Lefrak: city to recover from 'Decade of Swine.' (developer J. Samuel LeFrak addresses real estate industry conference)

Developer J. Samuel LeFrak told a recent industry gathering that the New York market's current problems really began in the 80's when a new breed of developer -- no names mentioned -- emerged and built millions of square feet of speculative office space in anticipation of never-ending demand and ever-escalating rents. They bought high in this "Decade of the Swine," he said, and now they must sell low.

Compounding the dilemma, says LeFrak, was the 1986 tax reform, the 1987 market crash and the nation's economic nosedive in 1990.

"It was fun while it lasted," said LeFrak to the Young Men'/Women's Real Estate Association (YM/WREA). "But now the banks want these loans repaid and these high fliers can't come up with the money."

Optimism for Future

As the industry begins the 90's, LeFrak warned them to expect the same types of changes, events and irreversible trends that made up the 80's. No one would have believed, for example, he said, the demise of communism, AIDS, the S&L crisis, the fall of Michael Milken nor the troubles of the Reichmans, Peter Kalikow, Trump and the Helmsleys.

" ... keep in mind that there certainly will be surprises that seem far-fetched, along with probable trends now shaping up and how they'll affect the real estate business and New York," he said.

But do not despair, beamed the be-spectacled LeFrak. The New York City real estate industry has faced problems before and has survived, and it will survive again, he said.

"It's the 14-year cycle," he said." ... just as the Bible says: Seven years fat, seven years lean."

New York and its real estate business, he said, is in a state of constant renewal. The central business district is always being renovated and replaced. And, despite the doomsayers, New York, he said, is still the most vital city in the world. It is a world center for, among other things, transportation, fashion, commerce education and government.

"New York is the king of cities," he said, "Sure it's full of office space but New York still absorbs more than a million square feet a year ... even if it is overbuilt."

The right building in the right location still always rents, he said, pointing to his own office tower on 57th Street which is 100 percent rented with such tenants as Bristol Meyers-Squibb, Citibank, 20th Century Fox and Eastdil.

LeFrak said he doesn't believe in suburban competition. "Our suburbs only exist as there is a healthy New York," LeFrak said.

LeFrak pointed to his own successes in affordable housing in Battery Park City, Newport, Bedford Stuyvesant, Mott Haven, Forest Hills, and urged bankers and builders to get involved in the creation of these units. While municipal budgets are tight now, he believes building will start again in a year or so and politicians will be demanding more moderate and affordable housing.

Governments, he said, will be devising new forms of the old 608 and Mitchell Lama programs. These problems work very well, he said.

LeFrak, whose family owns commercial and residential property throughout the metro area, said he continues to buy and build in the city and he predicts a renewed optimism in the city in 1993. While his plans have been halted for now, he said, he will forge ahead with building housing and Delancey Street.

The LeFrak Organization was founded in 1905, by Sam LeFrak's father, Harry. Today, Sam LeFrak's son Richard is president of the organization and, he said, they look forward to a fourth generation of LeFrak leadership