Let's get on with our live broadcast here from Eisner Amber, their Midtown Manhattan offices. They're getting ready for their annual real Estate Private Equity summit this Wednesday, Chelsea Piers, and we are getting ready to bring into the show now Sam to Do, founder and CEO of Megalith Capital Management, to talk about foreign investment in the New York real estate market. Sam, welcome, Thank you, Kathleen and Pam. It's
great to be here. You know, I've heard contradictory things on our show from people in the real estate business that yes, uh, money coming in from China, to a couple of years ago coming in from Russia from at least drove up prices in New York and southern California, any coastal city. Others saying hasn't been that big of a deal. What's your view now, It absolutely has been. I think what we first saw in two and fourteen
was in the luxury condom market. You saw a lot of buyers, firstly driven by Russian and Chinese and then broader Asian coming into that market. And what you're seeing now in two thousand, fifteen and into sixteen is the second wave of buyers more in the institutional sales market buying office and residential product. That's definitely propping up the market.
And what you hear from the investment sales brokers out there and the market is that, you know, historically you would have a cluster of five ten people in the in the top top echelon of the sales process, and now you have only one or two foreign bidders sort of sitting there propping up the prices. So sellers are meeting their expectations, but the buyer pool has shrunk. The buyer pool has shrunk. What's that done the prices? And do you think that perhaps the buyers ought to expand
their range of what they'd like to invest in. Well, New York City real estate is New York City real estate, right, That's the reason that buyers are are sort of, uh, will always be investing in this safe haven, you know here in New York. The question about the buyer pool. The buyer pool has shrunk, I think because there has been a recognition that there has been a you know, sort of a global I wouldn't call it a slowdown,
but a global correction or a global reversion. New York City has experienced it and I think that there's less of this um euphoria to catch the wave while it's still um, you know, on it's on the up and up, and I think people are calling the top of the market, and I think that has led to the tier one players to kind of come back and sit on the sideline. So broadly speaking, the residential and condo market in New York,
howes it look to you? You know, we are currently developing, by way background, about a million square feet of mostly residential condo as well as some rental product in Manhattan and Brooklyn. Um, what you saw, what you are seeing right now is at sub five million dollar units are
are selling well. More efficient and smaller units are selling well. Um. But I think what you're gonna see in the next wave of supply as it comes onto the market is that buyers are going to become a lot more discerning, a lot pickier, because the commodity product is about to hit.
Folks that paid a little bit too much for land and had higher construction costs and thus need to price their product at a higher price per square foot and or an absolute dollar value are now going to find that their product is not as appealing and buyers may want to be in a tier tier one building and take a tier two unit rather than taking a tier one unit one of these commodity buildings. The commodity buildings that you talk about, are we are we're going to
see some kind of you know, weeding out. I mean people are gonna are some people are going to go under. I think that you will see definitely people making less money than they thought they were going to make. Development is a very tricky and complex business, and everything always goes wrong, and that's what our job is as developers
is to manage that risk um. But I think that you know, what you will see is that that you know, I think that the price per square foot that folks initially ought was going to continue to rise and rise and rise, um has now slowed, and buyers are going to become a lot more cognizant of that, and they want to see the finished product. They want to see the finishes, they want to see the unit layouts. And I think that that's what you're gonna I don't want
to just hear about the power is shifting. So are we at the top in the market. I guess I'm thinking of a seller. If I'm a seller, and I'm thinking, oh boy, I've written this wave. I'm sitting on a lot of money. Now, baby, should you think about selling now? Our acquisitions team hasn't been very active in the last months, and we're expecting to become a lot more active in the next six to twelve months. And that's not for
marketed processes for sellers who are getting top dollar. It's for picking up some of what we would call I wouldn't call the pieces of a distress market, but sort of having an opportunity to come in and recapitalize projects that might be going sideways and some of the projects that I mentioned earlier. Uh, you know, we started off this segment by talking about foreign investment outside of the United States. Uh, what if I was going to be in this business? Now? What language, What's who? Who do
I need to understand in order to to do well? Well? I can tell you don't really need to understand any language, because I've said in many meetings with interpreters, and I've gotten very accustomed to sitting across the table from various Asian, Um and Russian you know, investors and developers who want to get experience and you know, and access to the New York City market. UM that come and bring those
types of you know, UM interpreters, quick questions. We hear that Disney has maybe a bid out on Twitter, considering it seriously, you just purchased land from Disney right here in Manhattan, so quick, quick to part. Does this deal make sense? And where you building now? Well, believe it or not prior to real estate. I come from a background in media, UM, and many of my colleagues have been at Disney as well as at Major League Baseball and are working on some of the deal that you
mentioned right there. UM, I think it's a very interesting deal, and I think it's you know, Twitter has lagged in the past couple of years, and it's Instagram and Snapchat and Facebook have really taken over. So I think it's interesting to show to your earlier point that UM, Disney is pivoting into sort of the next wave. All right, we're gonna I think I'm signing up for your Twitter. Sam to Do is a founder and the chief executive of a Megalith Capital Management. You can follow them on
Twitter at Megalith Capital. This is Bloomberg