Warburg Blog

A few weeks ago,I got a message from a friend  (who also happens to be an Upper East Side resident and broker) telling me one of my favorite local places had shut down. How did she know to mention ? Well,I tend to check in on Foursquare when I stop in for drinks or dinner. A few days (or maybe a week later) she send me a message and said NO they had not closed down,but had I checked out Maison Kayser yet….

Then,I read about Maison Kayser in a few blogs around their opening a few weeks ago,earlier this month August. And I thought to myself,sure…I’m going to stop in there one of these days,maybe for breakfast,or lunch…

And then today,as it turns out yesterday evening, somewhat last minute,I agreed to help a colleague out and show a listing for them on the Friday before Labor Day. And it was,right around the corner. And I thought to myself,well wouldn’t this afternoon be a perfect time to treat myself to lunch.

I stepped into the bakery,and I was immediately drawn to ,well..everything. I not only love desserts,I love carbs,in general (I compensate by feverishly walking around New York City every opportunity I get ,in addition to working out,but I digress…) .My original intent was to grab something and walk home. But I had this desire to stop,sit and luxuriate in the pleasure of taking time to have lunch versus what normally happens (Eat and run ,if you remember to eat at all).

Best. Decision. Made. The staff was warm and welcoming, friendly. Sometimes when you are dining alone,you can feel isolated or alienated,especially as they clear away extra place settings. Extra points to Maison Kayser for having a few tables already set for one. I was shown to a corner banquette and I immediately wondered what would I order. I did not think I was terribly hungry,but one of the appetizers caught my attention. And boy am I glad that it did ! My waitress Andrea was terrific,particularly when it came to helping me decide on dessert !

I started with Crabe & Guacamole. Shrimp,lump crab meat served over guacamole. Perfect late summer starter. And,I can rarely resist croque madame. Lots of fond memories associated with eating this…and could I EVER pass up dessert. I have been known to alter my eating habits to be sure I have room for dessert,and the Mi-cuit did not disappoint.

Maison Kayser’s Upper East Side location is at the moment the only one in the US,but never fear,as they ALREADY are planning to open a location near Bryant Park and in the Flatiron district. If you can’t wait,I assure you,it is worth the trip to the Upper East Side,don’t wait !

Maison Kayser is located at 1294 Third Avenue, NY NY 10021 www.maisonkayserusa.com . Open 7 days a week from 7A-11PM. Shall I see you there this fall ?

I have spent the last few days visiting friends in coastal Maine, where there are wonderful summer “cottages” and antique houses, often cheek by jowl with newer homes both beautiful and not so beautiful. The trip has led me to ponder again the aesthetics of housing. What are the qualities which make one space welcoming and appealing while another leaves us uneasy and on edge? Here are some ideas about the confluence of factors which inform our perception of interior space:

1. LAYOUT – Perhaps the most influential of our perceptions of the space around us pertains to its organization. Human beings are drawn to symmetry. We like it in architecture no less than in the faces of those we perceive as beautiful. So the way rooms are organized around the central axis of the space is critical to our enjoyment of them. That said, absolute symmetry can lack originality or any element of surprise. Thus the layouts, be they in apartments or houses, to which people are most often drawn are those with a sense of balance and symmetry in the enfilade of rooms-but nonetheless enlivened by asymmetrical touches.

2. PROPORTION – Proportion enhances the sense of comfort and pleasure introduced by a good layout. The golden mean, which mathematicians have defined as a ratio of 1/1.6, is most easily rounded off in architectural terms to a 2/3 ratio. In other words, the eye and the senses are pleased by a room of 20′ by 30′. If you increase the smaller proportion, the room becomes more and more square, which continues to please the senses. If on the other hand the larger proportion is extended, the room becomes a longer thinner rectangle, increasingly losing its sense of balance with each additional foot.

3. VOLUME – Ceiling height must scale to both the overall size of the property and each of its rooms. On the one hand, large rooms with low ceilings can create a claustrophobic experience for the user. But it is equally true that small or narrow rooms with excessively high ceilings can generate a spatially disorienting “wind tunnel” effect. While most people prefer a high ceiling to a lower one, more is not always better. In a welcoming space the volume is generous but balanced with the other architectural elements.

4. OUTLOOK – Even the best proportioned spaces can be compromised by a poor outlook. For most people the critical component in outlook is light. Natural light creates resonance in an interior, adding its luminous glow to all the architectural elements. And the quality of the light in New York seems to change around the tenth floor, becoming whiter and more penetrating. View also enhances any outlook. For those who can afford it, nothing extends interior space outwards like a view. The majority of people with whom I have dealt over the years prefer a mid floor, to preserve the human scale, gazing at water and natural elements such as trees or flowers.

5. DETAIL – Every space is enhanced by detail, from the most elaborate cornice to the simplest baseboard. To the modern eye, less is usually more when it comes to detail. Many of us find the deep elaborate moldings of the late Victorian era overwhelming; we tend to be more comfortable with the simpler Classical sensibility evident in the New York apartment buildings of the mid to late 1920s. Details influence the eye; when well done they can visually raise a ceiling or square a room. The best architects always use (and used) detail to enhance a space’s best qualities while minimizing its drawbacks.

The great architects are magicians. They brilliantly deploy the tools in their toolbox to create living environments which subtly draw us in and make us feel at home. The world over, the spaces which please us have elements in common; the deployment of layout, proportion, volume, outlook, and detail chief among them.

I have spent the last 25 years working on how to be an effective leader. I always knew that integrity and honesty mattered to me more than anything, but I wasn’t sure how to build those into a corporate culture based on collaboration rather than fear. An inspiring recent interview in the Times helped me crystallize some of my thoughts and got me thinking more proactively about what I believe. The article can be read at http://www.nytimes.com/2012/08/12/business/bill-flemming-of-skanska-usa-building-on-leadership.html.

Here’s what the years have taught me:

There is, as Bill Flemming notes in his interview, a great distinction between being a leader and a boss: a leader helps people figure out what to do while a boss tells them what to do. This resonates strongly for me. People will often come to my desk looking for solutions. Increasingly, I am out of the solution business. I try to ask “What do you think is the best way out of this situation?”  I am a guy with a lot of opinions, but these days I try to bite my tongue. More often than not I find that people already know the best solution. They are looking more for affirmation than problem solving.

An important corollary of this is the discovery that people solve problems in different ways. My agents and managers often arrive at solutions I wouldn’t have thought of. Sometimes I think my solution would be better but usually I find that this interaction can be a significant learning experience for me. I often don’t have the best answer. My job, I increasingly understand, is to bring out the best in those around me.

This brings me to another great statement of Flemming’s: “I work for the people below me.”  I think this notion lies at the heart of the management philosophy of any successful leader. As the president of Warburg, I am only as successful as the agents and staff working for the company. And their success, in turn, depends on my leadership. How well do I empower them to make good decisions? How well have I communicated my vision for the company? How good am I at listening to suggestions and complaints? Do I facilitate teamwork?

I did not set out to be a business owner; as I have noted before in this blog I began my adult life as a musician. I never went to business school. I am pretty bad with Excel and PowerPoint and my main arithmetical skill is a lightning-fast ability to compute 6% of any sales price! But over the two plus decades during which I have led Warburg Realty, I have learned that this business, probably like every business, is a people business. I strive every day to NOT be the leader who feels entitled because my name (or my middle name, actually) is on the door.  I know today that respect may or may not accompany a title; if it does it is only because it is earned. And I know that while I may be impatient, if I lose my ability to listen and really HEAR what my colleagues are telling me, my organization suffers. I may not agree, I may not do what is suggested, but I need to pay attention to it.

I don’t much like being criticized or having people disagree with me. I can get my back up. But it is my obligation, and that of every leader in my firm and every firm, to get over it. We work for our agents, and they often know more than we do. We cannot continue to do what we do because we have always done it.  I trust my team: staff, agents, and managers alike. With their guidance, I know Warburg will move confidently into the future.

In real estate, technology is our future. Or is it?

This past week, we talked a lot about technology at our management retreat. How 85% of home buyers begin their search on line. How many buyers feel they don’t need an agent because all the information on every property is right there at the touch of a keystroke. So much information is now on line that buyers view properties virtually, through photos and video; they can eliminate many properties without ever seeing the actual bricks and mortar, thus making themselves much more efficient.

These buyers are right; there is a LOT of information on line about properties. But does information actually drive purchases? Does anyone really want to buy a home based on information alone? Are the facts about a property (or a person) and its essence the same?

I love Facebook. I check it every day, often several times a day, to see what’s new in my newsfeed and who has been reading my posts. I post regularly on Facebook, though not multiple times a day as some of my colleagues do. But if you read about me on Facebook – if you and I become Facebook friends – what you know about me is carefully curated. I make conscious decisions about what to post and what not to post. I create a context for myself around the areas I write about on Facebook: real estate, cooking, a little music, my children and grandchild.  Knowing me on Facebook is not actually knowing me. To a certain degree I actively avoid nuance. I want to create an appealing distillation: these interests, this focus, these ideas. I avoid controversy in my Facebook self.

I believe this is the paradigm for responsible, professional on line interaction. And I think the implications spread far beyond Facebook. We are all curating a projection of ourselves, be it curmudgeonly, friendly, wise, or funny. And the goal is always attraction.

The same paradigm holds for on-line real estate. Every agent tries to put his or her listing’s best foot forward. The on-line projection reflects careful editing. It lacks nuance. And that is where agents come into the picture. Frequently the property the buyer has rejected based on its on-line depiction is precisely the one he should be seeing. You can only imbibe the feeling of a place – the light and air, the way the space flows, the detailing – as you walk through it IN PERSON. What looked small on your iPad may look just fine when you are there, and vice versa.  Buyers know just where they want to live, and they refine their Internet searches accordingly. But agents know that time and again people end up enthusiastically buying in neighborhoods they had never even considered until their agent led them there.

I say often in this blog that we as agents sell both a property and a sense of home. Anyone can buy a condo on line. But to find a home requires your presence in the space to soak up the intangibles. That reality can never go virtual.

We’re at an interesting moment of time in the current residential marketplace.  On the one hand, an already thinning inventory of apartments has been shrinking steadily since the second quarter of this year.  According to analytics provided by Noah Rosenblatt’s www.urbandigs.com, as of today, a total of 5,599 apartments are on the market in Manhattan—the lowest number in more than four years.  At the same time, there are 3,0009 pending sales—just 186 deals short of the highest number of signed contracts achieved during this same period on June 14^th of this year.  Properties in all price ranges are being absorbed at a faster rate than new properties are coming to market.  With supply dwindling and demand rising, sellers who price realistically have the edge today. 

In Manhattan, the real estate market continues to demonstrate an inherent strength and relative balance despite negative macro economics.  Europe’s debt problems will not stabilize any time soon, and they are as disconcerting as they are distracting.  Worrisome too is the future of China—the proverbial elephant in the room.  Our own U.S. stock market confounds us with its volatile swings.  In New York, while job creation is up 2.9% for the first half of this year, especially in tourist-driven hospitality and retail, unemployment still hovers at 10%.

At the market’s upper end where demand exceeds supply, a remarkably buoyant audience of buyers is setting all time records.  Several highly publicized transactions have achieved eye-popping numbers, and not all have been bought with foreign money.  This past February, a Russian industrialist purchased the penthouse at 15 Central Park West for $88M, and international capital is rumored also to be behind two recent $90+ contracts at One 57.  Not so at Ritz Carlton Towers where Steve Wynn paid $70 million for the penthouse in June; the Courtney Ross’ duplex at 740 Park was purchased for $52.5M in May by a couple relocating from California; a business woman from Connecticut bought the Ted Forstman estate at 2 East 70^th for $40M in June.  Adding up the trades for this category in the last six months, 19 additional properties over $20M and 32 homes priced between $10M and $19.5M have closed.

At the opposite end, there is high volume and strong velocity in the market below $2M which is thriving for two reasons mainly.  Consistently high priced rentals are driving first time buyers to capture historically low mortgage rates.  As of July 26^th, Freddie Mac reported average 30 year rates at 3.49% and 15 year rates at 2.80%—the lowest in history.  These are not expected to rise significantly for the remainder of 2012.

There is a marked difference in the buying patterns of the middle market, very loosely defined as everything between $2—9M.  Once dominated by Wall Streeters with frothy bonus checks, these buyers are more conservative than their predecessors, and their ranks comprise far fewer financial professionals (with the exception of hedge funders) and more real estate developers, entrepreneurs, attorneys and surgeons.  In this category where housing stock is particularly short, when a well priced resale is listed, generally it sells within three months, if not sooner, and frequently in competitive bidding.

In this climate of tight inventory, there is broad demand from four distinct groups:  overseas buyers seeking a safe haven, wealthy U.S. citizens looking for a trophy home, New Yorkers trading up or down, and out-of-towners desiring a piece of the Big Apple.  The environment seems favorable for new development projects which are making a timely comeback.  Scores of new condominium ventures are rising once again in all areas of the city after a virtual four year hiatus.  Stalled projects have been recapitalized, and commercial investments have rebounded with multiple high end developments in the ground alongside up market rental conversions.  This current wave of development will not only boost inventory levels for new properties, but will undoubtedly lead to increased numbers of resale apartments.  Typically, as confidence spreads, more sellers list their homes, and nearly always, the power of the market moves from the top down.

Many of the new condo ventures are trending to larger spaces with ambitious prices for the ultra luxury market.  On the Upper East Side in a 19 block span from 60^th—79^th Streets, Park to Lexington Avenues, there are at least seven high profile projects that will offer mostly large apartments for about $3,000 per square foot.  Creating more choices for buyers, these shiny brand new offerings will bring renewed energy to the marketplace. We’ll have to wait to see whether these developers will hit their impressive numbers.

There is every reason to believe that the market in Manhattan will remain stable for the foreseeable future. Despite global and U.S. economic troubles, demand for quality homes in our city at this point in time is high enough to balance a tight housing stock, favoring sellers who prices their properties realistically and market intelligently.

This week-end, preparing for our Management Retreat taking place at a facility near my home in Connecticut, I did a lot of baking. I am a pretty good baker but one of my cakes went horribly wrong: overcooked, stuck to the pan, a total disaster. In addition to being disappointed, I was infuriated. How did a process I fundamentally understand move inexplicably out of my control?

The same question occurs to me frequently when my agents are engaged in negotiations for the purchase or sale of properties here in New York. Deals can slip out of control in an instant, whether through error, circumstance or reactivity. Here’s how:

Everyone, buyer, seller, and agent alike, must make sure that all deal terms are clear and concisely spelled out, and that all property information is correct. Did the maintenance go up in the beginning of the year, a month after the property came onto the market? Since the seller may forget to mention it, the agent should remember to check. Have the taxes changed? Does the building have a flip tax? Who will pay it? Forgotten flip taxes have derailed more deals than any other single issue of my experience.

Has work been done on the property? Increasingly, contracts specify that, in a co-op, all work must have been approved by the Board of Directors. Frequently an owner cannot document this approval, since it was given verbally, or given many years earlier. I have seen major lawsuits arise over the question of what a former Board may or may not have approved many years in the past. So for today’s owners, it is critical that you make sure all your work approvals are conveyed IN WRITING.

There is also the question of approvals from the Department of Buildings. Contractors are frequently careless about the final sign off, which causes no issue until the current owner goes to sell. Then a search shows that there are open permits for the property, and the buyer doesn’t want to close until they are satisfied.  The same is true with any other lien. This issue can derail or delay deals, and often the seller is unaware of the problem until a lien search is performed. I recommend that all sellers search their properties for liens and open permits as a standard part of preparing to market the property. Closing an open DOB permit can be a lengthy and Kafka-esque experience, and it sometimes takes months. 

And while the list of possible unexpected crises is long, nothing quite compares to precipitous changes in the circumstances or inclinations of one of the principals. For example, a deal is agonizingly negotiated over weeks or months, the buyer signs the contract, and the seller decides to stay put. Or the buyer and seller are $10,000 apart, days go by, and neither will budge. Sometimes these situations simply need to breathe. A day or two helps get everyone back on track. Sometimes there is nothing to do but move on.

To keep our deals alive we all need the courage, focus and professionalism to change the things we can and the serenity to let go of the situations which are beyond our control. It’s not always easy for any of us, agents or principals, but it brings us back to fight another day.

By the way, I sliced and cubed the shards of the ruined cake and made an English Trifle. It was delicious!