Was watching a recent TRD Coffee Talk with Michael Stern and realized he's only 40. Couldn't find much background from Wikipedia/articles, but can anyone here with development experience explain how he rose so quickly to be doing these massive projects so young?
How is it possible he got the experience/knowledge to do this in such a short time?
Does anyone have a more detailed early life of how he started?
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With the caveat that I don't have any special knowledge that any developer in New York wouldn't...
He had a massive, massive home run with Walker Tower. To his credit, that took real vision to see what it could become. But he also encountered a confluence of circumstances which made it possible to buy at the absolute bottom of the market, and had partners willing to bankroll that vision, which is almost impossible to plan for or replicate. Since then he's done what lots of other developers do; build big and talk bigger.
The returns he achieved on Walker Tower were so spectacular that he didn't have trouble attracting additional capital. I wonder in five years if people will remember just how easy it was to get equity in NYC in the mid 2010s - any crap building could sell out off plans, and if you started early enough, buyers were paying unbelievable prices for apartments that never would have sold a decade earlier. Even late in the cycle LP money was just gushing out, any person with half a reputation could raise capital for a luxury condo project even as the projected unsold supply started climbing
And honestly, none of his high profile jobs since have seemed that impressive. 111 W 57th is and is going to be a disaster of epic proportions. They totally misread the market, and then after that completely missed the market. No way to rent those units. They built a building aimed at 1,000 or so people in the world and now none of those folks are buying. American Copper I don't know a ton about, but I find it hard to imagine an over-designed building charging 100/ft in a secondary area of Manhattan is renting the way they want it to.
But none of it matters, because he doesn't put equity into his propjects.
can you explain the last paragraph? how much equity is contributing? isn’t he the GP? does he actually not bear any of the financial liabilities? lucky guy.
Sorry, of course he's got bad boy guarantees, enviro, etc.
But the general model for development is that the GP puts in ~10% of the equity. Obviously that isn't a hard and fast rule or anything, but it generally is enough to keep GPs honest when it comes to making financially sound decisions. There was another thread, recently, that was showing the incredibly complex capital stack at 111 W 57th.
Basically what it means is Michael Stern will make money on the fees, which on a 9 figure project is a substantial amount of money, without having to put his own equity in. So he comes out ahead no matter what, he also gets the "prestige" of building a part of the city skyline, which is obviously a dream come true for any developer. But when the project inevitably goes bust (because the economics suck) he has no downside.
Imagine I have you $100 to go play roulette in a casino, and I told you you can take a 2% fee for every spin you play, and you get 20% of the winnings over a 2x or something like that. If you play it safe, and do what is smart for your financial backer, you're going to play something safe (I get that the analogy breaks down here because the odds should be roughly equal on every type of bet, which isn't the case in development) like reds, or odds, or whatever. But for Stern, it makes more sense to put it on 00, because his payout is enormous in that case and he has no downside risk. That is what he did at 111 W 57th. He sold his entire stake to various parties, kept most of the upside, and went for the home run project, because he makes tens if not hundreds of millions if it works. Anything in the middle doesn't really net him much: he is incentivized to make crazy gambles.
>But none of it matters, because he doesn't put equity into his propjects.
Absolutely key, similar to Trump, just lever up and get a lot of OPM.
>111 W 57th is and is going to be a disaster of epic proportions
It sure is pretty though. And the American Copper buildings are interesting, very few listings are posted online, but Streeteasy seems to show records that imply only half the building was leased up. Definitely not a great look.
American Copper has a nice public area. One of my dog's favorite things is walking along the fountain. It also has a nice 11k-ish vacant retail space on first ave. Combine that with the residential portion being half leased per streeteasy, I can't imagine it's doing too hot.
I don't know why I thought of this thread when I saw the news break. But it was just announced the American Copper Buildings are selling to Black Spruce Management for $850m. Idk how much it cost to build, but seems like a big deal...
Everything I've ever seen is on him is single family spec in the outer burroughs and then Walker Tower out of nowhere. would love to hear how that happens
he got walker tower for 27 million, which is quite a steal, and not that much of a stretch for someone who has built a hundred plus homes in florida - just my guess.
looks like he does all his deals with property markets group. maybe they have something to do with it?
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