The Real Deal New York

In the wake of the subprime and credit crises, problems are
becoming apparent even in New York City’s usually buoyant real estate
market. For this supplement, The Real Deal
has chosen to bring some plaster: First, we home in on macro
difficulties, as well as some less-discussed problems. The biggest problems in New York City real estate
” class=”read-more-link”>[more]

Multimillion-dollar homes are still finding takers in the Hamptons, but the notoriously tony vacation destination is showing serious signs of softening.

While the market there does not mirror the meltdown in the rest of the country, the Wall Street cash that has long flooded into the East End is clearly not flowing as freely this summer.

This month, The Real Deal offers a series of stories on what’s happening on the South Fork. In Hamptons, it’s no vacation” class=”read-more-link”>[more]

This time, the mortgage banking industry is not taking any chances.
Stung by the subprime mortgage crisis, the tightening credit market,
Wall Street layoffs and other bleak economic indicators, banks are
nervous. And this time around — in contrast to other periods in real
estate history — lenders are not waiting for the owners of commercial
properties to go into foreclosure. Staving off commercial foreclosure” class=”read-more-link”>[more]

It’s a tough time to be a residential
developer, as The Real Deal explores
in a series of stories. Projects
are taking longer to sell out, placing
developers in a bind as lenders
typically won’t let them lower prices.
And as units sit, developers find
themselves with additional costs.
Some developers are choosing to
go with Plan B and switch from
condos to rentals, but even that is
far from a safe bet these days.
Developers falling into a Catch-22
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Over the last few years, the number of local Brooklyn blogs has
multiplied exponentially; May’s Brooklyn Blogfest drew more than 100
bloggers, and some have even begun to call Brooklyn, ‘Bloglyn.’ For the bloggers, though, this is not just filling time — it’s about having a say in the development of the borough.
Real estate sites rise in ‘Bloglyn’
” class=”read-more-link”>[more]

Soho retail condo on the market

A 9,400-square-foot retail condo at 40 Mercer Street, part of a 13-story luxury apartment building designed by Jean Nouvel, is on the market, the New York Post reported. The commercial unit is expected to sell for around $50 million. It is currently leased to retailers Bose, Dermalogica and Vivienne Tam as well as a Wachovia Bank. Developer Hines Interests is offering the retail space in a joint venture with Andre Balazs. Woody Heller and Will Silverman of Studley are marketing the property.

Upper Manhattan residential portfolio for sale

Five apartment buildings in Washington Heights and Fort George are on the market with an asking price of $48 million for the package, but the buildings can be purchased individually as well. Two six-story buildings at 1083-1091 St. Nicholas Avenue total 135,462 square feet and are priced at $22.5 million; another two properties at 1621-1639 St. Nicholas Avenue total 95,126 square feet and have an asking price of $18.5 million; and a six-story, 40,924-square-foot building at 610 West 174th Street can be purchased for $7 million. Marcia Rose Yawitz, Peter Hauspurg and Harrison Douglas of Eastern Consolidated are handling the sale.

Flushing development site on the block

A 389,016-buildable-square-foot development site at 135-35 Northern Boulevard in Queens is on the market with an asking price of $31.5 million. The property, known as the RKO Plaza, is the site of a proposed 16-story mixed-use building with 200 residential units, 10,175 square feet of retail and a 15,108-square-foot senior center. The project also calls for 229 parking spaces. The residential component would include 73 loft-style units averaging 1,800 square feet. Greg Corbin, Thomas Donovan and Shimon Shkury of Massey Knakal are handling the assignment.

East Harlem assemblage on the market

A 38,554-square-foot assemblage at 2174 Third Avenue is on the market with an asking price of $25 million. The seven-parcel package has a mix of one- to five-story residential, commercial and mixed-use buildings. The property permits a mixed-use development of approximately 172,000 square feet. The average rent in the buildings is currently $1,300 for a studio, $1,900 for a one-bedroom, $2,500 for a two-bedroom and $3,000 for a three-bedroom. Marcus & Millichap is marketing the properties.

Soho mixed-use building for sale

A five-story, 8,728-square-foot mixed-use building at 523 Broadway is on the market with an asking price of $24 million. The loft building features four residential units on the upper floors and a ground-level retail space, currently occupied by Foot Locker. The footwear retailer has five years remaining on its lease. James Nelson of Massey Knakal is marketing the property.

Queens development site asking $24 million

A 7.5-acre development site in the Howard Beach section of Queens is on the market with an asking price of $24 million. Plans have been approved for a large, private gated community with 237 apartments ranging from 1,050 to 1,800 square feet. The units will have one to two-and-a-half baths and either a recreation room or additional storage space. The current owner had planned to push the development through in two phases, with the first phase consisting of 111 units. Stephen Preuss of Massey Knakal is handling the sale.

Washington Heights package offered

A pair of six-story mixed-use buildings at 545 West 164th Street and 540 West 165th Street is on the market with an asking price of $22.5 million. The contiguous elevator properties contain 108 apartments and 13 stores with more than 220 feet of retail frontage. The prewar buildings were constructed in the early 1900s. Harrison Douglas, Peter Hauspurg and Marcia Rose Yawitz of Eastern Consolidated are marketing the properties.

Bronx development site for sale

A 193,000-square-foot industrial development site at 2338 Hermany Avenue in the Bronx is on the market with an asking price of $16 million. The parcel, located in the Parkchester section of the borough, is zoned primarily for industrial use; three lots totaling 20,000 square feet are zoned for low-density residential use. NAI Friedland Realty is handling the assignment.

Rosie the Riveter may be iconic, but female executives in construction have faced an uphill battle securing contracts in a male-dominated industry.

According to the U.S. Bureau of Labor Statistics, the construction industry is the second-largest employer in the country with over 10 million workers, but just under 10 percent are women. Of those women, only about 26 percent, or 291,000 women, are in management positions.

A study done in 2005 for the New York City Council found that of the $6 billion in construction contracts awarded by the city during 1997 to 2002, women-owned businesses received just 6.85 percent.

Still, a handful of female-led firms have scored some high-profile jobs here in New York City.

Cheryl McKissack, CEO of the McKissack Group, landed $300 million worth of work for Brooklyn’s Atlantic Yards project. In Manhattan, when Tishman Construction Corporation started their large-scale renovation of the Plaza Hotel, they hired 39-year-old Maggie Kwan as director of structural systems.

For the last two decades, federal regulations have required that a small percentage of construction budgets be contracted out to women business enterprises, known as WBEs. The McKissack Group, for example, is a Minority and Women Business Enterprise (MWBE). The rule has allowed women to get their foot in the door despite the clubby relationship between developers and construction firms.

Certainly here in New York City, women in the industry have a growing presence. The Real Deal spoke to five women about how they worked their way up, got big contracts or were hired to work high-profile jobs.

The McKissack Group managed to grow one bid into several when working for Forest City Ratner at the Atlantic Yards, thanks to McKissack, who is 46, African-American and a single mother of two teens. She said that when Forest City Ratner first considered her company, they offered her the usual 10 to 15 percent of the project. But McKissack felt her firm deserved more.

“They initially viewed us as being a MWBE, but that didn’t [completely] define who we were, [though] it’s in part something we bring to the table,” she said.

McKissack pointed out to Forest City Ratner that her firm, which was started by her family in 1905, is the nation’s oldest minority-owned professional design and construction firm. Her client roster included several divisions of the Metropolitan Transportation Authority, including New York City Transit and Metro-North, as well as Amtrak.

“Once we showed them who we were, they were pleasantly surprised,” she recalled. “They asked us if we had any rail experience, and I told them about my experience with the MTA. The next day 150 huge E-size drawings [very large construction documents] arrived at our office. The project was moving the train tracks from one location to another.”

The McKissack Group not only had to extract massive amounts of aging rails from the building site, but it had to demolish the rail yard itself. The firm then built a permanent rail yard and had to remove the Carlton Street Bridge.

The original contract ended up increasing four-fold to about $300 million worth of work.

“That was clearly a defining moment for us — not only to land prime work, but it was work from a private developer, not a governmental agency,” explained McKissack.

Construction projects with private developers are limited, McKissack claimed, because it means breaking into the long-established “boys club” for a piece of a closely held pie.

“Many firms don’t want to share the arena because it means less for them,” she said. “We don’t have the opportunity to sit with Tishman Speyer when they are thinking about doing something on the West Side. By the time we hear about it, their architect, their contractor and everybody is in place, and they are already proposing to the MTA.”

Even more of an anomaly is a woman running her own steel erection firm, like Lenore Janis, the first woman with such a company in the early 1980s in New York State. She learned the business from her family, which ran a successful steel fabricating plant and erection firm in Westchester. She named her firm ERA Steel Construction.

But about 25 years ago, when Janis was starting out — as a single mother of two — she often felt the sting of being a woman in a man’s world.

“Every general contractor let me know that if he had his druthers he preferred not to work with a woman, but that the government was forcing him to,” she recalled. “The fact that I was a low bidder didn’t seem to register.”

The Women’s Ownership Act of 1988, the government regulation that mandated hiring women construction firms, paved the way for Janis and other female company owners to bid on government contracts.

“I was the only certified woman in steel erection at that time,” Janis said. “There was a recession then, and most of the work available was government work, especially with the Department of Transportation.”

Janis worked with iron workers putting up bridges and towers for the MTA and the Long Island Rail Road. But even with the government mandate to bring more women on board, only a small percentage of a project’s budget was required to go to women- and minority-owned companies, Janis explained. “If the government was building a bridge for $300 million, about 5 percent of that budget would go to women and about 9 percent to minority contracts,” she noted.

Today, those percentages are only slightly higher, she said. “It hasn’t really increased since the early ’80s, and that’s a shame; we have to do something about that.” Janis is urging women to shed WBE status and compete with male-owned companies. She is the president of the national organization of Professional Women in Construction (PWC), a networking and promotion group helping women in the industry.

Successfully breaking into that mainstream is Michele Medaglia, 37, who started running her father’s Long Island-based company, ACC Construction, when she was 25.

Medaglia, who majored in business management administration, worked for her father through college. She set out to change ACC Construction from an interior build-out company to a full-service company to include out-of-ground projects. When she started running the firm, it grossed $5 million. Today ACC is grossing $60 million a year with such clients as Vornado, Amtrak and Commerce Bank.

“The first thing we did was to diversify and broaden the portfolio,” Medaglia said. “We also hired an expert project manager from a health care facility, which let us work in hospitals and health care retail.”

Even though she was the CEO, Medaglia had to convince co-workers and prospective clients that she could do the job.

“I didn’t have an attitude, and I wasn’t afraid to make a mistake,” said Medaglia.

“I didn’t come off as if I had something to prove, and most, but not all, were very receptive.”

When Medaglia gave birth to twins five years ago, she was faced with another challenge: juggling work and family.

“Thankfully I have a supportive spouse, which is wonderful,” she said. “Some days you have to deal with family, telling yourself that you’ll deal with business tomorrow.”

The number of female-owned construction businesses nationwide rose 57 percent from 1997 through 2004, according to a 2005 survey by the Center for Women’s Business Research.

Still, Lina Gottesman, president and owner of Altus Metal & Marble Services, said construction companies owned by men still have many advantages, especially in the current economic climate.

“It’s still harder for women because we’ve often been held back by capital needed in these lean times,” she said. “When it’s tight, it’s a lot easier for a man to get more money from a bank than it is for a woman, who is often seen as struggling.”

This attitude from financial institutions is a throwback to the early 1980s, said Gottesman, who remembers her own difficulties getting credit.

“I was spoken down to by a lot of banking institutions. Even though I owned my own company, one banker said to me, ‘Why don’t you bring your husband in and we’ll discuss this further?’” she said.

“People are much more careful not to say things like that these days,” she added.

Gottesman is a trade contractor specializing in restoring ornamental metal, glass and stone. Her company restored the front entrance gates for the Park Avenue Armory and the New York City Public Library entrances. Other clients include Cartier’s, Temple Emanu-El and the World Financial Center.

A big challenge for Gottesman is finding women metal and marble refinishers.

“I’d love to have more women out there in the field, but men are not happy working with them,” Gottesman said. “One of the reasons has to do with strength and heavy lifting. It’s not that there aren’t women that can do heavy work; it’s just that the men haven’t had a lot of experience seeing them do it.”

Working on the large-scale renovation at the Plaza, where she works with mostly women, is Maggie Kwan, the director of structural systems for the Tishman Construction Corporation.

“The Plaza job is amazing. The managing, design, engineering and erecting are done all by talented women. How great can that be?” Kwan said.

The five-member female team at the Plaza is like any other group, she added. “We fight like anyone else, joke around, and at the end of the day we get the job done, like everybody else.”

Kwan, who emigrated with her family from Hong Kong when she was 11, was the first in her family to get a civil engineering degree. Her first project was on the Whitehall Ferry Terminal in Manhattan in 1998, where she worked first as the project engineer, making her way up to become project manager. “That job was my baby, and I started from the bottom up. It wasn’t just structural; it had multiple aspects of architecture and mechanical engineering. It was a well-rounded project,” she said.

Kwan also worked on 7 World Trade Center in 2001. “I was one of the first persons picked to be on the team,” she said.

That women in a company like Tishman Construction can reach the executive level bolsters Kwan’s hopes for her own career trajectory.

“My own company hired new female engineers, and I really think the industry is changing, whether people realize it or not,” Kwan said.

For jobs that aren’t in the top tier of the construction industry, Janis is seeing more calls for women. They come into PWC from recruiters asking for women project managers, engineers and construction managers. “What they tell me is that the companies want more women because they are having wonderful successes with them in these positions.”

But Janis still sees the proverbial glass ceiling. “Above a certain high level of executive, companies are seeing these women leave rather than give them a boost up the ladder,” she noted.

Going forward, Kwan doesn’t see any obstacles. “If there is a glass ceiling in the industry, I’ll probably use a stick and break it.”

For her part, McKissack often sees a growing optimism among women in the industry.

“A recent survey said that women are more optimistic about their business, and that’s what tides them over during hard times,” she said. “If you ask me, our business will be growing over the next three years.”

As the credit market tightens, demand is slowing for multi-property
portfolios — the most expensive investment sale category. Of the
property packages that do sell, more and more are being split into
smaller pieces when they change hands. Comments

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In the face of an anticipated slowdown across the office market,
Midtown’s Class B leasing activity soared in the first five months of
2008, more than double the amount during the same period a year ago. Comments

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As the credit markets continue to tighten, those looking to tap into New York’s real estate market are mining deeper than ever for alternative funding sources.

Pension funds, sovereign wealth funds, foreign investment groups, hedge funds, insurance companies and offshore investors are just a few of the sources that have gotten attention recently for stepping in to the fill the void left by traditional lenders.

In some cases, Midwestern insurance companies and financial firms that haven’t done business in New York in decades are also getting in on deals here, even requiring mini-tutorials to bring them up to speed on the city’s real estate landscape.

While blockbuster deals like the sale of the GM Building to a group that included two Middle Eastern investors make splashy headlines, many lower-profile deals are tapping foreign investors in the same way. Others are turning to new buying partners and less-usual sources of funding.

In March, for example, the Dermot Company, the owner of One Hanson Place in Brooklyn, acquired a rental apartment complex at 210-230 West 107th Street near Columbia University for $60 million. The deal was financed through a fund sponsored by London-based Henderson Global Investors, which had never before invested in New York, after a number of traditional lenders retreated, according to Steve Kohn, president of Cushman & Wakefield Sonnenblick Goldman, a real estate investment banking specialist.

Cushman & Wakefield arranged $23 million in financing from the $205 million Casa Partners IV fund, which was established by Henderson in 2007.

“They have raised the money from various institutional investors — to a great extent pension funds,” said Bill Dickey, president of Dermot. “The purpose of the fund is to invest in rental apartments. They had not previously invested in New York City.”

Kohn said the environment for putting together a deal like this has changed tremendously in the last year. The inability to sell mortgage-backed securities has made it more difficult to raise debt, he noted. In addition, lenders are less willing to finance loan-to-value ratios of more than 70 percent, meaning that buyers have to come up with additional equity or pay higher interest rates. As a result, the number of deals has dramatically slowed down.

“Many of the institutional investors have capital, but they’re waiting on the sidelines,” said Kohn.

Leaning on locals

Scott Singer, executive vice president at the Singer Bassuk Organization, which arranges equity and debt financing, said that despite the established reputations of many of his clients, he has been forced to search his Rolodex in order to finance new deals.

His firm is working with several Midwestern insurance companies that haven’t done a major deal in New York since the 1990s. For many of these firms, the biggest issue is getting them comfortable with some of the emerging residential markets in New York.

“A lot has changed in New York in the past 10 years, virtually all of it to the good,” said Singer. “If we’re talking about a residential deal, the number of neighborhoods that were considered reasonable for high-end luxury apartment buildings — that was a much more limited area 10 years ago.”

Singer said he was not at liberty to name the firms because the deals have not been finalized.

Of the out-of-state firms, he said, “We’ve always tried to maintain those relationships. When you get into a market like this, their response is not, ‘Hey, we haven’t heard from you in 10 years.’ Their response is more collegial.”

Meanwhile, David Schechtman, senior director at Eastern Consolidated, said that while overseas funds, pension funds, American firms based outside New York and other investors are entering the real estate mix here, they are leaning on local experts to guide them through the process. He said that top financial experts, architectural firms and real estate attorneys are being asked to navigate investors through the process.

“I think the lion’s share of these equity sources, if they’re not sophisticated enough on how to structure deals, they’re being well-coached by local partners,” said Schechtman. “In this city, in real estate, you can always hire somebody to think for you.”

GM’s ripple

The May acquisition of the General Motors Building by Boston Properties is a prime example of how the landscape has changed. The real estate investment trust led by publisher Mort Zuckerman agreed to buy the GM building and three other Manhattan properties from Harry Macklowe for about $3.95 billion.

The purchase price included about $1.65 billion in cash, $2.47 billion in debt and a $10 million stake in Boston Properties L.P. for Macklowe. Zuckerman was able to tap into his Middle Eastern joint venture partners (which reportedly include a Qatari sovereign wealth fund and the Kuwait Investment Authority) to finance the deal.

Spencer Levy, senior managing director of capital markets at CB Richard Ellis, says despite the talk of sovereign wealth funds investing in the U.S. and in deals like the GM sale, there is still a sentiment that the dollar has not bottomed out.

As a result, he said, much of that money remains on the sidelines. “While a lot of people are suggesting there should be a large influx of that capital to the states, as of today we haven’t seen it,” he said.

Still, Woody Heller, executive managing director of Studley, said the GM deal is an important benchmark that speaks to the willingness of sovereign wealth funds to make long-term investments in the U.S.

“For the last several quarters, the word on the street was that the sovereign wealth funds were distracted by Asia and less interested in the U.S.,” said Heller, who leads Studley’s capital markets group. “They were not interested in low initial yields and not interested in deals that didn’t have near-term upside.”

Dan Fasulo, managing director of research at Real Capital Analytics, predicted that the GM deal would spur a new round of trading in the city in the next few months.

“Everybody is going to be looking at the prices they trade for and will use that as a baseline,” said Fasulo. “I have a feeling that some of buyers are going to come out and play in the fall.”

The city’s big real estate players get big headlines, but sometimes being smaller is better when it comes to acquiring property in the city. That’s what the School of Visual Arts is discovering, as it expands its Manhattan footprint to create living quarters for more students.

While large universities like New York University and Columbia have entire departments devoted to keeping relationships with community leaders on an even keel, SVA has not so far needed those kinds of resources. That’s because unlike the city’s larger universities — which continue to run into widespread opposition while pursuing their expansion plans — SVA has faced fewer obstacles because of its smaller-scale expansion.

Without much fanfare, SVA, which has an enrollment of 3,300 students, has been adding buildings to its portfolio for the past two years. Recent purchases include a 54,000-square-foot site on West 16th Street between Eighth and Ninth avenues, which will house its undergraduate fine arts program, and the Clearview Chelsea West Cinema site on West 23rd Street, which will become SVA’s Visual Arts Theater.

In 2006, the school purchased a 143,000-square-foot property on West 21st Street, and last year the school signed a lease on a 24-floor tower at 101 Ludlow Street, which will be used as a 360-bed student residence. The Ludlow Street building was designed and constructed for SVA to lease out. This collection of new buildings is part of the school’s under-the-radar five-year expansion plan, now in its third year.

The school’s push to acquire properties has put it in direct competition with NYU, its far-larger neighbor. The two schools recently competed for the same building in the East Village: When NYU failed to obtain the space at Third Avenue and East 10th Street, SVA jumped in and got the site.

“The community board freaked out and said no [to NYU],” said Christopher Cyphers, provost and chief academic officer at SVA.

The Downtown arts school’s proposal for a five-floor, 100-bed dormitory with ground-floor retail was viewed by community planners as a better, less intrusive fit by leaders in the neighborhood.

Also in contrast, last year NYU ran into obstacles in its quest to develop more student housing in Alphabet City. Local groups protested the university’s plan for the site, saying it was too massive and that the infusion of hundreds of young students would negatively alter the area’s neighborhood feel. Meanwhile — though its expansion plans are moving forward — Columbia University’s recent drive to expand into Harlem faced determined and organized opposition.

Those are hurdles SVA hasn’t experienced to the same degree. “We’re fortunate in that respect,” said Cyphers. “If we were in a bidding war with NYU, we’d probably lose.”

Jeffrey Levine, president of Levine Builders, which has built three dorms for SVA, said the school is one of the first institutions he speaks with when a viable property comes up. “They are quick to respond and quick to act,” he said.

Still, a small institution dealing with third-party developers and landlords lacks the control over real estate that larger schools, which often have full departments devoted to real estate acquisition and design, possess.

“They put a lot of faith in the developer,” said Levine. “Failure to complete a project in a timely manner can be very costly [for the school].”

While SVA, which has 1,200 students living in its dorms, owns a quarter of its student housing buildings, the rest it rents on a long-term basis. Those contracts include clauses that allow SVA to renew its leases when the 30 years are up.

The school, in turn, does not begin making rent payments until it moves into a finished building. “We’re not in the business of housing to make money,” said Cyphers. “The developer assumes all the [financial] risk.”

The current expansion, which is designed to allow SVA to continue to accommodate incoming freshmen who request housing — usually about 75 percent of an incoming class of 660 — will be funded by operating surpluses and student room and board payments.

The school, which has been around for 60 years, has yet to look into outer-borough real estate, but officials say they may start as vacant space in Manhattan becomes scarcer.

Cyphers said the challenge is “convincing parents and students from out of state that [areas like] Brooklyn aren’t a form of exile.”

An eclectic crop of boutique hotels is emerging in New York, and although they’re all new brands, they are offshoots of well-established mainstays such as Hyatt, Marriott and the W Hotels.

The big hotel chains have launched the new boutique hotel brands in an effort to appeal to a market that is as interested in earning frequent traveler points as it is in experiencing edgy, urban design and a hip bar in the lobby.

Three offshoots of larger chains are scheduled to be built or already exist in New York — Hyatt’s Andaz opening at 75 Wall Street next year, W’s Aloft brand, opening in Downtown Brooklyn next year, and Hersha Hospitality’s Duane Street Hotel, which opened in January at 130 Duane Street. Others, such as Marriott’s Edition brand, being developed in partnership with boutique hotel pioneer Ian Schrager, are in the pipeline.

Schrager is widely credited with introducing the boutique hotel 24 years ago when he opened Morgans Hotel at 237 Madison Avenue. Commercial real estate advisor Andrew Calvo defines a boutique hotel as “unique,” with each location looking different and an emphasis on customer service.

But the “unique” part of the definition has changed. In the past, these boutiques were typically single stand-alone establishments. Now they’re often part of a chain with no loss of cachet to hotel guests. That’s thanks in large part to the success of the chic W Hotel brand, part of the Starwood Hotels and Resorts company, which was the first to make a string of boutiques into a major chain.

“When you walk into a W Hotel, it’s clear that you’re in a boutique hotel,” Calvo said.

The success of the W brand helped change the way large hotel chains looked at the possibilities for their own boutique hotel lines.

“Barry Sternlicht [former Starwood CEO] was ahead of the curve with W; he took the Ian Schrager model and developed a similar hotel product type as part of an offering for a multi-branded chain,” noted Daniel Lesser, senior managing director of the Hospitality and Gaming Group at CB Richard Ellis.

Now, boutique hotel brands fall neatly into a niche that many in the hotel industry are striving to fill.

“All of the chains are really offering varying products at varying price points to try to serve the traveling public,” said John Fox, senior vice president at PKF Consulting. “Folks who want the different price points and different products are willing to pay. And some of that niche market is also a validation of the boutique product; chains have come to realize that they need to be in that market segment.”

Building boutique hotels — both those that are part of existing brands as well as independently owned hotels — is a mixed bag in terms of cost. “Cost differences are not substantially different [between building a large hotel and smaller one], but boutique hotels are marginally high-cost to build,” said Neil Shah, president and CEO of Hersha Hospitality. “The fixtures and finishes of boutique hotels can be 20 to 30 percent higher cost than more traditional brands.”

However, financing them may be easier. “In today’s environment, with credit so tight, large loans are unavailable, so smaller boutique hotels may have less of a handicap than usual,” said Shah.

There’s a worry that boutiques may be the first to suffer in the event of economic turmoil. “Boutique hotels generally fall further in recessions. Only the deepest markets and the most compelling locations can acquire new customers in periods of low demand,” said Shah.

Still, some view the building of branded boutiques by large chains as a necessity in order for them to remain profitable. “There’s no choice anymore; a certain percentage of the traveling public is demanding a boutique product,” said Mark Gordon, head of the U.S. Hotel Group at Cushman & Wakefield. “Brands are not doing it because they view it as an option.”

Competition from successful boutique hotel chains is also pushing the big chains into this segment. “Smaller boutique hotel chains — Kimpton, Thompson, Morgans — are making huge inroads with travelers,” said Calvo. “Simply, people are bored of staying in a regular hotel. By the major chains building a boutique hotel brand, they are able to start from the ground up and charge lots for it, and people will gladly pay it. You go to a boutique hotel for the experience, because when you leave, you’ll never look at a hotel the same again.”

For its part, New York has its own economic climate as far the hotel business is concerned. “Manhattan occupancies are at 86 percent compared to a national average in the low 60s,” said Fox. “And in the first three months of this year, occupancies continued to increase in New York despite the economy, though they may have dropped a bit in April.”

And with the high demand, room rates are much higher here. “It is not uncommon to see a hotel such as a Hampton Inn, which would normally cost around $100 to $150 a night in a suburb or other metro area, cost upward of $300 or $400 a night in Manhattan,” said Calvo. “And the same goes for the larger New York hotels — Marriott Marquis, Hilton — an average night can cost anywhere from $350 to $500 for a basic room.”

With room rates already so high here, the price jump to stay in a boutique hotel room versus a regular nonboutique hotel room is much smaller in New York than it is in other areas. That narrow margin makes the choice of staying at a boutique hotel an appealing one for many travelers. “There may be a $50 to $100 price difference, but if you’re paying $400 for a room to start with, spending an extra $50 to stay at a boutique hotel is very worth it to a lot of travelers,” said Calvo.

What travelers experience at boutique brands varies, but most aim to provide the surroundings, service and lifestyle-oriented approach that makes up the boutique hotel success formula. According to Aloft spokesperson Angela Bliss, W’s Aloft hotels — often built in tertiary markets, such as near airports or slightly outside of major cities — were developed with the idea of filling a void in the Starwood portfolio. “Aloft grew out of interest from the development community. We had many developers interested in building W Hotels in areas that probably couldn’t support that model in the long run,” said Bliss.

Although Aloft hotels do not have certain boutique elements, such as their own restaurants — its bars serve appetizers and snacks — Bliss stressed that Aloft, which calls its rooms “guest lofts” and features sleek design, should still be considered a boutique brand. Its 176-room Brooklyn location, at 228 Duffield Street, set to open in 2009, was chosen in part for its proximity to Downtown Brooklyn to appeal to business and other travelers. Aloft’s rooms, meanwhile, are on the lower end of the boutique price scale; the average room rate is $150 a night.

While the Starwood Web site states there will be an Aloft opening in Long Island
City in December 2010 and one in Harlem in June 2010, Bliss would not confirm
those locations.

Hyatt’s Andaz hotels — the location at 75 Wall Street will be the first in the U.S. when it opens in early 2009, followed by another location at 485 Fifth Avenue — are at what Lesser calls “the highest end of the boutique spectrum.” They come with personalized service in the form of “hosts” armed with handheld check-in devices rather than a check-in desk and programs like “Reader in Residence” at the London location, in which writer Damian Barr reads to guests from a list of books he’s chosen or from a book requested by the guest.

The 42-story property, bought by the Hakimian Organization in 2005, was shopped around to several chains before Hyatt
proposed the Andaz. Because the property was deemed too big for a hotel, the 18th through 41st floors were turned into condominiums.

The combination of hotel and housing can be an attractive one for larger chains looking to add a boutique brand.

“Historically, boutique hotels were conversions,” said Cushman & Wakefield’s Gordon. “If you had a building that wouldn’t work for a large branded hotel, boutiques were a way to solve that issue because they’re more flexible in their design.” Now, Gordon added, “we’re also seeing new ground-up hotel development, as boutiques become more dominant within the industry, and more with branded residential above.”

“People are very much into the services you get with boutique hotels, and one of the top selling points that we have for the condos is having the hotel downstairs,” said Larry Kruysman, managing director for Corcoran Sunshine Marketing Group, which is doing the sales and marketing for 75 Wall Street. “People living in the apartments can take advantage of the hotel services such as room service and laundry, but if they’re not interested, they don’t have to use or pay for them.”

Shah of Hersha Hospitality admitted that opening the stylish six-story, 45-room Duane Street Hotel, where rooms start at $350 a night, was “kind of new for us. Our background is in operating the national chains; we own and operate over 50 Marriott, Starwood, Hilton and Hyatt hotels.” But when the property became available from mega-hotel developer McSam, which had originally planned to turn it into a
budget hotel, the Hersha group decided to
buy it and transform it into a boutique
hotel as part of its independently branded hotel group.

Hersha has plans for another independent property, the 93-unit Nu Hotel (formerly the Smith) at the corner of Smith Street and Atlantic Avenue in Brooklyn, which will open this summer. “There are an increasing number of people who are drawn to the lifestyle segment of the market, who appreciate design but would still like to get their rewards points,” said Shah. “They all have a place.”

Perhaps the most dramatic entry in the list of big hotels venturing into boutique territory is the 81-year-old, family-run Marriott chain’s collaboration with Ian Schrager. According to John Wolf, senior director of public relations for Marriott, when chairman and CEO Bill Marriott saw Schrager’s revamp of the Gramercy Park Hotel a few years ago, he was so impressed that he felt Schrager would be the ideal partner to help bring Marriott into the boutique realm with a new brand called Edition.

No Edition hotels are open yet; the first will probably open in early 2011. There are 10 development deals so far in several cities, including Paris, Chicago, Los Angeles and Madrid, with a New York location to be added eventually. Unlike a traditional Marriott, each hotel will be created by different architects and designers. The emphasis will be on the boutique mantra of personalized service and unique surroundings.

“Marriott teaming up with Ian Schrager is the ultimate validation that there has been a fundamental shift and that boutiques are part of the hotel industry,” said Gordon.

President and CEO of McSam Hotel Group, a Great Neck-based hotel development, construction, management and investment company, which has built over 30 moderately priced hotels in New York City, has 29 under construction and 20 in the pipeline. Comments

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McSam Hotel Group, the prolific hotel development company led by Sam Chang, is getting more involved in the operations and management side of the hotel business.

The company said it plans to operate about half of its new hotel projects going forward — a jump upward from the 30 percent that it currently operates.

“Third-party management is not our focus; however, we bought into an existing management company that already has a full infrastructure,” said Gary Wisinski, chief operating officer at McSam Hotels. “We’re only doing it because we want to have our people involved in our properties if we want to be the long-term owner.”

The move represents a shift for McSam, which has, in the past, developed hotels and then quickly sold them. (Chang, who has built his reputation as the most prolific developer of limited-service hotels in the city and is the subject of this month’s “Closing” interview, has more than 5,500 hotel rooms in the development pipeline in New York.)

However, with a development market that is slowing due to the commercial credit crunch, getting a stronger toehold in operations could be another revenue stream for the company. Indeed, Chang entered into a partnership in 2007 with the hotel management company Packard Hospitality Group. Packard, which is based in San Diego, has worked with McSam on more than a dozen hotel projects around the country, including the Holiday Inn Fresno Downtown, which opened in Fresno, Calif., in May, and the Hilton Tulsa Southern Hills, which opened in Tulsa, Okla., in January.

“Mr. Chang has the ability to assess, analyze and evaluate a property, not only from a real estate standpoint, but an operating standpoint,” said Michael Goldstein, president and chief executive of Packard, and Chang’s partner in the business.

In the New York area, Packard operates the Holiday Inn JFK Hotel under its partnership with McSam, and will open the Hilton Garden Inn Tribeca.

Packard is slated to operate at least three additional New York hotels for McSam over the next 18 months; however, the details have not been finalized, Goldstein said.

John Fox, senior vice president of PKF Consulting, said hotel developers may benefit from having a management arm, because flipping properties quickly has become very difficult amid the current credit crunch.

“For those folks that are well into deals, this provides another avenue for them to maintain their position until the markets recover,” said Fox.

He noted that hotel development and management are very different businesses, and said the economic slowdown is forcing hotel operators to keep costs low and keep hotels occupied without slashing room rates. He said Packard is an established hotel operator and said McSam has a solid staff at its company already.

Chang is adamant about the fact that his company is in solid financial shape, noting that it purchased $180 million of real estate in the city in the first three months of 2008 and that it is still in buying mode.

“Very few hotel developers are buying right now, and McSam Hotels is one [of them],” Chang said, during a recent meeting at The Real Deal’s office.

Wisinski said the company has concurrent strategies of “selling-selling,” and “holding-selling,” and that operations is one more profit source.

Still, the change comes amid a challenging environment for hotel development, which hotel and real estate experts said is due to increasing caution about funding hotel projects by major lending institutions.

One industry executive, who asked not to be identified, said the weak financing environment stems in part from a decision made by Lehman Brothers in early 2007 to pull out of debt and equity financing for new hotel projects.

Lehman Brothers had been an active player in the hotel business, both lending billions of dollars to fund new deals and forming joint ventures with various hotel chains to expand their brands.

However, Lehman began to pull back on hotel investment by early 2007 and by the fall, rival investment banks like Goldman Sachs were warning investors to shy away from hotel deals, amid concerns that companies would be slashing travel spending.

Bjorn Hanson, who retired last month as head of the hospitality practice at PricewaterhouseCoopers, said without Wall Street investment banks to finance deals, hotel developers must rely on relationship banking with smaller community and regional lenders, who will demand more formal lending agreements, smaller loan-to-value ratios, and in some cases, require recourse, which means personal or business assets are on the line if a loan defaults.

Hanson said that an experienced developer like Chang, who has a proven record of return on his investments, will have a much easier time obtaining financing than others; however, with fewer lenders available, the environment is tough on all developers.

“The investment climate in general is often overstated as being overly negative,” said Hanson, but he added: “I don’t want to make it seem like it is easy to finance a hotel. Hotels are specialized real estate. The market is tougher than it was two years ago.”

Goldstein of Packard said the companies will continue to look for new opportunities, but the market is making everyone be more selective.

“There’s never a buy for the sake of buying,” he said. “I understand the market is soft right now. If the opportunity is there, there will be expansion. If the opportunity doesn’t make sense, there won’t be.”

Typically, the extreme ends of the market — luxury stores like Saks Fifth Avenue and discount mass-merchants like Wal-Mart — prove recession-proof. By contrast, mid-market chains like the Gap usually suffer.

Here in New York, many generalities hold true, but the massive influx of free-spending foreign tourists and the huge population of office workers add slightly different nuances to the demand picture. Comments

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After last month’s $613 million acquisition of the Staubach Company by Jones Lang LaSalle, industry observers predicted that a bigger Jones Lang LaSalle would be better equipped to duke it out with the other larger players.

The deal shook up the tenant rep industry, with some firms rattling their cages to draw attention to their strengths and others, like GVA Williams, a full-service firm, pledging to announce its own partnership by the end of the year.

“The merger will give strength to JLL in some geographic and user areas,” Barry Hersh, associate professor at New York University’s Real Estate Institute, said. “JLL will focus on marketing its breadth of services.”

In response to the deal between Jones Lang LaSalle, a publicly traded global commercial real estate services firm headquartered in Chicago, and the smaller, Texas-based tenant rep firm Staubach, competing tenant rep firms are flexing their muscles.

“Studley is already licking its chops. It will pick up some brokers it wants, and is already out marketing, emphasizing its tenant rep/no conflict status to customers, such as law firms,” Hersh said.

Cresa Partners, a tenant rep firm based in Boston with business in New York City, asserts that it will remain purist.

“We will remain independent despite the industry trend,” said Marcus Rayner, a Cresa principal. “The merger is not advantageous for the corporate real estate consumer or the tenant because it means there’s one less tenant advisory in the marketplace. One of the reasons to be a tenant rep firm is you’re trying to avoid the conflict of representing landlords and tenants in the same market.”

The Jones Lang LaSalle-Staubach deal, to be completed in the third quarter, does not include Staubach’s retail services or investment development business, which will operate under license agreements. The new firm will have the Jones Lang LaSalle name.

“The culture and core values of collaboration, team work and an almost obsessive focus on client services couldn’t be more aligned,” said Peter Hennessy, president of Staubach’s New York region corporate services. “We all view this as the proper evolution of our companies and the next step to provide the best for our people, clients and partners.”

NYU’s Hersh said the cultures of the two companies were a good fit. “On one level, they both wear dark suits and white shirts,” Hersh said. “The corporate culture seems a little bit similar in that regard. They’re button-down, corporate-type firms.”

Julien Studley, who established the tenant rep model with the founding of Studley in 1954, said, “I think it’s probably a good merger. I think that Jones Lang wants to grow.”

Former Dallas Cowboys star quarterback Roger Staubach, who founded the Staubach firm in 1977 and was the company’s executive chairman, will be on Jones Lang LaSalle’s board of directors and serve as executive chairman of the Americas.

In fiscal year 2007, Staubach completed 7,280 transactions totaling $28 billion. Jones Lang LaSalle had global revenue of $2.7 billion in 2007, and its investment management business has about $50 billion of assets under management.

With the addition of more than 1,000 Staubach employees, the two firms will have 33,700 employees worldwide and 11,500 in the U.S. Staubach has 14 corporate offices, giving the new company a total of 68 corporate offices in the U.S. and 184 globally.

The sale could be seen as a barometer for the slow commercial real estate market.

“In tougher times, often bigger firms gobble up smaller firms,” Hersh said.

Some more consolidation is expected.

“I think what Jones Lang LaSalle did was very smart,” said Mark Jaccom, president of GVA Williams. “It proves that a tenant rep firm will be able to survive and better service their clients being part of an organization that has multiple disciplines.”

Jaccom, who left tenant rep firm Studley two years ago, said he foresees in the not so distant future that the landlord-tenant business will end up being in the hands of the bigger generalists: CB Richard Ellis, Colliers International, Cushman & Wakefield and Jones Lang LaSalle.

“I think you are going to see these four titans fighting it out there,” Jaccom said.

GVA Williams is looking to spread its wings.

The company has been looking for a partner “that will give [GVA Williams] more global reach and growth opportunities and will have deeper financial pockets,” said Jaccom, who directly runs GVA’s tenant rep division.
He said a deal like this could be closed by year’s end.

In the promotional book for his swanky new development, Gramercy by Starck, Philippe Starck stated that “with this beautiful building, I hope people will see it and say, ‘Oh, I want to live there!’”

They might also gaze at the façade and say, “Oh, I want a Big Mac!” Or, “Oh, I forgot to fill my prescription!”

It’s impossible to miss the McDonald’s on the ground floor of the French designer’s sleek glass condo at 340 East 23rd Street. The entrance to the ubiquitous fast-food joint melds with the façade, framed by a vertical and a horizontal yellow stripe and a vertical slash of red.

The golden arches consist of a square two-foot-by-two-foot sign featuring the mustard yellow logo on a dark red background that juts out perpendicular to the building’s face.

In addition to the McDonald’s, a CVS also occupies space at the building.

The pairing of such mass-market retailers with a luxury building like Starck’s is just one of many seemingly incongruous real estate matches in Manhattan.

But, according to Keri Eckhaus — an on-site broker at Gramercy by Starck who works for the Shvo Group, which is marketing the development — the juxtaposition at the building has not ruffled buyers. The presence of CVS and McDonald’s, which had yet to fry its first burger in mid-June, have barely affected sales, Eckhaus said.

In mid-June, only 20 out of 207 apartments remained unsold after sales opened in May 2007, she said.

“People talk about the McDonald’s, but it doesn’t make or break sales,” Eckhaus told The Real Deal. “There are separate ducts and vents, so no one’s going to smell French fries or anything.”

Many of the buyers already live in the neighborhood, and fewer than 40 percent come from abroad, she said. Available apartments in mid-June ranged from a $590,000 studio to a $3.6 million three-bedroom penthouse with northern, eastern and southern exposures and a hot tub on the wraparound deck.

So how did McDonald’s end up on the ground floor of a starchitect’s building? For starters, it owned one of the three parcels that made up the building’s footprint and negotiated a favorable deal to sell its air rights and occupy the new space, said Alan Miller, president of Eastern Consolidated.

Miller represented the developer in the CVS deal. Omnispective Management bought the ground-floor retail condo. CVS leased the space for 25 years with four five-year renewal options.

Such deals can be complicated, especially when an establishment like McDonald’s has an agreement with a franchisee at a particular location, said John Ciraulo, vice chairman at Massey Knakal. It’s rare to see any type of food establishment at a high-end condo, or even a five-star restaurant, because such uses are frowned on, he said.

“McDonald’s is a big landowner and has realized that its holdings, especially in Manhattan, are one- and two-story structures with lucrative air rights,” he said. “Because they’re not in the real estate business, they’re starting to agree to sell their assets. In this case, they leveraged their ownership of the land to strike a good deal,” Ciraulo said.

The Starck building is not the only high-end residential tower with a lower-end national retail chain at its base. The Millennium Tower condo, framed by Columbus Avenue, Broadway, and 67th and 68th streets, has a large retail space on its ground floor to accommodate a multiplex cinema and a Gap clothing store.

Gene Spiegelman, executive director of retail services at Cushman & Wakefield, brokered the retail space at 15 Central Park West, perhaps the epitome of retail-residential incongruity. The building, arguably the most lavish new construction in Manhattan, is anchored by a Best Buy, which occupies 46,000 of the 85,000 square feet of retail space.

The retail space averages $325 per square foot for ground-floor space and $75 for the second floor and lower levels. The lease with Best Buy has not had any impact on condo sales, said Spiegelman: One seller sought $15,000 per square foot for one apartment at the condo building.

“The people who move into these luxury buildings are going to snap up several flat-screen TVs and computers,” said Spiegelman.

He added, “Best Buy really raised its level of design to conform to the architecture; everyone who enters the store says it’s a lot nicer than they thought it would be.”

Although you’d think “the city that never sleeps” would be full disclosure, New York City hotels are offering, as one of their newest amenities, sleep concierges.

At the Benjamin at 125 East 50th Street, the “sleep concierge” offers, among other things, 12 different types of pillows to guests including an upper body pillow, hypo-allergenic pillow, Snore-No-More pillow, water-filled pillow, magnetic therapy pillow and a Swedish memory pillow.

The building — which has 209 rooms and charges between $400 and $600 a night depending on the season — even has a menu that includes all the pillows with pictures and an explanation of the benefits each pillow offers. It also has other amenities to help guests get a better night’s sleep, like a unique room service that has special dishes such as banana bread with peanut butter or warm milk and chocolate chip cookies.
Meanwhile, at the AKA extended-stay chain, there are “sleep seminars” initiated by Larry Korman, the co-president of Philadelphia-based Korman Communities, which owns the AKA properties. He hatched the idea after his own battle with insomnia.

The theory is that a few nights of missed sleep at a conventional hotel may be negligible, but when you’re staying for a month or two, good sleep patterns are critical. The firm currently has four Manhattan properties — AKA Central Park, AKA Times Square, AKA Sutton Place and AKA United Nations — with a combined 410 rooms.

These types of amenities may become the norm in a city where hoteliers are pulling out all the stops to capture customers. Over the previous year’s quarter, the average daily room rate grew only 8.6 percent to $262.29 in the first quarter of 2008, a slowdown from the growth of 14.2 percent from 2005 to 2006.

AKA’s sleep seminars are being conducted by doctors from NYU’s School of Medicine Sleep Disorders Center and from the New York Sleep Institute. Those in attendance at last month’s seminar, about 15 people, watched attentively, sipping green tea (coffee is a no-no).

The doctors on hand gave tips on sleeping, and they’ve walked through two of the chain’s properties — where rates range from $255 to $345 a night for a 30-day stay — making suggestions about how to tailor rooms to prevent insomnia.

“Some people who have trouble going to sleep at night, you want them to be in a room that has no street light outside, that’s not noisy, but very dark at night, with blackout draperies,” Sharon Telesca Feurer, the vice president of marketing for AKA, said. “Other people have trouble getting up in the morning, so you want them to have an eastern exposure, supplemented by having a light box.” She said the buildings have ear plugs, sleep masks, aromatherapy treatments and herbal teas avilable to help make sleep easier.

Besides the light boxes to help ease the pain of jet lag and other sleep disorders, AKA provides white-noise machines. The chain also stocks sleep CDs (one with classical music, the other with New Age tunes) and alarm clocks that simulate a natural sunrise with gradually increasing light instead of a jarring bell alarm.

The sleep concierge at the Benjamin, Anya Orlanska, said sometimes guests ask for medication. “But,” she said, “we’re not allowed to provide guests with any type of medication.”

In a recent Webcast interview, The Real Deal had a follow-up conversation with Sofia Kim, vice president of research at StreetEasy, exploring some aspects of last month’s cover story on price reductions at condos in Manhattan and Brooklyn, the city’s two most active boroughs for development.

Kim said that two-bedrooms in both boroughs are seeing more price cuts than any other type of apartment, which suggests there is an oversupply of these units. But lower prices have not necessarily led to more sales, at least in Brooklyn: Perhaps surprisingly, more units in the borough with price increases are going into contract than those with price reductions.

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

The Real Deal: StreetEasy collected listing price data for The Real Deal for Manhattan and Brooklyn new developments, and that data was based on pricing information that was sent to the Attorney General’s office. You found in your analysis that overall prices had gone down. Tell us first what the breakdown was for Manhattan and Brooklyn.

Sofia Kim: In Manhattan, there were 178 increases versus 208 decreases [in March, April and May], so 54 percent of the listings that saw price changes in Manhattan were decreases; whereas in Brooklyn, 64 percent of the listings that saw price changes were decreases.

TRD: And you mentioned previously that 183 went down versus 103 going up in Brooklyn. That’s pretty significant.

SK: Yes, it is significant. And you know, [for] brokers and developers, in general, lowering prices is probably the last thing they would want to do. Developers are more keen on negotiating with the buyer in terms of maybe covering closing costs, paying part of the mortgage tax or requiring a lower down payment, but now developers want to move the units more quickly.

TRD: Let’s drill a little bit into the Manhattan neighborhoods. There were more price reductions in some neighborhoods — Harlem, Upper Manhattan and Chelsea — than in others. Was that a result of greater inventory, or maybe these neighborhoods aren’t as desirable as others?

SK: Well, in Harlem — in Upper Manhattan — families who want to move to the Upper West Side and those who were finding they were priced out of that market were moving north, and developers saw that and made a mad rush to put up all these developments in Upper Manhattan and stretch the boundaries of the Upper West Side. So, in a softer market, you know, it’s these fringe areas that are going to see more reductions.

TRD: In Brooklyn, there were areas like [the] fringes of Park Slope where you saw some of the same evidence of price reductions. What was happening there?

SK: Yeah, you know, it was very surprising to see price reductions in Park Slope. A lot of the reductions were for last units in a development. There were reductions in the 151-unit building called Nova, and that building has awkward layouts — much smaller rooms. And there was another one, the Heritage, and that one was a first-floor unit.

TRD: Speaking of those units, is there any kind of relationship you’re seeing in the numbers to the sizes of the apartments such as one-bedrooms, two-bedrooms, studios — anything moving faster, moving slower or more price reduction in one or the other of the two boroughs?

SK: In Manhattan, two-bedrooms had twice as many decreases as they had increases. Brooklyn was a different story. Three-bedrooms had twice as many decreases as increases, and the two-bedrooms had three times as many decreases. It indicates to me that there is an oversupply in two-bedrooms.

TRD: I was going to ask you to look at specific developments like the Lucida and the Rushmore at Lincoln Square; did prices rise or fall at those projects and why?

SK: The Lucida actually had price increases; they had three price increases, I think totaling $2.1 million, whereas the Rushmore, I think, saw four increases totaling $275,000 — so, not as dramatic — and one decrease of $116,000.

TRD: You were able to track some of those listings to contracts, and you found that in a percentage of cases the contracts went through when the prices were lowered.

SK: In Brooklyn, it was very surprising — 6 percent of the units that had price decreases went into contract, whereas 35 percent of the listings that had price increases had contracts. There could be something psychological going on. Developers, you know, when they raise prices, they sometimes create a sense of urgency among buyers.

Manhattan

East Village

10 Bleecker Street

$2.2 million

2.5-bedroom, 2-bath, 1,300 sf penthouse co-op in prewar elevator building; 850 sf private roof deck, high ceilings, skylight, two exposures; building is pet friendly; asking price $2.25 million. (Broker: Bonnie Wyper, Corcoran)

Gramercy

$2.2 million

121 East 23rd Street

3-bedroom, 2.5-bath, 1,743 sf condo in new construction elevator building (Crossing 23rd Street); doorman; bicycle room, courtyard, fitness room, laundry room, lounge area, rooftop deck; common charges $1,390; taxes $132; asking price $2.25 million; 21 weeks on the market. (Brokers: Stribling; City Connections Realty)

Gramercy

$2.105 million

340 East 23rd Street

3-bedroom, 2.5-bath, 1,609 sf condo in new construction building (Gramercy Starck); building has fitness center, roof deck and lounge; common charges $1,417; taxes $190; 12 weeks on the market. (Brokers: Century 21 NY Metro; Shvo Group Marketing)

Greenwich Village

$610,000

125 West 12th Street

1-bedroom, 1-bath, 550 sf co-op in prewar elevator building; garden, common storage, bike storage, laundry; hardwood floors, open kitchen, windowed bathroom, high ceilings, walk-in closet. (Broker: David Drake, City Connections Realty)

Lower Manhattan

$3.15 million

38-44 Warren Street

3-bedroom, 2.5-bath, 2,632 sf loft condo in elevator building (the Keystone); two exposures, high ceilings, oak floors, modern kitchen, walk-in closets, private storage space, multiple heat and air conditioning zones; asking price $3 million; 161 days on the market. (Broker: Corcoran)

Lower Manhattan

$570,000

250 South End Avenue

1-bedroom, 595 sf condo in postwar elevator building (Hudson View East); 24-hr doorman; parquet floors, western exposure with partial river view; building has laundry room on every floor, driveway, common garden and common storage room; common charges $1,010; taxes $516; asking price $580,000; eight weeks on the market. (Brokers: Jessica Lee, Bellmarc; Marc Achilles, Stribling)

Midtown East

136 East 56th Street

$730,000

1-bedroom, 1-bath, 900 sf apartment; storage, closet space, garage parking; asking price $745,000; 15 weeks on the market. (Brokers: Rena Golstein and Laura Lawrence, Halstead Property)

Murray Hill

$671,500

123 East 37th Street

1-bedroom, 1-bath, 800 sf co-op in prewar building (the Lindley House); laundry, storage, roof deck, elevator; maintenance $1,319; asking price $679,000. (Brokers: Joanne Wong, City Connections Realty; Corcoran)

Murray Hill

$505,000

225 East 36th Street

1-bedroom, 1-bath, 750 sf co-op in postwar building; doorman, laundry, storage, garage, roof deck; maintenance $1,203; asking price $529,000; 24 weeks on the market. (Brokers: Erika Hardenburg, Citi Habitats; Century 21 NY Metro)

Upper East Side

$2.2 million

44 East 67th Street

2-bedroom, 2-bath condo in prewar Art Deco building; 24-hr doorman; eat-in kitchen, renovated bath, oversized windows, walk-in closets, storage space, dishwasher; building has common storage, central laundry room, security guard; asking price $2.25 million. (Broker: Corcoran)

Upper East Side

$2 million

120 East 81st Street

2-bedroom, 2-bath, 1,600 sf penthouse co-op in postwar elevator building; doorman; private terrace, walk-in closets; building has security system, low-cost garage, exercise room; maintenance $2,257; 49 percent tax-deductible; 256 days on the market; asking price $1.995 million. (Broker: Rhea Stein, Corcoran)

Upper East Side

201 East 79th Street

$1.35 million

2-bedroom, 2-bath, 1,300 sf co-op in postwar elevator building; doorman, concierge; windowed kitchen with GE appliances, master bedroom with en-suite bath and two closets; pet-friendly building has gardens. (Brokers: Richard Rosenthal, Brian Lewis, Halstead Property)

Upper East Side

$530,000

357 East 57th Street

1-bedroom, 1-bath, 780 sf co-op in postwar elevator building; 24-hr doorman; high ceilings, hardwood floors; building has garage, laundry room and rooftop deck; maintenance $1,098; asking price $535,000. (Broker: Joseph Robinson, Bond New York)

Upper West Side

$1.103 million

444 Central Park West

2-bedroom, 2-bath, 1,170 sf co-op in prewar elevator building; 24-hr doorman; oversized windows, hardwood floors, newly renovated kitchen, through-wall air conditioners; building has bike storage; maintenance $1,503; 43 percent tax-deductible; asking price $1.095 million; 26 weeks on the market. (Brokers: Svetlana Choi, Bellmarc; Paul and Caroline Zweben, Prudential Douglas Elliman)

Upper West Side

$1.025 million

230 Riverside Drive

2-bedroom, 1-bath, 839 sf condo in pre-war elevator building; doorman; beamed ceilings, white oak floors, marble bath with radiant-heated floor, modern kitchen; building has private garden with terrace, residents’ lounge, bike storage room, exercise room, laundry and storage; common charges $608; asking price $1.195 million; 205 days on the market. (Broker: Meredith Luck, Corcoran)

Upper West Side

$792,750

110 West 94th Street

2-bedroom, 1-bath, 1,000 sf co-op in prewar elevator building; city views, newly renovated kitchen and bath; maintenance $943; 40 percent tax-deductible; asking price $810,000; three weeks on the market. (Brokers: Bill Milvaney, Bellmarc; Pat Galante, Corcoran)

West Village

$3.32 million

1 Morton Square

3-bedroom, 3.5-bath, 1,700 sf penthouse condo; concierge; building has valet services, fitness center, children’s playroom and in-house garden; common charges $1,540; taxes $750; asking price $3.395 million. (Brokers: Darren Sukenik, Prudential Douglas Elliman; Warburg Realty)

Bronx

Baychester

$129,000

4380 Vireo Avenue

500 sf studio co-op in postwar elevator building; newly renovated kitchen and bathroom; pet-friendly building has storage, live-in super; asking price $128,000; 12 weeks on the market; maintenance $357. (Broker: Fred Levy, Halstead Property)

Brooklyn

Clinton Hill

$599,000

430 Clinton Avenue

1-bedroom, 1-bath, 1,255 sf condo duplex in recently converted elevator building; high ceilings, laundry, hardwood floors, walk-in closets; common charges $520; asking price $749,000; 349 days on the market. (Broker: Corcoran)

East Williamsburg

$626,000

52 Ten Eyck Street

1-bedroom, 2-bath, 1,800 sf new construction condo; spacious duplex with private garden, recreation room, study, hardwood floors, open kitchen; common charges $253. (Broker: Graham Oliver, Bond New York)

Flatbush

$220,000

1155 Ocean Avenue

1-bedroom, 1-bath, 843 sf co-op in postwar elevator building; hardwood floors, renovated kitchen and bath, dining area, laundry; maintenance $551; two weeks on the market. (Broker: Felicia Putter, the Developers Group)

Williamsburg

$854,000

50 Bayard Street

2-bedroom, 2-bath, 1,165 sf condo in new construction elevator building (Ikon); hardwood floors, high ceilings, laundry, concierge, gym, roof deck; common charges $815; 78 weeks on the market. (Broker: Troy Berman, the Developers Group)

Williamsburg

$520,000

170 North 11th Street

1-bedroom, 1-bath, 682 sf condo in new construction elevator building; air conditioning, high ceilings, hardwood floors, roof deck; common charges $121; taxes $396 (abated 15 years); eight weeks on the market. (Broker: Alan Shaker, the Developers Group)

Queens

Bayside

$420,000

18-15 215th Street

1-bedroom, 1-bath, 900 sf co-op in waterfront, postwar elevator building (the Towers); private balcony, dining alcove, hardwood floors, overlooks Little Neck Bay; building has fitness center, spa, pool, valet parking, on-site shopping arcade, dry cleaner, grocery, convenience store, salon; common charges $1,090; 50 percent tax-deductible; asking price $430,000. (Broker: Bay Benjamin, Bay Bridge Real Estate)

Long Island City

$805,000

12-11 Jackson Avenue

2-bedroom, 2-bath condo in new construction building; central air, hardwood floors, washer/dryer, part-time doorman, roof deck, gym, live-in super; common charges $628; taxes $189 (abated 15 years); one day on the market. (Broker: Alan Shaker, the Developers Group)

Brokers know that staging a home with works of art helps sell it faster. Now,
more real estate agents are reaching out beyond established artists to connect with the current art scene.

These brokers said they have seen sluggish properties that lingered on the market for months sell in a few weeks after being staged with original art or quality prints.

Exhibiting paintings and sculpture by local artists has been helping sales for broker Sandy Edry of Citi Habitats, who is selling renovated condos at 812 Riverside Drive at 157th Street. He reached out to artists in Washington Heights for original paintings to display in two of the apartments.

“I thought, rather than using generic art to put on the walls, why not tap into the thriving arts community here?” said Edry. “It was important to incorporate ties to the community for people who might live in the building.”

In one apartment, Edry used painter Tony Serio’s local landscapes and vistas of the George Washington Bridge. Pop-abstract works by Leandro De La Cruz were hung in the other unit. Edry printed flyers with
information about the paintings, the artists and a price list (works for sale ranged from $800 to $2,000).

The apartments were sold within a week of staging the units with art.

“People walk in, see the art, and it enhances the experience,” said Edry, who pledged to donate 5 percent of his commission from the sale of the units to arts groups.

According to Kristine Jegi of NY Home Staging Solutions, a $1.4 million property near the Flatiron District was staged with abstract art by Sybille Hassinger called “Box 1,” and got an offer at the first open house after being on the market for a month with no activity.

Commissioned works have been placed in developer Jeremiah O’Connor’s Manhattan House, and contemporary art by artists such as Carlos Vega, Bob Knox and Ian Teh is used by marketer Michael Shvo in the White Space Building at 650 Sixth Avenue in Chelsea.

Staging with iconic art is typical of
high-priced properties. Rae Gilson of Classic Marketing, an arm of Classic Realty, hung an original work by Andy Warhol over a fireplace when marketing a townhouse at 3 East 94th Street.

“The painting was on loan from a private collector for just two hours,” said Gilson, who used the Warhol painting to take pictures for a marketing brochure. “It was guarded by an art mover standing nearby.”

Work by celebrity artists enhances the value of luxury properties, added Gilson. “I think if a recognizable artist like Warhol,
Milton Avery or Picasso is on the wall, all of
a sudden, buyers see the whole house as
more substantial.”

Gilson finds that art also distracts buyers from a home’s flaws. “If there’s a bad view or if there’s no bathroom window, it’s nice to have a painting for a deeper perspective, giving the eye a place to go.”

Maureen Footer, an art curator and designer, used an eclectic mix of commissioned work and copies of classic art when she decorated a high-profile, $2.5 million apartment at the Manhattan House. The approach was to create a home in the spirit of Grace Kelly, who lived in the building in the 1950s.

Footer was challenged by the small size of the apartment, a 1,100-square-foot condo-conversion unit. She wanted to evoke a space both romantic and sophisticated, so she commissioned two abstract paintings by Garrett Chingery, an American contemporary artist, for the living room and bedroom. In the hallway, Footer hung two architectural drawings by Jansen, the French design firm. In the living room she placed a 1920s-era plaster bust of the Duke of Burgundy, a copy of the 18th-century original.

“Art subliminally reinforces a space,” said Footer. “It doesn’t just fill in the space and decorate the wall; it becomes a character that somebody might want to relate to.”

For Footer, art defines transitional spaces like a small hallway between the living
room and bathroom and kitchen. “If there’s art in the hallway, you’re not going to just walk through the space. It makes you slow down while taking it into account. It adds to the graciousness.”

Displaying art was Michael Shvo’s marketing theme for the 67-unit conversion at 650 Sixth Avenue. Shvo teamed up with the Jack Shainman Gallery, which provided large works by Vega, Knox and Teh for the building’s lobby, sales office and even Web site, where prospective buyers can click and drag the artwork to see how it looks on different walls.

Richard Grossman, an executive director of sales for Halstead Property who is familiar with the Chelsea building, said it attracted people who collected and appreciated art. “In terms of marketing today, art is one of the new status symbols. Developments in West Chelsea are designed with criteria important to an art collector, such as lighting and wall height. Developers are seeing success, especially on an individual resale basis,” he said.

Grossman said the connection between Shvo and the Jack Shainman Gallery is paying off, and many units are now in contract.

Local photography was used to attract buyers to a new condo building in the northern Manhattan section of Inwood. Marketers Sabrina Seidner and Susan Davis Eley of Nest Seekers International hosted an art show in January at the neighborhood’s Two07 Gallery. They wanted to draw attention to the 12-unit building on Payson Avenue called NOMA 175.

A steady stream of people flowed in to see photographs of the neighborhood taken by Ghila Krajzman, a professional photographer hired by Seidner and Eley. Next to pictures of restaurants and park scenes with children were signs that read, “Own your peace of Manhattan,” “eclectic,” “arrive,” “it’s NOMA motion,” and “the vibe of the new.”

“It was a natural way to meet people without doing a hard sell,” said Eley. “It generated interest and a connection in the community.”

The show was covered by the local press and helped Seidner find her target market. Almost 50 percent of the building has sold since January, with one- and two-bedroom units selling from $390,000 to $405,000.

Jegi of NY Home Staging Solutions, which stages properties in the five boroughs, Westchester and Long Island, said she selects art that doesn’t detract from the home. “Art always needs to be relatively neutral. We’re not trying to make a major statement because that will take away from the focus, which is to sell the homes,” she said.

Jegi spends about a tenth of her staging budget on art and finds the funds are well spent.

“We find [unstaged] properties that have been on the market without any movement suddenly get multiple offers after the first open house.”

Jegi staged a Park Slope apartment that had been on the market for 10 months with an asking price of $475,000 by adding early 20th-century modern art. There were two offers 10 days later.

Jegi used an untitled print by Han Mes and another by Mike Klung called “Motion 1.”

“We didn’t want to use art that was too modern so the property would appeal to families. Ultra-modern art would have been too cold, and traditional art limits your viewers,” she said.

A new broker recently hired Jegi to stage a loft space on Fulton Street in downtown Manhattan. The loft had been on the market for six months with no offers, she said.
“Even though it’s a tough market, it was sold in two weeks.”

How does one convert a 1929 landmarked building by famed architect Rosario Candela into condos without losing its generous proportions and touches of elegance — and without ever having tackled a historic conversion project before?

That was the challenge Vornado Realty Trust faced in its development project, which is now nearly complete, at the 12-story brick building at 40 East 66th Street, a highly desirable location also known as 771 Madison Avenue.

Vornado purchased the rental building in 2005 for $158 million.

Apartments at 40 East 66th feature original details like wood-burning fireplaces, and it is touted as one of the last Candela buildings in the city to be converted. But after eight decades as a rental building, repeated renovations made it difficult for the architects to know what some of the spaces, like the lobby, originally looked like.

Nancy Ruddy, president of the architectural firm Cetra/Ruddy
Incorporated, which has done projects ranging from the Orion to 141 Fifth Avenue and which
designed the conversion, said Vornado spared no expense in the update. “They really wanted to do something special, and we’ve been able to give life to this amazing Candela building and provide a beautiful level of detail and finish, most of which was not in the building originally,” she said.

Ruddy said the conversion should be completed in six months. Sales of the apartments, which start at $6 million, are underway.

“We have a full floor built out with models — one has already been purchased by a buyer. The rest of the building is actively being worked on. This has been a very special project,” she added.

To understand Candela’s work, she studied his other buildings, like the former Stanhope Hotel built in 1926 at 995 Fifth Avenue. That was converted in 2005 by Extell Development. The starting price for one of those 26 apartments was $10.5 million.

Although Ruddy knew Candela’s lobbies alternated from luxurious to simplistic, she found the lobby at 40 East 66th Street to be dark and dingy. To freshen it, she used the lobby’s original double-barreled vault as the main design element. “We took what we knew about Candela buildings and reinvented the spirit of the building as if it was always there,” she said.

Ruddy said the kitchens in
the apartments have “custom-designed cabinets, backsplashes of full slabs of marble with carved trim and antiqued limestone floors [to] create elegant family centers.” They also have Côte d’Or limestone floors, white cabinetry accented with nickel hardware and Calacatta marble countertops. Appliances include a Viking stove, Sub-Zero refrigerator, Miele dishwasher and Miele washer/dryer.

The units, which are about 2,500 square feet, each have three bedrooms. There are three apartments per floor, each with large rooms, as the developers wanted to keep the expansive spaces.

“Generally, prewar building conversions find larger rooms sliced into smaller ones. That’s how they lose their graciousness,” said Ruddy. “We kept the size of the public spaces intact, and we changed some of the floor plans by adding a powder room and making the master bath larger. We could do all that without losing space from the dining and living room.”

Ruddy also wanted to emphasize details such as the cove molding on the walls and ceilings, so where new walls were added, they replicated the molding in plaster.

“We also replaced the floors with new solid wood herringbone floors with a triple border,” Ruddy said.

Ruddy said the design challenges of 141 Fifth Avenue and
40 East 66th Street were very different. “At 66th Street, we built upon the inherent elegance of the building. [But] 141 Fifth was an office building with a beautiful, ornate facade.”

Iva Spitzer, one of the lead agents at the Corcoran Sunshine Marketing Group selling the condos, said the units were put on the market three months ago.

“Sales are going fantastically well. We have signed contracts, and the conversion plan should go into effect in a couple of months,” she said. Spitzer expects buyers to start moving into the 26 units by the end of the year.

The apartments had been rent-stabilized, and most tenants moved out when the conversion started. There are still a few tenants in the building who legally have the option of remaining after the building is converted. “They have the right to stay. Some may purchase their units; others may eventually move out,” Spitzer said.

In spite of a soft market, Spitzer predicted that sales of the Candela condo units will be unaffected because the apartments are one of a kind in a desirable location.

“These prewar conversions
offer a product that cannot be built again. We have a captive
audience of people who want to live in the 60s on Madison Avenue in a beautifully restored condo. Most prewar conversions fed into a niche years ago and all are now doing really well in spite of a soft market.”

Gene Hegy, 86, who is retired from his realty firm Eugene Hegy & Associates, knew Candela professionally.

“Rosie Candela would have been very much in favor of the conversion because it preserves the building and restores a number of the vital elements,” Hegy said.

He thought Candela would also get a kick out of knowing the
asking price. “The cost of one apartment being $6 million — that’s more than the original cost of the building!”

This past February, Tamir Shemesh, a managing director at Prudential Douglas Elliman, brokered a deal between a seller at the Milan condominium at 300 East 55th Street and, count ‘em, “10 or 12″ doctors from California.

“They need to travel for business or pleasure, and instead of staying in a hotel they are going to purchase something that will appreciate over time,” Shemesh said.

In the age of the co-op (read: board-regulated sales), this shared-pied-à-terre-style buying was more or less unheard of.

“Co-ops frown on pied-à-terres in general,” said Chris Poore, vice president at the Corcoran Group. “Especially if two people are sharing the property.”

“It’s a double whammy,” said Jeff Krantz, vice president of sales and marketing at City Connections Realty.

But with the rise of condo living, the shared pied-à-terre is gaining in popularity.

“Most co-ops will prevent [pied-à-terres] because the [other owners] don’t want to feel like they’re living in a hotel,” said Shemesh. “But a condo can’t prevent it.”

“There’s nothing in the offering plans that would prohibit you from [buying jointly],” noted Wilbur Gonzalez, managing director at Brown Harris Stevens’ ID Marketing Group. Gonzalez also pointed out that if the market gets tougher, a sponsor would likely be even more flexible about selling to more than one buyer.

That’s not to say that multiple buyers are banging down the doors of New York City brokers just yet. But there are instances.

Rodrigo Niño, president of Prodigy International, recently sold two units in the Financial District’s William Beaver House to four brothers from Spain.

“They are all paying an equal amount,” said Niño.

Still, brokers point out that with joint ownership comes a lot of responsibility — and risk. “It’s very difficult for people to take the plunge,” said Krantz, who has had more than one pair of buyers approach him about purchasing a shared property, but has never actually had anyone sign a contract.

“Getting into that kind of relationship … if the financial situation changes and one [person] can’t afford to buy the other out, managing the property becomes a logistical problem for a lot of people,” he said.

Add to that the cost of management, scheduling time (no one wants to be fighting over prime dates like July 4 or New Year’s) and potential lack of privacy, and it could break a deal.

“It could result in the end of a friendship or the changing of lives,” said Prudential Douglas Elliman’s Leonard Steinberg. “Though I do think it’s a wonderfully clever idea for offsetting the expense of owning a pied-à-terre in Manhattan, and much less wasteful because it won’t be sitting empty.”

Gonzalez recently sold two separate condos to multiple buyers. The first, he said, was a Downtown luxury unit, which was bought by foreign buyers who wanted a home in Manhattan. The second, he said, was to a pair of friends who purchased the property as an investment.

“One is single, the other is married. The unit they wanted was north of $5 million, so they pooled their money and bought it together,” said Gonzalez, who has personally joined forces with other individuals to buy investment properties. “Their intent is to rent it out, but they may sell it now that the value has appreciated.”

Gonzalez continued, “I think it makes perfect sense as an alternative investment vehicle. Oftentimes the entry costs are high for real estate, so if you can split costs and profits, you can enter that market.”

Gonzalez also predicted a quick recovery for the dollar, and conversely mentioned the pound and the euro dropping in value. “The dollar should recover by the end of the year, so there are a lot of Europeans who are converting to dollars now to maximize.”

For Europeans to share a pied-à-terre “makes complete sense as long as you can get your schedules in order,” added Gonzalez. “It’s certainly cheaper than a hotel.”

For this month’s Q & A, The Real Deal talked to brokers who said that while landlords are bending over backwards to maintain their monthly rental prices, they are offering more concessions than they were even six months ago in the form of a month of free rent, wiggle room on move-in dates and perks like free gym memberships. Comments

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In late 2006, when the Manhattan residential sales market was red hot, Lawrence Rich, an associate broker and vice president with Prudential Douglas Elliman, decided to put his money where his mouth was and buy some investment property.

Rich chose a duplex at ThreeTen, a luxury condo tower at 310 East 53rd Street that boasts valet service and a private garden. He put down 10 percent and waited for construction to end so he could close and flip.

But when January 2008 and the opening of ThreeTen rolled around, the market had changed dramatically. The fallout from last summer’s subprime debacle left buyers, once desperate to get into the market, more cautious, meaning sellers like Rich had to adjust their expectations. He put his new property on the market and hoped for the best.

“I was a little nervous,” he admitted. “There were several other similar apartments in the building that were also for sale. It was a very competitive process.”

Within a month, he had an interested buyer, but there was a problem: closet space. The buyer wanted more room for her approximately 200 pairs of shoes and 200 handbags. So Rich did something that he probably would have never considered during the boom times: He offered to have a professional company renovate the closets to her specifications. The price tag? A little more than $37,000, which Rich shelled out of his own pocket.

“I decided I wasn’t going to be greedy,” said Rich. “I thought, I have an opportunity to sell and make a good profit; I should do it.”

The scheme worked, and by March, they’d closed the deal. “I consider myself lucky to have gotten my money and gotten out,” he said. “Buying and flipping is a much more dangerous game now.”

His fellow brokers agreed.

“It used to be that if someone fell in love with an apartment, they’d make an offer that minute and close within a week,” said Louise Phillips Forbes, executive vice president of Halstead Property. “Now, people fall in love but aren’t necessarily prepared to make a decision right away.”

This kind of cooling off, brokers throughout the city said, means that these days, sellers, whether they’re investors reselling units or big development companies peddling sponsor units, have to work a little harder, and in many cases give a little more, to make a sale that a year ago would have practically made itself. And when the two come into competition, the stakes are even higher.

Forbes pointed to 10 West End Avenue, where she has a two-bedroom listing for $1.55 million, and the sponsor is selling a similar unit — but with a better view — for $1.8 million. Forbes said she and the building’s broker have a friendly relationship.

“If somebody comes to see the apartment I’m representing and says, ‘I like it, but there isn’t enough view,’ I’ll send them to her,” she said. “Of course, she tells me I’m not making her job any easier because having my resale on the market forces potential buyers to put a price tag on what they’re willing to pay to be on a higher floor.” (In this case, said Forbes, it’s an extra $331 per foot.)

Forbes admitted that this kind of I’ll-scratch-your-back-you-scratch-mine relationship is rare. And in the competition between resellers and sponsors, brokers said creative incentives, like the closet make-over, are becoming more common.

Sponsors can waive some closing costs, and also offer perks like a reduced fee at the health club or a storage bin downstairs.

Adrienne Albert, president of the Marketing Directors, also points to advantages such as appliance warranties, which go to the first buyer but often won’t transfer at resale.

“You have to look at each deal and evaluate,” said Albert. “You have to think, ‘What are the hidden benefits? Are these two apartments really the same?’”

According to data compiled by analyst Derrick Gross at StreetEasy, there are several Manhattan buildings where resales have hit the market before the developer has sold all sponsor units.

At 40 Bond, three of the four resale listings have cut their asking prices. Apartment 5D, a one-bedroom and the only unit in direct competition with a sponsor unit, has been on the market since September 2007, and dropped its asking price twice, from $3.6 million to $3.5 million in January 2008, and to $3.1 million on March 17. The unit had been listed by the Modlin Group, but is now being sold through Corcoran. The sponsor unit, on the market since November, is holding steady at $3.5 million.

Cipriani at 55 Wall Street has 23 sponsor units and 16 resales available, and the Avery on Riverside Drive had 13 sponsor units and 9 resales as of late May. According to Gross, the Avery dropped asking prices on five sponsor units in mid-May, including a one-bedroom now going for $95,000 less than its initial listing. Neither 55 Wall nor Gramercy by Starck have cut prices on their sponsor units, but “are most likely giving concessions.” The Gramercy by Starck had a total of 22 sponsor and resale units on the market in late May; one resale recently saw a price chopping of $75,000.

Karen Skinner bought a studio in a new condo building on East 100th Street in February 2007 for $287,000.

Skinner, director of operations of the Sept. 11 Families Association, and her husband both work in Manhattan and planned to use the apartment on weekends or when the weather was too bad to commute back to their primary home in Westchester. A year later, however, they’ve decided to sell the Westchester house and settle permanently in Manhattan. They’re upgrading to a two-bedroom on 117th Street. They had put the studio back on the market for $375,000, but reduced the price to $350,000. As of mid-May, they had two offers.

“East Harlem is really changing,” Skinner said. “A lot of people are looking to downsize, and there aren’t many studios for sale.”

Skinner said she’s not at all anxious about making the sale, but admitted she has thrown in amenities — she’s including the wall-mounted flat-screen television and a Murphy bed and sofa to sweeten the deal.

Roberta Benzilio, senior director of sales at Halstead, said that although they may have some advantages, developers are somewhat wary of going up against investors to sell units in new buildings. “A few years ago, when there was a frenzy of investors flipping and making huge profits, sponsors started to realize that these buyers were becoming their competition,” she said.

As a result, said agents, developers inserted “lock-in” clauses, which stipulate that a buyer can’t resell for a certain period of time after closing, or until the building is sold out. Benzilio said she’s heard of buildings telling buyers that if they resell at a profit, they have to share it with the sponsor.

But even when they aren’t competing with sponsor units, some sellers are still finding it difficult to unload apartments. The solution, for many buyers, is to rent their property for a few years and wait it out. Rich said he has clients who bought early at 15 Broad Street, ThreeTen and Sheffield 57, all of whom hoped to sell for a big profit. But in the wake of the credit crisis, they decided to rent the property and wait for the market to stabilize.

“Units in new developments are very desirable for renters because they offer services and amenities,” said Benzilio.

A loft-style apartment in Manhattan was needed for a television pilot, and a very determined man named Dan Pollack set out to find one.

After an apartment hunt lasting two weeks, Pollack found a great penthouse unit at 304 Spring Street. That was after scouting out 23 Manhattan places including the Setai New York at 40 Broad Street, 455 Central Park West, two Trump buildings, 505 Greenwich Street, 169 Hudson Street and 51 Warren Street.

Although he knows a lot of great New York City locations, Pollack is not a real estate agent.

He is a freelance location scout and was assigned to find the residence for the main character in a Barry Sonnenfeld pilot, “All Rise,” which has not been released.

A couple of factors complicate his searches, making it different from the typical apartment hunt: The sites are often off-market and occupied. To find them, Pollack goes door-to-door in Manhattan, Brooklyn, Queens and New Jersey, talking to building managers, owners and renters. If the location is suitable and the people are amenable to filming, he snaps photos of it.

Although some movie and TV location scouts turn to real estate brokers to gain access to properties on the market, most prefer not to.

“We stay away from brokers,” Pollack said. “They don’t [generally] know the type of space we need.” Still, in his search for a loft space for the TV pilot, Pollack did enlist two brokers.

“Part of the problem is, it’s apples and oranges,” added location manager Rob Striem. He worked with Pollack on the TV pilot, on the movie “The Brave One,” starring Jodie Foster, and on two yet-to-be released films, “Revolutionary Road,” starring Leonardo DiCaprio and Kate Winslet, and “Duplicity,” with Julia Roberts and Clive Owen.

Brokers don’t consider the size requirements of an apartment — the rooms have to be large enough to accommodate the camera, crew and lights — sound issues, site lines and whether equipment can make it in and out the building and elevator, Striem said.

A couple of real estate companies, Sotheby’s International Realty and Prudential Douglas Elliman, have film location services and brokers specializing in that niche.

For the most part, Striem said, “I find that most brokers don’t really want to do this because it requires a lot of time and energy, for not that sizable a payoff.” He said it’s the same concept at work in the overall real estate market.

Plus, brokers charge a commission. And that’s on top of the fee that is allocated for the landlord, and tenant, if there is one. And for shoots in co-ops, there is typically a large fee — it could be $5,000 or $10,000 or more — that the board generally demands.

It can be a challenge filming in co-ops, for example, which make up the bulk of New York City’s owned housing stock.

“In a co-op situation, it’s the most complicated because the co-op board has the most control over what shareholders can do with their property,” Striem said. “You may find someone who’s dying to do it and the co-op board will thwart the deal.”

For big budget movies with big-name designers and directors, the scouting process is more laborious.

“In a movie we’ll labor over the details in such a way that it’s incredibly meticulous and specific, trying to evoke something that’s real,” Striem said. “We’re always looking for the Holy Grail in movies.”

For one scene in “Revolutionary Road,” a movie set in the 1950s, Pollack had to find a restaurant for an upscale power lunch. So he looked at Eleven Madison Park Restaurant, the 21 Club, Ouest Restaurant, Café Loup, the Women’s Republican Club, the Yale Club, El Quijote Restaurant and Jumeirah Essex House. The producer selected the Essex House.

Other locations he has scouted include apartments, parties, courtrooms (the city has to approve usage), hospitals and garages.

Specifically, he found a mini-mart for the New York-set movie “The Brave One;” rooftops for the “Bourne Ultimatum” and the not-yet released film “Motherhood,” starring Uma Thurman; a military community with a park nearby for “the Messenger” — an Oren Moverman movie with Woody Harrelson that is under production; and a trailer park for the upcoming movie “The Wrestler,” starring Mickey Rourke. (Pollack got chased out of one trailer park.)

“Every once in a while you use Craigslist, but mostly you schlep around,” Pollack said.

Pollack has an MFA in directing from American Film Institute’s graduate film school and has written and directed short films that have screened in various domestic and international film festivals.

Pollack worked full-time on the set of the New York-based TV drama “Third Watch” between 2003 and 2005, which gave him ample time to navigate the city.

“Third Watch was cool because you got to see some interesting places in the city,” Pollack said, like Coney Island in the off-season.

Once Pollack and other scouts hand over the photos of the interior and exterior of a location with a few notes, Striem handles the logistics before presenting the best location options to the production designer and director.

“It’s not just about everything looking pretty. It has to be feasible,” he said.

A native New Yorker, Striem said he appreciates that he can “preserve the image [of New York] in film, which is forever,” and forge a “more intimate relationship with the city.”

No matter how many sites he and his scouts see, there are always more to uncover.

“You’ll always find something new that’s been there for 100 years that you never knew [of],” Striem said.

Located in Downtown Brooklyn, Belltel is not without its conveniences,
subway access being one of them. This was one of the major
selling points for “The Real World” team. Another? The fact that they
could have as much elbow room as they needed because the upper units
are still empty. ” class=”read-more-link”>[more]

The pace of residential sales in Manhattan continues to slow, causing a backlog of inventory. The rest of the summer doesn’t look any more promising.

Sales activity is down by roughly one-third from the same point last year, Jonathan Miller, president and CEO of appraisal firm Miller Samuel, said last month. Comments

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Howard Lorber is stepping up from hot dogs to finer dining — think
orange miso-glazed monkfish, or Long Island duckling with vanilla sweet
potatoes.

The chairman of
brokerage Prudential Douglas Elliman, who also serves in the same role
for the hot dog chain Nathan’s Famous, is purchasing the fashionable
Southampton restaurant Savanna’s, which lists the above items on its
contemporary American menu.

In late May, the New
York Post reported that Lorber bought Savanna’s from the estate of the
late business mogul Howard Gittis and planned to hand the reins of the
restaurant over to Manhattan restaurateur Tony Fortuna to run a
steakhouse called TBar at Savanna’s.

But Lorber, who purchased the land where Savanna’s sits in early June, told The Real Deal
that he has no plans to transform the restaurant this season. “It’s a
great place that has been around for 14 years,” he said. “I see no
reason to change it.”

Plus, Lorber said, he
doesn’t technically own the restaurant yet. He said Savanna’s is still
under the management of Gittis’ estate because the purchase took place
too close to the beginning of the season to change the name on the
liquor license.

As for next year,
Lorber, who owns a home in Southampton, said he would wait and see
whether it makes sense to revamp the establishment.

But a full house at
Savanna’s opening on June 14 confirmed the idea that no changes needed
to be made. “They’ve been packed without doing any advertising,” he
said.

Lorber said he first
learned that Savanna’s was available through his dealings with the
Gittis estate. Prudential Douglas Elliman is representing Gittis’s
15-acre summer compound on Ox Pasture Road in Southampton, which is
listed at $59 million.

He said his primary
interest in Savanna’s was the real estate, but added that he wanted to
be involved in the restaurant because he and Gittis were friends.
Lorber declined to say how much he purchased Savanna’s for, saying the
Gittis estate asked him not to reveal the price.

The purchase marks his
first venture into fine dining, although he has been involved with
Nathan’s since 1987. He is former CEO of the company and currently
serves as chairman of the board of directors.

When asked if Savanna’s could become a magnet for real estate types, Lorber said he hopes that will be the case.

Although the Federal Reserve has tried to stimulate the market by
lowering rates and making it easier for banks to borrow money, brokers
and economists have noted that developers, building buyers and
consumers continue to struggle to get loans, particularly from large
banks. Comments

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This year’s rash of construction-related deaths has placed intense scrutiny on New York City’s Department of Buildings — the agency charged with ensuring that construction sites are safe and buildings are structurally sound — to promulgate reforms.

With scores of construction sites across the city, that job has become increasingly difficult. Accidents on construction sites
in the city have killed 17 people this year, bringing the total to 148 deaths since 2002. Nine deaths occurred when cranes collapsed in separate incidents in mid-March and
late May.

According to the U.S. Department of Labor and recent reports, the majority of workers killed since 2002 have been undocumented workers, mostly foreign non-English speakers and non-union members. Half of the deaths were caused by falls hastened by improper use of safety gear, sometimes by forgoing it altogether. Five deaths this year occurred after workers fell from buildings.

Immediately following the disastrous week in late May when a crane collapsed on East 91st Street, killing two people, Mayor Michael Bloomberg and Robert LiMandri, acting buildings commissioner, announced proposals aimed at preventing future fatalities.

On June 4, the DOB said it would add an additional 56 inspectors to the department, bringing the total number of buildings inspectors to 461 from 277 in January of 2002.

Bloomberg, who attributed many of the deaths to “tragically reckless behavior,” proposed new legislation allowing the department greater oversight and enforcement.

“The bills will provide the department with the necessary powers to ensure
that contractors are held accountable for their work,” LiMandri said. “Buildings inspectors cannot be on every job site at
every moment of the day, and so we
must work together to create strong incentives for contractors to make safety their No. 1 priority.”

If those laws are enacted, the DOB will take a more active role in determining management style and workforce qualifications on construction sites, aspects of building now largely left up to the individual contractor.

As Richard Mendelson, a city director for the federal Occupational Safety and Health Administration, said, “At non-union sites, [often] there’s no one there besides the workers; the boss just drops them off.”

Mendelson agreed that better on-site management is critical, since most accidents are due to “work practice and operations, not design.”

Also, under the proposed laws, contractors would hold safety orientation programs and regular safety meetings to review
operating procedures during crane or concrete operations.

Mayor Bloomberg said these meetings, along with confirmation that the procedures reviewed were actually followed, would “reduce the chances of an accident when there is a breakdown in communication at the site.”

Contractors would also hire a licensed “Concrete Site Safety Manager,” who could be fined for violations. Industry experts estimated this additional employee would earn between $75,000 and $100,000 a year.

Workers performing rigging operations would have to certify that they’ve completed a 30-hour training course. Every three years, they would have to pass an eight-hour refresher course.

And nylon slings, identified as the cause of two deadly incidents this year, would also be largely prohibited.

“We did an internal assessment of the 51st Street crane accident in particular,” said Lou Coletti, president of Building Trades Employers’ Association of New York, referring to the crane that collapsed in March after a nylon strap broke, killing seven people. “I think the industry felt that there wasn’t a regulatory requirement that established a need to have that training.”

Mendelson agreed, noting that numerous construction jobs involving heavy equipment don’t require certification.

City Council Speaker Christine Quinn said fines would “ratchet up” after repeated violations. And a project safety monitor, hired by the city, would supervise construction sites with repeat offenses, an expense the contractor would ultimately reimburse.

The DOB would also track the record of general contractors, as well as demolition and concrete subcontractors, across job sites, as opposed to the current site-by-site basis.

Because violations would be monitored citywide, Quinn said careless contractors would have a greater chance of losing their right to do business.

Reaction within the industry to these proposed solutions has been mixed. Some dissenters said more focus should be placed on the department itself.

Coletti said the proposed reforms would prevent some accidents “with small contractors [who] do not invest money in training either their project management personnel or their workers,” but he said the industry would never be fatality-free.

Steven Spinola, president of the Real Estate Board of New York, acknowledged that with increased demand on the industry, “we’re reaching into a workforce that is perhaps not as experienced,” but said cutting corners on safety is in nobody’s best interest.

“When there’s an accident, regardless, it means that work stops, it means that insurance premiums go up and it means that the cost of the project goes up,” said Spinola.

Yet other industry professionals wondered if some reforms would actually increase accidents by further stalling construction, which ultimately prompts workers to work faster and for longer hours to make up for lost time.

For instance, a high-level source at one of the city’s largest construction firms said developers often ask his crews to work overtime after a stop-work order is lifted.

“It’s hard to recoup, and we certainly try to recoup by going on overtime,” sometimes putting in 60 or more hours a week for months at a time, he said.

The New York Post recently reported the DOB “issued nearly 29,000 permits for nighttime and weekend work between January and April — twice the number given out over the same period in 2007.”

Another source, who is not permitted to speak on behalf of his company, said the DOB should step up site monitoring and immediately impose compliance, rather than lengthy work stoppages.

While the reforms would require contractors who receive “Immediately Hazardous” safety violations to be in compliance within 24 hours, the reforms don’t
address the typical work stoppage or when it could recommence.

The intent of the proposed reforms, sources said, is to try to create a culture of accountability. The regulations would require the state to be notified if architects or engineers who have been subjected to disciplinary action are slated to work on sites. Companies will also be required to submit annual reports on accidents.

Still, inherent in the extensive documentation contractors would submit — to verify meetings were held, equipment checked and protocols followed — may be the creation of another bulky bureaucracy.

While Spinola acknowledged the proposed rules would lead to a longer pre-construction phase, he said the checks and balances are worth it. He said that eventually, as kinks in the system are worked out, the process would become more streamlined.

Although it may be by a smaller margin than in the rest of the country, New York’s foreclosure rate continues to climb.

In April, 5,696 people lost the roofs over their heads, versus 4,099 in the year-ago quarter, for a 39 percent spike, according to RealtyTrac, an online database of foreclosed properties. Nationally, the increase was 65 percent, jumping to 243,353 from 147,708. Every borough in New York posted a rise of between 14 and 88 percent over the same time last year, although Manhattan experienced a slight decline from March to April.

Experts think those numbers will continue to swell as interest rates for many mortgages reset in the coming year, rising out of the reach of homeowners. The loans at risk include subprime loans taken
out by lower-wage earners, but also many Alt-A mortgages, which are generally purchased by people who earn around $150,000 a year.

Though two missed payments may
not seem like a lot if you’re dealing with student loans or the power company, with home loans, that level of slipping behind typically starts the ball rolling on a lis pendens, which is the public document the bank files against a home, calling its title into question.

Soon after, a knock will come at the door from a process server with papers. If no payments are made, a court date will come about a month later, experts say. The bank could own the home a few months after that, although in New York, unlike, say, fast-acting Nevada and California, it can take almost a year before a judge rules that a bank can seize a house.

Despite the relative length of the foreclosure process, New Yorkers are suffering. Neighborhood Housing Services, an established counseling center, handled 2,160 foreclosure-related cases in 2007, compared with 200 in 2002, according to CEO Sarah Gerecke.

In terms of solutions, it’s abundantly clear that today is not like the old days (read: the decades before the 1980s), when you could stroll into the corner bank that issued your mortgage and plead your case directly to the president.

In those days, he or she might have lowered the principal balance as a way of making your monthly payment more manageable. (Lowering interest rates was less likely; the bank was borrowing its money, too, and if it was paying 4 percent to borrow, it was unlikely to drop the rate at which it lent to you to 3 percent.)

In recent years, though, mortgages haven’t been sitting in that corner bank for long; they’ve usually been bundled and sold as securities on Wall Street. With an often unidentifiable owner, begging for lenience has not been so easy.

Since the subprime mortgage crisis erupted, though, there has been action to provide relief on the federal level.

A bill being hammered out in the
Senate at press time, after clearing the House, could result in the guarantee of 500,000 mortgages nationwide, to the tune of $300 billion.

Lenders are also making themselves more accessible. For example, Project Lifeline, which debuted in February, gives lenders more negotiating power, particularly with those who have missed three months of payments. The homeowners’ loans must be serviced by one of six
banks: Bank of America, Citigroup, Countrywide, JPMorgan, Washington Mutual or Wells Fargo.

For help from a source without an
immediate stake in the loan, New
Yorkers can turn to one of two dozen
local housing counseling centers; especially recommended are those certified by
the U.S. Department of Housing and Urban Development.

While they used to focus on tenants’ rights, the centers now regularly counsel on foreclosures, their directors say.

Neighborhood Housing Services, for example, offers free foreclosure classes
at nine offices around the city, including in the South Bronx, Bedford-Stuyvesant and Jamaica.

In June, these centers, plus about
six others in New York, got a funding boost from the newly created Center
for New York City Neighborhoods, whose $6 million first-year budget is underwritten in part by hedge-fund manager John Paulson.

Described by Michael Hickey, its executive director, as a “central nervous system,” the center itself won’t take walk-ins, but will pay for added staff counselors at places like Neighbors Helping Neighbors, an organization focused in Sunset Park, Brooklyn.

But these approaches have drawbacks. For instance, some neighborhoods whacked with foreclosures, like Brownsville, Brooklyn, don’t have existing sites that offer counseling, and Hickey’s Center won’t create them — at least initially.

Yet when it comes to quick responses, centers are much more responsive than lenders, who can wait critical months to deal with individual borrowers’ problems, Neighborhood Housing’s Gerecke said.

And the number of walk-ins also underlines a more pervasive problem than even foreclosures: homeowners who are paying their mortgages, but breaking their backs to do so.

“The real casualties are the ones who are struggling,” Gerecke noted.

And the support system is flawed because it doesn’t connect homeowners and services early enough, said Lisa Breier
Urban, a partner at Manhattan-based Breier Deutschmeister Urban & Fromme who has been practicing real-estate law for 18 years.

“Homeowners can be like ostriches sticking their heads in the sand,” Urban says. “Sometimes you know you have a problem but will look the other way.”

Still, banks have recently shown greater wiggle room, she said, showing willingness to defer interest payments until a jobless borrower is re-employed, or allowing a short sale, a situation where the property is offered for sale at a price that’s less than what’s owed to the bank.

On the other hand, some homeowners, like the elderly, have fixed incomes that won’t increase much going forward, though their mortgage payments will. In those cases, deferring payments isn’t much of a remedy, said Nicole Gelinas, a senior fellow at the Manhattan Institute, which studies urban housing issues.

New York City could also do more in the way of public-safety monitoring, keeping vacant houses that are for sale free of squatters and graffiti, so property owners nearby could have an easier time unloading their homes, Gelinas said.

As to that imminent congressional bid to guarantee 500,000 mortgages, it’s
not clear how many New Yorkers will
benefit, since it may not apply to condos
or co-ops, Gelinas said. In addition, 500,000 seems tiny compared with the 7 million mortgages in jeopardy nationwide, she said.

“The only way the government could help homeowners, really, is to give them the money,” Gelinas said. “And the country can’t afford to do that.”

While many groups bear culpability for the subprime mortgage meltdown, appraisers, in particular, helped determine the sea levels that have put millions of Americans “underwater.”

As the crisis has unfolded, the trustworthiness of appraisers has taken a massive hit. New regulations meant to restore the credibility of the profession have been enacted, but many real estate professionals still wonder whether enough has been done.

“Appraisers felt threatened that they wouldn’t get business from banks if they didn’t come in with the right figure on their appraisal,” said Chris Dreibelbis, communications and economic policy director at the Reform Institute. “Inflated appraisals really skewed the market, and they got a lot of people in mortgages that they couldn’t afford and in houses valued at more than they were worth.”

Appraisers haven’t always been eyed with caution. In the early 1990s, appraisers served as safety nets for banks by independently evaluating the home — the asset underlying the mortgage. In the wake of the savings and loan scandals that rocked the real estate and financial industries, banks had a vested interest in getting a proper valuation on those — but that was back in the days when mortgages stayed on the books of the banks that issued them.

A decade later, the ability to sell securitized mortgages in the secondary market lessened the need for such stringent checks and balances.

“In the fast-paced market we were in a year ago, things were going up so fast that the appraisers were really in a bind,” said Klara Madlin, owner of Klara Madlin Real Estate and president of the Manhattan Association of Realtors.

Appraisers said that if they came to
mortgage brokers with appraisals that did not suit their needs, they would lose future business with those brokers.

“An independent appraiser is absolutely going to feel pressure if he continually goes in with a figure lower than the figure on a loan application,” said J. Philip Faranda, owner of J. Philip Real Estate.

The pressure to make numbers, some believe, was the genesis of today’s financial mess. A few inflated home values in one neighborhood affected the values of other nearby homes. The situation worsened further as lenders began ordering cursory “drive-by” appraisals instead of full appraisals.

In a drive-by appraisal, the appraiser never goes into the home.
Instead, the value is estimated based on neighboring home sales, square footage, number of bedrooms and school district.

When the credit markets froze last year, many homeowners found themselves stuck with houses they could not sell or refinance because of overstated appraisals. Banks initially would not accept many short sales because the banks’ appraisals listed the homes as worth far more than the market would support.

In March, New York Attorney General Andrew Cuomo tackled some of the system’s flaws through an agreement with the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, the nation’s two largest purchasers of home loans. The companies, which purchase about 60 percent of all home loans originated in the United States, agreed to the establishment of a “New Home Valuation Protection Code” that attempts to eliminate bias in appraisals.

Under the agreement, which goes into effect Jan. 1, Fannie Mae and Freddie Mac will not buy loans that do not meet the code. Specifically, the code prohibits mortgage brokers from selecting appraisers and bars lenders from using “in-house” appraisers or appraisal management companies that they own or control.

New York appraiser Jonathan Miller of Miller Samuel hails the agreement as a “step in the right direction,” but he said it must go even further.

“They have to figure out a way to incentivize buyers of mortgage paper to have high-quality standards,” he says. “It has become much more difficult to sell their paper to the secondary market and free up money so they can continue to lend to consumers. The whole issue is about restoring confidence in the credit markets.”

Not everyone supports the Cuomo agreement; not surprisingly, the mortgage broker industry has been critical of the changes.

“I think it’s an unfair and one-sided point of view based on false public perceptions,” says Andre Mitchell, a mortgage broker with Lynx Mortgage Bank in Westbury, N.Y.

Regulators should penalize those who have broken existing laws, but remain wary of over-legislating, he says.

“The market will correct itself,” he notes. “It’s just going to take time.”

Others in the industry say that fixing the flaws in the appraisal system would require the elimination of any long-term relationships between lenders and appraisers.

“I think we just need to give back independence to the appraiser so that he can just do his job,” says Sam Heskel, executive vice president at HMS Associates, an appraisal firm.

Some recommend requiring appraisers to stick to one geographic area in order to offer better appraisals.

An appraiser used to evaluating single-family homes in New Jersey, for example, does not have the proper frame of reference to appraise an apartment in a Manhattan high-rise, although in recent years they have, Madlin says.

Heskel takes issue with such suggestions, saying that appraisers who do their due diligence are perfectly competent to work in a broad geographic area.

Others said appraisers should be held answerable for loans that default following their appraisals.

“Instead of fearing for losing bank business, appraisers should fear getting a fine or going to jail [if they inflate a home value],” Faranda says.

Mortgage broker Mitchell thinks such a structure could unfairly punish appraisers.

If borrowers get unreasonable loans to buy the house and then default, that is not entirely the appraiser’s fault, Mitchell says.

In addition, there are no absolute standards of valuation in real estate, Mitchell adds. “If an appraiser does his job properly, and there are no blatant errors, it’s still always going to be subjective.”

Every industry uses its own metrics. Fabrics come by the yard, gas is sold by the gallon, office space in New York City is rented by the square foot. As it turns out, however, renting precise amounts of office space isn’t quite that simple.

As with most things in the real estate world, New York is in its own universe, one where building sizes sometimes seem to grow and shrink based on market conditions rather than actual physical dimensions. It’s also normal for all sorts of charges, some of which date back to pre-Depression days, to find their way onto leases.

“Buildings are the only inanimate objects that grow. A new landlord buys a building, and ‘poof’ — it gets bigger,” said Richard Warshauer, senior managing director of GVA Williams, a commercial real estate brokerage. “It’s fair if it’s not against the law and both parties agree.”

Arguing against these extra charges has been a longstanding headache for office tenants in the city. But experts say these charges are a problem that can be overcome with the assistance of a savvy broker, architect and sometimes a lawyer.

“The check upon the landlords for not going berserk is that we’re in a competitive marketplace,” noted Warshauer.

Landlords’ most notorious tactic for
manipulating rent is using a proverbial
rubber ruler to measure space.

“There’s no accurate way for a tenant to compare one space to another without actually measuring the floor area themselves,” said Jonathan Anapol, president of Prime Manhattan Realty.

The technical term for this phenomenon is “loss factor,” the difference between the actual square footage a tenant occupies and the area paid for in rent. In the past few decades, loss factor charges have swelled as tenants got charged for hallways, fire towers, staircases, ventilation ducts, sometimes even sidewalks.

Landlords argue this practice is fair because it considers common space everyone uses, like hallways and bathrooms, that still cost money to maintain, said Peter Boritz, president of Real Data Management, which performs technical area calculations.

Boritz said that landlords also increase the loss factor to account for major
capital improvements.

At the same time, worries exist that landlords are inflating numbers to pump up their bottom lines. Indeed, Commercial Tenant Real Estate Representation, a firm that advises clients how to cut rental costs, conducted two recent surveys of 100 randomly selected office towers in Manhattan. Their studies concluded that 32 percent of the subject buildings grew substantially in square footage since 1990, even though there had been no physical additions.

A tower owned by Swig Equities at 5 Hanover Square in Lower Manhattan grew 33.8 percent to 320,000 square feet, according to the CTRR report. The Department of Finance has the building listed as 292,466 gross square feet.

Two buildings in Midtown also grew
by more than 20 percent without physical additions: 800 Third Avenue and 666 Fifth Avenue, which Kushner Companies purchased two years ago for $1.8 billion, the most expensive building sale in the nation at the time.

“Loss factors actually go up both in
depressions and boom markets, which seems anti-intuitive,” explained Jan Zegarac, founder of Manhattan Office Space, a firm that helps tenants quickly find office space below 50,000 square feet. “It dilutes the actual price per square foot.”

Zegarac said it’s common for tenants to sometimes unwittingly lease floor space larger than the actual lot.

Despite knowing about these practices, brokers acknowledge that landlords are often unwilling to negotiate square footage, however arbitrary the measurement may seem. After all, unlike a gallon of regular unleaded, “there are other variables — such as views, number of windows, percentage of interior or non-windowed space — that affect a tenant’s usability of that space,” said Anapol.

Still, solutions to the problem of questionable charges exist.

“A well-advised tenant goes out and hires a space planner and architect and has him measure not just feet and usage, but how many employees can function in that space,” said Warshauer.

Of course, experts disagree whether brokers always work in the interests of their clients when it comes to reducing such costs.

“Tenant brokers, they’ll fight hard on something like real estate tax increases or operating tax increases because it doesn’t affect them,” said Zegarac. “Will they work as hard on getting the lowest possible rent? No. Will they work as hard on reducing the loss factor? No, because it reduces the check they’ll get from the landlord.”

Anapol, however, said charges hidden within the fine print can make a huge difference in annual rent increases and can often be negotiated. Tax increases borne by the tenant are calculated using the “base year,” which sometimes isn’t updated when leases are renewed, forcing the tenant to pay that increase twice. “It’s an added expense many tenants don’t realize [or] understand,” he said.

An annual increase known as the “porter wage clause,” negotiated in the 1930s by a union that represented the city’s elevator operators, is another common charge, even though most people push the button themselves these days. Experts say it’s possible to dispute these charges, too.

In all these instances, brokers advise consulting with experts.

Joel Spolsky, whose firm Fog Creek Software recently rented in Midtown, sought representation from another landlord’s lawyer. “He spends most of his days in court trying to evict tenants,” he said. “I thought he would be perfect to protect me from the likes of [people like] him. And he was.”

Spolsky said the lawyer removed from the lease words like “broom clean,” an ambiguous term that describes how the space must be left when the tenant vacates and can be used to withhold a tenant’s security deposit. Small language changes in contracts can make a big difference, he said.

Sometimes reducing charges can be as simple as examining the rent bill closely. Stephen Sunderland, senior managing director of Optimal Spaces, a tenant brokerage, said some landlords make a profit on electricity by charging above what was metered and capital expenses normally borne by landlords sometimes find their way into maintenance charges.

Yet he stopped short of calling for tighter regulation on this relatively autonomous industry. “Usually regulation causes more harm than good because laws aren’t usually imposed until [after the market in which they were based upon] changes, and then [they] never get taken off the books,” he noted.

In this universe, Sunderland said, negotiation and litigation keep things in order.

Apartment sales in Manhattan were either flat or down 34 percent in the first quarter of the year. Meanwhile, the average price of a studio was either $518,000 or $484,280. The average price per square foot of a co-op? Either $1,002 or $1,128.

To homebuyers, Manhattan market reports can sound like multiple-choice tests. The reports, put out by some of the
biggest firms in the city and by their collective trade association, the Real Estate Board of New York, often paint a muddled picture of the market.

“The consumer looks at four reports
and gets four stories,” said Paul Purcell, a founding partner at Charles Rutenberg Realty. “What kind of value is that? It’s a waste of paper.”

Under the current listing system in Manhattan, there is simply no easy way of getting a standardized report on the residential real estate market. The experts who write the reports often use similar databases, including the city’s ACRIS system, but they also rely on proprietary databases, and information from the brokerages they work for or managing agents they work with. Because every expert’s data is slightly different, and because they don’t all track sales in the same way, the numbers don’t add up.

The Real Estate Board of New York puts out a report based entirely on the publicly available data on closings, according to Michael Slattery, senior vice president for research at REBNY. But Jonathan Miller, an appraiser and principal at Miller Samuel who puts out a report for Prudential Douglas Elliman, said that by the time a closing is recorded in the city database, the data may be stale.

“Especially in the last couple of quarters, there have been a slew of closings that may have gone to contract 18 months earlier,” Miller said.

New York is unique in this respect. Most metropolitan areas are covered by a comprehensive multiple listing service that makes asking and selling prices available to everyone, and thus makes it easier to establish an average price and track sales volume. However, whenever Manhattan real estate firms have discussed putting together an MLS, the process has fallen apart over issues of control. Manhattan is also a particularly tricky market because it is dominated by co-ops, which do not face the same disclosure rules as traditional single-family homes.

“It is a real hole in the data not having an MLS for Manhattan,” said Walter Molony, a spokesperson for the National Association of Realtors. “It makes it a very challenging market to measure.”

Jeffrey Jackson, chairman of appraisal firm Mitchell, Maxwell and Jackson, used to make his market report available to the public, but now keeps his numbers private.

“The numbers are so frequently misused and misinterpreted,” Jackson said. “All these discrepancies were the reason I stopped
publishing the report.”

The commercial system is similarly
problematic. The major commercial real estate reports survey varying information — and define the boundaries of neighborhoods differently.

“The office market has had multiple reports with different numbers for inventory,” REBNY’s Slattery said.

But while real estate professionals acknowledge that the discrepancies among the reports can often be substantial, they don’t all agree that they constitute a problem. Miller said the reports that present the data in different ways serve different clients. And because the reports rely on different sources, they allow the appraisers and economists to “showcase our expertise,” he said.

“What we’re doing is, we’re showing our clients and government agencies that use our reports that we are more than just an appraisal firm — that we do market analysis,” he said. “If you just want to mechanically cite the change in a market metric like median sale price, that’s a mechanical process.”

Still, some real estate executives proposed ideas to make the reports jibe and give consumers and agencies a better feel for the direction of the market.

Purcell said he thinks the city needs an MLS that lists all available properties. An MLS would be a major shift because brokerages don’t currently share all of that information, which some firms consider a crucial competitive advantage. (In a previous job as president of Prudential Douglas Elliman, Purcell himself was reticent to open Elliman’s listings to other agents.)

Still, if companies shared listings and made them public, buyers and sellers would have a better feel for the market and homes would change hands faster, he said. Brokers from competing firms would then make listings available in one comprehensive database, allowing buyers to compare prices and amenities. Brokers from competing firms could show each others’ listings, (splitting the commission if a broker from a different firm sold the apartment) and buyers could rely on one broker for advice rather than going to multiple brokers. And at the end of a month — or even in the middle of the month — the market data could be compiled much more easily.

“You would know all the median price information, the negotiability factor — everything we’re interested in looking at and the consumer is interested in,” Purcell said.

Molony said the National Association of Realtors would also welcome a comprehensive MLS for Manhattan. The Manhattan Association of Realtors currently has an MLS, but the system doesn’t include enough properties to make it anywhere close to comprehensive. REBNY also has a public listings site, but not all the biggest firms have signed up.

“From our perspective it would be useful, so we could have more accurate data for the New York area,” he said. “From a consumer’s point of view that would certainly be advantageous because they could see what’s available and be better informed.”

Jackson, however, doesn’t think an MLS would necessarily make the market more understandable for the consumer. The most accurate information to gauge the strength of the market, he noted, is repeat sales data, because it eliminates the confusion that arises when a new luxury building opens and average sales prices soar. Since the city only recently began tabulating the sales price data for co-ops, repeat sales are currently hard to access. But within about four or five years, the city should have enough repeat sales data so that economists can create an index and determine more accurately how the market is doing, he said.

Soaring energy costs aren’t just hurting drivers. They’re also putting new pressure on owners of the city’s office buildings.

The cost of oil has been surging for five straight years. In the past year alone, prices have jumped 51.5 percent, to about $120 a barrel. These price hikes have triggered increases in the price of natural gas, which causes jumps in the price of electricity — a commodity that skyscrapers use aplenty.

Office building owners are in a particular bind: In Manhattan, the vacancy rate for all classes of office space started creeping up at the start of this year, and that means that raising rents for new tenants in order to offset energy costs is not an option. At the end of May, Manhattan’s overall vacancy rate was 8.5 percent, compared to 7.1 percent a year ago, according to a Colliers ABR report released last month. In addition, Colliers expects the rate to hit 10 or 11 percent by the end of this year.

“They can’t raise rents,” Robert Von Ancken, executive managing director at Grubb & Ellis, said of landlords. “If they raise rents, they’re not going to get any
tenants. They have to suffer the increases in operating expenses.”

Real estate executives said that building owners are responding to the growing cost pressure in different ways.

Some landlords are grudgingly absorbing the energy-induced cost increases. Others are becoming more aggressive about passing higher operating expenses on to tenants, even if they’re not in the form of increased rent. Since leases sometimes allow landlords to pass on increases in electrical costs, some owners are demanding somewhat higher-than-normal increases from tenants.

“I’ve seen energy costs [for tenants] definitely rise in the last 12 to 24 months,” said Paul Amrich, a senior vice president in
the brokerage services group at CB Richard
Ellis. “In the past, it was $3 a square foot. Now, it’s $3.50 a square foot per year.”

Many landlords are looking at ways to contain consumption by using technology — and to cut costs by entering into agreements with energy managers. Some are also shopping for better deals on electricity and taking out fixed-price contracts that offer protection against market-related price swings.

To save money, the owners of one 35-story office tower at 1370 Sixth Avenue have signed a one-year agreement with an energy contractor. The owners invested $640,000 in an automated energy management system that will control the use of lights, air-conditioning and other equipment throughout the building, said David Bury, vice president of property management with Normandy Realty Partners. Under the terms of the contract, the owners are guaranteed to see a reduction in the amount of electricity consumed.

The system should also make the 35-year-old building more comfortable for tenants, particularly on days when the weather is unseasonably warm or cold, Bury said.

Still, savings won’t come overnight. Indeed, it may take five years before the system delivers a return on the investment.

The building’s managers intend to highlight the system when marketing the building to both prospective and existing tenants. The system runs beyond normal business hours which could be a selling point for tenants who conduct business overseas, said Amrich, the broker for the building.

“This makes our building more attractive,” he noted.

Shopping around for energy is certainly catching on with commercial property owners. In New York’s deregulated market, Con Ed is no longer the one-stop shop for electricity. While it still controls transmission and distribution, Con Ed has sold its generating plants to other providers, allowing consumers and businesses to buy electricity from private, unregulated companies.

Margaret Carey, president of MC Energy, an energy services consulting company based in Westchester County, said she’s seeing more commercial and industrial property owners shop for electricity as well as natural gas and oil supplies.

Some are taking out longer term fixed-price contracts — beyond two years — that shelter them from price increases due to swings in the market. Longer-term contracts make sense for owners who intend to hang on to the property for a while, she said.

“It’s foolish not to be shopping for your energy supply,” she said. “You can never remain static and have the same buying strategy.”

Developers beware: In a city that has been awash in an unprecedented building boom, a pair of government agencies is starting to wake up to the neglected problem of slipshod condo construction.

The attorney general’s office and the
Department of Buildings have vowed to crack down on shoddy developers.

Condo developers who flout the rules — with everything from leaky roofs to unheated buildings — could come under increased scrutiny by the attorney general’s office, which has ramped up its Real Estate Finance Bureau.

The division, long considered inert, has been working more closely with attorneys, representing both aggrieved buyers and their developers, to address complaints and prosecute condo building violations, attorneys said.

At the same time, new construction codes issued by the city’s Department of Buildings were scheduled to go into effect on July 1.

The modernized codes replace antiquated rules from 1968, introducing stiffer penalties for building violations and the promise of tougher enforcement.

Currently, the frontline in the fight against shoddy condo construction runs through the attorney general’s office. Attorney General Andrew Cuomo, elected in 2006, has pumped up the Real Estate Finance Bureau with four new appointees.

Critics contend that the previous attorney general, Eliot Spitzer, shifted too many resources and personnel to his fights with Wall Street.

“The few Spitzer left behind [in the Real Estate Finance Bureau] were doing all they could just to review plans so development could continue,” said Douglas Heller, head of the co-op and condo practice at law firm Herrick Feinstein, which represents condo developers. “That left nobody to mediate construction disputes, litigate, prosecute or investigate.”

As a result, the office had not filed a case in years — until last fall.

Presently, the biggest case the department is handling is that of Mendel Brach, a developer accused of numerous safety violations by 72 families who live in five of his buildings on Bedford Street in Brooklyn.

Adding insult to injury, the families said they couldn’t sell the faulty apartments due to the violations, as the city would not grant them certificates of occupancy.

Now, the AG’s office is “putting a lot of pressure on the developer to make good, to fix the building and to buy tenants out. There’s nothing better than getting the AG’s office in a battle against a developer,” said Adam Leitman Bailey, a lawyer who represents condo owners.

In theory, the attorney general’s office has enormous investigative powers, and by law, can prosecute with wide discretion.

But right now, the office is also taking on shoddy developers by restoring the mediation process. During mediations, the developer, condo owner and their attorneys convene at the AG’s office to hash out disputes.

“The payoff for developers is speedier
review of their condo plans, and the benefit to unit buyers is enhanced scrutiny of habitability issues and mediation of construction disputes,” Heller said. He noted that to the extent that the AG’s office gets involved and mediates more, “there will be fewer lawsuits that allege shoddy construction of condos.”

While the AG’s office is still backlogged with condo construction/fraud complaints, the agency is starting to process them at a faster clip, lawyers said.

Part of the blame for poorly built condos also resides with the Department of Buildings. The agency, whose job it is to make sure buildings are habitable, has often been asleep at the wheel and has also green-lighted bad projects, sources said.

But it’s the recent, high-profile accidents in the city, including the deadly crane collapses in March and May, that have shone a harsh spotlight on building safety and the consequences of poor construction.

Now, the buildings department says it’s taking big steps to update a system that has come under fire.

“Unfortunately, it took a major accident that was costly and devastating to force the issue into the forefront of everyone’s mind,” said Robin Abrams, executive vice president of the Lansco Group.

When new building codes go into effect on July 1, developers will face fines that have doubled and tripled for building violations, Bailey said.

As a result, developers will “hopefully think twice before violating the law because they know they’ll have to pay heavily for
it,” he said. “The changes are fantastic for homeowners.”

The DOB’s codes hadn’t been revised in 40 years.

“New York City has experienced an unprecedented construction boom across all five boroughs in the past several years,” said Robert LiMandri, acting buildings commissioner. “Already this year, there have been an unacceptable 13 construction-related accidents, one more than all of 2007 combined.”

LiMandri replaced Patricia Lancaster, who left in April following some of those
accidents.

One significant change to the construction codes is the revision of the current classification of violations. Violations are no longer designated “hazardous” and “non-hazardous,” but are now classified as “immediately hazardous,” “major” and “lesser.”

In addition to the new construction codes, the Department of Buildings has been phasing in six new multidisciplinary enforcement teams created as part of its Special Enforcement Plan.

The department has recently suffered from a dearth of engineering and contracting talent that has been wooed away to better-paying, higher-profile jobs in the private sector, lawyers and brokers said.

The new plan is designed to “raise the bar for construction standards citywide and hold developers accountable when they perform unsafe or non-compliant construction work with the issuance of stop-work orders and violations,” LiMandri said.

Downtown Brooklyn

Myrtle Avenue and Gold Street

AvalonBay Communities is planning a 600-unit, 42-story rental apartment building on a 16,591-square-foot lot purchased from Myrtle Avenue Development Group for $30 million. The parcel currently has nine buildings on it. The planned project will include an underground parking garage and 5,000 square feet of ground-floor retail space.

Flatiron

The Alma

30 West 21st Street

Sales are underway at the 13-unit condo project, which includes 11 floor-through lofts, a triplex penthouse and an adjacent six-story townhouse. The units range in size from 3,000 to 4,500 square feet, with prices between $6 and $10 million. Amenities include maid service, a fitness center, pet spa and storage facilities. The building was designed by Karl Fischer Architects, with interiors by Roman & Williams. Prudential Douglas Elliman is the exclusive sales and marketing agent. Contact: www.almalofts.com.

Long Island City

23-17 Broadway

The buyer of the 4,000-square-foot development site plans to build a mixed-use building containing seven one- and two-bedroom apartments. The lot, which contains a wood frame house, sold for $999,000. The property allows for about 7,938 buildable square feet.

Midtown

53rd Street between Fifth and Sixth avenues

Tour de Verre

Architect Jean Nouvel’s skyscraper next door to the Museum of Modern Art was approved by the Landmarks Preservation Committee, the New York Sun reported. Building plans call for it to be taller than the Chrysler Building and to include a hotel and residential units. The building, developed by Hines Interests, now needs the go-ahead from the City Council after a land-use review. Elected officials as well as neighboring residents have expressed concerns about the height of the tower.

Morrisania

980 East 174th Street

The 7,500-square-foot lot, zoned for residential and commercial use, sold for $1.167 million. The site allows for 30,000 square feet of residential space and is already approved for five three-family homes. The building’s zoning allows for about 25,800 total buildable square feet, 15,000 of which could be commercial. According to Massey Knakal Realty Services, the buyer is planning a 40-unit apartment building with 4,000 square feet of commercial space.

Upper East Side

180 East 93rd Street

Greystone Property Development’s new luxury condominium will include nine three- and four-bedroom eco-friendly units. The building, designed by Barry Rice Architects, will have a geothermal well feeding the primary heating and cooling system, and rainwater will irrigate the private garden. Each unit has outdoor space. Amenities include a fitness center, temperature-controlled wine storage and children’s playroom. The building is expected to be ready for occupancy in spring 2009. Warburg Realty Partnership is handling sales. Contact: www.180e93.com.

Upper East Side

303 East 77th Street

The Isis Condominium

Sales began on Alchemy Properties’ 18-story, 31-unit condominium in early June. The two- and three-bedroom units range from 1,205 to 1,691 square feet and are priced between $1.625 and $3.395 million. There are four penthouses, with one four-bedroom, 2,553-square-foot penthouse priced at $5.495 million. The building’s façade is a green-gray mosaic made of Trespa, manufactured in the Netherlands. The building has a rooftop terrace and 24-hour lobby attendant. Contact: www.isiscondo.com.

Williamsburg

111 Kent Avenue

Sales are underway at the 62-unit luxury condo. The building includes one-, two- and three-bedroom units priced from $575,000. Amenities include a rooftop pool, sundeck and private cabanas. The building overlooks the East River with views of the Manhattan skyline. Completion is expected in spring 2009. Prudential Douglas Elliman is the exclusive sales and marketing agent. Contact: www.111kent.com.

Williamsburg

North Fourth

161 North 4th Street

Sales are underway at the four-story, 37-unit condo, which was designed by Karl Fischer. The residences range in size from 480-square-foot studios to 1,286-square-foot two-bedrooms, with prices starting at $375,000. Amenities include a fitness center, lounge, backyard with stone waterfall and private parking. The building is expected to be ready for occupancy in the fall. Contact: www.thedevelopersgroup.com.

Williamsburg

NV

101 North 5th Street

Sales at the Morton Group’s six-story, 40-unit condo began in early June. The building’s one-, two- and three-bedroom apartments range from 670 to 1,440 square feet. Prices start at $515,000. Amenities include a courtyard garden, rooftop terrace, fitness center, media lounge, virtual doorman and storage. Parking spaces are available for purchase. The Developers Group is the exclusive marketing and sales agent on the project. Contact:www.NV101N5.com.

Williamsburg

Soleil

275 South 1st Street

The 10-story, 20-unit project was designed by architect Ernest Keller with interiors by Funda Durukan. The building has two ground-floor duplexes and two one-bedroom units on each floor. Apartments range from 620 to 830 square feet. Prices range from $489,000 to $625,000. The residences have their own central heating and cooling system, and buyers can specify the color of their kitchen cabinets. The building also has a roof deck with five private cabanas for sale. Aptsandlofts.com is handling sales and marketing for the project. Contact: www.aptsandlofts.com.

Construction update

Fort Greene

Clermont Greene

181 Clermont Avenue

Construction is underway at the six-story, 74-unit condominium. The project’s one-, two- and three-bedroom units range in size from 665 to 1,539 square feet. Prices range from $450,000 to $1.3 million. Amenities include a garden with a reflecting pool and recreation area. Prudential Douglas Elliman is the exclusive sales and marketing agent. Contact: www.clermontgreene.com.

Fort Greene

Myrtle Avenue between Flatbush Avenue and Ashland Place

Red Apple Real Estate broke ground in late May on the
first phase of its Myrtle Avenue development. Plans for the project include three low-
rise buildings and a high-rise tower. The development will include approximately 85,000 square feet of market-rate apartments and 22,000 square feet of retail space.

Tribeca

34 Desbrosses Street

Jack Parker Corporation’s two-tower, 291-unit rental project topped out in June. The two buildings of the 285,000-square-foot project are connected by a bridge. The homes have views of the Hudson River and Lower Manhattan. Amenities include a gym, screening room, bar, game room, outdoor and rooftop gardens, a library and valet service.

Upper West Side

Harsen House

120 West 72nd Street

Construction on developer Anbau Enterprises’ 16-story, 17-unit luxury condominium Harsen House was completed in May. The property includes two-bedrooms, full-floor four-bedrooms, and a seven-bedroom duplex, all ranging from 1,500 to 4,700 square feet. The building was completely sold out by the end of 2007.

Sales update

East Williamsburg

The Jacksonia

137-145 Jackson Street

The 54-unit townhouse-style condominium project was 50 percent sold in early June, with more units to be released. The units are all one-bedrooms; some are duplexes. Prices start at $495,000. All homes contain central air and heat, private outdoor space and both north and south exposure. Amenities include a lawn and common roof deck. Occupancy is slated to begin this summer. Prudential Douglas Elliman is the exclusive sales and marketing agent. Contact: www.thejacksonia.com.

Midtown West

100 Riverside Boulevard

The Avery

Only 16 residences of the Extell Development Company’s 274-unit Avery were still available as of mid-May. The SLCE Architects-designed luxury tower has one-, two- and three-bedroom condos, with remaining units priced from $900,000 to $3 million. Amenities include an in-house theater with visiting artists from Lincoln Center, library with Wi-Fi Internet access, private courtyard, parking garage, game room, concierge, fitness center, entertainment lounge and children’s playroom. Corcoran Group Marketing is the exclusive marketing and sales agent. Contact: www.averyriverside.com.

Soho

The Renwick

15 Renwick Street

Sales began in early June for the Harch Group’s 12-story, 44-unit luxury condominium. Amenities include a sculpture garden, library, boxing gym, pool, sauna, private parking and valet service. Architect Ismael Leyva designed the building, which is slated for completion in 2009. Prudential Douglas Elliman is the exclusive sales and marketing agent.

Upper East Side

255 East 74th Street

As of mid-May, the World Wide Group’s 77-unit, 30-story luxury high-rise condo was 85 percent sold out. Available one- to five-bedroom units range from 1,000 to almost 3,500 square
feet in size. Homes are priced from $1.3 million to $12 million. H3 Hardy Collaboration designed the building, which is slated for occupancy in October 2008. The building features fireplaces, balconies, gourmet kitchens, stainless steel appliances and master bathrooms with radiant heat. Contact: www.255east74.com.

A new luxe development under construction on 130th Street and Seventh Avenue is testing how far into Harlem well-heeled buyers are willing to go — and how much they’re willing to pay.

The project, which is called WA Condominiums, is a six-story boutique building replete with amenities like an indoor swimming pool and a rooftop running track, a high-tech conference room and an underground parking garage. It is slated to go on sale this fall, around the same time construction is scheduled to near completion.

While there are other new luxury buildings in Harlem, most notably 111 Central Park North, the new glass tower on the corner of Lenox Avenue, WA stands out because it is located farther from Central Park and from a subway station, and because it has unique amenities — namely, the pool and track, along with its Jacuzzi and sauna.

Indeed, the athletic facilities in the low-rise structure are the kinds of features more commonly found in more expensive Manhattan neighborhoods.

The condo’s developers also have a unique story: They are two brothers who spent more than three decades in the neighborhood and have owned the land for years.

“You aren’t going to find two black men who get a $16 million loan from a bank to develop a 35-unit building,” said David Atkinson, who, along with his brother Trevor Whittingham, dreamed up the project and secured financing from Banco Popular. “We beat most of the odds. We didn’t do this with a lot of smoke and mirrors.”

In addition to the pool, the WA (which was named for Whittingham and Atkinson), will also have an indoor atrium, a 24-hour concierge service, an air-conditioned garage and a fitness center, which will be situated next to the pool on the building’s top floor.

The 35 apartments will all have washers, dryers, dishwashers, granite countertops and marble-lined bathrooms. They will also have 10- to 13-foot-high ceilings and nine-foot-tall doors.

The building’s modern design was brought to life by architect Marc B. Spector of the Spector Group, who is also working on revamping Long Island’s dated Nassau Coliseum.

But skeptics say that while the amenities at the WA are going to be state-of-the-art, the brothers have set asking prices too high.

The development includes eight one-bedroom apartments, 17 two-bedrooms, two three-bedrooms, two duplexes and six studios.

The one-bedrooms are priced at $1,209 per square foot, and range in cost from $902,088 to $1.04 million. The priciest unit, which has three bedrooms and a wrap-around terrace on the top floor, will have an asking price of $2.31 million, or $1,657 per square foot.

By contrast, 111 Central Park North is selling units in the range of $1,000 per square foot (for a low-floor, three-bedroom, three-bath currently on the market) to $2,000 per square foot (for a 4,000-square-foot park view duplex penthouse, with 1,500 square feet of terraces, which sold in April).

“Their asking prices are quite healthy,” said David Daniels, a senior associate salesman with Corcoran’s Harlem office, of the WA.

Still, Daniels said, “I don’t want to second-guess the developers’ marketing strategy.” He said that as a broker, he would have to see the building’s apartments before assessing whether they were overpriced.

Compounding the fact that the prices are high for Harlem, especially north of 125th Street, sales are likely to begin before the rocky market steadies out.

So far in the current economic downturn, which began late last summer when the credit markets froze up due to the subprime mortgage debacle, prices at Harlem developments have stayed roughly flat.

Certainly, the building is asking for somewhat higher absolute prices than other upscale developments in the neighborhood.

For example, other two-bedroom apartments in the neighborhood typically sell for $750,000 to $895,000, said Belynda M’Baye, managing assistant and associate broker at Harlem Homes Realty.

“I feel like it’s a challenging project because of its location,” M’Baye said of WA.

In clear view from the WA’s oversized windows, vaulted kitchen ceilings and doorman-attended lobby will be a large housing project, which may discourage prospective buyers, she said.

And although residents will have views of the George Washington Bridge, Yankee Stadium and City College from the roof, the building is situated a full six blocks from the 2 and 3 subway line at 125th Street.

That said, M’Baye called the development “beautiful,” and said despite the high prices, the developers might be able to attract the buyers they need because they are “pioneers.”

The developers of whom she speaks came up with the idea for the high-end development about four years ago, as they tried to figure out what to do with a plot of land on the northeast corner of 130th Street and Seventh Avenue.

Whittingham had purchased the plot in 1994, intending to use it as a parking lot for the Caribbean-American restaurant next door, which he owned. In a former life, the lot was home to row houses and a few mismatched commercial sites.

Now, 14 years later, the property does indeed have a parking lot — underground, beneath the rising luxury building. Construction workers poured the concrete foundation last September and construction started in earnest in November.

Atkinson said that 140 people have expressed interest in the structure so far, asking for information about the building’s launch date and availability.

While he said he doesn’t want to create a narrow definition of the buyer he envisions, he’d like to market to Asian and European investors, “because Europeans have an appreciation for Harlem.” Also, he hopes “well-heeled people that grew up in this community” will find the development attractive.

He expects to start selling apartments when the building is over 90 percent completed, later this year.

He wants people to see the quality firsthand, so they can understand where their money is going.

“Years ago we could pre-sell,” Atkinson said. Today, he added, “People want to see what they’re investing in.”

Speculative building is a risky endeavor almost anywhere. From the initial land purchase to the process of obtaining permits, hiring an architect and overseeing construction, building a home before you have a buyer is not for the faint of heart. In tony spots, like the East End of Long Island, where the price of land has gone up seven-fold in the past 10 years, it can be an even bigger risk.

And a year after the subprime mortgage crisis, it can be downright dangerous.

“I can’t imagine why anyone would go into speculative building right now,” said Walter Molony of the National Association of Realtors.

Nationwide, building is down. Though spec building isn’t broken out from the stats, new housing starts dipped 27 percent from 2007, which was itself a drop of 24 percent from 2006.

However, Michael Davis, a longtime developer of high-end properties in the Hamptons, argued that, “the Hamptons is unique.” Davis, who has already sold one spec home in Southampton this year for $5.9 million, has two others in the works. “If you’re in the right location in the Hamptons,” he said, “demand exceeds supply, even now.”

Still, market watchers are aware that even the Hamptons have not been completely immune to the fluctuations of the national market. In Southampton, for example, the number of new dwelling permits issued so far this year is just over a third of what it was in 2005. Between January and June 2008, the town handed out 62 permits — down from 88 last year, 130 in 2006, and 175 in 2005.

“Speculative development has slowed basically all over,” said Enzo Morabito, a longtime broker with Prudential Douglas Elliman’s Hamptons office. “But that’s not a bad thing. Why keep adding to the inventory?”

He continued, “the Hamptons is a lifestyle, so the speculators came out here, but our real estate market was never meant to be like that. There’s realistic profit, and then there’s greedy profit.”

Rick Hoffman, regional senior vice president in Corcoran’s East End office, put it this way: “Developers can’t be overambitious right now. In days gone by, you could rack up a major profit on spec building, but now you really have to treat it like a business. You have to have the right materials, the right design and the right price.”

Though there are no numbers tracking spec homes specifically, Morabito said there are “quite a few sitting on the market.”

According to Michael Daly, a broker with RE/MAX Beach Properties who also blogs about Hamptons real estate, a select group of developers and builders (including Michael Davis) have been betting on the Hamptons market for decades — and though they may be adjusting their expectations, they certainly aren’t packing it in. Instead, said Daly, some speculative builders have begun marketing their new homes pre-construction, thereby reducing the, well, speculation.

“More and more builders are putting out their products with sophisticated renderings and floorplans, seeking to gauge the level of interest before they start building,” Daly said.

He estimates that there are about one-third fewer “new construction” homes currently on the market in the Hamptons than there were last year. Of those approximately 135 homes, Daly said that about one-third are being offered “pre-construction.” He said that pool of inventory includes 60 percent of the homes on the market with asking prices above $10 million and 42 percent of the homes currently listed between $2 million and $5 million.

In Bridgehampton, for example, one 6,000-square-foot oceanfront property is listed for $22.9 million “total turnkey,” or alternatively for $15.9 million “as is with plans and permits.” In Quogue, a 9,600-square-foot bayfront property with a wine cellar, gym and tennis court on 4.1 acres is being offered pre-construction for $15.5 million.

“Builders are trying to mitigate a bit of their exposure,” said Daly, who points to 35 homes in the area that have been built but not sold.

Bernard Markstein, senior economist and director of forecasting for the National Association of Home Builders, said “mom-and-pop speculators, the people who got in during the housing boom, have largely shaken out or are licking their wounds trying to figure out what to do with their property. The long-term players, on the other hand, are simply trying not to overextend themselves.”

Custom homebuilder Joe Farrell is one of those long-term players. Farrell, who Daly called “one of the most successful builders in the Hamptons,” said he’s sold eight speculative homes in various stages of pre-construction, at prices ranging from $2.1 million to $18 million, in the last six months.

“One house [is] sitting a little longer than usual, but we ended up renting it for $600,000 for the summer,” Farrell said.

Still, he does admit to being a bit more cautious in the new market. “I’m only buying land if I can get a great deal,” said Farrell.

For his part, Davis said that about one-third of his current business is speculative construction and that the volume of spec homes he’s working on hasn’t changed much in the past year.

“Last year when subprime hit, it sounded as if the real estate market as a whole was going down the tubes,” said Davis. “But I think it’s unfortunate that the press tends to generalize.”

Don Sharkey, the chief building inspector for the town of East Hampton, said building permits overall are “definitely down about 10 percent.” But, he notes, they don’t have data isolating new construction.

Meanwhile, Don Louchheim, the mayor of the Village of Sagaponack, told The Real Deal that the village is currently considering four subdivision proposals, representing about 100 acres total.

The right location, said agents and builders, is key, as are views.

“If you’re south of the highway, that’s considered an amenity,” explained Morabito. “If you’re close to the ocean, that’s another. If you’re north of the highway and border an agricultural reserve or have a water view, those are amenities.”

Jeffrey Colle, who has been building and restoring high-end homes in the Hamptons for 30 years, said he is “absolutely as busy” as he was two years ago.

Colle is currently at work on a $40 million spec home in East Hampton, on which he is sparing no expense — from 18th-century fireplaces to bathtubs carved in Italy. The 12,000-square-foot home on Georgica Pond abuts a meadow reserve and will boast an infinity pool, six bedrooms, seven fireplaces and “sunsets that’ll knock your eyes out,” he said.

Colle said he’s already had brokers from Sotheby’s come by, as well as potential buyers from as far away as California and Australia. “I’ve been out here 30 years, and I’ve never seen the top of the market go down,” said Colle.

And that’s good news for other high-end developers like Robert Gianos, who has spent several years preparing to construct a Southampton subdivision that some have dubbed “Billionaire’s Corner.” Nothing like your typical suburban tract home, Gianos’ Olde Towne is reportedly inspired by the look of the village from when it was originally settled in the 1640s. Lots are reportedly priced at between $18 and $22 million.

“He’s building for untouchables,” said Daly, who reasons that since Gianos’ potential buyer won’t care what the price of gas is, the developer needn’t fret over market fluctuations either.

Jersey City, NJ

50 Dey Street

Canco Lofts

The six-story, 550-unit condo conversion of a factory building will feature studio, one-, two- and three-bedroom apartments. Homes at the SBLM Architects-designed building range from 640 to 1,663 square feet and are priced between $350,000 and $850,000. The lofts have 14- to 27-foot ceilings and white oak wide-plank floors. Amenities include a 10,000-square-foot club with a fitness center, yoga studio, event center with Wi-Fi, pet park, spa, children’s play room, screening room, bicycle storage, parking garage and shuttle service to the PATH trains. Contact: www.cancolofts.com.

Paterson, NJ

175 Broadway

Silk City Lofts

The Mercury Development Group’s five-story project contains 48 units, including one- and two-bedroom condos and duplexes ranging from 717 to 1,996 square feet. Prices start at $157,488. Amenities include a fitness center, parking garage, storage and concierge service. Poskanzer Skott Architects designed the building, which is scheduled for occupancy in fall 2008. Contact: www.silkcitylofts.com.

New Rochelle, NY

869 Weaver Street

The Greens at Cherry Lawn

The 26-home residential development opened to its first residents in mid-May. Developer WN Weaver Street LLC’s gated community is situated around a landscaped area. It covers 17 acres and is within 5 miles of 18 golf courses. Amenities include a concierge service, fitness center, heated swimming pool, tennis court and around-the-clock guarded entrance. Contact: www.tgacl.com

Construction update

Hardyston, NJ

Ridgefield Commons

The Pegasus Group, a developer, will take over the stalled development approved for 313 homes, as per a $20 million, court-appointed arrangement with Sussex Bank. Construction and sales at the townhouse community stopped with 100 homes built and occupied and 15 homes in various stages of completion. Contact: www.ridgefieldcommons.com.

Jersey City, NJ

77 Hudson

K. Hovnanian Homes’ 48-story residential complex topped out in May. The 1.3 million-square-foot project was designed by Cetra/Ruddy Incorporated, and is scheduled for completion in 2009. The building features floor-to-ceiling windows with views of the Hudson River, chiseled quartz bathroom walls and custom-designed cantilevered master bathroom vanities. Contact: www.77hudson.com.

Leasing update

Newark, NJ

1180 Raymond Boulevard

Eleven80

More than 230 of the 317 residences at Cogswell Realty Group’s 35-story apartment building were leased as of mid-May. Residences range between 598 and 1,401 square feet in size, with monthly rents ranging from $1,615 for one-bedroom homes to $2,425 for two-bedroom layouts. The building features a concierge service, valet parking, health club, bowling alley, entertainment room and shuttle service to the University District, Newark Airport and Penn Station. Contact: www.eleven80rentals.com.

Sales update

Morristown, NJ

40 Park

One-third of the seven-story, 60-unit luxury condo was sold as of mid-May after three weeks on the market. The building, developed by Roseland Property Company, has one-, two- and three-bedroom condos, with prices ranging from $400,000 to over $2 million. Amenities include a fitness center, game room, lounge area, terraces and private parking. Contact: www.40park.com.

Rahway, NJ

Savoy at Rahway

Developer Maplewood Homes’ 36-unit luxury condo was one-quarter sold by the end of May. The homes come in six different configurations of two-bedroom, two-bath residences, with up to 2,000 square feet of space. Prices start at $315,000. The project has on-site parking. Contact: www.homesbymaplewood.com.

Apartment sales quietly resumed at the Azure Condominium on East 91st Street last month.

According to Brown Harris Stevens, which is marketing the condos, the sales office reopened on June 14, two weeks after a crane collapse at the building killed two construction workers and forced a shutdown.

Luis Vasquez, Brown Harris Stevens’ director of sales, said, “Our momentum is back to where it was before the accident.”

Note: Correction appended

While Vasquez declined to say how many apartments have been sold in the building in total, it appears that 17 units have gone into contract since sales started at the Azure in January, according to listings data available to brokers.

While that data, which was provided to The Real Deal by a broker unaffiliated with the building, doesn’t show any units going into contract since the May 30 collapse, Vasquez said they have, in fact, signed some agreements since reopening the sales office.

He also maintained that prices in the 34-story tower, which has been forced to halt construction, are going up — not down.

Still, the challenge of selling units in one of the buildings at the center of the city’s construction safety crisis is indisputable, if not because of the stigma, then because of construction delays.

Sofia Kim, vice president of research at StreetEasy, noted that the Azure cannot close on any apartments without a temporary certificate of occupancy, which it does not yet have.

That certificate will inevitably be delayed because there is a stop-work order on the site due to the crash, the second fatal crane accident this year. The other crane accident, which killed seven people, was in Turtle Bay at 303 East 51st Street.

Vasquez said several buyers have made inquiries about apartments in the Azure since the accident. Some were aware of the fatal crane collapse, but they had not connected the event to the Azure. He said his office has been “very up-front” in letting them know.

One broker, who asked not to be identified, said delays at the Azure and problems related to the crane collapse could give potential buyers leverage in bargaining on price.

However, others disagreed. “I don’t think that a crane accident would be a contributing factor to being able to negotiate a lower price,” said Lala Wang, president of BrokersNYC, a listings service. She also noted that with construction costs at about $700 a square foot in New York City, there is little bargaining room for a developer to provide steep discounts.

Vasquez said the developer hopes to turn some units that were originally slated as one- and two-bedrooms into three- and four-bedroom apartments to capitalize on the growing demand for larger, family-sized apartments on the Upper East Side.

That decision, which will bring the number of units in the building down from the planned 128 to less than 100, was made prior to the crane collapse, he said. He also noted that the building has already made price increase addendums to the Azure’s larger units, and submitted them to the state attorney general’s office for review.

According to a broker, 17 of the 27 units currently posted for the Azure have been taken off the database, while 10 are still posted as available.

The broker said when listings are taken off the database it often means they are in contract. Among those that appear to be in contract is a five-bedroom, 2,867-square-foot unit listed for $5 million and a four-bedroom listed for $3.7 million.

It is unclear whether the other units removed from the listings database were sold or taken off by the developer for another reason, perhaps to be combined into larger apartments.

While sales can go forward, construction is in limbo.

The building will not meet its original June 2009 target completion date, Vasquez said. The stop-work order that was still in effect at press time has no lift date, and neither Brown Harris Stevens nor the developer, Leon D. DeMatteis Corporation, have the power to assure potential buyers when the project will be finished.

Vasquez said he did not think that construction, which had reached the 14th floor of the 34-floor tower, would be “materially delayed.” But, he conceded that until the investigation by the city’s Department of Buildings and the city’s Department of Investigations is complete, there was little way to know for sure.Still, he predicted that the crane accident and the resulting delay would not have a significant impact on sales.

“There is limited product on the Upper East Side in terms of new construction, and that is what we have on our side,” he noted.

Vasquez said the Azure is “affordable” compared to other Upper East Side developments. He said the Azure’s average price per square foot is $1,100 to $1,250, compared to the Lucida’s $2,000 to $2,300, and the Laurel’s $1,700 to $1,900 cost.

But one broker, who asked not to be named, noted that the differential has a lot to do with the Azure’s location, on the corner of 91st Street and First Avenue, which is far east and further from mass transit. The broker questioned whether the Azure would have to offer a better commission to buyer brokers, perhaps in the 4 percent to 6 percent range, to compete.

In addition, the broker noted that the Lucida is a higher-quality product.

“Discounts will come on the one- and two-bedrooms,” the broker said.

Gea Elika, a buyer’s broker who runs his own company and lists the Azure on his Web site, called it a “smart move,” for the Azure to keep prices down. “Properties like the Azure will open up the mid-market,” Elika said.

The Azure was one of the last buildings in the neighborhood to qualify for 421-a tax abatements, which means it was able to set prices slightly lower than it would have otherwise.

Also, it may be better-positioned than the building at the site of the other crane collapse, despite the fact that the same company, New York Crane and Equipment, was involved in both accidents.

According to published reports, the 51st Street building was in violation of 28 zoning regulations; the site’s permit was revoked.

A spokesman for developer James Kennelly could not provide any specifics or say whether sales were going forward on the planned 40-story building.

The office of Manhattan District Attorney Robert Morgenthau has opened a criminal investigation into that accident.

Most real estate developers agree that it’s taking longer to sell out residential projects, and that
can spell trouble for a less-than-well-capitalized developer.

If a condominium project takes just a month longer to sell out than anticipated, it means a developer has to make an extra interest payment on any loans and shell out for any real estate taxes and maintenance or common charges. Additional marketing expenses add to the financial burden.

Since developers are reporting that some condo projects are taking as much as twice as long to sell out as they were two or three years ago, that can end up being a big chunk of change, or even threaten to derail a project.

Developers declined to point fingers at any particular projects, but news reports have indicated that there are at least a handful of projects selling more slowly than expected. In Harlem, which has seen a spurt of new development during the real estate boom of the past few years, such projects as the Ivy on Second Avenue and the Lenox Grand are reportedly struggling.

In the Riverdale section of the Bronx, the sluggish real estate market prompted one developer, L&M Equity Partners and
affiliate Hudson Arlington Associates, to take the Arbor, a 127-unit condo at 3260 Henry Hudson Parkway, off the market to sell it to Columbia University for faculty and graduate student housing.

There are reports that sales at some
condominium conversions are lagging. At one, the Manhattan House at 200 East 66th Street, sales were slow enough to
lower prices.

“At the Manhattan House … they were having trouble meeting the number of sales they needed to make to have their offering plan declared effective, so in order to do that, they lowered the prices for the free-market and rent-regulated tenants,” said attorney Adam Leitman Bailey, who specializes in condominium and tenant representation, among other areas of real estate law.

“For people who are highly leveraged or who have expensive mezzanine debt, it’s starting to get problematic,” said Gary Barnett, president and CEO of Extell Development. “There are projects out there that have stalled out at maybe 40 or 50 percent sold, and those situations … you have to start worrying about the bank.”

Yet Barnett said that Extell has been having few problems selling units in the many projects it has around the city. The Lucida at 151 East 85th Street only has a few units of its 110 remaining, he said, while Avery Condominiums at 100 Riverside Boulevard has sold about 98 percent of its 274 apartments.

Barnett said that the torpid real estate market may have affected sales a bit at
Ariel East and West, two glass towers at 2628 Broadway and 245 West 99th Street, with 137 units between them.

“There, we’re about 85 percent sold,” he said. “Maybe we would have been 100 percent sold at this point if the market had had better velocity, but actually, we’re selling very well there.”

Because the project was not overleveraged, the issue of lagging sales in the Ariel buildings hasn’t been as devastating as it might be for a highly leveraged development, Barnett said.

“In the Ariels, where we’re better than 85 percent, we’re out of the bank on that number,” he said. “So while we’d love to get our equity out and ultimately get the profit, it’s not as critical.”

Jeffrey Levine, chairman and principal of Levine Builders and Douglaston Development, said developers should avoid getting into a situation where slower-than-anticipated sales can cause a project to flounder. Besides starting sales early and managing marketing expenses wisely, they should set up an “intelligent interest reserve” based upon a realistic absorption schedule, said the developer, who has only a penthouse left at the 21-unit Zinc Building at 475 Greenwich.

While that loft condo building sold out on schedule, for condo projects that are taking longer to sell, lower interest rates on London Interbank Offered Rate (LIBOR)-based loans are working in favor of developers, Levine said.

“Most of the construction loans are
LIBOR-based adjustable on a periodic
basis,” he said. “LIBOR has fallen, so in many cases, interest reserves have a longer time allotment than what would have been originally projected. To some degree, the lower interest rates wind up offsetting the slower absorption.”

But even that boost may not be enough for developers who underestimated their absorption schedule, he said.

“Those projects might have to go back to the market for some type of mezzanine or bridge financing, which, quite frankly, can be very expensive,” Levine said. “So you’re far better served in anticipating what your costs are going to be in advance than having to deal with them on an ad-hoc basis when you’re at that precipice.”

Levine said his project, the Edge, in Williamsburg, with more than 575 units, has sold almost 100 apartments in the first three months of marketing at the projected price of more than $900 a square foot. Still, in the current sluggish market, other developers may be in jeopardy of losing their projects, he said.

“Then it comes down to the lending
institutions, and how determined they are to do the smart thing or to do the expeditious thing,” Levine said. “Doing the smart thing may entail renting some of these
facilities up till such a time as there are willing buyers. Or they may choose to just cut and run by doing some sort of distress auction for units.”

Barnett said there may be a sprinkling of New York City condo developments that won’t make it.

“There are projects that are either in trouble, or the banks are shopping the debt, or there are cases where they’re actually taking back the fee,” he said, though he would not name specific developments.

However, Barnett said that he believes the market slump is having more of an impact on projects in the planning phase, which ultimately could assist developers struggling to pay growing carrying costs on existing condo projects.

“There are quite a few projects that are not going to get off the ground, which is actually probably good for the overall market,” he said.

Luigi Rosabianca, a managing member of the law firm Rosabianca & Associates, which specializes in real estate, said he believes relatively few New York City developers will lose their condo projects, if any.

“Because of how the offering plan system is set up, once they have construction bonds in place, you’ll see very few developers losing their projects,” he said. “By the time they get to that point, they’re in too deep not to make it work. They’ll just make less and less and less profit, and a project that might have been lucrative will no longer be.”

To get their apartment inventory moving, developers will come up with ingenious concessions, he said.

“They’ll do everything from [encouraging] the brokers with higher brokerage commissions to [encouraging] purchasers with some financial incentives, i.e. closing costs,” Rosabianca said. “I’ve started to see all sorts of really interesting proposals. I saw one building offer a year’s worth of butler service to a penthouse buyer.”

On the front end of projects, developers have begun to extend incentives to contractors to get construction work done within certain timeframes, he said. Also, they are beginning sales earlier than ever.

“We’re seeing a lot of pre-, pre-, presales,” Rosabianca said. “We’re seeing, even before the sales office is open, 15 or 20 percent sold, simply because developers are starting early and are making these tremendous concessions.”

For developers with condo projects coming out of the ground who are seeing sales lag, that may be the time for a marketing shakeup, he said.

“Developers will get new marketing agents, or new sales companies,” Rosabianca said. “We’ve all seen various buildings change their entire marketing strategy, where a building will be very sleek for a year, and then suddenly, it becomes very family-friendly, because they’ve tapped into that market.”

Developers can also try to reach other different market demographics — for instance, foreign buyers versus domestic buyers, he said.

An example of where that technique was used successfully was at the William Beaver House at 15 William Street.

“It was originally being marketed in a very different way than it is today, towards the young Wall Street purchaser,” Rosabianca said.

Now, a lot of their marketing materials are ‘It’s a wonderful family neighborhood.’” It’s served them very well.”

But if even a marketing shakeup doesn’t work, developers can, as a last resort, begin selling units in bulk, and even hold non-distress condominium auctions, Rosabianca said.

“Since the better units are easier to sell — those with the better floorplans and fantastic views — then you’ll often have the awkward layouts and darker units left, and you can always package those as part of a bulk sale,” he said.

If a condo project is struggling, “we see that at the late stages, where, for example, a developer will say, ‘If you take these eight units, we’ll give you a 12 percent discount.’”

But, though these types of luxury property auctions are increasingly being held throughout the country, Levine said that he doesn’t believe the New York City market is at a point where developers will have to hold them — nor will it get to that point.

“That’s something that happens in depressed markets,” he said. “What’s that Mark Twain saying? Contrary to reports of our demise, the New York City housing market … is stronger than virtually any other market in the country. There will be willing buyers again, whether it’s this month or next month when the housing market senses a bottom, and developers just need to wait it out.”

Developers of flagging residential condo projects in the city may
be faced with a new real estate Catch-22: the prospect of having to
provide additional equity to lenders or take out more loans if they
want to cut prices to attract buyers. Comments

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While condo buildings throughout the city are going rental to deal
with the economic slowdown and fewer buyers, the decision to make that
switch comes with complicated financial realities that vary from
project to project.

Historically, condo
projects went rental as a backup plan, but that is far from a
universally safe bet today — and sometimes, it’s flat-out financially
impossible. Obviously, the developer must consider how much rental
income can be generated from the building. In many cases, that amount
is not enough to turn a profit — and sometimes, not even enough to
cover what was borrowed for the project in the first place.

The formula for
determining whether a building would be viable as a rental depends on
several key factors: the underlying land development and construction
costs; the strength of the submarket the building is in; the size of
the developer; the financial standing of the lender; and, of course,
how much each apartment can rake in.

Barry LePatner, a
leading construction lawyer, noted that large and established
developers often have enough of a financial cushion to ride out a soft
market, even if means warehousing empty apartments.

But, he said, other
developers who launched during the peak of the condo boom are in tough
spots, because high carrying costs can make it hard for their numbers
to work with monthly rental income.

So exactly when can a
developer rely on renting out units to bring in enough money to tide
them over a rough economic stretch rather than try to sell the units?

Many experts
interviewed said the original price of the land acquired is key — so
it’s more financially feasible to execute the rental option in
Brooklyn, Queens and in less prime areas of Manhattan, because
acquisition and land prices are lower. The option of simply building a
rental tower also works for some of the old-time, established real
estate firms that have been sitting on land for years and don’t have to
factor in today’s sticker shocker prices.

Still, real estate experts said rental backups almost never bring in what they would if the developer were selling condos.

According
to Susan Hewitt, president of the Cheshire Group, a firm that
restructures co-op and condo buildings, if an apartment is selling at
$1,000 a square foot, and the developer wants a 10 percent return on
investment, that would require the rental equivalent of $100 a square
foot.

“I can promise you that
is well above the rental level anywhere in the city,” said Hewitt.
“That is why [almost] nobody was building rental buildings over the
past 10 years.”

Paul Massey, chief
executive of Massey Knakal, reiterated that point, estimating that
rents would only bring in $30 to $60 per buildable square foot in many
locations. “Land values went up, and construction costs went up to such
an extent that in most parts of the city, you couldn’t afford to build
a rental,” Massey said.

Scott Stringer,
executive vice president of the Singer & Bassuk Organization, a
firm that arranges financing for developers, said banks typically
require a 125 percent coverage factor to lend money on condo projects.
That means the net operating income — income minus basic expenses like
taxes, insurance, management fees and repairs — must be 25 percent
higher than debt service, which includes mortgage payments made by the
sponsor to the bank.

In first-class
Manhattan locations, it often makes more financial sense for developers
to stick wtih condos because prices, while softening, are still holding
up fairly well. As a result, many of the recent rental conversions are
taking place in more up-and-coming locations like the Financial
District, Harlem and parts of Brooklyn and Queens, where rezonings or
relatively low land costs have allowed smaller developers to establish
a toehold during the recent boom.

Just two years ago, a
small Harlem-based developer called North Manhattan Construction Corp.
secured a loan to develop a small, two-building condo project called
the Bridges. The seven-story buildings were to be developed as 31
apartments, ranging from one- to three-bedrooms, plus 25,000 square
feet of ground-floor retail space.

After being declared
effective by the Attorney General’s office in December, the developers
were able to close on the first building, called Bridges South, at 2279
Third Avenue, off 124th Street.

Halstead Property is
marketing the site, where prices range from $449,000 for a small
one-bedroom to $927,000 for a two-bedroom, two-bath apartment. But the
developer has decided to be more cautious with the Bridges North and is
going rental, according to Steve Kliegerman, executive director of
development marketing at Halstead.

“[The developer] has
enough equity in the job and potentially enough income from the
commercial space to carry the building as a rental,” said Kliegerman.

Kliegerman said he is
working on more than 20 different projects right now and that lenders
are demanding solid fallback plans to operate condo projects as
rentals, unlike in the boom times, when they abandoned traditional
financing standards.

He said the Bridges is the only one of his projects that has converted an entire building into rentals so far.

Halstead
began listing apartments in the Bridges North in May, with rents
starting at $4,000 a month for a two-bedroom and ranging up to $5,600
for a three-bedroom.

Meanwhile, in Long
Island City, where about 4,000 apartments are either under construction
or have recently opened, hundreds of units have gone into the rental
market either directly from the sponsor or as investor-owned
apartments. The same phenomenon is happening on a smaller scale in
nearby Astoria.

Charles Sciberras,
associate salesman at ReMax Today in Astoria, estimated that two-thirds
of the condo developers in the area were speculators trying to cash in
on a hot market, but when the market turned, their base of young
Manhattan professionals could no longer qualify for a mortgage.

Sciberras said he spoke
to one Astoria developer, whom he declined to name, who has sold only
12 apartments in a 200-unit building. That developer said he plans to
convert the remaining inventory into rental apartments. Other
high-profile buildings, including Arris Lofts in Long Island City, have
placed unsold apartments directly on the rental market, according to
brokers.

The developer Crescent
Street has decided to go rental with nearly one-third of its units at
View 59 at 24-15 Queens Plaza North. The condo, designed by Andres
Escobar, has been on the market through the Developers Group since
October 2006. Two-bedrooms are starting at $410,000.

The developer sold 27
units, but by late May decided to offer the remaining 11 two-bedroom
apartments as rentals ranging from $3,800 to $7,900 a month. According
to Mary Crocker, a sales agent at Prudential Douglas Elliman, the firm
was brought on to handle those rentals.

In Brooklyn, several
neighborhoods — including Downtown Brooklyn, Williamsburg, Dumbo and
Greenpoint — have seen condo inventory enter the rental pool.

Developer Two Trees
Management recently began listing its unsold inventory at 110
Livingston — the former Board of Education building that was converted
into 300 condos — as rentals.

Asher Abehsera, vice
president of sales and marketing at Two Trees, said the company sold
its first 260 units and decided to go rental with the remaining 40. He
denied the decision had anything to do with slow sales, but he said the
units can command $50 a square foot in rent.

StreetEasy lists 223
recorded sales in the building, at prices ranging from $365,000 to $1.4
million. Asking rents, meanwhile, range from $2,500 for a studio to
$6,850 for a three-bedroom, two-bath unit.

In Manhattan, some luxury rental buildings work because they were never expected to be condos in the first place.

The
Chelsea Landmark, a 38-story luxury rental building developed by Rose
Associates and Marine Estates, is one of them. Rents at the building,
which is located on Sixth Avenue and 25th Street, range from $3,400 for
studios to $4,400 for one-bedroom units.

Bob Scaglion, managing
director of Rose Associates, said because they built the tower as a
rental rather than converting it and trying to shoehorn a condo layout
into their vision, they were able to design an efficient unit mix and
size that generates more revenue per square foot. He said the building
brings in $80 a square foot in rents, whereas competing buildings are
generating only an average of around $55 a square foot.

Whether other
developers, especially those starting with condo plans, will be able to
replicate that success is another question.

“The rental scenario
will be very, very marginal,” said David von Spreckelsen, senior vice
president at Toll Brothers. “It will be difficult to stomach. Some may
go rental; some condo people will reduce prices and take what they can
get.”

Atlanta

With financing for new condo projects drying up and would-be buyers facing stiffer lending requirements, Atlanta-area developers are turning to high-end rental apartments, the Atlanta Journal-Constitution reported. Developer Lane Co. had a 50-50 split in its portfolio of rental and condo units in 2006; today, 95 percent of the company’s housing units are rentals. Pollack Partners recently completed the first phase of a 400-unit luxury rental complex, Two Blocks Apartment Homes, in the affluent suburb of Dunwoody. The firm is also planning a 600-unit rental project near Midtown Atlanta.

There are 148,300 vacant lots ready for residential development in metro Atlanta, enough to supply builders through 2013, according to real estate research firm Metrostudy. In a healthy market, there would be two years’ worth of lot supply. Many lots are owned by local governments and community banks that are doing a poor job of maintaining the properties, which they took back in many instances because of bad loans. Now, thieves are raiding the lots, people are dumping trash, and runoff is polluting nearby lakes and waterways, the Atlanta Journal-Constitution reported.

Boston

Although the median listing price for a condo around downtown Boston was up in April 2008, to $390,000 from $379,000 a year ago, the $300,000-and-under market has allowed first-time home buyers to buy low now and trade up later. There were 161 condo sales in the $200,000 to $249,000 range in five major Eastern Massachusetts counties in April, the largest number for any one category, according to the Massachusetts Association of Realtors. Data compiled by real estate publishing firm the Warren Group show that the median listing price for a condo in this region in the first four months of the year was $265,000, compared to $274,950 a year ago, the Boston Globe reported.

Chicago

The retail vacancy rate in the Chicago area increased in the first quarter, with consumers spending less amid store closings, the threat of layoffs and fears of recession, the Chicago Tribune reported. The overall retail vacancy rate in the region was 7.93 percent over the first three months of the year, compared to 7.52 percent in the same period in 2007, according to CB Richard Ellis. The highest vacancy rate was posted in the south suburbs, at 15.31 percent. The North Side of Chicago had the lowest vacancy rate, at 4.71 percent.

Las Vegas

Sales at high-rise condo towers in Las Vegas are not keeping up with the stockpile of units on the market, which could create a major logjam as thousands of additional units come online over the next few years, the Las Vegas Review-Journal reported. The city has around 9,200 completed high-rise units, according to research firm SalesTraq, with another 794 condos in presale stages and 12,497 units under construction. But only 4,202 units sold between January 2005 and April 2008, with just 20 closings coming from March to April of this year. The only completed residential high-rise on the Strip is Sky Las Vegas, where units go for $400 to $1,000 per square foot.

Los Angeles

The ultra-wealthy in Los Angeles County are continuing to build mega-mansions despite the housing woes and economic slowdown sweeping through the rest of the country, the Los Angeles Times reported. According to John Finton, a builder overseeing construction of a 32,000-square-foot house on Sunset Boulevard, there are at least 20 homes greater than 20,000 square feet in some stage of development in the affluent enclaves of Beverly Hills, Bel Air and Holmby Hills. Public records show fewer than 60 homes of at least 20,000 square feet in the county today and no more than 10 exceeding 30,000 square feet.

Philadelphia

Many would-be home buyers around the country may be hesitant to pull the trigger in the current market, but condo sales in Philadelphia have remained brisk over the past year, the Philadelphia Inquirer reported. According to the City Recorder of Deeds Office, the number of first-quarter condo sales throughout the city remained about even with last year’s first-quarter sales, at around 500 units. The Arts Condominium at 13th and Locust streets was the city’s best seller in the first quarter, at 47 units sold. Only one of its 372 units was available as of early June. In Center City, 32 condos sold for $1 million or more in the first three months of 2008, compared to 115 for all of 2007 and 49 in 2006.

Phoenix

SouthBridge and the Mix shops, a $36 million complex featuring offices, retail and restaurants, opened late last year in downtown Scottsdale just as the Super Bowl vaulted the area into the national spotlight, but now its retailers are complaining about an ailing economy and sluggish sales. Sales for downtown’s small retailers dropped 16 percent in 2007 from the previous year after five straight years of growth, while restaurants reported a 12 percent decline in business. In the first quarter of 2008, small retail sales fell 9 percent from the prior-year quarter, and sales at downtown restaurants dropped nearly 4 percent, the Arizona Republic reported.

San Francisco

As the housing downturn continues to run its course in the Bay Area, fewer housing units are being built, especially for lower-income households. Last year, the number of housing permits issued in the nine Bay Area counties dropped 24 percent, to 22,843 from an average of 29,978 issued annually from 1999 through 2006, according to the Association of Bay Area Governments. Only 2,700 permits were secured in 2007 for low-income households and 3,350 were for moderate-income households. The remaining 16,793 permits issued last year were for above-moderate-income households, the San Francisco Chronicle reported.

Search engine giant Google recently signed a 40-year lease for 42 acres at Moffett Field, a former military air station near the south end of San Francisco Bay, with plans for a vast community of office facilities, entertainment outlets and even employee housing. Google will initially pay $3.7 million annually to property owner NASA to carry out its 12-building expansion. When completed, the campus could employ as many as 5,000 workers, in addition to the 8,000 already stationed in the company’s nearby “Googleplex” headquarters in Mountain View. Google expects to break ground in 2013 and build out the space in phases through 2022, the San Francisco Chronicle reported.

Seattle

The number of pending sales for single-family homes and condos in King County dropped 39 percent in May from the 3,966 recorded in May 2007, according to the Northwest Multiple Listing Service. The year-over-year period also saw a sharp decline in the number of closed sales in the county, which includes Seattle, to 2,081 from 3,514. The median sales price of a single-family home and condo fell 2.89 percent, to $399,950 in May from $411,868 last year.

Washington, D.C.

The thousands of students that flock to the Washington area for summer internships are having a tougher time finding short-term housing this year in a tighter rental market, the Washington Post reported. Interns at government offices, law firms and nonprofits are competing for rentals with residents that are reluctant to buy in the uncertain housing market. The average rent for an apartment in Washington was $1,448 in the first quarter, 2.2 percent higher than in the prior-year quarter, according to locally based real estate research firm Delta Associates. Many students are turning to local universities such as George Washington University, where short-term rentals are offered for up to $270 per week for a five-week stay.

Trump Towers buyers seek refunds

Miami-area lawyer Peter Cooper went to court in early June on behalf of 80 buyers at Trump Towers in Sunny Isles who want to walk away from their purchases and receive refunds from the sponsors, the Related Group and Dezer Development. The suit seeks the cancellation of over $100 million worth of units and claims of around $21 million in down payments already made.

The plaintiffs claim that the developers used a “fraudulent marketing ploy” to sell the units, because they did not reveal that the Trump licensing agreement may not be permanent — there is the possibility the project could be renamed once all of its units are sold. Developer Donald Trump, who was not named as a defendant, told the Daily Business Review that he is “honored” that the licensing of his name has become the subject of a lawsuit.

Palm Beach, Miami-Dade appraised property value drops

Palm Beach County’s property values dropped 7 percent as estimated for tax purposes by the county’s property appraiser at the end of May. Total taxable property values in the county fell to $157.5 billion in 2008 from $169.4 billion last year, according to the estimate — the steepest drop in at least three decades. In addition to declines in value from the housing slump, voter-mandated cuts reduced taxable value from properties by more than $8.5 billion.

In Miami-Dade County, the property appraiser’s office saw values drop for the first time in 25 years, with the exception of 1993, the year after Hurricane Andrew caused billions of dollars worth of damage. Countywide, the value of taxable property is preliminarily assessed at $238 billion, a 2.7 percent decline from last year. The drop-off in tax revenue has prompted the towns of Aventura, North Miami Beach, Sunny Isles Beach and Miami Beach to seek strategies for providing municipal services for less money.

Russian billionaire pays $100 million for Trump mansion

Russian fertilizer tycoon Dmitry Rybolovlev agreed to purchase Donald Trump’s oceanfront Palm Beach estate at 515 North County Road for $100 million, a record for a U.S. single-family home, the Wall Street Journal reported. The mansion is priced at $210,000 per square foot of ocean frontage. Trump bought the property, called Maison de l’Amitié, for $41.35 million in 2004, and listed it at $125 million in 2006, slashing the price after two years of marketing. The 41-year-old Rybolovlev made No. 59 in Forbes’ list of the world’s richest people, with a net worth of around $12.8 billion this year, up from $3.3 billion in 2007.

Office rents rise fastest in 2007, may be poised for correction

Miami showed the steepest increase in office rents of any North American market over the one-year period ending March 31, 2008, according to a report released by CB Richard Ellis at the end of May. The market had a 29 percent gain over that period, the report said. Runners-up included Panama City with a 28 percent increase, Seattle with a 26 percent increase and Houston with a 25 percent gain.

This rise could be followed by a leveling off this year, according to a market report released by Marcus & Millichap published around the same time, although the market is expected to weather the correction healthily. The report predicts that office rents will rise slower than usual in 2008 and that there will be an increase in sublet space in the market, due in part to layoffs related to the housing downturn. It also expects an increase in direct-leasing vacancy.

Florida second in U.S. for foreclosures

One in every 242 Florida households filed for foreclosure in April. That total is up a whopping 146 percent from just a year ago, according to the latest RealtyTrac U.S. Foreclosure Market Report. And it’s the second highest in the nation.

Miami-Dade County leads the way in foreclosure filings, with Broward close at its heels. Palm Beach County, meanwhile, ranked fifth in foreclosure activity in April. With home sales prices still down by double digits, experts expect the foreclosure cycle to continue.

According to a report from the Mortgage Bankers Association, at the end of the first quarter, Florida’s foreclosure rate stood at 4.61 percent of about 3.5 million loans examined, or roughly 163,000 homes, compared to 1.03 percent of 3.42 million loans in the same period a year ago. The report also said that 11.6 percent of Florida property owners were more than 30 days past due on a mortgage payment or in foreclosure. The Miami-Dade County Clerk’s office recorded 11,768 lis pendens filings in the first quarter of the year, which is nearly half the number filed in all of 2007.

Once a thriving manufacturing area where an immigrant influx spurred the growth of the apparel industry, the Garment District, bounded roughly by Fifth and Ninth avenues and 34th and 42nd streets, by the 1990s had become one of the most depressed parts of Midtown Manhattan with the gradual loss of clothing factories, suppliers and wholesalers due to pressure from cheaper clothing imports.

But it seems that at least one industry has quietly taken over the area over the past few years: architecture, along with its counterpart, engineering.
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With several restaurants out of business on Long Island’s East End and a number of others for sale, it appears that even marketing to a wealthy Hamptons clientele can’t ward off the down economy — at least not entirely.

Local restaurant owners contacted by The Real Deal generally agreed that there is a wariness about taking on leases or purchasing restaurant spaces because of the economic uncertainty.

“There is a big joke here about ‘the two Ws’ that I really believe holds true,” said Eric Lemonides, the co-owner of Almond in Bridgehampton and the Almoncello in East Hampton, which opened in December. “Weather and Wall Street really do have an impact.”

Diners trekking out to the Hamptons this summer will see that several former prime eateries are now gone. For example, in the heart of Amagansett, the site of former Asian fusion restaurant Pacific East — a sprawling 7,000-square-foot space with two bars, an outdoor patio and a large parking lot — will be empty this season. It has been on the market for $6.5 million since September.

Also, Alison Becker has moved on from her namesake restaurant in Bridgehampton to run the eatery at the Maidstone Arms in East Hampton, leaving behind an empty 3,000-square-foot space on School Street.

Meanwhile, the nearly 5,000-square-foot club and restaurant in East Hampton at 44 Three Mile Harbor Road that seemingly changes names every year is leased for the season — Jeffrey Chodorow is operating a “shabby chic” version of his trendy Midtown steakhouse, the Kobe Club. The owner first tried to sell it in 2006, but took it off the market until February 2007, when it was listed at its current price of just under $5.5 million.

Note: Correction appended

In addition to those high-profile listings, there are a number of other restaurants currently in operation that have privately declared themselves for sale in the word-of-mouth market, according to insiders.

Lee Minetree of Corcoran, a top broker of restaurant space in the Hamptons, said the number of people inquiring about restaurants in the area has dipped by between 10 and 20 percent compared to last year. But he said despite the decrease in interest, the value of restaurant properties continues to rise because of the inherent barriers of entry to the industry.

With strict zoning laws and entrenched community politics, it is nearly impossible to open a restaurant in a space that wasn’t a restaurant before.

“Restaurants tend to always hold value because there isn’t a lot of inventory,” said Mark Smith, the co-owner of four restaurants, including East Hampton’s Nick & Toni’s and Rowdy Hall.

A broker for Prudential Douglas Elliman’s commercial services in the Hamptons, Robert Kohr, pointed out that while some restaurants have remained for a time on the open market, sellers have generally refused to lower asking prices. The listing price for Pacific East has held at $6.5 million since it went on the market in the fall.

Despite fears that a reeling economy and rising gas prices will keep beach-goers at home this summer, the optimists think the Hamptons will be impervious because of its traditionally wealthy clientele.

“I think the Hamptons customer is particularly resilient,” said Chodorow. “The reason I decided to open Kobe Club in the Hamptons is because I felt it was a great opportunity to further expose the brand to my ideal customer base.”

And for all the restaurants that are on the chopping block, others are opening, though many are being opened by already established Hamptons’ restaurateurs.

Some believe that factors such as a strong euro will bolster against any fallout in American clientele.

Jerry Della Femina, the owner of Della Femina in East Hampton, said he thinks the sluggish economy will benefit the restaurant business because people who would otherwise take trips to Europe will stay in the Hamptons.

It seems the area with the most turnover and restaurant activity this year is in Montauk. Likely the two largest restaurant properties for sale on the South Fork are the Inlet Seafood Restaurant and Rick’s Crabby Cowboy Café.

Situated on a seven-acre compound with views of Montauk Harbor, the Inlet Restaurant is on the market for $38.5 million. It is owned by a group of fishermen looking to cash out and retire.

The listing agent, Chris Coleman of Corcoran, said he thinks a single buyer interested in creating a private fishing club is a likely candidate.

Also on Montauk Harbor, Rick’s is an eatery and 22-slip marina with 14 guest houses that sits on roughly five acres of land and has just over seven acres of water rights. Prudential Douglas Elliman’s Kohr, who is representing the $9.9 million property, said it is a prime location for a yacht club.

Montauk is also home to two new restaurants this season. They are the Surf Lodge — opened by New York City club owner Steven Kamali — and the Second House Tavern. Both replace existing restaurants/inns.

Of roughly a dozen new restaurants that have popped up this season in the Hamptons, a majority have either been given facelifts under the same ownership or were opened by established local restaurateurs, which some say is a reflection of outsiders’ fears of the dipping market.

Late last month, Ed “Jean-Luc” Kleefield, the managing partner of four Hamptons restaurants, was slated to open the Grappa Wine Bar on Main Street in Sag Harbor. It will replace his New Orleans-themed restaurant and bar Mumbo Gumbo following a complete renovation.

Still, even a down market doesn’t always shape the decision-making of the extremely wealthy, brokers said.

According to one broker, the owner of the NFL’s Cleveland Browns franchise, Randy Lerner, who owns a number of properties in Amagansett, recently bought the Mill Garth Inn as well as the town’s landmark tavern, Gordon’s Restaurant, which is slated to reopen in September.

Prospect Heights has traditionally been a more affordable alternative to neighboring Park Slope. And now, as the Brooklyn market softens, apartment prices in Prospect Heights are dropping with it.

Sofia Kim, vice president of research at StreetEasy, said median prices in Prospect Heights — which is loosely bound by Flatbush Avenue, Atlantic Avenue, Eastern Parkway and Washington Avenue — declined by 4.8 percent from $619,000 to $589,000 between the second quarters of last year and this year, the most recent data on record.

The numbers reflect what Kim described as a “softening, but not a bubble bursting” in the neighborhood. Like other areas of Brooklyn, sales activity has slowed, and both buyers and sellers are making more conservative decisions, Kim said.

Meanwhile, according to StreetEasy, the median price per square foot in Prospect Heights dropped slightly by 1.5 percent, from $594 to $585 between the second quarter of 2007 and the second quarter of 2008. (Park Slope has increased by 1.8 percent from $684 to $696 during that same time.)

Despite that, broker Doug Bowen, who handles Prospect Heights for Core Realty, said he hasn’t seen prices declining. “Prices in Prospect Heights seem to have stabilized, and I don’t see any downward pressure at this point,” he said, noting that the townhouse market is especially strong.

He also said per-square-foot costs in new developments east of Vanderbilt Avenue — the main commercial drag and home to restaurants, cafés and bars serving $10 martinis — are averaging between $600 and $750.

During a tour through several open houses in Prospect Heights on a sweltering day last month, traffic was light and some brokers closed shop before their two-hour windows were even up.

At the Washington Condominium at 35 Underhill Avenue between Dean Street and Pacific Avenue, only two couples showed up during the first hour of the open house.

The new construction, 39-unit, four-floor building was completed last year. The second-floor apartment — a three-bedroom, two-bath condo that measured 1,474 square feet — was on the market for $899,000 with maintenance of $282. It was purchased a year ago by a couple with two children for $669,000.

The building had a small athletic center on the first floor with a sauna, treadmill, elliptical machine, bike, weights and kickboxing bag.

Corcoran agent Judah Domke said the owners put the apartment on the market in late May because they were upgrading to a house.

While they were only living there for a short while, they installed an entertainment wall between the kitchen and living room and new wood cabinets in the kitchen.

The apartment had hardwood floors in all rooms except the master bedroom and the children’s bedroom, which were carpeted. The master bathroom had marble counters, floor and walls, as well as a Jacuzzi and a separate shower. In addition, the living room looked out on the building’s common garden, replete with water wall, bamboo accents and small Japanese maple trees.

Potential buyers William Zhang and Yang Lee were on hand. They were looking in both Prospect Heights and Park Slope. Zhang lives in Queens, while Lee lives in New Jersey.Both work on Wall Street.

“The apartment itself is a decent size, very roomy actually, and it’s in our price range,” Zhang said.

But he ruled it out, noting that “it seems a little far from the subways,” and that there weren’t enough shops around. “The area could be more developed,” he said.

The apartment was about eight blocks from Prospect Park, the Brooklyn Museum, the Botanical Gardens and the Brooklyn Public Library; the nearby side streets are mostly tree-lined blocks with two- and three-story homes.

Three blocks from the Underhill property was 330 Park Place. Construction on the five-story building was finished at the end of May, and the building has five two- and three-bedroom condo apartments. Prices range from $715,000 to $899,000 with common monthly charges ranging from $162 to $346.

The units in the building were put on the market the first week of June, said agent Mary Goodson of Aguayo & Huebener.

“We are seeing many people who rent in Park Slope now looking to buy,” she said.

Goodson said the previous house was torn down. In its place the 25-foot wide building, which seems to fit in with the adjacent brownstones on Park Place, was erected.

“It took about two years to build here, and for many people living on the block, this is the first time they can come and see what it looks like inside,” Goodson said.

The building’s five units include three duplexes. The first-floor unit, which was 1,671 square feet, was on the market for $899,000 with common charges of $346 a month.

The two-bedroom, two-and-a-half bathroom apartment had shared access to the common backyard and a basement set up as a recreation room.

Meanwhile, the second-floor unit, a 1,216-square-foot simplex, was listed at $845,000 with monthly fees of $304.

All of the apartments in the building have granite countertops, stainless steel kitchen appliances, light hardwood floors, recessed lighting and washer/dryer hookups.

Again, traffic was light, but a couple expecting their first child stopped in to check out the first-floor duplex. They currently rent in Astoria and said they are ready to buy.

“We’re looking for a child-friendly apartment,” said Alana Martell, 31. “So far, features like the washer/dryer and the central air are all good.”

Martell’s husband, Sam Martell, 28, works at the United Nations as a researcher and asked about the closest subway, which is the B/Q about a block away.

“We’ve been looking for about a year, and we started looking in this neighborhood only a few months ago,” he said.

Another prospective buyer, Michelle Tepper, 38, said she was renting an apartment nearby in Prospect Heights.

“I’ve been looking for the last year or so,” she said. “I live in a rent-stabilized apartment now, but this might be the right time to buy because it seems slower, less frantic, more relaxed.”

Tepper, a designer, said the neighborhood has all the conveniences she needs, like shops and cafés on nearby Vanderbilt Avenue. And, she wants to stay nearby so that she can be near her friends and family.

Closer to Grand Army Plaza, an 800-square-foot unit at 60 Plaza East near St. Johns Place, on the border between Prospect Heights and Park Slope, was on the market for the second time. The price had been reduced to $395,000, according to Corcoran broker Jorge Murillo. He declined to say what the previous price was, or why the first sale fell through. He did say, however, that the price was lowered when the unit was put back on the market last month because it had been on the market for a while and needed some work.

The location was the main selling feature for the one-bedroom, second-floor co-op. The pre-war, doorman building was a stone’s throw from Prospect Park.

On the day of the open house, the apartment saw little activity. Murillo chalked it up to the extreme heat. During the last hour of the open house, no buyers showed.

“But last week,” he said, “about 10 couples checked out this apartment. They were mostly from Park Slope and some were from the Upper West Side.”

The apartment had hardwood floors, two arched doorways, some original molding, ample closet space and good light. But, kitchen fixtures were dated, as was the lobby.

According to Murillo, the co-op board is planning to redecorate the lobby, which has furniture dating back to the 1980s.

Go to chart: Getting a (beach) read on the real estate scene in the Hamptons this summer

Though he still could face charges over his involvement with a prostitution ring, Eliot Spitzer, New York’s former governor, is tiptoeing into the industry where his family made its fortune: Real estate.

Early last month, the New York Observer stated that Spitzer was reporting daily to 730 Fifth Avenue, which his father, real estate tycoon Bernard Spitzer, co-owns and runs his firm from. A week later, the New York Sun reported that the former governor called a meeting with union officials to float the idea of a so-called “vulture fund” to snap up distressed real estate assets with their financial help.

New properties could be a shot in the arm for the Spitzer family real estate business, which has been relatively stagnant in recent years, content to manage its existing portfolio rather than expand aggressively, as many of its competitors are doing, brokers and developers say.

In New York, the company’s property is valued at an estimated $500 million, including at least 10 buildings that are owned, co-owned or managed by Bernard Spitzer.

Most are located in Midtown or the Upper East Side. Notables include 985 Fifth Avenue, the 25-story luxury rental where Spitzer lives; and the Corinthian, an 865-unit condo that opened in 1988 at the site of the former East Side Airlines Terminal, which is bound by 37th and 38th streets and First and Second avenues. One of the firm’s newer projects is 150 East 57th Street, a 34-story luxury rental completed in 2000.

Of course, this will not be the first time the elder Spitzer has lent a hand to his son. With the success of his real estate empire, Bernard Spitzer nurtured his son’s privileged upbringing, expensive education and political career. According to published reports, Spitzer’s father injected hundreds of thousands of dollars into his campaigns.

But it remains to be seen how far Spitzer will take his newfound career in real estate or whether he’ll be successful. But with his father ill from Parkinson’s disease and his own options limited by his high-profile fall from grace, it seems likely that he will become more involved. We asked brokers, developers and real estate academics whether the industry will welcome the man once known as the Sheriff of Wall Street, before he tumbled from power after reaching the governor’s mansion. Here’s what they had to say:

Jeffrey Roseman, retail broker, Newmark Knight Frank Retail

Could a lack of experience in real estate hurt Spitzer?

No. He obviously is a very bright guy. I like to think our industry is full of rocket scientists, but we’re not. He ran the state of New York; he can run a portfolio. I would take him on my team any day of the week. And the industry will accept him. Spitzer [Enterprises] is a very reputable and honorable firm. When our renewal commission for a Piaget watch store in the Crown Building came up two years ago, they mailed us a check right away. Most people would wait for you to call and ask for it.

Kathy Sloane, residential broker, Brown Harris Stevens

What should Eliot do differently at the firm?

Eight hundred Fifth Avenue [a late 1970s rental building at East 61st Street] is their trophy property. It could do very well as a condo. Even though the company may now be in a holding pattern, those assets could be spun off to create masses of capital and opportunity. [Eliot] may have taken this business somewhat for granted before, but this is a time for the father and son to work together.

What is it about father-son tandems in New York real estate?

I love working with family businesses; there’s a wonderful feeling you get from walking into the offices and being greeted by family. Children are learning from their fathers, but the fathers can also learn a lot from their kids. Donald Trump realizes this and has three of his children with him on his Trump Dubai project.

Louis Dubin, president, the Athena Group

What was the industry’s impression of Eliot when he was attorney general?

He wasn’t particularly bad and he wasn’t particularly good at approving offering plans — his office was backlogged. And nobody blamed the attorney general for that. Condos were hot. In fact, he was in charge during some of the state’s best years, at least from a development perspective. I have no reason to believe he wouldn’t be welcomed.

Would it be a good move for him to start a vulture fund?

The market timing for something like that is excellent right now. If it’s run by someone who’s highly intelligent, in an industry that’s not incredibly technical, it could do very well.

Richard Sylla, professor, NYU Stern School of Business

Is Eliot a good match for a real estate job?

It’s not clear yet if he’s cut out for it … but the knack he has to learn is one that all successful New York real estate families [have], and that’s to pick up properties by borrowing most of the money. That’s how you become wealthy. Bernard Spitzer was among those who figured it out. Still, [the Spitzers] aren’t major players yet, like a Tishman Speyer; I just got back from Germany, where I noticed [Tishman Speyer] owns buildings. The Spitzers aren’t that big.

What are Spitzer’s chances of success?

Well, we are talking about a guy who doesn’t have a lot of options.

For years, investing in rent-stabilized buildings was a slow, but sure, game.

“There’s little downside,” said Steven Kohn, president of Cushman & Wakefield Sonnenblick Goldman. “It’s low yield, but you have significant upside — it’s just a question of how long it takes to realize it.”

In the past year, however, prices of such buildings and the volume of trades have been stagnant. And going forward, some real estate pros are predicting that rent-stabilized landlords will face their worst market in years — a confluence of skyrocketing fuel prices, the credit crunch and a possible revision of regulations from Albany after the upcoming state elections.

“There’s been a 37.4 percent increase in fuel costs this year,” said Jacky Monterosso, a spokesperson for the Rent Stabilization Association, the trade group that represents thousands of New York City property owners. “That one operating cost alone wipes out savings. We have owners that are taking out a line of equity just to make the ends meet.”

Monterosso said this year’s financial pressure was the worst for landlords since “the 1970s, when the Bronx was burning.”

After numerous hearings, late last month, the Rent Guidelines Board voted to increase rents 4.5 percent on one-year leases and 8.5 percent on two-year leases for the city’s 1 million rent-stabilized apartments. And, in an unusual move, it also approved an additional concession for landlords: A supplemental monthly rent increase of $45 for one-year leases or $85 for two-year leases for tenants who have lived in stabilized units for more than six years.

But even though the hearings’ outcome, on its face, favored landlords, rent-stabilized investors and the commercial brokers who work with them say there’s still pressure to sell.

The landlords won’t see the rent hikes they’ll be able to charge on lease renewals as being big enough to justify increases in fuel and maintenance costs, said Tom Gammino, a broker for Massey Knakal and former real estate attorney who specializes in rent-stabilized sales. Gammino notes that landlords had been pushing for increases of between 10 and 15 percent.

He added, “When fall starts, the onset of winter and its higher fuel costs are going to make a lot of owners want to sell.”

Another factor that will put pressure on owners to sell before the end of the year is the fall elections, Gammino noted. “If there’s a Democratic groundswell in Albany, the $2,000 vacancy decontrol limit is probably going to be increased to $2,500 or $3,000.”

In addition, the credit crunch has taken a toll on the rent-stabilized investment landscape.

“It’s just more difficult” for investors to secure financing for purchases nowadays, said Kohn. The banks, pension funds and other entities ponying up money for rent-stabilized buys “want to lend on current cash, not on projected increases.”

As an example of how the ratios have changed, “in the past year or so, financers have only been willing to lend investors between 60 to 65 percent of the money they need to buy rent-stabilized properties,” said Kohn, whereas 12 months ago, a buyer could count on getting 75 to 80 percent of their purchase covered by debt.

“More equity is required,” he said.

Kohn’s firm, Cushman & Wakefield Sonnenblick Goldman, was recently hired by the Dermot Company to raise equity for the $60 million purchase of three adjoining rent-stabilized buildings in Morningside Heights that contain a total of 180 units. Henderson Global Investors, a pension fund, put up the cash for Dermot’s buy, said Kohn. The debt was provided by Prudential.

The deal became a reality, in part, said Kohn, because of the buildings’ location. Rent-stabilized deals in neighborhoods like Morningside Heights, he said, have been “much less affected” by the credit crunch than would-be sales in “more marginal” areas.

“We’ll see a lot more activity before the year is up,” predicted Gammino, who noted that even though sales have languished, the trend on the horizon is for the balance of power to “move in favor of the buyers.”

Other real estate executives still have a fairly bullish view of the market.

“The availability of debt is affecting purchases,” said Eric Anton, executive managing director at commercial brokerage Eastern Consolidated. However, he notes, rent-stabilized investments are the segment of the city’s real estate market that’s “changed the least” in the past year or so.

“You’re buying apartments that remain way below market,” Anton said. “You’ve got so much upside, so much distance to go, that it’s not a matter of the market. In many ways, it’s one of the safest bets out there, because it’s all based on your ability to be a good manager.”

But tenant advocates, who argue that middle-income New Yorkers are getting financially squeezed, aren’t shedding a tear for rent-stabilized owners.

“Investors and owners have feasted at tenants’ expenses for a decade,” said Brad Lander, director of the Pratt Center for Community Development, a Brooklyn-based organization that advocates tenants’ rights. He noted that the recently released 2008 study of income and expenses found that “growth in income outpaced growth in expenses for rent-stabilized owners in 13 of the past 15 years.” At the same time, he said, “predatory investors have bid up the value of rent-stabilized properties assuming they could evict rent-stabilized tenants and move toward vacancy decontrol.”

When asked whether sales prices for rent-stabilized buildings will moderate with the current economic climate, Lander said, “We can only hope so.”

No property tax hikes in city budget deal

Mayor Michael Bloomberg and the City Council settled on a $59.1 billion budget for the next fiscal year that manages to keep in place a $400 property tax rebate and a 7 percent property tax cut. The 7 percent cut had appeared to be in serious jeopardy. Negotiations reportedly came to a standstill at City Hall just a few days before the agreement last month because the mayor wanted to roll back the tax cut to make up for reduced revenue, including a big drop-off in real estate transfer taxes. Council Member Lew Fidler told the New York Sun that the Bloomberg administration was “stomping their feet and rejecting every alternative.”

Construction safety bill passed

City Council members passed a bill requiring the number of fatalities, injuries, accidents and violations at every construction site to be posted on the Department of Building’s Web site, the New York Post reported. The bill will go into effect in four months and was unanimously passed after increased construction-related deaths and two crane collapses this year.

Pinnacle sues Stringer over tenant conversations

The Pinnacle Group filed a lawsuit against Manhattan Borough President Scott Stringer in New York State Supreme Court last month to force his office to release records of his communications with tenants who filed a federal lawsuit against the controversial real estate company. Pinnacle sued on June 13, less than a year after a tenants’ organization and 10 residents filed a lawsuit in Manhattan U.S. District Court against Pinnacle alleging deceptive practices, harassment and racketeering. Pinnacle has denied the charges, and moved in November to have the case dismissed. The judge has yet to rule on the motion.

City files charges against Scarano

The city filed charges against architect Robert Scarano last month for allegedly making false or misleading statements on applications filed with the Department of Buildings, acting DOB commissioner Robert LiMandri and Department of Investigation Commissioner Rose Gill Hearn announced. The Brooklyn architect has been accused of illegally dividing a Brooklyn lot in two to build the apartment buildings at 158 Freeman Street and 1037 Manhattan Avenue. Scarano allegedly filed falsified applications related to the two projects in 2000 and 2002.

City and state reach OTB compromise

A deal struck last month between Gov. David Paterson and Mayor Michael Bloomberg authorized the state to assume control of the city’s Off-Track Betting Corporation while granting the city a share of the operation’s gambling revenues. Mayor Bloomberg had threatened to close the city’s 68 OTB branches, which would have resulted in 1,500 job cuts for the city and millions of dollars in lost revenue for the state.

Tax-exempt financing jeopardizes Nets arena

Proposed regulations for tax-exempt bonds could jeopardize plans for the $950 million Barclays Center, the centerpiece of Forest City Ratner’s Atlantic Yards project in Brooklyn, the New York Times reported. The Barclays Center’s price will increase substantially without tax-exempt financing. Ratner and state and city officials have been lobbying the Treasury Department for waivers for the project.

New York’s foreclosures fewer than elsewhere

New York is bucking the national foreclosure trend, according to a new study by the Metropolitan Washington Council of Governments and Freddie Mac. The state’s numbers dropped compared to last year, and New York City was the second-least foreclosed-on city in the first quarter, just below Boston with 53 foreclosures for every 10,000 properties. The report also noted that foreclosures were more frequent in neighborhoods with large minority populations.

As a homeowner, seller or buyer, what should you make of the Federal
Reserve’s latest bombshell report on Americans’ home equity positions?

Panic? Mild concern? No big deal?

The dollar losses involved were huge and sobering. On a national basis, they document the personal financial impacts of declining home prices, especially in the frothiest boom markets of California, Florida, the Middle Atlantic states and New England.

But it’s important to keep the Fed’s numbers in perspective. They may not ring true in your own personal housing situation, your own neighborhood, or where you want to buy or sell. It all depends on when you bought, and where.

With that caveat in mind, here’s a quick overview of the home equity
estimates assembled by the Fed and
released last month:

• To no one’s surprise, home equity holdings on a national basis got creamed during the past year. Homeowners lost an estimated $879.6 billion in net equity wealth — that’s the difference between the current market values of their houses and their current mortgage debt. In the first quarter of this year alone, estimated national equity losses totaled $399.1 billion.

• Americans’ equity in their homes
represented just 46.2 percent of their properties’ market values during the first quarter of this year. Put another way,
total mortgage debt exceeded owners’ equity and constituted almost 54 percent of total home values.

• The Fed’s estimate of a nearly $880 billion loss of home equity wealth may strike you as shocking, but look at that number with some recent perspective. During the housing boom years, nearly $3 trillion in net equity was racked up in a few years as prices exploded in local markets with high levels of speculative investments powered in part by low interest rates and funny-money mortgages.

Here’s a crucial fact, however: Depending on where you live or own property, these wild gyrations of equity growth, followed by equity shrinkage, may not mean a lot. Listen to Jay Brinkmann, vice president for research and economics at the Mortgage Bankers Association and an expert on real estate cycles.

“I don’t think numbers like an $880 billion equity loss are all that meaningful for most individual homeowners,” he said. “When you look at home price data over the last five years, you find that large parts of the country never got caught up” in the boom and bust cycle.

The losses are highly concentrated. “The Fed’s (equity decline) numbers for the country as a whole are really being dragged down disproportionately by the big drops in prices in California, Florida and a handful of other states,” said Brinkmann. “Most markets haven’t been hit anywhere near as hard.”

The latest home price index report by the federal government’s monitor of property value movements, the Office of Federal Housing Enterprise Oversight (OFHEO), backs up Brinkmann’s point. It found that even in the depths of the current down cycle, 56 percent of the 292 metropolitan areas it surveyed showed positive, though often small, price gains during the first quarter of this year. OFHEO’s data cover millions of houses financed and refinanced by Fannie Mae and Freddie Mac, but exclude jumbo loans above $417,000 and most subprime loans.

Some markets are appreciating strongly, such as Austin, Texas (up 7.7 percent in the last 12 months), Grand Junction, Colo. (up 9.1 percent), Charlotte, N.C. (up 6.2 percent) and Provo, Utah (up 6.8 percent).

But even in areas with steep price declines, the five-year net equity gains are still significant. If you bought a house at the peak of the cycle in dozens of high-froth local markets — anytime between 2004 and 2006 — “you probably have seen some significant declines” in your equity, said David Berson, chief economist for mortgage insurer PMI Group. “But if you bought a few years earlier, you’re still probably well ahead of the game.”

Five-year data from OFHEO suggest that is correct. Houses in Naples, Fla., lost 18.7 percent last year, but are still up a net 61 percent over the past five years. Riverside-San Bernardino, Calif., houses lost 13.8 percent last year, but are still up by a net 71.5 percent since 2003. Metropolitan Washington, D.C., houses lost an average 5.1 percent last year, but have gained a net 68 percent over the last five years.

Bottom line: National numbers, especially on the downside, get all the attention. But unless you bought at the peak of the boom in a highly volatile area using a toxic mortgage, things probably aren’t anywhere near that bleak.

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

Picture this: You’re eager to take
advantage of today’s troubled real estate market and buy a foreclosed house at a fire-sale price.

The problem is, you don’t have much money for a down payment. And your credit files are scuffed up with late payments.

What you need is a service that can put it all together for you, linking you to lists of available foreclosures, credit repair and even low-down-payment mortgage financing.

Companies that promise to do at least some of these things — especially to fix your credit — ply their wares aggressively on the Internet. But can they really do what they claim to? Based on a recent settlement by the Federal Trade Commission, the only conclusion is: If the deal involves paying money upfront, don’t do it.

According to a complaint by the FTC filed in U.S. District Court in New York, the Home Buyers Consulting Network Inc. of Raleigh, N.C., promised would-be buyers that it could raise their credit scores by 50 to 100 points, help them locate foreclosed houses through a network of participating agents and connect them with low-cost mortgage money to complete the deal.

Through online and telephone pitches, Home Buyers Consulting Network and its affiliated firms — GoodCredit.com, the Good Credit Company and 0DownHomeBuyers.com — allegedly guaranteed clients that they could “remove accurate, negative information from (their) credit reports permanently, including bankruptcies and past due bills,” according to the FTC’s complaint. Sales representatives of the companies allegedly claimed they could not only remove bankruptcies from the national credit bureau files, but also from public records.

For their services, the companies typically requested an initial payment of $99 for credit repairs and $399 for credit and home-buying “consulting” services. The client also had to agree to a minimum contract period — anywhere from six to 12 months — and make weekly or monthly payments of $19 to $49. The companies promised to refund all monies except $99 if the customer was not satisfied.

After consumer complaints and an investigation in cooperation with North Carolina authorities, the FTC filed suit against Home Buyers Consulting Network and its chief executive, Douglas Andersen Moore, for allegedly violating federal credit and consumer protection statutes.

Among the claims:

• Home Buyers Consulting Network and its affiliates falsely promised clients that they could scrub credit records of even the most severely negative information, even though they were not able to do so when the information was “accurate and not obsolete.”

• The companies required payment in advance of actually performing their credit services — a violation of the federal Credit Repair Organizations Act. The companies also allegedly failed to include mandatory disclosures of consumers’ rights to cancel their contracts without penalty within three business days of signing agreements, also in violation of federal law.

In a settlement with the FTC in late May, neither Moore nor the Home Buyers Consulting Network admitted wrongdoing, but they agreed to stop “using any untrue or misleading statements” to pull in buyers looking for credit fixes, as well as to cease collecting money upfront for credit-repair services, and to provide the full disclosures to clients required by federal law.

The settlement imposed a $573,000 civil penalty and a $40,000 restitution of funds to customers. However, when Moore and his companies documented that they were financially unable to pay the penalties, the FTC agreed to suspend all but $10,000 of restitution to customers. As part of the settlement, Moore agreed to intensive, ongoing monitoring of his business practices.

William I. Rothbard, the defendants’ attorney, noted that the agreement “does not prohibit” Moore from further involvement in credit, real estate or mortgage activities, and that “he is moving forward.”

What’s the significance of the settlement for buyers who need to boost their credit scores to qualify for a mortgage in today’s tougher underwriting environment? No. 1: If the problems in your credit files
reflect actual late payments, nonpayments, charge-offs, court judgments, tax liens or foreclosures, don’t look for magic or
miracles. No legitimate “repair” service — no matter how much you pay — can make them disappear permanently.

Most serious credit issues are likely to remain in your files for three to seven years, and bankruptcies and foreclosures for as much as a decade. Tax liens sometimes remain on your records until they’re paid.

On the other hand, if your credit files contain erroneous information, it’s a different dynamic. Either you or an organization that specializes in credit assistance can contact the sources of the bad information and get it corrected on your national bureau files.

But under no circumstances should you pay money upfront for credit-repair services. If a company requires you to do so, file a complaint with the FTC at www.ftc.gov.

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

Gated communities popular in Russia

Gated communities are gaining popularity in Moscow, especially in the wealthy western suburbs of Rublyovka and Novorizhskoe.

President Dmitri Medvedev and Prime Minister Vladimir Putin call Rublyovka home. The upscale shopping center Barvikha Luxury Village is also located in the suburb.

Russian real estate developer Janna Bullock said there are about 350 gated communities with homes on the market in Russia, with half in the Novorizhskoe region, according to the International Herald Tribune.

Bullock’s latest project is the Ecoestate Pavlovskaya Sloboda, a six-house luxury compound in Novorizhskoe’s Istra district, 16 miles northwest of Moscow. The homes sit around a pond on a 7.4-acre site, and are between 4,424 and 5,333 square feet.

The development was designed by architect Giancarlo Alhadeff and English designer Nina Campbell. Prices for the homes range from $4.6 to $6.2 million. The homes feature furnishings and decorations that can also be purchased.

To introduce the development, Bullock hosted the Russian Design Show, an ongoing series of arts events, social gatherings and workshops in the gated community throughout June.

Over the past five years, Moscow home prices have been doubling and sometimes tripling in value, reaching $3 to $6 million, according to a real estate agent at Moscow’s Evans Realty.

Tourism increases in Nicaragua

Nicaragua is seeing increases in tourism and property sales to foreign buyers.

Foreign interest in Nicaragua has increased in the past few years. In 2007, $335 million was spent by foreign investors, up from $268 million in 2006, according to research firm Calvet & Associates.

Nicaragua has some of the least-expensive property rates in Latin and South America, and many buyers are looking at the city San Juan del Sur to purchase land, even though it’s difficult to reach. Visitors can take a private shuttle from the city of Managua to San Juan del Sur, a ride along a partially paved road that takes about three hours. The highway is under renovation, and power failures in the city are common occurrences.

Property in San Juan del Sur is priced in U.S. dollars, giving Europeans and Canadians more buying power with today’s weak dollar. Global Property Insight reported that the average home sells for about $66.35 per square foot in the city, the International Herald Tribune reported.

Increased tourist dollars are improving Nicaragua’s economy, but the country is one of the poorest in the region, according to the International Monetary Fund.

Iran property prices soar

Real estate prices in Iran are soaring, with prices rising more than 100 percent in 2007. Prices have been steadily climbing over the past three years, up 65 percent in 2006 and 50 percent in 2005.

The price increases can be attributed to President Mahmoud Ahmadinejad’s economic policy that created “quick-impact loans,” giving large sums of money to companies and individuals who could create jobs in Iran, where the unemployment rate is just above 10 percent, according to the International Herald Tribune.

Ahmadinejad recently cut back interest rates, which are now below inflation, spurring real estate sales in Tehran, Iran’s capital city.

Brokers and analysts believe prices will only continue to increase in the coming months in Iran because there are few investment opportunities there besides real estate.

In these difficult economic times, New York developers are
facing a dilemma. While apartments are sitting on the market in Williamsburg and other emerging neighborhoods, many developers don’t have the option of lowering prices to unload these units. And if they can lower prices, often they are required by their lenders to put more
equity into projects or take out additional loans. Either way you look at it, developers are in a bind.

This month, our spread on residential development delves into these and other new issues confronting developers, like when condo-to-rental conversions make sense. We also look at how, in a slower market, resale units in new construction buildings are competing with original
sponsor units.

When The Real Deal first came on the scene, we were able to shine a spotlight on important industry figures who typically went unnoticed by most of the press. Among those we highlighted was Sam Chang, chairman of McSam Hotel Group. Our cover profile of Chang several years ago introduced him to readers as the man with the most hotels in the city. Today, Chang is widely discussed in blogs, newspapers and, of course, in our own pages. For this month’s issue, we were pleased to catch up with him again, this time for the Closing. Our interview finds he’s still a remarkably driven man, willing to put his personal life on hold while he pursues his goals. He says he’ll slow down when he retires at age 50, a milestone only two years away.

Speaking of goals, we would like to propose one for our industry. While rents have remained relatively flat in recent months, it’s still the case that for most New Yorkers, who earn $60,000 a year or less, rents are too far out of reach. A simple solution? City-subsidized land for a developer like Related, Vornado, Silverstein or Durst to build affordable housing for young professionals. Because without affordable housing for our workforce, the best and the brightest may be forced to consider relocating to cheaper cities — and that’s the last thing we want for New York City.

No summer is complete without a trip to the Hamptons. We round out this issue with a look at spec home development in the South Fork and the impact that turnover among Hamptons restaurants is having on retail real estate. Be sure to check out this month’s special Hamptons edition of By the Numbers for some pretty impressive statistics at the high end of the residential market.

For a long time, our podcast has been on hiatus while we focused on producing video Webcasts. We decided that video doesn’t have to kill the audio star — at least, not on TheRealDeal.com. So the podcasts are back, and our first guest is Bob Knakal, chairman and founding partner of Massey Knakal Realty Services. Bob recalls the downturns of the late ’80s and early ’90s and points out that the current situation is actually better because there’s a lot more equity available for investing. It’s a great interview; I recommend you go to our Web site to check it out. We promise there are no questions about his much-discussed hair.

Read on,

Amir Korangy

Jones Lang LaSalle acquires Staubach

Jones Lang LaSalle and the Staubach Company finalized a merger last month in a deal worth $613 million. Jones Lang LaSalle, the publicly traded global commercial real estate services and investment management firm, is paying tenant rep firm Staubach in cash and stock options, plus potential earn-out payments of up to $114 million. Former Dallas Cowboys star quarterback Roger Staubach, who founded the Staubach firm in 1977 and was the company’s executive chairman, will be on Jones Lang LaSalle’s board of directors and will serve as executive chairman of the Americas (see JLL merger shakes things up).

NYU-Polytechnic merger approved

The New York State Education Department’s Board of Regents approved a merger between New York University and Brooklyn’s Polytechnic University at its board meeting last month. The controversial merger will make NYU the effective owner of Polytechnic University and all of its real estate holdings. Opponents of the merger at Polytechnic, to be renamed the Polytechnic Institute of New York University, have said NYU was most interested in acquiring the historic school’s Downtown Brooklyn property.

Metro launches real estate mag with REBNY

Metro Newspapers and the Real Estate Board of New York’s residential property listing Web site together announced a new glossy real estate magazine that will be published quarterly. “At Home with Metro” features spotlights on neighborhoods like Williamsburg and East Harlem, market analysis and an architectural feature called “Architectural Idol,” which recently profiled the “psycho killer modern” design of architect Janna Levenstein in West Hollywood. The magazine showcases new decorating styles and “domestic genius” tips for common household problems like removing stains.

Cresa Partners, Horizon merge

Corporate real estate advisory firm Cresa Partners announced last month that it had merged with New York-based real estate consulting firm Horizon to form Cresa Partners Integrated Services. Together, the two companies plan to expand strategic planning and facilities consulting services in the New York region. Horizon principals Keith Keppler and Kent Holliday will become principals of Cresa Partners Integrated Services.

Trump sells Atlantic City casino for $316 million

Donald Trump was expected to sell the Trump Marina Hotel Casino in Atlantic City for $316 million last month to New York-based Coastal Marina, an affiliate of Coastal Development, the Associated Press reported. It will be renamed Margaritaville. Trump Entertainment’s two remaining Atlantic City casinos are the Trump Taj Mahal Casino Resort and Trump Plaza Hotel and Casino.

Jeter gym grand opening announced

New York Yankees captain Derek Jeter was slated to open his new Flatiron gym, called 24 Hour Fitness Derek Jeter, late last month. Jeter partnered with 24 Hour Fitness Worldwide to establish the national chain’s first New York City health club, a 28,000-square-foot, full-service gym at 225 Fifth Avenue and 26th Street at Madison Square Park. Jeter’s name will be on two other Manhattan 24 Hour Fitness gyms: a 31,000-square-foot gym at 600 Broadway, near Prince Street in Soho, to open at the end of the year, and one in the Citigroup Center at 153 East 53rd Street at Lexington Avenue, slated to open next June.

SSJ Development creates construction arm

Local developer SSJ Development has launched SSJ Construction to help accelerate the development of the company’s projects. The newly formed group plans to speed up
the construction of a planned $30 million waterfront Brooklyn development in Gerritsen Beach called the Riviera. That project calls for single- and two-family townhouses, waterfront promenades, renovated docks and boat slips, and communal pools.

Alpha Equity forms joint venture with Praedium

Two locally based companies, Alpha Equity Management and the Praedium Group, have formed a joint venture to manage and develop investment products focused on publicly traded real estate securities. Alpha Equity is an investment management firm specializing in long/short equity strategies, while Praedium focuses on acquiring distressed real estate assets.

Core Group Marketing hired the former director of sales for Ian Schrager’s 40 Bond Street, a decision largely dependent on his experience in resales, Kirk Rundhaug said. The broker’s seven-year stint at Brown Harris Stevens was a huge selling point for the young brokerage, which got its start primarily in new development but is looking to diversify.

Rundhaug will assume the position of senior vice president and director of resales at Core. He will also be taking on new development projects, although he could not name any specifically. “Nothing is signed on the dotted line yet, but I will be working on a lot of nice projects,” he said.

Rundhaug was an associate broker at Brown Harris Stevens from 1998 to 2005, working in resales and marketing for luxury condos, hotel co-ops and townhouses in Manhattan. He then joined Corcoran Sunshine for three years to sell two of Schrager’s projects, 40 Bond and 50 Gramercy Park North. Throughout his career, Rundhaug has built up a clientele of high-net-worth individuals in New York, Connecticut, Florida and London.

Rundhaug said that Core hired three other brokers at the same time he was hired. “[Core] is growing, but growing in a managed way, instead of just hiring 35 brokers at once,” he said.

During Rundhaug’s short time with Corcoran Sunshine, he sold all but one unit at 40 Bond. He took the exclusive listing for that apartment with him to Core Marketing.

“Ian Schrager picked me out of a million people,” Rundhaug said. “That’s the only reason I went to
Corcoran Sunshine.”

He is optimistic about moving back to a small company. “A lot of your own ideas are brought to fruition [in a small company] because there’s a lot less politics working there,” he said.

As investors looking to buy big portfolio packages face an equity drought at investment banks and other traditional sources of leverage, CBRE’s Capital Markets Finance Group, a New York City-based capital advisory division, has hired Enoch Lawrence, an advisor experienced with balance-sheet lenders and foreign investors, to the position of senior vice president.

Lawrence will raise funds for the purchase of portfolios mostly valued $100 million and higher. He will work with CBRE clients around the world, but will focus on investments in New York City and the tri-state area.

He co-founded the commercial real estate consulting practice at Sandler O’Neill & Partners, where he worked for just under two years, before which he held the position of senior vice president at valuation firm Marshall & Stevens Realty Capital for four years, arranging over $1 billion in senior debt and mezzanine financing. Prior to that, he served as vice president at professional services firm PricewaterhouseCoopers.

Lawrence has arranged more than $3.5 billion in deals in his 15 years in the business, the largest of which was for a $970 million multifamily housing portfolio containing 24,000 units scattered throughout the Southwest and Southeast.

In addition to drawing from his experience working with investors from the United Arab Emirates and Britain during his work with Sandler O’Neill & Partners, he believes his work with domestic balance-sheet lenders will be a huge asset in his new position.

“With [Sandler O'Neill & Partners], I had the opportunity to work with a large number of community banks across the country,” he said. “And they always have been a large source of capital, but have become more important now with problems in the capital markets, because you’ve got a huge chunk of the pie that’s disappeared.”

One of the city’s largest commercial property owners and managers, Cohen Brothers Realty Corporation, has brought over former Macklowe Properties chief operating officer Michael Szollosi to serve as COO and senior vice president.

The move occurred in late May, just one day after the Wall Street Journal forecasted William Macklowe’s ascension to chief executive and chairman of Mackowe Properties, replacing his father as head of the company. That high-profile regime change took place in mid-June.

In Szollosi’s new position, he will oversee Cohen Brothers’ 12 million-square-foot portfolio of Class A office space in Manhattan, which includes 623 Fifth Avenue, 135 East 57th Street, 805 Third Avenue, 750 Lexington Avenue, 622 Third Avenue, 3 Park Avenue, 3 East 54th Street, 475 Park Avenue South and the D&D Building at 979 Third Avenue. The company’s other holdings include showrooms and design centers in New York, Florida, Los Angeles and Houston.

Previously, he managed Equitable Real Estate’s New York portfolio for
five years.

Szollosi is also a certified public accountant and has worked for the private real estate companies Corporate Property Investors and the Shorenstein Company for 14 and seven years, respectively.

Residential

Adina Equities

Robyn Lee joined as associate broker. She was previously with Pari Passu.

Aptsandlofts.com

Shana Bowes joined as director of marketing. She was previously a sales associate and project manager at the Developers Group. David Schorr joined as director of finance and development. He was previously with the Developers Group.

Barak Realty

Robert Lombardo joined as an agent. He was previously with Bellmarc Realty.

The Corcoran Group

Marlene Steiner and Tania Arias joined the firm. John Felicetti was appointed marketing and PR coordinator of the Corcoran Sunshine Marketing Group. Gina Galli was appointed project coordinator at the Corcoran Sunshine Marketing Group.

Halstead Property

John Wollberg was appointed director of sales at the Eastside office. He was previously executive vice president and managing director at ATCO Residential Group.

Prudential Douglas Elliman

Lior Barak and Christine Blackburn were promoted to senior vice president from principal of the Barak/Blackburn Group.

Commercial

Carlton Advisory Services

Sara Bejjani joined as vice president. She was previously CEO and founder of Royal Investments. Brendon Nepon joined as analyst and public relations manager. He was previously with Hypo Real Estate Capital Corporation.

CB Richard Ellis

Tim Dempsey and Ken Meyerson were named executive vice presidents. Phil Palmer joined as managing director. He was previously vice president of eastern sales at Quebecor World Inc.

GVA Williams

Lesley Lisser joined as senior asset manager. James Dempsey joined as managing director of the firm’s project management division. He was previously a vice president at JPMorgan Chase.

The Lightstone Group

Edward Kaigh joined as vice president of property management. He was previously with Equity Office Properties.

Macklowe Properties

William Macklowe was promoted to chairman and CEO from president. Harry Macklowe was named chairman emeritus.

Mitsui Fudosan America

Hiroki Saito was appointed CEO.

NAI Global

Andrew Simon and Gil Robinov were appointed executive managing directors.

The Praedium Group

Mason Sleeper joined as principal. He was previously a partner at law firm Shearman & Sterling.

Crossword: A Stones ditty for developers

Answer key

After working long hours showing office and retail spaces to clients, some of the city’s commercial brokers show just as much intensity once they get on the ball fields, taking part in the Real Estate Softball League.

The league saw an upset last year when Robert K. Futterman & Associates took the championship in its first year on the field. RKF beat reigning champion Massey Knakal, who with an undefeated 4-0 record so far this year appeared to be leading the league again as of press time.

The league has been playing in Central Park for the past 30 years or so, although nobody who spoke with The Real Deal — not even league commissioner James Saunders — could say precisely how old it is.

Each team plays eight games during the regular season, which spans from mid-May to the end of July. The regular season is followed by a two-week playoff in which each team plays one to three games.

Most of the players range from 25 to 35 years old, although Saunders said at least one player is around 60 years old.

Every team captain who spoke to The Real Deal said they believed their team would be champions this season, a testament to the competitive nature of the players. However, the games are played in good spirits, according to Saunders, whose day job is senior managing director at Newmark Knight Frank.

“We’re all just big kids doing what we were doing when we were little kids,” he said. “It’s a terrific forum for competing brokers to put their business competition aside and play each other.”

Cameron Mitchell, associate broker at Massey Knakal and captain of its softball team, had a less-friendly opinion on the matter. “These are our competitors in the industry to begin with,” he said. “So it just adds to the fact that we want to beat them.”

The list of participating firms has fluctuated throughout the years, although CB Richard Ellis, Cushman & Wakefield, GVA Williams and Newmark Knight Frank are mainstays. In addition to those four, Massey Knakal, Marcus & Millichap, Robert K. Futterman and Winick Realty Group make up the rest of the league this year.

The 2008 season introduces another new and relatively small firm to the league: Winick Realty. Winick was hopeful about its prospects after taking a win against CB Richard Ellis in their first game. They subsequently lost to Cushman & Wakefield.

“[Our opponents] aren’t as excited as we are, because it’s our first year,” said Joseph Isa, senior director at Winick and captain of the softball team. “And since we are the new guys on the block, there’s a little uncertainty about us.”

Note: Correction appended

As evidenced by the recent success of relatively small firms Massey Knakal and RKF, the size of a company, and thus its pool of potential team members, does not necessarily determine a team’s success. (This contrasts with college sports, where larger schools are assumed to have better teams and are placed in a different division.)

“Some of the larger companies have tryouts,” Isa said. “I didn’t even know if we had enough guys [for a team], but the response was tremendous.”

Mitchell lauded support from his firm’s executives as a driving force in the team’s success.

“Maybe in other places, people are pressured to work, and they sneak out of the office to play softball,” Mitchell said. “At our games, [Massey Knakal co-founder and CEO] Paul Massey comes out, in a suit, and watches us. And it’s a big deal when the top guys are huge proponents of the company softball team.”

The life of a professional athlete is similar to that of a real estate agent: The competition is fierce, the future is uncertain and he has to be on top of his game.

So it makes sense that a number of former professional athletes whose careers were cut short due to injury, burn-out or unfulfilled expectations have turned to real estate for a second or even third or fourth career. Former pro athletes have turned up at various firms including the Corcoran Group, Prudential Douglas Elliman, Halstead Property and Core Group Marketing.

“Pro sports has done nothing but help prepare me for my real estate career,” said Holly Rilinger, a former professional basketball point guard and new sales associate at Elliman. “I’ve learned how to deal with all kinds of people and work under extreme pressure.”

Still, after a successful run as a pro athlete, it can be difficult to start at the very bottom in a new career. “My biggest challenge has been coming from a profession where I was exceptional, where I basically had gotten to a point where I operated on ‘autopilot,’ and here I am in a new ‘sport.’ It’s like having to learn to dribble the ball for the first time,” Rilinger, 34, said. “I’m used to being the best and plan on being the best again in this new arena. I have to remember that it takes time.”

Rilinger has played in professional leagues all over the world and was picked up as a free agent by the Arizona-based Phoenix Mercury in the WNBA on the preseason roster. After Rilinger injured her foot in 2002, she packed up her basketball sneakers and entered the real estate business. She started at Elliman five months ago.

The real estate business can be good for athletes because they can be their own bosses, said Ric Swezey, a former professional gymnast and a senior associate broker at Corcoran. They know how to motivate themselves, and they generally “don’t have the patience to work for someone else,” said Swezey, who has been in real estate for six years.

Swezey, 36, was on the U.S. national gymnastics team, and his college team won the NCAA National Championship title his freshman year. An injury cut his professional gymnastics career short, and he had a string of careers — stuntman, recruiter, casting agent and actor — before becoming a real estate agent. Swezey was ranked Corcoran’s No. 4 broker in April.

Sports careers — even for those not at the top of the food chain — afford athletes some level of notoriety, which can bolster their real estate careers.

“My background in athletics and my Ivy League education made me unique to the real estate community,” said David Owens, a former professional baseball player and vice president at Halstead. “Through networking and relationships I had gained during my playing years, I have been able to represent many athletes in many sports as customers. The Halstead Homers company softball team is also currently undefeated — there’s a plus.”

Owens, 40, was a second baseman for four years on the San Francisco Giants minor league team and played two winters for Estrellas Orientales, a baseball team in the Dominican Winter League based in San Pedro de Macorís. During a month of spring training with the St. Louis Cardinals, he “decided I really didn’t want to play anymore.”

Former linebacker Ansel Shields, 31, hopes to close his first real estate deal — if not more than one — by the end of the year. After he was cut from the Dallas Cowboys practice squad, he went on to play for the semi-pro indoor Arena Football League before getting injured. While undergoing physical therapy at the U.S. Athletic Training Center in Midtown, he decided to become a physical therapist and trainer there. One of his clients was Steven Cayre, brother of Jack Cayre, co-founder of Core, who thought Shields might succeed in real estate. He started at Core in December.

Also at Core is former tennis player David Gergely, 30, who played in the highest German league as well as in tournaments in Scotland, France and Israel, including the Maccabi Games, the Jewish Olympics.

Hall of Famer and former Dallas Cowboys quarterback Roger Staubach has had the most success as an athlete turned real estate pro with his commercial real estate firm Staubach, which is being acquired by Jones Lang LaSalle for $613 million, in a deal slated to close in the third quarter.

Kevin Jenkins, 42, a former tennis pro and an associate broker at Corcoran, said persistence is a trait that benefits athletes and real estate agents. “You have a competitive drive. For example, I had someone [a seller] who’d been — I don’t know — begging me off an exclusive, like, three times. She kind of rebuffed me,” Jenkins said. “I just refused to take no for an answer.” He landed the exclusive.

Developer Henry Justin of HJ Development is ready to rock and roll, again.

The 56-year-old developer of 211 East 51st Street is finishing the construction of a new 1,000-square-foot rehearsal and recording studio with state-of-the-art audio design in the Fashion District. The cost to build the studio: about $50,000.

“I’ve earned enough security and comfort and money to afford myself this pursuit at this moment,” Justin said.

But Justin is not pursuing a new hobby; he’s going back to his roots.

A former songwriter, Justin has co-written more than a dozen recorded songs, including the 1977 hit “Get Up and Dance” on a record of the same name, performed by the Memphis Horns (and sung by the Doobie Brothers on the Dinah Shore show), and “Feelings of Love,” later sung by keyboardist Theodore Wender’s 1980s rock band 3-D, which played with bands like the Cars and the Ramones and appeared on Saturday Night Live.

“He’s a natural,” said Wender, his former songwriting partner, who has since been writing music for TV and commercials with 3-D lead vocalist Ric Zivic. “I’m very excited about writing again with
Henry. It’ll be really exciting. He always used to come up with great ideas.”

Justin is reconfiguring 1,000 square feet on the sixth floor of a building he owns at 261 West 35th Street. Wender is supplying the electronics, including his collection of vintage keyboards.

The studio will be used by Justin and Wender and both of their sons. Justin’s son plays guitar, and Wender’s son is a DJ.

“Henry’s son, Jonathan, was very involved in construction and design of the new studio, and my son, Daniel, was instrumental in the audio design,” Wender said. They will get “an opportunity to rehearse and record.”

Although Justin has been building
condos like the Cass Gilbert at 130 West 30th Street, the Heywood at 263 Ninth Avenue, the Parkwood at 31 East 28th Street and 211 East 51st Street (to be completed next month), he still jams every night at home on the piano or on his electric guitar.

“Real estate is very stressful and strenuous. [Music is] a tremendous outlet for me,” he said. “It’s a place for me to energize myself, to keep in touch with the talent and ability I have. Now, I’m revisiting the idea of writing music again.”

After graduating from Great Neck South High School on Long Island, Justin moved to New York City.

“I started from scratch with [Wender], who had a group,” which eventually evolved into 3-D, Justin said. “We wrote tunes together. I played a little harmonica for them at times.”

Justin attended the School of Visual Arts for one year, dropped out, bought a camera and made some cash traveling around, shooting low-budget films on subjects including the Lebanese Civil War and female boxer Cathy “Cat” Davis.

In 1976, Justin turned to investing in real estate with his father’s company, Justin Management, owner and operator of commercial properties.

“Real estate sort of jumped up in the ’70s,” Justin said. He got married in 1983 and was looking for a more lucrative career. “I only came into the business on a full-time basis in the early ’80s.”

In 2000, he opened his own outfit, focusing on developing luxury condominium conversions like the one at 211 East 51st Street, rather than just buying buildings.

Besides playing music for fun, Justin has kept himself immersed in the art world. In 2000, he founded the Center for Figurative Painting, an exhibition space for postwar American figurative painters. The center, now closed, had a permanent collection of more than 100 paintings.

Wender is hopeful that his pursuit with Justin will be fruitful.

“We’re going to write music together again for enjoyment. If you love what you do, it translates into magic,” he said.

In the early part of the last century, as skyscrapers grew taller and more complicated to oversee, J. Clydesdale Cushman laid the foundation for a modern system of building management.

Cushman was born into a real estate family: His father, Don Alonzo Cushman, founded D.A. Cushman Realty Corp., which developed and owned many of the buildings in Chelsea. (Cushman Row on West 20th Street remains a testament to Don Alonzo’s career.)

In 1917, J. Clydesdale Cushman co-founded Cushman & Wakefield, a property management company, out of an office just big enough for two employees. Today the firm is one of the biggest players in the New York City real estate market, leasing dozens of prominent properties. It is the world’s largest privately held real estate services firm, with offices in 58 countries employing more than 15,000 — including Cushman’s grandsons John and Louis, who serve as chairman and vice-chairman of the company’s board, respectively.

But Cushman’s realization that skyscrapers needed specialized managers is perhaps his greatest legacy. He foresaw a federation of individual buildings, each with its own staff that did maintenance and repairs but would also be able to pool resources when needed — for example, for bulk coal purchases.

It seems obvious now, but back then it was a new concept.

Prior to Cushman’s time, building owners acted as landlords, rent collectors, supervisors and advertising agencies for their properties — a system that became increasingly ineffective as building practices improved, allowing for bigger and more complicated office buildings.

“The multiplicity of perplexing problems of mighty skyscrapers,” Cushman wrote, “requires a highly specialized supervising staff… [working in conjunction with] an efficient renting organization.”

It was a revolutionary change. “Before Cushman, landlords had been responsible for everything — they were their buildings’ own management,” said Jan Alan Lewis, an attorney at the real estate department of Cole, Schotz. “They’d do the floor plans, stacking plans, renewals, ads, answer requests. They’d usually have an in-house accountant for all the billing and collections. But life became more sophisticated, and Cushman saw that an independent, third-party management company could be of tremendous assistance to owners by providing expertise. And this would add value to the owners’ bottom lines.”

“Management: How Modern Business Buildings Are Operated,” which Cushman wrote in 1922, described how to organize modern building management and leasing.

“His book raised the standards for management practices,” said John Cushman. “It outlined his philosophy, how to treat people and how to rent buildings. He was a real student of the game.”

Cushman was also influential in establishing standards for both floor measurements and advertising practices — standards that remain largely unchanged today.

A lucky mistake

In 1903, as an 18-year-old, Cushman moved to England where he sold building supplies to American manufacturers. He returned to New York in 1905 and continued in hardware sales until 1906, when he became a renting manager for the MetLife building at 1 Madison Avenue, then the world’s tallest office structure.

Prior to founding C & W with his brother-in-law Bernard Wakefield, Cushman intended to take over the company Hecksher & DeSauls, a leasing and management organization. But as luck would have it, he missed the opportunity.

Cushman “was supposed to catch the 7:04 train from Avon, New Jersey, to New York one day in September of 1917 for an appointment with the GM of Hecksher & DeSauls to take over the business,” said John Cushman. “But he tripped on a horseshoe and missed the train. That company dissolved, and my grandfather started Cushman & Wakefield instead.”

The firm’s first office on East 42nd Street consisted of just him and an office boy.

Soon, however, the company grew. By the time he wrote “Management,” C & W was operating several of Manhattan’s most distinctive buildings in Midtown, including 50 East 42nd Street, 244 Madison Avenue, the Canadian Pacific Building on Madison between 43rd and 44th, and the Hecksher Building at Fifth Avenue between 55th and 56th.

C & W managed to stay afloat during the 1930s, despite the Depression. The building boom of the 1940s created more opportunities for the company, including the assemblage of parcels for what became the United Nations complex.

Cushman was also active in the National Association of Building Owners and Managers, now known as the Building Owners and Managers Association (BOMA), in the early ’40s and ’50s. Cushman served the organization as secretary, vice-president and president.

In presidential speeches at BOMA conventions, Cushman impressed upon his colleagues the importance of public relations to “gain and hold the goodwill of the public.” He also stressed the need to rehabilitate and modernize older buildings as a means to keep occupancy rates at near-capacity.

His descendant recalled that Cushman’s core values have had a lasting impact on the business.

“My brother Lou and I would go to my grandfather’s house for dinners, where the talk was real estate,” said John Cushman. “My grandfather was a very ethical man, and didn’t tolerate anything less than forthright. Anything unsavory didn’t suit him at all. He was formal and committed to excellence, and everything he did was represented in that way. He was a handsome man, always dressed well, walking with a top hat and a cane.”

Cushman was president of C & W until his death in 1955 at 68 years of age. His great-grandchildren represent the family’s seventh generation in the real estate business.

“We have a genetic disposition for real estate,” said John Cushman. “We haven’t had a break from this business in 200 years — since Don Alonzo.

“My grandfather wouldn’t recognize the present company as the one that he built,” he said. “But he’d be proud.”

1970: Port Authority unveils plans to expand bus terminal

The Port Authority of New York and New Jersey announced plans 38 years ago this month for an $80 million expansion to its overcrowded Midtown bus terminal, as well as plans for a private developer to build a $50 million office tower above that.

The proposal to extend the terminal north on Eighth Avenue to the block between 41st and 42nd streets was expected to take two and a half years and be completed by about 1975. When the project was finally completed and the expanded facility opened in 1981, the cost had risen to $200 million and the proposed office tower project had been abandoned, a result of declining bus use, union strikes and a battered city economy.

The expansion, which increased the terminal’s capacity by 40 percent, had been planned in response to a surge in commuters from New Jersey. The original terminal had opened in 1950 at a cost of $24 million; it originally covered the entire block between Eighth and Ninth avenues and 40th and 41st streets. In 1951 it handled 39 million passengers. By 1966 it was handling 2.5 million buses with 69 million travelers annually.

The Port Authority estimated that in 2007, 57 million passengers riding on 2.1 million buses passed through the terminal.

In November 2007, plans were revived for the office tower component. The agency said Vornado Realty Trust and Ruben Companies would build a 1.3 million-square-foot office tower above the bus terminal.

1951: Woolworth’s signs lease in new Herald Square building

Discount retailer F. W. Woolworth and Co. signed a 50-year lease for retail space in a four-story building near Herald Square 57 years ago this month, making it the first major department store planned in years for the district.

The modest building originally proposed in 1951 was not constructed, and Woolworth instead moved into a 25-story retail and office building at 112-122 West 34th Street, across the street from Macy’s flagship store, which was completed in 1954.

The 1950s saw a postwar boom in Midtown construction. By 1957, the district had 41 newly built office towers and 35 more planned. In 1963, the building’s leaseholder, Webb & Knapp, sold its interest to a partnership including Lazard Freres and Co.

In 1967, Lawrence Wien paid $6.5 million for the leasehold. The building is now part of the W & H Properties portfolio, which plans to spend $80 million on renovations.

Woolworth’s, which was founded in 1879 in Utica, New York, closed the last of its stores in 1997, and in 2001 the company took the name of its top-performing athletic-wear brand, Foot Locker. Today, the shoe retailer’s corporate headquarters are housed at 112 West 34th Street, and a Foot Locker store is located on the ground floor.

1916: City approves zoning changes in reaction to tall buildings

The New York City Board of Estimate approved a comprehensive zoning law to regulate development in a uniform manner for the first time 92 years ago this month.

The city was spurred to action by outrage over buildings such as the 42-story Equitable Building erected in 1915 in the Financial District. Some citizens complained that such structures cast too many shadows and blocked views of the sky and water.

The Zoning Resolution updated the 1901 Tenement House Act, which sought to regulate the height of apartment buildings.

In 1916, developers scrambled to make the deadline before the resolution’s passage. “A most unusual rush set in to file plans, mostly for skyscrapers, under the former condition,” the New York Times reported at the time.

The new code encouraged tall buildings in plazas, used floor-area restrictions to moderate density and created different districts — manufacturing, commercial and residential — that dictated the type of space to be built in a specific neighborhood.

By 1948 the city was overwhelmed by zoning amendments, and leaders sought to revise the law. It was not until 1961 that a new Zoning Resolution was approved. That set of rules, while amended, is still the law today.

Compiled by Adam Pincus

In the July issue of The Real Deal, the story “Old rivalries get a workout on the diamond” spelled Joseph Isa’s name incorrectly.

The article “Hamptons eateries not immune” incorrectly stated that the Kobe Club is located in the Meatpacking District. It is in Midtown.

The story “Sales resume where crane fell” spelled Luis Vasquez’s name incorrectly.

The story “Real estate sites rise in ‘Bloglyn’” incorrectly identified Douglaston Development as the developer of One Brooklyn Bridge Park. Douglaston Development is developing the Edge project in Williamsburg, while RAL Companies is developing One Brooklyn Bridge Park.