Lasting Impact with David Brause

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis and Young's Tri State Investment Sales Group. In this program you'll learn game changing strategies to outperform the market. James will teach you how to source, execute and capitalize on the best real estate opportunities in New York and around the world. Now here's your host.

Welcome to episode number 224, the Insider's Edge to Real Estate Investing. This is your host, James Nelson. I'm principal and head of US Investment Sales sales for Avison Young. And with us today we have my friend David Brous who is president of Brous Realty Incorporated. I have known David for probably at least 20 years, maybe even more. And that being said, we've become closer through our history with the Young Men's and Women's Real Estate Association. It's an incredible organization here in New York and we start off the interview by talking about what that is. But we are both have the distinction of being former chairman and it's a really special bond and an incredible commitment not just to the real estate industry but also doing good. And that is a huge part of David's story that we're going to be talking about and certainly as his role as chairman on the Long Island City Business Improvement District as well as for Union Square and really getting involved not just to help with the real estate portfolio but doing good for the city. I also have spent time with David on the Real Estate Board of New York's Board of Governors where he works with the Commercial Chair Group as well. David's got a great story and we're entitling this lasting impact. He is once again the president of Browse Realty but he's a third generation real estate business which was founded in 1927 and they have a long term focus on value creation and the company prides itself on preserving the historic character of 20th century buildings while also integrating modern technology to revitalize interiors. And also have been involved in some significant ground up developments that David will talk about today. You're also going to get insights on the value of having private and patient capital, engaging with the community and he's going to also discuss efforts to create sustainable buildings and mentor the next generation. As always, you can go to james nelson.com I built this site for you. That's where you can find the show notes for this episode as well as how to go and connect with David. We have a brief word from our sponsor and we'll get right into the Interview with David Brous.

A Different Approach to Putting Our Clients First Davis & Young's US investment sales group oversees multifamily office retail development and specialty sales across the country. We give you direct access to our 60 US offices to source the best acquisition opportunities or to advise on dispositions. Our principally led teams leverage the best research and data analytics to provide you with tailor made strategies to achieve superior results. Please visit avisonyoung US Capital Markets or follow James Nelson NYC to learn more.

Welcome everyone. So excited to have with us my good friend David Brous who is President of Brous Realty Incorporated. David, thank you so much for joining us today.

Thanks for having me. Also. Also a very good friend. James, you've done an amazing job of creating incredible content and an incredible real estate career. So thank you for having me.

Thank you so much. So I'm wearing my YMW REA vest today. The Young Men's and Women's Real Estate association, we have that in common in that we're both former chairman. So maybe for the benefit of our audience, maybe you could maybe we'll first talk about, you know, what YMW REA is and then talk more about Brus Realty and your story.

Young Men's Women's Real Estate association was Young Men's Real Estate association back when it was founded in 1948. It was meant for the the young up and coming brokers and owners that weren't members of REBNY at that point after World War II to come in and become an honor society of these were the best and brightest in the real estate industry. And it's turned into a really robust group of still own and brokers and service providers, men and women. And we're about 3, 400 strong and we meet once a month at the University Club and lots of other wonderful events involving charitable activities throughout the city and a great opportunity to get to know lots of amazing real estate people in our in our business.

Absolutely. And it's been a wonderful thing to be a part of and not just as you said, for the networking, but all of the the charitable work that this group does, which I know is a big part of your story. So now maybe for our audience, if you could give them a little bit of background on Browse Realty. So I believe right now 3 million square feet of commercial and multifamily properties. So maybe kind of give us a sense of the portfolio and a little bit about the Brauss Realty story.

Sure. So the story begins almost 100 years ago in 1927. So we're 98 years. The Brous Brothers stationary store was founded on 125th street in Harlem. The three Brous Brothers, one of whom was my grandfather Jack Browse, started the stationary store. Ground floor, the building became available for sale. They hated paying rent, so they bought the building in the 1927. So that was the first, first real estate purchased for the family. No one went to college, no one. Only one of them went to high school. So these guys were pull up by your bootstraps kind of young men created the stationary business and with the profits in the business, bought real estate. Early 29, they sold it to an investor. They took the cash. Stock market crashes In September of 29, the great stock market crash, Great depression follows. They are one of the few people that has cash. So they buy the building back and then they buy more buildings on 125th Street. Their accountant tells them, you know what, you're actually making more money from real estate than you are from stationary. But you're working your tail off in stationary. I would end the stationary business and get a little more heavily invested in real estate. They became the largest owner on 125th street in Harlem in the 30s and 40s. Eventually they, they moved down to Midtown, Midtown South. My father joined the business in 1963. He started Helmsley Spear with a mutual good friend, Earl Altman. And Earl and my dad were at helmsley spear from 1950 until my dad joined his dad in 1963. My dad's innovation in brass realty was, was introducing debt. Where coming out of the Great Depression, you really didn't want to have any debt on your properties. That's how people lost their money. My father thought a moderate amount of debt would allow you to build a bigger portfolio, which they did. They started buying more and more office buildings in Midtown, Midtown South. Many of the buildings that we own today date back to that era 60s and 70s. We bought Union Square, we bought Vanderbilt Avenue, right near Grand Central, buildings near Penn Station and the Garment District and all really well located office assets near public transportation. I joined in 1995 and my innovation was we wanted to do new ground up development. So we started doing new ground up development in places like Upstate New York and Saratoga Springs, Fairfield county, like New Canaan. Eventually coming into New York City, we built a new apartment building on 57th between 3rd and Lex. We built a brand new office building in Long island city for the JetBlue Airways. Before that it was MetLife but moved into JetBlue Airways headquarters. A new apartment Building in Lyon City called the Forge. And our newest project is on 2nd Avenue and 39th Street. A new 20 story apartment building. Affordable New York. So 30% will be affordable there. And moving more into the residential business. We learned our lesson during COVID that it's great to have diversification. We're not heavily geographically diversified, but we are very property type diversified. So residential has been a big push for our firm in the recent couple years.

Wonderful. So I know you went to Wharton and then you went to Goldman Sachs after what was the thought process that you'd always join up with the family business or. Yeah, tell, tell us about that.

Really wasn't a preordained, I'm going to join dad and join the family business. I growing up, everybody thought I was going to be a science and technology kid. I always wanted to be an astronaut. I was growing up with, wow, I'm.

Learning all these things.

Yes, that NASA was a big deal. It was, you know, every young kid wanted to, you know, be an astronaut and join NASA. And that was definitely my, my passion. And over time I realized I was not going to be an astronaut. And I was, you know, very good at numbers and did very well at Wharton. And the best and brightest giving back to the ymw. The best and brightest is where I always want to be. From my perspective, the best and brightest, Morton went to Goldman Sachs. And so I got a couple of offers. Goldman made me a great offer. And once you're a Goldman in the investment banking division, you have a choice. Do you go into M and A, do you go into financial institutions? Do you go into real estate? And I said, you know, if it's all the same, I may as well go into real estate because my family's been in real estate since 1927. And that could be very interesting. And that leads to more interesting conversations, my dad about what he's doing in real estate versus what Goldman's doing in real estate. In 1992, we were coming out of another financial crisis. It was the SNL crisis and very few firms had cash to put into real estate. So it was really Goldman versus Morgan Stanley and GE Capital. So really three firms. And the snls had been hemorrhaging their debt was way overdone. You had the Resolution Trust Corporation came in from the US government to basically put liquidity into the old SNLs. So the federal government owned real estate they didn't want to own SNL's own real estate they didn't want to own. And you had three firms that were vying to buy at 10 cents on the dollar a lot of bad loans and real estate that was fine but had poor debt on them. So they sent these young analysts in 1992, go out and basically scour the country and find apartment complexes and office buildings. So I, you talked about the traveling. You've been doing it over the last couple of weeks and in one day I'd see 500 units in three different cities in Texas and then go to Arizona and go to Phoenix and Tucson the next day and then the next day go to San Diego and LA and buy hundreds of millions of dollars of property at 10 cents on the dollar. And Goldman had all the liquidity in the world at that point in time. We would go to the borrower and say, hey, we're your new lender. And they said thankfully no one's ever called me about my loan before. I didn't know who to pay my debt service to. So a lot of them were resolved at 100 cents on the dollar by title. So between 92 and 94, Goldman and Morgan Stanley and GE made a fortune of money. At the end of my term there, it was a two year analyst program. I wanted to get a little bit more involved in asset specific real estate. Instead of building a portfolio. I wanted to know what it was like to actually buy a building or develop a building. So I joined the related companies. I worked with Jeff Blau and Steve Ross for, for a year.

I don't think that was on your LinkedIn.

I, I didn't know about that period of time and moved from related. And at that point my dad and Bernie Spitzer started talking about a new development on 57th street which became 150 East 57th street which was a new residential building. We'd never done residential before. We'd never done ground up construction before. And I said if I'm going to do it for anyone instead of doing it for related, that would be a great time to pivot to Brass Realty. Wow. From there it's been the joy of my life to work with my father who unfortunately passed away two years ago. But to be able to learn from my father was an incredible opportunity. I work day to day now. It's an old style family business. Three generations now. We have my aunt from her generation, my sister's cousins and hopefully we'll have another generation to follow which will be another joy of my life to be able to have another generation follow in our footsteps.

Fantastic. Wow. What a legacy. And some of these names that you're Bringing up, you know, Helmsley Spear, Bernie Spitzer, I mean, these were kind of legends in the business. And so to, you know, kind of have a front row seat for that. Amazing.

It's been great.

So to go into ground up development, how did you learn the skills? Right, you're working as, you know, at Goldman Sachs, you're doing the numbers there and I would assume you got some development exposure related. But actually understanding the whole development process was this kind of learning on the job or at that point did you say, I'm going to go back and try to study this?

Yeah, absolutely. You know, I came out of Goldman thinking, you know, I know everything about everything because I'm 24 and I came out of Wall street and Best and brightest winter related. And there were not that many people doing development work in New York City at that point. Tim was related and maybe Millennium Partners and everything else is very quiet. And boy, Bernie Spitzer's done a ton of residential development on the east side of Manhattan, Central park south. And he owned the property directly next to a property that our family had owned for quite a while on 57th Street. 57th Streets has always been an amazing street. It's not quite where it was today with Billionaires Row, but 57th Street's a wonderful street and it would be great to be able to build.

But.

But we've never built residential. So it would be great to do it with someone who had so we a lifetime relationship between Bernie and my father. I got to know Elliot Spitzer, who was at that point running for Attorney General and eventually became governor. So it was me literally go every construction meeting, walk the site every day with my hard hat and try to figure out what is, what does Bernie know and how does he build these buildings so successfully. So really learning a lot from Bernie and. And then basically look at our, our portfolio and look at where we had interesting pieces of land which brought me to Saratoga Springs and upstate New York and New Canaan and Newtown and Danbury and, you know, a whole bunch of different small towns in upstate New York and Connecticut and really, you know, kind of cut your teeth at that point where the numbers are a little bit less than where it is when you're developing in New York City. At some point we had the ability to redo a building that we'd owned 1980, we bought the old Brewster Building, which was an old horse and Carriage Brewster Co. Had bought and built in 1911 right at the foot of the Queensborough Bridge in Wyon City. My father was a. So such A pioneer, in 1980, bought that building at the foot of the bridge.

But by the way, this isn't if you're picturing some small horse stable. I mean, how many square feet was this?

A. It was a 400,000 square foot building.

A lot of horses.

A lot of horses. So the Brewster Company was the carriage manufacturer of its time. If you were a Vanderbilt, a Carnegie, a Whitney, you had to have the Brewster carriage when you were in your horse and buggy going up and down Broadway in Manhattan. Eventually, Brewster started making automobiles that they built the Brewster chassis for the Rolls Royce. And then in the 40s, they started building airplanes. So it was Brewster, the Brewster Buffalo, which was an airplane that was used in World War II. It was sent out to the Pacific front to fight the US Was, was fighting against Japan. And over time, Brewster finally became no more. In the. In the 50s and 60s, the building turned into garment manufacturing, and the Durst Organization got involved in the building. At some point, they were. They were done with the building that didn't have an interest in staying in this building. My father bought that building at the foot of the 59th Street Bridge, surrounded by seven subway lines up and down, criss crossing Manhattan into Queens, and said, this has got to be an amazing building. He bought it for $4 a foot.

Back then, Long Island City wasn't even a thing.

Right.

There was no. There was no residential there. Right. I mean, it's pretty amazing that it.

Was higher, new, it was industrial. It was not even office. There was no way you would live there. There was no retail.

Right.

This was where the Rikers island bus would jump the prisoners, when they were done with their time at Rikers, they would dump them on Queen's Plaza. Wow. Because the subways are amazing, but not a great place to have a. An office building or certainly not a residential building. And in the last 40 years, that long Island City has seen such a transformation. It's now a great place to raise a family and have schools and parks and playgrounds and great retail and great mixed use. It has really transformed in the last 40 years. It's been amazing.

I definitely want to get to that because I know your family and your work on the Long Island City partnership have had a big part in that. But I want to just go back to that piece of learning the development game. And you mentioned, you know, being there in the room with Bernie Spitzer. I mean, what was it about his approach? I mean, what were some of the lessons that you learned from him on how to approach a development?

Sure. Now you're taking me back a ways. But Bernie, engineer by training, very exacting man, demanded excellence and perfection from every contractor, every architect. If you made a mistake, you had to explain why and had to make sure you weren't going to do it again. There was a collapse of a building that I think Maclo owned on Madison Avenue in the low 50s where the entire brick facade literally fell from the facade of the building and caused the whole, the whole problem for, for the, for the building owner and for the, the neighborhood at the time. And there was a brick tie. It was like a dollar aluminum piece of brick tie that attaches the brick into the cinder block of the structure of the building. And if you missed the brick die, the bricks would potentially fall from the building. So that had to happen right as we were building this building. And I remember him personally inspecting, he was getting to the elderly side of where he was at in his life and he would get down on his knees and this hard hat in his hand and get into the brick on the side of the wall and make sure that the bricklayers were putting in every little piece of these aluminum little brick ties to make sure that building wasn't going to be built inappropriately. It would not have happened probably in the next 10, 20 years while he was owning the building. But he knew this is a building we're going to keep forever and the little details make a huge differ. And if the bricklayer decides I'm going to be lazy that day and I'm not going to put in that, that dollar piece of aluminum that could rear its head in 20 years and all of a sudden you can have a major problem with your facade.

So definitely attention to detail, making sure that you're dealing with the right people. But also seems like to have an in depth knowledge of construction. So again, you know, for yourself, who didn't maybe have the knowledge of how buildings were built, was this again just learning on the job with how construction.

You don't, you don't do it, you don't learn unless you do it. And my, my father, God bless, was very, very trusting. He was very much of a, you, you gotta let people, you know, kind of be independent and not be looking over their shoulder. And David, if you think this development makes sense, I'm gonna support you110. I'll ask you a million questions. The joke in the family is always the devil's advocate. He would always ask you the question of why exactly going, going opposite to why you thought the right decision. And he would go in the opposite direction. But if you could def. And tell him this is a job that I think needs to be done and this is why I think we're going to make the money and this is your cushion and make sure and you're not over leveraging. He always had the leverage on his mind, given back to his father's experience, and that he would stand by you and say, David, you're going to go to the meetings. I won't, I won't go to the meetings. And this is, I'm a very young, you know, mid mid 20s at that point in time, and he supported me 100% and that gave me a lot of confidence to be able to go to these meetings and represent the family and pretty significant developments.

Yeah, I would. I mean, I'm sure having the right partner in Spitzer made a huge difference. But you know, oftentimes the fear of development, right, it's, it's viewed as a, the riskiest type of investment. There's a lot that can go wrong and, and oftentimes it's out of your control. Right? Maybe you do everything right. And whether it's a permit or some type of, you know, dealing with, with the MTA or what, you know, whatever the issue could be, I mean, there's a lot of things that, that are beyond your control. Right? So what, what kind of motivated you to get into development? Was it were you thinking about at the time? Look, we can diversify is higher returns, all the above. What, why, why, why were you so adamant about getting into development?

Right? I mean, again, from, you know, from, from a young man looking at New York City and to say that I want to make my mark on the city. There's nothing like developing a New York City building. It's just we are in the world capital. I think you and I love New York City like no else. To be able to make an imprint and to be able to build a building in New York City that makes money, that makes sense. That you're not going to lose to the bank because you over leveraged it with Great 10 is a incredible mark of pride that you have with your family, that you're, you're creating something amazing in the, in on the skyline. And these are not tall buildings that we're building. The tallest building we own is, is, is, is 43 stories.

So that's a pretty tall building you go to. You know, now in my new national role, I'm, you know, touring all over the country and I'm seeing, you know, I, well, in D.C. you can't have a building that's higher than the Capitol. So that, that, that rules that out. But even coming back from Phoenix, I mean, yeah, 43 story, you probably have one it, the tallest ones there.

That is true. But no, it's, it's interesting. I, I went to college with John Gray at Blackstone, and one of, one of my John Gray stories is that he had the debt on a, on a building in Long Island City. And a good friend of ours, Gideon Gill, you know him, said there's this great asset. Blackstone owns the debt. Maybe you could buy the debt. Maybe you could build something interesting there. I knew from hearing from John Gray for countless years that they do not develop to your point. That's how you, that's how you lose your mind money. You buy other people's problems. You buy a failed development, you buy the debt on the failed development, but you don't, you don't get into bed and be a developer and deal with all the vagaries of construction. And so he wasn't going to develop it. So we went over and we said, hey, you know, we want to buy this debt from you. We know you're not going to build it. We came to terms. He was incredibly gracious in terms of making sure we had the opportunity to buy it. And, yeah, we spent the next four years, this is 2014 to 2017, building what is now the Forge, which is 272 apartments right in Lyon City at Court Square. Incredible subway access, great great amenities, incredible views of Manhattan and views of Long Island City now. And that became a real core asset for our, our residential business. And we wouldn't have done it had we not had, you know, the, the great faith in Long Island City. And I guess when I look at a different site, I don't need to be hamstrung by the fact that the only thing we've ever done is office. The only thing we've ever done is industrial or retail. If the site says this would be a great residential site, there's no reason why we can't surround ourselves by really smart people and build a team of people like Bernie did as, as an engineer to try to figure out what I don't know, and I'll be the first one to tell you, I don't know what I don't know. But to have best in class architects and best in class leasing people and best in class contractors to build these beautiful buildings that make sense economically. And that's what we did at the Forge, and that's what we're doing on second Avenue right now. And that's what we did at the JetBlue building. And it's a little bit of rinse and repeat, but every building is very different and every site is very different. And different environmental issues and different issues with the MTA and different issues with the DOT and the dob.

And so how do you de risk that then? I mean, because again, these are major, major financial investments. I mean, talking about, you know, building, you know, 272 units, I mean, again, a substantial amount of equity financing. I mean, again, I, I don't know how, you know, via partners on something like that or how you go about building something at scale, but, but h. How do you mitigate, you know, the, the risk making sure the development happens the right way, but also making sure that financially you're not overextending yourself?

Yeah, these are, these are, these are the issues that keep me up at night.

Some of our seem so common. Well rested though. I don't, I don't, I don't buy it.

The debt, the debt is a big issue. If you can keep your debt under control. I could sleep at night during COVID knowing that these office buildings we own that were vacant, people are not coming to the office. You and I were the only people in mid den for a couple of months in there. As long as your debt is under control, you know, you can live another day. So if you have 70% leverage, you're not, you're not going to make it. So most of our buildings have no leverage. Some of our buildings have 20% leverage. Some of our buildings have 50% level leverage. Our new building on Second Avenue, I think we went with a 55% loan to value. So we are putting a huge amount of our own family equity and sometimes we bring in partners, but we really prefer to do it on our own own. And therefore you don't see us building, you know, five buildings a year. You see us building one project that takes us five years to do a project. We have a great office portfolio and retail portfolio that we keep reinvesting money in and keep tenanting and keep them fresh and new amenities and all the things that everybody needs to do to keep office tenants coming back to their buildings. But it'll be one building on second Avenue that we're going to build. It'll probably take us, you know, four or five years to plan it out, build it, get at least and get it refined, and then we move on to the next one. One. We just bought a piece of land in Long Island City as kind of a placeholder that is near other properties that we own down there and that might be the next development site. But we're incredibly patient. We don't have a big development team that we're paying large salaries where we say, oh, if we don't build another building, then we have to shut down this development team and we have to fire all these people that we just hired. Very lean team.

So talk about buying land kind of for, you know, almost a longer term development prospect. I mean, I would think oftentimes when you buy land, the development potential and value is already kind of baked into it. So you're paying a price where you really have to move on it because it costs money to carry these. So how are you able to, you know, find these sites then that you can kind of park, if you will? I mean, is there income on it right now and you're okay with that return and then you kind of wait for the area to improve? Is that.

I mean, Union Square is an area that doesn't need to improve. Union Square is an area that we know is amazing and the retail is great and NYU is there and the subways are there and beautiful park. I sit on the board of the Union Square Partnership, but the bid down there as well. So that's not an area in transition. I think the best days are still ahead of it, but that's an easy one. We own two buildings. We own 41 and 39 Union Square west, right on the corner of 17th and Broadway, right at the entrance to Union Square park from Broadway. So we bought 37 Union Square West. This is a property that I saw that congrats you and I were talking about for. I mean, since. Since I joined the company. I've been looking and salivating it. It would be amazing to be able to buy 37 and other buildings in Union Square area and really create a. A bigger footprint for our family. The owner there was a guy who was a owner and occupier, so he didn't want to move his business out and we just kind of kept in touch. Once a year we'd go out for lunch at the coffee shop down the street and we'd have the conversation that at some point we'll buy it from you. Okay, you'll buy it from me. And he had very high expectations of what that price might be. We waited and we waited and he waited and he eventually got older and said, you know what? I need to sell. And then Covid happened and unfortunately prices went down and we were still very Very patient. We didn't need to buy it yesterday, we needed to buy it at some point and we were there. And when it came time to sell it, he, I think there was a debt issue that was expiring and he came to us and said, listen, I have a very limited period of time to be able to get rid of this property and to save my, my family's remaining equity in this property. Are you interested? And I said, of course I'm interested. We came to a price literally within a couple weeks and we sold.

So that'll be another rental development or condo.

So it's a five story office on top of retail building. It has two office tenants in there. Now our thought is really just the concept of a taxpayer that my father would always talk about. You need to make sure that the building could pay its tax. Taxes and operating, I think was, was, was inherent in that. So no, we don't want to take money out of our pocket and continue funding the operating of this building. But if you have a short term, you know, five year leases, it gets you through this period of the market where there's a little bit of uncertainty, where interest rate's going to go, tariffs, immigration policy. Where are we going to find the next generation of plumbers and carpenters and painters and all the guys that are working on Second Avenue right now. It's say it's not an easy process to develop a building in New York City ever. But to do it with interest rates and tariffs and immigration, that, that a lot of risk. So our family looks at it saying, you know, we'll, we'll do something interesting there at some point and maybe it won't even be my generation, maybe it'll be the next one. I certainly hope it's ours, but if it's not, the building needs to stand on its own two feet and be able to pay its taxes and it's operating and keep expenses very low. That's why we have very lean teams and we don't have a bunch of developers sitting in an office waiting, you know, to chomping at the bit for the next development because that's I think, how maybe you make some inappropriate decisions going forward and yeah, so we'll survive another cycle and we'll see what we want to do with it.

And with your, your most recent project, the 157 units at 255 East 39th there, I believe you worked with a development partner. So sometimes you could partner with someone who could also help so that we're.

100% of the equity. Okay, so that's another interesting story. So that the, the Brous brothers left, left Harlem and they started buying downtown in January of 1941. 1942. January 1942. So Pearl harbor was December of 1941. So a month after Pearl harbor, my grandfather and his brothers decide there's something called the Second Avenue Subway that is going to come rattling down Second Avenue and there will be a stop somewhere between 42nd and 41st on Second Avenue. Because it has to be. Because Grand Central is just too close. There has to be a stop there. Let's buy real estate somewhere near the Second Avenue subway. 42nd street stop. So they scoured the records and they talked to brokers and they bought a building on the corner of 39th and 2nd in January of 1942. And it sat there and they rented it out. And 12 years later they bought not the next door neighbor, but two north. So they bought 729. They couldn't buy 733, so they bought 735. That was 10 years later in the 1950s. And then they sat in the 9th. 2011. So now my, my grandfather's generation is no longer around. My father and I bought at 737 and 739 Second Avenue in 2011. Again, we're missing that one spot at 7:33. Same thing like we did in Union Square. We waited, we waited, we waited. Finally we had someone who was interested in selling. And again, middle of COVID this was December of 21. Finally got a phone call saying hey, we're ready to sell. So this was the fifth piece. So there's one.

This is a multi decade assembly.

This was 80 years of an assemblage. This does not happen all that often. Often, right. But very patient capital, no debt on the buildings. Again, getting back to the financing. Getting back to our roots in the Great Depression and now we finally had five. We vacated everybody very quickly because we had no long term leases and McDonald's was our last long term tenant. They, they expired, took everything down and are now, you know, off to the races building. Our development consultant, not a partner in the firm, is a, a company called Lana Sarah. They've done an amazing job of helping us put together a great team of architects and contractors. We're using Central Ready as our architect. They've done incredible residential the city Tishman AOM is our contractor. People are hungry for work. So we found a lot, a lot of people at the highest levels at Tishman that are excited about building a rental building for Us and we hope to be TCO by the end of the year and renting by the beginning of 26.

Very excited to, to see that. And I, and you were kind enough to give me the. I, I asked you for one of the construction shirts because I, I saw. Yeah, one of, one of the, the crew wearing. I said, I got to get one.

Of those bright ar.

Yes, you could see me coming.

Oh, the funny story is that James. Oh, yes, lives on the New Haven.

Line and that's right.

Beautiful Fairfield, Connecticut, and he sees one of our guys leaving the site and getting onto his train in this bright orange shirt and it says Brau on it.

That's right.

And I said, how much are we paying these guys? They live in Fairfield county near James. That's right.

So I want to talk now a little bit about. Part of your story is so much about, you know, community involvement. I mean, you're chair of the Long Island City Partnership. You're on the Union Square bid. So talk about your giving back and becoming part of the community. Because we were talking a little bit before the show about, you know, developers oftentimes get this, you know, reputation that they're not acting in the best interest of the community. There's this tension and friction. I mean, it seems like to me that you've kind of dove headfirst into that and saying, look, I want to be a part of this community. I want to help make the area better. So, you know, maybe talk about, about, you know, the work that you do is part of the, the Long Island City bid as chairman and then certainly, you know, the Union Square bid as well.

Sure. So I'm on the board of three bids. The Union Square Grand Central Partnership and Long Island City Partnership. Long Island City Partnership. I was the first chair of the, the bid that was formed in 2005. So we're hitting 20 years. No one else raised their hand, I guess, 20 years ago. And I think they haven't fired me yet. But no, a bid is an amazing investment. Actually, Union Square was the first bid in New York City. And it's an amazing ability to basically have commercial property owners self tax themselves to enhance the services that otherwise the city isn't providing.

So this is a private, just, just for our audience, especially our listeners outside of New York, because this business improvement district, I don't know if this, you know, exists elsewhere in the country, but it's, it's not. To be clear, it's not a not for profit. This is a for profit.

No, it's not. It, it's not for profit. It is if we break even. Basically. Okay, we run it a break even. We hope we run break you. We have lots of reserves in case we don't. But no, the, the, the idea is that the real estate owner has to pay mandatory real estate taxes every year to the city of New York to provide essential services. Police, fire, everything else, you know, safe, clean and safe. But it doesn't get that clean and it's not always so safe. So the bids came along and said, hey, what if we, the commercial property owners around Union Square, to take Union Square as an example, or on Queen's Plaza in Long Island City, or right around Grand Central Station and Grand Central part, what if we decide we're going to tax ourselves 10 cents a foot? You know what, it's a rounding error. But 10 cents a foot times a couple million square feet around Grand Central Station actually adds up to a nice pot of money. That pot of money can then be used by these property owners to help everything that makes a property thrive. So it's not just putting, you know, filling in potholes and things like that. It is putting beautiful tulips in the plantings as you go up and down Vanderbilt Avenue and going up and down Queens Plaza. It is hiring security people so that you're making sure that people feel safe when they're eating lunch at Union Square Park.

Does everyone have to join? How does this work and is it the. So this still is through the city and the department, so they actually administer and collect the taxes. And then what happens if someone says, no, I don't want to be a part of it?

Great question. So it's a very, very long public approval process for exactly that right reason. You can't, you can't really opt out. So you decide what neighborhood should be a bid. You go around and you have lots of people sign petitions to start the process. You make sure you have buy in from the city, city council, mayor. It goes all the way up to the state. This is, it's a, it's a state and a city role in both of that. It takes, it could take five to 10 years to get a bid launched. And when you have the bid to expand the bid or to change the budget of the bid, all of this requires lots of approvals from the city and so state. So. But once you do have a bid bid in Long Island City, for instance, start in 2005 at 84 properties just on Queen's Plaza and Jackson Avenue. Like a tiny little micro part of the neighborhood. We started small we got the buy in. City councilman, everybody says, of course, like, you're gonna, you're gonna take money out of your own pocketbooks and put them in to improve your neighborhood. This is great. So everybody was very, very excited about it. Once the bid has been established, the city, and this is the important city role. Department of Finance. On your tax bill, you get a tax bill twice a year from the city. On your tax, we're gonna have real estate taxes, but now you're gonna have something called a bid charge. And the bid charge is gonna show up on your tax bill, and you have to pay your tax bill, otherwise you have a lien on your property. So you have 100% assessment. So it's not like people are going door to door hoping you're gonna pay your dues. This is a mandatory assessment. So bid is a very powerful structure. So, you know, come hell or high water, twice a year that bid is gonna get there. My money. And now it's a question of how does that money get spent. So it has to be spent in accordance with what you told the city you're going to do with the money. So you want to have security, you want to have safety officials up and down Union Square park, you can do that. You want to plant tulips, you want to have hanging baskets, you want to have beautiful benches and lighting and holiday lights, Christmas lights, It's literally the whole gamut. But really it is. What do we do to make Union Square, Wyoming City, the Grand Central, Bryant park really thrive? And the city should be only too happy to see these private business owners just adding to the magic that is these little neighborhoods. And if you're a tenant and you have an opportunity to go to be a tenant in a bid neighborhood versus a non bid neighborhood, you can actually tell a difference. A bid neighborhood doesn't have graffiti, doesn't have as much gum on the sidewalks, doesn't have as many people loitering and sleeping and all the lovely things that happen to our city. City, you have people paying attention. And we have had, in long city, we were on our second expansion. We've had people beg to us, please expand the bid down 44th Drive. Because 44th Drive right now doesn't look so great and there's graffiti everywhere and it would be lovely to see tulips coming through and beautiful trees and lights and holiday decorations. And we don't have that. And it's really hard for us to compete with the rest of Lyon City if we're not part of the bid. What a Gratifying thing to hear. Yes. Tax me.

Yes. Right.

We like what you're doing here and we want to extend it. So we just finished our second expansion. We're now long city is now the biggest geographic area of bid in New York City.

And your decision to be the chairman there, to be so involved, I mean, what, what drives you to do that?

So, I mean, in all of my philanthropy work and all of my nonprofit work, it's, it's, it's all about giving back. And some of it is self motivated because we own real estate in a neighborhood and the real estate only gets better if the neighborhood gets better. Better. But there's a lot of people that don't get involved with the bid, and there's a lot of people that don't get involved and don't give back unless it's mandatory. Right. And they don't spend the time. I don't have the time. I can't join that committee. There's 50 committees from each of these.

Yeah. How do you have the time?

Retail committees, there's hotel committees. I would ask you the same question because I think you're the only person who's busier than me. But how can you not like, if you, if you own a piece of real estate in a neighborhood, how could you not care what happens in the surrounding neighborhood?

Right.

How could you not care what the experience is like for your tenant to get off the subway and to walk two blocks to your building? What does that two blocks look like? What does it feel like? Is it safe? Is it clean? Is it decorated? Is it floral? Does it smell good? Like who, who is interacting with your tenant in between that two block walk? And there's a lot of, a lot of owners that look the other way and they don't feel like they can spend the time. I feel like I have to spend the time. And my whole family and my dad was one of the founding members of the Grand Central Partnership, who's the first treasurer, and so it really came down from him. How could this, this not be something we participate in?

And I know you've been on the board of the Real Estate Board of New York as well, so it definitely extends beyond that. You're also on the board of uja, so again, the question is, how do you, I mean, this is a lot of involvement. So how do you balance? And I would imagine these developments take a lot of time as well. How do you find the balance?

There's only so many hours in the day, so you have to kind of allocate I am very grateful that I have a really supportive family and my sisters have stepped up, my cousins have stepped up, my aunts, my entire Brows realty infrastructure has stepped up to say if David needs to be at this bid meeting or he's at this UJ meeting that there are other people that can carry the water. But it all is kind of infused in our family to give back. There's something in Judaism called tikkun alam which is to take care of the world, to leave the world better than how you found it. And there's a lot of people worried today that maybe we're not giving the world to our children as good as we found founded and that's, that's a concern. So within our business we're actually building many of our buildings are lead certified. We feel very strongly about green building design. Our my daughter, I've got to follow my kids lead. My daughter who you know from Colgate, Sophie is a vegan and we're making the first vegan building Second Avenue be, be be vegan. So no animal products will be used in the building which no one's ever tried before. Cool. Not that hard to be building a building with no animal products products. The structure of the building, it's concrete and steel and wood and that's easy. So then you get into all the furnishings and all there can't be any wool, there can't be any leather, they can't be any animal products and any of the furnishings. So this is kind of an interesting exploration. We feel, we feel good about it. We feel good about putting solar panels on the roof we're doing on this building. Also did on the forge. We're exploring in the JetBlue building. We explored with windmills and wind turbines to try to be able to use alternative energy sources because we know we're, we're polluting the planet by, by, by burning all the gas and oil and all, all of these building buildings. So we are trying to be forward thinking. We also think it's a great way to involve the next generation because the next generation has to be greener than our generation. Right. And they are definitely thinking about. My other daughter Anna is into environmental engineering right now at a company called Arcadis and they're all about trying to figure out how to make your carbon footprint and buildings more, more minimal than it is right now. So if we could try to prepare our, our buildings, our city for a better future from, from a green design perspective or all in.

I'm, I'm smiling because I know you're living this as well. I, I know you're not just saying this and then you're flying around in a private chat because I have seen. I, I bet you put more miles on a city bike.

Yes.

You know, whenever we're going to events. David, how'd you get here? I, I biked over here. And I know you're, you're, you know, on, on the train every day and you're not. So, so you're, you're obviously very aware of your carbon footprint.

That's kind of public transportation. Big fan of biking. If I can get somewhere, I'm not ubering, I'm.

And kayaking, you should tell the group. But one once a year. And if I'm not mistaken, you have kayak direct around all of Manhattan, is that correct?

I have. So ymwraa. Also, 20 years ago, everything happened. 20 years ago, we started kayaking and it was to support a very small group called the Long Island City Community Boathouse, which needed a couple of dollars. And we had a couple of young people at YMW that wanted to experience the waterfront. We all transact real estate in an island and you never really experience the water, like, really experience the water. Like you're afraid of the water. You're afraid of the east river, you're afraid of the Hudson River. It's dangerous. I, I don't want to be, I don't want to touch it. It doesn't smell good. Now most valuable real estate is the Gowanus Canal, which is a super fun site. So over the last 20 years, people have really engaged in this, being an island and getting involved in the waterfront. So we started going kayaking once a year, starting in Lyon City, right near the Pepsi sign on, on the river in Lyon City. And we've now morphed into moving into. We start now at the Intrepid. As you know, one of our biggest Trips was a 26 mile going around. It's called the circumnavigation of all of Manhattan. And that was a brutal day, but we did 26 miles in about 12 hours. Hours. We had a great lunch at Dinosaur Barbecue and that was our halfway point. And this year we're going up to the Palisades George Washington Bridge and back. So we have a, a really motivated group of young real estate professionals that help us. And it's a great way to get to know the city to, to, to see it by kayak. It's just, it's a glorious way to see our skyline and to see how. And that's how our city was founded. Right. It was founded when people came to this island and said what a great port. We did that great activity last year of the billion oyster products.

Yes.

Project that was like who would ever think that you would put oysters off of the coast of New York Island? Well, that's how we started. Like Native Americans came because it was a plentiful shores of New York and.

It cleans the water. I think it's. What is it? 50 gallons of water cleaned by a clamp. So we'll give a shout out. I know dear, you're your co chair on that. Lindsey Ornstein and of course Bill Montana.

Yeah.

Who does so much for the organization.

So they've been great.

So David, this has been amazing. We really appreciate your sharing your story kind of the company and then, you know, the, the need to give back to community. What would you say to, you know, the younger professionals who are out there who are saying, well, you know, I'm still trying to build my business and you know, the question of time always comes up. But why, why do you think it would make sense for someone to get involved even early on in their career? And you know, maybe it is someone who might want to join YMW rea. But why, why, why would you say it's important to get involved early on as opposed to later on in your career?

Sure, that's a great question. If you're at a big company, you meet a lot of people. When I was at Goldman and I had no time to do anything and I was surrounded by thousands of people that were young and motivated, it may have been a little bit easier to meet people and to get out and to kind of see different. Different people, different perspectives. At a small real estate company, it's imperative. When I joined Bryce Realty, I knew YMW rea, uja, Israel Bonds, all these charities. Every time you're done with the office, where are you going? Right. I can go back to my apartment or I can go to an event. And no one goes to more events than James Nelson. You go to an event, you meet different people. You're meeting brokers. I need the brokers to bring tenants to our buildings. I'm meeting other owners. I could learn from these other owners. How are they dealing with this issue? How are they dealing with that issue? I can meet with architects that have amazing designs, environmental engineers that can tell me the next green design. So if I'm just sitting in my own office. Office. I'm not learning as much as if I'm Going out and I'm meeting new people. And I, I'm a social person. I'm. I, I love meeting new people and learning about new things. I think the minute you kind of feel like you know everything, you're. You're done. So if I can learn new things by meeting new people every day of the week, I would love that. And YMW and all the, the nonprofit activities that I do is, is a great way to first give back and tikkun alum, as we talked about before, but also to meet new people. And the nice thing about YMW rea is now I'm on the older side and. But I'm meeting young people. And we have membership committee next week, and we have 10 young people, and they're all in their 20s, and they're all, like, eager. They just got out of college. They're bright. They have all sorts of great new ideas as how the city should function, how it should look and how it should be built and what kind of businesses should thrive here. And if I meet those people, I come back from those meetings saying, oh, my God, I love New York City. New York City is still bringing these people. You graduate college and you want to be in New York. You are the best and brightest from your class of wherever you want to come to New York. The best firms, the most motivated people, the best culture, the best restaurants, the best apartment buildings that we have helped build. This is a great, great place to be a young person. And, and if I can be in the room and meet some of those young people, it inspires me, jazzes and energizes me. And why, why would I not want to be energized in my career? Like, it's just a great way to get people together. And I hope that the young people look at the older guys and they're like women and say, oh, my, my God, I have so much to learn from these people. They've been around for 30, 40, 50 years, some of them. We just lost Earl Altman. He was in business till 93. And I mean, a giant. And how much time I spent with Earl and now Greg Shenker. I have learned so much from learning from, from, from, from Earl and his generation, my dad's generation, and hopefully the next generation to come. YMWRA members will, will learn from us.

Well, David, this has been incredible, and you're definitely living those words and that advice by sharing your story today. So I, I know the people listening are going to get a tremendous amount from this. So we're just really grateful for your taking the time today and sharing.

Thank you. Thank you for doing this, James. You. You have set an incredible standard of hard work and giving back and getting young people from Colgate and beyond.

That's right.

To mentor and to get involved in our business. And I thank you for giving me this opportunity.

Wonderful. And thank you to everyone as always for joining. You know, the best thing that you can do is share this episode with someone who you think that would benefit from this. And after hearing the story, how could. Sure there's going to be a lot of people out there who could certainly benefit. So as always, you can go to james nelson.com I built that site for you. It's not about me where you can find the show notes. There's a lot of helpful resources on the site as well and we're here to help you gain the insider's edge to real estate investing. But after hearing today's episodes, how to do it in the right way. Really important. And I know I got a tremendous amount out of this episode as well. So until next week, thank you again for joining.

This podcast is for educational purposes and should not be relied upon for investment decisions. The opinions expressed are those of the guests and not their companies. Listeners should not act upon the information without first seeking appropriate advice from an accountant, lawyer or other professional.

Thank you for listening to the Insider's Edge to Real Estate Investing. We appreciate your subscribing and sharing with your friends. If you haven't already, please connect with James at James Nelson NYC on LinkedIn, Instagram and Twitter. Twitter. Please also visit jamesn. Com where you can find the show notes and other episodes along with an exclusive video series and other helpful resources so you can gain the insider's edge to Real estate investing. Until next week.