The Real Deal New York

TRD looks at the highs and lows of the market’s past 10 years

April 01, 2013
By Lauren Elkies Schram

It’s been quite a roller coaster ride for New York City’s real estate industry since The Real Deal launched a decade ago.

Between the boom, the bust and the recovery, there have been many highs and lows for the industry — from record deals like Google’s purchase of its headquarters for $1.8 billion to the now-notorious default on the loan at Stuyvesant Town and Peter Cooper Village.

That’s not to mention all of the swanky new condominiums that have gone up, and all of the megaprojects that have transformed the city, including the construction at the World Trade Center site and Hudson Yards.

In addition, because of the blustery market conditions of the past 10 years, many of the one-time highs became lows as the economy did a 180.

Below is a rundown of some of the most notable ups and downs that the industry has seen since TRD started covering it all.

Time Warner Center opens
✔ The 2004 opening of Related’s $2 billion Time Warner Center turned Columbus Circle into a shopping mecca. High-end retailers like Whole Foods, Tourneau and Williams-Sonoma quickly snapped up space at the 2.8 million-square-foot vertical mall, which replaced the old New York Coliseum. The Mandarin Oriental hotel and Jazz at Lincoln Center were also fast success stories. And, of course, the high-priced condos have drawn celebrity buyers, while also setting new price records in 2003, 2005, 2006 and 2009, including a $43 million sale in 2003.

Average apartment price exceeds $1 million
✔ The average price of a Manhattan apartment hit more than $1 million for the first time in 2004, according to appraisal firm Miller Samuel. That average price continued to climb until it peaked at $1.59 million in 2008. But once the credit crisis took hold, the price growth began to reverse itself. In 2009, prices dropped an average of 25 percent from the market peak. Since the recovery, things have been improving: In 2012, the average price was close to $1.42 million, and the outlook for further price increases seems good.

Williamsburg and Greenpoint rezoning
✔ A 2005 rezoning of Williamsburg and Greenpoint paved the way for a residential construction craze in northern Brooklyn. Massive condo towers like the Edge and Northside Piers were built on once-industrial waterfront sites, while dozens of smaller condos were constructed inland. Enticed by shiny new developments with luxurious amenities, buyers snapped up units quickly. But when the recession hit, Williamsburg in particular was overwhelmed with half-completed condo shells. Those units are now, however, selling like hotcakes again.

Plaza Hotel’s $400 million makeover
✖ Elad Properties bought the Plaza Hotel in 2005 for $675 million — a reported record $838,509 per room (at the time). But plans for the $400 million gut renovation (and the addition of 181 condos) at the landmark building were controversial. In fact, Mayor Michael Bloomberg helped negotiate a deal in 2005 that preserved nearly half the hotel rooms and a third of the jobs for employees there. But when the condos hit the market, they quickly sold out, for as much as $7,000 per square foot. Still, problems remained, with lawsuits from unsatisfied condo buyers, the closing of the Plaza’s storied Oak Room bar and retail space saddled with lawsuits and vacancies.

Priciest Manhattan townhouse sale
✔ When investor J. Christopher Flowers paid $53 million for the Harkness Mansion at 4 East 75th Street in 2006, he broke the record for the priciest townhouse sale in Manhattan. In fact, he was the first to break the $50 million mark for any type of residential property when he bought the 50-foot-wide house at the height of the market. Five years later, Flowers sold the mansion for $16.5 million less than he paid for it.

15 Central Park West sells out
✔ As the most elite (and buzzed about) condo building of the decade, 15 Central Park West scored a major coup when it sold out in 2007 with a combined $2 billion in sales. The 61st Street building — famously developed by brothers Arthur and William Lie Zeckendorf and designed by starchitect Robert A.M. Stern — has attracted celebrities in entertainment, business and a slew of other industries. Building amenities include a 75-foot swimming pool, a screening room, wine cellars and an in-house chef.

Record building sales volume
✔ Since TRD launched there have been some blockbuster years in terms of dollar volume of building sales — in 2007, for example, Manhattan logged a high of $48.5 billion in investment sales. During the past decade, there have also been several record-setting individual building sales. In 2007, for example, Kushner Companies closed on a deal to buy 666 Fifth Avenue from Tishman Speyer for $1.8 billion, setting a record for the most expensive office building sale in U.S. history. And in 2010, tech giant Google bought 111 Eighth Avenue, also for roughly $1.8 billion.

Macklowe and Swig
✖ Like father, like son-in-law. At least that’s what happened during the downturn with developer Harry Macklowe and his one-time son-in-law Kent Swig. In 2003, Macklowe was on top of the world with his $1.4 billion purchase of the General Motors Building. That was followed in 2007 by his nearly $7 billion purchase of seven Midtown office buildings from the Blackstone Group. But in February 2008, Macklowe defaulted on a $5.8 billion loan associated with the latter deal, and was later forced to sell the GM Building and three others. Meanwhile, Swig also lost control of several projects, most notably Sheffield57, which he was converting into condos. Today, Macklowe is back in the real estate game, partnering on the conversion of 737 Park Avenue with the CIM Group as well as on 432 Park Avenue. The question now is whether his estranged son-in-law will follow suit.

Deadly crane collapses
✖ In March 2008, a crane collapsed at an under-construction 43-story condo at 303 East 51st Street, killing seven people and crushing an adjacent building. Two months later, another crane collapsed at 333 East 91st Street, where the Azure condo was under construction, killing another two people. Not surprisingly, the city Department of Buildings came under intense fire for a lack of oversight, and the accidents prompted a major crackdown on construction sites and crane operations citywide.

Hudson Yards breaks ground
✔ Bloomberg’s proposal to build an Olympic stadium at the Hudson Yards site was dashed in 2005, along with his dream to nab the 2012 games. But that failed bid sent elected officials back to the drawing board to figure out what to do with the Far West Side megaparcel. After a false start with Tishman Speyer, spawned by the rocky economy, the site’s owner, the Metropolitan Transportation Authority, selected the Related Companies to develop the 26-acre swath in May 2008. The first building of the mixed-use project broke ground in December 2012, shortly after Related announced its first anchor tenant: Coach, which will house its company offices there.

Lehman Brothers’ bankruptcy
✖ Sept. 15, 2008, was a day that went down in economic infamy. That was the day that global financial giant Lehman Brothers filed for bankruptcy, triggering the worst economic meltdown since the Great Depression and bringing to light the widespread subprime mortgage crisis. The fallout was global, and largely centered on real estate. That’s because banks all but stopped issuing mortgages to potential homebuyers and stopped issuing developers construction loans. Meanwhile, foreclosures surged, New York City apartment sales plummeted, co-op boards became stricter, buyers tried to back out of their contracts (see below) and office space sat vacant.

Rise of Interstate Land Sales Full Disclosure Act lawsuits
✖ In 2009, in the wake of the financial collapse, homebuyers (especially those who were in contract but had not closed on units) began scrambling for exits. Many tapped an arcane federal law called the Interstate Land Sales Full Disclosure Act, or ILSA, to do so. A federal circuit court ruled in favor of the buyers at Harlem’s Fifth on the Park and at Long Island City’s One Hunters Point. A motion to dismiss a similar ILSA suit against the Moinian Group at the W New York Downtown Hotel and Residences was also rejected. But the U.S. Court of Appeals for the Second Circuit ruled in favor of Related in an ILSA case at the Brompton on the Upper East Side.

High Line opens
✔ The first section of the High Line (once an abandoned, elevated rail line) opened in June 2009 as a public park running from Gansevoort to West 20th streets. The park — a pet project of celebrities like Diane von Furstenberg and Kevin Bacon — received millions of dollars in public and private funding. And, with the help of a rezoning, it’s spawned a reported $2 billion in new condos, hotels and office space in the surrounding area. The second section of the park, running from West 20th to 30th streets, opened in 2011, while construction on the third began in September.

Stuy Town’s $5.4 billion purchase
✖ In 2006, MetLife sold Stuyvesant Town and Peter Cooper Village to developer Tishman Speyer and investment firm BlackRock for $5.4 billion, the largest single asset sale in U.S. history. Tishman had hoped to convert the 11,232 rent-regulated apartments into market-rate units, but ran into hurdles. The owners defaulted in January 2010 and special servicer CWCapital Asset Management soon took control of the complex. In November, a roughly $150 million settlement was reached between the tenants (whose units were determined to be illegally deregulated) and the complex’s current and former owners.

Park51 sparks global controversy
✖ Park51 — the proposed $100 million community center and Islamic prayer space at Park Place and Church Street — set off an international firestorm in the spring of 2010. Opponents cried foul that developer Sharif El-Gamal of Soho Properties would erect an Islamic center just blocks from the site of the 2001 World Trade Center attacks. Proponents said the center would not only promote tolerance, but that building it was also a matter of freedom of religion. El-Gamal ended up opening a community center at the site in 2011. It’s unclear what his long-term plan is for the site.

The race to the sky
✔ It’s been a race to the sky since TRD started. Indeed, the 870-foot New York by Gehry, which opened in 2011 at 8 Spruce Street, currently holds the title for tallest residential building in the city, but when complete, Extell’s 1,050-foot, under-construction One57 at 157 West 57th will take that honor. But that tower won’t hang on to its designation for long. Indeed, developers CIM Group and Macklowe Properties are planning a nearly 1,400-foot, 84-story building with 150 luxury condos at 432 Park Avenue, the site of the former Drake Hotel. The building, which is set to open in 2016, is just one of a slew of exceptionally tall towers in Manhattan’s pipeline.

One57’s $90 million sale
✔ The duplex penthouse at Extell Development’s One57 sold in May 2012 to an undisclosed buyer for upwards of $90 million, setting a record for the most expensive New York apartment sale ever. The price for the 10,923-square-foot condo trumps a record set only months earlier when Russian billionaire Dmitry Rybolovlev paid $88 million for a penthouse at 15 Central Park West. The under-construction One57 is slated to be finished in early 2014.

One World Trade Center tops out
✔ The centerpiece building of the World Trade Center site topped out at a symbolic 1,776 feet at the end of last year, marking an important milestone in the rebuilding effort at the site, and making it the tallest overall tower in the city. Formerly called the Freedom Tower, 1 World Trade Center began construction in 2006 and is scheduled to be completed in 2014. Its anchor tenant, publishing giant Condé Nast, will occupy 1.2 million square feet in the building.

Atlantic Yards
✔ Brooklyn’s Atlantic Yards site has been one of the most controversial big projects of the last decade. The $4.9 billion project, which was first announced in 2003, not only divided a community and led to protracted court battles between the developer Forest City Ratner and opponents, it also got hit by the tanking economy. Still, after years of delay, Ratner finally opened the centerpiece of the project — the Barclays Center, home to the Brooklyn Nets — in September. And in December, the company began work on its first residential building, set to be the world’s tallest modular tower. It’s unclear what the timeline is for the remaining buildings planned for the site, which are supposed to include 2,250 units of affordable housing.

Superstorm Sandy
✖ When Superstorm Sandy touched down on Oct. 29, 2012, it damaged and destroyed nearly 400,000 tri-state-area homes, with the Rockaways and Staten Island getting hit hardest in the city. Meanwhile, Lower Manhattan commercial and residential buildings saw severe destruction, and several major hospitals, including NYU Langone Medical Center, were forced to shut down for as long as two months. And in one of the most visually dramatic storm-related events, a crane partially collapsed at One57, forcing neighboring residents and office workers to evacuate for almost a week.

  • http://www.facebook.com/john.garside.58 John Garside

    A lot of water under the bridge for sure! The amazing thing is how the high end of the market has just gone from strength to strength over that period – as exemplified by One57 and CPW. Btw, it was actually Ekaterina Rybolovleva who bought the penthouse at the latter

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