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Eichner: 'engine needed to pull NYC to recovery.' (real estate developer Ian Bruce Eichner addresses Young Men's/Women's Real Estate Association regarding recovery of New York, New York economy and real estate industry)

The commercial vacancy rate in Manhattan--some 31 million square feet in Midtown and 20 million square feet in Downtown--is intrinsically tied to employment levels, developer lan Bruce Eichner told a recent gathering of the Young Men's/Women's Real Estate Association.

With more than 350,000 jobs lost in this area since 1989 and another 40,000 expected to be eliminated this year "where is the engine coming from that is going to pull the train," pondered Eichner.

The cost of benefits and the technological revolution are two factors that are driving down the rate at which companies hire, he said, and while securities firms are boasting record profits, they are doing little expansion in terms of staff.

In addition, he said, New York City's quality of life problems and high taxes will determine how space is absorbed. The industry, he said, "is joined at the hip with the city of New York in its problems...Those businesses don't have to be here."

With funds available on an equity basis via pools of money, in the next 12 to 36 months, Eichnersaid, New Yorkers will see many of buildings owned or controlled by institutions go back into the hands of the private sector.

Eichner said he has been involved in an innovative sales method -- corporate trades. Rather than dispose of a property for market value, a corporation accepts consideration part in cash and part in trade credits for such items as media, travel, etc. In this transaction, a hotel was sold by an airline in exchange for media and jet fuel.

"Do I think that is the answer to New York?" he posed. "Don't be ridiculous, but I think there will be 1.3 deals done that way."

Eichner, who built some of the most significant projects of the 80's and later saw them taken over by lenders, was asked by a member of the audience what he would do over and how. If anything, he said, he would not have held out for too much on a lease or a sale. He did not, he said, "espouse the bird in the hand is better than two in the bush" theory.

In the 80's, Eichner said, $70 million in equity was chasing a 15 percent return. "It's what happens when the playing field is leveled," he said.
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Publication:Real Estate Weekly
Date:Jul 7, 1993
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