A Tale of Two Cities — NYC Real Estate, August 2026

Derek Bestreich, Adam Lobel and Luke Sproviero on a New York market running in two directions at once. Development sites, free market buildings and townhouse conversions are trading at all-time highs — while rent stabilized product gets hit harder every quarter, with 20-unit buildings selling for $1.3 million and owners sitting on apartments they can't afford to rent or leave empty.

The conversation covers the international bid and where Japanese capital is going next, why extend-and-pretend is finally breaking at the bank level, what happens when an owner can't produce the receipts behind a $5,000 rent, the office market's return from the dead, and what the industry is and isn't doing about any of it.

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Transcript

Welcome And Summer Market Check

Derek 0:00

Alright, welcome back. We're here at the real estate roundtable with IPRG. There's a little bit of a break there, but we're back into it. It's August of 2026, and I'm joined with Adam Labelle.

SPEAKER_03 0:12

Hello, Derek.

Derek 0:13

Welcome, Adam. Thanks. Luke Sproviero. How you done? We need the nicknames for you guys. Yeah. But anyway, this is Derek Vesterick, and we're here to talk about what we're seeing in the real estate market in New York City at this time in the summer of 2026. So how you guys doing?

Luke 0:31

Doing well. Trying to uh keep busy and find the product that people are buying, because as I'm sure you're gonna get into, there's things that are a lot of people are looking to buy, and there's things that not a lot of people are looking to buy. Yeah. Yeah, so it was going. How's the summer going? Summer's going well.

Derek 0:48

Yeah.

Luke 0:48

Trying to stay out of the city as much as I can.

Derek 0:50

Oh yeah?

Luke 0:51

Yep. That's good. It's not the best place to be in the hot summer.

Derek 0:56

Yeah, there's elsewhere that's nice to be hot. And uh a lot of people get out of town on the weekends. So it's very true. Kind of strange in the summer of the city. For sure. Adam, how about yourself?

SPEAKER_03 1:05

How you doing? Oh, good. Things are good. I mean, we had a uh we had a been having a really good summer, uh heading down to St. Louis uh tonight to spend uh see my dad's 75th birthday, celebrating with my family. And uh yeah, summer's been good. It's been relatively active and you know, we're staying busy.

Derek 1:20

So yeah, no, I know you wanted to touch on this, we'll touch on it briefly, but the the sales have been pretty strong. Activity's been strong. We have a night we we closed out a lot of properties in the first half of the year. Yes. Great looking pipeline going into the second half of the year. So um I guess that's a little bit of what we want to talk about here. Not not too detailed on our activity or the sales in general, but kind of high level. Um it feels like we're New York is a little bit of a like a tale of two cities when it comes to real estate. Because on one hand, there's there's so many things that are going so well, I guess, in terms of values and ownership side of the business. Um and just the market is performing very, very strongly in some hand on some levels. And on the other

A Tale Of Two NYC Markets

Derek 2:05

hand, you see a lot of distress and a lot of problems and a lot of serious concerns that people have throughout the market. So I just want to kind of weigh these two sides of the real estate market that we have in New York at this point. I'm happy to lead in with a little bit more if you guys would like.

Luke 2:21

I mean, I can I can jump off a little bit. I mean, I I if we're talking about different types of asset classes that are selling, it's it does feel weird because there are certain types of investment assets like development or free market buildings that are selling for, in my opinion, all-time highs, right? Like development through throughout where we focus in Brooklyn definitely are at all-time highs. The Manhattan Adam can touch on, but what we're seeing is is is very, very strong sales. So those are people that are building multifamily. A lot of these guys, if the price is right, they're building rentals. And they can get and if they can build like a 99 unit, they're definitely building rentals. Uh, and then you have these condo developers who are paying astronomical numbers for these land sites, and they're doing that because they feel like they're gonna be selling these condos in a in a very hot residential market. So that's why they're paying that price. There's no other reason to there's no other reason why they would be. Um, so that's interesting.

SPEAKER_00 3:22

Yeah.

Luke 3:23

And then obviously the townhouse conversion deals that we sell a lot of, that's a big part of our business. Those are very easy to sell. There's tons of buyers for that. So again, that's exit to homeowners. And then you can obviously see all the condo sales and the finished townhouse sales, and those are ridiculously high. Every day it's another sale for a number that we can't believe. It's true. Uh, and then obviously the the rent stabilized and the buildings that have some free market, some rent stabilized, these buildings are really down in value. So you it's really a tail between those different asset classes.

Derek 3:59

Okay, good. Yeah, you covered covered a lot of stuff there. Yeah. Um but yeah, it's it's it's true. So just to get into it a little bit more, I mean, on the valuation side, when you say these these free market buildings are selling for all-time highs, I mean, that's really been a function of of the rental market.

unknown 4:16

Yeah.

Luke 4:16

Well, there's one thing holding them back, which is holding everyone back, interest rates. I mean, these would be they would be going for even stupider prices if interest rates were relatively low. Like they're obviously higher. So that's the only negative thing for for these for the for these asset classes. But go on.

Derek 4:32

No, well, that that I don't think that's true because if you're seeing all-time highs across free market, mixed use, development, yeah, um, and user. Yeah, you're right. How can you say that interest rates are holding aback? Now I now I hear you, obviously fundamentally, yeah, because if they

Development And Free Market Demand

Derek 4:50

were three and a half percent or whatever they were a few years ago, we'd be looking at a completely different ball game. But the truth is we have a higher interest rate environment than we've seen. So to answer your question.

Luke 5:04

100%. So it's not affecting development, because you're right. Those are the highest the price per buildable is the highest it's ever been. So your interest rates were lower, they were lower.

SPEAKER_03 5:12

Well, you're all you're also talking about specific to Brooklyn-based development sites and condo-esque type of locations, right? Like I would I wouldn't say the the price per buildable square foot in Manhattan's at an all-time high. It's actually down from all-time highs because the cost of development is a lot higher, and the way that they've structured all the tax incentive for developers aren't as strong for kind of development. So, like pricing in Brooklyn and you know, call Williamsburg or Greenpoint or even like core western Brooklyn neighborhoods are selling for higher price rebuildable square foot than 95% of the Manhattan market in terms of development.

Luke 5:45

Um on the great A Manhattan stuff, you see crazy prices.

SPEAKER_03 5:48

Yeah, for sure.

Luke 5:49

Where someone could sell a condo like in the Upper East Side or whatever, Tribeca, like those prices are crazy.

SPEAKER_03 5:54

Yeah, but still the price for buildable is around like 400 per buildable square foot. And then you're seeing over six in Manhattan, yeah. And then you're seeing over 600 per square, you know, per buildable square foot in good Brooklyn locations because you're not a lot of it's you're not competing with the elevator amenity type of properties.

Derek 6:10

Uh a comp this week in Brooklyn for uh for a site on Union Street right off of Grand Army, and I think that sold for $650 a foot.

Luke 6:18

That's a big number though. Because we all know what Union is. I mean, there's a lot of traffic that packs. It's not the place I'd probably do that, but it's a big number. It's a good thing. Yeah, on a map it's very good.

Derek 6:28

On a map, it's good.

Luke 6:29

But to answer what you were saying, Derek, the interest rates, right? So you're right. It's for for the development, it's definitely not affecting it. And for the home ownerships, I think these people maybe they're not getting a lot of financing. It's not affecting it because they're the prices for the homes and the prices for development is higher than it was when interest rates were low in in these prime Brooklyn markets, okay? Now where I'm saying it's affecting it, on the renovated free market stuff, people it's free market, it's great, but people need higher going in cap rates because of where rates are. Where if rates on that stuff were three and a half, they're not gonna be like, I need they're they wouldn't be trying to get so close to a seven cap or a six and a half cap. Yeah. So that would come down. All right, I hear what you're saying. That's what they're saying.

Derek 7:11

You're saying the finished product. Yes, although going for great prices all in all, and the rental market doing great, you're saying the value is suffering because buyers are trying to get a cash on cash return. They have to. Which fun which factors in their cost of capital at like a six and a half percent rate of cut interest rate is really holding back the pressure.

Luke 7:33

Yeah, like that multifamily that we have a ton of activity on in Park Slow, for example, that where everyone's trying to get as close to a seven cap as they can because they don't want the negative leverage. That would be different if rates were lower. Like that were so there's still a ton of momentum. People want to buy it because it's the best product to buy, but they can't just pay these like historic prices where rate, if rates are called 6.8%.

SPEAKER_03 7:55

Yeah. I mean, the big the big trend over the last call at two years has been finding the obscure international buyer to come in. And you know, they have different tax benefits, like a seller, accelerated depreciation. And you have a ton of money coming from Japan. Numerous brokers are repping these buyers and they're bringing through different uh family offices into Manhattan in particular and exiting every single syndication deal. Those are the exits because those people pay a five and a half to six cap, or the rest of the market is probably uh a full basis point higher on that type of stuff.

Derek 8:26

So these guys are paying five and a half to six caps, you're saying these foreign investors because they have these overseas benefits.

Luke 8:31

I mean, they everyone's trying to get them to pay less than a six, but yeah, they're they're they're they're they're getting it on deals like a five and a half percent rate that I that I've seen.

SPEAKER_03 8:39

Yeah, it has to be squeaky clean, has to be perfect paperwork, has to be like very, very good, clean, renovated um cash flowing assets with a small amount of retail on them, and

Interest Rates Shift Cap Rate Math

SPEAKER_03 8:50

and they're the buyers for it.

SPEAKER_00 8:51

Yeah.

SPEAKER_03 8:51

So is that the best asset in the market at this point?

Derek 8:53

These clean, renovated, cash flowing imminent properties, or are they suffering like what Luke was basically saying based on the interest rate?

Luke 9:00

You still have to so I think they're not suffering. They're performing very well. Right, like rents are very high, they're free market, they're easy. Where they're suffering, it it's hard to exit properties right now, right? Like like Adam just touched on. Everyone knows like the Japanese funds, and if you have someone in 1031, like you'll hit a nice price if you can get them to buy your product or your property. But to the normal buyer, they like I said, they're not looking to have negative leverage. So their cap rates are affected. So it's hard to exit. Like, so if someone buys a deal, it's really hard to make money and exit right now if you had the cost to buy the building and you renovated the building, then you have to make your fees and your waterfall and like your all your stuff.

Derek 9:41

What are these Japanese buyers borrowing for in Japan?

Luke 9:43

I don't know. I think my guess do like for what they're paying in New York, they're probably borrowing around two and a half.

Derek 9:50

Yeah, I was gonna say two and a half to three and a half.

Luke 9:52

That's but that's a guess.

SPEAKER_03 9:52

You're also you're also seeing like I don't I don't know so much about this, but from what I'm reading, like the yen is actually like collapsing right now, and the US dollar is actually getting much stronger against the yen. So I do think there's gonna be a an additional influx of specific Japanese investors to the New York City market. And I think that trend of renovated multifamily and good locations is gonna continue because last year they weren't looking to buy in Brooklyn, but now they are. So you're starting to see them you know target the best locations in Brooklyn, the Western neighborhoods. What about the locations that are a little less than the best? I'm I'm not sure that those international buyers are gonna be buying in there in the short term.

Luke 10:29

I mean, you had you had Carlisle buying out there, but they're obviously not really buying that much anymore. So no, these these funds that we've seen, 99% of people that are in a 1031 or overseas fund, they're targeting really good locations.

SPEAKER_03 10:47

I mean, we we've we've showed them properties where it is perfect on paper, checked every single box, and then when they came to look at it, there was some graffiti on the adjacent property, or there's a homeless person sleeping on the street. They didn't buy it because of that. So I think the the tertiary markets are it's gonna take a little bit of time for them to see that benefit with the influx of foreign capital coming in. Um but I but I do think the core locations are gonna benefit moving forward with exits for the professional investors.

Luke 11:12

Yeah, there's the exits are out there. You should have you have to get lucky and find the right buyer. But you see it any exit that's big that someone says, Oh, that's a nice exit, it's to like a Japanese fund or it's a 1031 buyer. Yeah. And you have to get lucky at the 1031. They're seeing a lot of stuff.

Derek 11:29

And the 1031 buyers came because of a Japanese buyer.

Luke 11:32

And oh, that's nothing. All the 1031 buyers are in 1031's because they exited probably to them.

unknown 11:37

Yeah.

Derek 11:37

It's a lot of people. To two guys that were in a 1031 from Japanese buyers, right?

Luke 11:45

This is all true, yeah.

Derek 11:46

That was good.

Luke 11:46

Yep. All right, cool. Very true.

SPEAKER_03 11:48

And how long was that guy trying to sell the building for? Years. Years. Oh, yeah. Years. Yeah. And then what was the deal story on it?

Derek 11:54

No, I mean it's just right place, right time. We had 1031 buyer.

Luke 11:57

But that's the case for every any any comp you see right now that's above market, it's a 1031 buyer, and they they're they're gonna buy the right product, right? Like there's a and someone like you, like I was looking at the comps the other day. Someone sold a retail condo in the city and they bought a two over one in on in Prime Brooklyn. They paid a big number for it, but it's core, great tenant, good building. So, like, they're gonna flock to that stuff. Like, that's why right now day locations is the win.

Derek 12:25

So, like in on X and online, yeah, in the real estate circles, like

Japanese Funds And 1031 Price Support

Derek 12:30

you hear so many people just complaining so much about you know, the socialism and the rent freeze and the office to protect tenants, and there they're you know, like people that aren't here in New York, it seems like it's just nothing but doom and gloom, kind of in terms of like the business news, right? 100%. But on the ground, we're seeing uh families continue to buy houses for very high prices. Office leasing is up 25%. I think the uh the rents are up 25% year over year. Rents are up at least five percent year over year. You know, we have all these people continuing to buy into New York. Um so like what what's the thinking behind all that? Like people people still love to be in New York, even I mean, this Mam Dani thing, it's not new at this point. I mean, the primary was over a year now.

Luke 13:22

No, it's it's the only thing it's really affecting obviously he's targeting landlords, so that's not been great. But the the stuff that he's targeting, the rent stabilized stuff, I mean, that's really what they're going after, right? They're they're looking to own these properties. That's what I think.

Derek 13:37

But why are why are people paying so much or continuing to buy in New York? Like you said to me yesterday, we were talking about like these free market mixed-use buildings that you're extremely in demand and you think people are overpaying for them. Um I do. But basically, you're like people just can't get enough of these uh this product type, and people can't stop themselves from continuing to buy these assets. So so why?

Luke 14:03

There's I mean, there's a story, obviously, like New York is always gonna be good, and this is a a good time to buy, and it's only gonna get better, and these small free market buildings, like you have extreme rent growth or free market, like there's a story there, but what the crazy thing to me is like all the stuff in the news that you just mentioned, like obviously, like I go home and I see relatives and they're like, Oh my god, like you live in New York. Like people on the outside that don't live here think that probably everyone that lives here is crazy, and it's and it it's just nuts because everyone everyone continues to invest. Like people are buying condos, they're buying these mixed-use buildings, they're buying free market buildings, they're building development sites, they're doing all this stuff. And outside looking again. No, it's booming, it's ridiculous. There's a lot, but there's a lot of negative things going on. Of course, there's a lot of negative news. And the negative buildings, like the rent stabilized buildings, they're getting hit harder. I mean, we just sold a 20-unit in a prime location for for $1.3 million dollars.

Derek 14:57

A 20-unit building, yeah.

Luke 14:58

That's that's that's insane. Like if you bought a two over one in a good location for one three, you stole it. A two over one.

Derek 15:06

Yeah.

Luke 15:06

And this is a 20-unit building.

Derek 15:07

So I mean, dude, if you bought a piece of land, a one family, a two-family. A two over one, any small piece of real estate on like a 25-foot lot or less. Yeah. I mean, what can you buy for one three in New York at this point? But here we sold a 50-footer with 20 units. Yep.

SPEAKER_03 15:22

I mean, you you can't even buy a two-bedroom in Hoboken for $1.3 million. Like, can you buy a one bedroom? You can you can definitely buy a nice one bedroom, probably.

Derek 15:29

So it's equivalent to a one bedroom in Jersey.

SPEAKER_03 15:31

So would you rather own 20 rent stabilized apartments in Park Slope? Oh, it depends what your uh business plan is there.

Luke 15:37

Yeah. Listen, the whole thing, the rent stabilized stuff is getting hit so hard and it's only gonna get worse. And I think we could see like the motivation and making it so worse for for these people that are in power. And it's crazy. It's two sides, and these people, these people are getting hurt, and that's where you don't have the buyers, right? There's not people jumping in to buy these rent stabilized buildings unless there's a real story.

Derek 16:00

I disagree.

Luke 16:01

People are buying them, so you're right.

Derek 16:03

I think it's not an issue of the buyers. I think buyers will buy these properties and want to buy these properties and like the idea of the basis for the long term.

Luke 16:11

Yeah.

Derek 16:11

I think it's that you don't have sellers willing to sell at basically where buyers expect to be buying these properties, or you have banks that aren't willing to do a short sale because it may not even be the operator's decision at this point. Like, you know, we just saw that that property that sold in in Brooklyn where the guy paid he paid 9.2 million for it and he borrowed five and a half million at acquisition. So this is like seven years ago. He paid 9.2 million, borrowed five and a half million, and it

Rent Stabilized Values And Forced Sales

Derek 16:40

just hit the comps at 4.5 million. So that guy, the operator's equity got wiped out for sure. And the bank took sold it at a short sale. And now you have fresh capital coming in, a new buyer coming in, gets a reset basis at a price that makes sense to him.

Luke 16:55

He'll have a that's you make a good point. That you have to have the sellers willing to sell those prices. And people, but people are, right? Like you see a lot of these big families. Like when I started as a broker, we used to call these people all the time, and they didn't sell and they're probably and and now they're selling.

SPEAKER_03 17:10

And it's like well, at the time you could have sold it for a four and a half cap, and now it's like a ten cap, and the the values have been depressed like sixty-seventy percent on some of the phones.

Derek 17:18

The thing that that I think is interesting that we're starting to see for the first time is these forced sales or or short sales, because for years it was like a whole like extend and pretend thing, right? Like the the loan would come due, the borrower, the owner would go to the bank and say, Hey, you know, it doesn't cover for DSCR, or the bank wants like a pay down, the guy's like, I don't have money to pay down, so they just modify, they extend, and and everything keeps kind of moving, right? And the guy keeps making the the mortgage payments, or or they come up with some kind of workout, maybe interest only, some adjustment. But it seems like now we're starting to see these deals actually hit where the bank knows the asset is worth less than than the loan amount, and they want to get their money back and they don't want to continue to do this whole extend and pretend thing, assuming that they're even getting getting their debt serviced. Yeah. So you're starting to see, I think, um, I mean, we have one going on in the office right now that I was talking with Jared about yesterday, where it's basically, I mean, he was hired by the seller, but I mean, this is the the bank is the one they're they're losing money on the loan balance. So they're he's negotiating his fee with the bank. It basically turns from dealing with the borrower to dealing with the lender, but regardless, the deal is happening.

Luke 18:29

Yeah. But you see a lot of sales too, like not a lot, but you're seeing sales on this on these big RS buildings where it's the seller selling. I mean, they're selling, they have tons of equity even at these at these prices, and they're selling just to sell. There was that big package in the Bronx where he sold his entire portfolio. And these were like who is that? I forgot the guy's name. I'm not gonna insist it anyway. But there were big elevator buildings in the Bronx and they're all sold. There was like five in a row that sold, and he was selling deals for 60 a door, 40 a door, 50 a door. Like these are insane prices. And he had equity in there. Oh, yeah, he barely had mortgages. So yeah, but like the guy could have sold for way, way more like years ago. So it's like he now comes out of the woodwork to sell. And there are people like this. Yeah, I mean, they have to sell. They're probably selling for real reasons. Like there's he's probably retiring. There's there's real reasons to sell real estate. That's not always about what is my exit.

SPEAKER_03 19:21

Or he doesn't want to deal with the tenants going through on one and all the violations and all the headaches. Yeah, I mean, one of the one of their other things I'm starting to see is like after the 19 laws, like they obviously clamped down on any upside in the rent stable as apartments. So you see all these landlords just like not renting them out and having vacant apartments. And more and more and more as the years go on, they just start accumulating more vacant apartments in the building. And you know, recently we've been looking at a lot of like hybrid type of properties where there's five to seven or eight vacant apartments and a 20 or 30 unit building, and the landlord's cash flow is decreasing, it's barely covering at this point. And he's like, Well, what do I do? I can't rent them out because I'm losing money on the rental. And, you know, our and and he's really asking for the advice on like what to do. And it's like, I don't know, you could rent to a friend or a friendly and hope for better days, or you just got to leave it vacant. Uh and it's really a shame what what has happened to those types of people.

Derek 20:11

Those people don't know what to do with these apartment buildings. I was with I was in a 20-unit two weeks ago. I think 13 are vacant. The guy wants to get the rest vacant, he thinks there's like a condo conversion opportunity. But we went through the whole condo conversion play and like the condo sell-out prices for a for a multifamily walk-up building aren't great. It's gonna cost a ton of money to get there. Once you discount in like the expected return for the developer, the cost of construction, the amount of time it's gonna take, and and your sellout values. The val the the price of the property was just really wasn't great. Meanwhile, it's a 20-unit, so I think his tax bill on it's like a hundred a year, and he has to keep feeding the taxes, the insurance, the water.

SPEAKER_03 20:53

He's not collecting rent. Yeah. Well, and and who's gonna say the attorney general is gonna approve these condo tax lot subdivision permits in the future to redact out rent stabilized units to convert to good points. So, like, you know, there's obviously an inherent risk in doing that today because it's not like a sure bulletproof type of thing. Yeah. Um, you know, because if you're taking a 20 unit, turning it into six apartments, going floor throughs, making them three or four bedrooms, trying to sell, I don't know where the location is, but call it fifteen to two thousand dollars a foot plus, depending on the location. This was a this was like not that kind of location.

Derek 21:25

This was like like mid mid to south Brooklyn, where the high water mark for comps is a thousand dollars a foot. Yeah. But I don't think you can get a thousand dollars a foot for a for a tenement building converted to condos, so you gotta buy the building.

SPEAKER_03 21:40

It's three hundred dollars a foot to to make any money on that. And there's a lot of inherent risk in doing it, and it costs a lot of money. A lot of money. Yeah, and who's to say in two years when you finish the project the Albany hasn't struck down or some additional law to disable the ability to do that at this point. It makes sense. Why wouldn't they? Why would they? They're getting rid of sub rehab, you can't renovate it.

Luke 22:00

To be clear, anything that anytime you're deregulating apartments or taking rent stabilized units and trying to make them free market, they are gonna just not answer

Vacancies, Conversions, And Paperwork Risk

Luke 22:10

or reject. They're just gonna do it. You see the Spitzer lawsuits, the the sub-rehab lawsuits, like if you're attempting to do that, no matter what the no matter what fashion you're trying to do it in, it's gonna be delay, delay, delay, or just no.

Derek 22:24

Or change or change rules. They've delayed Spitzer for two years on what seems to be a pretty clear-cut law.

Luke 22:30

Very clear. It's very clear. It's got one tenant holding up this entire development. Yeah.

Derek 22:35

Yeah. And and DHR's not ruling on it. No.

Luke 22:38

They just don't have yeah, they're just taking their time. Like more of those change the law.

Derek 22:43

How many millions of dollars are just sitting around waiting because there's this one tenant that DHCR doesn't want to like tell them they have to vacate.

Luke 22:50

Well, he also doesn't want they don't want they don't want someone to take an entire building and make it market rigondos. Yeah. Like there's a lot of anytime they're you're doing that, they don't want to do it. So you gotta be mindful of that. And they and they've proven to to just change the rules.

Derek 23:07

They have changed the rules based on like backdoor, closed door meetings, apparently, based on that affidavit from the former Yeah Woody. Yeah, Woody, the Woody Pascal, the commissioner, yeah, or whatever his title was. Yeah. Backroom dealings, changing laws without any public debate or knowledge, and then boom, there you go. Here's here's here's how things work now.

SPEAKER_03 23:26

I mean, I I j I feel awful for the people that bought in 19 and 18 and just basically got their entire equity wiped out, rates changed, laws changed, those people just lost everything.

Luke 23:36

Yeah.

SPEAKER_03 23:37

But now what you're seeing is like all of those four sales, or a lot of them, because the five-year debt cycles, like a lot of that's behind us at this point, right? A lot of it. Not all of it, but a lot of it. A lot of it, I think, was on extend and pretend. Yeah, well not, but now that's why you're also still seeing it circulate a little bit. But starting to see it. But you saw a lot of foreclosures and bankruptcies last year and the last two years. Like it's been, it's it's it's gut-wrenching for people. It is in this industry. Now that the normal person working in tech and finance and marketing and being a nurse, like they're not privy to all this stuff because they're living in a different world than what we're seeing.

SPEAKER_00 24:09

Yeah.

SPEAKER_03 24:10

Um and it's really, it's really it's abys, it's abysmal what they've what they've done to some of these landlords.

Luke 24:15

Yeah, you mentioned there's two sides to all this. We talked about obviously the assets that are selling that everyone's gravitating towards. Obviously, you see the comps and pincus and traded and all of it. It's all development and this it's a lot of the same stuff. So we're seeing that, and obviously everyone that's in the business understands what's going on with Rent Stabilized and all that. But I think what we need to be aware of, I mean, what's going on with Bandami and and the and the politics here, he's obviously the whole administration's against landlords. And I think if from the outside looking in, he's doing really, really well. Like people like people that maybe aren't landlords, they like him. Of course. He's got the Knicks one, like all this stuff's like going his direction, like nothing bad has happened yet. Like he's he's doing well. And meanwhile, he's just targeting landlords, and that's getting way worse, way worse. And I think people need to realize they need to need to wake up and think, okay, this guy's actually doing really well, and he's gonna be perceived to be doing well. So, how much worse is it gonna get for landlords? Like, if he if he does well and gets re-elected or someone else comes in, like there's things that he is doing.

Derek 25:17

I mean, the these people studied Marx, Marxism, and socialism, and they're scary. Like, there's that video that they just posted of Cia Weaver, this whole like uh United Pinnacle Tenants film. It was a film, like a well-made film. It was 15 minutes long. And the first the first scene is her sitting there reading a book called The Great Rent Wars, and then shows like this list of books on this coffee table next to her. And if you zoom in on them, it's all just a bunch of like socialism, rent, rent strike. But but this is my this is my issue. Like, but they're implementing all this, all these old ideas.

Luke 25:48

They're implementing everything, they're coming out with all this good content, these videos. Like they're they're they are attacking, right? They're they're they're they're fighting very well. It it's coming across, they're winning. It's working, right? We're like the landlords, like we get invited to these events, like, oh, put pay five thousand dollars and play golf, right? And and we're like, oh, should we do it? Like, there's gonna be so-and-so there, and let's do it. But like, it's not about it's the it's no one's doing these events to talk about like the fight, like how how are we going to overcome this? How are we gonna like get somebody in that's changing things? What's what's the fight gonna be? It's never anything about that, and everything they're doing is hitting on all on all angles, and it's working. Like, even think about this. Even these these free supermarkets, right? Where obviously anyone that's that knows business or knows numbers is like, how's this gonna work? Like free food, like someone's paying for it, it's gonna be disgusting. You already hear stories, people like going in there, getting free food, then like flipping the food and selling it for a profit. But if you think about the business angle of it, right? Like, let's say that he opens 10 of these, right, and they lose $20 million a year. That's $200 million in deficit, right? That's literally nothing for New York. So all of a sudden, he knows it's gonna fail. He's gonna keep it apart, he's gonna keep it people working in there, he's gonna keep the food coming, everyone's gonna love it. He's gonna take the $200 million hit a year, which is absolutely nothing. And all of a sudden, the socialist movement is working. Everyone's like, it's working, it's working because he's taking a hit for a $200 million hit for 10 of these that it doesn't even move through the needle.

SPEAKER_03 27:20

Well, the reality is the tenants that are supporting these initiatives, yeah, they don't realize the ramifications to everyone else in the market that everyone else's rents are higher because of some of these initiatives.

Luke 27:30

Think about that business move he just did. I get it. If that that supermarket thing, he knows it's not gonna work, but it's a it's a business move. He's like $200 million loss for 10 of these. I get all of a sudden every other state's gonna be like look at this. Why does New York have these free grocery stores? But it's it's all there's a lot of these plays happening. What is the real estate industry doing to combat anything? Well, here's well I think I think what's frustrating That's what's frustrating.

Derek 27:51

I think what's really frustrating working in real estate is like like we all agree there's all these vacant apartments and you can't raise the rents, and there's a rent freeze, and the taxes, and the utilities, and the interest rates, and the buildings are worth nothing. And like you go on X and it's I mean, it's an echo chamber of like the same ideas over and over and over. But you're right, nothing is actually happening. But um no, dude, it just it basically just says to me that like a fight anymore, right? Like the fight is over.

Tenant Organizing And Landlord Survival Mode

Luke 28:20

What happens at the real estate events? We have the we have the sushi, we have the drinks, you pay all that money, and then nothing gets done, he's gone.

Derek 28:25

No, nothing gets done. I mean, that's basically just you go to schmooze and have fun, get the drinks and the sushi. Yeah, yeah.

Luke 28:30

Yeah, play the golf. Yeah, you can play golf, but like nothing's being organized. And it's not coming to me. And and the funds that are being raised, these things aren't going back into anything that's not going to be the real estate industry.

Derek 28:40

It's not it's not gonna happen. You you better I think you better hunker down, yeah, get patient. If you want to own these apartment buildings, you better be what they call like an above board or high water, high whatever the term is, high something landlord. Yeah. Um and just just be a good operator. Keep the violations off. Yeah, keep the violations off if you can. Yeah. Um and let let them ride and hope hope that in 10 or 20 years these laws change or there's something that loosens up. I know everyone's been talking about the vacancy increase for forever. Yeah, but um again, that's I think you'll get it, but it's not gonna be what you think. It's not gonna be like a a market reset like there is in California. It's probably gonna be like you can get like I don't know. You're still increasing rents substantially.

Luke 29:28

They're not gonna just sign off on that. Anytime you're doing increasing rents on market apart uh or sorry, below market apartments, that's what they're gonna do.

Derek 29:36

You know another thing, like how the the real estate industry has been beating this drum, all these vacant apartments, you want to like bring down rents and affordability, like add to the supply, like we're here, we're waiting for you. Yeah. They know no shit. Like it's so obvious, they know. Yeah, they don't want to allow it to happen. No.

SPEAKER_03 29:54

Well, I mean, the city easily could restructure the incentives for development.

Derek 29:59

They probably would prefer that the buildings sit vacant and you have to just feed the taxes, feed the meter. Yep. And now you're gonna have this whole rental ripoff hearing, and you have these rent impairing violations, new violations where the tenants don't have to pay pay rent. They're trying to organize these tenant, these tenant unions, right? Like that's what this whole video that it just came out with was about is organizing tenant unions because I got this email from the office of mass engagement from from the mayor's office, and it shows the video. It looks really good, it like kind of gets you excited, even though I don't agree with anything in it. It like still kind of gets you excited. Yeah, of course. It's got like this uh this guy's voice, he narrates it, it's like really beautifully done. Yeah, yeah. And then there's other links, and you click and it says talk to tenants.

Luke 30:40

Yeah.

Derek 30:40

And I think the tenants are these tenant unions, and there's like all these events that I'm I'm gonna end up going to one just to see what it's all about. But there's one in Grand Army, there's one in Flatbush, there's one in Harlem, there's one in they're they're all over the place. And basically you go and I don't know what happens there, but you talk to tenants and they probably preach the the Marxism and the socialism.

Luke 30:59

They're organizing.

Derek 31:00

You mean but yeah, they're organizing for tenants to not pay rent. So meanwhile, the landlords are sitting on these vacant units not collecting rent, and now you're gonna start dealing with your existing your your occupied units not paying rent. Yeah. And meanwhile, where's that gonna lead to the other?

Luke 31:17

Meanwhile, those landlords are going to these events, having the souch, being like, oh, this sucks, and you're not gonna do anything about it.

SPEAKER_03 31:22

I mean, you're seeing more and more and more rent overcharge cases. I mean, recently we saw one on a rent stabilized tenant, which that was like basically a first for us, like a rent stabilized tenant claiming they're being overcharged, and they have a pretty clear DHCR history of not being over overcharged, like the landlord's gonna win that case. But it's interesting. Like for for the most part, like mo most all these tenant protection units and they're they're starting to to have a real impact on the company.

Derek 31:48

More bankruptcies being filed. Definitely. And the mayor's office already tried to get these community groups to purchase the Pitcole portfolio. That didn't end up happening. Um they negotiated with Summit for a bunch of millions for repairs. But when it happens in the future on a smaller scale, they're definitely gonna get their community organizations to purchase these properties. You know, these tenant-run type of buildings. I think they'll just wipe out the taxes so like these groups don't have to pay real estate taxes, they'll pay for the insurance and the water and the heat, but they'll have a completely different operating structure than what like the regular you know, property owners have have to deal with. So yeah, I mean it's it's like as bad as it can get in terms of multi-housing and even the stuff with these individual apartment improvements, these quote unquote free market apartments in a rent stabilized building. Man, that stuff has become super tough. And it's really unfortunate. These are beautiful apartments that were renovated 15 years ago, 10 years ago.

Luke 32:51

Remember, the city said, Oh, you don't need to keep your records past four years, throw them out, do it all. Oh, of course. And now obviously, what are they doing?

Derek 32:57

That goes without saying.

Luke 32:58

Everybody knows that. Yeah, but now what are they doing?

Derek 33:00

No, now well, they changed they changed the law, right? Now there's no four-year look back.

Luke 33:04

So now no one has these paper, this paperwork.

SPEAKER_03 33:06

Well, why is a landlord would be like why why would you know what you did?

Derek 33:10

But you know what you did have to do is you had to demonstrate how much you spent in order to take the increase. Because that was the that was the deal. Yeah, you spend a certain amount, you get a certain amount of increase. Now, in 2026, we go to market these buildings for sale and we say, Hey client, where are the checks? Show us what you spent. Oh, I don't have them. Yeah. Okay, great. So we're marketing this building with these $5,000 rents, but like, how'd we get to $5,000? Where's the proof?

SPEAKER_03 33:39

Yeah. Well, you're I mean, you're not even buying the bricks anymore. You're buying paperwork. Yeah. And for most of the owners, they don't have it.

unknown 33:48

It's true.

SPEAKER_03 33:49

You know, and even if you bought what you thought was a free market building and the bank thought it was free market, and you know, all the tenants think it's free market. Well, guess what? If there's a problem with the tenant or they go to one of these meetups and realize that you can make a claim and the landlord doesn't have perfect uh paperwork on it, like the landlord's in trouble. And there's no ramifications to the tenants that are claiming these rent overcharges.

Derek 34:10

Um they can get a major payday.

SPEAKER_03 34:12

They get a payday, the landlord actually has to step up, start spending legal fees.

Derek 34:17

I don't even think these tenants know about that, but they will as the as the the New York City's mayor's office continues to blast out all this like pro-tenant, talk to tenants, unionize type of propaganda. These tenants will know. Yeah, and then these tenants will all be unjustly enriched at the cost of the landlord and the real estate market as these properties fall into bankruptcy.

Office Leasing Rebound And Closing

Luke 34:40

It's all true.

Derek 34:41

So you want to leave it there or you want to keep going?

Luke 34:44

No, I mean, obviously, I don't want to make it so doom and gloom, but like I think the re the reason why this is important as discussed is there's just really two sides to this. Yeah. And there's still obviously a huge part of the investment cycle that's really good.

SPEAKER_03 34:56

Well, I mean, talk about the the the rising of the ashes. Like, I mean, office buildings, and you mentioned this earlier, like the office, the office asset type is doing phenomenal right now. They also took a lot, they took some supply off the table by sure.

Derek 35:08

I was with uh I saw Ruby Schrohn in in our building. He's obviously a big office building landlord, he's the landlord of our building. And he said to me that all this office Theresi conversion and all this office space that's been removed from the market has been phenomenal for office leases.

SPEAKER_03 35:22

I mean, COVID, I mean, COVID, the office market got rocked the hardest. Things were trading for like 300 bucks a foot in Manhattan. Rents were going from like $70, $85, $80 a foot down to $30 or $20. And now it's back at historical highs because of what you just mentioned. And that that asset type in particular is continuing to perform excellent. And also be the work from home. Like my buddy works at Google, like it's a tech company. Like he should be able to work from home, but they're making him come to the office now so that there's camaraderie and so you can build a company.

Derek 35:50

There's been a bunch of big leases that have hit the wire. Anthropic, Snap, I saw this week.

Luke 35:55

But this all goes back to the whole the whole Mondame thing and how it's working. Like, think about this. Everything else, people are still willing to work here, live here, pay here, buy here, do whatever. So, like, where is it negative? Like, why, why as a landlord, why are we, why do we think this is gonna go horribly and this is only gonna be a four-year thing? It's good. This could be an eight-year thing just with that guy.

Derek 36:15

Yeah, just with that guy. It's gonna be much longer than eight years at this at this point. And it's gonna take a while. Like, you know, the capitalists that say this is this is destined to fail, it's gonna take a while to work its way through. And for people to see the effects of that. But let's um let's leave it here. I think we covered a ton of stuff. Yep. We gotta ha save some of our fodder for future episodes so uh we don't fizzle out on this again. Yep. Like we have in the past. We'll keep it going. Yep. There might be some uh similar content in the future. Uh all right. We'll leave we'll leave it there. Um thanks. Bye. Are you there? Are you there?