The Commercial Observer:
Last year, Eastern expanded its loan sales group. How has the response been?
Mr. Hauspurg: We actually started in 2005, which was a bit early, but we could see what was coming. The values were getting out of hand and we knew at some point the banks were going to become big players. It took a lot longer than we thought, and loan sales, even in 2009, there wasn’t a lot of them until maybe the last quarter. Now banks are doing a lot of loan sales, as they’ve become comfortable with the new value metrics. And when they see other banks doing the same thing, which is selling some of this paper and getting rid of the asset, the pricing has now narrowed and we’re starting to do a lot of loan sales. Plus, there’s an enormous amount of equity sitting on the sidelines just looking to buy these notes and mortgages as well. So in spite of there not being a lot of deals in the last 12 months, the pricing on the ones that have happened have actually been pretty spectacular.
Eastern recently procured two defaulted loans in Williamsburg. Are you starting to put more focus on the boroughs?
We’ve always been four boroughs. Not much goes on in Staten Island, but we’ve always been pretty active in Brooklyn, and Queens is a little bit less trading. Brooklyn is a big market and there’s a lot of trading in that market, and we do quite a bit of multifamily in the Bronx as well. And then northern New Jersey and Westchester we cover, and we go down to Florida, largely because some of the investors here are also Florida investors.
In Williamsburg in particular, what’s your outlook? The area hasn’t performed well.
It’s a terrific area. I mean, it’s full of life and it’s vibrant, but it probably has the greatest concentration of troubled real estate projects around. People picked up on it. Brooklyn Heights is, of course, developed out, and this was a new hot neighborhood, and for a lot of reasons, and just everybody went there at the same time. The banks gave them money, they put up the structures and there just weren’t enough buyers. So there’s going to be a lot for rent out there, and I’m sure there will be some great rents. There are sales going on, but the $900,000 sales of 2006 and 2007 are now $870,000 and even down in the sixes, depending on the location.
Between Eastern and Rockledge Properties, where you’re CEO, and your seat on REBNY’s Board of Governors, where do you spend most of your time and energy?
Right now, probably at Eastern, because this is similar to the 1990s, when a lot of brokers left the market. And that’s the time when you’re able to get brokers to move. Generally, sales brokers will stay at their desk until there’s a fire, but in this case there was a fire, but it was a different sort of fire. So we’ve been able to attract some good people, and we’re having some discussions with some other ones. Now’s the time to really focus on growing again, as we did in the 1990s, and capturing talent.
How has it been working with your wife, Daun Paris, here at Eastern Consolidated?
When you deal with that subject it either works really well or really poorly. In this case, I’m happy to say that after 29 years of being a partner, it’s worked great. She manages the office. She used to be a top broker, but then when we had the kids, she went into management of the personnel and the office issues, which frees me to make deals, which is my passion, and to supervise a great crew of junior brokers that we have here. So we go most days without even seeing each other. It’s great. But you got to turn it off at night-that’s the issue-but we’ve worked through that.
Your expertise in tax law must be coming in handy now that the economy has turned.
Taxes affect everything you do in real estate, and I’m sure in finance and everything else. But we’re in the highest-taxed city in the nation, and so we’re always looking for ways to make things tax-efficient, whether it be an ordinary 1031 sale, a tax-free exchange, or, rather, instead of a sale, which would produce a huge gain, we have restructured them as a long-term lease with an option to buy. And if you sell an option to purchase, the proceeds received today are tax deferred until the option is exercised. So that’s one way to get around some crushing taxes here. So it’s a great background to have. It’s come in handy now.
Speaking of taxes, have you filed yours yet?
No, no. I long ago delegated that to others. I don’t know how anybody does their own taxes, the way these guys have complicated it these days.