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Positive ideas to help change the times.

Our firm, Himmel + Meringoff Properties, sees 1993 as a year to promote new and positive ideas to help change the times and make a difference. We see three areas that need attention - Creating Liquidity for the Real Estate Market: Expanding the Tenant Base: and lastly, Financial institutions Recycling Real Estate Assets.

1. Creating Liquidity for the Real Estate Market. Six months ago, I was asked to chair the Subcommittee for the Real Estate Board, "Credit Crisis/Financial Issues." The purpose of this Subcommittee was to help create solutions to solve the liquidity crisis in the real estate market (participating companies include Aldrich, Eastman & Waltch, Cooper-Horowitz, Inc., Eastern Realty, Inc., General Electric Capital Corp., Glenwood Management Corp., Goldman Sachs Realty Corp, G.W. Michaels, Inc., The Harlan Company, Inc., Jack Resnick & Sons, Inc., Jones Lang Wootton USA, Met Life Real Estate, Riverbank Realty Company, Law Firm of Robinson, Silverman, Pearce, Aronsohn & Berman, Travelers Realty Investment Company, and Williams Real Estate Co., Inc.). The short-term goal of the Subcommittee was to help create liquidity in the market to finance tenant improvement funds; the long-term goal was to help generate pools of funds for capital investments. With the aid of political and industry leaders on the Subcommittee, we are currently submitting proposals to create a credit enhanced fund to be used for the real estate market.

2. Expanding the Tenant Base. (A) Brokers' Support: Additional ways to help rebuild New York City and the real estate market would be for the commercial leasing brokers to assist in increasing the number of tenants in New York City. Rather than spending time and effort playing "musical chairs" with existing tenants by moving tenants from one building to another, it is crucial that we increase the tenant base. This can be done primarily by (i) identifying growth industries, (i.e., health care, entertainment, medical technology, etc. ,) and providing incentives to companies to come to New York City for its many benefits, and (ii) attracting international companies to open a New York City headquarter's office.

New York City is still one of the leading cities. In the Nov. 2, 1992 issue of Fortune magazine, an article entitled "The Best Cities for Business", New York City was nominated as one of the ten top cities in the United States (New York was rated/15).

(B) New York City Financial Incentives: New York City must provide financial incentives to help keep the medium-sized tenants and attract new ones. Presently, New York City only has packages for the Fortune 500 Corporations who can capture the attention of New York City and demand incentives through the I.D.A. process. This, however, includes sale-leasebacks of the buildings to New York City and, therefore, only benefits tenants occupying most or all of a building. There are no financial incentive packages available to attract small and medium-sized tenants which are the backbone of New York City. Ideas for New York City incentives include employee tax credits, real estate tax freezes on the percentage of the building that these companies are occupying, occupancy tax reductions, and sales tax relief, etc.

3. Financial Institutions Recycling Real Estate Assets. Lenders should develop specific proposals and ideas that will recycle real estate. Financial institutions should be leveraging off of the operating resources and capabilities of the landlords as entrepreneurs.

Because of a large number of recent mortgage foreclosures, banks' real estate owned ("REO") has grown to a greater percentage of all assets. When the bank forecloses on the asset, it should sell the properties, i.e., Citibank's recent sale of 1540 Broadway to Bertelsmann AG. If the financial institution's appraisal department has forced the bank to take the property as REO, then it should sell it to the real estate specialists. Banks will have to ask the questions, "What business are we in, and are we to be owners and operators of buildings or lenders in the banking business?"

As young leaders of the real estate industry, we should use our energies to build, and not tear down our future. In the words of John Fitzgerald Kennedy, "In a time of turbulence and change, it is more true than ever that knowledge is power." We need to use our knowledge to formulate positive ideas for change and forge ahead!
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Title Annotation:Review & Forecast Section I; includes advice for creation of liquidity for real estate market, expansion of tenant base and financial institutions to recycle real estate assets
Author:Himmel, Leslie
Publication:Real Estate Weekly
Date:Jan 27, 1993
Previous Article:1992: confidence emerges from rubble.
Next Article:Market taking steps in right direction.

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