How Mark Seruya Finds Opportunity in Distressed Office and Retail Real Estate

Mark Seruya (00:00)
Despite what

Everyone reads whether in New York during this podcast, or listening to this podcast, or outside of New York, all the negative press about the current mayor and the current governor and what they’re doing to New York City as far as taxes and things like that. It’s still a place to go. And so what we noticed over the past three years, there there’s been a huge conversion from res from office to residential, which takes a lot of supply out of the market.

And then second, there’s been a lack of new construction in New York City. And then the work from home is basically gone from the big institutions.

Michelle Tack (02:08)
Welcome everyone to Real Estate Pros Podcast. I am Michelle Tack. I am the host and I have a a great gentleman with me that I’m very ⁓ excited ⁓ to introduce. and that is Mark Seruya ⁓ I don’t know if I pronounced that right, Mark, but ⁓

Mark Seruya (02:28)
First all, thank you, Michelle, for inviting me onto your podcast. I appreciate it. ⁓ my la last name is pronounced Seruya Yeah, just call me Mark. It’s fine. And but thank you, thank you for inviting me.

Michelle Tack (02:35)
Seruya, thank you. Mark I appreciate that.

Absolutely. Mark, one of the things that when we prepare for this podcast, that I was quite moved by in terms of your experience is how you were able to capitalize on the recent downturn and recent preceding this of office and retail within New York City. ⁓ can you, for those of that that may not come from the commercial

side the business. and for those that may, you know, are coming from the investment side or what have you, can you, you know, familiarize in a a short version of what you know what you’re doing and what that entails and ⁓ what markets you’re operating in.

Mark Seruya (03:29)
Sure. ⁓ great question. Thank you. So look, in every single market, there’s always cycles. ⁓ and sometimes cycles are started by in an event. This particular cycle was started by COVID, and that caused many disruptions in the real estate markets. ⁓ one of which, which I pay close attention to is office. People believe that office is going by the way of you know.

the most like the locomotive. So ⁓ or you know, a retail store or something like that. And the fact is people need a place to work. Work from home is not a good environment for employees and employers to have a a a good foundation for work. ⁓ and in particular in New York City, COVID hit New York City very hard. ⁓ so it’s been a l

At the time when COVID, right after COVID ended, ⁓ the the work from home was still very prevalent. And then you had the second part of it, after COVID ended, interest rates moved up a lot. And then a lot of these office buildings were bought five, seven, ten years ago, and they had fixed rates that are very, very low. And when they first set out to buy these office buildings, they had a performer where they thought,

With a base that rates would be at a certain level. Well, guess what? Rates are double. rents have gone down, and it’s caused a significant amount of distress in the market. So at KSR, my partners and I recognized an opportunity. You don’t always get it right. We were fortunate this time. That the pendulum the pendulum would go too far to the negative. And that’s what happened in New York City.

Despite what

Everyone reads whether in New York during this podcast, or listening to this podcast, or outside of New York, all the negative press about the current mayor and the current governor and what they’re doing to New York City as far as taxes and things like that. It’s still a place to go. And so what we noticed over the past three years, there there’s been a huge conversion from res from office to residential, which takes a lot of supply out of the market.

And then second, there’s been a lack of new construction in New York City. And then the work from home is basically gone from the big institutions.

So now, fast forward to where we are today, ⁓ the prices have stabilized, still a lot of distress opportunities. And the fact is, Michelle, we’re seeing a significant amount of office leasing going on in New York, to the point we’re getting some record prices. And then the question is well, where are these tenants coming from?

Well tenants are coming from a lot of large tech companies and AI companies need want to have a flagpole in New York City. So for the past three years we’ve been in buying office buildings, large office buildings. We just closed on one last week, right in Lexington Avenue, down the block from Grand Central Station, a great location.

Michelle Tack (07:22)
Congratulations. Congratulations. Well done.

Mark Seruya (07:25)
Thank you. And we bought one the end of ⁓ end of the year. ⁓ the largest office building in Brooklyn we bought. And so we continue to look for acquisitions in New York City. That’s that’s my focus in New York City right now.

Michelle Tack (07:39)
Let’s talk about also other markets that you’re in ⁓ and some of the focus ⁓ which you educated me about in terms of retail. ⁓ can you talk about the Ohio market, what you’re doing there?

Mark Seruya (07:51)
Sure. The Ohio market, I’ve been ⁓ an investor with a company called Windsor Properties. Alex Dorsey and I are the principal and I are partners. we started very small. We started buying single family homes around Ohio State University about twenty two years ago. And ⁓ this made sense. Houses were cheap, the rents were attractive. and then it came two thousand eight

⁓ I was l very liquid at the time and the you know, the financial crisis hit and we were able to take advantage of what was going on and started to buy multifamily around this the university. ⁓ that led to you know, decent sized portfolio and then we got priced out of the market because all the big boys came into Columbus, Ohio and I couldn’t compete with them. So we started to do developments in ⁓ Dayton. ⁓

Which was a at a turnaround city, it continues to be one. So what people don’t r ⁓ many people don’t understand that the state of Ohio is a direct beneficiary of bringing manufacturing home to the US. ⁓ so we are focused on workforce housing in both in the state, in particular in areas between Columbus and Cincinnati and Dayton.

where a lot of the ⁓ tech companies, in particular Google, Meta, ⁓ Intel and Amazon are building these giant data centers. So we are very active in ⁓ developing workforce housing there. So we’re in the middle of the capital area, so not one.

Michelle Tack (09:28)
Let me ask you a question. You’re you’re you you have a lot on your plate, right? You there’s two companies, you’ve got KSR and Windsor, you’re ⁓ continuing to you know invest and keep on going. How do you keep the business running smoothly? As much as we could talk about smoothly, right? In the in in as we are humans, right?

Mark Seruya (09:49)
That’s sixty four thousand.

So look, I I’m fortunate where I sit. ⁓ I’m not responsible for the day-to-day operations of the businesses. And my sole role is to review deals as they come across our table. and then reach out for both co investors and co GPs who want to be involved.

Either be, you know, in the Windsor Windsor deals or the New York City deals. So I have a staff of a few people that work with me. But for the time being, it’s mostly me and doing what I’m, you know, out there, shaking hands, going to meetings, going to conferences. I’m a very big believer in networking. And ⁓ I do a f a couple of podcasts and I have my own my own little social media thing, which I’m out there as well. So

⁓ yeah, so that’s what I do.

Michelle Tack (10:52)
That’s awesome.

It’s a lot of work. Let me ask you, no business is perfect, right? Can you ⁓ describe maybe a time when a deal was going sideways that you had to pivot really quickly? or a situation where you learn from ⁓ that added to your acumen. Just, you know, again, we know from operators like yourself that have been in this the long term, things do happen. ⁓

Any instruction or or things that we could learn from you on there?

Mark Seruya (11:56)
Listen, ⁓ every investment has its risk as well as opportunities. ⁓ you need to know how to measure risk and be able to take ⁓ a punch when you have to. ⁓ you need to look past your hand. People tend to panic when things are happening right in front of them and realize their investment may be sound, but in the short term there’s some hurdles that you have to, you know, take care of. ⁓

And many investors, look, I I have forty years of experience on Wall Street, and I’ll tell you that the biggest mistake that people make in any type of investment is getting emotional. Once you get emotional in an investment, more often than not, you’re going to lose because you end up buying at the top and selling at the bottom. And that happens in real estate as well. People panic when things are going against them rather than to taking a step back.

either asking for help or working with your bank or working with the management company and see how you, you know, get through it. But you know what? Sometimes, Michelle, no matter what you do, it doesn’t happen. And so you gotta you gotta learn to take a loss. Look, it if anyone is on any of your podcasts and they say they never took a loss, never have those people on your podcast again.

Michelle Tack (13:04)
Absolutely.

Understood. Do you have a specific example of the one that challenged you? Again, this isn’t about dirty laundry. It’s just trying to figure out, hey, you had this one example, it could be 20 years ago. I don’t care. But that you said, ⁓ okay, we got to pivot immediately ⁓ and do corrective action.

Mark Seruya (13:34)
Yeah, so my partner Alex and I bought a ⁓ a failed condominium in Columbus, Ohio. we came in there and basically fixed all the failures that were going on. But ⁓ unbeknownst to me, and it’s my own fault from not really realizing it, that ⁓ you know, condominiums are ⁓ are basically you have a time clock on you.

And as the time clock continues to tick, your returns continue to go down. The longer it takes to sell out these things, the worse your returns are going to be. So basically I knew that, but I didn’t know that at the time that the economy there was taking much longer to recover. And then also, you know, buying and

Buying and building and condominium it, although it sounds great, it’s all ordinary income when you sell the condominium. So it’s no real tax advantages unless you’re a full-time real estate person or you could do some 1031s. ⁓ so we decided to pivot and just rent the buildings, rent it out. and then we just decided to get rid of it. And basically we broke even after four years of owning this thing and we bought the asset cheap. ⁓ so

Knowing when you’re failing is failing is not the right word. ⁓ well you know, something failing is fine. It’s okay to fail. Okay to fail. You know, people who if you don’t fail, that means you’re not growing. So

Michelle Tack (15:01)
Yeah, it is.

Absolutely. Hey, I wanted to turn back to the networking just for a piece before we close out today. You people may not know that you had a long career ⁓ in the markets, financial markets, prior to going into the two, you know, developing the two businesses that are longstanding.

Mark Seruya (15:27)
Well

the the just yeah just to interrupt you. The ⁓ Windsor I’ve been involved with for twenty plus years. It’s the recent thing, KSR is only about you know six months.

Michelle Tack (15:39)
Okay, got it. Oh wow. Oh, okay. I apologize for getting that a little bit. Oh but can you um talk about did those relationships from the when you were in the financial markets have impacted in a positive way those things, for example, that you’re doing with KSR, etc.?

Mark Seruya (16:37)
Sure, absolutely. ⁓ my relationships that I developed over forty years on Wall Street and in any any businesses that I’ve been involved with, I would tell you that most of those people that I’ve crossed paths with over the past 40 years, I still have a relationship with. And because of that, ⁓ people trust is much higher. ⁓ people know that I genuinely care about them.

from their family to their health to the businesses. and because of that, when you’re genuine and not selling, people will trust you more. Even if you make a mistake, at least you know that you’re genuine and if you can admit that you made a mistake, that’s fine. People know people are not perfect. It’s the people who don’t do that, that cover their mistakes or selling all the time, or do not listen to what

the other person really has to say, those are the people that are more often than not are not successful.

Michelle Tack (17:36)
Agreed, agreed. ⁓ I want to thank you very much. You’ve been an incredible provider of ⁓ recent information ⁓ that people may not know about New York City, but more importantly, about I think the opportunities that exist even when things don’t appear to be opportunities, and you were able to strike out and ⁓ you know do things that were difficult in a difficult time. And that was, you know.

the COVID thinking about office buildings, offices. I think that’s fantastic. And I know you’re getting into re retail. So I want to thank you for that and sharing that with us. ⁓ I’m sure there’s some people that may want to ⁓ reach out to you for investment purposes or just ⁓ connections, what have you. Mark, would you provide your contact information, your email, what have you, and then spell it out as sometimes ⁓ people want to just write that down immediately.

Mark Seruya (18:33)
Well, first of all, thank you for that, Michelle. Thank you once again for inviting me onto your podcast. It’s always fun. ⁓ so people can reach out to me at Mark M-A-R-K @ksrny.com You could reach me alternatively on my phone. I’m happy to take a phone call at nine one seven nine zero three nine two seven five. So I do this and also

Michelle you should know I also do some financial consulting as well. So I do I wear I wear many different hats. Yeah, we didn’t touch on a few other things that I do, but that’s okay.

Michelle Tack (19:08)
Look, ⁓ hopefully we’ll have you on again. I really want to thank you. for the folks that are listening or subscribers. We value you. If you value this content, please continue to describe subscribe. And to those that are not subscribers yet, thank you for listening. Continue success mark.

Mark Seruya (19:23)
Thank you. Thank you, Michelle. Have a great day.

Michelle Tack (19:25)
You