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Guest cherzeca

NYCer for 40 yers here.  raised two kids here. talking to them I get a feel for how young adults feel about NYC.  before covid, they all loved it. after covid, "why spend this much if I am just zooming all day"? your next gen of office workers are not feeling NYC.  there are excellent coffee shops elsewhere too...

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Unless there is (another) government bailout of NYC, wouldn't the taxes just continue to increase on the remaining population? I mean, a lot of this stuff is fixed, right? It would kind of create a pretty vicious cycle.``````````````````````````

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A lot depends on how it's managed going forward.  Presumably there were good structural reasons for NYC to have become NYC, capital of the world, in the first place, be it institutional or geographical.  Some of those reasons are impaired by the aftermath of pandemic, some are not.  But clearly the short term is looking quite grim.  Whether it go on for a couple of years or a couple of decades depends on how it's  managed and how US interact with the world.  Longer term, presumably those same advantages that created NYC in the first place will resurrect it, the same way they did after the 70's.

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NYC has been through worse in the past (GD tent city in central park) and will probably go through more troubled times in the future. People who get fed up with taxes will leave, and people who have big ambitions and no experience paying high taxes will gladly move in and take a shot at hitting it big in the Big Apple.

 

For every person trying to escape a big city there is someone trying to escape their small town.

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Who knew people prefer larger living quarters when they can't go out much, and smaller ones when they can go out a lot?

 

Life is trade-offs, I guess.

 

So you mean to tell me that if there was a virus that is very contagious and it make people want to leave densely populated cities with high rent, I am supposed to be shocked at that kind of rationale behavior by the upper middle to rich class? 

 

Wow, I would've never thought of that.  2008/2009 was scary as well.  People tried to jack my tenants.  Every 7-10 years, you have to experience some pain in real estate.  It's just life.  This is round 2 for me with 2008/2009 being more scary in general but NYC holding up better.  This round is more specific for NYC.  Back in 2008/2009, I was pretty bearish about NYC because all the revenue and profit center that drove that boom was so tied to mortgage packaging.  That was totally going to go away.

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Guest cherzeca

Unless there is (another) government bailout of NYC, wouldn't the taxes just continue to increase on the remaining population? I mean, a lot of this stuff is fixed, right? It would kind of create a pretty vicious cycle.``````````````````````````

 

there is grittiness and there is unsafe.  former is kinda of urban cool, latter is uncool.  NYC is managing itself into uncoolness for your next Gen office workers.  seems like other cities are following suit

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Who knew people prefer larger living quarters when they can't go out much, and smaller ones when they can go out a lot?

 

Life is trade-offs, I guess.

 

So you mean to tell me that if there was a virus that is very contagious and it make people want to leave densely populated cities with high rent, I am supposed to be shocked at that kind of rationale behavior by the upper middle to rich class? 

 

Wow, I would've never thought of that.  2008/2009 was scary as well.  People tried to jack my tenants.  Every 7-10 years, you have to experience some pain in real estate.  It's just life.  This is round 2 for me with 2008/2009 being more scary in general but NYC holding up better.  This round is more specific for NYC.  Back in 2008/2009, I was pretty bearish about NYC because all the revenue and profit center that drove that boom was so tied to mortgage packaging.  That was totally going to go away.

 

I know, right.

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Guest cherzeca

Who knew people prefer larger living quarters when they can't go out much, and smaller ones when they can go out a lot?

 

Life is trade-offs, I guess.

 

So you mean to tell me that if there was a virus that is very contagious and it make people want to leave densely populated cities with high rent, I am supposed to be shocked at that kind of rationale behavior by the upper middle to rich class? 

 

Wow, I would've never thought of that.  2008/2009 was scary as well.  People tried to jack my tenants.  Every 7-10 years, you have to experience some pain in real estate.  It's just life.  This is round 2 for me with 2008/2009 being more scary in general but NYC holding up better.  This round is more specific for NYC.  Back in 2008/2009, I was pretty bearish about NYC because all the revenue and profit center that drove that boom was so tied to mortgage packaging.  That was totally going to go away.

 

covid is precipitating trends that are not friendly to NYC.  the biggest in my mind is the risk that "front office" as well as "back office" of the securities/finance industry will leave NYC.  the latter has already mostly happened. covid is encouraging the former.  if NYC loses much of the financial sector, then it will be shot to hell

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I've personally sold all my NYC focused REITs and purchased a boutique hotel in Belgrade, as it's the future.

 

https://nypost.com/2020/11/17/serbia-is-a-new-unlikely-oasis-for-nyc-residents-fleeing-the-city/

 

How much NYC office do you still own?  This is what makes a market.

 

low teens % of portfolio and dropping.

 

What was it at peak and how do you typically size?

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Who knew people prefer larger living quarters when they can't go out much, and smaller ones when they can go out a lot?

 

Life is trade-offs, I guess.

 

So you mean to tell me that if there was a virus that is very contagious and it make people want to leave densely populated cities with high rent, I am supposed to be shocked at that kind of rationale behavior by the upper middle to rich class? 

 

Wow, I would've never thought of that.  2008/2009 was scary as well.  People tried to jack my tenants.  Every 7-10 years, you have to experience some pain in real estate.  It's just life.  This is round 2 for me with 2008/2009 being more scary in general but NYC holding up better.  This round is more specific for NYC.  Back in 2008/2009, I was pretty bearish about NYC because all the revenue and profit center that drove that boom was so tied to mortgage packaging.  That was totally going to go away.

 

covid is precipitating trends that are not friendly to NYC.  the biggest in my mind is the risk that "front office" as well as "back office" of the securities/finance industry will leave NYC.  the latter has already mostly happened. covid is encouraging the former.  if NYC loses much of the financial sector, then it will be shot to hell

 

I don't have a lot of numbers or stats to back up.  I guess I am one of those HODL NYC people.  FB signed the Farley building while simultaneously laying out a plan to have 50% of the work force remote in 10 years.  My interpretation is that FB and the other big tech companies realize that NYC will likely be the best source for the 22-35 talent.  It wasn't that long ago when corporations were complaining that they can't compete on hiring in the suburbs. 

 

New normal probably looks like "35+ married with kids moves to the burbs earlier" because companies are willing to accommodate work from home or at least partially.  This provides a place for the younger 22-35 single and ready to mingle to flood into the city.  There were concerns a while ago that NYC was getting unaffordable and the young blood were priced out.  I think this is a great reset.  Those young'uns want to be near where the ACTION is which includes career prospect and mates.  Living in NYC never made sense for the parents helping out their kids etc.  But it is glorious for the kids. 

 

Willing to go long NYC.  There are still bargains.

 

In the ZIRP, the 6% dividend yield is KING (or likely to double).

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I've personally sold all my NYC focused REITs and purchased a boutique hotel in Belgrade, as it's the future.

 

https://nypost.com/2020/11/17/serbia-is-a-new-unlikely-oasis-for-nyc-residents-fleeing-the-city/

 

How much NYC office do you still own?  This is what makes a market.

 

low teens % of portfolio and dropping.

 

What was it at peak and how do you typically size?

 

Pupil and Gregmal trimming their office REITs... Uh oh...

 

Run, don't walk! 

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Who knew people prefer larger living quarters when they can't go out much, and smaller ones when they can go out a lot?

 

Life is trade-offs, I guess.

 

So you mean to tell me that if there was a virus that is very contagious and it make people want to leave densely populated cities with high rent, I am supposed to be shocked at that kind of rationale behavior by the upper middle to rich class? 

 

Wow, I would've never thought of that.  2008/2009 was scary as well.  People tried to jack my tenants.  Every 7-10 years, you have to experience some pain in real estate.  It's just life.  This is round 2 for me with 2008/2009 being more scary in general but NYC holding up better.  This round is more specific for NYC.  Back in 2008/2009, I was pretty bearish about NYC because all the revenue and profit center that drove that boom was so tied to mortgage packaging.  That was totally going to go away.

 

covid is precipitating trends that are not friendly to NYC.  the biggest in my mind is the risk that "front office" as well as "back office" of the securities/finance industry will leave NYC.  the latter has already mostly happened. covid is encouraging the former.  if NYC loses much of the financial sector, then it will be shot to hell

 

NYC lost the Madison Avenue advertising businesses, (think Mad Man), and it was once the fashion capital of US with its garment district, and the media center of the US with all big 3 broadcasters.  Finance is obviously hugely important to NYC today, but there are fundamental forces that give NYC its regenerative capacity.  Geography, for one, makes immigration benefit NY more than elsewhere in the US, and so are the transportation infrastructure, education institutions, etc.  There's reason why finance was centered around NY in the first place. 

 

That said, it's going to be on a down hill for a while, especially with characters like AOC having influence over decisions surrounding Amazon HQ2.  It'll take a while, but it's more about how it's run that will determine its future than just finance.

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I've personally sold all my NYC focused REITs and purchased a boutique hotel in Belgrade, as it's the future.

 

https://nypost.com/2020/11/17/serbia-is-a-new-unlikely-oasis-for-nyc-residents-fleeing-the-city/

 

How much NYC office do you still own?  This is what makes a market.

 

low teens % of portfolio and dropping.

 

What was it at peak and how do you typically size?

 

Pupil and Gregmal trimming their office REITs... Uh oh...

 

Run, don't walk!

 

To be fair, I have, over the past few months come across one of the most exciting invest opportunities Ive seen in a long time, and its not in the real estate space. Given my massive real estate exposure, my incentive to reallocate to a new and somewhat diversifying core position is large.

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Who knew people prefer larger living quarters when they can't go out much, and smaller ones when they can go out a lot?

 

Life is trade-offs, I guess.

 

So you mean to tell me that if there was a virus that is very contagious and it make people want to leave densely populated cities with high rent, I am supposed to be shocked at that kind of rationale behavior by the upper middle to rich class? 

 

Wow, I would've never thought of that.  2008/2009 was scary as well.  People tried to jack my tenants.  Every 7-10 years, you have to experience some pain in real estate.  It's just life.  This is round 2 for me with 2008/2009 being more scary in general but NYC holding up better.  This round is more specific for NYC.  Back in 2008/2009, I was pretty bearish about NYC because all the revenue and profit center that drove that boom was so tied to mortgage packaging.  That was totally going to go away.

 

covid is precipitating trends that are not friendly to NYC.  the biggest in my mind is the risk that "front office" as well as "back office" of the securities/finance industry will leave NYC.  the latter has already mostly happened. covid is encouraging the former.  if NYC loses much of the financial sector, then it will be shot to hell

 

NYC lost the Madison Avenue advertising businesses, (think Mad Man), and it was once the fashion capital of US with its garment district, and the media center of the US with all big 3 broadcasters.  Finance is obviously hugely important to NYC today, but there are fundamental forces that give NYC its regenerative capacity.  Geography, for one, makes immigration benefit NY more than elsewhere in the US, and so are the transportation infrastructure, education institutions, etc.  There's reason why finance was centered around NY in the first place. 

 

That said, it's going to be on a down hill for a while, especially with characters like AOC having influence over decisions surrounding Amazon HQ2.  It'll take a while, but it's more about how it's run that will determine its future than just finance.

 

 

Why don't people talk about biology?  Why don't people talk about the fact that if you are 22-35, single, horny, and promising, you want to be in NYC to meet others just like you.  If you are 25, Asian (East and South), and can code or build complex financial models or just trying to revolutionize the world, you want to be here.  Your odds are slimmer in Wichita.  If you are LGBTQ, this is a great place for you.  If you want Dim Sum, this is the place for you (although capacity leaving the market temporarily).  50% of my thesis is that this is the deepest liquidity pool for dating.  I will continue to bet on biology. 

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not to mention the pricing from a consumer standpoint is starting to get super attractive in my view:

 

https://streeteasy.com/building/360-east-57-street-new_york/10b

 

this apartment (well one a few floors up or down) was $5100 when i lived there in the early 2010's. it's now $4200. rent down 20% from almost 10 years ago, while salaries/all-in comp for elite fields is probably up 20% (or more in some instances, I'm honestly not as in tune with entry level comp for banking/consulting/tech)

 

the living room can be a 3rd bedroom, that's $1,400 / month average for 3 dudes to live in manhattan making like mid $100's 1st year out of college (finance/tech/whatever), or $2000/month for recently graduated big law types making $250K (you get your own bathroom and a full living room for having to deal with law school). i'm sure this apartment is not the cheapest/most expensive, i just picked this one because i have a great sense of comparability and know what it's like to actually live there (it's nice, doorman building, perfectly acceptable). it's not a hip spot, the neighborhood's kind of boring, but you're a walk away from the offices in midtown and a wasted cab ride away from lots of night life.

 

people make a lot more today than in the early 2010's, the disposable income of the yuppie crowd. rents down = massive increase in disposable income for playing and getting ahead in the greatest city in the world and that applies at all levels.

 

think how cheap its getting to share apartments in outer boroughs. sure that's bad for near term NOI, but it also creates an attractive pull.  you can say "well ya but you could get a house or your own apartment for that in XXX", sure, but it's not in NYC.

 

rents are skyrocketing in the places people are leaving to. like in south Florida for example.

 

the NYC premium collapsing should help buffer the "exodus"

 

EDIT: for context, the 2BR I shared in the south immediately after my time in NYC is now $2000 up from $1500. So the spread went from $3,700/month to $2,200/month.

 

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