45: The Value of a Handshake with Jeff Gural

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 episode 45 of Real Estate Investing Live from New York. This is your host, James Nelson. Got a great show lined up for you tonight. We have with us an interview with Jeff Gorrell. He's going to be talking about the value of a handshake. He's got an incredible story starting out in the city decades ago and making deals with a handshake and sticking to them. So some great lessons for all of you out there who are looking to build your own portfolio. So as we wrap up the summer here, I want to thank you all for your continued support and continue to keep your comments and ratings coming on itunes, Spotify, wherever you download your podcast. And make sure and keep a lookout for my new LinkedIn group for real Estate Investing Live from New York that I'm going to launch right after Labor Day because I want to be able to have this be really a network for you all and a platform where you can ask questions, get advice on deals that you're looking for. And I'm going to be taking some of these questions and I'm going to be answering them live on air. So keep a lookout for that. Also next week I'm going to be doing a Q and A with some Colgate undergrads who are in the real estate club there asking about tips for success and what to be thinking about for the future when you're thinking about a career in real estate. So we'll have that for next week as well. So wishing you all the best. And we're going to have a brief word from our sponsors and we'll be right back with that interview with Jeff Gorrell.

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And now it's time for our Investor Spotlight. With us today is Jeff Goral, who's chairman and principal of GFP Real Estate LLC, formerly Newmark holdings and Newmark Knight Frank. GFP Real Estate has an ownership interest in more than 50 properties, most of which are located in New York City. Jeff, together with his son Eric and nephew Brian Steinwerzel are responsible for all future acquisitions in managing and leasing of over 11 million square feet in which they have an ownership interest. Prior to Newmark Knight Frank In 1972 he served as chairman until 2017, which he became Chairman Emeratus. Prior to that he was a member of the staff of Morris Diesel Construction where he had a part in the construction of over a million square feet. Jeff's civic involvements are deep. In addition to being on the board of directors for rebny, he's also the president of Encourage Kids foundation and I have a Dream foundation as well as affiliated with several schools, being on the board of trustees for the new school and the chair of the Board of Governors for Eugene Lang College. And the list goes on and on. So he's clearly a great example for us all. So Jeff, thank you for joining us today.

Happy to participate. Perfect.

So maybe you could tell us a little bit about where you grew up. Were you born into a real estate family or maybe talk a little bit about your childhood experience?

Actually I was born into a real estate family, but I had no interest whatsoever in real estate. My interest was in construction and I went to Rensselaer Polytechnic Institute, rpi got a degree in civil engineering and went to look for a job in construction. And everybody asked me if I had any experience and I said no. And they said, well, come back when you have some experience. And this was 1964 and on a lark really. I had a friend who was going to Stanford to graduate school and I said, would you keep me company? I want to drive to California. I hear there's a lot of opportunities out there and see if I can get a job in construction. So he said yeah, sure, we'll have fun, you know. So we drove across country, stopped at all the tourist places, got to California actually my father had a friend and we got a job. People that may not remember, but in the old days if you went to the movies, they used to have a cartoon and we worked for the company that supplied the Cartoons. So we would, we would be. We had these, the cartoons come in these big cylindrical cans. So our job was to open the cans, take the old cartoon out, rewind it, put it back in the can and send it to the next film place. And then sure enough, I opened the paper. Once I got settled out there, we were actually living in a UCLA dorm. And lo and behold, I see all these ads for civil engineering. So I went for an interview with the State of California and they told me that they considered an education from an eastern school far superior to an education from a California college and offered me a two year job as a two year training program, which was perfect. So every six months I changed jobs and I did highway design, highway planning, surveying and construction. It was a lot of fun. I had like an orange highway department truck. We used to drive into Beverly Hills sometimes and get out of the truck with surveying equipment. People would say, what are you doing here? And we would say, well, I think they're going to put a highway here. And people would go crazy. The reason they did it was what they would do would be if they wanted to put a highway from A to B, they would find four very objectionable routes for the highway and five less and one less objectionable route. Then they would have a public hearing. And at the end of the hearing they would say, well, looks like the brown route has the most support. And they kind of rigged it because, you know, one would go through Beverly Hills, one would go through, you know, some other wealthy community, and the other one would go through, whether it be least opposition. So sure enough, I lasted two years. I had a girlfriend at the time, I called her up and said, you know, I got a job if you want to come out here and get married. So she did, we got married and we just celebrated our 56th anniversary actually. So congratulations. I came back to New York after two years because I hated living in Los Angeles. It was a strange place. This was 1964, in 66. So it was very different. The only people living in Los Angeles were people who moved to Los Angeles from someplace else. And typically the reason you'd move is because you didn't have a job, you didn't get along with your family, you didn't have friends. So you moved to California. So there's a lot of oddballs out there. I went right back to the first company, Diesel Construction, and they hired me on the spot and I worked. Started out in Staten island on a project and then they moved me to 437 Madison where I was there from the beginning, the demolition of the buildings that were there, the foundation work and the 40 story building. And it was built for the Kaufman organization. And Mel Kaufman was quite a character and I learned a lot from him and Bob Kaufman, who handled the leasing. They were really terrific to work for. And then they brought me into the office to become a project manager, which was kind of a promotion. And I oversaw 645 Madison Avenue, which is on 60th in Madison. And the owner of that building had a project in Harlem on 125th Street. And Irwin Miller, who was running, was my boss at the time, was one of the co presidents, called me in and said, and this was a time when we were a lot of racial unrest different, different than it is today. And he said, the people who own that building have to building a building in Harlem on 125th Street. And you're the most liberal person we know. So would you go up there for us and oversee that project? And I did. And I actually was able to build it using almost exclusively minority contractors, which almost didn't exist back then. So that was really an achievement. And I was really happy at Diesel. I loved what I was doing. I actually worked with Irwin. Peter Lira worked with a guy named Harold Schiff. Everybody reported to this guy Karl Morris, who was a very difficult person to work for, but was the best thing that ever happened to me. Everybody should work for someone who's really difficult because you'll learn how to accomplish something. Nobody wants to know why something doesn't get done. And when you work for someone who you know is going to rip your heart out if you don't get it done, you tend to get it done a lot more than someone working for me gets it done because I'm nicer. But it really, I think, made my career. And I was. I thought I would, you know, Peter and I would. We're the next generation. And you know, fast forward 15, 20 years, we would run the company. And that was my goal. And my father and his partners kept asking me to go into real estate. And I said, no, I have no interest. And I was the only one. There were three partners in Newmark. My father, a guy named Jack Schenker and Jerry Handler. And I had two very younger sisters. Jack had one daughter who married a doctor and lived in Virginia, and Jerry Handler had some young children. So I was the only one who could do it. And I had no interest. And lo and behold, Karl Morris, the way he got people to work for him because he was so difficult was he gave everybody stock in the company, and he said, I'm going to make everybody rich. And even I had, like, some stock in the company. And one day he comes, he calls a meeting, and he announces that he sold the company to ARA Food Services, which I thought was ridiculous. And at the time, we were building about seven buildings on Water Street. And back then, people built buildings without having a tenant. And I said to myself, this makes no sense. We're building all of these buildings with no tenants. And I have a feeling there's going to be a recession, and I don't want to work for Ara Food Services. So I said, I'll give real estate a try. And I left Diesel. I was absolutely correct. There was a recession. Took a long time for these buildings to get leased up. And I started doing. Overseeing some of the buildings that Newmark managed. But Newmark was a small, really, garment center company. And I was doing these small, what they call J51, residential conversions, where you got the tax abatement and you could buy buildings, and the tax abatement made the numbers work. And I did a couple in the Village, two on the Upper west side. I was very happy. And then Jack Schenker ran a building at 235th, which was the lighting building. And in those days, there were all these industry buildings. And so that building had all the lighting. All the lighting manufacturers in America had a showroom in the building. And the buyers, they would have two shows a year, and the buyers would come and start at the top and get on and just. Just walk through the building and stop it at the lighting manufacturer showrooms that were in the building. And if you were in the lighting business, you had to have a showroom in the building. And the garment center had similar. You had one building was women's dresses, another was men's clothing, another was children's. We had the toy center. So if you were in the toy building, you had to be. If you were in the toy business, that was where you had to be. And they had these big shows. And Jack Schenker was getting old, and he was older than my father, and he came to us one day and said, you know, Rudin built a Showroom building on 41 Madison. And they're stealing our tenants. And there is this young company, HL Richer, that's stealing all our tenants, and maybe we should see if they'll come to work for us and buy their company. So we met with them, and we bought the company for very little because it wasn't worth much. And fortunately, it was really Harvey Richer and Barry Gossen. And that really was the key to my success because Barry wanted to get rich. I was happy doing these residential conversions, to be honest. And I had grown up more of a middle class background. And Barry said, we got to go look to buy buildings. And my father had bought a couple of buildings, but he was very conservative. My father grew up in the Depression, and anyone who grew up in the depression typically was just conservative because they saw what happened, you know, they said, you know, things can go wrong. So Barry and I started looking to buy buildings. My job was to find buildings to buy, and Barry's job was to rent them. And we couldn't afford to buy fancy office buildings, but we were able to buy B buildings. And typically our modus operandi was to buy manufacturing buildings, gradually move the manufacturing tenants out, convert those buildings to offices. And we were, you know, the first big deal that we did was at 740 Broadway Astor Place, which was four buildings, actually. And that made my. My integrity became so important because the guy selling the building was a guy named Sam Galawitz. And I had shook hands with him to buy the building for $9 million. And a few days later, someone told me that Phil Polewski, who was a friend of mine, had a deal to buy it for $10 million. And I said, oh, no, you know, I'm going to lose the deal. And sure enough, I get back to the office and my secretary says, sam Galowitz is on the phone. And I said, oh, I know why he's calling. And he says to me, he says, jeff, I have a problem. And I pretended I didn't know, and he said I had a higher offer for the building. But my father always told me that my handshake is all accounts, and I'm perfectly willing to honor my handshake as long as you tell me you're not going to flip the building and make me look like a fool. So I said, no, I have no intention of flipping it. You could put it in the contract if you want, et cetera, et cetera. He said, yeah, I want to sell it, because I know you're going to move all the manufacturing tenants out of the building, But I know you'll do it in a nice way because these people have been friends of mine for 30 years, tenants of my father, and I don't want someone who's just going to kick him out. I said, no, I promise I'll do it the right way. We'll find them space, etc. So he sold me the building for $9 million. And from that day forward, I've never gone back on a handshake. Doesn't matter what. In fact, at that building, we had as the wines and liquors, as the tenant, and they were. They were moving out. They had bought a border building. And I had made a deal with Walgreens. And literally the next day, I got an offer from Chase for a million dollars more than the Walgreens offer. And I told Walgreens that they knew it. I said, no, don't worry. I'm going to make the deal as long as you know. And I had Duane read. This was before Walgreens owned Duane Reed. And the guy who ran Duane Reade was a friend of mine and a tenant. And he came to see me and he said, jeff, I need a favor. I said, what? He said, we don't want to give Walgreens a foothold in the city. I'll give you a million dollars not to make that deal. And I said, I can't. I never go back on my word. And he couldn't believe it. He said, I'll give you a million dollars not to make the deal. I know you have an offer from Chase. I said, it doesn't matter what you offer me. I'm not going back. And he stormed out of the office and lost a friend. And I've never, ever, no matter what, regretted not sticking to my word on a deal. And whenever someone says, why? I said, well, I bought this building for $9 million. So I figured that somebody, you know, because somebody was honorable. I'm two hundred and something million ahead of the game. I can afford to make. To make a mistake and be honorable. I've never looked back. So anybody who does business with me knows that if they shake my hands on a deal, they don't have to worry, worry that they're going to get a call that something got a higher offer. So from there, our business really took off. These buildings were so cheap, you have no idea. People cannot imagine. I mean, you're looking at a building that's over 300,000 square feet, four buildings combined for $9 million. So that's $30 a foot.

Probably half.

Of what they rent for today, but it's. Or maybe a third. But back then, I mean, you have an incredible story, and I love the importance of the handshake. And it's obviously also served you well over time. But curious today, do you feel that we operate in a different business climate? Do you still think there's handshake people out there or kind of how is the business landscape change changed today?

Totally changed. Back then, the way you bought a building, a broker would come to you. Henry Hart Rice was one of the top brokers, would come to me, my father and I, and say, I got a building that's perfect for you guys. You should buy it. And he'd have like a one piece of paper, handwritten notes, income, expenses, square foot. That was it. And he'd said. And he'd say, I think they'll sell it to you for $9 million. Pick a number. And you'd say, I'll get back to you tomorrow. And literally, I would analyze it on the back of an envelope, kind of. And all I cared about was if I thought I could have a 10% return after two years, I would buy it. That was it. But back then, keep in mind, interest rates were like 9%. So it was very different. Today, it's totally different. And by the way, like, a deal like that. So let's say we could borrow. We needed $10 million. We needed a million to fix up the building. So you could borrow, say, $7 million. You needed 3 million cash. So you would call one or two people and you'd say, hey, you want to go in with us? A million dollars, you know, we're going to put up. We need 3 million. You put in a million, we'll put in a million. I got Joe Schmo for a million. We'll own the building. And that's how we did deals today. If a building is $300 million, you can't call three people and say, hey, you know, I need $100 million. The bank will lend me, you know, 200. So everything is really done institutionally, either with institutional partners, with promotes, with all of that. And what that brings into play is there's no such thing as someone shaking your hand and saying you have a deal. Because all I have to do is say that I have a board of directors, I have shareholders, I have a fiducial obligation to sell this building for the most money possible. And I love you, Jeff, you're a great guy, but I'm selling it to somebody else. That's 1, 2. The brokers are going to send that out to 100 people. If you're looking to sell a building, for argument's sake, or if you're looking to buy, you're going to be one of a hundred people that gets the setup. And then you're going to submit a bid, or someone will submit a bid, and then the brokers will say, if you want to get to round two, you know, you gotta be over 50 million or whatever. So now they started it with 100 people, maybe they got 20 offers. Now they've got it down to six. People make second round, then it. Then they narrow it down to three, and it becomes sort of an auction. And I made up my mind that I would never buy a building if there was. If it was done that way. Because I just said, you can't possibly make be successful. Now, that's not necessarily accurate. People have made a fortune. But I think more money has been made buying, doing deals like that by selling them. Because what happens is people buy a building, make projections, the projections don't pan out. They're not too happy. The broker who sold them the building calls them and says, how's it going? They say, it's really not working out the way I thought. And the broker says, well, you know, I sold you the building for $100 million. I think I could sell it for $150 million. Would you sell it? And you look at him and say, yeah, if you can get me $150 million, I'll sell it because I'm not making any money. And sure enough, somebody buys it for $150 million and they can't make any money, and they sell it for $200 million. So I think a lot more money has been made buying and selling than actually operating buildings. Because no matter what you do, if you put projections into a computer and project out 10, 15 years and rents are going to go up 3% a year, any deal you do looks good. And a lot of these deals are done because people are getting a promote. And the problem with that is the people you partners with typically want to sell. And we've made most of our money, well, all of our money from not selling. I remember telling Barry, because Barry's a broker, why don't we sell? And I said to him, well, Barry, I've looked around and you got Rudin Durst, Lenny Litwin, Rose Associates. The people who seem to be the wealthiest are the ones who never sell. So why don't we just stick to that model? Because it seems to be working. And that was our model. We just never sold. Every once in a while we would have to sell because we had partners. But now the model, from what I see, some of the deals where we've gone with partners is that after two years, three years, they insist on selling. So we either have to sell it, which we don't want to do, or buy them out at a profit which is risky, you know, because now instead of owning the building for $300 a foot, instead of owning half the building for $300 a foot, you own the whole building for $400 a foot. And I'd rather own half for $300 a foot. So it's totally different. It's going to be interesting to see whether this pandemic is like the depressed. You know, like I said, my father grew up in the Depression. You know, I think it's gonna have a very, a very chilling effect on people who buy buildings with their own money. I think it will have less. You know, like I'm reading to, you know, I'm reading some of these hotel guys because the hotels, let's face it, they're in big trouble. And they're basically saying, we put together a fund and we think we can buy hotels for 30% discount and we're going to buy as many hotels as we can find. Prices have dropped 30%. The question is, should prices have dropped 50%? Because just because they've dropped 30% doesn't mean that that's what they're worth. Now, if you're using other people's money, which all of these deals are, take a shot, you know, that's how you make money. You make money in the down market. You know, I remember some past recessions where people made a fortune buying buildings from banks at ridiculous prices, but so be interesting. I would be reluctant to use my own money to buy a hotel today because I don't have the slightest idea of what the impact of Zoom is. We own buildings in SoHo too. And I made the deal with Dean and DeLuca, and they came to me. We had bought 560 Broadway for, I think, $8,750,000, which was more than we paid for Astor Place, but still, you know, 120,000ft. So, you know, $70 a foot. So they came to me and said, give me a 20 year lease. We'll move our operation from wherever they were. They were couple blocks in the middle of SoHo. At the time, Broadway was not the place to be. There were no retail tenants on Broadway. It was all sewing factories. You name it. Really tied into manufacturing. And he said, we'll open Dean and DeLuca here, but you need to give me a cheap lease for 20 years. So I said, okay. I did. So I gave him a lease for $50 a foot. I think maybe not even. And I said to myself, yeah, I Hope I live 20 years to renew this lease, you know. And then all of a sudden, SoHo takes off what the guy, what Giorgio told me is accurate. Everything on Broadway is great. And now the lease comes up. I sit down with them and I renew the lease for $250 a foot. And I'm on cloud nine. I just went from 400,000 to two and a half million. Sure enough, like a year later, people coming to me, jeff, can you get rid of Dean and DeLuca? I have a tenant who'll pay you $1,000 a foot for that corner. And naturally I would go to Dean and DeLuca and I would say, can I buy out your lease? And they would say, no, you can't buy out my lease. Now we know this. Unfortunately got sold a couple times, ended up with somebody in Thailand who didn't know what they were doing. And Dean and DeLuca went bankrupt. And I was able to rent it to Aritzia, which is a high end clothing company out of Canada. But again I shook hands with them. And the next day I got an offer from Capital One, which is a much stronger tenant than Aritzia is. And then a month later I got an offer from Whole Foods, which is probably stronger than Capital One. And I said, look, I made a deal with Arizia. I hope they don't sign the lease. But needless to say, when you have a lease that you don't want to get signed, it always gets signed. So I stuck to my promise. They're great marketing to great store. I mean a great brand. I hope they do well. And I thought it was good for the neighborhood really to have a high end fashion than it would be to have a bank on that corner. But, but you know, that deal was made at roughly what Dean and DeLuca was paying me. And the thousand dollars a foot is out the window. Now we own a building at 594 Broadway where all of the retail is empty. And needless to say, it's a struggle. And we have an offer that we're considering. But I don't have to tell you what, retail in SoHo has declined. Retail all over the city is completely different. So I, I have no faith in the future of shopping centers. To be honest. I think that we're in trouble with the Amazons. I'm up here in Dutchess Canada. We get a delivery from FedEx or UPS almost every day. And UPS is so busy that they deliver. I've seen them come in rented trucks and they use Uber. I've seen them where somebody drives up and the packages in the trunk of the car or in the backseat. That's how busy they are. They can't keep up with the demand. Now, obviously, I don't expect to spend the rest of my life up here. I look forward to going back in the office. Obviously the city's going to open up more in September. Schools, you know, is that going to be a disaster or not a disaster? I think if schools are not open, it really hurts the economy because it's impossible for someone to work at home and homeschool their kids. So they've got to either quit their job if they have a spouse who has a good job, or they've got to, you know, hire a tutor or, or form one of these pods or whatever. But there's no question that if you have young children and can have a job where you can work from home, you can't do both. So I think that's. I hope, I think schools could work out colleges, that's different. You know, telling kids to come back to college, move into the dorm and keep a mask on and stay in their room. Not going to happen. So I'm actually talking about bad luck. I'm doing a project in Jersey City. I bought a building in 1986 when the tax laws were changing and the capital gain rate was going up and everybody who was selling was going to sell in 86 because. And you had a lot of, you know, closings on New Year's Eve. And I bought this building from the owners of Harborside who had sold Harborside to whoever bought it. I forget it was a fund and this was like a secondary warehouse in a different location. And I bought it and said, this area is going to be just like Soho or Chelsea. It's going to become offices, etc. Apartments. And nothing happened. And then one day about five years ago, I went out there with my son and all you saw was new construction. Every place they were building buildings all around us. So I said we had, in order to survive, we had converted the upper part of the building into residential because all of our manufacturing tenants left. Because what happened was manufacturers didn't want to be on multi story buildings. They all wanted to be on one story building so they didn't have to wait for the freight elevator, you know what I mean? So we lost all our manufacturing tenants moved to the one story buildings that Hart's Mountain was building all over New Jersey. So Barry came up with the idea of mini storage. So we did this. Mini storage worked out great. We're making money. And then public storage buys the building across the street, opens up and we start competing with them and it's hard to compete with a public entity like that. So we have the bright idea that we should close down the mini storage. And I made a deal with a college to rent them dorms. And we're making three floors into dorms. One floor we're going to try offices and another floor we're going to have for artists. And lo and behold, right now mini storage is hot as can be because people who are moving out of the city to live with their parents need a place to put their furniture and belongings. So the mini story business is great. The dorm business is risky now, you know, because I don't know right now the college NIAC which is very, very, it's a religious type of college they're hoping to open but you know, in person. But you know, if they're not able to open in person, it's a problem, you know, dorm. I was just on a call with the new school and they're going to operate all online and only 10% of their dorms are going to be occupied. So not only are they losing all of that revenue, like you say, those people aren't going to be shopping. And so I have to hope that NIACC can pull it off because of its nature that students, it's a religious type of college. They don't get the party crowd that actually I participated in back in the early 60s. But there's a case where I would much rather have kept it. Mini storage, but who knew? So it's, this is really. I think people who use their own money are going to be very cautious and I think all of the buying that you're going to see going forward is going to be done with other people's money and they'll, you know, they could be right. It could be that the hotels come back and people look at it and say, wow, they were smart. They bought the hotel for a big discount. Hotels are as good as ever. You know, tourism is bigger than ever. Everything's fine. But I think those buyers will be the institutional buyers. I don't think you'll see people, you know, the family owned real estate people I think are going to be cautious. And the older you get, the more cautious you get. I find that my father was that way. You know, he would always argue don't sign personally. And he was right. But we did sign personally sometimes. But I try to av and so it's going to be very challenging going forward. But I still, when I analyze what a couple of. I just bought a. I bought a distribution facility up in Chester, New York. It was like a hundred thousand square foot building rented for five years, like a 7 or 8% return. I figured I could borrow the money for 3%. And I did. I did the deal. I make money. I made money from day one. The building is cash flowed from day one. I bought out a partner in a deal we had in a distribution facility in Newburgh, New York, on where the airport is up there. And just to show you the tenant. So half of it's occupied by FedEx. And I had half of it. We rented to a company that repaired Coke machines for Coke. And we made. We got it. We were able to get a discount on the mortgage because the building had been empty for quite a while. Half of it had been empty. I took over the leasing from my partners and we were making nothing but money. And lo and behold, the pandemic hits. And the guy from Coke, the guy who's fixing the Coke machines, calls me and says, Coke just told me that they canceled my contract. They don't need to fix any Coke machines. The economy sucks. And they're just going to leave the machines and not replace them with new or moderate or fickle repaired machines. And you know, people don't, you know, people aren't using Coke machines in colleges, in hotels and all of that stuff. He says, I got to give you the keys. So we put the space on the market, and within one day, I got an offer from a public company, Unifi unfi, that does food distribution. And I made a deal with them for more rent. I had two backup offers within a week. So that market is, if you have a good location for distribution, you don't have to worry. So that's a building that. I looked at it and had an immediate. I went back to my back of the envelope. Was it going to cash flow 10%? And it did. We bought a leasehold at 675,6 that had 13 years left that was essentially rented, except that Mattel wanted out and the seller had made a deal to let them buy out of their lease. And luckily we found someone who had actually been trying to rent space, rent the Mattel space. And the owner of the building was concerned about their credit and wouldn't rent them the space. So they approached us. I said, I'll rent you the space. If you want to invest with us, we need to raise $30 million or 20. I forget the numbers. And he said, yeah, I'll take a floor and I'll take 10% of the deal. So I said to myself, if he's willing to put up 3,4 million dollars to invest in the building. I assume that the company is okay, I'll take him as a tenant. And that building cash flowed from day one. Now, the trick is whether we'll be able to get the lease extended because it was only a 13 year lease. But I met with the fee owners. It's an old family and typically they have a big tax problem if they sell it. So we'll see. Right now I have essentially credit tenants in there. We have Nielsen Weight Watchers, so. And my partner, so. And then we have Trader Joe's on the ground floor. Michaels is a public company. Harmon's is owned by Bed Bath. It's a dream deal, really. It was a good deal for the owner of the building because she was able to convert ordinary income into capital gains. So it was like the perfect deal. She looked at it and said, well, if I'm going to collect $100 million over the next amusing round numbers, over the next 13 years of ordinary income, I'm better off selling it for 60 million and have capital gain and have the cash in hand. So that was a deal I did. But cash flow, it's much harder for me to be convinced to do a deal where I'm projecting 60, 70, $80 rents because I have to laugh because sometimes we'll have vacant space and, and I'll tell my nephew and my son, I said, how come it's vacant? And I'll say, what are you asking for the space? So they'll say $70. And I'll say, you know, I used to rent it for 12. Why don't we lower it to 60 and see what happens? And sure enough, we lowered to 60 rents right away. You know what I mean? Now they're doing the right thing. They're trying to maximize the value. And the market is $70. But honestly, I rented for $12. So the thought that I'd ever get $60 for that space, in my wildest dreams, I never envisioned getting $60. So, you know, and I think, you know, you have two types of owners. You have the people who've owned it for a long time who can afford to be generous. Like, for example, we're going through this pandemic. Every restaurant tenant that I have now is pay as percentage rent. Because what can, what can they do? They have, they're screwed. I mean, what's gonna happen when winter comes? If a tenant is in a business, you know, like theater business, tourism, I gotta, I got, I gotta, I gotta reduce the rent. I gotta make it I gotta work with them. So I look at it like I've got, as a good citizen, I've got to try to help these small businesses survive because our buildings really are all small businesses or nonprofits. Most nonprofits. No gala, no this, no that. I don't want to put them out of business. So fortunately, I would bet that family owned real estate people are much easier to deal with in helping tenants survive than the REITs or the, you know, the guys who have, you know, hedge funds as partners and, you know, they don't want to, you know, tell them the facts of life. So now I've seen it. I've lived long enough to. I'm 78, so I've been. I started, I joined newmark, like in 73. So it's like 57 years later, I've seen it all. And someone told me I forgot this, that three years ago I was on a similar panel like this and someone asked me about real estate and I said, everything's great. I don't, I don't. It's never been better. I said, but my experience is something unexpected happens that screws everything up. And I forget even saying that, to be honest. And they reminded me. And this is exactly what I was talking about, right? You know, 9, 11, unexpected. The housing bubble unexpected, you know, Wall street unexpected, you know, so this is exactly what I was expecting, but I wasn't expecting this, you know, because, you know, people are afraid to come to work, afraid to eat in a restaurant, afraid to get on a subway. I didn't even know that the buses weren't charging passengers, to be honest. You know, I just saw that they're going to start charging people on at the end of the month. So you were. People were getting on a MTA bus for free. I didn't even know that.

You know, I remember some interviews that you gave years back. Maybe it was on CNBC where you said that the wealthy should actually pay more taxes. And I think it's probably rare that you see someone from the real estate community on the far left. So I'm just kind of curious how you landed there. And I guess maybe you just kind of explained why there's going to be that great need. But is there kind of a correlation between your investing and your political philosophy?

The only thing where it affects us is we have a lot of nonprofits. And it would not be unusual for me to rent space to a nonprofit. And when the lease came up and the market had changed, for me to say to the nonprofit, don't worry, you don't have to. I'm not going to increase the rent. If I thought it was a non profit that, you know, was doing good for the world. I'm not talking about museums and, you know, Carnegie Hall. I'm talking about, you know, non profits that dealt with cancer survivors, sick children, trying to educate inner city kids, anything like that. So it's, it's. And as a result of that, nonprofits typically look to rent in our buildings. We actually do better when times are bad. Because when times are bad, the tenant has a choice of five buildings typically. So my hope is that the broker is going to say, look, you want my opinion, Jeff is the best landlord. He won't screw you if you get in trouble, he'll work with you. When times are good, everybody's successful. So we've seen good times. You know, I think maybe Sam Zell had something, you know, like if you people who go swimming with no clothes on, you know, you find out who's got no clothes on. When the tide goes out, you're going to find, you're going to see things. You're going to see people that bought these buildings that were considered geniuses start giving them back to the banks because the markets change. Look, we're a supply and demand business. Anybody who doesn't understand that. I once sold a piece of land to Jeff Glick, who you probably never heard of, but he was a very successful condo guy. He built two condo buildings, gorgeous. And the market sucked. And he went bankrupt. And he came to me, sat in my office and he said, I don't understand how this happened. I had great architect, great marketing, great bathrooms, great kitchens. And I went bankrupt. And I said, jeff, if there are 3,000 condo units for sale and there's only 1,000 people looking to buy a condo, it doesn't make any difference how great your marketing is and how great your, your architect is and how great your vanities are, you're screwed. And we are the quintessential supply and demand business. Anyone who's looking to be a buyer has to never lose fact that it's supply and demand. And if you lose sight of that, you'll go broke in a hurry. And we're about to see that. We're going to see a lot of sublet space on the market. We're going to see tenants that are pausing, right? Anybody who is thinking of moving next year is probably on pause right now. I would, you know, why wouldn't you be? Because, you know they're going to want to see are my people Coming back, are people going to want to work from home? And they're going to say to their landlord, they're going to say, could you extend my lease a year? And I know landlords who've told me they offered every single tenant in their building an extension, at least for a year. So you're going to. So anyone thinking of who was thinking of moving next year probably put that on hold. Companies that were thinking of moving in three or four years probably are still looking in the market because they're probably looking at getting a bargain. And their assumption is that in three years, you know, this will be over. But, you know, like, even. Who was it? Amazon just took. Took a lot of space and they said that they don't expect to occupy it for the next three years, but they're so. They have so much money they can afford to buy, you know, leases, sign a lease for 700,000 square feet that they don't need right away and grow into it over five years. But supply and demand is everything. I think, like I said, this pandemic will scare the guys like myself who use our own money. And you'll see the institutional guys, the REITs and stuff, will be raising money, not so much the existing REITs, because they're going to suffer. Obviously they've suffered. But the guys who don't own any real estate are going to go out and say, I'm going to raise a billion dollars. I'll be able to buy real estate really cheap. And those guys will be out there buying. That's who your customers will be, because they don't have the overhang of all the buildings that they already own where their tenants are struggling. So I think that's. That's what you're going to see. There'll be a lot. I think there'll be a lot of activity, and a lot of the activity is going to be these funds that have been created to buy distressed real estate at a discount. That's what you're going to see.

I would agree. Those are some great predictions, and we'll have to circle back in a year or two to see how this all plays out, but hoping we can get through this pandemic as soon as possible.

So.

Well, you have an incredible story and we only have a minute or two left. So I just wanted to ask you, what advice would you give to an aspiring investor, someone who's looking in to jump into the market now? What would you tell them?

That's a good question. I think what I keep in mind, location is very important. Location. Like I said, the industrial, the distribution facilities. One of them is on the grounds of Stuart Airport where you see three main highways intersect. The building that I bought in Chester is the same location is important, but supply and demand is the critical thing. So just because you hire the greatest architect in the world and have the greatest marketing and have the greatest vanities, if you do everything right, you could lose it. So this is a simple business. If you want to look at it simply. All you have to do is live long, not sell and don't put too much debt on the properties and I guarantee you'll be successful. So that's really the best advice I can give you.

That was great advice, Jeff. Well, thank you so much for taking the time. You're such an incredible passion, power of example for our audience and you know, with all the charitable work that you do and all that you give back for the industry, for the city and our country. So I really appreciate your taking the time to spend with us today A.

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