Today’s Guest is Jonharold Cicero. 

 

Jonharold is a Real Estate Attorney & Partner at DL Partners law firm in NYC and real estate operator and investor in four States. Join Sam and Jonharold in today’s show.

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John Harold’s Background [00:01:03]

John Harold’s Work as a Real Estate Attorney [00:04:00]

Risks in Real Estate Investing [00:08:01]

Air Rights and Complex Transactions [00:09:21]

Joint Venture Deals and Subdividing Buildings [00:11:59]

Compromises in Transactions [00:15:28]

Collaboration with other attorneys [00:17:39]

Personal real estate investments [00:19:58]

Experience and expertise in real estate law [00:21:44]

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Connect with Jonharold:

Linkedin: https://www.linkedin.com/in/jonharoldcicero/

Web: https://dlpartnerslaw.com/#attorneys-section/jonharold-a-cicero

 

Connect with Sam:

I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.  

 

Facebook: https://www.facebook.com/HowtoscaleCRE/

LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/

Email me → sam@blog.brickeninvestmentgroup.com

 

SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson

Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234

Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f

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Want to read the full show notes of the episode? Check it out below:

Jonharold Cicero([00:00:00]) – Picture, there’s a building and then the first four or five stories of the building we built is right up against it. And then after the fifth floor, it extends over the roof of the other building and then goes up another 15 floors. Wow. They end up looking like, uh, Tetris pieces that, you know, didn’t quite land. Right. Wow. It’s somewhat common in the city. Uh, there’s even a building downtown in, I believe, uh, around Tribeca that they call. I think they refer to it as the Jenga building cause it had some candel and the architect went with it and staggered the floors. So it’s, you know, when you see it, you know, it’s that building. Welcome

 

Intro ([00:00:38]) – To the How to Scale commercial real Estate Show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big.

 

Sam Wilson ([00:00:50]) – John Harold Cicero is a real estate attorney and partner at DL Partners Law firm in New York City. He’s also a real estate operator and an investor in four states. John Harold, welcome to the show.

 

Jonharold Cicero([00:01:01]) – Thank you. Happy to be here.

 

Sam Wilson ([00:01:03]) – Absolutely. The pleasure is mine. John Harold, there are three questions I ask every guest who comes in the show in 90 seconds or less. Can you tell me where did you start? Where are you now and how did you get there?

 

Jonharold Cicero([00:01:13]) – Uh, I started as a person, a child who grew up in New York City and saw the effects of gentrification firsthand. Uh, I had a single mother and she bought a small apartment in an area that wasn’t so great. And over 20 years it became a phenomenal area because everything around us got built up and she was able to cash out and it helped her get into retirement. And that’s where I got the real estate bug, wanted to become that person that had the capability of gentrifying neighborhoods and being involved in that process. Uh, I was originally gonna go get a, uh, MBA and learn about real estate that way and somebody gave me very, very sound advice and said, unless you’re getting an MBA from a top 20 school, you’re not gonna be working on Wall Street in private equity for real estate. Become a lawyer so you have a fallback. And that’s what I did. I went to law school, uh, focused on real estate, which was brutal because I was in law school during the great recession, so there wasn’t too many real estate jobs around. Um, but I stuck with it and a lot of my colleagues went into bankruptcy work and restructuring, but I stuck with real estate cause they knew that’s where my passion was and 15 years later, here I am. So it worked out.

 

Sam Wilson ([00:02:23]) – It worked out. No, this is cool. It’s gonna make for a fun conversation because I think rarely do we get the combination of both investor. I mean, you own your own real estate, you’re an investor in other people’s deals, but also you are an active attorney that practices, uh, some, some, you know, really nuanced parts, I think probably of real estate law. One thing I do wanna comment back on, and this is, this is a, a beef I have had, I think with people that are opposed to gentrification, that gets a, it’s a, it’s kind of a dirty word for a lot of people where they’re like, oh man, you know, these terrible humans that come in and buy neighborhoods and take ’em from dirty, dumpy little neighborhoods and actually make the place decent. You were the recipient or your mother was rather the recipient of the benefit of that. Right, right,

 

Jonharold Cicero([00:03:07]) – Right. Uh, I think from the perspective of most people, especially if their renters, uh, gentrification is a horrible term because it means renters gonna go up. You know, if you, if you own, you’re gonna, you’re gonna reap the benefits of the price increases,

 

Sam Wilson ([00:03:25]) – Right? Yeah. The b the the price increases. And, and, and, yeah, again, I’ve never, I’ve never quite understood the mentality of improving an area, being a bad thing. Like, oh, we’re gonna make this a decent place for people to live Again. Imagine, imagine how horrible her person you must be. So I love, I love the ti that’s how you caught the bug, was just watching it firsthand and said, man, this is, this is something I want to do. Tell me on, I guess, you know, what are you working on, on the law side of things right now? What are, what are some really some, some cool projects or some stuff you’re seeing happening in the marketplace?

 

Jonharold Cicero([00:04:00]) – Uh, I represent a lot of, uh, wealthy family offices and private equity funds. Um, anyone from you investors traded development companies. Um, so I do a lot of new construction condominiums. If you ever see the show, A million dollar listing on Bravo with all those brokers and they do a new construction condo. I would say for every three that you see on the show, new construction condos, I’m the attorney for one of every three of them. Uh, it, it’s constantly my clients on the show. I know all those brokers on a first name basis. Um, so I do a lot of that work, but I also do a lot of buying and selling commercial real estate, whether it be apartment complexes, uh, office buildings, apartment buildings, shopping centers, sometimes hotels, uh, and then also in buying and selling, representing the borrowers and negotiating their loan documents, um, and doing corporate structuring for the terms of their investors and how they’re entering into the deal.

 

Jonharold Cicero([00:05:01]) – 10 31 exchanges, sometimes reverse 10 31 exchanges into more complex deals That just did a deal, uh, last, at the end of last year where we bought a property. My client was selling a property, they were buying an apartment complex in the 40 million range, and they had a joint venture between a family office and a private equity fund that was run by the children of the family office. The private equity fund sold something and did a 10 31 into it as a tenant in common. And the family office was still trying to sell something and wasn’t gonna close in time. So we had to do a reverse 10 31 for that tenant in common so that they could come together and then they could subsequently sell their property and get the cash, uh, you know, the tax deferred exchange value out of the reverse 10 31. So complex stuff that keeps it interesting. Um, but, you know, and then a lot of straightforward stuff too.

 

Sam Wilson ([00:05:51]) – Wow. Yeah, that I bet, I bet that is, like you said, that’s the stuff that keeps it, keeps it interesting is probably also the stuff where you probably, you, you, you get to, uh, really put your creative, uh, problem solving hat on. Is that part of, part of what keeps it interesting for you?

 

Jonharold Cicero([00:06:05]) – Absolutely. Uh, you know, and, and it, it really, you run into so, so many varieties of deals and over time with more experience, you know, I’ve been doing this for like 15 years now. Um, hundreds and hundreds and hundreds of deals of all different asset classes in different areas, different sizes, different structures, and being able to tap into those experiences as resources, the structure, new deals, and especially with some of my less experienced clients, being able to come in, you know, clients who are not private equity funds and don’t have in-house council and separate financing got, being able to, to share with them some of the opportunities and options that are available for them to better structure their deals. I mean, that’s where they get the most bang for their buck with me. You know, you, you get what you pay for when it comes to attorney.

 

Jonharold Cicero([00:06:53]) – Um, and, and having a firm that’s real estate centric, that’s primarily all we do is real estate here. Having so many colleagues that I can refer, you know, and, and bounce ideas off of. Um, it, it’s beneficial, especially in New York City where you’re doing a lot of, you know, development and you need your na you’re up against your neighbors, you need access to their property in order to build your property. Like it, it gets sometimes outta control. So, uh, it keeps it interesting and I enjoy being able to help my clients grow because I see it over the course of years where they go from 2 million projects and now 10 years later we’re doing 20 million project.

 

Sam Wilson ([00:07:32]) – Right, right. No, that’s really, really cool. When you look at all, I mean, cuz you’re an investor as well and so you get to see probably, and like you’ve mentioned the gamut of transaction types. Are there risks you see people taking right now that you personally aren’t comfortable with? Obviously, you know, your clients can do what your clients can do, but what do you see in the, I guess the question is what do you see in the marketplace? What are people doing right now that you’re like, wow man, that that that, that doesn’t fit my investing criteria?

 

Jonharold Cicero([00:08:01]) – Uh, I think it as an attorney, um, naturally risk averse, I don’t think I was as risk averse before it became an attorney and then it became more risk averse. Right. Um, and, and it’s a constant internal struggle for me as an investor to battle some of that risk aversion. Um, but I, I do have, uh, clients who do some crazy structures, um, with regard to buy, you know, buying up lots and trying to secure air rights. We have that in New York City where you can buy, if you have an, a building next to you, say you bought a corner lot and you have a building next to you that’s only four stories, but as of right has the ability to be six stories. You can buy their air rights and transfer ’em over into your zoning lot so that you can build an even taller building on your lot then you would legally be allowed to.

 

Jonharold Cicero([00:08:46]) – Um, so some of those deals that get very complex, I do the zoning lot development, development agreements for those transactions. But for me personally, I mean that, that’s way too big for what I would invest in, um, or, or would take on as the main investor. Uh, I like more of, uh, I’m not so much into the class a high end luxury properties. I like more recession resistant investments, class B properties and Class B neighborhoods instructions that get complex with air rights and, and other things. Uh, my clients, I’ll help them do it, but that, that’s too much for me at this point.

 

Sam Wilson ([00:09:21]) – Yeah, no, I, I completely understand that. And we’ve never actually covered on this show. We’re pushing 800 episodes at this point. I’m thinking we’ve ever actually gone in depth on air rights and kind of how those are structured. I mean, that just seems like the wild West. I mean, maybe it’s not cuz you’re in New York City and you guys see it all the time. But I guess briefly, can you just tell us, is that, is it just like, I mean, how do you even establish what those air rights are worth?

 

Jonharold Cicero([00:09:47]) – I, I just did. Yeah. Yeah. I know that’s a, that’s a constant debate based on where the neighborhood is and what the air rights that are available are. Um, and, and without diving down the rabbit hole, you know, you, you have to buy air rights of a neighboring building before you can approach the building on the opposite side of that building so that you can buy their rights. Um, you know, you have to have the, the continuity of one building into the next building. You can’t just go from, uh, you know, leak your neighbor into a a subsequent building. So it, it gets crazy. Um, it determining what the value is based on comparables no different than comps, uh, that you would have when you’re buying a property. What are the comps for people who are buying rights? Um, so it, it’s a, it’s a tricky transaction, but I, I mean it gets very interesting. I mean, I, I just did a building where they can’t deliver over a neighboring building. So the first four, if you could picture it, there’s a, a building and then the first four or five stories of the building we built is right up against it. And then after the fifth floor it extends over the roof of the other building and then goes up another 15 floors. Wow. They end up looking like, uh, Tetris pieces that, you know, didn’t quite land. Right.

 

Sam Wilson ([00:10:59]) – Wow.

 

Jonharold Cicero([00:11:00]) – It’s somewhat common in the city. Uh, there’s even a building downtown in, I believe, uh, around Tribeca that they call, I think they refer to it as the Jenga building. Cause it had some candel levering and the architect went with it and staggered the floors. So it’s, you know, when you see it, you know, it’s that building. Um, but fancy,

 

Sam Wilson ([00:11:21]) – I’m gonna have to look that up. The Jenga building, I’m sure that, I’m sure that that’s well documented. Uh, I think it’s

 

Jonharold Cicero([00:11:26]) – 56 Leonard Street, I think is the address.

 

Sam Wilson ([00:11:29]) – Ok, there you go. I’m gonna look that up. I’m gonna look that up. That’s it. That’s really fascinating. And again, I think, I think I hear the, the, the, the, um, you really enjoy kind of that more complex nuance part of, of what it is that you’re working on. What are some opportunities you’re seeing right now, I guess in, in the broader, either in your market or just, you know, across the, across all the deals that, that you see coming across your desk and opportunities you’re working on. What are some stuff you see right now that you’re like, man, this is, this is a really, really cool space and I see people doing really well with it.

 

Jonharold Cicero([00:11:59]) – Uh, I think, you know, multifamily is always strong. I love multifamily from an investing perspective, use as well. Um, but really space, you gotta have service, uh, tenants. You can’t have, you know, retail tenants who are just selling products, right? They gotta be a service like a, you know, a salon or something like that. Um, or selling food or something. But, uh, interesting things that I see, um, you know, in here in New York City and this market, you know, prices keep going up and up and up and, uh, outer markets in parts of northern New Jersey and other parts of the five boroughs of New York City that when I was a kid you would never wanna go to are now starting to trend and, and, uh, become more valuable. Um, I look at this in particular, diaper Heights section of Brooklyn was a very much, um, um, my family’s from Italy and a lot of Italian Americans had settled there when, when I was a kid, my great aunts and uncles had houses they bought for 40,000 over there.

 

Jonharold Cicero([00:13:00]) – The same house with no improvements is now 1.5 million. Um, so, you know, the, the, the values have gone up. What I do think is interesting that I see a lot of in New York City is people, cause it’s a higher point of entry, a higher price to enter the market. I see people doing a lot of joint venture deals and then coming to me to subdivide a building into separate condominium units. So you can have, I just did one, um, maybe about two years ago here in Midtown where we had two bigger players enter into a transaction where they bought a existing office building. They went through the, uh, variance to get the building re-designated for zoning purposes. And then we split the building into two condominium units. One was the first floor through the 10th floor or 12th floor, and the other was 12th floor or 13th floor all the way up to, I think it was the 30th floor.

 

Jonharold Cicero([00:13:54]) – And the lower portion became a hotel. And then the upper portion became individual resident condominium that was above a hotel in the same building with a hotel entry and all the amenities of five star hotel, four star hotel. Um, so, you know, they can add value to that. Um, but it was two different partners that entered into the deal for the joint venture to acquire the building. And one is a hotel operator and owns the hotel condo and the other is a condo developer and owns the residential portion that they then further subdivided. So I see a lot of those kinds of opportunities where people, and even subdividing a a larger lot that people buy, uh, at a client who just did that in, uh, the Bronx and on the edge of Yonkers where we bought a huge lot and one was an older school building and they subdivided that into a separate tax lot of its own so that they could rent it back to the city to use as a school and they’re gonna add the improvements. And then this huge vacant part of the lot was further subdivided and, uh, now a film studio is being built there.

 

Sam Wilson ([00:15:00]) – So that’s really cool. Yeah, and I guess that’s the way that when you get into those creative structures and especially do dealing with the dollar amounts that you’re dealing with there in New York City, it makes sense, you know, to have the condo, uh, the residential condo, uh, developer and operator partner up with the hotel operator. I can only imagine the amount of, you know, we always say good fences make good neighbors. And so the amount of just working through on the front end, the nuances of how to structure those deals,

 

Jonharold Cicero([00:15:28]) – The, the easement that I had to write with regard to mechanicals and shaft waves and whatnot was quite lengthy, but

 

Sam Wilson ([00:15:36]) – Yeah. Yeah. And, and, and when you got done with that, did you ever hear back from those, uh, from those, from those owners and those operators? Did you ever hear back from them saying, Hey, if we had done this, or I would’ve added this provision in there or structure it differently next time?

 

Jonharold Cicero([00:15:52]) – Yeah, I mean, there’s always things you want in those agreements, but you know, the other side, you know, is also represented by council and that transaction, I represented the hotel portion. So the council who represented the residential portion had their own comments because they wanted things to be a little bit easier for their client. So it’s a give and take. You gotta reach a compromise and, you know, down the road people start to stop. They, they forget what was written or they don’t refer back to it and they try to get away with things and then there’s a, a dispute. But if it’s written well enough, um, you know, then you can go back and point to certain provisions and say mm-hmm can’t do that. We already accounted for that in the provisions here. But on a, to, to your point on a smaller scale, um, I think, uh, a lot of investors maybe overlook it and finding value, even in buying a smaller building that’s an excuse or a lot that has a building on it that’s in good condition that they maybe wanna do, you know, alterations to.

 

Jonharold Cicero([00:16:49]) – But there’s uh, you know, additional room in the back, maybe they can get variance. I did something in northern jersey where we had a building that had a huge backyard and it was on a corner of an intersection and we were able to keep that building and, you know, put, uh, commercial tenant in and there were some apartments above it, but that huge backyard on the building, uh, was along the side street, not the main avenue. And we were able to get a variance and do a curb cut and take that yard and separate it from the building. Cause the building didn’t really need it. The retail tenant on the first floor wasn’t using it. Uh, and then make that into additional parking, uh, with a curb cut and now the upstairs tenants can rent out parking spaces and, you know, in an area where there was a a a hard time finding parking, we had a tremendous value by doing this.

 

Sam Wilson ([00:17:39]) – Right. No, that’s, that’s really, really cool. And you know, there’s so many different parts of this. How, I mean, I would assume that you oftentimes correct me if I’m wrong, have to collaborate with other members at your firm there. Cause it’s like, hey, this is your specialty in getting whatever the variances are for curb cuts and all those things. I mean, is that, is it part of uh, just kind of a more of a collaborative law firm you’re working inside of?

 

Jonharold Cicero([00:18:04]) – Yeah, definitely. And, and obviously as the years go on, you meet a lot of attorneys at other firms and we, you know, reach out to each other and say, have you ever seen this? You have this kinda agreement that I can use as a base form for what I’m trying to do. And we help each other out. Um, you know, some attorneys are at adversarial, but many are are decent people contrary to popular belief. Um, and, you know, we work with each other, but certainly here, uh, our firm is a real estate firm. The only thing we don’t do is land use and zoning. But we have a, I’m in the commercial department, I’m in the condo development department. Um, we have a residential department, a leasing department, a construction department. Uh, so, you know, there’s a variety of people here that I can bounce ideas off of and, and that’s a great aspect to it.

 

Jonharold Cicero([00:18:49]) – Um, you know, for me personally, I I’m, I, I think there are some brilliant solo practitioners and small firms out there twice as it’s happened to my clients where they have a health issue and everything comes to a standstill on your project because the attorney had a health issue and there’s nobody else to rely upon. Or they’re doing things based on their experience, but maybe they’re not so experienced in construction aspects. Uh, you know, access agreements and construction issues. And they might be great at representing you in the acquisition of the property, but the construction side, it costs you some money that if you’re going somewhere else, you know, like I say, I say to my clients, you get fat, good and cheap, you get to pick two of the three. Right. One, fast and cheap, not gonna be good. I

 

Sam Wilson ([00:19:33]) – Gonna be good. I love that. I love that, that, that, I’ve heard that before and I think, I think that’s a brilliant, brilliant statement there. How are you scaling your own personal real estate investments? I know you’ve kind of told us a lot about the law landscape that you’re working inside of how you guys handle and scale the, you know, the, the, the opportunities for your clients. What are you doing on a personal front for scaling your real estate holdings?

 

Jonharold Cicero([00:19:58]) – So right now, uh, I had some smaller properties that eventually I will do 10 31 exchanges on. I’ve, I’ve had some value add opportunities in those smaller properties. I got into them at good prices with great interest rates. Um, so I’m looking at long term just raising rent and continuing to add value or like, I have another one I’m looking to do, uh, variance for parking to add more parking to it. Um, and eventually I’ll 10 31 those into something bigger along with, uh, additional accrued equity that I’ve put aside for those investments. Um, but I’ve also started investing with clients and friends who invest and develop much larger projects that I could personally take on, on my own. Um, and I, I put equity into those deals, timing it so that three years out, five years out, I have different money coming back to me that can then be reinvested because, you know, I wanna get to the point where I’ve got, uh, you know, 50 unit buildings instead of five and 10 year building.

 

Sam Wilson ([00:21:07]) – That’s really, really cool. I love that. I love what you do here. Uh, John Herald, this has been a blast having you come on this show today. I mean, uh, I feel like I’ve just scratched the surface of what it is that you know and understand about your local market there on how to work inside of it, the nuance to what it is that you do. I mean, you, you guys have to compete with, I mean, I look at, I look at, you know, some of the zoning. I got some report back from, from, uh, somebody today on some zoning issue. And it was, you know, I thought it was complicated. I’m like, this is a mess. But then here in Utah, I’m like, we got nothing. This is, this is really easy compared to what John Harold’s working on.

 

Jonharold Cicero([00:21:44]) – But it’s like anything else, the more you do it and the more complex it gets, the easier, you know, things that seem like monumentally difficult five years ago now I’m like, I’ve seen that five times. I got it,

 

Sam Wilson ([00:21:55]) – I got that.

 

Jonharold Cicero([00:21:56]) – Like anything else in life. Right, right. The more you do it, the better you get.

 

Sam Wilson ([00:21:58]) – Absolutely. I love it. John Harold, if our listeners want to get in touch with you, learn more about you, uh, and or work with your firm, what is the best way to do that?

 

Jonharold Cicero([00:22:07]) – Uh, you can reach me by email. Uh, I don’t know if you’ll be able to put that at the bottom of the screen or something. Uh,

 

Sam Wilson ([00:22:15]) – Show notes.

 

Jonharold Cicero([00:22:16]) – Sure, sure. And then, uh, always the by phone. Um, two easiest ways to reach me and LinkedIn. Uh, I am frequently on LinkedIn.

 

Sam Wilson ([00:22:26]) – Fantastic. And can you say it just for the people who are only listening to this show and maybe don’t have access to their, uh, computers or otherwise to find those, what is your email address?

 

Jonharold Cicero([00:22:35]) – Sure. It’s j Ciro, j c i c e r o, DL partners dog larry partners law com. So j ciro dl partners law com.

 

Sam Wilson ([00:22:49]) – Fantastic. John Harold, thank you for coming on the show today. I do appreciate it. This was awesome.

 

Jonharold Cicero([00:22:53]) – I appreciate it. This was a lot of fun. Thank you for having me.

 

Sam Wilson ([00:22:56]) – Hey, thanks for listening

 

Sam Wilson ([00:22:57]) – To the How to Scale Commercial Real Estate Podcast. If you can, do me a favor and subscribe and leave us a review on Apple Podcast, Spotify, Google Podcast, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.