The region’s most succesful real estate tycoons, including Northern Liberties and North Broad Street developer Bart Blatstein, casino mogul and institutional real estate investor Ira Lubert, and multi-family apartment czar Mitchell Morgan, divulged the secrets at a breakfast on this morning sponsored by Jewish Federation Real Estate.
Government money, either of the form of state subsidies or guarantees by Fannie and Freddie Mac, seemed to be necessary ingedient for many projects. Condo king Alan Domb, talking against his own interests, suggested that “if jobs were subsidized then real estate development would not have to be.”
Many of the developers lamented about the high cost of construction. Joseph Zuritsky, who is building an extended stay hotel near the Convention Center, said, “With construction costs in the city of the Philadelphia as high as they are, we needed 6 state subisdies to make the project a go.”
Blatstein, who announced two new projects on North Broad Street this week, urged the city to “develop a backbone” when it comes to unions. “Construction costs need to be subject to the free market.”
Blatstein, who recently bought the Inquirer building for $22 million, believes that he got a steal. He believes that the building would have been “worth $80 million in a sale leaseback by combining both the building and nearby Inquirer owned garage.”
In a counterintuitive move, a tieless Blatstein welcomes other developers in the sections of the city that he develops. “A rising tide lifts all boats.”
Morgan, who changed his mind last summer about taking Morgan Properties public in an $800 million stock offering, describes himself as a value-added property owner. “When we buy a new complex, we can go in and build a $6,000 kitchen for each apartment in three days. I can not buy a refrigerator for my home for $6,000,” he said.
Morgan, who will be hosting Republican nominee Mitt Romney at his Main Line estate on May 1, credits the cheap money available from Fannie Mae and Freddie Mac for a lot of his success. “We can still borrow at 3 7/8 percent and our cap rate is 6 percent.”
His main piece of advice “was to never overpay like I did when I bought the Kushner New Jersey properties in 2007.” Morgan landed on his feet on that deal because of his legal dexterity.
Morgan, who owns more than 30,000 apartment units in 10 states, also recommends, “Never micro-manage. I have 15 or 16 junior partners, who I have given equity to, that handle many details. In the beginning, I would see every apartment. There are some properties that I have never seen.”
The reclusive Lubert, who just opened the Valley Forge Casino Resort, believes that gambling in Pennsylvania will be more successful than in Atlantic City because of “the 20 mile rule.”
He explained, “In Atlantic City, all the casinos are right next to each other. They have to compete on price and giveaways. In Pennsylvania, each casino has to be more than 20 miles apart from the other.”
He describes his casino, which is only two in the state with a resort designation, as more “Borgota” than “SugarHouse.” Due to its proximity to the King of Prussia mall, he does not expect to have many high end retail shops in the mall.
He boasted, “We have already sold 10,000 memberships to the casino in the last week and a half.”