Francis Greenburger Discusses Real-Estate Development (Podcast)

the condominium in residential real estate development. This is a really fascinating conversation if you're all interested in um real estate development, how projects move forward, some of the challenges in dealing with the market cycle and credit availability, and pretty much anything related to what could throw plans off for for building a a big building, You're gonna find this conversation to be absolutely fascinating. So, with no further ado,

my conversation with Francis Greenburger. My special guest today is Francis Greenberger. He is a real estate developer, an author, a former literary agent, and a philanthropist. He is the founder of Time Equities, one of the larger real estate developers here in Manhattan and New York City. Perhaps he is best known as the creator of the residential co op. His autobiography is Risk Game Self Portrait of an Entrepreneur.

Francis Greenberger. Welcome to Bloomberg. Thanks Berry, So I'm kind of fascinated by your background and your history, and we're gonna get into a lot of the details, but the obvious question, what sparked your interest in in real estate coming from a background working in the book business. It

was pretty intuitive. I remember to this day, I was walking down the streets looking at buildings, looking at architecture, thinking about built environs, and thinking about real estate and New York and realized that I had some sort of visceral connection with it that defied my background or any particular particularly logical connection with my past. So in your book Risk Game, you wrote something that stayed with me. Quote the real estate industry has created far more bankruptcies

than billionaires unquote. Explain that well, I think, uh, um, if if you look around New York and I was walking here or past, for instance, Harry Macklowe's gallery on Park Avenue, you know Harry, who I know is how has had a mixed career. He's had some incredible successes, but he's had some incredible failures, all in New York City real estate. So, uh, it's about timing, it's about risks, uh, and it's about what you choose to do or not do. So let's talk a little bit about timing and risks.

You bought a piece of lands down at fifty West Street back in the eighties with the plan to either develop it or redevelop it in the future, and then that piece of property lived through September eleven and the Great Financial Crisis. Tell us a little bit about your history with fifty West. Okay, Actually, when I bought it, I wasn't thinking of redeveloping it. I was thinking of

it more as an income property. And it was fully leased and I think it made about a ten percent return, So it looked like something I could just hold on to and over time watch rents go up and hopefully expenses keep stable and have growing income and growing value. Um around uh uh in the nineties, we lost some tenants and uh New York was just beginning to think about downtown as a mixed use environment. I mean that was very non residential back in the day, right, a

non residential, although Battery Park already existed. And um there was something called the Giuliani Plan which offered tax benefits if you converted commercial properties to residential. So we were actually started to convert part of the building and was I think one of the first properties to qualify under

that plan UM by nineteen. By two thousand and five, we had maybe converted half the building, but there was a lot of major work that we needed to consider, and we realized that the sighting of the building was such that if, if, ah, if we demolished it and build a new building, there would be extraordinary views available from the apartments. So we began to study that as

an option. And you spend a lot of money on architects just even thinking about this, right, we spent you know, one of the surprises when you go into development is land as a expensive well, preparing plans is very expensive. And we developed full plans for the building, which at that point was to be a hotel and uh condominium apartment complex um, but our plans got interrupted by the course of events in the financial world. So let's talk a little bit about that. Here's a building that you're

racing to meet the deadline for certain tax advantages. You've already built the foundation, you've sunk a lot of the main support beams, but you haven't started building the building itself. And then September eight, Lehman Brothers collapses into bankruptcy, and I think you were talking about a five million dollar financing for the whole project from start to finish. What did the collapse of Lehman Brothers due to that development? Well?

I recognized almost immediately that building into that kind of financial environment would be a disastrous So I made the decision very quickly to pull the plug, halt development and wait for a better day. In other words, not actually give up the property, but hey, let's postpone this project until credit freeze up a bit. Credit freeze up, and

credit is only one part of the equation. If it's for sale housing the way this was condominiums, there had to be a willing market to buy it, because otherwise you might have the financing, but you haven't wouldn't have a way to pay it back. Makes sense. So but that ran into a problem almost immediately, didn't it. Yes, I had a little misunderstanding with with the bank who had financed the foundation construction for me, uh even though I had told them what I was doing, and they

seemed to concur all of a sudden. In January, they sent me a letter saying I was in default because my loan required me to continue building no matter what And of course I called him and crazy anyway, I don't really know what was going on. Within a couple of weeks they backed off and we renegotiated the agreement to allow for the interim period that would be needed until the market was was suitable and both from a financing point of view as well as a buying point

And how did the building ultimately turn out? Well, it turned out very, very well. One of the things that I found so fascinating in your book Risk Game was how razor thin the margins were for building properties and the constant search for cash and financing. Is that a fair description of commercial real estate in the nineties seventies or generally, Well, I would say generally. And it also

depends on the nature of what you're developing. So if you are in a generic kind of marketplace with generic ideas, uh, not surprisingly, competition is fierce and the margins are highly compressed. When you say generic marketplace, what are you referring to, Well, for example, New York City, which for the last ten or fifteen years has been considered or one of the best investment markets in the world. So capital from everywhere, every corner of the world wants to be here, so

there's fierce competition and cap rates get compressed. However, at the same time, if you go to other regions of of of the United States or internationally, you'll find a different picture, market by market, submarket by submarket. Very very interesting. In one of the things I thought was fascinating heading into the financial crisis was a similar situation where a

lot of global money was looking for returns. Much of it found its way to New York real estate development, and I heard a lot of real estate deal lawyers complain, Gee, the r O I s, the return on investments on all these projects seem to be getting more and more compressed. Is that a fair description of what was what you saw leading up to the O eight collapse? Uh? Very much so, although I have to say that it's not only leading up to the two thousand and eight collapse. Uh.

It's prevalent in markets that are in great favor. Um. Uh really on a continuous basis. So um it's just that competitive. You know, if you go to Toronto today, which is one of the uh one one of the biggest development markets in North America has been probably for fifteen or twenty years, you'll find that um. The profit margins on development are around twelve that's probably half of what it would be even in New York. Really it's

that tight. So one of the things that was so surprising about the financial crisis from a real estate perspective I had I have always thought of developers as being somewhat countercyclical and somewhat opportunistic. After a crash, they love to go looking for um high quality buildings and high quality plots for development that have fallen on hard times and are much less expensive than they normally would would be.

And there seems to be a tendency of them throttling back as the economy begins to overheat and interest rates rise. I don't know if we really saw a lot of that in that oh let's call it oh one to oh eight cycle. Am I looking at it with a that with a biased perspective? Or was that unusual versus prior cycles where developers seem to be savvier, they seem

to be the smart money. Well, I think that it's not all developers, or I think I think the world divides itself, and there is a tendency when the sun shines, when money is available for many developers to move forward. There are other UH developers, and I can think of a couple in New York, for example, the Durst family, who were intergenerational and used to thinking over long periods of time. And I remember that in post the collapse of TOO as in eight they started looking around and

buying when nobody else was. So of course, you also have to have very deep pockets because in these countercyclical times banks are not necessarily willing participants. So often you either have to have very very good banking relationships or you have to be able to buy with your own resources on all cash basis and then hope to finance at a later time. So uh, I think the vast part of the development crowd sort of follows the money UH. And then there's a group that's UH exceptional who are

more countercyclical. Hmm. Interesting. Let's talk a little bit about the innovation that is the cooperative. How did you come to recognize this legal structure as superior to others and and tell us a little bit about that development. So you mentioned that I invented the co op, which isn't true. Okay, co op existed long before popularized the co op. I did what what co ops? Prior to when I got involved, which was in the late seventies, were really familiar at

two ends of the spectrum. Either park Avenue very expensive apartments were many of those were co op buildings, or interestingly, there were some low income or limited profit UH co ops that were created for UH people who could only afford minimum really really affordable housing UH done in co op form. Those were done some some unions created those that housing. Some some were government UH and some were other not for profit groups. But in between or of

middle class housing UH. It was not yet popular, and I recognized that both UH buildings in the boroughs, for instance, a large complex that I undertook in Brooklyn and elsewhere UH would be suitable for home ownership. And I also recognized that there were secondary buildings, some non elevated in very good locations in Manhattan, for instance in Greenwich Village that would be very desirable and people would be interested

in owning. So it was really seeing a broader market for co ops as opposed to actually UH inventing the first one. Your dad was a literary agent and worked with quite a few very famous authors. How did you find UH that business? What was that like? Well? It was. It was very much in my family and in my blood. So I grew up among publishers writers UM and some pretty famous writers and some pretty famous writers Stephen King,

James Patterson, Dan Brown. These are household names, aren't they. Yeah, some of the some of those came well after my father died, more during my tenure. UM, but yeah, they were, they were. They were very much part of my growing up and and and my consciousness. How long did you actually work as an as an agent? Well, I worked actively for about a decade UM and uh, um, sort of fifty fifty with my real estate activities, and then I then I cut back the agency work. It's probably

I still own the agency today. It's probably five percent or less of my time. So back then it seemed that authors did not really get a great deal out of out of the publishers. UM. Was the business really all that lopsided back then? What was it like? Well, I think UM publishing was evolving, Distribution of paperbacks was

getting wider, book club distribution was strengthening. So the revenues that a very successful author could command were growing, and you saw a leap frogging of the value of brand name authors during that period. So so let me give you an example of something from your book that I found astonishing. Uh, your office represented Stephen King and his prior deals when you first brought him on limited his

annual royalties to ten thousand dollars a year. So even if he owned earned much more than that, it would get spread out over time. That seems like a terrible deal. Well, I have to correct a couple of things. We only work with Stephen for a moment in time because uh, certain issues that came up in his mind regarding conflicts

that he felt we had with other clients. But before we represented and he was working directly with Double Day and in the UH in the seventies, theoretically in a way to help authors, because we didn't have income averaging. So if you earned a lot of money one year, you'd pay a very high rate of income tax, and if you owed earn less the next year, Um, you

couldn't balance the two years. I think later on in tax legislation you could do that, but anyway at that time, so publishers and authors created this sort of maximum earning concept that they put in contracts purportedly to help the authors. But um, what happened in Stephen King's case is that his earnings were so enormous that what seemed like a reasonable annual amount initially became a hundred year payout for for what what what what? The earnings were as a

result of the success of his books. And you did a couple of other very big books. I remember Bronx Zoo about the New York Yankees, and the G Spot book just went berserk, that became a global bestseller. To tell us about that, well, I represented a psychologist, popular psychologist from California, man named George Bach, and he had he often stayed with me in New York when he was here, and he had just come back from a sexology conference where the author of The G Spot, Beverly Whipple,

had made a presentation about her research and theories. And he said to me, look, Francis, you should get a hold of her and uh um, she should write a book. So I said, uh, okay, I've never heard of the G Spot. Uh. I decided that I felt it was more appropriate to have a woman and a woman agent in my office pursue it with her, which she did, and we signed her up and the rest is history, and that's sold just huge amounts in all around the world,

all around the world. I have to go back to the nineteen seventies really where you cut your teeth in real estate. What was it like trying to develop real estate when interest rates were double digit and there seemed to be a lot of impediments to getting anything done In New York City. Well, in the early eighties, I was undertaking my first renovation. It was a building in Brooklyn Heights actually, and uh, I watched the prime rate

soar all the way. I remember it hit eighteen or nineteen percent, but it was astronomic and actually it was an invert he did yield curve. So the long rates were lower. You could borrow five year money at about fourteen point seven five mortgage money um. And what we did in those days the bank had a way that you could buy the rate down. You paid them a certain amount up front, so the homeowner would get a mortgage at twelve and three quarters percent, which in that

crazy environment seemed like a good rate. And so that was how we went about selling some of our units. The rest we ended up renting and selling a few years later when the market stabilized. So the regulatory environment, the sort of nimby thing that we still see today. The not in my backyard issue was that a big problem in the seventies or eight and eighties, or were people sort of open minded about development is good, it's

an economic increase and it creates more housing. Well, I think the people are are flexible, but there is an mbie kind of mentality, particularly depending on the type of housing that's being created. We undertook to build a major project in in Brooklyn, in downtown Brooklyn, and when I proudly told the borough president that we were including a major component of affordable housing, he said, no way, not

in that neighborhood. I couldn't believe my ears that UM that this UH, this politician, politician was was not favoring affordable housing. UM eventually overcame that because I explained that it was being co sponsored by the Actors Fund UH and that some of the people, some of the people there would be formally homeless people, but some of the other people were going to be retired actors who or UH needed needed housing, and that somehow made it more

politically acceptable. Quite quite interesting. So in New York we've seen a huge number of these very tall buildings going up. What do you think about the state of of real estate commercial real estate development today. Well, I think in in in terms of for sale for sale housing, the market is bifurcreated. Um. If it's housing that is at a low price point, which for New York City means

below three million, there's still a reasonably active market. The super luxury market has cooled off dramatically, and I would say that this is not a time that I would want to be building super luxury housing. And I think some of the projects that are sort of caught in the middle right now that are being built are going to have trouble selling their selling their units. So that space very much boomed for a while during the post credit crisis recovery. It seemed it was scraping along and

then it just exploded. Did we over build? Did the prices just get too silly? What what seems to be the issue there? And those tend to be cash purchases, not mortgage properties. Well, I think, especially in the higher end, is that fair. I don't think that that's necessarily true. I think it's mixed, uh problem, maybe half cash and

half financing. Uh, you know. I think it was a confluence of events which are often what occurs, and those events or a combination of increased supply a misperception of the depth of demand. So you know, people see a few apartments or you know, a hundred apartments being sold at a certain price point, and developers extrapolate that into

being a market for a thousand or two thousand. So often under the market system, we really don't know when we've oversupplied the market until we still thinks stopped selling. And the other factor, which I think is coming into play now, is that as a result of the tax legislation that was recently passed UH, New York and some other UH states that may be high service states but have to have high taxes to support them are in

disfavor UH. And I'm sure that's in the minds of of some wealthy people who are thinking of locating here. We're talking about salt state and local tax deductions which got capped UM at a pretty low level, which is heard in New York, California. I would guess Chicago and Boston. UH. I think those are all on the list, and there are others UM. I also recall reading you you would referenced LLCs more easily by condos versus co ops in order to UM in many ways provide some degree of

privacy for whoever the owner is. UM. Are we still seeing a lot of LLC purchases of of along those ways for for those purposes? Or has there was a giant New York Times article a couple of years ago about this, or has that trend kind of eased off? Well? I think ll c's exists for two reasons. In some cases it may be anonymity, but in other cases it's

a simple legal protection against personal liability. UH. And many lawyers would advise their clients, regardless of of whether they're concerned about their identity or not, to purchase through what's called a single purpose ll C UM so liability to protect the household, or liability to protect the owner. In cases to protect the owner, I mean normally you have insurance, etcetera.

But you know, God forbid some very very unexpected event occurs. UM, if it's owned by an LLC, you would be protected, Whereas if you owned it in your own name, you would be totally reliant on your insurance, which may be fully adequate. But UM, a very cautious lawyer would would recommend an LLC time Equities. Um, I know you focus a lot in Brooklyn and Manhattan. Are you outside of the New York area? Where else do you do you look to, uh do some construction and renovation? Well, actually,

Time Equities is a very national and international company. We own property in thirty states. We own property in six countries US, Canada, Germany, Holland, Italy and one property in the Caribbean. And let's talk a little bit about the real estate cycle. Where are we here? Is this late cycle early cycle? It seems like there hasn't been a lot of supply coming to the market. That doesn't seem like a lot of existing homes have come up. How how are you looking at where we are in that

in in that season? Well, I think real estate is always in two cycles. One is its own cycles supply and demand in a particular sub market, and the other is, uh, what's the financing market look like and what what is the ability of purchasers or renters to consume additional real estate? I think the economy generally bankers say we're in the tenth now eleventh inning of a nine inning game. Uh, and so we all sort of know that intuitively. Um, and that's of course a concern um UH. Different sub

markets have different characteristics. We tend to be opportunistic and we look for properties that are underperforming in a given market. UH, and real estate tends to exist over long periods of time, so we don't think in twelve twenty four month segments. We think in five and ten years segments, so we could be in and out of the cycle within that

period of time. So the credit cycle you referenced, I've heard lots and lots of people complain that they had to jump through all sorts of hoops to get a mortgage. If we're in the eleventh inning, we still seem to have fairly tight credit unless that's changed. How do you see us UM in terms of availability of credit, not necessarily price of credit, which is still pretty reasonable. I think.

I think the again, the credit markets are bifecreated, and when people refer to the problems of getting mortgages, they're usually talking about UH markets, the market for home home mortgages, and they're the regulators. The government, reacting to the last crisis, which seemed to enfranchise too many borrowers, became very very restrictive. I remember, as perhaps you did it. I think it was Bernanke who couldn't get a mortgage himself. UM uh

in any case. UM. In the commercial the financing of income properties whatever their type, residential, office, industrial, the markets are pretty liquid uh and uh um. Although the market has has maintained a decent discipline, there is more flexibility now in things like uh repayment terms, so we're seeing a lot of interest only loans rather than self amortizing or ten year admortizing loans. These are on the commercial development. On the commercial income property side, we have been speaking

with Francis Greenberger. He is the founder of Time Equities, real estate development company both nationally and around the world. If you enjoy this conversation, we'll be sure and come back and check out the podcast extras, where we keep the tape rolling and continue discussing all things real estate. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Check out my daily column on Bloomberg dot com. Follow me on

Twitter at rit Halts. I'm Barry Hults. You're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast, Francis, Thank you so much for doing this. I am a real estate junkie. I grew up in a household with a mom who was a real estate agent. It was always dinner table conversation, and I, as a person in finance, always paid close attention to what was going on in real estate if you were looking in the right place.

As much as so many people said the financial crisis came out of nowhere, if you were looking at the right part of the real estate market, there were tons and tons of warning that uh, freight train was coming down at the tracks that everybody. I just think most people weren't looking in those spaces we're talking two Uh. I think it took certainly took me by surprise. Uh. And I think it wasn't a like most people who

work in an industry. You might know a lot about your industry, but you don't necessarily know global finance as well as you might. I mean, we all take it into consideration, and the system was it was was really a banking and finance problem as opposed to a real estate problem. For for to say the least um. The other thing that took me by surprise. We have a president today who comes out of the real estate development sector.

I was surprised that the twenty two thousand and seventeen tax code basically punished places like New York City and New York State by capping the state and local um taxes. That that was kind of shocking to me. I figured if anyone wouldn't want to do that, it would be President Trump. But he signed off on that. Well, I can tell you a funny story. Barry Uh Ronald Reagan made the same proposal, and a number of the major New York real estate families, led by Larry Tish, called

an emergency meeting. They wanted to raise two million or five million overnight in order to fight the legislation that was being proposed. Same salt kind of UH provisions. And I went to that meeting and um Trump was there, and I think I was people kind of hemming and hawing, and I said, come on a sidewalk, cross us. A hundred thousand dollars are our whole portfolios are at risk here?

And I immediately agreed to make a substantial contribution. And Trump was number two, and then the others fell in line. So we obviously had a very different point of view at that time. But if he has a good memory, he certainly knows that This is a pivotal issue that has existed over a long period of time. So yes, I was very surprised to see him not appreciate the importance of what was involved. It almost seems like it's um a red state payback to the blue states for

not voting for him. I I don't know the thinking behind it. It's certainly doesn't raise a whole lot of money for the federal government. It's relatively modest in the scheme of things. I guess the high tax, high service states somehow offend the low tax, low service states. It's my best guest for that. Well, I think I think, uh,

I mean, I have no particular knowledge. I think Trump has left the real estate world and violy become UM totally devoted to his political activities, and hum seems to have transferred all of his allegiances to the right wing base, which he credits with his election. I think he's probably right about that. So, so you mentioned that time Equities has not only gone to expanded to thirty states, but is now international. When did that um begin? What was

that process? Like? I think the even though America may think of Canada as as as an extension of the us. They don't. I can assure you of that. Uh. And that was my first international investment, which I think was in you mentioned Toronto. Is that where it was? I know it was actually in uh in Montreal, Lovely city, lovely city. I've been dealing with a bro girl who was based in Montreal on the U S transaction which we completed, and he said, hey, you should come up

here there there's some great pies, uh. And it's very inexpensive. UH. And I went up there and I had arranged a lunch with a bunch of developers, bankers, and and it would seemed very pleasant until we got to dessert, and then war broke out over the uh French English separatism

uh in Montreal. So then I realized what the problem was. UH. And at that particular point in time that would have may have been ninety six or ninety seven, pricing did not really reflect, uh, the problems that were going on. But by night they did, and that's when I made my first purchase. So in other words, that um dual language mandate helped to drive real estate prices lower. Well, it was, it was, it was a confluence of events.

There was an extended recession, UM but certainly uh, the fact that the anglophiles UH, led by the Seagram family had made a decision to pull out of of Montreal was not a positive. And in fact, the first property I bought was from Seagram, from a Seagram's owned entity. Uh. And what do you what do you think of Montreal today? You know, I think it's a fantastic city. I often say it's France and North America. Um and Uh, it's booming, It's got a great tech center uh um factor. Uh.

I think it's a wonderful place. And some folks have said that um, Canada had come through the financial crisis without any of their banks blowing up. They have far fewer banks, a lot of concentration in the four or five largest banks, but a whole lot more regulation and a whole lot more oversight. The good news is their banks are all in pretty good shape. The bad news is a lot of people pointed Canadian real estate is one of the bigger bubbles in the world. What are

your thoughts on that? Well, it's true that cap rates in Canada have compressed a great deal and I haven't been able to buy any new income property there for five or more years. So I certainly agree that the market is very expensive. Um Uh, does that mean it's a bubble? Maybe? I think Um. The bubble that's referred

to is sometimes a construction boom in Toronto. Toronto has traditionally absorbed fifteen to twenty thousand new units a year, which is extraordinary, and they've been doing it for almost twenty years. Um. They have that much immigration to the city. They have that much immigration, both international as well as domestic. Um and people wonder how long can this continue without some sort of a breather. Since I started going to Vancouver for a conference about a decade ago, I just

think that's a fantastic city. It's beautiful, the weather is nice, that people are nice, the architecture is great. It's right on the Bay. Some people have described that as a China induced bubble. A lot of folks out of China can get money out of the country to buy real estate, and they the locals complain about these see through towers. Brand new buildings go up, they're fully sold, nobody's living

in them. What what do you see is happening in Vancouver. Well, the history of of the largest development project that I know of Vancouver was of course owned by Lee Kai Shing, who's perhaps the wealthiest person in in in Asia. I think he's Hong Kong based UM. He also owns ten percent of c ib C, one of Canada's largest banks,

So so his presence UH and he's legendary. He's the war and buffet of of of Asia UM and certainly has a lot of investors UH and apartment owners who have followed him and who have bought the complexes that he that he's built there, and it's I haven't been there recently, but it's enormous UM. So there is a very close tie to to to China, to Asia UH. And of course it's it's convenient because you can fly

fly there easily, being a West coast city. And I can imagine that today with with the Chinese UM currency controls, that that will affect the Vancouver market. In fact, I think I've read a little bit that it already has. But clearly the ability of the Chinese to buy outside their markets is being severely reduced and compromised at the moment. So you you mentioned you have UM investments in real

estate outside of North America. Where where are you putting money to work in either Europe or South America or Asia. What what catches your fancy these days? Well, my most recent uh, there were really two places that I would think about first as Holland. Holland was at the end of a long recession about two or three years ago. Banks weren't lending and a lot of the local real estate companies were very compromised by the losses that they

took during during a sustained recession. So real estate was very cheap in Holland and nobody had the ability to execute on it and buy it. So we have bought about twenty five or thirty office buildings there in the last two years. So that's been an area of great activity to us, and we've set up a small asset

management office. So we're very very Netherlands centric um. In addition, we just began made an investment in Italy, which is working its way out of an enormous pile of of debt and issues in a similar contrarian play where where in Italy, Well, we bought what we did was we bought a portfolio of non performing loans that says that it was controlled by a Tuscan bank, So most of

the loans are in and around Tuscany. There are worse places in the world to spend time if you're looking at Italy, are you looking at any of the other southern European countries that seemed to fall on hard times over the past a couple of years, Greece or Portugal or Spain. Well, we spend time looking at Spain. But we found that the tradition, the customs of the market are are less transparent there than we were used to. Uh. And so we we we were thinking closely about it

and allied ourselves some local groups. Nothing came of it. Uh. It's funny you mentioned Greece. Uh. We were having a discussion about Greece just the other day. And we'll take a look. Portugal is obviously a country that's very much on the rise and has a lot of very positive um indicators. Uh. And I'd like to investigate it more, although I suspect the real estate there has already reflected

the upturn in there economy. I would imagine that making an investment overseas, whether it's Canada or or Italy, is much more challenging than being in your own local backyard. How different are the legal rules? How different is the the business culture. What do you encounter when you try and bring what you've done in the United States overseas well? Clearly gaining a very very careful understanding of the legal

structure as am important, uh, understanding the tax structure. Uh. And that's sort of the first steps that we take when we think about a country. We look, of course at sovereign risk, but we look at the legal and tax structure. I remember going to Poland and hum a lawyer there was lecturing me on how Poland had special laws that uh, non Polish citizens couldn't own speculative real estate, and then he spent two hours explaining how to get

around it, and I said, well, you don't. I don't really like to get around things if if I'm not welcome here, thank you. Uh. And I can then can continue to concentrate on Germany, which certainly has lots of rules, but it's pretty transparent. It's transparent. Uh. So you have to you have to understand each each market uh and uh um, study it and and understand what you're getting into. Not too long ago, I was sort of shocked at how relatively inexpensive Berlin was compared to the rest of

the rest of Europe. Where where are you investing in Germany? Well, I started investing in Berlin and about two thousand three, two thousand four UM, and actually ran into a publishing friend when I was at a publishing convention in Frankfort, and he said, you like real estate, go to Berlin. They're giving it away and they were, so I bought as much as I could find. UM that made sense UH in sort of the two thousand four to two thousand ten twelve period. But now the market, just like Canada,

has become a very very favorite investment market. Prices have escalated and we're not able to buy UH properties they are at at at good spreads. We're happy to have the ones that we do and they're very very much more valuable than they were when we bought them. And you, guys, time equity is not much of a flipper. If you buy a property at a good price and it appreciates, but it's throwing off income, you would my understanding as

you prefer to hold onto those. We were very cash flow oriented, so we we UH we we sort of built our business based on having a very strong amount of cash flow because when you're in the flipping business, or totally in the for sale business. Uh, you're a victim of markets. And what do you do when the markets go south? If if you're running an income business, a rental business, you know that there's going to be

income there through thick and thin. It may vary to one degree or another, but you're not going to suddenly have the tap go dry. You speaking of taps, you mentioned the Dutch. I think most of Holland is below sea level, and they have some pretty extensive um structural engineering to keep water out even if we see sea

level uh go up. There was a piece in the New York Times not too long ago about the threats to certain coastal cities in the United States UM, and that the insurance industry has been raising rates if you're anywhere near either a hurricane zone or a rising waters um situation. How do you see the potential threat of rising ocean levels UM relative to real estate investment? Well,

it's certainly probably the greatest disruption that the business faces. Uh. We read every day, whether it's special sections in the New York Times or there was a report out this morning. Uh. And notwithstanding that, politically, the administration has decided that the problem doesn't exist or shouldn't be referred to. It's clearly a major problem, and it's coming and it's coming quickly

at time Equities. We've had a department a sustainability probably for ten years, so it's certainly an issue that we pay attention to. Um. It's not a simple one. Uhum. And how you manage the risk in different situations requires uh complex point of view. Um. It's funny. I spent the summer talking to my wife about our house, our beach house on Long Island, and uh do we sell it and move inland? What do we do? And of course it's problematic because we enjoy being there and our

family members and friends do. But when do you pack your bags and run? Uh? It's complicated. So if you were that that raises an interesting question. If you were shopping for a new beach house today, would you buy a place in let's say, the beach Front in Miami or or even the Hampton's Is that something you would be reluctant to put a big investment into. I would

certainly be reluctant. Uh and uh uh. The problem is, of course, the place that I have is attached to a lot of memories I've had it for twenty years, the kids grew up there, and how do you separate from it? But the problem with every real estate transaction

is you just described it. It's more than bricks and mortar, right, So I know I only have you for so much time, And I have a bunch of more questions to get to, UM, including my favorite questions I ask all our guests, why don't we jump right into those and and see where they go? Tell us the most important thing that we don't know about you. Well, although I am transparent and candid, Uh, I also know how to keep a secret and do so.

Tell us one no thank you? UM. Talk to me about your early men mentors who helped guide your career, be it in the literary agency space or in commercial real estate. Well, I was blessed with several extraordinary mentors. Uh. And these names won't mean anything to listeners, but UH. In in in the publishing business, UH, someone who in the industry is regarded as a giant. It was a German publisher named Roe volt And uh and he was

almost like a second parent to me. UM. In the real estate business, there were two people Charlie Benninson, who is well known in the industry, uh, and certainly had a major influence on me in all respects. Uh. And there was a another man named Milton Newmark who was a real estate lawyer who also was a great mentor to me. Mentors are very very important to me. I feel like I've learned more from them than I have in uh in in academic studying makes uh makes some sense? Uh?

What real estate developers, builders, investors influenced? How how you think about investing in the real estate space. Well, I I spent my entire career I always make an effort to listen to what other developers are doing, meet with them, read about them, uh, and learn from them. However, in the end, you have to make your own choices and decisions, and I feel I do it's informed by understanding the experience of others, but it's not determined by them. Fair

fair enough, Uh, Let's talk about some books. What what do you enjoy reading? What are your favorite books, be they real estate, non real estate, fiction, non fiction. Well, I'm an avid reader. Uh. Sometimes I'm reading out real estate, sometimes I'm reading about history, biography. Uh. I think non real estate. Recent book that is now shockingly in my mind on the best seller list. I think it's number

one is Sapiens, which is a history of mankind. It just shows you that there are an extraordinary number of sophisticated readers, a remarkable uh literary work and a remarkable history of mankind. Um, but I in real estate. It's been a few months. I read Sam's L's new book um uh and uh and thought that there were a

number of interesting insights in it. I also read a book came out a few maybe maybe a year ago about all the development that Zeckendorff did in New York that I thought was extraordinarily good and an interesting history of New York real estate. The Sam Cell book is am I being too subtle? Is that the one exactly? And what is Zeckendorff developing my life? Develop my life exactly? Exactly? Terrific book. And it talks not only about Zakendorff himself, but about the whole era in which he was such

a dominant figure. So you bring so much of a publishing background to to your personal reading, are you? Are you ever halfway through a book and you say I wish I would have found this book or the opposite, Who the hell published this crap? This is this is terrible. How does your background effects what you read? I mean, I I do look, I do look at at who publishes books, and to some degree it can inform the quality of it. But um, it's certainly not the soul criteria,

but sort of interesting to me. Just like if I look at a building, I'm interested to know who developed it, I should also, of course, I left it out. I also read continuously the books that might or agency produces. Of course I read Dan Brown's book The Second Its rives and uh, and many of many of our other clients. Who else, Um, let's let's let me give you an opportunity for some um sh endless promotion of your current

client roster. Who is uh? Do you find especially readable, compelling, fascinating? Well, i'd be concerned about would you defend any I would I would be I would be uh uh um. Here, I'll tell you a cute story. I got a new children's book the other day, and there is a there's an agent to our office who is a In addition to being an agent, she also writes books herself. And I didn't realize that it was so prolific, that she was so prolific. But if I understand what I got

uh the other day. It's her fiftie book. So she's both a very very successful literary agent but also writes at midnight, I guess, and has produced an incredible um uh library of our own work. That's a lot, although kids books don't have a whole lot of texts, so maybe it's uh granted they were shorter books. So let's talk about real estate. What are you excited about these days in in the commercial real estate area? Well, uh, I'm I I'm excited about tilting our portfolio to a

europe centric one. Um so um. Both our presence in Holland and now in Italy and exploring new places is something that that interests me a great deal. The other thing, uh, In in my career, I spent half half of it or more renovating half the world, but I hadn't done a lot of new development or new construct auction. Starting around twenty years ago or twenty or twenty five years ago, I got involved in new construction, uh, And I find

that very challenging and very interesting. So I'm I'm happy to be engaged in doing that, and it's it's it's exciting to me, is it a different experience starting with a clean sheet presentation by an architect, as opposed to here's the existing structure, here's what we have to work around. They sound like two very different are completely different. In one case, you're correcting the mistakes that somebody made. In

the other case, you're making your own mistakes. So what do you think is changing the most in commercial real estate? What what is going to be very different twenty years from now than than what developers are experiencing today. Well, I think as as as we were talking, when we came in, the nature of the workplace as as well as the nature of of where people live are are have got moved beyond programmatic needs, move beyond you know, space that you need for your work or for your

for your living. And we're very much involved in what we call experiential moments. How how is the space experienced? What? What is? What is? What is the user experience? Uh? What do they want to encounter? And we're seeing dramatic changes uh in that that people want amnetized spaces where

they can work in a different ways. As you were commenting as we were walking in about Bloomberg's right, you come into this building all the elevators take you to the sixth floor, which becomes the general lobby, And the thinking behind that is you just end up with these serendipitous interactions with people that you may not otherwise see if everybody just takes an elevator up to their own floor. And the whole idea of having um of food space and just it's a different design philosophy UM. And I

like your use of the word experiential. It really is what it is. It's not just physical space. Someone has thought about flow and how people interact in the real world. And these days when we're retrofitting suburban office buildings, which we do a lot, or urban ones for that matter, we're now introducing major um amenity lounge spaces, coworking spaces, wellness spaces, uh and and food and beverage spaces. So they're almost become a little hotel like beyond UM the

typical office situation. That's pretty interesting. So this is always an interesting question, and and I kind of have a sense of where you're gonna go with this from your book. Tell us about a time you failed and what you learned from the experience. Well, I fail all the time. I always say that I I don't bout about a thousand, A bout six fifty. That's pretty good, um so I think I think recently Hum, I don't know whether whether it's Bezos or somebody said, if you haven't failed continuously,

you're not making progress. Um so Uhum, I have many, many mistakes or many issues that we deal with. Uh. And I think when when a business plan goes wrong, the important thing is to switch strategies quickly and either find a way to minimize your losses or if it's a market correction that you're subject to, perhaps putting it, extending the business plan time frame until markets recover, which, for instance, if it's a for sale project, going into a rental mode would be a way to do that.

What do you do for fun outside of the world's a real estate I'm a big traveler, uh. I like new places. Um. Going to Copenhagen next week for the first first time. UM, be careful of the bicycles. It's a fascinating city. I spent a lot of time in Amsterdams, more bicycle dangerous than Amsterdam. UM. I have not been to Amstam, but I've been to Copenhagen, and even as many bikes are now in New York. It's just astonishing.

You You really have to know the rules of the road and basically know that there may not be any rules, to just watch out my rules, get out of their way. Uh. I love my family like everybody does. I love my friends. I spent a lot of social time, and I'm also a tennis player and skier. Interesting if you had a millennial or a recent college grad come to you and say they were interested in a career in commercial real estate,

what sort of advice would you give them? I would I would tell them to learn as much as they can, of course, h I would tell them to learn how to differentiate themselves and to see things, to try to see things that others don't. Because that's really as we discussed earlier, where the margins are you think like everybody else, margins are thin. And our final question, what is it that you know about the world of real estate today that you wish you knew thirty or forty years ago

when you were really ramping up? Well, I've always had a sort of creative uh side visual sensitivity, But as I've gotten more and more into development, I realized that I really do have a very keen architectural sense and development as a teamwork. It's team between an architect and

a developer. And if you bring that skill that way to see into things and and and to appreciate good architecture and also redirect architecture when it when it goes awry or it's not serving your program, that's a very beneficial relationship. And I've enjoyed my my working with the number of fantastic architects, including some of the starchitects of the world, so that that element of creativity is something that I discovered a little later in my career and

would have perhaps like to have done it sooner. We have been speaking with Francis Greenberger. He is the founder

of Time Equities UH International real estate development firm. If you enjoy this conversation, be sure and look up an inch or down an inch on Apple, iTunes, Bloomberg dot Com, Stitcher, Overcast wherever finer podcasts are sold, and you can see any of the previous two hundred and twenty five or so such conversations we've ad We love your comments, feedback and suggestions right to us at m IB podcast at

Bloomberg dot net. I would be remiss if I did not thank the crack staff that helps put together these conversations each week. U Medina Parwana is my producer. Taylor Riggs is our booker. Attica val Bron is our project manager. Michael Batnick is our head of research. I'm Barry Retults. You've been listening to Masters in Business on Bloomberg Radio