We recently sat down with Alex Elkin from Eastbound Construction to learn about his professional journey and the state of development in Manhattan. Alex founded Eastbound Construction 10 years ago to assist owners and developers navigate the complex world of Real Estate Development and construction. The company has been responsible for building over 1.6 million square feet of development projects with development costs over $2.2 billion. The interview has been edited for length and clarity.

When did you first take an interest in development and construction?  

I had some odd jobs after college but nothing stuck. I started working in construction and it fit my personality. I realized pretty soon that this would be the beginning of a long-term career and so I went and got my Masters Degree from NYU, did the LEED® program, and spent my 20’s learning everything I possibly could about Development and Construction. By the time I was 30, I felt confident that I really knew what I was doing. By the time I was 35, I was confident enough in my skill set and my experience to start working privately for developers to help them navigate through the challenges in NYC development and construction.

What are some of the challenges developers face today?

In addition to the typical challenges – sourcing debt and equity, coordinating design teams, managing contractors…etc. – developers are now facing additional challenges due to uncertain pricing (trade wars, volatility in commodity pricing like steel and glass) as well as local politics. The recently-enacted rent laws in NYC, for example, changed the landscape for many, many developers / owners. And changes to government agencies, like the Department of Buildings or Landmarks Preservation Commission, add additional and unpredictable layers of uncertainty. It’s not the easiest time to be developing but many of our clients are still doing so successfully. 

What is the initial meeting with a new client like?

They’re always interesting. Relatively new developers are (rightfully) concerned with being taken advantage of. And we’re here to protect them and guide them. Experienced developers are already aware of some of the risks and we can proactively mitigate them. The ones who come to us mid-project are always interesting because they’ve typically already run into issues and we map out the best way to get them back on course. Different skill set and different resources, but just as interesting.

Is there advice you’d offer someone who is looking to become a developer?

Being a successful developer requires the ability to do many different things at the same time. Speaking the language of finance (debt & equity), design (architecture & engineering), construction, insurance, legal…etc. My advice is always the same to people looking to get into development or construction – it takes at least 10 years before you become fluent enough in all those languages. So in the beginning, focus on one thing to become an expert in as quickly as possible. When you’re a plumber, your primary concern is plumbing and you don’t concern yourself with how to calculate interest reserve. And when you’re an insurance broker, you don’t have to worry as much about the difference between air-cooled and water-cooled mechanical systems. So pick something and learn everything about it. Then keep doing that over and over. And you’ll keep learning every day until you decide to retire.

My hope in writing this article is to enhance the willingness of NYC landlords to rent to foreign diplomats. The risks for a landlord renting to someone with diplomatic immunity are often misunderstood. It is very understandable why some landlords have trepidations in renting to someone with diplomatic immunity. After all, they can’t be taken to court, right?

Because New York City is the headquarters of the United Nations, we have the most diplomats from around the world living here. Every foreign diplomat coming to New York City for their respective post must find housing accommodation. The most common request is to live within the boundaries of Manhattan, typically below 96th Street. Many times the request is to live somewhat close to the United Nations. The most common overall lease term or stay needed is 2-4 years. In some cases, longer. But some require only a one-year lease.

“The purpose of diplomatic and consular immunity is to promote the effectiveness of official relations. Both types of immunities extend essential protections to diplomats, consuls, their families, and their staffs by limiting the ability of host countries to detain, subpoena, arrest or prosecute them”. (1)

“Diplomatic Immunity privileges extend directly from the 1961 Vienna Convention on Diplomatic Relations or VCDR. The Convention deals with exemptions from a criminal as well as civil laws of a host nation, in most circumstances. Generally, embassy territory and communications, as well as a diplomatic agent’s person and personal property, are considered inviolable under the Convention”. (2)

“Article 31 of the Convention exempts diplomatic agents from the civil and criminal jurisdictions of host states, except for cases in which a diplomatic agent (1.) is involved in a dispute over personal real property, (2.) has an action involving private estate matters or (3.) is in a dispute arising from commercial or professional business outside the scope of official functions”. (3)

“Also, Article 31 clearly states that while diplomatic immunity privileges may exist in a host state, these privileges do not exempt the diplomatic agent from the jurisdiction of the laws of the United States.

These privileges are not absolute either. For example, Article 32 provides that the sending state ‘may’ waive all diplomatic immunity privileges enjoyed by the diplomatic agent”. (4)

Paradoxically, there are very often bilateral agreements between the host nation (USA) and certain other countries, where additional points are notified (i.e. the range of diplomatic immunity, limitations, extended coverage and tax rules, etc.). This normally works on the basis of reciprocity [tit for tat]. The U.S. always demand a complete (full board) package for their diplomats abroad, so: vice versa.

The above VCDR quotes reflect only the general view of the U.S. State Department which are the basics for all nations. And the U.S. view about limitations in immunity for foreign diplomats posted in the United States is internationally highly controversial. Especially because the U.S. claim additional rights as a standard for their diplomats abroad.

No U.S. Credit History?

One of the most relevant items of information landlords want to see and be able to obtain is a U.S. credit history report. Most foreign diplomats don’t have a history of financial credit established in the U.S. The same is true for the majority of people coming to live and or work in the U.S. from other countries who are not diplomats. In the case of a foreign diplomat, it is noteworthy to mention that any diplomat who already has a civil servant position, a complete and thorough background check has already been performed by their government.

When a landlord qualifies their tenant in NYC, in many cases through a licensed real estate agent, the standard protocol for qualification is pretty much the same. One must have good financial credit, no civil or criminal judgments against them and employment backed up with proof of income.

One can rest assured that any foreign diplomat applying for residence in NYC has already been fully vetted by their government. This is important to realize since the process has been completed on the diplomat and non- diplomat alike.

It has not been my experience that a foreign diplomat has defaulted on rent payment. This is the usual concern but, I have never seen nor have I heard of it happen.

Longevity

Currently, according to the real estate magazine The Real Deal, “the signs point to a slowly strengthening market. Manhattan’s vacancy rate fell to 1.86 percent from 2.05 percent — as inventory shrank 10 percent.” (5)

The overall turnover of rental apartments is quite low. This is especially true for highly sought after pre-war or historical buildings like townhouses and brownstones in highly desirable neighborhoods like Greenwich Village, Gramercy Park, Soho and along Central Park to name a popular few.

The typical rental lease is one or two years. The average rental lease duration is lower than many landlords would like. In the case of a diplomat, the average stay is anywhere between 3-4 years and in some cases even longer.

Reputation

Many member states of the United Nations give their Mission or Consular employee’s in NYC a housing allowance or subsidy percentage which is included within the employee’s annual income, as set forth by their government. The ‘rent’ money is ‘government money’ and not the property of the tenant for any other personal use. Their government will first set a budget for rent for each individual diplomat. The budget is based upon the employee’s position, as well as how many people are in the family household.

This government subsidy is for housing and is to be used to pay for housing (rent) only. It is not to be used for any other expenses whatsoever. In the event that a Foreign Diplomat stops or refuses to pay rent, the money allotted to them as their housing allowance puts that individual in an embarrassing situation, but more importantly, the legal position of default with their own government. *It could generally be considered as an act of embezzlement of governmental funds.

Non-payment of rent may result in future diplomats from their nation being looked upon unfavorably in the city where they are to live and

therefore, such diplomats may have a much harder time finding places to live in the future. More than this, it may also reflect negatively upon the entirety of the diplomatic community within the whole of the United Nations here in New York City. This is well acknowledged within their community.

Diplomats have a high level of education making them well informed to international protocol which includes customs on housing rules outside of their own country of origin since foreign postings are quite the norm.

Advice to diplomats

Since U.S. credit history is paramount to a landlord’s qualification I suggest obtaining the following documents in order to better give the landlord a better understanding of yourself. Be prepared. The only information you will normally submit is your name, title, income, and office address.

1. Letter of recommendation from a current landlord or managing agent explaining your duration and rent payment history.

2. Bank statement from your current institution with a cover letter written in English explaining your balances.

3. A brief resume sharing your professional expertise as a diplomat along with information regarding your particular studies and interests at whichever Universities. Include your interest in living in New York City; perhaps for the first time.

Conclusion:

New York City is one of the most coveted posts for any foreign diplomat! No foreign diplomat coming to NYC has any intention to sour the relationship with his or her landlord for non-payment of rent since as we all know news, especially bad news travels in a New York minute. No Diplomat wants to ruin the reputation for everyone else within the entirety of their constituency. Any and every diplomat, when being hosted by a foreign country, are instructed and trained from the very beginning to adhere to certain cultural norms, and this is particularly true with regard to paying rent.

Any foreign governmental body whose diplomat is living outside their country of origin is always mindful and concerned for the reputation of their governments’ overall reputation in the host country they are residing in. In my many years of experience and personal dealings in finding housing accommodations for foreign diplomats here in NYC, none of my clients have ever defaulted in any way. In fact, to this very day, some landlords reach out to me from time-to-time to let me know they have a vacancy. They will ask if I am working with any foreign diplomat since the experience they had with the ones I have placed have always been very positive in every way.

Pasquale Strippoli

Licensed Associate Real Estate Broker in Manhattan

917-838-8821

pstrippoli@bondnewyork.com

(1) (2) (3) (4) http://www.usdiplomacy.org/diplomacytoday/law/immunity.php

(5) The Real Deal–dated April 11^th, 2019 by Meenal Vamburkar

(*) Not an official rule by any government. It is my opinion only.