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Eichner: opportunities exist for developers in the 90's.

While the real estate, market "ain't what it used to be, "opportunity is not dead, Ian Bruce Eichner told a gathering of fellow real estate professionals last week.

Eichner, a developer who built and lost to lenders some of the most ambitious buildings of the last decade, spoke last week on what developers of the 80's are doing in the 90's.

"I probably made more money from 1978 to 1983 than I did from 1983 to 1989," said Eichner.

In the late 70's and early 80's, Eichner said, one had the potential to put up small amounts of capital to make large amount of money. In the mid-80s he said, you were risking huge sums of money for the possibility to make $1.95."

That's because the majority of the money was borrowed, he said. "You were playing with $100 million to make $10 million, but we didn't look at it like that," he said.

In his earlier years, Eichner said, he used some guiding principles that may be of use to developers today.

There is value. he said. in "interdisciplinary approaches." A former assistant district attorney, Eichner said, as in early 80's, those willing to work with government can find opportunity and financing.

The developer said he tried to "marry" concepts with mixed-use developments, below-ground retail and multilevel atriums.

"It was tested by people who had creativity," he said... Nobody knew what to do then and anybody who had an idea and knew what to do with it was a very big fish ..."

In the mid-80's, he said, creativity was dwarfed by money.

So what are the developers of the 80's doing today? Many Eichner said, are asset managers. Others who are "solid" enough are attempting to buy REO properties or RTC portfolios. But as the government sells off more properties, Eichner said, the price of the latter is going up.

"That window is a window that is open and that is closing," he said. .

Eichner described a few of the areas that he says are currently worth pursuing.

Residential development for rentals, Eichner said, presents the lowest risk to lenders because there is an available market. In addition, tax abatements are obtainable. And, he said, the new Democratic administration will be in favor of now projects especially those that are "mixed" with some moderate or low-income units.

There are also chances to buy back "yesterday's mistakes at a discount." Class-a properties will be available for purchase in many urban centers in the United States, especially Southern California. The questions, however will be where will the financing come from what will the price be. Many institutions, he said, are unwilling to come to trips with the difference between book value and market value.

"They've written it down, but they haven't written it down" he said.

As a result, he said, he does not expect anything between 42nd and 59th, Lexington & Fifth Avenue, to move in the near future.

Downtown, Eichner said, the city must come in with policy changes especially in regards to zoning, allowing some residential developments or mixed use.

Eichner said that, in light of the growing interest on the part of the U.S. to assist in the stability an growth of Russia, he also expects to see a "really interesting deal" in the city of Moscow involving American construction and some insurance from the U.S. government.

Asked later by REW if he could be the developer behind such an endeavor, Eichner said, he spent a week in Moscow and St. Petersburg and that he has attended meetings with U.S. officials and representatives of ministries on a "cultural exchange" basis. He has also had |conversations' with representatives from various ministries about a "deal" for a specific piece of land in Moscow.

In terms of guarantees from the U,S. government, Eichner said, a key element would be. Some type of "antirevolution" insurance.

Some of the other ideas he has "fooled around" with include an integrated solid waste service and energy conservation.

In response to what he would have done differently with 1540 Broadway, Eichner seemed indicate that the 40-story skyscraper, which lost $200 million for leaders, was more a victim of the recession, "too much money" and "too many institutions" than any mistakes he made. The details of what happened at 1540 Broadway are almost "irrelevant," he said. That a building built for $320 million would sell for $119 million, he said, was "not foreseeable."

"You are not a genius when you make $22 million and you are not a failure if you lose $22 million," he said.

Eichner did say that in the future he would be more, "careful" about personal guarantees.

On Citispire, Eichner's mixed-use skyscraper on 56th Street, he said European American Bank "overreacted' when it foreclosed on him because the office portion was 87 percent leased and the residential portion substantially sold. The real problems there, he said, was that the project took too long to finish due to its height - the building is more than 800 feet high - and the project was completed at the onset of the recession.

On institutional lenders, Eichner said, "when they commit themselves to turn left they turn left and when they count $20 million to turn left - it doesn't belong to them - so they turn left," he said.
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Title Annotation:real estate developer Ian Bruce Eichner on real estate business in the 1990s
Author:Fitzgerald, Therese
Publication:Real Estate Weekly
Date:Apr 14, 1993
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