Jeff Gural, Chairman of GFP Real Estate, joined us for an interview. We discussed his real estate philosophy, a potential casino in New York City, the political environment, and other interesting topics.

Daily Beat: What are your general thoughts about New York City?

Jeff Gural: I’m nervous. I think the Mayor understands how important it is to make the city safe, but I’m not sure everybody else gets it. My granddaughter called me to see if I could buy her pepper spray because there was recently a robbery at knifepoint two doors away from her apartment in Greenwich Village.

Criminals need to be incarcerated. There must be a fear that if someone acts against the law, they will end up in Rikers Island. Prior to the pandemic, the city was safe and that perception has unfortunately changed.

Daily Beat: Are you taking advantage of any distressed opportunities within the office sector?

Jeff Gural: I leave acquisitions to my nephew and son – I’m turning 80 and am too old for that! I just focus on leasing the vacant space in our buildings that I bought over the last 30 to 40 years. We’ve recently done some industrial deals and sold a project at 7 Hanover for a large profit. Our team has been very happy with the results.

Daily Beat: What made you decide to sell 7 Hanover?

Jeff Gural: When you partner up with Wall Street, the likelihood is they’re going to be interested in selling. Over my career, I’ve kept roughly 85% of properties that I’ve bought and have regretted the few that I’ve sold.

Daily Beat: What’s the most important trait of great real estate investors?

Jeff Gural: The most successful people in the industry never sell. Obviously, you also have to watch how much debt you put on. We’ve all been through downturns and every time there’s been one, the market has recovered and reached new heights.

Just look around at Glenwood, Durst, Rudin, Rose Associates, and Fisher Brothers. That’s my philosophy. I never understood the logic of selling and paying capital gains. I was telling my nephew and son that I’ve sold a few buildings and if you added them all up, they’re worth a billion dollars more than what I sold them for.

Daily Beat: You recently donated a substantial sum to Governor Kathy Hochul’s campaign. Will she be able to govern as a centrist?

Jeff Gural: The first step is obviously for Kathy to win the primary. You have two candidates: Jumaane Williams who’s very progressive and is just getting his name out there. And then there’s my good friend Tom Suozzi. I would have told him not to run if he asked me, but his sole issue will be crime.

Lee Zeldin, the likely Republican nominee, will also heavily focus on keeping the city safe and if the Democrats don’t make some changes, I think he might have a chance.

Daily Beat: What are your thoughts on legalized mobile sports betting in New York?

Jeff Gural: New York is going to dominate because of its sheer size, but the 51% sports betting tax rate is foolish and not sustainable. These new online gambling platforms are all losing a fortune. Granted, my grandkids love it, but they’re betting with promos and have signed up for five accounts. I would expect it to slow down now that the football season’s over and that the free money is starting to disappear.

As long as they continue to operate at that tax rate, the companies will not be profitable and that obviously won’t go on forever. I think New York is a great market and a lot of fun, but I hope the kids aren’t getting addicted. The house always wins.

Daily Beat: You’ve been mentioned as someone who might build a casino in New York City? Do you think a casino will ultimately be built in Manhattan?

Jeff Gural: Governor Hochul correctly pushed for New York to accelerate the process of giving out the downstate licenses. I think Aqueduct and Yonkers will get two of them, allowing them to easily convert from a racing casino to a casino. They can do it quickly and there will be no opposition.

The big question is where the third license goes. No matter where they want to place it, there will be opposition. I don’t think politicians want to see it in New York City because it would compete with the theater and the restaurants. They also don’t want it to be in proximity to where people could cash their paycheck and walk into a casino and lose money before they even get home.

I think there will be a reluctance to put one in the heart of the city. There’s been a lot of talk about Brooklyn or near the Citi Field, which seems to be a logical place with a lot of auto repair shops.
Additionally, there are a lot of Asians there and they love to gamble. There’s no group of people who love to gamble more than Asians — it’s cultural. I’m very supportive of it because each license would easily net $500 million each.

Daily Beat: Do you have any updates on the Flatiron building and the recent dispute with Nathan Royce Silverstein?

Jeff Gural: We are in the process of renovating it – the building previously only had one set of stairs. I always felt it was unsafe and I was glad when the building became vacant because the interior had not been renovated in any significant way for around 40 years.

The first thing that we’re doing is putting in two stairways, upgrading the elevators, and completing the facade alterations with local 11. Our ownership group will then see how we can resolve the dispute with Nathan, but that might be impossible.

Daily Beat: With your background at Newmark, how do you envision the future of brokerage?

Jeff Gural: Brokers are here to stay. They’ve done very well because the commission structure was originally established when rents were $25 per square foot. We’re using the same commission structure even with rents at $100 per foot. I don’t see somebody signing a lease based on looking at a video of the space. It was helpful during COVID, but tenants need to see it in person.

Daily Beat: Are you concerned with the flight to quality to newer Class A buildings? What does this mean for your older building stock?

Jeff Gural: My philosophy is that there’s a flight to quality, but also a flight to cool. If you look at our SoHo and Tribeca buildings, those neighborhoods are sought after. You can’t duplicate cool in Hudson Yards. Well-located buildings with a cool lobby, high ceilings, concrete floors, and exposed ductwork are poised to do well.

Daily Beat: Are the changes in the office sector permanent?

Jeff Gural: Everybody’s assumption is that it’s temporary, but don’t think it’ll ever be the same. I think we’re kidding ourselves if we’re going to wake up and it’s going to be the same. We’re in a supply and demand business. Owners who understand that will be fine.

Daily Beat: Sounds like the luxury condo market and Vornado’s 220 CPS!

Jeff Gural: I can’t imagine buying an apartment for $25 million, but my old partner Barry Gosin did and it’s beautiful.

Daily Beat: What are you watching or reading?

Jeff Gural: Truthfully, this is the hardest I’ve ever worked in my life. I typically don’t read books, but I do watch Netflix, Amazon Prime, and Apple TV. I’m currently watching Yellowstone and really enjoy it. My reading primarily consists of real estate publications like yours. I’m up until midnight reading on my iPad.

Daily Beat: I heard you’re getting a cameo in season four!

Jeff Gural: Oddly enough, one of the companies that produced Yellowstone — Studio One — ended up being a tenant of mine in Soho. Unfortunately the company was sold and they are moving out in a couple months.

*The interview has been edited and condensed for clarity.

Steven Kaufman, President of the Kaufman Organization, joined the Real Estate Daily Beat for an interview. We discussed the office market, ground lease deals, the hybrid work model, and other topics.

Daily Beat: Average physical occupancy in SL Green’s office portfolio is approaching 25% as more workers return to the office. For new deals, free rent was typically anywhere from 12 to 14 months and TIs were $17 a foot. How does that compare with your portfolio?

Steve Kaufman: The occupancy has gone up a lot. Our buildings are not the classic Midtown Buildings. We have buildings in the Garment Center and Midtown South. Our main building is 450 7th Avenue at 34th Street – it’s a half a million square-foot building, which is where my office is. We’re back to probably about 70 to 80% of occupancy there now.

Daily Beat: Wow, that’s a very strong number.

Steve Kaufman: The reason is that we have mostly small tenants with entrepreneurial type firms where people want to or need to be in their office. So it’s considerably better than it was.

In some of the other Garment Center buildings where we have larger office tenants who occupy 10,000 to 15,000 SF on full floors, we have tenants who are still not coming back. It’s had an unfortunate impact on the food tenants that we have in the area who rely on the tourists and office workers for their business.

One of your competitors – the Commercial Observer – had an article about how the fast casual restaurant sector has really been hurt in New York. That’s not been good. Everyone is hoping that there’s going to be a broader return to the office in September. I know in the classical Midtown buildings on upper Sixth Avenue and Park Avenue, the percentage of people coming into the office is really very low, so we’re hoping that people come back. We plan on bringing our office staff back in September. The 2,000 to 5,000-SF tenants are coming into their offices, but the bigger companies are not.

Daily Beat: Are you going to mandate vaccinations?

Steve Kaufman: We’re considering doing what some of these big companies are doing, which is people that have not been vaccinated, mandate them to get tested once a week. We are not, at this time, considering mandatory vaccinations as a condition of returning to work. However, of the roughly 40 people we employ, there’s less than 10% who have not been vaccinated.

Nationwide, there’s about 30% of people who have not been vaccinated and what’s going to cause them to get vaccinated at this point, maybe their employers. The city’s even paying $100
to people to get vaccinated!

Daily Beat: The Rudin family recently revealed plans to build a new office development at 415 Madison and are heavily investing in renovations at 80 Pine Street. Do you have similar plans with your older buildings?

Steve Kaufman: Our buildings are all old. They were built in the 1920s-30’s and earlier. New York City is really a city of old buildings, especially the Garment District, which was all built between 1920 and 1930. There are very few new buildings there. So that’s where we have a concentration of properties and in the Midtown South area on 19th, 24th, 25th, and 29th Streets. And they’re all old buildings.

In the last five years, we put a new lobby and redid all hallways and bathrooms at our flagship building on 7th Avenue. We’re also putting in a conference center on the second floor, which is an amenity that we hope will be attractive to tenants. Although it was built in 1930, it looks brand new.

And our other buildings – the newer acquisitions like 135 West 29th and 40 West 25th – we are always modernizing. We just put a new lobby in 22 West 19th Street, which is a 200,000-SF building. That property was built in 1903 and looks beautiful.

Daily Beat: Good bones, especially pre-war.

Steve Kaufman: Yes. This is pre-World War I!

Daily Beat: Nuveen plans on adding simulation golf and other non-typical office amenities at 780 Third Avenue. Is this a fad or the future?

Steve Kaufman: We are looking at outdoor space in some of the buildings, which is a nice amenity. We aren’t adding restaurants, fancy chefs and all that. We don’t have buildings that are really big enough to support that type of amenity, but we are modernizing lobbies and outdoor space. We are not attracting a 100,000-SF tenant that’s going to decide to go to a building based on a fancy chef in the cafeteria.

Daily Beat: At the height of the pandemic, Kaufman’s partnership with AXA closed on 56 West 22nd Street from the Blum family for $48.5 million. And the 67,000 SF building was reported to have been 55% occupied at the time. Can you speak about the deal?

Steve Kaufman: I went into contract before the pandemic hit, and we closed – it’s working out fine for us. I don’t have the exact percentages, but we’ve been renting space there and we’re very positive on the future of that building and that neighborhood in particular.

Daily Beat: It’s interesting because Jacob Chetrit bailed on a deal with SL Green for the Daily News Building and ended up reaching a settlement on his $30 million hard deposit. Was there any renegotiating on your end?

Steve Kaufman: No. There was not.

Daily Beat: Let’s discuss some of your ground lease deals and the AXA partnership?

Steve Kaufman: 56 West 22nd Street and 40 West 25th Street are two buildings that are part of our AXA partnership and were both ground leases. The same is true of the buildings we leased from Gary Barnett– those are also ground lease deals.

Daily Beat: From the Ring Portfolio?

Steve Kaufman: Yes

Daily Beat: Some people are concerned about valuation resets – what are your thoughts on the ground lease market and what draws you to those deals?

Steve Kaufman: That’s always a concern, but being prepared to do ground lease deals rather than fee simple deals opens up a much wider range of possible acquisitions for us and our institutional partners. We like the ground lease structure and that’s what we’ve been successful doing.

We have two parts of our company – the core 10-building portfolio that we’ve owned for many years, which we discussed earlier. Then we’ve had the newer acquisitions that are structured as net leased deals, including the Ring properties and the AXA buildings. We also net leased a building at 21-01 51st Avenue in Long Island City a few years ago.

Daily Beat: Do you have any WeWork exposure?

Steve Kaufman: No. Todd Bassen was their real estate guy for a moment and I wanted them to take two floors at 519 8th Avenue. But luckily we did not do that deal.

I’ll tell you the funny thing. I had Regus as a tenant at 111 West 19th Street on one 23,000-SF floor. All their spaces are single purpose entities, so they threw that one into bankruptcy during the pandemic and closed it down. Meanwhile, I just read that they took 27,000 SF at 14 Penn Plaza. They must have gotten a hell of a deal over there. And why would they close down a place on 19th Street where people actually want to be and open up on 34th Street.

Daily Beat: There must’ve been a built out co-working space already there! Would you entertain a partnership model with a co-working firm?

Steve Kaufman: I would consider doing that if I had a block of space. But I think the demand for those small desk spaces is questionable. I honestly don’t know what’s going to happen if that’s going to come back or not. I got small 1,000 to 2,000-SF spaces that we’re trying to rent and there’s activity on it, but it’s not what it used to be. With regard to the future of office space, people want to go back to their offices and they are going to get rented, but I think long term there’ll be less use of office space.

Daily Beat: What do you think of the hybrid work model and only working from the office three days a week?

Steve Kaufman: I’m very comfortable with it. You know I’m a perfect example myself. I never worked from home a day in my life before this came and now you’re talking to me from home.

Daily Beat: I always love listening to NYC family real estate stories. Can you please share the company’s history?

Steve Kaufman: I’m third generation. My grandfather started the firm. He made a lot of money in the Garment Industry in the 1920s. And he was one of the original builders of the Garment Center. He had built some buildings that we still own – 462 and 470 7th Avenue. So that’s always a source of pride for us that you know we have managed to stay in business this long with the same families.

George Kaufman – a cousin of mine – was a very successful entrepreneur and real estate developer. He started the Kaufman Astoria Movie Studio, which is a completely separate business from ours. He died a couple of years ago.
I’ve personally been active my whole career – 50 years – in New York real estate even though I’m a very young 72.

Daily Beat: Are you guys in acquisition mode?

Steve Kaufman: Yes. We have institutional partners that we work with and are in acquisition mode. My team is actively looking for new deals.

*The interview has been edited and condensed for clarity.