BERAL, INC.
Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944
E-mail: mlikar@aol.com

BERAL INC.

Andrew Racz
President and
Director of Research
October 15, 2014

Interview with Jeffrey Lamb Of Lamb Realty

RACZ:

This is interview with Jeffrey Lamb, real estate operator and entrepreneur, mainly in New York City. Jeffrey, this is 2014, is there anything unusual in the real estate business this year and what do you expect let’s say for the next few years?

LAMB:

The market has been accelerating or I should say the values of real estate, at least in this particular area, in the greater metropolitan area, have been accelerating dramatically. There may be a leveling off at least in the values of apartments in the greater New York area. Generally speaking, the thought is positive for the next few years.

RACZ:

Let me ask this, the growth of the real estate industry, is it due to foreign money or American economic recovery?

LAMB:

It’s due to both.

RACZ:

You noticed the economic recovery this year?

LAMB:

Yes. At least in the general area, in the greater metropolitan area, at least in the upper levels has been a dramatic improvement in business. I mean there have been comments that lower level jobs have been shrinking as opposed to expanding.

RACZ:

Where is foreign money fitting in?

LAMB:

Foreign money is purchasing condominiums as well since they could be developed.

RACZ:

Chinese money in the world of Waldorf Astoria. Is it the beginning of a trend or is it just a flash in the pan?

LAMB:

I think it’s not the beginning of a trend. A trend had started a number of years ago where foreign entities and people have felt as if real estate, especially in the Northeast or especially in New York City, have been a secure place to put funds as well as the growth of value of those funds.

RACZ:

Now, look, if you take the whole Far East including China, there is a tremendous amount of money accumulated mainly because of American monetary negligence, and now there is a lot of foreign money influx. Is it possible that Chinese money, for instance, is vastly accelerating in the next few years?

LAMB:

In different articles that have been published on the subject, it appears that it is almost certain that there will continue to be an influx of funds. Surplus dollars are coming in from foreign lands ,coming into real estate at least in the Northeast, specifically the New York area.

RACZ:

Well, here in the Hamptons, the Chinese money is tremendous. There are brokerage firms that specialize in utilizing their contacts in China and as a result increase the prices 30, 40, 50%, and there is a sort of logic to it that if we have created big debts, the conditions in China, economic conditions are not as good as say people like. Anybody who has money will bring money overseas and so the best place in the world, in America is still in New York City.

LAMB:

Correct.

RACZ:

So in other words, if somebody who has good contacts and so on can make a tremendous amount of money just like many people made a fortune during the war.

LAMB:

Well, you know, the underpinnings is that there’s a high degree of security for financial assets in this country and the underpinning with the real estate. So it’s real estate in this area, exclusive of the Hamptons, the greater New York area, will continue to be a magnet for funds.

RACZ:

Now, OK, let me jump for a minute. What did you study and when did you enter real estate?

LAMB:

I went to one of the federal academies and that was, I graduated in the 60’s and I began investing in real estate in the 70’s.

RACZ:

But was it a full-time occupation for you?

LAMB:

No, it was just purchasing properties, almost like a hobby, and my business transgression has been going into consulting for real estate firms and contracting and then eventually we became brokers, licensed New York state real estate brokers as well as managers of large properties in the greater New York area.

RACZ:

So it’s like a real estate conglomerate?

LAMB:

Some people can call it that. Clearly, expertise would be an amalgamation of efforts in the real estate area.

RACZ:

OK, what are you doing now?

LAMB:

I own a real estate brokerage company. It specializes in property primarily in Manhattan, condominiums, co-ops and town homes. We have done brokerage transactions in Long Island which is primarily waterfront houses and in New York we have a property management company that manages large co-ops and condominiums as well as industrial properties.

RACZ:

Now, isn’t it a fact that some of the majors do this?

LAMB:

Yes.

RACZ:

I mean the brokers at the same time managers?

LAMB:

Yes.

RACZ:

And so you’re basically growing into the major real estate company, mainly in New York City?

LAMB:

We compete with the major real estate companies such as Douglas Elliman and Corcoran.

RACZ:

Well, Corcoran has only been around 30 years, no?

LAMB:

Yes.

RACZ:

How much, how much bigger than you is Corcoran?

LAMB:

Corcoran has got a national presence. We are strictly local in the New York City area.

RACZ:

But Corcoran started as a local realtor, no?

LAMB:

Yes, it did.

RACZ:

Do you operate with a meaningful amount of cash or are you mainly a service company?

LAMB:

We’re a real estate brokerage and management company, a service company as opposed to asset based. I do own properties of my own and I’m a general partner of a real estate partnership which owns various properties, separate and apart from our brokerage and management firm.

RACZ:

If the market, let’s say is foreign pushed, expands substantially, then owning properties and being a merchant is obviously very profitable?

LAMB:

Yes.

RACZ:

Tell me, is it easy to borrow money?

LAMB:

It’s for certain purposes and for certain purposes with reliable income streams, it’s relatively straightforward to borrow money. I’m in the midst of doing a $15 million refinance of a large property. It has a loan to value of approximately 12% and there are a number of institutions that want or are competing to lend this borrower funds.

RACZ:

So if public cash is injected to your company through a new public company , you could diversify to more profitable ownership of properties?

LAMB:

Yes.

RACZ:

It’s obvious if capital increases, then you make more money.

LAMB:

Yes.

RACZ:

I mean you own 100% of your company?

LAMB:

This particular company I own 50% and my brother owns the other 50%.

RACZ:

So it’s a family company?

LAMB:

Yes.

RACZ:

How many people do you employ?

LAMB:

About 12 not including the real estate brokers. Real estate brokers are independent contractors by law.

RACZ:

And what is what you would like to happen?

LAMB:

From a business perspective, from going to business?

RACZ:

Yes.

LAMB:

It’s, the ideal situation . Brokerage is exceptionally lucrative from this standpoint. The brokerage end up taking anywhere from, depending upon the price of the property, from say 1% to 10% of the value of the property without any outlay of investment. They’re just selling the properties. It’s by contract, they’re selling the property and they’re entitled to a portion of the consideration paid for the property. So the ideal situation is to develop a format to acquire brokers that have a following, a relationship following, where they will be engaged in selling apartments for the people that they know. So it’s almost as if like doing an acquisition of a company except the costs are less.

RACZ:

Now the real estate market in New York started to recover about five years ago.

LAMB:

Yes.

RACZ:

And prices have gone up somewhat, but if you take the next five years, the international economic situation or whatever you want to call, may create an opportunity that let’s say happened after the Second World War.

LAMB:

It’s always possibility.

RACZ:

I mean I read Joe Kennedy’s life a few times and he could borrow money at 4% but he was buying big buildings one after another. He was buying on Park Avenue. His broker was the legendary John Reynolds whose only other client was the Vatican. And that was an unusual time because the demand was tremendous. Soldiers coming home, some made money. The demand was very big until 1960’s.

LAMB:

Correct.

RACZ:

Currently there are 8 billion people in the world. Business has become more international than ever, the movement of people has increased despite Mr. Obama and New York City is becoming the center of the world, and attracts capital which is a tremendous boom to people who have cash.

LAMB:

Correct.

RACZ:

It’s not the same for the stock market.

LAMB:

However, fueled by the tremendous growth that you mentioned, there will always be pockets where people have become overextended or perhaps in their planning overly optimistic. Consequently, in the near term, we should expect to see some developers of property or purchase of property end up with their own particular problems. So the ideal situation would be have a force of capital that will be used to restructure those entities that are having financial troubles.

RACZ:

Let me come to the last point. Most of the companies like you, including Corcoran, are not public.

LAMB:

Correct.

RACZ:

Why not?

LAMB:

There are some public companies – Terro Properties, Realigie are public companies but most of them aren’t because it’s more entrepreneurial and a lot of people engage in this have their own funds. They haven’t needed to go the public market to raise money.

RACZ:

Yeah, but look, every business has to modernize which means things change, for a stock like this as well as Apple Computer which has multi-billion dollars. And the way I see, number one, people are sometimes reluctant to go public. You have to disclose information, organize information, probably I see this point as a negative. The second is that you can bring in intelligent people who are not partners. And the third thing is that there is a unique development which actually directs the international trend into New York City or the world of Waldorf Astoria simply for one reason. There isn’t a second one like that.

LAMB:

Correct.

RACZ:

I am not just looking at real estate, but in 1972 a company called Sonesta had 2.7 million shares. The stock was 10 and they owned 34 properties including the Plaza Hotel, and I bought up 8% of that company and I sold it when it was about double ,but had I kept it for 20 years, I would have made 30-40 times the money.

LAMB:

Correct.

RACZ:

I see a phenomena which is similar to some past boom conditions and which can create an atmosphere absolutely not seen in our lifetime. There is the Texas oil boom ,then the California electronic boom, the German recovery after the Second World War. But now there is something unique in the world and that money is accumulating. There are various pockets in the whole universe which are not invested in the country of origin. In other words cash is going somewhere and maybe floating to four places, five places, maybe to Zurich , but is definitely floating through New York. And the amount of money I’m talking is astronomical in this business. So you have to get organized, you have to reorganize your own company to take advantage of it. It has never happened before.

LAMB:

I agree with you.

   

Disclaimer

Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.

 

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Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail: mlikar@aol.com

Copyright © 2011 Andrew Racz. All Rights Reserved.

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