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Rebuilding the foundation of New York City.

Himmel & Meringoff Properties remains optimistic about the New York City real estate market in the long term. Short term, however, we are concerned about two industry-wide problems - liquidity and consumer confidence.

The government's passage of FIRREA in 1987 has helped to create a liquidity crisis. Banks are now required to keep as capital reserves a percentage of the appraised value of loans outstanding. This has caused panic among bankers: commercial lending institutions have redlined real estate as an are of new business, trying to make up for the excesses of the 80's by not lending at all.

At the same time, consumer confidence is at an all-time low, which means that people are extremely hesitant to expand their businesses.

The real estate industry needs help from Washington. We need legislation that will ease the liquidity crisis. At a minimum such legislation should (i) lower the capital gains tax so that owners can afford to sell and have an incentive transfer assets; (ii) keep depreciation at 31.5 years rather than switching to 40 (which would only serve to create business fro tax accountants); (iii) restore passive losses, and (iv) loosen bank's capital reserve requirements.

But despite the inevitable cyclical nature of the market - and the current atmosphere of hard times - we believe that New York remains a pre-eminent city for the international business community. Our positive outlook on New York City as the leading international business capital has helped us achieve high occupancy rate in our existing portfolio (averaging 97 percent).

Why do we believe business will continue to want to remain in New York City? * New York City is the world's leading financial center - the home of the New York and American stock exchanges, where $1.34 trillion worth of issues were traded in 1990 * Aggregate personal income in the New York metropolitan region totals more than $300 billion annually * New York City is the home of six of the nation's 10 largest commercial banks, five of its 10 largest law firms, four of its "Big Six" accounting firms, and three of its five insurance companies * New York City is home to more than 405 foreign bank officer - more than Los Angeles, Chicago and Houston combined * The headquarters of 47 of the Fortune 500 largest industrial companies and 58 of the Fortune 500 largest service firms are in the City * New York City has more than 15,000 manufacturing facilities, and more than 235 million square feet of office space, more than any other city in the world * The city's three major airports service 75 million domestic and international travellers a year

We are confident that if the City, State and Federal governments respond in a timely manner to the serious obstacles currently facing the real estate industry, the long-term outlook for the city's real estate market will be bright. We are actively working with the Real Estate Board and National Realty Committee to develop detailed business plans that will help rebuild this great city. We all need to work together to rebuild the foundation of New York City and the real estate industry.
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Title Annotation:Review and Forecast, Section III; real estate industry
Author:Himmel, Leslie Wohlman
Publication:Real Estate Weekly
Date:Jun 24, 1992
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