In case you missed the last week of DeBlasio press conferences, the first had a group made up of his main cabinet members. There was not a single businessman or real estate professional in the group. There was nobody with any senior management experience at all, including the mayor. Not a single one has ever run a complex group. The largest management task DeBlasio ever had was managing the ombudsman office of 40 people with no real role in government. One of the cabinet members bragged of his union background. They all are openly left wing.

This then got followed by another news conference where the mayor had the leader of every major city union on stage with him. He used this press conference to claim he was demanding along with the unions, that personal income taxes must be raised by $560 million a year for five years-that is $2.65 billion of higher taxes. Then there is the issue of retroactive pay for the unions standing on stage with him. That totals another $2.5 billion. Without these added costs the budget is already $2.5 billion or so in deficit.

DeBlasio has also stated that he intends to require all New York city employees of private companies to get paid sick leave and a higher minimum wage. Then any New York property which has any sort of tax break or subsidy from the city has to pay a living wage.

Then there was the election of a new speaker. She is a Puerto Rican woman who sometimes led protests on the steps of city hall while she was a councilman, and she brags that she has strong positions left of DeBlasio. In her acceptance speech she emphasized raising wages and benefits.

The new schools chancellor is a 70 year old retired teacher and principal who is happy to acknowledge her days as a union teacher. She, like the mayor is negative about charter schools and pro union. So much for the hard won progress Bloomberg made to try to improve education in the city for the minority kids who need it most.

These are just the start. The mayor and speaker have a whole agenda which is going to materially raise operating costs for property owners, restrict development and raise the cost of development. All of that leaves aside deteriorating safety and crime numbers, lower performance in schools, and over time, a reluctance of new companies to move into Manhattan due to all the higher costs and regulations.

There will be a run of regulations, higher costs and other anti successful rules and laws which over time will hamper making proper returns on investment in New York. Success is now considered bad officially and they talk about two cities, the need to redistribute wealth- that is you in case you missed it- and an end to luxury housing development in favor of affordable housing. The only good news is Cuomo is running on a platform of lower taxes and any tax increase must be approved by the state so maybe higher income taxes will not happen. It will be hard for Cuomo to push his agenda of making New York a welcome place for business if New York City is so anti business. The rest of the state does not count.

Not only are cap rates in Manhattan at levels that discourage investing, but when you add all of the DeBlasio issues, you need to step back and wait to see where all this goes.

Just be aware that only 16.5% of registered voters, actually voted for him and that is just 9% of the city population, so it is not clear if all of what he and the Speaker plan will happen, but enough will to make a serious problem for the next four years for any real estate owner investor.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM Digital Member, you’ll receive:

  • Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Joel Ross

Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.