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Moinian sets standard for going solo in 2005.

Certainly one of the top 10 most active buyers of real estate in 2004, Joe Moinian, president of the Moinian Group, has come to represent the quintessential individual investor, the type that bested stiff institutional competition by utilizing unparalleled speed and flexibility in purchases.

But while Moinian's penchant for negotiating a field stacked with perhaps an all-time high number of competitors represents one of the more impressive stories in real estate last year, not many will argue that the current climate of cheap debt had nothing to do with the financial empowerment and consequent prominence of the individual investor.

Now with rock bottom rates waning after a series of Fed increases, a weak dollar that some fear could eventually drive inflation, and a national deficit that has drawn fears for its treasury bond spiking potential, the golden age of real estate seems poised to enter a new phase where the question arises: can individual investors continue to stay on top? Of the class of investor he represents, Moinian is in the upper echelon, but if his plans for 2005 still serve as any indication for what individuals as a group will still be capable of going forward, institutional investors may have to take a back seat for yet another year.

"I don't see things slowing down for us in 2005," Moinian said. "There's going to be a lot of property on the market this year because there are a lot of owners who will want to take advantage of peak values while interest rates are still relatively low. It will be very challenging because there is so much competition for property, but I will continue to be very active, certainly we are not resting." Moinian's ability to continue building his real estate empire at such an impressive clip isn't simply a function of low interest rates, but his phenomenal ability to turn cap rates around. He can buy into 3% caps and double them in just months.

"Joe is the master at reversing cap rates," said William Shanahan, one of CB Richard Ellis's top brokers in investment sales. "If you look at what he did with his development at 1 West Street, Joe got extremely creative and developed the garage, a brilliant move that not many had thought of doing. What he does is he buys future income and bridges that gap between the purchase and getting to that point where a property is yielding good returns by using creative financing and smart repositioning tactics."

The good thing for daring investors like Moinian and the industry in general is that fundamentals began a turnaround in 2004 and are picking up momentum for '05 on the back of a growing economy and reinvigorated financial sector.

"Midtown is on fire right now," said Dean Shapiro of CB Richard Ellis. "The bellwether firms like financial service firms and law firms are very active and I could see the Midtown market hitting equilibrium in maybe a year's time. We're at a little over 10% vacancy and equilibrium is roughly between 8-9% so we're not very far away."

Although Downtown's fundamentals are slack in comparison to the resilient Midtown market, Shapiro indicated that firms will take their space search south when Midtown fills up, and he cited Morgan Stanley's recent 450K s/f lease at One New York Plaza as a prominent example of this type of migration.

One of the top two largest owners of property Downtown, Moinian's prolific residential conversion and development activity is helping transform the area into the kind of place company's will have to move to if they want to cater to a growing, vital workforce. Retail development could be one of the last components in the equation for turning Downtown's fundamentals around because it will entice continued growth of the area's burgeoning residential population, which in turn will fuel the office market. "The mall under the World Trade Center site was one of the top performing retail locations in the entire country," Moinian said. "Retail right now is the best segment in the New York City real estate thanks to the banks and Starbucks, who pay their rent and eat up everything. Right now, all the retail that I own is completely filled. We need more of it."
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Title Annotation:Annual Review & Forecast
Author:Geiger, Daniel
Publication:Real Estate Weekly
Geographic Code:1USA
Date:Jan 26, 2005
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