Interviews: Martin Nussbaum Slate Property Group

0:00 Speaker 1 Good morning. This is Michael Stola for the Stolar Realists. They report on the Cats round Table this morning. I have the arena of having Martin Nusbaum, who is the co founder and principle of Slave Property Group and Scale Lending.

0:13 Thanks for being here.

0:14 Speaker 2 Thank you very much for having me.

0:15 Speaker 1 So tell us and my listeners what you’re feeling of the market today, especially in light of Silicon Valley Bank, in light of Signature Bank and the other changes taking place.

0:27 Speaker 2 I mean, it’s a very unsettling time. I think we’re looking at a moment in time that’s unique and historic to a certain extent. So I think we’ve digested what I think is the worst of all of it, and I think we’re now really focused on how to take an opportunity in this market and make smart investments. I

0:47 think there will be still some fallout and some time that we need to get through some choppy water, but I think we’re ready to start looking at opportunities as opposed to being defensive.

0:56 Speaker 1 At this point, are there opportunities for buyers or sell us?

1:01 Speaker 2 The answer is is not opportunity on either yet.

1:03 Speaker 1 That is sort of very fluid.

1:05 Speaker 2 I think the opportunities that are coming are going to come for for buyers, particularly, being a seller today is very challenging. I think you’re only selling if you’re sort of forced to sell, or you have a very unique opportunity that you’re able to monetize.

1:20 Speaker 1 You’ve been very active in a number of markets. Okay, way do you see the multi family especially in light of the twenty nineteen legislation and the fact that you know, it’s very difficult to develop without four twenty one as I.

1:33 Speaker 2 Think it’s actually very good for the existing inventory that’s in the market, speaking specifically about the four to twenty one A. Without four to twenty one A, it’s nearly impossible to build new rentals. So the existing supply that’s in the market I think is going to do very well.

1:48 We have historically stayed away from any rent stabilized assets, so we’re not very intimately involved in investment investing in that space. But even that itself, I think the laws have changed, been digested. I think values have adjusted accordingly, and I think you know, I’m hearing and seeing buildings trade that are fully stabilized as well.

2:08 Speaker 1 What’s happening with the lending market, especially since you’re on both sides of the coin.

2:13 Speaker 2 It’s interesting on the lending side as a lender, it’s very challenging on the equity side when we’re financing deals. This is a moment in time where relationship lending is very, very important for us on the equity business. And we have been closing on a bunch of loans, on construction, loans, on value add reposition loans, on some which just closed

2:33 on a large transaction that was just a neutral refinance. Those are very heavily based off of lending relationships that have been long time for us and our partners. The lending pool of potential banks or private equity firms and debt funds is limited at this moment, so I think there’s a flight to quality for both lenders and borrowers.

2:55 Speaker 1 Now you’ve gone into other areas also, you know, the shelters, let’s talk about at in the affordable housing.

3:02 Speaker 2 Yeah, you know, probably four or five years ago we decided to get involved in impact investing. I think it’s been an area that myself and my partner and our firm are very focused on. There’s, as true New Yorkers, we feel as a real need to sort of help the living arrangements for homeless, workforce housing, affordable housing, and

3:23 everwhere in between. So our business has historically been a market rate residential building. We’ve expanded that into sort of the transitional housing affordable housing. It’s an area that I think New York needs a lot of help with. There’s a huge amount of demand for it a lack of supply.

3:39 So we’re focused on creating new homes, not just acquiring existing buildings. So we’re actually developing brand new transitional housing for various different components of the homeless world, as well as building ground up affordable housing in the sort of forty to sixty percent AMI range, which is appropriate to sort of help people have cost a cost of rental

4:00 across all spectrums of the market.

4:03 Speaker 1 With regard to asset classes. What’s your thought about retail, especially as an owner and also as a lender.

4:10 Speaker 2 I like the retail space. I think retail has been repriced and reset We own hundreds of stores throughout New York. I think once you’ve accepted what the market rents are, there’s actually a pretty interesting amount of new renters coming to the retail market at the appropriate pricing. That adjustment and acceptance of the new pricing has taken time, and

4:32 I think it’s actually worked its way through the market over the last ten years. It was challenged pre COVID, it became extremely challenged during COVID, and I think there’s been a reset there. I’m not afraid of the retail market.

4:44 I think it’s actually an interesting investment opportunity.

4:47 Speaker 1 With regard to the new projects, let’s talk about some of the projects, some condominiums that you’re involved with.

4:53 Speaker 2 Yeah, we’re about to break round on a really boutique, small condo project in the w village that I think is going to be a very interesting opportunity, pretty unique. We’re we’re from a condo side. We’re very focused on small, unique, class A locations.

5:11 Speaker 1 And then what prices, you know, we’ll be.

5:14 Speaker 2 In the mid two thousands, you know, in that range, depending on where the market is at the time. Like the benefit is we’re just starting the work now, so we’re really hitting the market in eighteen to twenty four months, which is, in my hope, is a better time to be doing that.

5:25 Speaker 1 Right. As a lender, where do you see the opportunities?

5:29 Speaker 2 I think there’s a for us. We’re seeing a unique opportunity to have very high qualified borrowers at much lower leverage points than we’ve historically been lending for the last five to six years. Again, I think that that’s a moment in time, sort of post all of the events that have occurred in the last sixty days. I think

5:46 that that will probably continue through the balance of this year. So we’re going to stick to what we have historically done, which is residential construction, residential conversions, bridge to completion, bridge to stability, and we’re going to focus on quality assets.

6:02 Speaker 1 Now, Yeah, one area that you really haven’t gone into is the hospitality or the industrial. What your thoughts about those two categories.

6:10 Speaker 2 You know, when we look at our business were we considered a bunch of different options when the time came to think about how to pivot it. Our business originated with the acquiring of existing multi family buildings as well as ground up of market rate. We decided to stay focused on the asset class that we really understand inside

6:27 and out and expand that business into both the debt side as well as our impact and affordable side. I like the hospitality space at a certain basis. I think it’s pretty interesting. Industrial. You know, we’ve never been involved with, so I don’t have a very strong viewpoint on it.

6:44 Speaker 1 So if do you believe other banks are going to be selling their loans since since since Signature is selling the other loans, do you think we’re going to see a focused by other banks to sell loans.

6:55 Speaker 2 I do. I think that banks are going to have a requirement from the FDIC to sort of shore up their allen sheets. So I think the way to do that is going to be through selling of some of the credit positions.

7:05 Speaker 1 Now banks right now lending, especially in light of the banking problems that we have in general, I mean, or they’re holding back.

7:14 Speaker 2 I think there’s a very big change in the requirements and the allowance of what banks are doing right now. I think most banks are not lending at this current moment. I think there’s going to be a pause in the market for at least another thirty to sixty days until the dust settles properly and the banks feel more comfortable

7:32 with sort of their bound sheets and what they’re allowed to do.

7:34 Speaker 1 And I think, as you said earlier at the start of the program, relationship lending and relationships are very important. And I’d like to thank more than dust I’m for being here today.

7:43 Speaker 2 Thank you very much for having me,