Make money off New York

If you missed out on Google's IPO, don't despair-you can make coin by investing in city life. We look at some hot prospects, and assess the risks and rewards.

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ART  |  REAL ESTATE  |  THEATER  |  MUSIC  |  NYC BONDS  |  FASHION  |  RESTAURANTS

Art


The status: Art remains a hot commodity—Christie’s enjoyed the highest half-yearly sales in art-market history in ’07, and despite economic turbulence that would normally engender investment decline, international art fairs are seeing record sales. Even you, the anti–Steve Wynn, can invest in something that is sure to appreciate.

The game plan: Thea Westreich, of Thea Westreich Art Advisory Services, reminds us that while the art world and the market often overlap, it’s important to keep in mind that they are separate entities. She encourages her clients to look with their eyes, instead of listening with their ears about what’s hot. And she affirms that there are remarkable opportunities to collect great art with staying power on a small budget. “There are some really, and I mean really good artists whose work is available for under $10K, and some wonderful galleries to frequent that have pieces in that price range,” she says, citing Miguel Abreu Gallery (36 Orchard St at Forsyth St, 212-995-1774), Orchard (47 Orchard St between Forsyth and Grand Sts, 212-219-1061), Andrew Kreps Gallery (525 W 22nd St between Tenth and Eleventh Aves, 212-741-8849) and Reena Spaulings (165 East Broadway at Rutgers St, 212-477-5006).

If you’re on a truly shoestring budget, Liz Dimmitt of Gumshoe, a company that offers art tours (and other NYC event planning) for young professionals, recommends art-school open studios, as well as neighborhood studio tours. “Speak with the artists themselves, and spend a period of time—maybe a year—really figuring out what you are attracted to before buying,” she says. Organizations such as Dieu Donné Papermill, Inc., hold benefit auctions featuring work at low prices—for info on the next one, go to dieudonne.org. And consider artist multiples, often produced in collaboration with corporations, designers or nonprofits, like the Public Art Fund’s towel editions —which feature beach towels designed by Jeff Koons, Elizabeth Peyton, Cindy Sherman and Kehinde Wiley, sold for $50 each at Target. In the words of Westreich, “The most important thing in collecting work is to follow your bliss. Great art survives us all.”

Risk: 3 The market has seen sensational hikes recently; paintings from the Leipzig School that sold for as little as $4,000 a few years back now go for $40,000. Reward: 7 Not only do you have the potential to strike it big (fast!), but you get to hang your investment on your wall.

ART  |  REAL ESTATE  |  THEATER  |  MUSIC  |  NYC BONDS  |  FASHION  |  RESTAURANTS

REAL ESTATE


The status: Property values here are defying national trends—maybe even gravity. The average price for a Manhattan apartment hit $1.4 million in the last three months of ’07, a 17.6 percent increase over the same period in ’06, according to a report from Prudential Douglas Elliman. Radar Logic executive VP Jonathan Miller, who prepped the report data, says luxury buildings accounted for the biggest gains, but the overall market is up as well.

The game plan: The subprime-mortgage crisis may not have burst NYC’s real-estate bubble, but it has changed the rules on loans, says Circle Mortgage Group president Dale Siegel: “Today your credit must be better than average, you may need to put 10 percent down, and the bank will also want to make sure you can afford the payments.”

If you’re buying an investment property, you’ll need a 30 percent down payment, says Century 21 broker Stefanie Gee. Otherwise the rents you charge may not cover your monthly mortgage costs. “And stay away from co-ops, which put too many restrictions on what you can do with the apartment,” she says.

If you can’t buy actual property, you might consider a share in a real-estate investment trust (REIT), which allows multiple investors to own profit-making private or commercial real estate. But be aware of the differences between different kinds of property, cautions Investing Is Simple (investingissimple.com) chief executive Julia Posacki. “Apartment REITs may do well if people turn to renting due to high buying prices,” she says, “while office REITs suffer if companies lease less space.”

As for how long it will take for your investment to appreciate, Miller says to think long-term. But take heart—less speculation and flipping is one reason the local market is still strong.

Risk: 2 It’s a good time to buy—so buy. Reward: 8 When the subprime madness cools—and it will—you’ll be there with property to sell.

ART  |  REAL ESTATE  |  THEATER  |  MUSIC  |  NYC BONDS  |  FASHION  |  RESTAURANTS

THEATER

The status: “If you need money to put your son through college, I’d say this probably isn’t the way,” says Mark Kaufman, president of Broadway and Off Broadway company CTM Productions. “On the other hand, as members of society, we have an obligation to make the arts happen.” If the possibility of losing money doesn’t make you want to jump off an upper-circle balcony (only about 20 percent of investors ever recoup their cash), invest in theater. “Gone are the days of David Merrick, who would come up with all the money and be the sole producer of a show,” says Kaufman. Indeed, plays and musicals have become so expensive to produce—up to $3 million and $20 million, respectively—that often it takes dozens of financial backers to get a show off the ground.

The game plan: So how few dollars can you put into a play to call yourself an owner? It varies. For the musical Ring of Fire, which had a three-month run on Broadway in 2006, CTM Productions set the minimum at $25,000 per investor. But “in some cases, people actually put in half that,” says Kaufman. “And if someone comes along and says, ‘Hey, I have $10,000 I want to put in the show,’ I don’t know any producer who’s gonna say no to that.” Before handing over the money, though, you’ll have to fill out extensive paperwork: The SEC’s accredited-investors regulations say that in order to put your cash in showbiz, you have to qualify financially (this usually means making at least $200,000 a year).

While most potential investors get invited to script readings, you can infiltrate the scene if you have cash to offer. Contact the Broadway League (212-764-1122, broadwayleague.com) for information about how to get involved, or enroll in a three-day course on investing at the Commercial Theater Institute (212-586-1109, commercialtheaterinstitute.com). As for picking shows likely to be successful, the best you can do is go with your gut. “Invest in what you believe in,” says Kaufman. “I used to think you could look at a script and know if it would be a commercial hit. But you can’t do that anymore: Younger audiences are looking for something different.”

Risk: 8 How many rich theater people do you know? Reward: 3 Artistic pride is worth millions—unless you have to pay the rent. And P.S. Investment won’t get you a discount on tickets.

ART  |  REAL ESTATE  |  THEATER  |  MUSIC  |  NYC BONDS  |  FASHION  |  RESTAURANTS

MUSIC


The status: Joining the music industry’s workforce makes about as much sense as hopping on a sinking ship these days, what with its dreadful returns (CD sales dropped 19 percent in 2007) and recent string of layoffs (Geffen, Interscope, Sony BMG and Island Def Jam delivered pink “Christmas bonuses” to many longtime workers last month). That said, there are ways for you—the MP3-hoarding music fan—to profit from a movement back underground, where doing it yourself means doing it digitally.

The game plan: SellaBand (sellaband.com)! The site’s basic premise: Sample thousands of acts worldwide, buy $10 “parts” in your favorites, and reap the rewards once $50K is hit and a record is cut, as ad revenue and net profits are split equally among the artist, SellaBand and “believers.”

“The money you ‘invest’ goes into an escrow account, which means we can’t touch it until an artist has reached $50K,” says music director Dagmar Heijmans, a former press officer–project manager for EMI and Sony BMG. “And we don’t get anything from that amount, either—every cent is used to produce the best possible album.”

“The reason I like [SellaBand] is the idea of getting fans to invest in you,” says And-y the Rebel, a scrappy Harlem rapper who’s generated $400 in shares. “All it takes is $10.” (Our pick: a Manhattan enchantress named Jess King. Five minutes online bring NYC’s leading unsigned artist—at nearly $5,000 in “parts”—a few steps closer to becoming SellaBand’s 14th success story.)

Doing your research helps: While he’s currently low on the SellaBand ladder, the 18-year-old And-y was recently interviewed on Good Morning America (he’s featured in the Michael Franzini book One Hundred Young Americans), which raised his profile among prospective “believers.” In other words, buy now and you just might be in his entourage later.

Risk: 5 It doesn’t cost much to invest—good, since the chances of striking it rich are low. Reward: 8 Buying into acts just sounds fun; if you become Rick Rubin in the process, all the better.

ART  |  REAL ESTATE  |  THEATER  |  MUSIC  |  NYC BONDS  |  FASHION  |  RESTAURANTS

NYC BONDS

The status: If you want to invest in New York’s future, why not loan the city the money it needs to build new roads, bridges and schools? Municipal bonds are the IOUs cities give the investors that provide such loans, and interest earned on them isn’t subject to federal, state or city income taxes. But that’s not enough incentive for many investors. Independent stock trader Daryl Montgomery, organizer of the New York Investing group on meetup.com, says the returns on muni bonds (about 4 percent) are too meager, especially when the dollar is falling and inflation a threat. “We don’t recommend bonds in general, and particularly not now,” he says.

The game plan: Use a calculator. The tax benefits of the bonds may not offset their lower returns—particularly if you’re not in a higher tax bracket. Investing Is Simple’s Julia Posacki explains that if you’re subject to a 46 percent combined tax rate, a 4 percent NYC bond offers the same yield as a taxable bond offering a 7.4 percent return. That’s a good return, but it probably also means your salary is nearly $350,000 a year. “If you’re not in a position to get meaningful tax benefits from muni bonds,” Posacki says, “you’re better served with similar credit-quality taxable corporate bonds.”

If you’re a big enough earner for munis, you’ve got options. You can buy individual bonds with a maturity rate—from several months to 40 years—that matches your investment horizon through any online brokerage site, Posacki says. Or try mutual funds with New York muni fund holdings, like Rochester Fund Municipals and Dreyfus NY Tax-Exempt Bond Fund. As infrastructure investments go, they’re way better than buying the Brooklyn Bridge.

Risk: 8 Save this article and take its advice five years from now, when times are better. Reward: 2 See Risk.

ART  |  REAL ESTATE  |  THEATER  |  MUSIC  |  NYC BONDS  |  FASHION  |  RESTAURANTS

FASHION

The status: “Designers often have tremendous talent and no business acumen,” says Barbara Randall, executive director of the Fashion Center Business Improvement District. “From an investor’s point of view, you have no idea what you’re getting into—a designer could have one great year and then sell nothing the next.” Um, okay, so bankrolling your favorite unknown clothing maker is unwise. Meanwhile, “auction houses and museums are paying more attention to fashion than ever before,” according to eBay’s style director Constance White, and since vintage clothing is hugely popular for collectors and wearers both, reselling has become a viable moneymaking venture.

The game plan: “Certain designers’ work—like that of Charles Worth, Balenciaga and Pucci—appreciates over time,” says White. “You’ll get the most value for a designer who defined his or her time.” Target items that are characteristic of that designer’s aesthetic, and make sure a piece is in excellent condition (duh). And speaking of, ah, “Target”-ing, there’s another, more immediate way of gratifying your cash-raising urges: Buy inexpensive limited-edition items at places like Tar-jay and H&M, then resell them online. “I personally would have loved one of those Viktor & Rolf for H&M items,” says White. (The designers’ wedding gown, on sale at H&M for $349, has sold on eBay for $1,000.)

If you don’t have the resolve to fight crowds at limited-edition H&M sales, try your great-aunt’s attic. “Top designers are using prints from Japan, South Africa and Nigeria right now,” advises White. “If you find a piece with such prints on it—a no-name thing from a few decades ago—snatch it up and sell it before it goes out of style.” The people in the know enough to pay hundreds for this newly trendy item are “die-hard fashionistas, museums or insiders working for designers,” White explains. Contact them and make a mint from a rag.

Risk: 5 You’ve got nothing to lose by selling stuff. Reward: 5 The eBay move is a sound idea, but we never thought a job in fashion could be so unglamorous.

ART  |  REAL ESTATE  |  THEATER  |  MUSIC  |  NYC BONDS  |  FASHION  |  RESTAURANTS

Restaurants

The status: New York’s restaurant and bar business is white-hot, what with Red Hook’s reinvigoration by seasonal eateries and the East Village’s transformation into a throwback-cocktail haven. This presents plentiful investment opportunities—and given that “operating costs are rising, commodity prices are up, and restaurants are paying more for food and utilities,” according to Jim Laube, president of RestaurantOwner.com, most joints need more capital than ever before.

The game plan: Your first step is spreading the word to friends and colleagues, says Laube. “Most bars and restaurants are private offerings, meaning they’re governed by SEC rules—owners can’t advertise for investors.” And don’t expect to sink money into high-profile start-ups, since the likes of Danny Meyer don’t want your measly smackeroos. Instead, pick a sum you’re willing to part with—it could be as little as $500 or $1,000 —and approach a favorite independent business you know and trust.

We asked Delissa Reynolds, owner of comfy Prospect Heights standby Bar Sepia (with a favorable ten-year lease!), and she said we could become a partner and help her expand her backyard. “You’re always entitled to the money you put in, and you’ll receive a percentage of the profits based on how much of the business you own,” she says (the bar’s been around for nearly four years, so it’s more than breaking even). Justin Laman, 31, who runs a college-prep company, loved the concept behind Park Slope’s craft-beer bar Pacific Standard. “When they went over budget and sent an e-mail to acquaintances asking for investors, I signed up as soon as I could,” he says. He prefers to keep his returns figures confidential but allows, “I wouldn’t have done as well with stocks.” Typically, if the business succeeds, expect to wait two to three years for your investment to pay off, after which “it’s all gravy—you can receive a 25 to 30 percent return rate,” according to Laube. Just don’t expect free drinks or a meal—after all, would you really want to shortchange your own establishment?

Risk: 5 If you invest in an already-successful joint, you’re likely to at least get your original money back—though aren’t we heading into a recession? And isn’t the restaurant business notoriously bad? Reward: 7 “I wouldn’t have done as well with stocks” is music to our ears.

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