Mitchell Moinian, Principal at The Moinian Group, joined the Real Estate Daily Beat for an interview. We discussed the resilience of New York City, the firm’s venture arm – Currency M, and how he envisions the future of the office.
Daily Beat: How has your rental portfolio occupancy been since March 2020?
Mitchell Moinian: Prior to the pandemic, the multi-family rental market in New York City was at an all time high.
When COVID-19 hit, there was a mass exodus; with many predicting the death of New York City. I never shared in that perspective because New York City remains the most resilient, high-demand, prominent residential market on the planet. Even when cases increased drastically at the height of the pandemic, the city was still filled with millions of people. While the occupancy rates decreased 10% to 20% this was more reflective of the city being at such a peak pre-pandemic, leaving abundant room for a slump.
Daily Beat: Does The Moinian Group own any multi-family outside of New York?
Mitchell Moinian: When it comes to our apartment portfolio, it’s reflective of our dedication to New York City, with all each of our buildings developed within The Big Apple except for Bezel at Miami Worldcenter, a 43-story, 434-unit, luxury rental high rise in a commanding, high-visibility location in the heart of Miami’s new world-cass mixed-use project. We opened the leasing office last month and the velocity has been and continues to be off the charts. In Miami, I think the standard for the rental market has historically been a little lower than Manhattan. We have brought our unmatched standard of luxury to the market and people are recognizing it.
Daily Beat: What are your thoughts on the overall resurgence in the market?
Mitchell Moinian: The bright spot in our experience during the market’s has been the major flight to quality. We benefited from this tremendously because all of our residential buildings are luxury high-rise, full-service properties. While they may have had their headwinds and moments of exodus, but they really bounced back quickly. As such, even though we took hits like everyone else, our vacancy rates were really on the lower end relative to others in the market. For example, PLG, our new 26-story, 467-unit entirely unobstructed building floating above Prospect Lefferts Gardens, opened in January 2020. We leased the entire building basically from day one of the pandemic all the way until about the end of the summer. A big part of that was Brooklyn versus Manhattan.
Daily Beat: Brooklyn really stood out at the time.
Mitchell Moinian: Yes. Even amidst the pandemic, we ended up being above pro forma for that building.
Daily Beat: Why has there been such a flight to quality?
Mitchell Moinian: The people who have money have seen their wealth grow. Unfortunately, it’s the people that are typically used to middle market products that were really put in a bind. The luxury demographic never really suffered economically, so as the prices of units went down, they took advantage of this arbitrage to pick whatever kind of state-of-the-art apartment they wanted.
Daily Beat: The Fed put out a data point saying the greatest economic impact was for the 25% of the lowest quadrant of earners. On a slightly different topic, what are your thoughts on the future of work?
Mitchell Moinian: Remote work has always been a part of the workforce. People never paid attention to it in the general public, but once the pandemic hit, everyone suddenly became remote work experts and virologists! Work from home is a viable option in a global emergency and will work for some positions moving forward, but we are big believers in the return to office, as nothing beats in-person collaboration. COVID-19 This reminds me of 9/11 in a sense. At the time, people said that we’re never going to go on a plane or in a skyscraper again. A few months later, people were back to flying all over the world and a few years later new office developments were fully occupied. There is this kind of shock factor from the pandemic, which is also affecting people’s psyche and existence. Contrary to a lot of what people say, I think this will ultimately make the office and the workplace better than it’s ever been, as it becomes far more than a 9 to 5 repository for desks, but a holistic, adaptable environment.
Daily Beat: Offices will be like a hotels in a sense?
Mitchell Moinian: Yes. Office buildings will demand a certain level of hospitality that did not previously exist. Companies are going to be forced to kick it up a notch. I do concede that entrepreneurs and founders will be more flexible to working a bit more privately at home within a hybrid model.
Daily Beat: Assume the hybrid model is the future, what does that mean for a company’s office footprint? What are tenants saying?
Mitchell Moinian: There are really two different markets. The first is small businesses that look for anywhere between 5,000 to 10,000 SF and that’s sector is leasing as it typically would. These companies want to be back in the office. For example, if one of their employees wants to take Fridays off, that’s not really going to affect their footprint. The added flexibility and convenience doesn’t change the amount of space these small businesses need. The second is corporate tenants who seek larger spaces. From what I’m seeing, these companies are keeping the envelope the same as it would be, but are re-prioritizing the use of certain spaces versus other things.
Daily Beat: What are they doing differently with the space?
Mitchell Moinian: For example, take a financial company that has 500 traders on one floor. Now, they’ll put 350 of their employees there and have another space for flex employees. They also need space for the collaborative, amenitized fun areas. The result is that the general envelope is more or less the same. Granted, it didn’t grow as much as it should have, so perhaps it’s frozen in time from three years ago, but it’s still a substantial space.
Daily Beat: Do you think law firms are going to still provide their attorneys with their own offices?
Mitchell Moinian: At first, I was a little wary about COVID-19’s impact on the legal sector because their job entails a lot significant amount of research and paperwork, but they’ve held consistent with the best leasing numbers. Back when I was in college and worked at Cushman & Wakefield, I remember seeing these law firms’ utilizing thousands of square feet just to store paperwork.
Daily Beat: That was really expensive storage area!
Mitchell Moinian: Obviously, no one’s really doing that anymore. That was the first layer that went away. I was curious what the law firms were going to do post-COVID-19, but ultimately they really pride themselves on collaboration.
Daily Beat: How would you compare the overall office vacancy rate of nearly 17% to higher quality buildings?
Mitchell Moinian: We’re really seeing a flight to quality when it comes to office buildings. Everyone is looking for the latest and greatest and we fortunately have a lot of class-A buildings. The TAMI (technology, advertising, media, and information) tenants, including the tech giants like Facebook and Google, are dominating the office leasing market right now. These types of tenants are not looking for commodity office space – they’re either going into something brand new or something that feels brand new.
Daily Beat: Is tenant experience on the landlord or tenant to solve?
Mitchell Moinian: The answer is different for corporate tenants and the smaller businesses. Google doesn’t really lean on a landlord for service experience, but when it comes to multi-tenant office buildings, the landlord serves as the quarterback for tenant experience. We have both in our portfolio, but our tenants typically fall in the latter. The big corporations that are best suited for 3 Hudson Boulevard — our highly-anticipated tower with 56 floors and 1.85 million square feet of office space — are amazing at how they design, program, and amenitize their spaces. These decisions about office experience are deeply rooted within their corporate culture and we tend to not be heavily involved in it upon leasing the space to those types of companies.
Daily Beat: Do you think tech platforms like HqO and VTS are an important part of the solution?
Mitchell Moinian: Everyone needs some aspect of technology. That said, no app is going to be as strong as showing up to one of your commercial tenants with a bottle of wine after ten years of being there and the lease is coming due; however, these startups very clearly provide owners, residents, and tenants alike with a layer of of technology that provides the necessary infrastructure for a property to operate efficiently. We have a startup in our Currency M portfolio called Eden Workplace led by Joe Du Bey, which serves several of these functions. It’s more for the hybrid work amenities and services – not only tenant experience.
Daily Beat: How’s The Moinian Group’s venture portfolio doing?
Mitchell Moinian: We now have about 20 companies within our portfolio. A majority are real estate centric, but not exclusively. Our timing was prime – we started around seven years ago, before everyone rushed into it. It’s a very patient business. Some are doing amazing – others got really affected by the pandemic. We’re always keeping a close eye on the space and looking to take more beats on the ever-growing marketplace.
Daily Beat: Have any companies gone public yet?
Mitchell Moinian: Not yet. We’ve had several exits in terms of acquisitions and now have a few that are in conversations about going public. With that said, over the past decade, the number of PropTech companies has increased by 300% and 2022 could be the biggest year yet. We are on the frontlines, investing in the ones to watch.
Daily Beat: Can you speak to some of your portfolio companies?
Mitchell Moinian: One I’m extremely excited about at the moment is Bilt Rewards – the first credit card designed for today’s renters to pay rent. We launched this past summer, and I am a founding partner. Its adoption has surpassed anything that we could have imagined. The cardholders and landlords alike are all very happy. From us to Avalon Bay, Related, Equity Residential, Trammel Crow, and Starwood Capital, a majority of the biggest residential landlords in the country have been using and deploying the program for their tenants across the nation. The growth remains out of control – there is no slowdown in sight!
Daily Beat: How does it work?
Mitchell Moinian: It’s a high level diamond elite MasterCard that residents you can earn points on each purchase similar to any other credit card, but it has the stark differentiator of no additional fees when it’s utilized for rent. Another startup I’m excited about is Moved. It’s best described as an Uber for moving services. The company started off as an aggregator where individuals would fill out information on their move and a qualified vendor would then show up at your apartment to help. The founder, Adam Pittenger pivoted just around two years ago to become the fundamental onboarding move-in software platform service for any tenant moving. When a resident signs a lease, a link would be sent to them and anything they would need for their your move is readily available within a portal that they’d created, including all moving services, which they already had.
Daily Beat: What’s your biggest regret in tech investing?
Mitchell Moinian: The co-living industry came to a screeching halt at the onset of the COVID-19 pandemic, with the average monthly rentals continuing to decline by 10-25 percent to this day, as health and safety concerns, uncertain economic conditions, work from home, and the drastic shift in migration patterns has affected all shared spaces. I still really fundamentally back many aspects of the co-living space, and more generally shared economy and I hope to see a bounceback. I think it might just be ahead of its time.
Daily Beat: What have you seen with construction costs on development projects?
Mitchell Moinian: Some things have gone up, while others have gone down. We’re definitely seeing prices go up from what we were anticipating pre-COVID-19. At The Moinian Group, we will continue to closely monitor and control the process, while striving to make the purchasing exercise as efficient as is possible.
Daily Beat: How do you deal with so many deliveries in your residential buildings everyday?
It must be like running a micro-fulfillment center in a building.
Mitchell Moinian: Excess package space! We have one building that received over 100,000 packages last year. It has been a fun, challenging exercise for our operations people. Long-standing technology companies and entrepreneurs alike are starting to finally offer innovative tech-based property management solutions to meet the continued, unforeseen, increased e-commerce boom. While relatively new, it’ll be exciting to watch the growth.
*The interview has been edited and condensed for clarity.