New Yorkers are fleeing the city in the scorching summer heat, trading subway cars for the Jitney and business casual for beachwear. The Real Deal heads to the Hamptons, where we look at hedge funders’ impact on the market and interview mega developer Joe Farrell. We also talk to Jersey Shore brokers about how Snooki and the ‘Situation’ are impacting the improving market there. Back in New York, brokers are divided on whether it makes sense to list for-sale properties during the dog days of summer. Still, it’s not dead, with the rental market sizzling. [more]
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Clockwise from left: Jamaica, Queens, 230 Park Avenue, Yitzhak Tessler, Bob Toll, Sam Suzuki and 621 Manida StreetFor the owners of distressed properties, it’s a harrowing ride to stabilization. Note sale, foreclosure, bankruptcy or recapitalization, there is no easy path from financial trouble to stable footing. And while some savvy investors have seized control of valuable New York City properties, many owners and lenders have lost billions of dollars through distressed real estate sales and restructurings since the financial crisis began. Manhattan’s investment sales market has recently improved, but the volume of losses here is staggering.
Click here to flip through The Real Deal’s August issue in a new format.
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Barry SternlichtBarry Sternlicht started his company, Starwood Capital Group, during a downturn — and recently he’s been expanding it, especially here in New York. Since the beginning of the year, Sternlicht, the firm’s chairman, has been ramping up his Manhattan deal-making. The brains behind the iconic “W” brand, he’s picked up a slew of Manhattan properties in the last few months, including 1414 Avenue of the Americas, and the former Donnell Library on West 53rd Street, among others. While Sternlicht has been one of the most active real estate players of the downturn, the focus on New York marks a shift from 2009 and 2010, when he concentrated on distressed properties in other parts of the country. Notable was his company’s 2009 deal to buy a 40 percent stake in Corus Bank’s distressed loan portfolio for $554 million after the lender was shut down by regulators. [more] -
Late last month, Heddings Property Group broker David Innocenzi logged on to domain registry GoDaddy.com to renew his ownership of TheInnocenzi Team.com. No such luck — it was already taken. He said agents from Prudential Douglas Elliman had purchased the domain name, and ostensibly set up the Innocenzi website so that it would redirect traffic to their own. “It was a total shock,” Innocenzi said. “For maybe 30 seconds it was even flattering that someone would consider our domain worth taking over. [But] of course I was also extremely upset.” If that story sounds familiar, it’s probably because Elliman itself made headlines in June when it sued Hamptons brokerage Saunders & Associates for doing almost exactly the same thing. [more] -
Gary Malin, president of Citi Habitats (seated), and Cliff Finn, managing director of new development marketing, at rental tower New York by GehryIn the past, top-of-the-line, modern finishes just weren’t available in most New York City rentals. Not so in 2011. The economic conditions of the past few years have ushered in an era of new luxury rental buildings, catering to would-have-been condo buyers looking for high ceilings, European-designed appliances, and plush amenity packages that have traditionally only been available in apartments for sale. For the major players in new development marketing, this shift toward rentals has been shaking up the field. Firms that have always excelled in leasing are now benefiting from an influx of new inventory that fits their niche, while some sales-focused companies are expanding their repertoire to include rentals. [more]
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From left: Mark Gordon of Tribeca Associates, Ron Burkle a stakeholder in Morgans Hotel Group, Gary Barnett of Extell Development and Tommy Hilfiger, who purchased the MetLife clocktowerFor the last few years, investing in New York hotels was like scoring the Presidential Suite at the Plaza — an experience reserved only for a select few, primary real estate investment trusts. Indeed, as the stock market roared back, these publicly traded REITs were able to raise capital almost as easily as dialing up room service. Recently, though, other types of investors — most notably management companies, private equity firms, government investment arms and hedge funds — have edged into the New York market, convinced, it seems, that hotel values in the city still have a ways to climb. That is despite the fact that hotels have already rapidly risen in value after taking a severe recessionary beating in 2009. [more]
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John CatsimatidisJohn Catsimatidis is the owner, president, chairman and CEO of the Red Apple Group and Gristedes Foods — Manhattan’s largest supermarket chain. Red Apple — which Catsimatidis said has around $700 million to $800 million in real estate interests — has a proposal to build three residential towers in Coney Island and is planning to add more residential buildings to the one it has in Downtown Brooklyn. In addition, Catsimatidis said he personally owns 300 properties in New York State and Pennsylvania. And he owns the Hellenic Times, a Manhattan-based Greek-American newspaper. He is also a prominent political fund-raiser and donor.Click here to flip through The Real Deal’s August issue in a new format.
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Reporters are suckers for statistics. They help ground our stories and present more evidence than mere anecdotal reports. They also make us sound official. You can see the importance of good data in many of the cover stories in this issue, of course. We researched which brokerages are marketing the most new residential development units, in order to judge who’s leading the pack following the downturn; we looked at the dollar value of hotel purchases to show how that sector has grown red hot for investors again; and so on. That said, some stats are easier to get than others. [more] -
New Yorkers are fleeing the city in the scorching summer heat, trading subway cars for the Hamptons Jitney and business casual for bathing suits. Even so, the residential rental market is as sizzling-hot as the temperature, brokers say. According to a market report released by the brokerage Citi Habitats, the average second-quarter rent for a Manhattan apartment jumped around 10 percent from the same period of 2010. Taking into consideration landlord concessions like a month of free rent, the median net-effective monthly rent paid by Manhattan tenants grew to $2,888 in the second quarter, up from $2,700 in the prior-year quarter, according to a report from Prudential Douglas Elliman. [more] -
Bureaucrats may soon find that their bureaus are just a little bit smaller. As the city, state and federal governments tighten their belts, brokers are seeing them reduce the amount of office space they lease. And with several prominent government agencies studying ways to reduce their footprints further, some insiders are beginning to worry about the impact that those cuts are going to have on Manhattan’s commercial leasing market. The uncertainty extends to some nonprofit organizations that depend on government funding, commercial agents said. [more]
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Joe FarrellBridgehampton denizens have probably noticed a handsome new building on the edge of town. The structure, which went up last May, serves as central command for prolific East End residential developer Joe Farrell, whose “Sandcastle” estate made international headlines when it rented for two weeks last summer for a stunning $500,000. Farrell is renting it again this summer, but he also has a host of other projects in the works. He says he has delivered 18 homes in the $3.5 to $10 million range so far this summer, and that by the end of the season he’ll have completed 30. Plus, he said, his new, more visible office — which has an employee barber shop in the basement and an upstairs apartment for his personal pilot — has been a “boon for business.” Comments
Economic clouds gathered on the horizon last month, amid legislative battles over the country’s debt ceiling and talks of layoffs at major financial firms. Still, Manhattan office leasing continued to tighten. July brought no eye-popping deals, unlike June, which saw Condé Nast ink a 1 million-square-foot lease at One World Trade Center Downtown, and Nomura Holding America taking 900,000 square feet at Worldwide Plaza in Midtown. Still, the overall market last month did see a decline in the amount of space available for lease. The availability rate for Manhattan office properties — measuring space that is vacant or will become available over the next 12 months — fell 0.2 points to 11.5 percent in July, according to data from commercial brokerage Cassidy Turley. [more]Picture this nightmare financial scenario: You’ve taken out a $150,000 home-equity credit line to remodel your house, you’ve already pulled out thousands to pay contractors and owe thousands more, when suddenly you get a curt letter from the bank. Effective yesterday, it says, we’ve shut down access to your credit line. Although we haven’t physically appraised your property, an automated valuation indicates it is now worth significantly less than when we approved your application. If you wish to hire an appraiser, chosen by us but at your own expense, you can appeal our decision. You’re in shock. You can’t pay bills you’ve already contracted for, you can’t touch the money you confidently believed you had. Plus, you know that house prices in your area have been relatively stable since you took out the credit line. How could a bank effectively devalue your real estate using nothing more than a computer program? [more]
Property tax cap becomes a reality
Cuomo signs the property tax cap billGovernor Andrew Cuomo has signed into law the first property tax cap in state history. The product of years of discussion in Albany, the cap limits property tax increases to 2 percent or the rate of inflation, whichever is less. Municipalities can only overturn the rule with 60 percent voter support. [more]
Fourth AvenueFourth Avenue — a wide boulevard wending its way from downtown Brooklyn to Bay Ridge — is still a far cry from the “Park Avenue of Brooklyn” that politicians predicted during its mid-2000s rezoning. Development on Fourth Avenue, especially the section that skirts the western edge of Park Slope, did indeed take off during the real estate boom. Pioneering condo projects in the area, like Novo and the Crest, are now sold out. But as The Real Deal and others have reported, the area saw a number of projects stall mid-construction during the downturn. Plus, the notoriously unattractive area — known for garages and empty lots — still has more auto¬ shops than doormen. [more]
The gulf between New York City’s real estate market and the rest of the country has always been wide. But that disconnect appears to be growing. “Manhattan seems to be one of the lucky ones,” said Jonathan Miller, president and CEO of Miller Samuel, who called the Big Apple one of “the best housing markets in the country, relatively.” For example, Manhattan’s median residential sale price in the second quarter was only 17 percent below the market peak in 2008, according to the most recent report from brokerage Prudential Douglas Elliman, which is prepared by Miller. That’s an improvement from the worst depths of the downturn, when Manhattan prices were 25 to 30 percent below the high, said Miller, who also does market research for Las Vegas, Washington, D.C., Baltimore and Miami. [more]
Clockwise from top left: Attorney Edward Harris, Bluestone Group’s Eli Tabak and Lowell Dansker of Intervest Bancshares. Bottom: Jamaica streetscape
The setup
In a strategy that many insiders say was highly unusual (and very creative), the Bluestone Group wrested control of a 200-plus-unit apartment building in Jamaica, Queens, by getting its hands on the owner’s line of credit. The property owner had taken out both a first mortgage and a revolving line of credit from a regional community bank. While the owner never stopped making payments on its mortgage, it defaulted on the line of credit about a year and a half ago. Bluestone agreed to discuss the transaction on the condition that the identities of the owner and the bank, and the exact address, were withheld, because the ownership structure is still being finalized. City property records, which will identify the parties, ultimately must be filed. [more]
The Carlton Group’s Howard MichaelsThe setup
Many struggling owners rescue distressed deals by bringing in a new partner. Although known euphemistically as a “recapitalization,” such a deal is often tantamount to a sale, and can be painful for the original owner. At 230 Park Avenue, which had a particularly opaque capital stack, one owner hung on (with a significantly reduced stake), while another lost hundreds of millions of dollars and limped away. [more]
Hal Fetner
The setup
Some owners fight to the bitter end, but ultimately don’t have enough money to hold on during a hostile takeover. That’s what happened to Tessler Developments and the Chetrit Group at 855 Sixth Avenue, a development site just a few blocks south of Herald Square, when Durst Fetner Residential stepped in. In March 2007, Yitzhak Tessler of Tessler Developments partnered with Meyer and Joe Chetrit of the Chetrit Group to shell out $140 million to a group led by Baruch Singer for six of eight parcels that ultimately made up the development site at 855 Sixth Avenue. [more]
Clockwise from top left: Bronx landlord Sam Suzuki; 621 Manida Street in the Bronx; Omni New York partners Mo Vaughn (right) and Eugene Schneur; and 1271 Morris Avenue in the BronxThe setup
Some owners know when it’s time to walk away from a distressed property, but it’s not always easy to do. It took Ocelot Capital Group three exasperating years to get rid of a portfolio of prewar Bronx apartment buildings. Thanks to political pressure and a severely discounted loan, former Major League Baseball slugger Maurice “Mo” Vaughn and his partner (backed by an investment firm) were finally able to take over (note: correction appended). [more]
Clockwise from top left: Alchemy Properties’ Kenneth Horn, Bob Toll of Toll Brothers, Leonard Taub of Kaish & Taub, Jonathan Caplan of Jones Lang LaSalle, 376-380 Third Avenue and the State Supreme Court BuildingThe setup
One of the most aggressive strategies for holding on to a distressed property is bankruptcy. But while a bankruptcy filing temporarily stops the foreclosure process, there are no guarantees that it will ultimately halt it. Kaish & Taub Development Group found that out the hard way when they lost their Gramercy Park assemblage to Toll Brothers. [more]
Starrett-Lehigh building1974: HELMSLEY BUYS STARRETT-LEHIGH FOR $13.5M1944: ALICE AUSTEN EVICTION BLOCKED AT 1690 HOME
1910: 17TH-CENTURY DUTCH, ENGLISH RECORDS LOST [more]
During the boom, when no Manhattan neighborhood seemed vulnerable to the economy, hotel deals seemed to pop up on every corner of Manhattan — no matter how far-flung. Now, though, as the market recovers, deal-making in Manhattan’s chief central business district — Midtown — has seen more hotel activity, and larger deals, than any other part of Manhattan, sources say. The area — which stretches from 34th to 65th streets and river to river — has seen “a number of high-dollar-amount deals,” said John Fox, a hotel industry specialist at PKF Consulting. A handful of these Midtown deals involve ground-up construction of new hotels, though most involve investors and developers snapping up older properties, including brands like the Algonquin and the Paramount, with the intention of renovating them. [more]
When temperatures rise in New York City, apartment buyers skip town — or so goes the conventional wisdom. That leads many sellers to believe that they are better off waiting for the fall to list new properties. But this summer, it’s not so clear-cut. Today’s market is more unpredictable than ever. As a result, more brokers are choosing to list properties in August rather than face the unknown in the fall. This month, The Real Deal asked industry experts to weigh in on the pros and cons of listing a new property during the dog days of summer. [more]A law aiming to prevent improper quid pro quos for title insurance agents just got a new set of sharp teeth — causing a furor in the already embattled industry. In late May, the Office of the General Counsel of the state’s Insurance Department issued an opinion about whether it’s legal for a residential brokerage to place lawyers on “recommended” lists, which are distributed to homebuyers, in exchange for those lawyers referring clients to the brokerage’s title insurance affiliate. The answer was a resounding no. The state agency ruled that this kind of quid pro quo is a violation of state law. As a result, brokerages are now prohibited from rewarding lawyers for using their firm’s affiliated title agency, or “punishing” those who don’t by removing them from recommended lists. (Until now, industry sources say that lawyers who failed to refer back business to the firms were often nixed from these lists.) Those who violate the law will now be slapped with a $1,000 fine or five times the amount of the financial inducement, whichever is larger. [more]
Hilton Grand Vacations Club on 57th Street at the Manhattan Club on 56th StreetFor all the unconventional housing arrangements people devise to afford living in New York City, the timeshare, historically, has not been one of them. There are just two timeshare-only buildings in all of Manhattan. And, at first blush, the owners of those timeshares — at the 161-unit Hilton Grand Vacations Club on West 57th Street and the 300-unit Manhattan Club on West 56th Street — appear to be struggling. Since opening in 2009, the Hilton Grand has seen 52 lis pendens, or pre-foreclosure filings, and six foreclosures among its timeshare owners. Meanwhile, the Manhattan Club has witnessed 17 lis pendens and 22 foreclosures since 2007, according to real estate data website PropertyShark. [more]
That signature skyline of Central Park South, one of the most illustrious and iconic in the city, is about to change more fundamentally and definitively than it has in well over a generation. Long before it has topped out, One 57, the goliath designed by Christian de Portzamparc at 157 West 57th Street, is a thing of pharaonic immensity that will be, at 90 stories, the tallest residential tower in the city. It will even dwarf Trump World Tower, which stands at a puny 72 stories, and 8 Spruce Street, which at 76 stories is currently the tallest residential tower in the city. The new building, formerly known as Carnegie 57, will contain 135 residential units, designed by Thomas Juul-Hansen, and will rise above a 210-room Park Hyatt Hotel. [more]
In order to complete real estate transactions in New York’s still-tough lending climate, some lawyers are turning to creative loopholes that have them operating in an ethical gray area, industry insiders say. Boilerplate contracts — once the norm in residential transactions — have been scarce for several years now as lawyers come up with deals “tailored” to the specific needs of buyers and sellers. But some lawyers are now going even further to avoid strict lending rules, adding contract riders that are not submitted to banks. Other buyers and sellers simply make private side agreements that are not mentioned in any of the closing documents. [more]
“Jersey Shore” cast members the Situation, left, and SnookiSnooki and the Situation may be embarrassing longtime Jersey Shore homeowners and renters with their hit MTV show “Jersey Shore,” but real estate professionals say the program’s notoriously trashy antics haven’t taken the market down with it. This month, The Real Deal talked to brokers and analysts who follow the Garden State’s beach towns, from Belmar to Long Beach Island, to find out how their season has been shaping up. They told us that the market is stabilizing — even if a full bottoming might be as far off as 2013. While sales volume is still running at two-thirds of its historic average in the so-called anti-Hamptons, it is up from last year’s all-time lows, one source said. The source also added that while there are bigger discounts to be had on the Jersey Shore than in New York or Philadelphia, “it’s still not Florida or Nevada, where they’re practically giving away homes.” [more]Connecticut
Waterfront mansion sells for record price
The Hascoe estateThe Greenwich estate of late husband-and-wife entrepreneurs Norman and Suzanne Hascoe has sold for $39.5 million, the Hartford Courant reported last month. The price is the highest ever paid for waterfront property in the ritzy suburb, and the sale is the most expensive in Greenwich since 2004. [more]
The Seattle skylineReal estate professionals believe the Seattle housing market has finally stopped declining, the Seattle Post Intelligencer reported. “It feels like we have hit the bottom,” said Lennox Scott, chairman and chief executive officer of John L. Scott Real Estate. “Buyer confidence has definitely returned.” Sales in King County rose 0.6 percent in June from the same period of 2010, and increased 12 percent from May, the paper reported. Meanwhile, pending sales were up 35.6 percent from a year earlier, but down 3.4 percent from May. The median sales price for a Seattle home was $345,000, down 8.2 percent from May and 4.7 percent from the prior year. [more]
UES rental building could fetch $220 million
A prewar Upper East Side rental building that hit the market last month could draw $220 million, real estate experts predict, because of its potential to be turned into condominiums and the value of its prime 10,000 square feet of Madison Avenue retail space, according to Crain’s. “There is a limited amount of properties on the market in general, so investor interest should be through the roof for something like this,” Dan Fasulo, managing director at Real Capital Analytics, said of the 11-story property at 11 East 68th Street, which is owned by Abro Management. [more]
Construction Update
Harlem
Beacon Towers
29 West 138th Street
Construction is complete and units are available for immediate occupancy at the eight-story affordable housing development. The 73-unit apartment building, developed by Strategic Development and Construction Group and Lemle & Wolff, currently has six unsold units. Prices for the available homes start at $275,000 for one-bedroom apartments, while two-bedrooms start at $343,000. Amenities include a fitness center, a part-time attended lobby, a courtyard garden and underground secured parking. Halstead Property Development Marketing is the agent. Contact: www.beacontowersliving.com. [more]Greenwich Village
$5.5 million
307 West 4th Street3-bedroom, 4-bathroom, 3,899 sf prewar townhouse; 4-story property is 20 feet wide with landscaped garden, 3 terraces, 4 wood-burning fireplaces, home office with private entrance and top-floor rental unit; taxes $1,785 per month; asking price $5.995 million; 21 weeks on the market. (Brokers: David Schlamm and Karen Loew, City Connections Realty; David Kornmeier, Brown Harris Stevens) [more]
Many of the new firms now bursting onto the real estate scene promise the latest, greatest commission splits. But Edward Longley, a former City Connections Realty broker who launched the Hollingsworth Group last month, has a different approach. “It’s not about the payout,” Longley told The Real Deal. That may sound surprising coming from a five-year veteran of David Schlamm’s City Connections, one of the first real estate brokerages in the city to adopt a “100 percent commission” model. But Longley, who named the new firm for his grandmother, said he has a longer-term approach. [more]
Patricia LevanWhile attending open houses recently, real estate broker Patricia Levan noticed an unsettling trend: An increasing number of potential buyers were unaccompanied by brokers. In fact, many already knew which apartments they wanted to buy, thanks to StreetEasy and other websites. “It scared me at first,” said Levan, founder of six-year-old boutique firm Levan Real Estate. “I thought to myself, ‘This is foreshadowing our obsolescence on the buy side.’” But Levan soon realized that the shift presented an opportunity for her firm. Last month, she launched a program aimed at rewarding buyers “who are willing to do so much of this job on their own,” she said. She dubbed the new initiative B.Y.O.A., for Be Your Own Agent. [more]
Valon NikçiValon Nikçi, a former broker with Harlem Lofts, has left to start his own firm: Link NY Realty. The company, which Nikçi officially launched in mid-June, sells and rents residential real estate in the Bronx, Manhattan and lower Westchester. While the firm has only a small batch of listings (it has four, but is expecting two more in the next few weeks), Nikçi insists that he works fast. His company’s motto? “If we cannot sell it, we will not take it.” In addition, to attract clients, the firm is offering an incentive — part of the money that normally goes to the broker. “We are offering buyers a percentage of our commission,” he said. [more]Residential
A.C. Lawrence & Company
Dean Dunbar has been hired as managing director to head the firm’s relocation division. He was previously at Bond New York. [more]
Rendering of Gramercy Park, TorontoHomebuyers priced out of Gramercy or Soho may want to look a bit further north. A number of new condominiums in Toronto, Canada, are taking their inspiration from New York City landmarks. The Gramercy Park, a new condo set to open in downtown Toronto early next year, is built around a private park, much like the Manhattan setting that inspired it. There’s also Soho Lofts in Toronto’s Yonge Eglinton area, the Residences of the World Trade Centre at 10 Yonge Street, and the New Times Square Residences near the city’s waterfront. [more]
A sudden flurry of New York City brokers are setting up shop in Florida, hoping to cash in on a housing market making strides toward recovery. In the last six months, commercial brokerage Robert K. Futterman & Associates and residential firm Prudential Douglas Elliman have both dipped their toes into the Sunshine State market with new Miami offices. They’re joining the Corcoran Group and Brown Harris Stevens, which already have offices in Florida. “Miami seems to be one of the most vibrant places in the U.S. right now, especially in terms of foreign investment,”said Robert Futterman, founder of the eponymous retail firm. [more]
Broker Regis RoumilaWith the success of “Selling New York”on HGTV and Bravo’s forthcoming New York spinoff of “Million Dollar Listing,”there’s little doubt that New York real estate can generate solid ratings for television networks. Now, Nest Seekers International is betting that small-screen exposure can yield big sales, too. The firm has struck a deal to broadcast its own internally produced 12-minute show on Cablevision’s Plum TV every Saturday, twice in the morning and once in the evening. Called “Blend”for its mix of real estate, lifestyle and celebrities, the show is hosted by Nest Seekers senior vice president Caroline Grane and filmed inside some of the firm’s priciest listings. The first episode aired Memorial Day weekend. It featured a cooking segment, a roundtable discussion by artists and designers about Manhattan’s Sloane mansion, and a tour of the Watermill home of Todd Hase, a Soho-based furniture designer. [more]
