00:00Before we get into what you're seeing specifically in New York and specifically on the Upper East Side,
00:05talk to us first about the journey from China to the U.S. property market and what that transition was like.
00:12Well, I was CEO for Soho China for 25 years and built buildings mainly in Beijing and Shanghai.
00:19And over global financial crisis, I started investing in the U.S. mainly as a way to diversify risk from China.
00:30So I really got into the U.S. real estate from 2009, 2010, but pretty passive, mostly as LPs or as owners of the buildings.
00:42And recently, since COVID, I relocated to New York and I've been looking at development opportunities and started thinking, what can I do?
00:54And the city seems to be starved with all kinds of housing, all segments of housing from affordable all the way to luxury.
01:05And I just see that people love to live in historic district, Upper East Side, Upper West Side, West Village, downtown.
01:18And yet, if you look around, the buildings are old.
01:22Yeah.
01:23And people want to be living in a magnetized new buildings with service.
01:27So that's what we decided to do.
01:29Not to give you my life story, but I just moved to Hoboken, but I lived on the Upper East Side for 10 years.
01:35I loved it.
01:36So the plan to develop luxury condos, I mean, the Upper East Side is pretty crowded.
01:42There is an overall housing crunch overall, but what will be your differentiating factor?
01:47Product.
01:48It's always a product, right?
01:49The location is important.
01:51You know, we've chosen historic district, Upper East Side, but most importantly, the product has to be what people want.
01:58I mean, I've spent a lot of time doing design, architecture design, interior design.
02:04And so really, we're excited to bring something fresh to the market.
02:10I am curious, though, too.
02:11I mean, we talk about the parcels of land that you found on the Upper East Side here.
02:14I mean, there's a reason why we have a lot of old buildings, because there's not a lot of, you know, empty land.
02:19It's certainly not in Manhattan or some of the more central parts of the city.
02:22So unless you tear something down, it's hard to even build something new.
02:26What does the price discovery look like in finding something that's going to be affordable, at least, excuse me, affordable in the sense of a return on your investment?
02:34It's one of the reasons you see that there's been so little supply of new apartment buildings is because it's expensive to build.
02:46It's expensive to buy land, to assemble land.
02:49It's also expensive to build because of the inflation.
02:52You know, the cost of building is so much higher.
02:54The cost of capital is so much higher, right?
02:55So that's when I actually just came out from this morning's broker's report on last year's market.
03:04Pretty much the walkway was there's such a lack of new development supply.
03:09And I think that's because the cost of building is high.
03:15I mean, you made your mark primarily in commercial real estate, at least when you were doing your work in mainland China.
03:22Compare and contrast that with doing a residential project, particularly here, not only in the U.S., but in obviously one of the hardest real estate markets in New York City.
03:34Well, it's quite different.
03:35The scale is very different, right?
03:37New York City, the prices are high, but the scales are smaller.
03:42You know, we're talking about these boutique buildings that we're building with 30 to 40 units, whereas in China, the scale will be 10 times.
03:52If not 20, 30 times, a much, much bigger scale.
03:58So but New York City is very well built, already so dense, right?
04:02So anything you want to build new, it just takes so much to assemble land.
04:07You know, you have to I mean, this piece of land, it's like we bought it five different pieces of land put together.
04:14And so that's just goes to show you how hard it is to build in Manhattan.
04:20And what you're building right now, will these be to sell or rental properties to sell?
04:25Interesting.
04:26And and what kind of buyer base are you seeing come in?
04:29I mean, are we talking about, you know, domestic, you know, New York buyers?
04:34Are you seeing international interest as well?
04:36I think primarily New Yorkers, because that location Upper East Side is very much a New Yorker with families, with a lot of great schools around that, families with children go to schools in nearby professionals.
04:51And that's that's the key.
04:53That's, I think, the prime market.
04:56There would always be some international buyer because it's New York.
04:59You know, New York is the primary location for international buyers.
05:03But I think if you look around that those international buyers are mostly in concentrating those super tall buildings rather than these boutique historic district buildings.
05:16I mean, your business, you also have a portfolio of, you know, non-residential buildings, including the GM building down the street.
05:23I am curious about the difference between what you're seeing right now and, say, the office and commercial real estate market in New York City relative to the actual housing market.
05:34Well, I give you a different markets like we build a building in Boston, an office building in Boston during COVID.
05:40In the beginning of the COVID, you remember this life science was so hot, right?
05:45So Boston office, Boston commercial market was so hot.
05:49So build a building.
05:50And then what we did not know was that interest rates started going up.
05:55And that really hurts life science industry in Boston.
06:00And it also hurts the commercial real estate.
06:03But New York, because of the financial institutions are back and going strong, you know, last year we saw the best leasing market in Midtown Manhattan.
06:13So that's why we are doing very well.
06:16And so if you look at these two markets, just Boston and New York, commercial real estate, that New York is doing significantly better than Boston.
06:25Yeah.
06:26Do you worry at all about some of the political issues and how that affects what markets might do better than worse?
06:32I mean, Boston has also had some other issues recently because of the pulling of some federal funding for a lot of those life sciences industries.
06:39And that's caused a bit of a retrenchment as well.
06:41Do you know, it's interesting because if you look at New York City, New York, Manhattan's apartment sales in the last 25 years,
06:51with the two exception years, which is global financial crisis, 2008 and COVID-2020, that really went down significantly.
07:01Otherwise, every year it pretty much sells between 10 to 11,000 units.
07:07It's very resilient, the market.
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