Luxury Redefined Global Impacts on New York’s Luxury Housing Market – New York City, North America ERIC MORGENSTERN M.S. Candidate in Real Estate Finance We all have just witnessed one
luxury housing market, an
competitive with one another
of the most explosive periods
attractive safety net for large
and ensure future project
of growth within New York
amounts of capital looking to
success,
City’s luxury housing market,
be deployed. According to The
developers
which
Real Deal, an additional 6,000
provide
is
defined
by
a
purchase price between $5M and
$100M
Property founder
according
Markets Kevin
to
Group Maloney.
luxury are
the
condo
forced
most
to
lavish
amenity packages and opulent
“NYC’s historically strong real estate market, coupled
finishes imaginable, tailored to attract their intended buyer. As a result, with so much
Unprecedented sell out figures
with the political stability and
north of $4,000 per square foot
strong currency offered by
have been achieved by luxury
the United States, has
NYC’s luxury housing market
accelerated the flow of
segmented itself into different
condo
developers
while
experiencing a near record-‐‑ setting pace of sales. NYC’s
foreign wealth into NYC’s
historically strong real estate
luxury housing market”
market, coupled with the political stability and strong currency offered by the United
condos are expected to come online by the end of 2016 with
States, has accelerated the flow
another 3,000 condos by the
of foreign wealth into NYC’s
end of 2017. To remain
May 27, 2016 [Edition 3, Volume 1}
international attraction from buyers and developer’s alike,
strata loosely defined by purchase price and buyer profile. For example, some luxury condo developers have reworked condo offering plans to
include
smaller
units
targeting foreign and domestic buyers with luxury product at
THE GLOBAL DEAL
lower price points. They have
foreign currencies, and the
have left cash heavy investors
also become more generous
uncertainty
of
waiting
with incentives including the
conditions
within
payment of both Transfer and
Latin America, and Asia.
Mansion Tax in order to keep selling at their projected pace. It still remains questionable whether or not we can expect the same demand absorption rates going forward with the anticipated
oversupply
of
luxury product, fluctuating
economic Europe,
lower strata of New York City’s luxury housing market still appears to be firing on all cylinders, even with reports of demand softening within its strata.
the
sidelines.
Luxury developers would be wise to cautiously approach
Although this may be true, the
ultra-‐‑luxury
on
new
deals
with
conservative low
more
underwriting,
leverage,
and
a
contingency plan in case their floating debt obligation exceeds their underwriting.
Rising
concerns of a frothy market
Metamorphosis of Mill Land in Mumbai The Rebirth and Rising of the City’s Skyline – Mumbai, India, Asia PARVARI PARALKAR M.S. in Real Estate Finance Does the collapse of a city’s
land in central Mumbai. Real
amenities
textile mills mean doom and
Estate is an asset type that can
aesthetics. Today, these towers
wreck? Many, when taking an
be transformed in line with
are
historical perspective, would
changing times. Just as the
restaurants, luxury residences
say yes. Indeed, this is what it
Highline Park in New York
(including World One, which
meant for collapsed mills in
remodeled itself by keeping
will stand at 1,450 feet upon
Mumbai. The employees lost
the original structure intact, so
completion) and commercial
their jobs and thus their means of livelihood. But it is only
did many of the textile mills in Mumbai.
spaces, premium retail brands and hotels. This previously
from the ashes that a phoenix ever rises, and this is exactly what happened here when these defunct mills were reinvented and revived in
the fastest growth rates of urban
development
metropolitan
city
in
a
with
a
population of 20.7 million.
“[I]t is only from the ashes that a phoenix ever rises, and this is exactly what happened
to
upscale
buildings have retained a large part of the original structure while altering its usage, while others have conceded to mega
down, what remained was a building situated on prime
skyscrapers with unparalleled
and
has 10 out of 27 of the World’s tallest
under
construction
buildings. This development overall
Many redevelopments of these
structures
in central Mumbai currently
has been a catalyst in the
here”
When textile mills were shut
super
tall
May 27, 2016 [Edition 3, Volume 1]
home
design
mill-‐‑dominated neighborhood
accordance with current times. What is seen today is one of
and
metamorphosis
of
Mumbai’s skyline, with the surrounding
areas
also
ushering in a change. This fast paced
expansion
should
definitely be on the radar for all real estate watchers around the world.
THE GLOBAL DEAL
Mediterranean Gate A Project Paused, Cancelled, or On Hold? – Tunis, Tunisia, Africa AMENI KABBOUDI M.S. Candidate in Real Estate Development Tunisia is located at the
cost about $25 Billion, with a
Investment arm of Dubai
junction
scheduled completion over 14
Holding, Sama Dubai. A
phases.
combination
of
the
Mediterranean’s Eastern and Western basins. It is very accessible, with flights of between 2.5 to 3 hours to all major cities in Europe, Africa and the Middle East such as London, Paris, Casablanca, Istanbul
and
Beirut.
Its
“[P]olitics and corruption have created problems, with disagreements between both the Tunisian government and the
location is the primary reason it was selected for this mega
Investment arm of Dubai Holding, Sama Dubai”
The Mediterranean Gate is a mixed-‐‑use project conceived in 2007. It stretches over 1,000 hectares on the lake of Tunis, a natural lagoon. This project was planned as an extension of the city, with the aim to integrate it within the downtown development
area.
The includes
commercial buildings within a central business district, which was needed to alleviate much
grinding
bureaucracy, corrupt demands,
International Real Estate
project.
of
The government of Tunisia constructed a highway bridge, in cooperation with Japan, parallel to the canal built by Japanese
company
International,
and
Spilast fully
financed by Japanese banks. This bridge linked the marina of the Mediterranean Gate to the sea, while also reducing the traveling distance between the northern part of the capital
and interference from the family of the former president Zein El Abidine Ben Ali have been recurring issues. Following the Arab Spring, political instability has been another factor discouraging the
development
from
occurring. Gulf
investors
have
not
historically
been
actively
investing in Tunisia. Qatar, which is the second largest investing country by foreign direct investment inflow in 2014, makes up only 9% of the total amount of this investment, while the UK and France are on top. Foreign investment in this real estate sector makes up only 4.5%, but there remain many massive
of the heavy traffic that
and the southern side.
commuting employees faced
This project was launched in
tourism-‐‑based and mixed-‐‑use
each day. It also includes a
2007, but was on hold for
developments.
seaside resort, golf course,
years following the financial
convention
and
crisis that hit the Dubai real
With a progressive democracy
shopping malls. It is expected
estate market in 2008. Further,
that, upon completion, it will
politics and corruption have
have the tallest commercial tower in both Africa and the
created
Mediterranean region. This
the Tunisian government and the International Real Estate
center
development was estimated to
problems,
planned
with
disagreements between both
May 27, 2016 [Edition 3, Volume 1]
and rumors
projects
more
restart the construction
both
transparency,
suggest
Mediterranean
in
that Gate
the will
plan, and will begin.
However, nothing has been officially confirmed yet.
THE GLOBAL DEAL
Struggles to Attract Luxury Hotel Developers Challenges Associated with Investing in Vietnam – Danang, Vietnam, South East Asia KHOA TANG M.S. Candidate in Real Estate Finance Possessing
to
visitors, it is simply not
beautiful
Congress, land in Vietnam is
enough. There is currently no
beaches, Danang, Vietnam is
only for Vietnamese citizens,
highway connecting Danang
planet’s
some
of
most
the
uncertain.
According
fast catching up with other famous beach cities in South East Asia such as Phuket, Bali and others. During the first two quarters of 2015, there were over 2.2 million visitors to Danang. The city is widely regarded in the local, national and international hospitality industries
as
the
next
“Destination on the Rise”. Despite the fact that hundreds of local hotels and resorts have been built to accommodate the growing demand for travel to Danang, it sees very little hotel development from the world’s luxury brands such as the Four Seasons and Mandarin Oriental, or other large brands such as Marriott and Starwood. Investing in Vietnam is not a straightforward
exercise.
Regulatory issues, its legal environment, and a lack of infrastructure and a skilled workforce
are
the
top
challenges facing any foreign investor.
“Investing in Vietnam is not a straightforward exercise” and thus foreigners may not buy and own land. Further, no corporate entity may have ownership
of
land.
The
government, however, does provide buyers the right to use land, but the duration and purposes are to be determined by the state. Hence, for a foreign company to obtain land use rights, it must partner with a Vietnamese national who
needs
to
contribute
capital in order to share in a joint venture deal involving the land. Otherwise, these firms may rent land, but the duration must be for less than 50 years. With ongoing policy change issues, it is indeed challenging
for
hotel
developers in this market, especially as they plan to spend millions of dollars on these projects.
Vietnam joined the World Trade Organization in 2007. Since then, many real estate regulations
to other parts of the country.
have
been
changed and are increasingly
Although International
Danang Airport
has
undergone some tremendous renovations to accommodate the growing demand from May 27, 2016 [Edition 3, Volume 1]
All
sorts
of
transportation
road
are
still
dependent upon National Route 1A, which was constructed
by
French
colonists one century ago. This is known as the “black spot” because of the number of accidents it experiences which lead to death. Narrow roads with a congestion of scooters, cars,
trucks
and
careless
pedestrians have made traffic extremely dangerous. Other similar destinations in South East Asia had begun developing their infrastructure before they started becoming popular. This is vital for a city with
threats
disasters.
of
Danang
natural has
to
ensure that the most basic visitor requirements are met before
going
above
and
beyond to satisfy the more sophisticated travellers in the luxury
segment.
If
these
concerns are not realistically and
honestly
addressed,
investors will start looking to invest elsewhere, where they can guarantee a better return on investment.
THE GLOBAL DEAL
NOTE FROM THE EDITORS It is with bittersweet gratitude that we present this final edition of The Global Deal. The time we have shared at Schack over the last year and a half with each other and with our fellow students will remain in our memories as our lives progress. In particular, we are thankful for the year we have been Co-‐‑Chairs of the Global Real Estate Group, where we have been able to contribute to the school that has given us so much. As we embark on the first steps of our next chapters, at least we will always have had our times at Schack and in New York. Thankfully, real estate is global, and fundamentally we can apply our learned concepts anywhere on the planet. We have enjoyed working with you, and we look forward to sharing our insights with future Schack students who will be subjected to our ranting on various panels. We would also like to thank Jessica, and our faculty advisor Professor Justin. We hope you enjoy the last Spring issue of the Global Deal. We are positive that the next Global Real Estate Group will continue to grow this publication. Indeed, as we type this, our keyboards are wet with our tears of immense emotion. But please don'ʹt worry yourselves; we'ʹll be fine. Happy reading, Denham, Felipe and Juan Carlos
If you are interested in contributing to The Global Deal, please respond by filling in the linked form. Participants chosen will write an article of between 250-‐‑300 words, covering the most relevant real estate news of their chosen country or global issue. Application Link: http://bit.ly/THEGLOBALDEAL NYU SPS Schack Institute of Real Estate The Global Deal A Publication of REISA’s Global Real Estate Group 11 West 42nd Street, New York City, NY 10036 Contact: gre.reisa@gmail.com Senior Editors: Denham Apperley (denham.apperley@nyu.edu) Felipe Kohn (felipekohn@nyu.edu) Juan Carlos Ramos (jcramos@nyu.edu)
May 27, 2016 [Edition 3, Volume 1]
“The Global Deal” is not an official publication of New York University. All of the opinions belong to the authors of the articles.