Archive for December, 2011
Thursday, December 22nd, 2011
Posted by Leonard Steinberg on December 22nd, 2011
New York will draw more than 50 million visitors by the end of 2011 — a record for the city, Mayor Michael Bloomberg announced yesterday.
“While playing host to the world isn’t new for us, the number of visitors we’re welcoming in recent years is new,” Bloomberg said during a ceremony in Times Square, while surrounded by cheering tourism officials. “That means more guests in our hotels, more shoppers in our stores, larger audiences in our museums and theaters, more diners at our restaurants.”
A healthy city economy benefits all. So will the naysayers only remember the snowstorm of 2010 when they think of Bloomberg? In my books this mayor has done significantly more good for this City than any other mayor before him. We should be thankful.
Thursday, December 22nd, 2011
Posted by Leonard Steinberg on December 22nd, 2011
The word RICH has to be one of the most used words of 2011….it also happens to be a four letter word. Just like the word LUXURY, it also has to be the most mis-used word, although in this lie many similarities.
What is rich? What is luxury? Both are very much words that have great meaning when evaluated relatively. To most earning $ 250,000.00 per year, someone earning $ 2 million per year is rich, while they consider themselves well off at best. Many million dollar earning bankers view themselves as poor next to movie stars and basketball players. To most buying an Hermes Kelly bag is luxury, while for someone else a Coach bag has the same value. Luxury can be a material object, service, etc., conducive to sumptuous living, usually a delicacy, elegance, or refinement of living rather than a necessity. Luxury is free or habitual indulgence in or enjoyment of comforts and pleasures in addition to those necessary for a reasonable standard of well-being. It can also be a means of ministering to such indulgence or enjoyment. Luxury can be a pleasure out of the ordinary allowed to oneself. It can also be a foolish or worthless form of self-indulgence: the luxury of self-pity. Its all very, very relative though.
Rich is defined as having wealth or great possessions….. abundantly supplied with resources, means, or funds: the big question is who defines what abundant is. Right now the world seems entirely focused on income as the definition of wealth. A co-op Board frowns on high income alone and does not consider that to be rich without substantial assets too. Old Money is often assets-rich and income-poor……so is someone with OLD MONEY rich if they cannot afford to replace the tattered curtains in their living room? Then again, someone rich in Montana, may be quite middle class in Manhattan, a best.
I find that the bigger struggle is actually within the so-called ONE PERCENT: I constantly hear the outrage of people who thought buying a one MILLION dollar apartment in New York would deliver the home of their dreams….the dissilussionment at the reality is Austin Power-style in its shock. TO buy a $ 3million apartment in New York these days, you probably need an income of at least $ 1million per year: thats not the 1% at all….. A $10 million apartment buyer would need to earn lots more than that……more like the 0,001%. I hear many who earn around $ 500k a year furious at those earning $ 5 million per year who pay less taxes than they do benefitting by all kinds of legal breaks that they simply do not have access to.
So while the class war that exists between the 99% and the 1% is potent, even more extreme is the class warfare within the 1%. Its all relative at the end of the day. All of it. I feel certain that the poor in Africa would consider the poor in the USA well off. Maybe RICH and LUXURY are the most mis-used words of 2011?
Wednesday, December 21st, 2011
Posted by Leonard Steinberg on November 21st, 2011
Christmas is almost upon us but some really good girls have had a visit from Santa a wee bit early: The 22-year-old daughter of Russian billionaire Dmitriy Rybolovlev received an $88 million penthouse condominium located at 15 Central Park West in her stocking from her daddy — the most expensive residential transaction in residential Manhattan real estate to date. A new record has been set for New York at just a bit over $ 13,000/sf.
A company associated with Ekaterina Rybolovleva, the daughter of Russian billionaire Dmitriy Rybolovlev, signed a contract to purchase the 6,744-square-foot, full-floor penthouse, resplendent with massive 2,000sf terraces and un-obstructed panoramic views of Central Park just a few weeks after it was listed. The penthouse currently owned by banker-extraordinaire Sandy Weill was designed by Robert A M Stern, the king of nouveau-riche-wanting-to-look-like-old-money architect, and Mica Ertegun (the queen of old money-helping-the-nouveau-riche-look-like-old-money designer)who did the interiors recently featured in Architectural Digest.
Dmitriy Rybolovlev made his fortune in Russia’s ‘wild west’ period creating a fertilizer empire which he subsequently sold…. and was acquitted of murder. For those who think Dmitriy over-paid, please be reminded that he paid half-price when compared to his 54-year-old Russian steel tycoon brother, Vladimir Lisin, with a fortune of 15 billion pounds, who bought a 300-year-old Park Place London mansion earlier this year for about 140 million POUNDS…..thats almost triple what Dmitriy paid for his daughter’s little crash pad.
Tuesday, December 20th, 2011
Posted by Leonard Steinberg on December 21st, 2011
Has anyone noticed how many ex Wall Streeters are turning to the markets to create new ventures and businesses? I have heard some who have lost jobs hopeless about their chances of re-creating their past positions or income and others who were just tired of the rat-race. Some have expressed interest in creating something tangible, creating industry, product or purpose.
Have you heard any of these stories?
I do believe business-owners to be one of the quickest future growth segments of the luxury real estate market, especially in New York.
Tuesday, December 20th, 2011
Posted by Leonard Steinberg on December 21st, 2011
There are certain essential expenses that Americans incur that are a form of taxation…..Here are two examples:
GAS: The average American spends over $ 4,100/year on gasoline…..thats over 8% of their income! Now thats quite a tax. Gas prices are artificially high because of OPEC’s ability to monopolize the oil markets, and even though monopolies are illegal for all others, well, the oil industry is obviously immune to the law it seems. Imagine reducing the cost (or consumption) of oil by a third and the average Amercian household could pump another $ 100+ per month into the economy.
RENT: The news talks about the rise in rental apartment construction, as opposed to ‘for sale’ properties citing the fear of first time homebuyers wanting to rent instead of own. If there is a sharp rise in the volume of rental apartments, we could see rental prices drop, although its unlikely in Manhattan. Over 2,1 million apartments in New York City have some form of rent regulation, about 40,000 have full rent control. Imagine those controls were removed, the general consensus is that landlords would go crazy raising the rents……but maybe the exact opposite is true. Is it not possible that with a flood of lesser priced units in the market, all rents would come down, thereby reducing this ‘tax’ on the consumer? Imagine each tenant having an additional $ 100 per month or so to spend in the economy (where sales taxes are collected). Then again, just like our Federal tax system, only a select few benefit from rent control: the only problem is the selection process is deeply flawed and benefits a few unfairly.
What other disguised ‘taxes’ are out there that could help the middle class have a better life? Cable? MTA fees attached to cab fees? ATM fees?
Monday, December 19th, 2011
Posted by Leonard Steinberg on December 19th, 2011
Cornell University is the winner of a competition to build a new science and engineering campus in the city: An official announcement from Mayor Michael Bloomberg is expected later today.
The city has offered free land on Roosevelt Island and up to $100 million worth of infrastructure. In a major sign of strength, the Cornell bid received a $350 million anonymous donation to help build the campus. Stanford University — another top contender — announced Friday it was pulling its bid.
City officials hope a new school will spawn hundreds of new companies, along with tens of thousands of jobs and billions in economic activity over the next three decades. Now THAT’S what I call a strong plan for long term AND short term job creation: jobs for design and building now, and a school that will be a draw for the best from around the country and the world. Now if only Mr. Bloomberg (or a clone) went to Washington……wouldn’t it be nice if all these “presidential” political hacks actually provided this kind of thinking as opposed to their tired, pathetic, partisan drivel.
New York’s future looks bright indeed.
Sunday, December 18th, 2011
Posted by Leonard Steinberg on December 18th, 2011
I have been ranting about the inaccuracy and inconsistencies of residential real estate sales reporting for years, and now the ultimate embarrassment: Unsurprisingly, this week the National Association of Realtors announced that the data they’ve been releasing on home sales has been flawed – mainly understated – by possibly as much as 20% lower than previously reported. They said they will recalculate the data going back to 2007. The national news/business TV shows have reported on this because it will mean the national housing decline will be much worse than earlier thought.
The question needs to be asked: How is this humanly possible without some fraudulent activity? Surely a sale is publicly recorded, and that sale becomes the basis of data? The NAR is claiming a host of somewhat plausible reasons for the errors, but I don’t buy them. Yes, these large organizations, just like governments, are notoriously inefficient and slow (lets not forget how our government revises figures all the time and lets us know we are in a recession many months after it has started!). BUt the reporting of sales is actually quite simple. The problem is that often large organizations and some real estate companies (just like governments and large corporations) report WITH AN AGENDA. Agenda’s drive inaccurate reporting more than anything else. This is about to change with the merger of globalization and the Information Technology revolution.
Both have achieved a critical mass in the first decade of the 21st century that has resulted in the democratization — all at once — of so many things that neither weak states nor weak companies can stand up against. We’ve seen the democratization of information, where everyone is now a publisher; the democratization of war-fighting, where individuals became superempowered (as in the case of Al Qaeda to take on a superpower); the democratization of innovation, wherein start-ups using free open-source software and “the cloud” can challenge global companies. And now we will see the democratization of real estate sales information, and it will be much more localized.
In my opinion, the national aspect of reporting on housing sales is the problem (even though its essential for a country to operate well). I would propose to regionalize the reporting much more. Averages are practically useless to most in real estate world as real estate is a very, very localized business. There should be a network of smaller reporting mechanisms (preferably electronic, not human) based on pure fact. This network should then feed into a national network.
Unfortunately, the bulk of residential real estate sales close weeks and months after the actual transactional terms are solidified. With new construction, these closings can take place 1 – 3 years after a contract is signed. It is at that moment of contract signing that the true insight to the market is relevant and meaningful. I would much prefer two reports: a ‘signed contract’ report and a ‘closed sales’ report. I do a monthly report in LUXURYLETTER: it is a blending of both, so while not 100% accurate (regrettably) it is a much better indication of what is happening my very specialized market right now. Would you want to buy Apple stock based on trades that happened 6 weeks ago?
I speak with bankers on a regular basis, and they too are shocked at the lack of accurate, solid information. Much of what is out there is distorted. And the complexity of some of the data is surprising. The ENRON-ess of it all is somewhat disturbing. There are other ‘industry organizations’ that collect large fees from brokers to spew out reports that are mostly inaccurate and meaningless, often timed to be some sort of historic reference book. The large fees usually support large salaries of the organization’s leaders……Washington-style.
Bad data breeds bad decision making: The bigger problem with the democratization of information is that there is so much of it out there, often un-verified, mostly inaccurate and mostly averaged so broadly that it has virtually no value to the consumer.
Saturday, December 17th, 2011
Posted by Leonard Steinberg on December 17th, 2011
If there is one thing people consistently ask me, it has to be: “How is it that the real estate market in New York continues to be so active, even through such tough economic times?” My answer is not a simple, quick one. Its rather complex and detailed. Here is how I break it down:
1) New York has a small percentage of owned real estate, with only about 30% either condominium, co-op, townhouse or condop. The remaining 70% are rental properties.
2) New York has always attracted a global buyer, now more so than ever. Of all the cities in the USA, New York is the one that caters best to the international wealthy, old and new. So for anyone wanting to ‘park’ dollars in residential real estate, New York is at the top of the list.
3) The volume of TOP QUALITY sale real estate is even smaller. Quality buildings with quality units are a small percentage of apartments.
4) Real estate follows life: deaths, divorces, births, marriages, mergers, re-locations. These elements continue regardless of economies. New York caters mostly to a wealthier audience: With very, very few options of high quality rental properties, the wealthy prefer home ownership as a means to control the quality of their home environment.
5) New York attracts the most ambitious and the biggest risk-takers: The new rich have become the high-betas of our economy. With their dependence on financial markets, their leverage and their hyperspending, the top 1% have income swings that now are more than twice as high as those of the rest of the population. As fortunes are made and lost, real estate sales and purchases follow suit. The beta of the top 1% nearly quadrupled between 1982 and 2007 to 2.39. The top 0.01% had a beta of 3.96, making even the riskiest tech stocks look safe by comparison. Economists and wealth managers say the betas of the rich have soared even higher in recent months as markets gyrated sharply.
6) Wealthy people like control: the concept of living in a rented property is still for many of the very wealthy a lesser lifestyle: If you won the lottery to-day, would you want to rent or own? Wealthy people like to install super-sophisticated electronics into their homes: this large an investment is completely unjustifiable in a rented property.
7) Home is a status symbol in New York’s wealthy circles. Living in a mediocre home is often not very effective when trying to impress professional contacts, let alone trying to convince that super-model girlfriend into marriage….
8) The great pretenders: Many in New York live well beyond their means, mostly in the hope of reaching their dreams, and often by faking it to the outside world for status. This group has the capacity to fall in tough times.
When I started in real estate many years ago, I remember a top broker being interviewed about the dessimated Japanese buyer market (the South Americans and Russians of to-day)……she reminded all in the room that just like a revolving door, there is a market as they buy on the way up, and another market as they sell on the way down. Brutal, but probably simply a reality of big city life.
Thursday, December 8th, 2011
Posted by Leonard Steinberg on December 8th, 2011
Is 57th Street becoming the new PARK AVENUE? With ONE 57, the EXTELL developed tower located between 6th and 7th avenues on 57th street commanding prices upwards of $ 5,000/sf comes confirmation that Macklowe’s site (now CIM)of the former Drake Hotel on Park Avenue and 57th Street will become….THE DRAKE HOTEL, located at 432 Park Ave, and designed by Rafael Vinoly. The plans show that a 1,300 foot tall tower will occupy this site, making it one of the tallest structures in Manhattan, taller than the Empire State building that measures about 1,250sf….the Freedom Tower will be over 1,700sf tall, still shorter than the Burj Dubai at over 2,000sf (See it in the latest Mission Impossible). Supposedly it will feature 128 condominiums with 12 foot tall ceilings with a driveway to ensure access privacy. The total cost of this mega-building is approximately $1 billion. Completion is expected somewhere around 2015/2016.
So will 57th Street elevate in status to attract this price-point of buyer? There were many naysayers when Trump developed 1 Central Park West, followed by the TIME WARNER CENTER…..all said Columbus Circle was a dump and no-one would live there. They were wrong. many said no-one would want to live next to Bloomingdale’s, and the BLOOMBERG building, 1 Beacon Court proved them wrong. 57th Street does boast some very prestigious retail, from Chanel to Louis Vuitton, Phillip’s, Burberry, Dior, etc…..and it is home to the Four Season’s hotel, a favourite amongst the super-rich visiting Manhattan. The Drake does have the Park Avenue address to fall back on, so chances are it will succeed. The key will be quality and supply-and-demand: these are hefty price expectations, and only time will tell if the market is deep enough in the $ 5,000+/sf category. Inflation may help.
Wednesday, December 7th, 2011
Posted by Leonard Steinberg on December 7th, 2011
Are the banks messing things up again? Surely it makes sense to try shifting homeowners in trouble who cannot pay their mortgages into more affordable mortgages that may prevent foreclosure? Apparently not….
The Treasury Department said that JP Morgan is still doing a poor job helping people permanently lower their mortgage payments as part of the government’s foreclosure-prevention program. The lender has been cited for rejecting people who were eligible for mortgage modifications three separate times since June.
JP Morgan said it was “disappointed with our rating” and that it “will continue to work hard to improve our processes and controls.”
The government first criticized four lenders—JP Morgan Chase, Bank of America Corp., Wells Fargo & Co. and Ocwen Loan Servicing—in June, and began withholding financial incentives of up to $1,000 per modification. Wells Fargo and Ocwen, a division of Ocwen Financial Corp., were removed from the list of companies needing “substantial improvement” in September. Bank of America got off the list in December.
The mortgage-aid program was launched in 2009 and was intended to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. But the program has struggled to convert them into permanent loan modifications. Homeowners have complained that the program is a bureaucratic mess. Many say they were disqualified after banks lost their documents and failed to return their phone calls. Banks have blamed homeowners for failing to submit needed paperwork.
Of the nearly 289,000 homeowners who have started the trial version of the program through JP Morgan, less than half have had their mortgage payments permanently lowered.