The Real Deal New York

Hell hath no fury like a real estate broker scorned, especially when it
involves a multi-million dollar deal, the client refuses to pay the
commission and the FBI makes an appearance at the closing. Lord Black vs. Sotheby’s: Round two” class=”read-more-link”>[more]

It’s one sign that the condominium boom is over in parts of New York
City: In up-and-coming, newly hip neighborhoods in Brooklyn and Long
Island City, developers who originally planned to make millions by
selling new condominiums are instead now renting these units. New landlords, not by choice” class=”read-more-link”>[more]

As nervous as brokers are about the 2008 residential market, there may
be one bright light: Commissions might be back. Nationally, that’s happening, according to Steve Murray, editor of Real Trends, which tracks commission rates.
Brokers find a silver lining with commissions
” class=”read-more-link”>[more]

For this month’s supplement, we peek behind the curtain wall and ask: When architecture meets real estate, what happens?
Art, meet money: ‘Paper architects’ find reality in design-friendly city” class=”read-more-link”>[more]

West Village townhouses are increasingly breaking the $10 million mark
and attracting the city’s wealthiest buyers. But some brokers fear that
the neighborhood’s once bohemian edge is being overwhelmed and diluted
by high-end condos and luxury retail. Bohemia trades up in the West Village” class=”read-more-link”>[more]

How NYC real estate breaks down post-crunch—and who’s on top Boroughs battle it out” class=”read-more-link”>[more]

Asking rent and leasing activity is still on the rise in Manhattan, though the market may be seeing the first of an expected increase in subleasing and vacancy rate.

As predicted since troubles began in the financial services industry this summer, investment banks are leasing space at a slower pace than before, according to Steven M. Durels, executive vice president and director of leasing for SL Green Realty. “Large financial institutions are sitting on the sideline,” he added.

Still, the average asking rent was up just over $1.50 to $68.46 per square foot in December, from $66.94 per square foot the month before, and up almost $14 from $54.62 per square foot in December 2006, according to data from CB Richard Ellis.

“The Manhattan market is still bullish, while bears are circling everywhere else,” said Adelaide Polsinelli, senior executive broker at Besen & Associates.

“Even with the psychology and pending job loss we have seen signs of, it will still be six to nine months before a change is reflected in the prices,” added Alexander Chudnoff, an executive director at Cushman & Wakefield.

Chudnoff said that with the vacancy rate still as low as it is, it would be hard for prices to adjust quickly, and when they do, they are more likely to level off than to actually decrease.

Vacancy rate on the island did creep up last month, a mere 20 basis points to 4.8 percent in December from 4.6 percent the month before, CBRE reported. It was still down from 5.0 percent in December 2006.

Looking forward, some industry experts see a further loosening of inventory on the horizon.

“We believe there will be a modest increase in availability as some large financial firms downsize by either electing not to renew certain space or placing a limited amount of space on the sublease market,” Durels said.

Leasing activity was up in Manhattan in December from the month before, rising almost 17 percent to 2.23 million square feet, from 1.91 million square feet in November, CBRE data indicate. It was down 18 percent from 2.73 million square feet in December 2006.

The total leasing activity in Manhattan throughout 2007 was 22.85 million square feet, down more than 23 percent from 29.86 million square feet for all of 2006, according to CBRE.

“Leasing activity is down now because there is less available space and a decline in new construction,” Polsinelli said. She noted that Manhattan’s vacancy rate is the second-lowest in the country.

The most activity is with smaller spaces, Polsinelli said, in the under-50,000- square-foot range.

Experts agreed that all types of prebuilt space are leasing the best, as the increasing cost of construction has made raw space unattractive to prospective tenants.

Midtown

The asking rent in Midtown was up $1 to $85.08 per square foot in December, from $84.08 per square foot the month before, and $67.10 per square foot in December 2006, CBRE data show.

“The healthiest submarket is—and will always be—Midtown,” said Polsinelli. “It is still the most desirable, the most in-demand and the most expensive.”

Leasing activity in Midtown was up 69 percent from the month before, to 1.25 million square feet in December from 740,000 in November, according to CBRE. It was down from 1.44 million square feet in December 2006.

According to Marisa Manley, founder and president of Commercial Tenant Real Estate Representation, the price differentiation between Class A and Class B space in Midtown has made lower-priced property in the submarket a rare find that tenants will jump on.

“If you can find reasonably good property in Midtown in a moderate price range,” Manley said, referring to offices below $90 per square foot, “that’s what’s renting the best, and there’s very little left.” She noted that most of the more affordable space in that area has been converted to Class A or is already leased.

The vacancy rate in Midtown increased 30 basis points to 4.4 percent in December, from 4.1 percent in November and 4.2 percent a year earlier, CBRE reported.

Midtown South

Average asking rent was up slightly to $50.55 per square foot in December, from $50.28 the month before, and
up almost $10 from $41.09 in December 2006, CBRE data indicate.

The vacancy rate jumped the most in Midtown South. It was up by half a percent to 5.4 percent in December, from 4.9 percent in the previous month, and 4.6 percent in December 2006.

Leasing activity dropped by 40 percent to 43,000 square feet from 720,000 square feet the month before. Leasing activity was still stronger than it was a year earlier, at 360,000 square feet.

Downtown

The vacancy rate Downtown increased for the first time in seven months, up to 5.6 percent in December, from 5.3 percent in November. It is still tighter than it was at 7.2 percent in December 2006. Its last increase was by 10 basis points to 6.1 percent in May.

Downtown’s leasing activity was 550,000 square feet in December, up from 450,000 square feet in November. It is lower than it was a year ago, at 920,000 square feet.The average asking rent Downtown rose to $47.26 per square foot in December from $46.53 per square foot in November, and up more than $7 from $39.99 per square foot in December 2006.

The Bronx, which was burning with investment opportunities before the credit crunch, is seeing the pace and size of its commercial deals level off, commercial brokers said.

While brokers are bullish on the potential of the borough, which they say is stocked with established residential neighborhoods that are underserved by retail, investors appear to be putting on the brakes.

Of the 25 largest commercial deals in the Bronx in 2007, according to data from Real Capital Analytics, only four deals were closed during the fourth quarter of the year: a $37 million office building, a $20.5 million apartment building, a $15 million mixed-use property, and a $12 million development site.

By contrast, the largest deals of 2007—the $165 million sale of Bruckner Plaza, a retail strip, to Vornado and the $133 million sale of Eastchester Heights, an apartment building, to RA Cohen & Associates – were both completed during the first quarter, well before the credit crunch started roiling the market in late summer.

Still, some of the factors that brokers think make the borough attractive to investors remain.

“One of the best investment markets in the country right now,” is how Dan Fasulo, managing director of Real Capital Analytics, characterized the formerly down-and-out borough.

“There is tremendous opportunity and a lack of institutional-type knowledge for the market,” he added.

While many investors may be familiar with the Bronx’s fancy residential neighborhoods—such as Fieldston and Riverdale in the northwest, and City Island to the east—commercial development is also on the rise throughout the borough.

Fasulo said that retail real estate is a particularly strong investment vehicle in the borough as it is “tremendously underserved—it is [like] a city of 1 million people; they need places to shop.”

At least until the recent credit crunch, cap rates—the expected annual income generated by a property expressed as a percentage of the purchase price—were moving downward as underlying property prices moved upward.

According to a report published by Real Capital Analytics, in the 12-month period leading up to Sept. 30, 2007, 18 retail buildings had been purchased in the borough at an average price of $334 per square foot and a minimum cap rate of 5.4 percent.

In the prior-year period, five buildings were purchased at an average of $253 per square foot, with cap rates at a minimum of 6 percent.

One of the areas that Fasulo is bullish on now is the northeast Bronx, which he said benefits from being anchored by strong residential neighborhoods and a large medical community. Office, retail and residential space are all seeing increased investment in this area.

Home run

Another swath Fasulo likes is the southern Bronx, near the new Yankee Stadium, which is scheduled for completion in 2009. He said that the Yankees’ new ballpark has attracted related construction, including the Gateway Center Mall, office buildings, government and cultural buildings, and a civic center. “All of these projects will create an influx of capital,” he said. “Any neighborhood that has billions of dollars of development under way, I am bullish on.”

Brad Barr, managing partner of real estate management company Bradford N. Swett Management LLC, notes that he has seen cap rates decline from a range of 10 to 11 percent to the current 5 to 6 percent as residential development drives demand for more upscale retail. “Mostly what we are seeing are restaurants and cafes in the South Bronx,” he said.

J.D Parker, regional manager at Marcus & Millichap Real Estate Investment Services, noted that many New York City investors consider the South Bronx the next hot spot. Parker said that four to five years ago residential properties sold for five to six times their rent roll, and they now sell at about seven to eight times.

One target of new residential improvement and investment in the South Bronx has been the Mott Haven area located along Bruckner Boulevard, Barr said. Investors are increasingly buying industrial buildings in the area and converting them for residential use after a recent mixed-use rezoning, he said.

Pure industrial plays are also going strong in the area.

“The [industrial] market in the South Bronx has improved. There are many more investors and users looking to the Bronx than 10 years ago,” Barr said. As an example, Manhattan-based car service companies and luxury auto repair businesses are looking north for real estate as space diminishes for these facilities in Manhattan, he said.

Companies are also turning to the area for industrial uses such as clothes-cleaning facilities, food storage and publishing fulfillment centers, he said, though he declined to specify cap rates for these sectors.

Cap rate compression

Along the Grand Concourse, a north-south thoroughfare lined with large apartment buildings (which generations ago had Park Avenue-like status in the borough), cap rates have compressed from about 9 percent just a couple of years ago to roughly 7 percent, said Peter Hauspurg, chairman of real estate investment brokerage Eastern Consolidated.

Hauspurg noted that residential cap rates in the northern half of the borough are lower than those in the southern half because it is simply “more desirable.”

Falling cap rates may be contagious as Bronx’s Westchester neighbor to the north, Yonkers, is attracting increased investment in multifamily rentals and sales, Hauspurg said.

Hauspurg said that average residential cap rates in the past two to three years have slipped about two percentage points to roughly 8 percent. “Now, more people of higher incomes are moving into the area—they are being driven out of Manhattan and priced out of other areas of Westchester.”

Some investors are “sick” of managing apartments, noted Marcus & Millichap’s Parker, and they are being attracted instead to “pure-play retail.” Areas of the Bronx seeing insatiable retail demand “because there is not a lot of product out there” include Gun Hill Road and White Plains Road, he said.

Go to chart: Largest Bronx deals of 2007

With building prices still near historic highs, landlords are taking the money and running, a decision that often affects small businesses. With condos replacing mom-and-pop shops on many street corners, The Real Deal asked brokers, property owners, city officials and preservationists: What city businesses are most vulnerable to buyout offers from developers?

Not everyone agreed on the answer, but most conceded that, like it or not, the majority of small-business owners—be they proprietors of bars, parking garages or Laundromats—can be hard-pressed to justify staying in business when a check for several million dollars is enticing them to shut down.

“It’s like winning the lottery,” said John Reinertsen, a commercial broker at CB Richard Ellis. Reinertsen, who works mostly in Queens, explained that when an area is rezoned from commercial or manufacturing to residential, the property value multiplies dramatically. And, as he put it, “It doesn’t make sense to make luggage if you can make $22 million to sell the building.”

With jobs going overseas and developers wanting to “build, build, build,” Nancy Ploeger, president of the Manhattan Chamber of Commerce, said that manufacturing has been hit particularly hard by the real estate boom. But, she said, “I really don’t think you can come at it from the perspective of what industries are being targeted. It’s not like developers are going around trying to buy up all the dry cleaners or bars in Harlem and buy them out.”

Bob Knakal of Massey Knakal agreed that for the most part, it doesn’t matter whether a business faced with a buyout sells records or serves beer. “The key consideration is, ‘Can I move the shop? And if not, am I ready to retire?’”

In part, businesses facing a buyout have limited options. “Mom-and-pop businesses very rarely successfully relocate,” said Michael Weiser, executive vice president of GFI Realty Services, a commercial brokerage and subsidiary of GFI Capital Group. “And some people, this is all they know how to do.”

Alan Miller of real estate investment firm Eastern Consolidated emphasized that land sales in Manhattan were breaking records last year. He points to the August sale of 510 West 21st Street, a former manufacturing site bought by a group of developers backed by entertainer Jay-Z for more than $50 million. Miller said that although sales volume has been down since the summer’s subprime debacle, prices are still high for now.

“The credit crunch will definitely have an effect,” said Miller, who credits, among other things, foreign money with keeping the market afloat. “More equity is required to do these deals now. So far pricing isn’t affected, though the transaction volume has slowed a bit.”

Still, said Knakal, “someone who wants to keep their business going is less likely to sell than someone who is ready to throw in the towel. I’ve seen guys who are more content pouring beer than they would be taking the money and retiring.”

That may be because many of their businesses are family-owned and have been passed between generations. Often, those properties were purchased years ago for a fraction of what they are fetching now.

The family that owns Houston Street’s longtime fish emporium Russ & Daughters isn’t certain what their great-grandfather, Joel Russ, bought their building for in the 1940s, but they are certain they aren’t selling.

“We get three to five calls every week asking if we want to make a lot of money selling our building, but we don’t even entertain the offers,” said Joshua Russ Topper. “Right now, there’s no possibility of selling, and I don’t see it happening in my lifetime.

“This is our family’s history, and it’s a landmark in New York and the country. It’s an important part of society, and that’s important to us.”

Artist Shalom Neuman feels the same way. Neuman’s Fusion Arts Museum, a non-profit gallery and workspace on Stanton Street, has been the target of developer interest for years, but he isn’t budging. Another of the lucky few who actually owns his building—he bought it in 1984 for “less than a square foot is going for these days”—Neuman said he constantly gets calls and mailings offering upwards of $10 million to buy his three-story building.

About five years ago, Neuman leased what used to be his workshop to Apizz, an Italian restaurant. That, he said, is as commercial as he’ll go.

“My life is about art,” explained Neuman. Holding on to his building, which he hopes to one day turn into a nine-story interactive museum, is Neuman’s way of doing his part to keep his neighborhood culturally rich.

But unlike Apizz, which is lucky enough to have a landlord who is committed to staying put, businesses that lease their space usually have no say in whether the property owner decides to sell. One example: In July 2006, the Perry Street Theatre shut its doors, much to the dismay of director David Elliott.

“Quite simply, you cannot compete with real estate – and unfortunately, smaller theaters, like the Perry Street Theatre, historically an essential part of the Off-Broadway landscape, are disappearing,” he said.

Andrew Berman, the executive director of the Greenwich Village Society for Historic Preservation, pointed to several other downtown playhouses, including the Variety Theatre in 2004, that have been forced out to make way for condos and other high-end housing.

“It’s almost an epidemic of losses in our neighborhood,” said Berman. “If you’re a non-profit theater, it’s hard to turn down $30 million. And in the case of the Variety, ultimately, they’re in business to make money. For the property owners, it just wasn’t in their best economic interest to keep the building as a theater.”

Elliott conceded the point. “For many building owners, the square footage of large performance spaces are worth so much more to commercial developers, and in our case, to wealthy homeowners,” said Elliott, who now runs the Perry Street Theatre out of a Midtown office.

“I suppose it is hard to blame them for recognizing the opportunity. It is just a blow to the arts, and really to the city, that the Village is now a place of expensive homes, high rents and boutique shops, rather than a place that might also attract New Yorkers and tourists for theater, music and art. But times change, he said.”

Anna Rhein, a broker with Picken Real Estate, a brokerage that specializes in bars, restaurants and nightclubs in New York City and the Hamptons, said that in the past year, she’s seen more and more landlords putting “demo clauses” into the leases they have restaurant owners sign. That way, said Rhein, “if a developer comes up to buy the place, they don’t have to wait out the lease.”

This new kind of clause puts business owners in a bind, said Rhein, making it harder for them to make the kinds of improvements to the space that might bolster business.

Still, said Sofia Kim, vice president of StreetEasy.com, the bottom line isn’t industry, it’s circumstance.

“I don’t think there are any particular businesses that are targeted by developers,” said Kim. “It’s really the location, the price tag and economic climate that will attract developers.”

But “selling out” isn’t always a bad thing. Herb Glaser, owner of Glaser’s Bakery on the Upper East Side, said that he and his brother John may well cash in once they decide to retire. Both men are in their 50s and don’t have children who are interested in running the business.

Glaser said his grandfather bought their building nearly a hundred years ago for less than $30,000, and judging from the going rates in the neighborhood, he expects he’ll get close to $5 million for it now.

“When you hear the numbers and figure what you’ll end up with, it’s tempting, especially as we get older. It’s hard physical work what we do here,” he said. But Glaser isn’t without regret when he considers life without the bakery.

“It’s sad,” he said. “But that’s progress, I guess.”

If recent activity in New York City’s financial services sector offers any insight, the economic outlook for 2008 may not be so bright. Financial heavyweights Merrill Lynch and Citigroup both announced multi-billion-dollar fourth-quarter losses last month. And a recent report revealed that consumer spending has been declining even at top-shelf retailers like Tiffany & Co. and Nordstrom—which until now have been largely insulated from the country’s fiscal woes.

To get a better sense of what might be in store for the city’s economy, The Real Deal spoke to Dr. Sam Chandan, chief economist at Reis Inc., in a recent Webcast interview. He talked about how the recent perfect storm of events will impact the city’s residential and commercial real estate market, which has long helped fuel the robust economy New Yorkers have grown accustomed to.

The Real Deal: There were reports recently that bonuses were down at many financial firms. How will that impact the residential real estate market?

Sam Chandan: New York is a very unique environment in that we have a large financial services sector in which bonuses are a significant driver of consumer spending. But we have noticed that many people are stepping away from the homeownership market right now and thinking about renting as an alternative.

TRD: Why is that?

SC: Would-be homeowners are concerned about the possibility of home values plummeting.

TRD: Do you see prices coming down in New York City?

SC: I think there’s growing concern that prices will fall here. Our expectation is that prices will drop. New York is beginning to show some clearer signs of vulnerability.

TRD: How much has transaction activity slowed recently?

SC: We’ve seen transaction volume fall significantly. But we have enough supply on the market, so at the current rate it would take well over a year to unload. We have to remember that the user cost of buying is not only driven by the price of the asset but by how much it costs to finance that purchase. What distinguishes a place like New York from some of the largest markets in the country is that no matter what asset you’re going to buy—in Manhattan, in Brooklyn, as well as in some of the other boroughs—you’re going to have to get a jumbo mortgage.

TRD: Many retailers reported dismal sales in December 2007. Does that mean we should expect more reasonable retail rents in the city after seeing year-over-year increases over the last five years?

SC: What we’ve seen over the last few years is that retail spending and consumer activity in the market have been a very strong product of the wealth effect. Consumers feel wealthier because their home and condo values are going up and also because they’ve had access to that equity through home equity lines of credit and second mortgages.

TRD: So consumer spending will remain healthy, and retailers shouldn’t be concerned?

SC: Consumers have been able to access their stores of wealth and have been engaging in spending at a very high rate. Now, we find ourselves in a situation where the willingness to draw from our savings has diminished because we’re all very concerned about the performance of the economy and job growth. That is putting stress on retailers.

TRD: Can we expect to see retail rents in New York City come down?

SC: I think it’s fair to say that if the vacancy rate for retail space in New York begins to show a larger number of empty storefronts, landlords will have to be more competitive to draw in new tenants.

TRD: Do you think we will see more vacant storefronts dotting our neighborhoods?

SC: I think we will over the next couple of years, but not necessarily at pharmacies or the neighborhood convenience store. At the end of the day, consumers will need to fill their prescriptions, and they will need to buy bread and milk. Those aren’t the types of businesses that are going to be affected during a slowdown in consumer spending. We have to be a little bit more concerned about the repercussions of some of the bonuses we talked about coming off the table. How are some of the locations that depend on the discretionary dollar going to perform?

TRD: What is your forecast for the city’s office market?

SC: One thing we saw in New York City last year – particularly in the office sector – was that rents accelerated tremendously, and the market remained strong. It may hit a rough patch, but we will see a modest increase in the vacancy rate compared to what we’ve seen in previous downturns. The real concern is not over fundamentals, rents and vacancies; in general, they will remain fairly stable. We need to think about whether there will be enough investors buying assets and holding the very strong pricing that we’ve been seeing in the market.

TRD: Give me a market outlook for the next four quarters in New York City.

SC: That’s a good question. The most significant issue for us right now is that demand for space is softening. What does that mean for us? Over the next few quarters, we will have a lot of space coming online, and we have to be a little concerned about how much of that new space will lease up.

TRD: Is New York City no longer insulated from the downturn that has plagued the rest of the country?

SC: New York may have been insulated for a long time from what has been going on in other parts of the county, but the recent surge in write-downs and adjustments indicates that the insulation may be fading. Over the next few quarters, we should see more pressure on the asset market for commercial space. And there will be fewer people looking seriously to buy a condo, given the great deal of uncertainty in the market right now.

West 57th Street is poised to go from dowdy to chic. Upscale
merchants such as Nordstrom are said to be eyeing 57th Street between
Fifth and Sixth avenues, and a luxury hotel could also sprout on a
block where several properties have recently changed hands. West 57th Street: Dowdy block preps for makeover” class=”read-more-link”>[more]

Wellie Chao used to own a small software company. Like many small business owners, Chao found the search for office space “pretty tough.”

Since he only had three employees, landlords didn’t want to deal with him, and brokers weren’t much interested in a new company with limited needs and cash.

From his frustration came an idea that pushed Chao out of computers—and into real estate. He rented 5,000 square feet on West 20th Street, installed cubicles and started renting them out individually.

Chao named his company Micro Office Solutions, and it is now one of a growing number of firms that slice-and-dice space for small businesses, satellite offices of out-of-town companies and solo entrepreneurs in the city. The field, which includes at least one publicly-traded international company, is mostly made up of new firms that are small businesses themselves.

While there is nothing particularly new about renting mini-offices cut from larger spaces, the number and variety of offerings has burgeoned, and for good reason. According to Census data, there are more than 19 million nonemployer firms in the U.S., and another 2.8 million with one to four employees. In New York State alone, there are 224,000 firms with between one and four employees and 1.4 million sole proprietorships.

As communications and technology have improved, and outsourcing to China or South Dakota has become increasingly common in more professions, going it alone has never been more viable. Office space, however, can be a bottleneck for businesses that are too small to need even an office suite or too financially tenuous to risk a five-year lease.

“Temporary office suites are not right for everyone, but for new companies or those in transition, they can make a lot of sense,” says Ben Friedland, a senior vice president at CB Richard Ellis. While these offices may be more expensive than larger, more permanent spaces on a per-square-foot basis, they offer a sensible alternative for companies that may be looking to add an office or for a new firm that wants to avoid the up-front capital costs of buying furniture or wiring a new space, Friedland says.

Chao says he charges a flat fee of $495 a desk per month and an additional $110 for Internet and telephone per month. Chao notes, however, that it is hard to compare prices because mini-office renters are also paying for use of common space and other amenities.

Flexible mini offices—whether an enclosed office, a cubicle or simply desk space—fill the startup niche, but also service larger clients who are seeking short-term rentals. Micro Office Solutions, which now has three locations in Manhattan, might lease 50 cubicles for six months to a new branch office of a larger firm testing the waters in the New York market, Chao says. Or it might rent a single cubicle to an individual working on his or her own.

When Chao was looking for this kind of space before he started up in 2003, he said he was mostly forced to seek oddball sublets from a firm that happened to have an extra office or two.

“It was not an easy process, and depended a lot on luck,” Chao says. Once a sublet was located, the sublessor, not primarily in the leasing business, might have limited interest in maintenance details, Chao notes. As a result, the entire process is “hit or miss,” he says. Micro Office now leases 65,000 square feet in three Manhattan locations.

Sunshine Suites, a competitor that also has three facilities in Manhattan totaling 70,000 square feet, provides conference rooms, Internet access, kitchen and common areas, as well as offices or cubicles. The company, whose most recent facility opened last year in Tribeca, also provides less tangible benefits like networking opportunities and reduced rates on perks like gym memberships.

Sunshine also offers a sense of hipness emanating from its modish spaces, which have the feeling of private clubs with their custom-designed cubicles. While most of its customers are one-to-five person businesses, it has also leased a 40-cubicle area to the software company Adobe. Sunshine Suites has the lowest price point of the firms surveyed, leasing cubicle space for as little as $325 per month.

Nutopia Workspace, which caters to a more creative, community-minded clientele, according to founder John McGann, also recently moved to a 10,000-square-foot loft in Tribeca after seven years in Greenwich Village. Rather than cubicles, McGann favors an “open space” plan inspired by Jane Jacobs and Henry George. More recently, the open-space model has been associated with Google and Bloomberg News.

In addition to full-time space (some of which is divided into cubicles and private offices) starting at $600 per month, Nutopia offers part-time and “drop in” plans suitable for freelancers who sometimes work at client or home offices.

Month-to-month space may also be attractive to downsourced bankers considering a new venture or simply looking for a place to send out resumes, especially where, as is usually the case, an outplacement package does not include the use of an office, says Paul Bernard, a Manhattan-based outplacement consultant.

Writers’ rooms, which offer desk space to working writers, are cheaper still. While the nonprofit Writers Room has been in business on Astor Place for three decades, its long waiting list has inspired a half-dozen for-profit competitors. These facilities, often owned by writers as well, lack permanent desks or phones. But they give writers, graduate students and even some stay-at-home mothers looking for a quiet escape a place to work outside of the house.

Harry Bruinius opened the Village Quill on Franklin Street in 2005. Acting on a tip from one of his journalism students, he found a Tribeca loft that had been inhabited by a squatter and offered the owner a deal by which he would renovate it at his own expense and turn it into a writing space. Bruinius now has 35 writers who use the space, and he also makes it available as an art gallery and for parties and corporate events.

Paragraph, which opened on 14th Street also in 2005, was founded by Joy Parisi and Lila Cecil, who met in the writers’ program at the nearby New School. Both were looking for a source of income that afforded them time to write their fiction.

On the opposite end of the spectrum are more traditional office spaces, like those offered by the Regus Group, a British company with locations in 400 cities around the world, and locally owned Bevmax Office Centers, which has six facilities in Manhattan, all in first-class buildings.

Rick Feld, a former real estate lawyer who started Bevmax in 2001, said his target client is the small hedge fund or accounting firm with five to 10 employees, which needs a prestigious address and an impressive conference room, but also maximum flexibility to expand or close shop. To reach that market, Feld typically offers six-month leases but also dots his hallways with modern art and designer furniture. “It’s not cheap space,” Feld said. “But it’s way more cost-effective.”

GM building on the market

The 50-story, 1.82 million-square-foot General Motors building at 767 Fifth Avenue is on the market. Current owner Harry Macklowe expects the prized Plaza District property to fetch $3.5 billion or more. The building was put up as collateral on a loan Macklowe took out last February for his $7 billion purchase of seven Manhattan buildings from Equity Office Properties Trust. Macklowe purchased the building in 2003 for $1.4 billion, a record price at the time. CB Richard Ellis is marketing the building.

Plaza District office tower could fetch $800M

A 27-story, 600,000-square-foot office tower at 650 Madison Avenue is on the market, the New York Observer reported. Japanese real estate firm Hiro North American Properties is looking to sell the property, which some real estate sources say could fetch up to $800 million, or $1,333 per square foot. Hiro paid $105 million for the building in 1984 and subsequently added a 17-story tower to the existing base. The property has since undergone a number of renovations.

Midtown office building for sale

A 39-story, 770,000-square-foot office building at 1250 Broadway is on the market, the New York Post reported. SL Green hopes the property will fetch more than $350 million. The building is 99 percent leased at below-market rents, with a 400,000-square-foot space anchored by the Visiting Nurse Association. The corner retail space is occupied by Woori Bank, a Korean bank. Richard Baxter, Ron Cohen, Scott Latham and Jon Caplan of Cushman & Wakefield are marketing the property.

Midtown West office building on the block

An eight-story, 400,000-square-foot office building at 441 Ninth Avenue is on the market, the Post reported. Health care company GHI’s headquarters could fetch between $210 and $250 million dollars. GHI plans to lease back the property, which has an additional 75,000 square feet of development rights, for up to three years. The building also has parking. Jimmy Kuhn of Newmark Knight Frank is handling the sale.

Midtown East office building on the market

A 24-story, 250,000-square-foot office building at 360 Lexington Avenue is on the market, the Post reported. Current owners Himmel + Meringoff Properties and Prudential are likely to fetch around $150 million, or between $550 and $625 per square foot, for the property. Darcy Stacom of CB Richard Ellis is handling the sale.

Broadway mixed-use building for sale

A six-story, 28,634-square-foot mixed-use building at 1369 Broadway is on the market with an asking price of $41 million, GlobeSt.com reported. The seller is 1369 Broadway Owners LLC, which is unloading the office and retail property to focus on the acquisition of larger assets. The 100 percent-occupied building has an additional 12,420 square feet of unused air rights. The average office rent is $31.95 per square foot. Eric Anton, Ronald Solarz and Jared Toothman of Eastern Consolidated are handling the sale.

East Village contiguous buildings for sale

Two contiguous apartment buildings at 410-414 and 416-418 East 13th Street are on the market with an asking price of $35 million. The six-story walk-up properties total 34,898 square feet above grade and 71 residential units, of which one is rent-controlled and seven are rent-stabilized. The one-, two- and three-bedroom units currently have no vacancy. John Ciraulo, Matthew Parvin, Joseph Sitt and Craig Waggner of Massey Knakal are marketing the buildings.

LES matzo factory asking $25M

Four conjoined former tenement buildings at 148-154 Rivington Street are on the market with an asking price of $25 million. The 47,500-square-foot property has been home to Streit’s matzo bakery since 1925, but the tenant is looking to relocate its business and will vacate in approximately one year. The corner site currently allows for a 35,776-square-foot residential development, but a community facility would raise the maximum buildable square footage to 67,600. Philip Huang and Michael DeCheser of Massey Knakal are marketing the property.

In a town where historic and modern buildings elbow each other for attention, the list of bold architectural statements can sometime feel endless. And, with new buildings remaking the city’s skyline by the day it can be hard to single out a true favorite.

But, this month The Real Deal asked builders, architects and real estate movers and shakers to go on the record with their favorite New York City buildings, excluding any that they’ve worked on or own (for some that requirement was hard to resist). The most oft-cited pick was the Seagram Builiding, but the Plaza, the GM Building and other iconic city structures made many of the lists. And, one major developer opted out of the Manhattan classics and instead went with the former U.S. Post Office in Brooklyn’s Cadman Plaza, which is now a courthouse. A list of top picks follows.

Dean Maltz Principal, Dean Maltz Architect

“My favorite building in New York is Rockefeller Center. Why? Because it is a beautiful example of civic architecture at both a human and monumental scale. The experience from the street through the promenade, to the plaza and then to the Top of the Rock demonstrates a masterful work of material, scale and hierarchy at multiple layers and levels above and below ground that beautifully integrates art, architecture and landscape design. I am always excited to walk through this space.”

Larry Silverstein President and CEO, Silverstein Properties

“My two favorite buildings are 9 West 57th Street and the Seagram Building. It is all about design, design, design. They are the best designed buildings in the city, excluding my own, 7 World Trade Center.”

Jeff Wolk President, COO, Fenwick Keats Goodstein

“The Empire State Building is my favorite and in my mind a true symbol of human achievement. The building contains 60,000 tons of steel, 10 million bricks and 200,000 cubic feet of Indiana limestone. The fact that this building was built at the onset of the Great Depression serves as a reminder that great accomplishments can be achieved during very difficult times.”

Jonathan Mechanic Partner, Fried Frank

“The MetLife Building at 200 Park Avenue is one of my favorites. Every time I go up or down Park Avenue, I see the sign and remember all the excitement of working on the purchase of the property on behalf of Tishman Speyer. The Seagram Building is another favorite, for its fabulous architecture.”

Laurence Kaiser President, Key-Ventures Realty

“If you put together light, views, detail and location, I would say 834 Fifth Avenue. It is the only building [of its kind] where the ceilings are high and the windows are a foot lower to the floor. You can sit and see the view; you don’t have to walk up to the window. It has standard ceilings of 11.5 to 12 feet, and that’s darn good.”

Aby Rosen Principal, RFR Realty

“Monday, Wednesday and Friday: Lever house. Tuesdays, Thursdays and Saturday: the Seagram Building. Sunday: my home.”

Stanley Perelman Managing principal, JANI Real Estate

“I believe the Seagram Building is the greatest example of modern architecture in New York City. The 38-story skyscraper designed by Mies van der Rohe was built over five decades ago but is still being replicated today. The building’s steel framing is exposed, and the exterior walls are made of glass curtain wall. The design is raw but beautiful; it exemplifies how science, engineering and functionality are intrinsically linked with timeless architecture.”

Joshua Muss Principal, Muss Development

“My favorite building in New York is the U.S. Post Office in Cadman Plaza, Brooklyn. For me, the building represents the strength and resilience of Brooklyn itself. Built in 1891, it now transitions, with Brooklyn, into the 21st century. It began as the sentry of the eastern district ports, endured the destruction and reconstruction of the Depression years, and has been further deconstructed and refurbished over the past few years and now serves as part of the federal court system. It is a New York City Landmark and is on the National Register of Historic Places. ”

David Michonski CEO, Coldwell Banker Hunt Kennedy

“The Plaza—because it represents the location and the elegance of all that is beautiful about New York City.”

Joe Moinian CEO, Moinian Group

“My dream buildings include the GM Building, with its elegant and bright design, Central Park views and unique plaza off Fifth Avenue, which defines the northern edge of the Midtown office market; and 180 Maiden Lane, which I purchased in 2004 in the heart of the Financial District.”

Compiled by Melissa Dehncke-McGill

President of Edward J. Minskoff Equities, a New York-based real
estate acquisition and development company. Minskoff founded the
company, which leases and manages 5 million square feet of primarily
commercial space, in 1987. [more]

New Yorkers all want a little something extra, especially when it comes to space. And with developments popping up in areas that would have seemed unheard of a few years ago (such as luxury hotels in Harlem and high-end rentals near the Holland Tunnel), those in real estate are looking for any extra space they can find. Down in the Bowery, developers are creating an entire street out of what was, until recently, a garbage-strewn, padlocked alley.

The appropriately named Extra Place is located north off East First Street, parallel to and nestled between Bowery and Second Avenue. The city-owned cul-de-sac has caught the attention of a handful of developers, real estate brokers, landlords, architects, foodies and fashionistas, all of whom are working together to create “a slice of the Left Bank, a pedestrian mall lined with interesting boutiques and cafés,” says Extra Place retail consultant and leasing agent Michael Ewing, principal at Williams Jackson Ewing.

Extra Place is not new. It has actually been a part of New York since about 1800, when landowner Phillip Minthorne divided his 110-acre farm equally among his nine children; the tiny parcel that was left over became Extra Place.

The alley dead-ends at the back of a New York University building surrounded by a chain link fence. But it has some notoriety for two main reasons—the building on the west side of the street is the former home of CBGBs, and the east side is part of the Avalon rental development.

Five years ago, the city, through its Department of Housing Preservation and Development, put out a request for a proposal for the vacant area. After speaking with the community board, they developed a plan for the alley. The final product will be a cobblestone street lined with plants and landscaping with a focal point at the end of the alley.

“We want it to be a beautiful and active destination spot,” says Ewing. “We want a park-like environment that fosters a sense of community with lots of small retail shops and cafés.”

The street itself should be finished by the end of March, although it will not get features like cobblestones until next year.

The Extra Place project is being brought about by Avalon Bay, a developer that made its mark on the neighborhood in 2005 with Chystie Place, a luxury rental complex at 229 Chrystie Street. That development consists of a 15-story rental building of 361 luxury and middle-income apartments (average market rental prices range from $3,000 a month for a studio to $5,500 a month for a two-bedroom) and the city’s largest Whole Foods (85,000 square feet).

Phase II of Avalon Bay’s handiwork, Avalon Bowery Place, is a nine-story building with 206 rental units and over 20,000 square feet of retail space that is located at 11 East First Street, right across the street from Extra Place. “We actually designed it so that it is a continuation of Extra Place across the street,” says Maria Masi, development director with Avalon Bay. “There is a long wide walkway leading into the apartment building with commercial spaces on each side.”

The two corner spaces already have tenants. To the east will be Bowery Wine Company. The 1,500-square-foot restaurant/bar/café will serve dinner (and lunch on weekends), have about 60 seats indoors with another 24 outside, and be open late to accommodate the locals. “We have a built-in clientele with our upstairs neighbors,” says owner Chris Sileo. The restaurant anticipates opening the second week of February. Directly across the way from Bowery Wine Company will be Veselka, a 2,600-square-foot outpost of the Lower East Side Ukrainian soul-food staple. “There is a great synergy that works with the both of us,” says Sileo.

But the bulk of Extra Place commercial space is located on the ground floor of Phase III. That rental building, at 22 East First Street, houses eight separate spaces ranging in size from 200 square feet to 600 square feet. Ewing and Avalon are looking for young emerging retailers. “We have turn-key spaces. We want people who are looking to finally do their own thing, like the just-graduated fashion student. Everything from fashion, jewelry, paper, flowers, etc.,” says Masi. To date, they have received a lot of interest from fashion retailers and a spa. The retail stores should be completed in late summer or early fall of 2008.

One of the spaces will be a café. “The deal is not 100 percent final, so I cannot say who exactly, but it will be a smaller outpost of an existing New York City, Zagat-rated French café,” says Ewing. The 2,000-square-foot restaurant will serve breakfast, lunch and light dinner fare and feature 75 to 80 seats along with outdoor seating. The café should also be completed in late summer or early fall of 2008.

Rents for this part of Extra Place are less than current market rents are on the Bowery (the neighborhood ranges from $135 to $175 per square foot).

On the west side of Extra Place, meanwhile, is hallowed ground to many: 315 Bowery is the former home of CBGBs and has a back entrance directly on Extra Place. “Who knows what used to go on in that alley,” says owner Elliot Azrak, principal with Azrak Capital Group. The 3,300-square-foot space, which has 35 feet of frontage on Extra Place, was recently leased to fashion designer John Varvatos. “This store is going to be totally unique, different from our other boutiques,” he says. “We’re going to make it a great way to look back at this remarkable history but also forward to what’s happening today.”

The store plans on an opening by the end of March, according to Jonathan Krieger, senior director at Robert K. Futterman and one of the real estate agents who brokered the deal. “This is a pioneering deal,” says Azrak. “It’s like what Jeffrey did to the Meatpacking District.”

Next door, 313 Bowery, which is the former CBGBs bar, is still searching for the right tenant. The 3,300-square-foot space has 25 feet of frontage on Extra Place. “We want something that will compliment John [Varvatos],” says RKF senior vice president Karen Bellantoni, who along with Krieger is working on both properties. “We want a fashion tenant. We are talking with a denim company and an outerwear company.”

Krieger, Bellantoni, and Azrak declined to speak about lease terms or prices for either space, quoting only average rents for the Bowery.

If John Varvatos and a French café sound like a far cry from the area’s rock ‘n’ roll clubs and restaurant and lighting supply stores, realize that the area has been going through a major transformation lately. The Bowery Hotel, the New Museum, Patricia Fields, Chase, Blue & Cream, Washington Mutual, 40 Bond Street, and the aforementioned Whole Foods and Avalon rental buildings have all moved into the neighborhood. Cooper Square Hotel and Daniel Boulud’s DGBG are also coming soon. “You are seeing more of the old places close and ‘for lease’ signs in the windows,” says Masi.

But not everything has changed. There is a social services and homeless shelter at 317 Bowery, the Bowery Residents’ Committee (BRC), which does not plan on moving any time soon.

Despite this fact, it seems like the neighborhood is embracing the change. “We are creating something out of nothing,” says Masi. “No one paid attention to this extra place, so it is not like we are tearing something down to build a monstrous tower; we are making something very nice and secure. Everyone benefits from that.”

In September, Manhattan real estate giant Harry Macklowe and his son William Macklowe—who together were looking for funds to meet a $6.4 billion debt payment—took investment banking star Joseph Perella with them to the Middle East in search of fresh capital. They were turned down.

While the Macklowes reportedly reached a deal with Deutsche Bank late last month to hand over control of the seven Manhattan office buildings they acquired less than a year ago for $7 billion and postpone the debt payment due this month while the buildings were sold, the road trip was an attempt at a novel source of financing.

The Macklowes had hired Perella’s boutique financial services firm, Perella Weinberg Partners LLP, to secure new long-term equity partners to assist in covering the exposure resulting from their aggressive acquisitions.

The trip to visit the Middle East’s “Big Four”—Kuwait, Qatar, Abu Dhabi and Dubai—was an attempt to go beyond that effort and capture debt financing.

Perella Weinberg, whose headquarters are in Macklowe’s GM Building, certainly has solid connections with Middle Eastern financial concerns eager to invest in Manhattan real estate. Perella Weinberg partner Tarek Abdel-Meguid is on the board of Kingdom Holdings, the Saudi conglomerate with extensive real estate holdings assembled by Saudi Prince Alwaleed bin Talal, who was instrumental in aiding last month’s $12.5 billion cash infusion for Citigroup.

Capital has lately been crossing the seas to America. Sovereign wealth funds and investment arms of governments—in both the Middle East and Far East—have been making significant real estate investments through U.S. institutions, said Scott Latham, executive director of Cushman & Wakefield’s New York Capital Markets Group, “because they have lots of equity, with limited investment opportunity, so increasingly they’re becoming equity partners in New York.” Sometimes the firms purchase outright. At other times, Latham said, they may put up as much as 25 to 40 percent equity.

Purchase transactions include deals done by Dubai-based investment firm Istithmar, a company led by CEO Joe Sita and said to be the investment arm of Sheikh Mohammed bin Rashid al Maktoum, ruler of Dubai and prime minister and vice president of the United Arab Emirates. Istithmar has considerable Manhattan holdings, including hotels and office properties as well as the recently acquired Barney’s luxury retail chain. Istithmar is also an investor in Perella Weinberg.

In December, the Related Companies (the developer behind the Time Warner Center) reported equity and debt investments of $1.4 billion—and promises of investment in future Related projects—from a group including the investment arm of the Abu Dhabi government. The investments, which did not involve any control over the company, were intended to provide cash for Related to finance new residential and commercial developments as the domestic credit crunch continues.

Overall, however, said Latham, “it’s unrealistic to think Middle Eastern money is readily available for financing of U.S. real estate debt. If Middle Easterners wanted to play in that debt arena, they already would be there.”

Isam Salah, a New York- and Dubai-based partner in the Atlanta-based law firm King & Spalding, said some of the firm’s liquidity-rich Middle Eastern clients would be open to providing financing in specific situations—perhaps on a bridge basis for their own deals in Manhattan and throughout the U.S. But to date, he emphasized, only equity investments have been facilitated, with no lending of capital.

Salah pointed out that there hasn’t been that much lending coming into the U.S. from abroad at all, and that large-scale mortgage lending usually is done domestically, where there is control over the terms.

“It’s just a long shot,” he said, for the Macklowes or any Manhattan developers, “to contact firms or agencies—for multibillion-dollar deals—that haven’t done any financing in the U.S. It’s likely they’re not really geared up for debt investments, that they’re more comfortable putting on the equity investment hat than the financing hat.”

In Islamic law, finance and investment transactions conducted by Middle Eastern institutions and individuals must be Shari’ah-compliant, referring to a strict code of Muslim conduct in business. Interest-bearing lending is considered abusive and not socially responsible, with the belief that all participants should share in the risk and share in the reward. Thus the use of credit and interest are taboo in Shari’ah-compliant transactions, and entities operating under Islamic law cannot borrow or lend money, at least not via traditional terms.

Over four or five years, Salah said, “there has been significant growth in Shari’ah-compliant transactions. Many of these use Islamic fixed-income securities called sukuk, which are instruments of debt transactions but are not interest-bearing. They’re tradable.”

PricewaterhouseCoopers estimates that the amount of Shari’ah-compliant capital investments worldwide—among more than 70 countries—is $500 to $800 billion, with annual double-digit growth anticipated over the next 10 years or more.

The core idea with Shari’ah, said Salah, is that “you can’t operate on a profit basis; you can’t make money from money.

A business partnership, rather than quick financing or providing money, is more socially responsible.”

Among other acceptable alternative structures, Salah said, are leasing arrangements with third-party financing that end in a purchase, with lease payments made against the assets, rather than interest payments, and also selling on a deferred-payment basis. “The volume and size of sukuk transactions has grown,” he said, “and now Middle Eastern groups are looking to expand them into the U.S.”

Professor Daryl Koehn, who holds the Cullen Chair in Business Ethics at the University of St. Thomas in Houston, had several cautions beyond U.S. regulatory concerns, regarding ethics in the potential for Middle Eastern monies being used in U.S. debt financing.

She pointed out that there is strong post-Sept. 11 sensitivity to things Middle Eastern: this country operates under the realities of being at war in the Middle East, paying high prices for oil while that same money is plowed back into investments here. In addition, U.S. entities are accepting cash from sovereign wealth funds controlled by foreign governments with political interests as well as financial interests.

At the same time, said Koehn, author of several books including “Local Insights, Global Ethics For Business,” people shouldn’t over-dramatize concern over Middle Eastern money being put to use in the U.S., the way Japanese investments in this country were scrutinized in the ’80s. It’s a global economy now, she said. “As long as oil prices are high, there’s going to be a huge amount of money from the Middle East looking for someplace safe to park. And oil prices are high for a variety of reasons, not just some Middle Eastern dictate. If we weren’t in thrall to Arab countries, we would be in thrall elsewhere.”

“The obvious caveat,” she continued, “is that some concern has to be paid to the industry into which funding goes. Some, such as Boeing and their competitors, and the defense industry, are more sensitive than others. Also, who has voting rights? If the partner doesn’t have a vote, nor is on the board, the influence is mitigated.” Such is the case with the Abu Dhabi Investment Authority’s injection of $7.5 billion into Citigroup in November, in trade for a 4.9 percent stake in the company but no leadership influence.

“We have to be sure we don’t become moral hypocrites,” Koehn said.

Go to chart: A ballpark look at the cost of stadium building

Falling Wall Street bonuses and fears of a nationwide recession may affect demand for Manhattan homes, but local market watchdogs maintain, albeit cautiously, that Manhattan real estate is still a solid investment.

“Quite obviously, if the country goes into a recession, New York City real estate would logically be affected,” said Elizabeth Stribling, president of Stribling & Associates. “That said, the perception that real estate in New York City is a better investment than placing money in the stock market continues to be a stated reason for buying for many of our customers.”

Naturally, lower bonuses and record losses among some of the largest companies will temper activity, particularly among those dependent on their bonus to purchase an apartment. But bonuses still ranked the second highest since at least 1985, at $33.2 billion or an average of $180,420 a person, according to data from the state comptroller.

They are “still very hefty numbers,” said Diane Levine, brokerage manager of the downtown office of Sotheby’s International Realty. The “market in New York City is still active.”

Frederick Peters, president of Warburg Realty Partnership, was more circumspect.

“We have so far not seen much change one way or another in the marketplace,” Peters said. “Clearly, there has been a large injection of capital into the portfolios of many in the financial industry. There is of course some offset of apprehension about the fear of recession and the continued weakness in the national housing market. For the moment, these two forces seem to be holding one another at bay.”

If the country sank into a recession, it would take time for the effects to take hold of Manhattan’s residential real estate market.

“How much time would really depend on how deep the recession goes,” said Gregory Heym, executive vice president and chief economist at Terra Holdings, parent company of Brown Harris Stevens and Halstead. “You have to remember that homes are not like stocks; their prices can’t move as fast. The concern over the next few months will be the effect of a possible recession on buyer confidence.”

And looking further out, there’s unease over what bonus payouts will be next year.

On the surface, sales in December ended with a bang, but the data, the most recent available at press time, were skewed by a spike in closings in new developments fetching eyebrow-raising prices.

The number of co-op, condo and cond-op unit sales in Manhattan increased to 779 in December from 720 in November, according to research by Heym of Terra Holdings. The median sales price increased in December to $928,378 from $836,250 in November.

“The rise in price, and to a lesser extent, sales, can be attributed to 15 CPW, which had more closings in December than November,” Heym said. “Also, there were closings at the new development 823 Park Avenue, four of which were for over $10 million. Forty-five Park Avenue also had a lot more closings in December. So, basically I’d attribute both increases to new developments.”

December saw a drop in inventory, consistent with years past. Inventory fell to 5,415 from November’s 5,677, according to data from Jonathan Miller, executive vice president and director of research for Radar Logic. Sellers typically take their homes off the market in order to re-list them in the stronger spring market.

While brokers said that the sales market is chugging along with buyers who can withstand greater loan scrutiny, the rental market seems to be taking a big hit, though December data from Citi Habitats show that rents averaged $5.25 more in December from November to $3,219.

“Even with less rental buildings being constructed, the lack of demand is almost unprecedented in my 35 years in the business,” said Marc Lewis, COO of Century 21 NY Metro.

“Landlords, across the board, are reporting this, and only the ones who sharpen their pencils and reduce rents, pay fees or offer other incentives are rapidly renting their units,” he said.

He forewarned, “The market is returning to where it was during the recession of 2001.”

Effects of the credit crisis could be more apparent in Manhattan this quarter than the third and fourth quarters of last year, since closings in the first three months of the year would likely reflect deals from the latter part of last year, following the eruption of the credit market.

In terms of current activity level, this month will be telling since generally there is a burst of contract activity at the end of February, Miller said.

“That’s something to look for as an early warning sign of what’s going on,” he added.

Residential brokers sound off

With bonuses dropping, companies suffering record losses and fears of a recession looming, it’s hard to ascertain what is going on in the real estate market. To get a handle on market conditions, The Real Deal recruited real estate pros last month to give their opinions on which way the market is headed.

Rick Pretsfelder partner, Leslie J. Garfield & Co.

While bonuses overall are down 4.7 percent, the composition of the bonuses (i.e., more stock than cash in some cases) is also an important factor. We don’t expect a huge impact in the immediate term, but if there is a sense that bonuses will be down again in 2008, then the real estate market may take a hit.

Mike Simon president, Century 21 NY Metro

The rental market is getting off to a slow start with a tremendous amount of inventory, some of which has been sitting around not being rented for a few months. Some owners are having trouble adjusting, and this is clogging up the market as others are reducing rents, paying fees or giving away free time as an inducement for clients to take their units.

Gil Neary president, DG Neary Realty

There will be more activity, but people, as opposed to last year, will be a little more cautious about how they spend their money – looking for better value, perhaps.

Frederick Peters president, Warburg Realty Partnership

There is no sign and no anticipation of an increase in prices, nor does there seem to be a decline in absorption or a decrease in prices.

Michele Kleier president and chairman, Gumley Haft Kleier

Everybody wants a piece of New York. I don’t think people who get smaller bonuses are going to move out to the suburbs. … People with lower bonuses may be going from buying a $9 [million] to buying a $7 [million] apartment.

Toni Haber executive vice president, Prudential Douglas Elliman

Probably if you bought a year ago and you’re selling now, if you include closing costs from before, you may not come out in the positive. Appreciation is not as great, unless it’s 15 Central Park West.

Lisa Lippman senior vice president, Brown Harris Stevens

It is still a seller’s market if someone bought more than two years ago. It’s easier for buyers to buy now than it had been, but still there are more buyers than good inventory.

Sha Dinour president, Triumph Property Group

Anyone transitioning from a rental to a purchase can find good deals in comparison to a rental scenario. Anyone in need of selling a property to upgrade or downgrade for another property is experiencing a much more difficult time.

Eddie Shapiro CEO, Nest Seekers International

Some buyers are actually under the illusion that if they wait a little [while], prices will come down; not going to happen. … New fed programs, including tax rebates and massive interest rate reductions should fuel confidence again.

Klara Madlin president, Klara Madlin Real Estate

In the last five years, people have grown to expect sales with bidding wars and double-digit appreciation. This year will return to more normal housing conditions, single-digit appreciation and a six-month turnaround on sales.

Robin Schneiderman vice president, Citi Habitats

New buildings or condo conversions with high common charges will be the first to slow down. People are concerned about overall costs and are looking at these charges more carefully.

Compiled by Lauren Elkies

With dire prognostications for the U.S. real estate market multiplying
like a virus, it’s no surprise that the impregnability of Manhattan’s
market is being questioned. [more]

Does the word “plutoed” mean anything to you? How about “truthiness?” Both have something in common with a word that’s been on the tip of everyone’s tongue lately: subprime.

Last month, the American Dialect Society voted subprime its 2007 word of the year. The honor means that the word will join the ranks of plutoed, which took the top spot in 2006 and means “to demote someone or something” (as happened to Pluto when the International Astronomical Union decided the celestial body no longer met its definition of a planet), and truthiness, which was the top word in 2005 (meaning “the quality of preferring concepts or facts one wishes to be true,” a phrase popularized on Comedy Central’s “The Colbert Report”).

The ADS, whose members include linguists, etymologists and grammarians, is an 118-year-old organization that has crowned a word of the year for the past 18 years. But 2007 marks the first time it included a special category for real estate.

Other real estate-related words or phrases in the running were “exploding ARM” (an adjustable rate mortgage that rises beyond a borrower’s ability to pay); “liar’s loan/liar loan” (money borrowed from a financial institution under false pretenses); “NINJA” (“no income, no job or assets,” which refers to a poorly documented loan made to a high-risk borrower); and “scratch and dent loan” (a loan or mortgage that has become a risky debt investment, especially one made by a borrower who has missed payments).

In addition to beating out other real estate terms, subprime had stiff competition from the words Facebook, green and Googlegänger (another person with the same name who shows up when you Google yourself).

Wayne Glowka, a spokesperson for the ADS, said the organization’s selection of subprime, as well as the inclusion of a category for real estate, speaks to the national preoccupation with the state of the housing market.

“Real estate words were given special attention because the trouble in the real estate sector affected lots of people last year, and taught the rest of us a number of terms that were new to us, like ‘subprime’ and ‘exploding ARM,’” said Glowka.

Although subprime is currently not included in many dictionaries, Glowka said he thinks that’s going to change.

“Dictionaries have missed the term, which is at least 10 years old, because dictionary editors like me are not all that
familiar with real estate and mortgages, other than the fact that we hate paying them,” he said.

A Nexis search of major newspapers—a category that includes 107 sources and leading publications like the New York Times, the Los Angeles Times and the Washington Post—found “subprime” 24,942 times last year. In addition, the word has been a regular in the pages of The Real Deal.

Of course, in an ideal world, the word and the underlying crisis will disappear. Here’s hoping that by next year, the subprime crisis will have plutoed.

Turmoil in the real estate market appears to be having another impact besides affecting prices, as the number of new real estate salespeople entering the profession for the first time in recent memory stalled last year.

For the five boroughs, the number of salespeople, who enter at the lower ranks of the profession and are less experienced than licensed brokers, was flat for 2007. Meanwhile, the number of brokers was up 4.8 percent for the year, likely a sign existing salespeople are taking the higher level of licensing as the market grows more competitive.

“People considering careers in real estate are reading all the negative publicity about the market and the mortgage situation, and it’s turning them off,” says Phyllis Pezenik, vice president of residential sales for DJK Residential. “There are fewer people wanting to become salespeople, but agents who have been established for some time are now able to apply for broker’s licenses.”

Statistics from the New York Department of State show that the number of salespeople in New York City in 2007 was 42,248, down 0.1 percent from 42,293 in 2006. That’s a departure from the profession’s past popularity. Of the five boroughs, Manhattan showed the largest uptick, at 0.6 percent, while Staten Island saw a steep 6.4 percent drop-off.

Staten Island also saw the smallest growth in its broker ranks, while Manhattan and Brooklyn saw the strongest. While the total number of brokers in all of New York City in 2007 was 25,529, up 4.8 percent from 24,354 in 2006, Manhattan broker ranks increased 6 percent for 2007 and Brooklyn increased 6.2 percent. Staten Island increased its broker ranks by a mere 1.8 percent, to 1,166 brokers.

One side effect of decreasing interest in the real estate profession: shorter waits to take the real estate licensing exam and, consequently, less competition in at least one part of a very competitive arena.

“A few years ago, there was so much hype about the real estate business, it was hard to get an appointment to take a test with the state; people were two- and three-deep trying to get licenses,” says Pezenik.

In order to become brokers, licensed salespeople must accumulate points through sales and rentals, a process that takes about two years and ensures that those who are going for broker’s licenses are already experienced agents.

Some feel the downturn in the U.S. housing market is weeding out the less-talented salespeople and brokers.

“Opportunities are created through markets like this,” says Jeffrey Roseman, executive vice president at Newmark Knight Frank Retail. “To compete in this business, you have to be able to communicate with the customers, understand real estate trends and market conditions, and know who the players are in all the markets. The days of a person calling a number off a sign and a broker with his feet on the desk taking the call are gone.”

Adds Fernanda Forman, a managing director at Bond New York, “People often enter this profession by default—they’re out of a job or just graduated and don’t know what else to do. When there’s a bump in the road there’s always a shift, and it’s not really a bad thing. Agents who leave under those circumstances are either not making it or not serious about the job.”

In 1985, well before developer David Walentas and his wife moved in, their 15th-floor penthouse was used to shoot scenes for “Year of the Dragon,” a movie about the world of organized crime in Chinatown. It was the perfect place to connote seediness and crime.

But much about the apartment—and the neighborhood around it—has changed drastically since then, largely because of Walentas’ vision for the area. The apartment of Walentas, owner of Two Trees Management, now offers a stark contrast to the crime movie. The space is filled with art, including two large cast-iron lions paying tribute to Leo, the zodiac sign that Walentas and his son, Jed (who is also his business partner), share.

From the bedroom window, Walentas can see J Condominium and Beacon Tower, two gleaming, luxury high-rises that are the newest additions to the area skyline. He didn’t build them, but his presence in Dumbo is one of the primary reasons they exist.

A once-derelict 20-block industrial area that fans out between the Brooklyn and Manhattan bridges, Dumbo was once dark and silent at night. Today, it’s a high-end residential enclave, where cafe lights spill onto lively streets. Walentas’ empire, stitched together over three decades, consists today of 12 residential and commercial buildings, totaling 8 million square feet.

“I used to say I had done a lot of things, but unlike most of them, Dumbo will be here in 100 years,” he said. “Not that many people have a chance to make that big an impact.”

Walentas began piecing together his Dumbo properties in 1978 with the purchase of the iconic Clock Tower Building for $6 a square foot—$1.5 million for the 250,000-square-foot structure. At the time, it housed a tape business whose trucks had a hard time navigating Dumbo’s narrow, stone-covered streets.

But when the city rezoned a number of key blocks in 1998, the building was converted into apartments. It now includes the 3,000-square-foot light-soaked unit he shares with his wife, Jane.

The apartment is in the Walentas Building—his name is spelled out in small, un-Trump-like letters on the awning—and its western windows have sweeping views from the Statue of Liberty to the Empire State Building, with a Manhattan skyline that seems close enough to touch. In a sense, that proximity helped Walentas secure financing for the project before anybody lived in Dumbo or could imagine doing so.

“When I first needed loans to buy here, bankers would say, ‘Where are the comps?’ So I would bring them up here and point to Manhattan and say, ‘Those are the comps,’” he said. “There needed to be people here first.”

The one-bedroom apartment has 12-foot ceilings and columns as thick as oaks. Oriental carpets set off its polished floors, and slate covers the kitchen counters; the absence of traditional cabinets intentionally recalls the Soho loft where the Walentases once lived.

In the living room, one large wall is dominated by 10 original Andy Warhol silkscreens of Marilyn Monroe in splashy, vibrant colors. Walentas said they were purchased directly from Warhol for $100 apiece, in a deal between “friends.”

In the one bathroom, basket-weave inlays jazz up the marble floors, while the wainscoting around the large bathtub seems like another referential touch, recalling the beachside cottages of the Hamptons, where the couple also owns a home.

Buyers who got in early paid $300 a square foot in the Clock Tower, which has 125 units. The Walentas family moved in the year after it opened. In a sign of how values have ballooned, the units now command more than $1,500 per square foot, Walentas said.

Not only did he carve multi-million-dollar lofts out of drafty spice warehouses in the neighborhood, and handpick retail tenants like the Smack Mellon Gallery, Jacques Torres Chocolate and others, Walentas personally insisted that Callery pear trees line the sidewalks to give the neighborhood a uniform appearance.

The city helped keep the neighborhood’s preserved-in-amber look. In December, the Landmarks Preservation Commission named Dumbo a historic district roughly bounded by Main, York, Bridge and John streets, ensuring that the exterior skin of the 91 buildings there won’t change much going forward.

Not all city-sponsored changes in Dumbo, however, were universally loved. Many Brooklyn residents felt that the city should have encouraged businesses to stay in Dumbo to maintain its manufacturing base, said Robert Perris, district manager of Brooklyn Community Board No. 2, which includes Dumbo, Fort Greene and Brooklyn Heights.

Those residents were worried about “the loss of good-paying jobs for people who didn’t have a great education,” Perris says.

Of course, not all employment options vanished; 111 Front Street is still commercial, and the Water Street corridor today is heavy with retail, including art galleries, markets and boutiques. Walentas’ own building features Bubby’s Pie Co., an offshoot of the popular Tribeca eatery, where $900 baby strollers are typically lined up near the door. But it’s not all kid-centric; the rock club Galapagos, formerly in Williamsburg, is converting a Walentas-owned onetime stable on Main Street and will open by summer.

The only thing that’s really missing, residents said, is a quality supermarket, though for now the gourmet grocery Peas and Pickles suffices.

Presently, there are so many businesses in Dumbo—110 in 2007, up from 60 the previous year—that the neighborhood now has its own business improvement district, formed in 2005 to focus on infrastructure shortcomings like those bumpy stone streets.

“There may not be much foot traffic yet, but there’s lots of potential and promise for the neighborhood,” said Tucker Reed, the BID’s executive director.

Convincing vendors to take a leap of faith in a work-in-progress area, Walentas continues to offer generous concessions to tenants, like two years of free rent. Even if that means a short-term loss, it fits Walentas’ long-range vision.

Last summer, Daniel Power, owner of the PowerHouse Arena, a publisher and performance space, relocated from Manhattan to a 10,200-square-foot, two-floor space in a Walentas building on Main Street. For his 10-year lease, he pays a “discount” relative to Brooklyn market retail rents, which are $40 a square foot; he also received a complimentary HVAC system to sweeten the deal, though he declined to specify his rent.

“Having a civic-minded landlord is unheard of in New York, and it’s a savvy business move on their part so ground-floor spaces don’t turn into Duane Reade,” Power said.

But other decisions seem to have less public support, like Walentas’ proposal to build a $200 million complex with 400 units, a 17-story tower and a school on Dock Street.

In the meantime, he’s focused on Clinton Green, a 30-story mixed-use tower with 1,000 rentals to rise on Eleventh Avenue and West 53rd Street in Manhattan.

Should tea leaf readers assume, then, that Hell’s Kitchen will be the next hot address?

No, said Walentas. “I’m too old to be early again.”

While Fort Greene is generating headlines for new condo towers including the Forté, a 30-story tower on Ashland Place; 85 Flatbush Avenue, designed by Ismael Leyva; and Rockwell Place, a converted piano factory, many of those looking to make the Brooklyn neighborhood home cite the attraction of the area’s historic housing stock.

On a recent Saturday, a number of potential buyers browsed brownstones, which are concentrated in the heart of the neighborhood directly south of Fort Greene Park.

An open house in a renovated, turn-of-the-century brownstone saw a steady stream of interested buyers touring its four vacant (and slightly unfinished) condo units. The units in the brownstone, at 10 South Oxford Street, ranged from a 1,950-square-foot, first-level duplex for $1.55 million to a 950-square-foot, top-level one-bedroom for $750,000.

“The area has great inventory,” Corcoran broker Abdul Muid said from his office on Lafayette Avenue. “If you find a prewar home that’s intact with all its details, that’s going to be a great buy.”

Those browsing at 10 South Oxford cited the building’s pre-war charm as on the top of their priority lists.

“I prefer a place with character,” said Dave Zweig, 33, a Manhattan broker visiting, on this day, as an ordinary customer with his fiancée. Zweig praised the quality of the renovation and said, “Sometimes you see these renovated places, and it’s so cheap.”

Zweig said that while he had looked at a place on Eastern Parkway closer to Crown Heights, he wasn’t sure he liked that area as much, and Fort Greene was the best match for his price range. He said he and his fiancée currently rent, and that it will make more sense for them financially to buy once they are married.

Also at the open house were Matt and Amanda Lipstein, ages 33 and 34, respectively, who were looking to upgrade from the 400-square-foot Lower East Side studio they have been living in since they married a year ago. “We like the small number of units,” Matt Lipstein said. “Some of the new places we’ve seen have a hotel feeling.”

The high concentration of properties with historic character seems to be helping Fort Greene stave off a real estate downturn. Muid estimated that prices have increased 4 to 7 percent in the past year.

According to statistics released by the Corcoran Group last month, average prices in Brooklyn overall rose by about 8 percent from 2006 to 2007. Meanwhile, according to the real estate appraisal firm Miller Samuel, average prices in Manhattan rose 10.8 percent over the same year.

Corcoran found that the average price increases varied among Brooklyn neighborhoods, but that the median price of a co-op jumped 5 percent in Fort Greene and neighboring Clinton Hill, while condos increased 4 percent.

The general concerns about the real estate market seem to have taken a bite out of the number of potential buyers out apartment-hunting in Fort Greene, but there are still plenty of people looking, brokers said.

“Whereas before we might have had 10 buyers for a property, now we have three or four,” said Karen Talbott, who was showing a five-story, three-family brownstone at 32 St. James Place. The asking price was $2.13 million.

Because of cold weather, some brokers said traffic was slower than usual on this particular weekend.

Most people who shop for $2 million homes don’t have a problem with loans, Talbott noted. “They pay a million cash and finance the rest.” She said the “old-world charm” of a Brooklyn brownstone makes Fort Greene popular among dollar-rich Europeans. “They’ll call and ask about Fort Greene or Clinton Hill specifically,” she said.

The St. James Place brownstone features many of the decorative accents that make older units across the neighborhood so desired. It has splashes of exposed brick; original fireplaces with mantles of white marble and dark, columned wood; an arched storage alcove off the bedroom; and a textured wall in the basement that appeared to be pressed tin.

Many of those milling through recent open houses in the neighborhoods said they were looking for an upgrade—either from renting to buying, or from a one-bedroom to a two-bedroom.

At an open house at 72 South Portland Street, Jenny Bent was contemplating making an offer on a ground-level, 900-square-foot one-bedroom unit with a 1,300-square-foot private garden in back.

“I’m priced out of Park Slope,” said Bent, who was pushing a stroller as she was walking through the unit. “This unit was listed for $645,000.”

Commercial real estate agent Buster Black, 29, was also intrigued. He has lived in Fort Greene for two and a half years and is now looking to buy a larger place. “I’m not actively looking in any other neighborhoods,” he said.

Hanging on the wall of this co-op was an indication of what might inspire such fierce loyalty to the neighborhood. It was a framed enlargement of a 2006 Time Out New York article that had named that particular block of South Portland as the best block in the city.

Corcoran agent Rudy Lucchese, who was showing the property, said South Oxford and South Portland have always been neighborhood favorites.

He shrugged off any suggestion that economic or real estate woes might slow Fort Greene’s transformation. “There is still a lot of demand for Brooklyn,” Lucchese said, “and this neighborhood is thriving.”

Like other gentrified sections of Brooklyn, Fort Greene has long been attracting Manhattanites who appreciate the upscale restaurants, shopping and neighborhood amenities, especially along DeKalb Avenue and around the triangular island where Fulton Street meets Lafayette Avenue. Also, the neighborhood is getting more upscale by the day. Just last month, Union Market, a high-end grocery, confirmed its plans to open a third outpost on the corner of Fulton and Rockwell Place.

Brokers estimated that 50 to 75 percent of their buyers, often young families or couples, are relocating from Manhattan. At Rockwell Place, 19 of 36 condo loft conversions have been sold, and sales manager Marco Auteri said a “good majority” of his prospective clients come from the city.

Many of them, Auteri said, mention the Brooklyn Academy of Music and nearby cultural attractions as a reason they like the neighborhood. A poster in his sales office illustrates the planned expansion of BAM’s cultural space, including a $35 million Frank Gehry-designed theater that many predict will transform the area even further.

City officials often tout construction as a sign of economic vitality,
but in the midst of the building comes the very real challenge of how
to sell or rent properties affected by dust, debris and noise. [more]

As weak spots develop in New York’s residential market and headline writers fret about rising foreclosures, bargain house hunters are querying real estate discussion boards to find out how they can get their hands on foreclosed homes.

But the strategy for pursuing these homes—and even homes merely on their way to foreclosure—is complicated.

Fortunately for homebuyers, there are many Web-based courses, classes and intensive weekend-long seminars to explain the ins and outs. These courses are drawing an increasing number of eager students, not to mention producing a barrage of advertising.

One of the first principles the seminars teach is for buyers to search for lis pendens. Latin for “suit pending,” a lis pendens is a legal filing that occurs before foreclosure as a homeowner falls behind on mortgage payments.

But even though they outline initial steps for investors like that, foreclosure gurus warn that getting a jump on homes headed for default is not a guarantee of easy money.

“It’s the one caveat I tell people—that this is not about getting rich overnight,” said Jessica Davis, president and publisher of Profiles Publications, a foreclosure listing service based in Jackson Heights, Queens. Davis teaches foreclosure seminars at New York University and has taught at the Learning Annex in the past. “You can make money and it doesn’t require talent or a degree, but you have to educate yourself, and you have to work at it. You have to learn how to minimize your risks by minimizing potential mistakes.”

Also teaching investment strategies in the foreclosure market is Matthew Lucks, director of training at PropertyShark.com. Lucks has been designing Internet-based courses but is now planning to teach his course in person starting this month.

Other courses are luring students with promotions that certainly seem intended to put dollar signs in one’s eyes. An ad that has run in Metro New York features a picture of Donald Trump and a headline: “If you’re not a millionaire by December 2008, you didn’t attend my foreclosure workshop.”

Is it a deal?

Rick Sharga of RealtyTrac.com, an online marketplace for foreclosure properties, sees lis pendens filings as a bona fide signal for experienced investors to capitalize on a default situation. He warned, however, that many of these properties have already been stripped of their equity.

“If you’re in a market like Queens and you see the prices depreciating and the number of lis pendens increasing, the challenge is to find a property entering foreclosure that has equity,” explained Sharga. “People may have overextended themselves and got involved with very risky financing, and there may not be any equity. In fact, the price of the property over the ensuing period may even be a negative equity situation.”

Investors usually end up working out what’s known as a short sale, said Sharga.

“This is where you negotiate with the bank, and the bank agrees to accept less of what’s due on the mortgage as payment in full for the property. Maybe the home owner paid $500,000 for the house, but the bank accepts $400,000 to sell the house.”

In other words, the bank is cutting its losses, realizing that in a down market, “it would cost them more money to hold and eventually re-sell the property,” said Sharga.

Roger Roisman, attorney and partner at the law firm Tannenbaum Helpern Syracuse & Hirschtritt, explained that a lis pendens is basically a notice that “here’s a property owner who is in trouble and who may lose the property to his lender.”

According to Roisman, if the timing is right, a lis pendens filing may signal a worthwhile deal. “This may be a red flag for someone looking for a bargain, a bottom fisher, for example. It may be the time to talk to the lender, if there is one, about acquiring the note or mortgage at a discount, or working with the owner of the property who clearly has lost his equity in the property, and try to acquire the property.”

But lis pendens may also signal different situations, such as when someone wants to prevent a transaction. Roisman laid out a sample scenario where the lis pendens acts as a buyer’s protection. “I want to buy a property and give a 10 percent down payment, but I fail to close when I’m supposed to. Capital markets being what they are, I can’t get a lender, or I can’t get an equity participant, or I can’t get either. The seller tells me he is taking my down payment, and he’s selling the property to the next guy. I will then file a lis pendens against the property, which will prevent him from selling it to the next guy without first dealing with me in a courtroom.”

Lis pendens filings in New York can be a sort of red herring, said David Schechtman, a commercial property broker with Eastern Consolidated. Schechtman, who heads the firm’s turnaround and distressed group, said lis pendens may not indicate that there is real financial distress.

“It could be a partnership dispute and disagreement or a tactic between a borrower and a bank,” he said. “It doesn’t necessarily always signal real financial distress. The difference in Manhattan is that you need so much equity in the deal to get a lender. There just is no subprime in Manhattan for commercial and residential properties.”

In New York City, it may not make that much difference, as the number of lis pendens filings is quite low in the first place. According to PropertyShark, in 2007, lis pendens filings for residential properties in all five New York City boroughs totaled 7,386, a number far lower than in other parts of the country. In Queens, 2,942 lis pendens were filed in 2007; in Manhattan, a mere 112.

But those numbers don’t seem to be discouraging some bargain-hunters.

“The volume of students has steadily increased over the past few years,” said Lucks of PropertyShark’s free online courses.

Lucks and Davis said their classes attract people with a wide range of backgrounds, such as beginning investors, experienced brokers, agents and retirees who see the market as more viable than retirement accounts.

How it works

Once a property has a lis pendens filing, the clock starts ticking. According to Peter Schillinger, a partner with the White Plains-based real estate law firm Odesser Schillinger & Finsterwald, the process gives investors plenty of time to buy the pre-foreclosed property.

“If you are able to locate a property prior to auction, that period is generally 12 to 18 months,” Schillinger explained, noting that a lender can start the clock when a property owner defaults on his or her mortgage.

“The filing of the lis pendens is the first thing that happens together with a summons and complaint. This is when the bank feels that the default has gone on long enough, and they want to start a lawsuit called a mortgage foreclosure action,” he said.

Not all meritorious

In general, the lis pendens filed since the credit crisis in the summer of 2007 have not resulted in bank auctions, according to Schechtman. “They’ve generally been cured. The borrower can cure it; they can get money from someone else to cure it. There are a lot of lis pendens filings, but just like a lot of lawsuits, they are not all meritorious.”

For bargain-hunters, the next step is to find out what happens to those homes that were teetering on the brink. Since some of them end up in bank hands, buyers try to learn how to negotiate with lenders.

“We are also seeing more attention paid to bank-owned properties instead of lis pendens or auctions,” Sharga said. “The reason for that is the inventory the banks are taking back has grown significantly over the last year, and the banks are more motivated to negotiate prices.”

Of course, if you’re not a bargain-hunter, this process cuts both ways. While saving a property from foreclosure by purchasing it in the lis pendens phase helps the distressed homeowner avoid the credit implications of a foreclosure, which can keep him or her from qualifying for loans or even getting a job, Lucks of Property Shark explained that the sale of foreclosed or defaulted homes has a distinct effect on neighborhoods. “Depending upon zoning and demand, investors may redevelop land, altering the face of the neighborhood. Some investors, especially now, are purchasing properties as a long-term rental. This creates a larger supply of rentals, thus driving the price of rent down in the area,” he said.

Getting lis pendens listings, which are available on the Internet, gives potential investors some advantages.

“When you are dealing with lis pendens, you are dealing directly with the owner, which means you can look at the property, flush the toilets, even have the property appraised,” said Bill Staniford, vice president of sales at PropertyShark.

Learning how lis pendens works and knowing how to use the data levels that playing field for both novice and veteran investors, said Staniford.

“As long as we can train people how to value a property correctly and identify the good deal, they should be able to generate a good purchase price, and values will go up,” he said.

He continued, “This isn’t a get-rich-quick mentality; this is a real business model people take seriously.”

Long Island hasn’t seen the worst yet

Sales have slowed on Long Island, with a drop in home prices and an increase in inventory. Pearl Kamer, chief economist for the Long Island Association, said home prices dropped across Nassau and Suffolk counties by 5 percent in the fourth quarter, while available inventory jumped by 8 percent.

And she said the most expensive homes have been hit hardest, with a price drop of between 10 to 20 percent in some areas.

She attributes the market’s fourth-quarter downturn to buyer caution in the wake of the national mortgage meltdown. “It’s the whole subprime mess,” Kamer said.

Meanwhile, statistics for all of 2007, released by the Multiple Listing Service of Long Island, show that average prices for both counties remained fairly flat to down compared to 2006.

Nassau posted an average price of $550,000 for December compared to $600,000 for December 2006, while Suffolk posted an average price of just under $450,000 in both December 2006 and December 2007, according to the MLS.

Kamer does not think Long Island has seen the worst yet. She predicted that the market will remain sluggish, and that the impact of the national mortgage mess will be felt as more homes come on the market and take longer to sell.

“We will see the worse of the subprime crisis in 2008, with the market not stabilizing until 2009 at the earliest,” she said.

She also said a lack of middle-income housing will cause problems for first-time buyers on Long Island. But she noted that Suffolk County Executive Steven Levy has been pushing state legislators in Albany to adopt legislation to develop more condos and townhomes geared toward first-time buyers. Kamer said that if Albany adopts the idea, it could transform the outlook of the market for future years.

Meanwhile, Governor Eliot Spitzer convened a commission last month to study property tax issues. The commission, which will be headed by his former rival Nassau County Executive Tom Suozzi, an advocate for property tax reduction, will make preliminary recommendations in May. It could provide assistance to Long Island, which Suozzi has long said is overtaxed.

Northern Jersey outperforms rest of state

Northern New Jersey remains the Garden State’s strongest residential market, largely because its close proximity to New York gives it an edge. The market for condos in Hoboken and along Jersey City’s waterfront continues to be robust, even as overall prices have flattened over the last year.

Data compiled by the Hudson Realty Group show that the average sales price for Hoboken was $524,126 for the fourth quarter of 2007. The Hoboken numbers are higher than the state median. The fourth quarter showed that condos remained on the market for an average of 61 days in Hoboken, about the same as the first three quarters of 2007.

Somerset County was the only county in northern New Jersey to post both an increase in median sale price and number of homes sold from the third quarter of 2007 compared to the same stretch in 2006, the most recent statewide data available. Median prices in the county jumped 1.27 percent to $508,400, while home sales rose 8.39 percent.

Essex County, which is home to wealthy towns like Short Hills and low-income cities like Newark, posted a decline of 8.24 percent to $432,300. Essex also saw home sales drop 13.74 percent from third-quarter 2006 to 2007.

Meanwhile, prices statewide have remained fairly flat since 2005, after showing dramatic gains since 2000.

The average sales price for all of Northern Jersey was $469,300 for the third quarter. That was above the Central Jersey average of $393,200 and the $275,300 average in South Jersey.

Third-quarter prices for 2007 show that statewide, the New Jersey housing market was slightly down.

The numbers, compiled by the New Jersey Association of Realtors, show an average sales price of $399,000 statewide for the third quarter, a decrease of $1,600 from the same period in 2006. The numbers rebounded from a low of $380,400 for the first quarter of last year.

Westchester remains steady—in some areas

Prices in Westchester County did not budge that much between 2006 and 2007 – at least for single-family homes, condos and co-ops, which make up the majority of the housing stock.

The median sale price of a single-family home rose less than 1 percent to $685,000 for 2007 from $680,000 the previous year, according to statistics released late last month by the Westchester County Board of Realtors.

Single-family home and condo sales increased by 2 percent over 2006, while co-op sales decreased by only seven units, or 1 percent, from 2006. Meanwhile, the county ended 2007 with 4,711 residential units on the market, or 18 percent below the end of 2006.

“It has been a good year overall,” Gil Mercurio, CEO of the Westchester Board of Realtors, said. “The market has been coasting along. Westchester is not being hit as severely as the rest of the nation.”

Westchester, like northern New Jersey, has been largely insulated because its buyers tend to be wealthy and are not affected to the same extent by subprime problems.

The one area of the market that saw weakness was multi-family homes, which tend to either be purchased by less affluent buyers or investors. The volume of sales in that category decreased 38 percent from 2006. Westchester has traditionally had a low amount of these investment properties, Mercurio said. Mercurio predicted that middle-income, affordable housing will dominate the real estate discussion in 2008. He said the county has a shortage of between 30,000 and 50,000 middle-income units.

Connecticut market is mixed bag

Connecticut’s housing market saw mixed results for the fourth quarter of 2007. According to Barry Rosa of Prudential Connecticut Realty, who produces a newsletter on the state’s real estate, Fairfield County’s market is running at 90 percent of last year’s activity, with prices rising slightly.

The median price for 2007 statewide was $199,000, a $4,000 rise from 2006. In Fairfield County, the median price remained flat at $295,000.

Individual towns in Fairfield County posted median price gains, including a 25 percent jump in Westport to $800,000 and a 12.4 percent gain in Stratford to $218,000. Conversely, the median price in Newtown dropped 24.6 percent to $357,450 and 11.7 percent in Wilton to $423,750. (A small set of data may have accounted for the large price swings.)

Rosa said inventory levels were largely the same as they were in 2006. He said inventory in tony towns, including Greenwich and Darien, has not changed.

“We are taking our lumps and bumps,” Rosa said. “What we have not had in Connecticut is an excess overhang of inventory. Without that excess overhang, Connecticut is doing well.”

Single-family homes have continued to dominate the market in Connecticut, with Rosa noting that foreclosures have been limited statewide. The foreclosures in Connecticut have been mainly limited to the state’s poorer urban areas, including New Haven, Hartford and Bridgeport.

Go to chart: Long Island, Westchester and Connecticut housing markets

The surge of foreclosures resulting from subprime home loans around the country has largely missed Manhattan, though the island has felt its effects in tightening loan standards.

It remains to be seen whether a wave of adjustable-rate mortgages, or ARMs, about to reset this year (some of them subprime and others not), may place Manhattan in a more vulnerable position, though most experts are betting it won’t. Subprime mortgages are loans made to borrowers with poorer credit at higher interest rates. ARMs are loans that enable a consumer to determine monthly repayments based on fluctuating interest rates.

In general, the most popular types of loans being taken out are the five-year, seven-year and 10-year ARMs, said Melissa Cohn, the president of Manhattan Mortgage Company, a residential mortgage brokerage licensed in 15 states. New Yorkers, more so than people living in the suburbs, have traditionally taken out ARMs.

“In New York City, which is the highest price point, people tend to steer more towards the adjustable, and in the suburbs and outlying areas, where loan amounts tend to be lower, we’re seeing a lot more interest in the fixed-rate product,” she said.

However, Manhattan has been largely insulated from the surge of subprime loans, and those include subprime ARMs, for two reasons, said Tom Barnhart, the president of Mortgage Commitments, a New Jersey-based mortgage brokerage that operates in the metropolitan region. First of all, subprime mortgages were largely unavailable for co-op apartments, which comprise 75 to 80 percent of the Manhattan housing stock.

Second, most subprime lenders didn’t lend for new construction condominiums; they had to be 90 percent complete, Barnhart said. “That gets rid of another 15 percent of the Manhattan market.”

So even if proportionately more loans in Manhattan are ARMs, they’re not subprime, but prime, which will not see a huge adjustment, Barnhart said.

“The subprime adjustments are huge, huge adjustments, and the prime adjustables aren’t going to be as large,” he said.

Given the current values of LIBOR (the London Interbank Offered Rate) and the one-year Treasury bill, the indexes typically used to derive home mortgage interest rates, the adjustment “might even be lower in terms of rate than what they currently have,” Barnhart said.

Barry Hersh, the associate director of the Steven L. Newman Real Estate Institute at Baruch College/City University of New York, agreed that Manhattan is well-insulated from any crisis surrounding ARMs.

“Seventy-five percent of the market in Manhattan is co-ops, and the co-op boards always required very strong financial statements from buyers,” Hersh said. “So therefore, it is much less likely there will be foreclosures in Manhattan.”

Barnhart said that he believes what may be more important for New Yorkers is whether they took out interest-only ARMs.

“The increase in the payment is not necessarily going to come from their interest rate as much as it is from if they’re interest-only,” he said.

Interest-only ARMs provide the borrower with the ability to pay for a fixed period only the monthly interest due, and none of the principal, resulting in lower payments during that term. A related type of loan called a pay-option ARM offers even lower monthly payments for a fixed term by allowing the consumer to pay only a fraction of the interest due each month, and none of the principal, resulting in a larger loan balance each month.

“The people who bought expensive properties with option ARMs, and who never had an ability to carry anything other than the negative amortization minimum payment, if they run out of the ability to avail themselves of that payment, the payment triples or quadruples upon the reset,” said Paul Levine, the chief operating officer of Refinance.com, a company that provides home loans to borrowers.

For people who took out super-jumbo loans, or those for more than $650,000, who may be the predominant borrowers of pay-option ARMs in Manhattan, they may be in a good position to cover those monthly payment increases, he said.

“This is pure speculation, but it would seem that in the super-jumbo market, in loans over $1 million, there’s going to be more ability to sustain on-time payments, even with the large adjustments, because you have a bigger bucket of income to begin with,” Levine said.

Barnhart agreed and said, “I think most of the people in Manhattan would be prepared to absorb the increase.”

But people who took out the pay-option ARMs in the jumbo loan category, or one for more than $417,000 and less than $650,000, may find themselves struggling, as they will have less residual income from which to make their adjusted payments, Levine said. He said there were pay-option ARMs taken in New York City, but not to the extent they were in other parts of the country.

“In California, virtually two out of three loans were option ARMs,” he said. “I don’t think there was any sort of statistic like that that one could realistically apply to New York, but it was certainly a popular product, and unfortunately, it was not only taken by people in the super-jumbo loan market. It was taken by people in the middle-class market.”

Barnhart pointed out that most borrowers who took pay-option ARMs have caps of 7.5 percent on the annual increase in the negative-amortization (or minimum) payment. However, in New York, when borrowers’ loan balance has grown to 110 percent of the original principal, the lenders then demand repayment of principal, which sends monthly payments spiraling, Levine said.

In most of the rest of the country, it’s 115 percent, meaning that New York will begin to see pay-option ARMs recasting about a year before everywhere else, he said. In the rest of the country, analysts have predicted that people will start seeing loans reset in 2009.

Cohn said that she doesn’t believe the pay-option ARMs will play a big role in Manhattan. “The option ARMs are really a minimal percent of what we do,” she said.

And all analysts said that because home prices have remained strong in Manhattan, most borrowers should be able to obtain some type of refinancing.

“I don’t see a huge spike in foreclosures due to resetting rates,” Cohn said. “If you take into consideration the fact that the average price of an apartment in New York is in excess of $1.3 million, our buyers tend to be better, more qualified buyers, and can qualify for refinancing.”

The loan packages available for refinancing are much more conservative products than originally presented to borrowers, Levine said.

“Refinancing is available, but you have to be able to afford a realistic, real-world payment, so if you’ve been making the minimum payment on an option ARM, you’re certainly not used to budgeting for it.

“Still, in the Manhattan market, where prices still seem to be slowly but steadily increasing, certainly there’s more motivation for the upper-middle-class and wealthy borrowers to fight and struggle to keep their homes, because there’s still an upside,” he said.

Part of the problem with predicting the effects these home loans might have on the New York City marketplace is a lack of widely available data. The Mortgage Bankers Association of America keeps statistics on the types of loans taken by borrowers nationwide, and breaks them down only by state.

“We haven’t really had a need for our members to have anything that detailed on a local level,” said Jonathan Pinard, the president of the Empire State Mortgage Bankers Association. “It might not be a bad idea going forward.”

The narrowest house in the city, a townhouse at 75½ Bedford Street, is so slim that one may wonder how this tiny slip of a building came into being — and why it still remains.

Wedged between 75 and 77 Bedford, 75½ is only nine-and-a-half-feet wide on the outside, eight-and-a-half-feet wide on the inside, and 32 feet deep.

The home’s precise date of construction is in question, but one thing is certain: This itty-bitty home has drawn a long list of famous inhabitants.

The home was constructed in the mid-1800s over a carriage drive between two homes that led to horse stables in the backyard.

It is believed to have been built in 1873, but there are some who say that based on land values and on the home’s original architectural style, Italiante, it is more in line with 1850s construction.

The list of former owners and renters reads like a who’s who of New York. There’s the cartoonist William Steig, the anthropologist Margaret Mead and the writer Ann McGovern, who co-authored a book called “Mr. Skinner’s Skinny House” about a man who lives in the narrowest house in the city.

It is also rumored that both Cary Grant and John Barrymore spent time there. And during the early 1920s, when artists began to flock to Greenwich Village, the home became an enclave for the pioneers who started the Cherry Lane Theater.

But the home’s most notable resident, and the name etched into the plaque on its façade, is Edna St. Vincent Millay, the Pulitzer Prize-winning poet. Millay won her Pulitzer in 1923, for “The Harp-Weaver and Other Poems,” while she was living in the house. She was the first woman to win the prize for poetry.

It was Millay and her Dutch husband, Eugen Jan Boissevain, who had the home renovated from the Italiante to the Dutch Colonial style in the 1920s. During their short stint in the home, they added the casement windows, skylight and Dutch stepped gable that passersby see today.

In the 1950s, a family with the last name Carroad purchased the home along with a couple of the properties around it. The family owned it until the early 1990s.

That was when Christopher Dubs, who has a background in architecture preservation, discovered it. Though the home was in disrepair, Dubs was intrigued, and in 1994 he bought it for $270,000.

“It was an old, ugly 1960s renovation that someone had done,” said Dubs. “It had red mosaic tile and a horrible kitchen and all these little chopped up rooms upstairs.”

Dubs had yet to start work on the house when Mayor David Dinkins came to recognize the building as the one-time home of Millay.

“The mayor came and they’re standing in front of it, and it was horrible,” said Dubs. “We put the plaque on the ugly brick facing.”

The big repairs — fixing the plumbing and getting the heat up and running — were made immediately so Dubs could rent it out. The “full cosmetic,” as he called it, came a few years later when he was able to devote the necessary time.

What he imagined would take two weeks — each of the four floors, including the basement, measures less than 300 square feet — turned into a four-month adventure.

“Once you touched one thing, you had to do the next thing,” Dubs said.

Complicating matters was the fact that the house is in a landmark district, so Dubs had to get permission from the city to make the changes he wanted. And he needed to keep the home’s appearance consistent with the time period.

That meant finding bricks circa 1920 when it came time to repoint the façade. He found them in a Long Island brickyard. Inside, he exposed the natural beams in the ceiling, replastered the walls, and installed old French doors and Juliet wrought-iron balconies in the back.

On the main floor he swapped the kitchen with the den and put a stove in one fireplace (the house has five of them) with four burners in a row, rather than the standard two-by-two configuration in order to save space.

“I knew how important space was, and in that house that was elevated to a whole other level,” says Dubs.

When he finished his renovations, which cost him $200,000, he was able to rent the house out for $6,000 a month. And, in 2000, he sold it for $1.6 million, nearly quadrupling the investment he made to buy it and fix it up.

“We had multiple offers. In fact, if I remember right, we had a bidding war on it,” said Ileen Shoenfeld of Brown Harris Stevens, who represented Dubs. “This house was very unique. And its uniqueness made it very desirable.”

“There was a bidding war,” said Patrick Lilly, senior managing director at Coldwell Banker, which represented Steven Balsamo, who ended up purchasing the house. Propertyshark.com records indicate that Balsamo still owns it. Calls to confirm this information were not immediately returned.

Lilly, who has worked in the West Village for 24 years and who specializes in townhouses, estimates that 75½ Bedford Street is now worth about $2.5 million.

“The designer buildings are going for a little over $2,000 a square foot, so $2,500 is about as high as you can get in the Village,” he said. “There was a Halstead deal on another small house that was 1,700 square feet, and that went for over $3 million. This one is 990 square feet.”

The price paid for 75½ Bedford Street is “because of its size and its pedigree and its uniqueness,” said Lilly. “You’re always going to pay a premium for uniqueness.”

For Ilan Bracha, who balances a career as a broker at Prudential
Douglas Elliman with his role as a developer at B+B Investment Group,
the dual positions are an opportunity to flex both muscles. [more]

Dumbo

192 Water Street

Developer Kay Water Properties has purchased the former Fancy Basket Company factory with plans to convert it into a six-story, 18-unit condominium above a 200-seat theater and a recording studio. The theater, studio and loft-style apartments are expected to be completed by the end of 2008, the Brooklyn Eagle reported.

East Village

52 East 4th Street

Sales are under way for HK Organization’s 22-story, 14-unit luxury condominium. The 32,000-square-foot building will have 16,000 square feet of retail—most likely a gallery—on the first three floors. It will have three one-bedroom and 10 two-bedroom homes, one with a private roof deck. The residences are priced from $795,000 to $4.7 million. Three garage parking spots are being sold for $175,000 each. Amenities at the Andres Escobar-designed building include an outdoor swimming pool, parking garage, gated driveway and part-time doorman. Luxury Lofts and Homes is handling marketing and sales for the project. Occupancy is slated for fall 2008.

Fort Greene

Flatbush Flatiron

75 Flatbush Avenue Extension

The Department of Buildings has given developer Isaac Hager permission to develop the 21-story, 108-unit apartment building, Brownstoner reported. The 150,000-square-foot tower will be 262 feet tall.

Fort Greene

294 Cumberland Street

Tova H. Corp has received permission from the city’s Landmarks Preservation Commission to develop the four-unit, four-story condominium project in the Fort Greene Historic District. The two-bedroom homes are each around 1,000 square feet, including a duplex with garden space and two apartments with roof decks. Groundbreaking is slated for February, with completion of the project expected by the end of 2008. Kutnicki Bernstein Architects designed the building.

Fort Greene

525 Clinton Avenue

Glickman Engineering has been hired as a project consultant for the 12-story, 30-unit luxury condominium. The site was purchased in 2005 for $6.2 million, Real Estate Weekly reported.

Greenwich Village

82 University Place

First-time developer Michael Diliberto is converting the two-story Cedar Tavern pub site into a nine-story, eight-unit condominium. The Garth Hayden-designed project will have one two-bedroom home per floor on the first seven floors, with a three-bedroom duplex above. The two-bedrooms will average 1,200 square feet and the duplex will be around 2,000 square feet. Prices will begin at $1.7 million. Occupancy is expected to begin in spring 2008. Prudential Douglas Elliman will handle marketing and sales for the project.

Harlem

325 East 101st Street

Construction is under way for the eight-story, 34-unit luxury rental project being developed by the Church of the Resurrection and New Jersey-based Hub Realty. The building will also house the church’s sanctuary and the Booker T. Washington Learning Center.

Midtown East

250 East 57th Street

World-Wide Group is developing the 59-story glass tower, with 320 units split between condos and rentals. The studio, one-, two- and three-bedroom homes will be 60 percent condominiums, priced at $1,500 per square foot, the New York Times reported. Skidmore, Owings & Merrill designed the project, which will have retail space at its base.

Fashion District

885 Sixth Avenue

Atlantic Realty Development’s 47-story glass tower will have retail on the first two floors, offices on the third, a fitness center on the fourth and rental apartments on the upper floors. Costas Kondylis designed the as-of-right project. The Winick Realty Group will be handling the building’s retail leasing.

Upper East Side

Azure

333 East 91st Street

Ground was broken in September and sales began in October for the 33-story, 127-unit co-op, being developed by the DeMatteis Organizations and the Mattone Group. The project, which will hold Public School 151 on its lot, will have studio, one-, two- and three-bedrooms ranging from 600 to 1,970 square feet in size. Apartments are priced from $713,000 to $3.7 million. SLCE Architects designed the building, and Brown Harris Stevens Project Marketing is the exclusive sales and marketing agent. Contact: www.azureny.com.

Williamsburg

Twenty Bayard

20 Bayard Street

The sales office has opened for North Development Group’s 18-story, 62-unit building, which was just over 50 percent sold as of mid-January. The project’s one-, two- and three-bedroom apartments range in size from 650 to just over 2,000 square feet. Homes at the Karl Fischer-designed building are priced from the mid-$600,000s. Andres Escobar designed the residences’ interiors. Amenities include a fitness center, on-site parking, residents’ lounge, children’s playroom, roof deck and 8,000-square-foot garden. Occupancy is slated to begin in spring 2008. Contact: www.twentybayard.com.

Williamsburg

Warehouse 11

Corner of North 11th and Roebling streets

The seven-story, 120-unit condominium will be largest non-waterfront residential project in North Brooklyn. Karl Fischer is the architect for the project, and Montreal-based Andres Escobar & Associates designed the interiors. The residences include studios averaging 480 square feet, one-bedrooms averaging 700 square feet, two-bedrooms averaging 1,050 square feet, ground-floor townhouse duplexes that are around 1,400 square feet, and penthouse duplexes with private terraces that range in size from 1,300 to 1,700 square feet. Prices range from $395,000 for a studio to $1.2 million for a duplex penthouse. Amenities include a fitness center, private courtyard and children’s playroom. Aptsandlofts.com is the exclusive sales and marketing agent for the project. Contact:www.warehouseeleven.com.

Construction update

Upper East Side

305 East 85th Street

The Ascend Group has broken ground on the 20-story, 58-unit luxury condominium. The 134,000-square-foot building will have two-, three- and four-bedroom homes, ranging in size from 1,300 to 3,000 square feet. The building’s amenities will include a children’s playroom, fitness center and a landscaped roof deck with a playground.

East Village

41-43 Bond Street

The city’s Landmarks Preservation Commission has stalled developer Adam Gordon’s plans to tear down two buildings to make way for the seven-unit condominium, the New York Sun reported. Although the project was proposed as-of-right, the LPC is seeking to expand the Noho Historic District to include the lot it sits on.

Financing

Fort Greene

29 Flatbush Avenue

GIM and City Community Capital both provided equity to the development team of the Dermot Company and Grosvenor Investment Management USA to build a high-rise rental apartment building on the 16,575-square-foot parcel. The project, slated to break ground in 2009, will be part of the BAM Cultural District, an effort to convert city-owned parking lots and underused properties into mixed-income housing and space for the arts.

Sales update

Chelsea

133 West 22nd Street

As of early January, the Ascend Group’s 99-unit luxury tower was 80 percent sold, after only three months of sales. Amenities include a rooftop courtyard, underground parking, swimming pool and health club.

Lower Manhattan

The South Star

80 John Street

Developer WSA Management’s 147-unit luxury condominium conversion, designed by architect Stephen Jacobs, was 90 percent sold out as of early January. The project contains one-, two- and three-bedroom homes, with interiors designed by Andi Pepper. Amenities include on-site parking, fitness center, concierge and preferred access to the Hotel Gansevoort’s restaurant ONO. Corcoran Group Marketing is handling sales for the project. Contact: www.southstarcondo.com.

Park Slope

The Vue

166 16th Street

The 10-story, 45-unit condominium project was over 50 percent sold by early January, only four months after the sales office opened. It is being developed by a partnership between Fairmont Capital, Katan Group and Aguayo & Huebener Realty. The Karl Fischer-designed building has nine one-bedroom, 18 two-bedroom and 18 three-bedroom residences. They range in size from 670 to 1,170 square feet, and are priced from around $380,000 to over $900,000. Occupancy is expected to begin in the first quarter of 2008. Contact: www.vueparkslope.com.

Times Square

Platinum

247 West 46th Street

SJP Residential Property’s 43-story, 220-unit luxury condominium had sold 127—almost 60 percent—of its units as of mid-January. The developer has named Cushman & Wakefield the exclusive leasing agent of the building’s ground-floor retail space. The remaining homes include one-bedrooms starting at $895,000, two-bedrooms from $1.7 million to $2.9 million, and a three-bedroom penthouse apartment for $7 million. The project’s amenities include a spa, yoga room, golf simulator, fitness lounge and landscaped terrace with an outdoor fireplace. Contact: www.platinumnyc.com.

Development in brief

Hell’s Kitchen

433 West 37th Street

An unidentified New Jersey-based developer has purchased adjacent lots at 433-439 West 37th Street and 431 West 37th Street for a total of $26.25 million, according to Real Estate Weekly. The buyer plans to build an 86,000-square-foot residential rental building.

Lower East Side

Corner of Rivington and Suffolk streets

The Streit’s matzo company has received an offer for its 47,000-square-foot facility above its $25 million asking price, Jewish Week reported. Massey Knakal, who is brokering the transaction, said the building will most likely be demolished to make way for luxury condos.

Park Slope

251 Fourth Avenue

Construction is under way for the eight-story, eight-unit residential project, Brownstoner reported. Bricolage Designs is the architect.

Park Slope

255 Fourth Avenue

KSQ Architects has been hired to design the building, after Scarano Architects was pulled from the project, according to Brownstoner. The plans originally called for a 12-story, 41-unit apartment building.

As condo developments popped up all over the city, an industry of
marketing and advertising sprouted up around them. But real estate
experts are wondering what will happen to those divisions now that the
U.S. economy is turning. Will new development divisions be forced to scale back?
” class=”read-more-link”>[more]

Forest City Ratner is practically a household name in the city because of its controversial Atlantic Yards project, which is set to remake a massive swath of Brooklyn.

But a short distance north, in Westchester County, the developer has another contentious project—one that is several steps ahead of its Brooklyn development.

Four miles from the Bronx border, Ridge Hill Village will be the largest development project in Yonkers history—just as Atlantic Yards will be for Brooklyn.

The mixed-use complex is projected to cost $630 million. After five years of fierce opposition and legal challenges, the company held a ceremonial groundbreaking on the site in November, and construction is now in full swing.

The development will include 1,000 apartments, 160,000 square feet of office space, a 175-room hotel and convention center, and a multi-screen cinema. Ratner has already signed leases with L. L. Bean, Whole Foods, Banana Republic, New York & Company and movie-theater operator National Amusement.

“It’s a done deal,” said Hezi Aris, a political blogger at YonkersTribune.com and the publisher of the Westchester Times Tribune. “The administration and other interest groups eviscerated the challenge, and everyone threw in the towel.”

The price tag and scope of the project pales in comparison to the $4 billion redevelopment of the Atlantic Yards site, but the two plans are both considered massive for their communities. What’s more, they have followed similar trajectories.

Last month, a State Supreme Court judge ruled in Forest City Ratner’s favor on Atlantic Yards, dismissing a lawsuit that was attempting to block the project from moving forward. However, there are still federal lawsuits challenging Ratner’s use of eminent domain.

Until the legal hurdles are cleared, the only work being done on the site is the demolition of several buildings the company owns.

In Yonkers, it’s a different story. Ratner has cleared all of the legal hurdles.

Like some Brooklyn officials who hail the Atlantic Yards project for all of the jobs it could create, officials in Yonkers, which has long struggled to remain financially afloat, say Ridge Hill Village will jump start the droopy economy with thousands of jobs and millions of dollars in desperately needed revenue, creating an important tax base.

Also like the Atlantic Yards site, the Ridge Hill Village site has a unique history. The more than 80-acre site was once home to a drug treatment center and defense contractor Lockheed Martin, which was bought out of its lease once redevelopment efforts began. In the early 1990s, New York State began marketing the property to developers. In 2002, the city signed an agreement with Forest City Ratner for the project.

From the outset, Ridge Hill Village was dogged by opposition.

According to the Journal News, a paper that covers Westchester County, the neighboring towns sued Yonkers over the plan. They eventually dropped the suit as part of a deal in which Ratner agreed to give them $5 million to help fund short-term traffic improvements.

The company has also created a task force to be overseen by former Governor Mario Cuomo.

Another lawsuit filed by three council members argued that the city changed the number of votes needed for approval, in order to make an end run around the Westchester County Planning Board.

A State Supreme Court judge annulled the city vote, but the project won approval on the second go-around.

There were additional accusations of improprieties. The city was harshly criticized when it created the Ridge Hill Development Corporation—a non-profit corporation that was not subject to public oversight—to collect the money generated by the development.

“From the beginning, the whole thing had been shrouded in secrecy,” said Aris. “The city created an entity to administer the plan that is not accountable to anyone.”

According to published reports, opponents were upset that the corporation was filled with politically-connected members. The city has said it would dissolve the corporation, but even now not everyone is satisfied. Debra Cohen, a lawyer who has challenged other city developments, said the city has not come clean with where the assets went.

And last year the City Council was served with a federal subpoena that sought records connected to the project.

“They were looking at all sorts of documents, especially audio tape relating to Ridge Hill,” said Chuck Lesnick, president of the Yonkers City Council.

Lesnick noted the development corporation has been liquidated but that it “has incurred certain expenses.” He said after it pays off title, legal and consultant fees, along with incurred interest, it will be dissolved and then “there should be complete disclosure.”

Despite all of the opposition, Forest City Ratner bought out the lease for $26 million and now owns the land outright, said company spokesman Loren Riegelhaupt.

The project is scheduled for completion in summer 2009.

Helping Forest City Ratner weather the opposition in Yonkers was the fact that the lion’s share of scrutiny has been aimed at the city, not the developer. In addition, the remote location has kept the actual construction process out of the public eye.

As the name implies, though, the site represents a challenging place to build. The only existing access to the hilltop abuts the New York State Thruway’s service road. Forest City Ratner is constructing a new egress to Tuckahoe Road, a heavily congested commercial corridor that may require widening and other improvements.

Seven years after the destruction of the Twin Towers, the Empire State Building remains the city’s tallest structure at 1,250 feet. But the race to surpass it is on—as is a separate battle for height supremacy in Brooklyn. And the question on many minds is: How much longer will the Empire State Building hold the top spot?

Several new towers that have either been proposed or are under construction could strip it or the Brooklyn record-holder of their crown—or at least come close.

The 1,046-foot Chrysler Building, once the second-tallest building in the city, was recently demoted to third place when construction workers at the soon-to-be-complete Bank of America Tower erected the spire atop that building that brought it up to 1,200 feet.

The Bank of America Tower, which is on Sixth Avenue between 42nd and 43rd streets, is scheduled to get its first tenants in May 2008 and to be completely finished in mid-2009.

Meanwhile, the Freedom Tower, the centerpiece of World Trade Center redevelopment, is supposed to soar to 1,776 feet, but new reports suggest that the height may shrink because of new technological developments that could render the 408-foot antenna that is supposed to top it off obsolete.

Construction on the foundation for the Freedom Tower started in April 2006, and steel for the building will be visible early this year. If the building does actually hit 1,776 feet, it will oust the Empire State Building as the city’s tallest structure.

However, the New York Sun recently published a story under the headline, “The Incredible Shrinking Freedom Tower,” which said that the building’s spire “could be jeopardized by new technology emerging as an alternative to the broadcast antenna.” Without the spire, the tower would still be the tallest in the city, but would lose its symbolic 1,776-foot height and end up only
surpassing the Empire State Building by a little more than 100 feet.

Competition to be the tallest building in the city is nothing new. Experts said the latest race is simply the quest of this generation. Anthony Robins, a historian specializing in New York City architecture, said, “We seem to be living through one of those enormous building booms that have changed the face of the city from one generation to the next.”

He noted that the 1920s brought “the great art deco towers” like the Chrysler Building, the Empire State Building and the GE Building at Rockefeller Center, and that the 1950s and 1960s brought modernist glass towers like the Seagram Building.

“Today’s real estate values, population growth and financing are bringing us more and larger new buildings than we’ve seen in a long time,” he said.

Brooklyn Battle

The race for the tallest tower is also intensifying in Brooklyn, where the 512-foot, 34-story Williamsburgh Savings Bank building is currently the building to beat. The bank-turned-condo is 738 feet shorter than the Empire State Building on the other side of the East River, but has been an iconic part of Brooklyn’s skyline since it was erected in the 1920s and has become the borough’s de facto height leader.

The 2004 rezoning of Downtown Brooklyn that allows for unlimited height restrictions has, however, paved the way for a new title holder in the borough. The contest has narrowed down to two contenders, which have both received a significant amount of attention in recent weeks.

Last month, the Brooklyn Eagle reported that the City Point tower being built at the former Albee Square Mall site in Downtown Brooklyn could become the borough’s tallest building at 65 stories. The project is a collaboration among several developers and urban planners.

If realized, City Point would bring 900 apartments and 600,000 square feet of retail to the former Albee Square Mall site. The project is still in the proposal stage, and final plans still need to be submitted.

But City Point seems to be locked in a race with the somewhat similarly named City Tech Tower, which Atlantic Yards developer Bruce Ratner is erecting on nearby Jay Street. Several estimates, including one cited in the New York Post, have put that building, which is being designed by famed Italian architect Renzo Piano, at 1,000 feet. Ratner’s team, meanwhile, has denied that height, saying it is based on old renderings that found their way into the public arena.

Still, should Ratner’s City Tech Tower achieve that height, or even anything higher than the Williamsburgh Savings Bank, it will serve as a victory for him. Just last year Ratner agreed to shrink the so-called “Miss Brooklyn” building on the Atlantic Yards site in order to secure government funding for the more than $4 billion complex. The height of that Frank Gehry-designed building was originally slated to be 650 feet, but was later dropped to 511 feet, leaving it one foot shorter than the Williamsburgh Savings Bank building.

The haircut occurred after some argued that the project was out of scale with the neighborhood. City Council Member Letitia James was one of the elected officials vigorously fighting to ensure that Ratner did not surpass the Brooklyn bank. She has been quoted saying that the height was out of scale with the neighborhood and would further the “Manhattanization” of the borough.

City Tech spokesperson Michele Forsten explained that the rendering currently displayed on the City Tech Web site “is not the final drawing for the buildings.” A spokesman for Ratner denied reports that the building would reach 1,000 feet.

Meanwhile, published reports say there are also about a dozen other buildings slated to soar over the 30-story mark in the borough in the next five years. And while they are not in the race to overtake the bank, they will undoubtedly raise the height bar.

Jersey City, NJ

Mandalay on the Hudson

20 Second Street

The 25-story, 269-unit luxury condominium, developed by Pinnacle Downtown, MCZ Centrum Properties and Wafra, was named Community of the Year by the New Jersey Builders Association. Prices for the one-, two- and three-bedroom residences start in the low $400,000s. Amenities include a heated outdoor pool, barbecue areas, residents’ club, 24-hour concierge, fitness area, outdoor playground and valet service. Contact: www.mandalayonthehudson.com.

Jersey City, NJ

The Residences at Dixon Mills

A joint venture between developers Robert Martin Co. and GoldenTree InSite Partners is converting the industrial complex into a five-building, 467-unit luxury condominium development, and sold out its first phase of 50 homes and 65 percent of its second 50-unit phase as of early January. Sales are also underway for the third phase of 50 homes. Prices for the studio, one-, two- and three-bedroom apartments begin in the mid-$200,000s. Amenities include courtyards with grills, private shuttle buses to the PATH station, fitness center, yoga/movement room, lounge, sauna and multi-purpose recreational court. Contact: www.dixonmillsjc.com.

Sales update

Edgewater, NJ

One Hudson Park

New York-based Tarragon Corp.’s 168-unit building, the city’s first luxury high-rise condominium, was more than 75 percent sold as of early January. Prices at the project range from about $600,000 for a one-bedroom to $768,000 for a two-bedroom and just over $1 million for a three-bedroom. Amenities include an indoor pool, fitness center, yoga studio, children’s playroom, media lounge and landscaped roof deck. Contact: www.onehudsonpark.com.

Hoboken, NJ

Garden Street Lofts

Garden Street and 14th Street

Bijou Properties’ seven-story, 30-unit condominium was 30 percent sold as of early January. SHoP Architects and engineering firm Buro Happold have been hired for the design of the project, which is vying for LEED certification. The development’s one-, two- and three-bedroom residences range up to 2,124 square feet in size. Contact: www.gardenstreetlofts.com.

Jersey City, NJ

50 Columbus

50 Christopher Columbus Drive

The 36-story, 400-unit luxury rental project, developed by Applied Development Company and Panepinto Properties, was more than 75 percent leased as of early January, less than four months after leasing began. Rents for the studio, one-, two- and three-bedroom homes start at $1,825. The project’s full-floor amenities space includes a lounge, screening room, billiards, children’s play area and business center; a landscaped roof deck has a swimming pool, cabanas and tennis court. Costas Kondylis is the architect for the building, and Andres Escobar is the interior designer. The Marketing Directors is the exclusive marketing and leasing agent for the project. Contact: www.50columbus.com.

There is no scarcity of straight-from-college real estate agents hoping to make it big in New York. A twenty-something who is willing to dive into New York’s convoluted and risky real estate development business is, however, more rare.

Eric Brody, who has spent the last few years developing projects in Brooklyn, is one of them. But Brody and the small universe of other young developers in New York are, for the first time, seeing the wobbly and uncertain side of the New York market. And the new market realities and increasing stringent borrowing demands are posing the first big test for many of them.

The 29-year-old founded the Brody Group in 2004, when the market was booming and there seemed to be an endless line of lenders and buyers queuing to get a piece of the action. At that time, every deal looked like a winning financial equation.

Brody acknowledges that the stakes are higher for young developers. He said the main issue is his lack of liquidity. “A downturn only makes it more difficult,” he told The Real Deal from the basement office he shares with his father, architect Van Brody, on Seventh Avenue in Brooklyn.

“The problem is not creditability; it’s being illiquid,” Brody said. “When dealing with banking institutions, it’s hindered my ability to do more developments because of a lack of cash. I’m bankable, but I have to increase the strength of my balance sheet. It’s just a matter of time.”

He said, “As of today, the changing market has yet to affect my sales.”

Reba Miller, principal of the brokerage firm RP Miller and Associates, said building a reputation and creating the possibility for long-term success takes years no matter how smart or talented someone is.

“They haven’t cultivated relationships. They’ve run the numbers, but they need to understand that staying and working through issues will forever build their team,” Miller said of young developers. “They don’t have the history of the highs and lows; they don’t know what it means it to fail; they have to understand that it’s like any market. Are they able to handle it?”

Miller recently worked with developers Terrence Lowenberg and Todd Cohen, both in their late 20s, on a project at 985 Park Avenue. The Icon Group duo used architect Costas Kondylis in addition to veteran residential broker Barbara Fox, Miller and a third partner.

“I think it was a big learning curve for [them],” Miller said, but added, “They surrounded themselves with experts.

“The challenges were in what to build, what was it going to cost and funding,” she said.

There is a small cadre of young developers in New York, including Brody, Lowenberg and Cohen, who have had success. But that doesn’t mean it has come easy.

“There are a ton of disadvantages to being young compared to the older generation,” said Lowenberg, who is 28. “In the beginning, it was harder, but old-time sellers have worked with us because they want to see it passed down to the next generation.”

He said breaking into the business wasn’t simple. “The highest barrier to entry is having equity,” he said. “Finding a deal no one else knows about is a good place to start. If you’re not bringing any expertise to the table, and it’s been marketed, that’s one thing. But if you can find an off-market deal, either below-market or impossible to find,” that also provides an edge.

Cohen said being young is more of an advantage than a challenge. “We have youth and energy on our side – we look to be creative and see value that other people might not see either though being more creative with space, financing or structuring deals,” he said.

The duo is now converting the Allerton Hotel, a former SRO on the corner of 22nd Street and Eighth Avenue, to condos. They made the $18.5 million acquisition with financing put in place by Marathon Structured Finance. The building is scheduled to open by the end of the year.

The Icon Group also sold all seven units at the 15-story condominium tower at 985 Park Avenue six months after the sales office opened. The duplexes and triplexes – which range in size from 2,469 to 3,100 square feet – started at $5.3 million.

Meanwhile, Brody’s firm has developed more than 85,000 square feet of property in Brooklyn, including a 21-unit condo at 457 Atlantic Avenue and Nevins Street – which Brody said is selling for an average of $708 per square foot.

Brody noted that he has been cautious and that his condo projects could also work as rentals if the market turns. At 870 Pacific Street, an eight-unit project, financing is already in place. “Obviously, my goal is to sell units, but if I had to retain them, I wouldn’t lose the development,” he said.

Sealing the deal

Winning over those he needed in the real estate community was step one. Brody met Joe Owen, for whom he’s developing a property on Dean Street in Brooklyn, through Bill Ross, director of development at Halstead Property.

The project is a rental with retail on the ground floor in Carroll Gardens. When Owen hired Brody, it was to work in an owner rep project management role. In that situation, the young developer isn’t liable for any money on the deal. Instead, he manages it.

Owen said he was initially “shocked” and “skeptical” about Brody’s age. But the two signed on to work together on projects at 262 Pacific Street and 104, 106 and 108 Smith Street in Cobble Hill.

“Eric is the guy you want working for you,” Owen said. “He understands the economics of development, the logistical problems of getting a building up, and he knows how the city functions.”

The chairman and CEO of the Singer & Bassuk Organization, Andrew Singer, said that things could get tougher for those with less experience.

“The changes in the financial markets, which will certainly affect everyone seeking to borrow, will have a particularly hard impact with those people who have the least experience and the least capital on their own balance sheets,” said Singer, whose firm specializes in real estate financing. “Age alone won’t be the factor. It becomes self-limiting when you have people that have less experience than others.”

Singer said in the last four or five years, investors with “almost laughable” proposals did not have much trouble securing financing.

“We chose not to work on those projects, but much to our occasional astonishment, people with zero background and substance were often able to finance their transactions,” he said. “These were hardworking, intelligent people not afraid to be turned down, [and] rarely were. Now that the wheel has turned, it’s a whole different ball game.”

Brody’s banker, Ed Sirlin, senior vice president at Signature Bank, said, “Eric had two strikes against him when he walked into my door: his age and his relative lack of experience.”

But Sirlin said Brody’s approach and knowledge of the market were part of what made Signature take him seriously. “It was really more the lack of experience than his age. He didn’t have a lot under his belt,” said Sirlin. However, Brody managed to win him over.

“He knew his business very well. His budgets seemed very realistic,” he said. “He was very polished and confident.”

The backstory

Brody’s story is emblematic of the unique ways that young developers have found their way into a high-stakes profession marked by an entrepreneurial work ethic.

His real estate career started by chance. He was managing a gym on 19th Street in Manhattan, but left after getting into an
argument with the owner and finding himself in need of a new career.

Brody started shadowing his father at his architectural firm and saw an opportunity to manage the firm’s projects. That business idea mushroomed, and soon he had a roster of other commercial and residential clients in Brooklyn and Manhattan.

A Brooklyn native, Brody attended construction school at the Institute of Design and Construction in 2002 and 2003. He spent the weekends hustling as a rental broker for Coldwell Banker to pay the bills. “Some would say that I’m more experienced than some of the big guys in that I went to construction school for two years and [grew] up in the business,” he says.

He got his feet wet in owner’s representative project management. When he launched his company in 2004, he was lucky to lure a host of landowners who were desperate to cash in on the development craze but lacked the know-how and financing.

Simultaneously, Brody bought two properties in Brooklyn. He purchased the Atlantic, which he acquired with his family and two silent investors, and where he is moving into a two-bedroom apartment. And he bought 870 Pacific Street with a partner. He expects units at the Pacific Street building to sell for $600 per square foot.

Brody says these projects helped him test his developer chops. He was responsible for signing the construction loan, getting the financing, and hiring the general contractor. But, he said, it was his father who prepared him for what was to come.

“My father was tough on me,” Brody said. “He was much trickier to win over than an investor. I had to convince someone who had known me my entire life that I knew what I was doing.”

Atlanta

Commercial real estate leasing in Atlanta will slow somewhat due to a lagging economy but is expected to remain relatively stable in 2008, according to a Grubb & Ellis forecast. The firm said that although the city will not be among the top markets for office leasing, industrial leasing could be healthy on the strength of increased demand for storage space. The retail leasing market is also looking up, due to demand for amenities like fitness centers and sports facilities, the Atlanta Journal-Constitution reported.

Metro Atlanta foreclosure notices went up 45 percent last month from the same period a year ago, according to Equity Depot, an Atlanta real estate data firm. The number of foreclosures has been rising steadily, with filings in 2007 up 29 percent from the previous year, the Atlanta Journal-Constitution reported. The numbers may also be higher this year due to leftover filings not submitted during the holidays and an extra week of preparation time in the reporting schedule.

Boston

The slowing Boston commercial real estate market received a boost to close out 2007, with the $477 million buyout of the Financial District office towers at 53 and 75 State Street, the Boston Globe reported. Brookfield Asset Management Inc. purchased a 49 percent stake held by partner RREEF Real Estate to claim sole ownership of the properties. The buildings went for $525 a square foot, about 10 to 15 percent lower than peak Boston prices, according to the Globe.

Foreclosure petitions in Essex County increased by 75 percent from January through October 2007, a sign that the local real estate market may be buckling under the weight of the nation’s troubled mortgage industry, the Boston Globe reported. According to the Warren Group, a Boston publisher of real estate data that reported the increase, filings in Essex County outpaced other areas of Massachusetts, which saw an increase of 63 percent in foreclosure petitions from January to October 2006.

Chicago

Chicago’s suburban office vacancy rate held steady in last year’s fourth quarter at 15 percent, compared to 14.9 percent in the third quarter. But a shaky national employment report in January and the looming threat of a recession could hurt demand for space, Crain’s Chicago Business reported. The U.S. unemployment rate hit 5 percent in December, according to the Labor Department. Foresite Realty Partners CEO Donald Shapiro expects the vacancy rate in the suburbs to rise to 17 percent by year’s end.

Las Vegas

Demand for expensive high-rise condos in Las Vegas is increasing, causing developers and architects to flee the faltering Chicago real estate market to build there, the Chicago Tribune reported. On the Vegas Strip, $15 billion in construction is underway, more than anywhere else in the world except Dubai and China. Condo prices at MGM Mirage’s new CityCenter, slated for a late 2009 opening, range from $500,000 to $12 million.

Las Vegas’ office vacancy rate went up to 12.4 percent at the end of last year from 11.5 percent in mid-year 2007, according to Las Vegas brokerage firm Commerce CRG. That number excludes more than 1 million square feet of sublease space, or empty space that is under lease contract; this brings the vacancy rate up to 14.5 percent, the firm said. To counter the slowdown, landlords are offering deals such as six months’ free rent or asking prices of 99 cents per square foot for the same period, the Las Vegas Review-Journal reported.

Los Angeles

The number of homes sold in Southern California fell 45 percent from a year earlier, and the median sales price for houses and condominiums is down 16 percent from last year’s peak, according to DataQuick Information Systems. This could be a sign that the housing slump will continue well into 2008 and possibly into late 2009, the Los Angeles Times reported.

Los Angeles consulting firm Beacon Economics has forecasted a 30 percent decline in Southern California home values from peak prices seen in recent years. Prices are expected to drop in 2008 and remain static between 2009 and 2011, the Los Angeles Times reported. The median price for homes in Los Angeles County dropped 11.5 percent between August and November of 2007.

Philadelphia

The supply of Center City hotel rooms could grow by more than 20 percent due to a building boom triggered by the expansion of the Convention Center, the Philadelphia Inquirer reported. The Philadelphia hotel market is coming off two of its best years in a decade, with daily room rates reaching a record $169 a day in 2007, according to PKF Consulting. Center City hotels had an occupancy rate of more than 74 percent last year.

Phoenix
Home prices for metropolitan Phoenix dropped 11 percent in December from the beginning of 2007 and could drop more, the Arizona Republic reported. The decrease could be a drop-off from the housing boom of spring 2005, when home prices were inflated by 20 to 30 percent. Vacancies in offices and apartments are expected to rise this year, while sales prices drop, said Stanley Paul Cook, a real estate market watcher with Landiscor Aerial Information.

San Francisco

San Francisco’s African-American community is being priced out of the city, as a wave of new condo developments drives home prices up, the San Francisco Chronicle reported. African-Americans in historical Bayview-Hunters Point, which is currently undergoing redevelopment, made up 65 percent of the population in 1990 but were no longer the majority by 2000. The median price of a single-family home there increased to $570,000 today from $129,000 in 1996. The city’s black population dropped from 96,000, or 13 percent of San Francisco’s population, in 1970 to 51,000, or 7 percent, in 2006.

Seattle

Commercial lease rates in Maple Valley, a city of about 20,000, are getting to be as high as rates in neighboring Seattle, the Seattle Times reported. Due to a shortage of city land for stores and businesses, prices today are up to $27 a square foot, compared to Seattle’s $31. The lofty prices are causing small businesses to suffer while the city works to find a solution. Commercial rents in South King County, where Maple Valley is located, increased by more than $1 a square foot in the past year and 17.7 percent since 2005, according to CB Richard Ellis.

A building boom in downtown Bellevue is causing residents to suffer from construction noise and traffic. Currently, there are 15 construction projects underway, with about 1.8 million square feet of office space, 375,000 square feet of retail and 3,200 residential units in the works. The current projects are expected to be completed by next year, but 19 more projects are under review.
 
Washington, D.C.

For the first time, every local county in the Washington region saw home prices decrease for much of last year due to an increase in foreclosed properties on the market for sale, the Washington Post reported. According to the Case-Shiller Home Price Index, single-family home prices fell 7.7 percent in the third quarter of 2007 from the same period in 2006. The decline is among the area’s steepest since a 5 percent drop between the first quarters of 1990 and 1991.

Renters in the Washington area have a greater selection to choose from and can now take advantage of lower prices, the Washington Post reported. The area’s apartment supply grew by 10,000 new rental units last year. More homeowners are also opting to rent their homes rather than sell them in a slumping real estate market. Rent hikes are at a five-year low, and even more rental units have been made available due to mass conversion of condominiums into apartments. Landlords are also offering concessions like free rent and discounts to attract renters.

Starting the week before Christmas, locals say that the airports in Jackson Hole, Wyo., and Aspen, Colo., become so congested with private jets that they run out of spaces to park them. The jets land, let off their passengers, and then fly to other nearby airports where they wait until their owners are done skiing.

Airport congestion is not the only sign of the popularity of these two areas, long known as enclaves for wealthy tourists. They share another commonality: red-hot real estate. While property values in other resort towns, particularly in Florida and Arizona, are being tugged down by a broad national downturn, brokers say the markets in Aspen and Jackson Hole have racked up double-digit percentage price gains in the past year.

Aspen saw $2.22 billion in vacation home sales in 2007, according to a report by the Land Title Guarantee, a firm that tracks Colorado real estate transactions. The average cost of a vacation home in Aspen stands around $6 million, up about 15 percent in the past year, according to brokers.

Sales in Jackson Hole are said to be up 13 percent over last year, and the average price of a home is $1.2 million, according to the brokerage firm Rare Jackson Hole Properties. In Jackson Hole, easy access to ski lifts can jack up prices considerably. In Teton Village, a cluster of condos located 10 minutes from downtown Jackson Hole but within stumbling distance of ski lifts, prices for condos are up 83 percent over last year.

“Some surrounding resort communities have been softer, but we’re up,” said Rick Armstrong, a professional skier who is also co-owner of Rare Jackson Hole Properties.

Brokers say different factors are driving prices upwards in both markets. Prices in Aspen are sustained by continued strong interest from wealthy buyers, including a small but significant component of foreign buyers. Easy access to the downtown and ski lifts is important but certainly isn’t the only factor.

In Jackson Hole the dynamics are different. There, a declining amount of land available for development combined with zoning regulations that cap building heights at 44 feet, mean that a limited supply of properties are fetching ever higher prices.

“The County Commission is very anti-growth,” said Mark Winston, a consultant with Jackson Hole Real Estate Company. “The last new development took nearly 10 years to get approval. There’s very little new development, and so all the commercial buildings are moving targets.”
Depending on its location within Jackson Hole, prices range between $600 and $1,500 per square foot. One of the most popular forms of ownership is time shares, with prices running between $55,000 for a two-bedroom condo for two weeks in the summer, to $350,000 for the same property for two weeks around Christmas.

Recently Marriott purchased several adjacent two- and three-story buildings, where they hope to build one 70,000-square-foot hotel. However, city regulations presently prevent hotels larger than 35,000 square feet.

The popularity of Aspen remains undiminished, and a number of properties have been asking and receiving stratospheric prices. In December, Prince Bandar, the former Saudi Ambassador to the U.S., sold his home in the Starwood neighborhood outside Aspen for $36.5 million. The property included a 14,239-square-foot house on a 66.6 acre lot. Earlier this year Prince Bandar pulled his other Aspen ranch, called the Hala Ranch, off the market. He was asking $135 million for that 95-acre property.

“Aspen is now probably the only Colorado market with a summer season stronger than its winter season,” says Michael Russo, president of Aspen Sotheby’s International Realty. Russo credits summer festivals like the Aspen Food & Wine Magazine Classic and the Aspen Arts Festival with bringing about the seasonal shift and drawing nearly as many tourists as the ski runs.

“You certainly don’t have to be a skier to enjoy Aspen anymore,” said Russo.

Sales of single-family homes hit low

Existing single-family home sales in Palm Beach have hit an all-time low, according to a recent report by the Florida Association of Realtors. Some had hoped that a healthier local economy would improve sales.

There were 459 single-family home sales in November 2007, the lowest number since the company began tracking data in 1994. That figure was down 13 percent from the 525 sold in November 2006, according to the association. Also, the median price declined 7 percent in November 2007 from the year-ago period.

Lawrence Yun, senior economist for the National Association of Realtors, told the Palm Beach Post that improving market conditions should yield more home sales soon. This notion was rejected by Jack McCabe, president of McCabe Research and Consulting in Deerfield Beach, who said 2008 will probably be one of the worst years for real estate in the country.

At the same time, national sales of previously owned homes inched up slightly in November, doing little to improve the housing slump. Over the past 12 months, existing home sales went down 20 percent.

In Palm Beach County, lagging sales have pushed up the inventory of single-family homes to a 57-month supply, according to Illustrated Properties Real Estate.

Posh golf course sees teardowns

Golf courses appear to be the main attraction for wealthy homeowners in Palm Beach County, where homes at Delaire Country Club in Delray Beach run from $400,000 to $6 million—even though many are torn down to make way for custom homes, the Palm Beach Post reported.

Claire Abrams, a Delaire resident and Coldwell Banker realtor, said the community is one of South Florida’s richest and has many young buyers. Within five years, all 324 homes in the neighborhood, which range from 3,000 to 5,000 square feet, could be rebuilt. The golf is reportedly what attracts people, with programs that allow residents’ family members to golf for free.

Delaire also features a pool, fitness center and tennis courts and requires an $80,000 membership fee, half of which is refundable upon termination of the membership. Residents also pay $3,400 a year in fees, which cover 24-hour security, maintenance of common areas and basic cable.

Empty buildings lead to rise in housing foreclosures

Housing foreclosures in Miami-Dade and Broward counties are on the rise as large new residential buildings remain largely unoccupied and mired in hundreds of millions of dollars in defaulted mortgages, the Miami Herald reported.

According to Condo Vultures, a Bal Harbour real estate consulting firm and brokerage, in the 20 buildings in Miami-Dade and Broward counties with the most units in foreclosure, loans in default totaled more than $271.8 million. Condo Vultures principal Peter Zalewski said the high rate of foreclosures reflects the wave of speculators that entered the market seeking investment opportunities.

Lucas Lechuga, a real estate broker with Esslinger Wooten Maxwell, attributed the rise in defaults to mortgage fraud stemming from inflated appraisals and fake buyers.

Zalewski said one effect on the Miami-Dade housing market is the increasing number of bargains that can be found as construction continues to add to the surplus of units on the market.

Residents of buildings with an excess of unoccupied units are seeing special assessments and hikes in maintenance fees, as community associations face budget shortfalls due to the lack of bill-paying residents.

Florida hotels surviving recession

The flow of tourists to Florida hotels and resorts has remained relatively strong with conventions still being booked and European travelers seeking to take advantage of the weak dollar, the Miami Herald reported.

However, while people are continuing to travel, they are spending less to do so. Hotel managers and tourism directors are reportedly noticing a decrease in customers’ travel budgets as they shun extra expenses, from eating out to using hotel mini-bars.

Atlanta advisory firm PKF Consulting forecasted Miami-Dade County room rates will increase 6.7 percent in 2008, down from 10.5 precent growth in 2007 and 13.3 percent growth in 2006. In Broward County, the firm predicts a 5.7 percent growth, down from 8 percent in 2007 and 15.6 percent in 2006.

Hotel owners are not yet worried though; they are still hitting or exceeding financial marks, and bookings are normal to above average so far for 2008, the Miami Herald reported.

Mixed-use projects suffering

The ailing housing market is bringing South Florida’s mixed-use projects to a standstill, according to the Sun-Sentinel, halting what was supposed to be the region’s next big thing in real estate development.

The mixed-use projects, which include shops, offices and condominiums, are being delayed or scaled back due to a lack of demand in the market. Developers had banked on these projects as an affordable way to accommodate the expected influx of new residents to South Florida. Broward County’s population was expected to surge to almost 2.2 million by 2020, an increase of nearly 400,000.

Almost every city in Broward was at one point considering approving more of these complexes, the Sun-Sentinel reported. Some developers now plan to ride out the housing slump, while others are simply adjusting their plans to build retail space or develop smaller projects.

One developer, Nob Hill Partners LLC, reportedly refunded buyers’ deposits at one of its proposed projects, Downtown Davie, which would have had 227 condos, 18 luxury townhouses and 100,000 square feet of retail. The firm is considering switching to rentals and adding more office and retail space.

Facing falling prices, slipping sales volumes and rising pre-sale contract cancellations, many South Florida condo developers and owners have thrown in the towel, opting to operate properties as rentals until the market improves — or selling units in bulk (often at big discounts) to investors looking to rent them out until the market changes.

But another alternative is just starting to emerge in South Florida’s tourist-heavy submarkets: vacation-oriented “shared-ownership” real estate models including timeshares and their burgeoning upscale brethren known as “fractionals.”

Few deals have closed transforming struggling condo projects into shared-ownership resorts. But well-placed sources, including consultants assessing the viability of these ventures, are anticipating a spate of activity in coming months, as fractional and timeshare specialists get involved with condo projects.

Just ask resort real estate veteran Dick Ragatz, whose Eugene, Ore., consultancy, Ragatz Associates, provides feasibility analysis for hospitality developments, including shared-ownership projects.

“We’re getting calls every week” from developers of failing South Florida condo projects, wondering whether they might make sense as fractional-interest resorts, Ragatz said. His firm is already consulting with “a couple dozen” struggling condo developers “up and down both coasts” and all the way to Key West.

Ragatz said he isn’t at liberty to identify projects he’s consulting on, but predicted that “dozens” of Florida condo developments will end up going the fractional route over the coming six months or so.

That’s clearly in the cards in today’s arguably disastrous condo environment, noted South Florida multi-housing guru Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach.

McCabe fears 2008 could witness “the great condo meltdown,” as the marketplace is already seeing a wave of heavily discounted “block sales” of unsold units at condo conversion and development projects. Hedge funds and other private equity players are typically able to negotiate prices at least 20 to 30 percent or more below original asking prices, McCabe said.

With developers still bringing thousands of new units to market, McCabe likewise expects to see some new properties ultimately operated as timeshares or fractionals.

Nearly 4.5 million American households own one or more weekly timeshare intervals. Florida is the biggest domestic market with just over 30 percent (or nearly 53,600) of the nation’s timeshare units. Beach-oriented resorts account for almost one out of every four timeshare resorts, with golf and island resorts each comprising between 9 and 10 percent.

According to Washington, D.C.-based American Resort Development Association, sales of weekly timeshare intervals grew by 16 percent to more than $10 billion in 2006, with Florida capturing 23 percent of the 2006 interval sales activity, according to a report by ARDA and Ernst & Young.

Given the soured market South Florida condo developers face, it’s reasonable that those with struggling projects in the region’s resort-oriented locales would look into timeshare or fractional alternatives.

This presents an opportunistic “silver lining” for timeshare specialists and related shared-ownership players in the midst of South Florida’s condo market woes, agreed long-time industry figure Franz Hanning, president and CEO of timeshare giant Wyndham Vacation Ownership in Orlando.

“We’ve heard from developers who seem willing to sell completed and partially completed projects at very attractive prices,” Hanning explained.

WVO’s Wyndham Vacation Resorts operates four timeshare properties in South Florida, plus the Wyndham Miami Airport Hotel. The company is one of several large, multi-market resort operators offering timeshare owners flexible “points-based” systems, allowing them to utilize various properties, rather than being locked into a specific week and site.

Popular resort areas and even some of the nation’s most dynamic downtowns are now seeing developments of more luxurious shared-ownership properties, offering the so-called fractional-interest alternative to a wholly owned second home. With the heavily amenitized properties often called “private residence clubs,” fractionals are targeted at wealthy buyers looking to visit several times each year.

Developers typically look to sell fractional interests ranging from one-twelfth (or one-thirteenth) to one-eighth, giving buyers the right to stay in a particular unit for three weeks or more each year. While the average weekly timeshare interval sold for $18,500 in 2006, fractional interests tend to be much more expensive.

For instance, at South Beach’s Seville Beach Hotel, which is being converted into a Ritz-Carlton Club property, one-twelfth-deeded interests are priced from the $100,000s to just over $500,000 for models ranging from 1,100 to 2,100 square feet.

Local noteworthy Flagstone Property Group and partner ING Clarion are including 100 fractional units, known as Residences at Island Gardens, atop the 150-room Shangri-La Hotel high-rise getting under way this summer on Watson Island, an island in Biscayne Bay close to downtown Miami. Asking prices range from $175,000 to $750,000 for one-eighth interests.

Ragatz noted that the Ritz-Carlton Golf Club & Spa, Jupiter, is perhaps the best illustration of prospects for successful fractional developments in South Florida. For $249,000 to $364,000, buyers are guaranteed five weeks annually at the project’s spacious 1,900-square-foot two-bedrooms and 2,900-square-foot four-bedrooms.

Of course, not every condo project is viable as a timeshare or fractional. Larger condo developments of 200 units or more aren’t likely to get converted to fractional ownership, as upscale buyers tend to prefer more exclusivity, Ragatz said, noting the average unit count for fractional projects is only about 40. The most attractive beach and golf locations tend to be good prospects, especially if residents have access to high-end hotel services.

And in beach communities seeing heavy tourism activity, timeshare specialists boasting the requisite high-volume marketing machine might make a go of a failing larger condo development, Ragatz explained. “Given that sales expenses comprise a disproportionate share of overall development costs, timeshare operators will need to negotiate an attractive purchase price to make a project pencil,” he stressed.

“I think we’ll see some entire condo developments end up instead as fractionals,” McCabe said. “After all, if you’re not able to sell a unit for $500,000, maybe you’ll do better trying to sell one-fourth fractional interests for $125,000.”

Of course, like condo developments, timeshare and fractional ventures certainly aren’t immune to market risks. The fractional ownership model, which makes most sense when second-home prices in high-demand areas become prohibitive, has been ready for take-off a few times over the past decade or so, Ragatz recalled. But each time, circumstances shortened the flight plan.

For instance, second-home prices were hitting peaks as the economy was booming early in the decade, but the Sept. 11 terrorist attacks dramatically cut into travel activity.

Values kept moving upward after tourism stabilized, but recent declines in much of the country make Ragatz cautious about what lies ahead, even as so many South Florida conversion plans seem set to materialize.

Falling sale prices and rising interest in fractionals aren’t a natural marriage, he explained. If whole ownership continues to become more affordable during the regional condo glut, Ragatz wonders just how strong interest in fractional ownership will be later in the year.

Thousands of who’s who in New York real estate descended on the Hilton Hotel on January 17 to commemorate the Real Estate Board of New York’s 112th anniversary. An exclusive, invitation-only cocktail party started off a night of industry power brokers mingling with politic bigwigs, including a parade of the 2009 mayoral candidates.

Tickets to the event were $900 each and the crowd was suitably dressed to impress, creating a sea of tuxedos dotted with the occasional elegant gown, like the navy Armani worn by Faith Hope Consolo. But the mood was somber at moments.

The gala took place the same day that Merrill Lynch announced its worst earnings quarter in four years, and days after Citigroup announced a jaw-dropping fourth-quarter loss of $9.83 billion, adding more fuel to worsening fears that the mortgage meltdown has triggered a recession that will hurt real estate sales, even in the so-called “insulated” New York City market.

“Sales will be leveling off,” said Frederick Peters, president of Warburg Realty, on line to check his coat. “The first two quarters won’t be so good, and prices may be down.”

“This is an interesting time to have the event,” said a commercial real estate finance executive. “No one is smiling except the Goldman [Sachs] guys–or it’s the alcohol,” he noted. He declined to be idenitified because he works for a major firm that”got burned” this year.

A sampling of big real estate players on hand included: Bob Knakal, chairman of Massey Knakal; Sandy Lindenbaum, of Kramer, Levin, Naftalis, and Frankel; Douglas Durst; Jon Mechanic of Fried, Frank, Harris, who received the Kenneth R. Gerrety Humanitarian Award; Francis Greenburger, CEO of Time Equities Inc.; Mark Shaw, executive vice president for strategic planning at Extell Development Co.; Darren Hornig, Dwelling Quest’s founder; Pam Liebman, president of the Corcoran Group; Jerry and Rob Speyer of Tishman Speyer; and Bruce Mosler, CEO of Cushman & Wakefield and recipient of the Louis Smadbeck broker recognition award.

A perennial observation about awards ceremonies: Attendees often pay little attention to them, even though they pull out all the stops to be there. In this case, officials on the dais as usual tried in vain to shush the talkers in the crowd, to little avail.

But more difficult to talk over was New York City council member Melinda Katz’s rendition of “America the Beautiful,” proving that patriotism trumps bad manners.

Still, the country’s economic health was clearly on the minds of the guests.

David Baxter, a member of the Cushman & Wakefield team that sold 666 Fifth Avenue in December 2006 for $1.8 billion, the highest amount ever paid for a single building in the U.S, said he is “cautiously optimistic,” about next year.

“Pricing is off 5 to 10 percent, depending on the area,” he said. Nevertheless, he added: “there is still tremendous demand.”

Bob Knakal said he thinks the devalued dollar will continue to help New York real estate in the coming year. “People are talking about deals,” he noted.

When asked to comment on the economic outlook for 2008, Steve Ross, chairman of the Related Companies, said, “I have two words for 2008: troubled waters.”

Joseph Moinian, who was with his tall son Mitchell Moinian (his second eldest, and a sophomore at New York University) said, “It’s going to be a great year for the Moinian Group.”

Is he poised to buy while everyone else loses their buildings? “For the right situation, yes,” Moinian said. “But while all the other diehards are busy getting their act together, we’re delivering amazing product to the market, like the W Hotel, and Atelier,” he said.

“It’s still early in the game to predict, and there has been no slowdown in leasing activity,” said William Rudin, president of Rudin Management. “Things went up too fast and too quickly,” he said of the last few years. The current market is more realistic, with more appropriate lending standards. ‘We don’t overleverage as a company,” he noted.

Will he capitalize on some of the fire sales coming up in 2008? Rudin is less likely to go after a building with a “5 to 6 percent cap [rate],” he said. By contrast, his St. Vincent’s development in the West Village is a “long-term play that has complexity,” he noted.

“From a broker’s perspective, [the declining economy means] they’re going to need us now more than ever,” said Lisa Maysonet, senior vice president at Prudential Douglas Elliman. “Before, the properties would almost sell themselves, but now you need real deal makers.”

Tamir Shemesh, a managing director at Elliman, said he is still bullish on 2008.

He noted that despite the talk, overall bonuses on Wall Street surpassed total 2006 bonuses at the biggest investment banks, and foreign money continues to drive business. “We lost a bidding war with a buyer from Spain” for a $2.3 million property, he noted.

Edward Andron of Leebar Management, a building management company, said the coming year was going to include “a budget crunch, and a tightening of our belts.” The net effect: “There will be a lot more for foreigners to snap up, but it will also be more competitive.”

New retail records set where Broadway crosses Seventh Avenue Times Square retail sets new records
” class=”read-more-link”>[more]

“People Get Ready,” the sign urges. No, it’s not Curtis Mayfield with a message about marching on Washington for civil rights – it’s trendy teen retailer Urban Outfitters, alerting Brooklyn shoppers to its impending arrival at 164 Atlantic Avenue at Clinton Street.

That stretch of Atlantic is better known for ethnic grocer Sahadi’s and a cluster of Middle Eastern restaurants. One blogger commented that the neighborhood was a little “mature” for the apparel and home furnishings chain, which is pitched to a young and lithe audience. But with new towers rising nearby and reports that New York University is scouting for more space in the boroughs, it may be a good fit after all.

Urban Outfitters is hardly the only national retailer testing the waters outside of Manhattan. Brooklyn’s residential construction boom has lured national brands to set up shop in a borough they might not have considered before. Particularly in downtown Brooklyn, where thousands of condos and hotel units are planned, developers are racing to bring corresponding levels of new retail.

However, an economic downturn, spinning out of the credit crisis, may put the brakes on future growth.

Pent-up demand

Retailers have been flocking to Brooklyn because even with the addition of an estimated 1.9 million square feet of retail space since 2002, the borough still has fewer stores than might be expected based on its population. There are six square feet of shopping space per Brooklyn resident versus 22 for U.S. residents on average, according to the Brooklyn Chamber of Commerce, which has estimated that Brooklyn can easily absorb over double its current number, or 13 square feet per resident.

Last year alone, Starbucks and Lucky Brand Jeans came to Smith Street in Boerum Hill, while Morton’s the Steakhouse inked a deal for a 14,000-square-foot eatery, its first in the borough, in the New York Marriott near the Brooklyn Bridge. The restaurant is set to open in late 2008.

Middle American stalwart J.C. Penney, meanwhile, will replace homegrown discounter Conway in the Fulton Mall, and a massive Target is slated for a tower to rise on the site of Albee Square Mall.

“Brooklyn, retail-wise, is No. 2 on the radar screen,” second to Manhattan, says Faith Hope Consolo, chairman of the retail leasing and sales division of Prudential Douglas Elliman.

Consolo says her clients are increasingly willing to look beyond the brownstone neighborhoods of Park Slope and Brooklyn Heights. She notes that she is showing clients spaces in Bay Ridge and Bensonhurst.

Tim King, senior partner at Massey Knakal, is bullish on downtown Brooklyn in particular. His firm is working on a couple of sites on Livingston Street – including a former parking lot at 230 Livingston that has been transformed into State Renaissance Court, a mixed-used residential and commercial development with 15,000 square feet of retail space.

The plan is to ride the wave of the area’s growth. More than 5,000 condominium units, 2,000 hotel rooms, and hundreds of thousands of square feet of retail and office space are currently in the development pipeline for downtown Brooklyn.

Slowing climate

Yet even as trendy national chains debut on previously gritty Brooklyn streets, concerns are mounting. By the end of last year, brokers and developers said speculative deals, in particular, were slowing. Prices for some development sites in Brooklyn were down 5 to 10 percent at the end of last year versus six months earlier.

Lackluster holiday sales and economic weakness added to the gloom.

“The cloud on the horizon could be the economy,” says Patrick Breslin, president of retail at GVA Worldwide. “That’s the one scaring me a little bit now.”

Retail is now seen as a troubled sector of the economy. While the luxury segment is seen as faring better, the weak housing market, higher gas prices and softer consumer spending are having a debilitating impact on mass retailers. Many suffered poor holiday sales and lowered their expectations for 2008, causing their stock prices to wobble. Shortfalls during that key profit-generating quarter could cause some retail chains to curtail expansion plans in 2008.

Still, developers like Joshua Muss, president of Muss Development, are betting on the borough’s ability to attract upscale retailers: The company’s major retail undertaking at the New York Marriott at the Brooklyn Bridge in downtown Brooklyn provides the right venue for mid- to higher-scale national retailers, he said.

Until now there have been few retail developments concentrated in easily accessible areas that could supply the growing needs of families, well-heeled financial sector workers, and other new, deep-pocketed residents who have recently invested in homes and high-priced condominiums, he noted.

“Even where there is development, or even luxury [residential] development in Brooklyn Heights, Boerum Hill and Dumbo, there hasn’t been any high-level retail because there hasn’t been any appropriate location,” he said.

Marriott and Morton’s

Muss Development will be leasing the Marriott’s restaurant space to Morton’s the Steakhouse, bringing a nationally popular chain to Downtown Brooklyn. Restaurant reviewers are already predicting a rivalry with Peter Luger’s, the famed Williamsburg steakhouse.

In December, the company reported that it had entered into a contract to purchase the first two floors of 345 Adams Street from the City of New York, adjacent to the hotel. The firm said it would seek tenants for the 40,000 square feet of retail space.

For its retail spaces, Muss said his company is courting H & M, the Limited, Apple, and other large, national retailers that appeal to a wide financial and cultural spectrum of shoppers.

Muss’s plans will supplement many of the other retail changes occurring in the area, such as at the Fulton Mall.

Acadia Realty Trust, AvalonBay Communities and MacFarlane Partners purchased the lease on the Gallery at Fulton Mall, its attached parking lot, and the former Albee Square Mall from Thor Equities for about $120 million to build a 1.6 million-square-foot, mixed-use complex called the Center at Albee Square. The development will have retail, office, and residential rental units, including a new mall with 475,000 square feet of retail space.

“Downtown Brooklyn is witnessing a real renovation in terms of the retail market,” said Joe Chan, president of the Partnership for Downtown Brooklyn. He pointed to another similar success story, Brooklyn’s Target at the Atlantic Terminal, which he said generates the highest sales volume in the U.S. for the chain.

Not including Bruce Ratner’s Atlantic Yards project, 57 projects will be coming into the development pipeline over the next five years, Chan said.

With many people fleeing the higher prices of real estate in Manhattan, local incomes are increasing, especially in the areas around Downtown Brooklyn, he noted.

The Fulton Street shopping district has largely been “a limited retail diversity of cell phone and sneaker shops,” said Chan. While gaps in Brooklyn’s retail scene won’t be easy to fill—because of the size of the borough, its diverse enclaves, and the lack of destination stores such as a major home-furnishing store—that “is starting to change,” said Chan.

There is enough foot traffic to fuel a strong local retail scene: Not counting local residents, the downtown area’s population swells to 150,000 each day, thanks to people who are shopping in the area, including jurors, employees of the Brooklyn court system a few blocks away, 38,000 students at seven academic institutions, and employees at other businesses in the area.

Still, as retail storm clouds gather, developers may want to nail down those leases to national brands.

During a downturn, retail areas that really suffer are those “that never have gotten strong enough with national retailers, and that includes parts of downtown Brooklyn,” said Consolo.

Some of Manhattan’s largest real estate brokerages are muscling in on Queens brokers’ turf to market new developments going up in Long Island City.

But with the exception of one firm joining the handful of local mom-and-pop shops, most are not yet opening up offices there, in part because of a lack of non-new development housing.

Manhattan-based Prudential Douglas Elliman, which is actively considering a new office in the neighborhood, has become one of the biggest players in the Queens market, with offices in Flushing and Bayside.

Elliman is the exclusive agent for the Powerhouse, which is scheduled for a July 2008 opening. The converted Pennsylvania Railroad power station will feature 177 loft-inspired units ranging from 600-square-foot studios to 1,700-square-foot three-bedroom units. Prices will start at $450,000.

“Long Island City and Queens in general represent one of the best opportunities for somebody to get in on the ground floor,” said Andrew Gerringer, managing director of the development marketing group at Elliman.

Elliman is representing another new development called the Foundry at Hunters Point, a four-story condominium with 57 units, ranging from studios to three-bedroom apartments, with prices expected to start in the low $400,000 range.

Gerringer warns that no decision will be made before 2008, as full-service locations will make sense after the neighborhood has established a resale market. For that to occur, a critical mass of existing homeowners is needed.

Still, major brokerage houses are betting that a new wave of condominium projects will turn this industrial transit point into one of the city’s most dynamic residential neighborhoods, luring first-time homebuyers with short commuting times to Manhattan and relatively low entry prices.

Led by the $2.8 billion Queens West redevelopment project at Hunters Point, Long Island City will have about 25,000 units when all of the current developments are completed, according to Andrew Ebenstein, operations manager at the Long Island City Business Improvement District.

“Clearly, the waterfront district has tremendous potential,” added David von Sprekelsen, vice president at Toll Brothers, the developer of the Fifth Street Lofts, a 118-unit condominium project on 48th Avenue and Vernon Boulevard in Long Island City.

Nest Seekers International, a Manhattan-based boutique agency, says it was the first Manhattan-based brokerage to open up a full-service location in Long Island City, a few months ago. The firm specializes in finding up-and-coming neighborhoods for its clients, and says it was also the first Manhattan firm to open up an office in Brooklyn’s Dumbo section.

“This is a very exciting, transitional neighborhood,” said David Grossman, vice president and managing director at the agency. “When you have an emerging market, there has to be a great deal of time spent with interested buyers in the neighborhood itself. What’s important is to help people seek the future here.”

Halstead Property is the exclusive agent for Fifth Street Lofts, which is more than 75 percent sold. There are about 25 units remaining, with asking prices ranging from $433,000 for studios to $1.49 million for three-bedroom units.

Manhattan-based Corcoran Group represents a number of new condominium projects in Long Island City and Astoria, including the Arris Lofts, which is represented by the Corcoran Sunshine Marketing Group. The 237-unit converted printing plant has sold most of its units, with prices ranging from $105,000 for studios to $2.9 million for a four-bedroom unit.

However, Corcoran president Pamela Liebman said there are no current plans to open up a new office in Queens.

The flood of new developments in Long Island City appears to be skewing the market. According to a report from Radar Logic, while Queens residential sales prices fell 5.2 percent to $460,000 in the fourth quarter, down from $485,000 in the prior year quarter, a large number of high-end condo closings in Long Island City pushed condo prices higher, as the median sales price increased 14.6 percent to $275,000, the report said.

Prior to zoning changes in Long Island City, local real estate sales were dominated by small family-owned firms that concentrated on Astoria, Sunnyside and other residential communities.

“The market here [in LIC] is not established in the way that there are units changing hands from an individual to another individual,” said Ebenstein. “It is really developers unloading inventory.”

The influx of Manhattan realtors will help fill many of these new developments, which are aimed at young professionals who cannot afford to live in Manhattan.

These brokers have vast databases of potential customers, and their brand names carry substantial weight across the city.

However, local brokers counter that consumers will ultimately make buying decisions based on the quality of the property they are viewing, no matter what the broker’s brand name.

“The customer who goes to purchase something is not impressed by what realtor he uses,” said Ted Kouris, owner of Metropolis International Realty in Astoria. “He’s looking at the product he’s getting.”

Charles Sciberras, a veteran salesman at REMAX Today, also based in Astoria, said that Manhattan brokers can’t provide the same level of local contacts and expertise about Long Island City and Astoria.

He questioned whether the big brokers will remain committed to the neighborhood if the local market is hurt by the mortgage crisis.

“I’ve been doing this since the time when you couldn’t give properties away here,” he said. “These guys doing all of these new condo projects are going to be sitting there with their fingers up their tuchus,” he said.

Columbia University has already won approval for a controversial
$7 billion expansion of its campus into West Harlem. But now New York
City’s proposal to rezone Harlem’s
cultural and business center on 125th Street is igniting another
firestorm. [more]

Take notice, commercial landlords: A new ruling by a New York City appellate court may discourage landlords from being overzealous in pursuing tenants on issues ranging from back rent to property maintenance to expelling illegal subtenants.

In the case of 542 Holding Corp v. Prince Fashions Inc., the Supreme Court Appellate Division in New York City found that a notice to cure and a notice of cancellation were legally defective. The notices’ flaw? They included unfounded claims along with valid ones.

“Sometimes landlords who are in a dispute may take an extremely aggressive approach and allege a broad array of violations, some of which are exaggerated, and in some cases, completely unfounded,” said Scott Mollen, a partner at the law firm Herrick, Feinstein LLP, who represented the tenant, Prince Fashions.

If a landlord does exaggerate the amount of money owed, the tenant may have trouble raising the money necessary to come into compliance with the lease, he said.

“If you have a slew of invalid claims, it makes it very hard to assess the true cost of preserving the lease,” Mollen said.

A notice to cure is essentially a warning document, which provides a tenant alleged to be in violation of a lease with the opportunity to come into compliance.

“The significance of this decision is that if a notice to cure contains allegations that are inappropriate or invalid, then the entire notice to cure is deemed to be defective and will be dismissed,” Mollen said.

He added, “The court’s really saying that it’s not asking too much from a landlord to be clear as to what the tenant has to do to preserve its lease.”

If a notice to cure is dismissed, the tenant is not off the hook—the first notice will probably be followed up by the landlord with yet another, slightly modified notice to cure. Yet the clock starts again with the new notice, so a dismissal and reissuance buys the tenant a breathing period, giving him or her more time to try to raise funds to comply or to file for an injunction.

As a result, it is in the best interest of a landlord to avoid drawing up catch-all notices, the kind that throw in everything but the kitchen sink.

And it is the best interest of a tenant facing a notice to cure to analyze it carefully, because if the tenant can poke a hole in any of the notice’s claims, he or she can cause the entire notice to be dismissed.

In the case of 542 Holding Corp. v. Prince Fashions, the tenant was alleged to owe more than six years of back rent, in arrears beyond the six-year statute of limitations for contracts.

The landlord issued a notice to cure that claimed defaults and sought additional rent, but didn’t specify when the sums became due or when the accountings required in the lease were allegedly delivered to Prince Fashions.

The trial court found that the landlord failed to delineate between the base rent and additional rent “and/or to specify with particularity when the rent became due.”

“Such substantive defect in a notice to cure renders the entire notice deficient,” wrote the Appellate Division in its Dec. 13 ruling.

Also at issue was a notice of cancellation of the lease, which was deemed ineffective because it was served prematurely.

The lawyers for the landlord, Robinson & McDonald LLP and Noel Dennis, a solo practitioner, are considering an appeal, Dennis said.

Adrian Zuckerman, a partner who leads the real estate practice at Epstein, Becker & Green, P.C., a law firm that typically represents landlords and institutions (sometimes as tenants), said the decision appeared to be a sound one, but that he didn’t believe it made any change in the law.

“The decision is consistent with other cases that have dealt with these issues, both in civil court and in Supreme Court, that require clear and concise notices,” he said.

One real estate lawyer familiar with the ruling, who did not want to be identified, said its significance may be in requiring a level of specificity in ejectment proceedings in state Supreme Court that had previously only been required in summary proceedings in the civil court system, the two legal remedies used by landlords to evict tenants.

Zuckerman pointed out that in either court system, landlords should be equally meticulous about their notices.

“My best advice to landlords is to act in a timely
and concise fashion, and give notices promptly,” he said. “Issues don’t get better with time when you have nonpayment situations.”

NYC foreclosures drop in 4th quarter

Foreclosures in New York City fell by 13 percent in the fourth quarter compared to the previous quarter, according to PropertyShark.com. The total of 605 foreclosures, however, was still 71 percent higher than the final quarter of 2006. The neighborhoods with the most foreclosures were in Queens: Jamaica, South Jamaica, Hollis and St. Albans.

Bloomberg says he will preserve property tax cut

Mayor Michael Bloomberg, in his state of the city address last month, said he was “committed” to keeping a property-tax cut in place for a second year, but he warned that “the economy appears headed for difficult times.” Despite huge projected deficits, Bloomberg factored a $400-a-year property-tax rebate and 7 percent property-tax deduction into his latest budget also, saying that homeowners “need continued tax relief.” The plan depends on “a variety of factors unknown today,” he said, such as the economy’s stability and state and federal aid.

Co-ops to benefit from Bush’s mortgage plan

President Bush’s plan to relieve mortgage debt could be a boon to the city’s co-ops. The Mortgage Forgiveness Debt Relief Act of 2007 will allow co-ops to raise rents for retail tenants, which could bring in more money for doormen and capital projects, and could lead to a drop in monthly maintenance fees, the New York Sun reported. The federal 80/20 law had mandated that no more than 20 percent of a co-op’s income could come from outside sources, which has become a challenge as retail rents have shot up. Now, co-ops need only to show that a building is 80 percent residential, or that at least 90 percent of the total income benefits shareholders.

Carroll Gardens downzoning looms

Calls are growing to downzone all of Carroll Gardens, a low-rise Brooklyn neighborhood lined with brownstones. Outgoing Council Member Bill de Blasio was scheduled to hold a rally at the end of last month to push for downzoning the entire neighborhood. De Blasio announced that the Department of City Planning has agreed to change an old zoning regulation that defined narrow streets as wide streets, which allowed for taller developments. Front-yard gardens — which gave the neighborhood its name — had been counted in the width of streets.

Spitzer’s $400M affordable housing plan questioned

Governor Eliot Spitzer’s plan to spend $400 million on affordable housing, announced during his state of the state address, has drawn questions from lawmakers about its financial feasibility, the New York Times reported. Others have praised the plan as an ambitious strategy to compensate for the Pataki administration’s developer-friendly policies. Spitzer visited Brooklyn last month to pitch his plan. “This is an issue the state has abdicated over the years,” he said. “Especially in New York City, it has resulted in the exodus of our middle class and our workforce. Our teachers, our firefighters, and our hospital workers have found it impossible to find housing that they can live in.”

Stringer calls for overhaul of construction inspections

Manhattan Borough President Scott Stringer has called for an inter-agency city task force to make surprise visits to construction sites, after a worker fell to his death at the Trump Soho tower last month, the New York Sun reported. “The way we’re doing this kind of inspection in these mega-buildings is not working,” Stringer said. City officials said that after a fire at the former Deutsche Bank building killed two firefighters last August, construction inspectors have made more than 1,000 surprise visits. By March, 67 more inspectors are due to be hired.

State court rejects Atlantic Yards appeal

The New York State Appellate Division has denied an appeal against the state’s use of eminent domain for Forest City Ratner’s Atlantic Yards project. Last month, a state judge dismissed another lawsuit, filed last year by opponents who were challenging the project’s environmental impact statement and hoped the court would reject it, forcing Governor Eliot Spitzer to re-examine the $4 billion development.

Council, Solow prepare to battle over East River project

City Council members are examining billionaire developer Sheldon Solow’s proposed seven residential towers at a 9.2-acre East River site. Council member Daniel Garodnick is pushing to reduce the towers’ height and density. Solow has already spent more than $1.8 million on lobbyists and land-use legal expenses, and has also made some concessions, including lowering the height of buildings. The City Planning Commission approved the project late last month.

The rush to build in recently rezoned residential neighborhoods caused construction complaints to skyrocket just over 18 percent in 2007 to 21,971.
That’s both the largest number of complaints and greatest
year-over-year increase for all five boroughs, according to the New
York City Department of Buildings.
Shoddy construction watch” class=”read-more-link”>[more]

The Real Estate Board of New York and the city’s Department of Housing Preservation and Development want changes made to a contentious bill that would make it easier for tenants to sue their landlords for harassment.

The bill, Introduction 627, which is currently wending its way through the City Council, has garnered attention because of the widespread ramifications it would have on the landlord-tenant battles and because it has a rival bill.

Steve Spinola, president of REBNY, told The Real Deal that his organization has recommended changes to Bill 627 that include requiring tenants to have any complaints against their landlords established as actual violations by HPD before proceeding with a suit.

Without this step, he said, tenants would be able to bring meritless suits against their landlords, costing them money and court delays, and forcing them into settlements even if they are not guilty of a violation.

Spinola pointed out that the city’s Office of Court Administration was also opposed to the bill because he said judges would be stuck trying to determine whether a violation had indeed occurred, a step that would create an unnecessary burden. “That job belongs with HPD,” he argued. Mayor Bloomberg has not publicly said where he stands.

Neill Coleman, an HPD spokesman, said the agency largely agrees with the proposed bill in its current form and does not support REBNY’s changes. But he said HPD wants some of the language in the bill to be changed.

As it stands now, the bill would allow landlords to assert that interruptions in basic services were not the result of their intentional or grossly negligent conduct. HPD is proposing new language that would require landlords to show that they had acted in good faith to fix disruptions and had not created an unpleasant environment that caused a “lawful” tenant to move out.

“While we believe that there are certain reasonable defenses, the current language would have made it very hard for a tenant to prove that the interruption of services was due to gross negligence,” said Coleman.

The bill could pass in some form, given its backing from Council Speaker Christine Quinn and from 34 of the body’s 51 members. The council’s buildings committee will hold another hearing on the matter in early February.

But both REBNY and the Rent Stabilization Association, another landlord lobbying group, are not giving up without a fight. “We call it the landlord harassment bill,” Spinola said.

In addition to the changes REBNY is promoting to Bill 627, a rival bill, Introduction 638, which is more landlord-friendly, is being floated. That bill, which is being sponsored by Council Members Leroy Comrie and Thomas White Jr., would shift the balance of power in the opposite direction of 627 and make it easier for landlords to sue tenants for making repeated complaints that have no merit. But it hasn’t gained the same traction.

Council Member Daniel Garodnick, a co-sponsor of the tenant-backed bill, said the council has “spent a lot of time getting intro 627 right.

“While we may make technical changes to the legislation, the spirit of the bill will remain intact,” he said.

“Furthermore, the idea that this law will create a flood of frivolous cases in housing court is something that we simply don’t accept,” he added. “Tenants generally do not have the time or inclination to spend a day in housing court, and will do that only in extreme circumstances.”

Council Member Melissa Mark-Viverito, another sponsor of Bill 627, appeared on The Real Deal webcast last month to discuss the issue. She said that as it stands now, tenants have no legal recourse for harassment.

Bill 627, she said, includes language that would classify certain behavior as harassment, such as using threats to force a tenant to accept a buyout and vacate an apartment, repeated discontinuation of essential services, repeated baseless court actions, and removing belongings from a tenant’s unit. If the bill passes in its current form, fines for landlords will range from $1,000 to $5,000.

Landlord-tenant lawyers are coming down on both sides of the debate. Adam Leitman Bailey, a lawyer who specializes in real estate, opposes Bill 627. He said it would lead to “thousands of lawsuits, millions of dollars in legal fees.” He also noted that there are already laws in place to protect tenants.

Another landlord-tenant lawyer, Luigi Rosabianca, a principal at Rosabianca & Associates, said he thinks 627 could make the imbalance between landlords and tenants more equitable.

According to Mark-Viverito, 627 does have provisions to ensure landlords are not bombarded with repeated suits from the same tenants. If a judge determines that a tenant has brought regular unwarranted complaints, he or she will be barred from taking further court action, the council member said.

Queen Elizabeth II once famously referred to her “annus horribilis”—a horrible year during which almost everything went badly, from royal family scandals to a raging fire that destroyed parts of Windsor Castle.

The American housing market experienced its own form of annus horribilis in 2007—a year when all the sins and excesses of the prior six years were visited upon nearly everyone in the system:

• Homeowners lost $160 billion in net equity in their homes from just the first quarter of 2007 through the third, according to the latest “flow of funds” data from the Federal Reserve. Homeowners’ equity stakes—their property value less their mortgage balances—dropped to 50.4 percent, down from 56.1 percent as recently as 2002. Both numbers could be worse when the Fed’s fourth-quarter survey is completed.

• Foreclosures on single family homes hit 1.69 percent in the third quarter—the worst in decades—and 5.6 percent of all home mortgages in the country were delinquent by 30 days or more. One out of five subprime adjustable-rate loans nationwide was delinquent by the end of the third quarter, but the proportion was even higher in a handful of states: 26.2 percent in Michigan, and nearly 23 percent in Massachusetts.

• Home sales tanked in almost every local market that had seen hyperinflation in home prices during the boom years of 2001 to 2005. Local declines in excess of 50 percent year-to-year are not unusual in parts of California, Florida, Nevada and Arizona. In many of the same markets the sales booms had been propelled by speculative investors looking for quick payoffs. Now one-quarter of all new foreclosures in California, Arizona and Nevada involve investor units—frustrated flippers sending back the keys.

• The national inventory of unsold houses jumped to 10.8 months, a level that even the most optimistic economists concede is a drag on the overall market.

• Job losses in housing and mortgage-related industries have been staggering—into the hundreds of thousands by some estimates—and extend to the highest executive ranks of Wall Street’s and banking’s most prominent firms. When you lose billions of dollars on dumb bets on subprime mortgage securities, you can also lose your head.

Enough. Everybody knows these tales of woe—and more. It was a lousy year. Could 2008 be better?

I think the odds are reasonable that it will. Here’s why: Even through the grimmest headlines of 2007, there were a number of positive underlying economic forces propping up real estate and keeping it from a true bust. If those forces continue, they should help cut the time needed for the correction cycle to bottom out and the historically inevitable recovery cycle to begin.

Take mortgage rates. Had the cost of money been significantly higher in 2006 and 2007, does anyone doubt that the delinquencies and foreclosures stemming from the toxic vintages of subprime loans would have been much worse? But the 30-year fixed rates that hovered in the low 6 percent range for much of the year—even in the high 5s for a couple of weeks—allowed many borrowers to refinance into alternatives such as FHA or conventional Fannie Mae/Freddie Mac loans. The recently announced national loan modification and rate-freeze effort should keep at least some—no one knows how many—struggling subprime homeowners out of foreclosure this year.

Steady, moderate national growth of new jobs, economic expansion and low inflation also helped the national housing market in 2007 and could do the same in 2008. By the way, despite all the scary statistics, sales of existing and new homes in 2007 totaled an estimated 6.5 million, which would make it the fifth largest sales year in American real estate history.

Another fact that often got lost amid the bad headlines in 2007 and offers reason for hope for a better 2008: Vast swaths of the country never experienced the excesses of the boom years, and have not endured the pains of the crunch under way in the most volatile markets. The latest quarterly home price data from the Office of Federal Housing Enterprise Oversight found that while significant declines have occurred in dozens of speculative markets during the past year, prices were flat or up in 204 of the 287 metropolitan markets surveyed.

At some point in every correction cycle, even in the most depressed markets, consumer psychology begins to change. People who need or want houses look around, see lower prices, affordable financing, and say: Hey, this is a smart time to buy. The cycle has done its work.

It won’t be everywhere, but that psychology should begin taking hold in a growing number of markets sometime in 2008.

Ken Harney is a real estate columnist with the Washington Post.

Is it a refi renaissance? Or a fast-closing window of opportunity?

Nobody can answer these questions for certain, but there’s no doubt about this: Thanks to the lowest mortgage interest rates in a year and a half—an average 5.6 percent for conforming 30-year fixed rate loans and 5.07 percent for 15-year loans—nearly 60 percent of all new mortgage applications by mid-January were for refinancings, according to data compiled by the Mortgage Bankers Association.

Some home-loan companies reported much higher proportions. At the Associated Mortgage Group Inc. of Portland, Ore., 80 percent of new applications last month were for refinancings. David Jolivette, Associated’s president, said “this has been the busiest January I’ve had in 20 years” as a result of the rapid surge in refinancing requests. While much of the demand is coming from homeowners facing payment resets on adjustable-rate and interest-only loans, many applicants simply want to take advantage of the rates in the mid- and upper 5 percent range—often with no out-of-pocket cash costs to themselves.

Jay Brinkmann, vice president for research and economics at the Mortgage Bankers Association, says so-called “no-cost” refinancings—where transaction fees are rolled into the interest rate—”are absolutely an option” for people who took out fixed-rate loans in 2006 or 2007 when rates were at or above 6 1/4 percent.

Though the specifics vary from lender to lender, many brokers and mortgage companies can offer a zero-out-of-pocket deal for an extra quarter-point tacked onto the note rate. In other words, borrowers with a 6 1/2 percent fixed-rate loan might be able to refinance into a new 6 percent loan without paying any fees at origination or settlement. The lender would simply tack on one-quarter of 1 percent onto the prevailing 5 3/4 percent 30-year conventional loan rate, and do the deal.

Assuming a $400,000 existing loan amount, homeowners could save $128 a month in principal and interest—$1,536 over the course of a year—by moving out of a 6 1/2 percent mortgage into a new 6 percent, 30-year loan with no settlement costs.

Jeff Lipes, president of Family Choice Mortgage Corp. in Wethersfield, Conn., cautioned that attractive though recent rate movements have been, some would-be refinancers cannot qualify in today’s stricter, post-boom underwriting environment.

For example, appraised values are a major hurdle for some homeowners. During the boom years when property values were soaring, meeting the minimum equity tests for refinancings was rarely a problem—even when owners wanted to pull out additional cash.

But during the past nine months, most national lenders have tightened underwriting rules and are now extra cautious about appraisal accuracy, borrower equity and credit scores, especially in areas where prices have been soft or declining, says Lipes. As a result, owners who bought properties with minimal down payments a few years ago may now find their appraised values lower and their equity positions insufficient to qualify for a refinancing.

Absent appraisal issues, according to Lipes, applicants with solid credit histories, documentable income and lots of equity can readily refinance into new fixed-rate mortgages at anywhere from 5 5/8 percent to 5 3/4 percent, with no points and no cash out.

Another complication to refinancings compared with five years ago concerns jumbo mortgages—those with principal amounts above $417,000. During the credit squeeze that reached its peak last August, jumbo rates zoomed far above their typical levels—and in some cases exceeded 8 percent. Since then, jumbo rates have returned to the upper 6 percent to 7 percent range, but are still too high for many potential refinancers.

What’s been fueling the sharp drop in mortgage rates and how long might rates stay low? Could the Federal Reserve’s record cuts in short-term rates flow through to the mortgage sector?

Brinkmann said the bellwether metric affecting mortgage rates is the 10-year Treasury security, not short-term rates. With the specter of recession hovering on the horizon, there has been a “flight to quality” in the bond market toward ultra-safe Treasuries, he says. That demand, in turn, has helped push long-term mortgage rates down.

How long this continues will depend heavily on investors’ perceptions of where the national economy is headed. Brinkmann’s own forecast calls for 10-year Treasuries “to start moving back up” at some point during the coming quarter.

Whether you’re thinking about refinancing or taking advantage of current low rates to buy a house, acting sooner rather than later should be a smart strategy.

Ken Harney is a real estate columnist with the Washington Post.

The rolling tsunami of home loan delinquencies and foreclosures is exposing serious problems in the mortgage industry’s capacity to quickly handle borrowers’ requests for help—whether loan modifications, short sales to ward off foreclosure, or much-ballyhooed rate freezes.

It is also bringing to light impediments to quick resolutions that may surprise some borrowers, such as the presence of home equity lines or second mortgages on the property. People with popular “piggyback” combinations of first and second mortgages, and hundreds of thousands of consumers with outstanding equity lines, could face complications they never imagined.

Listen to real estate attorney Nancy Gusman of Largo, Md., who represents financially distressed homeowners seeking ways to avoid foreclosure: “It’s insane,” she said in an interview. “[Mortgage] servicers tell everybody, ‘Call us as soon as you have problems making the monthly payment.’ But then the borrowers call and are told, ‘Oh no, we can’t talk to you about a loan modification. Your file is in the collections department [not the loss-mitigation department where loan modifications and short sales are handled] because you’re only 30 days late.’”

Some loss-mitigation departments, according to Gusman, delay getting involved until borrowers are seriously delinquent, 45 to 90 days behind on their payments.

“So I find myself telling clients—look, if they aren’t working with you, maybe you shouldn’t make any payments for a couple of months. Then they’ll pay attention. That’s a ridiculous situation.”

Major mortgage market players concede the sheer volume of requests from distressed borrowers—stimulated in part by widely publicized industry and White House pledges of rate freezes and workouts—is challenging the abilities of loan servicers to keep up.

Robert Padgett, director of nonperforming loan servicing for mortgage investor Freddie Mac, says mishandling of troubled accounts between collection departments and loss-mitigation and workout departments is “a problem. The collection folks are trained to recognize loss-mitigation [loan modification] opportunities early” in the process, and are supposed to push them through quickly to the specialists who can custom-craft workout solutions. But clearly that doesn’t always happen.

Gusman complains that even when the loss-mitigation staffs get involved, “things can drag on for months because [the servicers] fail to negotiate with you in good faith.” For example, she says, one of her clients is eager to participate in a short sale instead of going to foreclosure. In a short sale, the lender agrees to accept less than the principal balance owed by the defaulting borrower as an alternative to the higher losses associated with a foreclosure.

But in this case, according to Gusman, the servicer demanded a higher sale price than indicated by the would-be short-sale purchaser’s appraisal. The servicer then referred the case to the owner of the mortgage—Freddie Mac—where contentious negotiations have continued over an acceptable final price to resolve the deal.

There is still another complication, said Gusman—one that could potentially affect thousands of short sales in 2008 across the country: Besides first mortgages, many houses have large home equity lines. As junior liens, credit lines can be totally wiped out in foreclosures, leaving the bank that extended them empty-handed. However, for short sales to proceed, all lien holders generally must agree to the terms of the deal.

In a pending case involving a client of Gusman’s, there is an $80,000 equity line debt on the property. The bank says it wants nothing less than 50 cents on the dollar—$40,000—while the owner of the mortgage, Freddie Mac, generally limits its offers to 10 cents on the dollar.

Padgett agrees that the presence of home equity lines, second mortgages and other liens against a property can seriously gum up short sales—even torpedo them—if the junior lien holders won’t cooperate and take only a fraction of what they are owed.

Some banks holding large equity lines—$100,000, $200,000 and up—”play hard ball to the bitter end,” said Padgett, and can slow down what should be a quick short sale.

Other issues are complicating quick resolutions in distressed mortgage situations:

• Terrified about losing their houses, some homeowners stonewall mortgage servicers’ attempts to get in touch. But if borrowers refuse to accept calls, mail or personal visits from the servicer’s staff, the probability of avoiding foreclosure is severely reduced.

• Increasing involvement of “third parties”—people who represent or purport to represent the owners. Some, like Gusman, seek to guide owners through the process to a good result. Others are intent on fraud.

Ken Harney is a real estate columnist with the Washington Post.

The interest in innovative design in New York City, which has allowed a number of the world’s most famous architects to win residential building commissions, is helping starchitects’ assistants too. In part, the price premium that famous designers can command (see Apartment buildings as canvases) has allowed their younger, cheaper trainees to win their own projects.

Leading the generational shift are architects like Dan Wood and Amale Andraos of Work AC (who both worked for Rem Koolhaas), Markus Dochantschi at Studio MDA (who worked for Zaha Hadid) and G Tects’ Gordon Kipping (who worked for Frank Gehry). All are in their thirties or early forties.

These newbie architects are winning private and public commissions. For instance, Studio MDA, whose chief, Dochantschi, managed Hadid’s office in London, has several projects on the go, including an art gallery beneath Manhattan’s High Line. In Brooklyn, the firm has co-designed the BAM Brooklyn Arts Tower (with Germany’s Behnisch Architects). In addition, Studio MDA is the co-developer of the $85 million tower to be built in Fort Greene adjacent to the Brooklyn Academy of Music.

The tower, expected to be completed in 2010, will rise 36 floors on the north side and 30 floors on the south side.

It will feature 187 units of mid-income housing, with retail space and a dance center at the base.

Dochantschi said that compelling design, not just big-name recognition, is allowing relative unknowns opportunities to shape big public-private projects.

“Right now, and I would give a lot of credit to Bloomberg for this, there is a big understanding from developers and clients that design will be a criterion to getting certain approvals,” he said.

The young designers said the experience of managing and designing their mentors’ big-budget projects has given them the confidence to build their own businesses.

They said they are earning business the way architects always have: through referrals and relationships.

“We can’t charge as much as famous architects because we’re not established yet,” said David Salazar, a partner at Studio MDA.

Wood and Andraos came from Koolhaas’ Office for Metropolitan Architecture to open Work AC in 2002: they designed Diane von Furstenburg’s headquarters, which opened last year on 14th Street at the edge of the Meatpacking District.

They agreed that the fame of architects like Gehry and Koolhaas—innovative practitioners as well as theoreticians—has heightened clients’ range of expectations.

“Architectural knowledge has gotten a big boost in the past few years,” said Wood. “A lot of our friends and contemporaries are pushing ideas in practice rather than doing primarily academic work.”

Kipping, meanwhile, has designed a new tower for Baruch College’s campus at 23rd and Lexington.

“What we do doesn’t look like what Gehry does,” said Kipping, who recently redesigned Delano Village, an 1,800-unit complex in Harlem. “So they’re not getting a junior Gehry. But there are similarities in an attitude of servicing a client that I’ve learned over the years from him.”

The city’s insistence on expressive design in big projects, and developers’ awareness that distinctive architecture can command a price premium, may even mean that architecture’s star system is moving into a new phase.

“In New York, having buildings from international stars like Gehry, Herzog & de Meuron or Jean Nouvel is very new,” said Salazar. “What I see as a potential logical progression is that now that this kind of design has happened, young firms could find the playing field level a bit.”

When it does, architects who worked for the legends may have a running start.

At the 20th century’s close, if a city had cutting-edge architecture, it could reliably be found at museums, concert halls or on campuses, with the occasional high-concept courthouse or office tower.

In the last five years in New York, though, that situation appears to have flip-flopped; here, apartment buildings are increasingly leading the artistic charge, offering à la mode styles from the world’s top design talents.

To be sure, many blocks are still sprouting generic boxes. But developers seem increasingly willing to shell out for a skyline-arresting structure, realizing that in a market where tastes are more sophisticated, artfulness can translate into wider margins.

“Developers have come to understand that it’s good for business to do good design,” said George Ranalli, dean of the architecture school at City College of New York and a practicing architect. “By using a name architect, you can add at least 20 percent to the price.”

For instance, at 100 Eleventh Avenue, a condo that’s the creation of French prizewinner Jean Nouvel, 72 units, which range from 400-square-foot studios to 2,700-square-foot three-bedrooms, are priced at about $2,500 a square foot. As a result, the studios alone are $1 million.

At 40 Bond Street, a new condo project in Noho designed by the Swiss superstar firm Herzog & de Meuron, many units, even the smaller ones, sold for more than $3,000 per square foot.

That’s a steep premium over other ground-up condos in top New York neighborhoods, where the median cost per square foot hovers between $1,300 and $1,500. The rate at 100 Eleventh is perhaps even more surprising considering the building is located near parking lots and warehouses, and is next to the Bayview Correctional Facility, a women’s prison.

The building, which opened for sale in April but won’t close until spring 2009, is three-quarters sold, said David Comfort, a senior project manager for Cape Advisors, its New York-based developer. He ascribed that brisk sales pace chiefly to the
condo’s design.

Still, using an architect with the wattage of Nouvel, who nabbed his country’s Grand Prix d’Architecture, is not a cheap undertaking. The Eleventh Avenue project is costing around $600 a buildable foot, while a typical condo with a lesser-name talent might cost $450 a buildable foot. Comfort added, however, that the price premium is more for executing a quirky concept than for simply paying an architect’s salary.

“You wouldn’t want to take an artist’s painting and delete certain brushstrokes,” he said.

Until recently, renowned architects usually focused on institutional structures because they provided greater artistic license, said Michele Conte, former sales director for the Metropolitan Condominium at 181 East 90th Street near Lexington Avenue, designed by Philip Johnson and completed in 2005.

“With museums, they can concentrate on the magnificent façade only, because the tenant usually builds the inside,” said Conte, now a sales director for Stillman Development International. “In the past, they didn’t want to deal with Mrs. Jones’ closet space.”

While the developers got Johnson to switch gears, Conte downplayed
any lift he alone might have given prices, which averaged $1,200 a square foot for the 94 units at the Metropolitan, well above the $700 area average at the time.

“The truth is, buyers are too intelligent to buy something just because it’s from a certain architect,” she said.

Now, the Metropolitan’s builder, Stillman Development International, is at work on the Centurion. That condo, rising at 33 West 56th Street off of Fifth
Avenue, is being designed by I.M. Pei and his son, Sandi.

With 48 units across 17 stories, to open in January 2009, it’s the first high-end residential project for the elder Pei, who’s best known for his galleries, libraries and his pyramidal addition to the Louvre museum in Paris. When starting out, he did design Kips Bay Plaza, a modernist complex on the East Side with more than 1,000 apartments.

Robbie Antonio, president of Antonio Development, the Centurion’s co-developer, said that using any star designer typically adds $100 to $115 per square foot to a New York project. But that extra cost could be justified, as the 14 units sold since July have fetched $3,000 a square foot, notably high even in a superheated market.

“We hope we can have higher margins” because of the Peis, said Antonio. “But they are just one variable of many,” he noted, highlighting the building’s 31 different floor plans, unusual limestone façade and deep terraces.

Having a brand-name firm on the marketing packet isn’t enough to insure a
successful project, however. Gwathmey Siegel’s curvaceous Sculpture for Living at Astor Place, roundly panned by critics, had trouble selling sponsor units, and its resale values have been somewhat flat,
according to brokers.

Other times, a project seems to be weighed on its merits despite a marquee star’s presence. An example is the Time Warner Center—designed by David Childs of Skidmore, Owings and Merrill—where condos are appreciating by at least 10 percent every time they change hands, said Robby Browne, a senior vice president at the Corcoran Group.

And yet, “is it marketed as a David Childs building? No,” Browne said. “What impresses me is an architect who does a good job.”

Chicago’s burgeoning green roofs and Seattle’s new Olympic Sculpture Park have one thing in common: They were funded in part through density incentives, city programs that allow developers to increase the size of a given project, or transfer development rights to another site, in exchange for community benefits.

Density bonuses are also common in New York, the city that pioneered the concept
in 1961. For example, Gladden Properties has announced plans to build a 40-story tower on Eighth Avenue between 54th and 55th streets.

To build to this height, Gladden, a joint venture between Boston Properties and Robert Gladstone, is negotiating a deal to purchase the development rights from two adjacent playhouses in the Theater District, the Shubert and the Booth. In exchange, Gladden will contribute $2.4 million to an existing fund whose goal is to promote interest in Broadway theaters.

But although local transactions have increased since the 1960s, the public amenities funded through such programs don’t always live up to expectations, critics say. For example, although money generated from the sale of development rights in the Theater District was intended to incubate new theater programs, none of the $2.5 million generated since 1998 has been distributed, according to city officials.

The Theater Subdistrict Council, which oversees the fund, has yet to determine how best to invest it.

By the same token, about 250 outdoor plazas and indoor atriums have been created through density bonuses. However, most have fallen into disrepair or do not provide adequate public access, said Kathy Madden, senior vice president of the Project for Public Spaces, a New York City-based nonprofit.

“It was a good idea, but it didn’t turn out,” Madden said. “Developers got very good at meeting the criteria while creating a lousy public space.” In many cases, the spaces have been appropriated for private use, such as cafés, Madden said.

There are other concerns. In many cities, developers can choose from a menu of bonus options, ranging from child-care centers and rural land protection to public art and public transportation improvements. In New York, by contrast, such choices are usually limited to creating affordable housing or privately owned public spaces, or historic preservation.

“We need to be more thoughtful about the things that will help us endure growth,” said Brad Lander, director of the Brooklyn-based Pratt Center for Community Development.

Compared to other municipalities, New York has done little to advance density incentives that would actually provide “a salve” for density, Lander added.

In Toronto, for example, density exchanges have helped fund bus shelters, nature trails, day-care centers, schools, tree irrigation systems, historical-building restoration and dozens of public sculptures. Concord Adex, which is currently building about 20 condo towers as part of the $1.5 billion City Place development, traded an additional 1 million square feet for 1,200 units of affordable housing on three city blocks, a series of parks and about $9 million dollars of outdoor art.

Under Seattle’s density bonus and transfer of development rights programs, developers such as Washington Mutual and Vulcan Inc. have provided hundreds of thousands of dollars for performing arts institutions and public art, including Benaroya Symphony Hall and the Seattle Art Museum’s sweeping waterfront Olympic Sculpture Park.

“The program has been strong and effective,” said Michael Killoren, director of the Seattle Office of Arts and Cultural Affairs, adding that the council hopes to extend the incentives to outside of downtown.

Last fall, R.C. Hedreen Co., which is developing a hotel condo tower in downtown Seattle, paid $930,000 to preserve 300 acres of farmland. In exchange, the developer was allowed to add 62,000 square feet of residential space and increase the tower’s height to above 300 feet. “It was a profitable tradeoff,” said Hedreen CEO David Thyer.

Influenced by towns like Chicago—which offers 13 different density incentive options—New York is trying to improve and update its menu of incentives. Responding to concerns about deficiencies in privately funded public plazas, New York’s City Council adopted a zoning amendment last October that updates design regulations for such spaces, said Rachaele Raynoff, a spokesperson for the New York City planning department. Planning officials will also recommend inclusion of an arts density bonus for nonprofit arts and cultural uses for the 125th Street rezoning plan that is currently going through the public review process.

“This is intended to stimulate new investment in arts, entertainment and retail activities,” said Raynoff.

Even when such programs are well-executed, density incentives raise concerns about the impact on neighborhood character. For example, density bonuses have aesthetic costs, Raynoff said. “There are areas where bigger buildings are desirable, and areas where they are not.”

Instead of trading added height for community benefits, the city should require developers to include a “base mandate” of public amenities, from grocery stores to schools, said Lander. “Then the city could allow a density bonus for expansion of these amenities.”

Presently, there are about 200 transfers of development and density bonus programs around the country. That’s up about 25 percent since 2003, said Rick Pruetz, a national expert on transfers of development rights and a consultant with California-based Planning & Implementation Strategies.

But that growth may be slowing in the wake of an economic downturn.

“If demand for housing decreases, demand for density incentives will slump,” said Darren Greve, who directs King County’s Transfer of Development Rights program in Seattle.

In December, the celebrated Dutch architect Rem Koolhaas and his Rotterdam-based firm, the Office for Metropolitan Architecture (OMA), finally won their first significant commission in New York City.

OMA will design a luxury 22-story mid-rise building with a ground-level screening room on East 22nd Street, to be developed by Ira Shapiro and Marc Jacobs, the same team behind the adjacent, 60-story One Madison Park. The building is scheduled to be completed in 2010.

The project has been a long time coming. As the only “starchitect” to write a bestselling book about New York City (1995′s “Delirious New York”), it may seem surprising that it took Koolhaas so long to earn a local commission.

There have been near-misses. A 2001 gig to design a hotel on Astor Place for Ian Schrager fell apart. In 2003, it was rumored Koolhaas had been selected to design the Whitney’s expansion, but lost because of persistent objections from nearby residents and preservationists. A residential project in Jersey City has yet to break ground. So far, Koolhaas’ only executed work here has been the interior of the Prada store in Soho, a noted redesign, in 2002.

Despite eye-catching designs, Koolhaas seemed unable to make a New York City breakthrough.

Architects are sometimes mistakenly viewed not just as bold designers, but also as Ayn Rand-style heroes, daring individualists who shun compromise. The truth, at least for architects hoping to work in New York City, is usually the opposite. In Manhattan, land-use commissions, preservationists and activists all need to be effectively courted. To move their visions beyond AutoCAD, successful architects also need to be energetic salespeople and deft negotiators.

As a result, design firms can see projects evaporate because of a failure to consult the community. Last year, a design by noted British architect Norman Foster for 980 Madison on the Upper East Side also went down in a hail of local complaints.

To ensure that his firm creates winning designs and engages in effective diplomacy, in 2006, Koolhaas dispatched a new local director, Shohei Shigematsu, to lead his New York office.

Shigematsu’s mission has been explicit: Find projects and developers that balance the city’s dense context with OMA’s adventurous design ethic. While he sometimes falls into pillowy design-speak, Shigematsu acknowledged that his mission includes a mix of architecture and community diplomacy.

“There used to be more a feel of New York. Now, global trends are infecting New York, and my goal is to find out what we can do,” said Shigematsu. “We are reducing our focus
onto fundamentals rather than an extravaganza of forms.”

While Koolhaas’ competitors hesitated to salute or needle him on the record, experts agreed that New York’s brand of community power can foil daring designs in a way that other cities can’t.

“There’s a lot of regulation in London,” said Richard Sennett, an architectural critic with homes there and in New York City. “But public participation there is much less theater. You can’t just show up at a hearing and say, ‘Never!’”

Presently, no renderings have been released of the East 22nd Street project. Yet Shigematsu said OMA plans to respect what’s already on the street, and the tower may echo classic Art Deco mid-rise towers of the Flatiron district.

To handle the new work, OMA plans to expand its New York City staff from 25 to 50 by June. While he wouldn’t disclose details of jobs that remain in negotiation, Shigematsu made it clear that Koolhaas wants a deep local presence. The firm hopes to finalize a hotel and office project in Manhattan soon.

Though Koolhaas’ projects have a history of stopping and starting, and though he admitted he doesn’t know the intricacies of local politics, Shigematsu presented himself as sympathetic with preservationist impulses.

“A lot of developers in the Middle East expect an extravagant building,” said Shigemastu. “But there is more inherent complexity here than in Dubai, where the surroundings are a desert.”

During the building boom, designing residential projects became the bread and butter for many of the city’s architectural firms. Now, with residential construction slowing down, many firms are coping by embracing diversification.

Large firms like Skidmore, Owings and Merrill have always had multiple design specialties. Yet these days, medium-size and smaller firms are seeking new opportunities by bolstering their practices in other areas like health care and education, looking for work abroad and sometimes even developing their own projects.

Overall, the strategy seems to be working. A recent report by the American Institute of Architects forecasted that despite troubles in other fields related to real estate, job levels for architects in 2008 are expected to be similar to those from last year.

One area of growth has been designing health care facilities. The AIA study indicated that health care facilities presently account for about 14 percent of all domestic construction. The money spent building health care facilities has risen about 10 percent a year since 2004, according to the Census Bureau.

The study offered several rationales: First, there’s the expectation that as the baby boomer generation ages, more medical space will be needed. Second, changing technologies are forcing older hospitals into exhaustive redesigns of space.

The current boom—about $50 billion is being spent on hospital construction each year, according to the AIA—is expected to last until at least 2010. Accessing the market can be challenging, however. “For some fields like health care, you need people with expertise and a portfolio,” said Joan Saba, a partner at NBBJ Architecture, a firm based in the U.S. with offices in China and the Middle East.

Designing new university buildings is also proving lucrative for architecture firms. According to the AIA, the construction contract value of academic projects each year is about $25.2 billion.

“There’s clearly a building boom happening on campuses across America,” said Martin Vanderwerf, senior editor of money and management at the Chronicle of Higher Education.

Kermit Baker, chief economist for the American Institute of Architects, said that diversification into health care and education buildings is a shrewd hedge against residential construction downturns because most of the buildings are backed by government entities, which do not experience the same slowdowns that the private sector may during a recession.

Some firms are also dealing with the slowdown in domestic residential construction by looking for commissions abroad. The number of firms nationwide that characterize their work as “international” rose from 4 percent in 1999 to about 10 percent in 2005, according to the most recent data available.

While no figures exist among the roughly 4,000 practicing architects in New York City, the number that work internationally is said to be considerably higher. In particular, projects in the Far East and the Persian Gulf are luring U.S. firms.

Bice Wilson, principal of Meridian Design Associates, a firm with offices in New York, Miami and Geneva, noted that his firm has been working to diversify by switching staff and resources out of the U.S. to regions that are still booming.

Jane Ayers, a partner with NBBJ, said her firm has been doing a lot of work in China and other parts of Asia, particularly in the commercial sector, which has been strong in the region.

Perhaps the busiest firm from New York City working abroad is Skidmore, Owings and Merrill, which has multiple projects in the Middle East and in China, including the Burj Dubai, the world’s tallest office tower, going up in Dubai.

Finally, in addition to building specialty practices outside of the traditional residential and commercial markets, some architects have taken on the role of developer as they seek to diversify their business plans.

For instance, Studio MDA, a Manhattan-based firm, is developing an $85 million high-rise in Fort Greene, Brooklyn. (See Inside the open houses of Fort Greene) Another architect turned developer is Gary Silver, principal of Gary H. Silver Architects, who has several projects in the works in East Harlem, including the Observatory, a 38,000-square-foot residential project going up on First Avenue and 104th Street. Silver is also developing a seven-story residential project at 227 East 111th Street in East Harlem.

Silver enthused about the creative control that being the developer gives him. Yet he swears on a stack of blueprints that the main reason he departed from just designing was to provide a buffer in case of a downturn in the market.

“I did it to insulate myself from upturns and downturns in the market,” he said. “The architecture field is generally low-paying, considering other types of fields that have the same type of preparatory work.”

Architecture education in the United States is changing. Students are increasingly getting out of the classroom and interacting with developers and builders—an ever-more-valuable skill for practicing architects.

The luckiest students are perhaps those at Cornell University, where the developer of an eco-friendly resort in the South Pacific is sponsoring a studio architecture course this semester. Designers for the firm have scheduled to hold a charrette, a term to describe an intensive design collaboration, on campus with students this month, and in March, the entire class of 15 students is slated to go on a two-week field trip to Fiji.

While few students are fortunate enough to spend a week or two in Fiji as part of their coursework, “contractors, architects and owners are talking to each other in new ways,” said Daniel Friedman, dean of architecture and urban planning at the University of Washington in Seattle. “We need to prepare students to enter this arena.”

In the name of better preparation, more subjects are also being added to architecture curriculums.

Sustainable design, or the design of buildings that reduce carbon emissions, is becoming popular. Another topic that’s all the rage is “universal design”—making buildings friendly to people of all ages and abilities, including the aging baby-boomer population.

Continuing education and online learning are also growing in importance in architecture education. Practicing architects, who must take courses to maintain certification, find increasingly that the offerings are on the Internet.

Red Vector, the largest provider of online courses for design and building professionals, had 90,000 users last year, up from 40,000 four years ago.

Advances in computers and software have driven many of the changes seen in the past decade in the industry. Architects no longer spend the bulk of their time alone in offices drawing up extensive two-dimensional plans. Instead, design is done on computers with software that generates three-dimensional models.

“The ability to design buildings three-dimensionally and have realistic three-dimensional models has had a big consequence on the way architects think about designing buildings and how it is taught,” said Michael Liu, principal of the Architectural Team, a Boston-area firm. “You no longer draft a building; you build a three-dimensional model.”

This shift has allowed builders and engineers, as well as developers and project owners, to get involved in the design process sooner.

“The schematic design phase is no longer the exclusive province of the architect,” said Friedman.

This blurring of the lines in the development process heightens the importance of teaching students how to work with the other key players.

“There is a lot of discussion now on possibilities of how education is going to prepare students for the practice and the changes that are happening in practice,” said Catherine Roussel, director of education for the American Institute of Architects.

One possibility is internships or externships. The New Jersey Institute of Technology places its students in summer positions in offices of community development agencies and affordable housing programs across New York state.

Work-study programs, in which students spend full semesters on the job, are also a growing trend.

“We have well established that internships increase the readiness of graduates,” Friedman said.

The blending of the professions is also being institutionalized in some universities, where joint degrees are offered in architecture and other fields, including construction management and business.

Kevin Pratt, an assistant professor at Cornell’s College of Architecture, Art and Planning, said the addition of offerings in architecture schools that introduce students to other facets of development is a welcome change.

“When I was in school, you had one course, which basically taught you how to avoid getting sued,” Pratt said.

The field of architecture is having a paradoxical moment: While design has never been more current, observers have said that a staggering number of graduates and practitioners are streaming out of the profession. Real estate developers may be the unintended beneficiaries, professionals said.

In an informal survey, professionals said that fewer than half of graduating architecture students ever become working architects. The post-graduation certification program, a process that requires three years of apprenticeship in addition to a nine-step examination process, contributes to the profession’s astounding attrition rate.

In addition, salaries are low. Career counselors at architecture schools in the New York City area reported that the average starting wage for architects in the city is about $35,000, virtually unchanged since 2003.

“They want to be like Frank Gehry, but the salaries are so low, many can’t finance loans and live in the city,” said Judy Nylen of the career services office at the Pratt Institute School of Architecture. “Quite a few go into real estate-related jobs, where their training can be very valuable.”

When they quit being designers, many dissatisfied architects migrate to the field of construction management, where starting salaries range between $50,000 and $60,000. Another draw is interior design, a field that requires virtually no schooling, but which pays about $46,000 to start, according to the same report from career counselors.

A common complaint focuses on the inflexible way the profession is organized. Essentially, architects who are starting out often quickly find themselves stuck with narrow specializations.

The career of Algis Kalvaitis, 32, shows some of the dilemmas architects in the city confront. As an intern, Kalvaitis worked for Gensler, a firm with offices in 28 cities. The firm employs about 2,000 architects, each one working on parts of many different projects.

“You might get a small sense of a whole, but someone working above you is pulling it all together,” said Kalvaitis.

Kalvaitis jumped ship to Acheson Doyle Partners Architects, a firm in Chelsea that employs fewer than 20 people. There, he spends much of his time working on private commissions, like renovations of landmark buildings and condo conversions.

“What’s nice with a smaller firm is you see the whole project evolve,” Kalvaitis said. “It’s not as if you do your small part and move onto another project.”

For those architects who can survive the batterings of their profession, the job market is better than ever.

Scan job boards on the Web site of the American Institute of Architects or Archinect.com, a site known as the architecture student’s Facebook, and it’s clear there’s an unmet need for architects in New York. Suddenly, young designers have choices.

“It’s not logical. We have more job listings than we have people,” Nylen said.

If the six-inch-tall Lilliputians from “Gulliver’s Travels” suddenly appeared in New York City, they would have no trouble finding a place to stay.

Miniature-scale models of many of the city’s highest-end residential projects grace real estate sales offices throughout the city, and with their furnished apartments, detailed landscaping, and LED lights, these little worlds do not look anything like your daughter’s dollhouse. They are even built with curved curtain walls and replicas of the innovative window systems found in high-end developments.

While architects have been making models since Andrea Palladio rose to prominence several centuries ago, the niche profession has grown up in the last few decades. At the moment, business is burgeoning in New York City because of the increase in preconstruction sales and high-profile development competitions such as the bidding to build on the Hudson Yards. So far, the model-making boom doesn’t appear to be slowing down because of concerns about a downturn in the market.

The craft is highly specialized. Model makers use computer-assisted design programs, laser-cutting, and modeling machines. Developers often spend anywhere from $50,000 for a basic quality model up to hundreds of thousands of dollars for all the bells and whistles, which can include secondary models and accompanying audiovisual displays.

The production often involves a whole design team: model makers for different parts of the structure, artists, computer technicians, audiovisual teams and even subcontractors who specialize in making model horticulture.

Real estate professionals say that a high-end model has become an invaluable promotional tool in the increasingly competitive housing market.

“We have seen a dramatic increase in developers using these models,” said Stephen Kliegerman, executive director of development marketing at Halstead Property. “With more and more developments coming out all the time and competition rising, developers need more tools to give buyers a visualization of a property.”

Andrew Harris of Madison Equities, which is developing the Chelsea Modern at 447 West 18th Street between Ninth and 10th avenues in Manhattan, said that models have a distinct advantage when it comes to marketing new property.

“It is fine looking at plans, it is great looking at renderings, but it is very difficult for the average purchaser to understand what the building they are purchasing in is going to look like,” said Harris. “But I think that the model does it wonderfully well.”

In addition to providing an overview of a development, a model can be useful in highlighting a building’s special features or amenities. For example, when the sales office for 40 Mercer Street was opened and selling units, it was home to an electronically operated model that mimicked the way the windows rolled back in the living room to access the outdoor spaces. The luxury residential building in Soho was developed by hotelier André Balazs and Hines Interests. “A model can convey in a way that a lot of the other materials cannot,” said Jasmine Mir, vice president of marketing at Corcoran Sunshine, which marketed 40 Mercer.

In some high-end models, prospective buyers can choose a particular unit and then run an audio-visual display showing actual views from the not-yet-built apartment. The displays are made by video-camera footage shot at the development site from a balloon, crane or even a helicopter, at heights approximating those of the apartments in the building’s design.

Frederic Bell, executive director of the American Institute of Architects’ New York City Chapter, said the process of making a model can offer a developer or architect a new way to see their project and help him or her improve it.

But, he noted that sometimes the models can raise false expectations. “It [a model] can be a little fictive because it can be aspirational—there are architectural models that are there to convince people to approve something that should never see the light of day,” said. “They can try to create something that may not be politically possible.”

Most of the models exhibited at building sales offices and architectural competitions in New York City are produced by a small cottage industry of local model makers—firms such as Lenon Models, Cubic Dimension Inc., and Saleh & Dirani, Bell said.

One of New York City’s top model makers is Richard Tenguerian, who designed the model for the Durst/Vornado proposal in the Hudson Yards competition. He built the model in his basement studio on Lafayette Street, where on a recent Thursday evening he was finishing up a multi-building complex with ground-floor retail that will likely be filled by a big national chain like Old Navy or Bed Bath & Beyond.

Tenguerian built his first model at age 14 while working at a summer job in an architect’s office in his native Lebanon. Later, he trained at the Pratt Institute before starting his Manhattan-based company, Cubic Dimension Inc. Tenguerian said a high-quality architectural model is the product of both handicraft and skill with new building technologies.

“Nowadays, people are used to the keyboard; they use the software, they use the laser, and they assemble it and call themselves a model maker,” he said. “But I come from the old generation, where craftsmanship was crucial.”

Tenguerian’s work has taken him all over the world, including Vietnam (where he is working on a model of a three-tower development for the architectural firm HOK) and Dubai, where he has made a dozen trips for various building projects.

And although much of his recent business is linked to the New York metropolitan area’s real estate market, Tenguerian said that in general, he does well even during slow periods for new development.

“What happened in the past, when the economy was bad here, there would be business in some other part of the world,” he said, and though “there have been dry spells,” he noted that he hasn’t currently been feeling the effects of a slowdown.

Tenguerian claimed that the craftsmanship of New York City model makers is unrivaled. One reason for Gotham’s superiority, according to Tenguerian, is that the profession began here in the 1980s, while other parts of the world are still catching up.

“In Dubai,” he said, “they have model shops where they can do perfect laser cuts, but they are more like factories, and when you see the finished product, it is like a train set. It looks cartoonish.”

Sometimes, to save money, New York City developers commission models from foreign countries such as China, said Tenguerian, adding that on several occasions he has received emergency calls from developers seeking his services in repairing a broken model imported from another country.

As with high-end architecture, quality is sometimes not always apparent to the uneducated consumer. “Some people cannot see the difference between $10 shoes and $400 shoes,” Tenguerian said. “Others can appreciate the quality and the look.”

Neil Denari is sometimes called an architect’s architect: An award-winning architectural theorist, pioneer in the use of computer-generated design and renowned lecturer, teacher and former director of the Southern California Institute of Architecture, his designs have been exhibited around the world.

Never heard of him? Outside the rarefied world of academic design journals, few people have. That’s because until he received a commission to build HL23, a 14-story luxury condo fronting the High Line in Manhattan, exactly zero of Denari’s pet ideas had ever been built.

Yet when HL23 is completed in the summer of 2009, it will join a parade of other cutting-edge projects designed by marquee architects in West Chelsea. And with its unique configuration, the building seems to fit in quite well with its cutting-edge surroundings.

Whereas residential developments in many other parts of the city emulate historic buildings from several generations ago, West Chelsea and the area adjacent to the High Line are embracing more venturesome forms. The area is becoming a living museum of cutting-edge architecture, and an estimated $900 million is being spent by developers on nearly 30 neighborhood projects.

Yet HL23 will be different from its neighbors in several important ways. Zoning regulations require other buildings adjacent to the High Line to be set back by 15 feet, but a precious 5 feet of HL23 will actually connect the residential tower with the High Line, allowing residents to step through the front door into the park.

Also, unlike its neighbor, HL23 will cantilever from a narrow base out over the elevated former railroad trestle, so that anyone looking down from their unit will be viewing a landscaped park.

HL23′s site is so narrow that to some developers, the building might not have been worth building. Yet Alf Naman, the developer, knew the planning commission would be sympathetic to thoughtful design.

Naman is the developer behind one of the hottest Manhattan buildings, the Jean Nouvel-designed project at 100 Eleventh Avenue, also in West Chelsea. The developer wagered that in exchange for an eye-catching building, the planning commission might grant some exceptions.

“I said to Neil [Denari],” recalled Naman, “‘build me something that starts out small, and the floor plate gets larger as it goes up the building and steps away from the High Line.’”

Designed in less than two months, the result is a tower that up-ends perceived notions about the shape and scale of a typical building.

The planning department liked what it saw. Within a year, the project won seven exceptions to the zoning code, including the rights to build over the High Line and to place a private garden adjacent to the park, an amenity for the duplex that will occupy the second and third floors.

The materials that will be used in HL23 are also distinctive. The design included elements rarely, if ever, incorporated into a residential high-rise building.

The east-facing façade that hovers over the High Line is composed of giant undulating stainless steel panels, “among the largest ever used that are stamped [the process in which steel is bent into shape],” said Marc Rosenbaum, an architect who collaborated on the project.

Presently, the foundation is being laid. Construction is scheduled to begin in March.

“It’ll take a lot of engineering to get the right erection procedures,” said Naman.

Or, as Denari put it, “You have to work very hard to overcome the laws of physics. It’s building completely in reverse.”

The building will have two duplexes occupying the bottom and top floors, and nine floor-through units from about 1,900 square feet to 2,600 square feet. The 3,700-square-foot penthouse will have a 1,000-square-foot terrace. Prices for the units, which go on sale Feb. 21, range from $2.65 million to $10.5 million.

HL23 is pursuing LEED green certification at the Gold level.

The kitchens in the single-floor units will open onto oversized living rooms with floor-to-ceiling windows facing south; the bedrooms and master baths will have panoramic views along the High Line running north.

Each unit will have rift-cut solid oak floors with recessed baseboard moldings and quarter-inch reveals. Motorized shades on the north and south glass walls will allow residents to control their exposure to the High Line.

Although it’s not finished, HL23 will be the subject of an upcoming exhibit at the Museum of the City of New York in June—and it’s allowing Danari to finally shed his reputation as a “paper architect.” The innovative design may also have helped him win several other commissions.

“Architecture is a profession that rewards very late and takes very few risks,” he said. “We’re making up for lost time.”

Preserving New Delhi

New Delhi is trying to form a plan to conserve its treasured architecture from the first half of the 20th century, when it was founded while allowing development to accommodate its population growth of over 500,000 annually. India’s capital city now holds 13 million people, compared to around 900,000 when it was created.

The Delhi Urban Art Commission has proposed a design that would set aside a 14-square-mile area in the center of New Delhi to be protected from major new development, the International Herald Tribune reported. The plan also calls for preservation—and in some cases restoration—of the facades of historic bungalows built during the city’s initial construction.

The proposal also suggests installing several small, contemporary bungalows between the historic buildings in places, as well as destroying some bungalows outside of the protected area to make way for multi-story apartment and office developments.

The commission wants to maintain the aesthetic of the city center, planned by the renowned British architect Edwin Lutyens between 1912 and 1931. The structures that Lutyens designed, which borrow both classical Greek and Indian elements, are now used mostly as government buildings.

The prime minister’s office has reportedly approved the construction of 16 new government buildings in a 70-acre area occupied by 19 of Lutyens’ historic bungalows, which would require three of the buildings to be demolished.

Singapore leads world in home prices

Singapore was the world’s best-performing housing market in 2007 when adjusting for inflation, according to real estate research firm Global Property Guide.

The island nation showed an annual house price increase of 27.6 percent through the first three quarters of 2007, or 24 percent when adjusted to the country’s minimal inflation. This growth was significantly higher than its 7.6 percent price increase over the same period of 2006.

Luxury property values showed the greatest increase, jumping 56.4 percent year-over-year in the third quarter of 2007, according to data from Jones Lang LaSalle.

High demand from foreign buyers and local high-net-worth individuals drove the luxury market. During the first half of the year, en bloc sellers also helped boost the high-end prices.

Although some experts expect housing prices to continue to rise in 2008, the Singapore government is planning measures to curb speculation and begin cooling the market. These include delaying its proposed public development and abandoning a plan to allow buyers to delay home payments (see The subprime sneeze felt round the world).

Lending tightens in Europe

The European Central Bank’s survey of the 13-nation euro zone revealed tighter lending standards to homebuyers in 2007. This trend has been seen widely as a result of banks avoiding losses linked to securities backed by U.S. subprime mortgages, according to the International Herald Tribune.

At the same time, growth in housing prices has begun to slow across the European Union, after years of fast-paced growth, with downturns expected in some markets in 2008.

House price increases in the euro zone slowed to 4.2 percent at the end of the third quarter of 2007, compared to a year prior—the weakest growth recorded since the first quarter of 1999.

Experts predict that the markets which have seen the biggest boom in recent years—including Ireland, England and Spain—will see price corrections.

An economist with Deutsche Bank predicts that prices in Ireland will drop around 10 percent over the next 18 months, while prices in England will likely flatten out, but not fall, over the same period.

Half of Spain’s real estate agents went out of business in 2007. In Ireland, where home values had nearly tripled in a decade, an estimated 10,000 condominium units in Dublin were vacant late last year.

Although markets in many countries remain strong, in others, the woes of residential real estate in the United States are being mirrored. In some places, the real estate weakness is linked directly to the U.S. subprime mortgage collapse. Then there are the places where problems are the result of homegrown ills similar to those afflicting America—risky loans, rampant speculation and overbuilding.

“The impact of the credit crisis in the United States certainly has been substantial,” said Richard Kelly, head of homebuilding and construction for the British consulting firm BDO Stoy Hayward. “The stock prices of the house builders have taken a significant hit. There’s a lot of nervousness out there.”

Keith Barket, senior managing director for global money management firm Angelo, Gordon & Co., said: “I would say in some aspects it isn’t so much a spillover from what has happened in the United States, as it is other parts of the world are suffering from the same dynamics that have arisen in the United States.”

Yet while real estate sales and prices have slowed in much of Europe, the downturn in most European countries has not been as sharp as it has been in the United States. In Asia, markets have generally remained sound, and there are other pockets of strength across the globe, including some developing countries.

Towers of strength

According to online research firm Global Property Guide, Shanghai and Singapore recorded house price increases of nearly 28 percent in the first three quarters of 2007. Double-digit price increases were also recorded in most of Australia in 2007. Meanwhile, the Philippines, Colombia, South Africa and Hong Kong all had increases of more than 10 percent.

“We are still seeing an increase in prices in central Europe—Switzerland and Germany are doing well—and a significant increase in Eastern Europe,” said Chuck Lemire, the Vienna-based chief operating officer of RE/MAX Europe. “Prices have increased 10 to 15 percent in 2007 in Romania, the Czech Republic and Slovakia.”

According to Global Property Guide, Bulgaria recorded the world’s strongest house price growth last year, at 31 percent.

Real estate in Russia also remains solid, according to John Forbes, director of the London real estate office of PricewaterhouseCoopers. “With oil at $100 a barrel, money is flowing in for the oil-rich countries,” he said.

Home sales and prices have also been positive in Canada, with the exception of southern Ontario, which has suffered from weakness in the auto industry.

“We’re off on a record-breaking year in prices and volume,” said Don Lawby, president of Century 21 Canada. “I keep thinking the problems will reach across the border, but they haven’t. Usually, when the United States catches a cold, we get pneumonia.”

Areas of trouble

The reverberations from the U.S. subprime crisis have shaken credit markets around the world. Britain’s biggest shock came in September 2007, when Northern Rock, one of the country’s leading mortgage lenders, was unable to meet its obligations because of the subprime-triggered tightening of credit markets. A run on the bank was halted only after the British government promised to guarantee deposits.

In fact, tighter credit has been a drag on real estate all over the world.

“What we have seen clearly is that the lenders are tightening their criteria for lending,” said Simon Rubinsohn, the chief economist of the London-based Royal Institution of Chartered Surveyors. “They are a lot more cautious.”

An even broader concern is that because of the pivotal role the United States plays in the world economy, a U.S. downturn could spark a global economic plunge.

“The real fear over here is the United States tipping into recession,” said Forbes.

Areas of the world where a run-up in prices prompted overbuilding appear to be the most troubled real estate markets today. Spain and Ireland are prime examples, according to analysts.

“Ireland had seen astounding gains,” said Rubinsohn. “They are under pressure now, and real estate is coming down.”

Said Barket, “Spain sold more homes over the last five years than all of Europe. Much of this was second homes, and it became a matter of speculation. It’s crashing right now.”

In Mexico, Central America and the Caribbean, the market for second homes appears mixed, according to analysts. Some areas clearly have been affected by the troubles in the United States, while others appear insulated.

“There was a tremendous amount of speculation,” said Mitch Creekmore, senior vice president for Houston-based Stewart International and author of “Cashing in on a Second Home in Mexico.” He added, “Arizonans were taking money out of their houses and investing in a house in Mexico.”

With home equity lines of credit drying up in the United States, second-home markets in Mexico tailored to those buyers have struggled, according to Creekmore. But more upscale areas, including Puerto Vallarta and Los Cabos, have remained strong because buyers for those properties are not dependent on credit markets, he said.

Indeed, throughout the globe, real estate sought by
the very wealthy is little affected by the credit crisis, according to brokers who specialize in this market. “Many of the very expensive places, priced in the double-digit millions, are not even financed,” said Rauert Peters, chief operating officer of Engel & Völkers, a European premium real estate broker.

Shaun Osher, chief executive officer of CORE Group Marketing, a New York-based brokerage, said, “It seems the world is becoming more segregated between the haves and the have-nots, and it shows itself in the real estate market. People with money are still buying property.”

Economist Adam Smith once said, “All money is a matter of belief.”

While faith is a big component of the economy, it is not everything. Underlying value in the marketplace is also important, and on that front, New York City is doing just fine. It’s a fact that can be reassuring during these uncertain times, when many don’t know what to think or what to believe.

New York enjoys several special advantages. It is not just the capital of the business world, but also of art, publishing and fashion. While firms on Wall Street— considered the city’s powerhouse industry—cut about 6,000 jobs in the city last year, these other sectors and the raw talent they attract will help cushion the blow. After all, as bad as some may think things are, we are not seeing anything like the financial havoc of the early ’90s.

Still, we are seeing the impact of the credit crunch crisis on some real estate markets here.

To give you a sense of how the city is faring and how the boroughs stack up against one another, this month we present a comparative analysis looking at indicators like office vacancies, new condo development, foreclosures, building sales and much more. To take one example, many won’t find it surprising that Brooklyn’s real estate activity is robust and that price points in Northern Brooklyn are holding their value nicely and competing with parts of Manhattan. But there are surprises, like the fact that Queens has seen the smallest drop-off in condos entering the development pipeline among the five boroughs in the past year.

This month we also bring you an exclusive story about disgraced media mogul Lord Conrad Black. Lord Black’s spectacular fall from grace involves several plot twists and trips to the courthouse (and soon, jail). One of these twists involves his real estate broker, Patricia Patterson of Sotheby’s International. Ms. Patterson was a long-time acquaintance of Lord Black and his wife, but when Black’s apartment sale turned sour, so did their relationship. Our story examines the lawsuit over the commission on Black’s Park Avenue pad and some never-before-seen court deposition highlights.

On a separate note, for the last several months Harry Macklowe has been under a magnifying lens. The media, including us, played out every possible scenario in which he could default and what could happen as result of the titan being swept off his high perch following his aggressive building purchases. A few weeks before the first big debt payment on his $7 billion dollar portfolio was due, Macklowe reached a deal with Deutsche Bank and will hand over control of the seven office buildings he acquired about a year ago. While Macklowe didn’t fall the way most predicted, some were surprised he didn’t fight harder to retain control of the buildings.

I’m also pleased to present you this month with our Data Book 2008, the most comprehensive resource for information about New York City real estate. It’s been referred to as the annual almanac of New York City real estate, with every piece of data researched, compiled and organized for your edification. You can be sure our annual Data Book is found on the desks of real estate professionals and investors throughout the city, throughout the year, until our next edition comes out to replace it.

The Real Deal is also happy to announce that it has launched another edition of the magazine: The Real Deal South Florida. Because we are committed to bringing you the best real estate news, we are excited to be covering Miami as it goes through a challenging time. The connections between New York and Miami are undeniable. If you are interested in that part of the country, I recommend you subscribe to that edition as well at miami.therealdeal.com

Finally, I’d like to acknowledge the fine work our researchers and editors did on last month’s special report, the Records of 2007. In a compliment to our research department, some people who had broken records did not realize they had until they read it inside our pages.

Enjoy the issue,
Amir Korangy

Bank of America buying Countrywide

Bank of America Corp. announced that it will buy Countrywide Financial, the nation’s largest home mortgage lender, for $4 billion in stock. A recent surge in defaults and foreclosures had caused Countrywide’s stock to plummet. In August, Bank of America bought $2 billion of preferred shares convertible into a stake of about 16 percent in the lender. Countrywide’s default problems later worsened, and observers wondered if the lender would be forced to declare bankruptcy. The new company will do business with nearly one out of every two U.S. households.

Cresa Partners merges with Whitman Realty

Cresa Partners, one of the nation’s largest tenant representation firms, has entered an agreement to acquire Melville, N.Y.-based Whitman Realty Group Inc. Whitman Realty, one of the largest tenant representatives on Long Island, operated a partnership for several years with Newmark & Co. Real Estate, offering a full-service brokerage to the commercial market in Nassau and Suffolk counties.

Goldman, BRP to build in Harlem, Bed-Stuy

Goldman Sachs’ Urban Investment Group and BRP Development Corp. have signed a joint venture to spend $20 million on three mixed-income housing projects in Harlem and Bedford-Stuyvesant. More than 200 condos and rental units and 16,000 square feet of retail and community space are planned. The development costs are expected to total approximately $80 million.

Sale of NJ-based lender collapses

New Jersey-based PHH, one of the largest originators of residential home loans, announced that its planned $1.8 billion sale to General Electric and the Blackstone Group has fallen through. JPMorgan and Lehman Brothers slashed financing for the sale, and PHH said Blackstone was unable to find alternative financing. Blackstone was reportedly unable to convince lenders that PHH was still worth as much as it was in March 2007, before the mortgage meltdown.

In early January, Tali Geva, vice president of sales operations for real estate marketer Michael Shvo, told colleagues in an e-mail that she had left the marketing firm. The announcement came just after media director Gita Jagarnauth’s departure in late December.

Geva was one of more than a dozen Prudential Douglas Elliman employees who followed Shvo when he started Shvo Marketing in 2004.

In 2005, Geva told New York Magazine, “It didn’t even cross my mind to think about why I shouldn’t go. I would do anything for Michael … Michael is going to be the most successful person. Here, it’s being a part of something huge. It’s young, it’s energetic.”

When contacted, Geva had no comment.

Jagarnauth, meanwhile, started up a marketing and advertising company called GCR Media in January, according to her résumé, posted on professional networking Web site LinkedIn. Jagarnauth could not be reached for comment.

With the declining value of the dollar enticing foreigners into Manhattan’s high-end residential market, Fox Residential Group has started a division that will specialize in selling homes to overseas buyers. Called Fox International Services, the team is led by four of the firm’s experienced, multilingual brokers: Marcia Donen Roma, Annette Elvey, Bahar Tavakolian and David J. Martin.

Among them, the four are fluent in French, Spanish, Farsi, Russian, Polish, Italian, Mandarin and Hebrew.

The brokerage began seeing a surge of international clients about a year and half ago, and the four brokers first started working cooperatively around nine months ago.

“These four brokers were each doing their own thing, and they thought they could do a lot more business with foreign buyers if they started sharing the load—working together rather than trying to handle things on their own,” Barbara Fox, the president and founder of the Fox Residential Group, said.

According to Tavakolian, the majority of the division’s clients are from Ireland, Scotland and, to a lesser extant, England. Other buyers come from the Netherlands, France, Italy, Australia, China and India.

Fox said that the strength of the rental market has meant a lot of the international business consists of investment purchases.

“Not as many [buyers] are moving in permanently,” Fox said. “The market is much more active in the investment and pied-à-terre sectors.”

Tavakolian agreed that most of her foreign clients are looking for investment properties. She described one client from Australia, an executive at an oil company with a background in physics, who wanted to purchase properties entirely based on cap rates and other statistics, and did not want to see a single listing.

“He came to New York for two days,” Tavakolian said. “We just met in his hotel lobby and looked over spreadsheets. I had scheduled showings, but he said he was afraid that looking at a property [could influence him and override the numbers].”

Jorden Tepper left his job as executive vice president and director of sales at Manhattan Apartments and joined Century 21 NY Metro in the same position on Jan. 29. He said Century 21 NY Metro CEO Mike Simon and COO of rentals Mark Lewis had both impressed him with their business plan for the company.

Tepper said that in a “transitioning” market, it’s important to be with a household name like Century 21. “Historically, Manhattan has done well with boutiquey-type names, but I’ve seen a shift in the market with more consolidation and mergers, and I think larger names will probably do better in a transitioning market.”

He pointed to the fact that Manhattan’s biggest residential names are largely joined under parent companies—Terra Holdings owns Brown Harris Stevens and Halstead Property in addition to other firms, while NRT owns Corcoran, Coldwell Banker, Sotheby’s and Citi Habitats.

He said he is proud that one “can unequivocally say that Century 21 is the largest residential brokerage in the world.”

Lewis also joined Century 21 recently from Manhattan Apartments, where he was managing director in rentals. He made the move a few months ago.

Tepper started his career as an agent at Manhattan Apartments in 2001, and became executive vice president and director of sales in 2005. Tepper believed that although his title will remain nominally the same, having multiple offices and a larger base of agents would mean more responsibility in his new position at C21.Simon and Century 21 NY Metro’s board of directors have the exclusive rights to the Century 21 franchise in Manhattan. They currently have at least 100 agents in their main office at 575 Madison Avenue, as well as an uptown location in Harlem, and plans for additional locations.

Residential

Barak Realty

Jeffrey Tanenbaum joined as vice president. He was formerly of Prudential Douglas Elliman.

Community Preservation Corporation

Patrick Logan joined as mortgage officer. He was formerly director of development for Fordham Bedford Housing Corporation. Andrew Giglio was promoted to neighborhood mortgage officer. He was previously senior closing coordinator.

The Corcoran Group

Michael Spodek joined as senior vice president. He was previously with Halstead Property.

Commercial

CapLease

Paul McDowell was named chairman of the local REIT. He was previously chief executive officer.

CB Richard Ellis

Paul Allegretti was promoted to senior managing director of the company’s asset services group in the New York tri-state region.

The Clarett Group

Robin Cohen joined as director of project development services. She was previously president of her own mortgage brokerage firm.

Colliers ABR

Richard Bernstein joined as vice chairman. He was formerly president of Trammell Crow Company.

Madison Realty Capital

Eric Scheffler joined as managing director and general counsel. He was formerly associate director of the closing and structuring group at Bear Stearns.

Marcus & Millichap

Matthew Fotis was promoted to senior associate from associate at the firm’s Brooklyn office.

Muss Development

James Whelan joined as senior vice president of public affairs. He was formerly chief of staff for former deputy mayor Dan Doctoroff.

Sebco Development

Peter Cantillo was named president and chief executive officer. He was previously assistant deputy general manager at the New York City Housing Authority.

Spandrel Property Services Inc.

Herminio Torres joined as director of operations. He was formerly property manager for Jerome Belson Associates.

Treeline Companies

Howard Schor was promoted to executive vice president of strategic operations and planning. He was previously senior vice president.

Trump Organization

Sara Nemerov was promoted to vice president of global licensing from senior director of global licensing.

For some, $140,000 is the price of a studio apartment in an outer-borough neighborhood. But for others, it’s a mere month’s rent—albeit the most expensive rent check in the city.

The high-class location is the Waldorf Towers, where Brad Pitt and Angelina Jolie reportedly shelled out nearly $100,000 a month to rent a different unit, according to the New York Post.

Now, the landlord is putting unit 33A on the market in mid-February at a rent of $140,000.

The 6,000-square-foot apartment was once home to Frank Sinatra as well as composer/songwriter Cole Porter, for whom it is named.

The previous long-term tenant, who resided there for 10 years until February 2007, configured the unit as a six-bedroom, with a 24-foot-long marble entry gallery, 720-square-foot living room, library, formal dining room, kitchen and a “garden room” for entertaining.

Each bedroom has a private bathroom. The master bedroom, on Park Avenue, has views of Central Park and St. Patrick’s Cathedral.

According to the unit’s exclusive agent, Margaret Bay, vice president at Brown Harris Stevens, the previous tenant paid a six-figure monthly rent.

Bay refused to reveal the name of that tenant or the apartment’s most recent guests.

However, she said the suite has a long-term tenant planned for the end of 2008.

Bay has been the exclusive long-term leasing agent for the hotel for the past 17 years. She said the Waldorf would consider leases up to five years, with options to renew, but prefers to keep them to three years or less.

She also noted that the unit was briefly on the market in September, but is now undergoing “some soft goods work,”—in other words, the replacement and reupholstering of furniture.

In between its long-term leases—which run a month or longer—the Cole Porter suite goes for around $7,500 to $10,000 for a night. It is listed as a six-bedroom, but Bay said the hotel would consider leasing a piece of it as a two-, three- or four-bedroom apartment, renting out the remainder separately.

Bay noted that while 33A is the most expensive rental on the market, there is at least one other unit in Waldorf Towers that would go for more than $140,000 a month if it were renting. That is the two-bedroom, 3,000-square-foot presidential suite, which has hosted every American president since Herbert Hoover.

Clearly, what Brooklyn has been missing is a $150,000 man-made lake.

One evening last month, Robert Elmes, the founder of the Galapagos Art Space, which is moving to a new home in Dumbo, surveyed the hole carved out of his new outpost and explained just how one goes about building an indoor body of water.

Elmes’ former club—which opened in Williamsburg in 1995, pioneering the art, music and social scene there—housed a 300-square-foot pond that was its centerpiece.

Now, after multiple rent increases, Elmes is moving the venture to Dumbo and constructing a new space of 10,000 square feet with a 1,600-square-foot “lake.”

Elmes is designing the new moat with architect Tony Daniels.

While Elmes’ Williamsburg pond became an attraction for Galapagos, maintaining it was not easy, he said, adding that he learned from that pond what not to do.

The former pool sat in a fiberglass coating over a wooden floor. But when the fiberglass cracked (which it did regularly), it gave the water a pathway to seep out and rot the wood.

This time, the design is different, and so is his space, which is in a former horse stable at 16 Main Street. To create the pool’s foundation, contractors poured a cement floor that was covered with a layer of epoxy to ensure that no water can get into the cement.

“From a design perspective, it’s fairly straightforward,” said Daniels, whose firm Cycle specializes in environmentally-efficient design.

Indoor water displays are nothing new in the city; they have become even more popular since feng shui design has come into vogue. In fact, the use of running water to tap into the “energy flow” of a space has given rise to an industry of mini-fountains and indoor “water walls.”

For example, the Platinum, a condo building on West 46th Street in Times Square, has a moat in its lobby. In May, The Real Deal reported that the moving waterway rings the 2,500-square-foot-lobby, creating a mini-island.

At Galapagos, Daniels and Elmes said they devised an environmentally efficient system of pumps and pipes to keep the water moving slowly in a way that will prevent dust from collecting on its surface.

Daniels said one of the challenges is giving the six-inch-deep pool the appearance of greater depth. He said that was done by having the walls and lights slip seamlessly into the pond. The idea is that when patrons see tall walls and lights reflecting in water, it creates the illusion that the water goes down almost as far as the walls go up.

There will be seating on top of the lake, where guests will walk to “floating” pods on a winding, quarter-inch-wide, diamond steel path that will be raised on metal legs.

Elmes, who is in his early 40s, migrated to New York City from his native Vancouver to immerse himself in a more diverse arts scene.

He worries that the rising cost of real estate is driving away the city’s artists. He said it almost took him, and Galapagos, to Berlin—but then the real estate developers David and Jed Walentas offered him a deal in Dumbo.

1921: Ground broken for Yankee Stadium

Eighty-seven years ago this month, ground was broken for the largest-seating capacity baseball stadium in the world: Yankee Stadium.

The team purchased the site from the estate of William Waldorf Astor, builder of the Waldorf-Astoria Hotel, who had passed away two years earlier. The Yankees did not reveal the exact amount paid for the former 10-acre lumberyard, though an expert asked by the New York Times estimated the cost of the plot to be around $600,000. The cost of the stadium’s construction had reached $2.5 million by the time it was completed in 1923.

The stadium, which seated 58,000 people when it was intially built, was the first three-tiered sports facility in the United States. Once home to the New York Giants football team, as well as host to dozens of famous boxing fights, the stadium has experienced increases and decreases in its seating throughout its history, peaking at 82,000 in 1927.

While plans to build a new stadium had been known to the public for months, the club had decided only at the last moment to build on the 10-acre site on the east bank of the Harlem River, between 137th and 161st streets. They had previously been considering a much smaller plot, the site of the Hebrew Orphan Asylum, on Broadway between 136th and 138th streets.

Yankee Stadium is currently slated for demolition upon the opening of the team’s new $1.3 billion stadium on an adjacent lot in the spring of 2009.

1951: City bans discrimination at publicly assisted housing

In February 1951, the City Council passed the Brown-Issacs bill in a unanimous vote, prohibiting discrimination or segregation in any private housing facility receiving financial aid or tax exemption from New York City or any of its agencies.

The bill, named for Manhattan council members Earl Brown and Stanley Isaacs, was an important precursor to their 1957 Sharkey-Brown-Isaacs Law, which made it illegal to discriminate in the rental of units in a multi-family building for all privately owned dwellings. The largest, and arguably the most controversial, example of discrimination in a government-assisted housing facility at the time of the Brown-Issacs bill’s passage was at Stuyvesant Town.

The enormous complex—owned by Metropolitan Life Insurance Company—barred African-Americans from renting when it opened in 1947. That year, the New York State Supreme Court ruled that being a privately owned housing complex, Stuyvesant Town “may select tenants of its own choice…Clearly, housing accommodation is not a recognized civil right.”

With the passage of the Brown-Issacs bill, however, rejecting a tenant “based on race, color, creed, religion, national origin or ancestry” made a landlord guilty of discrimination, punishable by a fine of $500. The law also gave a tenant who had been subjected to discrimination the right to bring the case before the State Supreme Court.

1985: First tenants move into World Financial Center

In February 1985, Toronto-based developer Olympia & York announced that the first tenants would soon begin moving into its still-incomplete World Financial Center. Merrill Lynch had signed, at 3.9 million square feet, the city’s largest-ever lease, and according to its broker, John Cushman III, the largest in the world.

Merrill Lynch’s initial deal secured the space in the 34-floor Four World Financial Center as well as in the 44-floor Two World Financial Center.

The company then decided that it could only afford to take two-thirds of the latter, 2.2-million-square-foot tower, and transferred the remaining space back to Olympia & York. In the deal, the financial services company also sold back its right to acquire a 49 percent stake in Two World Financial Center, which would have cost it 25 annual payments ending in 2012.

Construction of the complex’s initial four buildings, having a total capacity of around 30,000 people, was completed in 1987. Since then, two more buildings have been added—the Winter Garden Atrium in 1988 and the NYMEX building in 1997.

The complex was damaged in the attacks of Sept. 11, and some of it was closed for repairs in 2001 and 2002.

In the January “Residential Deals” section, a deal at 201 East 25th Street omitted Ilene Rosenfeld of Bellmarc as a broker for the deal.

An article, “Windsor Terrace on edge,” inaccurately described an 18-unit development called Prospect Row at 1101 Prospect Avenue in Windsor Terrace. This is actually an alternate address for the Parc Maison development mentioned earlier in the piece. The project had been called Prospect Row before its units went on sale.

The “Broker Exchange” section in the January issue incorrectly listed broker Michael Spodek’s recent job change. He joined the Corcoran Group as a senior vice president. He was formerly at Halstead Property.

The “Broker Exchange” section also incorrectly listed Fernanda Forman’s recent job change. She joined as managing director of Bond Property Marketing Group. She was formerly director of residential marketing at Starwood Hotels Worldwide.