The Stoler Report with Michael Stoler: Mark Stagg

0:00 Speaker 1 Good morning. This is Mike Stoller for the Stoller Real Estate Report. Today’s show, we’re going to be talking about the Bronx and Westchester, which we have not focused in the past. So I have an expert who lives in White Plains, who does business in White Plains, does business in Westchester, as well as Riverdale. I have Mark Stagg,

0:21 the founder and the principal of the Stagg Group. Thanks for being here.

0:25 Speaker 2 Thank you. Good morning.

0:26 Speaker 1 So tell me a little bit about your company. Sure.

0:30 Speaker 3 We’re a company that’s been in business for 30 years. I started in ground-up construction, building a two-family house in the Bronx on 232nd Street. And from there, we built three families, four-story walk-ups. And finally, I built an elevator building.

0:53 And we haven’t looked back since.

0:55 Speaker 1 So when did you build the elevator building?

0:57 Speaker 3 I built the elevator building. I started building in 98, my first two-family house. And I didn’t build an elevator building until 2010.

1:08 Speaker 1 So what made the change to 2010?

1:11 Speaker 3 I brought the plans to a new architect. And I said, I want to build five, 10 families. And he said to me, no way. I’m not going to let you do it. So we ended up building a six-story building.

1:24 Speaker 1 Okay. In today’s world, what are you building?

1:27 Speaker 3 Oh, we’ve got a variety of projects in the pipeline. Westchester County, from market rate housing to affordable as well. Okay.

1:38 Speaker 1 What do you mean affordable? Affordable, I mean.

1:41 Speaker 3 Workforce housing, subsidized agency deals, 4% tax credit deals.

1:48 Speaker 1 Who’s doing the underlying deals? financing before you go to the agency?

1:54 Speaker 2 We’ve got larger institutions.

1:57 Speaker 3 You’ve got Bank of America, Citibank.

2:01 Speaker 2 Are taking the debt positions.

2:04 Speaker 1 Okay, let’s talk a little bit about Riverdale. You have one or two major projects in Riverdale.

2:12 Speaker 3 I’ve got in Riverdale, we’ve on Broadway and we just finished a great project in the Riverdale Tower about a year and a half ago. It’s an 18-story, 95-unit building.

2:26 Speaker 2 It fits right in on the avenue.

2:28 Speaker 3 I call it New York City living without having to be in the city.

2:36 Speaker 1 Okay. What type of tax benefits are you offered?

2:40 Speaker 3 That was a 421A tax benefit. We’ve done a lot of work at the as-of-rate 421A.

2:47 Speaker 2 Today, of course, everybody knows it’s a 485X.

2:49 Speaker 1 Okay, let’s talk about 485X and the limitations that are being built on the number of units.

2:58 Speaker 2 Yeah, that’s a big problem.

3:00 Speaker 3 And we don’t quite understand why they would restrict the number of units based on the pay scale. As of right builders, we have a certain way that we operate. So we’re going to take the path of lease resistance.

3:25 And when it comes to reporting, so a lot of people are taking these deals and they’re structuring either 99 units or they’re doing 275 unit buildings. So they’re getting around it. So I think it’s time for the legislature to look at that and make an adjustment.

3:43 Speaker 1 Okay. How is it? Is it user-friendly in White Plains as opposed to... Certain other parts of the city?

3:49 Speaker 3 Well, I’ve got Westchester County, you’ve got municipalities. So in the city, it’s as of right for the most part, unless you’re going to do a zoning change.

4:01 Speaker 2 A larger scale project. We’ve done very well in.

4:04 Speaker 3 100 by 100 lots. It’s the zoning in the Bronx allows us to build 70, 80, 90, 100 units. We. I have a great pre-development team. We put it in the pipeline. Within four to six months, we’re ready to go.

4:23 We have a shovel in the ground. In Westchester, with the municipalities, it’s a heavier lift, and it takes time.

4:32 Speaker 1 What do you mean by a heavier lift?

4:34 Speaker 3 Well, you have to go through the zoning may be there, but you have to go through the certain boards, maybe a city council, maybe a town planning board.

4:43 Speaker 2 So it takes time.

4:44 Speaker 1 Okay, yeah. Would you say today how it’s financing, sources of financing, from traditional banks to market rate?

4:55 Speaker 3 We happen to have a lot of experience, so I think for us it’s open arms, but I hear for the person getting started that doesn’t have the balance sheet, that doesn’t have the experience, it’s very difficult.

5:10 Speaker 1 What about interest rates, which have been going up substantially?

5:14 Speaker 3 Yeah, that’s put a monkey wrench in the wheel. And on the larger scale projects, if the needle, it’s going to move the needle with a point, point and a half, two points. That’s why I think we’ve got to be very concerned about, it hasn’t affected prices yet, which is interesting on land prices. We thought that would affect land

5:42 prices to make up for it.

5:44 Speaker 2 But we haven’t.

5:45 Speaker 3 Land prices have stayed steady. So it’s kind of an interesting phenomenon what’s happening.

5:50 Speaker 1 What about retail, especially in the Bronx and White Plains?

5:54 Speaker 3 I think retail, where retail is needed, I think it’s going to perform. I think the public still wants retail. They want those basic services.

6:02 Speaker 1 What about the hospitality industry?

6:06 Speaker 3 I think that as well. People want to go out. They want a place to stay and a place to be entertained.

6:15 Speaker 1 Okay, are you going to come into the other boroughs? I am.

6:18 Speaker 3 I actually, we just finished a project in Astoria, 68-unit building. We’re breaking ground on a 72-unit building in Astoria as well, Hoyt Avenue.

6:30 Speaker 2 We’re excited to do that.

6:33 Speaker 3 We’re about to break ground at 800 units, a two-phase project in White Plains. We’re just finishing up phase two. of an affordable housing. The first phase is 99% rented. We started the job in January of this year, and we expect to finish in the first quarter 251 units of subsidized housing.

7:01 Speaker 1 Okay. What price will the apartments rent for?

7:04 Speaker 2 Depends on the AMI.

7:06 Speaker 3 If you take a 40% AMI, you’ll get a one-bedroom for $ 850. Okay.

7:12 Speaker 1 You’re working with what type of nonprofits?

7:17 Speaker 3 Oh, we work with many nonprofits. You know, I thought when we got into the business, I was getting into the business of housing. The more and more I learned, we’re not in the business of housing. We’re in the business of people. That’s who we’re building this housing for.

7:35 And shelter is very important. And to be able to build for the less fortunate, On the lower AMIs, it never gets old.

7:45 Speaker 2 Never gets old.

7:46 Speaker 3 To see a single parent and the child walk into that new home and run into a bedroom and say, this is mine. That keeps us going. It’s not always about the X’s and O’s, where the numbers on.

8:01 Speaker 2 The balance sheet work. People have a love affair with new construction. Who wouldn’t?

8:06 Speaker 1 What’s happening in Yonkers?

8:08 Speaker 3 Yonkers, we’ve got a few interesting projects in Yonkers. We finished two market rate buildings there. We have in June of next year on Yonkers Avenue, we’re calling it a gateway project, 153 units. There were dilapidated houses there. It was heavy rock outcropping, not very sightly. We’re going to improve the sight line in the gateway. Mayor Spano and

8:36 the- team are very excited in the city to welcome this new project which will be a gateway project we’re also going to do there’s an adjacent park where we’re going to do some improvements in the park and that’s the fun stuff we get to take a ball field that’s dilapidated we get to improve the dugouts put new

8:57 lighting put new turf new fencing and that really excites us at Stag Group to do those things.

9:05 Speaker 1 So how do you look for the end of the year in volume and everything? We’re presently.

9:15 Speaker 3 Touching 6,000 units of built, owned, and managed. We have another 3,000. To 3,500. Units in the pipeline. So we’re very bullish. We’ve got a lot going on. We have over 500 employees now. And it’s a big responsibility, but somebody has to do it, and I’m passionate about what we do.

9:40 Speaker 1 And I’m very happy that I have you today to talk about interesting topics which have not been focused on the show. Thanks again.

9:48 Speaker 2 Thank you very much. Thank you for inviting me.