Interviews Jeffrey Levine, Chairman, Douglaston Companies, Douglaston Development

0:00 Speaker 1 Good morning. This is Michael Stoler for the Stolar Real Estate Report on the Cats Around Table this morning. I have one of the most active developers in the city of New York, Jeff Levine, who is the chairman of the Douglaston Companies, which include Douglaston Development, Lavine Builders, Clinton Management, and a couple of other entities. Jeff, thanks for being here,

0:19 Thank you for having me. Okay, Jeff, you are a vertically integrated company. Explain to me what that means.

0:27 Speaker 2 Well, as you know, we are developers, and as developers, we also have a wholly owned construction entity, Levine Builders, as well as a wholly owned property management entity, Levine Builders. So we construct it, we develop it, and we manage it.

0:44 Speaker 1 Okay, with all the life cycles in the periods that you’ve seen, how would you compare this cycle to the past recessions and the other cycles that have taken place in the past forty five years that you’ve been in business.

0:57 Speaker 2 I often say that being in the real estate develop element businesses not for everybody. Obviously, the cycles can take many of us, and as Warren Buffett often says, the downturns can tell you who swimming aked the reality is that I have seen downturns ranging from the savings alone scandals of eighty six to the results of the terrorist

1:22 attacks of nine to eleven in two thousand and one onto Libman, onto COVID, and now most recently, in addition to the bank failures we’ve just seen. The fact of the matter is the finance markets have simply left the building.

1:36 Speaker 1 Now you’ve recently secured financing for a couple of projects, let’s talk about the financing. Absolutely so.

1:43 Speaker 2 We are active in New York City in a number of various enterprises. We do quite a bit of affordable housing and have worked extensively with the various agencies of New York where the phbdhdceedc of the State Housing Finance Agency, and we are producing both low income housing, senior housing, affordable housing of all types, as well as housing for

2:12 homeless and shelters. We are also active in the mixed income category, where we just completed one of our largest projects, which was three eleven Eleventh Avenue over at the Hudson Yards. Now, because of the very high interest rates we’re experiencing, rents have been moving up appreciably because people are choosing in this environment, not to buy, but to rent, so we’ve

2:36 rented over seventy percent of that building in the first ten months at rents that approach one hundred thousand foot, which are virtually the high watermark for New York City. In connection with the jobs we have recently closed, we were able to purchase a property on Atlantica Avenue in Brooklyn, which has the benefit of the Affordable New York for

2:56 twenty one a, which gives you a taxi pavement consideration with delivering roughly thirty percent of the units affordably. This was a project that we bought which has a time clock of expiration because you have to complete it by June of twenty six in accordance with the regulations, and we are actively building it. It was a tough closing

3:16 because we closed the deal going into the summer. If you recall at the end of May, you had not only the debt ceiling limit problem, you also had the failure of the banks as well as rising interest rates.

3:32 So neils to say lending institutions were getting a little bit squeamish. But we were fortunate to close it because we are in the business over forty five years. We have an unblemished track record, and we were working with some very good quality institutions, specifically Wells Fargo and M and T Bank. We are in the ground with that one,

3:51 and we are closing other affordable projects at this time as well.

3:55 Speaker 1 You’re doing a lot of senior housing. Explained to me and my audience, what you what do you mean by senior housing.

4:01 Speaker 3 Well, there’s a wide gamut of senior housing.

4:03 Speaker 1 I’m talking about it. In New York.

4:05 Speaker 2 Our senior housing basically is comprised of two types. We build under HUT financing the two or two seniors, very often in association with not for profits, and then we also build the SARAH project, which is a state finance method for building seniors at low income. We recently completed one such project in the Cview section of Staten Island.

4:29 We’re about to begin another as soon as we can close. We are also partnered in then RFP that was held by the state for the Vital Brooklyn program.

4:38 Speaker 3 We have a partnership with Breaking Ground where.

4:41 Speaker 2 We’ll be building over one million square feet, which will include not only low income housing under the ELLA program, but senior housing under the SARAH program as well as supportive in shelter housing.

4:53 Speaker 1 Now what type of income can these people have to be in these programs? Fordy.

4:59 Speaker 2 Typically the lowing projects run anywhere from forty to eighty percent of.

5:03 Speaker 1 AMI AMI is what one hundred and eight thousand.

5:06 Speaker 2 Depending upon the number of people in the family, it can be as little as seventy five as I recall, and as high as one hundred for a larger family.

5:16 Speaker 1 What about your thoughts with regard to how our governor and mayor are working on taking.

5:22 Speaker 3 Care of this question.

5:23 Speaker 2 There’s no question that both are Mayor Eric Adams and our Governor Kathy Hokeel are showing leadership in the housing area, both of whom are singing the right song and indicating that we have a housing problem and the way to get out of the housing problem is to build into it.

5:39 They need some help though, from our city Council as well as our State Assembly and State Senate, and I think people are starting to get clearer heads on how to proceed.

5:48 Speaker 1 Okay, with regard to you have a number of projects in Brooklyn, including one where you once lived in the neighborhood, the Linden Houses.

5:55 Speaker 3 Yeah, I’m very proud of that.

5:57 Speaker 2 So there are some projects in forty five years of being a business that stand out. One such project which you did not mention, was after nine to eleven, I had the opportunity to reconstruct the ninety West Street an office building which was converted into housing under the Liberty Bond program. The building was structurally and cosmetically impacted by

6:19 the collapse of the trade centers. It was a building that was designed by Cass Gilbert back in nineteen oh six as a precursor to the Woolworth Building, and it was my privilege as a patriot and a builder to restore that building. The project you’re talking about now is the Linden Houses in East New York Brooke and where

6:37 I lived as a child and started to attend public school. I, in partnership with the New York City Housing Authority under rad Packed program, am currently renovating those buildings, eliminating the lead, eliminating the asbestos, putting in all new mechanical apparatus ruse pointing so that people can live in dignity and quality in the New Yorks City Housing Authority, and having lived

7:01 there as a child, having the opportunity to do this for the next generation is extremely fulfilling.

7:06 Speaker 1 Now what are you doing in the Kingsborough Kingsboro Psychiatric Facility.

7:11 Speaker 2 Well, the Kingsborough Psychiatric Facility, as I mentioned, was part of the Vital Building Vital Brooklyn program. We’ll be building over a million square feet there of both low income housing, senior housing, shelter housing, and supportive housing breaking ground. The wonderful provider of social services all over in New York City is our partner there and we hope to be

7:31 breaking ground there as soon as January.

7:34 Speaker 1 What about the financing on that type of Well.

7:37 Speaker 2 Again, financing their affordable housing has many sources of financing. This job in particular has access to state financing. Banks are subordinate and therefore happy to be in the job because it excuse me, and they are a senior to this financing which is available by the state.

7:55 Speaker 1 Okay, with regard to I remember many times you’ve said to me, there’s no way I’m going to go into a condominium development that’s changed recently. What how come you’ve changed that you want to be back in the co opate.

8:11 Speaker 2 Well, I can tell you that rental housing is, in my opinion, a way to go, because I always say that if the market doesn’t support you, when you get, there is always a fresh crop the next year when markets change.

8:25 Speaker 3 The condominium is.

8:26 Speaker 2 A perishable product if the buyers aren’t there for psychological reasons, for reasons of the economy of interest rates.

8:33 Speaker 3 It sits there.

8:34 Speaker 2 And not only do you have to pay your debt to the bank, but if you’re complete, you have to pay maintenance charges, taxes, so they can, frankly speak and eat you up and spit you out. So generally speaking, I have avoided condominiums, although as you may recall, I have done well with condominiums and different cycles. Having done that,

8:51 I remember the Third Streets twenty third Street back before the Lehman crash. We did extremely well, and there are other circumstances where I have not done as well. Having said that, I look at this market where people are hesitating to buy right now because of the uncertainty of the rising interest rates and the lack of available financing.

9:13 I believe that in two to three years, when a condominium project which could begin now is delivered to the market, there will be a great demand for a family size product on the Upper East Side of Manhattan.

9:26 Speaker 1 Okay, one last question with regard to conversion of office buildings I know what you did downtown, but what about it today? What’s your thoughts about conversion of office buildings into residential.

9:37 Speaker 2 Well, if you may recall, I started in the business working for a developer of the name of Herdmandel back in the seventies.

9:43 Speaker 3 I’m embarrassed to say Herd.

9:44 Speaker 2 Mandel under the J fifty one taxibayment, took vacant buildings of many different types, including the Brewclaws, Bruce Shield buildings, old hotels of Paris Hotel and converted them into residencial use. Most important was that you fifty one tax abatement. Today, office properties, some warehouse properties can be bought rather effectively, but unless we have a tax abatement, and again coupled

10:10 with the particular physical shape of the buildings, the location of the elevators, the stairs, the depth of the building, you get very inefficient units, very often in a conversion of an existing building to a multi family rental, and you have to factor that all in.

10:26 Speaker 3 So it’s not impossible, but it’s not easy.

10:30 Speaker 1 Okay, it’s not easy to be a developer and successful operator for forty five years. But I’d like to thank Jeff Levine for being here. Thanks you again, thank you