Interviews Ofer Cohen, Founder, President & CEO of TerraCRG

0:00 Speaker 1 Good morning. This is Michael Stola for the Stolar Realsied report on the Katsum the TV’s Roundtable this morning. I have the opportunity of having missed the Brooklyn the man involved with most of the investment sales and the entire development scheme in Brooklyn Ofacone, who is the president and founder of Terra c RG. Thanks for being here today.

0:18 Thanks for having me, Michael, So tell me how you look at it. You know, as you’ve been on my TV shows and we’ve discussed the crystal ball at the end of the show or at the beginning of the show, how do you look at the crystal ball when you recently came out with on a press release that investment

0:34 sales are down in Brooklyn’s what’s happening?

0:36 Speaker 2 So, I mean, I think you have to look at the Brooklyn market. You have to look at the historically what has happened. Right, So, when we started tracking this market in twenty ten, there was one billion dollars worth of investment sales transactions. Investment sales for those of you who don’t know includes you know, apartment buildings, retail buildings,

0:55 industrial buildings, development sites. Land market in twenty ten was just coming out of the recession, it was a billion dollars worthrough transactions, and twenty fifteen it peaked with almost ten billion, and then it was kind of hovering between six and seven billion for a few years. During the pandemic, which was obviously a down year in terms of transactions,

1:15 it was four billion dollars. And the reason I’m mentioning that is because while volume tends to go down and challenging economic times or challenging times in general, the average transaction in Brooklyn and the value of real estate in general quadrupled during this period, right in that decade between ten and ten and twenty twenty.

1:38 Speaker 3 So in twenty twenty.

1:39 Speaker 2 Two, however, we had a record year again in Brooklyn, ten billion dollars worth of transactions, tenfold from twelve years earlier.

1:49 Speaker 1 Do you give this the pent up demand?

1:52 Speaker 2 Yeah, so there was definitely pent up demand and was the tail end of a low interest rate environment. The last two quarters of twenty twenty two, you know, there was still closing of transactions that were originally at the beginning of that year, a tremendous amount of capital that was sitting on the sidelines in twenty twenty two, kind

2:15 of jumped in in twenty twenty one. In twenty twenty two, there was also, you know, the expiration of the four to twenty one a program that people rushed to acquire residential residential zone land towards the end of twenty twenty two to take advantage of the last days of that program.

2:31 Speaker 3 That program sunset.

2:33 Speaker 2 Was June fifteenth of twenty twenty two, about a year ago, so that was.

2:39 Speaker 3 Another reason for that peak.

2:41 Speaker 2 But you know, as you as you may know, the first quarter of twenty twenty three, that was significant decline, almost seventy percent decline in volume, you know, across the board, right across the board, all asset, all acid types, and we attribute that mostly to the interest rate environment that changed rapidly over the last nine months.

3:02 Speaker 1 Okay, you’ve recently been involved with this project on Atlantic Avenue, tell me a little bit of that it.

3:07 Speaker 2 Yeah, I mean, we we assembled the site started twenty eighteen, twenty nineteen, assembled a very large side on Atlantic Avenue between Franklin and the class Own Avenue, and went through the public process to rezone it from industrially zone land and one to one to a higher density residential project with a significant portion of the apartments mandatory inclusioner housing,

3:42 which is affordable, a permanently affordable apartment. So this is a project with thirty percent of the apartments are affordable, so a hundred and thirty seven apartments that are affordable. This isn’t bed Stye bet the Stayvesant that that project alone doubles the amount of before housing units that was created in this neighborhood for over a decade.

4:05 Speaker 3 One project.

4:05 Speaker 1 Let’s talk about you know, what’s happening in Williamsburg. I remember being at the groundbreaking in like two thousand and six for one of the first development’s major developments. Today we have Hermes. Yeah, Williamsburg.

4:21 Speaker 2 Williamsburg has really gone through tremendous transformation over the last at this point almost two decades.

4:31 Speaker 3 You know, while the residential development.

4:33 Speaker 2 Side of Williamsburg is sort of like fully developed, like the waterfront is fully developed. There’s a couple of new projects that are coming that our friends that Two Trees are developing, the Domino Sugar factory, that whole Meni neighborhood on the southern side of the.

4:50 Speaker 3 Willes Bridge, and one more project.

4:53 Speaker 2 But for the most part, the residential has already developed and what we’re seeing, like you’re saying, we’re seeing retail complete r transform.

5:00 Speaker 3 So Madison Avenue, retailers are coming to.

5:05 Speaker 2 The area around Bedford, Bedford Avenue and Willnensburg, So Gucci and Hermez and some of these other tenants. And if you walk there during the week and during the weekends, I mean it’s the retail is doing really, really well.

5:17 Speaker 1 We’re seeing a number of colleges and universities active in Brooklyn buying and selling their property.

5:23 Speaker 2 What do you yeah, I would say the most significant there’s just two unif Downtown Brooklyn has been a district that I’ve been very involved in. I’m the culture of the Doctor Workland partnership that two big institutions in downton Brooklyn LU and most recently NYU and School of Engineering.

5:44 So NYU made a tremendous amount of investment, you know, in the last twelve to eighteen months in the district, most recently with the acquisition of a building in Metro Tech. And we’re excited about it in Brooklyn because you know, we think that the partnership with academic institution and engineering schools like n y U provides a pipeline of talent

6:11 that could really fill in those jobs for the tech companies that are proliferating and areas like downtown Brooklyn and Williams boring in Dumbo.

6:21 Speaker 1 Right, you also have the Saint Francis College.

6:24 Speaker 3 So that’s right.

6:26 Speaker 2 So San Francis h San Francis has been marketing their site in Brooklyn Heights for a couple of years. Rocros ended up buying it. They actually moved their campus to the Wheeler which is the Tischman Spire building. Tishman acquired and developed this originally owned by Masis site. So it’s partially a new construction, partially a renovation for the older

6:50 people just want to Abraham and Strauss and you know Tishman originally thought about this building, conceived this building, that that commercial portion of this building as an office building. But I’ve recently visited the campus the new San Francis councils.

7:07 It’s remarkable, it’s a it’s a really it’s a really nice project. And also we’re very excited that the rock was he’s taking the lead on the old campus because that that’s just that’s unbelievable location, the campus, historic buildings in the middle of Brooklyn Heights. It’s it’s it’s it’s gonna be fascinating to.

7:27 Speaker 1 Is Brooklyn becoming the gym capital of the city of New York with a lifetime fitness and now the Chelsea Piers.

7:34 Speaker 3 Yeah, I mean so it’s true.

7:35 Speaker 2 So I mean it’s it’s I would I would categorize it as, uh, you know, Brooklyn. The demographic in Brooklyn is changing, and there is significantly more need for a man.

7:50 Speaker 3 It is, and especially with hybrid.

7:54 Speaker 2 Modes of work where people might not spend their time commuting and there they work more close either at their apartments are close to where they where they live. You know. So Chelsea Piers just opened last week, a brand new facility in Prospect Heights, actually across the street front office.

8:12 So I think it’s around eighty thousand square feet. It’s beautiful. It’s already very very busy. But that’s just in context. I mean, this is just showing you the depth of of of how active and how populist Brooklyn is as its own city. Right, It’s over two and a half million people. It has its own vibrancy, it has its

8:36 own economy, it has its own energy and look at you know, I go to Whackman supermarket in the Brooklyn Navy Yards and any any day of the week, anytime of the day, the parking lot is completely cool.

8:49 Speaker 3 And so it just shows you.

8:51 Speaker 1 It’s like when ahull of Food’s open, right, but.

8:53 Speaker 2 Say, guess what, Whole Food is still the parking lot is still full, and there was a need.

8:56 Speaker 3 Round one hundred big, amazing big grocery store.

9:00 Speaker 1 What about the office market.

9:02 Speaker 2 So the office market in Brooklyn has always been a small and medium sized tenet market, and we’re continuing to see that even coming out of COVID. So the that market of the you know, smaller twenty five to one hundred employee companies are continuing to be in Brooklyn, continue to sign leases and also different forms of of of

9:28 not just office, but hybrids of office and manufacturing like we’re seeing in Industry City and the Brooklyn Navy Are These are two industrial complexes that are are doing really, really well. And it shows that the strength and the advantage of those those combinations of manufacturing and office for Brooklyn.

9:47 So Brooklyn doesn’t have the availability of.

9:52 Speaker 3 Older stock class B office buildings.

9:55 Speaker 2 That you know we’ve seen in Manhattan, and there’s there’s there’s only a handful of of brand new office buildings that are still seeking large tenants. But for the most part, there’s it’s not such a you know, terrible office marketing.

10:08 Speaker 1 So, as I said a little while ago, I think my apple is very shiny and clear for Brooklyn. Okay, we may have had a burp based on the interest rates and some of the things, but I think Brooklyn is going to continue. They are going to be developing sides.

10:22 You had mentioned that you’re doing more with Exi Mobile, so there’s definitely they are. And the King of Brooklyn and my friend over here Ofacone, thanks for being here today.

10:32 Speaker 3 Thank you, Michael