Skyscraper Dreams

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I don’t write about books much on this blog, but I’m a major reader. And, because I’m a real estate nerd, a lot of the books are either about real estate itself or related fields (like private equity, corporate takeovers, etc.).

Am reading one now that’s got a ton of interesting anecdotes and thought I’d pass along the recommendation.

It’s called Skyscraper Dreams, and it’s about the genesis and growth of the major New York real estate families (the Rudins, Tischs, Tishmans, etc.).

I’ve always been fascinated by these families, mostly because we share a background. My great-grandfather Morris Kurtzman, whom I knew well because he lived to be 101, came from Russia in 1910 at 15, right in the sweet spot for the group of Jews who went on to build big real estate empires. Morris owned a bunch of real estate, but never got huge, mostly because he was speculating in the stock market in the late 1920s and got wiped out.

Anyway, here’s an interesting fact I picked up from the book: During the 1900-20s, when all of the big NY families got their start, you could reliably build into a 20-30% return on tenement apartment buildings. Capital was relatively scarce (banks generally did not lend to speculative builders), land was cheap (because the NY subway was opening up the Bronx and Brooklyn to development), building was cheap (because there were no codes and labor was so cheap) and there were hundreds of thousands of immigrants piling into NY in need of cheap housing.

Can you imagine how rich you could get in an environment where you could build into a 20% cap? You could build a building and have all your money back in five years, with everything after that profit. You could grow very easily, because there would be plenty of room to offer ridiculous returns to investors and still make money yourself (how does a 10% pref sound?!).

And think of what happened to the value of those buildings later on, as NY grew into the financial capital of the world.

Sadly, I doubt an opportunity like this will ever come again in the United States. Maybe I need to move to China?

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