The Real Deal New York

After a year of tumultuous financial events, buyers have gone from “more is more” to being wary of ostentation. Toning down luxe pitches” class=”read-more-link”>[more]

This month, The Real Deal goes behind the scenes at Downtown Brooklyn’s BellTel Lofts, the Dover condominium in West Harlem and Tempo in Gramercy, to find out how developers who started their buildings in the pre-crash financial markets are tackling the downturn.
What’s a developer to do?” class=”read-more-link”>[more]

As 2009 starts, restaurant industry brokers expect inexpensive eateries to continue adding locations to capitalize on demand for lower-priced fare in the economic crisis. Any restaurant company looking for space will have many choices and greater negotiating power, after a wave of closures last year that is only expected to intensify in 2009. [more]

While the credit crisis halted the $6 billion Atlantic Yards project rival Forest City Ratner snatched from it three years ago, Extell Development Company has emerged as the most active developer in the rehab of Manhattan’s West Side. If Extell’s head Gary Barnett has made the right bet on the area, he may emerge as one of the last men standing in New York City real estate. Extell plows ahead” class=”read-more-link”>[more]

One of the most profound impacts of the Wall Street crisis on New York’s real estate market is the sudden emergence of the new buyer’s market, a shift in the balance of power between buyers and sellers we explore in a package of stories this month. Buyers getting bolder” class=”read-more-link”>[more]

Most regard 2008′s records, which The Real Deal details as part of a series, as footnotes, rather than the main stories of the year.

That’s because, as our year in review recounts, after Wall Street collapsed in September, the key question became: how low will the city’s commercial and housing markets go? In our Q & A, residential and commercial players say they are bracing for a brutal year. On the commercial side, the consensus is the already elevated vacancy rate will increase further as the financial industry suffers and office space is dumped. A year to forget” class=”read-more-link”>[more]

With residential sales slowing, more brokers who once worked exclusively in sales are now taking deals that they never would have touched in the past: rentals. Daniel Baum, COO of the Real Estate Group New York, said brokers who once looked down on the rental side are changing gears.
Not too proud for rentals” class=”read-more-link”>[more]

While the economy’s gyrations have caused some investors to lose
faith in New York City real estate, experts say some sectors of the
real estate market remain largely recession-proof, and some areas of
the city will almost always lead to strong returns. [more]

As the bottom begins to drop out of the Manhattan office market, the most compelling series of negotiations will not necessarily be between commercial landlords and their tenants, but between those landlords and their lenders.

The record boom in real estate was based in part on a run-up in rents that some critics say was more about prestige than true market value. But now, the collapse of the financial services business and the ensuing economic woes means that trophy towers from the Plaza District to Lower Manhattan may suffer from a prolonged slump in rental income.

As a result, building owners will probably face tough sledding to satisfy their
lenders.

“There were some very aggressive deals done that are going to be problematic,” said Matthew Anderson, principal of Foresight Analytics, an Oakland, Calif.-based market research firm.

Industry experts say landlords will be under considerable pressure to maintain their existing asking rents, but with tenants having a lot more negotiating leverage in the current market, lenders may need to extend a lifeline to their customers.

Scott Singer, executive vice president at the Singer & Bassuk Organization, which brokers financing for real estate firms, said that commercial leases commonly include language that allows the landlord to “rent on market terms.” Therefore, if the market is down, the landlord has the right to rent at whatever the market rates are.

The tipping point comes when the
rents that a building pulls in are not high enough to pay off its debt service. In that case, the challenge is expected to be in
determining who makes the decision on whether to ride out the storm or to call in a particular investment.

Calling in investments

In the current market, loans are often
sliced up into little pieces and redistributed among multiple groups of investors. Therefore, a commercial landlord is often forced to deal with several layers of red tape before a decision is made on whether to grant a loan extension or refinancing, or to call in a default.

“In certain cases, banks are willing to talk, but they’ve sold off pieces of the loan to institutions that aren’t willing to talk,” said attorney Ed Mermelstein. “There are so many players involved in each of these loans that no one can agree.”

In addition, many commercial loans are not administered by the original lender,
but by third-party banks whose sole responsibility is to manage the performance of
the investment.

“A lot of the lenders no longer hold those loans; they seem to be in the hands of a special servicer,” said David Csontos, senior vice president in the investment sales division at GVA Williams. “They are serving at the behest of the bondholders.

“At some point in time, somebody is going to have to step up and say, ‘Foreclosure is the right thing,’” he said.

One building that’s already been affected by the market downturn is 620 Sixth Avenue in Chelsea, which was acquired in 2005 for $287 million by a group of top Manhattan real estate investors, including Yair Levy, Joe Chetrit and Charles Dayan.

Sources say the mezzanine debt was put up for sale in recent weeks after the owners failed to turn over enough leases to higher-paying tenants and decided not to expand the building, which had 200,000 square feet of air rights that could have been developed into condominiums or additional office space.

The landmark 670,000-square-foot building was appealing to the investors because it is one of the top retail sites in the area. In addition to Filene’s Basement and Bed Bath & Beyond stores, it has office
tenants that include Nike, the Gap and
Yahoo!

The owners attempted to raise rents by more than 50 percent, up to about $65 a square foot. And while designer Cole Haan recently expanded its existing lease by 28,000 square feet, the building has more than 70,000 square feet of vacant office space on its top floor. “That’s an example of a fabulous building that was acquired with too much debt,” a source said.

Officials at Newmark Knight Frank, which is leasing the space, and at the Chetrit Group were not available for comment.

Rental incomes reel

Few commercial landlords face more near-term exposure than Broadway Partners. The New York-based firm went on a spending rampage over the past seven years, acquiring about $14 billion in commercial real estate nationwide.

As part of its shopping spree, the firm has engaged in a number of highly leveraged acquisitions that were financed with short-term debt and based on fairly steep projections of rental income, including several high-profile deals in New York.

In June 2007, it bought 450 West 33rd Street, a 1.6 million-square-foot office building on the far West Side, for nearly $700 million. The firm put the building up for sale in early 2008, but a deal failed to materialize. As first reported by the New York Times, a new report by research firm Real Capital Analytics lists the tower as a troubled asset that is in danger of failing.

The building has been home to the New York Daily News, the Associated Press and other media and publishing companies.

Prior to the deal, asking rents had been in the low $40s. However, the Hudson Yards area had been expected to undergo massive commercial and residential growth. Now, with the economic crisis ravaging real estate development, nearly all major projects in the area have been halted.

Broadway Partners officials were not available for comment.

The firm’s other highly leveraged deals include the 2006 acquisition of 340 Madison for $550 million, the 2007 acquisition of 280 Park Avenue and the acquisition of the Beacon Capital Portfolio, which included the Park Avenue Atrium, at 237 Park Avenue.

Park Avenue Atrium took a hit from the collapse of Bear Stearns, which in 2007 expanded an existing lease to 250,000 square feet. Cushman & Wakefield now lists more than 166,000 square feet of sublease space in the building, but has not listed an asking rent.

And Broadway Partners has since started a series of deals to deleverage its assets, including the sale of 340 Madison Avenue, but it has $900 million in short-term debt coming due this month.

Meanwhile, Boston Properties, the real estate investment trust led by Mortimer Zuckerman, got an early taste of the financial crisis when Lehman Brothers, one of its largest tenants, collapsed.

In addition, the 118-year-old law firm of Heller Ehrman shut down in September, exposing 144,000 square feet of space at 7 Times Square, where Boston Properties is the landlord.

Doug Linde, president, speaking on a third-quarter conference call with Wall Street analysts, noted that the company received $43 million in annual rent income from Lehman Brothers, which leased 436,000 square feet at 399 Park Avenue, which the company now expects will be vacant through 2010.

The firm also receives $57 million from 48 different hedge funds and $77 million in rent from Citibank, which is shedding space at the Citigroup Center, where rents are expected to drop from $170 to $140 per square foot asking prices. Bloomberg News reported that the company plans to drop the Citigroup name at the building and rename it 601 Lexington Avenue.

“These events clearly came as a shock to us, and it made it clear at the moment that you can’t take anything for granted, and no organization is immune from significant disruption,” Linde said.

After buying the GM Building for $2.8 billion in June, Boston Properties insists that it has very little short-term exposure, noting there is very little space that is up for renewal in the near term; the few leases coming due are priced at half the market rate.

The company says that rents in the building are going for $140 to $200 a square foot.

Nonetheless, developers warn that loans should have a built-in allowance for an economic downturn, because rents cannot continue to rise without end. “The smart landlords see the writing on the wall,” said James Wacht, president of Sierra Realty Corp. “People who bought buildings in the last two or three years, who may have large mortgages, they may not be able to rent space at a rent that’s the market rent.”

However, Steve Kohn, president of Cushman & Wakefield Sonnenblick Goldman, said that landlords were largely justified in what they paid because the indications were that the market was resilient.

“It’s not fair for anyone to look back now and say they shouldn’t have paid what they paid,” said Kohn, whose firm arranges financing for commercial and multifamily buildings. “To be absolutely perfect all the time [is something] we wish we could be.”

Commercial leasing activity was thin in the typically slow month of December, as landlords held off listings until the New Year and potential renters waited for better deals. The industry was further spooked last month by the alleged $50 billion fraud by fund manager Bernard Madoff and the arrest of Marc Dreier, law firm Dreier’s founding partner, who was accused of swindling investors out of $380 million or more. [more]

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Move over, boomers. In the current down economy, Gen X buyers are the ones brokers want.

In a surprising twist of fate, baby boomers paralyzed by crippling stock market losses are being pushed aside in favor of these buyers, who despite their thin credit histories and predilection for borrowing from their parents, are more active in the market.

In recent years, baby boomers who were on the verge of retirement commanded much of the city’s real estate buying power, from high-level executives splurging on trophy homes to suburban empty nesters snapping up city pied-à-terres.

But while their boomer parents are now reluctant to buy or sell homes, younger buyers are often forced to move despite the sinking economy because of life changes like marriage and growing families, making them a key demographic in a recession.

Boomers are “in shock,” said Elaine
Clayman, a senior vice president and top-selling broker at Brown Harris Stevens. “We now have financial insecurity. It’s a really
big change.”

Because boomers have “now lost a substantial amount of their savings,” Clayman said, “they’re no longer looking to buy property.”

Or, as Michael Signet, the director of sales at Bond New York, put it, “I wake up every morning and have to take Pepto-Bismol every time I read about the stock market.”

Of the few remaining buyers, many are under 40, because younger people are more likely to experience life-changing events that force them to move, said Jacqueline Urgo, president of the marketing and sales firm the Marketing Directors. “With younger buyers, it’s not a discretionary purchase,” she said. “You can’t have a baby in a studio.”

Another reason young clients are sought after in the slowing real estate market is because they’re often first-time home buyers. Thanks to the credit crunch, lending restrictions have tightened across the board, and buyers in all sectors of the market are having trouble getting mortgages. But now that sales have drastically slowed since the calamitous Wall Street meltdown this fall, first-time buyers now face one less obstacle than homeowners: They don’t have wait for their current home to be sold before committing to a new purchase.

“A first-time buyer doesn’t have the problem of needing to sell their house to get
the equity,” said Jeff Li, a vice president of Staten Island-based Leewood Real Estate Group, which is marketing homes in its
Estates at Opal Ridge development primarily to young families.

Another advantage, he said, is the new federal tax credit of $7,500 available to first-time homebuyers through the federal Housing and Economic Recovery Act of 2008. That, combined with low interest rates and falling prices, makes it a good time to buy as long as buyers have good credit and money for a sizeable down payment, he said. For many, that requires help from parents. “They’ll probably borrow from their families to get their down payment,” he said.

And many parents seem happy to oblige, despite their reluctance to buy new homes for themselves.

“There are a lot of parents helping,” said David Kazemi, a vice president at Bond New York, who is representing a young, single
man who has rented an apartment in Greenpoint, Brooklyn, for years, but is now looking to buy a one or two-bedroom apartment in the area with help from his parents, who have cash on hand from the sale of a piece of international property.

Kazemi said parents are sometimes willing to help because they’re looking for alternative investments.

“People have lost faith in the stock
market,” Kazemi said. “Real estate’s a little more stable.”

But targeting new, younger buyers requires methods that many brokers are unaccustomed to using.

Clayman, for example, realized recently that tapping her usual pool of clients wasn’t generating many new deals.

“I’m not doing my normal schmoozing,” said Clayman, whose current clients include a newly married young couple who must sell the bride’s former home, a studio in the East 40′s. “There’s an instant rapport with people my own age, but am I going to do any business?” she said.

“To do business over the next five
years, I have to focus on Generation X and
Generation Y,” Clayman said. “They are the ones that have to move. And I have to
communicate with them the way they’re used to communicating.”

To target them, Clayman added a Gen X category to her list of contacts, started sending out e-mail blasts in addition to print mailings, and joined Facebook and LinkedIn. “I’ve been able to get back in touch with some of my old clients who are now having babies,” she said. “It gives you a reason to keep in touch.”

Clayman initially took a fair amount of good-natured teasing from friends of her 33-year-old daughter Justine after she joined Facebook. Originally available only to college students, the social networking site has surged in popularity with 20- and 30-somethings, with more than 70 percent of users age 34 or younger.

“My daughter’s friends say, ‘Your mother is the only grown-up on Facebook,’” laughed Clayman.

But for Clayman, the Web site is much more than a social outlet. It’s a crucially important way of connecting with younger clients in a marketplace where a majority of the few remaining buyers are in their 20s and 30s.

Bond New York also has a Facebook page, Signet said, and advertises in Billboard Magazine and Variety in hopes of targeting younger audiences.

Another way to reach first-time buyers is by targeting renters, said Urgo of the Marketing Directors. Her company is using the tactic to sell units at the Setai at 40 Broad Street in the Financial District, the Atelier at 627 West 42nd Street and the Visionaire in Battery Park City.

“We’re doing more rental mailings
than we have in the past,” she said. “We’re reaching out to higher-end residential buildings and inviting them to move up to home ownership. That young audience — that’s who’s renting.”

And of course, word of mouth is crucial, Urgo said. “The young audience talks up a purchase and refers their friends,” she said. “When it’s your first purchase, it’s part of the cocktail party conversation.”

As for older buyers, they’ll venture back into the market eventually, Urgo said. “It will come back around.”

Potential buyers are now putting very low offers — often 20 to 40 percent less than the asking price — on multiple properties at the same time, a strategy that was virtually unheard of only a few months ago. Sellers, increasingly desperate to unload their property, are countering offers they once would have considered insulting. [more]

In the early 1900s, a stretch of land in Bay Ridge, Brooklyn, near the waterfront was lined with mansions.

While the neighborhood is now known for its collection of single-family homes, at least two of those mansions survived and still exist today as reminders of a bygone time when Bay Ridge served as a vacation destination for wealthy New Yorkers, including merchants, businessmen, politicians and celebrities.

One is a large old stone home that sits on Narrows Avenue between 82nd and 83rd streets. Locals affectionately call it “the gingerbread house,” but its official name is the Howard E. and Jessie Jones House; it was named after its original owners, who were wealthy shipping merchants.

Built in 1917, the two-story, six-bedroom house was designed in the Arts and Crafts style, a rarity in the city, according to Lisi de Bourbon, a spokesperson for the city Landmarks Preservation Commission.

The home, designed by architect J.
Sarsfield Kennedy, is constructed of boulders, and has a roof that looks like thatch but is actually asphalt. The home’s unique architectural style is what earned it landmark status.

“It looks like something out of the countryside of England because of its thatched roof,” said Ron Schweiger, Brooklyn’s official borough historian. “There’s nothing else like it in the city of New York.”

According to Jerry Fishman, who owns it, the home was actually a cottage house
to a larger, pink, Mediterranean-style mansion that sat across the street on Narrows Avenue. That mansion was torn down in the 1950s or 1960s, and five homes now stand in its place.

Fishman, who rarely gives interviews about the home, told The Real Deal that the larger estate belonged to the father of the household, and the gingerbread house belonged to the son.

Fishman and his wife, Diane, bought the gingerbread house in 1985, but the home had been part of his life and the subject of much pining since his childhood.

In 1948, when Fishman was all of 6 months old, he was pushed past the gingerbread house in a stroller (he grew up around the corner on 84th Street).

Years later, he attended Fort Hamilton High School, which sits on 83rd Street, across the street from the gingerbread home.

“I had to have the house. I flunked English because I was looking [out the school window] at the house all the time,” he said.

Fishman even took Diane to see the home on their very first date. “I met my wife 37 years ago, took her here on our first date and told her we were going to have the house,” he recalled. “This house has always been a special place for us. It’s interesting and strange and inviting, and I knew it would go with me and my wife. And I got both of them.”

Fishman said the fascination with his home, which became an official city landmark in 1989, extends far beyond Brooklyn and even beyond New York City. He once received a newspaper clipping from Prague, which listed it as one of the 10 most beautiful places in the world.

In the more than 20 years since he bought the home, it has generated its own community lore. Fishman has even had to debunk some of the neighborhood rumors.

For example, there is an original turning platform in the garage — to turn a parked car around, so it wouldn’t have to be
backed out of the garage — but it no longer works. And, he noted, there is no bowling alley in the basement (that’s another mansion in the neighborhood).

Meanwhile, the other surviving mansion is nearby on Shore Road at 99th Street.
It’s a Mediterranean-style home with a
Spanish-style red-tiled roof, and it surrounds a courtyard.

Now, it’s a Catholic girls’ school, but in the early 1900s it was the vacation home of railroad tycoon “Diamond” Jim Brady. The house is rumored to have doubled as a speakeasy and a casino during Prohibition after Brady died, according to the Brooklyn Historical Society’s Bay Ridge/Ft. Hamilton Neighborhood History Guide.

Brady bought the mansion in 1895 and lived there with the Broadway actress Lillian Russell. She was famous for starring in many of Gilbert & Sullivan’s comic operas, including “H.M.S. Pinafore,” “Patience” and “The Sorcerer.” Russell starred in 13 Broadway shows between 1883 and 1912.

According to the book “Brooklyn: People and Places, Past and Present,” by Grace Glueck and Paul Gardner, Brady and Russell’s relationship was “strictly platonic,” and they simply shared a love of diamonds.

However, her friendship with Brady lasted longer than all of her three marriages.

The book says Brady used to walk down the Coney Island boardwalk in “diamond-studded sandals.” Brady died in 1917 and left the bulk of his fortune to Johns Hopkins Hospital, according to the New York Times.

“There’s a rumor that after he died, the house became a speakeasy and a casino. Then it took on a new name as a Catholic school,” said Schweiger, the borough historian.

The rumor that the mansion was a speakeasy and casino has never been confirmed, but Prohibition was certainly in full force after Brady’s death and before the home was converted into a school.

The Catholic girls’ school that now calls the mansion home, Fontbonne Hall Academy, opened in 1937. Like the gingerbread house, the school is a remnant of the old
Bay Ridge.

“This was the playground for the rich and famous of Manhattan — where they came to be in the country,” Fishman said. “Great mansions were always here in Bay Ridge, but unfortunately, they all have come down because of the price of land.”

Instead of illustrious mansions on acres of property, the residential neighborhood now has blocks of single-family homes.

Shore Road today is lined with a mix of large homes and apartment buildings. “Starting in the 1930s and ’40s, developers started coming in, tearing the mansions down and building high-rise apartment buildings,” Schweiger said. “Very few of the mansions are left on Narrows.”

In Soho, near high-end boutiques like Chanel, La Perla and Movado is 105 Mercer Street, a three-story house with a wholesome-looking green-and-white façade that belies a distinctly bawdy past.

The small home, located between Prince and Spring streets and built around 1899, was reputed to have once been a house of prostitution owned by a madam named Cinderella Marshall, according to the property listing.

The building, on the market for six months, changed hands in June for $3.55 million above its asking price of $3.5 million.

Granted, the sale occurred before the residential market froze up at the end of the summer. But the sale attracted enormous interest, according to Nancy Guo of Massey Knakal, who sold the building.

The listing noted it was once one of many “houses of pleasure” that lined Mercer Street in the 19th century, when “Soho was New York’s largest red-light district.”

However, while 105 Mercer once had company as a former “house of pleasure” in the neighborhood, that’s no longer the case. While the Apex Art gallery at 291 Church Street is located within a building that used to be a brothel, other former brothels in the area — such as 54 Leonard Street, which was also owned by Cinderella Marshall — are no longer standing.

Guo said the building attracted more interest than anything else in the realtor’s books since it was “a strange item in the neighborhood. There are not a lot of townhouses in Soho, and the size is small — so, based on a residential price per square foot, it’s a bit high in terms of the market.”

According to PropertyShark.com, the building has 1,875 square feet on a lot that is 19 by 25 feet.

Located within the Soho cast-iron historic district, 105 Mercer has original fireplaces in the living room and walk-in kitchen. The front doorway, surrounded by columns and with a fanned arch above, framing a glass panel, is also original.

The rest of the building, though, was completely renovated between 2003 and 2006. There are four rooms, each on a separate floor, and three baths.

The previous owner had used the building as a single-family living space, with the kitchen and living room on the top floor, a master bedroom on the second floor and a guest room on the lower level.

The basement, which is half above grade, was used as another bedroom.

It’s not clear how the current owner intends to use the building. Efforts to reach the owner via broker Brian Lover of Corcoran were unsuccessful.

The 19th-century ladies of the night, however, might not recognize the place today. The deck and garden on the roof didn’t exist before the renovations, nor did the cedar-lined walk-in closet in the master bedroom.

Although originally named for the cloth traders who built their businesses in the area, Mercer Street could easily have been named Bordello Street in the late 1800s. While the world’s oldest profession began its life in New York City around the docks, it quickly spread into the growing tenements and slums of the area just west of Broadway.

Timothy Gilfoyle, a professor of history at Loyola University in Chicago, wrote about New York’s burgeoning sex trade in “City of Eros: New York City, Prostitution and the Commercialization of Sex, 1790 to 1920.” He wrote that around 200 brothels existed in the 1820s, but the number rose to around 500 by the end of the Civil War. Landlords seemed to welcome them because they could easily make rent.

Marilyn Stults, a historian, conducts a walking tour that offers a glimpse into the seedier past of 19th- and early 20th-century New York. Stults said, “One of the reasons why the Soho neighborhood became a red-light district in the 19th century is that this formerly residential neighborhood went industrial around the late 1840s.”

After that point, “most of the houses were replaced by loft buildings, which were either factories or warehouses, many with stores on the ground floor, and any remaining houses became upscale brothels.”

According to Stults, “You can be sure that any buildings that are still standing in Soho that were obviously built as houses (rather than lofts) were at some point brothels.”

It’s a fact that, in a strange twist of history, seems to add to their allure today.

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December brought proof that real estate prices are plummeting dramatically as New York City anticipates months of recession and job losses ahead. [more]

[more]

Go to chart: A comparison with the global real estate downturn

Compiled by Linden Lim

In a Webcast interview last month, The Real Deal’s Jill Gardiner spoke to Daniel Baum, chief operating officer of the Real Estate Group New York, and Daniel Hedaya, director of leasing and management at Platinum Properties, about the weakening rental market and its prospects for 2009.

Baum and Hedaya predicted further price reductions and incentives for renters, and even the opportunity to lock in lower rents when leases come up for renewal.

Click here to see the full interview. Every week, The Real Deal posts a new edition of the Webcast, which features exclusive interviews with industry insiders.

The Real Deal: A two-bedroom, two-bathroom Midtown West apartment has seen asking rent drop by 20 percent to $3,600. While that drop is extreme even for this market — where rents are down across the board — according to Daniel Baum of the Real Estate Group New York, there’s nothing unique about the fact that it’s still empty.

Daniel Baum: We’ve seen almost a 20 percent appreciation in the number of vacancies just in the last few months alone. So that was a little bit alarming to see that number come onto the market so quickly and not the demand to absorb it.

TRD: As rents drop from the Financial District to Gramercy to Harlem, buildings throughout the city are also upping the ante on incentives that have already been in place for months. Danny Hedaya of Platinum Properties says just last [month], 99 John Street threw in a second month of free rent in addition to covering brokers’ fees. And he said some buildings are even offering three months’ free rent now. On top of that, a relatively new phenomenon is taking shape, as some existing tenants are actually signing leases at a lower rent when their leases come up for renewal.

Daniel Hedaya: It’s very surprising; it’s really converse to everything that we think of as renting New Yorkers. At the end of the day, most people, when they think about their lease renewal, they think, ‘Well, how much is my rent going to go up?’ Now, in these cases, a lot of them are saying, ‘OK, well, how much can I get my rent down?’

TRD: Some buildings are even offering six-month leases just to get units filled. Hedaya says most of those taking advantage of that are renters waiting for new condos they’ve bought to finish construction or those who are not secure with their jobs. Meanwhile, while many condos have converted to rental recently, that option is
becoming less and less attractive [to developers] as the rental market continues its downward spiral.

DB: It was one thing to switch from condos to rentals when rents were still high, because it might have been a much more viable opportunity. But as rents continue to come down, that opportunity is slowly becoming problematic.

TRD: Despite the tougher landscape, an increasing number of brokers who were once working exclusively in sales are trying their hand at rentals now.

DB: We are seeing a number of brokers who in the past, in all sincerity, wouldn’t even consider working the rental side of the market — you might even say shunning the rental side of the market — who are today now looking to bring rentals as part of their repertoire in order to make an income.

TRD: At the moment, the only bright spot in the market appears to be for renters who have newfound leverage after years of seeing their rent bills shoot up. And with no signs of the economy improving, that dynamic could be in place for a while.

DB: The beginning of 2009, I, like everyone else, have high hopes for. But my question is, we need people to come in who have jobs, and it seems like New York is losing jobs, not gaining them. So the possibilities of things turning around in the short term don’t seem to be all that rosy.

Compiled by Sara Polsky

Last year, the most expensive co-op sale on record occurred in Manhattan, a condo in Brooklyn sold for the highest price ever, and a group of investors paid more for the GM Building than anyone has ever paid for an American office tower. These high-water marks, however, did not define the year that was in real estate.

Residential and commercial brokers say the game changed following September’s financial crisis and the effect on deals will only start to become truly apparent this year.

And so most regard 2008′s records, many of which are listed below, as footnotes, rather than the main stories of the year.

Miller Samuel’s first- and second-quarter 2008 Manhattan market reports for Prudential Douglas Elliman, for example, noted record median sales prices — $945,276 and $1,025,000, respectively. However, according to Jonathan Miller, president of Miller Samuel, the record prices were overshadowed by increases in inventory and decreases in the number of sales throughout the year.

“In the first three quarters of the year, there was a 27 percent drop in the number of transactions,” said Miller. “A lower level of sales is the precursor to a lower level of prices. We saw a market that was seeing modest appreciation or moving sideways.”

Miller said the record-setting median prices in the first half of the year were mostly a product of the “tremendous amount of closing activity in new condos,” particularly high-end ones like 15 Central Park West, and since mid-September, there’s been a “significant” drop in transactions and prices that will be reflected in late-2008 and early-2009 data.

In July, Standard & Poor’s Case-Shiller housing index, which does not include condos or co-ops, lodged a 7.9 percent drop year-over-year for the New York metro area.

Jeff Wolk, president and chief operating officer of Fenwick Keats Goodstein Realty, said transactions in the final months of last year had reached a “virtual standstill” following the turmoil in the financial markets.

“We haven’t seen a standstill since Sept. 11,” said Wolk. “Confidence has been incredibly shaken and at this point, people are taking a wait-and-see approach.”

It’s notable that the record-setting Manhattan co-op sale closed in July. Jonathan Tisch, the chairman and chief executive of Loews Hotels, paid $48 million for a 14-room unit at 2 East 67th Street.

Wolk, however, doesn’t think such sales say much about the market.

“Record-setting prices in a place like Manhattan are always an anomaly because it really doesn’t reflect the full market,” he said. “Will some extravagantly wealthy billionaire or celebrity set a record in 2009? Who knows? I don’t think, however, that we’re going to be seeing record-setting prices for quite some time.”

And Miller believes that such sales are going to be “fewer and farther between,” not only because of the recession, but also because much of Manhattan’s most prized pre-war construction traded in the past few years.

“A lot of the better properties have already been sold,” he said.

Mark Lewis, president of Century 21 New York Metro, said he thought the only bright spots in 2008′s sales market were closings at 15 Central Park West and the Plaza, and Manhattan’s rental market was also extremely weak. “Apartments are renting around 2003 and 2004 prices,” he said. “Landlords are giving away the farm, and very slowly apartments are being absorbed.”

Lewis noted that while all recessions are similar because it seems like they’ll never end, “Manhattan always returns.”

Still, he sees some unique problems in the current market. “The problem is that now there are a lot of holes in the ground that won’t get built,” he said. “Some condo builders can’t even rent their unsold units because the banks won’t let them.”

Those holes in the ground can partially be explained by the run-up to begin construction work before the city enacted changes to the 421-a tax abatement program at the end of June, according to Jeffrey Levine, founder and chairman of Levine Builders and Douglaston Development.

The expiration of 421-a benefits “caused a number of developers to rush in to build at the worst time of the financial crisis,” said Levine. “They spent money, they’re in the ground, and they don’t have construction loans to finish the projects.

“The elimination of 421-a is putting another burden on the new housing development business when it’s suffering. I think it was terrible for the industry.”

In fact, the rush to build under 421-a during the first half of the year may have contributed to a record amount of construction spending in 2008.

In October, the New York Building Congress estimated that city construction spending would set a record of $33.8 billion in 2008, although the trade organization expected to see declines in 2009 and beyond.

The drop-off in building has already started; only three new building permit applications were filed for Manhattan construction projects in September 2008, the lowest number since September 2001, when only a single application was filed.

Levine, who runs both construction and development businesses, said construction costs started decreasing over the summer after rising steadily over the past two years.

Meanwhile, the builder’s development arm, Douglaston, saw the most expensive condo sale ever in Williamsburg this year, when a duplex unit at its Edge development sold for $5.145 million.

There were a couple other residential records in Brooklyn last year: The most expensive condo to ever sell in the borough closed for $7 million at a Dumbo building, and the priciest house sale ever in Brooklyn Heights was recorded when a home on Remsen Street sold for $10.8 million.

Levine said that while he’s proud of the Edge’s record-setting sale, the number of sales overall at the development have reflected current market realities. “Going back two years ago, we lived in a real estate market on steroids. The steroid of choice was the Mickey Mouse mortgage market.

“In July 2007, with the recognition of the subprime demise, we got back to a reality-based housing market,” he said.

“We opened up our sales office [at the Edge] in April 2008. Since then, we have sold 20 percent of the project. Going back a few years ago, that would have been a reasonable amount, if a little less than what we would have wanted.”

Commercial market comes to terms

It was a year of reckoning for the commercial market, too. “We had legacy deals from 2007 that we were able to get done in the first two quarters of 2008, but the second half of 2008, the last six weeks especially, have been brutal,” said Eric Anton, executive director at Eastern Consolidated, at the end of last month. “Lenders have gotten so conservative that even terribly safe deals don’t happen,” he said.

Anton said he believes that 2008 will be remembered for the deals that didn’t get done — such as the sales of Worldwide Plaza, 1540 Broadway, and the Helmsley Park Lane Hotel — rather than those that did.

Others had a less dire take on the market.

“Our market has been defined by pre- and post-Lehman,” said Richard Baxter, an executive vice president at Cushman & Wakefield. “Transaction volume was back to 2004 and 2005 levels. We were coming off two years that were pretty much an anomaly in terms of excess liquidity. It’s certainly returned to normalcy.”

Baxter said that while his firm believes the first and second quarters of 2009 will be challenging, there are “must-sells coming to market where the lenders will want to take whatever losses they want to take.”

The biggest commercial deal of the year was Boston Properties’ $2.9 billion purchase of the GM Building, a price that represented the most money ever paid for an American office tower. “I don’t think they’ll have any regrets whatsoever,” said Baxter. “It’s arguably one of the best locations in the world.”

As the market soured in 2008, the office leasing business started to turn in favor of tenants. “We represent tenants and, unfortunately, to some extent the bad market is helping them,” said Erik Schmall, a senior managing director at Studley.

Studley’s fourth-quarter market report shows a 10.4 percent availability rate in Manhattan, as compared to 7.6 percent a year ago.

Cushman & Wakefield executives said in October that commercial leasing activity in Manhattan was at a five-year low. “Deals are getting significantly more tenant-friendly,” said Schmall. “And I don’t see that trend reversing after Jan. 1.”

2008 records & benchmarks

• A report from PropertyShark.com said foreclosure auctions increased 184 percent on Staten Island and 150 percent on Queens between January and February.

• In the first three months of the year, according to appraisal firm Miller Samuel’s first-quarter market report for Prudential Douglas Elliman, the median sales price in Manhattan was a record $945,276; the average price per square foot was a record $1,289; and the average sales price was a record $1,722,991.

• In May, a group led by Mortimer Zuckerman’s Boston Properties announced that it would buy the GM Building from the Macklowes for $2.9 billion, the highest price ever paid for an American office tower.

• The most expensive condo sale ever in Brooklyn occurred in May, when a penthouse at Dumbo’s Clock Tower building sold for $7 million.

• In June, the Rent Guidelines Board authorized increases on rent-stabilized apartments of up to 4.5 percent on one-year leases and 8.5 percent on two-year leases, the biggest increase since 1989.

• In June, Ikea opened in Red Hook, Brooklyn. At 346,000 square feet, it is the largest big-box store in New York City, according to a report by WNYC.

• According to Miller Samuel’s second-quarter market report for Prudential Douglas Elliman, in April, May and June, the median sales price in Manhattan was a record $1,025,000 and the median sales price of a Manhattan co-op was a record $755,000.

• In July, Standard & Poor’s Case-Shiller housing index reported a record 15.8 percent year-over-year drop for the 20 metropolitan areas it tracks. The index, which does not include condos and co-ops, lodged a 7.9 percent year-over-year drop for the New York metro area.

• The most expensive co-op sale ever in Manhattan closed in July, when Jonathan Tisch, the chairman and chief executive of Loews Hotels, paid $48 million for a 14-room unit at 2 East 67th Street.

• Only three new building permit applications were filed for Manhattan construction projects in September 2008, the lowest number since September 2001.

• In September, the Mortgage Bankers Association released a report saying that nationwide, 9.16 percent of mortgages for one- to four-bedroom homes were at least a month late in payment or in some stage of foreclosure during the second quarter of the year, the highest percentage of overdue loans since the MBA began tracking the statistic 39 years ago.

• On Sept. 29, the Dow fell 777.68 points, the largest one-day drop in history.

• Cushman & Wakefield executives said in October that commercial leasing activity in Manhattan was at a five-year low.

• In October, the New York Building Congress estimated that New York City construction spending would set a record of $33.8 billion in 2008, although the trade organization expected to see declines in 2009 and beyond.

• Brooklyn Heights saw the sale of its most expensive home ever in October when the sale of a $10.8 million house was recorded in city records.

• A $5.145 million duplex sale at the Edge recorded in October was the most expensive condo ever sold in Williamsburg.

• The U.S. consumer confidence index fell to 38 in October, its lowest level in 40 years, from 61.4 the month before, according to a survey by the nonprofit Conference Board.

• The projected cost of the new Yankee Stadium is expected to be more than $1.7 billion, making it the most expensive ballpark in the United States, according to a New York Times article published in November.

• The city’s Department of Buildings reported 19 construction-related fatalities through the end of October in 2008, far surpassing the same 10-month period in 2007, when 8 deaths occurred, and all of the previous year, when 12 deaths were recorded.

• The Department of Buildings issued 72 initial demolition permits in November, 65 percent fewer than the 205 issued the same month a year ago, and a steep decline from the 164 issued in October. The number of demolition permits had risen from 3,386 in 2002 to a high of 6,480 in 2006. The number fell in 2007 to 5,582, and there had only been 2,112 permits issued in 2008 as of the end of November, according to an analysis by The Real Deal.

• In November, the 46-story Trump Soho hotel-condo topped off, making it the tallest building in the neighborhood.

• In December, the New York Times said financier Bernard Madoff’s Ponzi scam might be the largest such fraud in history. Many of the city’s biggest real estate players had money invested with him.

Until recently, it seemed like New York City’s real estate market was the exception to the rule. Unlike the rest of the U.S., what went up here showed few signs of going down, at least not dramatically. However, after Wall Street as we knew it collapsed in September, the question became how low the city’s commercial and housing markets would go. While we’ll possibly only begin to answer that question this year, a review of the events of the past 12 months indicates we have definitively exited the boom years. On the residential end, there were fewer and fewer deals inked, and inventory was sitting on the market longer. In the commercial world, office vacancy rose and rents dropped, and some of the industry’s most powerful players, like Harry Macklowe, found they were unable to pay the piper when loans came due. Meanwhile, some of the city’s biggest development projects, such as Atlantic Yards, now seem to be on life support, and it’s unclear whether they will ever see the light of day.

January

News broke of Harry Macklowe’s inability to pay off loans associated with his multi-billion-dollar purchase of seven Midtown office buildings from Equity Office Properties, setting the stage for a drama that would play out for much of 2008. In response, Macklowe began marketing his crown jewel, the GM Building, which early reports suggested might sell for as much as $3.5 billion. Toward the end of the month, the City Planning Commission approved developer Sheldon Solow’s long-held plans to build a mega-project near the United Nations with 4,000 units of housing. Meanwhile, two construction-related deaths in January — one at the Trump Soho condo-hotel site and the other at a development site in Clinton Hill, Brooklyn — focused attention on construction safety. Reports about the New York City residential market continued to be fairly upbeat, however, with particularly brisk sales noted at new developments in Manhattan. The Department of Finance, though, released statistics showing that New York City property values had increased an estimated 1.4 percent in the past fiscal year, a slowing from the previous year’s increase of 19 percent. Nationally, the picture was much worse: The National Association of Realtors reported that sales of single-family homes fell 13 percent in 2007, the biggest decline since 1982, while the median price of a U.S. home fell for the first time since at least 1968.

February

News broke of one of the largest residential transactions in Queens in recent years, the $300 million purchase of 47 apartment buildings by Vantage Properties. Manhattan’s high-end residential market was also strong, as public records for January indicated a record-setting level of sale prices for apartments, a number that was buoyed by pricey closings at 15 Central Park West. There were even reports that the sale of the Milbank Mansion on East 67th Street, once owned by Penthouse magazine founder Bob Guccione, would break the $53 million record for the most-expensive townhouse sale in the city, although it ultimately closed for $49 million. Still, month-over-month foreclosure statistics released by PropertyShark.com showed trouble in all five boroughs, with foreclosure auctions up 184 percent on Staten Island and 150 percent in Queens. City and state officials said they were girding for a precipitous drop in tax revenues from real estate transactions in 2008 and 2009, estimating that commercial sales volume would be down 39 percent, and that mortgage recording taxes would also plummet. In Brooklyn, there was bad news concerning two big developments: John Catsimatidis announced that he was putting his large, mixed-use Myrtle Avenue development on hold because of financing troubles, and Forest City Ratner dropped plans for its City Tech tower, a Renzo Piano-designed building that was supposed to be Brooklyn’s tallest skyscraper. Macklowe, meanwhile, technically defaulted on $5.8 billion in debt, although a deal was subsequently hammered out with lenders giving him an extension in order to sell his Equity Office Properties portfolio.

March

The appointment of David Paterson as governor to replace scandal-plagued Eliot Spitzer made the future of the renovation of Pennsylvania Station, a.k.a. Moynihan Station, seem particularly shaky, as Spitzer had been one of the project’s main proponents. Indeed, an obituary for Moynihan Station had been written by the end of the month. Question marks were also raised about whether the new governor would affect the scope or timeline for the World Trade Center site; if Paterson would follow through on the $400 million affordable housing fund Spitzer had announced he would initiate at the start of the year, and whether he would continue to be the critic of eminent domain he had been during his days as a state senator. The MTA announced that Tishman Speyer was the winning bidder for the massive redevelopment of Hudson Yards on the West Side, and the Plaza Hotel re-opened after the El-Ad Group completed a three-year, $400 million renovation of the landmark property. However, some big development plans crashed — Forest City Ratner told the New York Times that its Atlantic Yards development in Brooklyn faced significant delays because of the credit crisis and legal challenges, and the Related Companies’ plans for a massive entertainment center at Pier 40 were rejected by the Hudson River Park Trust. There was also great upheaval in the financial market when JPMorgan Chase reached a deal to buy Bear Stearns for $2 a share; JPMorgan took over Bear’s headquarters at 383 Madison Avenue, but said the acquisition of the property would not imperil its plans to develop a tower at the World Trade Center. In the middle of the month, a crane collapse at an East 51st Street construction site killed seven people, an event that would lead to a growing chorus of calls for reform at the Department of Buildings.

April

Shortly after another worker died at a construction site, this time on the Upper East Side, Patricia Lancaster, commissioner of the Department of Buildings, resigned. Meanwhile, the City Council approved one of the most controversial development programs of the Bloomberg administration by voting in favor of rezoning Harlem’s 125th Street in an effort to create 1 million square feet of new office space, 90,000 square feet of non-profit and visual arts space, and more than 3,800 new apartments. State lawmakers, however, killed Mayor Bloomberg’s congestion pricing plan. Market reports for the first quarter indicated that Manhattan’s residential market was weakening: Appraisal company Miller Samuel’s report for Prudential Douglas Elliman showed that while the average sales price was up 19.7 percent from the prior quarter to $1.7 million, the increase was mostly attributed to high-ticket closings, and there was a 9.4 percent drop in sales and an 11.7 percent rise in the number of days properties stayed on the market from the year before. The developer of what was to be one of Manhattan’s flashiest new buildings, the “sky cubes” at 80 South Street, announced that the site was for sale, effectively killing the project. The Santiago Calatrava building, which had first been announced in 2005, was supposed to be comprised of $35 million townhouses stacked on top of each other.

May

While a property that traded in Dumbo for $7 million became the most expensive condo to ever sell in Brooklyn, Toll Brothers CEO Robert Toll said sales in the borough had “faded.” Plans were announced for a scale-backed Miss Brooklyn, the signature Frank Gehry tower at Atlantic Yards; however, developer Bruce Ratner wrote an op-ed in the Daily News saying the project was far from dead. Manhattan fared better: After Tishman Speyer backed out of its deal to develop Hudson Yards, the MTA announced that it had reached a tentative, $1.054 billion agreement with the Related Companies to develop the site. The Freedom Tower at the World Trade Center site rose above street level for the first time. Also, a group led by Mortimer Zuckerman’s Boston Properties announced that it would purchase the GM Building from the Macklowes for $2.9 billion (the highest price ever paid for an American office tower), as well as buy three other Macklowe office towers — 540 Madison Avenue, 125 West 55th Street and Two Grand Central Tower — for a grand total of about $3.95 billion. In the residential market, there were also stratospheric hopes. In the span of one week, there were three closings recorded at 15 Central Park West for more than $20 million each, and one buyer at the building was reportedly trying to flip his $30 million condo for $90 million. In Tribeca, a townhouse hit the market for $35 million — a price that, if realized, would make it the most expensive single-family home to sell south of 14th Street. The city began to crack down on unsafe work at construction sites and announced it would hire more DOB inspectors, but before the month was out, another crane collapse on the Upper East Side claimed two lives.

June

The state attorney general’s office approved offering plans for the Apthorp, the sprawling Upper West Side prewar rental that Mann Realty and Africa Israel Investments proposed transforming into a condo with an average price of $6.5 million per unit, or $3,000 a foot — slightly above the initial asking prices at 15 Central Park West and just below those at the Plaza. The island’s commercial scene, however, had witnessed better days: For the first time in six years, effective rents on office space began to fall, according to executives at Newmark Knight Frank and GVA Williams. Across the East River, one of the biggest retail debuts of the year occurred when Ikea opened its first New York City store in Red Hook. In other Brooklyn news, government agencies and the owners of the 5,881-unit Starrett City in East New York reached a deal for a future sale of the project that would preserve its affordability, and the Landmarks Preservation Commission approved plans for the development of Williamsburg’s Domino Sugar Refinery, a project including thousands of units of housing. On the construction front, the city’s chief crane inspector was arrested on charges of taking bribes, and the city also filed charges against one of Brooklyn’s most prolific and controversial architects, Robert Scarano. While one big project, Queens’ Willets Point, got a boost when the Economic Development Corp. signed its first agreements with property owners in the area, another, the planned 1,200-room Javits Hotel, was killed. Meanwhile, two of commercial real estate’s biggest players, Jones Lang LaSalle and the Staubach Company, arranged a $613 million merger.

July

Mortgage giants Fannie Mae and Freddie Mac grabbed headlines for much of July as news broke that both were on the brink of insolvency. By the end of the month, a $300 billion housing rescue bill had passed Congress and been signed into law by President Bush. The bill’s aims were to support Fannie and Freddie and to help homeowners avoid foreclosure. In New York, the number of offering plans accepted by the attorney general’s office was down 19 percent for the first few months of the year as compared to the same period in 2007, a sign that the development boom was grinding to a halt. Some older properties in the city were still paying off handsomely, though: The most expensive co-op sale ever in Manhattan closed when Jonathan Tisch, the chairman and chief executive of Loews Hotels, paid $48 million for a 14-room unit at 2 East 67th Street. A few blocks south, the mansion at 603 Park Avenue sold for $31.8 million, after being on and off the market for nearly two decades. Meanwhile, Congressman Charles Rangel came under fire after the New York Times reported that he had leased four rent-stabilized apartments in Harlem; Rangel subsequently announced he would let go of one of them. Elsewhere in the rent-stabilized world, Tishman Speyer saw its revenues fall at Stuyvesant Town and Peter Cooper Village, despite having converted 560 apartments to market-rate rentals in the prior year.

August

Larry Gluck, one of the city’s biggest landlords, told his lenders that he was about to default on a $225 million loan for Harlem’s 1,230-unit Riverton Houses complex. The news made housing advocates worry about the fate of other rent-stabilized buildings, which had traded at a rapid clip during the boom. The Justice Department sued AvalonBay Communities for allegedly violating the Fair Housing Act at its Lower East Side building, Avalon Chrystie Place, saying the developer had not made its 362-unit rental accessible to disabled people. In the wake of the suit, other developers and landlords across the city feared they would need to spend millions in renovations in order to make sure their buildings complied with the law. Robert LiMandri, acting Department of Buildings commissioner, was made the permanent commissioner after the City Council changed its requirements for the position so that it didn’t need to be filled by a licensed engineer or architect. There was retail news around the city when the first supermarket in Long Island City opened, and Whole Foods announced it would open another store in Midtown by 2012, giving New York the largest cluster of Whole Foods in the country. Finally, the 15-year-old weekend flea market Antiques Garage announced it might have to move from Chelsea to Hell’s Kitchen because of soaring rents; it was reportedly Chelsea’s last remaining flea market. On the state level, Governor Paterson signed a foreclosure-avoidance bill that gave struggling owners an extra 90 days to try and keep their homes.

September

The financial system as everyone knew it fell apart: Near the beginning of the month, Fannie Mae and Freddie Mac were effectively nationalized; JPMorgan bought Washington Mutual; Citigroup acquired Wachovia’s banking operations; Bank of America agreed to buy Merrill Lynch; Lehman Brothers filed for bankruptcy; the government issued an emergency loan to rescue AIG; Goldman Sachs and Morgan Stanley became bank holding companies, and on Sept. 29th, the Dow fell 777.68 points, the largest one-day drop in history. Amidst the very real specter of tens of thousands of vanished Wall Street jobs, a sharp decline in bonuses, and a lack of demand for office space, brokerages both residential and commercial girded for a bleak fall and winter. Macklowe’s troubles weren’t over as he faced the foreclosure of the site of the former Drake Hotel. The group of bidders for Starrett City shrank to two, and the Brooklyn affordable housing complex was expected to sell for up to $900 million — far less than the $1.3 billion rejected by the Department of Housing and Urban Development in 2007. Faced with stagnant sales, more and more developers across the city tried to woo buyers to their condos by offering rent-to-own options. Finally, it was a month of goodbyes for New York: The Yankees played their last game at the House that Ruth Built, the Mets played their last game at Shea, and Coney Island’s Astroland closed.

October

Some developers tried to use the looming presidential election to woo condo buyers: Chelsea’s +Art condo offered to let buyers who signed contracts before Nov. 4 back out if John McCain won the presidential race, and Williamsburg’s Edge condominium put a giant banner on its building that read, “Sarah Palin, live here, see Wall Street.” It was a good month for the Edge, where a $5.145 million duplex was sold, the most expensive condo sale ever in Williamsburg. Brooklyn Heights also saw the sale of its most expensive home ever, when a house sold for $10.8 million. On balance, however, it wasn’t a cheery 31 days for real estate. The DOB recorded only three new building permits filed for Manhattan construction in the prior month, an 87 percent drop from the same month in 2007. For the third quarter in a row, Manhattan saw a double-digit decrease in apartment sales, with the number of sales dropping 24.1 percent from the same period a year prior, according to a Miller Samuel report. Listing inventory leaped 34.6 percent in the same period. Several hotel projects, such as the Nobu Hotel and Residences in Lower Manhattan, were reportedly stalled, and analysts predicted that any proposed hotels without construction loans in place would not be built for at least a year in the climate of the current market. It wasn’t a banner month for developer Kent Swig, either, as he announced a temporary suspension of sales at his 25 Broad condo conversion because of Lehman Brothers’ bankruptcy filing. About a week later, during a dispute over a failed project, developer Yair Levy allegedly struck Swig with an ice bucket.

November

A report released by real estate appraiser Mitchell, Maxwell & Jackson about Manhattan residential sales volume in September and October did not auger well: The firm found that the number of contracts signed in the two-month period was down 75 percent from the same time in 2007. High-end residential brokers braced for an austere Wall Street bonus season as a report from New York-based compensation consulting firm Johnson Associates predicted that year-end incentives for Wall Street’s senior managers would plunge by up to 70 percent, while average bonuses would likely drop by 20 to 35 percent. Some condo developers tried to boost sluggish sales by offering price protection programs, guaranteeing buyers a discount at closing if prices went down, a strategy common in troubled markets in Florida but new to the city. The biggest residential and commercial brokerages — including Prudential Douglas Elliman, the Corcoran Group, CB Richard Ellis and Cushman & Wakefield — announced that they were canceling their holiday parties, with the heads of most firms saying it wasn’t appropriate to celebrate given the troubled economic climate. Despite the fragility of the commercial market, however, one of the city’s largest residential firms, Halstead Property, announced that it would form an investment sales division and enter the world of commercial real estate for the first time. Meanwhile, three massive projects were approved by the City Council: The 111-block rezoning of the Lower East Side and East Village, the $3 billion redevelopment of Willets Point in Queens, and the 30-acre, largely affordable Hunter Point South redevelopment, also in Queens. A big real estate deal, however, was put on pause, when the MTA and the Related Companies failed to sign a contract for Hudson Yards. At least one other boldface project made progress, though: Trump Soho, the condo-hotel where a construction worker fell to his death in January, topped off, making it the tallest building in the neighborhood.

December*

The revelation that financier Bernard Madoff had allegedly been conducting one of the largest frauds in history with his multi-billion-dollar Ponzi scheme rocked the city’s real estate world, scuttling pending residential deals for Madoff’s investors and threatening the projects of developers who had money tied up with him. There was also bleak news about Manhattan’s residential market, as the Federal Reserve Board released a report based on data provided by appraisal firm Miller Samuel indicating that the island’s co-op and condo prices were down 20 percent since mid-summer. There was yet more evidence of a citywide development slowdown as the Department of Buildings reported a 65 percent drop in the number of demolition permits in November compared to the year before. As of the beginning of the month, meanwhile, there had only been two Manhattan building sales for more than $90 million in the fourth quarter, while there were 41 such transactions during the same period in 2007. On a more positive note, PropertyShark.com reported that November home foreclosures were at their lowest level of the year, although the real estate data Web site’s CEO warned that there was likely to be an increase in city foreclosures in coming months tied to job losses. Forest City Ratner, meanwhile, announced it was suspending work on its $4.2 billion Atlantic Yards project because of the economy, and architects at Frank Gehry’s firm working on the development’s design were laid off. One of the city’s top real estate investment sales brokerages, Massey Knakal Realty Services, was reportedly seeking equity partners because of the stagnant commercial market. Starrett City’s pool of potential buyers shrank to only one, a group of investors that planned to offer around $700 million for the affordable housing complex, far less than the $1.3 billion previously offered.

*Includes news that broke between Dec. 1 and 20, 2008

If there is one glaring conclusion from 2008 that everyone can agree on, it’s that making predictions about New York City real estate is often an exercise in futility. But with key facts at hand about construction financing, condo sales and office vacancies, everyone in the city’s real estate community is preparing for a brutal 2009. In this month’s Q & A, some of the biggest residential and commercial players tell The Real Deal what they fear and anticipate in the New Year. [more]

Construction update

Upper West Side

Linden78

230 West 78th Street

Urban Residential’s 20-story building has topped off. Most of the 35 units have at least three bedrooms, and some will have outdoor space. Amenities include a private outdoor garden that opens off the lobby. Move-ins are expected to begin in spring 2009. The Corcoran Sunshine Marketing Group is the marketing and sales agent. Contact: www.linden78.com.

West Village

The Luminary

41 Seventh Avenue South

Construction is ongoing at the project, which includes five residential units and two commercial units. The residential units range from 1,111 to 1,567 square feet, and prices run from $517,200 to $2.8 million. Sotheby’s International Realty is the exclusive sales and marketing agent.

Williamsburg

Metropolitan Avenue

Apartments

502 Metropolitan Avenue

Meltzer/Mandl Architects will design the Chetrit Group’s mixed-use residential, retail and parking project. The 14-story building will include 140 rental units, 26,000 square feet of retail space and a garage with approximately 210 parking spots. Amenities include private terraces, a courtyard and an outdoor recreation space. Completion is slated for 2010.

Financing update

Williamsburg

34 Berry Street

Developer LCOR has closed on a $33 million construction loan from Bank of America for a 142-unit, $69 million rental building. The Perkins Eastman-designed building is slated for completion in spring 2010. Building amenities will include an outdoor garden, fitness center, meeting room and on-site parking. Rose Associates is the leasing agent.

Sales update

Bedford-Stuyvesant

821 Halsey Street

Sales have launched at the renovated 5,000-square-foot townhouse. It contains six units ranging in size from 780 to 1,350 square feet and in price from $310,000 to $399,000. Funda Durukan designed the apartments. Aptsandlofts.com is the marketing and sales agent.

Central Harlem

Striver’s Lofts

223 West 135th Street

Sales will begin this winter at the five-unit building with two-bedroom, two-bath apartments. Units range in size from 1,318 to 1,709 square feet, and prices fall between $1.1 and $1.648 million. Kitchens are custom designed by Veneta Cucine. Sotheby’s International Realty is the exclusive sales and marketing agent.

Chelsea

133 West 22nd Street

Closings have begun at the Ascend Group’s 99-unit building. Prices for the one-, two- and three-bedroom units range from $800,000 to over $4 million. The building was designed by Cetra/Ruddy. Amenities include an outdoor pool, landscaped rooftop deck, fitness center and onsite parking. Cantor Pecorella is the exclusive sales and marketing agent. Contact: www.133west22.com.

Downtown Brooklyn

Belltel Lofts

365 Bridge Street

About 50 percent of the units in developer Clipper Equity’s 250-unit project had sold as of mid-November. These units, studios through two-bedrooms averaging 1,252 square feet, represent 90 percent of the units released in Phase I of sales. The residences in Phase II, which range from studios to three-bedrooms and from 600 to 2,700 square feet, have now been released for sale. Prices for these units, which are available for immediate occupancy, range from $625,500 to $1.89 million. Amenities in the landmarked building include a fitness center, screening room and business center. The Bracha Group is the exclusive sales and marketing agent. Contact: www.belltellofts.com.

Murray Hill

303 East 33rd Street

Sales began in late November at Toll Brothers’ and the Kibel Companies’ 12-story, 128-unit condominium, which is being built to meet LEED standards. Prices for the studio through three-bedroom units begin at $600,000, and the apartments range from 546 to 2,782 square feet. Amenities include parking, concierge, roof terrace with reflecting pool and bocce court, fitness center, children’s playroom, media lounge and storage. Cantor Pecorella is the exclusive sales and marketing agent. Contact: www.303e33.com.

Tribeca

The Fairchild

55 Vestry Street

Sales began in late November
at the 21-unit project, which has two- to four-bedroom lofts ranging in size from 1,350 to 2,835 square feet. Prices range from $2 to $9 million. The building includes direct elevator access to each home and a refrigerated storage area. The Marketing Directors is the exclusive sales and marketing agent. Contact: www.tribecafairchild.com.

Upper East Side

Miraval Living

515 East 72nd Street

C & K Properties and Zamir Equities’ 39-story condo conversion has 365 units, 107 of which have been sold. Prices range from $750,000 to $5.5 million. The building’s amenities include a swimming pool, spa, art studio and health club. Corcoran Sunshine Marketing Group is the exclusive sales and listing agent, taking over from Prudential Douglas Elliman. Contact: www.miravalliving.com.

Upper West Side

Columbia House

237 West 108th Street

One unit has been sold and three are still available at the development, where sales began in June 2008. Each unit has two bedrooms and two and a half baths. Prices range from $1.61 to $2.23 million. Sotheby’s International Realty is the exclusive sales and marketing agent.

West Village

397 West 12th Street

Two units are in contract and three remain available at Cary Tamarkin’s condominium building, where sales began in July 2008. Two- to six-bedroom units range in size from 3,613 to 9,779 square feet. Prices range from $5.5 to $17 million. Sotheby’s International Realty is the exclusive sales and marketing agent. Contact: www.397w12.com.

Compiled by Sara Polsky

Developers are increasingly relying on their preferred lenders and mortgage brokers to help their buyers navigate the complex world of mortgages and increase their chances of closing deals. [more]

One day, when they renew their leases for perhaps the fourth or fifth time, tenants of the 34-story luxury rental building under construction at 316 11th Avenue at 30th Street will have a bird’s-eye view of the northern end of a freshly landscaped High Line park. Just beyond that, they will see the towers and parks of the Hudson Yards, a massive redevelopment of the last sprawling, vacant parcel of land in Manhattan.

Until then, they might be a little lonely.

Rising fast and due to hit the market in less than 12 months, the building can expect to have neighbors such as a freight forwarding operation, office building, self-storage warehouse and a Con Ed facility.

Still, developer Jeff Levine, head of Douglaston Development, said, “We feel very upbeat about this project because we think it’s a growing neighborhood in close proximity to the employment centers in Midtown.”

Levine is also optimistic because Douglaston landed financing for the project in July 2007, just before credit for new construction dried up completely. Competition for renters among new buildings will be limited, he figures.

“The lack of construction financing that has followed the subprime meltdown has made it virtually impossible to create new rental products,” said Levine.

The project is coming up under New York State’s 80/20 program, which helped the developer secure financing and mitigates the risk.

“Under the 80/20 program,” he explained, “for creating 20 percent of the units at the low-income level, you get the benefit of not only a tax-exempt bond rate, but the benefit of a 20-year tax abatement, both of which make economic sense for the project. As a developer, you still have to assume the market risk of rent-up and cost, but the lower the taxes and bond rates, in concert with the tax abatement, the more viable, and therefore more financeable, is the project.”

Projected rents are $2,400 for studios, $3,000 for one-bedrooms and $4,000 for two-bedrooms.

Levine is using his own Levine Builders for the construction and commissioned the husband-and-wife team of architect Stephen Jacobs and interior designer Andi Pepper to design the building, as he has with 325 Fifth Avenue, 555 West 23rd Street, the Gansevoort Hotel and the Edge in Williamsburg.

The rectangular building runs long on West 30th Street, and Jacobs said, “We knew we would most likely have no more information about the High Line when the building started renting.”

With the completion date of the third and last phase of the elevated park uncertain, those involved with the tower are expecting the High Line to remain in a dilapidated condition for a number of years along the stretch of 30th Street. “So we made a decision to put the lobby on 11th Avenue,” said Jacobs. “This created challenges and opportunities.”

For one thing, placing the elevator bank in the normal position for a lobby, near the front entrance, would have required some tenants to walk the interior corridor for almost the whole length of 30th Street to get to their apartments.

“Our solution was to place the core where it is most efficient,” said Jacobs, “and to create a three-story space that would be kind of semi-public — make the trip from 11th Avenue to the elevator core a spectacular experience.”

The lobby will be a pleasant diversion for the tenants and workers in the area until the neighborhood takes shape — the only game in town, really.

“It’s a big space,” said Pepper, the interior designer. “We wanted to make something like a concert hall that had a multi-functional use, where sometimes you have café tables and you can stay in and have coffee, hang out and socialize, and other times, you can set up a concert there.”

Pepper called the lobby theme “fun” and said it’s “kind of a Mondrian-type design.” It is aimed a young audience — fashion, media, entertainment and IT professionals — whom the architects and developer
expect to take a chance on the area.

The floors in the lobby will contain granite in different colors — large stones in the public atrium-like space on the western side, and smaller stones with a more intricate pattern on the residential side.

The public lobby will be lit, said Pepper, by “hanging spheres of fun, pop lights — not chandeliers.” The public area will be covered with giant multicolored panels of suede, which, beyond fun and pop, will serve as an acoustical damper.

The residential lobby will have
horizontal lighting panels flush to the wall that diffuse the light to present a more
subtle ambience.

The building will contain two garages, one at ground level for tenants, and a larger public garage underground. Getting permits for the parking was a chore.

“New York is the only city which discourages you from building parking,” observed Jacobs. “Everywhere else in the world, they make you build parking.” The garages will be largely obscured by the 4,000 square feet of retail at street level.

The third-floor amenity space looks down on the lobby and contains a gym, computer area and a large lounge with pool table, fireplace and a separate party room.

The building will have 369 studio, one- and two-bedroom apartments. The interiors are contemporary. “We’re trying to do what we did in the 2000s in condominiums, with stainless steel and white cabinets in the kitchen,” said Pepper. A pendant light will hang over the countertop.

The finishes are pricier than the typical rental, but “since you’re buying so many kitchens,” said Pepper, “you have buying power, so you can up your design element.”

A few residential projects are scheduled to come up in the area within the next few years, the first being Extell’s Towering S, a 50-plus hotel/condominium under construction on 10th Avenue and 30th Street designed by Steven Holl. The near-full-block Avalon West Chelsea is just about to begin construction. +Art, a condominium at 240 West 28th Street, is scheduled to open in 2010.

But generally, new development is on hold now in West Chelsea, as it is all over the city. “We don’t believe there will be any new products financed until the housing market is deemed to be healthy,” said Levine, “which I think will probably take at least another year.”

Meanwhile, he concluded, “We think we have an uncontested marketing opportunity to lease up without many [construction] jobs in our wake.”

Morris Township, NJ

Wheatsheaf at Morris Township

Fenix Development & Investment’s project will include 23 townhomes spread over 12.25 acres. The two- and three-story, three- and four-bedroom houses will average 4,000 square feet. Prices will start at $1.46 million, and the homes will include private elevators, master bedroom suites and outdoor terraces. Occupancy is expected to begin in spring 2009. Contact: www.wheatsheafhomes.com.

Sales update

Hoboken, NJ

Adams Square

The developers released a two-bedroom, 1,010-square-foot condominium unit for $495,000. The building, a former school, contains two- and three-bedroom units. Amenities include a private courtyard, a fitness center and parking. The Marketing Directors is the exclusive marketing and sales agent. Contact: www.adamsquare.com.

Hoboken, NJ

The Emsee

TreeTop Development’s condominium is more than 50 percent sold. The one- and two-bedroom apartments range from 711 to 1,510 square feet. One-bedrooms begin at $374,000 and two-bedrooms at $509,000. Amenities include rooftop space, balconies, common courtyard and parking spaces. Contact: www.arielhoboken.com.

Jersey City, NJ

The Residences at Dixon Mills

At the five-building, 467-unit joint venture between developers Robert Martin Co. and GoldenTree InSite Partners, 130 units are in contract, and 120 have closed. Prices for studios begin around $220,000, and duplex condos begin in the mid-$400,000s. The building offers concierge service, courtyards, parking and private shuttle buses to the PATH station. Contact: www.dixonmillsjc.com.

Livingston, NJ

Cedar Gate at Livingston

Incentives, including reduced prices for early move-ins, are now available for buyers at Westminster Communities’ project, which includes 54 three-bedroom townhomes. The largest townhouses will be around 4,000 square feet, and those available for occupancy within the next three months start in the upper $600,000s. Amenities include two-car garages, private outdoor space and optional finished basements for additional square footage. Contact: www.cedargatelivingston.com.

Montauk, NY

Montauk Manor

236 Edgemere Street

Available units range from studios to three-bedroom apartments from $200,000 to $500,000. Amenities include indoor and outdoor swimming pools, tennis courts, a health club, a spa and a restaurant. Brown Harris Stevens is the exclusive sales agent. Contact: www.bhshamptons.com.

Construction update

Jersey City, NJ

Crystal Point

Fisher Development Associates’ condominium topped off in mid-October. The 42-story, 269-unit building was designed by Gruzen Samton architects. The one-, two- and three-bedroom units range from 800 to 1,817 square feet. Apartments include balconies as well as washers and dryers. Building amenities include a spa, a fitness center and an outdoor deck. Contact: www.crystalpointcondos.com.

Compiled by Sara Polsky

After living in the same Upper East Side apartment for three
decades, Veronica Hackett, co-founder and managing partner of the
developer the Clarett Group, was finally inspired to move by one of her
own projects: Sky House.

Hackett, whose company has developed six condominium and three
rental projects in New York City, says she regularly contemplated
moving with each new development. Yet the 55-story Sky House
condominium, located at 11 East 29th Street between Fifth and Madison
avenues, won her over.

Sky House, a sliver building with three apartments to a floor, has
expansive and largely protected views in four directions, a result of
the deal the Clarett Group made to build on the site of the former
parish house of the Church of the Transfiguration at 1 East 29th
Street.

Hackett — who paid $2.635 million for her 1,612-square-foot,
two-bedroom space, according to PropertyShark — chose a 50th-floor
apartment in the skyscraper’s A line, which has views in all
directions.

“As a developer, you always fall in love with your buildings,” says
Hackett, who moved in last summer, adding, “I knew this site pretty
well from the ground.

“But it wasn’t until I had family in town and took them to the Top
of the Rock that I realized where the site was. It was like, ‘Oh my
God, there’s absolutely nothing around it.’”

She and her husband, Jack, thought the 2,817-square-foot penthouse,
which is still on the market, would be too large for them as “empty
nesters.”

“My son, Jeff, is now 25, and I don’t anticipate him moving
home any time soon,” Hackett says with a chuckle. “And Jack and I have
a commuting marriage. He’s a scientist and spends most of the week in
Charlotte, N.C., where he owns a small start-up high-tech crystalline
laser company.”

For Hackett, who passes most of her time at the Sky House except
when traveling for business (or visiting the couple’s other home on
Long Island), the draw was floor-to-ceiling views to the south, east
and west — and a view to the north, which is more limited but includes
almost the entire Empire State Building.

“I have views of both rivers and the harbor,” Hackett says. “I love
architecture, and this neighborhood has so many interesting buildings.
You can see such detail — the whole city is like a jewel of an art
piece.”

Architect Bruce Fowle, senior partner of FXFowle Architects, says
he designed Sky House in a way that would complement the Church of the
Transfiguration, built in 1849. That meant building a narrow tower
constructed of brick masonry similar to that of the church. The tower,
which narrows a bit at the top and is reminiscent of a campanile,
houses the elevator core and staircase, surrounded by a lot of glass.

Also, Hackett’s apartment, along with all the others in the A line,
has vertical windows so residents can gaze down into the English-style
churchyard. Apartments in the other lines have punched and horizontal
windows.

“We tried to make each one unique and avoid the cookie-cutter approach, so
people had choices not only in the shape of the apartment, but the expression of the façade,” Fowle says.

On the advice of her interior designer, Emily Abrahams of Katherine
Gormley Architects, Hackett and her husband kept the apartment largely
empty at first and moved furniture in slowly to get a sense of the
spaces and the play of the ever-changing light.

It was good advice, Hackett says. She ended up forgoing the
architect’s specifications and moving the dining area from one side of
the massive living room to the other.

“We really wanted something that wouldn’t compete with the views,” she says.

She also realized that very little of the furniture from her former
Upper East Side apartment would work in her new “great room” made of
glass.

“We had a French Provincial dining room set … and a huge English
chest that wasn’t going to work in here,” she says. She ultimately went
with furnishings that are simple but strong. For instance, two spindly
metal coffee tables by the French designer Christian Liaigre remind her
of attenuated sculptures of the human figure done by Italian artist
Alberto Giacometti.

To keep everything spare, Abrahams even designed some of the
furnishings herself, including two delicate dark walnut chairs and lean
coffee tables with off-center steel bases. All the pieces, including
two upholstered chairs by Liaigre, are sleek with fluid lines.

“There’s nothing that’s bulky in there,” says Abrahams. “The
upholstery is not overstuffed. The dining room table from BDDW in Soho
has a charred texture and a beautiful cast bronze trestle base that
looks very light — though it actually weighs a lot.”

Hackett says she decided to go with two parlor sets in the lofty
living room to capitalize on every angle of the dramatic views. The two
groups also give her the option of seating up to 20 people.

“We don’t entertain that much, but we do holidays,” she says. “For
Thanksgiving, we moved some chairs and added another table and served
16 people.”

Hackett says that the views were so alluring in Sky House that an
unusually large amount of the square footage is given over to public
spaces. The master bedroom, at 154 square feet, is modest, though its
floor-to-ceiling views to the south and east lend the illusion of
vastness.

Hackett sometimes watches the sunrise from bed or with a cup of coffee in
hand at her desk with Pepper, a mostly
Belgian schipperke dog rescued by her
husband, by her side. A Louis Ghost Chair,
a transparent design by Philippe Starck,
and a slender antique English writing
desk that Hackett bought in London in
1976 cut elegant figures near the eastern window, yet serve to keep the focus on
the view.

A second bedroom, typically used as a den and library, has a sofa
bed, closet space and en-suite bathroom, and is frequently occupied by
Hackett’s sister Cheryl when she visits.

As far as color, Hackett decided to go with a very neutral palette.
“The design philosophy, so to speak, is a contrast of neutral, with
dark woods and the interplay of textures with fabrics and lines,” she
says.

For instance, one of the larger, heavier pieces is a low bureau
tucked into the short breezeway between the dining area and kitchen,
but it’s made of an unusual smooth holly wood that is cream colored.

Though she’s not a collector, finding the perfect fine art for the
apartment was a big goal, Hackett says. Abrahams helped her select some
pieces with the advice of gallerist Lori Bookstein of Lori Bookstein
Fine Art.

“Before I saw Sky House, I’d never seen a view like that in my
life, and I’d never seen light like that in my life,” says Bookstein, a
gallerist since 1997.

“The light is so tangible,” she says. “The color of the walls is
constantly changing, and there are times when the white paint looks
green or yellow or super white, so my feeling was that all of the
paintings should almost have light as the subject.”

Bookstein ended up focusing on second-generation New York School
painters, such as Paul Resika and Robert De Niro Sr., along with
younger painters who came out of that tradition, such as John Dubrow
and Tine Lundsfryd.

One painting by Lundsfryd is a luminescent white crossed with
little lines, and an abstract painting by De Niro Sr. is a study in
neutral colors tinted with mauve, pink and orange. “With a view like
that, it’s very difficult for any object to compete,” Bookstein says.
“So rather than the paintings being very material, I was thinking of
things that were more evocative.”

While she modified the living room, Hackett decided to retain the
kitchen of cherry woods by KitchenAid chosen by the building’s
architect. It includes a paneled refrigerator, black mist granite
countertops and a sea-green glass backsplash.

Even though Hackett says she is generally finished decorating, it
seems the work may be ongoing; she finds that she’s discovering
something new about its aesthetics each day.

“I came in one brilliantly sunny afternoon, and the sun was just
hitting the Verrazano Bridge and pulsating,” she says. “It was like the
bridge was shimmering.

“And then the next day, light from the sunrise will bounce off the
clouds, and you get these brilliant but unexpected colors in the West,”
she says.

“And as the sun goes down at night, the lights go on in the city, which is beautiful,” she continues.

“One night I fell asleep on the couch just watching the Empire State Building changing colors.”

[more]

[more]

A few years ago, the prolific McSam Hotel Group opened a Days Inn in Sunset Park, the Brooklyn neighborhood south of Park Slope and north of Bay Ridge. At the time, it seemed like a new day was dawning for hotels in the area.

The hotel’s location — on 39th Street between Fourth and Fifth avenues — is close to Sunset Park’s long stretches of rowhouses and commercial properties. The 43-room hotel is also a block and a half from the Gowanus Expressway, which runs over Third Avenue. The property is in the western section of Sunset Park, an area defined by roaring traffic, warehouses and industrial activity.

Now, five other hotels, most in the border zone between Sunset Park’s industrial and residential sections, are planned or in some stage of development nearby. Like the Days Inn, most of the planned hotels will be economy lodgings.

However, the trend toward hotel development is unlikely to proceed past the properties that are already in development. For one, financing for hotel construction has been almost impossible to obtain as the credit crunch has worsened. In addition, the McSam Group fears Brooklyn will soon see a glut of hotels.

Although McSam, owned by developer Sam Chang, blazed a trail with its first Sunset Park hotel, Gary Wisinski, the firm’s chief operating officer, says it won’t be building any more properties in Sunset Park, or any other section of Brooklyn, once it completes construction on the hotels it now has in the pipeline.

“We were very bullish on Brooklyn — past tense,” said Wisinski. “Our hotels have done well, but we are very concerned with the amount of product planned for the borough.”

The McSam Hotel Group is developing two Comfort Inns in the area. One is on 38th Street between Third and Fourth avenues, and the other on 59th Street overlooking the expressway.

The 38th Street Comfort Inn is under construction, while the Department of Buildings has yet to approve plans for the 59th Street Comfort Inn. Meanwhile, another developer has laid the foundation for an as-yet-unnamed 46-room property on 39th Street near Fifth Avenue.

And the newest hotel to open in Sunset Park is a Sleep Inn, which was scheduled to open late last year, according to its developer.

The 97-room hotel, on 49th Street between Second and Third avenues, is expected to have average rates of $150 a night and a projected occupancy rate of 70 percent in its first year of business, said Raj Bhagia, a partner in SAI Development, which is developing the property.

“We’re opening in a weak economy, but eventually, in two or three years, we expect business to be good,” said Bhagia, who added that he believes Sunset Park, as a heavily residential neighborhood, is underserved in terms of hotel rooms.

“The location near the expressway is also attractive,” said Bhagia, noting that the traffic artery could help to lure business travelers.

SAI also planned to start construction on another hotel in the neighborhood, this one on 33rd Street between Third and Fourth avenues, in December, and have it open for business by the end of 2009. Bhagia said that his firm has not yet secured an operator for the location.

The proliferation of hotels in Sunset Park is similar to the hotel growth in Gowanus, the mostly industrial neighborhood farther north up the Brooklyn-Queens Expressway, where three hotels have opened and six more are planned.

Indeed, construction of the Gowanus and Sunset Park hotels could result in a sort of hotel corridor alongside — or very near — the BQE.

Commercial broker Ofer Cohen, managing director of the firm Terra CRG, said that Sunset Park, like Gowanus, was probably attractive to hotel developers because “if you had a dilapidated warehouse that wasn’t good for anything else, you could sell it as a hotel development site.” At the same time, Cohen noted that Sunset Park hotel developers were probably eyeing potential customers who wanted to pay lower rates than at hotels in Gowanus.

Cohen said a Holiday Inn Express that opened on Union Street in Gowanus in 2006 “does great business.” He said, “People who couldn’t get a room there, or who wanted to pay less, might come to Sunset Park.”

Average nightly rates for the Gowanus Holiday Inn Express recently were above $200, while rates at the Sunset Park Days Inn ranged between $125 to $150 for the same period, according to Web sites for both hotels.

Aside from a possible glut, today’s lending environment makes the acquisition and construction of hotels in Brooklyn “very tricky,” said Cohen, whose firm is headquartered in Sunset Park.

“There is zero financing available, especially for budget hotels,” said Cohen, who helped broker the sale of the Comfort Inn site on 38th Street to McSam a few years ago. “The truth is that whatever is in the pipeline is all that’s going to happen for now.”

Cohen said he recently had a Sunset Park hotel development site in contract, but that the deal didn’t close because its would-be developer “had a very solid business plan, but he went to every lender in the country and couldn’t get financing.”

That said, Cohen still believes there is room for hotel development in Sunset Park, because the neighborhood is close to other heavily residential areas, like Bensonhurst and Bay Ridge, which are underserved by hotels.

And he notes that today’s economic climate might be considered something of a boon for budget hotel operators because “they’re kind of recession proof,” with rates that are more affordable to guests who are struggling during an economic downturn.

While budget hotels may be growing in Brooklyn, the construction of several such properties in Gowanus led City Council Member Bill de Blasio to hold a press conference on their proliferation in May. De Blasio argued that such hotels threaten to become “hot sheet” destinations that are used for prostitution if they can’t generate enough revenue from business or tourist guests.

The three new hotels now open in Gowanus are budget brands Comfort Inn and Holiday Inn Express, as well as the boutique Hotel Le Bleu. A Super 8 is scheduled to open soon, and construction is under way on a Fairfield Inn.

The four other hotels in the works for the neighborhood will likely include both budget and higher-end properties, according to statements from their developers.

While a similar budget hotel building boom appears under way in Sunset Park, business leaders don’t think they would ever meet the fate that de Blasio fears.

“I don’t see a Comfort Inn becoming a hot sheet,” said Carl Hum, president and CEO of the Brooklyn Chamber of Commerce. “National chains do their homework before opening somewhere.”

Hum believes that the Sunset Park hotels will mainly serve family members visiting residents of the community.

“This is a family-oriented neighborhood, and, as in many parts of the city, people are living in small quarters, so visitors need somewhere to stay,” Hum said.

Bhagia of SAI Development, meanwhile, said that because of the substantial investments involved in building hotels, lenders would be very wary of financing projects that could reflect poorly upon them.

“If you’re giving out a loan of $10 or $12 million, you’re not going to want to back something that could end up with a reputation like that,” he said. “Nobody wants to get in trouble.”

At least one business leader in the community, however, is undecided about how the hotel influx will affect Sunset Park. “It’s interesting that they’re building here, but I have no idea why they’re doing it or what impact it’ll end up having,” said Renée Giordano, executive director of the Sunset Park Business Improvement District. “I never thought of the neighborhood as a tourist destination, but we’ve always advertised that it’s convenient for getting to the airport.”

William C. Thompson Jr. is in his second term as New York City comptroller. As the city’s CFO, he works to ensure the city’s financial health. He manages
$96 billion in five pension funds and has diversified the pension
portfolio from primarily public equities into private equity, real
estate and other asset classes. [more]

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In response to the construction slowdown, New York architectural firms are shedding staff, trimming expenses and switching from residential projects to lower-risk work on institutional and governmental projects with secure funding.

For some, the current conditions are bleak enough to bring to mind the bad old days of New York in the early 1990s, when new construction projects came to a virtual standstill. [more]

[more]

The latest federal statistics on housing prices in hundreds of local markets reveal patterns that haven’t been making the nightly news: While on a national basis homeowners have lost over $1 trillion in equity since the end of the boom, the overwhelming majority of local markets continue to show net cumulative value growth over the past 60 months.

In fact, according to the third-quarter 2008 survey released Nov. 25 by the Federal Housing Finance Agency, out of 292 metropolitan markets, 273 showed positive net home values over the course of the previous five years, while 19 were negative.

That may be of little comfort to consumers who bought houses late in the boom in 2004 and 2005 and are now underwater on their loans. But it’s important for anyone who wants to understand real estate cycles and may be considering a purchase for the long term.

Unlike stocks, where your asset values can go from peak to zero in a matter of weeks, house values tend to be far slower moving and can be more durable over extended periods of time. Buy a house and hold onto it for five to 10 years in all but the most severely depressed local economies, and you’re likely to see positive growth in
its value, even if a rough patch of price deflation intervenes.

The FHFA’s quarterly data track price changes in several hundred local markets stretching back to 1975. Unlike other indexes — which may omit entire states and give extra weighting to high-cost, historically volatile areas — the FHFA covers every metropolitan market nationwide. Its data are based on repeat home sale and refinancing transactions where mortgages were funded, owned or contained in securities backed by Fannie Mae and Freddie Mac. As a result, the properties tracked do not include houses financed with jumbo loans, and the survey data underrepresent the subprime slice of
the total marketplace.

In the latest quarterly FHFA study,
dozens of local markets showed positive appreciation for the past 12 months despite negative national numbers. Most of them are in areas with moderate housing costs that never experienced the hyperinflation of the boom.

For example, Austin, Texas, saw average housing prices gain by 5.6 percent during the past 12 months and by a cumulative 35.3 percent since the third quarter of 2003. Houses in Grand Junction, Colo., increased in value by 4.7 percent during the last
12 months and by a cumulative 66.1 percent over 60 months. Prices in Syracuse, N.Y., were up by 2.8 percent over 2007, and by 29.9 percent during the past five years.

Forty-three metropolitan markets saw appreciation gains of 2 percent or higher in the past year, while others — mainly in California, Florida and Nevada — experienced double-digit deflation. Twenty-seven metropolitan areas around the country have racked up 50 percent or higher cumulative gains since 2003. (The complete 85-page survey is available at www.fhfa.gov.)

The data also provide an overview of home values in many metropolitan areas that have seen losses in the past 12 months but are net positive over the last five years. For example, Chicago prices dropped by 3.8 percent in the past year but are up by a cumulative 28.3 percent since 2003. If you bought a $200,000 house in late 2003, in other words, it’s likely to be worth $256,600 today. In Los Angeles, where prices exploded during the boom but plunged 18.8 percent in 2007, the cumulative value gain from third quarter 2003 through the same period this past year was 45.6 percent, according to the FHFA data.

In Washington, D.C., and its suburbs, which saw a 12.5 percent price decline in the past year, the cumulative gain for homeowners over the past 60 months has been 43.7 percent. Other examples include Phoenix (negative 16.6 percent one year, positive net 48.3 percent over 60 months); San Francisco (negative 8 percent one year, 31.9 percent gain five years); Seattle (down 3 percent past 12 months, but up 54.9 percent for 60 months); and Tampa-St. Petersburg (down 15.1 percent for the year, but up 37.6
percent since 2003).

Among the top markets for cumulative gains over the past five years: Honolulu (up 78.7 percent), Virginia Beach, Va. (72.6 percent), Flagstaff, Ariz. (66.5 percent), Bellingham, Wash. (65.6 percent), Wilmington, N.C. (62.1 percent), and Baltimore (60.6 percent). Worst performers: Detroit (down 18.4 percent) followed by Merced and Stockton, Calif., both down 15 percent.

The takeaway: There’s no question that there have been some painfully deep localized declines in the past two years. But the statistical fact is that values in the overwhelming majority of markets are positive over a five-year timeline.

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

If it is your intention to be involved in New York City’s hospitality industry, you must have a positive attitude and conviction. As the president of a national chain of boutique hotels said to me, “You either have to be crazy, or be an optimist, since each day you start your business with no customers and hope by the end of the day, your rooms and restaurants are full.”

So it’s no surprise that in the wake of the worse economic crisis since the Great Depression, industry leaders who spoke to The Real Deal were cautiously optimistic on the state of the hospitality market in 2009.

Eric Lewis, the head of the global hospitality valuation services at Cushman & Wakefield, said that while the New York hotel market is facing a “perfect storm” of negative market forces, it’s important to keep two things in mind:

1. The market is coming down after an unprecedented run-up in revenue-per-room rates, which increased by roughly 86 percent from 2003 to 2007 and are now at
historic highs.

2. The New York market has proven remarkably resilient. Although it should be hit during this down cycle, there is every reason to expect it will return to health once the storm passes.

Mark Gordon, the executive vice president at Cushman & Wakefield Sonnenblick Goldman, said that while the fourth quarter was rough for the hospitality industry, things need to remain in perspective.

He said that since 1972, the hotel market has only had six years of negative revenue per room (or revpar).

Even with the economic challenges, he said, the average rate in the city through October was $307.29 with occupancy of 88.5 percent — the highest in the country by a considerable margin.

“New York City also has strong supply-and-demand economics,” Gordon added. “Since 2000, there were only three full-service and/or luxury hotels developed in Midtown: the Hilton Times Square in April 2000, the Westin Times Square in October 2002 and the Mandarin Oriental in December 2003 — aggregating 1,500 rooms. This is the total supply that was added in Midtown in the past eight years, a period of time in which 4,000 rooms were taken out of service, resulting in a net decrease in hotel rooms.

“No other city in the U.S. has this kind of dynamic,” he said.

Even so, the tide is turning. Sean Hennessey, president of Lodging Investment Advisors, said, “The Manhattan hotel market, which has shown exemplary strength in recent years, has begun to falter in the wake of the financial markets’ upheaval, which began in late summer.”

Hennessey said that through September, revenues for hotels in New York City were up about 8 percent compared to the same period in 2007. Following the collapse of Lehman Brothers, demand quickly deteriorated. As a result, citywide revenues per available hotel room fell about 10 percent in October and 20 percent in November; they were running slightly more than 20 percent down for the first few days of last month.

“Most hoteliers expect the 8 percent year-over-year revenue growth achieved for the first nine months of the year [to] completely evaporate by year-end,” Hennessey said in late December. “For 2009, the consensus view among local hotels is for hotel revenue per available room to decrease approximately 12 percent.”

He said the biggest concerns are:

• A less vibrant Wall Street hurts all
hotels. Demand from businesspeople who support Wall Street, such as lawyers and
accountants, is generally slackening.

• As other countries’ economies weaken, the demand that accrues to New York as a “world city” declines.

• The “AIG effect” is prompting hotels to hold meetings that might once have been held in New York in other locations, such as New Jersey and Connecticut, instead.

• Rising airfares have discouraged both international and domestic travel.

• The strengthening dollar discourages foreign tourism: For example, it is now about 30 percent more expensive for people to visit the U.S. from Europe than it was at the beginning of 2008.

• Low consumer confidence discourages spending on discretionary items, particularly trips to destinations considered extravagant. At present, New York City’s hotel room rates are by far the highest in the country.

• A spate of new hotel openings will likely put pressure on all hotels to offer discounts and promotions in an attempt to stimulate demand.

Taken together, it’s a gloomy short-term forecast. On Hennessey’s last point, however, one thing is certain: Fewer new hotels are expected to be built over the next 12 to 24 months.

Many hotel projects on the drawing board will be placed on temporary hold due to the lack of construction and permanent financing. Many of the more than 40 hotels that are in various stages of planning in Downtown Brooklyn, Long Island City and the Bronx will never be built.

Ed Lombardo, vice president at Pacific National Bank and one of the most active lenders for new hotel construction, said, “Construction financing for hotel development will be a challenge in 2009.

“The lender and equity investor will have to be able to project past the current negative environment in order to see a positive economic environment when the project is completed,” he said.

“A hotel deal starting in 2009 will not be completed until 2011, when the economy should be growing. Without economic growth, we do not have support for the hospitality industry.”

Lombardo said if an investor plans to start construction on a hotel, there will be many financial obstacles to combat to gain financing.

He said financing will be provided only to those who meet certain criteria: First, they must be financially strong and experienced hotel operators. Second, they must have hotel projects in long-established submarkets such as Midtown East and Times Square (forget all of those plans for the outer boroughs). Third, they must have well-managed, nationally recognized franchises with strong reservation systems. And, finally, they will be financed with a loan-to-cost of 50 to 60 percent, requiring an investor to put in a great deal of capital.

The president of W Financial, Gregg Winter, said financing hotels today is even more challenging than financing other new construction projects.

“As challenging as it is today to obtain construction financing for well-conceived multifamily rental or mixed-use projects, obtaining financing for new ground-up hotel projects is exponentially more challenging — something like trying to surf on a glacier,” he said.

“Only the strongest, most experienced and truly liquid hotel developers will have any chance of laying claim to one of 2009′s few hotel construction loans,” he noted.

“Even the savviest developers who do somehow manage to thread this needle and qualify for such financing must now expect some level of recourse,” Winter added.
“Prospective lenders will scour the developer’s balance sheet and pipeline of other projects to screen for any
signs of trouble, or potential trouble that may strain the developer’s finances during the construction and stabilization period.

“Clearly, the bar has been raised to unparalleled heights, and with good reason,” he said.

All told, 2009 will be a challenging year for the economy and the New York hospitality industry. Nevertheless, I
concur with Hennessey and Gordon when they say New York City will continue to be the global financial and leisure capital of the world, and it is still the most desired destination for many domestic and international travelers.

From both a performance and investor-demand perspective, New York will always be the strongest hotel market in the country.

Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” on CUNY TV and “The Michael Stoler Real Estate Report” on 1010 WINS. He is a Director at Madison Realty Capital and an adjunct professor at the NYU Real Estate Institute.

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In “Extraordinary Popular Delusions & the Madness of Crowds” by Charles MacKay, we are told, “Men, it has been said, think in herds; it will be seen that they go mad in herds, while they only recover their sense slowly, and one by one.”

Happy New Year! Here’s to recovering our sense, however slowly, one by one. Thank God 2008 is over. It started out like a dream, but ended like a nightmare, one that lingers and haunts us.

Without a doubt, the last year was tragic and the list of nightmares extensive: Madoff, Bear Stearns, Lehman Brothers, Fannie Mae, massive foreclosures, Macklowe and more. The result? Plummeting real estate sales volume and falling prices here in the city. But New Yorkers will survive, as they always do, scars and all.

After Sept. 11, New York City witnessed one of the worst economic downturns in its history, but only shortly after embarked on one of its greatest booms. In a recent conversation I had with one of the city’s smartest billionaires, he pointed to this phenomenon of New Yorkers becoming more motivated to lift themselves up after a fall. He told me that a new wave of millionaires will be made in the next few years, and their successes will be the result of finding opportunities during these dire times. Wise words from a rich man — nothing is more valuable than that. This month we look back at some opportunity seekers who made their fortunes in down markets in years past. Check out the story on page 29.

The fundamentals of this downturn are clearly different from ones we’ve had in the past, and of course the market’s reaction is also different from what we’ve experienced before. In this issue we look at how the game has changed with a series of stories on how buyers are exerting their newfound dominance over sellers. We examine how buyers are terrorizing sellers with insultingly low offers, in some cases 20 to 40 percent below asking price.

In the same series we also have a story on how brokers have abandoned shell-shocked Baby Boomers and are now increasingly targeting Generation Xers as their primary clients.

I am constantly reminded by top company executives that our recent news coverage has been negative. My response to them: We are in a recession and to try to report otherwise would be stupid. The only other approach would be the tack that some of my favorite newspapers and blogs in the city are taking, which is to cut back on their real estate coverage. That is not acceptable to us. So I am proud to say that when it comes to real estate news, The Real Deal is still the only must read in town.

With many commissions lost and staff layoffs piling up, many of the larger brokerage houses felt it was prudent to cancel their holiday parties. In the face of so much gloom, we thought the industry could use a little lift. Typically our own holiday parties are reserved just for our staff, but this year we thought it would be a good idea to open our doors to some of our friends and supporters in the industry and have a rocking party for 1,200 guests. In response to the stellar attendance, we plan to hold more events for networking, including forums and seminars, in the coming year. Be sure to check our events calendar for updates in 2009.

Here’s to a productive New Year!

Amir Korangy

P.S. Also, be sure to look for our annual Data Book 2009 next month. As always, the book is filled with all the data and research you need to get a leg up in the challenging market.

Prudential Douglas Elliman’s Cobble Hill office is expanding with six new brokers formerly with the Brooklyn-based Fillmore Real Estate. Anthony Santangelo, a former Brooklyn regional vice president at Fillmore, and Camille Logan, a former manager in Fillmore’s Cobble Hill office, joined Elliman as executive vice presidents and directors of sales. Four other former Fillmore managers also joined the office as brokers. Fillmore Real Estate closed two of its offices in the past few months.

“We have been watching Elliman come into Brooklyn over the past couple years,” Logan said. “Elliman reaches a very wide audience, and I think people are looking for established and respected [brokerages], especially as the market changes.”

Logan said the former Fillmore managers joining the office have worked in several Brooklyn communities, not just the Cobble Hill area, and they plan to use their contacts to expand Elliman’s business in the borough. All the former Fillmore employees will be working out of Elliman’s office at 189 Court Street. Several other new brokers have also just joined the office.

“We want to be a more visible part of the community,” Logan said. “We are going to market extensively in the surrounding communities. Our brokers have ties in the communities, and we’re not going to wait for clients to come in.”

Despite the down market, Logan maintains that it’s still a good time to buy in Brooklyn. She said she and her colleagues moved to Elliman because they will be able to reach more buyers. “When you’re from the community, you speak the same language,” Logan said. “You can explain to the new people moving in who have read about Kensington or Bay Ridge, but don’t know where to find the best prices or where to get your dry cleaning or what schools are in the neighborhood.”

After leaving the Brooklyn Chamber of Commerce just two years ago for Massey Knakal, Mack Tham has moved on again, this time to Marcus & Millichap. Tham, a former director of sales at
Massey Knakal, said he is moving over to Marcus & Millichap, a national real estate investment firm, to
diversify his business.

“Marcus & Millichap gives me a wider platform,” Tham said. “If my client decides to buy or sell in Brooklyn or Queens or outside of New York City, I can work with them.”

During his first year as an investment specialist at Marcus & Millichap, Tham said he will concentrate on properties in a few neighborhoods, including Flushing, Queens, and both Brooklyn’s and Manhattan’s Chinatowns.

“The market is going to get worse before it gets better, and I want to be flexible,” Tham said. “I want to expand in these markets first, and then near the end of 2009 and 2010, expand business even further.”

Tham will be working out of Marcus & Millichap’s Brooklyn office at 16 Court Street. Although he doesn’t live in Brooklyn, he’s no stranger to the borough. Prior to joining Massey Knakal in 2006, Tham served as the director of real estate and development for the Brooklyn Chamber of Commerce, where he worked with property owners to reduce vacancy and provide incentives for developers to build in Brooklyn.

A trio of commercial brokers who left Besen & Associates has formed a new Manhattan-based firm, Onyx Real Estate Advisors, the team told The Real Deal in an interview. The group includes Laurence Ross, who partnered with Adelaide Polsinelli to form the Platinum Team at Besen from 2005 until 2007.
In July 2008, Polsinelli, a 10-year veteran of Besen & Associates, moved to Marcus & Millichap. Polsinelli said she is not going to join the Onyx team.

Ross, Christen Portelli and Joshua Goldflam are equal managing principals in their new venture, which was formally created last month and focuses on commercial sales. The team will also handle leasing, management and financing.

In a city that has been hit with cutbacks at real estate services firms, including Massey Knakal, Cushman & Wakefield and CB Richard Ellis, the three said their departure was not related to staff reductions. “It was just time for us to be a little bit more independent,” Portelli said.

Onyx, whose offices are located at 99 University Place, has about a half dozen listings, most in Midtown South. The firm has two additional salespeople and an office administrator, and hopes to hire six additional brokers by July.

In the new lower-volume sales and leasing market, the principals said they were not cutting their commissions but were offering more hands-on services.

The approximately 10 people who left Besen & Associates this past year bring the number of brokers there down to about 25, they said. Ronald Cohen, chief marketing director of Besen & Associates, declined to comment on the current number of employees, but said the firm had recently hired new brokers.

Real estate consulting firm formed

Four real estate industry professionals recently formed a national real estate consulting firm, Gallin Glick Sullivan O’Keefe. The firm, headquartered in New York, aims to advise investors, lenders, government agencies and other companies on loans and acquisitions. Henry Gallin is a former developer, owner and broker; Michael Glick has operated portfolios of multi-family, industrial and office properties; Frank Sullivan has sold more than $15 billion in commercial property; and Ray O’Keefe was most recently president of Grubb & Ellis New York and the company’s director of international operations.

Guardhill picks up IndyMac retail division

Guardhill Financial Corp., a Manhattan-based mortgage brokerage, has found new opportunities in a credit crunch that has led banks to scale back their mortgage lending. The 17-year-old company, headquartered at 950 Third Avenue at 57th Street, recently hired 30 new employees and plans to expand its New Canaan, Conn., office and open a new office in Jericho in Nassau County within the next several months.

Massey Knakal seeks equity partners

The top executives of Massey Knakal Realty Services have been reaching out for financial partners as the commercial real estate sales firm struggles through one of the toughest markets in years. Industry sources said co-founder and CEO Paul Massey Jr. and co-founder and chairman Robert Knakal are seeking partners to provide an equity stake. Massey said the company has held conversations with possible funders, but would not elaborate on any possible structural changes to the firm.

Corzine models new NJ board after REBNY

New Jersey Governor Jon Corzine is copying New York City in his latest bid to revitalize the Garden State’s sagging economy. Last month, Corzine announced the creation of a New Jersey real estate advisory board that a spokesperson for Corzine’s economic growth office said was modeled after the Real Estate Board of New York. The idea behind the New Jersey board, which will serve as an informal advisor to the governor, is to bring industry executives together with government officials to brainstorm policies and stimulate real estate development, said the spokesperson, Jennifer Monaghan, from the state’s Office of Economic Growth.

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The real estate business is rife with superstitions, and now more than ever brokers are flocking to the rainstick during the drought.

When I first came to work in real estate, I was given a desk and a proverb from a senior broker. The desk was old and missing a few handles on its drawers, but the proverb was a real genuine key to real estate success. “Don’t ever, and I mean ever, under any circumstances, calculate the commission before the deal is done,” the senior broker said. I remember laughing, but no one else laughed. In fact, the entire office stopped what they were doing and stared me down into an embarrassed silence.

It took a while for me to learn. A few “done” deals disappeared mysteriously into a black hole, but eventually I learned that being superstitious is better than being broke. This is accepted dogma in the world of brokers. Rarely will an agent walk under a ladder in an apartment being renovated. Maybe you’ve seen a broker run off from their clients at full speed when a stray black cat has walked by. Sounds crazy, but it happens. And that’s during a boom.

Well, desperate times call for desperate measures. At my office, we have recently become superstitious in our fervent desire for new business. Where there used to be a donation jar for the less fortunate, we now have a jar for lucky pennies. We’re an Israeli company, so each morning before the day officially begins we wrap a wine glass in a towel and step on it. Then we shout “hopa!” and start working (though we did that before the recession, too). And don’t come by our office on Thursday evenings after a full moon, because you might find us dancing around a fire sparked from apartment-listing flyers.

While superstitious behavior in the office has become extreme, the breaking of taboos can produce more horrendous results than ever before. I heard of one broker who calculated a commission before the deal was final. A week later he was seen hiking through the Rocky Mountains in nothing but a pair of Huggies Pull-Ups while yelping about chopping down a cherry tree. Sad story.

In all seriousness, though, whether it be superstitions or just better business ethics, there has been a marked change in the way brokers are doing business. Brokers need each other’s help more, and relations between brokers are in general friendlier, sometimes a little too friendly. Like the time I was led by a fellow broker to an apartment through a trail of rose petals. That was sweet and incredibly creepy. My client, understandably, ran like hell.

Also, while clients still despise us, they have sympathy for our plight. There’s nothing like being petted gently on the head by a complete stranger. As you cry into their now tear-soaked shoulder they softly say, “We do appreciate that you’re trying.” Then my client, understandably, runs like hell.

This new way of doing business is how things should be. This is the way markets can correct themselves. Perhaps when people struggle together, they are more willing to come out of the fray together.

Podnos is a broker at Ben & Company.

It’s a sign of the times. Large billboard-type ads are an increasingly familiar sight on the facades of vacant retail properties in Manhattan, according to outdoor advertising companies who used to beat the bushes hunting for landlords with well-located buildings for advertising campaigns.

In a down market, it appears landlords are recognizing the potential revenue — and even visual appeal — outdoor ads can deliver. Advertising firms said they’ve seen a dramatic increase in the number of Manhattan buildings that have become available for ad campaigns. In addition to extra money, the advertisements are low-maintenance. Unlike indoor tenants, ads don’t complain about broken air-conditioning or plumbing problems.

An executive with Inwindow Outdoor, an outdoor advertising firm, estimated his company has seen a 50 percent increase in the number of Manhattan properties available for “storescape” advertising since the first quarter of 2008. Big and small property owners are expressing interest, said Ray Lee, managing director of real estate for Inwindow Outdoor, whose clients include HBO, HSBC and Starbucks.

“We’re talking about people managing 1 million square feet,” Lee said. “They want to lease out vacant storefronts to us as easily as someone who owns a five-story walk-up in Soho.”

Inwindow’s storescapes are graphic billboard-type ads positioned at eye level on building surfaces and windows. Made of vinyl, the ads range in size from 25 to as much as 100 linear feet, Lee said.

It wasn’t so long ago that Inwindow pursued landlords with strategically located buildings in desirable neighborhoods. Now “the landlords are approaching us,” Lee said. “We’ve seen an increase in terms of the number of listings we’ve acquired and also the receptiveness of landlords.”

Landlords see the advertising revenue as a way to offset fixed costs such as utilities and insurance, and also to enhance a building’s appearance, he said.

Bill Walther, vice president for asset management at G Holdings, a commercial development company, said his firm was concerned about dressing up the exterior of its 43-story building, a Marriott Residence Inn, while it was under construction on Sixth Avenue between 38th and 39th streets.

A series of billboards was installed on the windows facing Sixth Avenue. Walther said the ads made the building look more presentable while it was being built. The income, while nowhere near as lucrative as an indoor lease, was a secondary bonus, he said.

Walther declined to comment on how much the advertising generates in income, but Lee said landlords can make $2,000 to $8,000 a month for a monthly advertising campaign, depending on the building’s location and frontage. Buildings in Midtown command the highest rents.

In Soho, Kurt Trenkmann of Trenkmann Estates agreed to lease the exterior of his company’s seven-story building at 403 Broome Street. Ads appeared on the property on and off for a year until a new tenant moved in. The ads look similar to the ones that appear on subway station platforms, Trenkmann said.

They were an easy source of income and were not an “eyesore,” he added. Trenkmann wouldn’t hesitate to make his building available for future campaigns. “It’s just extra money,” he said.

The commercial real estate networking site MyDealBook.com has a new look for the New Year. As of Jan. 1, MyDealBook.com — which was founded by former PropertyShark.com CEO Ryan Slack as a way to connect commercial real estate professionals — will be known as GreenPearl.com.

The rebranding will include a new logo and new Web address, as well as new blogs and other features.

The name change comes after a wave of unexpected confusion for MyDealBook. After launching in the spring of 2008, Slack was surprised to receive a cease-and-desist order from the New York Times, which had trademarked a similar name for its “DealBook” blog.

The idea of racking up legal fees to battle for the name was unappealing, Slack said, especially since industry professionals constantly confused MyDealBook with The Real Deal and other sites.

“We got a lot of confusion,” Slack said. The name was “easy for people to mishmash in their heads if they weren’t paying close attention.”

He said the name change is also an opportunity to add new features to what he called a 450,000-member site, including two new blogs, new events and “webinars,” and an email-based alert system that lets members know when deals that fit their criteria become available.

Brainstorming for a new company name was not new to Slack. PropertyShark.com, too, had started life with a different name: NYCPropertyResearch.com. Following the same technique he used then, Slack sat down at his computer looking for available domain names. Green Pearl eventually emerged the winner.

Pearls, which are rare, signify the elusiveness and importance of good business relationships, Slack said, while the color green is a nod to the sustainability movement.

The new logo hasn’t been unveiled, but Slack said it is a green orb with an image of the Earth on it, referencing the global real estate market. After all, he said, the Earth is “the original piece of real estate.”

1971: City approves loft living for artists in Soho

The city’s Board of Estimate approved a zoning change 38 years ago this month that permitted hundreds of artists to live legally for the first time in loft buildings in Soho. The gritty manufacturing neighborhood with its signature cast-iron facades began attracting artists in the 1960s who were seeking cheaper live-work spaces in Manhattan. The buildings’ high ceilings and large windows provided abundant natural light for artists. But the area’s light manufacturing zoning in an area that employed about 20,000 workers did not permit residential uses, and so many lived there illegally, fearing evictions.

The new provision covered about 1,000 buildings south of Houston Street to Canal Street, and from West Broadway to Lafayette Street. It was estimated that some 600 artists and about 1,400 family members were living in the lofts.

In 1970, the City Planning Commission estimated artists were paying an average of around $200 per month for a 2,400-square-foot space. The city tried to strike a balance between the residents and the manufacturing industry, and two years later, in 1973, the Soho Cast Iron Historic District was designated.

By 1983, rents in Soho skyrocketed to $1,000 to $2,500 for a 1,500-square-foot loft as art galleries, boutiques and trendy restaurants moved in. Today, landlords charge about $4,000 to $8,000 per month for an equivalent amount of space.

1953: Private property in city worth record $19.9 billion

The assessed value of private property in New York City reached a record $19.9 billion, fueled by a postwar construction boom that eclipsed the previous high set in 1932, the city announced 56 years ago this month.

The taxable value of the city’s realty wealth for fiscal year 1953 to 1954 was 2.5 percent higher than the year earlier, fed by new development and a tax change to equalize the worth of comparable properties.

The total assessed value in 1932 was $19.6 billion, but with the onset of the Great Depression, the municipal rolls declined and remained lower for two decades. The greatest net increase was $203 million in Queens, which was undergoing a surge in new home and apartment construction. Manhattan followed with the next highest net increase of $147 million, but much of that was due to the tax change, not new construction.

The assessed value of the Empire State Building was set at $45 million, which was no change from a year earlier, but the Equitable Building at 120 Broadway was set at $30 million, a $1.5 million jump. By 1975, the total assessed value of city property had doubled to $40.3 billion. For fiscal year 2008, the total assessed value of city property was $145 billion, while that of the Empire State Building was $262 million, according to the city’s Department of Finance.

1930: City’s largest hotel, the New Yorker, opens

The 43-story, 2,500-room New Yorker Hotel was the tallest and biggest hotel in New York City when it opened in the early weeks of the Great Depression 79 years ago this month. The limestone-and-brick tower at 481 Eighth Avenue between 34th and 35th streets in Midtown South cost $22.5 million to build, and became a gathering place for Hollywood stars such as Spencer Tracy and Joan Crawford and a venue for Big Band jazz legends such as Benny Goodman.

The building, with its distinctive Art Deco setbacks, had a grandiose lobby, two ballrooms and one of the largest barbershops in the world. The sub-basement housed the nation’s largest private power plant. But as the neighborhood declined in the late 1960s and early 1970s, the hotel changed hands several times. It sold in 1967 in a foreclosure auction to the Hilton Hotels Corporation, which in 1972 sold it for $8.9 million to a hospital.

After going bankrupt in a failed attempt to convert the hotel into a medical center, the hospital sold it in 1976 for $5 million to the Rev. Sun Myung Moon’s Unification Church, which used it for residences for two decades. In 1994, a small portion of the building reopened as a 187-room hotel. In 2000, the hotel became a franchisee of the Ramada hotel chain with 912 rooms and suites in the top half of the building. Offices and dormitory rooms occupy the lower half of the building up to the 18th floor.

Compiled by Adam Pincus

Many real estate investors in New York find it a struggle to hold on to their properties at a time of plunging prices and scarce refinancing opportunities, but others can’t wait for things to get worse.

When most investors are crouched in defensive postures, it’s a near certainty that the next John Jacob Astor or the next Harry Helmsley is out there building or expanding their empire.

For nearly 200 years, market downturns have provided opportunities for those with initiative and intelligence. [more]