Banking Executives Outlook for 2020 | The Stoler Report-New York’s Business Report

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♪ [THEME MUSIC] ♪>>OH, CRYSTAL APPLE! 2020. ARE YOU GOING TO BE BRIGHT, DULL, OR SHINY? TODAY, I HAVE ASSEMBLED A GROUP OF BANKERS WHO PROVIDE FINANCING FOR REAL ESTATE COMMERCIAL INDUSTRY TO PROVIDE THEIR INSIGHT ON THE STATE OF THE MARKET IN 2020. MY GUEST, LOUIS ROSADO WHO IS THE MARKET MANAGER FOR COMMERCIAL REAL ESTATE FOR THE NEW YORK REGION, CAPITAL ONE BANK. JACOB WEINSTEIN IS THE SENIOR VICE PRESIDENT GROUP MANAGER IN NEW YORK AND NEW JERSEY FOR PEOPLE’S UNITED BANK. JORDAN CASELLA IS THE SENIOR VICE PRESIDENT FOR NEW YORK AND NEW JERSEY, BANK OF AMERICA, AND LAST BUT NOT LEAST, EUGENE KENNEDY, WHO HAPPENS TO BE MARKET EXECUTIVE FOR CUSTOMERS BANK. MR. ROSADO, HOW DO YOU SEE 2020? HOW WAS 2019?>>GOOD, STRONG, A STRONG YEAR. A MULTI-FAMILY, WE HAD A STRONG RUN. STRONG RUN LENDING TO THE DEBT FUNDS. THE END OF THE YEAR, IT WAS A GOOD YEAR. COMPETITIVE, PRICING-WISE, BUT A GOOD YEAR.>>WHERE DO YOU SEE THE OPPORTUNITIES FOR 2020?>>MULTIFAMILY IS ON THE TOP OF THE LIST AND IS ONE OF OUR BIG BETS.>>IF I WERE TO PUT TOGETHER MULTI-FAMILY OWNERS WITH YOU, THEY WOULD SAY THAT MULTI-FAMILY IS NOT A GOOD MARKET BECAUSE THE REGULATIONS CAME INTO EFFECT ON JUNE 14 AND HAD A BIG EFFECT ON THE STABILIZED UNITS.>>THAT IS TRUE. THERE ARE STILL PROPERTIES AT THE RIGHT LEVERAGE THAT NEED FINANCING, AND FOR US, WE DON’T DO A LOT OF ONE TO FOUR FAMILY FINANCING. FOR US, DOING MULTI-FAMILY GETS US C-RATE CREDITS. SO, IT IS A BIG PUSH FOR US.>>JJ, HOW DO YOU SEE THE MARKET?>>2020 WILL BE A GREAT YEAR. 2019 WAS A RECORD ORIGINATIONS YEAR FOR PEOPLE’S ON THE COMMERCIAL REAL ESTATE SIDE. WE ARE STILL GROWING OUR PLATFORM. HALF OF OUR NEW LOANS WE MADE ON COMMERCIAL REAL ESTATE WERE WITH NEW CLIENTS. IN FUNDAMENTALS, WE DON’T SEE THOSE CHANGING DRASTICALLY. THERE WILL BE A LOT OF BUSINESS DONE IN 2020.>>JORDAN?>>THE ENTIRE BANK MARKET HAS HAD A GREAT 2019 ACROSS THE BOARD. I SEE THAT CONTINUING IN 2020. BANKS WILL BE VERY ACTIVE, RATES ARE LOW. CLIENTS HAVE A TON OF DRY POWDER TO PUT TO WORK. WE WILL SEE TRANSACTIONS HAPPEN, BUT THAT BEING SAID, WHEN I SAY WE ARE BEING VERY ACTIVE. IT IS NOT LIKE LOAN BOOKS ARE GROWING 20%, 30%. THE DURATION OF OUR LOAN BOOK, OR ANYONE’S LOAN BOOK TENDS TO BE THREE TO FIVE YEARS. SO, JUST TO RUN IN PLACE, YOU’RE DOING A LOT OF ACTIVITY AND A FAIR AMOUNT OF VOLUME.>>I HAVE THREE PEOPLE DEDICATED TO THE REAL ESTATE MARKET. I HAVE EUGENE, WHO IS MORE INVOLVED WITH THE COMMERCE AND INDUSTRY MARKET. HOW DO YOU SEE THE MARKET?>>IT IS STILL STRONG. MOST OF OUR CLIENTS, IF NOT HAVING RECORD YEARS THIS YEAR ARE HAVING VERY STRONG RESULTS THAT WILL LEAD TO ADDITIONAL OPPORTUNITIES FOR US IN 2020. SO, YOU KNOW, 2019 WAS A LITTLE BIT OF A ROTATION FOR US IN TERMS OF DEEMPHASIZING MULTI-FAMILY, A LITTLE MORE FOCUS ON HEALTH CARE-RELATED, LITTLE MORE FOCUS ON THE DEBT FUNDS, CONSTRUCTION, WHICH WAS A NEWER VERTICAL FOR US. IT WILL BE CONTINUED GROWTH IN THOSE AREAS THAT WE HAVE PLANTED SEEDS IN THE LAST 18 MONTHS THAT WILL TURN INTO A REGIONAL AND/OR NATIONAL BUSINESS.>>A LOT OF THE ACTIVITY HAS TAKEN PLACE IN THE FAR WEST SIDE, THE HUDSON YARDS. BANK OF AMERICA HAS BEEN ACTIVE IN THE MARKET. HOW DO YOU SEE THE GROWTH OF THE HUDSON YARDS AND THE AREA AROUND THAT BESIDES THE HUDSON YARDS PROJECT, JORDAN?>>I SEE THAT AREA CONTINUING TO GROW AS MORE PEOPLE MOVE IN. YOU KNOW, THE OFFICE INFRASTRUCTURE HAS BEEN CONSTRUCTED AND CONTINUES TO GO UP. A LOT OF THESE REALLY LARGE TOWERS ARE NOW MORE OR LESS LEASED TO A LARGE COMPONENT. SO, YOU KNOW, I THINK THERE WILL BE MORE ACTIVITY, MAYBE ALONG THE LINES OF MORE MULTI-FAMILY, SOME RETAIL, AND THE QUESTIONS AROUND WHETHER INFRASTRUCTURE CAN SUSTAIN IT, WE WILL FIND OUT, BUT OBVIOUSLY, TENANTS WANT TO BE THERE. THEY ARE SIGNING LARGE LEASES AND THEY ARE MOVING LARGE EMPLOYEE BASES TO THAT MARKET.>>WHAT DO YOU SEE ON THE FAR WEST SIDE?>>WE HAVE SEEN THE RESIDENTIAL SPARKING ABOUT WITH MORE RESIDENTIAL CONSTRUCTION TO COME. WE WILL LOOK AT OPPORTUNITIES.>>YOU WERE INVOLVED WITH JEFF LEVINE IN ONE OF THE FIRST PROPERTIES — IN THE INITIAL STAGES.>>RIGHT. WE HAD SEEN ONCE THEY PUT IN THE OFFICES — LIKE YOU SAID, YOU BRING THE EMPLOYMENT, YOU WILL HAVE THE PEOPLE.>>ONE AREA AND I WOULD LIKE ANYONE TO CHIME IN ON THIS, WE HAVE BEEN SEEING A LOT OF TRANSIT-ORIENTED DEVELOPMENT, ESPECIALLY IN WESTCHESTER AND SOME IN NEW JERSEY AND SOME IN LONG ISLAND RIGHT NOW. HOW ARE THE BANKS LOOKING AT THESE DEVELOPMENTS? JORDAN?>>IT MAKES SENSE. OBVIOUSLY, THE COST TO GO RENT FOR A MILLENNIAL VERSUS LIVING IN MANHATTAN OR BROOKLYN MAKES A LOT OF SENSE, TO GO TO WESTCHESTER. THE CONCERN FOR THE BANK MARKET AND FOR THE INVESTORS AS WELL IS A TON OF SUPPLY COMING TO MARKETS SPECIFICALLY, AND I AM SURE IT WILL GET ABSORBED. IT IS A QUESTION OF WHAT PRICE POINT AND HOW LONG ARE YOU OFFERING CONCESSIONS? BUT LONG-TERM, IT IS A GOOD PLAY AND A GOOD PLACE TO BE.>>JJ, YOU LIVE IN THE SUBURBS, OK? YOU LIVE IN NEW JERSEY, NOT FAR FROM THE CITY, BUT YOU HAVE A TOUGH COMMUTE. YOU DON’T HAVE THE TRAIN. HOW DO YOU SEE THAT MARKET?>>WE LIKE TRANSIT-ORIENTED DEVELOPMENT IN THE SUBURBS. THERE IS A REASON FOR IT TO EXIST, NOT JUST FOR MILLENNIALS, BUT FOR OTHER FOLKS WHO WANT TO STAY IN THE SUBURBS. THEY HAVE REASON TO BE THERE. WE HAVE A PROJECT NOW, THEY REDESIGNED THE BUILDING A FEW TIMES FOR LARGER UNITS. NOT NECESSARILY FOR FAMILIES, BUT PEOPLE WHO WANTED THEIR FAMILIES TO COME VISIT TO HAVE A SPARE BEDROOM. WE SEE THAT AS A PHENOMENON THAT WE WILL CONTINUE FINANCING IN 2020.>>YOU LIVE IN LONG ISLAND. HOW DO YOU SEE THE EXPANSION TAKING PLACE?>>IT IS SO LONG IN THE COMING. SOME OF THESE DEVELOPMENTS HAVE TAKEN SO LONG TO BE BUILT. THESE COMMUNITIES NEEDED IT. NEW PRODUCT JUST DID NOT APPEAR THERE. IN LONG ISLAND, IT IS A RARITY AND IT TAKES SO LONG TO GET ENTITLED AND GOING TO THE GROUND. THERE IS DEFINITELY DEMAND FOR IT. WHEN YOU HAVE SO MANY PEOPLE RENTING OUT THEIR HOMES, WITH SOME PEOPLE LIVING AT HOME, DEMAND IS THERE.>>HOW IS THE POSITION OF THE BANKS TODAY WITH REGARD TO HOSPITALITY DUE TO AIRBNB? WHAT ARE YOUR THOUGHTS ON CO-LIVING? ANYBODY WANT TO BRING IN YOUR THOUGHTS ON THE BANK’S POSITION?>>WE HAVE SEEN UNIT SIZES SHRINK IN SOME PARTS OF MANHATTAN, FOR SURE. WE ARE STARTING TO REALIZE THAT THERE ARE PEOPLE WHO SPEND MOST OF THEIR TIME OUTSIDE OF THEIR LIVING SPACE WILL BE HAPPY WITH A SMALLER UNIT SIZE.>>I’M NOT TALKING ABOUT THE SMALLER UNIT SIZE. I’M TALKING ABOUT THE CO-LIVING — WEWORK CONCEPT WHICH DIDN’T WORK. WHERE YOU RENT A BEDROOM AND BASICALLY, YOU MIGHT HAVE A BATHROOM AND YOU ARE WITHIN A COMMUNITY OVER THERE? HAS THE BANK BEEN INVOLVED?>>WE HAVE NOT. OBVIOUSLY, IT IS A VERY BIG PLATFORM. I DO THINK IT MAKES SENSE IN CERTAIN CITIES, WHERE THERE IS ENOUGH DENSIFICATION. RENTS ARE SKYHIGH, BUT I DON’T SEE THAT BEING A HUGE THEME IN THE MULTI-FAMILY MARKET LONG TERM. BUT THERE IS PROBABLY A NICHE FOR IT TO A CERTAIN EXTENT. ON THE HOSPITALITY FRONT, YOU KNOW, WE GENERALLY ARE MORE CONSERVATIVE AS BANKS ON THE HOSPITALITY FRONT WHEN YOU WANT TO PUT FULL LEVERAGE ON IT, YOU CAN GO TO A DEBT FUND AND TEND TO LIKE LIMITED SERVICE HOSPITALITY MORE, OR THERE’S LESS VOLATILITY IN THE CASH FLOWS COMING FROM F AND B IN MEETING SPACE, IF YOU CAN GET AN AGGREGATE POOL OF PROPERTIES WITH DIVERSIFICATION IN MARKETS, THAT IS AN AREA WE LIKE TO PLAN.>>YOU LIVE IN BROOKLYN. HOW DO YOU SEE THE MARKET WITH REGARD TO THE CNI MARKET AND REAL ESTATE MARKET IN BROOKLYN?>>IT IS STRONG IN BOTH COUNTS. YOU KNOW? SOME ISSUES WITH SUPPLY AND HOW MUCH HAS BEEN BUILT IN A SMALL AREA, DOWNTOWN BROOKLYN ON THE REAL ESTATE SIDE, BUT WE ARE SEEING CLIENTS WITH SMALLER PROJECTS, 20 TO 30 UNITS IN SOME PARTS OF BROOKLYN, SOUTH BROOKLYN, AND HAVING A LOT OF SUCCESS WITH THOSE PROJECTS BECAUSE THERE IS A LOT OF DEMAND FOR THEM. ON THE CNI SIDE, IT CONTINUES TO EVOLVE. THERE ARE STILL A LOT OF NEWER COMPANIES IN BROOKLYN. SO, FOR US IT TENDS TO BE MORE OPPORTUNITY ON THE CASH MANAGEMENT DEPOSIT SERVICES SIDE VERSUS LENDING OR ABL SIDE. BUT IT IS ROBUST. A LOT OF PEOPLE STILL WANT TO LIVE AND WORK IN BROOKLYN.>>I KNOW THAT BANK OF AMERICA HAS MADE A COMMITMENT TO PARTS OF BROOKLYN. HOW DO YOU SEE THE OUTSKIRTS OF THE FURTHER REACHES, LIKE CONEY ISLAND?>>WE HAVE BEEN INVOLVED IN SOME LARGE PROJECTS IN THE AREA, BUT I THINK, AFFORDABLE HOUSING IS A NEED ACROSS THE METRO AREA. YOU CAN GO OUT TO CONEY ISLAND AND CERTAIN AREAS OF THE CITY, AND DEVELOP AT A CHEAPER COST THAN RIGHT HERE IN MANHATTAN. AGAIN, AS IT TIES TO THE MULTI-FAMILY THEME, WHETHER IT IS TRANSIT-ORIENTED, OR WHETHER IT IS IN SECONDARY AREAS OF NEW YORK CITY, YOU KNOW, THAT TREND WILL CONTINUE AS THE NEED FOR HOUSING AND AFFORDABILITY IS REAL AND WILL BE THERE.>>E-COMMERCE IS BIG BUSINESS TODAY. THIS IS A TWOFOLD QUESTION. HOW IS THE BANK’S INTEREST IN INDUSTRIAL AND NEW INDUSTRIAL PROJECTS BEING DONE?>>YOU HAVE TO THINK ABOUT WHO ARE REALLY THE OWNERS OF INDUSTRIAL? IS IT THE FAMILY? WHO IS REALLY CONCENTRATING ON IT? I COVER MOSTLY LOCAL SPONSORS, SO A LOT OF THEM ARE NOT IN THAT ARENA. SO, ARE WE THERE YET? THEY ARE LOOKING AT DOING DEALS, INDUSTRIAL DEALS, IN THIS MARKET HERE IN NEW YORK.>>JJ, NEW JERSEY HAS LOTS OF WAREHOUSING AND INDUSTRIAL PROPERTY. HOW ARE YOU LOOKING AT THE INDUSTRIAL MARKET, ESPECIALLY RIGHT NOW WITH THE E-COMMERCE EFFECT?>>I AM WITH LOUIS. WE FOLLOW SPONSORS THAT HAVE A BACKGROUND IN THE INDUSTRIAL SPACE. I KEEP HEARING IN CONFERENCES, YOU KNOW, YOU CAN FILL UP YOUR INDUSTRIAL SPACE IN NEW JERSEY EASILY. AND YOU KNOW, LAND IS BEING SOLD FOR $200 A FOOT AND THERE IS A LOT OF MOMENTUM OBVIOUSLY, BUT FOR US, IT WAS AND WILL REMAIN ABOUT SPONSOR FIRST.>>WHAT ABOUT RETAIL? STUDIES HAVE BEEN DONE THAT NEW YORK CITY IS UNDER RETAIL DEPENDS ON THE LOCATION. BROOKLYN IS UNDER RETAIL, QUEENS IS UNDER RETAIL, EVEN STATEN ISLAND WHICH PEOPLE DON’T TALK ABOUT MUCH. HOW DO YOU SEE IT AS A BANK, THE EXPOSURE OR INTEREST IN GETTING INVOLVED WITH RETAIL, JORDAN?>>I ECHO J.J.’S SENTIMENT. WE ARE SPONSOR-DRIVEN AND WILL FOLLOW OUR CLIENTS WHEREVER THEY GO. WE DO DEALS ALL ACROSS THE COUNTRY, BUT WE ARE BEING VERY CAUTIOUS WITH RETAIL, BUT AS YOU SAID, NOT ALL RETAIL IS BAD. YOU WALK UP 3RD AVENUE AND YOU SEE A LOT OF EMPTY STOREFRONTS. YOU KNOW? THE BANK, LARGE BANKS IN GENERAL, ARE FINANCING LARGER SCALED PROJECTS. NOT RETAIL CONDOMINIUM HERE OR THERE. AND THERE ARE SOME STRONG POWER CENTERS AND STRONG MODELS. IT IS REALLY SPENDING TIME LOOKING AT THE ASSETS AND THE MARKET, AND YOU CAN PICK UP SOME RELATIVE YIELD IN RETAIL FOR THE RIGHT DEAL, RELATIVE TO THE MULTI-FAMILY DEAL YOU ARE DOING, SO IT IS GOOD TO HAVE A LITTLE BIT OF YIELD AND PRODUCT IN YOUR LONG BOOK.>>PEOPLE SAID THAT WITH THE TAX LAWS AND THE LIMITATIONS ON INTEREST AND TAXES, COUPLED WITH THE FACT THAT NEW YORK CITY MAY HAVE TOO MANY CONDOMINIUMS, HOW DOES THE INTEREST, IF IT IS A SPONSOR, SOMEBODY YOU KNOW WITH REGARD TO DOING A CONDOMINIUM LOAN TODAY?>>TOUGHER. CONDO LOANS ARE TOUGHER RIGHT NOW. DEFINITELY IN THE LUXURY AREA, IT IS TOUGHER. I THINK THE FOREIGN MONEY COMING IN BY UNITS HAS SLOWED DOWN AND WE ARE SEEING SALES AT A LOT SLOWER PACE. UNTIL SOME OF THAT INVENTORY OUT THERE IS ABSORBED, WE WON’T GET BACK ON TO DOING ANYTHING FOR A WHILE.>>JJ?>>FOR THE RIGHT SPONSOR, WE WILL LOOK AT IT. WE HAVE NOT BEEN ASKED TO LOOK AT A LOT OF CONDO FINANCING. THERE IS TOO MUCH TO DO ON THE MULTI-FAMILY RENTAL CONSTRUCTION SIDE, ESPECIALLY IN THOSE TRANSIT-ORIENTED AREAS. WE’VE BEEN VERY BUSY WITH THAT.>>WE HAVE BEEN RISK-OFF SINCE 2016 IN THE CONDO SPACE. WE HAVE DONE SOME DEALS IN CERTAIN POCKETS. WE ARE NOT FINANCING DEALS WHERE THE PROJECTIONS ARE NORTH OF $4,000-$5,000 A SQUARE FOOT. GENERALLY NEIGHBORHOOD TYPE OF DEALS WHERE FAMILIES WANT TO MOVE INTO. WITH THAT BEING SAID, WE HAVE SEEN DEBT FUNDS FILL THE VOID IN THE MARKET, THERE’S PLENTY OF CAPITAL FOR INVENTORY LOANS, CONDO CONSTRUCTION, BUT FROM THE BANKS, I THINK FROM THEIR POINT OF VIEW, THE SUPPLY STORY IS VERY CONCERNING.>>FOR A KID WHO GREW UP IN BOSTON, ONE OF THE BIG BUSINESS IN BOSTON AREA IS LIFE SCIENCES AND THAT IS MAKING A BIG ENTRY INTO THE CITY OF NEW YORK. THEY RECENTLY BROKE GROUND IN LONG ISLAND. THERE IS A NEW LIFE SCIENCE IN WESTCHESTER COMING UP THAT WAS JUST APPROVED. HOW DID THE BANKS SITTING OVER HERE LOOK AT THAT MARKET?>>I THINK, YOU KNOW, OUR BOSS OR GROUP HAS A HANDLE ON THE ACTIVITY IN CAMBRIDGE AND UNDERWRITE THE HIGH UPFRONT COST. IN NEW YORK, IT IS A BRAND-NEW CONCEPT.>>WITH THE EXCEPTION OF THE ALEXANDRIA SITE, WHICH WAS BUILT IN NUMBER OF YEARS AGO ON CITY-OWNED LAND, THERE HASN’T BEEN ANY LIFE SCIENCES, BUT WITH WITH CORNELL AND THE CHANGES IN THE PROTON CENTER, IT IS A MARKET THAT CAN BE A MARKET THAT BANKS COULD LOOK AT.>>IN THE RIGHT MARKET, ABSOLUTELY. SAN FRANCISCO, YOU PUT IT UP THERE, BOSTON, I THINK WE WILL SEE MORE HERE IN NEW YORK, BUT I THINK, IT IS BECOMING MORE OF AN UNDERSTOOD ASSET CLASS AMONG BANKS. AND I THINK THE INVESTORS ARE LOOKING TO PUT EQUITY TO WORK IN THAT SPACE AS THEY SEE CONTINUED GROWTH. I THINK IT WILL BE MORE OF A PRODUCT, BUT IT DOES COME AT A HIGH PRICE POINT. IT HELPS WHEN THERE IS A TENANT THAT IS READY TO GO INTO A NEW GROUND-UP DEVELOPMENT.>>– SPONSORS FOR SURE.>>LET’S TALK ABOUT AFFORDABLE HOUSING. NEW YORK AND THE REGION NEEDS AFFORDABLE HOUSING. I WAS READING ABOUT FARMINGDALE AND LYNDHURST, THEY ARE DOING LOTTERIES FOR AFFORDABLE HOUSING. WHAT IS THE BANK’S POSITION TODAY WITH AFFORDABLE HOUSING? I KNOW CAPITAL ONE HAS –>>AFFORDABLE HOUSING GROUP. WE’RE STILL VERY ACTIVE IN IT. NOTHING SCARING US AWAY FROM –>>I THINK IT IS A SAFE AREA. JJ?>>IN THE NEW YORK AREA, WE TEND NOT TO NEED AS MANY OF THE CRA CREDITS AS THOSE THAT NEED THEM. WE ARE NOT AS AGGRESSIVE SOMETIMES AS OTHER LENDERS ON AFFORDABLE HOUSING. BUT FOR CERTAINTY OF CASH FLOW, THERE ISN’T MUCH BETTER THAN THAT.>>EUGENE WAS TALKING ABOUT THE BANK HAS MADE MORE OF AN INVOLVEMENT WITH CUSTOMER SPECIFICALLY WITH REGARD TO HEALTH CARE. HEALTH CARE IS SUCH A LARGE MARKET TODAY. IT IS A HUGE MARKET IN THE BRONX AND IN NEW JERSEY. WHAT TYPE OF — ARE YOU DOING?>>OUR BIGGEST PUSH HAS BEEN WITH THE SKILLED NURSING -TYPE FACILITIES, WHICH IS SOMETHING THAT WE ARE ABLE TO SCALE A LITTLE LARGER INTO LARGER DEALS WITH THE SIZE OF OUR TEAM. THAT MARKET CONTINUES TO BE VERY, VERY ACTIVE, VERY ATTRACTIVE FOR US. SO, YOU KNOW, I SEE THAT BEING STRONG AGAIN IN 2020.>>JORDAN?>>YOU SEE MORE AND MORE OF IT COMING ONLINE IN THE MARKETPLACE. IT IS A CHALLENGING PRODUCT TO SOME EXTENT TO FINANCE CONSTRUCTION-WISE DUE TO HOW LONG IT WILL RAMP UP? YOU DON’T KNOW THE DEMAND UNTIL IT IS BUILT. FOR THE RIGHT CLIENT, DEEP POCKETS, CERTAINLY, IT IS SOMETHING WE LOOK AT AT A VERY SELECT BASIS, BUT NOT A BIG PART OF THE BOOK.>>WITH THE AGING BABY BOOMER, ONE OF THE MARKETS THAT IS GROWING IN NEW YORK CITY SPECIFICALLY, MANHATTAN SPECIFICALLY, IS THE ASSISTED-LIVING. RIGHT NOW, WE HAVE A BRAND-NEW LOCATION ON 56TH STREET AND LEXINGTON AVENUE, AND THEN THERE IS A PROPERTY THAT WAS THE FORMER ESPLANADE ON THE WEST SIDE ON WEST END AVENUE. YOU SEE IT IN NEW JERSEY ALSO.>>THERE IS ONE IN MY TOWN. WITH GREAT TRANSPORTATION ACCESS. IT DOES NOT HAVE MUCH GROUND, WHICH SURPRISED ME, BUT YOU SEE PEOPLE WANT TO AGE IN A PLACE WHERE THERE IS A LOT GOING ON.>>THEY WANT TO BE NEARBY. AND THEY WANT TO HAVE THE ACCESSIBILITY OF GOOD HEALTH CARE INSTITUTIONS NEARBY, IN CASE THEY GET SICK.>>LIFE DOES NOT STOP JUST BECAUSE YOU MOVE INTO A FACILITY LIKE THAT. IT CONTINUES BEING VIBRANT.>>LOUIS, YOU SEE THAT IN LONG ISLAND QUITE A BIT?>>QUITE A BIT, WITH A COUPLE OF DEVELOPERS. I HAVE SEEN THAT AS FAR AS RIVERHEAD. IT IS DEFINITELY, THEY ARE SELLING THE HOMES, THEY WANT TO LIVE NEARBY, THEY WANT TO CONTINUE TO BE NEAR THEIR FAMILIES.>>WHEN WE ARE LOOKING AT NEW PRODUCTS AND EVERYBODY IS OUT THERE TRYING TO GET BUSINESS, WHERE DO YOU SEE, I MEAN, A COUPLE YEARS AGO, IT WAS — THERE WAS A DISCUSSION ABOUT THE OPPORTUNITY ZONES. WHERE DO YOU SEE NEW OPPORTUNITIES NEXT YEAR? EUGENE?>>WE HAVE SEEN A HANDFUL OF OPPORTUNITY ZONES. WE ARE PURSUING OPPORTUNITY ZONES FROM A DEPOSIT GATHERING ANGLE RATHER THAN A PRODUCT-DRIVEN, CONSTRUCTION SIDE. I DON’T KNOW IF THE OPPORTUNITY ZONE SORT OF HYPE HAS LIVED UP WITH WHAT FOLKS EXPECTED THIS YEAR, BUT I THINK — I KNOW THERE ARE FOLKS TRYING TO GET THEIR DEALS DONE BY THE END OF THE YEAR. THERE IS STILL A LOT — –>>ONE TOPIC I HAVE NOT DISCUSSED IS THE CO-WORKING PHENOMENON. EVERYONE SAW WHAT HAPPEN WITH THE WEWORK SITUATION AND THE DIFFICULTIES WITH THE OTHER COMPANIES IN THE BUSINESS, THE SMALLER ONES. I AM NOT TALKING ABOUT CONVENE OR INDUSTRIOUS WHO ARE RUNNING MANAGEMENT TYPE OF AGREEMENTS. WHEN YOU ARE OFFERED AN OFFICE BUILDING TO FINANCE, HOW IS THE BANK LOOKING AT IT WITH REGARD TO FINANCING, IF IT HAS A CO-WORKING COMPONENT?>>SOME LIMITATIONS. LIMITATIONS ON THE AMOUNT OF SPACE, LIMITATIONS ON WHAT THE CASH FLOW WILL CARRY FOR DEBT SERVICE. IF YOU WERE TO EXCLUDE DEBT SPACE, WHERE YOU WOULD LOWER YOUR DEBT COVERAGE RATIO, BUT YOU ARE LOWERING IT ON A LOWER INCOME. SOME RESTRICTIONS ON ADDING ADDITIONAL CO-WORKING SPACE IN THE BUILDING.>>ANYONE ELSE?>>I THINK THAT IS CONSISTENT WITH HOW THE MARKET IS VIEWING IT. THE BIGGER QUESTION IS, WHAT IS THE IMPACT ON VALUATIONS DOWN THE ROAD? CERTAINLY, CASH FLOWS ARE DRIVING THAT, BUT ARE INVESTORS GOING TO PAY A DISCOUNT BECAUSE OF THAT CO-WORKING EXPOSURE?>>JJ?>>I ECHO WITH WHAT LOU SAID. LIKE WITH ANY OFFICE BUILDING, WE LOVE DIVERSITY OF RENT ROLL, UNLESS YOU HAVE A LONG-TERM INVESTMENT GREAT RATE CREDIT TENANT. CO-WORKING IS FINE AS A COMPONENT OF THIS.>>IT LOOKS LIKE THE APPLE WILL BE SHINING IN 2020. I WOULD LIKE TO THANK ALL OF YOU FOR BEING HERE. LOU, JJ, JORDAN, EUGENE, SEE YOU NEXT WEEK. ♪ [THEME MUSIC] ♪

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