The Real Deal New York

Seizing on stalled sites

Developers are picking over the last dormant pieces of land on the city’s construction watch list

August 01, 2014
By Adam Pincus

From left:

From left: 96 Greenwich Street and 540 Bedford Avenue

With land prices skyrocketing, cranes dotting the skyline and new projects launching almost daily, it may seem like development in New York City is firing on all cylinders. And it is. But, surprisingly, there are still hundreds of stalled developments throughout the five boroughs.

In fact, the city Department of Buildings identifies more than 530 locations on its “Stalled Sites” list which it started up in 2009 during the recession. Work on those sites was halted and has never resumed — either because of financial distress or because of another problem, whether it be construction violations or legal wrangling.

However, rather than a lifeless list of dead properties, the list has become a handy tool for some of the city’s savviest real estate investors — including Extell Development, Toll Brothers and Fortis Property Group — to pick over in their efforts to find distressed development sites to go after.

Developers today are tripping over each other to find locations for development as land reaches record prices. Average land prices in Manhattan leaped more than 67 percent, to above $500 per foot last quarter, from early 2011, figures from Massey Knakal Realty Services showed. And a handful of individual deals have topped $800 per foot. Meanwhile, average land prices in Brooklyn rose more than 50 percent, to over $150 per foot last quarter, from 2010.

This month, The Real Deal reviewed the 80 sites on the DOB’s “Stalled Sites” list in Manhattan south of 96th Street and in prime Brooklyn as of late June.

About half of those 80 would not be considered stalled by most in the industry because they’ve either been purchased or recapitalized. For example, the list includes Fisher Brothers’ 92 Fulton Street, which is slated for a 16-story residential building, and 959 First Avenue, which Toll Brothers snapped up for $64 million in late 2013.

Yet there are scores of projects that remain truly stalled, mired in a Twilight Zone of legal battles, financial distress and other problems, TRD’s review found.

Here’s a closer look at the five largest (truly) stalled sites in Manhattan and Brooklyn:

Manhattan

Owner: Sheldon Solow
Address: 700 First Avenue, Murray Hill
Size: 1.9 million square feet

700 First Avenue Microsoft Sheldon Solow

700 First Avenue (Photo: Google)

Developer Sheldon Solow teamed up with Fisher Brothers in 2005 to buy nine acres along First Avenue, between 35th and 41st streets, from Con Edison for $630 million. The mercurial and wealthy Solow — Forbes pegs his net worth at $3.7 billion — and Fisher had ambitious plans to build a 6.1-million-square-foot development, including 4,100 residential units, for a total cost of $4 billion.

The city approved the plan in 2008, but the project was famously derailed by a legal spat between the partners, with Solow ultimately buying out Fisher.

In addition, the recession dampened enthusiasm for the project, and Solow, who’s in his mid-80s, reportedly had a health scare several years ago.

No construction applications were ever filed. But in May 2009, the city identified a portion of the massive site between 38th and 40th streets as stalled because necessary work on the sidewalks had not been completed. That work was done days later, but the site never shook its stalled status with the city.

Rosenberg & Estis’ Frank Chaney said many projects on the stalled list — such as Solow’s — appear to be sites where construction never even got underway.

Last year, Solow sold Michael Stern’s JDS Development one acre, between 35th and 36th streets, for $172 million. And Stern was reportedly considering buying more.

But so far, the rest of the sprawling site is sitting dormant.

Neither Solow nor JDS responded to requests for comment.

Industry sources say brokers have been knocking at Solow’s door with unsolicited offers, but Solow is said to be close to announcing new plans for the site.

Owner: Si Jie Mei Inc.
Address: 112-114 Chambers Street, Tribeca
Size: 28,343 square feet

112-114-Chambers-Pincus1

112-114 Chambers Street

As the market was heating up in Tribeca in 2008, the city issued permits to a family-owned Chinatown company called Si Jie Mei to add a floor to adjacent, four-story mixed-use buildings at 112-114 Chambers Street, between Church Street and West Broadway.

The owner planned to gut the buildings and create eight rental apartments on the second through fifth floors along with retail space on the ground floor.

While the two buildings are small, they were erected more than 150 years ago and have a rich history, including a brief period in the early 1960s when avant-garde artist Yoko Ono lived in 112 Chambers.

Yet because they are part of the Tribeca South Historic District Extension, there are restrictions on what can be done with them.

The owner was hit by several stop-work orders months after receiving the permits, and by 2010, the city added it to the stalled site list.

Arpad Baksa, the architect tapped by Si Jie Mei, said the project stalled in 2010 when the city began tearing up the road for an infrastructure project on Chambers Street that was supposed to wrap up in 2013 but is still ongoing. That, Baksa, made the redevelopment all-but-impossible.

“They started digging up the street which added a crazy burden to our client,” Baksa said.

The buildings remain locked with a partial stop-work order in place, but Baksa said he and a Si Jie Mei executive were scheduled to meet with the DOB late last month to get construction restarted. Messages left at Si Jie Mei, which owns several residential buildings in the area, were not returned.

Still, for property owners like Si Jie Mei — who’ve lost several years of financial returns but managed to hang on — there may be a silver lining.

“If [owners] have been able to hold onto these projects after buying in the last peak, the market should save them as properties are now worth much more today,” said James Nelson, a partner with Massey Knakal.

Baksa said Si Jie Mei has, in fact, been contacted by a number of interested buyers.

Owner: Robert Kremer
Address: 96 Greenwich Street, FiDi
Size: 27,300 square feet

96-Greenwich-Pincus1

96 Greenwich Street

The home of the notorious-but-now-shuttered Financial District strip club the Pussycat Lounge is also on the city’s stalled site list.

The 20-foot-wide building, which dates back more than 200 years, has a complex recent history.

It was considered — but rejected — for landmark designation in 2009, as one of three adjacent row houses built in the first years of the 19th century.

In 2007, the Pussycat’s owner and long-time building lessee, Robert Kremer, testified during a hearing that the building should be designated a landmark.

The next year, the building’s then-owner sold about 22,000 square feet of excess development rights to developer Sam Chang for an undisclosed price, for a hotel project next door at 98-100 Greenwich Street.

One month later, in April 2008, Kremer bought the building, stripped of development rights, for $2.5 million. He quickly filed plans to add two floors to the then three-and-a-half story structure. But within months of obtaining permit approvals, the site was hit with the first of several stop work and vacate orders and slapped with construction violations for inadequate structural supports, among other things.

The property still has seven active DOB violations dating back to 2009 and 2010, and the building was put on the stalled sites list in January 2011, the same month the strip club closed.

But even with construction halted, Kremer has been readying the property for its next act.

In October 2012, he bought back the 22,000 square feet of development rights from Chang for $575,000, increasing the value of the site by millions of dollars, property records show. And in May, he took out a new loan for $4.3 million.

Kremer told TRD that he would not use the additional air rights to build a much taller building. “We are going to give it an Old New York look. We will keep it at five-and-a-half stories.”

He’s searching for a national tenant for the ground-floor space, and said a yoga studio might take the upper floors. He said he didn’t want to finalize a ground-floor deal now because several buildings on the Greenwich Street block are under construction, making “the block look like it was bombed out.”

Owner: Michael Hirtenstein and Sean Largotta
Address: 49 East Houston Street, Nolita
Size: 30,501 square feet

49-East-Houston-1

49 East Houston Street

Telecom entrepreneur turned real estate investor Michael Hirtenstein and partner restaurateur Sean Largotta paid a modest $5.5 million in early 2008 for a 25-foot wide parcel at 49 East Houston Street, between Mott and Mulberry streets.

Their architect (also Baksa), filed plans for a 14-story, 41-unit residential building, utilizing air rights purchased from neighboring parcels.

The property ran into trouble during the downturn, leading to a partnership dispute. In 2009, Hirtenstein sued Largotta — whose restaurants include Midtown steakhouse Bill’s Food & Drink — for more than $3 million, seeking repayment of a loan guaranty.

Then in 2010, Baksa sued the developers, seeking roughly $40,000 for unpaid architectural fees, in a suit that’s still ongoing. That July, the city added the building to the stalled sites list.

More recently, in February, Steve Stollman — who sold the building to the duo with the expectation he would get an interest in the completed building — also sued them for just over $9 million, claiming he was financially damaged because nothing has been built. Hirtenstein and Largotta did not respond to a request for comment.

The site sits on a nondescript stretch of Houston Street, but is just a block from the redeveloped Puck Building at 295 Lafayette Street and close to the bustle of Soho.

Owner: Lee Pan Realty; William Su and partners
Address: 126 Hester Street and 128 Hester Street, Chinatown
Size: 9,162 square feet; 7,536 square feet

126-128-Hester-1

126-128 Hester Street

Two adjacent lots owned by unrelated companies — one long vacant, the other a former cause-celeb for rent-regulated tenants in Chinatown — are listed as stalled sites.

In October 2005, the owner of 126 Hester, Lee Pan Realty, filed plans for a new, six-story building on a 25-foot-wide lot that’s been vacant since 1940. PropertyShark shows that the site has up to 9,162 square feet of developable rights.

The city approved the plan and issued permits in 2008, but in 2009, with some excavation completed, the city ordered that construction be halted and put the property on its stalled site list, citing deteriorating foundation work.

In addition, DOB said work at the site was contributing to a precarious situation next door at William Su’s 128 Hester, a six-story, 10-unit apartment building.

There were no development plans for 128 Hester, but the building was shaking and cracking as Su was building an adjacent hotel at 93 Bowery. In the fall of 2009, the city issued an order to vacate 128 Hester, which was soon demolished.

But the building became the focal point of a bitter rent regulation battle, with elected officials such as City Council Member Margaret Chin and State Senator Daniel Squadron chastising Su for neglecting the building.

The state twice — once in 2010 and once in 2013 — ordered Su and his partners to pay relocation expenses, totaling about $800,000 to the tenants. In late 2013, the owners sued to block that order. That matter is now pending in court.

John Gorman, the attorney representing the building’s former tenants, said if successful in defeating the owner’s suit, it could mean a forced sale of the property with the proceeds going to pay the tenants. “128 Hester is a plot of land that could be quite valuable,” Gorman said.

Early this year, Barbara Dansker of Marcus & Millichap began marketing 128 Hester, with 7,536 square feet of development rights, for $4.6 million. But she said she halted the effort because of the legal wrangling.

Brooklyn

Owner: Congregation Yetev Lev D’Satmar
Address: 540 Bedford Avenue, Williamsburg
Size: 199,251 square feet

540-Bedford-GoogleW

540 Bedford Avenue (Photo: Google)

Two sons of the late grand rebbe Moses Teitelbaum of the Hasidic Jewish Satmar sect are fighting over a partially built, three-story synagogue.

The site — which has nearly 200,000 square feet of development rights and sits between Ross and Wilson streets — has been on the stalled site list longer than any other that TRD surveyed. Construction came to a grinding halt because of a split between two of Teitelbaum’s sons: Aaron and Zalman. The dispute — which dates back to 2001 when the younger Zalman was controversially appointed head of the Brooklyn Satmar congregation — centers on who controls the congregation and, therefore, who owns the site.

The feud has left the Williamsburg building framed out in steel and in construction limbo.

The project first got rolling back in 1998 when the congregation was awarded city permits to build the synagogue. But very little progress was made over the next decade, and in 2008, the site was slapped with a stop-work order.

Still, the permits were renewed several times. Then in 2010, with construction partly underway, Zalman’s faction complained to the DOB, saying that permits renewed in the name of Aaron’s faction should be revoked because Aaron’s representatives were not authorized to act on behalf of the congregation.

Instead of taking sides, the DOB said the dispute made it unclear who truly controlled the property, and revoked the permits in July 2010.

Today, Aaron and Zalman each lead separate Satmar congregations in Williamsburg.

Even as construction is on seemingly perpetual hold, insiders said the site was not likely to be sold or demolished. Instead, they said, it would remain on mothballs until the succession dispute was resolved.

Owner: Henry Abadi
Address: 455 Smith Street, Gowanus
Size: 331,680 square feet

455-Smith-Street-Microsoft-RedW

455 Smith Street (Photo: Microsoft)

A vacant parcel with significant environmental contamination along the Gowanus Canal takes the prize as Brooklyn’s largest stalled site.

In 2009, the city added the property to its stalled sites list, after demolition of a one-story building halted. That building later partially collapsed, and was razed.

The parcel, which is owned by apparel manufacturer Henry Abadi, sits just south of the site dubbed Gowanus Green, where the Jonathan Rose Companies, Hudson Companies, the nonprofit Fifth Avenue Committee, and the Bluestone Organization are teaming up to build 774 units within a mixed-use project on city-owned land.

While Abadi’s site needs remediation, he won a long-sought judgment last month from the city’s Tax Commission, which reduced his assessed value over the past six years by a total of roughly $4 million, which TRD estimated will save him about $400,000 in cumulative property taxes. Abadi told TRD that he was not looking to sell, noting the site was contaminated and, therefore not ready to be sold.

The large gas and electric company National Grid is responsible for the site cleanup, which stems from the production of coal gas years ago.

A spokesperson for National Grid said the company has been weighing remediation options. However, that plan must be first be approved by the state.

“Nothing is in my hands,” Abadi said.

Broker Sean Kelly, a managing director at CPEX Real Estate, said many properties along the Gowanus are in limbo because of environmental cleanups.

“The land owners around the Gowanus, particularly those on the canal, are in sort of a holding position,” because of both the environmental review and a proposed rezoning of Gowanus, Kelly said.

“It’s sort of the last bastion of great real estate between five brownstone neighborhoods and Downtown Brooklyn where there is a real opportunity to create some housing density,” Kelly said.

Owner: Wydra family
Address: 426 South 5th Street, East Williamsburg
Size: 48,000 square feet

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426 South 5th Street (Photo: Google)

A five-parcel East Williamsburg site is also stalled, with only a foundation and first floor constructed.

The site — which has 48,000 square feet of development rights and is zoned for hotel, retail or other commercial uses — has 100 feet of frontage each on Hewes and South 5th streets.

The former owner, Mendel Brach, won city approval for a 78-unit, nine-story residential building in 2003. But just a few months later, the site was slapped with a stop-work order because construction was going beyond the scope of what had been approved. That stop-work order has been in effect ever since.

In 2006, Brach — who was barred in 2009 from selling condos in New York in connection with an unrelated 2002 Bedford-Stuyvesant project — and his partners lost the site to the Wydra family, a local developer who lent them $2 million and then foreclosed on them.

But the Wydra family, which developed the Williamsburg condo known as the Gretsch, didn’t file new plans to jump-start the project, and three years later when the city started up its stalled site list, 426 South 5th Street was one of the first to debut.

In 2013, the Wydras signed a five-year net lease with developer Milan Patel. Several sources said Patel is planning to build a hotel, and city records show he has an option to buy the site at the end of the lease term. No plans have yet been filed.

CPEX’s Kelly said a hotel was a good use for the location, noting that Brooklyn is “under hoteled,” and “Williamsburg is a destination.”

Last month, the property was listed with commercial brokerage Greiner Maltz for an undisclosed amount. One source, however, said despite the listing, it’s not for sale.

Owner: Unclear
Address: 50 Greenpoint Avenue, Greenpoint
Size: 51,534 square feet

50-Greenpoint-Ave-GoogleW1

50 Greenpoint Avenue (Photo: Google)

A group of investors bought this site at 50 Greenpoint Avenue back in 2006 for $4.3 million, demolishing the existing building there and leaving a vacant lot.

The next year, they filed plans for a 44-unit residential building to be designed by architect Karl Fisher.

The project, which has roughly 51,000 square feet of development rights, sits in a formerly industrial area of Greenpoint that’s now undergoing a residential transformation, with projects such as the Pencil Factory at 122 West Street a block north, where condos are selling for more than $1,000 per square foot.

Yet in 2009, the city declared 50 Greenpoint stalled.

In a promising sign, the city reissued new building permits in June 2013. But in February, those plans were revoked, DOB records show. No new plans have been filed since.

George Roth, the Flushing-based developer who filed the plans back in 2007 for 50 Greenpoint, is no longer an owner, a representative from his firm told TRD.

It’s unclear who owns the building now.

Kelly estimated that the site would likely sell for about $300 per square foot. That compares to about $83 a square foot when the owners purchased it.

Owner: Mendel Klein
Address: 294 Rodney Street, East Williamsburg
Size: 30,618 square feet

294-Rodney-Street-GoogleW

294 Rodney Street (Photo: Google)

Plans remain stalled for a large corner parcel in East Williamsburg, a neighborhood that has been slow to develop as a retail center.

Brokers said the site, which goes by both 294 Rodney Street and 329 Broadway, had been quietly marketed about two years ago. At that point, it would have likely sold for about $180 per foot, but now it would undoubtedly sell for far more. Broker David Behin, president of the investment sales and advisory division of MNS, estimated it would sell for about $280 per foot.

“In any part of Williamsburg, values are going up tremendously [because] the end asset — whether rental, condo or retail — has also gone up,” Behin said. Yet the neighborhood still has not taken off, despite brokers’ predictions that revitalization was near.

In 2006, longtime owner Yitzchok Kaufman borrowed at least $1.4 million against the parcel, which is two blocks east of the Brooklyn-Queens Expressway. The next year, he filed plans for a six-story building with 10 residential units.

In April 2009, the parcel was designated as stalled, and in May 2013, Kaufman sold it to Mendel Klein for $4.7 million, city records show.

Klein has not filed any new plans and the existing plans have expired, DOB records show. Klein and Kaufman could not be reached for comment.

  • WannaBeLandlord

    Is 90 Water St site still just sitting there with a Wells Fargo lending banner flapping with wind?

  • WVillager

    I can see many people on this site suffer from “crabs in the barrel”! The real issue at the end of the day becomes a moral one! There is no balance which frightens me…

  • Mike Stoen

    Castle Brands inc. stock symbol ROX-Donald Barnet.EXEC VP-moving to Park Slope!

  • doodle

    WESTPAC BANKING STATES CHINESE REAL ESTATE DOWN 25 % IN 5 DAYS IN CHINA– 5 DAYS ?? SEEMS CHINATOWN SLOWER- ONE ON HESTER {I WAS INVOLVED WITH SILVER’S film -or slivers in my a$$}

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