Market Uncertainty mixes with high expectations [more]
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It was another big year for pricey buildings and the buyers who covet them.
Low interest rates continued to fuel the investment sales market in Manhattan, with big buyers from Joseph Moinian to SL Green plunking down sizeable sums to snap up properties before the days of cheap financing disappear.
In this issue, The Real Deal takes a look at the top building buys of 2004, with a detailed map.
More than 60 buildings sold for over $50 million. While no single acquisition rivaled the purchase of the GM Building for $1.4 billion in 2003, the top deals showed the large amount of capital chasing properties: Jamestown paid $755 million for a stake in 111 Eighth Avenue and developer Elad Properties paid out $675 million for The Plaza hotel.
Murray Hill Properties, Swig Burris Equities, Tishman Speyer, the Chetrit family and Chicago magnate Sam Zell’s REITs were among those who made multiple big purchases each.
Industry observers say the sales market is hot; others say too hot.
“The commercial sales market is very hot and will probably stay that way in 2005,” said Anthony Westreich, chief executive of Monday Properties.
Barry Gosin, vice chairman of Newmark & Co., expressed concern about some of the recent high-flying deals.
“I think that the really top end of the market is overheated on the investment side,” he said. “As long as interest rates remain low, it will continue.”
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After a spate of partial and full conversions to condominiums, Central Park South, home to some of Manhattan’s marquee hotels, has become the locale of choice for real estate investors who want a semi-permanent address and pricey park views.
Though the venerable Pierre and the stately Carlyle hotels have long been in the apartment selling business one triplex at the Pierre recently listed for an astounding $70 million plans for at least partial conversion at the iconic Plaza and swank St. Regis signal a new wave of high-end condominium sales in the area.
In 2001, the developers of the top-floor residences at the Ritz Carlton Hotel at 50 Central Park South started a trend that rapidly gained momentum as travel dwindled after the Sept. 11 terror attacks, causing luxury hotel revenues to plunge.
Richard Born, principal of BD Hotels, said bringing in part-time residents as full-time owners makes economic sense. According to his back-of-the-envelope calculations (see related story, “When Hotels Should Go Condo”), a well-marketed condo can generate prices equivalent to 20 years’ worth of revenues for a luxury hotel room in an average economic climate.
For top-of-the line properties, that multiple could be even higher. The Plaza, at Fifth Avenue and Central Park South, and the nearby St. Regis, at 2 East 55th Street on Fifth Avenue, are expected to fetch prices of as much as $2,000 a square foot for their planned top-floor residences. The prospect of hefty profits has prompted industry speculation that there are similar plans in the works for the Stanhope Park Hyatt at 995 Fifth Ave. and the Sheraton Russell Hotel at 45 Park Ave.
Buyers will be spoiled for choice.
Renowned architect Charles Gwathmey has signed on to convert the old Windsor Hotel at 100 West 58th Street into condominiums for developers Yitzchak Tessler and the Chetrit Group. The 373-room Empire Hotel at 44 West 63rd St. is being converted to 125 luxury condominiums, also by the Chetrit Group.
Further away, at the Gramercy Park Hotel at 2 Lexington Ave., hotel developers Ian Schrager and Aby Rosen are reportedly creating 30 luxury condominiums among the hotel rooms.
“It’s not a new concept,” said Esther Muller, president and chief executive officer of Esther Muller Consultants, a real estate consulting firm. “If it’s managed properly, it can be highly profitable. It’s a great opportunity for the investor today to invest in a facility they can enjoy for themselves, and at the same time, they have equity build-up, cash flow that could be positive, and they have tax advantages.”
Muller, a condo-hotel enthusiast since her own purchase of a similar unit in Israel 15 years ago, said owning this type of residence gives a buyer freedom that regular apartment ownership doesn’t allow, since there’s often a 24-hour hotel staff maintaining the condo in the owner’s absence.
There’s also an anticipated appreciation rate on the condominium of between 5 percent and 10 percent annually, she said.
Though it’s a different proposition, economically and legally, the Inter-Continental Hotel at 110 Central Park South is converting from luxury hotel rooms to co-ops. Developer Anbau Enterprises is planning 65 units at the 27-floor former five-star hotel, about a third of the rooms it rented out. Prices haven’t yet been set, but are expected to range from $1 to $10 million per unit.
While the co-op unit values may not appreciate as quickly as condos, they may be better suited for people seeking a permanent, if pricey, address. The legal limitations on occupancy of a condo-hotel unit often require that owners only live there part-time.
Overall, industry observers say the recent spate of conversions in the Central Park South area makes sense because many tourists would prefer to stay elsewhere in Manhattan, such as the theater district.
That leads to some debate about who will be the primary market for the hotel-condo. Some say it will be Europeans, since the Euro is considerably stronger than the dollar. Others say it will be empty-nesters from the suburbs seeking a Manhattan pied- -terre.
William Morris Hunt III, president of Coldwell Banker Hunt Kennedy, said exorbitant maintenance fees may determine who becomes a condo-hotel client. Developers may end up with corporations as buyers.
“I think it’s generally a different buyer from your average co-op buyer,” he said. “You can’t just show them this thing with an $8,000 monthly maintenance fee. That doesn’t make sense.”
A corporate buyer, however, has the financing, and in return, receives the flexibility of a condominium as opposed to a hotel suite, plus the hotel-quality service. There is also the branding of the hotel name to consider, Hunt said, to impress clients. “These are pretty special spots,” he said.
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Developers weigh long-term cash flow versus short-term profits [more]
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Developers trying to sustain and ride the Brooklyn boom say slowdowns in paperwork may hobble growth in the borough.
Delays by the Department of Buildings have stretched project approval times from the three- to four-week standard of the mid-1990s to as long as six months, said veteran developer Isaac Katan.
Other builders and architects echo his complaint, and bemoan the added costs of delays, which they ascribe to high volumes of paperwork and the system-clogging behavior of expediters, agents paid by developers who are supposed to speed up the bureaucratic process for them.
“The clock runs on construction loans and initial acquisition costs,” said developer Josh Guberman. “You’re paying out money while waiting for your permit to be issued. That can’t be good for business.”
Ilyse Fink, a building department spokeswoman, said the average time for Brooklyn project evaluations is shorter than Manhattan requests, and speedier than in the Bronx.
“It takes an average of 10 days for a new building plan to be filed, data entered, assigned to plan review and examined in Brooklyn,” she said.
Count Karl Fischer among the skeptics.
One project had the architect tussling with plan examiners for 10 months before it was finally approved last year. Fischer said the process shouldn’t take more than two months, but concedes that the development community may be a victim of its own success.
“Brooklyn has too many projects and too few staff,” he said.
Fischer said the department is simply “overloaded with work,” making it difficult to make appointments with the plan examiners.
Guberman said the building department’s workload in the borough has tripled over the past five years without a corresponding increase in people and resources. The infrastructure in place at the department “hasn’t got a fair shot” at handling the larger workload, he says.
“There’s a direct correlation between the volume of work that’s coming to the desks of these plan examiners and their ability to turn out and approve plans,” he said. “It’s simply untenable to maintain the same schedule and the same turnaround time for three or five times the business.”
He predicts the problem of delays is set to get worse, considering that Brooklyn has been receiving more applications than Manhattan since the first half of 2004.
Developers also said some of the blame lies with expediters, who are hired to assist architects and owners in securing approvals from the buildings department.
Katan called expediters the major cause of delays and accused them of collusion with unscrupulous architects in creating problems. He said the expediters clog up the system with blind appointments in the department’s Borough Hall offices, not tied to specific plans, then sell the appointments to colluding architects eager to secure speedy approvals.
In the past two months, the buildings department has moved to check the abuse by banning blind appointments and requiring that every appointment specify the particular project plan to be seen by the plan examiners. Katan said the changes will improve the situation.
Fischer said he worries the new system might actually make things worse, especially the elimination of walk-in appointments, which he said might create longer waiting times to secure appointments with plan examiners.
Engineer Scott Schnall, who runs a Brooklyn-based expediting firm, agreed. He said the new regime, which eliminates the walk-ins and relies on a telephone system for making appointments, has already caused appointments to start running one month behind and has doubled the time it takes to get approvals.
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Rise of interest-only loans pushed by institutional investors, not eager buyers [more]
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The gulf between the revived Midtown and laggard Downtown leasing
markets widened in November, though brokers said 2005 will see the gap
closing as part of an overall pickup in activity. Manhattan
vacancy rates remained steady at 10.6 percent in November, rising only
slightly from the October rate of 10.5 percent, according to monthly
figures complied by Grubb & Ellis. Despite the nominal rise,
vacancy rates remain near a two-year low that promises to shrink as
Midtown inventory decreases, the company said. [more] -
The shops of the Time Warner Center are nearing their first anniversary, and as some outlets tally up numbers that surpass their sales projections, brokers are casting their first tentative votes for the success of the urban mall. There’s vertical retail traction in Manhattan even if some critics still say the shopping experience comes straight from the suburbs.
More than 90 percent of the 325,000 square feet of retail space was preleased to upscale shops and restaurants before the Center’s delayed February opening. One space in the six-floor arcade remains empty.
“There are three tenants we are negotiating with two are apparel, one is food,” says Webber Hudson, executive vice president at Related Urban Development, a division of The Related Companies.
The 80-story residential and commercial towers at Columbus Circle, built by The Related Companies and Apollo Real Estate Investors, created a retail hub in an area that was largely a commercial wasteland. The mall opened three months late, dogged by talk of past failures for vertical retail projects in Manhattan.
After betting big paying as much as $500 a square foot retailers have stuck it out and most appear to be thriving.
Tommy Todd, manager of Bar Masa, an offshoot of the exclusive sushi restaurant Masa, located on the fourth floor, was suffering a high waiter-to-customer ratio last summer.
But things have turned around, he said.
“We are doing quite well,” he said. “It’s what we hoped for. The customer mix is interesting. We have a lot of guests coming that work in the building or neighborhood. In addition, we’ve got people that live in the neighborhood and tourists.”
Retailers such as Tourneau, A/X Armani Exchange, Sephora, Williams-Sonoma and Borders Books and Music are also surpassing expectations for sales, according to brokers.
Litsi Yahes, manager of Tourneau, says the ground-floor store is seeing a conversion rate the percentage of people who actually make a purchase of about 20 percent.
Even stores on upper floors are moving enough merchandise to meet their targets, seeing more locals as customers than tourists.
“The store is doing well,” says Igor Credali, business analyst for Sephora, located on the second floor. “We’re on target.”
Third-floor audio equipment retailer Bose’s sales are at 160 percent of projections for the year, with about 750 customers visiting the electronics store daily and a conversion rate of 10.8 percent.
Even the expensive restaurants that set up shop under the eyes of a legion of critics to say nothing of discerning New York diners are reporting good results.
Brokers say the presence of the luxury Mandarin Oriental hotel invigorates the customer mix, adding tourists to a potential clientele of building residents, local office workers and nearby neighbors.
Top-notch restaurateurs were bought into the upper floors of the mall in the hopes that consumers would travel up to eat and shop on their way back down. Elite restaurants such as Jean-Georges Vongerichten’s V Steakhouse, Per Se, Caf Gray and Masa have gotten mixed reviews (four stars for Pe Se from the Times, three unofficial stars for Masa and one for Bar Masa, two for Caf Gray and one for V Steakhouse.)
“As it pertains to the restaurant side, it’s a smashing success,” says Alan Napack, director of retail services at Cushman & Wakefield.
But in a food-obsessed city, the Time Warner Center may owe its success to Whole Foods, a trendy health food store.
“To me, Whole Foods was a stroke of genius,” says Napack, who negotiated leases for A/X Armani Exchange and Blair Delmonico. “It’s just bringing a ton of people into the center.”
Napack said he recently spent 20 minutes at the checkout line there, but continues to brave the crowds. Many shoppers are making the trip across town for premium groceries, he says.
The Time Warner Center “was probably one of the only vertical spaces in Manhattan that was actually thought out. It wasn’t an afterthought,” he says. The retail space was the work of developer Ken Himmel, president and chief executive officer of Related Urban Development, who specializes in development of urban vertical shopping centers and whose work includes the eight-story Water Tower Place in Chicago.
Though the mall omits a pedestrian movie theater a fixture of suburban malls it is instead home to Jazz at Lincoln Center on its fourth floor.
“Things like that are a little bit out of the box,” Napack says. “They are going to bring people through the center all the time.”
Faith Hope Consolo, vice chairman of Garrick-Aug Associates, says other vertical malls, such as the Trump Tower, Herald Center and A & S Plaza, suffered because New Yorkers don’t have time to travel upward.
“There’s no reason to go inside and upstairs, there are so many choices at street level,” she says. “But let’s remember the vertical retail that did work: that was the World Trade Center, where you had 100,000 people passing your door every day.”
Prices for retailers at the Time Warner Center are somewhat high for Manhattan. Napack says the last deal he did at the Time Warner Center was a ground floor lease at $350 per square foot.
According to Hudson, leasing rates vary broadly but top out at $500 per square foot.
The average retail rent in Manhattan is $150 per square foot, but Fifth Avenue rents are as high as $1,400 per foot, while the financial district bottoms out at $75 per foot. Marquee shopping drags such as Madison Avenue and 57th Street see rents of $800 per square foot, Consolo says.
She believes the Shops at Columbus Circle need to check their post-holiday results before success can be ascertained.
“Until we see the project mature, we really don’t know,” she says. “So let’s revisit it after the first quarter of this year.”
Developers are more inclined to an outright declaration of victory, claiming average retail sales per foot of “well in excess of $1,000,” Hudson says.
That may lead to even higher rents in a new year they predict will continue to see strong sales, especially with the initiation of a multimillion-dollar marketing campaign reaching far outside the mall’s established trade area.
“When we analyze rent as a percent to sales, there is a lot of room for rents to grow,” Hudson says. “As for sales, we see no reason for sales to soften.”
The Real Deal
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Acclaimed designers help developers gain higher prices in fringe areas; building costs high [more]
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Rupert Murdoch’s record-setting deal to buy a $44 million Fifth Avenue penthouse provided a shot in the arm for the high-end Manhattan apartment market in December, as overall inventory shrank, brokers and appraisers said.
Murdoch’s agreement to purchase the late Laurance Rockefeller’s triplex co-op at 834 Fifth Avenue capped a season that saw a good number of high-priced transactions.
“The reported sale did more to energize the upper-end market than any Wall Street report could,” said Kathy Korte, manager of Sotheby’s Midtown office. Some buyers had bet on a drop-off in prices after the start of the year, “but I think that is wishful thinking on their part. There has been a new energy in the market since after the election.”
Jonathan Miller, president of the appraisal firm Miller Samuel and author of the Douglas Elliman Manhattan Market Overview, said the upper-end of the market appeared to be “healthy.”
“We have seen a lot of transactions in excess of $5 million since this fall,” he said. “Those deals set the tenor of the market, and it says that people feel pretty confident about the market over the next year.”
Miller said in mid-December that there had been a drop in overall transactions compared to the month before, but attributed it to the usual slowdown after Thanksgiving.
He also said the market was seeing price increases, “but not at the level we’ve seen in the last couple of months.”
Miller said he anticipated 3 percent growth in fourth-quarter prices.
Inventory always in short supply was expected to show further decline for December following a significant drop-off in November.
The number of condo and co-op exclusive listings tracked by Miller dropped to 4,694 in November, down from 5,207 the month before, a 9.9 percent decrease. Listings were down 6.7 percent compared to November 2003.
“There was a noticeable drop,” Miller said.
Previously, inventory had been relatively flat at around 5,100 listings from April through October.
The first quarter will be critical, as buyers are flush with cash in January and February. Wall Street bonuses were widely projected to be 10 to 15 percent higher than the previous year. Korte said she expected a few top earners to “do a lot better” and spur three or four massive, top-of-the-market buys in 2005.
Korte also said Europeans were in the market in bigger numbers due to the weak dollar. “We’re seeing a lot of people contact us for investment properties, gravitating to new development,” she said.
Overall, Miller said he doesn’t expect to see price increases in 2005 equal to 2004′s price gains.
“I don’t think it will appreciate at the same pace as 2004, and I don’t know if it would be healthy if it did,” he said.
Jeffrey Jackson, chief economist at appraisal firm Mitchell, Maxwell & Jackson, said he is seeing the market enter a new phase.
“The market appears to be entering unfamiliar territory equilibrium,” he said. “Statistically and anecdotally we see a balanced market with the expectations of buyers and sellers generally in line.”
Mortgage rates will rise moderately, Miller predicted.
“I think they will trend up through 2005 as a result of the improving economy,” he said. “There will likely be only modest increases, because the Fed is doing everything it can to prevent inflation.”
Miller said he expects more residential units to come online in 2005 compared to 2004.
Some industry leaders have pointed to overbuilding in the residential market (see “Predictions for 2005″ story in this issue), but Korte disagreed.
“The outlook is very bullish,” she said. “It’s been 10 years since I’ve heard something like that.”
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Rise of interest-only loans pushed by institutional investors, not eager buyers [more]
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Rupert Murdoch’s agreement to buy the late Laurance Rockefeller’s Fifth Avenue penthouse for $44 million last month may have set a new price record for Manhattan apartments, but several contenders are in the running to surpass the new high water mark though maybe less than there used to be.
There is, of course, the triplex penthouse at the Pierre hotel going for $70 million, a listing shared by Corcoran’s Sharon Baum and Brown Harris Stevens’ Elizabeth Sample and Brenda Powers.
But another property represented by Sample and Powers the penthouse at the Ritz-Carlton hotel on the market for $45.5 million – was gone from the brokers’ Web site as of mid-December.
Sample didn’t return calls about what happened to the potentially record-setting property as of press time.
Another property at the pinnacle of the market – a penthouse duplex at the Trump World Tower selling for $58 million and listed by Michael Shvo is somewhat less impressive than it appears at first glance.
Rather than a duplex, it’s actually listed as two separate one-floor, eight-bedroom and 11-bath apartments, going for a paltry $28.24 million each.
Morgan Goldberg, Shvo Group vice president of marketing, said the properties had always been listed in that fashion since going on the market more than a year ago. “You can purchase both of them,” she said.
If Shvo sells both units at once, it would be similar to Corcoran broker Robby Browne’s $42.5 million sale at the Time Warner Center last year, the previous record, which involved combined apartments.
It’s worth noting, too, that the sales price for the Time Warner deal was also widely reported at $45 million prior to the Murdoch buy, seemingly leaving the title of “most expensive apartment” open to dispute, though sources interviewed recently said $42.5 million was the correct price.
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Brokers who post their listings on Craigslist.org can now make their ads more colorful.
RealtyBaron.com, a Texas-based company, recently introduced a free tool that can add color, images and formatting to postings on Craigslist. The service is targeted to users who do not have experience with Web publishing.
“We like Craigslist.org as much as the next person, but the real estate ads can be a bit bland,” says an introduction to the new tool.
There is a catch, as the site is banking on the failure of those who are trying to sell or rent their home without an agent.
The site requires users to register, thus gathering lead information.
RealtyBaron.com explicitly states its sales goal. “If it doesn’t work out and you decide to use a realtor or agent, return to RealtyBaron.com and we’ll hook you up,” the site says.
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In other creative new ventures, the Kaufman Organization is taking a page out of the residential real estate playbook, having launched a “staging” service for commercial real estate last month.
Partnering with Cort Furniture Rental, a Warren Buffet company, Kaufman has created on-site furnished model office showrooms featuring desks, chairs and tables that are available for rent or purchase. The models allow potential tenants to visualize their businesses in the spaces available and make it easy for them to furnish their offices.
“Having a model in place can help a prospective tenant decide how to best utilize the floor plan, and also make smaller spaces more attractive,” said Kaufman leasing director Barbara Raskob. “It also affords us the opportunity to show how the space can be laid out.”
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To jaded Manhattanites, the residents of western Chelsea’s newest condominium development once belonged in distinguished company think Lewis and Clark or Vasco de Gama in the pantheon of explorers in unknown territory. The westernmost reaches of the neighborhood were the last frontier.
Aileen Grossmann, director of sales for The Heywood, a new luxury condominium conversion of a prewar printing house on Ninth Avenue and 26th Street, doesn’t go that far, but admits mention of the area still raises an eyebrow or two.
“A lot of people look at us like we’re pioneers,” she says. “It’s like with the Chelsea Mercantile when it opened on 25th Street and Seventh Avenue. People said, ‘I don’t want to live way over there.’”
The building’s location in western Chelsea is an interesting one. It’s near a large low-income housing project, and steps from the greatest concentration of contemporary art exhibitions in the world.
According to Fionn Campbell, an independent Chelsea broker, “the city buildings haven’t prevented over 240 art galleries and very chic restaurants from moving here.”
Campbell’s was the first sale made at The Heywood, a three-bedroom, 2,000-square-foot corner apartment to an international artist seeking a New York pied- -terre.
The project is developer Henry Justin’s second conversion of an historic commercial building into a luxury condominium. He also converted the Cass Gilbert at 130 West 30th St., in the mostly commercial garment district. That development saw 45 luxury apartments snapped up in 45 days the fastest selling project in the history of Douglas Elliman, according to the company.
The conversion of the Gilbert, named for the great architect who designed it, was performed under Landmarks Commission supervision, after “two years, four dozen meetings with planning boards, the planning commission, Landmarks, the city council and subcommittees,” says Justin.
In contrast, “The Heywood comes to me as a gift,” Justin says. “Here I had a 10-story architecturally significant building with 50-unit approval from the Buildings Department. My love is doing restoration of turn-of-the-century buildings, turning them into high-end residential units.”
Built in 1913, the building is a monument to prewar durability. “It has four feet of concrete between floors,” says Grossman. “The city could go under, but this building will stay.”
Within reason, Justin’s restoration is trying to keep to prewar standards. “In Manhattan, most people like to sheetrock their ceilings,” he says. “I have four guys, arms flailing eight hours a day, putting close to six coats of PlasterWeld, StructureLite, a full coat of gypsum and four coats of compound. I want to give them the building as close to the way it was made 100 years ago as possible.”
The Heywood’s marketers hope its prewar dimensions may sway some prospective buyers to trek another few blocks north and west. Its commercial past means it has 12-and-a-half- to 13-and-a-half-foot ceilings, as well as a healthy number of eight- by 13-foot windows. The smaller windows let in lots of light at eight by 10 feet.
Once Justin decided on the footage for the apartments, opting for five loft-style units per floor, he turned to Shamir Shah, the New York designer who also designed 260 Park Avenue South, who was so enthusiastic he purchased an apartment in the project for himself. “Henry seems to favor larger, more spacious apartments where so many projects squeeze on the square footage,” Shah says.
Shah calls the interiors stylistically “transitional.”
“They are to a degree informed by the history of the building,” he says, “but they take advantage of new and interesting materials, and the detailing on the inside tends to be streamlined and modern,” in keeping with artistic North Chelsea and its “younger, fashion forward sort of crowd.”
Amenities include four-inch-wide white oak flooring, Shaker-style eight-foot doors, central heating and air conditioning and washer-dryer units. The oversized kitchens contain custom handcrafted white oak cabinetry, limestone countertops and Sub-Zero refrigerators. Master baths will feature marble countertops and tub decks with large soaking tubs and Toto water closets.
The Heywood offers four ground floor duplexes, ranging in size from 2,140 to 3,000 square feet, with large recreation rooms, priced below the market rate at under $700 per square foot. Four of the five penthouses are duplexes as well, two of which have spacious outdoor terraces. The largest penthouse is listed at $3.7 million.
Apartments on remaining floors include one-bedrooms with a home office or den, two-bedrooms with media rooms and three-bedrooms with three full baths. Prices range from $1.3 million to $2.2 million.
Scheduled for occupancy this summer, the Heywood opened for sales in November and sold 25 percent of its units in a few weeks.
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Fast sales at new project; critics point to weak design [more]
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Boerum Hill
State Renaissance Court
Schermerhorn, Hoyt and State Streets
Developers last month arranged financing for a pair of connected buildings, one of which has eight floors, the other seven. The mixed-income affordable apartment rental project is being developed by the IBEC Building Corporation and the Strategic Development Group under the auspices of the city’s Department of Housing Preservation and Development. A later phase of the project will include 14 two-family townhouses on the site.Central Park South
Windsor Park by Gwathmey Siegel
58th Street and Avenue of the Americas
The Former Helmsley Windsor Hotel is being converted to 103 condo apartments. Sales began the day before Thanksgiving and there were contracts drawn up for 42 units by mid-December, around half of which are signed. The building includes two penthouses, priced at $13 and $16.25 million, and seven duplexes priced from $3.3 million to $3.6 million. The developers are Yitzchak Tessler and Meyer Chetrit. Contact: The Sunshine Group, 212-750-0500.Dumbo
Jehovah’s Witness Complex
Construction is scheduled to begin this year on a massive complex for the Jehovah’s Witnesses following approval last month by the City Council zoning subcommittee. The three-acre waterfront industrial site will include four towers, the tallest 20 stories high, a large, glassed-in welcome center, a dining hall, a church and a 1,110-car underground garage. It will house around 1,600 Witnesses who work in the group’s Brooklyn Heights headquarters, according to the New York Post. The full City Council was expected to approve the plan at the end of December.Harlem
The Kalahari
116th Street between Fifth and Lenox Avenues
The 250-unit condominium will have its apartments sold at market rates, with 30 percent reserved for moderate-income buyers and 20 percent reserved for low-income buyers. Construction is expected to begin in June 2005 and be completed by mid-2007. The developers are Carlton Brown of Full Spectrum Building and Development and Ron Moelis of L & M Equity Participants.Harlem
Morningside Court
West 117th Street between Morningside and Manhattan Avenues
The 49-unit condominium was completed in November in the last phase of renovating a block of vacant buildings. The one-, two-,three- and four-bedroom units were sold for an average price of $145,844. More than 95 percent were available to buyers earning less than $75,000 a year. The developer was Morningside Builders. The architect was Roger C. Lewis. The Harlem Community Development Corporation served as the marketing agent.Hudson Heights
The Bennett
736 West 187th Street
The seven-story building, being marketed as the first ground-up condo in the Hudson Heights area, is currently under construction and is expected to be ready for occupancy in summer 2005. Fifty-five units are currently on the market, with apartments ranging from 672 to 1,395 square feet. One, two- and three-bedroom condominiums are asking $295,000 to $653,000. The building offers 30 indoor and outdoor parking spaces. Contact: The Developers Group, 718-222-1545.Lower East Side
The Garfield Building
142 Henry Street
The seven apartments in this former manufacturing building built in 1912 will range from 1,550 to 1,900 square feet. Prices range from $850,000 to $1.675 million. The building, located just below East Broadway, has common roof access and 360 degree views on several top floors. The architects, Ronald Castellano and Christopher Haynes, previously worked with architects including Richard Meier, and are also the owners of the building. Contact: Frank Torre, Corcoran, 212-941-2544.Lower Manhattan
Block bounded by West, Chambers and Warren Streets
A 400-unit tower four blocks north of Ground Zero is being planned by a Resnick family partnership. The city’s Economic Development Corp. signed off on the sale of the land in December allowing the project to go forward. The 383,000-square-foot building will include either market-rate rentals or condos, and construction is expected to begin this month. The project will also include a community facility and space to be leased to P.S. 234.Lower Manhattan
133-135 Greenwich Street
A 30-story luxury condo is planned by Thames Greenwich LLC, which purchased the site for $24 million. The seller, YL Real Estate Developers, will retain a small interest in the project.Upper East Side
219 East 67th Street
Five loft-style apartments at the former 36,000-square-foot Christie’s East auction house between Second and Third Avenues recently went on the market. Full-floor 4,665 square foot apartments range from $5.4 million to $6.75 million and the 5,886-square-foot penthouse duplex is selling for $10.4 million. Apartments include a private underground car park accessed by a remote-controlled elevator. The units will be delivered in January, the New York Observer reported. The developer is Shahab Karmely and RFR Realty. Contact: Carrie Chiang and Ralph Krueger, Corcoran, 212-836-1088.Construction update
Lower East Side
Avalon Chrystie Place
Bowery and Houston Street
A $150 million building, the first of four planned on East Houston Street, was topped off by Mayor Bloomberg in November. The developer, AvalonBay Communities, expects construction to be completed by December 2005. The building will occupy the south side of East Houston Street between Chrystie Street and the Bowery. It includes 361 mixed-income rental apartments, a 42,000-square-foot recreational and community facility and two floors of retail space. The project was designed by Arquitectonica, and SLCE. The four buildings will have a total of 712 rental units.Sales update
Chelsea
Vesta 24
231 Tenth Avenue
The 14-story, 22-unit condo sold out in October in a day and a half, according to the Times. Two and three-bedroom units range from 1,420 to 2,500 square feet, and from $1.16 to $3 million, according to Corcoran.com. Contact: Jim Brawders and Cay Trigg Blau, Corcoran, 212-343-5420.Downtown Brooklyn
Boulevard East
53 Boerum Place
More than 80 percent of the 99 units were sold at the newly constructed condominium by mid-December; 14 units are still available. Studio, one- and two-bedroom apartments are asking $250,000 to $700,000. SDS/Procida is the developer; the Stephen B. Jacobs Group designed the building. Contact: Cheryl Nielsen-Saaf, Corcoran Group Brooklyn,
718-522-4919.Forest Hills
The Windsor
108-24 71st Street
More than 45 percent of the apartments in this 21-story, 95-unit condominium sold in their first month on the market, according to The Marketing Directors. Apartments range from 615 to 1,752 square feet. The project was developed by Cord Meyer Development and designed by Ismael Levya Architects. Contact: The Marketing Directors, 212-826-8822.Lower Manhattan
The Crest
63 Wall Street
More than 300 apartments were rented in the 37-story, 476-unit building since it went on the market six months ago, according to developer Metro Loft Management. Studio, one- and two-bedroom apartments feature 425 to 2,000 square feet of living space. The building once served as the corporate headquarters of banking giant Brown Brothers Harriman & Co. Contact: Citi Habitats Marketing Group, or visit crestnyc.com -
Atlanta
Commercial
Low rents and government tenants have kept buildings nearly full in the Northeast Expressway/South office market. While not a particularly high-profile market compared to Midtown or the Central Perimeter, the average occupancy in big developments in the area is more than 90 percent, compared with the low 80s found in most other pockets of the metro-area office marketplace, according to the Atlanta Business Journal.
Boston
Residential
Sales of single-family homes in Massachusetts fell for the third straight month in October. The 5.3 percent slump was the biggest year-to-year decline since a drop of 7.6 percent in May 2003, when concern over the war in Iraq still had consumers skittish about house hunting. The October median sales price for single-family homes jumped 12.4 percent from a year ago to $344,950, and condo sales remain strong.
Residential/Commercial
Low mortgage rates have continued to fuel residential construction in Massachusetts. Permits were up 10 percent from January through September compared to the same period in 2003, according to the Boston Globe.
Chicago
Residential/Commercial
Large apartment rental building sales were on pace to set a record this year, according to Appraisal Research Counselors. There were $379 million in sales through the third quarter, which would be second only to 2000 if no other deals closed, though there were several big properties currently on the market. Private investors and condo converters predominate among buyers, brokers say.
Las Vegas
Residential
The median cost of a new home in Las Vegas slipped to $272,930 in October from $279,000 in September, according to Home Builders Research, but prices still are up nearly 32 percent from a year earlier. Building permits dropped 45 percent in October compared to September, but are still up 40 percent compared to last year, according to the Las Vegas Review Journal.
Los Angelos
Residential
California’s foreclosure rate is expected to climb in 2005 after reaching the lowest level in more than a decade during the third quarter of 2004, according to DataQuick Information Systems. A total of 37,875 homeowners statewide were sent default notices between January and September, compared to 51,182 people who received them during the same period in 2003.
Commercial
A historic Hollywood studio that was the former headquarters of Columbia Pictures has been sold for $110 million. The private equity firm GI Partners bought the 17-acre Sunset-Gower Studios from Pick-Vanoff Company. “Mr. Smith Goes to Washington” and “I Dream of Jeannie” were filmed at the studio, which will remain in use.
Miami
Residential
Roughly 10 to 15 percent of the new condo stock in South Florida is being purchased by investors, causing concern for some about too much speculation in the region’s housing market, according to Realtor.org. Approximately 10,000 units are being converted.
Philadelphia
Commercial
Signs are pointing to a possible comeback in the suburban office market, according to Grubb & Ellis. Absorption in the third quarter was at levels not seen since the fourth quarter of 2002, with 162,805 square feet taken off the market. The overall vacancy rate still stands at a steep 22.4 percent, however, according to the Philadelphia Business Journal.
San Francisco
Commercial
Tishman Speyer has more than doubled its San Francisco footprint, using cash from its Dec. 1 public offering in Australia to snag stakes in two office buildings, at One Bush St. and 595 Market St. The company also paid $51 million to buy 300 Spear St. a parking lot which it plans to transform into one of the city’s largest residential developments. The residential project will have 650 luxury condos and is expected to break ground in April 2005.
Residential
The state Department of Real Estate, which licenses brokers and salespeople, said it received more than 10,000 complaints in the fiscal year ended June 30, up 29 percent from the previous year, according to the San Francisco Chronicle. The increase could have to do with the increased numbers flocking to real estate as a profession in California. Since 2001, the number of licensed real estate agents climbed by 25 percent, to 393,750 as of this summer.
Seattle
Residential
The median sale price of a home in King County, where Seattle is located, surpassed $300,000 in November, marking the first time that residential prices have topped that level.
Washington, D.C.
Residential
The Washington, D.C.-Maryland-Virginia metropolitan area registered some of the fastest rates of home appreciation in the country during the third quarter, according to the Office of Federal Housing Enterprise Oversight. Housing costs in the District of Columbia surged 23.95 percent compared to the year before, giving it the No. 4 berth on the list of rapidly escalating residential markets. Maryland and Virginia also landed in the top 10, with respective year-over-year gains of 22.3 percent and 18.1 percent.
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Townhouses cheaper than rest of Manhattan in traditionally undervalued area [more]
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Traditionally a neighborhood of jet-setters, Central Park South may be getting more sedate, as a slew of luxury hotels turn condo.
However, brokers who work in the area don’t see an impending transformation to a high-end version of Strollerville.
“It will pull more to a neighborhood, but it’s still not going to be like the Upper West Side or the Upper East Side,” said William Morris Hunt III, president of Coldwell Banker Hunt Kennedy.
Other brokers agree.
“People may stay there for longer periods now, but it’s still basically pied-a-terre-land,” said A. Laurance Kaiser IV, president of Key-Ventures Inc.
There are no conveniently located or priced grocery stores, Kaiser pointed out, and while horses pulling carriages in Central Park may titillate short-term visitors, they are a smelly daily reality for full-time residents.
“A neighborhood basically has people of all ages,” he said. “How many people with baby carriages live there? The apartments generally are not large they’re not family apartments and there are no schools around.”
Developers of the Inter-Continental Hotel at 110 Central Park South, set to convert to 65 co-op units, said they’ve been surprised at the potential buyers they’ve heard from, including families.
Stephen Glascock, president of Anbau Enterprises, the Inter-Continental’s developer, said the opening of the Time Warner Center has bolstered Central Park South’s credentials as a residential neighborhood.
“There is no substitute for living right on the park and being able to wake up and see trees in the morning in the center of New York City,” Glascock said. “Central Park Conservancy also is renovating the children’s area across the street, which will just add to the attractiveness of Central Park South as a residential neighborhood.”
Despite the scenery, Central Park South can be a hard sell without basic amenities. In an ironic twist, the full-service hotel-condos being developed in the area might actually curtail development of any services that make the neighborhood more appealing to full-time residents.
However, Kirk Henckels, director of Stribling Private Brokerage, points out that there is a more developed residential neighborhood just two blocks south on 57th Street.
Most apartments in the neighborhood are small one- or two-bedroom units under 2,000 square feet, Kaiser said.
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Could you lock in your current equity value and be protected against future real estate market declines? Could you, in the lingo of the financial markets,a hedge your home equity holdings?
Questions like these are highly relevant for large numbers of homeowners around the country who wonder: How long can the housing appreciation boom last? How long can the average American house gain more than 1 percent a month in value, as it did in the last 12 months, or gain close to 50 percent in value over the past five years?
A possible answer was filed late in November with the Securities and Exchange Commission. A company called MACRO Securities Research LLC expects to begin offering an entirely new financial instrument in the coming months that will permit anybody from individual homeowners to giant institutional pension funds to hedge their bets on housing price changes in real estate markets across the country.
Though the underlying securities structure is complex, the bottom line for homeowners is this: If you are worried that your equity might decline, you will be able to go to your stockbroker and buy a hedge security that protects you from the loss you fear.
If you think it’s likely that housing prices will fall in your area over a period of time, you could buy what the SEC filing describes as a “Down-MACRO” that insulates you against equity loss. Think of it as taking what’s known as a “short” position on a stock. You are expecting or betting that an asset, in this case your house, will sell for less at some point in the future.
If the system outlined by MACRO in its S-1 filing at the SEC works as planned, your short or down position will be matched with an investor probably a big institution such as an insurance company or pension fund that buys a “long” or “Up-MACRO” position for its own portfolio-hedging reasons.
The ambitious MACRO concept for a new market of housing price-indexed financial instruments might not be credible, were it not for its developers’ sterling credentials. Two of the co-founders, Robert Shiller and Allan Weiss, helped pioneer the system of local housing price indexes now used by the federal government, investors Fannie Mae and Freddie Mac, and many large mortgage and housing firms to gauge property value changes in hundreds of local areas. Their firm, Case Shiller Weiss of Cambridge, Mass., also created the “CASA” automated property valuation system that many lenders and banks use to estimate home real estate values online, at far lower expense than conventional appraisals.
Shiller, an economist at Yale University, is well known for another reason. He wrote the best-selling book “Irrational Exuberance,” which warned about the speculative bubble in the stock market preceding the market bust of 2001 and 2002.
MACRO’s chief operating officer and co-founder, Samuel Masucci III, is a Wall Street hedge fund and mortgage securities veteran who helped develop the “shared appreciation” home mortgage in the United Kingdom.
In an interview, Masucci said the creation of housing price-indexed securities not only MACROs but futures contract trading programs should spawn a wave of innovative, housing-related financial products for consumers and investors. Among those already on the drawing boards are home equity insurance policies offered by insurance underwriters to their homeowner customers, and a new breed of mortgages that carry discounted interest rates because the lender’s risk of loss on the property is hedged in the futures market.
The Chicago Mercantile Exchange confirmed early this month that it is working with MACRO Securities to develop housing price-indexed futures trading programs for institutional and individual investors. The MACRO securities now in registration with the SEC are expected to trade on the American Stock Exchange.
Equity protection is not a new idea. Capital-market experts have been working on ideas for years that would tap into the nation’s largest, relatively illiquid asset Americans’ estimated $22 trillion in home real estate holdings. But the development of accurate, widely accepted housing price indexes covering hundreds of markets, even down to the ZIP code level, has opened the door.
Meanwhile, in Syracuse, N.Y., homeowners who live in the city and want to insure their equity against market reversals can do so already. Home HeadQuarters Inc., a nonprofit group, insures between 50 percent and 150 percent of a home’s value against loss of up to $200,000, for a one-time premium of 1.5 percent of the home’s value. The program requires residency for a minimum three years, and is calibrated to an index measuring changes in median home sale values.
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Ken Harney is a real estate columnist for The Washington Post. -
Last month’s column discussed planning for an assistant. Once you’ve decided you need one, it’s important to conduct a search with a plan behind it, or you may find yourself adding to your problems instead of alleviating them with capable help.
Starting a search for someone who can provide top-drawer support is often the toughest step, and the question that I’m most often asked is, “Where do I look for an assistant?”
My recommendation is to recruit from real estate licensing schools. The market is flooded with bright, new aspirants who are eager to put their recently learned skills to real-world use. It’s win-win for both sides: novices have the opportunity to work with and learn from an established agent while brokers will get licensed salespeople who can take on a broad range of responsibilities.
The best opportunities often go to people who don’t wait to be called. Ervin Hechavarria, who now works for Prudential Douglas Elliman, scoured the Web sites of top brokerage firms when he was moving to New York from Washington, D.C. He focused on top brokers and approached the ones with whom he wanted to work. Ervin is now with the Heddings Property Group, a unit of the larger firm. “I liked his gumption,” says Douglas Heddings, managing director.
Like other job applicants, Hechavarria went through the interview process before he was hired. Every broker has a specific trait he is looking for. Alan Pfeifer, a vice president at Halstead Property, seeks out those with business backgrounds. Lorraine Weiss of Prudential Douglas Elliman wants someone who is “super organized [and] very into details.” Outline the skills and job requirements that are most important to you and work from that list as you meet applicants.
Prepare for the interview process the same way you would for a pitch with a singular focus. Develop a list of questions. Here are some suggestions:
–Why are you interested in real estate? This position?
–What do you hope to gain from this experience?
–What do you expect from me?
–Where do you see yourself in 12 months?The answers will give you insight into the person’s career aspirations and expectations.
The interview will also reveal some important business attributes, such as the person’s professional manner, his conversation skills and his ability to perform under pressure. It’s also an opportunity to determine if you and the candidate can work well together. “I want to make sure that the chemistry is right before I make a final decision,” says Pfeifer.
Working with an assistant can be a rewarding experience, unless, of course, it’s not. The stress level in this industry can be high. Don’t take out the day’s frustrations on your staff, who may give less of themselves and take a less enthusiastic view of the business.
Treat them with respect and “give them time to adjust to their new responsibilities,” says Jeffrey Rothstein, a Prudential Douglas Elliman executive vice president and director of sales. Make them feel like they are part of the team. As Hechavarria says, “I have a deep sense of ownership” regarding his team and their work. That pride and loyalty is priceless.
But what happens if the employer-employee relationship doesn’t work out? “Terminating someone is not easy,” admits Pfeifer. “I try to make it a gentle and understanding process. No one goes into a relationship thinking that it will not succeed. When failure happens, it’s upsetting for all involved parties.” Go to your Human Resources Department for guidance. It’s important to know and follow the proper legal procedure if you need to let your assistant go.
You now have what you need to plan for, hire and work with an assistant. Good luck!
Ms. Muller is president and CEO of Esther Muller Consultants.
