Brace yourself for a captivating discussion with our special guest, Daniel Kaykov, a real estate development expert from the Renovation Group. We unravel the art behind his successful condo developments in prime locations such as Greenpoint and Williamsburg and explore his expansion into promising markets like Carroll Gardens, Sunset Park, Astoria, and Long Island City. Daniel shares his wisdom on adapting products to different markets, maintaining efficiency, and keeping them affordable for buyers amid fluctuating interest rates. We also give you a backstage pass to the construction side of things, revealing the challenges that come with excavating and laying foundations, as well as the importance of thorough planning, execution, and, above all, quality control.
Daniel illustrates these complexities with his own experiences, offering an insider's perspective that could be invaluable for anyone interested in the industry.
Follow Daniel: @renovation_group_nyc
Follow IPRG: @iprg_ny
www.IPRG.com
Brace yourself for a captivating discussion with our special guest, Daniel Kaykov, a real estate development expert from the Renovation Group. We unravel the art behind his successful condo developments in prime locations such as Greenpoint and Williamsburg and explore his expansion into promising markets like Carroll Gardens, Sunset Park, Astoria, and Long Island City. Daniel shares his wisdom on adapting products to different markets, maintaining efficiency, and keeping them affordable for buyers amid fluctuating interest rates. We also give you a backstage pass to the construction side of things, revealing the challenges that come with excavating and laying foundations, as well as the importance of thorough planning, execution, and, above all, quality control.
Daniel illustrates these complexities with his own experiences, offering an insider's perspective that could be invaluable for anyone interested in the industry.
Follow Daniel: @renovation_group_nyc
Follow IPRG: @iprg_ny
www.IPRG.com
All right, welcome back. We're here at the Realty Roundtable with IPRG and I'm joined today with Luke Sproviero at IPRG. Donald Flaherty at IPRG, this is Derek Bestrick, and we have our guest here today. Thanks for coming, daniel Kekov from the Renovation Group, I'm happy to be here. So thank you for inviting me To have you here. I guess the pretext of the conversation we just sold you a development site in Long Island City, so that kind of spurred this conversation. Sure, I have but happy to get another one done with you.
Speaker 2:I think we've well started with all the other deals that you know we did in the past about four years.
Speaker 1:Yeah.
Speaker 2:So I think in the past four years this is the fourth deal.
Speaker 3:Yeah, it's been like a deal a year.
Speaker 2:Yeah, so yeah exactly.
Speaker 5:And we even closed on a bunch of others, just things that they connect. But, yeah, definitely.
Speaker 2:So you guys have been very active. You know we're happy what you're bringing us. Yeah, we're making money and hopefully you know you guys making a good commission on the deals that you bring. That's the goal.
Speaker 1:Absolutely yeah. So we sold you a handful of development sites and your thing is building condos on these properties. So sure, it's really, it's really great to be creating housing, you know, for New Yorkers at this point, especially if they're being such a lack of supply of housing in the city.
Speaker 5:Housing for rich New Yorkers. But yes, yeah, it's like nice condos obviously.
Speaker 1:I don't know if that's considered rich. It's not rich.
Speaker 5:You know, we have a number of products like.
Speaker 2:Greenwood Heights Sunset.
Speaker 5:Park Gotcha.
Speaker 2:You know it's also like a good product for, you know, other sub markets for sure in Brooklyn.
Speaker 1:Yeah, for sure. So I think I think what you know we'll bounce around and we'll go to a lot of different stuff here, but just out of the off the top, I mean, something that has been pretty interesting for us with you is we find you I mean your buying sites in Greenpoint and Williamsburg, but then you bought in Carroll Gardens and Sunset Park, greenwood Heights, astoria. We just sold your property in Long Island City, so it's a lot of markets that you're kind of overseeing in that way, yep.
Speaker 2:So you know, as you guys know, we focus mostly on prime locations, prime markets. Our, I guess, primary market would be Greenpoint and Williamsburg. But if we cannot find anything at a good price, you know we cannot make money for our investors we would follow other markets where we can generate that return for us and for our partners. So that's basically the idea why we're following the markets. You know we're basically following the yield you can say. And obviously we're exploring other markets like Queens. We never invested in Queens. You know it's our first two deals in Queens and they stand out and we couldn't miss them. So the deal in Astoria, it was a waterfront type of a deal, you know. So it's prime location, waterfront, not a flood zone, the soil is good, no piles required, corner property. So it basically checked off a lot of requirements on our end. Long Island City also, it's a corner property, prime Long Island City, one block from ferry. So also, you know, we think that it's a good market to explore.
Speaker 5:Are you doing the same type of product in Green Point Williamsburg that you're going to do in LIC in Astoria? Is it somewhat different? So?
Speaker 2:the product is very similar in terms of quality, but in terms of size we're basically making it more efficient so people can afford the product, even with in high interest rate environments. So we're basically looking at efficiencies. Now. You know, before we used to build oversized units, high ceilings, just to stand out from the crowd. Now we're building something that's going to be efficient but still maintain the same amount of quality, you know. So basically, to stand behind our product in any market that we're dealing. Does that mean that means it's a lower price point? It's going to be a lower price point, but the same price per square foot Got it, you know.
Speaker 2:so that's why smaller units smaller units, yeah, and again efficiently designed. So you have maybe three bedroom instead of two bedroom where people, if they want to upgrade, they don't have to move out of the neighborhood, they can stay in the neighborhood and basically have the same quality of life.
Speaker 5:Yeah. So it's one thing I noticed about your units, the ones I've been in big windows, ceiling heights huge, big staircases really open. So now you're going to do a little something a little different.
Speaker 2:We're thinking because in one of the projects townhouses that we built in good market. They were all oversized and kelier. Yeah, another deals, maybe five years, so it was an expensive product, even for low interest rate environment, it would be hard to sell this is a townhouse or a condo Townhouses.
Speaker 2:So now imagine and I know some developers they continue with townhouse strategy and they ended up feeling the pinch because the rates went up. It's hard to push oversized units, so it comes to townhouses, comes the same, comes to huge, I guess, condo apartments. So you can find a buyer, but it just takes longer?
Speaker 1:Is that like a function of price point? Is there like a price point where you feel demand starts to diminish?
Speaker 2:Yep, that's for sure, at those rates and at those prices.
Speaker 1:Like at what price do you think demand starts to diminish with the current rates?
Speaker 2:So everything is comparable. It depends on the market, so you cannot say that Got it. Like in Williamsburg, if I guess the highest price people would pay to rent a three-bedroom would be $10,000. You want to make sure that when you build condos, their cost for the same condo is around $10,000. Got it? So you want to make sure that it's affordable to rent or affordable to keep.
Speaker 1:You're comparing the cost of your product versus the rental market. Similar rental.
Speaker 2:Yes.
Speaker 1:Because at the highest point of the rental market, the high water market, the rental market, you're comparing the carrying cost of your units to that. So, even though someone has to buy your unit and put down 20% or whatever, whatever it is, you're still looking at just the monthly carry of the unit compared to what else is out there.
Speaker 2:Yeah, basically it's really smart, yeah, so even if we're not going to come close to that, but if you try to come close still, people will overpay $1,000 or $2,000 to own a unit you know, luxury unit, which the value in those markets you guys know it's continued to grow.
Speaker 5:Yeah.
Speaker 2:So even people overpay $1,000 or $2,000, I don't know a month, they know that overall they make money on the unit itself. Because Greenpoint, williamsburg primarily it's a low-in-130 type of neighborhoods and before coming out with DesignMix we're looking what is the neighborhood missing? We'll go on Zillow, simple analysis, just like when you call us say I have a property, are you interested? What's the price point? Right away you go on Zillow, you know what you can sell it at and you see what's lacking. You put on Zillow 3-bedroom. You'll probably see 2-3 units.
Speaker 5:Yeah, it's not a lot.
Speaker 2:I know so. And then you look at what they're missing. They're probably missing a parking, they're probably missing an elevator. You know, maybe it's not the best finishes, maybe it's a stock of building. So you know that you can push that number better if you deliver a better product. So that's basically our analysis.
Speaker 1:You try to figure out what the market demand is that you could fill the void Yep.
Speaker 2:So one example in Carroll Gardens on Gardner Street. Gardner, yeah, if you look at this block, it was 55 by 100 that we purchased during COVID. You know we signed a contract in December 2019, we had to close April 2020. The economy shuts down April 2020. Definitely, you know. So we were still be able to close once the economy opened up in June of 2020. So, but that particular project in good markets, developers didn't touch it because from your windows, your overlooking concrete plant, recycling plant, you know. But we had to bring something different to the neighborhood where people would be able to pay top dollar, even for that block, and in Carroll Gardens, most those neighborhoods they don't have land where you can build 50 plus.
Speaker 2:So most people who build townhouses it's townhouses that woke up, so they don't have an elevator. So what we did? We basically brought in an elevator, even though it was outside of our general strategy. We tried to minimize loss factor on our buildings. We added, basically, a loss factor. We put an elevator but at the end of the day it paid off because we were one of few buildings in the whole Carroll Gardens who had an elevator compared to walk ups.
Speaker 5:It's true, it's not a lie. I mean that's, it's a big part of our business now is these existing wider townhouses that people are doing like bowtie condos and no elevator?
Speaker 3:Yeah, there's never been a situation on any of your deals where the elevator not having an elevator hurt you.
Speaker 2:It's. It didn't hurt us, but it's just tougher to sell sometimes. You have to find the right buyer.
Speaker 3:Yeah.
Speaker 2:And you know they're willing to walk up to the second or third floor of course kids. So and we find that in Williamsville Greenpoint a lot of people, you know younger people, they're more active, they don't mind walking up a few steps, you know. But there are people who come and says I have older parents and I'm thinking how, how will they walk up? So those are not obviously the buyers.
Speaker 1:Can we talk more about this? Carroll Gardens deal garnet. So you said you're looking for yield. You also said this this condo development is out front of like concrete sites and recycling sites.
Speaker 2:It's a very industrial location where you really wouldn't say it's not right in front, but I guess few blocks on Smith Street On Smith Street, right in the block, exactly.
Speaker 3:Yeah, if you haven't seen it at the other end of the block. You're right under the BQE, right there. Yeah.
Speaker 1:It's. I mean you call it Carroll Gardens, but it's got much more of like a Gowanus type of feel.
Speaker 2:I guess you know, when people buy in certain neighborhoods they look at the school districts. So it falls into Carroll Gardens school districts. Okay, you know the feeling is, yes, gowanus type, but still it's part of the school districts that people want to be in. And again, your few blocks away from what? One block away from court street, you know right. You have all the access to the restaurants. It's around the quarter for sure. The Smith Smith Street. Your one block away from the train.
Speaker 1:The train is right there.
Speaker 2:Yeah, so it's very convenient. Obviously, the area is improving. They're building like a massive development over there, I think a thousand apartments.
Speaker 1:There's so much development going on. It's unbelievable what's going on.
Speaker 2:The neighborhood will change people who bought from us. They will definitely make money on it, you know, in the long term so, but they love the product, you know, and the owners, the buyers of the buyers, love it.
Speaker 2:Yeah, we'll make sure that when we always improve this from a previous construction somebody says you know, we're like the noise we hear, we try to improve the noise factor. You know, like a soundproofing. You do that with with windows, windows between floors. We put additional mat, for example. Any feedback that we get we try to improve on the next deal.
Speaker 1:And you use that as like a sell to the, to the buyers. Being like this is like one of the added stuff that we did.
Speaker 2:We do that and it's also a reputation, you know. So, basically, whenever people come to buy from us, they they ask about us because, again, we're a smaller company. They ask to talk to the brokers, say who are these people, the brokers? With confidence, they can say they sold this, this and this condos. Go and interview these people, you know, go ask for recommendation. That's great, yeah, so we're very confident when people go and they can ask for feedback. So that's what we're trying to maintain the reputation.
Speaker 1:When you saw that Garnet property for the first time, we're like what was it about the property that got you to bite on it? Was it just like the overall price or the location? Because you know, I mean, I think just from the outside looking in. I wasn't involved in the transaction. But I wouldn't necessarily pin that as being. I mean, you bought such prime locations in Greenpoint and Williamsburg. I wouldn't like pin that as being the location where you're going to go and do your luxury condos.
Speaker 2:So you know, we built projects for other developers and we built for ourselves and, like Red Hook location, I was building for a client he's a developer, you know and he bought it in. I guess in this is Karel Garnet but he bought it on the other side of what is it?
Speaker 1:The BQE, bqe Hamilton.
Speaker 4:Yeah, you cross the school in Red Hook you cross the school.
Speaker 2:Donald, you start by once.
Speaker 3:Yeah, I know that.
Speaker 2:So you have projects behind you. That's Hicks.
Speaker 1:Yeah, hicks yeah exactly so.
Speaker 2:You have projects behind you. You have housing projects, housing projects. You know low income projects behind you. You have school right in front of you. On the other side of the block you have plumbing supply and during COVID people bought at $1,000 a square foot. I think the developer bought it at $150 at that time. He helped learn for about three years, but you know so I saw that people still buying regardless. You know they want to be in Brooklyn. They cannot afford Cobble Hill, they cannot afford Karel Gardens, so they just basically moved into a different sub market, which is also, I think, convenient for people who work downtown. You know you go through the tunnel Red Hook. Oh, it's great, yeah.
Speaker 1:If you work down here by where we I mean I live in Park Slope and if you work down here and live in that area Red Hook, karel Gardens I mean it's like a real 15 minute commute, exactly. To have a 15 minute commute in a major urban market and not be like living I mean, luke lives right here in Tribeca. That's a different story but like it's really incredible. I mean I don't, it's not a 15 minute commute because I take the train, yeah, oftentimes, which I really enjoy, but like if I got a uber home, I'm home in 15. Okay, so it's.
Speaker 2:You know you're home in 15 minutes. Yeah, I get an Uber from right here.
Speaker 1:Yeah take the battery tunnel. Yeah, definitely home in 15 minutes. In rush hours, oh, I mean, rush hour may be a little different, but yeah, not much 20 minutes. Yeah, there's never a whole lot of traffic.
Speaker 3:But anyone who lives in those areas. They picked their time to leave and come. Yeah, they know you just get a repetition.
Speaker 5:So at a curiosity. I mean you brought up good points, school districts and the blocks, not stuff. But yeah, I mean it's pretty unique. I mean, from a broker standpoint, we sell to a lot of kind of developers like we. Probably we sell a lot to the Groundup developers in Williamsburg. Greenpoint do a lot of the the boutique townhouse conversions to calm developers. A lot of these buyers are very One location, like something deviate a little bit right Like they. Maybe they do Cowboy Hill and like Brooklyn Heights and for you like doing groundup development, these bigger sites, there's obviously breast to it, but you're buying in all these different areas. So what's what? What's like? Number one reason You'll do a deal like is it the block? Is it, like you said, school district? Like what are you looking at? Because it's gotta be hard.
Speaker 2:So the main thing is the price right price.
Speaker 5:Okay, that makes sense.
Speaker 2:Okay, you know and, and then we see if it's, if we buy to this price, what? What can we deliver? Okay, in this market? What is this market lacking? You know so what? Like in on guard, that it would be an elevator in a story far away from the train station. You need parking, you know so. It depends on the market and depends on the product that we're, you know so. We constantly want to stand out from competition. We also don't want to build the same thing, that's, you know it's not selling on the market. So we're trying to Build, I guess, like a niche product where we will stand out in the specific market.
Speaker 5:So I like this. Obviously it's under contract, given close, it's not give too many details, but you jump pretty quickly on this LIC deal. We just did yeah, what about that deal when you're like this is gonna be my first LIC deal, or why'd you jump on that?
Speaker 2:So it's almost a equivalent to Greenpoint. Okay, it's like almost similar product. A location you know it's close to the water, close to the ferry water. Okay that you guys brought it to us.
Speaker 2:On Huron you know you know close to the water. You know they. I guess the market is strong. You know it's not over saturated with candle, candle projects. But also I'm hopeful that they'll build like a Footbridge. Okay, I think they're playing the night Long Island City to Greenpoint. That will boost up you know any projects or any product that people building in Long Island City. The biggest thing was a corner, corner, corner. You know which. On the corner you don't need to. What do you call Like? You don't need to excavate. Okay for parking, you can just park on the side of the building interesting.
Speaker 2:No, that's, that's huge. Yeah, like 50 footers or 25 orders. You put a parking, it goes through your Building you basically kill the first floor.
Speaker 5:That's an issue at 50s, because anything 14 years and up, yet the supply parking right, all right. So any 50 footer people are taking a big deduction for parking. So for you, you're not doing that here and we're not yet.
Speaker 2:That's why the corners. I think it has a value for everyone. Like you said, light and air laying air.
Speaker 5:I was about to yeah.
Speaker 2:I guess what you call a footprint of the building. Yep, you know, and parking is a big thing, but you know, I think the city already realizing that parking limits the amount of housing you bring to the market, so they want to wave.
Speaker 2:I saw that, I heard that you know so that's gonna be a big thing because it also goes into our Calculations how many units Doing you want to build. So on, in our 6b, for example, if you build more than 10 units, you need, I think, 50% parking After you go to a lemon really.
Speaker 5:Yeah it's a lot of parking.
Speaker 2:So now you go from 0 to 5, for example of 0 to 6 so now, obviously you can and monetize the parking, yeah, but at what cost? Correct you know. So, you know. So. That's why it's better to build 10 oversize units, then 11 smaller units or 12 smaller units. Then you don't have to deal with parking. So I think city is doing a smart thing by Uh you know waving the parking requirements.
Speaker 5:So how, in going back to like Greenpoint right, yeah, how sensitive you to blocks, right, like we did here on. But here on it's very obvious to me it's produced off of Franklin, very close to the water here on, obviously, one of those streets in Greenpoint. That's very good. But then we sold you that that site on diamond, right. So what? Why diamond?
Speaker 2:Um so one of the things that was a white a lot.
Speaker 5:Yep.
Speaker 2:Uh, we like, we liked the edges Diamond, it's not just diamonds. 47 diamond district, you know like.
Speaker 3:That makes a lot of sense, so there's always a reason.
Speaker 5:Well, that's, I think, you're.
Speaker 3:I think you're also very sensitive to zoning too. I mean any deal that we it's always r6p Relatively yeah.
Speaker 2:So on diamond, we were a little bit skeptical Buying it because we're buying it from, from a developer, yeah, so every time you buy from the developer, you want to know why they're selling. That makes sense, you know so. And we realized why they sold it, you know, because the groundwater was so high that they couldn't do parking. At that time, you know, I saw their plans. They wanted to build like 20 units, so they needed 10 parking spaces. 10 parking spaces means you know you have to take it over. So I guess they realized, and I think you guys delivered the project at cost, I think, whatever they paid, we basically picked it up from them because, uh, they didn't want to do condos, they wanted to rentals, um, so that's basically one of the biggest factors, I guess. That's what wider lot, what else? No demo required was, you know, ready to be built, and I believe we closed on it November 2019 yeah 2021.
Speaker 5:Yeah, 19 was here. I'm probably now is even for that now. So 2021.
Speaker 2:Yeah, I got a TCO. I mentioned to down 20 in November 2023. There you go two year cycle with a TCO and I guess then it was a good addition to the neighborhood. People like it. Yeah we're, you know we sold out. We didn't close yet, but we're fully sold out Above what we were planning.
Speaker 5:You're not, so you're not the first person to like diamond that people so diamond. Eckford's another street too. We for some reason and effort's a beautiful block like. I like it, but People really for condos. They're big on diamond, they're big on Eckford and they're. They're very similar streets but it's funny I've noticed that.
Speaker 2:So, uh, I think the biggest thing was aqua diamond anything close to my Karen park.
Speaker 5:Yeah.
Speaker 2:That's where the value is. People want to be close to that park. Gotcha, you know they do sports. Uh, makes sense. You know kids are running around, so and hopefully you know we're gonna make another project soon on Eckford. Okay so.
Speaker 1:Good, nice, all right. All right. So you said earlier, going back to Garnett and Hicks, um, you said One of them you said was available for 150 per buildable square foot and you saw a Hick selling for a thousand a foot. So like, like, just just taking a step back, like if something's available for 150 per buildable and it's selling for a thousand, that's like a deal where you know you can hit your yields. Is that right, correct, yeah at that time.
Speaker 2:So the developer that I built for he bought for 150, sold at a thousand square foot Mm-hmm very successful. You know nice product. So again, once I start spending in the area, people bring me deals. I saw 50 by 55, by a hundred on the other side, close with the train. Yeah, and you know the I think at that time it was a 1200, yet a square foot market projecting, projecting.
Speaker 1:So for the 300,.
Speaker 2:You know we had enough cushion to you bought it 300, 300 yeah got it.
Speaker 1:So is there? Is there like just a ballpark number for, like this, the sales value versus the price per buildable square foot? Is it like, like you want to spend a third on the land, or 25% on the land of what you project selling out at that's?
Speaker 2:I think the basic math right. People want to make a hundred percent on their equity, but now it's harder to achieve that because construction costs is higher, I guess carry costs eating it into the profits. So Now you need to make probably a hundred to hundred, twenty percent Equity, you know, and banks are not lending. So you're, you cannot be over leveraged unless you go to hard money Loans. Yeah, so you know you have to have that mix and obviously Executioner plays a big role.
Speaker 2:Are you gonna carry the loan for two years? You know, if you borrow 5.5 million dollars at 10%, 100%, I you know your problem is spent 500,000 a year over two years. That's a million dollars. You know we're In. I guess two years ago you would just have $250,000 a year expense, you know so. And also, when you come out, in which markets do you come out? Because now people also have to buy your inventory. So how long you're gonna sell? You have to basically Make sure that the turnover in sales is also quick, not just execution. You want to make sure that you price the product correctly, the right price, so you keep selling it and go on to the next project.
Speaker 1:How do you? So? You're buying these sites and it takes two years to develop. How do you like project what, where the sales market is gonna be for for condos two years out? Because you know, in the current environment we're in it. Just, I feel like there's been a lot of volatility in the market where, for home buyers, rates were, like you know, in the 2% range, now they're in like the 6 to 7% range, which you'd think would have a big impact on pricing. I'm not sure if it has, but I feel like when you're buying these sites and you're taking on a lot of market timing risk and you put in a lot of capital out and you have a lot of costs of the capital and everything Like, how do you go about projecting that and how you're gonna sell these?
Speaker 2:into the future. So, again, the biggest thing for us is inventory. Right, if you don't have Supply, the demand will will be always strong, you know, regardless of interest rates or other External factors. So that's, that's a big thing. Also, you know, I come from a financial background. I used to work on the wall street during 2007 crisis and if you guys remember what happened, you know a lot of people defaulted when the race went up. A lot of people Defaulted. There was so many, so much product on the street, you know, and we kind of have had an idea that people locked in at the lowest levels in history. Right, if they have to sell this units, you know, to somebody else at a discount, they would rather keep the property. So they're keeping all that inventory away from the market.
Speaker 3:So I have a feeling right now right now yeah, so.
Speaker 2:I was on At the same time. I wasn't ready to buy a house. I rushed to buy a house when the rates were going up. You know it's that's what yeah because I had an idea that, you know, the interest rates are gonna go up. Yeah, it doesn't mean people are gonna start selling, you know, and that's what happened a lot of the opposite.
Speaker 2:It's the opposite compared to 2000, some crisis, you know, because now you have strong loans, strong people, they can afford. In 2007, the door that those were bad loans and and people had to basically Default and or couldn't paid their mortgages. Mm-hmm. So I guess they improved due diligence on the lawn underwriting and People got the cheapest money you know. So it's Doesn't make sense to sell. They can keep it forever 30 year mortgage.
Speaker 1:You're basically betting that there's a lack of supply, which we know there is, but you're saying, in terms of housing Resales, there's gonna be a lack of supply and there's still gonna be pent up demand and regardless of where the interest rates are, you're betting, then, obviously, good locations in New York City at the right price points. The demand will just be there to carry the market.
Speaker 2:So that was our view and it played out well that you know the rates are gonna go up, people are not gonna not sell, reduce their valuation, they're not gonna reduce at the loss, they rather keep it and, you know, have the money that they have by something else in full cash. But I think what the feds did not anticipate and I think that made a mistake, they went with the rates too fast. Mm-hmm.
Speaker 2:If they would increase slowly, people would transact and you would have inventory in the market and they were so late in starting. Yeah.
Speaker 1:I feel like they're just so trailing like indicators, like what, what feels like is going on in the economy versus what they're doing. It feels like there's like a solid one-year lag, so that, to your point.
Speaker 2:You're right that they're late and in order to catch up, they did it quickly. Yeah, you know. So that's, that's what happens.
Speaker 1:And now they like froze everything up right now I mean I've seen that on the residential side but then no like start to loosen it, but it's gonna happen like a year too late. So we all had to kind of suffer through that a little bit.
Speaker 2:I feel that is a bigger risk. If rates are gonna come down slightly, people are gonna start putting their inventory to the market and you're gonna see more supply.
Speaker 1:That's your risk. Yeah, yes, that's a risk to you.
Speaker 2:Well, it's, it's. It's gonna offset, I guess, the interest rate environment. But in terms of supply, you're gonna start seeing more supply people who are holding back but they need to make a move. You know we'll start bringing things to the market.
Speaker 1:It's an interesting like counterintuitive perspective. I was speaking with the guy yesterday and we're talking, I the the forward Fed, like curve or Fed funds rate, like the forward projections that there's gonna be like four to five rate cuts for next year. So speaking with the buyer about that yesterday and I'm like, yeah, I'm like it's great, we're gonna see rate cuts. I'm like the markets coming back boom, boom, boom or selling stuff, and he's like Derek, he's like that's not good for me. I'm like I'm like why? I like it's good, there'll be more deals. He's like no, he's like right now it's good. He's like, yeah, he's like when things are tough and you know rates are high and there's not as many buyers and there's not as much liquidity, he's like I'm thriving in this environment. But he doesn't want the market to like kind of open up more because you think surprises will go back up and there'll be so much more competition.
Speaker 1:He's a developer. What kind of product? He's just buying cash flowing buildings or redeveloping rental buildings. Yeah, but like it's just. It's interesting how you have like those different views with like With how rates play into the market as a whole.
Speaker 2:So for the four developers it's slightly different, because we're looking projecting two years from now.
Speaker 2:Yeah, yeah you know for sure, for People who retail guys, cash flowing properties, you know they want to lock in, I guess, at eight cab, seven cab. Wait for the race to retreat, yeah, and they'll double the evaluation if it goes to four percent. So for them is, yeah, raise as much money as you can, buy as much properties as you can and wait for, you know, raised, that's the game for them, yeah. So which, again, it's a good plan. But what if the rates are not gonna come down? That's a that's a big risk.
Speaker 1:Yeah, I mean we look at a lot of these, these projections that people put out, and people are projecting like selling their buildings forever. They're projecting selling their buildings at five caps and you know all of a sudden.
Speaker 3:We're just not all this. Yeah, I know like now we're.
Speaker 1:We're getting these listings and I'm like in on these calls and meetings with investors and they were promised to sell it and exit five cap and here we are, like talking six north of six. Maybe even pushing seven.
Speaker 5:But so that's so. That's really it. So you guys have a two-year window because we talked about this before you came in. Today there's a lot of people like they're very sensitive to interest rates and the pricing and we've seen prices come down. But, like I said, a big part of our businesses is ground up and existing structure condo deals. Prices to me I mean you might disagree, but prices to me are just as high as they were and some markets are higher Like a cobble hill is for land and vacant buildings like like cobble hill, right, yeah, so, like I said, we saw we're selling a lot of existing structure and cobble hill, brooklyn Heights that are.
Speaker 5:You know, they have to be a certain width, it's usually 22 feet and up. The prices that we're selling deals today are Higher than they were a year ago or two years ago and I'm like how is this possible? Interest rates are as high as they've been. Yeah, the cost of construction I think everyone here knows is much higher than it was. How are they paying more? I just don't get it. I mean, the demand has to be there, obviously, but they've got to be doing some sort of projection.
Speaker 2:So I guess there's also another big component which all of us know okay you know, affordable housing expired. Yeah so all those people who used to do affordable housing doesn't make sense to build rental projects and they have to do something so they don't want to take a big project. They would buy town houses, 25 footer, turn it into condos, you know, and basically keep the price per square foot in terms of construction cheaper because it's just a remodeling project.
Speaker 2:Just remodeling, it's a remodeling project so they can go in and out quickly. You know it's a condo project in. I guess it also tight in the environment. Yeah cobble hill is very tight like very prime. Yeah. So I think that's the big factor also, because people who you didn't compete on the condos, they came into the condo market and started also, you know, becoming your competition to some extent 100%.
Speaker 5:Another thing I noticed too, another trend that makes it makes a lot of sense.
Speaker 5:But you see, you see, like Hoboken and markets like in Hudson County, but what they're doing is they're taking like a four-story, 25 footer, right, and they say, okay, how many people can really buy this entire thing for 10 or 11 or 12 million, right? Obviously there's people, but it's a smaller amount of people and I'm sure they have a lot to look at. But what they're doing is they're dividing into two. They're saying, okay, I'm gonna do two duplexes here. It's almost to have a backyard, some will have the roof, and I can find a lot of people that will do five million or four and a half and Almost have that townhouse style living in a 25 footer With outdoor space. You know, like I said, for the roof and then for the backyard. And they're finding a lot of people that are willing to spend that four and a half to five and they'll find two of them instead of Finding that one for ten or eleven million. And then it's allowing them to pay more on a price per foot Existing price per foot for these townhouse conversions.
Speaker 2:I'm not familiar with Hoboken you saying well, hoboken you see it.
Speaker 5:So Hoboken I'm not really familiar as well, but I I track it a little bit so you see the deals. There's a lot of that going on where a developer buys the entire box.
Speaker 5:Yeah, but Bell Bios 25 footer. No, not land, existing structure, but. But Hoboken's fully townhouses. A lot of our wine like 25 feet is. It's not uncommon and they're set. They're finding two buyers at two and a half or two million each. Or in Hoboken, let's say one and a half each and Sell a house for three, four million. There's tough, but to sell two apartments in that house for a million and a half, two million each, not tough. Yep, and now I'm seeing that in in Cobble Hill, broken heights.
Speaker 2:No, the same thing townhouse living.
Speaker 5:It's half the price. They do it twice and they end up in the same part, just to find one person for ten, eleven, twelve million. It's not a walk in the park in Brooklyn.
Speaker 1:No, it's Understand but, so okay. So so, going back your units, your units that you've developed or that you're coming out of, come to the market with Our prices down today from where they were a year or two ago, or they equal or are they higher. This is, for the end user, like where's the residential market, in your opinion, in terms of the stuff you're seeing?
Speaker 2:our observation that the price per square foot In the markets like Greenpoint Williams work.
Speaker 1:I feel like they're higher compare to To the markets up, even though interest rates are so much higher. So there you go. Yeah, yeah this is what Luke is talking about, where guys got a lot prices Like it's just so counterintuitive to us. We're so surprised Just to see land prices Well, at all-time highs.
Speaker 2:So what I find interesting is that you know how many land deals do you bring to the market. There's not a lot. So if you don't bring land deals, the developers cannot bring new product to the neighborhood.
Speaker 2:Yes, rare so you know, and that's what we like. You know there is a shortage of land, which means that you're not gonna compete with the next developer. Like the markets, like bet style. You know we don't go there because there's so much land. You start building and so other developers at the same time might be building next to you. Hmm.
Speaker 2:So you come out to the market, to this, to the market at the same time with a similar product, you know, and saturation rate is gonna, you know, take a while to saturate all, all that supply that you bring at the same time.
Speaker 5:It's interesting and plus to talk about size, right Like you're, you're not the only person that wants 50 feet and up. And how many are those in Blaine's burn Greenpoint Like there's? Like you count on one hand there, how many deals are actually left?
Speaker 2:It's yeah, it's harder to find. You have to be more creative, yeah, and you have to piece deals together. But I think In the past six months I started seeing more and more deals coming to the market 50 for us.
Speaker 5:Why is that? The neighbors on board like what? Why I?
Speaker 2:I guess some people realize you know rates are gonna be high and not going anywhere. We need to sell and they're selling at the market rate. You know they're convinced that we need to get out. You know it's not a cash flowing product Like we're right now in contract on 402, 404 Manhattan Avenue, a house and yeah, yeah, 54, but the same owner.
Speaker 5:I know that deal right, yeah, but yeah, they're not making any money, so they cannot keep even even they don't have any mortgage on it, for example, they're not it's not gonna make sense to keep it.
Speaker 2:and as a cash flowing property it's only a mortgage, it's only beneficial as an end user. You know, if you want to have a side yard, you want to live in that house. But as an investment it doesn't make sense. As a development they're not gonna develop themselves, so they have to sell and I guess, people realizing that they have to start making moves.
Speaker 3:Making moves, I think. I think a lot of people are realizing that Poor someone's telling them that the land prices haven't fallen either. I think they could still get the same prices and someone's in their ear saying the pricing hasn't changed that much on land.
Speaker 5:In Greenport, williamsburg. It's true, you could still get your price. If I find a self swing right now in Greenport, williamsburg that I owned, I'm not I'm not like upset about it, whereas if I owned yeah, I'd say six family in Bushwick. I'm very pissed yeah but, like, not like you're fine.
Speaker 1:It's so crazy up prices down so much in some categories and are the same or higher in other categories. You know, I, we were working on that property in Park Slope and I think even I think you were even surprised at where your numbers Were shaking out on that. I mean, is is like an all-time high price for buildable square foot that we were seeing, but yep and I guess cost.
Speaker 1:Yeah, I mean you can factor that into to the cost in terms of getting it to a piece of land, but those are really, I mean, a remarkably high price for buildable square foot, I think, and that's definitely where the market is. You're not the only one who's there on that, and yeah.
Speaker 2:But in regards to that deal it has its own risks. You know. Demolition risk, yeah, I guess a reputational risk also bringing down the church you know in that neighborhood.
Speaker 1:Aren't you doing a church deal that?
Speaker 2:no, we're doing a church deal, but we're not demolishing it, you're redeveloping it. We're just subdividing and we're getting the back out of the church.
Speaker 3:It's a pretty ugly church. I mean, it's not like it is a church. Which one are you talking?
Speaker 2:about North Fifth and you're doing that with. Well, yeah, that one is. Yeah, that's a separate.
Speaker 3:I know the bad story on Russell Street. I know like we didn't. You were close to doing that. One Didn't want to touch it because the whole community went up and picketed outside the church. So I know there's and North.
Speaker 2:Fifth is a small church.
Speaker 3:Yeah.
Speaker 2:And that one was significant. You know, it's like a landmark type of a church yeah. You know, so I feel bad even bringing it down.
Speaker 5:Yeah.
Speaker 2:So that's why one of the conditions was you know, let them demolish it and we'll buy it. You know that's what? That was a big thing for us, but price per square foot. I think what people pay for the finished product, you know, makes sense, you know you buy it, of course 300, 500 into development and you're 600, 500. Yeah, you still can sell it at 1800.
Speaker 1:1800. Yeah, is it before before? All the cost is selling.
Speaker 5:Now that you know that's because you more more.
Speaker 1:He's told you.
Speaker 5:Well, yes, but like a Brooklyn, I heard that. But like Brooklyn and Queens is different. But why Manhattan? Is the price? So, because if we see, we see sites like in the Grantsville it's all like 400 a foot and we're like crushing those like 400 foot to walk in the park. For us in Green Park, williamsburg, we just hit like 520 and North six Manhattan, even for the prime it's just so much more expensive to build there, like, why are prices?
Speaker 2:I think it's just like. I guess close of construction in the city is more expensive.
Speaker 5:It is, even though it's like close Manhattan Brooklyn.
Speaker 2:Yeah, but it's dense neighborhoods, you know it's closer and then most likely it's not our six B where you go. You know smaller density building Gotcha. You have to go 10 to 15 stories.
Speaker 5:It is you know very high density.
Speaker 2:And there's loss factor. To that Loss factor. You know the managing building in this neighborhood is harder.
Speaker 5:Yeah yeah, Our six B we hit way higher. I mean our six B price per foot are way higher than our six or six A or efficiency efficiency of the.
Speaker 2:You know like, for example, if you go more than four stories, you need double stairwell, you need an elevator. You go more than, I think, seven or eight stories, you need a hoist for construction workers. You know so now you have to introduce that as as cause. You go 10 to 12 stories, Now you need a crane. So you know so it's keeps adding up, you know so. That's why I think people still go at the and analyze the yield on the development. So it's not like people don't want to be in the city, it's just the yield doesn't make sense to develop in the city.
Speaker 5:Yeah, Like we saw. I heard about a 50 by 100 and I'm like West eighth in the village. I mean I used to live right there. I know it's a good location, a very good location. I was blown away by the pressure buildable but it was a 350. Yeah, and it was, but it was a 50 and you definitely high density. You're building on West eighth, which I know just by the trap, like I know they are pretty well like there's a ton of traffic, like good luck getting people there. So I guess there's all that plays into it, of course, but I know the sellouts there, like there's just a scarcity in the West village. What do you think?
Speaker 1:it's else for.
Speaker 5:I mean when I live there, I mean it's.
Speaker 1:Condos.
Speaker 5:I mean, I don't know, I don't know the market that well in the West village, but you're definitely for a brand new condo. You're paying $25, $35 a foot, all day. I think, and it's also scarcity. There is no new buildings over there. I was very surprised how many new buildings are coming up in the village? Very rare. It's all landmark. There's nothing. There's no land left.
Speaker 2:That's also a big thing, landmark.
Speaker 5:Yeah.
Speaker 1:It's a landmark, he said, he said 2,500 a foot is what he was projecting.
Speaker 5:So that guy who bought West eighth, so I was 350 a foot, so I was a guest and I was right.
Speaker 2:Yeah, landmark is also a big thing, you know.
Speaker 5:Yeah, they hear that that look at that. He bought for 350. So every 25 hundred. Yes. Where's he getting eaten there? I don't understand.
Speaker 2:Did he finish the project?
Speaker 1:or just bought it and there's demo demo, but demos.
Speaker 5:Demo is still a single story warehouse.
Speaker 2:Yeah, demo, but again the people have a stomach for you know, dealing with stress and dealing with a was in this dense environment, you know.
Speaker 5:I would want to build on West eighth, so that's it. It's a ton of people, ton of traffic, too late, like it's just a lot of, a lot of stuff going on. It could be another thing where a lot of people don't like to develop.
Speaker 3:Develop on McGinnis Boulevard. People just don't like eyes on your property and stop work orders, with all the things that come with that. I would think that that's expensive. It took a while. I mean that's why people don't like building on. Mcginnis Boulevard, I know for a fact. And the pollution department buildings drive, drive drive on it all the time.
Speaker 2:And if you block the lane, you know you have so many complaints at the same time People calling from their cars and start complaining. You know, sometimes it might not be you that block the cars, but they don't care, They'll call you know, this development, blocked it.
Speaker 2:We had instances like that, you know, people just complained and they cursed and they it's not us. What do you want us to do? But and this are not busy streets, you know but building in the middle of the city where you already have traffic, as traffic as it is there is construction element to it, forget it.
Speaker 5:Gotcha, that makes sense. So these size, recent in Greenpoint, huron, it's ideal.
Speaker 2:It's easy, it's you know nice. I enjoy developing in those neighborhoods. You know it's less hassle, less I guess stress when you build those markets.
Speaker 5:How much thought? I mean, obviously every developer deals this, but how much thought to these, these potential buyers, are they putting into these blocks? Like, are they going? Like ah, like I don't want to live here, it's too much traffic, or I don't want the noise, or there's too much retail, I don't want to be on a retail corridor, right, Like that has to play into it, right? So you're really thinking about like the tree line blocks, I would assume easier sell, right?
Speaker 2:And tree lines. Obviously it's ideal. You know it's quite blocks, but we didn't build the retail locations yet, like with what do you call it? Building with detail on the first floor. So we're not there yet, but eventually that's the goal Do you want to get to that point.
Speaker 5:Yeah, I would think that'd be a disadvantage, right, or what's? Why do you want to get there?
Speaker 2:There is, I guess, advantage from tax perspective. You know, I think you can get iCAP on the retail and you can keep the detail and can keep it. Yeah, and basically have cash flowing forever.
Speaker 5:Yeah, keep the retail for free pretty much when you sell the other stuff. Yeah, if you can.
Speaker 2:Two years of hassle is not a, thing, but yeah you know you, you put some sweat equity into it and obviously that's ideal. A lot of people who build bigger buildings, they love cash flowing properties, they target and they overpay for this project.
Speaker 5:Are you going to try doing that? I mean, like you brought your body on Manhattan Avenue, you could almost. It's not a great retail quarter right there, but some parts of Manhattan. You could do that on right.
Speaker 2:So we had a part of it to buy something in Manhattan Avenue. But you know you have an issue with, I guess, subway station.
Speaker 5:Yeah, subway below we're doing with that on Union.
Speaker 2:So, exactly Like we're trying to avoid any potential stress, we were already working with what Do B? Fdny, dot, ecb, now you have to work with MTA. You know, on some sites you have to work with DP environmental. So so many agencies on one project. You know it's, it's, it's a big headache and a lot of paperwork, yeah, so keep it simple.
Speaker 1:Um, I feel, I feel like it really every finger on the pulse of the market and what's going on with the economy and and also in terms of, like, capital and cost of capital and just your projects in general. But are there like, are there like key market indicators that you really track in order to like, keep on top of, I guess just I don't know the, the, the developments in general, or the sales market, or the costs of materials and stuff like, what are the main things you're constantly looking at in the market?
Speaker 2:Um, well, uh, the primary is interest rates. You know, uh, where it's, um, I guess, uh trending in which direction. So obviously you know that's that's the biggest thing. Construction costs, uh, we built a old account, was in house, you know pretty much maintain the cost and the risk of construction, but uh, regardless of that, it's the supply and everything is upward sticky. So you know it's very hard to bring the prices down for construction.
Speaker 2:So, but at the same time, if we're having uh, uh, like we're being as efficient as possible, developing something, we know that, uh, our competition is probably overpaying people who are hiring a GC, you know, who are not uh, managing uh their projects uh in efficient manner.
Speaker 2:Uh, so this is basically one of our advantages that you know. So the replacement cost uh is uh the fact that, basically, if you cannot build cheap and no one else in the market can build cheaper than you, you know. So you know that at the end of the day, you, you, when you sell your inventory, you're going to be the most uh, um, how should I say it? Um, uh, immune to the market when you sell it. So, even if you have to take a haircut on, uh, on projected sales, you're still going to do better than uh other people in the market and I guess you have more room to lower your prices to turn over your inventory. So those are basically now just to be as efficient as possible in terms of uh financing, in terms of construction and in terms of acquisition. If you got it the most efficient, you'll probably have a bigger chance to succeed when you sell your inventory.
Speaker 1:You think you think uh all the crazy inflation that we saw in terms of materials and labor. Is that, is that slowing down at this point?
Speaker 2:Uh, I guess they're, they're, they're they're, they're, they're, they're the uh, the increases slowing down, but I don't think it's decreasing.
Speaker 1:But are yeah, okay, so we're just like set at the new yeah, it's, it's it's a yeah New benchmark.
Speaker 2:Basically You're not seeing stuff come down. Okay, I guess there was some article in the news UPS workers right, they they getting paid like what? 40 for $50.
Speaker 5:Yeah.
Speaker 2:An hour, you know, plus overtime. You know, I don't, I don't think it's going to reverse that trend. Mm, hmm. So the deliveries and everything you know it's already priced in, so it's I guess it's a new setting for the environment. So we're going to be at that level.
Speaker 5:Yeah, we've heard these numbers. Like to build a building, what it costs now versus what it did and used to write a number. You said 500, right, I've heard I used. I thought maybe it's a rental. People said they could build a building for 300 a foot. But that's probably all rentals, I assume.
Speaker 2:No when I said 500, it was soft cost, yeah, you know, and a big chunk of it is uh carry costs.
Speaker 5:Carrying costs yeah.
Speaker 1:That's like such a big chunk of it. Yeah, but it's.
Speaker 5:it's a lower number than I thought you'd say for for condos, that's that seems pretty efficient.
Speaker 2:Condos would build a 300. Our product.
Speaker 5:It's good, it's yeah, so that's that's a big advantage, I think for you that's a big advantage.
Speaker 2:But regardless of our advantages, you know the market rates, paperwork, additional paperwork, additional requirements by the government violations.
Speaker 5:You know the city needs to make its money, so so these numbers were here and like these crape like we we've heard, like there's this, there's this group that does high end, you know, renovations of townhouses, and like the Upper East Side, they're throwing out like $700, $800 a foot to renovate these houses. Like how, how is that possible? Just hard cost. I mean, maybe it's hard and soft, but still that's a lot of money, right, like that's millions, I don't think it's cost of financing. No, they're not including cost of financing.
Speaker 1:They're not like architect. Yeah, Architect for sure. What's?
Speaker 5:where's the money in, like doing these high end renovations and like, even in Williamsburg, where's the money in the renovation, like where? Where's the expense? Expenses, yeah, the costs, the costs, like what's the big?
Speaker 2:number in there. So when you're renovating a small project, you know your prices will go to $500 a foot. You know, compared to building a new development, you're going to be more efficient or just going, you know, ground up. Okay. Because, for example, they, they, they have additional costs. For example, I don't know demolition. For example, we don't have that part of the calculation if we're buying land, so in that 300, we don't have demolition expense. Mm, hmm.
Speaker 2:You know, and obviously if you have a bigger footprint, bigger project, you have economies of scale, you know. So you bring one sewer for 25 footer, it goes to $30,000. Or for, you know, 100 units, you're going to still going to be $30,000. So if you divide that cost 30,000 by 10,000 square feet, it's close to $3. By 100, it's close to a 30 cents a room. You know, whatever the cost is, or elevated cost you, $10 a square foot or 20 losses for foot.
Speaker 2:So when you say you know the bigger the project, you have economies of scale which basically bring the price down.
Speaker 5:Yeah, you know, so that's that's.
Speaker 2:That's a big factor because I also priced one developer at building a 20 footer. My cost to them was 420.
Speaker 5:No, I mean, it's just we hear these numbers, like some it's mostly townhouse renovations and maybe it's because they're working with existing structure and everything's old. But like people have said, like like I've heard 3 million, $4 million to renovate a townhouse, like I just in my head and this is not your business, it sounds like, but I sort of simple, they're spending that money. I just don't get it. Like custom woodwork, like custom cabinetry, like I don't know.
Speaker 2:Listen, even the basement right. If you need to excavate or underpin the basement, increase the ceiling height of the basement.
Speaker 5:Dig it out. I'm not going to do it with machine.
Speaker 2:You're going to do it by hand. So it's a manual in terms of you know labor or do something in the backyard.
Speaker 5:Yeah.
Speaker 2:You have to bring everything through the front.
Speaker 5:Yeah, so that's additional cost. Yeah, glassing up the back of these townhomes Like that seems expensive.
Speaker 2:Expensive, lack of access, more manual work, you know so, and it's always harder to fix something than just to do it from scratch.
Speaker 5:Everyone said that.
Speaker 2:Yeah.
Speaker 5:Makes sense, rather just do it. Ground up.
Speaker 1:Yep those old buildings have issues, yep, on the projects you've done previously not in the current market, but back when interest rates were lower. Were there anythings in the units that you went for that you felt like really had a high payoff, that maybe you didn't have to do, but you went ahead and did it, like I know, like the high ceilings were like a fixture of your units and I guess maybe you lose some floor area or potential with that, but it seemed like that was a real selling point, what really helped you to get the highest prices for these units.
Speaker 2:So even to this day, we try not to cut corners. Regardless we're going to bear additional expense, but we still want to deliver the same product because historically we had a very good success and we're trying to continue doing similar products. Obviously we're switching certain products because they're more efficiently priced, but not necessarily that we're going to sacrifice on the quality.
Speaker 5:What a meta. He pays off the most the high ceilings, the window size, the appliance package. What have you done? That was a nice one. That was a 20 grand well spent.
Speaker 2:I think appliance package is very important. I think in the past projects we used subzero wolf package but there is additional issues right now with subzero and wolf. The lead time is a year and a half. How do you deliver this, even if you want to? Sometimes we need to alter the package to give equivalent like a melee package or something similar. Elevator is a big thing. Rooftops additional office space if possible, because people are still working from home In the future. People have businesses. They need that additional space where they can continue working from home because they enjoy the lifestyle of people changing a little bit. I work from home myself. I enjoy working in the office of my house rather than going to the office and spending 12 or 15 bucks or whatever Working in the office, which is a little bit lonely.
Speaker 3:You also provide everyone outdoor access as well, every single one of your units.
Speaker 2:Not everyone, but we try to again outdoor space like rooftops or backyards, whatever we can maximize Balconies for outdoor space. People have passed. Nowadays A lot of people want to make sure they have access to the backyard. Sometimes we do duplex down to extract additional value from the land which is not calculated per buildable outright. So you can get additional value out of the land.
Speaker 1:Is that calculated in the price per foot when you sell the units?
Speaker 2:I think it's probably half the value as above grade it covers the cost of foundation and you have a nice space for people to buy the unit, but it sells for discount relative to, of course, yeah, half the price.
Speaker 1:We thought that I don't know what else you guys want to go over. I just had a couple final questions. What?
Speaker 5:about storage. I think storage is a great investment. It doesn't cost a lot, you don't have to finish it, but people need storage in New York. Is that coming to?
Speaker 2:No, I have 100% agreed. So for oversized units, we have enough storage in the unit. If apartments become more efficient, we'll constantly think how people can utilize the storage in the building in one location, like somewhere in the cellar, which doesn't cost anyone any square footage, and they can still utilize that storage. So building storage also helps.
Speaker 5:The kind of building I live in. Everyone has storage. It's a small, it's six units. There's a lot of storage in the basement. Everyone has huge lockers. The basement is not finished. It's not like duplex, so they didn't spend money on finishing it. But is it better to finish these basements to let people have like a wreck area down there, or just keep it cheap and give it to them as storage? I mean, I just don't know.
Speaker 2:So when you say big storage, is it 3x3?
Speaker 5:No, it's big, it's like a closet. We put couches in there. Oh wow, pelotons in there. It's a lot of space. They saved a lot. It was a lot cheaper to do that than to finish the space and give someone duplex space.
Speaker 2:Yeah, so I think for a smaller building it doesn't make sense to make the gym.
Speaker 5:Yeah, no.
Speaker 2:Especially if you live in the city. You have access to such nice sports activities in the neighborhood. Yeah, but listen, it's always we have to brainstorm. What do we do with the rack space?
Speaker 5:Yeah.
Speaker 1:Anything else you want to go over? I'm just going to ask Dan a couple final closing questions here.
Speaker 5:I'm good, I like the stuff here. Yeah, it's been great.
Speaker 1:Really appreciate the perspective Learned a lot. So just like high level, what's like your favorite and least favorite things about what you do day to day?
Speaker 2:Favorite is, I guess, the final closing of the units. When you see the building, that's it. You know it means that somebody values your production. That's like the ultimate, that's the biggest compliment. People pay the top dollar and at the end of the day they're buying this unit.
Speaker 1:Yeah.
Speaker 2:And also talking to people who bought the units that are still happy, enjoying the units and that the resale value went up. Everyone is making money in the process by living. So that's the biggest compliment. And being friendly with all the people, that relationship with previous buyers, yeah, so that's, I would say, the biggest compliment to what we do, very nice.
Speaker 1:And how about the least favorite part of the business?
Speaker 2:The least is probably excavating. Excavating. The biggest. You know the beginning process.
Speaker 1:What's that foundation? Foundation yeah.
Speaker 2:It's because it's the biggest risk in construction.
Speaker 1:Foundation is.
Speaker 2:Well, when you start excavating the soil, because you don't know what's in there.
Speaker 5:Water levels.
Speaker 2:Yeah, you know from, I would say when you do borings, you know what the water is, you know you're hoping it's going to be much lower, you know, or cleaner. So and once you start excavating you deal with neighbors. You know neighbors are trying to come out and make sure that their building is not damaged in any way. So this is like a biggest stress, I guess, in construction you want to make sure that you know you come out.
Speaker 2:You come out because once you have a foundation, the department doesn't bother, your neighbors don't bother you. You know it's like extracting a tooth. You know the biggest thing.
Speaker 1:Well, I thought you said to your baby.
Speaker 2:So no, do be again. If you do everything right, you're not going to have issues with the OB because there is an agency there to protect people, neighbors, you know construction workers. If you do everything right, you know like they will give you a fine 10,000, 20,000.
Speaker 5:Yeah.
Speaker 2:Imagine the building settling. You know this is going to cost you too much, oh, yeah, so the OB is there sometimes today, and most times I think they probably people who are developers or contractors that don't know what they're doing. They're actually helping them to avoid these kinds of mistakes. You know and you see you probably see stall construction sites. You know they did the foundation and they cannot move forward. They're under-ordered. They didn't put proper e-bars, they didn't do proper concrete, the concrete didn't cure properly. That's why you see all the stall sites with the foundation. It's not that, but they damage the neighbor, for example. Yeah, you know so because suddenly you see a lot of like you see the green fences yeah.
Speaker 5:Yeah, you think about that. That's your biggest enemy is not enemy, but your biggest obstacle is the person with the most to lose. Right, the OB doesn't have the most to lose. This is the walk in the park for them is her job, but your building is next to someone's multi-million dollar home and they're if you mess that up, they're going to go after you because they have a lot to lose.
Speaker 5:Exactly, and that caused you headache. And that people hear that neighbors, like even the condo sites. Now one of these sites didn't sell it was a boutique deal but he found out he found the neighbors were real pain in the ass and he wasn't going to sign off on things and he was always looking and he didn't buy the deal. He's like I'm not dealing with a neighbor. He's like I have enough to deal with.
Speaker 2:Exactly.
Speaker 5:And now we're starting to hear that.
Speaker 2:So that's the biggest component. You know when you start excavating you start having those conversations with the neighbors Sometimes it's not the owner of the building, it's tenants Look out of the window and they see like a big hole. You know, or you excavated the. They didn't have us. What do you call waterproofing?
Speaker 2:Now you know they're going to be exposed to some extent, so you just have to do the right job by the neighbors you know, and make sure that when you're excavating, because it can basically wipe out the whole deal if you're not going to do something properly.
Speaker 3:Like for your answer. I mean you basically made a pool right, you enlightened it like it would do a pool right.
Speaker 2:Here. And well, that's for waterproofing. Yeah, just make sure we always try to use the best materials, like waterproof concrete, for example. As I packs, we add as a chemical to concrete. It crystallizes if there is a crack in the concrete. So, plus additional materials. So we spend more time, because once you have an issue with waterproofing, Done. You cannot fix it.
Speaker 5:I'm big on the waterproofing, yeah, the number one thing is water.
Speaker 2:So I'll tell you an interesting story on diamond seed. Yeah.
Speaker 2:You know, there were a few buyers that came and the counselor said how was your waterproofing? And my brokers has go to Daniel's buildings and see if he has any issues. And they're like no, we just lived in one development, constantly have water coming in, you know, from side, from the roof. So and we were, my broker was selling the last unit and these people end up signing the contracts. You know, they believed that. They looked, they brought the engineer and they were signing the last. We were selling the last unit and it happened to be on Sunday after a heavy, heavy rainstorm, you know. So all those people who signed the contract about three months ago or two months ago, they all showed up to the open house and walk the building to make sure that you know, because if you have a leak the developer can clean up, you know. And just before, right before the sale, and you know, let them deal later with the issues. But they came right after the storm. They saw the building is dry. Wow, smart home buyers.
Speaker 1:Yeah. That's a span of water. Water.
Speaker 5:I mean that's the biggest headache. Yeah, you gotta leave it there.
Speaker 2:Listen, people hear stories. You know they want to make sure they're not going to have one of those issues when they buy the building.
Speaker 3:Even in my building, the condo building right here in downtown Fadai, we had that rainstorm. My whole basement was completely flooded. I mean I don't own it, but like it was completely flooded. The water was coming from all over the place.
Speaker 2:No, we were completely dry and I think there was also a huge rainstorm Three, three years ago or two years ago. There's been a bunch of them. Not Sandy but like one that just rained nonstop for like an hour.
Speaker 5:That also took us out of Jersey. What was that? I forget Hurricane something it was the earth and I.
Speaker 1:I think oh.
Speaker 5:Irene.
Speaker 4:Yeah, maybe Irene, one of them Zarene. Yeah, good, that's a good quality control, so that's a big advantage for you. They put the money in there because everyone has trouble leaking.
Speaker 5:Basically, you know you're not going to have to go to the water, they're going to have to go to the leaking basements and I'm sure every developer and contractor will agree it's better to put this money now. Yeah.
Speaker 2:Than to fix that problem later. You know so because if to fix it is going to be nightmare, change the floors, you know, repaint the walls you still going to fix the roof now that you know that it's leaking? Yeah. Why not just do the right thing from the beginning and avoid those issues?
Speaker 5:All right, well answered.
Speaker 1:All right, anything else you want to go over?
Speaker 2:No, pretty good, you know. Thank you for the waiting Cool.
Speaker 1:All right.
Speaker 2:It's a pleasure, my first podcast. All right Good. Yeah, amazing, well, I think. I think we just do see how it's going to come on.
Speaker 5:It's going to come out good. It's going to be great.
Speaker 1:Yeah, I think we all learned a lot, and definitely had a good time and is educational. So good, good perspective and really really appreciate you coming in and happy that we're able to sell you so many sites and more to come, yeah definitely, we're sure we're sure and really happy to hear you describe all the successes with the sales. It's very cool, yep, thank you All right.
Speaker 2:So, daniel Kikoff, thanks so much.
Speaker 3:Absolutely. Thank you, okay, all right.
Speaker 5:Thank you so much man, thank you.