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Today's Tough Market Needs Intelligent, Adjustable Developers

There are a lot of things plaguing builders and developers right now, but the panelists at Bisnow’s sixth annual Construction and Development event believe intelligent, innovative, persistent players can still find their way. 


No one captured this sentiment more than William Macklowe Co CEO William Macklowe (right), who detailed the difficult process behind his 21 East 12th development in the East Village. Although the site came with its air rights, he said, acquiring the ground lease was a nightmare, as it came with possession issues and a fee owner with tax problems. Even when he acquired the site, he had to deal with zoning laws and heavy resistance from the East Village’s Historical Society director, Andrew Burman

Everything was set against against us, except for the old adage of ‘location, location, location,’” he told RSM partner Steve Kirn (left) and the Tuesday morning crowd.

The solution was twofold. Not only did he have to find a financial partner who understood real estate and could parse through the extremely complicated structured deal (“it would take me the whole day to explain it”), but he had to prove to the government that the 23-story development was respectful of the surrounding neighborhood with its use of concrete and masonry, based on exhaustive research.

As for the resistance? Simple: ignore it. 

Andrew Burman is nothing to me,” William said.

Even outside this project, William says his success is founded on market research and conservative financial strategies, such as using 50% loan-to-cost and avoiding Wall Street executions, alternative lenders and preferred equity. 

At 156 William St, for example, William bought the '60s building with “no redeeming qualities” because the price was right ($250/SF) and the knowledge that NY Presbyterian would be the only medical facility south of 14th Street after St. Vincent closed. 

“We had an opportunity to create the only medical office building Downtown, something we knew would be desperately needed," he said.


L&L Holding SVP Josh Carson (second from right) said he was also satisfying a desperate need for new office space in Midtown with 390 Madison Ave, which added “a beautiful glass structure to the heart of Manhattan.” 

And, much like William, Josh and L&L are keeping an ear to the ground on the effect of the Midtown East rezoning.

“I can’t say what its effect will be in the short term, but the long-term effects could be monumental,” he told Zetlin & De Chiara managing partner Michael Vardaro (right). So monumental, Bohler Engineering principal Joe Deal (second from left) wishes other areas, like Long Island, would follow suit.

The biggest thing to focus on in the short term, Joe, Josh and ConEdison Energy Efficiency Team manager Dave Pospisil said, is keeping a building’s infrastructure and energy performance efficient, as it's become more affordable and can save firms thousands on renovations and quality-of-life improvements.

Although Dave conceded people shouldn’t be ripping their systems out of the walls—“it’s more of a life cycle thing"—Dave says the city’s more aggressive than ever in its energy and environmental codes. An example: Local Law 84, which forces buildings over 50k SF to post their energy and water use information in a database for comparison with other buildings in the area.

“A LEED certification may not matter as much as it used to or as much as an EnergyStar rating,” he said. “But what it stood for does.”

Joe adds that it's easier to work with the government on these measures, as it's begun using electronic systems for permits and registration to make the process quicker and easier.

Greener buildings, Josh says, are also buildings focused on employee wellness, as natural light and fresh air help productivity and absenteeism rates. That’s why L&L obsesses over its mechanical systems to connect with the environment as much as possible.


But, with every development comes the question of financing, which has grown more complicated. The Continuum Co general counsel Michael Merola (left) says EB-5 is the biggest question mark, as it's set to expire at the end of the year and the uncertainty of its future has caused some foreign investors to sit on their hands.

Even when it was in its prime, he added, there was a threat of the financing “disappearing” when contractors needed to be paid. That’s why it's essential to have a flexible capital stack, GFI Development president Steven Hurwitz (second from right) says.

It’s just as important to have as a flexible portfolio, he added. The Beekman in FiDi, for example, includes both a luxury hotel and 68 condos, which share amenities like room service. This combination, he says, not only taps into FiDi’s increasing tourism and condo markets, but also provides a nice offset in case either one slows down. Although, Steven admits he’s not exactly worried about that.

“We’ve proven ourselves to be sustainable time and time again,” he told Partner Engineering & Science principal Charles Tallinger (right), who moderated the panel.

Metropolitan Realty Associates CIO Todd Bassen (in the hard hat) points to the rapid change in Manhattan’s office markets. Midtown South, once the value play, has boomed with TAMI tenants, so the solution was to just look south. When FiDi got hot, all it took was a look across the river to Long Island City. Even as bigger tenants shift from Midtown to Hudson Yards, that only presents the opportunity to revitalize Midtown’s aging towers.

“There’s always somewhere else to look,” he says. “There’s always somewhere else to build.”