Could the stage be set for the city’s seemingly endless residential inventory crunch to ease slightly in the coming years?
Judging by the rise in the number of construction permit applications recently filed with the city’s Department of Buildings, sources say that’s a real possibility — but there are caveats.
This month, The Real Deal examined the residential building permit applications filed with the city between 2011 and February 2014 to determine the most active developers in the five boroughs.
By that measure, the busiest developers were a mix of well-established players and up-and-comers.
The top five developers on the rankings are: Extell Development; the Moinian Group; JDS Development (which partners on some of its projects with Property Markets Group); the Related Companies and the Continuum Company. Those firms were followed by HFZ Capital Group, Rabsky Development, Acadia Realty Trust, Rose Associates and the Chetrit Group.
Several of those companies — the household names — were major pre-recession players with the financial means to purchase development sites on the cheap when the market stalled. Now they’re building projects on those sites and reaping the benefits.
Others, like Simon Dushinsky’s Brooklyn-based Rabsky, made surprise appearances on the list. A relative unknown pre-crisis, the firm filed permit applications to build about 1 million square feet. Companies like Bruce Eichner’s Continuum Company and Joseph Moinian’s Moinian Group filed permits to build their first new projects in several years.
Kelly Kennedy Mack, president of the new development marketing firm Corcoran Sunshine, said many developers jumped back into the market in 2013, encouraged by low residential inventory and rising prices. However, she noted, by all jumping in at once, they’re likely contributing to a stabilization of pricing.
“Moving forward, the market may be moderated by growing new development inventory, which will increase the number of sales, but could potentially stabilize price growth,” she said.
TRD — which zeroed in on the window between 2011 and today because many projects take an average of three years to come to fruition — found that developers applied for permits to build about 28 million square feet of new residential inventory in 2013. That’s a 56 percent year-over-year jump, and a 140 percent increase from 2011, when the market was still reeling.
Through February, plans were filed for about 3.7 million square feet of residential product in 2014.
However, less than 30 percent of the planned units in the Manhattan development pipeline are expected to price below $2,000 a square foot, sources said. That’s largely because soaring land prices continue to push up luxury pricing.
As a result, only the luxury market can expect any kind of relief on the inventory front.
“With the limits of luxury pushing further upward, I believe there is a tremendous opportunity for developers looking to build mid-market luxury buildings in Manhattan,” Mack said.
Vornado’s 220 Central Park South
Catching the giants
Not surprisingly, some of the developers who made TRD’s top 10 have been buying and selling real estate in the city for decades.
Since 2011, Gary Barnett’s Extell filed permit applications for a total of 1.95 million square feet at three residential projects, according to TRD’s research. That does not include the company’s most high-profile project, luxury tower One57, because its permits were filed in 2009.
The new projects include a 233-unit, 1,424-foot-tall skyscraper at 217 West 57th Street, which is slated to cantilever above the Art Students League building next door. Despite owning the parcel since 2005, Barnett didn’t file permit applications for the site until 2012.
Click to enlarge
Last year, Extell also officially filed plans for a mammoth 594-unit rental building on the West Side, at 551 10th Avenue between 40th and 41st streets. Barnett acquired a 99-year ground lease for the site in 2011, from the estate of Sol Goldman, and last year purchased 140,000 square feet of air rights from Saint Raphael R.C. Church, which owned the adjacent site.
Finally, in 2013, the developer filed plans to expand and convert a site adjacent to the Park Avenue Christian Church at 1010 Park Avenue to a 16-story, 17-unit condo with amenities such as saunas, a playroom, a gym, an outdoor recreation area and a private terrace.
Barnett did not respond to a request for comment on the firm’s current activities.
Meanwhile, as TRD and others have reported, Extell is not the only one with a project in the works on 57th Street. JDS, which is headed by Michael Stern, filed plans to develop a total of 1.31 million square feet of residential projects during the three-year window that TRD analyzed.
That included plans with PMG for 111 West 57th Street, an ultra-skinny, 1,350-foot hotel and condominium, which is slated to become one of the tallest residential towers in the city. The partnership is also converting a building formerly owned by Verizon at 435 West 50th Street into a 51-unit condo.
JDS also filed plans to construct a nearly 800-unit rental building at 626 First Avenue. PMG is not involved with that project. Several of the duo’s joint projects, like the high-profile Walker Tower conversion in Chelsea, were not included in TRD’s analysis because plans were filed before 2011.
Meanwhile, Ziel Feldman’s HFZ — which was also one of only a handful of development companies that purchased prospective development sites and mortgage notes in the wake of the recession — has 15 active projects citywide, Feldman told TRD. But permit applications were only filed for three of those properties between 2011 and February, according to TRD’s research. Those three applications totaled 1.05 million square feet of residential product and included the 35-unit High Line-adjacent condo 505 West 19th Street, where units are being marketed for prices ranging from $2.2 million to $7.4 million.
HFZ also filed permit applications to convert a commercial building at 11 Beach Street in Tribeca into 27 condos in partnership with investment firm New Valley, which is headed by Douglas Elliman chief Howard Lorber; and for the construction of a hotel and condo at 20 West 40th Street.
“We sold most of our real estate in 2007 and 2008. We got really lucky with timing,” Feldman told TRD. “We waited about a year, and then came in and started purchasing again when others weren’t. A lot of the projects that were purchased during that time are now being built.”
Development giant Related filed permit applications for six buildings, three in Chelsea, two in Tribeca and one on the Upper East Side. They include a 36-story tower at 203 East 92nd Street, where the upper floors will contain 308 residences, and 261 Hudson Street, a 220-unit residential rental development.
Meanwhile, the Chetrit Group filed permit applications for six projects during the period examined by TRD, including plans to convert the Cabrini Medical Center on East 19th Street at Second Avenue to residential use. The company is also bringing a mixed-use hotel and apartment building to 500 Metropolitan Avenue in Williamsburg. The project will have roughly 56,000 square feet of commercial space and 89,000 square feet of residential space, according to recent filings.
And Vornado Realty Trust, while further down on the ranking at No. 17, filed plans for one of the city’s most eagerly anticipated residential projects, a 920-foot Robert A.M. Stern–designed limestone condominium tower at 220 Central Park South. It also filed plans to build a 314-unit residential building on top of its Rego Park shopping mall, just off the Long Island Expressway in Queens. Sources said the 24-story addition, which will be designed by SLCE Architects, will be a rental.
Surprise appearances
The ranking contains a few surprises, perhaps most notably that relative unknown Simon Dushinsky made the cut.
“I’ve never heard of him — and that never happens,” said Stephen Kliegerman of Terra Development Marketing, which heads up sales at residential development projects throughout the city.
According to TRD’s research, Dushinsky’s Rabsky Development filed permit applications for seven projects in 2012 and 2013, six in Brooklyn and one in Queens.
The company’s largest projects include the 187-unit 395 Leonard Street and the 177-unit 755 Kent Avenue, both in Brooklyn. It’s also planning a 44-story residential tower with 415 units at 29-32 Northern Boulevard in Long Island City. The site cost $35 million, according to news reports.
The building will reportedly feature ground-floor retail space and a 43rd-floor pool and lounge, as well as parking and a fitness center, according to news reports. It’s unclear if the residential component will be rentals or condos.
Dushinsky did not respond to multiple requests for comment.
“He, very smartly, became a buyer when the market crashed,” said Marketing Directors executive Andy Gerringer, who is familiar with the developer. “He was a name in Brooklyn that we’ve heard for the last several years, but the most active? That comes as a big surprise to me.”
Other unexpected entries on the list of top permit applicants include Eichner, who filed applications for 1.06 million square feet in residential product, all in 2013. The developer’s previous ground-up projects — the condo CitySpire, built in the late 1980s, and 1540 Broadway, an office tower — were both surrendered to creditors in the 1990s. But Eichner is now reemerging after a series of highs and lows in New York and Florida.
“He’s like a phoenix that’s risen from the ashes,” Gerringer said. “He got really hammered in a couple of markets, but he’s still out there. He’s one of those guys who is just a survivor.”
Eichner’s Continuum Company — whose projects have included the city’s first time-share resort, the Manhattan Club, which opened in 1997 — filed permit applications for what’s slated to become Harlem’s tallest residential project, two 320-foot-tall buildings totaling 690,000 square feet at 1800 Park Avenue. It also filed for an 80-unit condo at 41 East 22nd Street, near Related and HFZ’s almost-sold-out One Madison. The 790-foot-high tower will have a 17-foot cantilever over the adjacent 33 West 22nd Street, according to news reports.
Big project bounce
Several companies made the cut thanks to one mammoth project.
The Moinian Group, for example, is building a 1,174-unit rental building going up at 605 West 42nd Street, which will total 1.39 million square feet. The firm bought the site in 2005 and broke ground on the tower that same year. The foundation was more than halfway laid when the financial crisis halted the project, but it resumed last year, and is now slated for completion next year.
Rose Associates and Acadia Realty Trust also have single projects that propelled them onto the list. Rose is converting a 931,126-square-foot, 66-story Financial District office tower at 70 Pine Street into luxury rental apartments. Acadia, meanwhile, is developing a mixed-use building at 70 Fleet Street, part of its gargantuan City Point development in Downtown Brooklyn, which will have 251 residential units, according to DOB records.
The future pipeline
Overall, from 2011 through February, developers requested permits to build 62 million square feet of residential product, TRD’s data shows.
About 48 percent of that square footage is in Manhattan, followed by Brooklyn at 26 percent, Queens at 15 percent, the Bronx at 10.3 percent and Staten Island at less than 1 percent.
Yet while permit applications give some indication regarding the most active developers in the city, they don’t capture every project in a developer’s pipeline, especially those in the early planning stages.
For example, HFZ announced plans for at least six projects that it hasn’t yet filed city paperwork for, including a hotel-condo it’s developing with the Witkoff Group and hotelier Ian Schrager at 215 Chrystie Street, as well as a condo conversion of the Chatsworth rental building at 344 West 72nd Street.
HFZ also recently bought a 750-unit rental portfolio from Westbrook Partners for $600 million, and plans to convert the four Manhattan buildings, in Nomad, Midtown and on the Upper West Side to for-sale residences. Plans for these conversions also are not yet filed with the DOB.
Despite this slew of new inventory in the pipeline, Corcoran Sunshine’s Mack said it will still not be enough to meet the demand.
“In Manhattan, we are expecting over 10,000 new condominium units to enter the market within the next three years,” she said. “This annual average of 3,300 units is higher than the past few years, but it’s still a far cry from the more than 8,000 units that were introduced in 2007. The market needs more inventory across all price points.”