The Real Deal New York

This month, in a series of stories, The Real Deal examines the next chapter in New York City real estate. Wall Street’s wild volatility last month froze the city’s residential market. Brokers said the economic seesawing is paralyzing buyers and sellers. Mortgage lenders have also clamped down further on buyers, though more buyers are heading to all-cash deals. Many are wondering: Could the dark days of the late 1980s and early 1990s return? The downward plunge” class=”read-more-link”>[more]

This month, The Real Deal looks at the nation’s most exclusive zip codes to see how high-end markets besides Manhattan are faring. While these areas are more insulated than their less affluent counterparts, many markets are beginning to see big cracks in their foundations with prices and sales volume declining. High-end U.S. markets show cracks in the foundation” class=”read-more-link”>[more]

Few companies have looked down from as lofty a perch as Tishman Speyer, the venerable blue-chip firm that holds stakes in several New York landmarks such as Rockefeller Center and the Chrysler Building. Tishman expanded its empire even wider during the boom, but now it appears that even this company is paying a price for success. Will Tishman Speyer buckle?” class=”read-more-link”>[more]

Real estate analysts believe developer Harry Macklowe won’t be the last to lose a Manhattan trophy tower purchased in the heady days of 2006 and 2007. Crisis may spawn building sales rise” class=”read-more-link”>[more]

Despite buyers’ desire to purchase, banks are increasingly unwilling to write mortgages for some new buildings, especially those that have sold only a small percentage of their units. [more]

A growing number of developers with projects under way in Manhattan are being confronted by lenders who are either unwilling or unable to continue funding. The Lehman Brothers bankruptcy, which was filed in mid-September,
has — not surprisingly — put several construction projects in the city
on hold. But other lenders are also putting pressure on developers to
provide more equity in projects as a way to improve the financial
profile of their struggling banks, real estate attorneys said.
Holding up funds for construction” class=”read-more-link”>[more]

Park Slope’s Fourth Avenue has been billed as the next frontier of gentrification in Brooklyn. However, because of the credit crunch, a number of buildings that were initially planned as condos will now come to market as rentals. The frenzied pace of construction of new projects should also slow. Fourth Avenue on slippery Slope” class=”read-more-link”>[more]

The colorful collage of banners and academic building signs around Fifth Avenue and 13th Street owes its multi-hued palette to the highly active leasing and refurbishing activity of the New School, which has been a player there since 2000.

But had it not been for the economic crisis, that streetscape would be getting even spiffier with the addition of a shiny new building.

Although the tumultuous expansion of nearby New York University has been the focus of local attention in recent years, the New School has also emerged as a transformative force in the Greenwich Village skyline. It proposed a gleaming glass-sheathed campus center to replace an outmoded three-story building at 65 Fifth Avenue on the southwest corner of 14th Street, a move greeted with skepticism from local residents.

As first presented at community meetings held between Decemeber 2007 and March 13, figures began circulating among activists that the building would rise 300 feet and be capped with a 50-foot utility tower, though a school spokeswoman claims those dimensions were never stated in any of its presentations, and that the school had presented several options of varying heights. But just after they introduced the initial plans and announced that they would begin the application process last summer, the economic meltdown seems to have shut the project down with no timetable for when it could be revived.

“Everything’s on hold,” said Caroline Oyama, a New School spokeswoman. “With the credit markets the way they are, we’re being very cautious. In this climate, nothing’s on the table, but if things change, we will come back again.

“The roller-coaster economy has put enormous pressure on every nonprofit in our city, including the New School,” she said.

Local politicians and activists had been gearing up for a battle with the New School, vowing a fight over the glossy building’s design.

When the flow of information about the project ceased after the school made several presentations to Community Board 2, according to activists and local politicians, the lack of outreach helped further galvanize opponents over what they considered to be the school’s imperious attitude. Opponents lumped the institution in with New York University and St. Vincent’s Hospital, which have been embroiled in their own development donnybrooks.

Oyama said that the school had been in constant dialogue with interested parties and has been considerate of its neighbors.

“The New School has generally been a low-key, good neighbor for many years, but they’re beginning to create some friction,” said Andrew Berman, executive director of the Greenwich Village Society for Historic Preservation. “NYU is the 800-pound gorilla down here, but this would be the largest building ever in the Village,” he said, adding that the New School’s design clashed with its surroundings.

For years, the New School expanded within existing buildings, due in part to its limited endowment, but that changed when the need for dormitories became acute.

The school’s aggressive acquisition and leasing program expanded the campus from 725,000 square feet in 1995 to 1.3 million square feet in 2005, according to a master plan presented in 2005. The master plan projected an increase to 1.8 million square feet in 2015 to accommodate a possible rise in enrollment from 6,068 undergraduates and 3,322 graduates to 15,000 students by 2012.

The school annoyed some locals in the 1980s, when it built a dorm at 135 East 12th Street that “a lot of people who live on the block hate,” due to its size and bland design, said Berman. But, “NYU just built a 26-story dorm on the same block, so they are probably focusing their hatred a little more on that these days.”

In 2001, the New School bought 118 West 13th Street for $21.5 million, converting it into a 180-bed dorm, and built another dorm to its specifications at 300 West 20th Street, which the school leased at first, then bought for $25 million in 2007, except for the ground-floor retail units, said Oyama. The school also houses students on four floors at 31 Union Square West at 16th Street, 5 West 8th Street and on 17 floors at 84 William Street in the Financial District.

In 2004, the school crossed the symbolic divide of 14th Street when it leased 194,000 square feet at 79 Fifth Avenue at 16th Street, which is used for classrooms and offices.

In its 2005 master plan, the school also proposed constructing a glass structure that would facilitate linking floor plates with 66-68 Fifth Avenue along with 70 Fifth Avenue and 2 West 13th Street, increasing the structure’s square footage from 60,000 to 166,000, but that has since been scrapped, said Oyama. The school renovated the existing buildings, creating a large open space on the ground floor, and also refurbished 72 Fifth Avenue at 13th Street.

The plan for 65 Fifth, unveiled earlier this year before Community Board 2, would require a zoning variance to evenly distribute air rights transferred from a neighboring property across two lots that lie in different zones, which would place the project before a public review. Under current zoning, the school could build a 31-story building on the eastern lot but would be limited to 16 stories on the west, said Brad Hoylman, board chair.

The initial presentation to Community Board 2 consisted of massings, or rough renderings of the project. The only stats provided were 300 feet with the 50-foot extension, and did not even include the number of stories, said Hoylman, who acknowledged the preliminary nature of the plans, but added that “putting something on 14th Street that looks like a transplant from a suburban office park is inappropriate.”

The school sent a letter to the board on October 1 signed by its president, Bob Kerrey, explaining that “building in this city at this time is costly and difficult” and that the New School is no exception to the vagaries of an uncertain future.

But before he knew about the letter, Hoylman said that there had “been radio silence from them since early summer. The community appreciated the early outreach, and there were high expectations that the public input process would be serious, but there has been a fair amount of frustration.”

Other Downtown schools expanded their real estate holdings and built new projects without causing much of a stir, mainly by building as-of-right. The School of Visual Arts expanded its presence in Chelsea, for example, and Baruch College built a heralded student center in the vein of the Skidmore, Owings & Merrill design for 65 Fifth Avenue, which is centered on quads, or gathering places, in the sky for space-strapped schools.

A goal of the New School’s building plan is to consolidate its programs that are scattered around Manhattan, including Parsons the New School for Design at 560-566 Seventh Avenue and Mannes College the New School for Music at 150 West 85th Street. The school floated the idea of selling the buildings, but these buildings are not on the market, said Oyama. The school doesn’t own the New School for Drama building at 151 Bank Street and has no plans to move the program.

“The reason that we’ve grown is because we’ve been fiscally prudent and there’s no sense taking on any undue risk now,” said Oyama.

Despite its efforts, growth at the New School will undoubtedly attract public scrutiny and ill will in a neighborhood famous for fighting development projects.

“They’re taking the whole place over,” said Paul Graziano, planning consultant to several City Council members, regarding the New School’s bailiwick. “They’re a different animal than NYU, but they still need to be taken down.”

Nobody is going to build condos. Mezzanine financing is a dead issue. There was a full lack of understanding of the interconnectivity of markets. Those were just a few of the bold comments that experts spouted in The Real Deal’s Q & A on lending this month.

While banks have slowly started lending to each other again, financial analysts, academics and commercial real estate insiders are not taking the new lending landscape lightly. One said he was fearful that the lending freeze would “go on indefinitely.” Another said that middle-market entrepreneurs, which are a big part of the real estate engine in New York City, would get boxed out by banks and would not have access to the leverage they need to get projects moving.

Still, most of those interviewed this month seemed to think that while the vast majority of new construction on the drawing board in the city is being shelved, projects in mid-construction would get built. That’s because banks, even those that are struggling, have nothing to gain by cutting off funding 70 or 80 percent of the way through a project.

“They will fund till completion because if they stop, there will be lender liability litigation that they will undoubtedly lose,” is the way one NYU professor put it.

And, if there is any kind of upshot to having Wall Street turned on its head in these last few months, it might be that the new lending paradigm will keep the market less volatile in the future.

“It’s a little like rebooting a computer [and] starting again with very conservative lending,” said the head of a real estate investment bank.

Plus, there may be opportunities for investors who actually have liquidity. For more, we turn to our panel of experts:

Lawrence Longua clinical associate professor, NYU Schack Institute of Real Estate

With lending at a virtual standstill, what area of real estate development do you expect to be most affected in New York City?

Nobody is going to build condos. The question is the uncertainty of value in any deflationary economy. [People think], ‘I’m not going to buy anything if I am concerned that it might deflate in value.’ In commercial development, any new development is driven by rents. Looking forward, I see a reduction in rents. The ground-up construction lenders have substantially shut down. Any [lenders] that are still in the market are making loans capped at 50 to 55 percent of cost, and that is too much equity for almost any developer to put into a deal.

What is your biggest concern about the lending freeze?

That it’s going to go on indefinitely. A major provider of debt capital has been commercial mortgage-backed securities, especially in 2006 and 2007. In 2006 in the U.S., CMBS [provided] $203 billion, in 2007 it was $230 billion, in 2008 it was $12 billion, and there are perhaps two deals in the pipeline that might bring it up to $14 billion. This source has virtually shut down.

What surprises you most about the lending environment today?

If there is anything I am surprised about, it’s how severe and how sudden this was. There was full recognition that there would have to be a leveling off of the prices of single-family homes, but the thought was that it would be something of a soft landing. The fact that it has spread globally and into every asset class is stunning. There was a full lack of understanding of the interconnectivity of markets.

What kinds of projects, if any, are still able to get lending today in New York?

For development financing, probably nothing. If they are fully uncertain of values and value is heading in the wrong direction, any lender wants 35 to 40 percent in equity. Even lenders with low loan-to-value are requiring some kind of recourse. Even real estate investment trusts, in many cases with market caps of billions of dollars, are being made to come up with some form of recourse.

And how long will it take until New York developers feel the impact of the bailout?

A long time. It might take longer than the rest of the country, in part, because this town is so heavily driven by financial services. Job losses on Wall Street have a ripple effect throughout the economy. Existing properties are hurting; shadow and sublet spaces create some real problems, especially on highly leveraged properties.

Will we see projects in New York partially complete and left hanging because banks will start canceling construction loans?

Most of my career was as a construction lender. They will advance the loans as construction takes place. Once they start funding, they can’t stop. They will fund till completion because if they stop, there will be lender liability litigation that they will undoubtedly lose. If it is not finished, the property will not be generating money. Unfortunately, when it is complete they find that the value of the property may not be what they thought it would be.

What do you expect for the short- and long-term future of mezzanine financing?

Mezzanine financing [which can supplement a primary loan] is a dead issue for the foreseeable future. There might be funds that will purchase existing mezz financing, but I doubt that the market will provide new mezz financing for commercial real estate. One reason why mezz financing exploded over the last eight to nine years was that mezz lenders were able to exit their loans through commercial real estate collateralized debt obligations: pooling these loans and selling bonds. It’s possible that I might not see another CDO in my lifetime. The demand for yield in a low-interest rate environment and the exit provided by CDOs drove this market to a great degree. But the fear and uncertainty that has shut down the CMBS issuance is amplified in the mezz market.

Paul Adornato chartered financial analyst, BMO Capital Markets

What’s your biggest concern about the lending freeze?

I don’t necessarily think a reduction in construction lending in New York is a bad thing. If we are in for a period of slower demand in residential and commercial space, then delivering new space to the market is not wise. The market is working the way it should by slowing the amount of capital when there is less demand for new construction.

What kinds of projects are still able to get funding in New York?

There could be projects that still make sense. For example, Acadia Realty is looking to redevelop their retail space underneath the Port Authority Bus Terminal at the George Washington Bridge. So even in this environment, there are big-box retailers looking to redevelop retail space. Acadia Realty also has another project on Fulton and Flatbush in Brooklyn, the City Point tower, a mixed-use building anchored by Target [with] office space and residential above. By the time these projects are completed the economic environment will likely have changed. At Atlantic Yards the first portion is the arena, and that is moving forward. The rest will be subject to market conditions.

Will we see projects in the city that are partially complete and left hanging because banks will begin canceling loans?

It is not in anyone’s best interest, including the banks’, to have a half-built project. Usually when you see a half-built project, it’s because the developer is not able to meet its obligation. In that case, a better-capitalized developer can sometimes take over.

What do you expect for the short- and long-term future of mezzanine financing?

That’s an interesting area. A lot of the work-outs we expect to come from the bailout package will come in the form of mezzanine debt. They will look to acquire mezz debt if it provides an attractive risk/reward profile. It could sometimes be restructured into equity ownership, as a creditor sometimes gets ownership of the asset if the borrower is not able to satisfy the terms of the mezzanine loan.

Are you seeing developers shift to smaller projects or halting projects altogether because of the lending environment?

There are projects that were planned that will never get built. That’s the nature of the real estate game. There’s more talk than action. It’s part of the normal real estate cycle. It’s worse than it has been, but not as bad as the worst real estate depression in New York City. Office vacancy right now is 7 percent, which is quite healthy, given the layoffs that have been announced. We think vacancies could climb to 11 or 12 percent — still less than the 16 to 18 percent that the city saw in the mid ’90s.

Paul Fried principal, AFC Realty Capital

What area of New York real estate development do you expect to be most affected by the lending freeze?

Starting with condos, for-sale residential has been hit the hardest and will come back the slowest, depending upon the employment picture. At this point, it’s really a race to see what slows down more. Commercial development is entirely a function of the economy. With the financial question mark hanging over our heads, it’s not an environment supporting residential or commercial development.

What’s your biggest concern about the lending freeze?

The real estate industry sees growth through middle-market entrepreneurs. It’s not dominated by large public companies. Middle-market players need access to leverage lending. As we go into the lending thaw, the middle-market borrower will be the last to get access to credit.

Do you foresee anything positive resulting from the lending freeze?

It’s a little like rebooting a computer [and] starting again with very conservative lending. We are going to go through severe retrenchment. As we come out of recession, lending is going to be done on a conservative basis, which will keep the market at lower, less volatile valuation levels.

What kinds of projects are still able to get lending today in New York?

Basically, all lending now is cash-flow based, for all property classes — retail, residential, rental or office. The notion is that there is still money available to the extent the lender can assess a property’s cash flow and forecast future cash flow. The riskier the property’s cash flow, the less likely it is to get financing.

What sort of impact do you think the government bailout will have on lending in New York?

New York is still home to some of the world’s primary trophy properties, so as credit markets thaw, some of the places the first loans will go to are stable New York assets with Fifth Avenue and Park Avenue addresses.

What is the lending freeze going to mean for the construction loans that banks dole out in phases?

Construction has pretty much ground to a halt. Outside New York, we’ve seen many situations where banks have stopped funding in the middle of construction. In some situations, they don’t have funds or participating banks have gone under. Quite possibly, we could see problems here in New York because the projects tend to be large and involve multiple banks. If one bank has a liquidity crisis, that can bring the entire project to a halt.

Do you expect lenders to start canceling loans to developers?

There are banks that have not been in a position to fund their loans. We are already seeing that. Some lenders are reluctant to confess to their borrowers that they don’t have capital and try to find a technical breach of the loan terms so they can stop funding.

What do you expect for the future of mezzanine financing?

Mezzanine financing as it existed in the prior cycle is gone. The notion of a junior- to high-level senior loan with a little sponsor equity behind it is toast. It will only exist in a model where the sponsors are required to bring significantly more equity to their project. No matter how you look at these questions, it all comes back to the same result — developers and property owners are going to be required to bring far more equity to their projects.

Are you seeing developers shift to smaller projects or just halting projects altogether because of the lending environment?

If they do larger projects, they don’t shift to small projects because it means the same amount of work for smaller economics. It’s more [likely] that they sit on these projects, or mothball them while they wait for a change in this environment. It’s been going on an entire year. There has been talk about projects halting, but they have such long gestation periods before they require financing.

Matt Pestronk managing director, Ackman-Ziff

With lending at a virtual standstill, what area of real estate development do you expect to be most affected in New York?

Condo development is not going to be financed until current projects sell through or are converted to rentals. Condos will be down about 90 percent. For rentals, it depends on the availability of government money — rent-subsidized programs. For the people that build rental housing without government assistance, land cost will have to come down by half. Commercial development is not happening right now.

Will we see projects in New York that are partially complete and left hanging without the funds because banks will start canceling loans?

I don’t see that to be one of the primary problems right now, except with projects funded by Lehman.

What will it take for lending to free up and for banks to start lending to other banks again?

I think banks are already lending to other banks again. It’s just a matter of time as to when they lend to developers and how long it takes for reasonably aggressive debt to show up. I’d say it’ll be over 24 months before we get back to the traditional 75 to 80 percent leverage levels again.

Jarret Tarnol director of commercial real estate finance, GFI Capital Resources Group

Do you foresee anything positive resulting from the lending freeze?

Once the dust settles, there will be tremendous amounts of opportunities for those investors who have liquidity and the ability to develop, own and operate. The next few years will be a time for certain people to make a lot of money in commercial real estate.

What kind of projects are still able to get lending today in New York?

Stabilized assets like apartment and office buildings that have borrowers with good liquidity. Good net worth are still deals that are getting done.

What is the lending freeze going to mean for the construction loans that banks dole out in phases?

I was in Vegas a couple of weeks ago, and I counted the cranes not moving during the four days I was there. New York City seems to be the last market hit, but there are definitely projects that are going to be frozen for a while. Some banks that have closed loans on these deals will stop funding draws if they have no other choice, forcing developers to seek equity investors or to try to find money from sources like mezzanine funds. In some cases they will simply walk away, giving another developer the opportunity to take over. Although I can’t see Manhattan projects being affected like those in Las Vegas or Florida, the city is not completely protected from every bad thing that is going on in the country.

Do you expect lenders to start canceling loans to developers?

Yes. I have seen it begin to happen. Some lenders are looking for clauses in loan documents to avoid future draws.

Steve Kohn president, Cushman & Wakefield Sonnenblick Goldman

With lending at a virtual standstill, what area of real estate development do you expect to be most affected in New York?

Condo development will be most affected because that constituted most of the development occurring in the city over the past few years. Other than in Downtown, there was not much office development to speak of, but if there was it certainly would be impacted as well. Quality rental projects would be the most likely to be financed, but even these are challenging today.

What is your biggest concern about the lending freeze?

The biggest concern is that the lending freeze will affect well-performing, high-quality assets. The only problem is that they have near-term debt maturing at a level that can’t be refinanced today.

What do you expect for the future of mezzanine financing?

There will be increased demand for mezzanine financing given the reduction in senior loan levels. Senior debt used to be in the 75 to 85 percent loan-to-value range, and today it is less than 70 percent. This capital gap needs to be covered by mezzanine financing or additional equity. This is projected to continue for the near term.

James Parrott chief economist, Fiscal Policy Institute

What sort of impact do you think the bailout will have on lending to New York City developers?

There are three main components to the economic situation: the financial market, the housing market and the broader economy. It looks like some stability is returning to the financial market. It’s not clear, but it looks like bank lending is starting to thaw, especially since the Treasury has created an infinite safety net. But we still have the housing market problem and an economy in recession. We won’t be able to tell if [the bailout] is working until the economy gets going again. It was only intended to stabilize the financial market. Until there is action from Washington to stimulate the economy, the overall outlook for New York City development is not going to improve.

Do you expect lenders to start canceling loans to developers, and how will that process play out?

It depends on the project, what resources the developer has, their contingencies, but it is not going to be easier to get construction financing in particular.

Lease valuations were unpredictable and deals were few last month
while brokers cautioned tenants to hold off on signing any unnecessary
rental contracts as prices continued to drop, real estate experts said.
[more]

As Washington regulators and Wall Street investors grapple with frozen credit markets, a fierce debate rages over an accounting method that some critics blame for the near collapse of the nation’s banking system.

Critics charge that so-called “mark-to-market” accounting — also known as fair value accounting — has forced banks to write down billions of dollars in assets that are considered nearly worthless in a frozen market. It’s a strategy critics fault for much of the dismal condition of Wall Street.

Mark-to-market, which is used all the time in the trading of New York City buildings, essentially requires that lenders assign a value to an asset based on its current market value, as opposed to a more traditional hold-to-maturity model that uses historical income and other criteria for valuing assets.

“When they talk about toxic assets, what they really mean is they have assets on their books for which there is no market,” said attorney Mark Fawer, chairman of the real estate department at the Dreier law firm in Manhattan.

Real estate investors often use mark-to-market accounting — which lawmakers are now looking to reform — to assign a value to assets based on what the property could command on the market if it were sold today.

For example, when Boston Properties acquired the General Motors building for a record $2.8 billion in June, it assigned a value based on the current market rents for the building as opposed to the actual rent being generated from existing tenants. The company noted that the average rent being paid at the GM building was $90 a square foot, which it said was half the current market rent of $180 per square foot.

“The magnitude of the mark-to-market at $90 a square foot was a critical factor in our decision to purchase the GM building,” said Mike LaBelle, chief executive of Boston Properties, during the company’s second-quarter conference call. “Over time, we believe we will see growth in market rents and capture significant growth in current income and appreciation.”

He said that Boston Properties would realize a $1 billion mark-to-market adjustment once it accounts for the difference between current rents and market rents.

Mark-to-market accounting gained a foothold in September 2006, when the Washington-based Financial Accounting Standards Board issued new guidance for valuing assets, known as FAS 157. The standard of valuing assets has been used in Europe for many years, and was designed in part to establish a uniform method of how to measure the value of assets.

Under the guidelines, there were three different levels used to value an asset:

• Level 1 assets are used to measure assets that have specific market data, like stock prices, to determine their value.

• Level 2 assets are used to measure assets that have a comparable measuring stick. A Class A office building in the Financial District, for example, could be compared to a similar building in the same submarket.

• Level 3 assets include assets where there is no direct comparison. Very often, they involve collateralized debt obligations for a bucket of subprime loans.

Among major U.S. banks and other financial institutions, mark-to-market is used to value collateralized debt obligations and mortgage-backed securities. Banks are required to peg the value of these assets on a quarterly basis, even if there is no intention to sell them.

Critics charge that the existing mark-to-market system forced lenders to write down the value of those securities when the markets dried up, and there was nobody willing to buy these assets.

“With mark-to-market, right now, there is arguably zero market value for a lot of the toxic mortgages sitting on the balance sheets of various lenders,” said Jonathan Miller, president of the appraisal firm Miller Samuel.

In May, Merrill Lynch, which has since been taken over by Bank of America, reported that its Level 3 assets, which mainly consisted of hard-to-value commercial mortgages and other assets, rose nearly 70 percent to $82.4 billion. In July, the now-defunct Lehman Brothers reported $41.3 million in Level 3 assets, which comprised 6.5 percent of its total assets. By September, the weight of its toxic investments proved to be too much, and Lehman collapsed in a massive bankruptcy filing.

Martin Sullivan, former chief executive of AIG, blamed mark-to-market rules for the company’s near collapse in September, when an $85 billion taxpayer bailout was required to support the declining value of the company’s credit default swaps.

“When the credit markets seized up, like many other financial institutions, we were forced to mark our swap positions at fire-sale prices as if we owned the underlying bonds, even though we believed that our swap positions had value if held to maturity,” Sullivan testified before Congress. “The company nevertheless began reporting billions of dollars of unrealized losses on the basis of then-current market valuations.”

As a result of the Lehman and AIG debacles, the FASB issued new guidance on how lenders can use mark-to-market accounting. The rules would allow lenders to use assumptions of future cash flow as an alternative to assuming the value at a “fire-sale” discount.

The Securities and Exchange Commission has proposed a comprehensive study to determine its role in major bank failures.

A majority of industry officials say that mark-to-market is the most accurate method of determining the value of an asset. They say critics of mark-to-market are using the rule as a scapegoat for risky investing.

“In many ways, the attack on mark-to-market accounting is as much as anything a scapegoat because accounting standards don’t talk back,” said David Larsen, managing director of the San Francisco office of Duff & Phelps and head of the company’s fair value measurement advisory practice. “It’s been much maligned in the press as a proxy by people who are upset about other things.”

John Ross, former chief executive of the Appraisal Institute, said, “We tend to believe the concern over fair value accounting is a straw man.”

“The bottom line,” said Ross, who is also a senior advisor for RICS Americas, the U.S. arm of the Royal Institution of Chartered Surveyors, “is even if the market becomes very illiquid, any manager of assets really should be aware of what the underlying value is of those assets. It is the most economically efficient basis for reporting an asset.”

New York City’s historic buildings — which boast Roman arches and columns, grand staircases and ornate stonework — are undergoing a modern retail renaissance.

Throughout the city, high-profile architectural jewels such as 20 Exchange Place in the Financial District, the Plaza Hotel in Midtown and the old Williamsburgh Savings Bank building in Brooklyn are being prepped to house 21st-century retailers.

But just as developers are champing at the bit to turn buildings with old-world charm into dramatic selling spaces — confronting the challenges inherent in crafting workable, modern retail environments in some very old buildings — they are also often tasked with adhering to the guidelines of the city’s Landmarks Preservation Commission and the State Historic Preservation Office.

“You can’t change [the windows],” noted Christine Emery, senior managing director of the Lansco Corp., who has confronted the problem in several cast-iron landmark retail buildings in Soho. “They’re protected. It’s a challenge, because it’s not as easy as a floor-to-ceiling piece of glass in modern buildings, where you can see right into
the store.”

Andrew Mandell, a broker with Ripco Real Estate, agreed. “Windows large enough to display merchandise — that is the most critical thing for a retailer.”

Still, interest in these historic spaces seems to be strong. “A lot of landmarked buildings in the past were traditionally banks and post offices,” said Faith Hope Consolo, chair of the retail leasing and sales division of Prudential Douglas Elliman. “What’s happened over the years is that retailers realized that a lot of these buildings could work very well” for other types of retail like stores and restaurants.

The specialty grocer Trader Joe’s is a prime example. In a much buzzed-about move, it opened a 14,500-square-foot store on Court Street in Brooklyn in September, in the landmarked Independence Community Bank building.

Mandell said retailers are becoming more nimble at working with the landmarks commission to convert these spaces into merchandising emporiums while maintaining their character, “which wasn’t the case 10 years ago.”

Elisabeth de Bourbon, a spokesperson for the LPC, said a number of national retailers, such as Home Depot, Bank of America, the Gap, Starbucks and Old Navy, now operate stores that reflect the character and features of the buildings they’re in.

“We’ve seen a lot of creative proposals for businesses that take advantage of the historic features and character of a landmarked building,” de Bourbon said.

The interest comes as the LPC is increasing the number of buildings with historic-district status. According to de Bourbon, there are approximately 25,000 landmarked properties across the city, up from about 23,000 in 2003.

Still, some retailers work better than others in landmarked buildings. Big-box merchants and retailers with rigid floor plans have serious hurdles to overcome. While not in a landmarked building, the Home Depot on 23rd Street had to reconfigure its normally sprawling floor plan into a vertical space to deal with a tight New York City layout.

Downtown boom

In the Financial District, where New York City has its historic roots, a mini retail boom in older buildings has been in full swing, though that will likely change with the fallout in the financial services industry (see Retailers cautious about Lower Manhattan).

Tiffany, Thomas Pink and BMW are just some of the merchants that have set up shop in the area, in older (if not all officially landmarked) settings. Last fall, Tiffany opened a store at 37 Wall Street in a landmarked Beaux-Arts-style building that was constructed in 1907.

Now, the retail development of Depression-era skyscraper 20 Exchange Place is poised to round out the merchandising revival that’s been under way in the area.

“The woodwork is still impeccable; it’s ornate bronze and nickel stonework,” said Jack Berman, vice president of Metro Loft Management, the developer behind the conversion of the landmarked Art Deco building. “It’s certainly a trophy building, and one of our best properties.”

The tower, which was finished in 1931, used to be the City Bank Farmers Trust Building, which later became Citigroup.

In addition to housing 850 apartments, it will lease 130,000 square feet of retail space on the ground floor and lower levels for about $100 per square foot.

Berman has set his retail expectations high. He is hoping to snag a high-end spa, upscale restaurant or luxury retailer like Gucci for the space by the end of the year. The lower level could be leased to a gourmet food market or a gym, said Darrell Rubens, managing director of Winick Realty, which is brokering the space.

Rents in such a landmark building are comparable to non-landmarked buildings, Berman said. “It’s more location that determines the price,” Berman said.

Meanwhile, around the corner, the New York Post reported that Apple had been looking at 23 Wall Street, a landmark building that is the former headquarters of JPMorgan, as the site for its next Manhattan store. But the company has since decided against occupying the Downtown space following the upheaval on Wall Street, according to Crain’s.

Apple already operates stores in two landmarked buildings in Soho and Midtown.

Preserving and converting

Consolo is working on a number of landmarked retail spaces throughout the city. These include several historic mansions on Madison Avenue, she said.

The mansions in the 60s, 70s and 80s will likely be leased to fashion retailers from France, Italy and the U.K., according to Consolo. Asking rent will be in the $2 to $3 million range annually, she said.

But it’s her listing at One Hanson Place in Brooklyn that has garnered all the attention of late.

The 33,000-square-foot retail space has remained empty for more than two years.

In April, the building swapped its Newmark Knight Frank broker for Consolo at Prudential. She said asking rent for the retail space is $2.5 million a year; according to published reports, that figure was around $3 million under Newmark. Consolo said she is eyeing Microsoft, Sony, Bose, a major furniture retailer like ABC Home — even a museum store. But as of press time, no deals had yet been inked.

Whether the landmark designation has specifically kept retailers away is unclear, but it definitely presents a unique challenge that a store wouldn’t face in a more run-of-the-mill building.

Jeffrey Roseman, executive vice president of Newmark Knight Frank, said the firm was negotiating with Borders to take over One Hanson Place, but that the bookstore’s business was “in terrible shape.” Although the fact that the building is landmarked didn’t make it easier to lease, “that’s not why the deal didn’t happen,” he said.

Indeed, he said, the LPC “is becoming a little more flexible.” For example, with brass or marble tables often found in landmarked banks, the commission will now allow retailers to remove them or preserve them off the premises, he said.

He said one reason why One Hanson Place didn’t lease is that “up until recently, Brooklyn has not been on every retailer’s radar screen.”

Roseman, who praised Consolo, said only a retailer with “demagogue” status, such as Crate & Barrel, Apple or Whole Foods, would be able to overcome the challenges at One Hanson Place, such as no ground-level windows and exterior signage limitations.

Window issues (they are way above ground level) and signage issues are, in fact, at the top of the list of challenges. To satisfy the LPC’s requirements, retailers must come up with creative ways to create storefront signage that does not detract from the architectural features of the building. Preservation agencies typically frown upon neon signage and backlit channel letters, Mandell noted.

In the case of One Hanson Place, Prudential has submitted to the LPC for approval two blade signs displaying the name of the store that would run vertically on both sides of the building.

“You can see [the signs] way across the street, and it’s tastefully done,” Consolo said.

Costly changes

While landmarked buildings’ exteriors are most often subject to preservation guidelines, sometimes, the interiors require careful handling, too.

For instance, the ultra-luxury Caudalie spa from Bordeaux, France, will open up on the second floor of
the landmarked Plaza Hotel, a space with an asking
rent of about $100 a square foot. When the demolition team was renovating the space, it uncovered an interior wall with rich architectural details that the LPC wanted to preserve.

The spa is just one facet of the Plaza’s retail collection, a major renovation and retail revival that will be unveiled this year. The mélange of shops also includes Austrian bakery Imperial & Royal Court Confectionery, Demel’s Sons, and eyewear retailer Morgenthal Frederics.

In addition to interior detailing, in landmarked buildings, entrances and exits can be an issue. Often, the entrances in landmarked buildings are not at street level, so lifts have to be created. The buildings’ changes must factor in the Americans with Disabilities Act.

Also, the buildings must be updated to meet fire-safety regulations. While modern retail buildings are constructed with two exits to meet fire safety requirements, many older structures are not. “That means digging into a façade to create exits, which causes headaches and is an expense,” Lansco’s Emery said.

If those headaches seem daunting to American chains, Consolo said international retailers don’t seem overwhelmed by the rules and regulations of landmarks. Mandell echoed that point: “European companies tend to look at their stores and storefronts more as artwork, and architecture is more important to them.”

In a Webcast interview last month, The Real Deal’s Jen Benepe spoke to two construction industry leaders to find out how the economic slowdown will affect construction and construction jobs in New York City in the next two years. An October report from the New York Building Congress predicts that 28,000 jobs in the construction industry will be lost by 2010. The number of projects is also likely to shrink.

Log on to www.therealdeal.com to see the full interviews and access the archives. Every week, The Real Deal posts a new edition of the Webcast, which features exclusive interviews with industry insiders.

First, The Real Deal spoke to Richard Anderson, president of the New York Building Congress.

TRD: So your report that just came out said that things are going to be fairly good in construction through 2009 but maybe fall off in 2010. Why the rosy picture for 2009?

Richard Anderson: It turns out that 2008 will be the best year for the New York City construction industry. That kind of activity cannot stop abruptly, even when the economy turns, so 2009, barring a real [further] slowdown of the credit markets, will be fairly OK. It’ll be less than 2008, but 2010 is when things start to drop off fairly significantly.

TRD: Now, your projections say that we will probably lose about 28,000 construction jobs by 2010. Will we see some of those jobs lost a little bit sooner, and when will that start?

RA: That will probably start next year. The peak is 130,000 jobs this year. If things level off softly, as we hope they would, then we’d only lose a few thousand jobs. But 2010′s the question mark. And it could be even worse than our forecast if the public infrastructure programs do not get financing going forward — the city’s capital budget and the Metropolitan Transportation Authority in particular.

TRD: Also in your report, you say that we could have the smallest workforce in construction since 1997. Which sector would you say is most affected going forward?

RA: The residential sector will be hurt the most. And this is because housing units will fall [by] half in just a two-year period. That’s a substantial drop. The commercial and public sectors are not anywhere near as strongly affected by this downturn.

TRD: In your report, would you say that this is one of the most drastic falloffs in dollar amounts for the industry?

RA: It’s a substantial decrease in 2010. But compared with previous economic downturns in the late ’80s, early ’90s, and certainly compared with the early 1970s, this is not that drastic.

Next, The Real Deal spoke to Michele Medaglia, president of ACC Construction.

TRD: No doubt you’ve read the New York Building Congress report. They’ve projected something on the order of 30,000 jobs to be lost by 2010. Do you agree with that report?

Michele Medaglia: Yes, I do. I do agree with that report.

TRD: Why?

MM: Because there’s definite fear, right now, that exists in the market, and people are waiting to see what happens. You know, right now it’s like a rollercoaster, and everyone’s kind of frozen and saying, OK, I’m not making a move until this kind of settles down and we all see where we are.

TRD: OK, now, what about your firm? Have you decided that you are going to not hire as many people in 2009?

MM: Right now, we are in a very good position where I have a significant amount of work to carry me through to at least the first quarter of 2009. So right now, we’re good with the staff that we have, and we actually are hiring right now. It’s not, you know, a ton of people, but it’s definitely a few people, especially in the field, in our operations department, because we do have the work booked.

TRD: Given that you’re so good in high-end retail, what’s going to happen with that sector to your company?

MM: Well, the number of projects in high-end retail are obviously down, and they’re going to be. But [going forward] there are other industries that are going to be busy. For instance, colleges, universities, health care — and that’s what we’ve been marketing since the beginning of this year.

TRD: Michele, we already know this is a very competitive industry. What’s going to happen now?

MM: It’s going to get even more competitive. It’s going to get really, really competitive. If the number of projects — and we see this happening — decreases, all of us who are in this industry, and there are many of us, are going to fight like hell for every single project.

Massey and partner Robert Knakal founded the commercial real
estate firm 20 years ago this month. The brokerage, which has 67 agents
in three offices and is slated to open a fourth office in New Jersey,
has created a niche for itself, focusing on mid-size building sales and
operating on a territory system. Comments

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Any new Whole Foods Markets in New York City are going to be a Whole Lot Smaller.

The company that made a big mark on Manhattan four years ago with a sprawling 60,000-square-foot Columbus Circle store has dramatically slashed its ideal store size for new locations to 25,000 to 35,000 square feet, according to Northwest Atlantic Partners’ executive vice president Chase Welles, the grocer’s New York-based broker.

Note: Correction appended.

The $8 billion Austin, Texas-based supermarket chain, which has been struggling, is also negotiating with developers to find a partner that would handle construction on its site along Brooklyn’s Gowanus Canal at Third Avenue and 3rd Street. After shelling out $4.9 million for the 2.1-acre parcel in 2005, Whole Foods has been bedeviled by toxins at the site as well as public spats over a landmarked structure there.

Welles said the environmental cleanup is now complete, but the wet ground there makes construction overly complex. The grocer’s goal for the long-delayed project is now to pay market rent on a retail store, most likely as part of a larger retail development.

“We are looking for a development partner … someone who will build on the site so we can end up with a Whole Foods there and not end up building it ourselves,” Welles said.

“It’s not in Whole Foods’ core competency to be a real estate developer,” Welles added, noting that the company was in talks with several well-known developers.

Whole Foods — which has seen both its earnings and its stock price take a hit as the economy has faltered — is one of several national and local natural and high-end grocers trying to forge ahead in New York as the economy collapses. Both Trader Joe’s and local player Brooklyn Khim’s Millennium Market recently opened stores or committed to local deals — though that was before the economy dramatically worsened.

Like Whole Foods, some grocers are reacting by slowing new store openings and scaling down prototypes. Others, including Khim’s, are focusing on a back-to-basics approach of clean stores with fresh products.

All are counting on continued demand among New Yorkers for healthy foods and increasing numbers of consumers shunning restaurants to save money.

“We think people are going to cook more, and it’s good for the market,” said Khim’s Millennium owner Charlie Khim, who with his brother runs half a dozen natural foods stores in and around Williamsburg and Bushwick, and just inked another deal.

However, with food prices skyrocketing, and 165,000 people projected to join the ranks of New York’s unemployed in the next two years, strapped consumers may end up skimping on organic foods, which can cost twice as much as non-organic products.

Whole Foods already felt the pinch of consumer cutbacks earlier this year as the economy began to weaken. It has been trying to shed its “Whole Paycheck” reputation with more bargains and consumer education efforts, but so far, investors and consumers are skeptical. The firm’s shares are down 70 percent since last year, while same-store sales have dwindled.

“I’ve been trying to keep up with the organic foods, but it’s difficult and pricey, and my checkbook can’t do it too often,” complained one blogger recently on a parents’ forum, summing up the barriers these retailers face.

Despite the risks, building owners are still interested in renting to natural and organic markets, but are seeking established operators with good credit.

Khim’s Millennium quickly completed a deal this fall at 460 Driggs Avenue in Williamsburg when the economy was already in turmoil, and plans to open next month. According to Winick Realty Group director Amanda Scoblick, who represented both sides in the transaction, the landlord was receptive because he shopped at Khim’s other locations. Khim signed a 15-year lease for 5,000 square feet.

“This operator has a lot of experience and a long track record of nice build-outs,” said Scoblick. “They know the market, and the landlord is comfortable they are not taking a gamble.”

Both Whole Foods and Trader Joe’s have logged success recently in New York. The privately held Trader Joe’s, which reportedly posted $6.5 billion in revenue last year, has pulled in crowds of shoppers to its Brooklyn location since it opened several weeks ago at Court Street and Atlantic Avenue. And Whole Foods’ Tribeca store, which debuted in July, logged the best opening day of any of the company’s stores in New York City.

Those banner openings, however, represent deals planned long before the economic slowdown. This year, Whole Foods reacted to slowing sales and profits by scaling back its expansion.

It is now scheduled to open just 15 new locations nationally in 2009, down from the 25 to 30 stores it had been planning to open. The company could scale back further due to the economic meltdown.

Whole Foods has several local leases signed or in the works, including one at 808 Columbus Avenue; Welles insisted Whole Foods wants to proceed with these deals.

“[They] haven’t backed out of any,” he said.

In an August conference call with investors, Whole Foods CEO John Mackey acknowledged his company had a game plan for greater economic weakness, but declined to elaborate. In a fourth-quarter conference call slated for Nov. 5, he will likely be grilled on these details.

In the meantime, Whole Foods is grappling with the issue at the center of natural/organic markets’ ability to survive in an extended economic downturn: convincing consumers that organic and budget eating can go together.

“Know just how to get the most bang for your buck
without sacrificing the benefits of natural and organic foods” by turning to the experts at Whole Foods, the company writes in a relentlessly cheerful new flyer emphasizing bargains.

Go to chart: Blackstone’s biggest buyers

Nearly two years after one of the largest leveraged buyouts in history, some of the real estate players who purchased buildings from the Blackstone Group have seen their fortunes dwindle, while others have received a strong return on their investments.

The Blackstone Group’s $39 billion purchase of the Equity Office Properties portfolio in February 2007 included nearly 543 buildings nationwide in a slew of major U.S. cities.

When Blackstone immediately turned around and began selling off its new portfolio in pieces at the peak of the commercial market, it left several winners and losers in its wake.

Its most high-profile victim was, of course, real estate titan Harry Macklowe, who famously bought seven Midtown towers from Blackstone in a highly leveraged deal before the bank seized them earlier this year. But Macklowe wasn’t the only one who got in on the action. And questions remain: How did the Blackstone Group do and what happened to the others who purchased from the private equity firm?

Since Blackstone made its big Equity Office purchase in 2007, it has sold just under half of the 543 buildings it bought, or 261 buildings. Those buildings went to 15 investors, including Beacon Capital, which bought 42 buildings; Maguire Properties, which bought 41; and Morgan Stanley, which snagged 10.

In total, Blackstone sales garnered $25 to $30 billion, say sources familiar with the company. All of those sales took place before last August, when the commercial real estate market began to tank.

“There’s no question that some of the spinoff buyers who used short-term leverage are running into some difficulties,” said Dan Fasulo, managing director of Real Capital Analytics. “Any major deal done at the top of the market in 2007 with short-term leverage is in trouble for the most part. Some folks got stuck without a chair when the music stopped.”

Given the timing of Blackstone’s sales and the fact that it intended from the beginning to hold some of the properties it bought from EOP, the firm made out swimmingly. The powerhouse private equity firm, which made hay in 2007 when it went public at the top of the market, is headed by colorful chief executive Stephen Schwartzman — who famously threw himself a multi-million-dollar birthday bash in 2007 and profited handsomely from the EOP acquisition.

“Blackstone did pretty well,” said Barry Vinocur, editor of REIT Wrap, a daily e-mail newsletter. “Some of the people it sold to flipped the properties themselves. How you turned out depends on where you were in the food chain.”

And, it goes without saying that real estate titan Sam Zell, who founded EOP, an REIT, and sold its massive portfolio to Blackstone for the inflated price of $39 billion, made out well. In addition to his real estate fortune, Zell, a billionaire who reportedly nicknamed himself the ‘grave dancer’ because of his knack for snapping up distressed assets, owns the Tribune Company. He is trying to unload the Chicago Cubs baseball team, one of the most profitable franchises in sports.

Beacon Capital of Boston, which bought 42 of Blackstone’s properties in the Seattle and Washington, D.C. area for $6.4 billion, the largest buyer of Blackstone properties in terms of number of buildings, was also apparently a winner.

It sold 14 of the 42 properties — all in the Seattle area — to Archon Group for $1.2 billion.

“Beacon culled down its holdings to what it wanted,” a source familiar with the company’s activities told The Real Deal. “It’s pretty conservative and financed the deal with long-term debt.”

Beacon budgeted to lease 1.9 million square feet of its property and through September had leased 1.7 million square feet, said the source, who asked not to be identified. The rents it has garnered exceeded its projections, and it was able to invest less capital than it originally expected.

“To date the performance has been very strong,” the source said. “Obviously you have to be concerned about what will happen to the economy … but little of the portfolio is coming up for refinancing over the next 12 to 18 months.”

Maguire Properties, which bought 41 buildings in Los Angeles and Orange County from Blackstone for nearly $2.9 billion in April 2007, on the contrary has suffered a bumpy ride. The purchase made Maguire the second biggest buyer of Blackstone properties.

Many of its southern California properties housed real estate-related businesses that ran into trouble after the property bubble burst. Maguire has sold eight of its Orange County properties for $650 million — five to Bixby Land/Mercantile RE Advisors and three to Muller/Rockwood.

Maguire loaded itself up with so much debt that it became the most highly leveraged of the 15 major office REITs. As of June 30, Maguire was scheduled to pay back 11 percent of its debt by the end of next year.

The company announced in September and October that it pushed back payment deadlines to 2010 for two construction loans combining for $49 million, that it secured a $100 million borrowing backed by a hotel, office and retail complex in Pasadena, and lengthened the maturity of an Orange County office construction loan until Sept. 28, 2009.

At Maguire, the issue was former chief executive Robert Maguire, Vinocur said. “He was a real estate deal guy who just couldn’t help himself. They were almost like junkies. He obviously hadn’t read the news that if a crash struck in the U.S., mortgage guys would get hit first.”

Thomas Properties, which took 14 of Blackstone’s buildings in Austin for $1.2 billion, also may face some problems, as it partnered with Lehman Brothers, which has since gone under, said Fasulo, from Real Capital Analytics. Thomas officials declined to comment.

Other large buyers of Blackstone’s EOP properties include Tishman Speyer, which bought seven buildings in Chicago for $1.7 billion, and Shorenstein Properties, which acquired 50 buildings in Portland for $1.1 billion. Officials from those companies declined to comment.

More recently, San Francisco-based Shorenstein went on another buying spree, acquiring two of the Midtown buildings that Macklowe bought but couldn’t hold on to. Shorenstein reportedly spent a combined $930 million for Park Avenue Tower at 65 East 55th Street and 850 Third Avenue. According to Robert Von Ancken, executive managing director and valuation consultant at Grubb & Ellis, Macklowe paid about $990 million for them in 2007.

While most of the EOP properties are of high quality, the fact that they were bought at the peak of the commercial market could clearly hurt their current owners.

“Nobody who bought real estate in 2007 around the time of the EOP deal and is honest would say it’s not worth less,” Vinocur said. “As a rule of thumb, for anyone who bought and is still holding, I would guess their property is worth about 40 percent less.” In New York, that decline might be smaller. Commercial real estate experts say that property is down about 20 percent.

But Sam Chandan, chief economist for research firm Reis, sees some bright spots for the commercial market that includes the EOP properties. “We don’t observe tremendous stress caused by rising delinquencies and defaults,” he said. “The downward pressure on asset prices relates to change in expectations. It’s not of the magnitude that would come from spikes in default rates like in the residential market.”

The new owners of Blackstone’s EOP buildings pray it stays that way.

Click here to see the desk of Stephen Siegel

Go to chart: Wall Street fallout shakes real estate investment trusts in New York City and beyond.

Compiled by Linden Lim

Manhattan

Chelsea

$1.37 million

450 West 17th Street

2-bedroom, 2-bath, 1,100 sf condo in a new elevator building; 24-hour doorman, concierge; building has fitness center, roof deck, storage, children’s playroom, pet spa, parking; common charges $1,009; taxes $33; asking price $1.37 million; one day on the market. (Broker: Holly Sose, City Connections Realty)

Chelsea

$823,000

77 Seventh Avenue

1-bedroom, 1-bath, 975 sf co-op in a new building (Vermeer); doorman; unit has renovated kitchen and bathroom; building has laundry facilities, parking garage, bicycle storage, roof deck; maintenance $986; last listing price $839,000; 10 weeks on the market. (Broker: Ruth Sobie, Halstead Property)

Chelsea

$419,000

100 West 15th Street

Studio, 1-bath, 400 sf loft co-op in an elevator building; unit has marble bathroom, storage; building has laundry facilities, bike room; maintenance $604; 50 percent tax-deductible; last listing price $419,000; six weeks on the market. (Brokers: Ari Harkov and Laura Strandhoy, Halstead Property)

East Village

$2.622 million

643 East 11th Street

2-bedroom, 2-bath, 2,200 sf condo in a new elevator building; unit has private keyed elevator entrance, two balconies, terrace, washer and dryer; common charges $2,289; taxes $190; asking price $2.722 million; 10 weeks on the market. (Broker: Jason Lanyard, City Connections Realty)

Gramercy

$2.4 million

39 East 20th Street

3-bedroom, 2.5-bath, 1,963 sf condo in a prewar elevator building; 24-hour doorman; building has valet and maid service available, rooftop sundeck, laundry rooms, intercoms and alarms in every apartment; common charges $840; taxes $892; last listing price $2.495 million; 14 weeks on the market. (Broker: Anna Shagalov, Halstead Property)

Greenwich Village

$2.5 million

45 Fifth Avenue

2-bedroom, 1-bath, 1,660 sf duplex co-op in a prewar elevator building; unit has 1,000 sf terrace, renovated kitchen and bath, hardwood floors; maintenance $3,020; last listing price $2.5 million; 19 weeks on the market. (Brokers: Gina and Michael Serman, Corcoran; Joe Testone, Bellmarc Realty)

Greenwich Village

$750,000

23 East 10th Street

1-bedroom, 1-bath, 775 sf co-op in an elevator building (the Albert); doorman; building has roof deck; maintenance $1,125; asking price $769,000; two weeks on the market. (Brokers: Stephanie Davis, Matthew Drennan, Mark David & Company)

Greenwich Village

$630,000

149 West 12th Street

1-bedroom, 1-bath, 600 sf co-op in a prewar elevator building; unit has renovated kitchen and bath; building has laundry facilities, storage, bike room; maintenance $663; asking price $630,000; two weeks on the market. (Brokers: Sam Sullivan, Prudential Douglas Elliman; Joe Testone, Bellmarc Realty)

Lower Manhattan

$1.335 million

70 Little West Street

2-bedroom, 2-bath, 1,356 sf condo in a new elevator building (the Visionaire); 24-hour doorman; unit has sustainable harvested wood flooring, bamboo cabinets, granite counters; building has fitness center, rooftop garden, lounge; common charges $516; taxes $1,257; last listing price $1.335 million; 19 weeks on the market. (Broker: Joanna Benigno, Halstead Property)

Midtown East

$1.148 million

212 East 47th Street

2-bedroom, 2-bath, 1,006 sf condo in a new elevator building; 24-hour doorman, concierge; unit has a balcony; building has fitness center, rooftop garden, media lounge, parking; common charges $848; taxes $1,000; asking price $1.19 million; two weeks on the market. (Broker: Shai Shustik, Manhattan Residential)

Murray Hill

$490,000

30 East 37th Street

Studio, 1-bath, 480 sf condo in an elevator building; concierge; building has a laundry room; common charges $454; taxes $190; last listing price $500,000; nine weeks on the market. (Broker: Joshua Judge, Coldwell Banker Previews International)

Tribeca

$3.1 million

25 North Moore Street

1-bedroom, 2-bath, 2,800 sf condo in a prewar building (the Atalanta); doorman; unit has a 70-foot-long living area, granite counters, walk-in closet, sunken whirlpool tub, hardwood floors, central heating, washer and dryer; building has a roof deck, storage; common charges $1,353; taxes $1,655; asking price $3.3 million; 51 weeks on the market. (Broker: Sharon McGrail, Bond New York)

Tribeca

$2.8 million

69 Laight Street

3-bedroom, 2.5-bath, 2,600 sf duplex condo in a prewar elevator building; doorman, concierge; unit has skylights, windowed kitchen, fireplace, washer and dryer; building has live-in superintendent, fitness center, storage, roof deck, bicycle room, children’s playroom; common charges $2,106; taxes $1,230; asking price $2.995 million; 35 weeks on the market. (Brokers: Gavin Fries, Manhattan Residential; Jim Brawders, the Corcoran Group)

Upper East Side

$2.6 million

200 East 61st Street

2-bedroom, 2-bath, 1,450 sf condo in a new elevator building (the Savoy); doorman, concierge; unit has terrace, park views, walk-in closet; building has roof deck, health club, parking garage; maintenance $1,902; last listing price $2.95 million; 13 weeks on the market. (Broker: Eileen Grossman, Halstead Property)

Upper East Side

$642,500

345 East 73rd Street

1-bedroom, 1-bath, 700 sf co-op in a new building; doorman; unit has hardwood floors, balcony, southern exposure; building has courtyard, garage, bike room, private storage, roof deck; maintenance $1,434; 48 percent tax-deductible; asking price $665,000; 24 days on the market. (Brokers: Kristina Ojdanic and Jessica McCann, the Corcoran Group; Karen Skurka and Dylan Hoffman, Prudential Douglas Elliman)

Upper East Side

$558,000

520 East 76th Street

1-bedroom, 1-bath, 750 sf co-op in a prewar building (John Jay House); building has laundry room, roof deck; maintenance $1,418; 51 percent tax-deductible; asking price $575,000; eight weeks on the market. (Broker: Steve Weber, City Connections Realty)

Upper West Side

$1.35 million

50 Riverside Drive

2-bedroom, 2-bath, 1,300 sf co-op in a prewar elevator building; doorman, concierge; unit has hardwood floors, windowed eat-in kitchen, washer and dryer, northern and eastern exposure; building has storage, children’s playroom; maintenance $1,676; 42 percent tax-deductible; last listing price $1.385 million; 23 days on the market. (Brokers: Marie Bingham, Brown Harris Stevens; Kristina Ojdanic, the Corcoran Group)

Upper West Side

$749,000

685 West End Avenue

1-bedroom, 1-bath, 825 sf co-op in a prewar building; unit has hardwood floors, washer and dryer; building has a roof deck; maintenance $971; last listing price $749,000; 3.5 weeks on the market. (Brokers: Laura Wagner, JC DeNiro and Associates; Alexandra Bellak, Prudential Douglas Elliman)

Upper West Side

$520,000

176 West 87th Street

1-bedroom, 1-bath, 600 sf co-op in a prewar building; unit has southern and eastern exposure, dining bar, windowed bath, hardwood floors; building has roof deck, laundry, bike room, storage, children’s playroom; maintenance $647; 40 percent tax-deductible; last listing price $525,000; 12 weeks on the market. (Broker: Brian Lewis, Halstead Property)

Uptown

$310,000

330 West 145th Street

1-bedroom, 1-bath, 605 sf condo in a new elevator building (the Hamilton); doorman; unit has eastern exposure; building has laundry room, roof terrace, fitness center, parking garage; maintenance $722; 40 percent tax-deductible; last listing price $310,000; eight weeks on the market. (Brokers: Neil Tilbury, Tony Von Meyers, Halstead Property)

Uptown

$160,000

478 West 156th Street

Studio, 1-bath, 450 sf co-op in a prewar elevator building; unit has western exposure; maintenance $460; 33 percent tax deductible; asking price $160,000; 16 weeks on the market. (Broker: Leif Johansson, Barak Realty)

West Village

$2.2 million

155 Perry Street

1-bedroom, 1-bath, 1,268 sf condo in a prewar building; unit has hardwood floors, fireplace, southern exposure; building has roof deck, laundry facilities, video security; maintenance $344; last listing price $2.2 million; one week on the market. (Brokers: Jodi Cowen, JC Deniro & Associates; Debra Kameros, Prudential Douglas Elliman)

Brooklyn

Brooklyn Heights

$615,000

60 Remsen Street

2-bedroom, 1-bath, 800 sf co-op in an elevator building; doorman; building has a roof deck; maintenance $1,114; 34 percent tax-deductible; last listing price $650,000; 15 weeks on the market. (Broker: Lee Lewis, City Connections Realty)

East Williamsburg

$445,000

225 Maujer Street

1-bedroom, 1-bath, 1,123 sf duplex condo in a new building; unit has central air, renovated kitchen and bath, hardwood floors and washer and dryer; building has video intercom; common charges $289; taxes $21 with 15-year tax abatement; last listing price $499,000; 24 weeks on the market. (Broker: Jessica Pfeiffer, the Developers Group)

Prospect Heights

$1.82 million

401 Park Place

3-bedroom, 2-bath, 2,407 sf, 3-story townhouse; unit has two fireplaces, stained-glass window details, study, garden with patio; taxes $3,372; asking price $1.695 million; 30 days on the market. (Brokers: Jessica Buchman, Michael Rohrer, the Corcoran Group)

Williamsburg

$1.237 million

30 Bayard Street

3-bedroom, 2-bath, 1,410 sf condo in a new elevator building (the Aurora); 24-hour doorman; unit has central air, hardwood floors, terrace, washer and dryer; building has roof deck, health club, parking, garden; common charges $1,186; taxes $185 with 15-year tax abatement; last listing price $1.237 million; 24 weeks on the market. (Broker: Alan Shaker, the Developers Group)

Williamsburg

$659,000

134-136 Powers Street

2-bedroom, 1-bath, 1,175 sf duplex condo in a new elevator building (Aria); unit has central air, renovated kitchen and bath, hardwood floors, 156 sf terrace, washer and dryer; building has roof deck; common charges $488; taxes $115 with 20-year tax abatement; last listing price $659,000; six weeks on the market. (Broker: Felicia Putter, the Developers Group)

Williamsburg

$565,000

170 North 11th Street

1-bedroom, 1-bath, 700 sf condo in a new elevator building (Lucent); unit has central air, renovated bath, hardwood floors, washer and dryer hookups, balcony; building has indoor parking; common charges $145; taxes $39 and 15-year tax abatement; last listing price $565,000; 24 weeks on the market. (Broker: Nicole DeVincentis, the Developers Group)

During the week, architect Joseph Pell Lombardi helms a 20-person firm in Manhattan that has specialized in historic conversion projects for almost 40 years. On weekends, he does the same thing with his own homes.

Lombardi’s passion for restoring noteworthy historic structures dominates his free time: In the 1970s, he transformed the wood-paneled offices of Sinclair Oil Corporation titan Harry Sinclair into a sumptuous residence at 33 Liberty Street in Downtown Manhattan, his residence during the week.

And every weekend for the last 30 years, he has presided over a painstaking preservation project in Irvington, N.Y., which saved the stunning Octagon House, a 148-year-old residence topped with an octagonal observatory, from almost certain demolition. Though almost finished with the first phase of the restoration, save for the basement and a portion of the elaborate veranda, the home requires constant maintenance.

“It’s like a suspension bridge,” said Lombardi. “Once you reach the end, you have to go back to the beginning and start again.”

Taking his passion to obsession status, he’s also restoring a Vermont farmhouse, a chateau in France and a Hungarian castle.

The complicated work on the Octagon House occupies most of his weekends, though he regularly visits his three other homes on roughly six-week cycles.

When he bought the house from the National Trust for Historic Preservation for $75,000 in 1978, the slate-covered dome had begun to collapse, threatening the home’s structural integrity.

Lombardi fixed the roof and began restoring the house to the way it looked in the 1870s, down to the garden, artwork, period furniture and quirky shades of paint inside and out. Lombardi pursued one particular antique bedroom set for years because it depicts Hudson River scenes, and the bedposts are octagonal.

An icon in Irvington, a town filled with grand architecture built by 19th-century captains of industry, the Octagon House is the only known residence in the world built in the domed colonnaded shape of a Roman temple, Lombardi said.

Banker Paul Armour built the first two floors in 1860, establishing the eight-sided footprint. Tea merchant Joseph Stiner added the dome and the wraparound veranda in 1872. The house resembles a Technicolor version of the U.S. Capitol dome or the top of a Roman cathedral, and seems incomplete, as if the rest of the building were buried below the ground. Visitors have referred to the home as a “baroque spaceship” and “an arrested carousel,” said Lombardi.

Inside, the house appears pristine. Wood paneling covers the circular room inside the dome. A spiral staircase leads to the octagonal observatory, which provides 360-degree views of the Hudson River Valley.

Like previous residents, Lombardi reports several ghost sightings. He once hosted an event for a nonprofit organization and insists that he saw a woman in a flowing bright white dress wander through the house, then disappear.

“It’s not a ghost intent on malice, so I’m OK with it,” he said.

Preservation for ‘oddballs’

Lombardi, 68, grew up in Manhattan, then spent his teen years in Irvington, where he graduated high school and knew about the Octagon House, though he never aspired to own it. He launched his Manhattan firm in 1969, when most architects were attempting to make their mark with bold modernist statements.

“Everyone else wanted to do skyscrapers, and I was just about the only firm that specialized in the historic preservation field,” he said. “I was considered to be an oddball, but now you have historic preservation majors at universities. There was almost none of that back then.”

He began refurbishing townhouses in Murray Hill and Kips Bay and invested in local properties. During the depressed early 1970s, he bought 239 East 31st Street for $30,000 with $5,000 down, and bought five more townhouses on East 32nd Street. A pattern emerged: After he began renovating his assets, buyers came along who then hired him to continue renovations.

“You had these gorgeous one-family brownstones that had been turned into rooming houses, but the additions were easily reversible, and it didn’t take too much work to restore their grandeur,” he said.

In the 1970s, when the city’s zoning changed to accommodate lofts in manufacturing zones, he jumped at the chance to buy and sell what were then referred to as raw-space conversions, including his first such project at 18th Street and Broadway. Lombardi provided heat, electricity and plumbing, but tenants bought “as is,” often without walls and other finishes.

“The term ‘loft’ as we know it now didn’t exist, and the banks wanted no part of
these arrangements,” he said. But the market snowballed. He found work in Noho, Soho and the Flatiron district and began arguing zoning variance cases in front of the Board of Standards and Appeals, a task usually done by lawyers, although the board consisted of architects and engineers.

In the late 1970s, a friend told him that 33 Liberty Street, a 1919 office tower that had served as headquarters of Sinclair Oil, was on the block.

At the time, almost no one lived in Downtown Manhattan, yet Lombardi sold out half the building. When he went to the flagship Chase Manhattan Bank branch across the street seeking a loan to finance the rest of the building, the loan officer hustled him out. Before leaving, Lombardi asked the banker to consider the words of Chase chairman David Rockefeller, who had recently been quoted saying that Downtown needed residents to become a viable community.

“I implored him to bring the deal to Rockefeller, but he scoffed. A few weeks later, I got a call from the same loan officer seeking a meeting, and he ushered me in as if the first incident had never happened.” Lombardi received a $1 million mortgage with a quarter down in cash.

He moved into the building’s 29th floor after converting Harry Sinclair’s large office into an apartment.

Not counting his five homes, Lombardi has completed around 160 loft conversions, about a third of them as principal, and is working on the former Dia museum building at 550 West 22nd Street. The upper floors will consist of residences, and galleries will occupy the rest. He’s done around 15 buildings on Greene Street and is now working on numbers 70, 96, 98 and 102, along with four Upper East Side mansions.

But the economic climate, which he said reminds him of lean times like the early 1970s, the late 1980s and after Sept. 11, may slow him down.

“After Sept. 11, clients didn’t pay, and financing was tough to secure,” he said. “Now, I’m scared stiff that there will be fewer phone calls, and I’ll have to wonder where my next clients will come from.”

Despite all the deals Lombardi has undertaken, he’s “not sipping mint juleps on the porch” of the Octagon House, he said. “I have a hammock I’ve never ever been in. There are many times when I’ve had $5,000 that I spent restoring part of the house rather than go out for a night on the town.”

Advance notice has long meant advance revenue for developers of high-end condos, a market niche where success is measured partially by the number of preconstruction sales.

In September 2005, for example, The Real Deal reported that an entire floor at 15 Central Park West had gone into contract before construction began.

Developers used presales to increase buzz on projects, and presales were favored by some buyers who followed the logic that unit prices would increase once there was a tangible building in progress.

Today, however, it’s less about buzz than necessity. Some developers — particularly those who have projects in the pipeline outside Manhattan’s most desirable neighborhoods — are doing preconstruction presales because if they don’t, banks won’t finance their construction loans.

According to developers and analysts, banks are reluctant to invest in some projects unless a developer can demonstrate a certain amount of buyer interest through signed contracts and deposits.

“No developer is going to tee up a whole project unless they have a bank lined up for it,” said Greg Belew, a co-founding partner of the development firm Fifth Square Partners. “Banks are saying they won’t give you a construction loan until you have a certain amount of presales.”

Belew’s Fifth Square Partners is developing an 88-unit project at 76 North 4th Street in Williamsburg called the Steelworks Lofts. The firm now relies on presales, and has yet to start construction on the condo, which is a conversion of an old warehouse.

“In our particular case, there was a tightening up of lenders’ standards from when we started discussing financing with banks,” said Belew, noting that Fifth Square was able to secure an acquisition loan for the Steelworks property, but that its lender is requiring presales for a construction loan.

While Belew would not say how many presales the bank was requiring in order to dole out the construction loan, he noted it’s “not a large number” of the total number of units slated for the project. Listings for the building show units ranging from $515,000 to north of $1 million.

The presales for Steelworks involve prospective buyers putting down deposits of 10 percent for the units. The money is held in escrow and, as with other presale arrangements, is returned to the contract holders if the condo doesn’t get built.

Belew said that Fifth Square intends to start construction on Steelworks this month using the firm’s own funds in advance of an anticipated construction loan. The firm is marketing the building via an off-site sales center.

Another developer, Muss Development, is also using presales. The firm is building Sky View Parc, a mixed-use project in Flushing, Queens that will grow to 1,100 units under its current plan. The first phase will feature 448 units spread out over three towers, the first of which has already topped out. Muss is now preselling the second tower, which is not yet under construction. Prices range from the high $300,000s to more than $2 million.

Jason Muss, a principal at Muss Development, said presales on the second tower were driven more by demand than lender requirements. He said sales on the development’s first tower moved briskly, and it made sense to the firm to commence sales on the second tower.

Muss said that the sales center for Sky View has spurred presales. The center contains a 14-foot model of the development and five 60-inch flat-screen televisions that showcase various aspects of the project, including an elevated park, an outdoor swimming pool and 800,000 square feet of
retail.

“We’ve found the center really helps with presales because it gives people a real idea
of what this huge project is going to look like,” Muss said.

He said presales “make sense” for large-scale projects, and that the firm used them for its Oceana development on Brooklyn’s Brighton Beach, a 15-building, 865-unit gated community built in the late 1990s.

“With Oceana, people who bought presales got a better value than buyers who waited until we completed construction,” he said.

Luigi Rosabianca, founder of real estate law firm Rosabianca and Associates, echoed Muss’ assertion that presales were often attractive to buyers because “there’s
usually a reduction in price if you’re taking that leap of faith and just buying off an architect’s rendering.”

And when the city’s new residential development market was thriving, presales were also attractive to developers.

“First of all, a bird in the hand is worth two in the bush,” Rosabianca said. “But it also helped developers negotiate better loan rates, because they could prove to lenders that they didn’t have a volatile business plan.”

Rosabianca said his firm is seeing prospective buyers “shy away from presales,” primarily because of uncertainty about securing mortgages (see related story on page 58).

Be that as it may, developers may not have a choice.

According to Eric Anton, the executive managing director at real estate investment firm Eastern Consolidated, far more developers are finding themselves in situations where they can’t start construction until they secure a certain number of presales.

“In New York, you’re bleeding on the land value, because you’re not building,” he said. “But banks are scared, and they aren’t taking risks now. Many would actually prefer to finance rentals rather than speculate on condos.”

Anton mentioned one development on the drawing board where its lender is requiring a certain number of presales before construction can commence, but he is bound by a confidentiality agreement to not name it.

“What I’m seeing nowadays is that you can’t get banks to finance anything unless
you can prove a certain amount of buyer interest,” he said. “And you can forget about
anything that’s not in a prime location — 72nd Street and Fifth Avenue is one thing, but Williamsburg is a totally different story. Everyone’s running away from risk.”

Fernanda Forman, managing director of the property marketing group at Bond New York, also said that the location of a new development likely has significant bearing on whether or not — or to what extent — lenders are requiring a certain number of preconstruction presales.

Forman knows of one Queens condo project where the lender is requiring its developer to sell half the building before releasing a second round of construction financing.

“I would expect that [preconstruction presales] would be more likely to be required if a project is in a fringe neighborhood, or a developer doesn’t have a solid reputation,” she said.

Wall Street’s recent wild volatility has caused the New York City
real estate market to freeze in its tracks, with sales volume
screeching to a halt and deals falling apart as potential buyers have
watched their net worth evaporate. [more]

Go to chart

The turmoil on Wall Street bears an eerie resemblance to 1987′s October stock market crash: a period of unprecedented prosperity and expansion suddenly halted by plummeting stock prices, complete with newspaper photos of panicked Wall Street traders, trouble with Iran and changes to the 421-a tax abatement program.

Despite assurances from the real estate industry that New York’s housing market will be able to avoid the kind of slump that marked the city’s serious recession in the late 1980s and early 1990s, the question remains: Could it happen again?

This time around, nobody knows how long or severe the all-but-inevitable recession will be. Right now, most market indicators show that the city housing market should fare better than it did during the dark days of the early 1990s.

Still, the status that the city has achieved as something of a real estate utopia — with safe streets, manicured parks and rapidly appreciating home values — shouldn’t be taken for granted, experts warn.

They say that crime and homelessness are already on the rise (homicides are up 8.3 percent over the same period last year, and city homeless shelters are full) and will likely worsen as the city budget is depleted. Meanwhile, the aggressive expansion of development in outlying neighborhoods will probably come to a halt.

That means less building of new luxury housing in previously low-income areas of the city, such as Harlem, Bushwick and Long Island City. “You’re not bringing new development into those areas,” said Jonathan Miller, the president of the real estate appraisal firm Miller Samuel. “What you’re likely to see is less movement in that direction — it will hold where it is.”

How New York City weathers the economic meltdown may depend more on the determination of Gothamites to protect the neighborhoods they’ve built up in recent years than on anything else.

“New York’s traveled so far — it’s not going back,” said Richard Rosenfeld, a professor of criminology at John Jay College of Criminal Justice. “The city has gained back its neighborhoods. New Yorkers are going to fight before they give that up.”

‘Conversion mania’

On Monday, Oct. 19, 1987, the Dow dropped 508 points, or 22.6 percent, and the S&P 500 fell roughly 20 percent, ending a decade of unbridled development, speculation and co-op conversions in New York City.

“It was a huge development period,” said Diane Ramirez, the president of Halstead Property, who has been a real estate broker since 1973. “Everybody in New York wanted to be an owner. Developers were building like crazy.”

Much of the boom was due to apartment buildings being converted into co-ops, Miller said. “We had a tremendous surge in conversions in the 1980s.”

Moreover, the city tweaked the 421-a tax incentive in 1985, changing the rules so that in much of Manhattan, developers would have to build a certain amount of affordable housing in order to qualify for the tax benefit.

Much like the changes to the program implemented this past summer, developers rushed to build before the new rules took effect. “The abatement expiration encouraged developers to get holes in the ground by 1985,” Miller said.

The city’s real estate and development landscape changed drastically in the late 1980s after the crash.

The stock market nosedive and ensuing recession, combined with changes in tax policy and double-digit interest rates, left the city with a tremendous glut of available apartments, especially one- and two-bedrooms, which had been popular with speculators.

“We had so much supply in the studio to two-bedroom range, we were choking on them,” Ramirez recalled. “No one wanted to buy them. It was unbelievable oversupply.”

In the mid-1980s, roughly 40,000 new co-op and condo plans were filed with the attorney general’s office a year, said the chief economist for Terra Holdings, Gregory Heym, who called the period “conversion mania.”

Between 1990 and 1991, the number of plans filed tumbled from 19,207 to 3,041. And by 1993, it hit an all-time low of 950.

In 2007, by comparison, there were 25,281 new plans filed — nowhere near the mid-1980s peak of roughly 40,000.

“We see a lot of construction now, but we have not over-converted over the past decade like we did in the 1980s,” Heym said.

By 1989, New York City had roughly seven years worth of available inventory on the market, Miller said.

“The housing stock that came on the market in the late 1980s didn’t get fully absorbed until the mid-’90s,” he said.

Inventory is one area where today’s New York real estate market is in much better shape than it was going into the recession of the late 1980s and early 1990s. Unlike the seven years of inventory stockpiled then, the city has only 7.9 months of supply, Miller said.

“That’s part of the reason I’m optimistic about our current marketplace,” Ramirez noted. “Our supply-and-demand numbers are quite good. From a historical perspective, we are in a much healthier place.”

Other factors that have better prepared New York for the current downturn include lower mortgage rates, less real estate speculation and stronger employment figures.

Mortgage rates hovered near 11 percent in the late 1980s — almost double what they are now, making it sharply more expensive for prospective buyers to make a purchase. Although some experts expect rates to rise — Miller said his “sense is that rates will trend higher over the coming year” — they’re not expected to come anywhere near 1980s levels anytime in the near future.

Meanwhile, there are also fewer speculators in today’s market than there were in the 1980s, Heym said.

“In 2007, before this thing started, the market was incredibly strong,” he said. “It wasn’t falsely propped up by investors. We’re in a good position going in.”

Heym also pointed to employment as a key factor that would help buffer the city. While the city is bracing for the loss of 40,000 financial sector jobs and tens of thousands of additional ones (11,000 employees have already gotten pink slips), the number of layoffs is not expected to touch what it was in the 1990s.

At that time, more than 350,000 people lost jobs, Heym said. “The big unknown for us right now is what the job losses are going to be,” he said. “Most people are not expecting the job loss to be as much this go-round.”

A different city

There’s no denying that New York City’s real estate market has been buoyed by vast changes in quality of life in the city over the past decade.

“We were a different city in the ’80s,” Ramirez said. “We’re an international city now. Everybody wants to be here. We’ve got a lot more going for us.”

A huge component of the improvement is the dramatic decline in crime the city experienced during the Giuliani administration and then during the Bloomberg years. The felony crime rate in New York City dropped by a stunning 71 percent between 1990 and 2006, according to the Furman Center for Real Estate and Urban Policy. Currently, the number of burglaries per 1,000 residents is less than one-fifth of what it was in 1990.

David Kennedy, director of the Center for Crime Prevention and Control and professor of anthropology at John Jay College of Criminal Justice, attributed the drop to changes in policing strategy that are unlikely to be reversed even if the city falls on hard economic times.

“It’s a huge change that’s occurred,” Kennedy said. “Things could get a little bit worse and still be dramatically better than they were before.”

Still, while New York is unlikely to fall back to 1980s levels of violence, “we can expect some increase in crime,” Rosenfeld said.

Indeed, according to the NYPD’s CompStat program, which tracks statistics weekly, the number of homicides for 2008 to date was 416 at the end of last month — 8.3 percent higher than last year’s level of 384.

“There has not been a period in the city’s history during which crime did not go up during economic downturns,” Rosenfeld noted.

He said decreases in tax revenue could lead to cuts in the police force. “The NYPD has shown that it knows how to use scarce resources wisely,” he said. “The question is, ‘Will they have the resources to manage the increase in crime problems we’re already beginning to see?’”

The city has roughly 36,265 police officers, down by about 4,000 from the peak in 2000. Recently, City Hall asked the NYPD to cut $94 million, or 2.5 percent of its operating budget, for the fiscal year ending next June.

In addition to crime, homelessness is on the rise because of the latest economic woes, according to Patrick Markee, senior policy analyst at the Coalition for the Homeless. The organization released figures late last month showing that 1,464 families entered city shelters in September, a 22 percent increase over the same month last year and the highest one-month gain since the city began keeping statistics 25 years ago.

“It’s really bad, and the thing that’s got us most
alarmed is, it’s probably going to get worse,” Markee said.

With the credit crisis tied to crime, homelessness and quality of life, the economic realities for the city have already started shifting.

“The economy alone is ensuring that we’re not going to see the rapid expansion of the past few years,” Rosenfeld said. “If crime rates go up in addition, that can slow the
expansion even more.”

However, he said, now that new homeowners have moved into outlying neighborhoods, they’re unlikely to abandon them. “Property owners as well as renters have real stakes in the stability of their neighborhoods,” he said. “They aren’t going to give that up easily.”

Despite unprecedented attempts by the federal government to get banks lending again and to get the economy moving, buyers are finding it harder to get mortgages since the fallout on Wall Street.

In the last few weeks, banks have added stipulations that New York borrowers have even higher credit ratings than they had recently needed. Also, in some cases, lenders are going so far as to require borrowers to set up checking accounts at their banks if they increase the amount of financing on a mortgage.

While nontraditional lenders do exist, New York City buyers are finding that generally loan-to-value ratios are shifting against them, contributing to the cycle of decreasing activity and dropping prices in the downturn.

In the last few weeks, there’s been a 15 percent drop in clients among mortgage brokers in the city, and the number of loans actually issued has gone down as much as 40 percent, as deals are scuttled at the last minute by banks and buyers, according to mortgage brokers, real estate brokers, title insurers and developers.

“This fall has been a strange time — a triple witching hour of market volatility, a national election and drawn-out Jewish holidays that have disrupted the cycle,” says Melissa Cohn, president of the Manhattan Mortgage Company.

Last summer, banks were already in retreat, financing just 80 percent of purchases on average, said Michael McGivney, a senior vice president in the Midtown office of Stanley Capital. Now, after the financial cataclysms of the past month, they often just will cover 70 percent, McGivney said.

As a result, the size of down payments has increased for both co-ops and condos. Earlier this month, Steve Moran, a senior loan officer at Preferred Empire Mortgage Company, told The Real Deal that in the past putting down 10 percent for a condo and 20 percent for a co-op was typical in Manhattan. Those numbers have now jumped up to 20 percent and 30 percent respectively, he said.

Meanwhile, buyers can forget secondary financing, more commonly known as home equity loans. In 2006, those loans comprised 80 percent of all the mortgage activity McGivney handled, almost all of them in cases where the buyers sought to pay just 10 percent of a condo’s price and needed a home equity loan to cover what their primary mortgage could not. McGivney said today they make up just 5 percent of his transactions.

What changed? Banks realize those loans are the last kind to be paid back if a borrower defaults. “Lenders took a real bath on these,” says McGivney. They are “basically gone.”

Another added bank stipulation is that New York borrowers have credit scores of at least 700 — up from 650 just a few weeks ago, regardless of the price or type of a unit, according to James Gricar, an executive vice president at Brown Harris Stevens.

About 60 percent of his clients use mortgages to buy homes.

“Banks don’t have money to lend to buyers the way they did,” says Gricar.

Banks may also be willing to tailor their terms with unusual requirements: Some banks will demand that if they contribute a larger share of the loan, the borrower must invest that difference in the bank, McGivney said.

For example, if the borrower sought 80 percent financing, but the bank initially didn’t want to go above 70 percent, it might still come around if that extra 10 percent were placed in an in-house checking account, mortgage brokers say.

While some sources interviewed say that co-op buyers need to reach a little deeper into their wallets, others say that for financially healthy buyers, lenders don’t seem to be significantly changing their rules about co-ops. They seem satisfied with already-strict, existing co-op purchase rules, dictating a 25 percent down payment and two years of cash reserves, some brokers say.

However, all seem to agree that banks are changing their tunes about new condos, requiring now that at least half the units in a building are sold — a sign that the project will likely be seen through to its completion — before signing off on any loans for individual buyers. (See Ominous signs from new condos.)

As of late October, Chase, for example, is requiring that a condo in New York be 75 percent sold before extending any financing, Cohn said.

But while large banks may be tougher to crack, smaller regional institutions seem more flexible.

For example, Patriot National Bank, Astoria Federal Savings Bank, Ridgewood Bank, Hudson Valley Bank and Metropolitan National Bank — all of which have strong presences in the outer boroughs and suburbs — are lending 80 percent on loans of up to $3.5 million, McGivney said.

“It’s not true you can’t get a loan,” he said. “You just can’t always go to Countrywide or Chase.”

While there are indications the federal rescue plan has sparked some interbank lending, homebuyers will likely have to wait a year to see any considerable effects on mortgages. Even then, rates on a standard 30-year-fixed mortgage may just barely drop below 6 percent — low in historical terms, but higher than the rates that hovered between 5.25 and 5.5 percent during the recent boom, according to mortgage brokers. In the 1980s, by contrast, rates were in the 12 to 15 percent range.

One immediate benefit of the $700 billion government rescue plan, though, is that the conforming limit for loans backed by Fannie Mae and Freddie Mac is now $729,650, up from $417,000.

As a result, New York homebuyers suddenly have access to lower-cost loans that they didn’t qualify for before. The city’s homes have generally tended to be too expensive for the Fannie Mae/Freddie Mac programs, which generally cover mortgages issued by large publicly held banks like Chase, Wells Fargo and Citi.

“It probably won’t help the average condo buyer,” Cohn said, “but it will help people in the outer boroughs.”

Still, she adds, the higher conforming limit is only temporary, expiring at year’s end. While a higher limit will likely be extended, it will probably be lower than $729,650.

The point might be moot if the fundamentals of the real estate economy don’t improve. One particular worry is that sellers aren’t lowering their asking prices fast enough, says Douglas Panero, a real estate attorney and partner in Manhattan-based Rabin Panero and Herrick.

Until then, buyers won’t be shopping around for mortgages anyway.

In fact, the downturn of the early 1990s “pales in comparison to this,” said Panero, who’s been practicing for two decades.

“This seems to be a different variety,” he said, “with troubles in cities and troubles in business, and the stock market getting it all at once.”

In real estate, the saying goes, cash is king. But in New York City, that became truer than ever last month as the Dow Jones started freefalling.

As investors watched in horror while their stock portfolios hemorrhaged money, many chose to pull their cash out of the stock market and put it into real estate.

While real estate is no doubt softening, too, the market, especially in New York City, is still perceived to be a stable long-term investment that offers something of a reprieve from the stomach-churning daily fluctuations of the Dow.

It’s difficult to quantify the number of all-cash deals, but brokers say they have noticed a sharp increase in cash transactions in recent weeks, even among wealthy buyers who would have no trouble getting a mortgage.

“The stock market’s a scary place to be right now,” said Elaine Clayman, a senior vice president at Brown Harris Stevens. “People who know how to make money seem to see real estate as a place to park it.”

Clayman said she recently received two all-cash offers on a one-bedroom on East 72nd Street, which sold for $625,000. Meanwhile, she said clients have asked her for referrals of real estate brokers all over the country because they’re looking for investments that are alternatives to the stock market.

“I’m asking my buyers and sellers, ‘Are you thinking of investing elsewhere?’” she said. “They say, ‘As a matter of fact, I am.’ It’s people moving money around.”

In recent weeks, “whatever business I’ve done has been all cash,” said Iris Shorin, an associate broker at JC DeNiro & Associates, who recently represented the buyers of a $925,000 one-bedroom at London Terrace Towers in Chelsea.

And Michael Daly, the principal broker at True North Realty Associates in the Hamptons, said some 75 percent of his deals are all cash right now. He recently represented the all-cash buyers of a $2 million Shelter Island home and a house in Westhampton Beach that sold for $7.5 million in cash.

In part, the predominance of all-cash transactions reflects the difficulty of getting a mortgage in the midst of a credit crunch. Struggling banks are reluctant to lend to all but the most qualified buyers, so buyers without impeccable credit are finding it nearly impossible to buy homes, despite softening sale prices.

“The majority of people that I’m seeing are very cash-heavy,” said Jessica Armstead, an associate broker at the Corcoran Group. “The media has pounded it into the brains of people that getting a mortgage is not easy. You need to have your whole package in place.”

But the difficulty of getting a mortgage doesn’t impact all-cash buyers, some brokers say. Even if they wanted to take out a mortgage, they are wealthy enough to easily qualify for financing, Clayman said.

“It’s not a mortgage thing,” she said. “People who buy all cash can get a mortgage.”

However, she said, many wealthy buyers are choosing not to get a mortgage, opting instead to put more of their assets in real estate until the stock market recovers.

“With what’s going on with the market and what we expect to happen over the next 12 to 18 months, it makes sense to put it in real estate rather than sit on it in cash,” she said.

Others have been amassing cash in recent months in anticipation of real estate bargains, Daly said.

“A lot of people have gone heavy into cash over the course of the last year,” he said. “They’re waiting for the bottom — in all types of investments. For those who feel that the bottom is here, it’s time to make a move.”

One reason real estate is an attractive investment in times of financial turmoil is psychological.

When markets are uncertain, some investors look for “hard assets,” like real estate, according to Jonathan Miller, president of the real estate appraisal firm Miller Samuel.

“It’s hard to look at your stock portfolio statement and see 25 percent of it wiped out, whereas housing is tied to a physical asset,” he said. “The asset still functions even if it loses value.”

In other words, “when you buy an apartment, it’s real, you can touch it,” said Shorin, who is representing a pair of all-cash buyers from St. Louis looking for a pied-à-terre in New York. “With stocks, it feels like it’s just paper.”

It’s always been beneficial for homebuyers to use cash, which helps expedite the closing process and allows them to avoid mortgage-recording taxes. But homebuyers in the current market are finding that cash gives them even more advantages than normal.

“There never will be a seller that won’t sit up and take notice from a cash offer,” Shorin said. “It means you can close immediately. And in this market, you don’t know if a buyer will get a loan, even if they’re very qualified.”

S. Hunie Kwon, an executive vice president at JC DeNiro, said he recently accepted an all-cash offer of $875,000 for a two-bedroom apartment at 50 Lexington Avenue in Gramercy. Though the offer was slightly lower than the seller would have liked, the all-cash offer allayed concerns about whether the prospective buyer would be able to get a loan.

“This market gives the all-cash buyer that much more leverage, knowing that it’s more difficult in terms of getting a mortgage,” Kwon said, adding that with cash, “it’s a done deal” when the contract is signed.

The practice is also becoming common because it’s convenient for foreign buyers, who find that paying cash is easier and has tax benefits, said Shorin, who noted that the buyers at London Terrace Towers were British. “It was just easier,” she said. “No red tape.”

International buyers, too, have found it more difficult to get financing as the credit crisis has deepened.

“A year ago every foreign buyer came here and got a loan,” Shorin said. “Those days are over. I don’t know if foreign buyers could get 60 percent. The whole nature of the playing field has changed.”

Go to chart: How Manhattan compares to the U.S.

While the subprime mortgage
meltdown has roiled many real estate markets across the nation, New York’s pain has been less about housing and more about the woes of the financial services industry, which sets the tone for Gotham’s fortunes.

New York property values once seemed immune, as if the real estate bubble would never burst: Prices continued to rise, if at a slower pace, while many other markets saw sharp drops, if not an outright collapse.

Now, the aftermath of the Wall Street meltdown is bringing New York more in line with the rest of the country, and the disparity between here and everywhere else may be coming to an end, at least as far as a real estate comparison is concerned.

On the local employment front, the situation appears dire enough that New York City Comptroller William Thompson Jr. last month nearly doubled job loss projections for the city over the next two years to 165,000 from a July projection of 85,000. Of those jobs lost, 35,000 are expected to come from the finance industry.

In New York, the finance industry accounts for about 9 percent of city tax revenue and 20 percent of state tax revenue, making the city particularly vulnerable to job losses in the sector.

Unemployment in the city rose to 5.8 percent in August from 5 percent in July and stayed there in September, according to the state Department of Labor. The jump was the largest increase on record, going back to 1976. Still, the city’s unemployment rate is lower than the national rate, which increased to 6.1 percent in August from 5.7 percent the previous month, a rate the country hasn’t seen since September 2003, according to the U.S. Bureau of Labor Statistics.

The firm Marcus & Millichap predicts that job losses will help push the apartment vacancy rate in Manhattan up to 2.8 percent in the final quarter of the year.

Nationally, the vacancy rate for apartments increased to 10 percent in the second quarter, the most recent data available, from 9.5 percent a year earlier, according to U.S. Census data.

The slowing economy has already hit the New York office market, with Manhattan vacancy rising to 9.1 percent in September from 6.8 percent a year earlier, according to a report by Colliers ABR. The report forecast that the Manhattan office vacancy rate could rise to 12 or 13 percent through 2009.

National office vacancy rates rose, too, hitting 13.6 percent in the third quarter, up from 12.5 percent in the third quarter of 2007, according to a report by Reis, a
commercial real estate information provider.

In the condo and co-op market, Manhattan prices have begun to fall but remain higher than a year ago, according to a market survey prepared by appraiser Miller Samuel for Prudential Douglas Elliman. The median sales price in the third quarter fell 9.4 percent to $928,200 from $1.03 million in the previous quarter. That median price was still 7.4 percent higher than the $864,390 of the third quarter in 2007.

Nationwide, the figures look bleaker. The average U.S. existing home price in August, the latest figures available, was down 8.9 percent from the year before, to $245,000, according to the National Association of Realtors.

Still, Manhattan has shown bigger increases in inventory and a quicker slowdown in sales than the national numbers recently, perhaps because the national market got weaker earlier. Manhattan inventory is up 34 percent compared to a year earlier, in contrast with a 2.3 percent decline nationally.

According to another measure of the market — the Standard & Poor’s Case-Shiller home price index, which measures single-family homes in 20 metropolitan areas — the greater New York metropolitan area was down 7.4 percent in July compared to a year earlier, a considerable contrast to Manhattan’s year-over-year performance and more in line with the national figures. The index doesn’t include condos or co-ops, making it a better measure of the areas around Manhattan including parts of Long Island, Westchester, southern Connecticut and northern New Jersey.

Overall, the Case-Shiller composite index of 20 areas around the U.S. has dropped by 16.3 percent, and in areas hit the hardest by the bursting real estate bubble, the Sunbelt cities of Las Vegas and Phoenix, it has been nearing 30 percent. Miami and Los Angeles prices fell by more than 25 percent.

“What happened in those markets that didn’t happen in New York was both relatively over-inflated price increases — home prices going up 30 percent to 50 percent in a year — plus overbuilding,” said Maureen Maitland, vice president of index services at Standard & Poor’s. “When the bubble burst in those markets, there was a sharp decline that happened very quickly.

“On a relative basis New York is doing better than the rest of the nation,” she said.

Nationwide, foreclosure activity was up 12 percent in August compared to July and up 27 percent compared to a year ago with around 303,900 filings reported, according to RealtyTrac.

About a third of the foreclosure filings — 101,700 — were in California, while Nevada earned the dubious distinction of having the highest foreclosure rate for the 20th consecutive month, with one in 91 households receiving a foreclosure notice.

Among metropolitan areas, the New York City area ranked 84th nationwide for foreclosure activity, according to RealtyTrac.

While the number of new foreclosures in the city jumped by 60 percent to around 1,100 in the third quarter of 2008 compared to the same period last year, it pales in comparison to a city like Los Angeles, which saw more than 15,700 foreclosures in the third quarter, according to a report by Property Shark.

Jessica Davis, president of Profiles Publications, which publishes foreclosure data, estimated that foreclosures in the city have doubled since last year, hitting mostly in the boroughs. But that’s changing.

“Brokers in Manhattan were kind of smug, saying, ‘Manhattan is insulated, it’s not happening here,’” she said. “But now it is starting to happen.”

The New York City real estate industry is generally assumed to focus
more on the West Village than on the West Wing. Yet in recent weeks,
real estate brokers here could have passed for TV pundits with their
constant talk of the presidential race.
[more]

Go to charts: Contracts collapse, prices drop

A rapidly growing program was helping to boost sagging real estate sales in the outer boroughs before it was banned last month, brokers said.

Seller-financed down payment assistance, which allows buyers to put no money down when purchasing a home, became illegal on Oct. 1 as part of the Housing and Economic Recovery Act signed by President Bush over the summer.

The controversial practice, which allowed nonprofit groups to help buyers qualify for mortgages backed by the Federal Housing Administration, has traditionally been far more prevalent nationally than in New York City, where most homes were too expensive to qualify for FHA loans. But brokers say the practice spread quickly in the outer boroughs this summer, after the ceiling on FHA mortgages was increased.

“It was one of the best programs,” said Lori Ojeda, an associate broker at ERA Top Service in Queens Village, who sold three homes through the down-payment assistance program since learning of it this spring. “I was very upset when they got rid of it.”

Popular with homeowners hoping to unload their property quickly, the so-called “DPA” works by allowing them to “donate” funds to a nonprofit organization, such as Maryland-based AmeriDream or California-based Nehemiah Corp. of America. The nonprofit grants a down payment to the buyer in return for the donation — usually around $500 — from the seller. The grant allows the buyer to qualify for a mortgage backed by the FHA, which until recently required 2.5 to 3 percent down. (The Housing and Economic Recovery Act raised that figure to 3.5 percent.)

As subprime mortgages have disappeared, seller-funded down payments exploded in popularity across the country. Adam Glantz, a spokesman for the New York bureau of the U.S. Department of Housing and Urban Development, said seller-funded down-payment programs now account for roughly 35 percent of FHA loans nationally, leaping from only 18 percent in 2003.

Some 1 million Americans have used DPA programs in the 10 years since a loophole in housing laws allowed them, adding up to $130 billion in mortgages, according to AmeriDream, a nonprofit that specializes in DPA.

It’s difficult to estimate the number of New York City buyers who have purchased homes through DPA, since city-specific data isn’t available. According to AmeriDream and Nehemiah, there have been more than 9,400 recipients of seller-funded down payments in New York State, generating some $958 million in mortgages.

Co-ops and condos are not eligible for FHA loans, so the practice is not common in Manhattan. And until recently, it was also uncommon in the New York area as a whole, since FHA loans could only be extended for homes less than $417,000. But this summer’s federal housing bill increased that limit to $729,750 in “high cost” markets like New York.

In January, the ceiling will fall to $625,000.

As a result of the higher limits, DPA programs experienced a surge of popularity in Queens, Brooklyn, Long Island and the Bronx, according to Martin Burger, a Queens attorney. “There was a flurry of activity,” he said.

Roughly 175 customers signed up for seller-funded down payment assistance from Long Island-based Continental Home Loans after the company instituted a $1,000-down program a year ago, said Continental president Michael McHugh.

While it lasted, the down payment assistance program was a helpful stimulant in the down economy, McHugh said.

“In a declining market, it helps sellers move their homes,” he said. The program’s elimination “throws out one type of option that was open to homebuyers that now isn’t there.”

Ojeda of ERA Top Service in Queens Village said she’d never heard of DPA before she learned of McHugh’s program this spring. But once she found out about it, “I told everybody I could possibly tell,” she said. “Now that FHA has gone up, it fits in perfectly.”

Ojeda said she is concerned that the program’s demise will have a negative impact on home sales in the area. “We’re having so many difficulties as it is,” she said. “This just made it much harder. With that program leaving, there are fewer options now.”

McHugh said the programs helped consumers who lacked cash for a down payment but were otherwise well-qualified.

“Saving a down payment is really a hard thing, and not having reserves is a scary thing,” he said, adding that his typical customer for the program was a first-time homebuyer making from $75,000 to $150,000 a year. “This really was supporting the middle of the market.”

But seller-funded down payments have come under fire from critics.

The FHA has said that roughly one-third of DPA recipients default on their loans, and those borrowers are two to three times more likely to default on their payments when they receive a down payment from a nonprofit.

Glantz said the additional cost of the down payment is often added to the total price of the home, unbeknownst to the buyer.

“I don’t think the buyer’s aware that their donation comes back into a higher price of the house,” he said. “It’s really an unfair real estate practice.”

Because recipients are more likely to default on their loans, Glantz said, DPA was on target to cost FHA up to $4.6 billion in unanticipated losses.

Burger, the Queens attorney, said he had “mixed emotions” about the program. While it helped some well-qualified families who simply didn’t have cash for a down payment, he worried that the program was being abused.

“I have a closing tomorrow where this is going to get a nice couple and their son into a house that they can afford,” he said. But in other instances, “I’ve seen the program misused by real estate brokers who will take anybody off the street.”

Rather than being eliminated, the program could have been revamped to require tighter lending standards, said Alex Brill, a research fellow at the American Enterprise Institute for Public Policy Research, who recently completed a report on the topic. Government data on seller-funded down payment defaults may be exaggerated, he added.

“Yes, there are a higher number of defaults among homebuyers that use DPA, but it’s not nearly the magnitude that’s being claimed by critics of the program,” Brill said.

“We need buyers wherever we can find them these days,” added John Grant, executive director of the National Association of Responsible Home Rebuilders and Investors. “There was no need to eliminate this thing.”

The Chelsea Enclave, a luxury apartment building under construction on
the edge of property owned by the General Theological Seminary of the
Episcopal Church in West Chelsea negotiated long and hard to make sure the new construction on their
land would be something it could live with.
[more]

After 13 years of battling to build luxury mansions in Bedford, Westchester, real estate mogul Donald Trump finally secured the green light to start construction on the project. But that was before the credit market froze.

Now, Trump has put the brakes on that project (as first reported on The Real Deal Web site) and is holding off on starting others there. While he is proceeding with projects that are already under way, he only has one project in New York City, the Trump Soho, a hotel-condo on Spring and Varick streets in Hudson Square.

Trump has other projects in Connecticut and abroad that he is looking to complete.

“Who wants to build in a down market? I’m in no rush for many different reasons, and one of them is the market,” he said.

Trump’s battle in Bedford goes back to 1995, when he purchased a 213-acre property known as Seven Springs for $7.5 million, with the express purpose of building one of his signature high-end golf courses.

The hilly property actually reaches into three towns: Bedford, New Castle and North Castle. At first, the project garnered intense opposition from locals who feared that the chemicals required to maintain the golf course would run off downstream, polluting Byram Lake, the only source of drinking water for nearby Mount Kisco.

After an eight-year battle, Trump switched gears. Instead of the golf course, he offered to build 17 luxury mansions
with price tags of $10 to $30 million. After a series of lawsuits (some still pending), the plan was whittled down to seven mansions in Bedford.

When completed, the Bedford homes would be expected to generate about $3 million a year in tax revenue.

At a Sept. 23 meeting with the Bedford Planning Board, the Trump Organization said it was ready to break ground
before winter, promising up to 500 construction jobs.

But now, Trump has decided to halt the project altogether. “We’ll wait until the market is stronger,” he said.

Wayne Heicklen, a partner at the law firm of Pryor Cashman and co-chair of the firm’s real estate department, said that Trump, like every other developer today, is being cautious about starting new projects. Heicklen, who worked at the firm of Dreyer & Traub in the 1990s, represented Trump at that time, when he was being burned financially.

“He didn’t do so well for a while,”
recalled Heicklen.

Heicklen said that Trump’s problems today are similar to the ones he had in the 1990s, which were tied to problems with the credit market.

“He struggled then because the markets had fallen,” Heicklen said. “He topped out, and there was no turning back.”

The only way for Trump to pay back his lenders, said Heicklen, was to go forward, finishing his buildings and hoping that the sales would cover the debt.

With the credit crises, Trump is in a similar position today with Trump Soho in Manhattan and Trump Parc in Stamford, Conn. Outside the New York area, he’s also in a similar situation with a 92-story project in Chicago he is developing, slated to be the tallest building constructed in the U.S. since the Sears Tower.

“Stopping construction now isn’t viable, and he has no choice but to go forward,”
said Heicklen. “But he’s a survivor — he lands on his feet.”

Scaling back is not new to Trump.

In 2000, Trump scaled back his Trump National Golf Club in Briarcliff Manor to include 17 townhouses — though not a proposed 80-unit apartment building. “That’s probably my most successful golf club,” he told The Real Deal. “I sold 17 townhouses at $2.5 to $3 million each.

“I had the right to build an 80-unit apartment house, but I chose not to do that.”

In New York City, construction continues on Trump Soho. “We are going forward with it,” said Trump. “Sixty percent of the building is sold out. It has good zoning. The units are selling like hotcakes. We should be open in six months.”

Pre-construction sales, which opened last September, listed apartments for $3,000 a square foot. And Trump just got the nod from the city to add an extra floor to the building, making it 43 stories.

Still, the project has had its own well-publicized problems. In January, a worker at the Trump Soho site fell to his death from high-rise scaffolding that collapsed under too much weight. Three additional workers were injured.

Contractor Bovis Lend Lease had already received several violations from the Department of Buildings, including one for an out-of-control crane that smashed the window of an adjacent building in October and for storing materials too close to the edge of the 39th floor.

In 2006, construction work was put on hold after workers discovered human remains, later determined to be from a church burial vault.

Community opposition has also dogged the project.

Andrew Berman, executive director of the Greenwich Village Society for Historical Preservation, said Trump violated zoning laws to build Trump Soho by building in an area zoned for manufacturing and transient hotels, not a hotel-condo.

“It’s the first-ever hotel-condo in New York City that’s in a manufacturing zone,” said Berman, who accused the developer of being duplicitous.

“Trump has used the Trojan horse method of getting
approvals and has gotten around the law,” Berman said. “It’s been handled deceitfully.”

According to Berman, the building was constructed over a 19th-century graveyard for an interracial abolitionist church. “If Trump had been forced to seek a zoning change, he would have had to do an archaeological survey, which probably would have uncovered the graveyard without the bulldozers, finding several dozen bodies first.”

Berman criticized Trump for having a general disregard for zoning laws and regulations. “It’s one thing to have a brash personal style, but it’s another to play fast and loose with the law and with peoples’ lives,” he said.

Trump completed two Westchester projects last year. Trump Plaza in New Rochelle is a 40-story tower with 194 luxury condos overlooking the Long Island Sound; the building is now 65 percent occupied. At Trump Park in Yorktown, a 141-unit luxury condominium building, occupancy is now at 55 percent.

Trump said the timing was good. “We were all
finished prior to the market downturn, so I got lucky,” he said. “I completed many of my projects at the height of
the market.”

Still under construction, however, is Trump Parc in neighboring Stamford, Conn. The 170-unit luxury condo is 36 stories, which will ultimately make it the tallest building in Stamford. According to Trump’s Westchester public relations firm Thompson & Bender, occupancy is planned for spring 2009.

Overseas, proposed projects for Trump include buildings in Egypt, India, South Korea, Turkey and the United Arab Emirates. A $2 billion waterfront golf resort is also in the works on 1,400 acres on the northeast coast of Scotland — it will have 1,000 condos, 500 luxury villas, a hotel and two golf courses.

“Trump recognizes it has become a global economy,” said Heicklen.

However, the global economy is faltering in reaction to the American market crises, and Trump may have to put his projects on hold.

“Although Dubai is strong today, the Far East and Europe are all starting to feel the sting of the sluggish economy. If that happens, he’ll have issues like any other developer,” Heicklen said.

Meanwhile, Trump has every intention of breaking ground at his Seven Springs property as soon as financially feasible. “This property is a jewel, and it’s going to be a magnificent high-end job. I’ll start it when the market comes back,” he said.

Trump’s updated plans for Seven Springs call for an equestrian center with 20 stables and a building to house paid staff.

The Seven Springs property once belonged to Eugene I. Meyer Jr., owner of the Washington Post, and is where Meyer raised his daughter, the late Katharine Graham, the paper’s longtime publisher. At one time, Trump considered moving his family to Meyer’s 39,000-square-foot mansion, but now he’s not sure. “I may or may not move in — I just don’t know if I’ll do that,” he said.

Meanwhile, Trump is still fighting several other battles related to Seven Springs’ land rights and road access, and hopes the financial crises will weaken the towns’ resolve and give him greater bargaining power.

“I like getting zoning in a bad market,” he said. “I like starting jobs when the market is good or starts getting good. When the market comes back, whenever that might be,
I’ll start the job at Seven Springs. I consider this a very
small job.”

Hoboken, NJ

Vesta Hoboken

609 Observer Highway

The Vesta Group’s 16-unit condominium will open this fall. The units are two-bedroom condominiums and three- and four-bedroom duplex penthouses in a six-story building. Amenities include outdoor space, a gym and on-site parking. Contact: www.vestahoboken.com.

Newark, NJ

Southwyck Estates

The project, in Newark’s Redevelopment Zone, will include 200 two- and three-family homes. The two-family residences, with three bedrooms and two baths in each unit, will be 4,000 square feet total. Each home will have an attached two-car garage in addition to on-site parking. Prices start at $319,000. Contact: www.southwyckestates.com.

West Orange, NJ

Bel Air

East Mount Pleasant Avenue

Developer Matzel & Mumford’s project has 250 townhouses from 3,090 to 3,700 square feet on 160 acres. Residents can choose among 10 three- and four-bedroom floorplans. Amenities include a recreation center with pool, fitness center, library and tennis courts. Prices begin in the high $600,000s. Contact: www.mmhomes.com.

Sales update

North Stamford, CT

Windermere on the Lake

191 Erskine Road

Furnished model homes are now open for preview at the development. NRDC Residential’s 74-acre project includes 24 homes built in four styles modeled on English village homes. The community includes a clubhouse, gazebo and dock for fishing. The homes feature fireplaces and sports-equipment rooms, with optional elevators, pools, home theaters and custom libraries. Homes are priced between $2.985 million and $4.8 million. Contact: www.windermereonthelake.com.

New Brunswick, NJ

The Residences at the Heldrich

20 Livingston Avenue

Eighty percent of the 48 units in the Residences at the Heldrich, a condominium atop a four-star hotel, were sold as of early September. The condos range in size up to 1,325-square-foot two-bedrooms. Amenities include private underground parking, catering and housekeeping services and a spa. Contact: www.heldrichcondos.com.

Paramus, NJ

The Sheffield

Sales are underway at the Sheffield. The four-story condominium building, developed by The S. Hekemiam Group, includes one- and two-bedroom units priced from $325,000. The building also has a Wi-Fi lounge and screening room, yoga and meditation studio, fitness center, enclosed private parking and a business center.

Leasing update

Saddle Brook, NY

140 Mayhill

Saddle Brook Mayhill Associates’ community of 158 rental residences will begin leasing this fall. The homes are one- and two-bedroom residences. Amenities include balconies or patios, covered parking and a fitness center.

Compiled by Sara Polsky

Brooklyn Heights

The Standish

169 Columbia Heights

Taurus Investment Holdings’ 12-story, 94-unit building will have studios to three-bedrooms from 500 to 2,500 square feet. Monthly rents range from $2,200 to $5,900 for studios, one- and two-bedrooms and $7,200 to $15,000 for larger apartments. The building, formerly owned by the Jehovah Witnesses’ Watchtower Bible and Tract Society, was sold to Taurus in December. Halstead Development Marketing is the exclusive marketing firm. Contact: www.halsteadpdm.com.

Brooklyn Heights

314 Hicks Street

The five-story, 4,400-square-foot townhouse is slated for completion in the fall of 2009. It will have five bedrooms, five bathrooms and an elevator. The townhouse is listed at $6.2 million. Deanna Kory of the Corcoran Group is the exclusive sales and marketing agent. Contact: www.stateandhicks.com.

Chelsea

124 West 23rd Street

Anbau Enterprises plans to construct a 16-story, 34-unit green condominium. The units will range in size from 600-square-foot studios to 2,400-square-foot penthouses. BKSK Architects will design the building, and Andres Escobar & Associates will handle the interior design. The building will have a community garden and recreation area, as well as 4,000 square feet of retail space.

Sales update

East Harlem

Conrad

342 East 110th Street

Sales at the David Marks Development Group’s eight-story project began early last month. The 35 units range in price from $399,000 to $560,000. Sizes range from 610 to 860 square feet. Amenities include a 2,200-square-foot garden, an outdoor lounge area with a hot tub and spa, and a gym. Occupancy is expected to start in January 2009. The Corcoran Group is the exclusive sales and marketing agent. Contact: www.conradcondominium.com.

Gramercy Park

57 Irving Place

Sales began at Madison Equities’ new development. The building features nine units, and residents can choose among townhouses, duplex penthouses or full-floor residences. Residences start at $6.75 million. Amenities include outdoor space, a 24-hour lobby attendant, a cold storage room, private bicycle storage spaces and access to the private Gramercy Park through membership in the Players Club. Occupancy is expected to begin in the first quarter of 2009. The Corcoran Sunshine Marketing Group is the exclusive sales and marketing agent. Contact: www.57IrvingPlace.com.

Harlem
Observatory Place

2021 First Avenue

Move-ins began at the 11-story, 38-unit condominium with a green design. The building was more than 50 percent sold as of last month. The studios and one-, two- and three-bedrooms range from 500 to 1,385 square feet, and prices begin in the $300,000s. The building was developed by a partnership of architect Gary Silver and Silverpoint Builders. Warburg Marketing Group is the exclusive sales and marketing agent. Contact: www.observatoryplacenyc.com.

Sheepshead Bay

Bay Breeze

3165 Emmons Avenue

Sales began at the three-story, 43-unit building last month. Condominiums range from 500-square-foot studios to 1,700-square-foot penthouses. Ninety percent of the units have private outdoor space. Prices start in the low $200,000s, and penthouses are in the $800,000s. Amenities include a concierge and doorman service, garage parking and an intercom with audio and video displays. Fillmore Real Estate is the exclusive sales agent. Contact: www.thebaybreeze.com.

Sunset Park

One Sunset Park

702 44th Street

Sales started last month at the condo conversion of a prewar rental. The six-story building has 54 units with 21 residences available for sale, ranging in price from $300,000 to $585,000. Apartment sizes run from studios to two-bedrooms, some with a windowed study, ranging in size from 562 to 1,114 square feet. Units were gut renovated and updated with high-end appliances and finishes. Amenities include a fitness center, landscaped garden and basement storage. The project is a joint venture of Paul J. Klausner/Continuum Development Corporation and Sierra Realty Corp. Halstead Property Development Marketing is the exclusive sales and marketing agent. Contact: www.onesunsetpark.com.

Tribeca

Zinc

475 Greenwich Street

Developers Douglaston Development and Montagu Square Development have released the final penthouse at Zinc, the 21-unit, seven-story building, for sale. The penthouse is a 2,767-square-foot, four-bedroom, three-and-a-half-bath duplex loft with a terrace and was listed for $5.5 million. The penthouse can also be combined with an 885-square-foot loft. Amenities at the building include a fitness center and refrigerated storage. Greenberg Farrow Architects designed the building. The Corcoran Sunshine Marketing Group is the exclusive marketing and sales agent. Contact: www.zincbuilding.com.

West Village

397 West 12th Street

Two of the five raw loft condominiums at developer and architect Cary Tamarkin’s 10-story building, where sales began in late July, are under contract. The units range from 2,826 to 6,409 square feet and start at $5 million. Residents will have access to an oversized elevator and private storage. Sotheby’s International Realty is the exclusive sales and marketing agent. Contact: www.397W12.com.

Williamsburg

Two Northside Piers

4 North 5th Street

Sales at the Two Northside Piers luxury condominium began in
late September. The building, part of a three-tower, mixed-use project, is being developed by Toll Brothers City Living, RD Management and L&M Development Partners. The 30-story building has 270 studio, one-, two- and three-bedroom apartments with prices from $349,990 to $2.9 million. Interiors will be designed by Stephen Alton. Amenities include a concierge, refrigerated storage for fresh food deliveries, an indoor pool and a children’s playroom. Contact: www.northsidepiers.com.

Williamsburg

Nforth

161 North 4th Street

Sixty percent of the 37 residences in NForth were sold out as of early September. The building, designed by Karl Fischer and interior designer Andres Escobar, has studios, one- and two-bedrooms, with prices starting at $375,000. Residents have access to a lounge, fitness center, landscaped common backyard, storage and private parking. The Developers Group is the exclusive sales and marketing agent. Contact: www.thedevelopersgroup.com.

Williamsburg

Steelworks Lofts

76 North 4th Street

Sales at Fifth Square Partners’ Steelworks Lofts began last month. The 88-unit building designed by AvroKO has studios through three-bedrooms starting at $495,000. Amenities include outdoor communal kitchens, a stone fire pit, a library and a fitness center. Halstead Property is the exclusive marketing and sales agent. Contact: www.thesteelworkslofts.com.

Construction update

Brooklyn Heights

45 State Street

The four-story, 3,430-square-foot townhouse, with interior design by Gordon Kahn, is slated
for completion in November. It will have three bedrooms and three bathrooms and will include a garage and two terraces. The townhouse is listed at $4.25 million. Deanna Kory of the Corcoran Group is the exclusive sales and marketing agent. Contact: www.stateandhicks.com.

Carroll Gardens

Satori

340 Bond Street

Occupancy at Satori, a four-story, 34-unit building, is expected to begin in late 2008. The building, with interiors by Hadas Design, is inspired by Japanese design. Units are studios, one- and two-bedroom residences and range in size from 486 to 1,216 square feet. Prices start at $470,000. Residents will be able to choose from optional parking spaces, private garage parking and rooftop terraces. The Developers Group is the exclusive marketing and sales agent. Contact: www.thesatoricondos.com.

Midtown East

Alexander Plaza

315 East 46th Street

Developer Continental Finance Corporation’s 25-story condominium tower is under construction and scheduled to open in 2010. The 52 units range from one- to three-bedrooms. The building was designed by Sydness Architects and features a triangular entry plaza and glass walls within apartments. Amenities include garage parking, a fitness center, storage and a residents’ lounge. The Corcoran Group is the exclusive sales and marketing agent. Contact: www.alexanderplazany.com.

Upper East Side

Georgica
305 East 85th Street

Developer Ascent Group’s 20-story condominium topped off in early September. The building will have 58 two-, three- and four-bedroom residences ranging in size from 1,237 square feet to 3,000 square feet. Prices start at $1.75 million. The Cetra/Ruddy-designed building is 30 percent sold and is expected to be completed in 2009. Contact: www.georgicalife.com.

The end of cheap credit could end plans for many large apartment projects and office towers, as scarce and pricey financing prompts developers to shift toward smaller projects.

“That happened the last time (during the downturn of the late ’80s and early ’90s),” said Jeffrey Katz, the CEO and principal of the residential and commercial property development company Sherwood Equities. “In the early part of the recovery, developers who had before only done very large deals were willing to do much smaller deals, and I think that’s smart.”

Christopher Albanese, the principal of the commercial and residential development company the Albanese Organization, agreed that the days of residential projects with hundreds of units may be gone for now.

“I think the larger, experienced developers will do smaller projects,” Albanese said. “Large construction loans now are very difficult to obtain, so I think as the market comes back, you’ll see the smaller projects first.”

He said the Albanese Organization, which is developing a 251-unit Battery Park City condo building called the Visionaire, would consider scaling back.

“Right now, we have a half-million-square-foot condo going up, the Visionaire, but if the right small site became available, we would consider developing a much smaller project than we might normally do, because they’re less risky,” Albanese said.

Property developers said financing is still available, but construction loans, especially those over about $50 million, are coming with much more onerous loan terms. Recourse provisions are more stringent, required interest reserves are larger, and banks are demanding that developers put in more equity,
typically 35 to 40 percent.

“Going out for a $200 million construction loan in this market would be impossible without an enormous amount of recourse,” Albanese said.

“I heard of one large loan where the developers were on for 100 percent recourse, and that was unheard of a year or two ago,” he said, though he wouldn’t reveal any more details about that transaction.

Greg Belew, a co-founding partner of the development firm Fifth Square Partners, said that with smaller banks stepping in to replace larger money lenders that have disappeared, financing will be abridged, which means smaller projects.

“I think developers are going to become more reliant on local- and regional-
sized banks to get deals done, and that’s certainly going to indicate smaller deal sizes,” Belew said.

Belew, whose firm is working on the Steelworks Lofts, an 88-unit condo conversion in Williamsburg (see Presales assume new role), also said loans over $50 million are tougher to secure. A $50 million loan translates to an approximately $75 million project of about 50 to 60 units in Manhattan, or a project of less than 100,000 square feet, depending on land costs.

“I think you’re going to see, for the time being, fewer of the 150- to 200-unit-plus developments, unless their construction financing is already in place and committed,” he said. “I think you’ll see more boutique-type developments. I would define a boutique development as anything from five to 50 units.”

Some of the larger development companies said they’d consider becoming involved in smaller projects in a depressed market. Gary Barnett, president of the Extell Development Company, which has done a succession of very large condo buildings in Manhattan, said the company “might look at some smaller projects that we wouldn’t otherwise look at” in order to “keep the shop busy.”

Jeffrey Levine, the chairman of Douglaston Development, which does condo and rental buildings with hundreds of units, said his company would contemplate getting involved in small-scale developments in hard times like the present.

“The bottom line is, big deals are going to have a very difficult time getting done in these next few years,” Levine said. “What you may see is developers, in order to keep their staffs occupied and continue the business to the future, will move to smaller jobs where there is less risk and less equity requirement.”

However, both Belew and Albanese said that if larger developers are sitting on land owned free and clear, they will likely wait out the sluggish market rather than build smaller.

At Sherwood, which owns several development sites around Manhattan, including a residential one on the far
West Side, Katz said the company plans to do just that.

While development plans have been drawn up for the site on 10th Avenue between 35th and 36th streets — a 200-unit residential building is envisioned — Katz said development will commence only upon favorable market conditions.

“I don’t think this will be a good year
[to start a new building],” he said. “I don’t think next year will be a good year either, but we’ve owned the site for 20 years, so if we own it for 23 years before we build it, it doesn’t matter to us.

“Whether it’s office or condominium, the next year or two probably won’t be a good time to develop it,” Katz said.

Other developers of large projects agreed they would rather warehouse or sell the land than shrink the size of a planned project. That could mean waiting until the market would allow them to build the project to the maximum size allowed under the zoning.

“In New York City, if you have the ability to build, and you own the land, you’re very reluctant to build smaller than you’re allowed to,” Barnett said.

However, Levine said developers might have a hard time carrying land through a prolonged market downturn.

“Generally, if you own land, and you have significant debt, you are in between the proverbial rock and a hard place,”
he said.

Levine said he anticipates those developers will seek out partnerships with larger development companies that still have good access to financing.

When lenders were handing out financing to “anyone with a heartbeat,” novice developers typically focused on the boutique projects. Now, banks won’t even consider lending to developers without an extensive track record, Levine said.

Tim Crowley, a managing director of Flank, a design development firm that focuses on boutique projects with only a handful of units — typically outsized condominiums — said he will be watching to see what larger developers do. But he said he doesn’t believe there will be a major trend toward boutique development among the big players.

“Big development firms, like the Related Companies and Vornado, aren’t going to start looking for small projects,” Crowley said. “I think what you might see is developers and equity sitting on the sidelines until they can find really quality distressed assets to reposition. I don’t see a lot of them using their infrastructure to tackle a 50,000-square-foot project.”

If one thing is for certain, it is that
developers will be getting creative to pull off deals.

For instance, the hotel developer John Lam downsized when he couldn’t obtain enough financing to build a 660-room Sheraton hotel near the South Street Seaport in the Financial District. He is hoping to break the $250 million project into two smaller hotels, one of which will be a 220-room Sheraton.

Lam said he is making arrangements for one bank to finance one hotel and another bank to finance the other.

“Right now, credit is very tight, and our company is still getting credit, but over $100 million from one bank is difficult to get in this market,” he said. “So we divided the project.”

However, other property developers said they doubted that would be done with residential projects. “With major development projects in Manhattan, that would be difficult to do, as you could imagine,” Levine said. “You can’t say, ‘I’m going to build floors two through eight now, and next year, I’m going to do floors eight through 12.’”

Developers whittling down the size of their projects are also cutting back on the little extras.

No developer admits sacrificing quality to save money, but one of the first places ripe for cost cutting remains expensive amenities, like rooftop cabanas and bowling alleys. The trend has been growing over the past year. Even pools and fitness centers may go.

“I think developers finally started to realize that we don’t need high common charges for all these silly, nonsensical amenities that we barely use,” said Luigi Rosabianca, a managing member of the law firm Rosabianca & Associates, which specializes in residential and commercial real estate. “For a developer, it’s always nice to maximize your square footage, and you can do that by eliminating that pool we only use twice a year.”

Shaun Osher, the founder and CEO of CORE Group Marketing, which handles new development marketing, said basic amenities will stand the test of time. But, he said, extraneous, spare-no-expense features will be the first to go.

“Anything that makes sense and adds value in a buyer’s mind should stay intact,” he said. “A lot of people have to have a doorman. Not a lot of people have to have a putting green on the roof. Amenities that never made sense before still don’t make sense, and the ones that always made sense will still make sense.”

However, for property developers who already have an offering plan, excising amenities isn’t a viable option.

“I think a lot of these amenities have been overblown,” said Andrew Gerringer, the executive vice president of the development marketing group at Prudential Douglas Elliman. “But if you have an offering plan out there, and if you’ve sold some units, you’d have some disgruntled purchasers if you went back and started pulling out some of the major amenities.”

Those developers may want to cut costs in the area of marketing and advertising, industry experts said.

For example, the developer of Tempo at 300 East 23rd Street recently paid $500,000 for a rotating hologram of the building to spur sales of the condo development’s 103 units, said one broker, who asked not to be identified.

“I wish he had paid off [the] mortgage instead of spending that money, because he’s not going to get any more sales from it,” said the broker. “Smoke and mirrors don’t sell apartments.”

Jeffrey Levine, the chairman of Douglaston Development, said certain types
of marketing spending will be discontinued, but the Internet will continue to be important.

“The lavish parties you saw for condominiums are a thing of the past,” he said. “I think marketing is changing as a result of the world we’re living in. Internet advertising and presence is critical.”

That doesn’t have to be expensive, he said. One cheap marketing tactic that got Douglaston’s Edge condo in Williamsburg publicity was the banner it hung from the site a few hours before the vice presidential debate last month. The banner, which read, “Sarah Palin, Live Here, See Wall Street,” played on the Republican vice presidential candidate’s statement that she was able to see Russia from Alaska.

“We were just being lighthearted about our political situation, but that had a huge Internet presence that caused buyers to come upon us,” Levine said.

Meanwhile, shaving rates for various professional services may be another way to save on development costs. And certain glamorous perks favored by developers in the latest boom, like the use of celebrity architects, will most likely be jettisoned.

“For the moment, the days of ‘starchitects’ may be behind us,” Levine said. “Obviously, grandiose schemes are a thing of the past.”

While some developers will be looking to cut costs wherever possible, others will take advantage of the new terrain, especially when it comes to dropping Manhattan land prices, Levine said.

“At a certain point, and that point is coming closer, these construction lenders, land-loan lenders and bridge-loan lenders, be they hedge funds or whatever, will be selling some of this land to get it off their books,” he said.

While they’re on the lookout for those opportunities, developers will also likely see their labor costs falling, Rosabianca said.

“Any time you’ve got some competition among people looking for work out there, I think your labor costs will come down a little bit,” he said.

Levine said that construction costs are already being reined in as contractors begin to work more efficiently.

“Obviously, the lack of bank financing has made all of the contractors very much aware of the fact that we may be looking at a dearth of new construction projects,” he said. “The intelligent contracting firms are working tighter to insure their workflow.”

For now, too, oil is 50 percent cheaper than it was a year ago, while many of the metals used in construction, such as copper, steel and aluminum, have become less expensive, Levine said.

“Nationally, the homebuilding industry went to hell in a handbasket a year ago, so there’s less demand,” he said. “As a result of that, prices for materials like the gypsum wall board and wood boarding materials have come down, too.”

But the cost of glass has increased steadily. That has prompted many New York City developers to modify plans for glass curtain walls, or drop them altogether. That move away from glass will also save developers from having to install expensive shades.

While Levine said he believes contractors and subcontractors have begun lowering their bids, Gary Barnett, the president of Extell Development Company, said he hasn’t yet experienced that.

“We haven’t seen any really sharp drop in construction costs right now, but we expect that to start happening as the contractors and subcontractors see the shortage of development going forward,” Barnett said. “There’s very little in the pipeline coming up in 2009.”

The depth of the housing crisis should not surprise anyone who has kept a place on their night table for a few widely hyped books on the meltdown in the last year.

But for those who are still scratching their heads, trying to figure out what’s happening to the nation’s financial system, there’s an onslaught of soon-to-be and more-recently published books to choose from. “Six Days that Shook the World,” by New York Times contributor Roger Lowenstein, and “Too Big to Fail,” by Times reporter Andrew Ross Sorkin are just a few to look out for in the near future.

Meanwhile, though books like “The Subprime Solution,” which was written by Yale economist Robert Shiller, have already received widespread attention, others have been lower-profile, and may require digging through the shelves of a local Barnes & Noble. And then there are those like the “Trillion Dollar Meltdown,” by Charles Morris, that are getting updates. Morris is releasing his “Two Trillion Dollar Meltdown” this spring.

The latest batch of books span all categories. For those who want to get an overview in under an hour, “The Skinny on the Housing Crisis” fits the bill. For others who want to know who to hold accountable, several new books offer dramatic narratives that look at the business executives who worked in the subprime mortgage business. And, for investors, there are plenty of books on how to turn a profit in the midst of a meltdown.

As New York developers, brokers and buyers try to navigate the new real estate terrain, one thing is certain — that there’s a voracious appetite for books with explanations, and no shortage of authors willing to oblige. Here’s an abbreviated roundup of some of the books that are out there:

The Skinny on the Housing Crisis: What Every Homeowner and Homebuyer Needs to Know

By Jim Randel, Clover Leaf Publishing

This comic-book-style read offers a quick and painless way to learn about mortgage securitizations, payment-option loans and even tranches. Randel, an attorney and real estate broker, tells the tale of newlyweds Beth and Billy, who get suckered into buying a house with an adjustable-rate subprime loan that they can’t afford. The couple eventually loses their home to foreclosure, and the strain of the experience proves so traumatic that they end up getting divorced. A whole network of opportunistic businesspeople takes advantage of them, including their real estate agent, a crooked appraiser, their mortgage broker and even their lawyer. After each transaction Beth and Billy make in their ill-fated quest to realize the American Dream, Randel offers explanations of some of the unsavory industry practices and questionable types of loans that led to the housing crisis.

Confessions of a Subprime Lender: An Insider’s Tale of Greed, Fraud, and Ignorance

By Richard Bitner, John Wiley & Sons

Richard Bitner — who’s been making the rounds on the publicity circuit over the last few months — describes the self-deceptions and the culture of denial that pervaded the subprime mortgage industry during its boom years. He’s in a position to know, having spent five years as the owner of Dallas-based subprime lender Kellner Mortgage Investments. Bitner had a better record than most: During his tenure at Kellner, his firm had an average delinquency rate of 3 percent, in comparison to the industry average of 20 percent. However, as competition increased, he found he was underwriting riskier loans and dealing with sketchy characters, such as a vice president of one of the largest mortgage operations in Cleveland who turned out to be a convicted felon with a penchant for throwing knives around his office. Nobody comes out unscathed in this insider’s account of the subprime mortgage industry, which describes the business practices of Wall Street investment firms and rating agencies, as well as the brokers and lenders who set up homebuyers with mortgages they couldn’t afford.

Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis

By Paul Muolo and Mathew Padilla, John Wiley & Sons

Two noted financial reporters go behind the scenes to show what went on inside corporate boardrooms and at investor luncheons during the unwinding of the mortgage and credit crisis. Their protagonist is Angelo Mozilo, the perennially tan, well-coiffed CEO of Countrywide Financial, who started out as an errand boy from the Bronx and ended up founding what was to become America’s largest home-mortgage lender. Mozilo is portrayed as a complex figure who on one hand played a leading role in increasing homeownership by minorities, but who also got caught up in peddling problematic mortgage products such as payment-option adjustable-rate loans — known in the industry as the “I’ll-worry-about-it-tomorrow” option. The authors show, however, that there was plenty of blame to go around. They describe how a widely shared belief that housing prices would continue to rise helped sustain the shaky business models and complex financial instruments that are now collapsing.

The Abandoned Property Investor’s Kit: Find the Owner, Buy Low

By Reggie Brooks, John Wiley & Sons

A nuts-and-bolts approach to investing in abandoned properties, this book falls more into the get-rich-quick vein. It was penned by a former telephone company employee who discovered a way to turn a profit after coming home from work one day and watching an infomercial advertising real estate seminars. Brooks signed up for the class and took careful notes; today, he is known as “Mr. Abandoned Property” and says he makes about $40,000 a month buying and selling abandoned homes. His book is peppered with tips on how an investor with little or no money can end up profiting from deals involving abandoned properties. He discusses creative financing techniques such as wrap-around mortgages. The book also comes with a free subscription to an online course that Brooks says is worth $395.

Foreclosure Myths: 77 Secrets to Making Money on Distressed Properties

By Chip Cummings and Ralph Roberts, John Wiley & Sons

Right now, many investors are not keen on buying foreclosed properties in New York City: Housing prices have begun to fall in neighborhoods hit hard by foreclosure, there is no bottom in sight, and the subprime mortgage market has dried up, limiting resale potential. But in neighborhoods and parts of the country where prices have already taken a nosedive, there is opportunity, according to veteran real estate investors Chip Cummings and Ralph Roberts. Their book is structured around refuting the “myths” that have developed about investing in foreclosed properties. Most of the advice is quite useful for both veterans and neophytes. It includes tips on how to evaluate foreclosure properties before an auction, how to purchase a house pre-foreclosure, and how to finance a purchase with little or no money down. Interestingly, the first myth that the authors set about disabusing is that buying a foreclosure is taking advantage of someone else’s misfortune.

Financial Shock: A 360 degree Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis

By Mark Zandi, FT Press

As they say, hindsight is everything: In spring 2008, Zandi, the chief economist and co-founder of Moody’s Economy.com, and many others believed that the “financial turmoil [had] reached an apex in mid-March, when the Federal Reserve stepped in to engineer the sale of Bear Stearns.” In fact, in the last chapter of Zandi’s informative book on the developing subprime mortgage crisis, he states, “As this is being written about a year after the subprime mortgage shock hit, the worst appears to be over.” Well, maybe not. In the book, Zandi does identify weaknesses he says could (and did) further destabilize the financial system — declining housing prices, increasing foreclosures, the credit default swap markets, leveraged and mortgage-backed securities and banks having to take massive write-downs. His book is especially good at describing how foreign money helped fuel the expansion of the U.S. credit and housing markets.

Atlanta

The $1 million Atlanta luxury home has become the $2 million-or-more luxury home, according to brokers who sell in the high-end market. There were 165 single-family homes for sale for $2 million to $20 million in Atlanta’s Buckhead neighborhood in early October, the Atlanta Journal-Constitution reported — a supply that could meet buyer demand for three years. Many Atlanta luxury buyers pay all cash, and most prefer new or thoroughly remodeled homes. Many already have several homes and are purchasing homes in Buckhead for proximity to restaurants and the arts. Even in a buyer’s market, the list-price-to-sell-price ratio tends to be 90 to 93 percent.

Absorption in metro Atlanta’s office market — the number of tenants who moved in subtracted from the number who moved out — increased in the third quarter but is still almost two-thirds lower than it was at this time last year. The office market overall had a positive absorption of 38,287 square feet, the Atlanta Journal-Constitution reported, with the most absorption occurring in Midtown, where there was a positive absorption of 168,675 square feet. The suburban submarkets had negative absorption and lower rents than urban submarkets such as Midtown, Downtown and Buckhead.

Boston

Developments around the city have stalled amid the credit crisis as construction costs rise, credit is less available and investors worry about taking risks. The 1.1 million-square-foot retail, hotel and residential project at Waterside Place on the South Boston waterfront; a development at South Station that would include a hotel, condos and retail space; an $800 million complex over the Massachusetts Turnpike; and a $200 million condominium development downtown are four projects that are on hold until the long-term effects of the recent economic turmoil are clearer.

Chicago

Ty Warner of Beanie Baby fame has signed a contract for the Chicago Spire’s duplex penthouse, which was on the market for $40 million. It may be the most expensive residential sale in the Chicago area, the Chicago Sun-Times reported. The 10,000-square-foot penthouse occupies the 141st and 142nd floors of the 150-story building at 400 North Lake Shore Drive, which is slated to be the tallest building in the western hemisphere. A third of the 1,200 units in the Shelbourne Development Group’s building have been sold, and construction is scheduled to be completed in 2012.

The city’s office vacancy rate dropped to 10.7 percent in the third quarter, the lowest rate since 2002, Crain’s Chicago Business reported. There were a number of large downtown office deals in the third quarter — including law firm Baker & McKenzie’s 300,000-square-foot lease in a new tower on West Lake Street and BP’s lease of 225,000 square feet at the Chicago Mercantile Exchange Center — but the deals had been in progress for nine months to a year, and similar deals are not being set in motion today, brokers said.

Las Vegas

Over 9 percent of the households in Las Vegas are in foreclosure, compared to 2 percent nationwide, the Las Vegas Review-Journal reported. Nevada also leads the country in pre-foreclosures, which are the notices and auctions that precede a foreclosure. There were 3,563 foreclosures in Clark County in September, making the year-to-date total 22,543. By September of last year, there had been only 7,704 foreclosures. There have already been more pre-foreclosures in Clark County this year than there were in all of 2007.

The Las Vegas industrial market is struggling in the wake of the economic slowdown. The industrial vacancy rate was 9.2 percent during the third quarter, according to Grubb & Ellis, up from 8.6 percent the previous quarter and 5.9 percent in the third quarter of 2007. For the first time in eight years, industrial construction fell under 1 million square feet, the Las Vegas Review-Journal reported. The total amount of leased space fell to 18,400 square feet during the third quarter, and average monthly lease rates dropped to 73 cents per square foot from 76 cents per square foot in the previous quarter.

Los Angeles

Foreclosures in Los Angeles County rose by 196 percent between the third quarter of 2007 and the third quarter of this year, the Los Angeles Times reported. The third quarter 2008 number — 15,749 foreclosures, according to a report by Propertyshark.com — is a whopping 923 percent increase over the third quarter of 2006. One zip code in Palmdale had the highest number of foreclosures, with one out of every 45 homes falling into foreclosure. Parts of Lancaster, Sylmar and Pacoima also had high numbers of foreclosures.

Phoenix

A real estate investment firm paid $66.24 million for the Shops at Chauncey Ranch on Scottsdale Road and Mayo Boulevard in the region’s second most expensive retail transaction so far this year, the Arizona Republic reported. The buyer was Levine Investments, which bought the development from AV Arizona 1. The 169,000-square-foot space is about 98 percent leased, and the retailers already present include Whole Foods, the Container Store and PetSmart. Levine Investments also owns 700,000 square feet of retail space at the Promenade, on Scottsdale Road and Frank Lloyd Wright Boulevard south of the Shops at Chauncey Ranch, purchased for $123 million in 2005.

San Francisco

The turmoil on Wall Street makes uncertain the future of several million square feet of office space in the Bay Area. Financial firms that have merged or dissolved in recent weeks control 4.2 million square feet of regional real estate and 2.4 million square feet in San Francisco, the San Francisco Chronicle reported. One estimate holds that companies will look to relinquish at least 500,000 square feet of office space in the city and that another 250,000 square feet may open up as a result of the credit crunch.

Construction began at the beginning of last month on Shorenstein Co.’s 601 City Center, a 23-story office tower in downtown Oakland at 12th and Jefferson streets. The $240 million project, with 597,000 square feet of office space, is expected to open in two years and create 1,000 jobs, the San Francisco Chronicle reported. Built mostly from recycled steel and with roofs covered by drought-resistant plants, the tower will be one of the largest green office buildings in the East Bay. Shorenstein and Metropolitan Life Insurance Co. have said they will contribute $2 million from the project to the city’s affordable housing fund.

Seattle

Prices in King County continued to fall in September, but the number of pending sales increased for the first time since last year, the Seattle Times reported. Buyers’ offers were accepted on 1,767 houses, an almost 15 percent increase over the September 2007 numbers. But the number of pending condominium sales declined by over 20 percent in September. The median price of a single-family home fell by 7.8 percent from the September 2007 number, while the median price of a condo fell by 9.3 percent. Brokers said the increase in accepted offers may be a sign of a turnaround in the market, but it will be impossible to tell until the federal bailout takes effect.

Washington, D.C.

Evermay, a historic estate in Georgetown, went on the market for $49 million, a record price for residential property in the area. The listing surprised many real estate agents, who say they can’t believe buyers would want to spend that much money on a house in a down economy. The 22-room, 216-year-old estate on 28th Street NW in Georgetown was last purchased in 1923 (see related story on page 90). Several people have already asked to see the house, the Washington Post reported.

Compiled by Sara Polsky and Linden Lim

While Lafayette Street seems like two different worlds above and below
Canal Street, brokers say that could all be about to change. That is, if economic conditions cooperate.
A luxury condo is coming to 50 Franklin Street, off of Lafayette, and
one block away, new stores and residents could be on the way, thanks to
a rezoning approved in July. [more]

“New York can do better than the new Fourth Avenue.” That was the title of an article published earlier this year on Streetsblog, a Web site advocating pedestrian-friendly, livable streets. The article went on to lambaste the Department of City Planning for not requiring ground-floor commercial uses in the avenue’s new developments in the area that was rezoned in 2003.

“Instead of transforming Fourth Avenue into Brooklyn’s next great neighborhood, these new developments turn their back on the public realm, burdening the street wall with industrial vents, garage doors and curb cuts,” it noted.

Has city planning heeded the pointed criticism? Perhaps.

In the department’s proposed rezoning of the Gowanus area, the city is looking to rezone a stretch of seven blocks from 1st to Douglass streets on Fourth Avenue. (The strip had been left out of its larger 2003 Fourth Avenue rezoning because it was earmarked for industrial uses.) This time around, the department will mandate that a certain percentage of building frontage on
Fourth Avenue in the seven-block expanse — which, despite the addition of some new hip restaurants and bars, is still largely home to a number of auto-body shops — include active ground-floor uses.

In fact, the department went so far as to include a photo of the air vents on the new Crest condo project that fronts Fourth Avenue in its draft Gowanus rezoning proposal.

The image superimposed a large red “X” over the vents to indicate that design style would no longer be acceptable.

Still, many Fourth Avenue developers dispute the notion that the avenue’s new buildings have created an environment that is not attractive to pedestrians, or that it does not spur commercial activity on the street level.

Gregory Rigas, who has built two rental buildings on the avenue that do not include
active ground-floor commercial uses, contends that retail will follow the influx of residents to the avenue.

“I’m sure they’re going to build shops,” he said. “People have to go shop and eat somewhere.”

Jean Miele, who is constructing a development between President and Union streets that will include commercial space, concurs. “The market will dictate that there is more commercial,” he said.

Developer Dominic Tonacchio notes that he has included ground-floor commercial uses in all his buildings that have been constructed or are on the drawing board. He said that he and his partners intend to make the Fourth Avenue traffic medians outside his developments more aesthetically pleasing.

“I think once some of the buildings are done, we’re going to decorate the traffic medians, get permits to put flowers there, or something like that,” he said. “We want to do it to fix it up and make the area look nice. You’re going to see more and more people walking on Fourth Avenue.”

While there are still questions about whether the new Fourth Avenue buildings will end up creating a streetscape that’s more attractive to pedestrians than the current traffic-clogged mega-thoroughfare, there has definitely been an increase in retail since the 2003 rezoning.

On one block, between St. Marks Place and Bergen Street, three bars have opened up. A couple of blocks to the south, an Australian gastropub called Sheep Station opened in 2006. In a review of the restaurant a few weeks after it opened, a New York Times critic noted that “the place was packed with all kinds of people: older couples shouting over the characterless mix of music blasting in the barroom, a woman hand-feeding French fries to her girlfriend.”

The owners of Sheep Station are now planning to open a ramen restaurant on Fourth
Avenue and Degraw Street. Earlier this year, an Ethiopian restaurant called Ghenet, which has
an outpost in Manhattan, opened on Fourth Avenue and Douglass Street. An independently owned coffee shop with weekly open-mike nights, Root Hill Café, also opened earlier this year. The shop has generated attention for featuring a Clover coffee maker, a specialty machine that costs $10,000.

Developers are certain that as the avenue’s population swells, more such retail options
will follow.

“We have trendy bars near us now, and restaurants opening,” said Shloimy Reichman, who’s developing a building on Butler Street. “A couple hundred people have already moved into condos on the avenue, and as more come, services will follow. If someone had been on Fourth Avenue five years ago, they wouldn’t recognize it today. It’s definitely becoming a nicer place.”

Have FiDi residents — and workers — stopped shopping? The minute the stock market began sliding, the media began to wonder about the fate of the Downtown retail scene, which in the past several years has transformed itself from workaday stores serving Wall Streeters on their lunch hour to the likes of Tiffany & Co.

A spokesperson for Hermès, which opened in June 2007 at 15 Broad Street, said that it has been “bombarded by calls” in the past few weeks inquiring as to how the store is faring. She insisted that as of last month, “sales have remained stable,” but said company policy does not allow the release of numbers to the public.

According to Sam Chandan, chief economist at Reis, the commercial real estate analysis firm, the financial sector makes up 12 percent of jobs but 36 percent of wages in New York City. As a result, the recent round of Wall Street layoffs affects a disproportionate share of spending activity in the city.

Brokers say that while it’s hard to quantify if retailers are pulling back in the
Financial District yet, “caution” is the word of the day when it comes to considering store space there.

“I think most everyone is in a wait-and-see mode,” said Michael Hofmann, senior managing director for retail at Colliers ABR, who noted his clients have been back to see spaces several times. “The clients that I rep — luxury retailers — are definitely in a wait-and-see mode. They’re waiting to see if places like Tiffany and Hermès can put the numbers out.

“The events of last month have given everyone pause.” he said.

Apple, according to Crain’s, was seriously considering a lease on 50,000 square feet of space at 23 Wall Street up until about a month ago, but decided not to go forward with those plans. Neither Apple nor the leasing agent, Robert K. Futterman & Associates, could be reached for comment, but other brokers expressed surprise at the collapse of the deal. “I thought that building would have been a natural location for them,” said Michael Stone, senior director of retail services at Cushman & Wakefield.

He added, “I have heard that the space is a little awkward and very expensive. It’s a significant commitment to Downtown, and they already have three big stores in the city, so maybe they figured they have enough now, or they’re waiting for retail space at the new World Trade Center.”

Mercedes-Benz, meanwhile, denied a recent report in Crain’s that it had plans for a Downtown dealership near BMW’s 67 Wall Street space. Donna Boland, manager of corporate communications for the luxury car company, said that for the past two years, Mercedes has been looking to replace its Midtown facility with another one in the same neighborhood.

She added that Lower Manhattan wasn’t workable for the company in terms of factors like parking availability.

The population in the Financial District has more than doubled since before 2001 (from 22,961 to 56,354, according to figures from the Downtown Alliance).

With the increase in residents and businesses, the area is better positioned to weather the bad times, brokers said, noting that the streets are still teeming with people. And they say that there is a strong need for more retail to serve them.

“My recent experience is that there are the same amount of people on the street and not enough retail to support them,” said Stone.

Yet it’s possible that the residential and commercial infrastructure that now exists in the Financial District may hinder its growth in the short term, as investors who had been buying residences in the area look elsewhere.

“Unfortunately, I think that the area that will suffer most in the city will be the Financial District,” said Andrew Mandell, partner in Ripco Real Estate.

The recent round of Wall Street buyouts and mergers doesn’t bode well for potential moves Downtown for financial companies.

For example, HSBC, which was considering moving its headquarters there, has put its plans on hold, according to Mandell. And Merrill Lynch, which was just acquired by Bank of America (soon to be headquartered at One Bryant Park), could end up scaling back its space at its World Financial Center site.

For this reason, some luxury retailers may look to other parts of Manhattan when picking new store locations. “Ask luxury retailers where they look for their demographic, and they will tell you in the wealthiest areas,” said Colliers’ Hofmann.

There may be enough of an upscale demographic for Whole Foods, which opened its doors this summer at 101 Warren Street.

There also may be unexpected opportunities for some businesses to take advantage of the lifestyle adjustments some former Wall Street employees are sure to experience.

Orin Wilf, president of Skyline Developers, whose company leased space to Tiffany at 37 Wall Street, had originally planned to lease space in the building to Italian clothier Brioni, but that deal fell through about a year ago. Now C-Swing, a company that provides golf lessons, will take over the space.

“They can make it in either economy,” said Wilf regarding C-Swing. “Wall Street guys usually can go out and spend money on this kind of luxury, but now, if people are losing their jobs, they need something to do. C-Swing may be charging $2,000 a year for a membership, but joining a golf club in the area costs half a mil. I’m happy that we got that type of tenant.”

Darrell Rubens, managing director at Winick Realty, said he is still moving forward with about half of his leases in the area. “People are looking more closely, and there are often more senior people in the company examining the locations,” he noted.

Ironically, some of the new condos and other residences that have sprung up in the Financial District (and there are many of them) are also preventing certain small service-oriented businesses from taking space in the area.

Most of the newer residences have in-house amenities such as dry cleaning, so it’s unlikely that those types of businesses could take advantage of potential retail vacancies. “You already have the service industry down there. You don’t have businesses like dry cleaners opening up because newer buildings have those services,” said Rubens.

In the boom times, brokers had approached long-time leaseholders with buyout propositions so that higher-paying tenants could take their places. And according to Rubens, this tactic has been a way to get around the fact that there is also a simple lack of vacant space in the Financial District. “There’s not that much vacancy down on Wall Street — very few for-rent signs,” he said.

Now, according to some brokers, the slumping economy may present an obstacle to the buyout strategy since retailers might be less motivated to seek space.

“You’ll see less in the way of lease buyouts going on,” said Mandell. “Retailers won’t be as aggressive with respect to what they’re willing to pay. What fuels buyouts are aggressive retailers, and without that, the money just isn’t there. And the hesitant climate is not helping that.”

Chandan from Reis noted that over the past few years, New York has benefited from a boom in tourist spending, a factor he expects to reverse as the global economy begins to slow, and as the U.S. dollar begins to appreciate compared to the euro and the
Canadian dollar.

Still, some that decide to take space Downtown may have better luck than others.

“What will go right now is moderate food; it’s not a time to open a very expensive restaurant,” said Cheryl Cohen, president of Trend Setter Realty.

Several brokers insisted that now was a good time to make a deal with landlords willing to adjust to the reality of the downturn.

“A lot of landlords realize that it’s a tough time, and it may be a tough time for a while, and they’re going to have to discount their rents,” said Roxanne Betesh, senior managing director at Sinvin Realty. “Getting something is better than getting nothing, and it’s a good opportunity to open a store.”

Wilf added, “Tenants should start making deals with landlords now so they can
get a better deal now before the market
starts upticking.”

Many brokers agree that ultimately, it’s too soon to tell what the impact of the financial crisis will be, though there is some consensus that the area will ultimately rebound and that the infrastructure that now exists will aid in the recovery process. “The future is extremely bright,” said Mandell. “It’s the short term that’s worrisome.”

Two years ago, the Windsor Terrace/Kensington section of Brooklyn was one of the brightest spots in the emerging Brooklyn real estate market.

The neighborhood was fast becoming a magnet for writers, artists and growing families priced out of more established areas such as Park Slope and Brooklyn Heights.

However, the wave of speculative residential development that started in Windsor Terrace/Kensington during the boom has now been stopped in its tracks by the squeeze on lending. The financial meltdown has — at least for the near term — left
several half-built condos and empty lots in its wake.

“This neighborhood is very much the victim of speculative development gone bad,” said Warren Shaw, president of the board of directors at 81 Ocean Parkway, a co-op building that has a stalled development across the street from it and an empty lot next door.

Until the credit crunch hit, developers had zeroed in on a seven-square-block area in Kensington bounded by Fort Hamilton Parkway to the north, Coney Island Avenue to the east, Caton Avenue to the south and Ocean Parkway Service Road to the west. One of the most visible problem developments in that locale is 23 Caton Place, where developer Moshe Feller had planned on building a luxury condo that neighbors felt was out of character with the community.

The 107-unit Karl Fischer-designed condo, which was dubbed “Caton on the Park,” now sits half finished. The developer ran into financial trouble, and the Department of Buildings issued a stop-work order in April after construction workers walked off the job.

In June, Chicago-based Corus Bank filed suit in New York State Supreme Court after the developer defaulted on a $32.5 million loan. (Feller had previously filed a motion to prevent Sagecrest II, a Greenwich, Conn.-based mezzanine lender, from selling its interest in the property; Sagecrest filed Chapter 11 bankruptcy in August.) Lawyers for Feller were not immediately available for comment.

Corus Bank, for its part, declined comment.

Cindy Whiteside, a senior associate salesperson at the Corcoran Group and a resident at 81 Ocean Parkway, said part of the problem at Caton on the Park may have been the lack of a pre-sales effort.

“Most new developments will offer pre-construction sales,” said Whiteside in September. She added that she was impressed with the aesthetic qualities at 23 Caton Place, and believed that apartments at the site could sell with a proper marketing push. “If somebody could save that site, I could sell those apartments tomorrow.”

However, weeks after the federal bank bailout, Whiteside cautioned that selling most buildings was becoming more difficult. “Any property is going to have a
challenge in this market because of credit,” she said.

Meanwhile, another developer, Empire Equities president Daniel Rokeach, had asked the city about two years ago to rezone a site at 22 Caton Place, located right next door to 81 Ocean Parkway, so he could build a 68-unit condo.

Shaw said that residents at 81 Ocean Parkway opposed the new building, in part because it would block natural light and air for up to two dozen apartments in his building, and would create traffic congestion because of the lack of available parking space.

After neighbors circulated an opposition petition, a compromise was reached for an underground parking space and the creation of a 16-foot side yard that would provide natural light and air for residents at 81 Ocean Parkway.

However, the developer ran into financing issues, in part because he does not own the land outright, but controls the site under a long-term ground lease from another owner. Banks are often reluctant to finance buildings operating on a long-term lease because of the risk that the land owner may sell the property.

Rokeach said the company is working on financing for the building, and that he may revise the project with a smaller number of units. He has already changed his original condo proposal to a rental.

Tom Angotti, an urban affairs professor at Hunter College who worked with community groups during the rezoning fight, said that residents in Kensington were upset when they were told that existing zoning laws would allow real estate developers to build high-density condos in a community that has historically consisted of one- to three-family homes, a mix of moderate co-op apartment buildings, light industrial sites and the Kensington Stables, a popular venue for horse riding in Prospect Park. “They were surprised to see a lot of new developments sprouting up around them, and discovered that the zoning permitted it,” Angotti said. “They were also concerned about the Stables being surrounded by high-rise development.”

Jeremy Laufer, district manager of Community Board 7, which includes Caton Place, said many in the community were concerned that a rapid increase in the number of luxury condos would price local residents out of their homes.

“The massive development that has taken place in our community has been a concern,” said Laufer. “One of these concerns was, who are these units being built for?”

Still, real estate brokers insist that
the development problems at Caton Place have not spilled over into other parts of Kensington, where sales have exceeded 2007 levels.

According to the Brooklyn Board of Realtors, 21 co-ops and condos were sold in Kensington during the first nine months of 2008, compared with 14 a year ago. The average sale price of a co-op or condo is up 8 percent compared with a year ago, to $248,376.

However, the average days on the market rose 66 percent to 243 days, an indication that brokers are having a harder time moving inventory.

There are certainly signs of sluggishness at two new completed condo developments.

At 235 Ocean Parkway, a new eight-story, 15-unit condo marketed by Corcoran, prices were slashed dramatically in recent months, and 11 units were temporarily pulled from the market last month, according to StreetEasy.com, a real estate data Web site.

For example, a 720-square-foot one-bedroom apartment that was originally put on the market in March for $499,000 was cut to $379,000 by late July, before being withdrawn last month. A 1,070-square-foot two-bedroom, two-bath unit, which was listed for $625,000 in March, went into contract in September for $504,000.

Nonetheless, local real estate brokers
remain bullish on Kensington.

Carolyn Cedar, an agent at Fillmore Real Estate, noted that median sales prices through September — the most recent data on record — are up 18 percent since 2005.

However, she said that some potential buyers are planning to sit out the market until mid-2009 due to the recent financial meltdown and the tight credit market.

Whiteside and Shaw said that sales at 81 Ocean Parkway continue to move rapidly, with one-bedrooms selling in the $200,000 range and three-bedroom apartment selling in the $500,000 range.

Still, the prospects for rescuing some of the dormant sites on Caton Avenue remain bleak unless lenders are able to renew their funding obligations or new investors are brought in.

“It’s going to be status quo until the
financial markets and real estate markets recover,” said Shaw.

The slump in commercial building sales is threatening to take a sizable
bite out of New York City tax revenues this year, which could force
Mayor Michael Bloomberg to make even more drastic choices than he
already has to keep the city budget balanced. [more]

Council wants more Willets Point info

Faced with a Nov. 12 vote to approve the controversial redevelopment of Willets Point, City Council members are complaining that not enough specifics about the plan’s costs have been revealed, the New York Daily News reported. Mayor Michael Bloomberg has earmarked $400 million in the city’s annual fiscal budget for the plan, but has not shown how that total breaks down. The city has not provided details about the five land-lease deals it signed in the project’s footprint, which account for three acres of the 62-acre site. Rep. Hiram Monserrate of Jackson Heights said that the plan’s 32 opponents in the City Council are also skeptical because a developer has not been named.

Retail rent stabilization proposed

Council Member Robert Jackson plans to introduce a bill that would require small businesses and landlords to submit to arbitration in negotiating retail lease renewals if the parties can’t agree on a fair rent. The legislation aims to preserve small businesses by prohibiting large rent hikes in short-term lease renewals. The bill states that lease renewals would be set at a minimum of 10 years, unless otherwise agreed upon, and arbitration would be triggered if either party disputes the rent increase rate. The rates would allow for no more than a 3 percent rent increase each year, the Villager reported.

Affordable housing funds struggle

The New York City Acquisition Fund, which Mayor Michael Bloomberg tapped in his campaign to build 165,000 units of affordable housing, may be in trouble as the private-sector banks contributing to it falter, the Daily News reported. Partners in the $240 million fund include Washington Mutual, Wachovia and Fannie Mae. The city already faces a shortage of 100,000 to 300,000 units of affordable housing, according to the Pratt Center for Community Development.

DOB releases new crane license requirements

The city’s Department of Buildings released new requirements last month for individuals seeking Class C licenses to operate mobile cranes. New applicants must obtain certification from the National Commission for the Certification of Crane Operators, a nonprofit organization that develops performance assessments for safe crane operations nationwide. Written and practical exams are part of the organization’s certification, as well as criminal background checks and compliance with a substance abuse policy. Contractors who are already licensed to operate mobile cranes must obtain the certification by Sept. 30, 2009 to keep their licenses.

Preservationists want West End Avenue to be designated historic district

Preservation group Landmark West is calling on the Landmarks Preservation Commission to designate a new historic district on the Upper West Side, including all of West End Avenue between 70th and 107th streets, the New York Times reported. The group said developers have been seizing individual rowhouses along the avenue, demolishing them and replacing them with glass apartment buildings. The Upper West Side is already home to seven historic districts.

LiMandri sworn in as DOB commissioner

Robert LiMandri was sworn in as commissioner of the Department of Buildings last month. LiMandri has more than 19 years of engineering, real estate and construction management experience, and has been part of the Department of Buildings’ senior management since 2002 as the deputy commissioner of operations and first deputy commissioner. He took over as acting commissioner in April after then-commissioner Patricia Lancaster resigned under pressure following two fatal crane accidents that killed nine people.

Compiled by Linden Lim

In these days of awe, when the stock market, capital markets and credit markets are in total disarray, there is absolutely no chance that I can be optimistic on the state of the residential condominium market. I probably should be wearing all black and seeking part-time employment as a mortician.

In my discussions with industry leaders, the general consensus is that developers of residential condominiums are in a state of denial. Developers say that everything is beautiful and sales are just great. Unfortunately, it looks to me that the only increases are in the large number of classifieds that appear in the real estate section of the New York Times, in the tabloids and the glossy magazines advertising unsold condominiums.

The president of Citi Habitats, Gary Malin, participating in my real estate trends class at the NYU Real Estate Institute, said, “Basically there have been no condominium deals in October.” A number of developers who planned to open their sales offices in the fall are postponing opening for at least 90 days.

Ofer Yardeni, the co-founder and managing partner of Stonehenge Partners, said, “There is fear in the streets.”

The managing director responsible for condominium development sales at a major New York City brokerage firm, who preferred to remain anonymous, said, “Anyone who tells you that the market is rosy is either lying or has their head deep in the sand. Everyone is worried: Buyers, sellers, brokers, bankers, lawyers, appraisers, accountants — everyone. Is it the end of the world? No, unless the financial markets continue to trend lower and lower by the week, and then all bets are off.

“Developers who do not, or cannot, negotiate with purchasers will be sitting on their properties for a while. Some of the financially sounder developers that will be able to hold off and take their time to sell as the project becomes more complete will weather the storm, while those that can’t could find themselves in deep trouble,” the managing director said.

A senior broker at a prominent New York residential brokerage firm said, “With 30,000 to 40,000 individuals who have or are going to lose their jobs, they won’t be buying or upgrading their residences. If anything, a large number of them will probably try to sell, so there will probably be another 10,000 or so additional residences to be put up for sale, just what we need — more inventory.”

One of Manhattan’s most prominent developers, who preferred to remain anonymous, said, “The Manhattan condo market is very soft, but not totally dead. We have traffic, but the question is how many are lookers who are not seriously interested in buying? The deals we have are those born of necessity, such as forced relocations.

“Discretionary purchasers in the $1 to $3 million category are virtually non-existent. The constant drumbeat of negative news regarding the economy and the housing market together with tougher mortgage standards and higher equity requirements has put a definite chill in the market.

“If this was a movie, it would be ‘Waiting to Exhale,’” Kenneth Fisher, a partner at Wolf Block, said. “Buyers are holding their breath until they find out when Wall Street is going to settle down and hoping they don’t pass out in the meantime. It’s not just Wall Street; law firms are jittery with one blue chip law firm on the verge of dissolving and others cutting costs.”

He added, “Developers with cash reserves are moving forward on new projects in anticipation of the markets settling down by the time they need construction financing two or three years down the road. Those with revenue streams are still in the game. Those who can only roll over the profits from one job into the next are hoping that they still have a chair as the music stops.”

The founder and chief executive officer of a real estate investment fund, who are the co-developers of one of the most successful residential condominium developments in Harlem, said, “I think sales have truly come to a complete standstill and will continue to be stalled until there is a brighter economic outlook. It is going to get worse before its gets better.”

A broker at one of the nation’s largest residential brokerage firms, who preferred not to be identified, said, “Brokerages and their senior management want to continue to send the message that all is going to be fine, and as soon as someone says otherwise then they hammer that person for not toeing the company line.”

“The overall current situation has certainly created a sense of ‘wait and see/rent or buy,’ but ultimately people need a place to live, and many have been waiting for a correction to pull the trigger,” the broker said.

Further complicating the sales of residential condominiums is the reality that first-time homeowners and purchasers are no longer qualifying for residential mortgages. Additionally, costs have risen for developments, and developers are now required to speak to their banker for additional funds to complete the project.

One of New York City’s leading developers, who preferred to remain anonymous, said, “We are all in uncharted territory. Never before has anything like this existed — it’s the perfect storm squared.

“The bankers and the lenders created this with their cavalier lending practices. I think the worst is yet to come. The lenders’ greed is still evident; they are going to have to recognize the value of hands-on developers, and possibly forgo some of their interest and returns if this is going to turn around and stabilize. Shutting down and applying the old standards are not going to work in this environment.”

Chris DeWeaver of Prudential Douglas Elliman said, “What developers do not understand or won’t face up to is that a number of their signed contracts will not proceed. That client of theirs who went to contract with either 5 or 10 percent down and was pre-approved, well those loan programs that they were going to close with no longer exist, so they are toast. To make matters worse, those people will now lose their deposits.”

In conclusion, I concur with a local developer who preferred to remain anonymous when he said, “Buyer psychology is very negative. When people finally hear the talking heads saying the housing and the economic crisis is abating, then and only then will the market begin to return to some degree of normalcy.”

Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” on CUNY TV and “Building New York” on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is also an adjunct professor at NYU Real Estate Institute and a former columnist for the New York Sun.

In the current credit squeeze, if you have less than a 20 percent down payment, there’s pretty much only one major source of mortgage financing available: FHA, the Depression-era home loan insurance agency that still offers 3 percent down, 30-year fixed-rate mortgages with consumer-friendly credit standards, even on jumbo loans in high-cost areas of California and the East Coast.

But there is a potentially troublesome problem looming for FHA: New loan volume is exploding — tripling in the past 12 months alone — and Congress just handed the agency the responsibility for virtually all the government’s efforts to keep economically distressed homeowners out of foreclosure by refinancing their current, unaffordable loans.

FHA says it needs to hire more staff and upgrade its technology to be able to handle the crush of new business, but complains that Congress hasn’t appropriated the necessary funds — $65 million — to do the job fast enough. Capitol Hill appropriations committee staff dispute some of that, but the specifics of the arguments over dollar amounts aren’t the issue.

The real question is this: Can a government agency whose market share dropped below 3 percent during the heydays of the subprime boom now properly handle explosive volume rocketing it to a market share 10 times its low point — an estimated 30 percent this year? Are both the agency and Congress, which controls the purse strings, up to the task?

Mortgage industry, homebuilding and real estate experts worry about the possible consequences of shifting too heavy a share of the mortgage market too quickly to an agency that may be inadequately staffed or funded by Congress. Howard Glaser, who served as acting general counsel for HUD, the parent department for FHA, during the Clinton administration, worries that loading on too much business without properly funding staff increases and technology upgrades raises the odds of future breakdowns.

“FHA is assuming the risks of a mortgage market abandoned by private investors — without the risk management tools,” he said. “My fear is that next year at this time, we will be debating an FHA bailout.”

Steve O’Connor, senior vice president of the Mortgage Bankers Association, agreed there’s danger lurking in the massive increases in loan business going to FHA. “You just can’t expect to fit that amount down the same size pipe — you’ve got to expand the size of the pipe” by funding additional staff and upgraded technology, he said. “It’s a very serious concern.”

The National Association of Home Builders and the National Association of Realtors — whose home sales to consumers in the coming year will be heavily dependent on financing support from FHA — have similar worries. Dick Gaylord, president of the Realtors, said that “if [FHA] is truly going to serve its growing constituency,” its staffing and funding will need to expand.

FHA — for years the forgotten, federally controlled stepchild of an industry dominated by Fannie Mae, Freddie Mac and the Wall Street mortgage bond machines — is now insuring more than 140,000 new loans a month, according to agency statistics. It has $400 billion in outstanding loan balances in its insurance portfolio, and runs its home mortgage business with 937 employees in offices spread around the country. The agency wants authorization to add 160 employees immediately.

Though historically a resource for first-time buyers, minorities and consumers with imperfect credit, FHA increasingly is the go-to place for people who have above-average credit backgrounds but lack — or choose not to use — large amounts of down-payment cash. In August, according to agency data, approximately 23 percent of all new FHA home purchasers had FICO credit scores above 720 — far beyond the proportion of prior years. In the same month, just 12 percent had FICO scores below 600.

With mortgage limits extending into the jumbo category, the agency is attracting large numbers of customers from high-cost areas of the country — especially California and the mid-Atlantic states. One of 10 new borrowers in August was from California.

To some mortgage lenders and loan officers, FHA is now the main game in town. “Nothing competes with them,” said Paul Skeens, CEO of Colonial Mortgage Group in Waldorf, Md.

Fannie Mae and Freddie Mac, both now in federal conservatorship, have steadily added fees to the point where “they just aren’t competing with FHA on down payments or costs,” said Skeens in an interview. In 2001 and 2002, Skeens’ firm did just one-quarter of 1 percent of its volume in FHA. Now, it’s 60 percent.

“The last thing we need right now, with the shape the housing market is in,” he said, “is for FHA not to function well.”

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

By now, anyone interested in the architecture of New York City will be
familiar with 15 Central Park West, one of the very few developments,
and surely the largest, to be built on that illustrious avenue in the
past half century. And yet, what is architecturally the best part of the building, the
courtyards on 61st and 62nd streets between Broadway and the park, has
only just been completed. Comments

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The article “Holding up funds for construction” from the November print
edition, incorrectly cited a Real Deal article. It implied that the
Swig Equities development Sheffield 57 was funded by Lehman Brothers,
which was not the case.

Ireland in recession as real estate boom fades

A 10-year real estate boom in Ireland has faded away with a steep drop in new home construction as the country becomes the first in the euro-zone to fall into a recession.

New home construction declined by 30 percent in the second quarter. That decline and a decrease in investment spending in general will probably continue to slow the Irish economy in 2009, economists told the International Herald Tribune.

Economic activity in Ireland is now the weakest it has been in 25 years, and the country has recorded two successive quarters of economic decline, the common definition of a recession.

Other countries in the euro zone will likely join Ireland in a recession as financial turmoil continues to swamp Europe. According to a September Reuters poll, economists believe there is a 40 percent chance that the entire 15-country euro zone will fall into a recession in the next 12 months.

Dubai gets taste of global meltdown

The ripples from the global meltdown are reaching Dubai, even as a $1.5 billion resort opens on an artificial island shaped like a palm tree and more new projects dot the skyline.

In the first signs of trouble for the region, banks have decreased lending, slowing construction plans. The United Arab Emirates recently committed $13.6 billion to help fix the country’s credit problems, according to the International Herald Tribune.

But given Dubai’s superheated economy, some analysts said a slowdown could be healthy, as long as it doesn’t become too prolonged, and could prompt a shift away from speculative building.

Speculation has made up a significant portion of market activity, with speculators borrowing money to put down 10 percent on unbuilt properties and then flipping them for huge profits, a strategy that worked when housing prices were leaping as much as 10 times over the course of a few years.

Property values will likely fall in Asian financial hubs

Office rents will likely fall and vacancy rates could rise in Tokyo, Singapore and Hong Kong, Asia’s financial centers, as banks slow their hiring and expansion plans.

Rents in Hong Kong’s Central District are expected to fall 25 percent by the end of 2009 as cheaper office space comes onto the market across the harbor, according to the International Herald Tribune. The vacancy rate in the Kowloon East District is 15 percent and may increase to 40 percent within two years.

While so far, major banks haven’t announced job cuts, layoffs could take their toll in areas that have been fueled by the growth of hedge funds and banks.

Job losses could cause rents to fall by an estimated 47 percent at Singapore’s Marina Bay Financial Center, an office project under construction, according to one projection. Tenants who have pre-leased space may end up subleasing it out.

Tokyo banks have hit the pause button on lending, hurting office rents. One Credit Suisse analyst predicted more bad news with the likelihood that Morgan Stanley and Goldman Sachs would be a smaller presence in the city in the future. He predicted that office rents may fall by 5 percent for prime buildings and by 10 percent for Class B buildings.

Compiled by Sara Polsky

The laws of gravity affecting New York’s once-soaring real estate market are holding true across the Atlantic, too. Commercial and residential markets that climbed for years in London are now heading sharply downward.

Like New York, its rival and sister city, London depends heavily on the financial sector, and its economy is also being pummeled by the banking and stock market crises.

There’s little sign so far of banks or other companies dumping office space onto the market, although real estate experts say they may do so as they grapple with the fallout of the recent financial panic. But building prices that had soared when billions in investments flooded the commercial property market are now sliding fast — and sales have ground almost to a halt.

“‘Strangled’ is the word I use,” said Bill Tyser, head of the financial district investment team at Cushman & Wakefield’s British arm. According to the company, there was $2.04 billion worth of transactions in the third quarter — just 20 percent of the volume in the same period last year. (Figures were converted from British pounds based on the exchange rate late last month.)

From 2003 through 2006, commercial building sales boomed as retail investment funds, international buyers, debt-backed individuals and consortia bid up prices in a market they saw as an easy source of profit. Prices flattened late in 2006 and started falling in 2007.

After the credit crunch hit, sales volume dropped off dramatically. Now, said Mat Oakley, head of commercial research for the real estate agency Savills, there are so few transactions that no one knows just how far the market has fallen. He estimated prices were 20 percent off their peak.

“The correction that we were expecting at the beginning of 2007 has now happened, and the question going forward is, ‘How much over-correction are we going to see?’” he said. With debt tight and those with cash still waiting for further falls, that over-correction “will probably be quite significant,” he said.

Potential buyers — particularly German investment funds and sovereign wealth funds from regions like the Middle East — are waiting for prices to slide further if banks begin forcing sales and investors pull money out of property, said Oakley. In 2009, he predicted, “there will be some amazing bargains on the market.”

New development has slowed dramatically, too, with most projects that hadn’t broken ground when the credit crunch hit now shelved indefinitely. The big ones still in the works — the Renzo Piano-designed Shard of Glass, which will be the tallest building in Britain, and the Pinnacle — are backed by Middle Eastern wealth.

Jobs down, vacancies up

The picture is less bleak on the office leasing side.

While investors were driving up building prices, occupancy rates (and rents) remained steady. They’re sagging but not crashing now, and some analysts say they’re likely to bounce back strongly after 2011, when they forecast a space shortage because the debt crisis will have forced the cancellation of so many building projects.

Vacancy rates in the City, London’s financial district that includes the East End skyscrapers of Canary Wharf, are now 5.5 percent and are likely to climb to 12 percent as banks and the industries that serve them lay off staff, said Julian Stocks, head of investments at the London office of Jones Lang LaSalle.

In the pricier West End, home to hedge fund and private equity firms as well as media companies, vacancies are now 3.9 percent and are likely to get close to 7 percent, Stocks said.

Unlike during the dot-com boom, when banks and others planning big expansions leased lots of space and off-loaded it as soon as their prospects dimmed, analysts say that this time, businesses have filled every inch of their space before renting more. Consequently, there’s now less overhang space that tenants need to sublet quickly.

Still, with the Centre for Economics and Business Research predicting 62,000 financial job losses here in 2008 and 2009, office space is bound to free up.

The now-defunct Lehman Brothers, for example, had 4,500 workers in London. Some 2,500 of them were saved when Japan’s Nomura Bank took over some of the company’s European operations, but the rest have either lost their jobs, or will soon, as accountants wind the business down.

UBS, Citigroup, HSBC and the Royal Bank of Scotland are among other financial institutions that have already started shedding London workers. Those job cuts should bring rents down as well.

In the financial district, rents peaked above $115 a square foot last year; Cushman & Wakefield’s Tyser said they were in the high $70s now, adding that landlords have gone from offering one year rent-free on a 15-year lease at the start of 2008 to offering three years free. He predicted that landlords will have to start cutting rents more soon.

In recent years in the West End, a number of hedge funds signed leases above $200 a square foot, with a few close to $240. Tyser said top prices are now around $195 a square foot, and would likely fall to between $145 and $160.

Residential ‘gazundering’

Home prices in some parts of London nearly tripled in the boom years from the mid-1990s through 2007, but now, residential numbers are heading down, too.

The Nationwide Building Society, one of Britain’s biggest lenders, said that by the end of September, the most recent data on record, London prices had fallen 9.4 percent from a year earlier, to an average of $465,315. It predicted further falls in the fourth quarter.

Many others think the picture is even worse.

The residential brokerage Kinleigh Folkard & Hayward said London prices are now down more than 20 percent from their peak last year. Managing director Lee Watts predicted they’d lose another 5 percent before leveling out.

The brokerage Knight Frank, meanwhile, predicted that residential real estate in London as a whole would see a 25 percent drop in values by next year, with prime central areas down 20 percent.

Watts said sales volumes at Kinleigh Folkard had dropped by half over the year, with third-quarter numbers off 70 percent from the same period in 2007. Properties now sit on the market for an average of 90 days, up from between 28 and 42 days, he said.

When the bottom will come is anyone’s guess. While Britain didn’t experience the overbuilding seen in the United States, unemployment is rising, and mortgages are hard to come by. The Bank of England noted that mortgage lending collapsed by 95 percent from July to August.

Savills said neighborhoods like Kensington, a popular destination for financial workers, have been particularly hard hit, with prices dropping 16 percent so far this year. In the neighborhoods of Knightsbridge, Mayfair and Belgravia, where international demand is strong and old money predominates, the falls have been about 7 percent.

Although rents have remained relatively stable, the so-called “buy-to-let” sector — highly mortgaged, amateur landlords who once helped fuel the buying boom — is now hurting. So, too, is the middle of the market, where high prices have fallen sharply, said Alan Clarke, U.K. economist at BNP Paribas Bank.

In a city where real estate was for years a favorite topic of dinner conversation, one telling indicator is the return of a term used in previous busts. During the fat years, buyers complained about “gazumping,” when a third party torpedoed a deal with a higher offer after a sale price had already been agreed upon. Now, its opposite is more common: “gazundering.”

That’s what happens when a buyer backs away from a promised price once a sale is in the works, offering a lower amount.

Beth Gardiner is a freelance reporter based in London.

Recently, I read that in crisis, there is opportunity. While the person who said that may not have a mortgage to pay or a construction loan to collect, I can certainly appreciate that sentiment.

I’m also seeing it in action, albeit by a limited number of players who are actually well poised in the current market.

In last month’s publisher’s note, I mentioned how the Durst Organization usually likes to spend money when the market is down. It looks like that is exactly what’s happening with the current downturn, as The Real Deal Web site recently reported that Durst will be spending $300 million in the coming months to buy distressed properties. (So there are two things one can take away from this: 1) I was right. 2) Our Web site is a great place to keep abreast of real estate trends and news.)

The legends of New York City real estate take the long view of the market, meaning they understand that it always bounces back. So, for the cash rich, a down market is merely a sale.

But not all of us are flush with cash, and so the question is: How does one create opportunities without cash? The credit market is obviously of no help these days — we’ve seen building buys above $50 million come to a screeching halt. Our piece on page 128 about building sales shows in detail exactly why it’s the sector with the largest decline in activity in the city, and we supplement that story with a piece on how banks are backtracking on construction commitments and leaving developers in the dust, in some cases mid-construction (see Holding up funds for construction). These recent events have affected everybody; even Donald Trump is holding back on projects in New York. Check out our piece on the Donald’s developments on page 24.

One of the most heartbreaking and perhaps most informative books I’ve read about New York City real estate, outside of “The Power Broker,” is called “High Rise.” It’s a true story about the development of 1540 Broadway, which was started during the boom in the late 1980s and finished during the recession of the early 1990s. At the time, it was an extremely pricey development, with a $320 million price tag for construction; it ended up being sold in distress for only $120 million when it was completed, or a little more than a third of its construction cost.

Our Q&A this month shines some light on construction in the city, and some of our experts say that stories like “High Rise” are going to be abundant in the coming years. Some examples of halted construction are already appearing. Only a year ago, we wrote about how Miami’s skyline was made up of buildings and cranes. Today, those cranes are no longer there; instead, there are remnants of incomplete projects. I am not saying New York is in or will see the same situation, but it has happened here to a degree.

Also in this issue, we continue to examine the blue-chip firms and how they are faring in the downturn. This month, we look at Tishman Speyer as it faces some trouble at Stuyvesant Town and Peter Cooper Village, which Tishman bought in 2006 for $5.4 billion, a record price for a single real estate asset in the U.S.

The firm has so far managed to keep its head above water, unlike others. Company head Jerry Speyer is known to be a conservative player even though he has made some large-scale moves. But very much like the Equity Office Properties buy by Harry Macklowe, the Stuy Town deal for Tishman could be the deal that breaks its back. While several observers say Tishman is well positioned to weather a downturn, and has been resilient in the past, in the current market, no one knows what to expect anymore.

Finally, I’d like to mention that as a result of the shake-up in the media world recently, we’ve been fortunate to have added several new names. When the New York Sun shuttered, there were a few talented people there that we wanted to join us. Reporter Candace Taylor is well versed in the residential beat, and we are very excited to have her on staff. Michael Stoler’s access to the top brass in the real estate world has always provided his columns with authority, and we are especially happy to have him on board. We are also pleased to have James Gardner join us as our new architecture critic.

Enjoy the issue,

Amir Korangy

A home in Greenwich, Conn., can easily have seven bathrooms. Each year, the town’s high school sends dozens of students to Ivy League universities. Its public beaches are among the state’s largest and most pristine. The well-heeled suburb’s per-capita income is three times that of most of its Northeastern peers.

So it’s no wonder the town regularly finds itself on top 10 lists of most desirable U.S. areas. But Greenwich, which has about 60,000 residents, might not be so different from the rest of the nation after all. Sales and prices have slipped in recent months, as inventory has climbed and average time on the market has stretched from three to six months.

Plus, in late September, Greenwich experienced a rare foreclosure auction. An indicted hedge-fund manager lost his 7,300-square-foot dwelling, complete with a spa and waterfall.

“We’re not immune to larger problems,” said Nancy Healy, a partner at Greenwich brokerage Shore & Country Properties.

From January through August, 380 single-family homes traded hands in Greenwich, versus 562 in the year-ago period: a sharp 32 percent decrease, according to the Greenwich Multiple Listing Service.

But buyers shouldn’t go bargain hunting just yet. In the same period, median prices dipped from $2.1 to $1.99 million, only about 5 percent.

In fact, 2008′s biggest sales were still substantial: The priciest was a six-bedroom, 20-acre property that sold for $18 million, and the fifth most expensive was a seven-bedroom home in the “back country”— the rural area north of the Merritt Parkway — that went for $13.8 million.

Few of these properties will ever face foreclosure because local lenders generally insist on 30 percent down payments, something “our California clients are always frustrated by, because they’re used to putting down 10 percent,” said David Ogilvy, founding broker of David Ogilvy & Associates.

Many builders and real estate agents
see Riverside, on the town’s southern edge,
as the growth area. Architect Mark Strazza and his builder, his brother Ralph, are
developing Finney Knoll, a seven-unit subdivision there. So far, five of their deep-eaved homes have sold, and the sixth, a 4,000-square-foot four-bedroom residence, is listed for $2.4 million.

The Strazzas are facing a much tighter sales market for this property, but they believe being in Riverside and near the Metro-North train station will help sales.

One bright spot for Greenwich has been sales of condos, which made up a sliver of the town’s housing stock a decade ago but now comprise about 10 percent, or 23,000 units. While sales fell from 165 to 119 in the January-to-August period, a 28 percent drop, the median price barely budged, from $750,000 to $725,000.

The demand, say developers, comes from across-the-border Westchester residents who flock to Connecticut to enjoy taxes that can be as much as two-thirds lower.

Condo buyers are also often in-town empty nesters looking for smaller units with less maintenance; they also want to be within walking distance of Greenwich Avenue, the central business district nicknamed “Rodeo Drive East.” That’s a major selling point for Beacon Hill, a 2-acre, eight-unit condo development a few blocks away. Its 5,000-square-foot Shingle-style townhomes, which feature elevators, media rooms and optional wine cellars, start at $3 million.

One contract has been signed since marketing began this fall, but acknowledging the market’s turbulence, developer Belray Capital has indefinitely postponed groundbreaking for the eight units in the second phase of Beacon Hill, a $43 million project. “We’ll do it when we feel more comfortable with the economy,” said Ronald Young, principal with Belray Capital.

Greenwich Oaks and Greenwich Place, which were supposed to be condo conversions of two rental complexes in the Byram neighborhood, haven’t fared as well. Backed by Lehman Brothers, which collapsed in September, developer Antares Investment Partners paid $223 million for the 396 units in February 2006 but ran into difficulty selling them. The properties went into foreclosure last December.

In the long view, the appeal of Greenwich real estate is almost undeniable. Beautiful antique abodes line twisting tree-shaded roads, just a short drive from commercial districts that offer urban amenities in village settings.

While prices in Old Greenwich start at $500,000, there are $300,000 alternatives in Pemberwick, on the town’s western side. Although Wall Street job losses may be a concern, numerous hedge funds are based here, which can thrive on the kind of volatility seen in roiling markets.

“You can find about whatever you want here,” said broker Nancy Healy, “except for maybe a men’s field hockey team.”

With economic storm clouds looming overhead, even the resilient, celebrity-saturated Aspen market is feeling a bit of a chill. Sales are slower than normal, though area realtors noted they aren’t too concerned yet.

Thanks to the area’s restrictive growth policies, which keep supply limited and exclusive, the über-rich continue to pay tens of millions for their mountain hideouts.

“Aspen real estate is a finite commodity being chased by the world’s wealthiest people,” said Gary Feldman, managing partner at Joshua and Co.

Brokers are even so bold as to use the economic crisis as a selling point. “With the financial turmoil that Wall Street’s having and the uncertainty that develops, it becomes very comfortable for people to put their money in a very isolated market where they can’t build anymore,” said Bob Ritchie, a broker with Coates Reid & Waldron in Aspen. “There’s no new supply. This is a kind of place where 85 to 95 percent of our sales are for cash. Most of our property owners are lenders, not borrowers, so they are on the other side of the economic ladder.”

While deep-pocketed buyers can easily splurge in a market where the average listing price is $7 million, if they want to flip a house, it can sit on the market for long stretches. But many are not under any pressure to sell and can hold out — even for years — for the price they want, market observers say.

That’s exactly what Ritchie is seeing now. Those looking to sell for lifestyle reasons won’t take lower prices, because the slowdown doesn’t affect their lifestyle. Instead, they’re rejecting offers, resulting in a lower number of overall sales.

The volume of sales was about $1.8 billion for the first half of the year, compared to $2.65 billion for the same period last year. That $1.8 billion includes a couple of $35 and $20 million homes, and a few dozen in the $10 to $15 million range.

Prices are up about 5 to 15 percent over last year, which is lower than Aspen’s usual average growth of 20 to 25 percent on a year-to-year basis because of the lack of new supply.

Aspen and nearby Snowmass allow no growth except in limited areas, which leaves very few vacant building sites. In fact, there have been just five lot sales so far in 2008.

With the downturn in the economy, local banks have also been reluctant to fund new speculative homes.

Still, it’s not exactly a seller’s market. Ritchie is advising people that they can sell their Aspen homes in the next six months if they want to, but only if their value-to-price ratio is strong compared to other homes on the market. Right now, pricing for a new, exceptional property is from $2,000 to $3,000 a square foot.

“We know at the end of the day that Aspen will always be in demand,” said broker Joshua Saslove of Joshua and Co. “Great Aspen properties are not a bad asset to own.”

He should know, because he sells many of them. Saslove and his firm have closed on some of Aspen’s highest-end sales this year, including the two priciest. The first was a 200-acre, 14,300-square-foot home with 11 bedrooms and 12 baths that sold for $36.375 million in April. Then the Ponds (on Willoughby Way, which is one of the most prestigious addresses in Aspen) sold for $20.75 million in August. The home is 11,500 square feet on 2 acres nestled just a five-minute walk from downtown, at the base of Red Mountain and overlooking Aspen Mountain.

The most expensive home for sale in Aspen is also listed by Saslove, a $60 million, 15,000-square-foot house on 44 acres on West Buttermilk Road. The house comes with a separate stable and caretakers’ buildings, and boasts a wine cellar, theatre, home gym, extensive fireplaces, and decks and terraces with panoramic views.

Already, Saslove says, condominium and hotel reservations and lodging are up substantially, which is a sign of good things to come this winter. “The mountain peaks already have some snow,” Saslove said. “Things look like they’re blowing our way. In spite of what people think is going on in the economy, Aspen continues to be sought after by the international community.”

Saslove said Aspen’s cultural offerings and outdoor activities make it very attractive to buyers. In addition to arts festivals, “there are all these beautiful mountains and all these activities: hiking, biking, skiing. Run a river through it with great fishing, and you’re done.”

It’s the kind of place where it’s not uncommon to see 100 or so private jets lined up at the airport and run into the McCains or Clintons at a conference. Not to mention movie stars. “It’s a place where celebrities hang out and nobody makes a big deal,” Saslove says.

On this side of the Atlantic, there are few places like Boston’s Beacon Hill. Here, elegantly preserved 19th-century brick and brownstone homes mingle on streets lined with gas lamps, and everyone congregates in the neighborhood’s cozy shopping district, which forms less than a square mile in the center of one of the world’s great cities.

Parking spaces on Beacon Hill cost more than an average single-family home in many Boston suburbs, and this year’s biggest property sale in the neighborhood topped $9 million. But despite its sheltered status as Boston’s most desired neighborhood, Beacon Hill has not been spared from the meltdown in the financial markets.

This year, sales on Beacon Hill are down considerably from their 2004 peak. Through the second quarter, they have remained on pace compared to 2007. “We haven’t seen prices deflate by any dramatic measure,” said Jeffrey Heighton, senior vice president of Coldwell Banker Residential Brokerage in Boston. “We have seen volumes fall. That has been the main effect.”

In fact, the median sales price of a
Beacon Hill home was up in the second quarter to $553,000, compared to $525,750 for the same period a year earlier. In Suffolk County, which includes Boston and several of its immediate neighbors, the median home price has fallen by 11 percent this year, to $325,000.

But even through the credit crisis and faltering global economy, high-end and mid-range properties, both condos and single-family homes, continue to sell in Beacon Hill, according to brokers. “The finer homes are moving quickly,” said John Ranco, director of sales for the Boston office of Gibson Sotheby’s International Realty. “They are mostly cash purchases, or 50 percent or more down.”

There is also considerable activity in the $1 to $1.7 million range, properties that typically feature three bedrooms and are considered mid-range for Beacon Hill. “They’ve been selling well because they are attractive to growing families who want to stay in the city,” Heighton said.

At the top end of the market, there were a dozen homes on Beacon Hill for sale for $5 million or more last month. The 8,450-square-foot Benjamin Mansion, built in the 1820s and recently renovated, was being offered for $14.5 million. The single-family row house, considered one of the grandest homes in Boston, has six bedrooms, six baths, eight fireplaces, two parking spaces and a lap pool on its roof. The building overlooks the famed Public Garden.

Even pricier is the 10-bedroom Appleton-Parker House, built in 1818 and formerly home to the Women’s City Club. It has a price tag of $27.5 million and is being marketed as either single-family or a multi-family that could be turned into four condominiums.

Location is part of Beacon Hill’s draw. It overlooks the Charles River, Boston Common and Public Garden, and is only a
short downhill walk to the Financial District, Faneuil Hall, the Boston Garden (now TD Banknorth Garden) and the Boston Harbor.

Despite this center-city location — and easy access to public transportation — Beacon Hill has the feel of a village. The narrow streets and dearth of parking discourage cars and virtually eliminate traffic noise off the main streets. The quaint shops on Charles Street are mostly locally owned. On Beacon Street, a couple of blocks from the historic State House, is the bar that became known to millions of television viewers as Cheers, the tavern where everybody knows your name.

“There is a great sense of pride and ownership in the buildings,” said Suzanne Besser, executive director of the Beacon Hill Civic Association. “People see it as a stewardship.”

Beacon Hill is home to a number of public figures, including U.S. Sen. John Kerry, novelist Robin Cook, celebrity chef Todd English and Fidelity Investments head Ned Johnson. Before he became president of the United States, John F. Kennedy was a Beacon Hill resident.

While the neighborhood of about 10,000 does have a reputation for exclusivity, it is not without diversity. The so-called “north slope” has multi-family rental buildings and is home to many students and young singles. There is also senior housing, low-income family housing and a building reserved for people who are HIV positive.

A big factor in the strength of the Beacon Hill real estate market is the limited supply. While other historic parts of Boston, including the Back Bay and South End,
are seeing big new buildings going up, new construction is rare on Beacon Hill. Additionally, the entire area is a historic district, which means existing structures cannot
be altered without City Hall’s approval. Vacant land on Beacon Hill, meanwhile, is almost nonexistent.

Demographics also favor the market on Beacon Hill. Suburban empty-nesters, many of whom lived on Beacon Hill in their younger days, want to give up their cars and enjoy city life. “There is definitely a flight into the city, especially among the wealthier people,” said Michael DiMella, managing partner of Charlesgate Realty Group in Boston.

With property values holding up on
Beacon Hill, the neighborhood also attracts investors from abroad. “Right now, over half of my clients are from overseas,” said Alex Voss, a trilingual principal at Marston & Voss Realty.

Living on Beacon Hill does have its challenges. Parking on the street is all but impossible, and private spaces in garages are scarce and costly. Because the buildings are old, many do not have elevators, and not many have concierges.

Aficionados of the neighborhood accept the inconveniences. “You walk everywhere,” said Heighton. “It’s really a lifestyle.”

Average sales price

(2Q 2008)

$784,805

Median sales price

(2Q 2008)

$553,000

Number of sales

(2Q 2008)

77

Inventory

(2Q 2008)

100

Days on market

(2Q 2008)

85

Top five sales in 2008

1. $9.375 million, 5-bedroom, 5-bath row house, 8 Mt. Vernon Street

2. $6.35 million, 5-bedroom, 7-bath
single-family, 78 Beacon Street

3. $3.5 million, 5-bedroom, 5-bath
single-family, 10 West Hill Place

4. $3.48 million, 6-bedroom, 5.5-bath single-family, 4 Chestnut Street

5. $3.45 million, 5-bedroom, 4.5-bath single-family, 16 Charles River Square

During the last decade, Nancy Itteilag has lived in four homes in Georgetown, a neighborhood of tidy colorful townhouses, cobblestone streets with old trolley tracks and some of Washington, D.C.’s most high-profile figures.

Itteilag, whom the Wall Street Journal named one of the country’s top 10 real estate agents in 2007, buys all her personal investment properties here. In total, she’s owned five “gems.” Today, she rents three of her homes and lives in the fourth.

“If you ever want to sell a property in Washington, D.C., even in a soft market, Georgetown is highly saleable because there’s no new construction, no competition,” she said.

In the past year, sales have slowed in the nearby tony neighborhoods of Foxhall and Glover Park, but Georgetown’s market has remained strong. Between January and the end of September, 98 single-family homes have sold compared to last year’s 86. Meanwhile, the number of days on the market has increased only six days.

The neighborhood’s housing stock is 10 percent condos, 10 percent detached homes and 80 percent classic Georgetown townhouses, usually dating back to the turn of the last century or before. Toward the north side of the neighborhood lie the ultimate Georgetown status symbols: mansions set back from the road so that they have front yards — homes like that of the late Washington Post publisher Katharine Graham, which sold for $8 million in 2002.

The right house in Georgetown — one that’s fully renovated, has parking and goes on the market when there are few comparable listings — still commands top dollar. The median home price for the first nine months of 2008 was $1.3 million compared to $1.2 million for last year.

For condos, though, prices have dropped nearly 20 percent compared to the first half of 2007, according to William Rich, vice president at real estate research firm Delta Associates. However, this segment of the market isn’t very big: Only 26 units sold last year, and sales levels this year are keeping pace.

Luxury developer EastBanc, for one, is feeling the squeeze. In 2004, EastBanc completed construction on 3303 Water Street, a stunning 70-unit building overlooking the Potomac River, which was sold out by the time residents moved in late that summer.

The group’s latest luxury condo project — located in the West End, a neighborhood next to Georgetown — isn’t faring as well. A 92-unit condo building, 22 West has a rooftop pool and second-floor garden terrace planted with tall grass to block views of an unsightly Exxon station below. Apartments range from $800,000 to $3.8 million, and the building, which opened in the summer, was only 40 percent sold as of late September. “I believe we’ve delivered a great product at a fair price, and we won’t drop the prices,” said Anthony Lanier, EastBanc president.

Regardless of the area slowdown and
the country’s financial instability, two
historically significant properties in Georgetown could further boost sales numbers in
the neighborhood.

In August, Tutt Taylor & Rankin Sotheby’s International Realty listed the Halcyon House, a 30,000-square-foot mansion, for a potentially record-breaking $30 million.

Roughly a month later, Long & Foster Georgetown one-upped them by announcing the sale of the Evermay Estate, a grand brick mansion on 3.5 acres of land, for $49 million. The property, located at 1623 28th Street N.W., once included 150 acres of land stretching all the way to the northern grounds of the White House, the Treasury Building, the Old Executive Building and Lafayette Square. The estate was purchased by diplomat F. Lammot Belin in 1923 and was passed down through heirs.

“There must be some confidence that this is not a disastrous time to put high-level properties on the market,” said Ginny Chew, a real estate agent with Arnold, Bradley, Sargent, Davy & Chew.

Chew hasn’t seen any major changes in her clientele since the boom ended. If anything, buyers these days are just more cautious. “We’re just kind of waiting with our fingers in the wind,” Chew said.

Twenty years ago, South Beach was a district of ramshackle historic buildings occupied by elderly retirees, drug dealers and poor immigrants. Billions of dollars worth of revitalization later, South Beach is a retreat for celebrities and affluent internationals trying to purchase a piece of paradise.

“South Beach’s luxury market is selling strong, even though some deals are getting done at 20 to 30 percent below the asking price,” said Esther Percal, a senior vice president at Esslinger Wooten Maxwell in Miami Beach. “But nobody is giving anything away down here.”

Despite the economic downturn, the credit crunch and housing market devaluations, South Beach luxury brokers report some standout sales in 2008 — especially in South of Fifth, or SoFi, an ultra-exclusive neighborhood surrounded by water on three sides. It is also home to Apogee, which brokers call the most prestigious South Beach condo ever built.

Of course, it comes with a very high price tag. Apogee’s three-level, six-bedroom penthouse, complete with ocean, bay and city views, is listed for $22 million. It boasts a private pool, rooftop palazzo, summer kitchen, staff quarters and other luxury amenities.

“People don’t want to live north of Fifth Street because they want the status and exclusivity this neighborhood offers,” said Sildy Cervera, a condo specialist at Related Cervera Realty in Miami. “When you live in SoFi, you can walk to great restaurants, shopping, nightlife and the beach.”

SoFi is located within South Pointe, the southernmost tip — and most exclusive area — of mainland Miami Beach. The most expensive condos and single-family homes in South Beach are all located here, from Apogee to its luxury-row neighbors, such as
Yacht Club at Portofino, Continuum and Icon South Beach. The highest-priced Miami Beach sale this year was $15 million for a penthouse at Apogee. In fact, nine of the 10 most luxurious South Pointe sales for 2008 can be found there.

While the inventory is swelling and the prices have deflated, the most expensive properties in SoFi, and South Pointe in particular, are holding their value better than most other Miami Beach neighborhoods. The average sales price at the top of the market is nearly 2,000 percent higher than the median sales price, according to the real estate Web site Trulia.

“The highest-priced properties on South Beach aren’t affected, but sales of luxury properties in the
million-dollar range have definitely dropped,” said Thomas Flitsch, principal of Engel & Völkers Miami Real Estate. “This is a second-home market and a holiday destination for foreigners, but they are looking for bargains.”

The bargain hunting is reflected in the difference between listing and sales prices: The three-month average listing price in Miami Beach is $927,791, down 2.5 percent. In contrast, the average sales price is $745,266, down 36.4 percent year over year.

Beyond the typical wealthy Europeans, Asian billionaires are outbidding South American buyers as they leverage a weak
dollar. And brokers say bigwigs from New York City, Chicago and Los Angeles are still haggling for second homes in the million-dollar range.

“It doesn’t matter if it’s a Trump condo or a $250,000 studio on South Beach; everybody wants to feel like they are getting a good deal,” said Tom Grimshaw, a broker at Real Living Properties in Miami. “Even if they are paying a premium, they want to tell their friends at the cocktail party what a great deal they got.”

There are a lot of friends to tell: The number of sales is up nearly 24 percent since the same period last year.

In exclusive SoFi, there are deals to be had. Take, for example, the new 28-unit condo development at 125 Ocean Drive, where spacious pads are priced between $6 and $8 million, and the developer is offering buyers a new Lamborghini Gallardo Spyder. But if they’re not motivated by incentives, the average listing price for South Pointe was $1.4 million through the first nine months of the year, and the average sales price was $1.36 million.

While the average listing price on South Pointe is down 1 percent, the average sales price is down 9 percent. The number of sales, however, is down about 50 percent year over year, something brokers attribute to the credit crunch.

“Naturally, we expect a fallout from the Wall Street crisis, but we are blessed because people still want to be in South Beach,” said Jill Eber, a broker at the Jills, an agency under the Coldwell Banker flag in Miami Beach. “We’re still selling luxury condos South of Fifth for $2,500 a foot, whereas in New York City comparable condos are selling for $6,000 a foot.”

Miami is touted as the gateway to Latin America, but South Beach may be the region’s most international locale. The famed Lincoln Road attracts shoppers from all over.

“The wealthy internationals are still coming to South Beach in droves,” said Nelson Gonzalez, a realtor with Esslinger-Wooten-Maxwell in Miami Beach. “Everybody else goes somewhere else in South Florida. South Beach is like New York, with the nightlife and the culture — but we have palm trees and sun.”

Dazzled by the lights of Sin City and bolstered by the dollar’s weak standing, wealthy citizens from Canada, Europe and the Middle East are scrambling to buy some of the nation’s most valuable property: high-end, high-rise condominiums towering above the Las Vegas Strip.

While only 409 units exist today — Sky Las Vegas’ luxury condos that sold two years ago for $400 to $600 per square foot — four multi-billion-dollar projects have been announced over the past year, which will add roughly 1,500 luxury residences to the cityscape by 2011.

Demand is strong: Condos at the Residences at Mandarin Oriental, priced at $1,500 to $2,500 a square foot, won’t be ready until late 2009, but 90 percent of them sold out in the first two weeks of sales in 2007.

Still, in the current economic climate, buying any home in Sin City could be seen as a gamble. The city’s median price for new homes hit $259,847 in August, the most recent data available, dropping for the fifth month in a row. The figure is down 24 percent from August 2007, according to SalesTraq, a Las Vegas-based research firm.

For existing homes, the numbers are just as bad: The median price dropped to $200,000 in August, down 27 percent from August 2007.

“For someone to say that Vegas isn’t in a real estate recession, they’re lying to you,” said Aaron Auxier, an agent with Shapiro & Sher Group, who last year broke Vegas’ price-per-square-foot record after nailing the sale of a $2,400-per-square-foot condo.

“But the knowledge of how valuable property is on the Strip isn’t completely understood,” he continued. “Global buyers understand it, and are buying it. In a way, they’re saving Vegas’ economy.”

With one in every 91 households on the receiving end of a foreclosure filing in August — a pace that’s about 80 percent of that of current home sales — Nevada continues to lead the nation in foreclosure rates. The phenomenon is just starting to affect the upper echelon of real estate in Vegas.

So far this year, banks and lenders have bought back 87 properties valued at $1 million or more, nearly five times the number of repossessions of luxury homes in 2007. The Las Vegas Review-Journal reported in September that of the 7,363 listings that
are bank owned, 16 are priced at more than $1 million.

Just two, however, are over $3 million.

“The financing has gone away for luxury homes that cost $1 million to $3 million,” said Patty Kelley, president of the Greater Las Vegas Association of Realtors. “But homes over $3 million? That’s a different story. The folks buying those are paying cash.”

Many of those wealthy clients are third- and fourth-home buyers from the West Coast who are looking to establish Nevada residency for the tax benefits. Robert Jenson, CEO and principal realtor for the Jenson Group, finds that they tend to buy homes in two master-plan communities: Summerlin, located about 15 miles from the Strip, and MacDonald Highlands, about 13 miles south of Las Vegas.

In Summerlin, gargantuan custom-built homes fetch up to $9 million, feature green and high-tech amenities and are centered around nine golf courses, including the Jack Nicklaus-designed Bear’s Best Las Vegas found in the Ridges, the most exclusive area of Summerlin. Its neighborhoods also abut Red Rock Canyon National Conservation Area, state-protected land. Late last year, a custom estate in MacDonald Highlands — a 1,200-acre development nestled in the foothills — sold for $19 million.

“Vegas is a bargain for luxury real estate buyers,” said Bruce Hiatt, a founding partner of the Luxury Realty Group in Las Vegas. “You can pick up some condos and some luxury homes for below what the cost of replacement would normally be.”

So far this year, overall home-sales volume has exceeded last year’s — the Greater Las Vegas Association of Realtors reports a 93.3 percent increase in units sold compared to the same period in 2007 — but many luxury real estate agents say the Wall Street meltdown has caused their clients to think more cautiously when it comes to buying multiple homes. The question is, for how long?

“We’ll probably see price points continue to erode over the next two quarters and then stay at the bottom for upwards of one year,” said Brian Gordon, a principal at Applied Analysis, a financial consulting firm in Las Vegas.

“There’s no magic switch, obviously,” added Dennis Smith, president of the Las Vegas-based Home Builders Research. “We just have to ride it out. Unless you have cash —then you can get some unbelievable deals.”

Average sales price

$249,828 (Jan.-Aug. 2008)

$382,671 (Jan.-Aug. 2007)

Median sales price

$245,000 (Jan.-Aug. 2008)

$294,000 (Jan.-Aug 2007)

Inventory

20,623 units (August 2008)

27,321 units (August 2007)

Average days on market

62

Top five sales in 2008

1. $11.5 million: 59 Promontory Ridge Drive, a 5-bedroom, 5-bath single-family home carved into a mountain on a 2.36-
acre lot.

2. $6 million: 8280 Via Olivero Avenue, a 7-bedroom, 11-bath single-family home on a 1.5-acre lot; includes room for RV parking; master suite has its own wing.

3. $5.8 million: 15 Wild Ridge Court, a 4-bedroom, 7-bath home featuring views of Red Rock Canyon National Park.

4. $5.1 million: 34 Promontory Ridge Drive, a 4-bedroom, 6-bath home featuring a private pool and granite, marble and onyx counters.

5. $4.3 million: 45 Club Vista Drive, a 7-bedroom, 9-bathroom home on a 1.2-acre lot featuring an in-ground pool with a disappearing edge.

When AT&T announced this summer that the company was moving its corporate headquarters from San Antonio to Dallas, real estate agents in the Park Cities salivated. The arrival of executives from the world’s largest telecom company would surely jump-start the dormant residential market in North Texas’ most luxurious address.

The Park Cities comprise two separate incorporated cities just north of downtown Dallas: Highland Park (home to people like Dallas Cowboys owner Jerry Jones) and its “downscale” neighbor to the north, University Park (adjacent to Southern Methodist University). Although UP, as it’s known locally, is now overrun with McMansions, it possesses a quaint, small-town feel thanks to the many family-run shops that populate the area, as well as its well-maintained parks. HP, meanwhile, mixes beautifully restored homes of all styles (prairie, modern, Georgian) with audacious McMansions.

One of the priciest properties to sell this year is a 15,715-square-foot, $10.5 million “chateau” that features six bedrooms, a wine cellar, pool, guest quarters and an elevator. Competing in that price range was an 11,000-square-foot condo that sold for $9.95 million. While it only features four bedrooms, it boasts killer views, a media room and a shoe closet many women would kill for.

Despite those closings, there was a problem: The expected luxury market kick from AT&T never happened. Instead, the downturn did.

In these neighborhoods, the luxury market has mirrored the relatively stable Dallas-Fort Worth residential market over the past few years — in slight but steady decline in terms of sales, but with prices holding up better than in most national markets.

In fact, average sales prices even rose in the Park Cities in 2007, up 5 percent in Highland Park to $2.13 million and up 15 percent in University Park to $1.38 million. Both neighborhoods are on pace to maintain those levels in 2008.

But the countrywide downturn had also slowed activity in North Texas by the summer, and agents looked for any good news.

“People were looking for deals, even those folks who could previously afford living in the Park Cities,” said Jeff Duffey, an agent who runs Jeff Duffey Associates. “They’re looking just below the $600,000 to $800,000 entry-level price, or they were waiting on prices to come down. Which is smart. Because I would show something at $1.2 million, and eight months later, it would be at $920,000.

“No one is insulated from the downturn. Not even the rich,” Duffey said.

According to statistics from North Texas Real Estate Information Systems and Texas A&M University’s Real Estate Center, high-end home sales in Dallas proper have finally slumped after rising for most of this decade. Through August, sales of $1 million-plus homes were off 12 percent in Dallas-Fort Worth; sales of homes $800,000 to $1 million were down 25 percent.

In early October, there were about 1,500 new homes vacant in North Texas with prices at more than $500,000, according to MetroStudy Inc. In addition, there were nearly 1,500 million-dollar-plus homes listed in various real estate listing services.

“There’s definitely a trickle-up effect
happening in the Park Cities,” said Austin Kilgore, real estate editor of Park Cities People. “Many homeowners that may be interested in selling are biding their time because of the lack of qualified new buyers. Homeowners that must sell their homes are finding it increasingly difficult to move their properties, and that’s causing the local fluctuations in the market.”

The market gyrations and credit crunch have also made it harder for some to refurbish luxury homes they already own. Ray Balestri, who owns his own law firm, Balestri and Associates, had to scrap plans to undergo a $500,000 makeover of his kitchen in his multi-million-dollar home on the border of Highland Park and Turtle Creek.

“And I’m not getting that new car, and I’m not going to add on to my lake house,” Balestri said.

“Trust me, everyone is feeling the pinch.”

Like a lot of North Texas, though, the luxury market is seeing some signs of growth, primarily because the region had a much less significant fall in prices and sales than similar-sized markets on the East and West coasts. (In fact, Dallas-Fort Worth pre-owned home sales rose 2 percent in September, after more than a year of declines.)

“We take for granted how much stronger we are than most of the country,” said Chris Pyle, who works for the Ben Jones Group at Allie Beth Allman & Associates. Pyle is still seeing clients obtaining the $4 million and $5 million loans they need when buying in Highland Park. He’s also done $13 million and $8.6 million contracts recently. “Days on market have shot up, but folks are just waiting for better deals and better financing,” he said.

Of course, with talk of George W. and Laura Bush making their home in the Park Cities sometime next year, there are expectations of a high-end bump. Just like with AT&T.

Few people are down and out in Beverly Hills. As home to some of the world’s wealthiest people — Hollywood regulars as well as foreign diplomats with warm-weather pieds-à-terre — this Southern California luxury neighborhood has barely been hit by parts of the housing fallout seen in the rest of the state.

“I have yet to see a foreclosure in Beverly Hills,” said Ernie Carswell, an agent with Teles Properties, a Beverly Hills real estate firm. “Folks here are still buying and selling — perhaps just a bit less casually than they were earlier this year.”

That’s not the case statewide, where foreclosure resales amounted to half of all transactions in September. Following September 2007, when sales were at a record low, bargain hunters snapped up affordable homes and fueled a 65 percent jump in home sales, according to MDA DataQuick, a research firm in San Diego. The surge drove the state’s median home price down 34 percent to $283,000, while Los Angeles County saw its median price drop about 30 percent to $360,000.

Even in Beverly Hills, where sales data is spread over three zip codes, the median home price plunged to $930,000 from $1.8 million the year before.

“Even the wealthy are being a little less cavalier about gratuitous spending,” said Ronna Brand, owner of boutique agency Brand Realty in Beverly Hills, trying to
put a positive spin on the slowdown. “However, luxury properties continue to be highly desirable.”

The luxury market in Los Angeles encompasses more than a dozen neighborhoods, ranging from Malibu’s coast to canyon addresses on Mulholland Drive. Hollywood’s wealthiest scions live in what real estate agents have dubbed the “Platinum Triangle,” an area on the west side of the city that includes the city of Beverly Hills and the neighborhoods of Bel-Air and Holmby Hills. Many of the $5 to $125 million estates situated
in the hills feature panoramic views of the Los Angeles basin, some of which stretch to the Pacific.

Earlier this fall, the biggest sale of the year to hit Los Angeles County occurred when the CEO of a contracting company paid $36.7 million for a massive, not-yet-completed nine-bedroom, 18-bathroom house in Beverly Park.

In October, actress Jennifer Aniston spent about $15 million for a one-story, 9,000-square-foot home in Beverly Hills with six bedrooms, seven bathrooms and half an acre of land. A few months before, tennis star Pete Sampras sold his five-bedroom gated Tudor-style mansion to “Will & Grace” co-creator Max Mutchnick for $23 million.

The number of houses selling in some high-end neighborhoods is down. In September, home sales were down 22 percent over the previous year in Brentwood, the hilly area home to Governor Arnold Schwarzenegger, Reese Witherspoon and Justin Timberlake — but the area’s overall market remains about where it was a year ago. Teles Properties, which reports on about 20 zip codes for its clients, says that of the Platinum Triangle homes listed at $5 million and up, eight are in contract, up from seven during the same time period last year.

Brentwood, Hancock Park and Malibu all saw an increase in their median sales prices, and 41.6 percent of the homes that closed over the summer sold within the first 30 days of being listed.

Like the rest of Southern California’s housing market, the time it takes to sell a multi-million-dollar house in old-Hollywood locales has increased by about 40 percent. However, the less glamorous and newly developed areas just outside of Beverly Hills, such as Culver City, Silver Lake and Los Feliz, are seeing $5 million to $8 million homes go more quickly.

“These areas are becoming more popular than the older, more established ones as first-time homebuyers look for something more affordable,” said Lou Piatt, co-founder and CEO of Teles Properties.

Of course, most folks selling in and around Beverly Hills can wait out a down market.

“Most luxury-property owners have the financial wherewithal to hold onto property and be selective about the buyer and price,” said Brand. “Besides, nowhere on earth is there a more unique climate to enjoy with an entertainment industry to keep our real estate business churning.”

Savills launches distressed real estate division

New York-based real estate investment banking firm Savills recently
launched a distressed real estate group that will tap its international
investment base for the acquisition of joint venture interests,
recapitalizations and investments in operating companies. The company,
which has offices in Europe, the Middle East, Australia and Asia, also
plans to offer a full range of restructuring and bankruptcy advisory
services. The new division will be led by senior vice presidents R.
John Wilcox III and Fredric J. Leffel and executive managing director
Jeffrey Baker.

Winoker acquires tenant rep firm

Winoker Realty has acquired Miller & Partners, a New York-based
commercial brokerage that specializes in tenant representation. Marc
Miller, founder of Miller & Partners, will serve as executive vice
president at Winoker and continue to assist former clients. In this new
role, Miller will also expand Winoker’s existing network of clients and
help with the company’s recruitment initiatives. Prior to launching his
own firm, Miller spent 12 years at Studley, where he was a managing
director.

PropertyShark officially launches university program

Real estate data Web site PropertyShark last month officially
launched its continuing education program, PropertyShark University,
and associated Web site, PropertySharkUniversity.com. PropertyShark
classes cover such topics as short sales, distressed properties and
real estate certification. “It’s an ideal time to launch this,
especially with distressed property,” said Bill Staniford, CEO of
PropertyShark. “Right now in [this] market environment, it’s critical
that people become aware of these kinds of things.”

Long Island brokerages merge operations

Garden City-based Dougall Fraser Real Estate has partnered with
Daniel Gale Sotheby’s International Realty to expand its reach in the
Long Island residential market. Dougall Fraser, who established his own
firm in 1989, and his team of sales professionals will join Daniel Gale
Sotheby’s network of 600-plus agents across 30 offices and divisions
spanning Long Island. The office will remain in Garden City and will be
known as Daniel Gale Sotheby’s International Realty, Dougall Fraser
Division.

Not many people would think of opening a mortgage brokerage in this financial climate, but David Maundrell, president of aptsandlofts.com, and his long-time friend and banker, Ross Weinstein, just started up Union Square Mortgage Group.

“Mortgage broker companies have made millions of dollars off my company, and all I asked of them were referrals,” Maundrell said. “Introduce me to a seller or a developer. I never got anything out of these guys. I felt my brand was strong enough to start to diversify, and branch off into other product lines.”

Maundrell and Weinstein are building on the reputation of aptsandlofts.com to attract clients and help spread the word.

“That’s the key to building a business,” Maundrell said. “It doesn’t matter how many ads you place; it goes back to referral-based business. You have to give the customer the best product.”

Although Union Square Mortgage Group will be the preferred lender for aptsandlofts.com, they are completely separate companies. Maundrell said Union Square Mortgage Group will be working with all brokerages, even aptsandlofts.com’s competitors.

Maundrell said they were trying to reflect their openness and familiarity with places outside of the city in their company name.

“We want to do business everywhere, and there has to be a Union Square in every county, statewide,” Maundrell said.

He admits the market “is rough.”

“It’s a long-term growth strategy,” Maundrell said. “In a challenging market, we are able to have relationships and put a foundation in place so when we get to the point when [the market] makes a swing, we will be well positioned to succeed.”

Gordon Hoppe is moving up the ranks at Corcoran Sunshine Marketing Group to the newly created position of senior vice president, director of sales.

Hoppe joined Corcoran Sunshine as a vice president in 2006, after working as the senior managing director for the Corcoran East End offices and serving as the managing director at the Sag Harbor offices.

He said his main goal in his new position is to
offer more intimate sales training sessions, instead of cramming 100 people into one room.

“The primary goal of what I do is to make sure I’m available to folks on site,” Hoppe said, adding that he meets with every new hire at Corcoran Sunshine and tailors sales meetings to fit specific sites. “I have to give the company tools and information to do their job better and keep ahead of the curve in the marketplace.”

Hoppe also heads up Corcoran Cares, an organization that donates money and time to various nonprofit organizations, including the Partnership for the Homeless and the Empire State Pride Agenda.

Ken Krasnow is back in New York as the new managing director of Massey Knakal Realty Services’ Brooklyn office, after serving as the COO of Apartment Realty Advisors Florida. Prior to his stint in Florida, Krasnow was an executive vice president at Trammell Crow, and also spent 18 years at Cushman & Wakefield, where he was the executive managing director and the New York-area leader.

“I’ve known Paul [Massey] and Bob [Knakal] for many years and always admired the focus of the firm,” Krasnow said. “They shared with me their strategic vision for the firm, opening up in New Jersey and looking in the tri-state area and beyond. Once I saw the strategic vision of the firm, it was a natural fit for me because what I like to do is help firms grow and develop their people and resources.”

Krasnow said his immediate priority is fortifying the Brooklyn offices by increasing revenue and transactions. He is also eyeing other ventures to further the company’s long-term plan of creating a national presence.

Residential

Aptsandlofts.com

Jennifer Lee was hired as director of business development. She was formerly with the Developers Group.

The Corcoran Group

Eileen Robert joined the firm as senior vice president and director of townhouse sales. She will be based in the company’s Westside office.

Commercial

American Land Services

Marc Lawrence was promoted to senior vice president and managing director. He has been at the company’s New York City office for three years.

Branded Concept Development

Stephen May joined the firm’s team of restaurant and food-service specialists. He was previously at Winick Realty Group.

Cohen Brothers Realty

William Watkins joined the company as senior vice president and director of property management.

Cushman & Wakefield

Joel Herskowitz joined the firm as senior director. He was formerly president and chief executive officer of Grubb & Ellis New York.

Eastern Consolidated

R. William Harvey joined the firm as a director. He was previously with Roxiticus Capital Management. Jeffrey Randall Karp rejoined the firm as a director after three years with law firm Kelley Drye & Warren’s real estate practice group. Gregory Struck joined the firm as an associate. He was previously director of business development for CORE Group Marketing.

Gramercy Capital Corp.

John Wheeler joined the firm’s real estate division as senior director of leasing and asset management. He was previously at Antares Investment Partners.

Grubb & Ellis

Patrick Breslin joined the New York City office as president of the company’s East Coast retail group. Andrew Connolly joined the retail group as managing director. Kenneth Yip joined the retail group as financial analyst and associate.

GVA Williams

Annie Yao, Joshua Gurwitz and Rogelio Galindo joined the firm’s brokerage and research divisions.

Studley

Richard Eaddy joined the company as senior managing director. Evan Margolin and Key Otomo were promoted to corporate managing director from managing director. Ryan McKinney was promoted to associate from research specialist. Carlos Nascimento was promoted to manager of application services from senior developer of application systems.

Trinity Real Estate

Emily Lloyd was appointed chief operating officer. She was previously chief executive officer of the New York City Department of Environmental Protection.

Compiled by Roland Li

Go to puzzle: Spare a nickel for the bailout?

Click here for the solution.

Massey Knakal shrinks agent pool by 25 percent

In the midst of the financial crisis, commercial real estate firm Massey Knakal Realty Services has reduced its number of agents by a quarter to 46 from 63 in order to increase its brokers’ territories, the company’s chief executive officer said.

Paul Massey Jr., CEO and co-founder of Massey Knakal, said the reductions were not made
in reaction to the weak marketplace, but to increase the potential sales volume for the remaining brokers.

“Everyone will think this is in reaction to economic externalities, but the planning for the growth in territory size has been going on all year,” he said in an interview.

The latest round of cuts came in September. Compared to the start of the year, the number of agents in Brooklyn and Staten Island dropped to 14 from 21; and Queens and Nassau declined from 15 to eight, Massey said. Manhattan, the Bronx and Westchester fell by three to 24 brokers.

Massey said discussions to reduce the number of brokers began in January, and the final decision was made in the spring. Overall employment at the brokerage has dropped to 146 from 191 at the start of the year, he said.

Still, John Falco, a former Queens broker with Massey Knakal who lost his position in the reshuffle, attributed the job reductions to the tough economy.

“All the real estate firms are feeling the pressure from the credit crunch,” said Falco, who is nevertheless upbeat about opening his own brokerage firm.

He and broker Rubin Isakharov, who worked together in the Queens office, opened their firm, Falco and Isak Realty Services, about two months ago. The firm has four listings in western Queens.

“It is a great time to build your name. Obviously the volume and transactions will not be the same as the previous year, but some of the best companies have started in hard times,” he said. By Adam Pincus

Edge scores priciest condo sale in Williamsburg

The Edge recently sold one of its duplexes for $5.145 million, marking the most expensive condo sold in Williamsburg, and the seventh most expensive condo ever sold in Brooklyn, according to an analysis by The Real Deal. The buyer combined two penthouse units to create a 3,969-square-foot apartment with six bedrooms and six bathrooms. The apartment also has two roof decks and two balconies. The Edge is on Kent Avenue between North Fifth and North Seventh streets, and the Developers Group is the condo’s exclusive sales and marketing team. TRD

More Brooklyn renters from out of state, report says

The number of incoming Brooklyn home hunters from outside of New York State increased over previous quarters, according to a third-quarter Downtown Brooklyn report looking at prospective renters.

Twenty-six percent of Brooklyn apartment hunters in the third quarter were from out of state, compared to 20 percent in the second quarter, according to the report from Ideal Properties Group, a small, local residential firm.

Of the 26 percent of out-of-state apartment seekers, 23 percent were from New Jersey, 12 percent from Massachusetts and 12 percent from California. Forty-two percent of people looking to rent in Brooklyn already lived in the borough and another 21 percent came from Manhattan, according to the report, based on information from 1,211 client registration forms. The rest hailed from elsewhere in New York State or did not disclose their home addresses.

Park Slope, where 47 percent of aspiring renters were apartment-hunting, remained the most popular Brooklyn neighborhood, but Fort Greene, Clinton Hill, Prospect Heights and Red Hook also attracted a fair amount of interest, at 36 percent combined, according to the report. Interest in Clinton Hill, Prospect Heights and Red Hook increased over the second quarter of 2008. Meanwhile, Fort Greene did not attract the same level of activity compared to a quarter earlier, with a 1 percent drop to 11 percent. By Sara Polsky

Former Henson house sells for $28 million

The Lenox Hill mansion at 117-119 East 69th Street that was once owned by Muppets creator Jim Henson sold for $28.5 million. The 12,000-square-foot townhouse went into contract on June 23, and the sale closed September 25, according to city records posted last month. The buyers’ identities were concealed by a limited-liability company. The sellers are Brian Brille, Bank of America’s global head of investment banking, and his wife, Leslie Simmons Brille, according to reports. They were asking $32 million for the property in April. They paid $12.4 million in May 2005 for the neo-Georgian mansion. Henson’s company bought the property for $600,000 in 1977, and his children and heirs sold the building to the Brilles in 2005, property records show. By Adam Pincus

Retail brokers expect sharp vacancy rise in new year

The weak economy has New York City retail experts anticipating a larger-than-normal rise in store vacancies in the first quarter of 2009 after what is expected to be an anemic Christmas shopping season.

Robin Abrams, executive vice president of the Lansco Corporation, said she expects more retail vacancies in the months immediately following the holidays.

“I think there will probably be more,” she said, citing the recent stock market pummeling and the bleak economic news as the key factors that will drive up store vacancies.

Gary Trock, senior vice president of the New York tri-state region retail services team at CB Richard Ellis, said he believes the financial sector layoffs will hurt retailers in the city.

The job cuts “will severely affect the Christmas season. That will have a strong effect on the nationals,” he said. He also said, locally, “Mom-and-pops are getting hammered.”

Retail reports showed a widespread drop-off in consumer spending nationwide in September at stores ranging from Nordstrom to Target.

Historically, store vacancies tend to increase in the first quarter as weak retailers close shop after the holiday season. That phenomenon even holds true when the economy is solid.

In the first quarter of 2007, for example, availability rose in three of the top five submarkets in Manhattan: Fifth Avenue from 42nd to 49th streets; Fifth Avenue from 49th to 60th streets; and in Soho, according to data from Cushman & Wakefield. In the same period, vacancies fell on Madison Avenue and on the Upper West Side.

In the first quarter of 2008, retail vacancies rose or
remained the same in all the submarkets, according to the data.

Trock said the emerging retail markets in Manhattan are especially vulnerable.

“The growing markets we see in the Lower East Side, the Bowery, the West Village … Washington Heights, those markets are the ones that are going to get hit the most. They will get more vacancies,” he said. By Adam Pincus

Art dealer buys Yorkville condo for $12 million

Art dealer Dominique Levy and her partner Dorothy Berwin paid $12 million for a six-bedroom, 5,002-square-foot duplex at 170 East End Avenue in Yorkville, according to city records. The sale went into contract in May 2007 and closed on Sept. 24, city records from last month show. Levy is a co-director of contemporary art gallery L&M Arts on the Upper East Side and Berwin is a film producer. By Adam Pincus

Wall Street crisis hits Hamptons

As the chaos on Wall Street has unfolded recently, observers have waited for the Manhattan real estate market, with its close ties to the financial sector, to show signs of a slowdown. But it’s the East End where the Wall Street meltdown has led to immediate aftershocks, brokers say.

Sales activity in the Hamptons — the popular weekend destination for Wall Street tycoons — has all but stopped, prices have plunged and deals are disintegrating, brokers on the East End said.

“We’re so Wall Street-focused out here,” said Michael Daly, principal broker at True North Realty Associates. “In the past week, it’s like everyone is holding their breath.”

Fashion designer Adrienne Vittadini’s five-bedroom waterfront home in Water Mill, listed with Sotheby’s International Realty, was recently reduced from $6.95 million to $6.495 million, down more than $1 million from its original listing price of $7.6 million, according to an Internet-based listings exchange system. An eight-bedroom home on Parsonage Lane in Sagaponack, originally listed at $9.995 million, is now $8.495 million, while a Bay Avenue home in Water Mill first priced at $4.995 million is now available for $3.995 million.

Despite the perception that good prices are available, many buyers are afraid to act
because they’re waiting for the market to bottom out, said True North Realty’s Daly, author of the Hamptons Real Estate Blog.

“Anyone who is in the process of negotiating or moving on a property just appears to be taking a let’s-wait-and-see attitude,” he said. “When we do see a bottom, we’ll see some good activity.” By Candace Taylor

Chuck Close buys $6 million Bond cond-op

Portrait artist Chuck Close and his wife Leslie paid $5.95 million for a cond-op unit at the Deborah Berke-designed 48 Bond Street in Noho. The sale by photographer Gary J. Cooper closed on Oct. 6, according to property records. The couple also owns a 2,500-square-foot cooperative nearby at 20 Bond Street. Close, 68, was critical of development on Bond Street, which he said threatened to shut out sunlight, rendering his studio unusable. Cooper and his wife bought the apartment in the 17-unit building in April for $5.25 million but never moved in, Cooper said. By Adam Pincus

Newly formed GSLM closes first deal

GSLM Capital Partners said it recently completed financing on the proposed $55 million Columbia Hicks apartment complex in Cobble Hill, Brooklyn, marking the first development under GSLM’s recently launched urban investment fund.

GSLM, a partnership of L&M Development Partners and Goldman Sachs’ Urban Investment Group, established an $100 million urban investment fund in April to develop mixed-income housing in New York and other cities.

“We’ve been committed to rezoning and redeveloping this site with L&M into much-needed mixed-income housing since January 2006,” said Carrie Van Syckel, a vice president at Goldman Sachs Urban Investment Group. “This particular area of Cobble Hill is a unique community, and the sites were prime to be redeveloped, having been underutilized with light industrial activity.”

Columbia Hicks is a 149-unit rental complex on Columbia Street, just south of Atlantic Avenue on the Brooklyn waterfront, which includes 50 affordable units. The project, originally proposed in 2007, was scaled down after a series of contentious meetings with community members near the waterfront site.

Community activists were initially concerned about the height of the building and potential zoning changes in the area. Part of the project sits on land that the developer acquired from the city, according to Seth Donlin, spokesperson for the Department of Housing Preservation and Development.

Citibank is providing the permanent and construction financing for Columbia Hicks. The city Housing Development Corp. provided about $20 million in bond financing and $6.4 million in low-interest subordinate debt.

Ground-breaking was scheduled to begin last month, with completion expected by late 2010. Pre-sales are expected to launch by mid-2009.

Goldman Sachs and Westchester-based L&M previously teamed up on several development deals, including the Aspen, a rental building at 1955 First Avenue, and the Kalahari, a luxury condominium at 40 West 116th Street. By David Jones

It’s all in the family at Houlihan-Parnes

The fifth generation of Houlihans recently joined the ranks at Houlihan-Parnes/iCap Realty Advisors. Christie and Kelly Houlihan, daughters of James Houlihan, managing partner, joined the family business started by their great-great-grandfather.

Before coming on board, Christie, 25, spent three years working in Washington, D.C., as a policy researcher for Senator Hillary Rodham Clinton and was involved in the re-authorization of the Children’s Health Insurance Program.

“The story of how our company has grown is remarkable. It started with our great-great-grandfather coming over from Ireland and working as a carpenter,” Christie said. Houlihan, based in White Plains, is a real estate services firm with departments in commercial leasing and management, residential management and mortgage servicing.

Christie started working in January, and her sister Kelly joined her at the company in August.

Kelly, 23, graduated from New York University in May with a degree in early childhood education and psychology, but said she knew early into her senior year that she wanted to join the family business after interning at Houlihan-Parnes throughout college.

Both Kelly and Christie said their father never pushed them to work for the company, but they were interested in real estate from an early age.

“When we were little, we would play games writing up deeds,” Christie said. “One time, we wrote up a deed to our little brother.”

The sisters don’t have a permanent home at Houlihan yet, and are testing out all of the departments before settling on one. Christie said she is leaning toward commercial financing, and Kelly is interested in the marketing side. Christie is also attending law school at Fordham University.

She said she doesn’t intend to leave Houlihan to join a law firm after graduation.

“Kelly and I both intend to be here forever and one day to be the next generation that runs the company,” she said. By Jovana Rizzo

Brian Podnos is a residential and commercial sales associate at Ben & Company. While the toll the mortgage meltdown and subsequent economic implosion have had on the real estate market has been reported, The Real Deal offers an individual’s perspective through Podnos’ impressionistic take on the crises — with some gallows humor, which may be the only way to view employment in real estate today.

9:00 a.m. My day begins.

I step out of my New York City apartment. It’s a beautiful morning. Birds are singing and the sun is shining as the markets plummet and lenders decide not to lend. Too bad the weather doesn’t pay the bills.

When I get to my office, it is stiflingly hot because the air conditioning is broken. They are developing a new condo next door, so the office reverberates like a big jackhammer. The bathroom on the floor above me is leaking on my desk. I wonder if someone else will eat my sandwich today.

First, I check my e-mail. There’s usually at least one deal that has fallen through. Here’s a typical example:
Dear Brian, Thanks for all your help and the hours
you spent providing us with excellent service. Instead of finding a place to live, we’ve decided to become traveling circus performers. My husband will be the elephant trainer, and I will be the bearded lady. Thanks for your weeks of hard work!

I stare at e-mails like this until my eyes bleed. After that, I go to the bathroom and cry a little.

10:00 a.m. Coffee.

Which of the 14 Starbucks locations on my block should I go to?

10:30 a.m. Work the phones.

I’m a man of many talents. I do commercial real estate, residential sales and residential rentals.

There are many calls to make over the next few hours. First, I call the residential clients; every day, new clients inquire about the buildings that we exclusively broker.
Although the number of inquiries has dropped off recently, we still get a trickle.

Here is something that hasn’t changed much since the crisis: People still think that they can live in a penthouse for a penny. The magnitude of the pickiness in rental shoppers is astounding. But still, I’m a professional and make the calls: “Mr. So-and-So, is there any way I can spend hours finding you an incredible apartment so you can back out at the last second because you didn’t care for the doorman’s shoes?”

Then there’s the commercial side of the phone. I have a big blue book with a list of all the building owners in the area. I make calls to find out who is selling, who is buying and how I can match them up. This used to be fun (not really) when it led to something productive. Today, it’s a different story. Sellers don’t realize it’s not 2005, while buyers have decided to cryogenically freeze themselves like Walt Disney. Most of the time I’m so used to getting hung up on by the secretary that I’m completely caught off guard when I’m able to connect to the actual principal:
“Are you the owner?”

“Yes, what do you want?”

“Really? You’re the owner?”

“Yes.”

“I’m sorry. I’m a little taken aback.”

“What is it?”

“I don’t know.”

“What!?”

And even when I remember to ask the respondent if they are selling or buying, I’m always thrown off if they are. I tend to forget to ask for important information, like, how much do they want? What’s the status of the tenants? Can they deliver the building vacant? My conversations will go like this:
“Are you taking offers?”

“Yes.”
“Great! Thanks!” Click. “Wait, oh no! Damn!”

1:00 p.m. Lunch.

Since when does a slice of pizza cost five bucks?

2:00 p.m. More coffee.

I think I’ll go to Starbucks number six.


2:30 p.m. Time to make deals.

But first I check Google News, CNN and the Drudge Report. Is it just me, or does seeing the headline “Dow drops triple digits” every single day lose its punch after a while? No time to ponder this; I have to check my personal e-mail. I might have a new friend on Facebook, or my father may have sent me a dirty but humorous e-mail.


3:30 p.m. Time to really make deals.

It’s time to do some real work now, especially since the principal of my company is wondering why I’ve been surfing the Web for the past hour.

The afternoon is usually the easiest time of the day to deal with people on the phone. They are happier, and generally satisfied from a filling lunch. They relax, knowing that the end of the day is nearing. I, on the other hand, become more frantic. Too much coffee.

“HELLO! ARE YOU TAKING OFFERS?!”

“Can you stop screaming, sir?”

“Sure, is this better?

“Yes. What do you want?”

“Are you taking OFFERS?!”

“You’re screaming again.”

4:00 p.m. Deal-making ends.

Certain months (feels like years ago) provide you with a surplus of money, so much that you don’t know what to do with it. I gamble, drink or spend my money in other ludicrous manners. One time, I hired a skywriter to spell out: “This cost me $5,000.” I don’t know why.

Now I have no money, because no deals are being made. Times are rough. The important thing is to keep on living. In the movie “The Dark Knight,” I learned that the darkest part of the night is just before the dawn. And when dawn comes, you burn off half your face and go on a manic-spurred killing spree using nothing but a coin. That’s why I like to sleep during the darkest part of the night. If it happens to be on a park bench next to my new hobo friend, so be it.

6:00 p.m. The end of the day.

The day has been long. Someone ate my sandwich again. My desk has a bucket on it filled with bathroom water. Why am I coming back tomorrow? I ask myself. Then I remember, at some point in the future, this all will turn around.

1974: First modern skyscraper declared landmark

The American Radiator Building on the south side of Bryant Park in Midtown was the first modern skyscraper to be designated a city landmark, 34 years ago this month.

The 23-story black and gold office tower at 40 West 40th Street was built in 1924 in the Art Deco style, eschewing the Beaux-Arts style that dominated high-rise building design in previous decades.

At the time, the city’s Landmarks Preservation Commission had designated only two other skyscrapers — the Manhattan Municipal Building at 1 Centre Street and the Flatiron Building at Broadway and 23rd Street, both in 1966.

Since the designation, about 40 skyscrapers have been landmarked, including the Chrysler Building and the Chanin Building in 1978 and the Empire State Building in 1981.

The commission wrote in its designation report, “With its striking forms and colors … (it) initiated a new trend in skyscraper design in New York City.” The building was designed by Raymond Hood, the architect of the Daily News and McGraw-Hill buildings on 42nd Street. The 338-foot tower is now occupied by the high-end Bryant Park Hotel.

1936: Rockefeller buys Harlem apartment after foreclosure

John D. Rockefeller Jr. paid $1.857 million to buy the insolvent Dunbar Apartments in Harlem 72 years ago this month, a complex he built eight years earlier for $3.5 million.

The 511-unit apartment complex, between Seventh and Eighth avenues and 149th and 150th streets, was the first large co-operative built for black tenants in the city. Named for the famous poet Paul Laurence Dunbar, who died in 1906, it opened in 1928 as a project intended to improve the quality of housing in Harlem. Residents paid an average $14.50 per room. The project sold out its first year.

But the stock market crash in 1929 and the Depression hurt tenants’ ability to make their payments. Despite being nearly 98 percent occupied in 1931, the building became insolvent. Rockefeller brought the foreclosure against the housing complex, which had defaulted on a $2 million mortgage originally written in December 1927. He returned the tenants’ equity, and the six-building complex was converted to a rental building.

Rockefeller sold the building in 1937 for $1 million. After changing hands several times over the years, the Pinnacle Group bought the property in 2005 from landlord Baruch Singer for $94.38 million, city records show.

Famous residents of the building, which was designated a landmark by the city Landmarks Preservation Commission in 1970, included writer W.E.B. DuBois, actor Paul Robeson and North Pole explorer Matthew Henson.

1909: Record $822 per foot set for Manhattan parcel

The banking firm the Manhattan Trust Company agreed to pay a record $822 per square foot for a Downtown building at the corner of Nassau and Wall streets 99 years ago this month, surpassing the previous top price of $700 per foot.

The 20-story steel-framed Gillender Building was built on a slim 1,825-square-foot parcel, a prime piece of real estate adjacent to a seven-story building.

The Gillender tower was the tallest building in the city to be torn down when it was demolished in 1910, just 13 years after it was built. It was replaced by the 41-story Bankers Trust Building.

Negotiations for the building began in April, the deal was finalized in November and the final contract was signed in December, the New York Times reported.

The previous record of $700 was paid several years earlier for a lot on the southeast corner of Broadway and Wall Street. The cost at the time was calculated by the size of the 25- by 73-foot parcel, not by the building’s total square feet or the buildable feet. Using today’s pricing method, the $1.5 million paid for the approximately 31,000-square-foot tower would be considered about $48 per foot. Pricing it according to the buildable square feet used in the Bankers Trust Building would yield a cost of only about $20 per foot.

Compiled by Adam Pincus