the global deal e3v1

May 27, 2016 [Edition 3, Volume 1}

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 of the most explosive periods of growth within New York City’s luxury housing market, which is defined by a purchase price between $5M and $100M according to Property Markets Group founder Kevin Maloney. Unprecedented sell out figures north of $4,000 per square foot have been achieved by luxury condo developers while experiencing a near record-‐‑setting pace of sales. NYC’s historically strong real estate market, coupled with the political stability and strong currency offered by the United States, has accelerated the flow of foreign wealth into NYC’s

luxury housing market, an attractive safety net for large amounts of capital looking to be deployed. According to The Real Deal, an additional 6,000

condos are expected to come online by the end of 2016 with another 3,000 condos by the end of 2017. To remain

competitive with one another and ensure future project success, luxury condo developers are forced to provide the most lavish amenity packages and opulent finishes imaginable, tailored to attract their intended buyer.

As a result, with so much international attraction from buyers and developer’s alike, NYC’s luxury housing market segmented itself into different 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

“NYC’s historically strong

real estate market, coupled

with the political stability and

strong currency offered by

the United States, has

accelerated the flow of

foreign wealth into NYC’s

luxury housing market”

May 27, 2016 [Edition 3, Volume 1]

T H E G L O B A L D E A L

lower price points. They have also become more generous with incentives including the payment of both Transfer and 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

foreign currencies, and the uncertainty of economic conditions within Europe, Latin America, and Asia.

Although this may be true, the 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 ultra-‐‑luxury strata. Rising concerns of a frothy market

have left cash heavy investors waiting on the sidelines. Luxury developers would be wise to cautiously approach new deals with more conservative underwriting, low leverage, and a contingency plan in case their floating debt obligation exceeds their underwriting.

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 textile mills mean doom and wreck? Many, when taking an historical perspective, would say yes. Indeed, this is what it meant for collapsed mills in Mumbai. The employees lost their jobs and thus their means of livelihood. But it is only from the ashes that a phoenix ever rises, and this is exactly what happened here when these defunct mills were reinvented and revived in accordance with current times.

What is seen today is one of the fastest growth rates of urban development in a metropolitan city with a population of 20.7 million. When textile mills were shut down, what remained was a building situated on prime

land in central Mumbai. Real Estate is an asset type that can be transformed in line with changing times. Just as the Highline Park in New York remodeled itself by keeping the original structure intact, so did many of the textile mills in Mumbai.

Many redevelopments of these buildings have retained a large part of the original structure while altering its usage, while others have conceded to mega structures and super tall skyscrapers with unparalleled

amenities and design aesthetics. Today, these towers are home to upscale restaurants, luxury residences (including World One, which will stand at 1,450 feet upon completion) and commercial spaces, premium retail brands and hotels. This previously mill-‐‑dominated neighborhood in central Mumbai currently has 10 out of 27 of the World’s tallest under construction buildings. This development has been a catalyst in the overall 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.

“[I]t is only from the ashes

that a phoenix ever rises, and

this is exactly what happened

here”



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 junction 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 location is the primary reason it was selected for this mega project.

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 area. The development includes commercial buildings within a central business district, which was needed to alleviate much of the heavy traffic that commuting employees faced each day. It also includes a seaside resort, golf course, convention center and shopping malls. It is expected that, upon completion, it will have the tallest commercial tower in both Africa and the Mediterranean region. This development was estimated to

cost about $25 Billion, with a scheduled completion over 14 phases.

The government of Tunisia constructed a highway bridge, in cooperation with Japan, parallel to the canal built by Japanese company Spilast International, and 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 the southern side.

This project was launched in 2007, but was on hold for years following the financial crisis that hit the Dubai real estate market in 2008. Further, politics and corruption have created problems, with disagreements between both the Tunisian government and the International Real Estate

Investment arm of Dubai Holding, Sama Dubai. A combination of grinding bureaucracy, corrupt demands, 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 historically have not 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 planned projects in both tourism-‐‑based and mixed-‐‑use developments.

With a progressive democracy and more transparency, rumors suggest that the Mediterranean Gate will restart the plan, and construction will begin. However, nothing has been officially confirmed yet.

“[P]olitics and corruption have

created problems, with

disagreements between both the

Tunisian government and the

International Real Estate

Investment arm of Dubai

Holding, Sama Dubai”



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 some of the planet’s most beautiful beaches, Danang, Vietnam is 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.

Vietnam joined the World Trade Organization in 2007. Since then, many real estate regulations have been changed and are increasingly

uncertain. According to Congress, land in Vietnam is only for Vietnamese citizens,

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.

Although Danang International Airport has undergone some tremendous renovations to accommodate the growing demand from

visitors, it is simply not enough. There is currently no highway connecting Danang to other parts of the country. All sorts of road transportation 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 of natural disasters. Danang 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.

“Investing in Vietnam is not a

straightforward exercise”



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: [email protected]

Senior Editors:

Denham Apperley ([email protected])

Felipe Kohn ([email protected])

Juan Carlos Ramos ([email protected])

“The Global Deal” is not an official publication of New York University. All of the opinions belong to the authors of the articles.

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

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

the global deal e3v1

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