Zohran is no Lenin

Zohran Mamdani’s election as Mayor of New York City is the worst nightmare for the Big Apple’s commercial landlords, the reason why the shares of SL Green and Vornado have been sandbagged on the NYSE. The last thing a soft Manhattan office market with a plunge in inbound foreign tourism and spike in the 10-year US Treasury yield needed was a 35 year old self declared socialist Marxist who wants to freeze rents, which are admittedly exorbitant in the most exciting city I have ever lived in my life or visited anywhere on the planet. Even Mother Nature has turned against New York City REITs as Manhattan and the Boroughs are blanketed white by a severe winter snow storm that has paralyzed the city that never sleeps.

SL Green (SLG) shares on the NYSE were slammed from their $68 high a year ago to $46 now. SL Green is a ritzy midtown landlord that owns 32 million square feet of offices/condos in Manhattan alone. Mamdani’s election was a disaster for New York office REITs since it triggered an exodus of wealth from Wall Street and the yuppy wastelands of the Upper East Side to the balmy, low tax embrace of the sunshine state, which now even hosts a former Manhattan property developer turned Emperor of the World. So Mamdani was the best thing to happen to Florida since Miami Vice and the construction of Walt Disney’s theme parks in Orlando. Oscar Wilde taught us that price is what we pay, value is what we get and a man who knows the price of everything knows the value of nothing (obviously a real estate broker LOL!).

A bear raid in 2023 after the failure of Silicon Valley Bank evoked fears of vast CRE loan losses in US regional banks took down Vornado office REIT to $15, where its portfolio of Manhattan office towers traded at prices below those then prevailing at Business Bay and Karama. This was insane, so I knew Vornado was a no-brainer buy at $15 and the REIT repaid my faith by rising in price a year later to 45, a rare triple bagger in securitized New York property.

Lady luck, Mamdani Junior and the seven sigma meltdown in the Japanese bond market on Black Tuesday (Jan 20th) have once again given me another gift horse I dare not look in the mouth. SLG now trades below the value of the admittedly pricy land on which its Manhattan office empire is built. So Hallelujah! No free lunches in Dubai property but a free lunch in New York City for Matt.

Zohran is no Lenin. NYC will remain the financial, media, fashion, art and literary capital of the world, no matter what happens in the White House. I love the idea of buying one of the world’s great commercial empires for just the value of its land with the lolipop of a 6.8% dividend yield while I wait for Xanadu.

I concede the bubonic plague is not over in office since occupancy rates are still only 50-55% of pre-pandemic levels due to Zoom, Teams and digital nomads. Mamdani’s election has cured the new supply dilemma that is the Achilles heel of CRE landlords in midtown Manhattan. One Vanderbilt was a AAA megaproject. The vacancy rate in NYC is still a ghastly 22% but, like Audrey Hepburn, am singing in the rain at the prospect of another New York REIT triple bagger. Love ya New York and go Knicks