The ‘forgotten borough’ gets noticed

The idea that Staten Island’s North Shore will be the city’s next hot market may invoke a few chuckles, given the borough’s backwater reputation. But there’s no doubt that change is coming to the waterfront communities on the island’s North Shore.

Four major projects are underway: the New York Wheel, Empire Outlets and Lighthouse Point on either side of the Staten Island Ferry Terminal in St. George, and the apartment complex URL Staten Island, a mile away at the long-fallow former Navy home port in Stapleton.

Staten Island, with just under 500,000 residents living mainly in single-family homes, is the most suburban of the five boroughs. It certainly has not attracted the attention showered on its hipper, sexier sister boroughs of Brooklyn and Queens, not to mention Manhattan, though some are hoping the wave of development will be a game changer.

“People once thought of Williamsburg, Dumbo, Park Slope and Red Hook as backwaters too,” said James Prendamo, managing director of Casandra Properties.

The Real Deal spoke to elected officials, developers, brokers and community leaders on the front lines of Staten Island’s redevelopment and found broad optimism for the future. There is no doubt that concerns remain, including negative public sentiment, as evidenced by Community Board 1’s recent rejection of Shore to Shore Realty’s planned condo conversion of an old warehouse to condos, and worries about issues like flooding from major storms and that traffic problems will be compounded by strained infrastructure.

Nevertheless, the shovels in the ground at the “core four” projects have already triggered rising real estate prices and speculation on a number of other projects, and with residential and commercial developers buying properties throughout the area, the real estate market appears ready to take off.

“Staten Island is closer to the rest of the country than it is to the rest of the city in many ways, but this corridor is closer to the city than the rest of Staten Island is,” said Borough President James Oddo. “I think now that they’ve discovered Staten Island, more and more off-island folks will continue to come here seeking development opportunities.”

For more on the Staten Island waterfront, we turn to the experts.

Andrew Gonchar
CEO, Shore to Shore Realty

Given that three of the big waterfront projects are clearly aimed more at tourists than Staten Island residents, how much can they influence prices and activity for the broader community?

I think if you don’t get the residents, you’re not going to get the tax base. If you don’t get the tax base you’re not going to get the restaurants or the amenities that you require. I don’t think one can survive without the other.

Andrew Gonchar

In the spring, an investor purchased an office property on the waterfront for a Staten Island-record $21.5 million. What is happening in general with the investment sales market on the North Shore? Are prices rising rapidly because of all of the new investment in the area?

The offerings are coming up, but the bids have not really been hit as of yet … once you have the shovel hit the ground, once you really start to see infrastructure coming in, I think you’ll start to see the prices really escalate. Granted, they have gone up tremendously, but I still think that they’ll go much higher.

Much of the retail space in the waterfront neighborhoods that surround these big projects is aging and vacant. Are developers eying these properties for redevelopment? What type of retail do you expect to come in? What prices can developers expect to pay per square foot?

I think the answer is: they’re perfect. If you look at our project with Fishs Eddy, it fits that exact mold. It was a vacant piece of property over there that was dilapidated and run down. I think the problem is that the neighborhood … they’re not so aggressively looking at change, as the developers and the politicians are. They’re being a little hesitant.

I think everybody’s anticipating that you’re going to see $30 to $40 to $50-per-square-foot numbers, when the development process has occurred.

Shore to Shore was unable to get Community Board approval for the mixed residential-retail project at the old Fishs Eddy warehouse. What are you planning to do now? Are you concerned that community opposition could make it harder for you to move forward?

You’re always concerned about community opposition. You’re hopeful that the environment calls for what you’re doing. At this point in time, we haven’t really figured out, 100 percent, a game plan. The problem is that the land use committee voted 7-1 in our favor to approve our project. It was the full board that did not accept their recommendation.

We’re just focusing on other developments. We’re going to let the situation kind of play itself out over there.

James Oddo
Borough President, Staten Island

In the last few months, four major projects started along Staten Island’s North Shore waterfront. Why do you think these developers have stepped in now? What’s changed in the market on Staten Island or in the city in the last few years?

James Oddo

In truth, this was sort of a shotgun wedding … The Wheel was [placed] by then-Mayor Michael Bloomberg, “You’re not going to Governors Island, you’re going to Staten Island.” So they really had no choice. It made sense for the Wheel and the Empire Outlets to be attached at the hip. I think it’s just sort of coincidence that the Homeport project, and the Lighthouse Point project are kind of happening at the same time.

More globally, it’s a combination of the price points changing in other boroughs, literally running out of space in other boroughs and people being intrigued by things like the Wheel and other projects.

A  local developer was recently unable to get Community Board approval for a mixed residential-retail project at the old Fishs Eddy warehouse building on Bay Street. Are you concerned that community opposition could make it harder to move forward with future projects?

I think irrational community opposition could make it harder. Rational concerns are always welcome. And we vet it, and that’s how we get to a better project.

If we want to discuss the aesthetics, if we want to say that the terracotta skin they had planned should be replaced by red brick, I’m all up for conversations like that. If you want to speak erroneously in public and then have it reported on, that this violates existing zoning, that’s incorrect.

Some critics of the developments have also expressed concern that there is no “master plan” and that the added traffic will overwhelm the neighborhood’s infrastructure. Do you think a master plan is needed to address infrastructure issues?

I think ideally, you don’t have four projects happening at once. It sounds great to have a master plan. Sometimes, master plans tend to be too restrictive. I think the thing that we can all agree on is that there has to be some plan.

We do have infrastructure challenges. The one given is we need a traffic plan, not after these projects have been built and we study to see how bad the damage is. But right now, we need to see what improvements we need to make along the corridor on a small scale to a medium scale in the near term. And that’s something the de Blasio folks are well aware of.

Plans for several other smaller residential developments in the ferry area have been announced. Are you concerned that there is too much speculation right now, or do you think there is enough residential demand to fill all of these units?

No. I welcome it. Staten Island is overwhelmingly a bedroom community. I am not really interested in establishing new neighborhoods or increasing density in most of Staten Island, because we don’t have the infrastructure to withstand the additional cars.

Along this corridor, we have the ability to draw folks who are much more inclined to use mass transit, who don’t have a problem walking to the ferry and going to Manhattan and the rest of the city. To me, it’s a very different dynamic than the overwhelming majority of Staten Island.

Elysa Goldman
Director of Development, Triangle Equities

How many more development sites are available in the area, and what sort of projects do you expect to see proposed for the neighborhood?

The Bay Street corridor connecting Lighthouse Point to Stapleton is perfect for additional commercial and residential development, given the strong transit connections, existing infrastructure, and proximity to a strong commercial district anchored by the Richmond County government center. I think we’re going to see more hotel and residential plans being proposed in St. George as well.

Do you think adequate safeguards are being put in place to guard against Sandy-like flooding and related damage from future storms?

Yes, I do. We all saw what happened during Superstorm Sandy and everyone is especially conscious of the vulnerability of the location, like any waterfront location. However, leaving a beautiful spot with as much potential as the North Shore underutilized is not the answer.

With three hotels planned for the area, is there a concern about oversaturation?

I think a borough of 470,000 people has significant capacity for hotel room growth. An independent city of similar size generally has over a half dozen significant hotels. Hotel development is vastly important for making this a true destination spot, rather than people taking day trips on the ferry.

Nicholas Siclari
Chairman, Community Board 1

What’s changed in the market in the last few years to attract developers to step in on the Staten Island waterfront now?

When CB 1 gave its support to NYC HPD to enter into an agreement to build what is now The Rail [apartment complex] at the former Stapleton parking lot, it caught the attention of developers.

How many more development sites are available in the area, and what sort of projects do you expect to see proposed for these neighborhoods?

There are many opportunities for development in the area. It has long been our belief that Downtown Staten Island should reflect the type of housing and retail found in Brooklyn and lower Manhattan. The North Shore along Bay Street and the Richmond Terrace corridor could and should be a walkable community, so we support development similar to The Rail all along the stretch. We are the one area that is serviced by both bus and train. We are also set up with town centers, which need to be zoned to allow retail at the
bottom and several stories of apartments above. This type of zoning will bring the density necessary to support retail. We also believe that the beautiful historic houses further inland and in the hills should be preserved to keep the character of those neighborhoods quaint and bucolic.  

A local developer was recently unable to get Community Board approval for a mixed residential-retail project at the old Fishs Eddy warehouse. Are you concerned that community opposition could make it harder to move forward with future projects?

The developer was unable to properly answer the simple questions asked of him and the presentation was very poor.  The vote reflected his lack of preparation. We take our job seriously; so advice to future developers — be prepared with a good plan and to answer questions.

Some have cautioned that the North Shore waterfront, which flooded during Superstorm Sandy, is still vulnerable and is not primed for this type of development. Do you think adequate safeguards are being put in place to guard against flooding from future storms?

We are working with the Governor’s office to fund projects that will ease flooding. The North Shore Waterfront Greenway, which was born out of CB 1, is a 12-mile-long linear park that would run from Verrazano Narrows to the Goethals Bridge along the waterfront. Some of the plans for the park would help ease flooding. What we found following Superstorm Sandy was that The Rail, which was a relatively new building, did not receive damage from the flood due to the new building requirements. New buildings will have even more strict requirements, so between the two, we think we will fare much better in future storms.

What are some unexpected things you’ve seen in terms of development in the waterfront neighborhoods in the past few months or year?

We were surprised to learn how many young people and seniors were moving off Staten Island due to the lack of rental units. When The Rail filled up so quickly, it showed us that we needed this type of housing here. We were very surprised to learn how many people wanted to live vertically, but were not afforded the opportunity. This is our chance to keep Staten Islanders on Staten Island.

James Prendamano
Managing Director, Casandra Properties

How much development has the area seen in terms of dollar volume in the last few years and what overall impact do you think these projects are having on the surrounding area?

There has been over a billion dollars in public and private investment in the North Shore. When leading development firms such as Ironstate Development, BFC Partners and Madison Realty Capital and institutional firms such as Goldman Sachs invest in a community, the impact is significant.

Are you concerned that community opposition could make it harder to move forward with future projects?

Much of the successful development of the North Shore occurred because our firm, and the developers we represent, met with the community and addressed their concerns.  The open dialogue between the community and the developer has historically resulted in projects that work well for everyone.

Do you think a master plan is needed to address infrastructure issues?

I disagree with the statement that there is no master plan. City Planning had the vision many years ago to rezone St. George and Stapleton, creating special districts to avoid many of those issues. We are seeing responsible development in accordance with those guidelines come to fruition now.

What are some unexpected things you’ve seen in terms of development in the waterfront neighborhoods in the past few months or year?

An influx of international money.

Joseph Ferrara
Principal, BFC Partners

How many more development sites are available in the area, and what sort of projects do you expect to see proposed for the neighborhood?

I am aware of several large-scale residential projects that are in the pipeline. These projects consist of market rate rental housing with a commercial component on the first floor. Currently there is a rezoning effort being targeted for a stretch of the Bay Street corridor that will convert existing manufacturing zoning to a residential district that will bring rise to at least another 1,000 mixed-income units for the North Shore.

Are prices rising rapidly because of all of the new investment in the area?

There are property owners that have placed properties on the market and have asked an incredibly elevated asking price. One day, condos will sell at $800+ per square foot and rent for $80+ per foot, but today isn’t that day. The trend is on the uptick, but quite a few million square feet of existing pipeline needs to become reality before we hit the levels of Williamsburg and other trending neighborhoods.

Are you seeing an increased number of properties listed or preparing to sell in anticipation of further development? Or are sellers holding off?

I find that there is a mix of both. I do know with the rezoning that current building owners are holding out for a bigger bang for their buck. With affordable/mixed-income housing, which will be a required component of the rezoning, there is only so much value that can be assumed in order to bring one of these projects to reality. If property owners are smart about the asset they own, they would be prepared to put together a development plan to be able to build and/or partner with a developer. … Waiting for a huge payday could be a mistake, unless someone is willing to wait about seven years.

Do you think adequate safeguards are being put in place to guard against Sandy-like flooding from future storms?

Our project has been designed to deal with occurrences like Superstorm Sandy; we have implemented a “crash wall” that will protect the existing MTA building and surrounding track area that we will bridge over during our construction process. Our entire project has been elevated due to the new FEMA flood elevations. During Superstorm Sandy, [our] building on Bay Street took on 3 feet of water across the entire first floor, and with smart planning, like elevating all mechanical equipment above the first floor, we had that building up and running six hours after the waters subsided. All new projects need to address these issues if one wants to maximize the life of their property.

Cesar Claro
President, Staten Island Economic Development Corp.

What’s changed in the market in the last few years to attract developers to step in on the Staten Island waterfront now?

Cesar Claro

In 2007, the Staten Island EDC issued a report showing how development can take place on these sites. We brought the study to NYC EDC, who eventually released an RFP to developers, which ultimately led to these developments.

Given that three of the new projects are clearly aimed more at tourists than residents, how much can they influence prices and activity for the broader community?

Right now, we expect the tourist activity to be aimed exclusively at the Wheel, Empire Outlets and Lighthouse Point. For it to spill over the broader community will require a bigger plan.

Do you think a master plan is needed to address infrastructure issues?

Many of us have waited decades for this development. Is it happening before a traffic plan and master plan are in place? Yes. But that will come in time. Traffic is the biggest impediment and there will be some very difficult days ahead, but I expect the powers that be will eventually put a plan together.

What are some unexpected things you’ve seen in terms of development in the waterfront neighborhoods in the past few months or year?

An increase in requests for space by industrial firms.

Angela Ferrara
Executive vice president, The Marketing Directors

Angela Ferrara

What about this area do you think would surprise a developer or buyer coming from Manhattan or Brooklyn?

One of the surprising elements is how easy of a commute it is to Downtown NYC. Also, many people don’t realize that the Staten Island Ferry is free.

What are the biggest challenges that the Staten Island waterfront neighborhoods face?

Probably the biggest challenge that currently exists is the connection to the waterfront.  Luckily with my project, [The Accolade condos], that has been addressed with corridors that will connect Richmond Terrace to the new esplanade. The waterfront is a huge asset that all should enjoy and having direct connectivity to the residents and neighborhood are key.    

Right now, this is an area in transition. The waterfront has all the makings to not only be a wonderful destination point in New York, but also an ideal place to live. But I think the challenge is getting people to realize that this is happening now and not to miss the incredible growth opportunity here.