Developer: Market has too much to offer to ever truly crash

Real Estate Weekly, Sept 20, 2000 by Elaine Misonzhnik

Philip Pilevsky's speculation on whether the current real estate boom will last was a simple "I don't know," last Monday afternoon, at the National Realty Club luncheon. But according to the hotel developer, the only thing that he could foresee affecting New York City's market negatively would be an external, rather than internal, factor, such as a war in the Middle East, or international terrorism.

The president of Philips International stressed the many advantages that distinguish New Your City from the rest of the country, pointing out that there is no logical reason why the present golden age should end. "Whenever there is a prosperity, people always find reasons to explain it," he said. "But the truth is, no one really knows what actually started today's hot market, and no one can predict what will make it end. In any case, the circumstances are favorable for developers right now, and we should take advantage of them."

Pilevsky attached particular importance to the fact that Manhattan is an island -- a circumstance that limits new construction possibilities, and drives the values of already existing properties further up. According to him, if there is a lack of available space in other areas of the country, developers can just "expand the territory and build more. But in New York we are limited. That makes the existing buildings more valuable, and at the same time, creates a lot of possibilities for re-developments and conversions."

Another significant factor that sets New York City apart, in Pilevsky's view, is its status as an international capital. The abundance of constantly expanding cultural institutions and entertainment centers "has tremendous positive repercussions for the City," he said.

"International guests who come here visit the local restaurants, they shop at the local stores, they live at the New York hotels. Lately, the City has become a haven for the noveau riche from the formerly communist European countries. When these people buy apartments in the United States, or send their children to school here, they don't go to Des Moines, Iowa. They come to New York."

As a result, Pilevsky believes that there will always be an opportunity for new re-developments in New York City, as far as the hospitality, retail, and non-profit sectors are concerned. "The hospitals, the museums, the universities that are located in the City are always searching for an opportunity to expand," he said. "And these cultural institutions are not going to expand into Hoboken. Maybe the office sector will move there, but New York doesn't have to worry about competition as far as the non-profits are concerned."

As an example of the opportunities that exist within the City area, Pilevsky spoke about the new hotel conversion his company is doing at Bryant Park. Philips International has bought a landmark New York building some time ago, and decided to cash in on the investment by turning it into a four-star hotel. According to Pilevsky, the Bryant Park development will be targeted toward the fashion and entertainment industry, providing its guests with over-the-top amenities and a screening room. "The hospitality sector is one of the most important markets in New York City," Pilevsky said. "We are very confident in the opportunities that exist here for us." The hotel, which according to the developer looks like a museum, is scheduled to open in about 60 days.

In addition to this high-profile project, Philips International is doing some less spectacular, but equally profitable, conversions. The company has bought several buildings in New York, including an office building at 35th St. and 5th Ave., the Bar building at 57th St., and a 30,000 SF Queens Atrium Center in Queens. "We decided to buy residential, office, and commercial properties, and are very excited about the New York market," Pilevsky said. "I can't give a prognosis -- nobody can -- but I think the market will last."

"Unless, of course, we get some lunatic for a president who is going to give unprecedented tax cuts," the developer joked.

"That would make the Fed crazy and they will start raising interest rates."