what happened and respect the people and that we lost during that period of time. So a lot of what those have gone through with 911 has resonated with me a lot as we were moving forward through this process.

I was really amazed to hear your story and when you spoke to our company, too, and talking about that time and how everyone did come together.

After.

That incredibly tragic event, but how New York did rebound stronger. And I know that's the hope today with what we're facing, but this is very different because then we were all able to come together and help support the local businesses. And now the best thing we can do is to, you know, to stay put. And I do want to get to that. And I really, I want to hear all the things that you've been doing to help us figure out how best to move forward. But just to go back to your story and so, you know, coming out of that and the city starts to rebuild, talk to us about what was going on at Rexon at the time. Were you all building the portfolio? I mean, you had an incredible run until, was it 2007 when you ultimately sold the company, but maybe talk about while you were at the company, how you all were able to expand the portfolio and what the focus was at the time.

Yes. So what we did in 1995, when we took the company public, the objective was to acquire other sort of generational family businesses in office and industrial space throughout the whole New York metro area and build a regional company with the view that you have this power of local, of connectivity, of insights, of relationships that would be a competitive advantage for us to be able to source opportunities, service our customers better than we otherwise would have, work with local officials, and build stronger communities through the process, which is something that was always important and rewarding for us. So we did a series of acquisitions, and then by 1999, we were in every market. And then in 2001, actually post 9 11, we began the process, start thinking about shedding some of our suburban assets and investing more into New York city. And so in 03, we shed our industrial portfolio and then took the proceeds from that and began buying more and more in New York City. And then by, I would say, 05 06, we were one of the largest owners of office properties in New York at the time. And we saw the world changing again. We saw that while New York was thriving and prices were escalating, rents were going up. We saw our customers needs were changing and that there was a need for them to be more and more flexible. And yet the public markets were more and more restrictive. So whenever we did anything that wasn't within the four walls of what the public markets thought was normal, we would get penalized. And yet when we talked to our customers and sort of changing demographics, we realized that we needed to operate differently and think longer term to what was going to be the changes that would come through technology, through the way people work, people live. And so we decided to sell the company in 06 and ended up selling in January of 07, which is pretty close to where the top of the market was. But in reality it was more strategic than speculation. As to being at the top of market, it was more strategic. That is a time that we thought that there was enough demand that we could actually trade the company. You never want to try to sell a public company or begin the process unless you know you're gonna be able to execute. Because if you fail, you lose the confidence of your board, your customers, your partners, your shareholders. So we knew there was the window, but we also felt that we wanted to restructure our approach to being longer term, have more flexibility and really driven by our customers insights and our customers needs about how they want to live, work, play and stay in a changing dynamic. So we sold in 07 and then went out and raised capital from around the world for a period of time and then came back in the market in August of 09 and probably over a two year period of time acquired about $4.5 billion of assets early in the game. And if you think about August9, our first acquisition was a piece of debt on 1166 Avenue in the Americas and JP Morgan was its sole tenant. And we were getting a 15% cash on cash return and we spent literally weeks underwriting. What happens if JP Morgan goes out of business? And what's this worth? So there was still that much uncertainty, but we went through that process and then continued to buy buildings from private equity hedge funds and then file tech companies as they were growing on the west side. Bought Starrett Lehigh, which was our first big building in Chelsea, and then a number of others in downtown. And so we again it all became where are our customers? What do they need? Same thing, a multifamily thinking about transit oriented development in the outer boroughs and suburban urban areas that have that connectivity. And so that's driven our business and our growth. And today we have about $9 billion of equity, private equity that we've raised from around the world and $20 billion of, of assets that's in this portfolio. So we're as vested as you can be in the city. And the underlying theme and investment thesis was that New York at the time, coming out of 08, 09, another big downturn was being repositioned to be a magnet for talent. And that was Mike Bloomberg's big Focus was how do we create a economy that focuses on applied sciences. And as technology was evolving, it wasn't about creating new technology, it was how do you implement that technology to make a business more effective. So how do you apply that technology? And so our bet was that that was going to be successful and more and more of talent would come to New York. And as more talent came to New York, more companies would come to New York and we'd have this self reinforcing cycle. And if you look at the, you know, the stats in terms of population growth, job growth, you know, last year, the recent flurry of major tech companies and media companies making enormous commitments to New York, that's really what's what's driven it. And so today as you think about where we are, it's, you know, that's really, I think the question at hand, right, is that that cycle that we went through, that self reinforcing cycle of talents coming here, talent attracting, the companies, will be able to sustain itself in a post C19 world. And our bet is that it will because I think that New York, as you said earlier, it's been tested before, but there really is no place in the world like New York in terms of the scale, diversity, culture.

The level.

Of different types of businesses that are here, and expertise. So there may be a period of time like post 9 11, where you may see some pullback. You may hear stories about people moving to the suburbs, people moving to secondary cities out of sort of a fear and anxiety from what we're all living through right now. But as we get to a point where there's a vaccine and we normalize things and work our way through this, New York will resume itself. And I think one of the big benefits we have, which we didn't have back in 08, was that we have the big companies that have made commitments here. Whether that's Google, whether it's JP Morgan, whether that's Disney, they're building for the next decade, two decades, three decades to be here. So in this case it's almost the inverse is going to be the stabilizer. It was the talent that brought the companies, the companies being here is going to stabilize us through this period of uncertainty and give New York a chance to get to the other side and then rebuild all the characteristics that made it so attractive to start with.

Well, I fully agree that the New York will come back, it always does, and it'll be different this time. But I think we could certainly also learn from how you were able to rebuild at various points over the last few cycles. And I want to definitely talk more about today, but I just. You talked about how you sold in 07 and then you were able to raise this money. And I've got to imagine that was no small feat. Thinking about the collapse of Lehman and Bear Stearns and suddenly you're back in the market trying to raise capital. And for our listeners on the show today, they're probably thinking about, okay, there's going to be opportunities in the future. But right now the capital markets are effectively shut down. So I've got to imagine there was some similarities back in 2009 when you were looking to raise money. So how were you able to convince investors and banks that this was now the time to jump back in and that you could deliver?

Yeah, that's a good question. And it was really. We started in 2007 and 8. So you really challenging times, particularly in the U.S. u.S. Pension systems were overwhelmed with challenges. Not only they were overwhelmed with challenges, most of them had to have budget cuts. So you'd have one portfolio manager doing the job of 10 trying to deal with all the fire hose of challenges coming to them. We had the benefit of having a very strong track record with our public company. Over an 11 year period we had a 700% return to our shareholders. So we had that. But the reality is the investors that we were pursuing were totally different investors than the ones that would own our shares as a public company. And so these were all new relationships and it was very difficult. We literally traveled around the world. People say what was the worst decision you made? I always said the worst decision I made was that right after we sold our company, I didn't take a year and a half off and start later. Right. Because we just started the process.

I was gonna ask if SL Green asked you to take some time after that. I mean you were able to go back and invest right into New York after the sale was there, I think.

We had a year non compete in New York City, in Manhattan maybe. So the theory was let's go raise the capital during that period and then come back out. And what ended up happening was there were, I would say 90% of the traditional capital sources were dealing with too much real estate issues of their own to have interest investing in a new concept. Even they thought it was the right concept. There was the 10% and it turned out to be, in our case, global investors, non US Investors that had not been invested in real estate when the collapse occurred and saw this as a unique opportunity to get into one of the most competitive markets in the world when there was least amount of competition. And they viewed us as having the local expertise to be able to go do that. And so that was really, we were fortunate to find the handful of them at the time who believed in that vision. But also it took us to really start cementing and building momentum, was getting the first yield. Because you can talk theoretically about what you think the opportunity is, but that only goes so far. But when you can actually show people, here's the investment opportunity, here's why this is so compelling, it's right in front here, then people can start seeing tangibly what you're referring to. So it really wasn't until we started to lock up our first couple of deals and we had to use more of our own balance sheet in doing that, that we were able to start getting momentum in growing the fundraising process.

So the old adage for real estate is location, location, location. And I'm sure you've subscribed to that, knowing where your portfolio is today. But I mean, timing has been so critical for your success and whether it was selling Rexin or when you went back into the market. So I guess, you know, the question moving forward is, I mean, we all assume that there is going to be some disruption here. But for, you know, for our listeners who are thinking about, okay, when do I jump back in? When is it safe? I mean, what would you say to that?

Yeah, so we try to really focus on developing a research based sense of conviction. And this goes back many years where we, even as a public company, whereas we have this eyes wide open approach where we try to sort of close off the noise of what the market's saying and do our own work, talk to our own people, and then say, okay, here's where we think it's going to be. I think it's one of the reasons we sold our company. And we write every year a white paper where we spend from the beginning of really the end of December to the third week in January, looking at what's happening in the world, how that's going to impact our country, our region, our business, our customers, what's happening locally with labor, the quality of life, et cetera, et cetera, and come out of that with a theme that we want to invest with. And that gives us a discipline to say, you know, what if it doesn't fit with that theme, don't invest in it, don't spend the time on it. But it also gives us conviction of something that is part of our belief set and is there even though other People may not be looking at it or thinking it's too expensive. We move very quickly to go and execute on that. And so it's even the same now. We just finished in January our white paper for 2020 and threw it in the garbage because everything that was pre COVID 19 isn't really relevant anymore. Right? So we're in the process now of writing our next white paper. We're doing a special white paper that is doing a deep dive as to what does a post COVID 19 world look like, which types of asset classes should perform well? Where in New York do you need to be investing? Where should prices settle out? Where should cap rates settle out? What are the indicators that we should be looking at as signs of we're getting that there's more to go down before it comes up. And so we're going through that whole process. We have a team that I lead on that process now. But without getting into the detail of that, my sense is just like in After 0708, New York is a very competitive marketplace. And so you need to get to a point where people are ready to capitulate, right? You got to get to the point where people don't think this is a V shape economy is going to come back. And so they were waiting, but now they don't. They don't need to. They're going to say, I can't wait anymore. I got to sell because I got to buy back stock. I got to sell because I got to deleverage. I got to sell because I got to denominator effect. I got to sell because I got to fund another project. Right? Those are the types of opportunities that we wait to see in the sweet spot where they come. So you monitor them and you wait. And ultimately I do think they will come. We're raising another round of funds with $500 million just focused on this might be market dislocation and that we'll be looking to invest here and that we'll expect to raise another $500 million to a billion dollars around that. So I think there'll be opportunity, but we stay disciplined and maybe there won't be as much opportunity. I'm one to believe that the stock market and the overall market has not really priced in what really is going to happen? Because I sort of view that we're going from where we are today to a new abnormal. And that new abnormal is going to be in place until either there's a new vaccine that has been distributed to get 300 million people combined with herd immunity which no one really knows how to get from there point A to point B or some validity of the antibodies test. But under all those circumstances that could be 12 to 18 months. I think when you think about having to live in a world where you had a social distance and avoid density for 12 to 18 months in this city is going to have a meaningful impact in the city and the country and the economy. And so when people are talking about going back to work, going back to work doesn't mean we're just going back to work the way work was and frankly doesn't mean it's going to go back to work the way the work will be after with Ru this issue and find the vaccine for this virus. It's going back to work in a really abnormal way where restaurants, if they're open, are going to be open at maybe 25 to 50% capacity. Well, what's a restaurant do? Can it make money? Can it survive in that instances? Retail? Same question. How do you think about concerts and movie theaters? And so I think there's a lot of challenges ahead of us going through the next 12 months or so. I think we'll be OK. But I don't think it's a market that it's going to have this V shape and I don't think this is a market that's going to be able to just sustain itself. I think there's going to be a lot more federal stimulus that's going to be injected into the economy and we'll navigate our way through it. But the pricing right now in the public markets and the pricing right now, I think in terms of where real estate is doesn't really reflect this yet.

Yeah, it definitely seems it will take time. But I think your observations are spot on and I'm really glad that you bro brought up the white paper because our mutual friend Seth Pinsky, I know used to work on that paper with you. I mean this was not just a three page exercise. I mean this was really a volume. And I think the lesson here for the investors listening is it's the difference of being reactive as opposed to proactive and really having a thesis of where the opportunities are going to be and then have that battle plan to go after. And I would wonder how many companies actually do that every year and think about it as opposed to just kind of waiting things to appear. So I've always been very impressed with.

That approach and it's not an easy process. You mentioned Seth. Seth's actually working with us on it now as part of the team as well. But it's a process. It's a painful process. It's a lot of, you know, introspective thinking. It's a lot of trying to think outside the box. It's a lot of debating internally and then a lot of writing to get the thought process going right. So my kids tease me, you know, I said my pajamas all weekend long. Working on it for the whole. For the whole January. So it's a. It's become a little bit of an event in our family.

I would love to read one of those, so. But I'm sure you keep it under lock and key, so I know you've also done work and you're now the chairman of the Regional Plan Association. So with everything going on, there's a big question now about how are businesses, are people gonna leave the cities? Are they gonna go for the suburbs? If I'm not mistaken, the Regional Plan association was saying, okay, it's not black and white. It's not. They're not two opposing factors, the cities and the suburbs work together. And I think a big part of that, at least here in the New York metro area, was how to create much needed housing, which couldn't all be accomplished here in the city. So maybe you want to talk a little bit about that as opposed to them being two opposing factors, maybe how cities and the suburbs work together.

Sure.

And I think New York is a model for many of the other urban areas around the country, if not some of the ones around the world, where I think for it to be successful, the central business district has to have a regional lens, and you need that regional connectivity for it to be successful. And that's one of the challenges that we've had in New York more recently, is it hasn't really taken advantage of the region around it to create the affordability of housing. And I think one of the things that will be a byproduct is of this current crisis. It's going to be an accelerant for a lot of trends that made sense but required people to change how they operated and now will actually happen more quickly. And we've seen that already with technology and the fact that people are using zoom meetings and things that they had not done before, hey, what this is effective. So it's going to be a part of our, you know, approach going forward. I think the same thing as people think now about offices. You know, now we're, in the last decade, it's all about been density, density, density, how do I save money? I think now they're going to be thinking about more broadly, you know, we need to get people in spots, but having maybe satellite offices, not everyone in one office, so where it's so dense, which then creates a question about wellness and health. And then satellite offices also then enable people not to have to be on public transportation, which then can ensure them being healthier as well as reduce some of the capacity issues we've had on our transit systems and solve some of our affordability issues relative to housing. Because if you're able to move people out of the city core, then you're able to actually find more affordable housing. And so I think that is actually a good byproduct that could come out of this. And even as people think about when they come to work, how they come to work, if you're working in a satellite office, you may be working from home part of time, or then coming to the office, there's going to be a new rotation about how that balance will be. And I think it will be a healthy balance along the way.

Yeah, I think about the work that you're doing in New Rochelle, which is also in an opportunity zone, and almost creating a new city there, but still it's 30 minutes on the train to get to the city. So I mean, they can definitely coexist. So it was definitely exciting to hear about the work that you're doing there.

Let me use that as an example. We're building the residential units in New Rochelle, which is a city that's sort of iconic in its own nature. It's got tremendous amount of character, great architecture, great streetscapes, great diversity. As you mentioned, 30 minutes away from midtown Manhattan, yet we're building New York City quality residential at 50% less the price if you live in Manhattan. So if you're thinking about that trade off of quality of life, and again, a 30 minute ride on Metro north, it makes a lot of sense. And we're doing the same thing in Stanford, the same thing in Yonkers, the same thing in Glen Cove on Long Island. And so I think that is something that will come out of this as a more normal way of people deciding where they live and work.

Yeah, I think I saw a report from the RPA that talked about using a lot of the land next to these train stations, which there used to be such an enormous need for parking, but I think I heard something of the magnitude of 150 to maybe even 250,000 units could be added along those lines. So that was certainly encouraging because even coming out of this, we're still going to have a housing crisis. So it's good to know that we have that ability so getting things moving again. And I know it's hard to predict the months ahead, but as you think about what happens with pricing, are we going to see distress? I kind of think back to what 09 was like and some of the opportunities. But then the other hand, is there going to be. Are the capital markets going to be opened up? Is there going to be debt and equity to do that? So maybe talk about what you see, what you think is going to happen over the next year or two in the market.

Yeah, so I think there'll be some dislocation and I think there'll be. And again, it depends on what sectors. I think in the debt market right now there is already some dislocation. That is one area we've been looking at buying debt at discounts and have a couple things that we're working on now at meaningful discounts and that usually is the first to go. In this case, hospitality and hotels are going to be an area where I think you'll be seeing some meaningful distress selling there because we went into this somewhat oversupplied and now obviously this is sort of the center of where the storm is hitting from an economic standpoint and it's going to last a lot longer in terms of tourism and hospitality, in terms of the downturn than other businesses. So that's an area where I think there'll be opportunities. I think as it relates to class A office, class A multi family, there'll be some dislocation, more driven by the need for people to recapitalize or capitalize some other part of their balance sheet or some other part of their business and there being less traditional sources of funds to do that. Right. You wouldn't have the breadth of pension funds and endowments and others that were in the market before and particularly in New York because there's still a question mark to some people as to whether what New York looks like. Post this. And so I think for believers in New York like ourselves, I think that is a unique opportunity for us to find the spots and But New York also is a market that has proven that the windows of opportunities, particularly for high quality properties, is only open relatively short periods of time because when things start to recover quickly, the capital starts to flow back in and pricing starts to normalize. So even in 09, I would say the window of good really buying, I'll just say more taking care of the taking the market dislocation and not the value creation opportunities which is the balance of our investments. But just taking the opportunity of this dislocation was probably a year to 18 months before it fell back into equilibrium. That's why I think you really need to wait and be ready when the window comes and know what you're looking for and have good conviction and then pounce quickly.

That's great insight and really appreciate your sharing. So we only have a couple more minutes left, so I really want to talk, just to close out, talk a little bit more about your success, your company's success over time. One thing I noticed when I was researching and kind of looking at your team, it seems like people have been with you. You've got incredible loyalty. Talk about how important that has been for your company's success.

Yeah. So you know my partners, Mike Matoro, Jason Barnett, my brother Todd. We've been working together, obviously, for over 20 years now. Right. So we've been through a lot together. And then the teams below that have been working with us for a long time. And what you find is when you have a lot of people that work together a long time, it's much easier to work in sync without having to have that orchestrated. It happens more naturally. And we know that we can rely on each other. We know each other's strengths. We know each other's sensitivities. We know that as we go through this process of whatever we're working on, that they'll rally each of the different parts of the organization to do what needs to get done. So it's definitely an advantage for us in terms of that continuity that we have. And I think, again, part of that white paper process that we go through gets us all channeled and our team all channeled in a specific direction. And our firm's a multidiscipline firm, so we do leasing, property management, construction. So you really need all those expertise to really evaluate some of the things that we're evaluating, execute some things we're executing. And that's where the leadership of our teams at Oval work together. You know, it's like each one of them drives those specific segments of our business in the same direction.

That's fantastic. I mean, so important to have that team atmosphere and have that loyalty and that experience together. So what advice would you give to someone? And I was speaking to a friend who wasn't an acquisitions job previously. He's not sure what the future is. I mean, someone who's a couple years into this business, what advice would you give them right now? I mean, we're going to see a shake up. What would you be doing if you were in their shoes right now?

So I would say one near term advice and one longer term on the near term. These are the moments where people can shine. These are the moments where the people that were in leadership positions before may not know how to react to the current environment. Right. And so coming in without the legacy weight on your back and coming in with a fresh perspective and being able to see the world for what it's going to be versus what it was is an advantage right now. So through my career and I've seen through the people that work with me or for me, I've seen these are the times where you could see the people jump ahead. So I would say anyone that's coming in right now, this, while it may seem like a challenging time, it's also a time where there's the most opportunity for you to excel because the people that were at different levels may be falling off or maybe looking at the world from the past, not the future. So I would keep pushing and again, keep thinking forward, not backwards. The second thing I would just say, which is I think being critical for us as a firm and I think for business in general, is that you have to go into these things. I say, you know, be humble and hungry, right? When things are good, be humble because you know they're only good so many times. And one day you're going to have your own challenges. And when things are bad, be hungry and keep pushing forward. Push through the tough challenges and you, and you'll climb your way back to where you need to be. But you got to be humble and then hungry on the other side. I think that's a critical piece. And then the last piece, I'll just say is do this for more than, you know, just being successful or making money, do this for. So it has a sense of purpose for you, a sense of meaning for you, something that is tied to making our communities better, your neighbors better, people's lifestyles better. Because you know, then when you define having a rich life, it's not just about your balance sheet, it's about the life you lived in totality.

That's awesome, Scott. Thank you so much. Incredible advice for our listeners. And once again, thank you for, for everything that you're doing for the industry and for New York and wishing you nothing but the best.

Thank you. Thanks. I appreciate it.

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Welcome back, everyone. This is your host, James Nelson of Real Estate Investing live from New York. And now we're going to share with you a snippet that I did with an interview with Reggie Thomas, who's the senior vice president of government affairs for rebny. And for those of you looking for the full interview, please go to my YouTube channel at James Nelson, NYC to find this webinar and others.

So why don't we just jump right into it and outlined the latest of the federal stimulus plan, which I believe is being called 3.5 of the triple P. And this was another $310 billion that was made available to small businesses totaling 659 billion. But maybe tell us what other provisions were included in this most recent addition of the stimulus plan.

Yeah, thanks for that, James. And it's interesting just what in the world has happened just over, you know, the past two weeks. As probably everyone on the webinar knows, the initial paycheck protection program, which was hundreds of billions of dollars, actually ran out of funding. And so as a result, you know, Republicans and Democrats and the president kind of had to come together and determine a plan forward on how to kind of refill that pot. Republicans that wanted just a straight extension just to go ahead and just put more money in. But you know, we'll get to this in a little bit. The Democrats were definitely concerned about the implementation of ppp, specifically the fact that there were a lot of community and local banks who maybe didn't have access to it, a lot of small creditors and credit unions, and also a lot of MWBEs who maybe didn't get access to that funding as quickly as possible compared to some of the other major companies out there. So along with our refilling it, 250 billion or so of that 310, it's unrestricted, 60 billion or so. It's set aside for those community based lenders and those smaller banks are just referenced. And then on top of that, they put in some extra money, including the economic injury disaster loan program. So the EIDL is sort of the step one, if you will, when you want to apply the strings are a lot less there for that program. So they added $60 billion to that. Along with that they did 75 billion for things like hospitals, other money for equipment, things of that need. So that's where the long and short of where we are with perfect.

And I don't want to spend too much time on it, but I know there was some challenges and even some criticism with the first tranche that went out. I know sounds like the LA Lakers initially might have benefited from it. And being a Knicks fan, we definitely want to make sure they give that back. They certainly don't need any more money to build their roster. But also, you know, in all seriousness, you know, some, some of the, the big banks who were maybe extending these just to the, you know, their private clients and maybe this wasn't made available to the smaller businesses. So I don't know if you'd have any commentary on that.

Yeah, no, it was, it was definitely interesting to kind of see how the program played out, just to kind of give the 10 second background. I mean, it's important to remember that when Congress authorized this and the President signed this into law, the banks basically had seven days or less to kind of get the program up and running. And for banks to execute on a program that's hundreds of billions of dollars, you know, there are a lot of details that had to get worked out. As one example, you know, one of the major banks, national banks, you know, decided to only service their client, current checking account clients, because there's a lot of due diligence that has to be made on these accounts. And obviously banks are concerned whether or not they're going to get that money funded from the federal government the way the program is lined out. So there are a lot of, there are a lot of things that have to get fixed with this. But you know, you see this in the press reports, but Congress is definitely looking at the next route to make sure that there are the appropriate guardrails in place to make sure money gets perfect.

And again, even though we're going to be answering questions at the end of this, we don't want you to forget your questions. So go ahead, put your questions in the Q and A box as we go along and we'll come back to them. And hopefully as we go along, we might also answer some of them as well. Okay, so what future stimulus do you think could still be forthcoming? And what changes or modifications to this has Rebny asked for in this relief?

So Congress is expected to resume their work in the coming weeks. And so, you know, we've had quite A lot of discussions about what are sort of realistic priorities. Right. I mean, there are things that, you know, we think we really want to go after, like, things like salts. At the same time, we also have to go after state and local aid. And so there's a lot of things. And it's important to know to have priorities with all this. One thing that REDMI did, we joined with a number of other business groups to ask for reforms to the paycheck protection program. So first, the 75, 25 split of being able to only use upwards of 75% for payroll costs, that has to change. New York is inherently a different market where your overhead is significantly more than just labor. That's sort of one major reform that we've asked for, another major item that we're all pushing for. And I want everyone who's watching to kind of help join this call, and we'll have some action calls on this. But state and locally, this is critical. We've heard Governor Cuomo talk about this every day on the press conference where he talks about New York State being the number one donor state compared to some other states who are saying, I don't know about state and local funding, are actually the ones who actually are recipients of federal dollars compared to what they put back in. So we're going to be advocating very heavily on state and local aid, and we're joining forces with quite a lot of people to do that. So I'd say those are some of the major items that are kind of on the table. But, you know, it's always a moving target. We talk to members of the New York congressional delegation and other members of Congress every day. And so based on that, we're always kind of refining and retaining what we believe perfect.

And any hope for additional mortgage relief. I know, and I'm talking beyond Fannie and Freddie, and I know the government said that they would, or Fannie and Freddie rather made statements that they would not begin foreclosure proceedings. They would give forbearance in exchange for the landlords keeping the tenants in place. But any other, you know, potential mortgage relief, that. That's. That's in sight.

Yeah, and thanks for bringing that up, because that, that definitely is a pretty big priority, not just for the real estate industry, but a lot of folks who are looking for reforms in the next round. You know, I think, you know, with Fannie and Freddie residential mortgages especially, I mean, that only covers what, 25% of the residential mortgage market, Right. So you still had the rest of the residential mortgage market who didn't get any relief. And we also got zero relief on commercial mortgages as it relates to any kind of federal mandate. So those are two major priorities that we're looking for, because in all of our conversations, elected officials, they look to the industry and say, hey, what can you do about rent for, you know, for renters and for small businesses? And we tell them first things first. I mean, we gotta get reform on commercial mortgages and the rest of the residential market because it's much tougher for property owners to still pay their property taxes. They'll pay for all their costs and still pay for a mortgage, while at the same time offering rent concessions and rent forgiveness or rent forbearance to their own tenants who they need revenue from.

Perfect.

And then let's.

This is also a very hot topic, which is business interruption insurance. And right now, you know, it would seem that Covid certainly does not fit.

Into.

The previous definition for business insurance. I know Rebny has been a huge advocate for expanding the definition. Of course, for the insurance companies to weather, I mean, they would just be flooded with requests, as I'm sure they already have been. So no doubt, I would imagine the federal government would have to backstop this. So any thoughts there on the likelihood?

Yeah, it's one of those things where, you know, it was easy, I think, for a lot of advocates and a lot of external folks to say, hey, insurance just paid these claims. But you know, the explicit, in many cases, they explicitly put into the into their contracts that pandemics are not included and it would just frankly bankrupt them. Then of course, the ripple effects would be dramatic if there were somehow legally forced to pay a lot of. So one of the big requests we have is for the federal government to backstop a lot of these claims. But also it's important to kind of learn the lessons from this and what we do moving forward. I mean, for a lot of tenants who are looking to sign commercial leases, and you know, for those of you who are property owners in these transactions, I mean, that's a big contingency. Now is in this new world, post COVID 19, how exactly are we building these types of things into contracts? And so it's important that the federal government creates some sort of prospective program as well that ensures some level of confidence that when a tenant signs a lease or property owner takes on a tenant, that they too will have some sort of recovery mechanism. God forbid this were to ever happen.

I know certainly for new leases, it's a very hot topic about the COVID provision And what happens if there's another pandemic? But yeah, in the meantime, to have some business interruption insurance would certainly go a long way. And Valentin Staller, thank you for your question in advance. Has the state also made requests for the same type of business interruption insurance coverage or is this really something that has to happen at the federal level?

Yeah, unfortunately it's one of those things where, you know, we believe kind of where everything lies, it's going to be incumbent on the federal government. The amount of money that this would potentially cost is pretty significant. As a result, it's the type of thing that we're likely going to need to go to the federal government on.

Okay. So before we jump over to the state, anything else on the federal level, I mean, I know last webinar we did we talked about some of the tax relief with the loss carry forwards being able to be applied further back. Anything else that our listeners need to be aware of that the federal government is doing in the way of relief.

Yeah. So you know, I mentioned this briefly before and thanks for talking about sort of the tax items which the IRS and everyone should do this. I mean in terms of the last webinar we had till now, IRS has actually put up two updated bulletins about some of the tax provisions. So just important to kind of keep updating yourself on that, especially going directly to the source irs. You know, we talked a little bit about state and local aid. This is going to be the big battle for our city and our industry over the next couple of weeks. And so, you know, we're going to have, you know, advocacy opportunities for everyone who's watching. Literally just a one click advocacy where you can write to your member of Congress to let them know how critical this is. And yeah, they should come home at the end of May with delivering a stimulus package for New York directly.

And with that, that's all the time we have for this week. Thank you again for all your support during these challenging times. Please continue to tell your friends about the show, post your comments, your ratings on itunes and Spotify, and if you have not connected me yet through social media channels, please do so at James Nelson NYC until next week.

Thank you.

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. Again next week.