Summit Notebook

Living wages at Xanadu Meadowlands? Think again, New Jersey

Do not expect the developer that’s working on the massive Meadowlands shopping and entertainment complex in northern New Jersey to compel its tenants to pay their workers a living wage. Related Companies, the New York-based real estate developer behind the project, said on Tuesday that it would be a deal breaker.

We talked to Stephen Ross, Related’s founder, chairman and CEO at our Global Real Estate and Infrastructure Summit, and after a while, talk turned to the stalled project, slated to open in 2011, four years after the 2007 planned opening date. Among other things, we learned that the name “Xanadu” isn’t happening anymore. Related, which took over the project after a bunch of lenders dropped out, has a list of other names, but wouldn’t share them with us.

The most interesting thing that I heard is that Related would not force stores at the complex, located in East Rutherford, N.J., by Giants Stadium, to pay living wages to their employees. While a minimum wage is the lowest hourly, daily or monthly wage that employers must pay, a living wage is what is considered the lowest amount of money that someone requires to pay for shelter, clothing and other basic needs. Here’s what Ross (incidentally, the 95 percent owner of the Miami Dolphins football team) said about that:

That would be a deal breaker for any retail development. … People earn tips. The large retail tenants have a different wage scale that they pay. I think the most important thing today is creating jobs.

Ross shared more with us on this thought. He referred to the Bronx’s Kingsbridge Armory project,  a plan to convert the Eighth Regiment Armory building to a shopping mall that fell apart after the New York City Council tried to get Related to do the same thing. Ross contemplated the notion that the New York City government could try to make a living wage commitment a legal requirement:

I think that would be disastrous for New York. It would certainly be vetoed by [the Bloomberg] administration. Looking ahead, it might sound good for a politician or a labor leader, but I don’t think they’re thinking ahead or have very much vision about what’s happening in the world today.

Of course, politics and business are about compromise. Maybe New Jersey and New York could consider passing a law that requires retailers to place tip jars at strategic points throughout their stores.

LeFrak: We’ve been bunting for years

Watch out for Richard LeFrak when he’s at bat and you’re in the outfield. He has a tendency to bunt.

This is a funny baseball technique to use when most executives spend their time trying their best to hit home runs, but LeFrak Organization‘s chairman, president and CEO says it’s worked for his real estate empire, so there’s no need to stop now. When we asked him at our Reuters Global Real Estate Summit why his company didn’t borrow a ton of money during the real estate boom, he said:

We did not want to be seduced by market conditions. My children like to kid me — Every time you get up to the plate, you bunt, and we’ve been bunting successfully for a hundred years. As a result, I’m not interested in changing the methodology that’s worked so successfully.

LeFrak, grandson of Harry LeFrak, who started the company in 1901, took a similarly cautious approach to resort hotels, which he also talked about at his summit appearance on Monday in New York City:

It’s way out on the risk curve. … It sounds glamorous, but boy, you gotta have a strong stomach for that. It depends on a lot of discretionary spending –- corporations willing to step up and do outings and have meetings in places that may or may not be looked favorably on by their shareholders… The whole notion of saying, “I’m going to take my top producers to Hawaii” may not be, let’s say, that robust.

LeFrak talked about meeting people who’d built big luxury resorts on Caribbean islands like Anguilla, including some places that might not always have up-to-date infrastructure, like an airport that can handle moving lots of people onto and off the island.

When you ask, how do people get here, they shrug their shoulders. There’s opportunity in that space, but it would be a departure from the way I would like to think and how our executives like to think about how we would spend our money.

Q+A: Maria Fiorini Ramirez

I sat down with Maria Fiorini Ramirez today after she joined us at the Reuters Investment Outlook Summit and asked her about starting her own company — the global economic consulting firm Maria Fiorini Ramirez, Inc — her advice for young entrepreneurs, and if women can balance a successful work and home life.

Where you were you born? Naples, Italy

When did you come to the U.S? 1960. To East New York.

Did you go to high school there? Yes, St. Michael’s. An all girl’s Catholic school.

Where do you live now? Far Hills, New Jersey

Did you ever think that you were going to start your own business? Yes. And a global one because I always liked geography and history.

AUDIO – Real estate’s ugly confluence

All week, we have been meeting real estate executives at Reuters Global Real Estate Summit who have discussed the many different areas of concern that have spread throughout the sector.

Some have spoken about deleveraging. Some have told us about the shrinking of values. Others have said it’s a confidence game — as in, there isn’t any.

But J. Allen Smith, chief executive of Prudential Real Estate Investors, brought it all together for us quite nicely.

In Smith’s view, the real estate universe is subject to a confluence of all the above-mentioned problems and a few others as well. He sees it as a unique time and does not see a rebound for some time.

It’s a daunting time to be in the industry, for sure, but at the end of his comments (which you can hear by clicking on the link below) he is starting to see a glimmer of hope here and there. After the past couple years, even a glimmer is a pretty welcome thing.

Smith was one of our featured speakers at this year’s summit, which continues through the end of this week. Reuters has exclusively interviewed guests in our offices including New York, London, Shanghai, Mumbai, Sydney and others this week.

For more on Smith’s comments, please click on the attached link right below:

Smaller cities’ real estate to stall- what are your town’s prospects?

New York and a handful of other major U.S. cities are down, but will never be out as far as their commercial real estate goes, a leading New York real estate private equity investor said Monday at the Reuters Global Real Estate Summit.

“New York’s not going away- it’s THE global city.”

Second tier cities are another matter entirely, said Thomas Shapiro, president of GoldenTree InSite Partners. “We are a big believer in the big city theory which is that the bigger cities will continue do better, to the detriment of secondary cities.”

Companies always go to where the best talent is, he explained, meaning cities such as his big five– New York, LA, San Francisco, Boston and Chicago– remain magnets, their status self-perpetuating

“Goldman Sachs is not moving to Miami because the intellectual capital is in New York- ditto Boston, ditto San Francisco, ditto LA.”

Here’s Shapiro’s prognosis for how some other U.S. cities will fare as the real estate market recovers:

San Francisco: one of the top markets, Shapiro said, because “San Francisco has a diversified economy.” Chicago: “It’s a boom and bust town, but it is an important center.”

AUDIO – A new emerging market for real estate

Remember the good old days where — if you lived in the United States anyway — people would talk about “emerging markets”?

We’d nod our heads knowingly, wishing these poor folks the best as they tried to accumulate the swell things we had bought for ourselves. We knew that residents of Mumbai or Caracas or somewhere would never attain the great things we had in such abundance here in the good old USA (Hummers; his and hers monogrammed dishtowels; zero down, 110% mortgages on houses we couldn’t afford … that kind of stuff), but we still wished them well.

So, here we are in 2009 and at this year’s Reuters Global Real Estate Summit we find that the new emerging market is … well, it’s right down the block.

According to our guest Tom Shapiro, president of GoldenTree InSite Partners private equity investment firm, the new emerging market in the real estate world is the United States.

Shapiro, in a lively discussion, spoke glowingly about his firm’s recent new business in Brazil and about other opportunities he was seeing outside the United States. But, while he said his firm had not made any investment in the U.S. in about two years, he was starting to look for opportunities and see some enthusiasm for deals to get done.

Shapiro said it was still to early to decide what inning the real estate meltdown was in, but he was starting to see some interest from the sidelines about what the “next big thing” would be — and with cities like New York, San Francisco and Boston as potential growth engines, he was a little hopeful.

Optimism this week has been pretty thin in the real estate world, so we need to take it where we can get it.

AUDIO – ‘Off to the Outlets’ — A new real estate mantra

When it comes to shopping for bargains these days, retailers are expanding their window of possibilities the same way as increasingly price-conscious consumers.

While the concept of outlet malls and shopping centers was once considered a last-ditch way to unload excess inventory, Steven Tanger, chief executive at Tanger Outlet Centers, says the model is changing…and fast!

Tanger, speaking at the Reuters Real Estate Summit on Tuesday, said that many retailers who had previously shunned the outlet concept are starting to look at the option as more than just something for “the other guy.”

Mr. Tanger also gave us an update on how business conditions are looking overall — including how much the recent spate of lousy weather in New York is weighing on shoppers’ moods (it hasn’t helped our moods that much either, quite honestly!).

But Mr. Tanger was a bit more sunny than the New York weather has been – at least about his own space in the retail world. He sees companies and store concepts including Limited Brands, Victoria’s Secret and Restoration Hardware all expanding their businesses into outlets.

He even sees an outlet market for plastic shoes — as Crocs has entered the space.

Tanger, with outlets spread throughout the United States, sees this expansion as a plus for his business and a definite avenue for future growth. While Tanger is a very East Coast-centric concept right now, the map of the United States has a lot of room for growth for the company and Tanger said he and his team are looking for opportunities to expand right away.

AUDIO – A record-setting blog!

Everyone likes to set records. Think about those two giant twins who felt the need to ride motorcycles for their Guinness Book of World Records picture. What were those guys thinking?

Well, after many Reuters Summits, it seemed we set a record on Monday for the use of the word “crap” in one session.

It’s not a particularly glorious achievement, of course, but when thinking about the state of the real estate industry these past few years the words could have been a lot more nasty.

At the Reuters Real Estate Summit today, Richard Jones, partner at the Dechert LLP law firm and co-chair of the firm’s real estate group, spoke about the kinds of deals that will have to get done to help get the ball rolling on the many restructurings that need to be completed industry-wide in the next few years.

As there are a great number of troubled loans out there, the question of what happens to the worst of them (jokingly granted an effluent-style nickname). Jones, who advises clients on almost every side of an available real estate transaction, gave a good sense of exactly what will have to happen to start seeing the market swing back into action.

Jones was one of the featured speakers at this year’s summit, whch continues through this week around the globe. Reuters will be welcoming guests to centers including New York, London, Shanghai, Kuala Lumpur and Sydney.

For a chance to listen to Jones’ thoughts, please click on the link below:

AUDIO – Pulte Homes and the Cycle

It’s not a motorcycle or a unicycle – we’re talking the overall real estate business cycle.

While the bulk of the focus at this year’s Reuters Real Estate Summit is on the commercial real estate side of the business, Richard Dugas, chief executive of Pulte Homes, spoke to us about how things look on the residential side of the aisle.

It remains pretty rough out there.

Dugas told us it was still difficult to predict where things stood and how the rest of 2009 would shape up, but he did sound somewhat hopeful that the sector had leveled off from its dramatically depressed levels seen during 2008.

The confetti was not going off and there was no champagne being passed around just yet, but after a ride south that the residential real estate and building industry has seen, “not getting much worse,” sounds a lot like “better”.

Dugas was one of the featured speakers at our annual Real Estate summit, which this year has guests across the globe in centers including New York, London, Beijing and Kuala Lumpur.

To hear Dugas’ comments, please click on the link below:

iSkyscraper? If you were Apple, why not?

If you had paid $3.5 billion for a skyscraper named after bankrupt automaker General Motors, wouldn’t you want a tenant to come in and pay you another few million to rename the building, with the added bonus of giving it a name not associated with a failed recipient of government largesse?

Boston Properties, which bought the building last year, located at the southeast corner of Central Park in Manhattan, is not known to be shopping around the naming rights to the building, but a top real estate broker in Manhattan, known as the “Queen of the Skyscraper” has one suggestion if ever it is : Apple.

The GM Building is home to Apple’s sleek flagship store, well known to the hordes of tourists and New Yorkers alike, and the maker of the iPhone enjoys top brand name recognition and public affection that Apple is a logical choice.

“If I were Steve Jobs I would be negotiating now,” said Darcy Stacom, the CB Richard Ellis broker who handled the transaction. (She hastened to add she has no knowledge of whether Apple is or might be interested.)

What’s more, she said, the building is home to CBS News’ national daily broadcast, so a massive audience hearing, “Live from the Apple building in New York…” every day would be a major coup for the retailer.

The naming rights to such a marquee building can be cost millions (they are not typically sold outright, but built into rents.) Then again, few companies, Apple among them, can afford that luxury in this market. And even if, as Stacom says, it takes a while for New York to get used to a new name, they may be eager to forget GM.

(Reuters photos)