The Stoler Report with Michael Stoler: Brian Ray

0:00 Speaker 1 Good morning. This is Mike Stola for the Stolar Real Estate Report. It’s an interesting time in real estate in New York and in Miami. I have an individual who’s been very involved over the past twenty five years in all aspects of real estate. He is the managing partner at Alchemy ABR Investment Partners. His name is Brian Ray,

0:22 and he’s been a friend and he’s been on the show in the past, and he’s going to provide his insight to what’s happening in the office market, the luxury condo market, as well as retail and everything else. Brian, thanks for being here.

0:36 Speaker 2 Always good to see Michael.

0:37 Speaker 1 Okay, so let’s talk about what I’m totally surprised when we spoke the other day, the rent that you’re getting at your new property on fifty seventh Street. And I’m Billionaire’s row.

0:50 Speaker 3 Yeah, we’re very excited on twenty five West fifty seventh Street. It’s been a long time coming. We’ve been involved with the site for over six years in partnership the Cavalry Baptist Church. We actually built them a condo at the base of the office tower and delivered it back to him at the end of twenty twenty five. So we

1:08 were retaining the office tower where we have seventeen floors of space to lease, and we have an amenity floor world class, and then we have a separate retail condo which we’ve leased out to one of the top restaurant operators in the country.

1:22 Speaker 1 Is that the individual from Philadelphia.

1:24 Speaker 3 No, this is ten to five Hospitality. Our good friend Dan Daly’s. One of his top brands is called Mother Wolf, and they’re one of the top restaurants in La Miami Las Vegas, and they’re going to launch a new concept with us in New York City, which should be opened up early at twenty twenty seven.

1:41 Speaker 1 Let’s talk about the rints. In twenty nineteen when you started on this project, you were projecting one sixty maybe it’s that high.

1:49 Speaker 3 Unblended, probably a little less. So we were fortunate we had a great partner, Kane International, which is now Kane I have to mention them. Our timing was very stressful pre COVID. It was time to close a construction loan and things went sideways in New York and we were able to get through that with the help of the

2:06 Gallery Baptist Church leadership. Most wonderful people and we navigated we started building through COVID. Our timing was unique in the fact that when we were starting to buy out the project, we had all the inflation when the banks had some problems a few years ago, So our buys were higher than we projected. But one of the great

2:24 benefits and you know, interesting opportunities we had coming out of COVID was a lot of these great companies, private equity, hedge funds, law firms, family offices. They all wanted new space, they wanted more walkability, and we were the beneficiaries of that.

2:38 So we got very fortunate where even though our buys were higher than we thought, you know, rents have picked up substantially from our underwriting and we’ve been.

2:47 Speaker 1 Me most people would not believe that you have a blended rate in some of the office space as high as two hundred and thirty dollars a foot.

2:54 Speaker 3 Yeah, we’re heading north of that. We’re starting to lease up the tower. We have one of the great leasing teams in ther city, led by Mitch Consker from JLL and Christine and Cad and Turk and Christine. So we’re very fortunate with our leasing team. We’ve been grinding, very, very hard. We’ve delivered world class space views a central Park.

3:13 So if you look at our tenant mix, they’re mostly private equity and family offices and they want to be in the Plaza district and they want to have views of Central Park. We have ceiling to floor glass fourteen and a half foot ceilings floor floor to slab, so it’s great product, minimal columns. We had a great LBG

3:32 construction management firm built the building for us, great architects. We had Gensler do the interior of the amenity floor, which is truly unique and special, and we had FX Collaborative designed the building from inside out.

3:45 Speaker 1 So let’s talk about the amenity space.

3:48 Speaker 2 Yep. So we made some decisions.

3:49 Speaker 3 I mean, we had about sixty five hundred square feet of interior and about thirty two hundred square feet outside. We thought of doing a gym, We thought of different components, but we really want to to be an amenity for the building user. So we designed an amazing executive conference suite so you can come in there and have board meetings,

4:10 bringing people from around the globe. We did a catering kitchen so we have a great seating area. We have a beautiful outdoor space that’s landscaped, but most importantly it’s really catered towards conference facility, so that if the building.

4:24 Speaker 1 Works, the average space that the tenant is taken.

4:27 Speaker 3 Everybody’s taking ten thousand feet. Our last three leases that we’re either done or executing or negotiation or all multi floor tenants. So it’s been a great audience. We’re really picking up. I think by the end of this quarter we should be almost seventy percent leased, so we’re really starting to achieve some good milestones for us.

4:47 Speaker 1 Let’s talk about some of the kind of minium projects you’re working on in New York City.

4:53 Speaker 3 Well, the condos are things that are kind of in the pipeline. We’re more focused on some of the rental buildings. We’re building condos or there’s a lot of action, a lot of activity. I’d rather Restords, Kennon Joel speak to that next time they’re on your show. But we’ve been fortunate during that same downturn, with the inflationary periods and

5:11 the banks went down, we were able to buy two great sites on the Upper east Side to build rental towers.

5:16 Speaker 1 Where are they.

5:17 Speaker 3 Ones an eighty eighth and second and that building will be delivered in the fall. How many units that building on eighty eighth and second is about forty five units. It’s all fair market. It was a five parcel assemblage.

5:30 We sold off two that were existing buildings and we built along the avenue at eight eighty eighth and second, and that’s all fair market rents. Obviously, it’s a very tight market. There’s a lot of word on what’s going on.

5:43 So we’re very optimistic about where rents are. Project rents definitely north of one thirty five a foot.

5:49 Speaker 1 With one foot, yeah, so that equivalates into what for a one bedroom.

5:55 Speaker 3 One bedroom, you know, it could be you know, twelve thirteen thousand dollars a month. We have some four bedrooms three bedrooms. If you look at what we’re building, the majority of our units or three bedrooms we’re catering to that Upper east Side family that’s not ready to buy yet, that has kids in school.

6:10 Speaker 1 So how large are these units?

6:13 Speaker 3 They average you know, you know, nine hundred to fifteen hundred square feet, and then some of the bigger units are closer to you know, two thousand. But we’re excited on that building, and then we’re building another building we just closed financing with HELLBA was in the media lately on our First Avenue project, and that is a forty

6:30 five X project.

6:31 Speaker 2 That building were playing on for forty five X.

6:35 Speaker 3 Really replaced for twenty one A. I think we talked about a little bit when I was on your show last and basically it’s an affordability allowance with the tax abatement to build affordable housing. So about twenty percent of our units will call it are going to be red stabilized and the rest are fair market. So we’re excited

6:54 on that project. Very similar underwriting to what we’re going to see on eighty eighth and Second, we did a great loan with Heliba. We have another great lender of Phineas did our loan up on eighty eighth and second, they did a loan for us. We built a tower in Chelsea on twenty third and eighth. We completed about

7:12 two years ago. They were a lender there. So we like to come back and do deals with the same lenders and same partners, and we have great partners.

7:19 Speaker 1 Let’s talk a little bit about Florida. So Florida actually born in New York City, grew up in Florida, but good memory.

7:28 Speaker 3 We’ve owned buildings in Florida. We sold them post COVID. We were very fortunate we got out of our buildings at a nice profit. UH in Palmage County. UH very familiar with Miami back in my Rfar days. I was lucky enough to do some projects down there, so we had a deep set of relationships on the capital markets front,

7:45 on the leasing front, on the sales front, on the financing front. We tied up a site a few years ago Salvation Army Heart of Wyndwood, which is a very cool, gritty area. It’s like compared to Williamsburg in Brooklyn, and we’re building a their twelve story condo, one hundred and eighty six units. Our capital partners are a great group

8:06 out of Brazil called Galapakos there. I think maybe the third or fourth largest asset management firm now in Brazil. We had a great trip down there. We met their whole team, wonderful people, and it’s just a great project.

8:18 We’re opening up our sales office.

8:19 Speaker 1 And what’s the unit’s going to be selling, per Swift.

8:22 Speaker 3 About eleven hundred of foot. Douglas Eleman’s our sales agent down there. Jay Parker, Sharon Nowitzki are just a great team. We’re very excited about that. We’re opening up our sales office across from Windwood Walls, and we think our timing could be great. There’s been three or four condos that have been built of the last couple of years and

8:39 they did very well. A lot of what’s been built by a lot of New York developers is rental product and they had a much better basis than we had. We pivoted to condo again post inflationary period, so our condo underwriting is strong and you could utilize deposits in Florida, so the economics are are are strong, and we were

8:58 very hopeful that we’re going to do very well in sell the and it’s really.

9:00 Speaker 1 What are you planning to do in the future in New York.

9:03 Speaker 2 We are very active.

9:04 Speaker 3 This is the busiest we’ve ever been as Alchemy and Alchemy Properties and Alchemy be our investment partners. We’re seeing a lot of stuff. We have great partners like Carlisle and Kane and a W and Prudential and black Rock, and we have great international partners out of out of Japan and South Korea uh Dation, and we’re just very fortunate.

9:31 So we’re very busy in New York. We’re looking a lot of things we have.

9:35 Speaker 1 Would you build another office building in New York?

9:37 Speaker 2 Yeah, you know, we’ve looked at some sites. You know.

9:39 Speaker 3 We were fortunate our building on fifty seventh Street was done.

9:44 Speaker 2 It was small enough that we didn’t really need an anchor tenant.

9:47 Speaker 3 So if you look at some of the bear towers that are getting built, you know, they really need to get anchor tenants, and there’s only so many of those floating around. So we were able to build a spec building.

9:54 We got fortunate. We had a great capital partner that went. We had a great location, we had a great kind of ruckshire. There’s no base of the building, so we start at one hundred and sixty five feet I believe where the first office floor kind of sees the skyline and the park. So it’s a unique asset. But no,

10:11 we’d love to do more office. We’re looking at a lot of office. It’s still very challenging to find equity for office. The banks are I think healthy in a lot of ways, you know, as well as I do.

10:21 I think the banks are coming back in for the right assets. But we had on our office building in Midtown. We’re trying to recapitalize that one, and it’s a very thin bandwidth of equity, so we’re talking to some non traditional LPs that necessarily wouldn’t have been the buyers of office historically.

10:36 Speaker 1 So what do you project on the office to residential?

10:43 Speaker 2 You know, we’ve looked at a lot of that stuff.

10:45 Speaker 3 You know, most buildings, you know, some of the older buildings fifty sixties vintage, they’re just big floor plates, so you might have to do a light well on some other things. We’ve looked at some of the other stuff that’s getting built now it’s not our expertise. We’ve done it with Woolworth Tower, but that was unique. My partners

11:00 Kennon Joel build that unique layouts and just spectacular space. It didn’t really require like a major retrofit like some of the older existing stock does. But it’s it’s something we’ve looked at. I think that there’s going to be a lot of incentives needed by the city to vacate some of these spaces and have your taxes so high while.

11:20 Speaker 2 You do these.

11:20 Speaker 3 But hopefully the government in place is going to work with developers to create a lot more housing because Obviously New York City needs more affordable housing.

11:28 Speaker 1 So in the conclusion, I thank you are very positive on New York, definitely, Florida.

11:34 Speaker 2 And North Carolina. We’re building a project.

11:35 Speaker 1 In North Carolina.

11:38 Speaker 3 One of our partners, Blake, grew up in Virginia, knows the market well. He pinpointed a great site next to Duke University in Durham. We started building a townhouse project throughout Chemy Properties, and then we had a site to build rentals on one of the great piece of real estate in downtown Raleigh on Nash Square. So we were

11:58 originally going to build a rental tower, but as we’ve been talking about with the capital markets and inflation fluctuating, we pivoted to condos.

12:04 Speaker 2 So we’re partners with New Valley in that one.

12:06 Speaker 3 John Lunley is a great friend and partner, and we just brought in a new partner, Crimson Capital.

12:10 Speaker 2 It’s their first deal with us.

12:12 Speaker 3 So you know, we’re just very fortunate that we have great partners and great lenders, and most importantly we have an amazing team of about thirty people in the house between architects and project manage.

12:21 Speaker 1 Thanks you. Ken and Joel have done a very good job, and I project that twenty twenty six, twenty twenty seven will be great. DearS, and thanks for being here today.

12:31 Speaker 3 Thank you for having me. You’re one of the true icons in New York and have me back anytime, my friend. Thank you,