The Real Deal New York

Over the course of a career spanning nearly six decades, Sheldon Solow’s
determination and self-assurance have carried him to the pinnacle of
the real estate world. His 10-year effort to win approval for the East
River development is nothing if not a testament to his tenacity. Solow courts new battles
” class=”read-more-link”>[more]

With last month’s death knell of the nation’s fifth largest investment
bank and over 20,000 job cuts expected in the industry, the city is
nervously waiting to see how Wall Street’s state of imbalance will
impact the real estate industry. Watching Wall Street
” class=”read-more-link”>[more]

Over the past decade, Brooklyn has attracted an ever-growing flood
of ex-Manhattanites drawn to its cheaper prices and its continually
gentrifying neighborhoods. But now, the borough is attracting a new
kind of transplant: the international apartment hunter.
Foreigners crossing pond and the river to Brooklyn
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While sellers of lower- and mid-priced homes have suffered,
some real estate watchdogs maintain that the market for trophy
properties has remained insulated from price fluctuations. Luxe gets pinch of reality: A look at Manhattan’s top sales
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Developers said projects slated to start up in 2008 will be virtually nonexistent. “Everything coming up now is a ’09,” said Daren Hornig, managing partner at SAXA. Developers afraid to break new ground” class=”read-more-link”>[more]

From November 2003 to
April 2005, Maurice McDowall helped push through 80 home mortgages or equity
loans worth a total of more than $20 million. But those loans often happened to be for more money than the homes underlying them were actually worth. How mortgage scammers make their mark” class=”read-more-link”>[more]

If the city’s Off-Track Betting operation goes ahead with its plan to shut down six dozen storefronts in mid-June, you can bet that the properties that those
gritty, 1970s-era parlors sit on will likely become go-to spots for new commercial and retail ventures.

Brokers said the planned shutdown, which involves locations in all five boroughs, provides a rare real estate opportunity. While not all OTB outposts are in prime locations, some are in retail hotspots or on the edges of up-and-coming neighborhoods. They said OTB landlords, who have been locked into long-term, discounted leases with the government, could get back into market-rate leases, possibly doubling their rents overnight.

Gary Trock, senior vice president of retail services at CB Richard Ellis, said the shutdown will likely pave the way for more upscale retailers.

“I think it will substantially increase the value of the ownership’s property,” Trock told The Real Deal. “I think it will be all good [for] a neighborhood not to have an OTB in that market, [considering] the nature of the clientele.”

Trock ticked off OTB’s trophy locations, saying that rents at the headquarters site at 1501 Broadway could be in the $400 to $500 range. OTB currently pays $29.50 per square foot at that location.

He also cited the OTB location on West 48th Street at Rockefeller Center, though that outpost is already paying near-market rent at $194 per square foot because OTB recently renegotiated a deal with the landlord that involved other concessions.

A little history: In February, after Mayor Michael Bloomberg said the city would have to start subsidizing OTB because it wasn’t getting enough money back from its revenue-sharing formula with the state, the OTB’s board of directors voted to shut down the organization’s 72 operations in the five boroughs.

While there is still a chance that the state could come up with a settlement before the June 15 shutdown, that is starting to look increasingly unlikely, given the chaos surrounding Governor Eliot Spitzer’s resignation last month.

Barring an 11th-hour deal, leases on 15 of the OTB’s 61 branches will expire without renewal at the end of 2008. (Three leases have already expired, including one at 28-15 Steinway Street in Astoria, and one on Hylan Boulevard on Staten Island.) In addition, OTB will terminate leases early at nine other branches, and brokers will work with landlords to get out of the remaining 34 leases.

In addition to those 61 outlets, OTB will lose three teletheaters and eight betting facilities inside restaurants to the shutdown.

Sublets at the 34 longer-lease locations will be brokered closer to June, when new market rates can be locked in, according to a 42-page document outlining the shutdown plan.

A number of the 17 Manhattan OTB locations are situated in the heart of first-tier retail markets: There are three in Midtown, one on the Upper East Side on Second Avenue between 69th and 70th Streets, one on the Upper West Side on West 72nd Street between Broadway and Amsterdam, and one in Chelsea, where Trock predicted there would be no problems finding new tenants.

There are also locations in downtown Brooklyn, Park Slope, Williamsburg and Greenpoint. Those locations are primarily near transportation and in high-density areas.

“The locales … some are good, and some are bad,” said Trock, who has advised several landlords about OTB spaces in the past.

“All of these leases are severely undervalued, and going back to ownership would be a positive thing,” Trock said. “If any ownership is smart, they’re not going to let them off for free. [They are going to] get some sort of penalty from Off-Track Betting.”

Sal Ferrigno, a senior managing director at Robert K. Futterman & Associates, a retail brokerage firm, said he is “absolutely” looking at the soon-to-be-available spaces.

“We already have some sites [in mind], and we’ve pinpointed our clients. The landlords need to get possession and OTB needs to give up the space, and then we can probably start negotiating deals,” Ferrigno said. He declined to name the clients or where he is looking.

But in an interview, Raymond Casey, the president of the city’s OTB, said he remains hopeful that his agency will stay afloat.

“There’s still time,” he said. “We’ll see what the new governor has to say, but he clearly needs some time to understand the issues.”

Although Casey declined to comment about any brokers scouring out his locations, he said it is something OTB is watching closely with its own realtors.
“We’re pretty comfortable that we’ll have a lot of flexibility with our leases,” he said. “This is not the first time OTB has faced some sort of adversity, and we came through it. Many of our landlords have been with us for 30 years.”

Still, Trock singled out the West 48th Street location near Rockefeller Center as “a great, great location” that will do “very well subletting.” He also mentioned the OTB location at Second Avenue and 53rd Street, which is two floors and 15,000 square feet. Trock said it would be “perfect for a restaurant.”

In the outer boroughs, OTB parlors tend to be in residential neighborhoods where Ferrigno said there will be opportunities for smaller companies to move in. Not all of those branches are in prime retail spots, and wooing new tenants might not be easy, especially given the uncertain dynamics of today’s market.

Still, many landlords will likely see a boost in their rent collections. Current rent at the OTB in Downtown Brooklyn is $62 per square foot, compared to the market rate of $75. In Williamsburg it’s $38 compared to the $60 market rate, in Greenpoint it’s $27 compared to $65, and in Park Slope it’s $45 compared to as much as $65, according to Diana Boutross, a broker with Winick Realty Group who has worked extensively in Brooklyn.

“We know that there’s going to be a lot of retail available, and I think the numbers are adjusting,” Boutross said. “A lot of their stores are located fairly well.”

Michael Worthman, a broker with Winick Realty Group who focuses primarily on retail spaces in Lower Manhattan, brokered a deal on Fulton Street near an OTB parlor on John Street. “I don’t know if it’s a sign or a coincidence, but a lot [of OTB parlors] are in areas that are on the rise,” he said.

Because the betting parlors tended to attract a more down-market clientele than most neighboring tenants would prefer, Trock said the departure of OTB will be a net positive for the area. “This just adds to an additional cleanup of another neighborhood,” he noted.

Casey dismissed claims that any OTB closings would raise real estate values and defended the parlors’ clientele. “OTBs are really a microcosm of the neighborhoods they exist in,” he said. “I don’t think it’s going to change the culture of the neighborhood. The net economic effect will be a negative one, not a positive one, as the businesses fall off without OTB patronage.”
That will become clearer if the parlors actually close.

Worthman said with spots in the Financial District and on lower Lafayette Street, landlords will be able to command market rents at $100 to $200 per square foot. According to the closure report, OTB currently pays $108 per square foot for the 5,800-square-foot space it occupies at 110 Lafayette Street just south of Canal. And uptown, rents near the OTB in Harlem along 125th Street between Seventh and Eighth avenues are reaching as much as $150 per square foot. The OTB pays $90 per square foot.

Worthman said Lafayette has been a “great block in
the last few years, especially as you get more south toward Canal.”

“It’s still on the rise, and it’s not there yet; it’s still under the local guys,” he said, adding that the area is “going to be seeing a little of bit of a change in quality of tenants, and maybe that has to do with getting rid of guys like OTB.”

He struck a confident note about finding new retail tenants. “There’s a guy always looking,” Worthman said.

Whatever befalls beleaguered landlord and developer Harry Macklowe and his property empire, his travails are part of a long line of epic busts in New York City real estate. As he and others before him demonstrate, even Gotham’s biggest builders fall from time to time.

When they do fall, they generally follow the Macklowe model: A developer builds or buys a trophy property, pledges it as collateral, becomes overextended and the entire empire topples. “That paradigm happens often,” said Tom Shachtman, author of “Skyscraper Dreams: The Great Real Estate Dynasties of New York,” adding, “The bigger you are, the more collaterized you are.”

Well-known busts include Rockefeller Center Properties, which was forced to file for bankruptcy in the 1990s when it was owned by the Japanese-based Mitsubishi Estate Company, and Donald Trump, whose entertainment company emerged from bankruptcy in 2005. Other less prominent examples echo the experience of Macklowe, who seems headed toward a resolution of his $5.8 billion default to Deutsche Bank. It will end in the surrender of seven buildings purchased with billions of borrowed dollars, thanks to a credit crunch that’s jacked up the price of financing deals in the wake of the subprime mortgage collapse.

Indeed, many of the largest real estate players survived bankruptcy and re-emerged as builders (or, in Trump’s case, also as television personalities).

With Shachtman’s help, The Real Deal has compiled a list of the biggest tumbles by New York City developers. Call them skyscraper nightmares.

Henry Mandel

Henry Mandel was one of the premier developers of the 1920s. He built hotels like the Lombardy and the Tuscany and an office tower in Pershing Square. Two of his grandest projects were the London Terrace apartments, a project for which Mandel acquired four city blocks in Chelsea and demolished 80 homes on the site, and the Park Vendome on 57th between Eighth and Ninth avenues.

Mandel’s crash came during the early years of the Depression. It was triggered not by his big deals, but by one of his small ones.

Mandel owned a modest building off Union Square. In 1931, a creditor who held a $40,000 mortgage on the Union Square property commenced foreclosure proceedings. Mandel, busy juggling the leasing on London Terrace and the building of the Park Vendome, was strapped, distracted by a messy divorce, and was ultimately unable to pay. In 1934, the Union Square foreclosure was granted. Three months later, Mandel was forced into personal bankruptcy, and his $36 million empire (big money in those days) was dispersed to creditors.

Bill Zeckendorf Sr.

In the 1950s and early 1960s, Bill Zeckendorf Sr. and his company Webb & Knapp controlled what Time magazine called the world’s largest real estate empire. Zeckendorf, who smoked foot-long cigars and hobnobbed with presidents, was so fond of credit that he once remarked, “I’d rather be alive at 18 percent than dead at prime rate.”

He owned hotels, office buildings, shopping centers and housing developments in 17 states, not to mention Canada. His portfolio included the Chrysler Building and the Century City site in Los Angeles.

Zeckendorf’s fall was triggered, Schachtman said, by his plan to build a hotel — the Zeckendorf — at 51st Street and Sixth Avenue. Zeckendorf broke ground, but the property sat as an empty hole. It was bleeding cash, and efforts to sell the site failed.

Hilton Hotels expressed interest, but ultimately built two blocks north. In 1965, Zeckendorf’s company declared bankruptcy, and its properties were sold off. But his family real estate business came back. Today his grandsons, William and Arthur, who developed 15 Central Park West, are two of the biggest developers in the city.

Alan Tishman

Until the mid-1970s, the Tishman family operated as one firm, the Tishman Realty and Construction Company.

The breakup into three separate companies was partly influenced by the city’s financial crisis and the sharp downturn in real estate that accompanied it. But it was directly triggered by problems with 1166 Sixth Avenue, an office tower the family started building in 1973. The project began with an informal agreement by the one-time communications giant General Telephone and Electronics to lease a third of the building. But after construction began, GTE’s headquarters was bombed in protest of the Vietnam War. Despite Alan Tishman’s urging, the company headed to Connecticut (as many were doing at the time). Tishman was left with a half-built tower and no tenants.

In 1976, Tishman walked away from the property, which was taken over by Equitable Life Insurance. The Tishman family divided its interests into three firms: Alan headed the management company, his brother, Bob Tishman, and Bob’s son-in-law, Jerry Speyer, took control of the development firm, and the construction company was sold to Rockefeller Center Corp. It was later bought back by company executives.

Peter Kalikow

Like Donald Trump, Peter Kalikow was heir to a real estate fortune based in the outer boroughs and moved to Manhattan.

Also like Trump, Kalikow dabbled in takeovers (he bought a big chunk of CBS) and in media, buying the New York Post in 1988. The money-losing Post, by Kalikow’s own reckoning, was a huge distraction.

While he was focused on the paper and its turmoil, he also borrowed around $250 million to build the Millennium Hotel and purchase a collection of small apartment buildings in the east 70s. He planned to knock them down and make way for a luxury high-rise. The plan fell in the wake of tenant opposition. By 1991, he was forced into personal and business bankruptcy. His personal debt exceeded $350 million; his companies owed more than $1 billion. By 1994, though, Kalikow had rebounded strongly enough to be named a board member of the MTA. In 2001, he became the board’s chairman.

Ian Bruce Eichner

In the late 1980s, Ian Bruce Eichner emerged from relative obscurity as the builder of 1540 Broadway, a 44-story office tower in Times Square. While there were problems with construction — including the need to shore up the neighboring Lyceum Theater, which developed a dangerous crack, and the complications of an enormous electronic display on the façade — the main problem was that while the building was going up, the office rental market was coming down.

As the project proceeded without guaranties from major tenants, bankruptcy ensued. The whole episode is captured in “High Rise: How 1,000 Men and Women Worked Around the Clock for Five Years and Lost $200 Million Building a Skyscraper,” an entertaining 1993 book by Jerry Adler. Eichner reemerged as a developer in Florida and Las Vegas (where he has run into financial difficulties anew) as well as in New York.

Olympia & York

After buying nine New York skyscrapers during the 1970s recession and winning the rights to develop Battery Park City, Olympia & York emerged as the largest property company in the world. The company’s biggest difficulty was not in New York or Toronto, where it was formed, but in its London Canary Wharf project.

Problems in London were felt throughout the Olympia & York empire. With the company owing nearly $20 billion, founder and chairman Paul Reichmann was forced to resign in March 1992. The company filed bankruptcy in Canada later that year. By 1996, it had emerged with a new name, World Financial Properties (now part of Brookfield Properties), and still owned 11.5 million square feet of office and commercial space. Reichmann made his own comeback as a developer and fund manager and for a time even regained control of Canary Wharf, which has become a huge success as well.

Founder, chairman and CEO of international real estate investment
banking firm the Carlton Group. Founded in 1991, Carlton specializes in
equity and debt placement, investment sales and commercial and
residential loan sales. In 2007 alone, the company closed more than $7 billion in transactions. Some of its more notable deals include the 2007 financing of the $350 million Trump Soho; the $825 million equity and condo conversion financing of Manhattan House in 2005; and the $1.7 billion recapitalization of the GM Building in 2004. [more]

Helmsley Park Lane Hotel could fetch $1B

The 46-story Helmsley Park Lane Hotel is expected to hit the market shortly and could fetch close to $1 billion, the New York Post reported. The 1971 property could end up selling for up to $1.5 million per room, according to one hotel analyst. The Park Lane was one of numerous properties placed in a trust after Leona Helmsley died last summer. The hotel is expected to draw interest from both hotel bidders and residential developers. Eastdil Secured and Cushman & Wakefield Sonnenblick Goldman are reportedly among the firms vying for exclusive rights to the assignment.

Manhattan House space asking $100M

The commercial space at the Manhattan House complex at 200 East 66th Street is on the market with an asking price of $100 million. The property includes 25,000 square feet of retail, 7,350 square feet of office space as well as a 225-car garage. Observers say a deal could bring several major apparel retailers to the Upper East Side apartment complex, including Brooks Brothers. Asking rents range from $200 a square foot on Second Avenue to $350 a square foot on Third Avenue. Owner Jeremiah O’Connor of O’Connor Capital Partners is converting the property into condominiums. Eastdil Secured is handling the sale.

Meatpacking District property for sale

A four-story, 5,163-square-foot commercial building at 446 West 14th Street is on the market with an asking price of $50 million. The buyer has the option of assuming the vacant property’s $22 million interest-only mortgage, which has a fixed rate of 5.82 percent over an 11-year term. The top floor of the building will have to be removed, because the air rights were sold to the adjacent property. Brendan Gotch, Jonathan Hageman, Robert Knakal and James Nelson of Massey Knakal are marketing the property.

Gowanus development site on the market

A 174,017-square-foot development site at 404-430 Carroll and 153 2nd streets in Gowanus is on the market with an asking price of $27 million, the Brooklyn Eagle reported. Boymelgreen Developers previously had plans for a mixed-use complex at the four-acre site, dubbed Gowanus Village, but the developer split with partners Africa Israel Investments and the Katan Group, and the plans have been put on hold. Africa Israel and Isaac Katan are selling the property. Ken Freeman of Massey Knakal and Ingram & Hebron are handling the assignment.

Noho retail building for sale

A 16,039-square-foot retail condominium at 380 Lafayette Street is on the market with an asking price of $25.5 million. The six-story commercial building, also known as 6-10 Great Jones Street, is located in the Noho Historic District. The multi-level space features 6,858 square feet on the first floor and a lower level of 9,181 square feet. The space is currently leased to restaurant Chinatown Brasserie until 2017; a step-up in its base rent will take effect in 2011. Brian Ezratty and Scott Ellard of Eastern Consolidated are handling the sale.

UWS theater space could fetch $20M

A landmarked, 15,000-square-foot theater at 2626 Broadway is on the market with an asking price in the low $20 million range, the New York Post reported. When Metro Theater closed several years ago, the owners had tried to rent out the space to a retail tenant or a restaurant. The property, which has been approved for conversion into a multi-level store plus mezzanine space, is now for sale. The owners took advantage of the city’s Industrial and Commercial Incentive Program to secure an annual tax abatement of $250,000 over the next 15 years. Peter Hauspurg, Jeffrey Troy and Peter Carillo of Eastern Consolidated are marketing the property.

Two Queens apartment buildings for sale

Two six-story apartment buildings at 162-20 and 164-03 89th Avenue in Queens are on the market with an asking price of $10.2 million. Located in the borough’s Jamaica neighborhood, the elevator buildings total 72 units and almost 18,000 square feet of space. The average monthly rent at 162-20 89th Avenue is $885; the average monthly rent at 164-03 89th Avenue is $1,026. An $8 million mortgage with a 5.475 percent rate over a 10-year, interest-only term must be assumed, with annual payments of $438,000. There are nine years remaining on the loan. Brian Sarath and Thomas Donovan of Massey Knakal are handling the assignment.

Years after the implosion of Silicon
Alley, as New York City’s tech scene was known in the 1990s, America Online and financial software firm SunGard Data Systems are taking major chunks of real estate in New York. The move — call it Tech Real Estate Investment 2.0 — has left some wondering if the local technology scene has learned its lessons from past indiscretions.

By the late 1990s, thousands of start-up firms had descended on Manhattan, with little more to show than wildly inflated stock prices. When the dot-com bubble burst in 2000, the wreckage was strewn around the city, with most of the impact felt in the downtown real estate market.

The memory of that implosion, along with the current credit crisis, has created a different environment in tech real estate today. Landlords are more wary about leasing to start-ups that have yet to prove themselves — though tech executives, by contrast, say their businesses are more seasoned now. Companies are signing leases based on real revenues and legitimate business models, and argue that they will not fall prey to the same exuberance that nearly destroyed the industry in the early part of the decade.

Silicon Alley was traditionally defined geographically as the area extending south and southeast of the Garment District that included the Flatiron area and Chelsea. Technology companies considered location — particularly access to mass transit, restaurants, nightlife and green space — a key to attracting the best employees. Today, however, due to high asking rents and conversion of office space into condominiums, it’s rare to find a start-up company that can find available space in the heart of the area. As a result, some firms are satisfying themselves with being on Silicon Alley’s fringe, in less edgy neighborhoods or in less cutting-edge spaces.

AOL comes to the Apple

After buying five advertising services companies in the past 12 months, AOL will officially relocate its Dulles, Va.-based headquarters this month to a prime 152,000-square-foot location at 770 Broadway (at Astor Place), where the Nielsen Company is currently headquartered.

“We’re focused on being an advertising-supported Web company,” said Anne Bentley, senior vice president at AOL. “When you’re focusing on advertising, it makes sense to be in the epicenter of the advertising universe in New York City.”

AOL will initially relocate 350 programmers and advertising executives for its new Platform A unit, and the company hopes to attract the best talent in the area with open architecture floor plans and so-called idea galleries that foster collaboration among its employees.

Staubach & Co., the lead broker on the deal, has remained silent since closing the agreement in September, but published reports show that AOL will pay $69 a square foot for the first five years of the 15-year lease.

SunGard, a Wayne, Pa.-based firm, is consolidating space it already has in Manhattan. The company signed an 11-year lease for a 120,000-square-foot space at 340 Madison Avenue, and the company will move into its new home in January 2009.

Officials at Broadway Partners, which acquired the building at 44th Street in 2006, said the lease represented a major coup as SunGard had been considering an alternate site near Penn Station, and that the Grand Central area is not the typical kind of space that technology companies desire.

“They’re trying to attract certain types of employees,” said Alan Rubenstein, director of asset management at Broadway Partners. “They’re used to being in more cutting-edge types of spaces.”

He said the firm decided to rent the space because of the price, and the location gave the company a high profile when potential investors visited the site. Asking rents at the building are about $78 per square foot. The company will be responsible for its own buildout.

Small stars

In contrast to the go-go atmosphere of the first Silicon Alley boom, today’s climate can be brutal for small companies without large amounts of cash and a demonstrated ability to deliver revenue.

“A new technology firm is going to have a tough time here in New York,” said Jeffrey Schwartz, senior managing director at Adams & Co.

He said he has leases out on a dot-com client with $14 million in the bank, but
negative retained earnings of $5 million.
He said the previous implosion of Silicon
Alley and the current credit crunch is
making landlords very particular about leasing to tenants without proven track
records.

“There was a big infiltration of product on the market that came straight from the dot-com era,” Schwartz recalled. “We saw a lot of brand-new chairs and brand-new furniture go back straight to the landlords.”

Still, smaller tech companies are eager to move to Silicon Alley, even to its fringes.

Michael Kaufman of the Kaufman Organization just closed a lease for Philadelphia-based Tel America Media to move into a 3,000-square-foot space at 499 Seventh Avenue. Tel America, which aggregates unsold advertising inventory and sells it to cable affiliate stations, was scheduled to move into its new offices March 1.

Kaufman said asking prices were about $47 a square foot.

Bond Art and Science signed a new lease for a 6,000-square-foot space at 38 West 21st Street in November after its previous location, 9 Desbrosses Street, was converted into condominiums. The company could have considered moving to the outer boroughs, but felt that Silicon Alley was a location that was close to its client base.

“Our product is our people,” said founder and senior partner Jeffrey Dachis, who was also the co-founder of the hot interactive marketing shop Razorfish in 1995. “Our product needs to be in a place where it can be deployed in a way that is beneficial to our clients.”

Bond is paying about $35 to $40 per square foot in rent, which is very favorable for the area. Dachis believes that small companies are often being charged well beyond the space they are actually using.

“The brokers and landlords are selling space for lease that is grossly marked up from the actual space you are renting,” he said.

Proclivity Systems, which forecasts online consumer purchasing behavior, relocated in January to a 4,500-square-foot space on the third floor of 134 Fifth Avenue. The company, originally founded in 2006, relocated from Midtown due to the need for additional space.

“There’s good mojo here,” said Sheldon Gilbert, founder and chief executive of Proclivity. “When we were down at Grand Central, it was a ghost town on the weekend.”

Azoogle.com, an online performance advertising firm, relocated to a 5,000-square-foot space at 512 Seventh Avenue after spending a year and a half at 55th Street and Park Avenue. The company was originally based in Toronto and opened its New York offices in 2005.

“New York City is appealing in general for a lot of companies,” said Mike Sprouse, chief marketing officer at Azoogle. “I know there are start-ups being hatched in the area, particularly in the online space.”

The new space is a sublease that had been occupied by Ivillage.com, the online women’s network; that company had been contracting its space requirements over time.

“From what I’m seeing, it’s a very good area for digital media firms,” said Ruth Colp- Haber, a broker at Wharton Properties. “Typically, they like to attract young people, so they want space that is peppy and has great transportation access.”

Cash upfront

The Garment District has been dominated by small manufacturers, but recent zoning changes have led many small firms to set up shop, mainly for the close proximity to Penn Station and the Port Authority Bus Terminal. Colp-Haber said that rents in the area have shot up more than 30 percent, averaging about $50 per square foot for a quality space.

One of her clients, Fog Creek Software, has operated for five years from 535 Eighth Avenue, where it has a 6,000-square-foot space. The firm has maxed out of its current quarters and is currently negotiating a 10,000-square-foot lease in a Class A building in the Financial District for about $55 per square foot.

“Some of the difficulty for smaller companies is not just the dollars per square foot but the heavy cash upfront,” said CEO Joel Spolsky.

He said in some cases, landlords are asking for $400,000 security deposits for a 10,000-square-foot space; for a new company, that outlay is prohibitive.

Vumber.com, a company that sells disposable phone services, moved out of the Woolworth building into the 20th Street offices of one of its investors when it couldn’t find any affordable space.

“One of the things we kind of miss is affordable incubator space,” said Jodd Readick, co-founder of Vumber.com. “The landlords want a long-term commitment with huge down payments and buildouts.”

Readick said the company would like to find something in the $30 to $50 range and is working with the Lawrence Group to find an affordable location.

Nutopia Workspace, a Manhattan company, is trying to fill the incubator niche by offering a shared workspace environment with the services that a lot of technology companies need.

John McGann, founder of Nutopia Workspace, said that he’s seeing a lot of foreign companies looking for space in Manhattan who may be in a better position to afford the rents. The company has about 25 businesses that share a 10,000-square-foot workspace at 81 Franklin Street in Tribeca.

The firms range from technology to media to fashion companies, but they all share the same inability to afford down payments and asking rents.

McGann worries that the same dot-
com implosion that happened in the earlier part of the decade could happen again, and that as the economic downturn forces companies to contract, a lot of these start-up technology companies could suffer the consequences.

“There are striking parallels,” he said. “People don’t want to believe it. A bubble is a bubble.”

However, most technology executives said that companies today are more sober and mature than their predecessors.

“There definitely are more robust, more revenue-driven companies that are successful,” said Proclivity’s Gilbert.

“You’re not seeing some kid who knows how to spell the word HTML and can
raise $10 million as soon as he sneezes,” he said.

At 6 p.m. on Sunday evenings, the line outside Lucali, an 18-month-old brick-oven pizzeria in Carroll Gardens, can be 50 people long. That’s before the restaurant even opens; the only word the chef and owner, Mark Iacono, can find to describe what happens next is “chaos.”

“That’s when it’s really hectic,” Iacono said, adding that the wait can be as long as two hours.

Even as economic uncertainty looms, leaders in the restaurant business say they expect New York City’s eateries, especially those in the outer boroughs, to keep doing well. While the logic may seem counterintuitive — belt-tightening and all that — many outer-borough restaurants are offering less expensive alternatives for New Yorkers who are notoriously averse to cooking for themselves.

“People are still going to eat,” said Chuck Hunt, executive vice president of the New York State Restaurant Association. “It may be that they spend less money, but indeed, they’re still going to have to eat.”

And in the outer boroughs, per-square-foot rents are far cheaper than they are in Manhattan. While rents in prime locations in the West Village can reach $250 per square foot, with prices at $125 per square foot on some side streets, rents on Smith Street in Carroll Gardens or on Fifth and Seventh avenues in Park Slope — all major restaurant rows — are only $75 or $100 per square foot, said Benjamin Fox, president of Winick Realty Group.

Fox noted that the only other area of Brooklyn that commands $100-per-square-foot rents is Montague Street in Brooklyn Heights. In parts of Williamsburg off Bedford Avenue, Fox said, rents are as low as $40 per square foot.

“When it comes to restaurants, there’s no such thing as an off location,” he said.

In Brooklyn, it can be easier to turn a profit in the restaurant business because the rents are cheaper, and, in many cases, the owners are also doing the cooking.

In Manhattan, many chef-owners are forced to open several restaurants just to stay profitable, said Clark Wolf, the president of Clark Wolf Company, a Manhattan-based food, restaurant and hospitality consulting firm. He said owning a Manhattan restaurant is an all-around “bigger deal” because of those high core costs.

Charlie Kiely, the owner and chef of the Grocery, an eight-year-old Michelin-starred restaurant on Smith Street, said the smaller spaces allow many Brooklyn restaurants to reach capacity. “It allows us to put food on the plate at a much more reasonable price,” Kiely said.

In addition to the lure of those reasonable prices, the time, energy and effort it takes to travel to Manhattan also prompts many people to stay close to home and opt for the restaurants, especially in Brooklyn but also in Queens, which is not quite on par with Brooklyn, but is growing, said Tim Zagat, founder and publisher of the Zagat guide.

Wolf noted that in the outer boroughs, residents really seem to have a “pride of place” and are glad to be supporting entrepreneurs from their own communities.

So what do the lower rents of outer-borough restaurants mean for customers? In most cases, they trickle down into lower menu prices, which are in turn luring in more diners.

In addition, Wolf said that if interest rates drop further with a brake on rent increases, more entrepreneurs may take the opportunity to open restaurants in new areas.

“By the end of the year, there might be some opportunities in real estate that only come cyclically,” he predicted.

Restaurants are typically the first retail tenants signifying a neighborhood’s pending arrival. Ditmas Park in Brooklyn is a case in point.

Vipin Agarwal, an owner of Picket Fence, a “comfort food” restaurant in the area, said business has been good since he took over the spot from its original owners last year.

“It is a neighborhood restaurant, and it is reasonably priced,” Agarwal said of the four-year-old eatery on Cortelyou Road. “When [diners] are not in the mood to cook or wash the dishes, they can come over to the restaurant, and we are there to serve them.”

Contrary to the image of restaurants as possibly attracting vermin or being difficult, Hunt of the Restaurant Association said landlords “love” to have restaurants as tenants. “There have been restaurants that have brought a lot of neighborhoods back from decay,” he said. “Restaurants have made it possible for the landlords to demand higher rents and, to some extent, [those rents have ultimately] driven restaurants out of some areas.”

In some examples, he added, rents are tripled once the original restaurant’s lease is up.

Tim Zagat points to what he calls the “BATH” restaurants: “Better Alternatives Than Home.”

The 2008 Zagat guide rated 135 outer-borough restaurants in the under $30 a meal category. That number was up from 99 just four years earlier. Zagat said that the $30 marker is used as a measure of an “affordable” meal because “they buy wholesale, you buy retail; they are very efficient in producing the food, whereas you are fairly inefficient.”

Meanwhile, Zagat, which began publishing a Brooklyn-only guide in 2003, had more than 200 overall restaurant listings in its most recent edition, which came out in December.

Since 2005, the number of Brooklyn restaurants listed in the five-borough Zagat edition increased by more than 23 percent to 216 from 175. A decade ago, there were only 30 or so Brooklyn restaurants listed in the citywide directory, Zagat said.

“The restaurant industry in New York has continued to grow even at the worst of times,” he added. “There are some very fundamental demographics that are supporting what has truly been a revolutionary growth and diversification of American restaurants, particularly in New York restaurants.”

He pointed to nationwide economic factors that lead Americans to work longer hours and consequently be crunched for time to shop, cook and clean.

Plus, the era of high-end dining has waned with a broad range of brasseries, cafés, and restaurants of every ethnic cuisine gaining in popularity.

At Lucali, with its rustic wooden tables and original 1910 plaster walls, Brooklyn neighbors eat thin-crust pizza and calzones made with imported ingredients and toppings Iacono chose from a farmer’s market that morning.

“It has that nice neighborhood feel,” said the 41-year-old Iacono, a third-generation Carroll Gardens resident. Everybody knows each other, and tables await the regulars who come weekly, he said.

Though he had never before made pizza, Iacono spent two years quietly building the space after work and on weekends and never told anyone what he was up to. Once he opened his doors to the neighborhood, Iacono said he watched as his restaurant quickly filled to capacity.

“It was something I wanted to ease into,” he said. “It didn’t work out that way.”

Bank branches have cornered the market on Manhattan’s high-profile retail corners in recent years, at times displacing even well-known favorites like the Second Avenue Deli.

But as the banking industry’s heady expansion binge ends, the Chases, Citibanks and Wachovias that seem to dot every city block could give way to fashion retailers, home stores and service chains — merchants that, until now, have been stymied by the stranglehold banks have held over much of the city’s prime retail real estate.

At the height of the bank expansion 18 months ago, a corner spot could bring landlords twice the normal asking rent.

On Third Avenue in the 60s, where rents went for $200 to $250 a square foot, landlords were striking deals for $300 to $350 a square foot for bank tenants, brokers said. Other retailers simply couldn’t compete.

But those days are over.

Brokers now say the shakeout from consolidation in the banking sector and the financial industry’s current woes could spell branch closings throughout the city in the next few years.

In part, market saturation has halted branch expansion, with big names such as Chase and Citibank “now pulling back,” said Robin Abrams, executive vice president of the Lansco Corp.

The past few years, banks had been in brand-building mode and were pushing rents to steep levels, sometimes way beyond asking prices, as they competed against one another in certain neighborhoods.

Landlords had “played one bank against another to get top dollar,” Abrams noted. “It created intense competition.”

But now, those financial firms “got the critical mass” they craved in the city, said Bill Melville, senior managing director of Lansco. “It’s the law of diminishing returns.”

Treading carefully

Complicating matters, the subprime mortgage mess has destabilized the banking sector. And the unraveling at Bear Stearns underscores an industry in crisis mode. As a result, banks are taking a cautious stance.

“There are serious issues right now,” said Andrew Mandell, a broker with Ripco Real Estate who counts banks among his clients. He noted that the banks have halted expansion. “It’s fair to say they all have: Commerce, Chase, Citibank, Wachovia.”

Banks such as Chase and Washington Mutual said they could not pinpoint the number of locations they would open in New York City this year or next year, while HSBC declined comment.

But Citibank suggested a slowdown from 2007.

“We’re going to focus on performance and productivity of our existing branch network,” said Janis Tarter, a spokesperson. “While we will continue to open branches, they will perhaps not be to the level of last year.”

Abrams said the change means that desirable locations with high foot traffic that “were hard to come by” are now “more readily available at more realistic rents.”

Indeed, coveted corner spots that would have been scooped up by banks 18 months ago are sitting in neighborhoods such as Soho, Midtown and the Upper East Side.

International retailers such as Zara, Reiss and Uniqlo that are on the hunt for high-profile locations could benefit from the banks’ retreat, Abrams said.

Soho, for example, is ripe for new, non-bank retail,
brokers said. A 2,600-square-foot former shoe store on the southwest corner of Broome and Broadway is now up for grabs, noted Melville.

“That location instantly would have become a Chase,” he said.

The southern end of Soho is becoming a hotbed of fashion and home stores, with new retail stores like Madewell (J. Crew’s spin-off) and home stores CB2 (Crate & Barrel’s sub-brand) and Muji adding a fresh buzz to the area.

Fashion tenants or wireless carriers could also turn up in locations that would have been reserved for bank branches in new residential developments with retail bases on the Upper East Side.

Brokers noted that new luxury condos like the Brompton (86th Street and Third Avenue) and the Lucida (86th Street and Lexington) are ripe for new retail blood.

Midtown, meanwhile, could see more tenants like
Staples and Kinko’s that cater to the office market,
Mandell said.

One branch that is already on the chopping block is at Madison Avenue and 39th Street. Chase, which purchased the Bank of New York in 2006, is selling one of its acquisition’s sites because it already owns one of its own across the street.

In Harlem, a Washington Mutual branch has been vacant for a few months, said Jeff Schettino, vice president of commercial leasing at Giscombe Realty.

The space on 125th Street and Lenox Avenue
will likely go to “some kind of large retailer,” Schettino said.

Consolidation concerns

As the subprime mortgage crisis plays out, the
question becomes, “Are [more] banks going to consolidate? Is there going to be a shakeout?” Melville said. “The big fish usually eat the smaller fish.”

For now, “you’ll continue to see cases where leases are coming up, and you’ll see shuffling going on,” Mandell said.

“There’s a lot of overlap in portfolio,” he said, noting Capital One’s acquisition of North Fork and Chase’s purchase of Bank of New York will likely
result in those banks unloading more spots.

Indeed, the closure of Chase’s “redundant stores” is only 50 percent complete, said Michael Fusco, a Chase spokesperson.

At Washington Mutual, “as far as I know, we don’t have plans to close any Manhattan stores at this time,” said Lisa Friedman, a company spokesperson.

But brokers said notable shifts would start to
unfold this year.

In the next six to 12 months, “there will be
a fairly significant change in the retail world,”
Mandell said.

Conventional wisdom has predicted that once Wall Street’s troubles manifest themselves in job losses, the office market will begin to feel the heat. And last month saw Lehman Brothers announce it will lay off 5 percent of its global workforce, along with JPMorgan’s stunning purchase of Bear Stearns, with predictions that at least one-third of the bought-out firm’s 14,000 employees will get cut.

Adding to the grim news last month:
Citigroup reportedly said it would cut another 2,000 jobs, on top of a January announcement of 4,200 layoffs. The layoffs, mostly in its investment banking unit, will largely affect the bank’s New York and
London offices.

And more pain is expected to be on
the way.

“We haven’t seen the major shakeout in job numbers yet,” said Robert Sammons, managing director of research at Colliers ABR. “I don’t know when we will, but I expect it will be in the next couple of months.”

But job cuts or no, vacancy rates have already seen a rise in Midtown, Midtown South and Downtown in February from the month before.

The borough’s vacancy rate was up 40 basis points to 5.2 percent in February, from 4.8 percent the month before, according to data from CB Richard Ellis. It was still slightly lower than its rate of 5.4 percent in February 2007.

Asking rents also increased in all three markets, according to the data. Experts say that a lag exists between when space comes on the market and when rents soften to reflect the surplus. Another possible explanation for strong rents in the face of rising vacancy is that concessions, such as months of free rent or construction allowances, are already reducing the effective rent tenants pay without changing the recorded asking price per square foot.

The average asking rent in Manhattan was up 67 cents to $69.56 per square foot in February, from $68.89 per square foot the month before. It was up almost $13, over 22 percent, from $56.64 per square foot in February 2007, according to CBRE’s statistics.

Citigroup, iStar Financial and Bear Stearns are expected to dump a combined 610,000 square feet of space onto the market in the near future, according to Crain’s New York. The publication also reported that after its announced layoffs, Lehman Brothers could unload around 400,000 square feet of office space.

“The good news is, there hasn’t been an overabundance of new construction in the commercial market recently,” said Michael Heaner, managing director of the Kaufman Organization. He suggested that the lack of new space will act as a cushion and “facilitate a fast recovery” in the likely event of vacancy increases (see related story on page 86).

Meanwhile, speculation abounds as to what JPMorgan will do with the 1 million square feet of office space it has garnered in the trophy of 383 Madison Avenue that came in the Bear Stearns deal. Sammons, who is not personally involved with JPMorgan, guessed that even with the firm’s expected layoffs, JPMorgan would be more likely to occupy such a “coveted space” than to sublease it, and would first rent out at its other locations or at secondary Bear Stearns office buildings received in the trade.

Manhattan’s leasing activity was down to 1.32 million square feet in February, from 2.20 million the month before. It was 1.15 million square feet in February 2007.

“[Tenants'] sense of urgency in the leasing market that we saw six to nine months ago has subsided, and there is a little more patience out there,” said David Menaged, director of Adams & Co. Real Estate. “In the first quarter, we have seen more space in all sizes become available — we are no longer in a frenzied market.”

Menaged said that the cooling demand will result in downward pressure on asking rents, with a full recovery of Manhattan’s market in a time frame of two years.

Midtown

Leasing activity in Midtown was down to 1.02 million square feet in February, from 1.77 million square feet the month before, according to CBRE data. It was down from 1.15 million square feet in February 2007.

The average asking rent in Midtown
was up 35 cents in February to $84.27 per square foot, from $83.92 the month before, and up from $68.32 in February 2007, CBRE reported.

The vacancy rate went up to 4.7 percent in February, from 4.5 percent in January. Midtown’s vacancy rate was 4.8 percent in February 2007.

Midtown South

Midtown South’s average asking rent leapt $1.85 between January and February, to $52.94 per square foot. In January, the average was $51.09, after a $1.16 drop from the month before, according to CBRE.

Industry experts told The Real Deal that Midtown South was the office market with the most promising near-term prospects. Heaner said the Kaufman Organization is “very bullish on Midtown South,” and Menaged agreed that it is the healthiest market. “Tenants continue to consider this area very desirable due to its great access to transportation, affordable rents and quality buildings,” Heaner said.

Leasing activity fell to 130,000 square feet in February, from 210,000 the month before, according to CBRE’s report. The vacancy rate climbed to 6.5 percent in February, up 40 basis points from 6.1 percent in January, CBRE reported. The rate was 5.3 percent in February 2007.

Downtown

Downtown’s leasing activity fell to 160,000 square feet in February from 220,000 square feet the month
before, and 510,000 square feet a year before, according to CBRE’s report.

The vacancy rate in Downtown was up 80 basis points in February to 5.7 percent. It was 4.9 percent in January 2008 and 7.1 percent in February 2007.

The average asking rent was $48.91 per square
foot, up from $47.64 per square foot in January, and
$42.44 per square foot in February 2007, according to CBRE statistics.

In the last few months, several major banks have called off plans to
build new towers in Manhattan, providing yet another sign that the days
of Wall Street’s flush expansion are over. Big banks scrap tower plans” class=”read-more-link”>[more]

Downtown Brooklyn’s rezoning was originally promoted as necessary to spur office construction and keep companies from moving to New Jersey’s waterfront. Four years later, Brooklyn’s central business district has experienced a net loss in office space as developers have gravitated instead to more lucrative residential and hotel projects.

The residential conversions at One Hanson Place and the Verizon building in MetroTech (now Belltel Lofts) accounted for a loss of 908,000 square feet of Class B office space. And an untold number of several smaller office buildings have been torn down or could be converted to residential, such as the historic Conway building on Fulton Street.

Meanwhile, several projects that were part of an expected addition of 1.6 million square feet of office space have gone nowhere. That figure includes at least 290,000 square feet at City Point, a planned mixed-use tower at the former Albee Square Mall site, which has been vying with several other planned projects to be Brooklyn’s tallest building. The Downtown Brooklyn Partnership said that three office buildings totaling 217,000 square feet are already under construction in the area.

Downtown Brooklyn Partnership President Joe Chan, who worked on the 2004 rezoning under the Bloomberg administration, acknowledged that in the years following its enactment, residential demand was stronger than office demand. Along with drawing commercial tenants, the other goal of the rezoning “was the growth of Downtown Brooklyn into a 24/7 community” and “to spur growth where growth made sense.”

The new rules were flexible enough to allow development under changing market conditions, Chan said, adding that the typical build-out from rezoning spans multiple market cycles.

Following last month’s stunning collapse of Bear Stearns and predictions of vacancies in Manhattan, Atlantic Yards developer Bruce Ratner revealed that he had not yet secured an anchor tenant for the project’s signature tower, Miss Brooklyn, and would delay its construction indefinitely. Ratner said the Nets basketball arena would be built on schedule, while the rest of the mega-project’s future remains unclear.

City Point co-developer Paul Travis remains upbeat about the commercial market and said he’s considering eliminating some apartments to accommodate 400,000 square feet of office space.

“Historically, Brooklyn’s office market has tended to do well in times when tenants are much more concerned about cost, which is usually when the economy is going down, not when it’s going up,” said Travis, a Washington Square Partners managing partner. “You saw a tremendous amount of growth in the Brooklyn market in the early ’90s, which was not exactly a stellar time for the economy.”

Most people interviewed said occupancy at MetroTech, where nearly all of the borough’s Class A space is located (including 290,000 square feet leased by Bear Stearns), is dependent on low vacancies in Manhattan. But industries showing interest in Brooklyn, such as insurance, non-profit, media, advertising and law firms, could help make the borough less dependent on the success of Manhattan’s market and the financial sector, Chan said.

Before Ratner tries to build more than 1.6 million square feet of office space at Atlantic Yards, he first must fill the space at MetroTech. El Diario, the Ms. Foundation for Women, and HeartShare Human Services of New York have all recently signed leases in MetroTech, leaving a remaining 644,000 square feet available. The Partnership expects vacancy to drop another 170,000 square feet once pending leases and subleases are signed.

Paula Ingram of Ingram & Hebron Realty said MetroTech rents are closer to Class B rates than Class A. She handled leasing at 177 Livingston Street by the Treeline Companies, and said 95 percent of the space at 177 Livingston Street is already leased — though the building is still under construction — mainly because rents were between $29 and $32 per square foot despite Class A amenities.

Ingram, like many brokers, said she’s concerned the borough will run out of Class B and C space, which is at its lowest vacancy rate in six years. “It’s a problem we’ve been talking about for a long time,” she said.

Class B and C space, which caters mainly to small and mid-size firms, isn’t generally profitable enough for new commercial developments; it often comes from conversions and renovations. “There’s a real shortage of those spaces at any time,” said Chris Havens, chief executive of CRES Corporate Real Estate Services.

Although Verizon never put its building on the market after the company vacated it, Havens said he believes the building, which has struggled to sell its condos, would do well as Class B space. Displaced commercial tenants from One Hanson and various teardowns have all increased demand beyond supply, Havens said.

Travis, the City Point co-developer, worked for Forest City Ratner during MetroTech’s early years, when Downtown Brooklyn was desolate after dark. He said the city nearly lost Chase Bank (now JPMorgan Chase) to New Jersey before finally offering the company “a very significant amount of money … way beyond anything anyone would consider today,” to relocate its operations center to MetroTech. That was before new residents, retailers and restaurants made Downtown Brooklyn more desirable, he said.

“You would not give that level of incentive today because you wouldn’t need to,” he said.

Investment banks, which for many years fed the real estate boom by
offering easy credit, then packaging loan deals together in securities
and selling them to investors at a profit, have limped away from that
market. Comments

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Since the woes of the credit market accelerated last summer, multifamily and office building deals in Manhattan’s commercial market have come to a near standstill. But while Wall Street takes a breather from financing the city’s biggest deals, savings and loan banks and insurance companies that financed smaller deals in the past may be stepping up to the plate.

Large mortgage-backed securities from Wall Street are being shunned, at least for now. As a result, the city’s Harry Macklowe-size developers are saddled with debt and desperate to refinance nine-figure properties. And prospective buyers in the market are running into a severe lack of liquidity.

Some capital advisory experts The Real Deal spoke with said that one group in
particular, balance sheet lenders — a bank or fund that keeps all of its debt on its own books without packaging it into securities and selling it off, as the big Wall Street
lenders did — has begun to fill the gap
left by Wall Street’s secondary commercial mortgage-backed securities (CMBS)
market wizards.

“With a balance sheet lender, they keep your debt, so you just owe them money,” explained one commercial mortgage broker. “And if you don’t pay them, they just come take your real estate.”

Balance sheet lenders, also called portfolio lenders, include local savings and loan banks as well as life insurance companies. In New York, players include Capital One Bank (formerly North Fork Bank), Bank of Smithtown, New York Community Bank, Signature Bank, MetLife, Prudential and Royal Bank of Scotland.

Michael Campbell, a partner at capital advisory firm Carlton Advisory Services, said he is closing a mortgage deal for a Manhattan office building where a balance-sheet lender will provide about two-thirds of the equity for a $300 million purchase. Campbell did not wish to identify the property.

Other larger deals are also being financed by balance-sheet lenders, according to the advisory firms contacted by The Real Deal,
although none would disclose the lenders or the properties involved until the
deals closed.

It should be noted that the investment sales market’s smaller deals remain fairly unaffected by the CMBS drought. Purchases of small to medium-size properties, ranging up to $50 million for commercial buildings and up to $100 million for multifamily residential buildings, have always been financed by balance-sheet lenders, said Paul Massey, CEO of Massey Knakal Realty.

Balance sheet lending is nothing new — it was the norm before mortgage-backed securitized loans began driving Manhattan’s commercial market with eight- and nine-figure loans.

“The balance sheet lenders have always been there; they’re just taking advantage of being the only ones available now,” Campbell said.

Originations of CMBS loans nationwide are expected to fall dramatically throughout 2008, according to the trade publication Commercial Mortgage Alert. And mortgage brokers here said such loans have come to a flat halt in New York City. The biggest loans written for commercial investments in New York last year came from CMBS lenders, including Goldman Sachs, Bank of America, Lehman Brothers and Morgan Stanley.

For big loan borrowers, the exclusive niche balance sheet lenders now enjoy adds up to higher costs in the near term, as portfolio lenders no longer facing competition from big CMBS lenders can charge higher rates than they have in the past. They can also be more selective in their investments.

Campbell said that because balance sheet lenders these days typically only provide an average of around 65 percent of the equity in a purchase — compared to the average 85 percent CMBS lenders would have given a year ago — building purchases virtually always require a mezzanine loan as well, further adding to the cost.

Wall Street lenders would provide a higher percentage of financing, because they were willing to accept the projected value of a property if, for example, a landlord planned to raise rents on a multifamily property.

“Wall Street was telling borrowers, ‘If there is aggressive management, and you’re going to roll your sleeves up and make more profit, we’ll lend to you based on forecast,” said Matt Albano, a senior associate at GCP Capital Group.

“[With] savings and loan banks, it’s old-school lending. It looks like a Polaroid: You have this much money and expect this much debt; this is what we’re giving you,” Albano said. “So now, borrowers have to bring a lot more cash to the table.”

In addition to this shift in who provides the equity for big commercial deals, a change in how the loans are structured is now pending.

Since balance sheet lenders simply do not have the capital for the $500 million loans made by Wall Street lenders like Morgan Stanley or Bank of America last spring, the biggest loans structured for Manhattan commercial building purchases are now coming as amalgamations of equity from several different lenders.

Although this means big deals can continue to happen in a world without CMBS lenders, they are — and will continue to be — happening at a much slower pace.

Down the road, a borrower or its capital advisory firm may find itself courting several banks or insurance companies in order to attain the volume of financing it could have achieved with one big CMBS loan.

“Most of the deals we are doing right now involve
syndicating loans from several balance-sheet lenders — $100 million from one, $75 million from another, $50
million from two others, etc. — to make a larger mortgage,” said a member of a capital advisory firm who wished
to remain anonymous. “Now that every deal costs a
couple hundred million bucks, the deals are just taking so much longer.”

New York’s publications are on the move, and dislocations will be part of the landscape for the foreseeable future.

Newspapers and magazines are struggling to adapt to the migration of their readers to the Internet, and as they adjust, storied titles are making some changes in scenery as well. After the 2007 acquisition of Dow Jones, News Corporation founder Rupert Murdoch is reportedly planning to move parts of the Wall Street Journal away from its Financial District environs to Midtown. At the same time, beleaguered magazine Newsweek is said to be relocating its offices to the Financial District.

High rents in Midtown are spurring some of the departures south. Average rents in Midtown are reaching $83.92 per square foot but are less in Midtown South,
at $50.55, while they are averaging even
lower, at $47.26, Downtown.

In making the move Downtown, Newsweek would pay less, since rents at its likely new headquarters at 100 Church Street run between $45 and $53 a square foot — less than half of the $100 and up at its home on 57th Street.

And while there’s no confirmation of the impending move yet, the current lease expires next year, and the company has already told its landlord it’s not renewing, according to Robert Sammons, managing director of research at Colliers ABR.

Several other media companies are also heading Downtown and to Hudson Square, with others eyeing the Hudson Yards proposals for the far West Side as future headquarters sites.

Although Newsweek would likely be the biggest name to move Downtown, others include American Lawyer Media, publisher of American Lawyer magazine, which will begin moving employees into 90,000 square feet at 120 Broadway in July; Niche Media, publisher of Gotham and Hamptons, which will set up shop this summer at 100 Church Street; and Mansueto Ventures, publisher of Fast Company and Inc., which moved from Midtown to 40,000 square feet at 7 World Trade Center.

Recent media moves to Hudson Square, the area sandwiched between the Hudson River, Sixth Avenue, Morton Street and Canal Street, include New York Magazine, which relocated from Madison Avenue and 50th Street last year; Nature America, publisher of Nature Magazine, which moved from Park Avenue South in fall 2005; and CBS Radio and Clear Channel Communications (both mid-2007) as well as WNYC, which will be moving in phases that will be completed in June.

The shift may be part of a new cost-conscious paradigm — to go along with the industry’s fundamental shifts. Midtown West still has CBS’ headquarters, NBC is still camped out at Rockefeller Center, and the Hearst tower on West 57th Street is a locus of women’s magazines such as Cosmopolitan. But the location of media headquarters matters less than their ability to retain advertisers and readers — as long as that headquarters is somewhere in Manhattan.

Unlike other industries that can move to cheaper cities, “these are real New York businesses, and they need to be in New York. They don’t have the option of keeping their edge and relocating to Richmond or Tampa,” said Janno Lieber, president of the World Trade Center Properties, an affiliate of Silverstein Properties, which developed 7 World Trade Center.

Publishing companies’ margins are becoming smaller, so they look to save money on real estate, said Joe Hilton, senior managing director with commercial real estate firm Grubb & Ellis. “Media firms are moving Downtown for Class A space at rentals 30 to 50 percent less than comparable space in Midtown,” he said.

Driven by rents

The exodus to Downtown is really being driven by price, agreed Leon Manoff, executive managing director at GVA Williams. “Rentals in Midtown and Midtown South are exorbitant, and they’re rentals that a publishing company can’t support.”

These moves Downtown weren’t orchestrated, but happened organically, said
Dara McQuillan, spokesperson for Silverstein Properties.

“The area lends itself to more artistic
endeavors such as publishing,” said Sammons. “I certainly think, with the number of these firms relocating to Chelsea, Hudson Square, Tribeca and even Lower Manhattan itself, that media has shifted further south
in Manhattan.”

New York has seen this before. In the second half of the 19th century, Park Row was known as Newspaper Row because most of the city’s newspapers, including the New York Times and the Globe, were located there to be close to City Hall. The Sun Building at 280 Broadway was the location of the daily newspaper of the same name through four decades after the paper bought it in 1917. It’s now a landmarked building.

Hudson Square is also a former hive of
the printing industry and is full of warehouse-type buildings with large windows, providing excellent light, and open floor plans that formerly accommodated enormous printing presses. The floor plans suit the open newsroom style favored by many modern media companies.

Incentives for relocating Downtown are available to all businesses by the city’s Commercial Revitalization Program. Under the program, the Department of Finance offers a $2.50 per-square-foot real estate tax abatement for up to five years and exempts businesses from commercial rent tax if their annual rent is more than $200,000 per year. Businesses must be located in nonresidential, pre-1975 buildings south of Canal Street.

Getting together

American Lawyer Media is consolidating its operations to two locations from four, with the bulk of employees working Downtown. A small number of employees will be based outside the city, the company told The Real Deal, probably in Brooklyn or New Jersey.

ALM knew there were tremendous synergies to be derived from having everyone under one roof, said Manoff, who represented the company in its new Downtown lease. “It saves time getting to meetings, and the lines of communication will be greatly enhanced.”

“What’s increasingly apparent is that the currency of the workforce is no longer just about remuneration, but also about a great working environment and the amenities it can offer,” said Brandon Haw, senior partner with Foster and Partners, the developer behind the Hearst Tower in Midtown. “It’s also about feelings of success and the self-worth that [a good building] can engender.”

The next media movement could have gone toward Hudson Yards, until Tishman Speyer won the bid to
develop the site last month. News Corp. had signed on as an anchor tenant for the Related Companies’ failed bid, and Condé Nast was an anchor tenant in a 1.5 million-square-foot tower as part of Durst-Vornado’s unsuccessful proposal.

Still calling Midtown home

Now under the News Corp. umbrella, the Wall Street Journal is reportedly planning to move part of its staff from the World Financial Center to join the New York Post at the News Corp. headquarters at 1211 Sixth Avenue.

Hearst in 2006 opened the distinctive LEED Gold-certified Hearst Tower at 300 West 57th Street, with the goal of bringing all its publications and 2,000 employees together. The 46-story tower was built atop the company’s former six-story headquarters.

The New York Times relocated to a new headquarters tower at 620 Eighth Avenue last year from its old West 43rd Street building.

Condé Nast and Reuters have retained their Times Square offices,
although the former moved some publications to a building with a top-notch cafeteria at 750 Third Avenue.

The Associated Press moved its employees from Rockefeller Center, its home of 66 years, to 450 West 33rd Street in 2004. The new building has pulled all news departments onto one floor, which Kathleen Carroll, senior vice president and executive editor, said was designed to be “collaborative, energetic and creative.”

Rodale moved to 733 Third Avenue in 2001, recently adding an additional 29,000 square feet for a total of 145,000 square feet. The company renovated the building to make it look more like a Downtown space. It removed the dropped ceiling, maximized natural light in workspaces, lightened and opened the lobby and created a yoga studio.

Manhattan

Chelsea

$1.525 million

124 West 24th Street

1-bedroom, 2-bath, 1,170 sf condo in prewar elevator building; exposed wood beams and columns, custom kitchen; pet-friendly building has common rooftop cabanas; maintenance $748; taxes $455; asking price $1.55 million; 60 weeks on the market. (Brokers: Emma Hamilton, Corcoran Group; Halstead Property)

Chelsea

$1.05 million

420 West 25th Street

1-bedroom, 1-bath, 1,036 sf condo in newly converted building (Loft 25); common charges $1,242; taxes $461; asking price $1.05 million. (Brokers: Stribling & Associates; City Connections Realty)

Flatiron

$1.865 million

225 Fifth Avenue

1-bedroom, 2-bath, 1,249 sf condo in landmarked prewar building; 24-hr doorman, concierge; penthouse duplex has 11-foot ceilings, marble baths, views of Madison Square Park; common charges $483; taxes $1,019; asking price $1.9 million; 23 weeks on the market. (Brokers: Alan Pfeifer, Holly Palance, Halstead Property; Prudential Douglas Elliman)

Gramercy

$795,000

245 East 25th Street

1-bedroom, 1-bath, 700 sf co-op in postwar elevator building; 24-hour doorman, live-in super; newly renovated unit has Jacuzzi tub and terrace; building has roof deck and storage; maintenance $917; 47 percent tax-deductible; asking price $819,000; 26 weeks on the market. (Brokers: Charlie Summers, Bellmarc; Mickey Cohen, Micon Industries of New York)

Gramercy

$475,000

310 East 23rd Street

600 sf studio co-op in prewar building (Foundry); newly renovated kitchen and bath, oak hardwood floors, 11-foot ceilings; building has roof deck and laundry facilities; maintenance $875; asking price $495,000; 12 weeks on the market. (Broker: Renee Becker, Citi Habitats)

Greenwich Village

$2.85 million

1 Morton Square

2-bedroom, 2.5-bath, 1,483 sf condo in new construction building (One Morton Square); 24-hour doorman, concierge; 10-foot ceilings, hardwood, parquet and marble floors, marble bath, modern kitchen, walk-in closets, washer/dryer; maintenance $2,231; taxes $586; asking price $2.6 million; 19 weeks on the market. (Broker: Colette Rosenberg, Corcoran Group)

Greenwich Village

$720,000

425 East 13th Street

1-bedroom, 1-bath, 680 sf condo in new building (the A Building); 24-hour doorman; laundry room; building has rooftop pool with health club; common charges $680; taxes $240; asking price $720,000; 12 weeks on the market. (Brokers: Cantor Pecorella; Century 21 NY Metro)

Harlem

$279,000

235 West 137th Street

350 sf studio condo in prewar townhouse; building has laundry room; common charges $268; taxes $154; asking price $279,000; six weeks on the market. (Brokers: Catherine Holmes, Barak Realty; Jason Lanyard, City Connections Realty)

Lower Manhattan

$900,000

300 Rector Place

2-bedroom, 2-bath condo in postwar building; 24-hour doorman, concierge; wood floors, windowed kitchen; building has roof deck, private garden, fitness center and laundry; common charges $1,472; taxes $793; asking price $918,000. (Broker: Pierre Moran, DJK Residential)

Lower Manhattan

$815,000

2 South End Avenue

2-bedroom, 2-bath, 1,035 sf condo in postwar elevator building (the Cove Club); 24-hour doorman, concierge; balcony, southern and western exposures; common charges $2,880; asking price $850,000; two weeks on the market. (Brokers: City Connections Realty; Prudential Douglas Elliman)

Midtown

$1.875 million

160 Central Park South

1-bedroom, 1.5-bath, 1,365 sf condo in prewar elevator building; 24-hr doorman, concierge; building has maid service, health club, hotel services and business center; maintenance $2,810; taxes $1,593; asking price $1.95 million; 49 weeks on the market. (Broker: Paul Kolbusz, Corcoran Group)

Midtown East

$1.16 million

235 East 55th Street

1-bedroom, 1.5-bath, 861 sf condo in newly constructed building (the Capri); 24-hour doorman, concierge; floor-to-ceiling windows, granite kitchen, marble baths; building has laundry facilities; common charges $899; taxes $310; asking price $1.205 million; six weeks on the market. (Brokers: AIB Management Corp.; Edward Longley, City Connections Realty)

Midtown West

$1.48 million

635 West 42nd Street

2-bedroom, 2-bath, 1,042 sf condo in new construction high-rise (the Atelier); 24-hour doorman, concierge; building has full basketball and volleyball courts, sundeck, fitness and yoga centers; maintenance $837; asking price $1.495 million; eight weeks on the market. (Broker: Robert Nunley, Citi Habitats)

Midtown West

$945,000

350 West 50th Street

1-bedroom, 1-bath, 670 sf condo in postwar elevator building; 24-hour doorman, concierge; large windows, renovated kitchen, herringbone floors; building has health club and parking; maintenance $1,030; taxes $717; asking price $945,000; five weeks on the market. (Broker: Gabriel Bedoy, Corcoran Group)

Murray Hill

$1.25 million

136 East 36th Street

2-bedroom, 1-bath, 1,100 sf co-op in prewar building; live-in super; hidden closets, stained wood floors, marble countertops; building has marble lobby and landscaped roof deck; maintenance $1,565; asking price $1.35 million; four weeks on the market. (Broker: David Favale, Citi Habitats)

Soho

$3.55 million

22 Mercer Street

2-bedroom, 2.5-bath, 2,392 sf condo in prewar building; 11.5-foot ceilings, walnut floors, granite countertops; common charges $1,272; taxes $2,012; asking price $3.65 million; four weeks on the market. (Brokers: Corcoran Group; City Connections Realty)

Upper East Side

$1.61 million

515 East 72nd Street

2-bedroom, 2-bath, 1,027 sf condo in newly converted elevator building (Miraval Living); building has garage, garden, health club, spa, pool, valet parking, maid service and café; common charges $824; taxes $1,061; asking price $1.655 million; two days on the market. (Broker: Prudential Douglas Elliman)

Upper East Side

$650,000

179 East 79th Street

1-bedroom, 1-bath, 750 sf co-op in prewar building; maintenance $1,152; 50 percent tax-deductible; asking price $650,000; one week on the market. (Brokers: Rena Goldstein, Halstead Property; Sotheby’s)

Upper West Side

$892,000

44 West 62nd Street

1-bedroom, 2.5-bath, 1,000 sf co-op in postwar elevator building; 24-hour doorman; balcony, separate dining area, galley kitchen, hardwood floors; maintenance $1,717; 40 percent tax-deductible; asking price $899,000; 25 weeks on the market. (Brokers: Kristina Ojdanic, Greg Kammerer, Corcoran Group)

Upper West Side

$830,000

210 West 103rd Street

3-bedroom, 2-bath 1,050 sf co-op in prewar building; office, sunken living room, hardwood floors; building has laundry room and storage; maintenance $1,410; 50 percent tax-deductible; asking price $799,000; 12 weeks on the market. (Brian Lewis, Ayo Haynes, Halstead Property)

Brooklyn

Carroll Gardens

$749,000

98 Second Place

1-bedroom, 1-bath, 1,150 sf co-op in prewar building; wood-burning fireplace, newly renovated kitchen, washer/dryer, garden; maintenance $688; 62 percent tax-deductible; asking price $749,000; 13 weeks on the market. (Brokers: Brian Lewis, Gloria Macri, Halstead Property)

Dumbo

$1.18 million

100 Jay Street

2-bedroom, 2-bath, 1,260 sf condo in newly constructed elevator building (J Condominium); 24-hour doorman; marble baths, 10-foot ceilings, floor-to-ceiling corner windows, hardwood floors, washer/dryer, dishwasher; maintenance $851; taxes $23; asking price $1.18 million; 34 weeks on the market. (Broker: Michael Coleman, Corcoran Group)

You might expect Karl Fischer, a Canadian architect who designs upscale residential buildings in trendy New York City neighborhoods such as Chelsea and Williamsburg, to live in an apartment decorated with designer furniture and fixtures. Think again. He lives in a small condominium complex on a quiet side street in Manhattan’s South Street Seaport neighborhood.

Fashionably dressed, high-cheekboned residents drift in and out of the building on a weekday afternoon. But instead of a white-glove service lobby, the building’s entrance, next to a deli, is an anonymous glass door that opens onto a corridor leading to a courtyard with a Japanese-style rock garden with a stream of water running through it.

Fischer has designed about two dozen buildings, including luxury condos, but there is nothing about the décor of his seventh-floor penthouse residence that would earn it a photo spread in Architectural Digest. Despite his success, Fischer said he feels uncomfortable with luxury, and the décor of his apartment echoes this sentiment. The 900-square-foot pied-à-terre (Fischer has a home in his native Montreal, as well as one in Vermont) is functional with no wasted space.

In fact, the first thing you see upon entering the apartment is a half-dozen pairs of sensible shoes and sneakers arrayed against a wall.

To the left of the front door, a sunlit corridor leads past a row of rooms that include a plain-looking white-tiled bathroom, a sparsely furnished bedroom and a closet. The corridor ends at an open-plan room with a kitchenette, a dining island and a living room area dominated by two loveseats upholstered in gray corduroy. Most of the furniture was bought at Crate & Barrel during one big shopping expedition, Fischer said.

Two shiny end tables with curved legs stand out from the rest of the furnishings. They were given to Fischer by the owner of a furnished apartment that he used to lease at 25 Broad Street.

He said he never would have bought the tables himself because they are too ornate for his taste.

“I don’t feel comfortable with luxurious things; it is just my nature,” said Fischer, a compact man of 59 with a salt-and-pepper beard and moustache. “I just like basic stuff.

“I have a standard Volkswagen; I don’t have to get a BMW,” he said.

Still, the architect’s apartment has some unique features. Skylights and picture windows run along most of the southeastern side of the rectangular-shaped penthouse, and natural light floods the space.

From the dining island, there are wide-angle views across the East River to the Brooklyn shoreline, where several of Fischer’s completed residential projects are located. His hits include the Gretsch Building, a former musical instrument factory at 60 Broadway where celebrities like Busta Rhymes bought units, and the Schaefer Landing development on Kent Avenue, both in Williamsburg. (There is even a stretch along Bayard Street in Williamsburg nicknamed Karl Fischer Row because of his three condos there.)

On the other side of Fischer’s penthouse, a set of windows and a glass door that leads out onto an open-air terrace offer a sweeping vista of Lower Manhattan’s skyline.

Inside, some of Fischer’s interests and artistic sensibilities are expressed in the few artworks that are scattered around the living area.

Propped on top of a radiator cover are two Japanese-style watercolors that his wife, Pamela, bought from an artist in Central Park. Fischer said that he likes the way the artist creates a feeling with just a few brush strokes. In the corner of the room is a small sketch by Pamela of a butterfly.

On one of the kitchen cabinets is a
stencil sketch of a snowboarder that
Fischer’s son had printed on T-shirts for Fischer’s 50th birthday party, to commemorate his and his son’s taking up the sport that year.

When Fischer, who opened his New York architectural firm in 1999, and his wife purchased the apartment three years ago, they had not even bothered to look at any other properties on the market. Instead, they went to see the place on the first day that it was shown and decided to buy it right on the spot.

“If I like something like a painting, I will buy it,” Fischer explained. “Sometimes the more you look, the more confused
you get.”

What sold the Fischers on the apartment were its skylights and its many windows. Fischer said that the views and light make the apartment seem larger and enliven the whole space.

“You feel as though you are in touch with the outside world as opposed to being cut off from it,” he said. “It is fascinating watching the boats go up and down the river. Sometimes I fall asleep on the couch, and I have woken up at 4 in the morning and seen the sunrise — the light is just amazing.”

Fischer spends three days a week in Manhattan, weekends at his country house in Vermont, and the beginning of his workweek at his home in Montreal, where he also has an architectural office. He said that all three of his homes have open layouts, generous amounts of sunlight and great views.

His weekend home in the mountains of Vermont is a modern house with glass on three sides and a double-height living room.

“There, you feel like you are in the middle of the woods even though you are inside,” he said. “You can be in the living room at 5 in the morning, and a herd of deer will walk by.”

Natural light and views to the outside world are also important considerations in the buildings that Fischer designs for his clients.

“Whenever I design buildings, I am very conscious of where the light is coming from and where the views are,” he says. “If I can make an apartment have windows on two sides, I will. Or to avoid an apartment with only a one-directional view, I will punch out a bay window to create a space where someone can stand and look out in different directions.”

For Fischer, a major attraction of the South Street Seaport neighborhood is that it reminds him of the waterfront district in his native Montreal. Both neighborhoods are historic with relatively low-lying buildings and cobblestone streets.

He also likes the fact that he shares the seventh floor of his building with only two other apartments.

“I don’t like living in tall buildings,” said Fischer, who has designed towers including a 14-story and 24-story duo at Schaefer Landing. “I prefer being in a smaller building where I know my neighbors.”

Another draw for him is the easygoing familiarity of the Seaport and the wide range of small restaurants that are in the immediate vicinity. “I have something like five restaurants on this block. I can go to a different one every night, and they actually all know me,” he said, adding, “I also have a deli downstairs, and the guy there knows me too. He waves to me all the time.”

For Fischer, keeping his living space simple enhances the drama of the outside world. “I wouldn’t call myself a minimalist architect,” he said, “but I don’t like flowery or dressed-up places — I like the space, the light or the view to speak for itself.”

With the economy on the rocks, an increasing number of brokers are saying that the Manhattan rental market is softening. A recent report by the Real Estate Group New York showed that doorman buildings are performing the worst as buyers head for more no-frills options, though it also found that the overall market was faring better than in previous months. [Since then, the brokerage issued a new monthly report for March, showing further weakening in the market. It found a drop in rents of about 1 percent for one-bedroom apartments and a drop of almost 2 percent for two-bedrooms in Manhattan.]

In a recent Webcast interview, The Real Deal’s Jen Benepe spoke to Daniel Baum, chief operating officer at the Real Estate Group New York, to get the full story. The residential brokerage said its monthly market studies show a cross-section of data from thousands of rental listings below 100th Street and under $10,000.

Log on to www.therealdeal.com to see the full interview. And log on every Monday and Wednesday for a new edition of The Real Deal’s weekly Webcast, featuring a recap of each week’s breaking real estate stories and exclusive interviews with industry insiders.

The Real Deal: Your last few reports point to some weakness in the rental market, but your February figures said that the rental declines had finally slowed. What’s going on there?

Daniel Baum: What we found is, typically on a cycle, in January we would see a rebound in rents from a lull that happens in November and December. And this year, we didn’t find that to be the case. So in February when we saw that rebound happen, we thought that was quite notable. Had we not seen that happen, we would have a much less optimistic feeling going into this year’s rental season.

TRD: Despite the fact that rent declines are slowing, you did see some notable trends. Most notable is that rents are down in doorman buildings Manhattan-wide — even in coveted areas like Tribeca and Soho — and they’re up at non-doorman buildings. What do you think is going on, and do you think this has any relationship to the economy?

DB: Yes, I think it speaks directly to the economy. The fact that people are shying away a little bit more from the higher-priced luxury rentals and looking more towards the non-doorman no-frills in order to save money is a good indicator of what’s going on in the economy and in the general consumers’ minds.

TRD: Doorman building rents are down overall. With so many units coming on the market, are we going to see landlords at doorman buildings scrambling to fill vacancies?

DB: What’s interesting is, if you looked at November and December, you would see that prices had actually come down dramatically already. And landlords had, as you put it, been scrambling to offer incentives to renters to come to their buildings, and to brokers to bring their clients to their buildings. A lot of them would prefer — rather than lower rents continuously — to simply offer concessions to the renter. And a lot of times, it works.

TRD: Let’s talk about some of those new luxury developments like 10 Barclay and 95 Wall Street. What do you think is going to happen to those types of developments?

DB: I think these developers build buildings based on the larger-than-the-immediate marketplace. I think when they look at the overall marketplace of Manhattan, they still see it as an opportunity to build rental properties. So, though rents may be down today, a year from now, two years from now, five years from now, they expect rents to go back up.

TRD: You note in a report that the Lower East Side has emerged as one of the most expensive neighborhoods for doorman studios. What happened there?

DB: Well, the Lower East Side has become kind of a frontier for new development. But with the development of the Bowery and new projects like the Ludlow, and all the new development going on in that section, it’s really raising the Lower East Side to another level. [But] the Lower East Side still presents a lot of fantastic opportunities for very reasonably priced rents as well.

TRD: That lag in January is obviously a little bit unusual. Is it a sign of uncertainty?

DB: The lag itself brings about uncertainty. I’ve seen that January usually shows us, or maybe you might even say foreshadows, what’s coming up, and when you see a rebound from November and December in January, it’s a very good sign. When you don’t see that, and the market’s lagging — and in February, you see that rebound a little bit — you think to yourself, ‘Is the rebound real, or is it that maybe it should have taken place a month ago and we’re just behind schedule?’ I think as we go forward in 2008, we’ll see as to whether this weakness is just a downturn that we rebound from quickly, or whether this goes on longer than just this year.

The neighborhood of Washington Heights is currently a star of the Broadway show “In the Heights,” where a bodega owner sings and dances against the dramatic backdrop of the George Washington Bridge.

While that may be a romanticized depiction of the area, the largely Dominican and Latino neighborhood is increasingly becoming a destination for those getting priced out of other parts of Manhattan and gentrified Brooklyn.

The median household income has been rising in Washington Heights, which runs from 155th Street north to Fairview Avenue and is shouldered by the Harlem River on the east and the Hudson River on the west. The area saw telltale signs of change four years ago, when Starbucks and Staples opened.

Now, with the economic outlook looking bleaker by the week, several recent open houses there were busy with prospective buyers looking to relocate from rentals in more expensive parts of Manhattan or from pricey Park Slope in Brooklyn.

A 1,300-square-foot, three-bedroom co-op at 825 West 179th Street, which had been on the market for about two weeks, attracted a steady flow of apartment hunters.

The bright, second-floor unit, located in the Cabrini apartment building, was on eye level with the ramp to the George Washington Bridge. If that was a mark against it, it won points back with its view of the Palisades cliffs across the river. The asking price for the co-op was $559,000, and its monthly maintenance was $747.

For the sake of comparison, a two-bedroom co-op on 72nd Street is currently on the market for $1.29 million, and a three-bedroom co-op just north of that on 79th street is going for $1.65 million.

“This is the last bastion of affordability,” said Troy Johnson, 40, who has two dogs and was looking to buy in this pet-friendly building. He said he knew the neighborhood, but “I never thought I would live up here. Things change.”

Johnson, an actor who just finished a stint in the popular Broadway show “The Drowsy Chaperone,” said he
wanted to move from his rental some 30 blocks south on Riverside Drive.

“I have some friends that live up here,” he said. “I guess I’ll be close to the Riverside [Park] for my dogs.”

The co-op unit had a large open living room, a dining room, a renovated walk-in kitchen and a bathroom with a Jacuzzi tub.

A couple looking at the apartment liked the view and thought the span of the George Washington Bridge would look “cool” at night.

They also liked the area because of the proximity to 67-acre Fort Tryon Park, and to Bennett Park, a Revolutionary War site that overlooks the Hudson River. The Cloisters, a museum dedicated to medieval art, and Columbia Presbyterian Hospital are also nearby.

On 181st Street, one of the main retail strips in the area, eateries and bodegas are interspersed with dollar stores and flower shops.

Also at 825 West 179th Street, Maria Pascal of Prudential Douglas Elliman held an open house in a first-floor unit.

“We’ve had a few people, but it’s been quiet,” said Pascal, hoping that more apartment hunters would show up. “We just put this on the market, and this is the first open house we’ve held.”

The five-room unit was quieter than the one on the second floor. The asking price was $499,000, and the monthly maintenance was $622.

The roughly 1,000-square-foot unit had two bedrooms, a drawing room that is currently being used as a work space, 11-foot ceilings, a renovated eat-in kitchen with granite countertops and stainless steel appliances, and a railroad-style, 35-foot hallway.

At an open house farther south at 812 Riverside Drive at 157th Street, buyers milled around a renovated two-bedroom, two-bathroom unit.

The fifth-floor unit had an asking price of $1.04 million and monthly maintenance of $1,360. The marble lobby was accessed by a buzzer system through a large entryway and double glass doors.

Bianca Franco, who is 22 and works at Worldwide Biggies, a digital film studio in Times Square, was looking at the apartment with her parents and her boyfriend.

“We’re looking for a place where we can all live together,” she said, explaining that she was living in a small rental by herself on West End Avenue.

“The space here is incredible,” said Franco’s boyfriend, Michael Schere, 23, who works in Soho. “You really get your money’s worth.”

The 1,687-square-foot unit had a view of the river, a maid’s room/office that included a full bathroom, a triangular-shaped bedroom and three walk-in closets that would make any clothing hound salivate.

Another young couple was taken with the space but not the price.

“This is a good neighborhood, but not good enough for these prices,” said Marc Brooks, 30, a nurse at Montefiore Hospital. “These prices don’t reflect the recession — it should be a lot less.”

Brooks was checking out the open house with his wife, Melanie, 34, who is a high school teacher. “We want to own an apartment instead of renting,” she said. “But this is out of our budget.”

Citi Habitats broker Sandy Edry took them to see another condo in a neighboring building at 801 Riverside Drive. The apartment was an “add-on” to the open house at 812 Riverside Drive, meaning that a broker can accompany a buyer who expresses interest on the spot.

Some of the rooms at 801 Riverside, a prewar building, were irregular shapes — triangles, or parallelograms, because the building was on a triangular block.

Two side-by-side apartments had a combined asking price of $1.32 million with a $1,527 monthly maintenance. But for those not interested in spending that much, the apartments were available as two separate units.

Edry said Citi Habitats had three people interested in the property as a combo, but noted that they would need to tear down the shared wall. He said there were also a number of offers for each of the single apartments.

Combined, the two apartments would measure 2,000 square feet — the aggregated unit would include four or five bedrooms, two bathrooms, a formal dining room and living room.

“This is a conversion, non-eviction plan building,” said Edry, meaning that the tenants can decide whether they want to sell or continue renting.

The combined apartment was on the market for about a week.

“We’ve already sold about 14 units in this building,”
said Edry.

Hip isn’t the first word that comes to mind upon mention of Stuyvesant Town and Peter Cooper Village.

But the new owners of the mega-complex are hoping for younger tenants as they re-brand the property and continue to change some of the stodgier rules that have defined life at the development.

Some changes, such as opening up the lawns for play and sunbathing, have ruffled feathers and exposed a culture clash between newcomers and the old guard, who object to the more raucous atmosphere youthful residents bring.

In 2006, Tishman Speyer and BlackRock Realty made headlines when they bought Peter Cooper Village and Stuyvesant Town from MetLife for $5.4 billion, the largest single property sale in U.S. history. Sandwiched between the Veterans Affairs Medical Center on East 23rd Street and Alphabet City, the sprawling 80-acre complex of 110 buildings ranging from 12 to 15 stories was built after World War II, and was designed as housing for veterans and city workers.

In an effort to inject a bit of hipness and fill vacant apartments in the massive property, which has the appearance of a middle-class housing project, the new owners have created a marketing campaign touting a more sophisticated and youthful image. The marketing also makes use of the surrounding neighborhood, suggesting the blocks around the complex lend it some coolness.

A flurry of other changes announced last month also signals that the owners have a new attitude. Tishman opened a new health club located in space once occupied by a supermarket; it offered a month of free rent to signers of new annual leases and eliminated a rigid restriction on pets. For the first time in the complex’s history, cats and dogs up to 90 pounds are allowed if owners pay a onetime $250 fee.

The end of a MetLife prohibition on using the lawn for playing and sunbathing has sparked some indignation from longtime residents, who are unused to seeing bikini-clad young women lying on the grass outside.

Dividing the complexes

To create the marketing campaign, Tishman Speyer brought in branding firm G2 to develop a distinct identity for Stuyvesant Town and Peter Cooper Village, starting with separating the two complexes in its print ads and brochures.

“That was the longest brand name in the world,” said Rodger DiPasca, senior partner at G2, a part of Grey Global Group, which has worked with Rockrose Development, Blue Star Jets, Absolut and Cachet clothing stores.

The makeover team created two distinct logos and taglines: “Redefine Manhattan Living” (Peter Cooper Village) and “Love Your Space” (Stuy Town).

“If you stood at the corner of First Avenue and 20th Street, the dividing line between the two, you’d think there was no difference,” said DiPasca. “You have to enter the properties to appreciate what makes them different.”

Apartments are larger in Peter Cooper Village, where the buildings form a zig-zag pattern. The buildings at Stuyvesant Town are positioned around ovals, communal hubs that encourage interaction.

New Web sites attempt to appeal to a distinct demographic envisioned for each property.

For Peter Cooper Village, ads seem
targeted to married couples in their 30s and families by promoting its proximity to Gramercy Park, connoting a high-end
vibe. Text on the property’s new Web site reads, “80 acres of tranquility right here in Manhattan.”

To try and attract younger renters, Stuyvesant Town is presented as a civilized extension of the perennially hip East Village. The first line that pops up on the Web site reads, “Closer to Greenwich Village than to Greenwich, Conn.”

One promo photo for Stuy Town, used in a recent series of print ads in daily newspapers, depicts a stylishly disheveled couple in their late 20s lounging on the sofa, the woman holding a glass of wine. Views of a model interior feature funky furniture and bright colors.

On the new Peter Cooper Village Web site, marble bathrooms and more substantial wood furniture predominate. The couple shown drinking wine is older and more formally dressed than their counterparts on the Stuy Town site. Children, noticeably absent on the Stuy Town site, are featured prominently in Peter Cooper collateral.

As listed on the sites, monthly rents at
Peter Cooper Village start at $3,275 for a one-bedroom and $4,450 for a two-bedroom. One-bedrooms at Stuyvesant Town begin at $2,750; two-bedrooms fetch $3,800.

Close, but not too close

The marketing strategy makes sense, especially for a property that likely lacks cachet among younger tenants, said historian Barry Lewis, whose New York City-themed walking tours have aired on PBS.

“When you’re 25, you want to live where the action is, but when you near your 30s, the charm of living in a place where all of New Jersey and Long Island comes to get rowdy in the streets wears off,” said Lewis. “You want to be close to the bars and the restaurants, but not too close.”

His uncle lived in Stuyvesant Town, and “going there from our little apartment along the L train at the Brooklyn-Queens border, it was like paradise,” he said. “His apartment was much brighter, and there were playgrounds, open space and promenades.”

Three years ago, Justin Hoffman, 28, lived in a small studio on Bleecker Street. “It was outrageously loud and annoying to live there,” he said.

He found out about a $2,200 a month one-bedroom at Peter Cooper Village on the Internet. He was familiar with the property because he used to live in a dorm on East 25th Street when he attended law school.

“To me, it was a place where people spent years on a waiting list to get rent-controlled apartments, but when I heard that I could live there, I liked the idea of having a real apartment,” Hoffman said. “They’ve done a nice job renovating the complex, but it is what it is — an older building without any modern bells or whistles.”

He chafed when his rent went up to $2,700 after his first lease ran out, but he didn’t want to deal with the hassle of moving. He lauded the location, since he runs along the East River promenade, and when he wants to go out, he can easily hail a cab on First Avenue.

Stereos blaring

Many other twentysomethings have also taken to Stuyvesant Town, in some cases to the chagrin of existing tenants.

“They build pressurized walls and stuff four people into two bedrooms,” said longtime resident Soni Fink. “They come out in the hall to talk on their cellphones because there’s no privacy in their apartments and their stereos are blaring all night. This place is not like it used to be.”

The complex consists of about 70 percent rent-stabilized units; the rest go for market rate, said Al Doyle, president of the tenants association, who has lived there his entire life.

“The number of rent-stabilized tenants is dwindling,” Doyle said. “We’ve had a lot of senior citizens who have left for retirement homes, or moved out for medical reasons, or they’ve expired.”

Published reports place the vacancy rate at 5 to 10 percent.

“At Stuyvesant Town, the first thing you think of isn’t necessarily hip or happening, but the demographics are changing,” said Daniel Garodnick, city council member and lifelong resident of Peter Cooper Village. “I see more grad students and young professionals around here every day, but there are also a lot of empty apartments.”

Spring is in the air, bringing hope to Manhattan real estate brokers that the traditionally busy season will give a boost to a slow real estate market.

But a seasonal uptick may not be enough to spark a revival of a market dampened by the aftermath of the credit crisis.

“Historically, [April] begins the real ‘spring’ market after everyone has received their bonuses from the year before, taken stock of their tax returns and the weather turns better,” said John Wollberg, executive vice president of Atco Residential Group. “This year, I would predict more of the same level as we saw in March.”

In anticipation of the traditionally busiest season of the year, sellers have started putting their homes on the market, bumping up inventory.

“The upward trend in inventory we are observing at this time of year appears to be seasonal. The amount of the increase since the first of the year is within the range of increases seen in the past seven years since we began tracking this data,” said appraiser Jonathan Miller, president and CEO of Miller Samuel.

The number of Manhattan homes on the market increased in February from January, the most recent two-month comparison available at press time. There were 6,225 listings in February versus 5,926 homes the month before, a 5 percent increase, data from Miller indicates. Year-over-year, however, inventory dropped 1.1 percent from February 2007′s 6,292 listings.

The data does not appear remarkable.

“Inventory tends to rise from January to April as listings enter the market before the spring selling season,” Miller said. “Once sales levels increase in the spring, inventory levels off and then declines over the summer.”

At the same time, prices are going up, but not at a dramatic rate.

“We are experiencing increasing signs of a market in transition — pockets of swift sales, but otherwise longer marketing periods for apartments than has been the case in the recent past,” said Alan Nickman, an executive vice president at Bellmarc Realty.

Fallout from the credit crisis still lingers and, if the national market is any indication, won’t likely go away anytime soon.

“There is a chance there may be a slower sales volume due to the credit crunch and the percentage of uncertain approved mortgages, which reflects on the market negatively, but overall, the market will remain consistent,” said Dawn Tsien, president of the new developments division at Coldwell Banker Hunt Kennedy.

The median sales price ticked up 1.2 percent to $860,000 from $850,000 between January and February, according to data from Terra Holdings, parent company of Brown Harris Stevens and Halstead Property. Out of the East and West sides, Downtown and Northern Manhattan, the West Side saw the greatest jump in median sales price, to $1.3 million in February from $995,000 in January, a 26 percent change.

“This is due primarily to a bunch of closings at 15 Central Park West, and some other new developments including the Avery and 200 West End Avenue,” said Gregory Heym, executive vice president and chief economist for Terra Holdings.

The greatest drop was in Northern Manhattan, where the median fell 12.9 percent to $418,000 from $480,000 in January, Heym’s data shows. He attributes this to “fewer high-end new development closings. Developments have been inflating the overall median in [that] market for a while now.”

The data has been influenced by a spurt of residential sales in the luxurious 15 Central Park West as well as the Plaza Hotel.

“The interesting thing will be, when 15 CPW and the Plaza are done with all their closings, to see what happens to the numbers,” Heym said.

Manhattan’s rental market continues to show weakness. The average rent in Manhattan dropped in February to $3,180 a month for studios through three-bedrooms, from $3,221 in January, a 1.3 percent change, according to data from Citi Habitats.

“The rental market is showing signs of price decreases in cases where a landlord has multiple units available,” said Colleen Dwinell, sales agent at DJK Residential. “Landlords in certain instances are reacting to the fear of extra inventory and the unknown. It has been a landlord market, but there are signs that this is changing.”

What the pros had to say

Real estate brokers are crossing their fingers that business will be good this month. To get a sense of what is going on in the market, The Real Deal sent out a survey last month to industry pros. Following is a sampling of what the experts had to say.

Elizabeth Stribling, president, Stribling & Associates

We are seeing [price weakening] with sellers who originally overpriced their property in an overreach and also with sellers who are asking [for] dollars based on their personal needs rather than on market reality.

John Wollberg, executive vice president, Atco Residential Group

One positive trend is that ‘all cash’ purchasers have an opportunity to stand out in the pool of buyers and have a better opportunity to negotiate a more favorable purchase price.

Colleen Dwinell, sales agent, DJK Residential

At the moment, the sales market is not increasing or decreasing. People are waiting to see what will happen.

Alan Nickman, executive vice president, Bellmarc Realty

Previously, asking prices were just going up incredibly compared to previous sales, so instead of seeing rapidly increased prices against the last sale, we are now seeing modest increases against those numbers.

Samuel Thomas (Toma) Milbank, vice president and director, Brown Harris Stevens

I am finding that most sellers are pricing their apartments more reasonably. This has had a great impression on many of my buyers. [Yet] new developments are only going on for more and more money. There appears to be no adjustment with pricing from the
developers, and it appears to not have affected them.

Shaun Osher, founder and CEO, CORE Group Marketing

People are reducing their prices to something more reasonable. Some cuts are as little as 2 percent and as much as 20 percent, depending on how overpriced they are.

While last summer’s credit crisis pushed some homebuyers to the sidelines, recent news has prompted even more buyers
to put off their plans indefinitely. [more]

Fresh from graduation, tens of thousands of young renters arrive in the city each year, looking to rent in Manhattan. But the numbers are daunting: One-bedroom doorman apartments rent on average for $3,500 a month, and landlords want to see annual incomes of 40 or more times monthly rent before they give an applicant a shot at a lease. Some applicants bring in guarantors, but those co-signers have to show incomes of 80 times the monthly nut.

What are these fresh-faced hopefuls to do if they don’t have a high-paying job in
the financial sector (an increasingly less-likely scenario) or a parent making buckets of money?

Buy insurance, according to the Insurent Agency Corp., an insurance company founded by Jeffrey Geller and partners. Targeting these recent graduates, the company has just launched Insurent Lease Guaranty,
the first apartment lease insurance policy in the country.

“We are the institutional mommy and daddy,” said Geller. For individuals the company deems creditworthy, it guarantees payment on one-year leases in return for a one-time fee of between 58 and 70 percent of one month’s rent.

Insurent will guarantee people with annual incomes of a more modest 27 times the monthly rent, as long as their credit is sterling. It also offers pre-qualification certificates
applicants can bring to brokers and owners to expedite apartment approval.

“When you take a look at our primary target segment, college and professional school graduates entering the workforce,” said Geller, “the vast majority of these people — 80 to 95 percent — will not qualify on their own. So what happens is, by hook or by crook, they get their parents to co-sign, or they borrow from their friends or from their credit lines to put up the additional security.”

Landlords will often take five or six months’ rent in advance in order to accept marginal applicants.

In a city where vacancy rates rarely go below 4 percent — a landlord’s market if there ever was one — what’s the incentive for an owner to give preference to an applicant waving a lease guarantee when there’s a
line of qualified applicants stretching down the block?

The answer: Time is money. “Even with people lining up for that one apartment,” said Geller, “it’s still the goal of the landlord to rent the apartment as quickly as possible to the most creditworthy person. In the case where you have a co-signer, the process can take seven, eight or nine days,” he said, as opposed to three or four days without a co-signer.

Having just opened in early March, said Geller, Insurent Lease Guaranty is “in the landlord sign-up and acceptance phase.” Signing up requires the owner to take the guaranty in lieu of a co-signer. The renter still has to meet all other criteria, including proof of employment and a credit check.

So far, the biggest landlords to sign on have been the Icon Group, which owns more than 40 rental buildings with more than 1,000 tenants in the city, and Cape Advisors, whose rental portfolio includes 19 St. Marks Place in Manhattan.

Zach Levine, director of leasing for the Icon Group, figures the product is good for the city. “The landlords in Manhattan hold all the cards,” said Levine. “So why not help the tenant and give them another weapon in their arsenal — help get them into the city and thrive? You don’t want to keep people out of Manhattan.”

But Geller said some landlords are reluctant to sign up simply for fear of change. “Even if it costs the landlord nothing,” he said, “it still is a change from the status quo.” To encourage them to step out of their comfort zones, Geller said, “We keep the procedure exactly like what they do right now.”

Most rental real estate professionals find the lease guaranty insurance intriguing.

“It’s an interesting product, no question,” offered Gary Malin, president of Citi Habitats, the city’s largest rental brokerage. It’s attractive to tenants who might qualify for apartments that were previously just out of reach. He said, “It does give the landlord that one extra layer of comfort that maybe they didn’t have before.”

But, Malin added, “Landlords already do a lot of their own background screening to make sure that they’re getting a good, solid tenant pool. I think their qualification procedures prevent real major issues.”

Even if the rental market in New York City begins to slip in reaction to job losses, landlords will still likely stick to the stringent standards that have served them well for so long, rather than take a chance on getting stuck with marginal tenants.

According to Cliff Finn, Citi Habitat’s director of new development marketing, “I’ve been through up markets and
down markets, and in all the years I’ve been doing this, I’ve never seen any leniency in how people are qualified in terms of income and credit.”

The demand was there, the zoning allowed for it, and developers saw the lucrative opportunity to build out and market high-end residential projects in Downtown Brooklyn — perhaps too many developers. As of the end of last year, more than 14,000 new residential units were either in the pipeline or already under construction in the booming neighborhood.

But as the last units of the neighborhood’s first wave of new condos look for buyers, buildings are having a tougher time selling. And with plans killed for developer Bruce Ratner’s City Tech Tower, which could have been Brooklyn’s tallest building and the city’s tallest residential tower, and other residential projects seeing delays or no activity after being approved, late bloomers may not stand a chance in a market where the appetite for condos could already be satiated.

In addition to canceling the 600-unit City Tech Tower, Ratner has delayed plans to build parts of his nearby Atlantic Yards project, which called for 1,000 residential units in three towers in its first phase, followed by 5,000 units in 11 towers; it would be Brooklyn’s largest mixed-use development ever.

It is clear that buyers were drawn to the area at one point. In the first half of 2007, when major developments began to introduce a large supply of units, they were met with overwhelming success. At 110 Livingston, 300 condo units sold out in just over 13 months.

“You’re seeing an area that is kind of a teenager, and it is growing up now, showing a need for new development,” said Asher Abehsera, director of sales for Two Trees, developer and marketer for 110 Livingston.

But 110 Livingston benefited from getting ahead of the pack, starting sales in 2006, just before a handful of condos that opened sales at the end of 2006 or the beginning of 2007. And although they are almost all more than 50 percent sold, selling well in the first half of 2007, other projects see units languishing.

The prewar office-to-condo conversion Belltel Lofts at 101 Willoughby, a 219-unit project, still has 55 homes on the market and 23 in contract after 17 months of sales, according to the real estate research Web site StreetEasy.com. The project’s remaining units are priced from just over $500,000 to around $1.9 million, at an average of $700 per square foot.

J.J. Bistricer, a spokesperson for Belltel’s developer, MetroTech, cited the waning availability of home loans as a major culprit in the building’s sales slump. “You just have to be patient as a developer,” he said. “You see the trends, see that things are starting to settle; people are sitting back for a few moments … but soon they will come back.”

At 189 Bridge Street, 17 of the 58 units remain on the market after 15 months of sales, and four listings are in contract. Some apartments have seen price reductions, according to StreetEasy, and the remaining studio to two-bedroom apartments range from $500,000 to just over $1 million, or around $850 per square foot.

“The absorption rate just can’t withstand that much inventory within a quarter-mile radius,” said Kim Soule, vice president at the Corcoran Group. Soule also said that the overall housing market’s slowdown has added to the area’s problems. “We’re not seeing the frenetic new condo launches we did, where everybody rushes to buy.”

Oro Condos tower at 306 Gold Street, which dominates the view of the Flatbush corridor from the Manhattan Bridge, still has 18 units on the market after 13 months of sales, according to StreetEasy, as well as 92 listings in contract. The apartments, which haven’t seen any price drops, sell for an average of $750 per square foot.

The project’s developer, United Homes, owns another site across the street, at 313 Gold Street, where plans for a 35-story residential high-rise had been described to The Real Deal in spring of 2006. Plans for this second tower have not materialized, and United Homes did not return phone calls by press time.

But given the pace of the projects that have hit the market, experts are questioning whether developers who arrived late to the party are going to stay at all.

On Myrtle Avenue, on three blocks between Flatbush Avenue and Ashland Place, a massive mixed-use development planned by Gristedes supermarket chain owner John Catsimatidis has been delayed.

Originally slated for groundbreaking this spring, now only construction on the first of three phases, to include about 100 of the project’s 700 or 800 condos, will begin this year. Completion for that phase is expected in 24 months from its start date.

Catsimatidis maintained that the project’s slowdown is a result of a lack of financing in general, and unrelated to the condo supply nearby, or any other problem specific to the area.

“If you could name me which bank will give me $500 million, I’ll go there right now,” Catsimatidis said.

“And prices will soften on the other side of the fence too,” he said, referring to a possible slowdown in unit sales. “The banks are no longer lending [buyers] 95 percent of sales prices.”

Original plans for the project, which may have been changed with the delays, called for 552 market-rate units and 215 below-market-rate units.

The landmarked condo conversion One Hanson Place, developed by the Dermot Company, still has 20 of its 179 units on the market, according to StreetEasy, and one listing in contract since the first listings came on the market 22 months ago. The remaining units in Brooklyn’s tallest building are priced around $960 per square foot.

Brenda Vemich, vice president of Stribling Marketing and director of sales for One Hanson, claimed that sales have not slowed, but that the project sold gradually because units could only be shown as they were built out. She is bullish on the pace of sales for the remaining units, saying that the goal is to sell out by the projected completion date, at the end of summer.

A boutique development at 96 Rockwell Place, a prewar conversion, exemplifies the area’s fall-off in pace of sales. After selling half of its 36 market-rate units in the first four months, the project is still hanging on the market a year later, with eight remaining units and 21 apartments in contract. Marco Auteri, sales manager for Halstead Property, who is marketing the project, said he is confident the homes will sell out by the time the conversion is completed at the end of summer.

Some have attributed the slowdown in the last few months to a seasonal decrease in sales seen during the winter. Auteri said he has seen a noticeable increase in buyers’ interest since the end of February; three deals have been signed at 96 Rockwell since then.

Some experts said that new rental developments are a safer bet for the area. Lalezarian Developers, planning a four-story, mixed-use retail and rental apartment project at 235 Gold Street, a block north of Tillary Street, is doing just that. When completed in two years, the project will have 512 luxury rentals, retail space and parking.

While the firm has always built rentals, and so has not steered away from building condos in the area, it acknowledged that the condo oversupply in the area and the increasing difficulty for buyers to obtain a mortgage is good news for 235 Gold’s prospects. “I think a lot of potential residents in the area are now looking at rentals where they were looking at condos [before],” said Kevin Lalezarian, a principal of the company.

Lalezarian is also optimistic that having received financing for the project early on, it stands to do better than other rentals that may be coming into the area a little behind it. He said the project cost around $200 million, with $130 million in financing.

Abehsera of Two Trees cited sales at 110 Livingston as a testament to the neighborhood’s demand for homes.

He asserted that Two Trees benefited from having a “fan base” in the area, whereas an unknown entity there is likely to have a harder time selling. “There are a lot of products [from] a guy who owns a series of dry cleaners and convenience stores and is now a developer — and that’s not going to fly here anymore,” he said.

He also thinks that with standards set high in the first round of new condos and conversions in the neighborhood, future developers will have to try harder.

“If you’re not going to mirror the finishes of the previous builders and compete with your predecessors in the area, you’re not going to see buyers flocking to the product,” Abehsera said.

As the housing market sputters, condo buildings are
increasingly seeing residents fall behind on their payments of common
charges. [more]

Bona fide real estate companies may soon find themselves entangled
in massive mortgage fraud cases as more FBI arrests of corrupt brokers
are expected in the next few months, if not sooner.

Last year, the FBI
launched 1,210 mortgage fraud cases — up threefold from the 436 cases
launched in 2003. (The FBI only investigates mortgage fraud that is
worth $500,000 or more.) And for the past six months, the FBI has been
working with other federal, state and local agencies to further expand
its sting. In interviews with The Real Deal, FBI officials said
that more arrests will be announced soon and that crooked brokers
working for legitimate real estate companies are next on the list.

Crime networks from
Eurasia and the Middle East are running the biggest scams, said John F.
Campanella, the FBI’s supervisory special agent in New York.

“These are loosely knit
crime groups, and everybody disappears in the woodwork, including the
straw buyer and his counterfeit W-2 forms and worthless pay stubs,”
Campanella said.

But no matter how tight the crime networks are, they can’t succeed without help from legitimate real estate firms.

“We
arrest the street brokers at the first opportunity. But the street
brokers have to go to legitimate, licensed brokers to submit documents
to the banks. They process deals that they know are fraudulent: They
want a cut of the deal, and that’s where we have opportunity,”
Campanella said.

“The documents
presented by the banks at closings can help us see where the money
went,” he added. “That’s how we’ve arrested straw buyers and street
buyers.”

High up in a boardroom
at 26 Federal Plaza, a group of FBI agents and officials laid out the
mortgage scams in specific detail for a Real Deal reporter.

The
FBI employees are part of a mortgage fraud working group that also
includes members of the U.S. Secret Service, Housing and Urban
Development, the New York State Banking Department, the New York State
Department of Investigation, U.S. attorney offices and Veterans
Affairs.

“It grows each month. We are pooling our resources,” said special agent Kathleen M. Diskin.

About
90 percent of the mortgage fraud scams in the tri-state area occur in
Queens and Brooklyn, mainly because that’s where most of New York’s
single-family home units are, officials said.

As the price of homes
skyrocketed by the middle of this decade, so too did the number of
scams. According to the 2007 U.S. Foreclosure Market Report from
RealtyTrac, which tracks foreclosure properties, there were 2.2 million
foreclosure filings, default notices, auction sale notices and bank
repossessions reported nationwide on 1.285 million properties last
year.

That’s up a whopping 75 percent from 2006.

The report also shows
that more than 1 percent of all U.S. households were in some stage of
foreclosure during the year, up from 0.58 percent in 2006.

The rise in mortgage
defaults associated with subprime mortgage lending has created a group
of desperate homeowners who are so close to losing their homes that
they become perfect targets for mortgage fraud criminal networks.

Yet as big banks and
mortgage companies lose significant money in the frauds, they begin to
reach out to law enforcement with leads strong enough to launch
investigations. It’s then up to the prosecutor’s office to decide how
big a priority mortgage fraud should be, FBI officials said. Civil
litigation, officials said, is highly unlikely because the people
scammed out of their homes are left with nothing. They have no money
for shelter, let alone for lawyers to sue the scammers.

The homeless ex-homeowners have also possibly already been duped by lawyers paid for by the scammers.

Even
if those lawyers aren’t in on the scam, they are paid a quick buck
(usually $750) for their services, don’t ask questions and don’t take
the time to learn what the homeowners are signing away, let alone
explain the content of the papers to the homeowners themselves. While
the lawyers are often unethical, it has thus far been difficult to
prosecute them, as greedy incompetence does not automatically equate
with criminal intent to defraud homeowner clients, said the FBI field
agent.

The lawyers even have
the audacity to blame their clients. The agent said lawyers give
excuses like, “My clients didn’t ask questions. I was in a rush that
day.”

“They can deny knowledge of the fraud itself,” the agent said.

Law
enforcement officals also noted that lenders need to do a better job of
verifying potential homebuyers’ identities as well as credit ratings
and conduct their own property value appraisals instead of depending on
potentially criminally inflated prices.

In another type of
scam, ethnic crime networks buy and sell the same homes to each other,
raising the price per home each time in intricate pyramid schemes.
Homes valued at $300,000 in 2004 are flipped more than five times so
that their end price, when the scheme is busted out, is $800,000,
investigators said.

“And the straw buyer,” said an FBI
field agent, “pockets profit every step of the way.”

Butler, NJ

River Place

307 Main Street

More than 50 percent of the 68-unit project, developed by Heartstone Developments and Roger Mumford, was sold as of late February. The development has two-bedroom townhomes ranging in size from 1,442 to 2,036 square feet. Prices start at $300,000. Mary Cook & Associates is the interior designer of the homes, which are available for immediate occupancy. Contact: www.riverplacebutler.com.

Eatontown, NJ

Mill Pond

American Property Realty’s 118-unit condominium has sold 40 percent of its first phase of homes. The development’s two-bedroom residences range up to 1,600 square feet in size, and are priced from $200,000. All homes have a private balcony or terrace. Contact: www.americanproperties.net.

Jersey City, NJ

77 Hudson Street

Developer K. Hovnanian has partnered with Victory Hall, Jersey City’s community arts center, to exhibit art from the center at the 48-story, 420-unit project. The Cetra/Ruddy-designed development has one-, two- and three-bedroom units ranging in price from $500,000 to $2.75 million. Amenities include a roof-top park, swimming pool, hot tub, lounge, jogging track, dog walk, fitness center, private dining room and kitchen, children’s room, theater and game rooms. Contact: www.77hudson.com.

Jersey City, NJ

Grove Pointe

102 Columbus Drive

The 29-story, 458-unit development was 90 percent leased as of late February. The building, which was designed by DeWitt Tishman Architects, recently leased 65 of its rental units to St. Vincent’s Catholic Medical Centers. Rents for the studio, one- and two-bedroom homes start at $1,950 per month. Amenities include a landscaped deck, pool, fitness club, yoga studio, game room, private screening room and catering kitchen. Contact: www.grovepointerentals.com.

Construction update

Union City, NJ

The Thread

3312 Hudson Avenue

Construction on W Developers’ 14-story, 150-unit luxury condominium is underway, with completion slated for fall 2008. The development will have one-, two- and three-bedroom residences ranging in price from $300,000 to $800,000. Amenities include a recreation room, fitness center, children’s playroom, landscaped outdoor plaza, putting green, children’s outdoor play area and onsite parking garage. The exclusive sales and marketing team for the high-rise is Manhattan-based CORE Group Marketing. Contact: www.threaduc.com.

Sales update

New Brunswick, NJ

The Residences at the Heldrich

10 Livingston Avenue

The four-star hotel’s 48-unit condominium component was sold out as of mid-February. Homes vary in size, up to 1,325 square feet for a two-bedroom. Prices begin at $400,000. Amenities include a pool, exercise room and spa, as well as hotel services such as concierge service, room service, catering and housekeeping services. Contact:www.heldrichcondos.com.

Chelsea

Prima

130 West 20th Street

Sales began at the 36-unit, 14-story luxury condominium in mid-February. The building, designed by H. Thomas O’Hara, has one-, two- and three-bedroom apartments ranging from 555 to 1,860 square feet in size. Prices start at $700,000. Occupancy is slated to begin in spring 2009. Prudential Douglas Elliman is the exclusive sales and marketing agent. Contact: www.primachelsea.com.

Flatiron

15 Union Square West

Brack Capital has begun selling condos at its 36-unit redevelopment of the building that once housed the Tiffany company headquarters, the New York Sun reported. Perkins Eastman Architects designed the six-story addition to the building. The two- and three-bedroom units range in size from 1,700 to around 2,800 square feet. Prices range from $4.11 to $8.95 million. Amenities include a gym, swimming pool, valet parking and hotel services. Brown Harris Stevens is the exclusive marketing and sales agent. Contact: www.15usw.com.

Harlem

Riverside Drive Condos

660, 680, 690 Riverside Drive

Developer Pinnacle Group has renovated the three buildings, and some units are ready for immediate occupancy. The two-bedroom residences range in price from $180,000 to $600,000. Barak Realty is the exclusive marketing and sales agent for the project. Contact:www.barakny.com.

Lower Manhattan

Four Seasons Hotel and

Condominiums

99 Church Street

Larry Silverstein has announced plans for the 80-story development, which will have 143 condo units and 175 hotel rooms. The project, designed by architect
Robert A.M. Stern, is slated for completion in 2011. At 912 feet,
it will be the tallest residential building in Manhattan when completed. Corcoran Sunshine is the exclusive marketing and sales agent.

Lower Manhattan

The Setai, New York

40 Broad Street

Developers Zamir Equities and the Setai Group have named Platinum Properties the exclusive agent for four units at the building, which is being converted into a 167-unit luxury condominium.  The project’s units range from 582 to 1,161 square feet; prices start at $745,000. Amenities will include a rooftop lounge, spa, wine cellar, library, screening room and conference center. The Marketing Directors is the overall marketing and sales agent for the project. Contact: www.setainy.com.

Note: Correction appended.

Prospect-Lefferts

Gardens

Park Tower

27-35 Lincoln Road

Developer Henry Herbst has acquired building permits for the planned 23-story, 80-unit residential tower, according to news reports. The glass building, designed by architect Tom Gilman of Gilman Architects, will overlook Prospect Park.

Riverdale

Solaria

640 West 237th Street

Arc Development’s 20-floor, 56-unit luxury condominium is ready for immediate occupancy. The building, designed by SLCE Architects, has one-, three- and four-bedroom residences that start at $660,000. Amenities include a stargazing deck, valet parking, fitness center, lounge, entertainment center and children’s play area. The Marketing Directors is the exclusive sales and marketing agent. Contact: www.solariariverdale.com.

Soho

111 Mercer Street

Veracity Development is converting the vacant 11,332-square-foot, five-story loft building into
condos with ground-floor retail. A renovation by Grzywinski Pons Architects will include a new lobby and storefront, as well as four loft apartments and a 1,250-square-foot penthouse addition. The developer has received the required approval from the Landmarks Preservation Commission to renovate this building in the historic district.

Williamsburg

SteelWorks Lofts

76 North 4th Street

The 88,000-square-foot building is being converted to condominiums, Brownstoner reported. Apartments will range in price from $560,000 for a studio to more than $1 million for the largest apartments. Halstead Property is the exclusive marketing and sales agent. Contact: www.thesteelworkslofts.com.

Williamsburg

125 North 10th Street

The building’s sales and marketing firm, CORE Group Marketing, is utilizing so-called WildPostings, typically found at street entrances to subway stations and at construction sites to promote movies and CDs, to promote the 86-unit development. The firm will also use podcasts to advertise the project’s one-, two- and three-bedroom homes. Prices start at $575,000. Contact: www.125north10th.com.

Construction update

Carroll Gardens

The Oliver House

360 Smith Street

Construction began on the seven-story, 44-unit development in mid-March, Gowanus Lounge reported. Architect Armand Quadrini designed the 65,200-square-foot building, which will be 70 feet tall.

Chelsea

316 11th Avenue

Construction is underway for Douglaston Development’s 34-story, 369-unit luxury rental apartment. The building will have 4,000 square feet of ground-floor retail space and two levels of parking. Amenities will include a lounge, fitness center, banquet room and outdoor terrace. Occupancy is expected to begin early next year. Contact: www.douglastondevelopment.com.

East Flatbush

3692 Bedford Avenue

M & R Management broke ground on the eight-story, 51-unit rental apartment building in late February. The development will have studio, one- and two-bedroom apartments. Amenities will include a fitness center, laundry rooms, children’s playroom and storage facilities. The building, designed by Karl Fischer Architect, will also have ground-floor office space. Pre-leasing for the building is slated for January 2009, with occupancy anticipated for spring of 2010.

Harlem

Livmor Condos

2131 Frederick Douglass

Boulevard

Construction on the 73-unit, 12-story condominium developed by Joy Construction is underway, Curbed reported, with completion expected by spring 2009. The building, designed by Hugo Subotovsky Architects, will have 3,000 square feet of commercial space and a 17,500-square-foot church, as well as a roof deck and gym.

Financing

Williamsburg

44 Berry Street

Wrightwood Capital provided $17.5 million in financing for the acquisition of two vacant buildings totaling 45,000 square feet. The space will be converted to 42 residential units with 13,600 square feet of retail space. The development will have one-bedroom units with about 1,000 total square feet. Amenities will include a common rooftop deck area.

Sales update

Brooklyn Heights

One Brooklyn Bridge Park

As of early March, Robert Levine’s 449-unit condominium complex was more than one-third sold, the New York Post reported. Prices range from $525,000 for a studio to $7.75 million for a triplex penthouse. Amenities include private storage, a children’s play room, yoga studio, game room and golf simulator. Parking spaces are also available and range from $128,600 to $281,000. Stribling Marketing Associates is the exclusive sales and marketing agent. Contact: www.onebrooklyn.com.

Fort Greene

One Hanson Place

As of mid-February, when the last nine units of the Dermot Company’s condo conversion hit the market, the 179-unit landmark building was 70 percent sold. The building contains one- and two-bedroom units ranging in price from $830,000 to $5.875 million. Amenities include a clubroom, terrace, business center, children’s playroom and fitness center. Stribling Marketing Associates is the exclusive sales and marketing agent. Contact: www.onehanson.com.

Midtown East

Trump World Tower

First Avenue and 47th Street

The last condo in Trump’s 376-unit luxury development was sold in late February. The development has one-, two- and three- bedroom units that range from 580 to more than 2,800 square feet. Units sold for between $825,000 and $22 million. Amenities include hotel service, a private spa and health club, swimming pool, restaurant, private wine cellar, landscaped garden and valet parking.

Soho

The Machinery Exchange

136 Baxter Street

Max Protetch’s 14-unit building was 60 percent sold as of
early March. The loft apartments range in size from 1,300 to about 3,000 square feet, with prices between $1,200 and $1,900
per square foot. Stribling Marketing Associates is the exclusive marketing and sales agent. Contact: www.machineryexchangecondo.com.

Upper East Side

Old Stanhope Hotel

995 Fifth Avenue

As of mid-February, all but five
of the 26 units were in contract
at Extell Development Company’s co-op conversion, designed by John Simpson & Partners Architects. Residences range in size from 4,100 to 8,400 square feet and are priced from $12 million, the New York Observer reported. Amenities include a fitness center and wine storage room. Corcoran Group Marketing is the exclusive marketing and sales agent. Contact: www.995fifthave.com.

Upper East Side

The Laurel

400 East 67th Street

As of early March, the Alexico Group’s 31-story building was
10 percent sold, amounting to $30 million in sales. Designed by Costas Kondylis & Partners, the LEED-certified building has
studio to six-bedroom homes ranging from 460 to 4,000 square feet in size. Prices begin at $820,000. Amenities include a fitness center, screening room, atrium lounge, private dining room, catering kitchen, game room, craft room, multimedia computer room and on-site parking. The Sunshine Group is the exclusive marketing and sales agent for the project. Contact: www.laurelcondominium.com.

Upper West Side

Avery

100 Riverside Boulevard

Extell Development Company’s 32-story, 274-unit luxury condominium was 90 percent sold as of mid-February. The building, designed by SLCE Architects, has one-, two- and three-bedroom units at prices ranging from $900,000 to $3 million. Amenities include a screening theater, game room, courtyard, library, entertainment lounge, parking garage, fitness center and children’s playroom. Corcoran Group Marketing is the exclusive marketing and sales agent. Contact: www.averyriverside.com.

Between the pending extension of the No. 7 subway line, the tabled
expansion of the Jacob K. Javits Center, the fragile economy and
Governor Eliot Spitzer’s shocking resignation last month, there are a
lot of balls in the air for development on Manhattan’s far West Side. [more]

With 40 stories and 1.1 million square feet of Class A office space to
lease, including 53,000 square feet of retail, SJP Properties has its
work cut out for it at 11 Times Square. The $1.2 billion development at
42nd Street and Eighth Avenue is the largest speculative, or spec,
building under development in New York City. [more]

The developers famous for transforming Dumbo from a seedy industrial area into a hip enclave are joining the stampede of builders who have grand plans for another of the city’s last frontiers — the far West Side.

David Walentas and his son Jed envision an ambitious mixed-used development — which would be one of the largest projects in the neighborhood — on 11th Avenue between 53rd and 54th streets. The 32-story building would have 900 rental units and ground floor retail in a design the Walentases said minimizes the impact on the streetscape. But some in the community oppose the zoning changes needed to allow a building of that scale, and the project faces an uphill battle obtaining city agency approvals.

Neighborhood resistance has thwarted projects by the Walentases’ company, Two Trees Management, in the past. While David Walentas’ early bet on converting vacant industrial buildings in Dumbo paid off, there was opposition more recently over Two Trees’ proposed Dock Street development adjacent to the Brooklyn Bridge.

In Clinton, where Two Trees is working for the first time, some neighbors suggested that they overpaid for the land and shouldn’t be granted a larger building just to allow the investment to pay off.

Two Trees paid $130 million for the far West Side site, a former Verizon parking lot, in 2006. The company began excavating the 94,463-square-foot lot in November, but its plan to begin building this year faces plenty of hurdles. The site, zoned for light industrial, needs a raft of agency approvals before the project can move forward. A spokesperson for the Department of City Planning said Two Trees’ application is being reviewed but would not comment on when it might be certified, which would begin the formal public review process.

The proposal also needs an environmental impact statement, unusual for a spot rezoning, and aspects of the plan will need approval from the Board of Standards and Appeals, the Housing Finance Agency and ultimately, the City Council and Speaker Christine Quinn, who represents the area.

The Walentases declined to be interviewed for this story, but in documents filed with Community Board 4, Two Trees describes its plan for the site. In addition to 900 rental units (including 180 designated affordable), the project would bring a 16,000-square-foot grocery store; 31,000-square-foot health club; a car dealership along 11th Avenue; and 28,000 square feet of horse stables to relocate the Police Department’s mounted unit.

The building, dubbed Clinton Park, has a design created by Enrique Norten of TEN Arquitectos, the architect of the One York condo project in Tribeca. Renderings show a terraced S-shape that rises from seven stories at its base along 11th Avenue to 32 stories at its mid-block peak. The site is across 11th Avenue from DeWitt Clinton Park, and the design evokes a staircase zig-zagging from 11th Avenue to nearly the top of the 457-foot AT & T tower to the east.

According to a proposal filed with the community board, the development would require $120 million in equity from Two Trees, and would be financed with tax-exempt bonds from the Housing Finance Agency in exchange for making 20 percent of the units affordable. That financing may also be in doubt since the HFA announced in January that less money would be available under the 80/20 bond program, which is in high demand by developers.

Neighborhood opponents

There have been few projects of such scale so far west in the neighborhood; if it is approved, Clinton Park could be a sign of things to come.

“This particular section of town at the moment is the last developable land in Manhattan,” said Tom Cayler, a member of the West Side Neighborhood Alliance who opposes the Two Trees project.

The city plans to rezone 11th Avenue from south of the site to 43rd Street, now a strip dominated by auto dealers. And as developments take shape to the north (like the Extell and Trump towers rising along the Hudson above 59th Street) and south (like the planned Hudson Yards redevelopment), interest in the western edge of Clinton is growing.

That’s what the Dermot Company and Archstone (now part of Tishman Speyer) said they believed when they bid to develop city-owned land between 51st and 53rd streets on the west side of 10th Avenue. The partnership acquired the land for $30 million in 2005 with a proposal to build a pair of 24-story towers with 627 rental units and 23,000 square feet of retail. The development, known as Archstone Clinton, includes 20 percent affordable units, performance space for nonprofit theaters, and a public garden and arcade. Construction finished in February, and less than 20 percent of one tower remains to be leased.

Daniel Doern, vice president of development at Archstone, said he believes people and businesses have grown more comfortable moving farther west. “Our project has had a tremendous impact, and I think it’s kind of shifted the balance of the neighborhood to the other side of 10th Avenue,” he said. “For a long time, 10th Avenue was kind of the edge.”

With that shifting interest, the discount on the cost of land has disappeared. “There was a time when the land prices were lower here,” but that’s no longer the case, according to Jeremy Scholl, community manager of the Archstone Clinton. “A lot of people compare this to what Chelsea was eight or 10 years ago.”

But neighbors uneasy about the Two Trees plan fear the consequences of large-scale development in the area. While even critics praise the Walentases for meeting with the community early on and soliciting concerns, they say their proposal is just too big.

Anna Levin, chair of Community Board 4′s Clinton/Hell’s Kitchen land use committee, said the board would be more receptive to a building on the scale of the 24-story Archstone Clinton towers. But Two Trees’ request for a total floor area ratio of 9 — which would require both a zoning map change and text amendment — would set a bad precedent for development along 11th Avenue, Levin said. The board has pushed for a FAR of 7.5.

Some say that Two Trees is pushing for the exception because it needs a larger building to profit on its $130 million investment. “The problem again, the way that we see it, is
because they so overpaid, they can’t get their money unless they get their 900 units,” Cayler, of the West Side Neighborhood Alliance, said.

The Walentases are trying to court the neighborhood, Levin said, noting that “there are aspects of the plan that are very appealing to the community,” including the decision to center the building’s bulk in the middle of the block and keep the façade low on the side facing DeWitt Clinton Park. Two Trees agreed to put affordable units on every floor, not just the lowest floors, and included the Police Department stables at the board’s suggestion.

Two Trees is also appealing to the officials who will ultimately decide the project’s fate. The Walentases recently maxed out their contributions to the Council Speaker’s likely mayoral campaign: David, Jed and Jane Walentas each gave Quinn the maximum $4,950 contribution in January, according to campaign finance records. They have also given a combined $4,300 to Manhattan Borough President Scott Stringer’s campaign.

In addition, the company has paid law firm Wachtel & Masyr more than $37,000 in lobbying fees since it bought the site in 2006, according to public records. Because the law firm has worked on other Two Trees projects in Brooklyn, it is not clear how much was allocated for the Manhattan project.

Both the community board and Stringer will weigh in during the public review, but Quinn’s support will likely make or break the plan. A spokesperson for Quinn said it would be unusual for the speaker to comment on the project this early in the process. But she could hold the key to whether Two Trees’ latest bet pays off.

Before residents move into their glass curtain wall condos or new “prewar” buildings, before the construction starts and the sales office opens, there is an architecture firm wrestling with a concept. Often, that concept evolves and changes strikingly from the original plans.

This month, The Real Deal went behind the scenes with one New York City architectural firm to see how a project goes from the drafting board and blueprint phase to the high-end units that brokers and developers boast about selling.

The firm, Della Valle Bernheimer, is erecting a boutique 11-story condo at 459 West 18th Street, which is expected to be finished in October. Apartments at the building range in size from 1,450 square feet for a two-bedroom to 3,500 square feet for a penthouse unit and cost between $1.78 million and $6.9 million. There are currently only three units left.

Architect Jared Della Valle, 36, explained that he and his partner, Andrew Bernheimer, bought the property 18 months ago after a search that lasted more than a year.

Because the property is L-shaped and sits next to the new, all-glass Chelsea Modern condo building, the firm had unique constraints when coming up with the design.

The idea started with a back-of-a-napkin sketch (see sketch, right) and evolved through a series of revisions, including one that incorporated the financial realities of the market, which sent the team back to the drawing board at the 11th hour (more on that shortly).

Della Valle said the team working on the project, which consisted of about five people, began with 30 to 40 options before it narrowed the design down to the stark, angular black-and-white building it settled on.

According to the architect, they gave themselves a very tight four-month deadline for the design and the documentation because they were acting as both the developer and the architect.

“We treated the start of this project as if it had an immovable completion date, like a competition,” Della Valle said.

The 30 to 40 design options included many versions of the same four main designs. Della Valle categorized them like this: articulated party walls with a curtain wall cascade; articulated frame with a curtain wall canvas; a monolith with punches; and slipping or nesting objects.

As the sketches above show, the final design falls into the last category with a white, glass trapezoidal shape “slipping” or “nesting” into the black, aluminum-paneled façade.

Della Valle outlined several challenges that the project faced. First was the zoning, which requires an 85-foot setback. Second was the shape of the land. About half of the 50 feet of frontage running along 18th Street is 50 feet deep, while the other half is 100 feet deep. And third was being next to the Chelsea Modern, which has a horizontally shaped design.

“We were deliberately looking to strike these vertical lines to create this stopping point,” he said. “It’s making a vertical gesture versus a horizontal one.

“The shape we ended up with,” he added, “is actually the mathematical formula that the zoning resolution provides for.”

A design process like this almost always involves some trial and error. In this case, they tested the building with different façades, trying stone and the black exterior to see which would work better. And they ultimately chose glass “punch-out” windows, with some pieces measuring 45 feet by 8-and-a-half feet, that run along the front façade like movie screens.

The building’s last-minute revision came after they submitted the condo filing to the attorney general’s office, about two weeks before the plan was scheduled for approval. On their broker’s advice, they decided to change the mix of units to include only one unit per floor, with some duplexes, rather than a mix of smaller apartments. Their sales team said the area was about to be flooded with smaller apartments. The design changes and new documents took about 30 days to prepare.

“It was very stressful, but it made sense given our new understanding of the competition,” Della Valle said. He said the larger units were something that they had wanted to do all along, but “had a hard time committing to” because they believed there was greater appetite in the market for apartments below $1.5 million.

Once the design was finalized, the architects had another challenge. The site had very tight physical parameters that would mean there would be very little margin for error in construction. The builders decided to prefabricate elements of the glass and aluminum so they could be dropped in place by a crane once the frame of the building was erected.

The frame topped out in early March. The façade will take 13 days to install by crane. It was supposed to be installed in March, but was delayed because of the moratorium on crane usages resulting from the Upper East Side accident last month.

That is just one of the unexpected realities of drafting a condo in New York. The three units left in the project, which will include a concierge service, are going for $2.73 million, $2.85 million and $6.9 million.

Once this building is done, the 10-year-old firm will move on to the next project. Della Valle declined to say what that would be, but noted that it is “much bigger,” and it’s in Manhattan.

Call it New York’s “green rush.”

Since 2006, nearly 60 planned new apartment projects around the city have been shown to the U.S. Green Building Council, with promises to minimize their environmental impact.

To do so, these projects must earn 26 of 69 points on a scale created by the Leadership in Energy and Environmental Design (LEED), the country’s most popular green benchmark.

But the rush for that green imprimatur might have more to do with public relations than eco-friendliness, according to consultants, environmentalists and developers.

Critics say that when marketing materials claim a building is “trying for LEED,” developers can be making a misleading statement too early in the process, because what really counts is the certification, which can happen up to a year after the building is completed.

And these critics say some buildings are shooting for bare-minimum “certified” ratings — below silver, gold and platinum — which in many cases is just a half-step above basic building code requirements.

The USGBC has recently tightened standards, but the best way to thin the ranks and see which developers are truly
committed may be to concentrate instead on the building process instead of the finished product.

“Instead of starting with your end point and saying, ‘How can I get these credits?’ developers would have to focus more on how they actually build their walls,” said Auden Schendler, an LEED consultant and the environmental director at Colorado-based Aspen Skiing Company, which owns resorts.

Without that restructuring, critics say LEED’s scoring system is imbalanced because it equates siting a building a half-mile from a subway line — easy to pull off in Manhattan — with diverting 50 percent of demolition debris from landfills (both earn 1 point).

“If you’re a game-playing person, certification can mean very little,” said Derek Denckla, a principal of Dumbo-based Propeller Group. Denckla is nevertheless seeking gold certification for Greenbelt, a five-story condo in Williamsburg.

Greenbelt’s eight units, ranging from 750-square-foot one-bedrooms to 1,100-square-foot two-bedrooms, are priced from $599,000 to $815,000, and one has sold since February, said Denckla, who’s co-developing the project with architect Gregory Merryweather.

LEED’s administrative costs, which pay for an inspector and often for outside consultants, can add 5 percent to a project’s “soft costs,” or in Denckla’s case, $190,000. That can be onerous to small developers, he said.

Indeed, Susan Boyle, a principal with Brooklyn developer Big Sue, decided at the last minute to abandon plans to seek silver certification for the Nassau Brewery Ice House, a six-unit apartment she built in 2004 in Crown Heights.

Organizing the receipts proving that its contents were made of recycled materials into the thick packet that LEED boards require would have been too time-consuming, and getting someone else to do it would have cost “at least tens of thousands of dollars,” Boyle said.

“But we accomplished our goal of using sustainable methods,” she said, “though we don’t have a plaque to show it.”

Mark Rossolo, a director at Green Globes, a competing rating service based in Portland, Ore., said that LEED places too little emphasis on how far materials must travel before they reach the construction site.

“Making the system more about life cycle assessment” could make LEED less pliable, Rossolo said.

Creating a more useful rating system could be rendered moot if building codes adopt much of what’s espoused by LEED, Green Globes and others.

Seeking these hard-and-fast standards, as opposed to LEED’s voluntary guidelines, is a goal of the National Association of Home Builders, which this spring will unveil its National Green Building Standard. Four awards, bronze, silver, gold and emerald, will be given, said spokesperson Calli Schmidt.

Like LEED, the standards won’t be prescriptive but will evaluate buildings once they’re up and running, though Schmidt promised they won’t generate LEED’s high level of paperwork. And they will create universal standards, unlike various local building codes.

The USGBC, in an apparent response to the backlash, strengthened its guidelines last June; it’s now a requirement,
not an option, for buildings to be 14 percent more efficient than regular building codes dictate.

By November, the point system will reach “version 3.0,” which will expand LEED’s point scale from 69 to 100.

That will allow categories to be weighted more accurately, said Russell Unger, executive director of the USGBC’s New York chapter.

Future changes could also require building materials with more sustainable life cycles, he said.

“If you care about the environment and human health, you go for LEED. If you want to save money, you go for it. And if you care to sell buildings, you go for it,” Unger said. “At the end of the day, we’re building better buildings.”

Some builders agree that the system isn’t imperiled, said George Aridas, an executive vice president with the Albanese Development Corporation.

The company has built two of the only five certified residential New York buildings — Tribeca’s Verdesian and Solaire — with another, the Visionaire, now rising at the southern end of Battery Park at 70 Little West Street.

“Yes, there are some low-hanging fruits in urban areas,” Aridas said. “But LEED is not as manipulatible as some would have you believe.”

Go to Chart: Accidents on the rise with increase in construction activity

First there was the glass craze; now there is the blinds craze. Throughout the city, developers and builders of glass buildings are increasingly shelling out serious money to give buyers a reprieve from fishbowl living by including shades and creating a uniform look in their new construction.

In some cases, the cost to outfit each apartment with the blinds, which are often motorized and made from sleek, space-age-type materials, can reach five figures. At 40 Mercer Street, the Jean Nouvel-André Balazs building, for example, developers spent $843,000 to install more than 600 motorized shades in all 44 units. That’s just over $19,000 per apartment.

“Window treatments can be extremely costly depending on the materials used. Good fabric drapes can cost tens of thousands of dollars,” said Leonard Steinberg, executive vice president at Prudential Douglas Elliman. He is handling sales at 200 11th Avenue, the Annabelle Seldorf-designed building that will provide motorized shades at a cost of $25,000 per unit. “The value to a building is consistency
from the exterior — even if it’s not an all-glass structure.”

Jon Gmora, account executive at DFB Sales, a shade manufacturer and installer in Long Island City, said, “Shades have long been an afterthought, but they are now
being considered sooner than they used to be in building design.

“Motorized shades can go for $10,000 to $20,000 depending on many factors, including fabrics, installation details and the number of motors,” he said. At the Chelsea Modern at 447 West 18th Street, the developer is including shades worth $8,500 to $10,000 in each unit.

“We’re giving the whole package, not just an empty shell,” said Andrew Harris of Madison Equities. “When residents go to bed the first night they move in, they won’t have to hang sheets across the window. We planned on doing this from the word ‘go’ because it gives the building’s façade a uniform look — and it protects their art, their furniture and their floors.”

Carter Peabody, a filmmaker who lived for years in a prewar West Village apartment, snapped up the last one-bedroom at the Chelsea Modern. He agreed that having the developer provide shades will take care of both the privacy factor and the hodgepodge of different window dressings that would have sprouted up and detracted from the building’s overall appearance.

When he first toured the property, Peabody said he was “seeing dollar signs as I looked out the windows,” thinking about how much it would cost to get custom-made shades.

“But when I heard that the window coverings were included in the plans, I was thrilled that I wouldn’t have to go through the hassle of tracking them down on my own, or spending the thousands of dollars that I had envisioned,” he said.

The shades are, of course, a far cry from Venetian blinds, velvet drapes or even standard-issue office shades. The four-figure models come in recessed coves called “ceiling pockets” that allow the rollers to disappear overhead when not in use.

Also, with the help of guide wires, no window or skylight is too hard to cover, especially if the devices are installed during a building’s construction phase, when walls don’t need to be broken through.

At 48 Bond Street, the building’s canted windows prompted the developer to take matters into his own hands. Donald Capoccia, principal at BFC Partners, the building’s developer, said it took time to have shade coves carved and to coordinate the framer, the drywall contractor and a special electrician.

Incorporating the 4-by-6 inch ceiling pockets into a building’s plans added to the upfront costs, but arguably added value to each unit.

“We’ve all seen buildings where the curtains or blinds can get like a circus, and I didn’t want that to happen here,” Capoccia said. “I looked at the architectural plans for the façade and saw that these were exceptional windows, and that it was important to have a consistent approach to the treatments that would go into the building and maintain some integrity to them.”

In some cases, architects, designers and developers are outfitting units with low-voltage wiring to power motorized shade rollers, along with other remote-controlled appliances. At 48 Bond, which is sold out and opened last month, buyers have been offered a palette of six different colors to cover the 6-foot-wide, 8-foot-high windows. Most of the 15 units contain four windows and will cost buyers $3,500 to $5,000 to outfit.

No one has complained, Capoccia said.

At the Visionaire, located at 55 Battery Place in Manhattan, the Albanese Organization is touting its ceiling pockets and wiring for motorized blinds not just as a luxury, but also as a green feature that helps with temperature adjustment and protects against UV rays. Albanese estimated that the cost of installing electric wiring and ceiling pockets, but not the blinds, is around $3,000 per apartment.

Gmora of the Long Island City shade manufacturer said some solar-controlled shades automatically adjust to the level of brightness in a room, which “cuts down on the
building’s heat load.”

He said business is up by about 20 to 25 percent.

Review by Dorn Townsend

“The Deal”
By Adam Gittlin
Oceanview Publishing, 442 pages, $24.95

At last, a thriller set in the world of commercial real estate brokers. The hero is not a spy, detective or law enforcement officer, but a hard-boiled and resourceful Manhattan broker.

He’s hired by a Russian conglomerate looking for New York office towers as a way to diversify assets. On the surface, this sort of assignment should come easily to Jonah Gray, one part of a four-member team that competes for lucrative deals. Yet the half-billion-dollar offer comes with two significant caveats: The proceedings must be confidential, and the Russians need to wrap up the transaction in less than three weeks.

These provisos set Jonah and his team off on a hectic adventure. Each member of his team must identify and woo separate, and sometimes reluctant, property owners. Jonah’s attempt to pull together his buyout proposal becomes complicated when, at a wedding in the Hamptons, someone slips him legendary — and recently stolen — Russian jewels.

As author Adam Gittlin describes it, elite Manhattan commercial brokers inhabit their own high-stakes milieu. They’re not only chasing multi-million-dollar commissions but pursuing the good life of cocaine, dinners at Balthazar and trysts with high-heeled, thong-wearing babes.

The book’s action also unfolds in real estate offices, which is where Gittlin taps his insider knowledge. (Gittlin used to work as a commercial broker for SL Green Realty Corp. and now is the principal at his family’s firm, Gittlin Companies Inc.)

For instance, older tycoons like to spend long lunches at the Four Seasons restaurant accompanied by pretty young gold-diggers. Despite the city’s anti-smoking laws, being able to light up a cigar in the city’s bistros is a symbol of status. And bottom-lining in a conference room is one thing, but bonding over a lap dance at the Penthouse Club is also important.

With the exception of Jonah, commercial brokers don’t come across as all that likeable. When they’re not dropping into “warrior mode” during negotiations, name-dropping and status envy are rampant. Gray relishes the time he and his colleagues spend “at Il Mulino for dinner with clients, or the Rainbow Room for lunch to discuss strategy … . We had expense accounts larger than most Americans’ salaries.”

Gittlin also pulls back the curtain on the structure of office leasing deals, details that are often hidden. “The way the commission on a sale works is quite elementary. For the first 5 million dollars of the purchase price, the commission is 6 percent. On the portion between 5 and 10 million, the commission is 4 percent. On the portion between 10 and 50 million, 3 percent. If the price is higher still, on the portion between 50 and 100 million, the commission is 2 percent. Any portion that goes over 100 million is calculated at 1 percent. The aggregate number, keeping in mind that this structure is subject to negotiation, is the price tag for the service.”

In the typical thriller, the problem-solver is attentive to shadows lurking around every corner. In “The Deal,” however, Gray foils the bad guys while also appraising
assorted properties. The challenges of overcoming problems with taxes and understanding variations in commissions for multi-year leases, minutiae strongly delineated in this novel, will appeal to some. Others may yawn.

Gittlin isn’t above having a body fall out of a closet, but he does not indulge in car chases or disguises
or (much) hand-to-hand combat. To thwart the plans of
his devious Russian adversary, Gray deploys unorthodox
property maneuvers. Here’s an example: “So what we’ll
do is work the cost of the asbestos abatement, or
removal, into the overall price, which will simply decrease the total value on a per-square-foot basis by a couple
cents. Then we’ll use these savings to handle the problem ourselves instead of tying up the transfer of ownership
by having them deal with it. Piece of cake.” “The Deal”
is rife with these kinds of tactics of property leasing
and sales.

Along the way, Gray traverses broker parties, the
conflicts of bidding wars and certain vagaries of property management. Because he romanticizes these processes, readers in the industry may see the drama of their work with fresh eyes. (Don’t worry, there’s also a lot of sex, lies and scheming.)

One of the novel’s failings is that it takes so long
to get started: Nearly a third of the book elapses before the subplots emerge. However, when they do surface,
coincidences arise, and what falls in place are the satisfying conventions of the thriller genre, such as jeopardy, conspiracy, shootout and the saving of friends.

What Gittlin does very well is to situate the action in
the new gilded age of Manhattan’s real estate hurly-burly.
In the process, he captures selected aspects of family dynasties in real estate, the adrenalin of deal-making, and the
joy of spending other people’s money.

In Gray, Gittlin has created a likeable exemplar of
a striver who, in shaping the flow of commerce, becomes
a target. The pleasure of this book lies in following a
headstrong Jonah around town as he learns that certainties can be upended.

Atlanta

Equity Depot, a firm that tracks foreclosures in Atlanta, concluded that the number of foreclosure notices issued in metro Atlanta from January to February 2008 climbed 45 percent from the year-ago period. Georgia had the third highest home-loan delinquency rate among states in the fourth quarter of 2007, behind Mississippi and Michigan, the Atlanta Journal-Constitution reported. The news came as delinquency rates in the U.S. climbed to the highest recorded levels in 22 years, according to the Mortgage Bankers Association of Washington, D.C.

Boston

Office rents at some of Boston’s most desirable locations have topped $100 a square foot for the first time in nearly a decade, the Boston Globe reported. The average asking rent at the city’s Class A office towers is approximately $67 a square foot, but some owners of top-quality properties are asking $80 to $95 a square foot. That’s up from the low of $38 a square foot at comparable buildings in 2003. According to Jones Lang LaSalle, which represents Boston’s largest office landlord, the Blackstone Group, the last time office rents exceeded $100 a square foot was in 2000.

Chicago

The Chicago metro area’s top 10 homebuilders closed on just 7,200 new homes last year, down from 11,400 in the prior year, the Chicago Sun Times reported. They saw $2.6 billion in revenue in 2007, down from $3.5 billion in 2006. In years past, builders with more than $20 million in revenue didn’t make the top 50 sellers list; in 2007, the 50th-ranked builder on the list had only earned $9.3 million. The No. 1 seller on the list, Pulte Homes, credited its relative success last year to the large amount of business it got from referrals.

With demand for environmentally friendly housing on the rise in Chicago, residential developers are increasing the amount of green features in their buildings, the Chicago Sun-Times reported. Dynaprop Development Corp. is building the eco18, a 12-story, 93-unit condominium tower that will be powered with the largest geothermal energy system in the city. The system is expected to decrease residents’ energy costs by up to 40 percent; units will start at $279,000. Meanwhile, Related Midwest is building 340 on the Park, which could become the first residential building in the Midwest to meet the Leadership in Energy and Environmental Design (LEED) certification guidelines.

Detroit

There were 3,591 single-family home and condo sales in the metro Detroit area in February, up 12.8 percent from the year-ago period, according to Realcomp, a Michigan provider of multiple listing and real property information services. Realcomp president Karen Kage said the rise in sales can be attributed to the increase in foreclosed homes on the market, which has caused home prices to depreciate by as much as 15 percent, the Detroit Free Press reported. The city of Detroit saw the greatest increase in the area, with a 49.4 percent jump in sales in February compared to the previous year.

Las Vegas

Second-home buyers and vacationers from Las Vegas have long found the suburb of Summerlin a desirable destination, even as the region’s real estate market has sagged, the New York Times reported. Developers have created more housing and amenities to accommodate vacationers who enjoy the community’s comfortable distance from Sin City; Summerlin is just 12 miles northwest of downtown Las Vegas. Data from local firm Home Builders Research indicate that new housing units in Clark County have increased 55 percent since 1998, to nearly 257,000. Home prices in Summerlin start in the high $200,000s and exceed $10 million.

Los Angeles

Higher-priced neighborhoods in the San Fernando Valley are starting to show negative signs of the subprime loan debacle, with foreclosures more than tripling in January from the same period last year, the Los Angeles Daily News reported. San Fernando Valley foreclosures jumped 324 percent, which amounted to 534 families losing their homes, according to California State University researchers. In addition, 1,360 homeowners received default notices. The residential market from Glendale through Calabasas also took a hit, with a 50 percent drop in home sales in January from last year; the median home price fell 16.7 percent, to $525,000, in the same period.

Around 300 miles north of Los Angeles, Mammoth Lake-area developers are counting on a pair of luxury hotel and residential developments to revitalize the resort town’s second-home market. The Ritz-Carlton Residences, slated to break ground in May, will feature two- to four-bedroom units of up to 4,000 square feet; prices will range from $1.7 to $6.5 million. The 230-unit Westin Monache Mammoth condo-hotel opened in November after having sold 131 units in an April 2005 pre-sale and the rest four months later, the Los Angeles Times reported. Mammoth Lakes Multiple Listing Service data show that 22 percent fewer condos sold in 2007 than in the previous year.

Philadelphia

Philadelphia’s sagging housing market could finally be improving, with showings in some neighborhoods up substantially since last year’s 50 percent drop-off from August to the end of 2007, the Philadelphia Inquirer reported. First-time homebuyers are taking full advantage of the current economic climate in which sellers are more willing to make a deal. Although the market slowdown has made financing a new home more difficult, the FHA has increased loan limits to $420,000 for metro Philadelphia. In addition, Freddie Mac recently reported that 30-year fixed-interest rates had begun to fall.

Phoenix

Two high-end Scottsdale office towers, the Portales Corporate Center I and II buildings, sold for approximately $383 per square foot, the most ever paid for an office property in the Valley, according to Grubb & Ellis. The majority stake in the properties, located at 4800 and 4900 North Scottsdale Road, sold for $172.7 million to Principal Financial Group of Des Moines, Iowa, the Arizona Republic reported. The seller was a joint venture between locally based Forum Capital and Pacific Coast Capital Partners. The buildings have a combined 450,000 square feet of space. The previous Valley record was held by the $373 per-square-foot sale of the 24th at Camelback I building in Phoenix in 2006.

San Francisco

February was another slow month for Bay Area home sales, with new home sales and resales dropping 36.7 percent from the year-ago period, to 3,989, the San Francisco Chronicle reported. The median sales price also declined 11.6 percent in February from the same period in 2007, to $548,000; the figure also represents a 17.6 percent drop-off from the peak median sales price of $665,000 in June and July 2007. In an effort to boost home sales, the limit on conforming mortgages in high-cost regions like the Bay Area has been raised to more than $700,000 as part of the federal stimulus package. All counties except San Francisco, Marin and Santa Clara recorded double-digit drops in the median sales price in February.

Seattle

Total home sales in King County declined 36 percent in February compared to the same period last year, though house and condo sales increased by 421 from January 2008, the Seattle Times reported. Year-over-year sales in February declined 25 to 38 percent in surrounding counties, according to the Northwest Multiple Listing Service, with the biggest drop coming from Kitsap County and the smallest decline reported in Piece County. Inventory remained high in King County in February: There were 69 percent more houses, condos and townhomes on the market compared to February 2007.

Washington, D.C.

Commercial leasing activity in Washington declined 28.4 percent from 2006 to 2007, to 23.4 million square feet, the Washington Post reported. Cutbacks in federal government leasing activity as well as a looming recession are to blame, according to brokers. The slowdown could be bad news for developers in the area, where 15.8 million square feet of commercial space is currently under construction in 129 buildings. Only 18 percent of office space under construction in the District was pre-leased by the end of 2007, according to CB Richard Ellis. The region’s average vacancy rate shot up to 10.4 percent last year, the first time in three years it reached double digits, data from research firm CoStar show.

The ads scream from the pages of
local newspapers: “Original price: $1,002,488. Sale price: $803,358. You save: $199,130.” “Deals of a lifetime weekend event: Make us an offer!”

It’s no secret that new home builders are slashing prices on houses in South Florida. But lately, buyers have been getting off the sidelines, and inventory — in some locations — is starting to move.

Just how low are prices going? And how big are the deals that buyers are picking up?

Ask accountant Karen Harris. In January, she closed on a four-bedroom, two-and-a-half-bath house at Sunset Falls in Miramar, a project by Sunrise-based G.L. Homes of Florida. Although the 3,412-square-foot home was originally priced at $545,470, Harris paid just $417,000, a savings of $128,470, or 24 percent. Plus, G.L. threw in extras: 16″-by-16″ tile downstairs and a waiver of its 1 percent builder’s fee. Harris said G.L. even offered her a credit for closing costs that would have amounted to $7,000, but her bank wouldn’t allow it. “I was there at the right time,” she said. “I negotiated, and they worked with me.”

The fire sale on new home
pricing in South Florida is being driven by a confluence of excess inventory, low buyer interest, record-low levels of builder confidence, and pressure on builders to cover escalating
carrying costs, which are eroding profits on existing inventory.

“It’s very difficult for homebuilders right now,” said Brad Hunter, director of the South Florida division of Metrostudy, a housing industry research and consulting firm. “There’s still downward pressure on prices.”

Hunter said that in addition to the apparent market factors, builders are starting to feel squeezed by competition from local banks, whose inventories of new homes are swelling due to builder foreclosures. “Up to now, banks have been very stubborn about pricing the homes in their inventory,” he said. “I think later on this year, we’ll see more and more of them taking lower bids for the properties just to get rid of them.”

Hunter said new home builders have already slashed prices by 20 to 25 percent from their peak. The greatest discounts are available on the Treasure Coast, he said, where housing projects from Fort Pierce up to Indian River County are under the most stress.

Builders are taking varying approaches to cope with the challenges of today’s market.

“We negotiate on price, options, upgrades and closing dates,” said Marcie DePlaza, division president of G.L. Homes. “We’re even doing special incentives where we put in window treatments, accessories and light fixtures. Those are all incentives for a home purchase, because the house is then in move-in condition.”

Buyers can grab houses at prices 20 to 25 percent less than they were a couple of years ago, she said.

G.L. is also buying down interest rates, offering free homeowners association dues and throwing in other perks to make deals — depending on the demand for the project, for the particular house, its location and how long it has been on the market. Buyers who are already prequalified for a mortgage are considered “a hot prospect” and have the most leverage.

Coconut Creek-based Minto Communities is using a different approach to sell homes in a tough market. “We started working on new product in the spring of 2006, when we started to really see that the market was going to deteriorate,” said Harry Posin, the firm’s president. “We’ve introduced all new product in every one of our communities.”

At Olympia, a Wellington community that Minto has been selling since October 2001, new models are what Posin called “market-priced — not where the market was, but where we believe the market is today.”

According to Posin, a buyer can pay 30 to 35 percent less for a lot with a newly designed model at Olympia than for the product originally planned for that lot. As long as buyers have good credit, they can pick up homes at 2003 prices — before the run-up started.

Condominium developers are discounting the prices of new units as well, said Peter Zalewski, founder of Condo Vultures, a market analysis firm in Bal Harbour. But despite the glut of available units, he said builders are reducing prices only by about 10 to 15 percent, choosing instead to wait and see if they can move unsold or defaulted units in bulk to the various funds searching for block purchases. “No developers or lenders that I am aware of are willing to discount units on an individual basis by more than the deposits kept from defaulting buyers,” he said.

Zalewski believes what will really drive pricing of condos is the foreign market. “If foreign buyers are willing to accept minor discounts of 15 percent off original pricing, the developers will be fine,” he said. But “if the foreign buyers want deeper discounts, the market could get bloody.”

Ft. Lauderdale units keep coming

Despite declining sales volume and prices in Fort Lauderdale, residential developers continue to seek and obtain approval for new developments. On a single day in mid-March, developers received approval for 629 condo or rental apartment units in the city. All of the projects had been approved a few years ago but stalled, and will now move forward.

Two condo developments, Coconut Grove Residences and Bamboo Flats, opened their doors last month, and construction of several large projects in the city is currently underway, including the 172-unit project Sapphire, which topped out last month, and the rental complex Satori. Some developers in the city are shifting projects from condos to rentals, which are easier to finance.

Palm Beach mansion seeks $81.5M

Billionaire philanthropist Sidney Kimmel is selling his Palm Beach mansion at 1236 Ocean Boulevard for an asking price of $81.5 million. The 18,000-square-foot waterfront house was designed by architect Thierry W. Despont. Kimmel paid $5.5 million for the property in 1993 and demolished the previously existing house. The estate’s first open house, in early March, was so exclusive that its Corcoran Group sales team invited only 25 buyers’ brokers.

Florida’s foreclosures tripled in 2007

Florida’s rate of foreclosure tripled in the fourth quarter of 2007 from the previous year, according to the Mortgage Bankers Association. The recent subprime crisis has hit Florida and California harder than most states, the association said. The two states accounted for 30 percent of new foreclosures, while they represented only 21 percent of outstanding loans.

More than 5 percent of loans in Florida were over 90 days delinquent, trailing only four states in the percentage of home loans that were “seriously delinquent” or in foreclosure.

Bal Harbour complex underway

The Related Group and Starwood Resorts & Hotels have broken ground on the three-tower, 27-story hotel-condo project at 9701 Collins Avenue in Bal Harbour. The project, called St. Regis Resort & Residences, will have 268 condos, 36 hotel-condos and 183 hotel rooms on 9 acres. The project’s sell-out value is estimated at more than $1 billion. The all-glass tower complex, which is expected to be completed in 2010, will also hold a 15,000-square-foot spa and a fitness center.

Insurers cut homeowner policies

Thousands of Floridians will lose their homeowner insurance policies as insurance companies continue to cancel them or shift their policyholders to other underwriters. Insurance companies plan to drop thousands of Florida policy holders this year, claiming that covering damages to homes in Florida has become too risky a business.

State Farm and Nationwide, among the largest homeowner insurers in Florida, indicated they would cut a combined 90,000 policies nationwide beginning this year. The state-backed Citizens Property Insurance, along with some small new private insurers, are stepping in to fill the gap.

Developer buys half of Dolphins

Developer Stephen Ross, chairman of New York-based Related Companies, is purchasing a half-stake in the Miami Dolphins from owner Wayne Huizenga for $550 million. Related, developer of Tower Condominium at CityPlace in West Palm Beach and other projects, has 12 properties total in South Florida. Pending the NFL’s approval of the transaction, Ross will acquire half ownership of the team, as well as Dolphin Stadium and some developable land nearby. Huizenga has announced plans to invest around $250 million in stadium renovations, expected to be completed by 2009.

Oversupply drives down condo prices

An estimated 25,000 condos were on the market in Miami-Dade County as of the beginning of March, according to the Multiple Listing Service, and 12,000 to 15,000 are expected to come online in the next 18 to 24 months. With a rate of about 10,000 condos sold per year, the oversupply has brought prices down as much as 40 percent in Miami-Dade County.

Although condo sales in Florida were down an average of 27 percent in 2007 from the year before, the price drops are expected to attract investment and second-home buyers from elsewhere in the U.S. and abroad.

Ft. Lauderdale OKs street fixes

The city of Fort Lauderdale has approved a plan for streetscape improvements near the downtown projects of two developers. Avenue Lofts was paid $365,900 for street work around Foundry Lofts and Mill Lofts, while Flagler Junction was paid $230,600 for work near the Bamboo Flats. The city agreed to use property tax funds collected in the northwest Fort Lauderdale/Progresso/Flagler Village area.

Boca Raton developer sues bank

A bank is being sued by Florida developers for revealing details of a secret land deal in Boca Raton. The lawsuit, initiated by developer Greg Talbott, seeks $180 million in damages from Fifth Third Bank and Mission Capital Advisors. According to Talbott, the banks wrongly exposed a $50 million deal to sell four plots of his land in downtown Boca Raton to another developer, Tom Crocker.

The lawsuit alleges breaches of confidentiality and fiduciary duty and invasion of privacy, saying that the bank and capital advisory revealed the price Talbott is willing to pay for the land, jeopardizing the deal.

Plenty of change is in store for a two-block stretch of West 23rd Street, where one cinema has closed and two eateries have shuttered.

It’s a corridor that has so far been underserved by major development, brokers said.

After a five-year search, the School of Visual Arts has finally found itself a venue at the recently shuttered Chelsea West Cinemas at 333 West 23rd Street, between Eighth and Ninth avenues. The 20,000-square-foot space will be used for lectures, class meetings, film screenings and other public events, said Michael Grant, the school’s assistant director of communications.

The school signed a 26-year lease at Clearview Cinemas’ two-screen theater, which has auditoriums with 550 and 350 seats.

“We want it to be a real destination,” Grant said, noting that the school plans to announce soon that it will host live programming open to the public.

The school, which has about 4,000 undergraduate and graduate students, has taken occupancy and plans on running a limited number of movies in the spring, before renovations commence in the summer.

Designer and SVA acting chairman Milton Glaser, who created the graphic and decorative programs for the World Trade Center’s restaurants, will design the building’s interior and exterior. The fully renovated building will have a new name, the Visual Arts Theater, and will reopen in the fall.

SVA has had to make do for the last several years by renting off-campus sites, such as the Loews Kips Bay movie theater at 570 Second Avenue and the New York Directors Guild Theater at 110 West 57th Street. The school needed a space large enough to accommodate big events, including meetings for the school’s 500-person administrative staff. The largest classroom at the school can fit up to 200 people.

Chelsea West Cinemas, which opened as the single-screen RKO 23rd Street in 1963, closed in mid-January. The theater is just one block away from its busier Clearview sister theater, Chelsea Cinemas at 260 West 23rd Street, between Seventh and Eighth avenues.

West 23rd Street has “kind of stayed the same” while other “areas have developed,” said Robin Abrams, an executive vice president and one of the principals at the Lansco Corporation. “It’s a strange corridor.”

Both a Ben & Jerry’s and a Burgers & Cupcakes between Seventh and Eighth avenues have recently closed.

Kenneth Rosenblum, a co-owner of Standard Realty Associates and the landlord of 265 West 23rd Street, the two-story building that housed Burgers & Cupcakes on the first floor, said that he has received inquiries about the 1,900-square-foot space.

Rosenblum is asking $125 a square foot in rent for the location.

Larger, full-service restaurants on West 23rd Street like barbecue joints Dallas BBQ and Rub, both near Eighth Avenue, and chain restaurant Outback Steakhouse, east of Sixth Avenue, appear successful, brokers said.

Madison Avenue might be the quintessential American luxury shopping
strip. But as rents continue their steep rise and the dollar remains
weak, many domestic retailers are looking north of the traditional
ultra-exclusive span from 57th to 72nd streets. [more]

Bushwick hasn’t lived up to the hype of recent years as Brooklyn’s next up-and-coming neighborhood for young buyers priced out of Williamsburg, and now it has fallen prey to the downturn affecting many fringe neighborhoods.

The area has a fair share of public housing projects, with few restaurants and shops. Amenities associated with gentrification have been slow to materialize, and many old buildings have not been restored. Sales have slowed, and at least one appraiser sees development slowing this year as well.

Still, despite the gloomy picture, a number of developers have new projects rising, some in the neighborhood’s industrial area. Optimistic brokers are betting that buyers will indeed move east along the L train line, seeking bargains.

Several ground-up projects with over 100 units are planned for the neighborhood. Construction has started on Troutman Gardens, a 140-unit condominium by developer Mayer Schwartz, who built the Opera House lofts in East Williamsburg.

Brokers are hoping to attract buyers with prices under $500 a square foot for loft spaces in renovated stone houses that offer a relatively quick commute of about 20 minutes to Union Square. While the most attractive areas are around the Jefferson Street L train stop, some developers are pushing the boundaries and going farther east, close to Bushwick’s border with Ridgewood in Queens.

At 358 Grove Street, a new ground-up, high-rise building with large windows went on the market last September. The first two months of sales were slow — the building’s location is close to the L train’s Myrtle-Wyckoff stop in an area with few signs of gentrification — but 30 of the 59 units have sold in the last six months. There are also new developments and conversions on Jefferson and Troutman streets near the Central Avenue M train stop, closer to Manhattan.

Halstead broker Brian Cohen said buyers are in their 30s, and trying to find apartments cheaper than in Williamsburg and Harlem, where prices per square foot for condos are around $750 and $800, respectively, he said. And with the average price per square foot about $1,180 in Manhattan, prices in Bushwick are more than half off.

“Bushwick is the place to go and develop,” said Cohen, who is about to start sales on a dozen units on Linden Street, which is in the same area. “People are looking for
better prices.”

A tough sale

Still, despite the new projects, Bushwick appears to be a tough sell for brokers.

The volume of sales for single and multi-family houses in Bushwick plunged by more than half in 2007, compared to the prior year, according to a recent report by HMS Associates, a real estate appraisal firm. Sales of two-family houses went from 356 in 2006 to 168 in 2007. The firm has no data on condominium sales in Bushwick; Sam Heskel, executive vice president, thinks there will be less development in the neighborhood this year.

Brokers are already seeing a slowdown in sales.

“Compared to the first condo projects in Bushwick two years ago, prices are down, and sales volume has also slowed,” said David Maundrell, president of aptsandlofts.com.

However, Maundrell said buyers in Bushwick may be somewhat cushioned from the economic downturn because mortgages under $417,000 have lower interest rates, making it easier to buy.

Elan Padeh, CEO of the Developers Group, said the volume of sales in Bushwick had slowed down at the end of 2007, but had picked up a little since. He said prices remain the same since that period.

Heading east

The firm aptsandlofts.com, which traditionally focused on Williamsburg and Greenpoint, expanded to Bushwick in 2006. Its brokers have sold more than 50 units in seven condo developments. Most of these buildings are rehabilitations of 1900s stone row houses on Putnam Avenue, Decatur and Troutman streets with original details and modern amenities. Prices range from $325 to $400 a square foot, depending on the distance from the L train.

The firm represented 1060 Putnam Avenue, on the border of Bedford-Stuyvesant, a six-unit rehabilitation with stylish interior design that sold five units in two weeks. On 289 Troutman Street, two blocks from the Jefferson L train stop, eight of the residence’s nine units sold for $400 to $450 per square foot in four months. The two ground-floor duplexes have a private garden, and all other units feature large balconies and exposed brick.

“Unlike Williamsburg, this neighborhood is not just about artists and creative types. There is a broader market,” said Maundrell of aptsandlofts.com. “We had people from
all walks of life: firemen, nurses, public service employees.”

The six condo units at 1271 Decatur Street, which is much farther from Manhattan and close to Ridgewood, also sold relatively quickly at approximately $250 per square foot.

At 223 Maujer Street, the Developers Group marketed units in a four-story building with a glass curtain façade and Jacuzzis in the apartments at $500 per square foot.

Padeh thinks there definitely is a future for Bushwick because developers and architects have done several high-quality projects. “Good architecture will have a long-term positive effect on the neighborhood,” he said.

Other brokers are also betting that these new projects will help the neighborhood get over its turbulent past, when looters burned buildings during the 1977 blackout.

Where zoning doesn’t allow residential units, a former garment warehouse is being converted into commercial lofts. Bellmarc broker Joe Irving said the Varet Street lofts target artists in need of a cheap workspace. Prospective buyers include photographers, architects and designers.

The price per square foot ranges between $250 and $370, and Bellmarc is currently doing test marketing to see if there is demand for hotel units in the building. “The transformation of Bushwick over the past five years has been incredible,” Irving said. “During commute hours, trains are packed.”

Those looking for counterfeit handbags, $5 bottles of perfume or human hair wigs can find them on Manhattan’s slanting stretch of Broadway between West 23rd and West 34th streets.

The downmarket area, chaotic with street vendors and shoppers thronging to wholesale stores, is sandwiched between the Flatiron and Flower districts and is one of the few Manhattan neighborhoods in this area to have staved off gentrification.

Part of the area is in the Madison Square North historic district, notable for its ornate Belle Epoque buildings. It’s this architecture that a clutch of developers is betting
can attract tourists, despite the area’s chronic shabbiness.

The Ace Hotel Group, which already has popular outposts in Portland, Ore., and Seattle, and another planned for Palm Springs, Calif., will open a branch inside
the terra cotta and brick Hotel Breslin
at 1186 Broadway on the corner of West
29th Street.

When it opens in December, floors one through 10 of the landmarked building will feature 247 rooms, from 230 to 800 square feet, starting at $270 a night, said Alex Calderwood, the company’s founder.

The Ace’s top two floors, meanwhile, will house people who have lived in the building in recent years, when the hotel was a single-room occupancy facility, and who are
choosing to stay put, according to GFI Development Company, the project’s Manhattan-based developer.

Others who don’t want to move claim that GFI is harassing them to nudge them out the door. Though the Department of Housing Preservation and Development found that harassment did occur, a judge later dismissed the decision. The tenants are appealing, and the case could be heard in April, said Susan Cohen, a housing attorney with Manhattan Legal Services.

Simultaneously, the tenants oppose GFI’s effort to relocate laundry machines from the basement to the 12th floor and limit them to one elevator, Cohen said.

Meanwhile, the ground floor of the Breslin, whose façade sports raised Beaux-Arts garlands, is losing its dozen narrow shops, about eight of which now appear shuttered.

They will give way to a 24-hour restaurant from Ken Friedman, owner of the West Village’s Spotted Pig, which will occupy 3,500 square feet of the lobby, entered from 29th Street, Calderwood said.

Adding more West Coast élan will be an offshoot of Stumptown Coffee Roasters, a Portland company, in an 800-square-foot berth; there will also be Rudy’s, a multichain barbershop, across two floors.

The remaining 3,500 square feet along Broadway have yet to be leased, said Calderwood, but fashion retailers are being courted for a street that can command $300 a square foot.

“There are very few areas left in New York that have the feel of an emerging neighborhood,” Calderwood said. “This could put a stake in the ground for revitalization.”

Andrew Zobler, a principal of GFI, wouldn’t say what he paid for the Breslin, which he closed on last November. But he’s clearly banking on the area’s turnaround. Another hotel, NoMad, as in North of Madison Square, is planned for 1170 Broadway, a limestone turn-of-the-last-century office tower at West 28th Street. When it opens in December 2009, it will feature 160 rooms, Zobler said, plus street-level retail.

“I see this neighborhood as an architectural jewel that’s sitting in the middle of the most convenient location in Manhattan,” he said.

Like the Tenderloin, the 19th-century name for this area, where visitors fell prey to seedy characters, its modern-day counterpart has also suffered from crime.

In 2007, the 13th Precinct, which includes this neighborhood and other areas to the east, saw three murders, 210 assaults and 1,660 cases of grand larceny. In comparison, the adjacent 10th Precinct, covering Chelsea, experienced less than half those totals, with no murders, 162 assaults and 827 grand larcenies.

While criminals could deter visitors, the Ace, at least, thinks its low rates will win them over. At $270 a night, the rates will be about 15 percent cheaper than the average Manhattan hotel room this year, which is expected to cost $320 a night, according to industry estimates.

And while there are a handful of other hotels slated for west of Sixth Avenue and north of Herald Square, few are in the immediate vicinity, one exception being the 124-room Wyndham Garden Inn, slated for 37 West 24th Street.

Still, Calderwood sees his product competing with boutique properties farther downtown, which “offer a $400-and-up price point, so this is a relative value,” he said.

The area could change markedly if higher-end developments draw the same ilk, said Jennifer Brown, executive director of the Flatiron/23rd Street Partnership, the business improvement district. “Everybody’s been hoping for an anchor that can benefit the rest of the corridor,” Brown said.

Other developers seem to be doing their part. There is construction at 1182 Broadway, a 17-story mid-block high-rise, inside the Madison Square North Historic District. And there are plans to renovate 1141 Broadway at West 26th Street.

According to plans filed by owner Mocal Enterprises with Manhattan’s Community Board 5, the building will gain apartments on floors six through 17, and the ground through fifth floors will stay commercial.

By this summer, the first residents of the long-awaited Chelsea Stratus will have moved into their condos in the neighborhood’s tallest building.

At 40 stories, the building’s height has been its key selling point. In a few years, however, there will be more castles joining the Stratus in the sky along the heavily developed Sixth Avenue corridor between 23rd Street and Herald Square.

One of the new towers in the pipeline for Sixth Avenue is 885 Sixth Avenue, which is tentatively being called Tower 111. The 47-story glass tower at 32nd Street will have 47,600 square feet of retail space, including a wide base for multi-level shopping. The ground floor, mezzanine, second and third floors of the Costas Kondylis-designed high-rise will house stores, while the upper levels will be residential — a design akin to that of the wildly successful Time Warner Center.

The developer, Atlantic Realty Development, started consulting retail brokers when planning for the building commenced.

Benjamin Fox, the president of the Winick Realty Group, is leading the leasing efforts for the project, and the firm expects it to draw national and international companies. The building will rise across the street from the Manhattan Mall and right near Macy’s.

Only a block away, Winick is also handling leasing for another tower that’s in the works, 855 Sixth Avenue. Tessler Developments and the Chetrit Group are building a 30-story building that should be complete within the next couple of years.

“The area is a continuation of Herald Square,” said Jeff Winick, CEO of the company that bears his name. “J.C. Penney, for example, is coming to 32nd Street and Sixth.”

Winick said 855 Sixth, which is between 30th and 31st streets, will have anywhere from 120,000 to 200,000 square feet of retail space and two or three parking levels.

Like 885 Sixth, the building is being designed by Costas Kondylis, and it too will have a wide base for stores topped with residential floors.

“The area is a true melting pot of residential and retail,” said Winick. “It’s an obvious location to have big retail.”

And yet, developers are counting on the fact that plenty of people will want to call the stretch home. In this respect, the Chelsea Stratus, which is on Sixth Avenue between 24th and 25th streets, is a success story.

“We’re looking to have occupancy by the end of May or beginning of June,” said Chris Saliearno, Prudential Douglas Elliman’s on-site sales coordinator at the Stratus.

Saliearno said that as of mid-March, 85 percent of the condo’s 240 units were sold. Prices in the building started at around $750,000 and topped out above $4 million, with most in the $1 to $2 million range.

“The ones on higher floors sold first,” said Saliearno, who noted that the development attracted a wide range of buyers, including many first-time purchasers.

Until recently, new high-rise development on Sixth Avenue between 23rd and 34th had been primarily rental. Between 2000 and 2006, five rental buildings were constructed on the stretch, including the 407-unit Chelsea Landmark and the 266-unit Archstone Chelsea.

Now, aside from the nearly complete Stratus and the developments at 855 and 885 Sixth, two other high-rise residential buildings are also on the drawing board: Adellco’s the Remy, on 28th Street — which has been planned for a couple of years, though construction has yet to begin — and J.D. Carlisle Development’s 46-story condo-hotel between 29th and 30th streets.

There are also other hotels currently in some phase of construction nearby, including the Hotel Indigo at 127 West 28th Street, and 128 West 29th Street, which developer Sam Chang is turning into a Doubletree.

As the Stratus bears out, sales in the area are generally healthy, according to brokers.

“The studios, ones and twos are doing great,” said Richard Hamilton, a senior vice president with Halstead Property. “There seems to be slowness in some of the loft-type buildings with full-floor units. The $2 to $4 million range is where we’re seeing some resistance. The Stratus and the Onyx [at 261 West 28th Street] have both done well.”

Hamilton noted that the entire swath of the avenue is changing in character, especially in terms of its retail makeup.

“You still see some of the storefront wholesalers, but they’re on their way out,” he said. “In 10 years, it’ll look like a canyon filled with tall condos and rentals.”

Despite Newark’s reputation, formed mainly in the wake of the 1967 riots, as a blighted inner city that investors wouldn’t touch, a wave of Manhattan-based developers is now crossing the Hudson River and doing deals.

Since the beginning of 2008, several New York-based investors including Apollo Real Estate Advisors and TreeTop Development have acquired major residential properties in New Jersey’s biggest city. The firms plan to erect new apartment and office towers and convert old buildings into luxury rentals.

Apollo, a real estate investment fund manager headquartered at the Time Warner Center, teamed up with Radiant Property Management in January to buy a 724-
unit block of rental properties in the city’s South Ward for $43 million. The firm is spending $7 million to renovate the nine-building complex.

Apollo partner James Simmons said the company has been eyeing various residential, commercial and retail properties near downtown Newark for the past two years.

“We as a firm always thought Newark had some strategic advantages that were just being overlooked by the market,” Simmons said. But, he said, before Cory Booker took over as mayor, “investing in Newark was something that was difficult for us to get our arms around.”

Meanwhile, TreeTop, which has new projects in Williamsburg and Greenpoint, is also aggressively buying residential property in Newark.

In January, the firm spent $22 million to buy the 293-unit Parkwood Place apartment complex in the Forest Hill section of Newark. The company is also buying 255 units in the North Ward and a property in the city’s Central Ward.

“People sometimes think of Newark as this lower-class neighborhood where people will live in whatever it may be,” said TreeTop principal Adam Mermelstein. “I think five years down the road, it’s going to be a different place.”

Manhattan-based Cogswell Realty Group, which two years ago converted a building on Raymond Boulevard into the first luxury rental in Newark in 40 years, is betting on that too. It’s moving forward with a long-discussed plan to redevelop the former Hahne’s department store and Griffith Piano building into condo loft apartments.

Industry observers say developers are increasingly looking to inner cities like Newark, where land is cheaper and the payoff can be greater if the neighborhood becomes more desirable.

“There’s 40 years of perception problems you’re fighting against,” said Arthur Stern, a principal at Cogswell Realty. “It’s not just from renters and buyers; it’s from lenders and the government itself.”

One issue that developers may have to face is a backlash from tenants over rising rents and potential displacement. A coalition of tenants’ groups voted Mermelstein as the worst landlord in New York City, in part due to alleged harassment of tenants in his Williamsburg apartment building. Mermelstein said that thus far, there has been no resistance from tenants at Parkwood Place.

Newark Deputy Mayor Stefan Pryor, who previously led the Lower Manhattan Development Corporation, boasted that the Prudential Center, the sports arena that opened downtown in October, and the New Jersey Performing Arts Center are finally putting Newark on the map for positive reasons.

“There is a changing perception justified by the facts of Newark,” Pryor said. “We’re biased, but we think that Mayor Booker has set a tone that is very receptive to development.”

Certainly, Newark is seeing change. While the execution of three college students made national news last year, the city saw a double-digit drop in violent crime in 2007. Until February 2008, Newark went 43 days without a murder, one of its longest stretches without a homicide in decades.

Still, those who have followed Newark through the years note that it will not
fully turn the corner until development spreads from stronger neighborhoods to weaker ones.

“Part of what Newark needs to be cognizant of is [that] revitalization doesn’t just mean lots of high-wealth people moving into the city and corporations moving into the city,” said Peter Kasabach, executive director of New Jersey Future, a Trenton-based public policy group.

The Booker administration is using tax abatements and other incentives to spur development. It has created the Brick City Development Corp., a nonprofit led by chief executive Joe Ritchie and Pryor, who serves as chairman, to help encourage new investment. The group replaces the old Newark Economic Development Corp., which critics charge was a featherbed for politically linked developers under the previous administration.

It seems that some of the renewal efforts are beginning to pay off: In January, the performing arts center brokered an agreement with Philadelphia-based Dranoff Properties to develop a 250-unit luxury tower, called Two Center Street, which will include 30,000 square feet of street-level retail and 750 parking spaces.

About 20 percent of the units will be set aside for the arts community.

Also, according to Pryor, the Manhattan-based Lam Group and Edison Properties have reached an agreement to develop a business-class hotel downtown, the first major new hotel project in the city in more than 30 years.

The new deals come on the heels of a $150 million agreement announced in December between the Related Companies and Tiki Barber, the retired New York Giants running back, to renovate affordable housing in Newark and elsewhere. Later that month, the Booker administration reached an agreement with former New Jersey Nets player Tate George to redevelop 102 vacant and abandoned properties in the city’s West Ward.

While Newark does not have the convenience of coffee shops, banks and pharmacies on every corner, it is a bargain compared to New York.

The city had 6.4 million square feet of Class A office space at the end of 2007. Asking rents were $31.80 per square foot, and there was a 6.4 percent vacancy rate, according to data from Cushman & Wakefield. Last month, in a significant move, American Express Bank Ltd. announced plans to relocate its operations from Lower Manhattan to 50,000 square feet at Two Gateway Center in Newark. The banking division was recently sold off by the credit card giant.

Tim Greiner, executive managing director at Newmark Knight Frank, said his firm is in talks with several law and engineering firms about leasing space at One Riverfront Center, a Class A office building across the street from Newark Penn Station.

Government officials have been trying to use the train station to attract new business. Earlier this year, New Jersey Governor Jon Corzine signed the Urban Transit Hub Tax Credit Act to provide 10 years of tax credits on office rent to companies located within a mile of a major transit center.

Meanwhile, by the fall of 2009, Rutgers Business School is scheduled to relocate to One Washington Place, a newly renovated building near the Broad Street train station. Chicago-based shopping center firm Tucker Development, which signed a lease to open its first New Jersey office at 50 Park Place, also made an agreement with the Berger Organization to redevelop a 3-acre site located across the street from the station. The site will be developed into a mixed-use project, while the old Westinghouse plant located next to Broad Street station is being demolished to make way for a new development.

The city has put out a request for proposals for about 40 acres of publicly and privately owned land surrounding the Broad Street station and has put out a request for developers to submit proposals for that property.

“Newark has finally come into its own and begun to see the interest it deserves
both on the commercial and residential front,” said Miles Berger, chairman of the Berger Organization.

A building does not necessarily have to be “huggable” to merit preservation. That’s how Peg Breen, president of the New York Landmarks Conservancy, makes the case that certain modernist buildings deserve landmarking consideration — even if some see them more as eyesores than as architectural treasures.

“The Seagram building, the Lever House — some of these buildings are not as huggable as the older Beaux-Arts structures,” Breen said, referring to two iconic 1950s office buildings on Park Avenue. “But you have to look at their importance in the architectural continuum, and how well-designed it is for what it is. Different periods of buildings go in and out of style. You don’t not save a building because it’s not pretty.”

Since in New York, buildings must wait for at least a generation to become eligible for landmark status (a minimum of 30 years is required), a new wave of not-so-huggable buildings is coming up for consideration. For instance, One Chase Manhattan Plaza, an aluminum-and-glass slab dating to 1961, was recommended for landmarking just last month.

On various wish lists for preservation are 50s- and 60s-era buildings that include: the former Look Magazine building at 488 Madison, which was designed by Emery Roth & Sons and erected in 1950; the Donnell Library Center at 20 West 53rd Street, designed by Edgar I. Williams in 1955; the Port Authority terminal at Washington Bridge Station, which was designed by Pier Luigi Nervi in 1963; and the Henry L. Moses Research Institute at Montefiore Hospital in The Bronx, designed by Philip Johnson in 1965.

This crop of buildings’ importance, or lack of importance, to the city’s landscape has become a subject for fierce debate. Adding urgency to the matter is that some of the structures are in the line of fire for developers, who want to demolish them and erect shinier replacements.

The architect Robert A.M. Stern said the city’s modernist buildings are, in a way, victims of the deeply-seeded resentment that dates back to their construction.

“The preservation community was slow in paying attention to modernist buildings,” Stern told The Real Deal. “The preservation movement started to grow when modernist buildings were replacing traditional buildings, and the modernist buildings got pushed to the side because people were angry about them.”

The O’Toole building at 36 Seventh Avenue (designed by architect Albert Ledner, who also designed the Maritime Hotel) and 2 Columbus Circle are the poster children in this round of debate. St. Vincent’s Catholic Medical Centers, which owns the O’Toole building, has asked for permission to demolish it despite the fact that it is located in the Greenwich Village Historic District. It argues that the O’Toole is an aging facility and that the new 21-story tower it wants to build will allow it to provide more advanced, high-tech medical services.

Meanwhile, 2 Columbus Circle, commonly known as the Lollipop building, is undergoing renovation to house the Museum of Arts and Design after not making the landmark cut.

The Silver Towers housing complex, designed in 1966 by architect I.M. Pei and bounded by Bleecker and Houston streets and by LaGuardia Place, has also recently come under the landmarking microscope.

New York University, which owns two of the 32-story buildings, had wanted to build new buildings in between the towers. But the Greenwich Village Society for Historic Preservation has been lobbying the city to landmark the entire block, including the towers.

NYU, in a reversal of its previous position, recently announced its backing of that effort.

“This would be the first postwar urban renewal superblock to be considered for landmarking anywhere in the country,” the executive director of the preservation society, Andrew Berman, said. “There are not too many developments in that mold that would be considered for designation.”

After the New York Times published a story about the possible Silver Towers landmarking, responses on the paper’s Web site ran the gamut.

“The nature of aesthetics is that something of the recent past is almost inherently rejected to look to the future,” said John Jurayj, co-chair of the Modern Architecture Working Group, a preservationist committee. “There is a 10- to 20-year memory lapse that occurs in culture, but the Landmarks Commission needs to step up to the plate and not be part of that.”

“The Silver Towers may not be everyone’s cup of tea, but they are a good example of Pei’s work,” Breen said. “It’s not all about like or dislike. Five or 10 years from now, everyone’s eye will have changed again.”

Preservationists worry that many modern structures worthy of landmarking will be overlooked as mundane parts of the urban landscape.

“There are many vernacular, modern buildings that are not by popular architects — those are some of the most endangered because they’ve become what we’re used to looking at,” said Nina Rappaport, chair of the New York tri-state chapter of Docomomo, a group devoted to the documentation and conservation of buildings from the modernist movement — a mission statement that was abbreviated to give it its name.

The group recently coordinated a survey of Midtown modernism.

But while Rappaport and others said not enough modernist buildings are being protected, Michael Slattery, a senior vice president of the Real Estate Board of New York, said that if too many buildings are preserved, the city’s progress will stall. And, he said, the city suffers when preservation is used as a weapon to block new development.

“We need to acknowledge the value that preservation may have in terms of the
city’s architecture and history, but we need to balance that,” he said. “Too often, buildings of questionable merit are being proposed for landmark designation more to stop new development.”

Slattery said 2 Columbus Circle is “an example of a questionable building that could help to transform and revitalize Columbus Circle. I think the renovations were the right outcome, but it was a very contentious and problematic process.”

Of the buildings that preservationists are debating at the moment, the Donnell
Library seems to be the most endangered. Plans call for razing the building and replacing it with a hotel, though the library, which cannot afford necessary renovations, will occupy space on the first and basement floors.

Working in favor of many modernist buildings is that many of them are still structurally viable and lend themselves easily to restoration.

“Modern buildings are very versatile in terms of preservation,” said Jurayj. “Even if these buildings are altered, they are very easy to restore; all the techniques exist within contemporary architecture’s practice.”

Restoration “has a lot to do with maintenance, or lack of,” added Simeon Bankoff, executive director of the Historic Districts Council. “In some cases, there was a use of a new technology in the building that was still being perfected. They used specialty materials, and no one was sure how they were going to age.”

The Lever House at 390 Park Avenue, built in 1951, was already in shabby condition when it was landmarked in 1982. Water seepage, rust and damaged windows were among its problems. But according to Jurayj, its restoration in the late 1990s has rendered it “better as a restored structure than it was before.”

In a city where development is omnipresent, preserving some of these buildings is no small challenge.

“Modernism can be a convenient scapegoat; people can say a building is past its prime, a white elephant. But we have to bring along the idea that preservation is as valid a purpose as any other development,” said Kate Wood, executive director of Landmark West!, a nonprofit that focuses on Upper West Side preservation.

The debate, of course, is likely to continue into future generations because there is no guarantee that today’s new office towers and apartment buildings will be seen as pretty 30 years from now.

“Preservation is not a popularity vote,” Jurayj said. “It should be a question of
curating for the future the best, most important, and most historically and architecturally interesting buildings.”

Stern put it this way: “A mix of buildings is part of what makes a place rich and deep in meaning. Landmarks don’t freeze a city in amber.”

Tishman Speyer picked to develop Hudson Yards

Tishman Speyer was selected late last month to develop the MTA’s 26-acre Hudson Yards site, with a winning bid of $1.004 billion. Tishman, which lacked an anchor tenant, offered $112 million more than the only other bidder that was still in the running at the time, the Durst Organization-Vornado Realty Trust joint venture. Morgan Stanley had previously withdrawn from Tishman’s bid over fears that a new headquarters would not be built in time. Tishman’s plan calls for 8 million square feet of office space, 3 million square feet of housing and 13 acres of open space.

Council passes Solow’s East River project

Developer Sheldon Solow’s $4 billion plan to build seven towers along the East River was approved by the City Council last month after its Land Use Committee unanimously approved it. Solow reduced the height of a proposed residential tower on the west side of First Avenue, between 39th and 40th streets, from 69 stories to 44, and trimmed three other towers to placate elected officials. He pledged $10 million for a public pedestrian bridge over the Franklin D. Roosevelt Drive. A controversial office tower, however, is still planned.

Manhattan population continued to grow in 2007

Manhattan’s population grew by 8,000, or 51 hundredths of a percentage point, in the year ending July 1, 2007, according to the latest census data. That accounts for more than half of New York state’s total population growth in the period and the largest numerical increase among all the state’s counties. Manhattan was also the only borough to see its population grow at a faster rate than it did the year before. However, New York City’s growth paled in comparison to other parts of the country, the New York Times reported.

Tenants gain right to sue landlords for harassment

Mayor Michael Bloomberg signed a City Council bill last month that will allow tenants to sue their landlords for harassment, the Times reported. Penalties for tenant harassment will range from $1,000 to $5,000. The bill was supported by City Council Speaker Christine Quinn and many housing advocates, but was opposed by the Real Estate Board of New York and the Rent Stabilization Association.

East Side tower had 13 safety violations

Before its collapse last month, the tower at 303 East 51st Street had been issued 13 violations by the Department of Buildings, including two that were rated as “high” in severity, the New York Post reported. Violations included excessive debris, unsafe materials storage and inadequate roof protection. After city officials said those violations were not relevant to the collapsed crane that killed seven people, Manhattan Borough President Scott Stringer said, “Quite frankly, if the buildings commissioner believes that is normal, then the buildings commissioner can work elsewhere.” Building inspector Edward Marquette was arrested after he allegedly falsified documents to show that he inspected the crane prior to its collapse.

Bronx housing construction down

Permit applications for new residential developments plummeted by 33 percent in the Bronx last year, according to a city report. The city issued permits for 3,104 new residential units in the Bronx in 2007, compared with 4,658 in 2006. Despite the drop, a record dollar amount was invested in the Bronx last year, according to the borough president’s office: More than $925 million was spent on housing projects, compared to $713 million in 2006 and $237 million in 2002, the New York Daily News reported.

NYC foreclosures up 13 percent

Foreclosures in New York City increased 13 percent in February from the previous month, and were up 113 percent from the previous year, according to a PropertyShark.com report. Foreclosures in Brooklyn were up 20 percent over the prior month, to 53, while the number of Queens foreclosures more than doubled from the same period last year.

Although New York State Attorney General Andrew Cuomo has said he is beefing up his office’s ability to go after shoddy developers, lawyers say progress is already being made in the courts.

Lawyers are pointing to three decisions that will likely set new precedents for buyers seeking restitution for new condos fraught with problems.

Buckled wood floors, walls raining with runoff water, apartments lacking certificates of occupancy months after being sold, and promised washers and dryers switched for lesser brands are some of the complaints lawyers are hearing — in rising numbers — from owners of new, yet they claim defective, apartments.

A decision reached in the highest state court so far, the Appellate Division, First Department, in October 2007, Kramer v. Real Estate Ltd. Partnership, clarified the court’s position that it would allow a private lawsuit for fraud and misrepresentation against developers — reversing an earlier court’s previous position that only the attorney general’s office can sue for fraud in such cases.

“The Kerusa [Kramer] case made it perfectly clear that there is no special immunity for developers, and if they make any intentionally false statement to a buyer, they can be held liable for it,” said Robert Weigel, partner at Gibson, Dunn & Crutcher, who represented Kerusa Co. in its suit against the developer of 515 Park Avenue, a property with mold problems.

The move supported owners who are frustrated with a spate of poorly constructed condominiums that have at best left them holding the bag — or at worst homeless, said lawyers familiar with the cases.

Another decision handed down in February in Kings County State Supreme Court: Bridge Street Homeowners Assoc.
v. Brick Condominium Developers “reversed previous reasoning that effectively barred a private lawsuit against developers for inadequate construction,” said attorney Adam Leitman Bailey, who represented
the owners.

In the Bridge Street case, the owners had sued developer Joshua Gutman for lack of fireproofing, a defective roof with penthouse apartments built on top, and walls so thin they claimed they could hear their neighbors brushing their teeth, according to press reports.

The third case, settled in November 2007 in Kings County Supreme Court, concerned the Williamsburg Mews Condominiums. The owners sued and won over a roof that leaked, windows that caused drafts and leaks, flooding, mold, mildew, an inadequate HVAC system that left occupants cold in the winter, and thin sheetrock that violated city fire codes.

Those decisions could open the door for thousands of complaints that have never previously reached the court system for fear of dismissals, said Bailey, whose firm, Adam Leitman Bailey P.C., also handled the Williamsburg Mews cases.

Lawyers said that the more expansive interpretations of the law made in these recent court decisions have sidestepped the Martin Act, which normally regulates the responsibilities of the attorney general to act on behalf of aggrieved owners. The courts, they said, can now provide a forum for
distressed homeowners to seek reparation and damages.

Powering up the AG’s office

To beef up the real estate department, which oversees new condominiums, Attorney General Cuomo announced in January that he would be raising the fees for reviewing and approving condo offering plans to 0.4 percent of the development’s offering price. This effectively hikes the maximum fee from $20,000 to $30,000.

Cuomo said the extra monies would fund additional lawyers to speed up the backlog of offering plan approvals, which normally take three to six months for approval.
The monies are also to be used
to beef up mediation and litigation efforts, lawyers close to the office said.

Though Cuomo’s office would not comment on how many attorneys it had hired, outside counsel estimated that at least four professionals had been added.

Even with the recent increases in staff, lawyers are doubtful that the attorney general’s office will really play an important role in litigating shoddy developments — a reality some lawyers said the courts may have recognized. Whether the courts have intended to take matters into their own hands is not clear, but the net effect has been a real clarification of the law, said Weigel.

While the Martin Act gives the AG the power and responsibility to prosecute a sponsor for fraud or misrepresentation of the property being offered for sale in the offering plan, his office has struggled to handle the increased load of offering plans, most lawyers said, and they contend the AG has not handled the rising number of complaints or responded with necessary litigation.

“We could file a complaint with the AG’s office — the problem is that lately, they have not been that responsive,” said Luigi Rosabianca, who heads his own law firm and is currently trying to hammer out a deal with a developer for two lines of apartments that were seriously damaged by weather during construction.

In response to a Freedom of
Information Act request from The Real Deal, the AG’s office said the number of shoddy construction or fraud complaints by new owners submitted to the office increased 2 percent from 1,242 in 2006 to 1,267 in 2007. But anecdotally, that number is much higher, according to lawyers, who said they don’t even bother contacting the AG’s office anymore since they rarely get a response.

The number of offering plans submitted to the AG’s office, an indication of the growth in the condo sector, has grown by more than 300 percent over the past five years, rising from 299 in 2002 to 929 in 2006, said the agency.

There is no record of how many condo owners the current AG’s administration has actually assisted since coming into office a little over a year ago. Amy Karp, assistant counsel for the AG’s office, wrote in her FOIL reply that the office “did a diligent search and does not possess” records of any parties for which the AG’s office had negotiated settlements or required litigation on behalf of condo owners.

Repeated phone calls to the office to clarify were not returned.

Impossible burden

In the Bridge Street case, the court pointed to the inadequacy of New York State law that places the burden on the attorney general to address all problems with new condos.

To expect the government agency to have “exclusive responsibility to litigate private claims of all aggrieved condominium purchasers within the State of New York would be to place an impossible burden upon a public official and was surely not the legislative intent,” wrote Judge Carolyn Demarest in her decision.

Also, some offering plans are worded so vaguely as to give the developer a way out if finishes and other promised aesthetics haven’t been provided, said Robert Braverman, a partner at Braverman and Associates. In other words, a number of common complaints, such as the developer changing the brand of appliances, don’t even qualify for review by the AG’s office.

Instead, many of those complaints have become private matters handled by lawyers hired by condo owners for anywhere from $1,000 (for individuals) to $40,000 (for entire boards) to negotiate finishing touches, corrections or additional upkeep where it is needed, said Braverman.

When the negotiation process doesn’t work, some condo owners are taking the next step of suing the developer and anyone else included in the project, which can cost more than $100,000, said Bailey.

Since “before the start of the Spitzer administration, the attorney general’s office generally has not used its power to sue developers under the Martin Act, and has filed less than a handful of cases,” said Bailey.

The AG’s office is also hamstrung by some restrictions. Only those cases that have the backing of the entire condo board will even be reviewed by Cuomo’s office,
said lawyers.

One reason, lawyers said, is that the office would never have the time to review the thousands of cases it would receive otherwise. If the AG’s office does get involved, it can only do so on behalf of buyers, because the basis of any action would be the offering plan, and that is only presented to the owner in a purchase.

As complaints about shoddy construction have skyrocketed, lawyers have said they’re tired of dealing with them. “I am almost at the point where I am going to tell clients not to buy new construction,” said attorney Donna Glasgow, who reads blogs like Curbed.com that track deficient buildings so that she can stay abreast of the problem buildings.

But New Yorkers’ appetite for buying condominiums hasn’t slowed. Despite the national housing slowdown, Manhattan condo sales were up 24.7 percent in the fourth quarter of 2007, at 1,232 units compared with 988 in the fourth quarter of 2006, according to Radar Logic, a Manhattan appraisal firm.

The amount of money being spent on condos in Manhattan hasn’t dropped either, making rotten apples that much more expensive. Prices hit record levels in 2007′s fourth quarter, with an average sale price of $1.75 million — a 17.8 percent increase over the average $1.486 million for the same quarter of 2006.

Overpromised and underdeveloped

Lawyers said they’re surprised by how New Yorkers will put up with poor construction.

Rosabianca said one client with a new $1.8 million apartment found out the hard way that a drainpipe had not been connected to his bathtub: About five minutes after the client started his bath, his downstairs neighbor started pounding on the door, soaked to the bone. “Probably because the foreman was not walking around the job site, and there was a kid installing the plumbing,” said Rosabianca.

One building at the center of a battle is 125 Central Park North. The condo owners filed a complaint in New York State Supreme Court on Nov. 2, 2007, against the developers QJL Associates; CPN Associates; 125 Parkway North; Sara Olsen, one of the developers; and others associated with the project, citing deficiencies in construction throughout the building. The complaint cited five causes of action against the developers, with claims of over $31 million in damages, and additional causes of action and damages totaling another $58 million against the project’s engineers and builder.

Owners of the condos, who paid between $383,800 for apartment CF-2 and $1.675 million for a penthouse apartment on 110th Street and Fifth Avenue facing Central Park, said that the apartments were not built as promised in the original offering plans, nor up to the city’s building code, according to court documents.

The complaint also alleged that among other things, the bathroom ventilation systems, kitchen exhaust systems, washer-dryer systems, interior doors and frames, exterior wall brickwork, and cleaning and repairing of the façade were deficient, or below industry standards.

“My sense is that this is really a battle with the developer over various finishes” and does not include structural defects, said David Kosakoff of Sinnreich and Kosakoff, who represents Steven Kaplan, a structural engineer on the project.

Sara Olsen and her attorney, Peter Voletsky, declined to comment, as did the owners and their legal counsel, Debra Schoenberg of Wolf Haldenstein Adler Freeman & Herz. Calls to Norman Horowitz, the Halstead Property broker representing the property, were also not answered.

Attorneys also said many complaints are surfacing in Brooklyn, where the pace of development has accelerated, especially in newly rezoned areas.

One such conversion, the Williamsburg Savings Bank at One Hanson Place, a $165 million joint venture by developers the Dermot Co. and Canyon Johnson Urban Fund (a REIT that specializes in inner-city developments and is partially controlled by basketball player Magic Johnson), has had its own share of issues.

The much-touted project is converting the 512-foot, 34-story Brooklyn office building with its iconic clock tower into mostly residential condos — approximately 260 units. The project will include 33,000 square feet of retail and offices on the ground floor.

Two doctors and eight dentists who took up professional offices on the ground floor and were promised new office space in the conversion have had nothing but problems, they said. Their lawyer is Bailey, who said that most of the complaints
have been resolved through a negotiation process with the sponsor, who is their landlord.

But the doctors, some of whom have been leasing space in the building for more than 30 years, said there continue to be problems, including inoperable heat and cooling systems, persistent leaks, poorly glued carpets, unsightly and poorly accessible entryways, and sporadic elevator
service. The problems that have plagued their tenure at the offices have caused them to lose about 10 percent of their clients, some estimated.

“A conversion of a space with ongoing tenancy certainly has complications that are very different than new ground-up construction,” said Kristin Neil, project director for the Dermot Co. “Communication with the tenants becomes a key
piece of working through that aspect of a project.”

The doctors are now in negotiation with the owners to buy their floor for between $10 and $14 million.

How owners protect themselves

Many attorneys and brokers recommend that condo buyers, whether dealing with conversions or new developments, do more upfront work before signing on the dotted line.

Many condos are still in the process of being constructed while buyers are told they need to make 10 percent deposits. At Manhattan’s average sales price of $1.75 million, that deposit of $175,000 is a lot of money to lose if you back out on a sale.

Mindy Diane Feldman, senior vice president at Halstead Property LLC, recommends hiring a good real estate lawyer to help identify what the obligations and responsibility of the sponsor and developer are in an apartment that hasn’t yet been completed.

“Every transaction that is done has a pre-closing inspection,” said attorney Lisa Breier Urban, a partner at Breier Deutschmeister Urban & Fromme. “The buyer is entitled to do a walk-through and do a pre-closing inspection sheet.”

Items that need to be considered are whether the apartment is habitable or not, and which improvements will make it habitable. Important items that have been promised, such as washers and dryers, should be itemized on the punch list, Breier Urban said.

All items that aren’t there need to be noted and attached to the closing documents, with a sign-off from the sponsor.

So despite the impression that once a buyer hands over the deposit, he or she is a goner, there is still some hope, she said.

Of all the vague notions that real estate players have about Governor David Paterson, the idea that he will support new affordable housing could be the most solid.

Paterson has said little about his devotion to property tax reform or his zeal for making sure the city’s big projects that are already underway succeed, since Governor Eliot Spitzer’s abrupt resignation last month over his ties to a prostitution ring.

However, experts say that Paterson, the lieutenant governor from Harlem who was sworn in March 17, will probably work to craft new incentives and find new funding to create housing that low- and moderate-income people can afford. Experts suggested that the $400 million housing fund that would pay for affordable and supportive housing, which Spitzer proposed in his State of the State address, has enjoyed enough support in key legislative districts and from Paterson that it seems likely to proceed.

“Governor Paterson has a strong background working on affordable housing issues as a state senator,” said John Raskin, an organizer with West Side advocacy group Housing Conservation Coordinators. “He is in a good position to prioritize both new funding mechanisms and reforming rent laws.”

Real Estate Board of New York president Steven Spinola, citing an e-mail sent last month by
state Housing and Community Renewal Commissioner Deborah Van Amerongen, said the fund “is still alive.”

“At the moment, the $400 million is on the Assembly side of the budget,” Spinola said, adding that the Senate has proposed a fund half that size.

So will the governor push for the higher number?

“Paterson’s biggest problem is, ‘How the hell do we figure out how to set a budget?’” Spinola said last month. “But I can’t imagine he’s not going to be an advocate for affordable housing.”

An Albany insider, who asked for anonymity because he once worked for Paterson, confirmed that the new governor — who worked on fair housing issues for the NAACP before becoming a state senator — could easily score points with legislators by embracing a cause he knows.

“It’s a priority for a lot of legislators,” the source said.

Where that affordable housing gets built is another mystery. Observers said it is unclear whether Spitzer’s controversial proposal to sell land north and south of the Javits Center, which would help fund the affordable housing program, will go forward. The north parcel would have to be rezoned by the city, and Mayor Michael Bloomberg opposes its sale because without it, he told the New York Times, future expansion plans for the Javits Center will be hobbled.

And upstate cities need affordable housing as sorely as the Big Apple does, portending more political deals.

A logical place for state-supported affordable housing in New York City could be over Hudson Yards. The state-owned, 26-acre rail yard is the largest parcel of undeveloped land in the city. Tishman Speyer won the bid to develop the site from the MTA last month.

Both developers’ advisors and Anna Levin, a leader of the local community board, have noted that the required city zoning on the yards’ eastern side requires high densities that could mean enormous building costs. Tax credits for affordable housing on the yards’ western side could offset those big costs.

“Everyone involved would like to re-look at the zoning,” said an advisor to one of the bidders for the site, who asked for anonymity to avoid revealing his client’s concerns. The western portion of the rail yards will undergo rezoning now that the state has selected a bidder, so Paterson can now try to work affordable-housing funds or incentives into the equation.

But as with every issue before the state, handicapping what Paterson plans to do is a dangerous exercise. Observers pointed out that nobody knows whether projects near Hudson Yards, like the transformation of Penn Station into Moynihan Station, whose future looked bleak last month, will ultimately survive.

What’s more, Paterson may be wading into a morass he can’t easily correct, some industry insiders said.

“The rail yards deal had become so muddled and so vulnerable in the shaky credit market that many of us think the whole deal is destined to fall apart, and that on-site affordable housing will have to wait until some day when the rail yards will realistically be developed,” said one real estate veteran, who asked for his name to be withheld.

On a Sunday early this month, anti-chain store firebrand Reverend Billy and the so-called Church of Stop Shopping, a group that advocates for mom-and-pop stores, will kick off its latest event at St. Mark’s Church in the Bowery.

Joining the Reverend — a performance artist who is known for his impassioned opposition to Wal-Mart, Starbucks and the like — will be a local activist group, the East Village Community Coalition.

The EVCC is working with the Pratt Center for Community Development on a new survey of the neighborhood’s retail, set for completion this spring.

“We want to call attention to this project, and how it can eventually lead to rezoning in the East Village to ban formula retail,” said Michael O’Neil, communications director for the Church of Stop Shopping.

While the battle between big chains and mom-and-pop stores has raged in New
York City for decades, this year, Reverend Billy’s call for zoning change is gaining new momentum, both among activists and in
city government.

City Council Members David Yassky and Gale Brewer are drafting legislation centered on tax reform and zoning changes to aid mom-and-pop stores. Meanwhile, community groups such as the EVCC and the Park Slope Civic Council are developing their own plans, which are gaining support from New Yorkers caught up in a nationwide trend toward shopping locally.

“People are starting to talk about an urban environment,” said Catherine Bohne, vice president of the Park Slope Civic Council, which is developing initiatives to help small stores. She is also the owner of the Community Bookstore in Park Slope. “Clearly, there is a real value in these places that is not being addressed within the system.”

Whether the clock will ever be turned back on deep-pocketed chains like Starbucks and bank branches is uncertain. Still, given that many threatened small retailers list skyrocketing rents as their biggest challenge, some store owners, including Bohne, have commercial rent control on their wish lists.

Most sources on both sides of the debate, however, view that as unlikely. The concept has been introduced in the state legislature without gaining traction, and also failed in New York City in the late 1980s.

Jeffrey Roseman, executive vice president at Newmark Knight Frank, said commercial rent control is “sort of a non-starter.”

“It’s never been done, and why should it be done?” he said. “It hurts the property owners, and you’re going to get properties that fall into disrepair, and people will not want to invest money in New York.”

Politicians and activists view zoning changes and tax abatements as more viable tools to help small shopkeepers. Yassky cited the example of one element of the Bloomberg administration’s controversial proposal for new zoning in Harlem: the stipulation limiting ground-floor frontage of banks, one of the most active competitors that small stores face.

But as the controversy over rezoning of Harlem’s main street illustrates, efforts to alter zoning tend to provoke strong reactions. In that case, a chorus of community opposition has greeted the proposal for bigger and taller commercial buildings on 125th Street. Landlords, meanwhile, are likely to line up against changes aimed at boosting mom-and-pop stores.

“It could be a big mistake, both hurting business and reducing tax revenues,” said Dewey & LeBouef partner Stuart Saft, a real estate attorney with a long track record of representing landlords.

Roseman said limits for commercial zoning didn’t seem to pass muster.

“What’s the authority, just, ‘We don’t want it here?’ To
arbitrarily say we don’t want any more coffee places, clothing stores or drugstores, I’m just not sure,” he said.

He cited local success stories like Paragon and Gracious Home and said that “chains don’t kill the mom-and-pop stores. Poor execution kills mom-and-pops. Paragon is a mom-and-pop, and they kick everybody’s butt.”

Small-store advocates know they face a tough fight, and Yassky and Brewer said they are consulting with a broad coalition. Their zoning proposal is likely to add an overlay to existing requirements, limiting the types of stores in a small area to non-chains or owner-occupied stores.

“We’re not trying to take whole neighborhoods, but carve out at least some space on commercial strips for mom-and-pop chains,” said Yassky.

Another component of the Yassky/Brewer proposal might well be a lower tax rate for owner-occupied small businesses, to help address the issue that owners can earn more by renting out their retail spaces to cell phone or bank outlets than by running their own stores. Since this move would not help mom-and-pops that merely rent, Brewer said the tax incentives may also be expanded to owners who rent to mom-and-pop stores.

For Brewer, who lives on the Upper West Side, aiding mom-and-pop stores took on urgency when she began counting bank branches and cell phone stores in her district four years ago. Her list now totals 61.

Meanwhile, Bohne, a neophyte to business when she took over the Community Bookstore in 2001, has inspired such loyalty that locals have stepped up as advisors and
investors to offset recent financial troubles.

On a recent rainy evening, she sold a children’s book to a young family at her store, joking about Mary Poppins as a Mozart sonata played on the stereo.

With Ken Freeman, president of the Park Slope Civic Council, Bohne is developing concepts to help small businesses compete. One idea is to create an urban conservancy akin to the nature conservancy, to buy commercial property and receive a tax deduction for renting the space to mom-and-pop stores.

“I’m not saying anything should be done that’s unfair to anybody, but … there should be some sort of incentive from the city if you’ve stayed a long time and can demonstrate a benefit to the community,” Bohne said.

Almost anyone who’s bought a house or taken out a mortgage in recent years knows the problems:

• Lenders’ “good-faith estimates” of loan and settlement fees provided at application too often are off the mark. Eleventh-hour surprise charges can add hundreds or even thousands of dollars to consumers’ bottom-line costs at closing. No federal regulation requires strict adherence to the estimates, and no government agency pursues lenders who fraudulently lowball their estimates to pull in more business.

• The whole process of obtaining a mortgage lacks transparency, and loan features are often confusing to consumers or are never explained by lenders and brokers. That confusion, in turn, is a key reason why so many borrowers now find themselves locked into bad loans they never understood in the first place.

• There is too much pressure to use lending, title and settlement service affiliates of the builder or realty broker. Builders, for example, sometimes dangle $10,000 to $30,000 worth of “incentives” in front of purchasers, but only if they’ll use the builder’s affiliated lender, where mortgage rates and fees frequently are higher than elsewhere.

These and other problems are targets of a new, sweeping effort by federal authorities to reform the system with better disclosures and a crackdown on scammers. It’s actually the Bush administration’s second try to push through settlement improvements. An earlier effort in 2002 was hounded by lending, realty and title industry critics and withdrawn.

The latest effort, outlined March 14 by officials at the Department of Housing and Urban Development, would transform the good-faith estimate into a comparison-shopping tool, force lenders to guarantee that their estimates are on the money, and walk borrowers step-by-step through closing procedures with a new consumer-friendly “script” for settlement and escrow agents nationwide.

Among the key changes you can expect if the proposal is adopted after HUD’s 60-day public comment period:

• A new, nationally uniform four-page good-faith estimate that is laid out graphically to highlight all the key working features of a loan, including rate, points, origination fees, prepayment penalties, potential payment increases, escrows, title insurance and closing charges by category. The form then prompts applicants to take the lender’s estimates and compare them with estimates provided by up to three competitors.

The new disclosures were tested by focus-group researchers who found that they enabled consumers to pick the “best” loan deal — lowest rate, lowest total fees and most advantageous terms — 90 percent of the time.

• Strict limits on variations between upfront cost estimates at the application stage and the final charges that appear on the settlement sheet. Certain costs controlled by lenders could not increase from the application to the closing, absent tightly defined “unforeseeable” circumstances such as wars or disasters. Total settlement fees could never be more than 10 percent higher.

• All fees paid to mortgage brokers tied to the interest rate must be disclosed and labeled as a “credit” to the borrower. This is intended to red-flag extra payments that brokers and some loan officers receive for steering applicants into higher note rate deals. At the same time, though, the rule change allows cash-short borrowers to pay for closing costs with a slightly higher mortgage interest rate.

• Incentive packages marketed by builders and others that effectively pressure consumers to use affiliated companies — but don’t deliver true economic benefits or discounts — could violate the law under the new proposals. For example, if a builder incorporates “incentives” into the selling prices of homes but requires use of affiliated mortgage, title and settlement agencies to obtain those illusory savings, this would violate the rules.

On the other hand, incentives and discounts that are real — where buying a package of mortgage, title and other services costs much less than they would if purchased individually — would still be permitted.

The reform proposals were greeted with statements of approval from major lending groups, but some critics said they will require extensive and costly changes in the mortgage and settlement services industries.

Washington attorney Phillip Schulman of K & L Gates, who represents title, mortgage and settlement clients, called HUD’s proposal “complicated, confusing and controversial,” and predicted tough opposition from industry groups. Brian Montgomery, assistant secretary for housing, disagreed, saying, “The timing is right. There is a lot of anguish out there.”

Ken Harney is a real estate columnist with the Washington Post.

Property appraisers have been warning about it for a decade, and the real estate market is reaping the whirlwind: The price declines underway around the country are partly the result of systemic, intentional overvaluations on home appraisals — much at the behest of loan officers illegally influencing or threatening appraisers to “hit the number” needed to close the deal.

But if an extraordinary new legal settlement last month has its intended effect, that system will be changed radically in the coming months.

• Most lenders won’t be able to fund new mortgages without guaranteeing that the underlying property valuations are free of influence or pressure, and fully conform to a new national quality code for appraisals.

• Appraisers and consumers will have complaint hotlines to report any of a long list of prohibited forms of appraisal interference by loan officers, realty agents and others.

• Lenders who have in-house appraisal staffs or who have financial interests in appraisal management companies won’t be allowed to use valuations generated by those services if they want to sell loans into the secondary mortgage market.

• Mortgage brokers, who originate anywhere from an estimated 50 to 60 percent of all home loans, will be cut out of the appraiser selection process altogether.

• National oversight of home real estate appraisals will be turned over to a new Independent Valuation Protection Institute that will monitor the accuracy of home appraisals and automated valuations, receive and mediate complaints, or forward them to federal and state regulators.

These and other sweeping changes are contained in a settlement among the two congressionally chartered mortgage investors, Fannie Mae and Freddie Mac, the attorney general of New York, and the federal agency that oversees Fannie and Freddie.

The settlement terms are still open to comment from the mortgage industry and the general public, but the core quality standards for appraisals already are in effect for loans delivered to Fannie or Freddie. Next Jan. 1, the entire agreement is scheduled to take full effect.

Many consumers might ask: What’s the big deal here? Aren’t accurate appraisals in everybody’s interest and long overdue? Absolutely. But in several ways, the new agreement is unprecedented. Fannie Mae and Freddie Mac are federally regulated corporations, answerable to Congress. Normally, they don’t kowtow to state governments. But using a 1921 securities fraud law that is unique to his state, New York Attorney General Andrew Cuomo brokered an agreement that transcends the normal reach of state governments — one that could eventually touch almost every home mortgage transaction nationwide.

Late last year, Cuomo began an investigation of potential appraisal fraud in the portfolios of Fannie Mae and Freddie Mac. With what he considered evidence of appraisal problems generated by a separate suit involving a major seller of loans to Fannie and Freddie — Washington Mutual Inc. — Cuomo began negotiations with the two companies and their federal regulator, the Office of Federal Housing Enterprise Oversight (OFHEO).

Cuomo never announced what, if anything, he found amiss inside Fannie and Freddie. In the settlement agreement, both companies denied any wrongdoing. First American Corp.’s eAppraiseIT subsidiary, accused by Cuomo of inflating appraisals under pressure from Washington Mutual, also denied wrongdoing, as has Washington Mutual.

Whatever the causes, Fannie and Freddie agreed to overhaul their appraisal standards and practices, signed on to a detailed home valuation code of conduct covering all their mortgage activities, and committed to pay $24 million over the next five years to create and staff the independent institute that will oversee appraisals nationwide.

Federal banking regulators are expected to adopt parallel reforms, effectively extending the agreement’s reach far beyond Fannie and Freddie to banks, thrift institutions and credit unions.

Mortgage brokers are incensed at what they consider their unfair treatment in the settlement, as are some large lenders who have financial interests in appraisal management firms.

Roy DeLoach, executive vice president of the 25,000-member National Association of Mortgage Brokers, said the group is exploring legal action because the settlement, which he believes amounts to “a de facto regulatory action by OFHEO,” failed to follow federal procedural rules.

In an interview, DeLoach also demanded that settlement parties reveal the findings of the investigations. Referring to the matter as “Appraisergate,” he asked, “What did Cuomo find? How does it relate to brokers? Have they gone after appraisers who submitted inflated valuations?”

Absent a federal court order, don’t count on answers to these questions soon. In the meantime, a new era of better appraisals
just might be over the horizon.

Ken Harney is a real estate columnist with the Washington Post.

Ho Chi Minh City sees rapid growth
Several years of free-market trade has boosted Vietnam’s economy, leading the way to its admission into the World Trade Organization last year. Now, the nation’s largest city, Ho Chi Minh City, is experiencing rapid economic growth, with much commercial and residential real estate development.

Beginning last summer, local investors made a batch of preconstruction purchases in the city. Prices for some Ho Chi Minh City luxury apartments, which range up to 2,700 square feet in size, tripled in 2007, according to the International Herald Tribune.

The government has released blueprints for planned towns in several areas nearby, like the 8,250-acre Saigon South, expected to have a population of 1 million.

The demand for luxury condo developments in Ho Chi Minh City is so high that for one such project, the Vista, hundreds of people camped out in front of the sales office the night before sales began. Unit prices there leapt from $125 to $250 a square foot over the course of a few weeks.

But many experts are worried too much investment in these projects is speculative, and that prices are likely to see a correction soon.

The nation’s economy is growing at an annual rate of 8 percent.

In the commercial sector, low supply has kept rents growing steadily, up 40 percent in the past year in Ho Chi Minh City, with an average of around $70 a square foot expected by local commercial brokers in 2008.

Baja gets new resort town

In 10 years, a 3,200-hectare chunk of Baja California now speckled with construction will be a town of 6,000 homes known as Loreto Bay Resort, if all goes as planned.

A joint venture between the Mexican government and Citigroup is developing the project, which is expected to attract a new wave of baby-boomer expatriates retiring from the United States to its southern neighbor.

Recent pushes by Mexican leaders to attract foreign buyers have brought tougher regulation to the housing market, so expatriates have been less worried about the reliability of their brokers and the authenticity of land titles. Another selling point for American retirees: Mexican property taxes are about one-tenth what they are here.

Properties at Loreto Bay run at a fraction of the prices seen in well-established resort destinations like Los Cabos or Cancun. A 3,800-square-foot penthouse unit at Loreto Bay sold for $625,000 in 2004, compared to the upwards of $2.5 million one would have paid for a comparable apartment in well-established Cabo that year.

Homes at Loreto Bay range in price from $300,000 for a one-bedroom to $1.5 million for a custom house. A three-bedroom, two-bath with a roof terrace recently sold for around $400,000.

Estimates of the eventual total cost of the development range from $3 to $6 billion.

Resort home market holds its own in Portugal

As Portugal faces a rise in construction costs and increasing competition from other nations in Europe’s second home market, the government’s effort to reinvigorate tourism through increased marketing may be paying off.

Morocco, Brazil, Argentina, Croatia and Bulgaria are among the new entrants offering second home destinations with cheaper housing. Resort homes in Croatia and Bulgaria cost one-third the price of a comparable home in Portugal, a source told the International Herald Tribune.

Still, 2006 saw 70,000 foreign nationals owning a home in Portugal, accounting for 4 percent of the Iberian housing market, Secretary of State for Tourism Bernardo Trindade told the International Herald Tribune. His agency predicts the figure will grow 5 percent annually over the next few years.

The homepage of Mirax Group Corp., a Moscow-based real estate development company, features five young men standing in a heroic pose on the edge of a building. The Moscow River curves behind them, and so does the Moscow City project, a vast $12 billion mixed-use venture that is rising on the edge of the city’s downtown. The five men — some wearing designer suits, others formal blazers — might as well be wearing superhero capes, given the vaunted status of real estate developers in Russia these days.

Since the country’s financial crisis in 1998, recovery has been remarkable. Annual growth has averaged above 7 percent. While oil and other natural resources, which are trading at near-record highs, account for a majority of the economy’s shine, analysts said that since 2003, other sectors, particularly real estate and construction, have also been booming. Real estate has become so profitable that it is commonly referred to as “the new oil.”

Indeed, real estate and construction account for the wealth of about a quarter of Russia’s 87 billionaires, according to a survey by Forbes Magazine.

“[Right now] construction and real estate are the engines of growth,” said Sergei Riabokobylko, the Russia director of Cushman & Wakefield Stiles & Riabokobylko, the Russian part of the global brokerage.

Many of these new real estate tycoons are quite young. For instance, Sergei Polonsky, the ninth-youngest billionaire on the Forbes list with a net worth of about $1.2 billion (which earns him the rank of 962 among the world’s 1,125 billionaires), is just 35. In building Moscow City, his
firm, Mirax, will erect the 1,660-foot Federation Tower, which will be the tallest building in Europe.

The development will add 1.5 million square meters of office space to the market by the end of 2011.

Other young real estate and construction tycoons include 35-year-old Dmitry Zelenov, ranked 843 with an estimated net worth of about $1.4 billion. Zelenov’s fortune was made through his development company, Don-Story, which built the 833-foot-tall Triumph Palace apartment tower in Moscow.

Two other Russian real estate biggies, Kirill Pisarev and Yuri Zhukov, each 38 years old and each with an estimated net worth of $6.1 billion, tied for the 160th spot on the Forbes list. Together they founded First Mortgage Company; in what at the time was Europe’s largest real estate share issue, the firm sold 15 percent of its equity for $2 billion last June.

“These guys were the people who were pushing the envelope in the late ’90s and early 2000s when everyone else was
saying, ‘What are you doing?’” said Riabokobylko. “They are the ones who have created some of the most visible projects, and now they are looking west, south and causing the paper value of properties in cities to skyrocket. A survey done in March by PricewaterhouseCoopers and the Urban Land Institute indicated that Moscow’s property market is the world’s hottest.

Last year, the same survey ranked Moscow 18th in the world.

According to international property analyst Knight Frank, the cost of homes less than five years old in Moscow was up 92 percent in 2007. Yekaterina Thain, a director at Knight Frank real estate, expects prices to grow by 18 to 25 percent this year.

Despite the addition of nearly 8 million square feet of new space in the last four years, the value of commercial space is also going through the roof. In Moscow, the vacancy rate for office space remained at just 2.4 percent in 2007, and asking prices have gone up 45 percent in just one year, to $1,909 a square meter (about $180 per square foot), according to Knight Frank.

Many Russian real estate moguls have their hands in multiple real estate-related enterprises, including road and airport construction.

Riabokobylko explained, “Clearly, the amount earmarked by the government for infrastructure is tremendous. The government has realized that infrastructure investment brings a multiplier effect.”

However, even despite the present boom mentality,
analysts said Russia’s latest batch of billionaires isn’t invincible.

“I wouldn’t say they are masters of the universe. They haven’t gone through a full real estate cycle.

“We’re still waiting to see how long the boom cycle will last. It is inevitable that we will enter an oversupply phase,” said Riabokobylko. “However, the structural
deficiencies are so serious that it could take five to 10
years to reach a stage where we may experience a supply-driven crisis.”

This issue marks the fifth anniversary of The Real Deal, and we’re proud of having established this magazine as the source you turn to for real estate news.

In the past, if you wanted real estate news, it meant waiting around until Sunday to get the New York Times’ real estate section. But that coverage takes a lowest-common-denominator approach, targeting consumers with mostly feature articles.

We chose to cover real estate news with depth and professionalism. It was strange to us that although real estate is the second-wealthiest industry in New York, its coverage was limited and not very sophisticated. Even today, much of the news about real estate that’s out there is dumbed down despite the fact that already savvy New Yorkers are even more attuned to real estate issues today, thanks (unfortunately) to the subprime crisis.

We are working to elevate the discourse on real estate matters. Our reporting and original research is used in the industry and by other media organizations, like Reuters, which taps a daily feed from our Web site.

Our desire to bring you the most useful and accurate reporting and data means we’ve been well positioned to report on the biggest story of the past six months. As the aftershocks of the mortgage meltdown continue to hit the real estate market, we’ll continue to be on top of the story, bringing you the information that will help you navigate the marketplace.

This month, we take a look at the collapse of Bear Stearns and how the retrenchment of the financial sector has affected New York real estate. We take a closer look at what could happen to the residential market if projections for 20,000 of Wall Street’s 180,000 workforce to be unemployed by next year come true. Curiously, while Bear Stearns’ former CEO, James Cayne, managed to scoop up a $27.6 million condo at the Plaza Hotel, some of his colleagues from Wall Street are running away from their deposits and backing out of contracts for new condos.

On the commercial front, we look at how banks are scrapping their plans for office towers and how some experts contend that this will actually be a good thing for the market, because a limited office supply will bolster the market in tough times. This and other stories can be found in our special report, Watching Wall Street.

It’s impossible to talk about the national market and the New York City market in the same breath. The market here is unique, largely because of its high-end inventory. This month, we take a look at sales in the ultra-high-end market and compare them to the same period a year ago, and find that the luxury market is largely holding its own. Take a look at our comprehensive list of the top 25 Manhattan residential sales since the start of last year. One of the interesting discoveries: Sales at 15 Central Park West make up a quarter of the list.

On the development front, we asked developers about their outlook for new residential projects. Some of the city’s most active developers said there will be very few new projects started this year (even though there will of course be lots of projects being completed and finishing sales). They said that most new projects will be pushed back until 2009.

We also have a story on Russian real estate billionaires, a By the Numbers look at the recent rash of construction accidents in the city, and much more. Enjoy our anniversary issue, and thank you for reading.

Sincerely,

Amir Korangy

As the real estate market slows down, some brokerages are adopting a broader perspective and expanding their global reach.

“We now have a lot of foreign developers who have come to us wanting to get their projects out there,” said Neal Sroka, president and COO of the newly established Douglas Elliman Worldwide Consulting, under the Prudential Douglas Elliman umbrella.

Sroka and his seven-person team are handling marketing, public relations and sales for seven projects in Tel Aviv, Moscow, Dubai and the Caribbean, including the first-ever Nobu hotel, called Nobu Hotel and Residences, in Tel Aviv. They have six more deals in contract.

Sroka, a marketing strategist, was until recently an international broker at the Corcoran Group, running the Sroka Group, before joining Elliman Feb. 1.

With a weak U.S. dollar and the surge in condo development, New York City has become a foreign buyer’s haven. At the same time, Sroka said that New York brokers can no longer bank on local buyers.

Elliman had international business before Sroka came on board, but Douglas Elliman Worldwide Consulting offers a team of brokers focused exclusively on overseas business. Sroka and his team have strong ties in South Korea and throughout South America, and they understand cross-border transactions, he said.

His work is taking him to Frankfurt, where Deutsche Bank invited him to address the bank’s high-net-worth clients about purchasing in New York City and the Caribbean.

Other companies are venturing or have ventured into international waters. Louise Sunshine, chairman of Sundezio, is starting a new global online media company, Domineum.com, which will provide a database of luxury condos, condo hotels and fractional interests in the top 50 global and resort markets. The Web site will also feature market research for purchasers as well as original luxury lifestyle content and will be going live in fall 2008.

Other firms, like Fox Residential Group, have gone global, launching divisions to sell New York properties to international buyers.

Despite merger talks between appraiser Miller Samuel and research firm Radar Logic in 2007, the pair jointly announced in mid-March that a deal will not occur. Both parties declined to comment on the financial terms of the deal, in which Radar Logic would have acquired Miller Samuel.

Although Miller Samuel decided to cancel the merger, both firms said that the split was amicable, and that they would be open to collaboration in the future.

As early as October, Miller Samuel CEO Jonathan Miller began using the title executive vice president, director of research at Radar Logic. “From my actions, in terms of embracing taking the title, developing [Radar Logic's] RPX monthly housing report, speaking on behalf of their firm, presenting at conferences, it appeared that we were wedded to the idea of
making this work,” Miller said. “But the process didn’t move fast enough, and as time passed, I decided that we had to move on.”

Michael Feder, president and CEO of Radar Logic, said that originally it seemed advantageous to consolidate the two companies. “But then, given the behavior of the market, it started to not make sense. What did make sense was for Miller Samuel to stay independent and do its own thing.”

Since the break-up, Miller has held an optimistic attitude toward Miller Samuel’s future as an independent company, calling the present a “watershed moment for the appraisal industry,” following Attorney General Andrew Cuomo’s crackdown on dishonest appraisers and a “general lack of understanding by lenders as to what their collateral is worth.

“I foresee firms like Miller Samuel that come from a neutral viewpoint being sought out by lenders that want to know what the properties they are lending against are actually worth,” Miller said. He said that his firm will probably do consulting for Radar Logic in the near future. “And if time passes and the companies are still speaking and all that, if a deal can be done in the future, it’s not out of the question,” he said.

The Durst Organization has hired Jonathan Drescher as director of major projects, a newly created position at the company. Drescher will oversee the hiring and progress of contractors to plan, design and build Durst’s large-scale projects, which could include its Hudson Yards plans with partner Vornado Realty, pending the results of its bid with the MTA.

The results of the Hudson Yards bid could be revealed as early as this month. Two other projects Drescher will head at Durst include a $200 million mixed-use building at 623 West 57th Street, which will include a private school, retail and parking, and a “large condominium project on the Upper East Side” about which he said he could not yet reveal details.

Most recently, Drescher worked as an associate principal at Arup, a design and building consulting firm, for nine years. There, he was a project manager for the World Trade Center site and the Fulton Street Transit Center. Prior to that, Drescher worked with a private development company as a project director for Airport Group International, a global airport developer.

“I wanted to get back to working with a developer after being at Arup,” he said, noting that both jobs are managerial. “[Durst] is a terrific organization, with a terrific record and terrific prospects.”

Residential

Century 21

Linda Hirschberg joined the firm as personnel manager. She was previously personnel manager for Manhattan Apartments. Wesley Stanton joined as a sales and rentals agent. He was previously with Manhattan Apartments.

Colgate Sales

Elida Jacobsen Justo was promoted to president from vice president of sales and marketing.

Prudential Douglas Elliman

Gilad Azaria was promoted to partner with the Bracha Group. He was previously vice president.

Commercial

The Athena Group

George Drallios joined as vice president of design. He was previously a partner at Costas Kondylis & Partners.

CitySites Commercial Group

Amanda O’Callaghan joined as associate director.

Cresa Partners

Jennifer Lamb was appointed director of administration. She was previously office manager for Context-TQA, a hedge fund.

Cushman & Wakefield Sonnenblick Goldman

Dave Karson was promoted to managing director from director.

Eastern Consolidated

Paul Nigido was promoted to senior financial analyst. Gail Lewis was promoted to marketing director. Tara Thomas was appointed communications director.

Jones Lang LaSalle

Cindy Froggatt was appointed senior vice president of the firm’s strategic consulting group.

Kalmon Dolgin Affiliates

Grant Dolgin joined as a salesperson.

Massey Knakal

Christopher Phillips was promoted from intern to associate. John Stanton joined as associate. Rachel Hammer was promoted to full-time sales support and database associate from part-time employee.

NAI Global

Peter Setaro was appointed director of public relations. He was previously senior account executive at Princeton Partners.

Newmark Knight Frank

William Cassidy joined as managing director.

Robert K. Futterman & Associates

Karen Bellantoni was promoted to executive vice president and partner. Ariel Schuster was promoted to senior vice president and partner.

Studley

John Hirsh, Jason Perla and Scott Weiss were promoted to managing directors. Allyson Bowen and Brad Wolk were promoted to associate directors. They were previously assistant directors.

Time Equities

Zachary Adler joined as associate of acquisitions and development.

JPMorgan buys Bear Stearns, headquarters included

JPMorgan Chase acquired Bear Stearns, which had been pushed to the brink of collapse by the subprime mortgage crisis. The initial sale price of $270 million, which was being revised upward at the end of March, included the Bear Stearns headquarters at 383 Madison Avenue valued at $1.2 billion. The 85-year-old investment bank, which survived the Depression, had been decimated by its mortgage-backed investments. JPMorgan reached an agreement to buy the firm on March 16 for less than one-tenth of its market price two days earlier, which sparked outrage among Bear employees. JPMorgan and the Federal Reserve will guarantee Bear Stearns’ huge trading obligations.

Blackstone CEO gives $100M for New York Public Library makeover

Stephen Schwarzman, the Blackstone Group CEO known as a buyout mastermind, has pledged $100 million for a makeover at the central New York Public Library on Fifth Avenue at 42nd Street, the New York Times reported. After its reconstruction is finished in about 2014, the century-old Fifth Avenue structure will be called the Stephen A. Schwarzman Building. The central library will no longer be used just for research; it will absorb the circulating collection from the system’s Mid-Manhattan branch, at Fifth Avenue and 40th Street, which will be sold. The library has been criticized for its $59 million sale of the Donnell branch in Midtown in November to Orient-Express Hotels, which plans an 11-story hotel, with the library on the ground and basement floors.

Robert DeNiro’s luxury hotel set to open

Actor Robert DeNiro’s 88-room Greenwich Hotel at Greenwich and North Moore streets was set to finally open on April 1 with a promotion that might make some wonder if it’s really just a joke: $300 off the regular room rate. Although the reduction only applies to the lower-cost accommodations, the normally $725 rooms are all unique and feature a variety of treats, including newspapers delivered daily from the patrons’ hometowns, according to Hotelchatter.com.

City Tech tower plans killed

Developer Bruce Ratner and the City University of New York dropped plans for the Renzo Piano-designed City Tech tower in Downtown Brooklyn, the Brooklyn Paper reported. The residential tower with a dorm and lab could have reached 1,000 feet, making it Brooklyn’s tallest building. A top CUNY official said both sides had mutually agreed to kill the costly project. In December, CUNY raised Ratner’s fee to $307 million. Piano also pulled out, according to the New York Daily News. Council Member David Yassky said Ratner, who is building the Atlantic Yards mega-project, might have been stretched too thin by the credit crunch. Yassky also said the tower was “an awkward fit” for the corner of Tillary and Jay streets. CUNY still plans to build its dorm and lab in a building that could be only 10 stories.

Brooklyn’s Polytechnic University approves NYU merger

Trustees at Polytechnic University in Brooklyn approved a merger with New York University, despite an ongoing investigation by a state senator and questions from the attorney general’s office, the Times reported. Polytechnic postponed its merger vote in February after New York State Sen. Kenneth LaValle, the Republican chairman of the Senate’s Higher Education Committee, said he was investigating ethical and legal concerns. Opponents said NYU was only interested in acquiring Polytechnic’s real estate. Polytechnic has a 650,000-square-foot campus in Brooklyn’s MetroTech Center and holds air rights that developer Forest City Ratner could be interested in buying.

When times are tough, landlords often offer a month’s free rent to lure tenants. Now a developer is taking a similar approach much further.

Maplewood Homebuilders recently rolled out what it calls the “no mortgage for one year program,” offered to qualified buyers who close on a select home in any of the company’s 11 communities in New Jersey.

“There are no balloon payments or push-off payments that turn it into a 31-year mortgage,” said Tom Jablonski, executive vice president of sales and marketing at
Maplewood.

At the company’s new 36-unit project, the Savoy at Rahway, two-bedroom condos start at $315,000. Homes at the Bergen Mills development in Monroe Township go for $1.1 to $1.2 million.

Under the plan, Maplewood opens an escrow account equal to 12 months of a buyer’s mortgage, including principal and interest. Maplewood then sends the homeowner a check every month in the amount of the mortgage payment.

Participants must pony up a 20 percent down payment and take their mortgage through Wells Fargo at a 30-year fixed rate not to exceed 6 percent, a limit that protects Maplewood against those with shaky credit.

“If you have a credit score in the 500s and can’t get a loan below, say, 8 percent, we feel that we don’t need to subsidize that,” said Jablonski.

“I’m seeing different incentives for buyers lately, from a free Lexus to free furniture to other upgrades,” said Manhattan real estate lawyer Neil Garfinkel. “New developers need to move product, and this is a glitzy way to get people in the door.”

Maplewood Homebuilders got into the business of distressed real estate last year after the new company acquired about 600 properties in central and southern New Jersey from Kara Homes, which filed for bankruptcy in 2006. Maplewood reopened 10 former Kara communities and is developing other properties of its own.

Marketing for Maplewood states that the offer would end March 31, but Jablonski is willing to let the deadline slide. And he said he’d be willing to let borrowers lock in a loan rate for projects that aren’t yet completed.

“You can’t ignore the headlines,” he said. “We have to get clever in what we offer. If someone wants a reduction in price or upgrades that equal the value of the mortgage payment, that’s fine, too.”

The case of a kidnapped English bulldog splashed across newspapers and airwaves last month had a real estate connection: The pet’s owners are Jessica and Kevin Kurland, who is the president and founder of Kurland Realty.

Fortunately for Clara, the purloined pet, Jessica has a friend, Beth Ostrosky, whose boyfriend is known for reaching wide audiences: the radio personality Howard Stern. He invited Jessica on the show to publicize the search effort, and the story was picked up by the New York Post.

The saga began around 8:30 p.m. in mid-March, when Clara went missing from outside a Food Emporium on the far West Side.

On the show, Jessica offered a $3,000 “no questions asked” reward for the return of the dog. And Stern berated her for leaving the dog tied up outside the store unattended.

Kevin put up flyers in the neighborhood of the incident, showing a picture of the 3-year-old bulldog and indicating the reward.

He began his brokerage as a one-man operation in 1997, beginning with residential rentals, out of his apartment. The company has expanded to home sales and commercial leasing and sales, and now has a staff of around 30 brokers and 40 total employees.

Also pitching in was an animal rescue organization called Rescue Ink, a crew of hulking, tattooed volunteers with a soft spot for animals.

“[Rescue Ink] looks like a gang that you don’t want to run into in prison,” Kevin said. “One of them is a former detective, and they’re all pet lovers. They’re big teddy bears, but they look really mean.”

Three days after Clara went missing, Kurland told The Real Deal that he had upped the reward offer to $5,000. And four days after the search began, an anonymous couple found Clara walking down the street, not far from where she went missing.

Welcome to the concierge age, which has brought hotel-style services like wake-up calls and reservation booking to upscale residential buildings. Now another hotel perk is spreading: the fancy breakfast.

While breakfast has been around for awhile — luxury buildings in New York began offering the meals a few years back — more residential buildings including rentals are offering them, some to members of their health clubs.

Michael Fazio, co-partner of Abigail Michaels Concierge, which provides concierge services at high-end buildings throughout the city including Sheffield57 and the Avery on the Upper West Side, said breakfasts are typically Continental-style: a buffet of baked goods, yogurt, fresh fruit and beverages.

Some buildings offer to-go meals packaged in bags with the building’s insignia printed on the side. A number of condos and rentals go all out with omelet and waffle stations on weekends.

American Leisure, which runs health clubs at residential buildings, added breakfast to its club offerings. Steve Kass, the founder and CEO, said American Leisure provides breakfast through its clubs at around 70 high-
end buildings in the city, including the Biltmore on 47th Street and Eighth Avenue, Tower 31 on West 31st Street, the Mark on East 77th Street, 37 Wall Street and 170 East End Avenue.

In condos with health clubs, residents are automatically members, so everyone shoulders the cost of breakfast while health clubs at rentals generally require a membership fee.

At Tower 31, a rental, breakfast is served in the 31 Club, where the annual fee to join is $750. Club 5 at the Biltmore serves 125 to 150 people every day, said Kass.

“The joke is that a typical single person has a quart of sour milk and a container of stale Chinese food in their refrigerators,” he said. “So we try to make breakfast fun, interesting and fast by rotating offerings from well-known local vendors” like Bouchon Bakery and Amy’s Bread.

The club also has a demo kitchen, where it holds weekend cooking programs for residents.

At 31 Club, around 75 percent of tenants eat at a communal table, Kass said.

A convivial dorm-style breakfast is held at the 550-unit Orion condo on West 42nd Street, which is known for encouraging group activities. Breakfast is served on the 29th floor with extra seating on the 30th floor, said Raizy Haas at Extell Development.

Haas said breakfast is a new frontier for high-end Manhattan buildings. She said her vendor, Penmark Realty, now plans to expand its breakfast offerings beyond the Orion.

The next step for Extell and American Leisure is to install kitchens in buildings and prepare individual meals for condo owners. Kass’ new project, which he could not name, will offer the equivalent of room service for all meals.

At Ariel East, on Broadway and between 99th and 100th streets, Extell will offer a simple daily breakfast menu to residents, who will check off items that they would like to have delivered to their units.

“Andy Warhol once said that in 25 years, everyone would be living in a hotel,” said Abigail Newman, co-partner at Abigail Michaels Concierge. “He should have gone into real estate, because that is exactly what’s happening.”

For 13 years, David Kapell was mayor of Greenport, N.Y., where he implemented controversial programs like welcoming the Guardian Angels to help police the streets.

But Kapell was not just dealing with policing and tax policy. A licensed real estate broker, he also inserted Greenport, a fishing village on the North Fork of Long Island, into several high-profile land deals while in office. Kapell was at the helm of the village as it saw a boom in real estate values, and even sold a Greenport home to Kofi Annan just before the diplomat started his stint as secretary general of the United Nations in 1996.

Last year, Kapell, 58, retired from public life to return full time to the real estate agency he runs with his wife, Eileen, and his son.

“As mayor, I made a market for Greenport real estate,” he said. “But as mayor, I was too preoccupied with my official duties to exploit the market personally, and my competitors ate my lunch.”

Kapell said he tries to stay under the radar in his real estate dealings: He avoids name advertising and eschews the MLS. He noted that the commercial side of the real estate business has been strong (he recently sold a gas station convenience store for $1.2 million). But, he said, residential sales have been “extremely challenging.”

Kapell’s interest in real estate began with industrial buildings in what is now Dumbo in the 1970s. While playing bass in a blues-rock band, he scouted properties.

In 1979, he moved from the Upper East Side to Greenport, and put up his own shingle to sell houses. Though Kappell described the weathered Victorian village as a “welfare dump,” its charms lured him to stay.

He got involved in local government in the 1980s and was elected mayor in 1994 just as a police scandal erupted.

Officers in the village had been colluding with drug dealers and engaging in sexual escapades (including on the chief’s desk), so Kapell disbanded the force and turned policing functions over to the Town of Southold, saving Greenport $800,000 a year.

He refunded a chunk of the money by handing out checks on the steps of village hall, which gave him considerable political capital. Next, he turned his attention to the former site of Mitchell’s restaurant, which was boarded up and considered an eyesore.

“It was like having a blighted building where the Plaza Hotel stands; that’s how prominent it is,” said Kapell, who went to Harvard’s Kennedy School of Government for a one-year mid-career master’s program in public administration while in office. He earmarked funds from the police surplus toward the project and converted the 3.2-acre parcel into a public park, with a carousel, marina, amphitheater and ice skating rink.

Denise Civiletti, co-publisher of the Suffolk Times, a weekly that covers the North Fork, said Kapell “knew how to advance his agenda, but he was a controversial figure — you either loved him or you hated him.”

Opponents called him a “Rudy Giuliani type” with a “take-no-prisoners attitude.”

Kapell said he acted like a “seller’s broker” for the village — without the commission payments, that is.

In 1995, after Cablevision took down a 350-foot tower that had been located on village land, Kapell opened talks with Sprint PCS, which built an identical tower on the same spot. He negotiated leases with four other cell phone companies and a radio station.

“It gave us $250,000 a year on a tower someone gave us that sits on our land,” he said. “It was like a free lunch, since people were already accustomed to the tower.”

A few years later, he enabled the construction of a new power plant that supplies energy to the Long Island Power Authority. The generator, which is in the woods, hidden from the road, pays $350,000 in annual rent.

And, in a creative arrangement, he established a hybrid auction and offered a 3 percent fee to any private broker who landed a buyer for three municipal properties. The village suggested a price based on an appraisal, set a relatively short termination date for the listing, and reserved the right to accept the highest bid without obligation to any broker or buyer. In each case, closing prices exceeded the appraised value.

Kappell also welcomed the Hell’s Angels to rumble through the village; he rankled some locals when he invited Curtis Sliwa, the radio talk show host and founder of the Guardian Angels, to patrol the town.

But his efforts were not enough to ensure his heir apparent, William Mills, a victory. Mills lost in the last election to David Nyce, a local gallery owner, furniture maker and recent transplant to Greenport.

Still, Kapell’s big-city style keeps him in the headlines. A few months ago, he sued the village for stripping away his retiree health benefits. And he is plugging away at his real estate business, looking toward his next big sale.

1986: Jacob K. Javits Convention Center opens

The sprawling Jacob K. Javits Convention Center opened 22 years ago this month. With 1.8 million square feet of show space on Manhattan’s West Side, the convention center has the most amount of space under one roof in the country.

While the city’s new center was triple the size of the New York Coliseum on Columbus Circle, which it was built to replace, it was not the largest convention complex in the nation, trailing the Las Vegas Convention Center and McCormick Place in Chicago.

The American International Fur Fair and Art Expo ’86 were the first trade shows mounted on the center’s opening day, April 3, 1986. The $486 million modernist glass and steel center, designed by I.M. Pei and Partners, extends from 34th to 38th streets and between 11th and 12 avenues. It took seven years to build.

A ceremony in 1984 named the unfinished center in honor of Jacob K. Javits, a popular New York senator who served for 24 years. He died a month before the building opened.

Preliminary plans for a $1.8 billion expansion of the center, which would increase its size by 45 percent, were approved by the state in 2006, but after cost estimates for the project jumped to $3.2 billion, then-Governor Eliot Spitzer cancelled the complete overhaul. Spitzer had proposed a much less ambitious, 100,000-square-foot expansion prior to his resignation; final plans are tied up in political wrangling between Albany and New York City.

1944: Manhattan vacancy rates dip below 1 percent

Vacancy rates for Manhattan’s rental apartment buildings fell below 1 percent for the first time 64 years ago this month, according to a report from the Real Estate Board of New York, as the economy improved and recently returned World War II soldiers needed housing.

The results came from a sample of the borough’s 321,765 units in modern
elevator and walk-up buildings, but did not count the so-called “old law” tenements and “slum buildings.” Desperate prospective tenants were “scanning the obituary columns for leads on possible new vacancies,” according to a Times article. The
vacancy rate for modern buildings had been falling steadily since 1932, when it hit a
record high of 17.7 percent, then began dropping dramatically in the fall of 1942, when it was recorded at 9.8 percent.

In 2005, 3.79 percent of Manhattan’s approximately 600,000 rental units were vacant, according to the Department of Housing Preservation and Development’s Housing Vacancy Survey. However, a 2007 report by brokerage Citi Habitats contended that the rate that year was in fact below 1 percent in most neighborhoods in the borough.

1913: Record-breaking mortgage for Equitable Building

Ninety-five years ago this month, the largest mortgage the city had ever seen for a single parcel of property was arranged for the construction of the Equitable Building at 120 Broadway.

Delaware businessman Thomas Coleman Du Pont, an heir of the famed Du Pont family, along with his associates, borrowed a $20.5 million loan from the Equitable Life Assurance Company and filed the note with the city on April 25, 1913. The agreement stipulated that the long-term mortgage, at 4.5 percent interest, would be paid in gold. The loan was expected to be paid off by May 1, 1974.

Du Pont’s Equitable Office Building Corporation had purchased the development site in October 1912 for $13.5 million, after an earlier Equitable Building was destroyed in a fire in January that year. The 38-story building covers the entire lot bounded by Nassau, Cedar and Pine streets and Broadway. When it opened in 1915, the 1.7 million-square-foot building became the largest office building in the world by total floor area.

The Beaux-Arts structure rises straight up with no setback, casting an enormous shadow. Even before it was built, plans for the building stirred controversy, as neighborhood advocates had suggested that the city build a park on the site.
The Equitable Life Assurance Co. sold the mortgage in 1947 and then bought the building in 1958, according to a federal landmark designation report. In 1980, a partnership including Silverstein Properties purchased the office tower for $60 million, and in 1996 it was designated a landmark.

Compiled by Adam Pincus

Given the bleak economic outlook and uncertain times for New York
City real estate, the late developer Lewis Rudin’s steadfast belief in
hanging on to all his holdings may serve as an encouraging example for
jittery developers in a slumping market. [more]

A story in the March issue, “Midtown office rents drop,” incorrectly stated the Midtown rent change from the end of December 2007 to the end of January 2008. According to CBRE numbers released after a periodic update of submarket boundaries, Midtown office rents increased by $.55 to $83.92 as of January 31, 2008, from $83.37 at year-end 2007, after adjusting for a change in the Midtown boundaries to include the Penn Station submarket. The $85.08 Midtown rent figure for December 2007 cited in the story was based on boundaries that were uncorrected. A statement about declining rents in Midtown was not a result of comments by Pamela Murphy, vice president at CBRE, who was quoted elsewhere in the story.

A photo of Brennan Zahler, a Corcoran Group senior associate broker, was incorrectly used instead of a photo of Patrick Brennan, a Corcoran Group senior associate broker, for a Web story that was posted on March 28 under the headline “11 city brokers face tax evasion charges.” Zahler was in no way connected to the article.

An item in The Deal Sheet in the March issue referred incorrectly to the brokerage company representing the landlord in a retail transaction at 265 West 72nd Street. The company is Bullaro Properties.