The Real Deal New York

With hundreds of millions of dollars in short-term debt coming due
in January, Lawlor’s private equity firm has emerged as the latest
poster child for overleveraged post-boom distress. Now that Harry
Macklowe’s goose has been cooked Broadway Partners races to unload its trophy towers” class=”read-more-link”>[more]

Financial news headlines about Wall Street’s meltdown are ratcheting up the fear factor for buyers and sellers, who are becoming even more cautious about plunging into the real estate market.

Industry experts anticipate price drops across the board. But certain residential neighborhoods will probably be hit harder than others by the chaos on Wall Street.
Worry chills local residential market” class=”read-more-link”>[more]

Brooklyn developers are trying to woo would-be buyers who may be
indecisive about the market’s health with deals that allow them to rent
a unit in a condo while putting their monthly rent checks toward a down
payment.
Other developers are also switching to their back-up plan, changing
buildings from sales to rentals, but not without costs and
complications. Rent-to-own catching on” class=”read-more-link”>[more]

When the nation’s finance sector ended as the world knew it last month, the city’s real estate community was left slack-jawed, wondering what it would mean for the commercial and residential markets.

With behemoth investment banks falling like dominoes, New York’s brokers and developers started getting used to the fact that the oncoming pain would be far deeper than previously expected. This month, The Real Deal breaks down the Wall Street meltdown by sector in a series of stories that look at the numbers that matter to real estate insiders. Breaking the bull” class=”read-more-link”>[more]

The fro-yo trend began picking up steam when Pinkberry opened its first
Manhattan store in late 2006; the company, which was started in Los
Angeles in February 2005, was already hugely popular in its hometown.
Pinkberry expanded quickly in New York — within a year, the chain had
eight locations in the city. Fro-yo face-off” class=”read-more-link”>[more]

Layoffs from the bankruptcy of Lehman Brothers, the sale of Merrill
Lynch to Bank of America and the government takeover of American
International Group should create another 3 to 4 million square feet in
availability, said Steven Coutts, senior vice president of national
research services at commercial brokerage Studley. Wall Street woes expected to increase available space” class=”read-more-link”>[more]

 
A home store fire sale is ablaze in New York City. Retail space once occupied by defunct furniture chains Bombay and Domain, as well as home merchants now viewed as passé, such as Pier 1 Imports and Straight from the Crate, is either changing hands or has come on the market.
   
Retailers ranging from apparel merchants to drugstore chains, restaurants and gourmet grocers could set up shop in the former home stores.

But retail vacancies could also be filled by a new wave of hipper, hotter and in some cases more upscale home retailers such as West Elm, CB2, the Container Store and Gracious Home that appeal to the city’s increasingly young and affluent population, brokers said.

Nationwide, the meltdown in the housing sector has hobbled home furnishings retailers, a situation likely to be made worse as Wall Street’s latest woes hit Main Street. And in New York City, the sector’s troubles have been exacerbated by rent increases so steep they are prohibitive for stores selling home goods, which generate lower profit margins than apparel, for example.

Beyond the retailers who are liquidating stores nationwide this year, such as Bombay, Domain and the Sharper Image, other home retailers are questioning whether it’s financially viable to remain in the Manhattan market. And the answer, increasingly, is no.

“They are faced with lease renewals and the rent increases are often high for them to pay, so they end up closing stores, relocating or consolidating locations,” said Andrew Mandell, a broker with Ripco Real Estate.

Languishing in the middle

As the middle class is being expunged from a city increasingly built for affluent residents, mid-level retailers are, too, brokers said.

“In Manhattan, you have a sophisticated customer base looking for something unique,” said Robin Abrams, executive vice president of Lansco Corp. “These days, that crowd views Pier 1 Imports and Bombay the way they would view a chain restaurant. They wouldn’t go to Houlihan’s because they have other alternatives. It’s a different shopping mentality.”

As a result, a bifurcation of the market has occurred. “You have two extremes. The customer on a limited budget who is shopping frugally is shopping in the suburbs” for home goods, Abrams said.

With both home and apparel retailers in the city, “now everything is cheap-chic and luxury,” said Faith Hope Consolo, chairman of the retail leasing and sales division of Prudential Douglas Elliman. “There is no middle market.”

Leaving home

The last two Pier 1 Imports stores in Manhattan are on the market.

However, the retailer “has not made the decision to leave either store,” said spokesperson Kelly Keenum. “We would love to stay in both stores if it proves economically feasible.”

The Pier 1 Imports store at 1550 Third Avenue at 87th Street, whose lease expires in 2010, is being eyed by bank branches, restaurants and apparel merchants, at an asking rent of $250 per square foot.

That’s a far cry from the $40 to $60 a square foot Pier 1 Imports signed on to pay when it first leased the space in 1992, said Jedd Nero, executive vice president of retail services for CB Richard Ellis, who brokered the original lease.

Meanwhile, Robert K. Futterman has been retained to start an early marketing campaign to secure a new tenant for the Pier 1 Imports at 71 Fifth Avenue and 15th Street when that lease expires in 2012.

The space could go to an apparel retailer along the lines of Zara, H&M or the Gap, or an international merchant like Top Shop that would appeal to students at nearby New York University and the New School, said Mark Lapidus, a managing partner with 71 Fifth Avenue LLC, the majority owner of the building that houses the store.

The home departures have been especially pronounced on Broadway’s home furnishings row in the Flatiron District (see story on page 142).

Both 900 and 936 Broadway (spots formerly occupied by Bombay and Domain, respectively), are on the market.

The former Bombay store, with an asking rent of $130 per square foot, could be leased to an apparel retailer by the end of the year, said Sam Stein, a broker with Justin Management who is handling the location.

When Domain first signed a lease in 2000 near Lincoln Center, that area was expected to blossom into a destination for home retailers.

At the time, Domain and Ethan Allen Interiors each opened stores in the luxury towers at 101 West End Avenue at 65th Street.

But the area never took off as a destination for home stores, said Mandell, who first leased the spot to Domain. Domain and Ethan Allen each shuttered those stores this year.

The Domain spot is ripe for a drugstore, bank branch, gourmet grocer, gym or yoga studio, Mandell said. “It’s an area in transition with a lot of residential development and there will be services needed.”

For its part, the Sharper Image — a chain that sold grown-up toys for the home, such as vibrating armchairs — was stuck in a time warp, still selling the entertainment of the 1990s as the Apple-type stores were capturing the imagination of shoppers, Consolo said.

The Manhattan locations for the now-extinct chain are a broker’s dream. “All the stores they’re vacating are in prime real estate with very high tickets [rents] from $500 to $800 a square foot,” Consolo said.

These include a store in Rockefeller Center and one at the South Street Seaport that could be scooped up by Juicy Couture, American Eagle or American Apparel, she said.

Local mom-and-pop home stores like Straight from the Crate are also being nudged out. The entry-level furniture store has closed six stores in the past two years, and only two stores in the chain remain.

“It’s very hard for mom-and-pops to survive with escalating rents,” said Nero, who is looking to find a new tenant for the Straight from the Crate store that closed this year at 50 West 23rd Street.

New kids on the block

The home store exodus isn’t just making room for fashion — it has paved the way for the next generation of merchants selling furniture, bed linens and coffeemakers.

Although these stores may not yet be filling the precise spots being vacated by the departing chains, retailers such as West Elm, Gracious Home, CB2 and the Container Store are providing a fresh alternative to home retailers that had lost their luster and didn’t keep step with changing tastes, brokers said.

As Domain exits the Upper West Side, West Elm, with its young, trendy, modern aesthetic, is making its debut nearby in the Zeckendorf building at 15 Central Park West between 62nd and 63rd streets. The building is said to be drawing the likes of celebrities such as Denzel Washington, Sting and Bob Costas, said Mark Finkelstein, president of Retail Strategies, who brokered the lease.

Rents in the area are an estimated $400 per square foot, brokers said.

West Elm already operates stores in Chelsea and Dumbo.

Whereas Domain appealed to an older customer and grew stodgy, West Elm “came up with a furniture line and product mix that is affordable yet youthful and has a modern edge to it, which seems to be more appealing these days,” Mandell said.

Just as Williams-Sonoma birthed a hipper, younger spin-off with West Elm, Crate & Barrel has spawned CB2, a lower-priced, contemporary sub-brand that is spreading its New York wings.

CB2 opened its first New York store in Soho last year and is scouting for another Manhattan location.

Young people just starting out in the city, who formerly might have gone to a store like Straight from the Crate, now “have a tendency to be drawn to name brands with a little bit of a hip factor” like CB2 or West Elm, as well as the Container Store, Mandell said.

The storage emporium “is looking [to expand] all over the city,” Consolo added.

High-end home merchants are also branching out. Upper East Side fixture Gracious Home is making its Chelsea debut in October.

Gracious Home “is really tailored to the market,” Consolo said.

Indeed, the store will open in the Chelsea Landmark on Sixth Avenue between 25th and 26th streets, a new 38-story residential tower that sits smack in the center of one of the city’s densest luxury apartment booms.

What’s more, Williams-Sonoma will bring Williams-Sonoma Home, its newest, toniest furniture concept, to Manhattan with a store in the Time Warner Center, Finkelstein said.  

As the credit crunch expands into New York’s office market, landlords are starting to manage their buildings smarter to deal with the shrinking margins for error.

Commercial property owners are scrambling to offset declines in rents and combat higher energy and other costs. They are doing everything from outsourcing building management to installing more energy-
efficient systems and, in some cases, selling ads on their empty retail storefronts.

From Midtown to Lower Manhattan, companies are slashing jobs and subleasing major blocks of space, eroding the gains in commercial rents that made the city’s
office market so attractive to investors. A flood of sublease space often undercuts the ability of landlords to maintain price integrity on available space.

There are other signs of a shifting marketplace. Firms like Jones Lang LaSalle are beefing up their property management businesses to offset declines in their brokerage business group.

“There’s no reason to beat around the bush: New York City’s commercial real estate market will get worse, especially for landlords, before it gets better,” said Robert Sammons, managing director of research at Colliers ABR, in a second-quarter report.

That’s because some landlords are having trouble filling their buildings, and the situation is expected to get worse. The overall vacancy rate in Manhattan climbed 90 basis points to 8.7 percent in the second quarter. While overall asking rents climbed 2.1 percent to $66.75 a square foot, Class A asking rents fell 28 cents to $87.10 a square foot. And more troubling are projections that the overall vacancy rate will climb to nearly 11 percent by year’s end.

In a rival report, Cushman & Wakefield warned that asking rents could fall anywhere from 5 to 10 percent in the second half of 2008, due to financial industry layoffs and newly discounted space entering the market.

The city’s top commercial landlords are working proactively to lock up new leases with existing tenants and launching
major programs to renovate buildings
to make them more attractive to prospective tenants.

Marc Holliday, SL Green Realty Corp.’s chief executive officer, said his company has pre-leased 433,000 square feet of space, which will reduce its overall lease exposure to 421,000 square feet for the balance of 2008 and 1 million square feet in 2009, according to a transcript of the firm’s second-quarter conference call.

By renewing existing leases and signing new tenants before a space becomes vacant, SL Green said it is putting itself in a stronger position to negotiate rents with future tenants. During the first half of 2008, SL Green leased a total of 940,000 square feet, raising rents by 48 percent and raising same-store net operating income by 10 percent, Holliday said during the conference call.

In July, the company signed a 15-year lease with accounting firm BDO Seidman for 121,000 square feet at 100 Park Avenue. SL Green is about to complete a $72 million renovation at the property, which includes adding new elevator cabs, a two-story atrium lobby and also 2,000 new insulated windows.

“We’ve been very concerned about keeping a close eye on our energy costs,” said Larry Thomson, senior vice president and director of operations at SL Green.

The company is seeking silver LEED status in six of its New York office buildings and has also begun the $160 million renovation of 1515 Broadway, which will include upgrading the street-level retail space to bring in higher-end restaurants. The company also plans to raise rents for new tenants.

According to the New York Observer, Greg Hughes, chief financial officer at SL Green, said last month that Viacom is expected to renew its lease at 1515 Broadway, where it pays $50 a square foot in rent. But, sources close to Viacom later told the New York Post that the entertainment company had not committed to doing so. Meanwhile, SL Green has been able to sign two new tenants to $85-a-square-foot leases.

Kevin McCann, managing director of client solutions at Cushman & Wakefield, said the biggest concern of a commercial landlord in this market is how to retain existing tenants, and that it often involves hiring a professional property management firm to create a better environment.

“That doesn’t often involve cutting costs, it involves being efficient,” said McCann.

Cushman & Wakefield has been asked to help landlords use their space better, even trying to get tenants to cut their space in existing leases to augment sublease possibilities.

“A tenant may have three floors in a building but their layout is inefficient,” said McCann. “They say to us, we have 60,000 square feet but I can get 60,000 square feet two years from now for $2 a square foot less. Maybe you don’t need one employee for every 300 square feet of space.”

With the slowdown in leasing activity, companies like Jones Lang LaSalle see more opportunities in the property management side of the business. It manages 1.2 billion square feet of office space worldwide and about 45 million square feet of office space in New York City.

The firm also has an extensive project management business that helps companies manage relocations, expansions and site build-outs.

“If institutional buyers become more active, that will be a good thing for us,” said Lance Carlile, regional manager of Jones Lang LaSalle’s property management group.

Jones Lang LaSalle was selected by Ogilvy New York to oversee construction of its new offices in the 11-story Ogilvy Building at 636 11th Avenue, and it is managing the project with an eye to efficiency. The 559,000-square-foot space will include break-out rooms, a full-service kitchen, a media production room, cafeteria, printing facilities and a large gathering space.

Jones Lang is also overseeing a gut renovation of the building, which is owned by the Hakimian Organization, with partner firms Peykar Brothers Realty and Gorjian Properties.

In a slow market, though, many tenants cannot afford large blocks of space.

Robert Bielsky, president of Manhattan Commercial Realty Corp., said landlords are trying to make their buildings more attractive by subdividing large blocks of space, making them easier to lease to small and mid-sized tenants.

“[Rents] are not really coming down that much on small space, because there’s still tremendous activity going on,” he said.

Landlords are limited in their ability to pass the high cost of energy, labor and building materials onto tenants in the form of higher rent, but they can negotiate escalation clauses into a lease agreement.

For example, if rising winter heating bills are a worry to a landlord, they can negotiate language into the lease that requires the tenant to share those excess costs.

“A tenant now would be responsible for proportionate share in any increase in heating fuel over and above a base price,” said Bielsky.

That means landlords are looking to turn a dollar however they can. Inwindow Outdoor, a New York-based advertising firm, helps landlords earn thousands of dollars of incremental monthly revenue. The company launched advertising campaigns for Converse and Red Bull in vacant street-level retail spaces in major office buildings. Inwindow has placed ads in buildings like 675 Third Avenue.

Ray Lee, who manages commercial real estate operations at Inwindow, said: “It offsets expenses from electricity to insurance to taxes.”

Go to chart: LI gas stations shutter

If you’re a Manhattan resident who’s considered dealing with the diminishing number of gas stations — and the increase in the price of gas — by trekking to Long Island, think again.

It’s been well established that gas stations are disappearing in Manhattan and the outer boroughs, but now they are even abandoning the suburbs east of Manhattan.

The development could lead to a rude awakening for those looking to fill their tanks. The reduction of gas stations typically means increased prices at the remaining gas retailers due to less competition, experts said.  

According to the New York State Department of Agriculture and Markets, Nassau and Suffolk counties had 1,377 gas stations in 1998. By 2007, the most recent data on record, the two counties had lost 151 gas stations, a drop of 11 percent.  That doesn’t include the two New York City boroughs of Brooklyn and Queens, which are technically on Long Island, though still part of the city. From 2003 to 2007, a slightly shorter period, those boroughs went from 1,165 gas stations to 1,053, a loss of 9.6 percent, according to the New York Fire Department.

Some commercial real estate brokers believe the loss of gas stations on Long Island, which can be partially attributed to the consolidation of gasoline companies, is simply a reflection of what’s happening nationwide.

“This is probably true for most parts of the country, where gas stations are diminishing for various reasons,” said Gregg Carlin, a senior vice president with the Woodbury office of the commercial brokerage CB Richard Ellis.

Throughout the nation, there is a push on the part of gasoline companies to maximize profits by opening larger gas stations with multiple pumps and convenience stores on at least an acre or more of land, he said. But in some areas, especially New York City or Nassau County, it can be hard to find a piece of real estate that large.

“These older properties — some plots are as small as 10,000 to 15,000 feet — make it a little difficult to get enough pumps to do these large convenience stores on the property,” Carlin said.  “And when you do a convenience store, you also need to have spots for people to park their cars. So the gas companies seem to want at least an acre to an acre-and-a-half of land.”

Marie Zere, president of Zere Real Estate Services, based in Ronkonkoma, Long Island, said that especially in Nassau County there is a lack of sites large enough to put in new gas stations. “There are no sites in Nassau County,” she said.  “Any growth area has been in Suffolk County. In Nassau, you have little sites that are like one-quarter of an acre with a gas station on it.

“You could never do a gas station there anymore because the regulations demand something like 1.5 to two acres,” she said.

Zere said that, though she has brokered some gas station land sales, like many commercial brokers, she doesn’t typically like to work on gas station sites as there’s little money in those deals. Thus, it can be hard to determine if some former gas station lots have fetched higher prices as development parcels than if they’d remained gas stations.

 ”All the gas station companies, the Hess Corporations, have their own scouts that look for sites,” she said. “So there are very few brokers that specialize in this.”

Cory Zelnik, president and CEO of the commercial brokerage Zelnik & Company Real Estate, based in Manhattan, said he has leased some sites to gas station operators in the past. But now, the value of land on Long Island is making it more advantageous for gasoline companies to sell off sites they had previously leased to gas station operators.

“The gas stations for many years held prime positions, on corners, etc., and now the big oil companies — the Exxons, the Mobils — have contracts or leases with operators that are coming due,” Zelnik said. “So they look to reposition the asset, like any other real estate person would.

“They’re finding it more opportunistic to just sell these things; it adds funding to their bottom line,” he added.

With the proliferation of bank branches in the tristate region (a trend that may be ebbing in light of financial institutions’ troubles), along with the continual growth of pharmacies on Long Island, there are plenty of companies that can afford to pay top dollar for well-located former gas station sites, he said.

Carlin agreed, saying the land is available, especially in Suffolk County, yet it can be difficult to secure an affordable site. “It’s very competitive to get these properties,” he said. “The drugstores are after these corners, as well as the financial institutions and the fast-food operators.”

Zere said that 1.5-acre corner lots in Suffolk are being scooped up by drugstores and other retailers for $2 to $4 million or more. In Nassau County, the land is being snapped up at $2 to $2.5 million an acre.

“When it comes to gasoline stations, it’s not a supply-and-demand issue,” she said. “It has to do with the incredible value — the value is greater for other uses.”

But one critical attribute of former gas station sites — which are typically appealing if only because their one-story structure makes them easily convertible — can make them unattractive for new users: potential contamination.

Ordinances regarding the operation of gas stations in Suffolk County, regulating their discharge and limiting gas storage, have made it harder for gas station operators to turn a profit, Zere said. That may have driven some out of business or prevented new gas stations from opening.

“I sold a gas station in Lake Grove about seven years ago, and the buyer still hasn’t opened his doors,” she said. “He fixed it up, put in pumps, and he still hasn’t opened it.”

There was also a precipitous drop in the number of gas stations on Long Island after December 1999, when the U.S. Environmental Protection Agency passed new guidelines on underground tanks that made it harder for smaller gas stations to comply with expensive regulations, said Jessica Chittenden, a spokeswoman for the state Department of Agriculture and Markets.

The climbing value of land on Long Island may not yet have surpassed what is needed to clean up certain contaminated sites, Zere said. Oftentimes, the cleanup of a former gas station site becomes a negotiating point in sales transactions.   “Sometimes, a buyer will come along and say, ‘I love this corner. I want this corner. I know you’ve got contamination,’” Zere said. “‘You spend the first $100,000 to clean it up, and I’ll spend anything over that.’”

But many developers will not buy a site unless it has been cleaned up by the seller, or at least a site assessment has been paid for by the seller. But that can take some time.

“I have a gas station I worked on seven or eight years ago in the Hampton Bays area, and it went in for remediation,” Zere said. “It’s still contaminated and the cleanup bill is huge.” 

Over the past six months, McSam Hotel Group has unloaded a half
dozen of its New York development sites to the Magna Hospitality Group,
a small hotel investment and management firm that is not that well
known to many in the local real estate community. Indeed, the firm — which is based in East Greenwich, R.I. — has emerged
as a key business partner to Sam Chang’s budget hotel empire since
entering the fray here in 2005. [more]

 
While brokers boast that Brooklyn would be one of the largest stand-alone cities in the country, convincing retailers to open stores there is not an easy feat.  Though the borough is in the midst of a retail makeover (look no further than furniture giant Ikea coming to Red Hook for evidence of that) and Target is rumored to be expanding there, real estate insiders say wooing the big national chains that are used to paying Middle America rents is still hard work.

Nonetheless, most say that the Home Depots, Urban Outfitters and American Apparels of the world will thrive in the coming years and that independent, mom-and-pop hardware and clothing stores will be flailing to keep their heads above water.

In The Real Deal’s Q&A this month, brokers said places like Downtown Brooklyn, Williamsburg and Park Slope’s Fourth Avenue, where new residential development is under way, will see the biggest gains when it comes to new retail openings in the borough in the next few years.

But they said that Brooklyn’s sister borough, Queens, has far more retail with its mega-mall Queens Center and more plentiful neighborhood shopping options. And, they noted that while per-square-foot rents are on the rise, they will never catch up with Manhattan. Others noted that while H&M is opening a new store in the Fulton Mall, department stores are still reluctant to sign leases for Brooklyn space and high-end, Madison Avenue designers are not scouting for locations. And, they said, there are plenty of areas of Brooklyn like East New York that are still lagging with rents as low as $10 to $15 a square foot. For more on retail vacancies, big box versus mom-and-pop and expected retail growth, we turn to our panel:

Robert Greenstone chairman and CEO, Greenstone Realty

What is the biggest challenge in getting retailers that have traditionally looked to Manhattan to consider Brooklyn?

The biggest problem is perception. Retailers, and to a large degree retail brokers, think Brooklyn is mostly low-income housing, and they bring all their preconceived ideas, which they can’t see past. Manhattan brokers either won’t give Brooklyn the time of day or aren’t interested in learning about the market. It amazes me. Retailers have to understand that Brooklyn has buying power.

What kinds of new retailers are showing the most interest in Brooklyn?

Independent, mom-and-pop-style stores will continue to open in Brooklyn because it’s more affordable than Manhattan. CVS and Walgreen’s would open more stores if the right spaces were available. H&M, American Apparel, Brooklyn Industries, Finish Line — these are names that come to mind. In Williamsburg, there is Triple Five [Soul] and so many great funky stores and restaurants.

What kinds of retailers are showing the least interest?

Department stores. Obviously there’s a lot that goes into finding the right location for a department store, such as land, parking, access and economics — but with Macy’s on Fulton Street cranking out sales of nearly $1,000 per square foot, one would imagine that more department stores would see Brooklyn as having more potential than someplace in Wisconsin. Target is right in targeting the boroughs. Costco and BJs also.

What segment of the retail market in Brooklyn — big box, independents or local chains — is faring the worst?  

If there was a weakness to the Brooklyn retail landscape, I’d have to say it is that there aren’t enough large properties on the market that lend themselves to retail. And because parcels are typically small, they are owned by individual owners who lack a clear plan for their property. Property owners tend to think only about achieving certain rent numbers and not about upgrading and renovating their retail spaces … When times are good, the mediocre retailer is given a free ride. Not so today.

What sort of per-square-foot retail rents are you seeing in the area of Brooklyn that you work in?

In Williamsburg, Greenstone Realty is leasing the Edge, which has 60,000 square feet of retail space. Asking rents up and down North 6th Street are around $100 per square foot. However, asking rents at the Edge are south of that. Douglaston Development, the landlord, is more interested in the right tenant mix than the last nickel — which I believe is the right thing for the project. Specifically, we’re interested in great, funky cafés, a fabulous bakery, restaurants and apparel stores, and a serious gourmet food market. By comparison, most of the spaces on North 6th Street require extensive renovations to make the space retail friendly. Some retailers in the area report achieving sales in excess of $1,000 per square foot.

How does that differ from one, two and five years ago?

Over the past few years we’ve seen rents escalate; however, not nearly at Manhattan’s pace.

There was a study a few years ago that found that Brooklyn was “under-retailed.” Is that still the case?

Nationally, there’s 36.4 square feet of retail space per capita. In Manhattan it’s 52.2 square feet. But in Brooklyn, that number is only 10.8 square feet per capita. I see the most growth and activity coming to areas whose look and feel most closely resembles Manhattan, meaning Downtown Brooklyn and Williamsburg.  

Frank Terzulli executive vice president, Winick Realty Group

What segment of the retail market in Brooklyn is faring the worst?

The independents. Like any place else, once the national and regional chains move in, the little local guys get hurt. Hardware stores have to compete with Home Depot. You see that on the Upper East and Upper West Side, and you are seeing that in Brooklyn as well.

What kinds of retailers are showing the least interest? 

Manhattan retailers geared toward the tourism industry and Madison Avenue; high-end retailers are not going to move into Brooklyn.

What sort of per-square-foot retail rents are you seeing in the area of Brooklyn that you work in?

Retail rents [throughout Brooklyn] are anywhere from the mid- to high-$30s to $200 a square foot, depending on where you are. On streets like Fulton [in Downtown Brooklyn] or Montague [in Brooklyn Heights] where they are getting $150 a square foot, some landlords are pushing for $200 a square foot. The Brooklyn gap in rents at the high end is catching up with some of the average rents in Manhattan.

What are the biggest selling points being used to pitch Brooklyn?

[While rents are catching up], they are and probably always will be lower than Manhattan.  We are getting a similar residential base with much less rent, but income levels are similar to the Upper East Side, Upper West Side or Battery Park City. A residential base with similar demographics — that’s what the drugstores and banks look for.

J.D. Parker regional manager of Brooklyn office, Marcus & Millichap

What is the biggest challenge in getting retailers that have traditionally looked to Manhattan to consider Brooklyn?

Showing retailers the demographics as well as the diverse locations that are available. In the last 36 months on the macro level, Brooklyn turned the corner in terms of being able to attract larger national tenants. Brooklyn is stigmatized [by those] not from New York. I don’t know what it is — crime has diminished, but it is a difficult place to do business. It is not an easy place to get in and out … [but now] retailers want to capitalize on the market in Brooklyn.

What segments of the retail market in Brooklyn — big box, independents or local chains — are faring best and worst?

Big box, local and national chains are doing best. Independent mom-and-pops are by far faring the worst.

What sort of per-square-foot retail rents are you seeing in the area of Brooklyn that you work in?

The lease for Yofiore, a yogurt store on Court and Remsen [near Borough Hall] for approximately 600 square feet was $258 a square foot. That’s the high end.The Fulton Mall leases in the $100 to $150 per-square-foot range. The new lease for Ricky’s at 191 Bedford Avenue was signed at $150 a square foot. From Fulton to East New York we are seeing places renting at $10 to $15 per square foot, which is the extreme low-end.

What about vacancy rates in light of the economic slowdown?

The farther you get from the subway, the more retail drops off. Older retail corridors where rezoning didn’t occur, like Utica Avenue and Nostrand Avenue, the foot traffic isn’t there. Spaces are sitting vacant because there is no market. Broadway has seen revitalization; apartment rents are strong near the subways and as a result retail rents follow suit.

Which parts of Brooklyn are you expecting to see the most retail growth in the next five years?

The Fulton Mall will change dramatically after the Albee Square project is completed. The Bedford Avenue corridor from Broadway to North 11th Street and McCarren Park will improve dramatically and rents will rise. On Atlantic Avenue from the docks to the Ratner project to Flatbush and a few blocks beyond, we’ve seen a tremendous run-up in the last 12 months. It will rise as new development and condo projects come online. Smith and Court streets will continue to improve and rents will rise. Also, 86th Street in Bay Ridge, Kings Highway, Church Avenue and Flatbush will continue to improve.

What are the biggest selling points being used to pitch Brooklyn? Discounted retail rents? Larger spaces?

It is an improving demographic with a large student population, increasing tourism and a lot of hotel units coming online. There aren’t the large spaces in denser areas, but in South Brooklyn — Gowanus and further south, there can be success. For example, Ikea is seeing success.

David Tricarico director of retail services, Cushman & Wakefield

What is the biggest challenge in getting retailers that have traditionally looked to Manhattan to consider Brooklyn?

The challenge is the big box or the size of store layouts in the neighborhoods they desire. It is not fair to compare small chains to Manhattan. It is Petco, not Prada, in Mill Basin.

What segments of the retail market in Brooklyn are faring best and worst?

Big box and local chains [are doing best]. The independents are faring worst because the big chains are moving in. They are getting hurt by category killers; the local hardware store has to compete with the Home Depot. The local grocer has to compete with Costco and Fairway.

What kinds of new retailers are showing the most interest in Brooklyn? 

Housewares and home furnishings are looking around. There is a lot of tire kicking.

What about vacancy rates in light of the economic slowdown?

Vacancies are similar to Manhattan in that the good product remains good and the bad product is not rented. Rents are reasonable in areas that are being gentrified like Downtown Brooklyn, where there is a lot of stuff planned and there is a lot of new construction, though there are not a lot of takers. It’s going to be fantastic in five years, but in the short term it’s tough.

Which parts of Brooklyn are you expecting to see the most retail growth in the next five years?

Red Hook and Downtown Brooklyn. Once strong sales are reported from IKEA in Red Hook [there will be more growth there]. It’s an area for large formats and high sales volumes. Retail growth is a herd mentality. Downtown Brooklyn will be quicker because it already has built a lot of new construction. The bigger box stores take a lot longer to do.

There was a study a few years ago that found that Brooklyn was severely “under-retailed” when compared to its population. Has this changed?

It is unfair that Brooklyn’s sister borough Queens has a bit more retail. But that is because Brooklyn is older and it didn’t have the space for the stores. There’s no Queens Boulevard in Brooklyn. Also, Queens has one of the best regional malls in the country, Queens Center. And there are little pockets like Bayside; each neighborhood has its own strip. Brooklyn shoppers go to small supermarkets and pharmacies. They are looking for better quality retail like an H&M, which they may be getting soon.

What are the biggest drawbacks to pitching Brooklyn?

In the smaller areas like Park Slope or Smith Street, some of these buildings have been owned for [years] and they don’t want to talk to brokers. They would rather make a deal with a local retailer than bring a quality tenant like a fashion chain such as Urban Outfitters. It’s a lot speedier for them — so it is a real challenge. The educated owners, like in Downtown Brooklyn, are professional landlords. You also have [industrial buildings], and it’s a challenge to talk to these guys because it’s hard to convince them and deal with an owner who doesn’t have a computer.

Albert Laboz chairman, Fulton Street Mall Business Improvement District

What is the biggest challenge in getting retailers that have traditionally looked to Manhattan to consider Brooklyn?

The challenge is trying to convince a retailer or big box unfamiliar with New York City that they could have a $100 million store instead of a $10 million store. As an example, I was negotiating with a major retailer for a 150,000-square-foot space at a rent of $48 per square foot. We negotiated for 11 months and even got to the lease stage when they came back and said they could not justify the rent. These big box [stores] are used to paying $5 a foot and having a store that does $8 million a year [in business]. They don’t know what it is to have a store where you pay $50 a square foot and do $100 million a year. These retailers often are the anchor of a strip mall in some suburban location, and as an anchor they pay $10 to $15 a square foot and have a percentage rent clause. In other bigger cities, rents are in the $20 to $25 range.                                              

What sort of per-square-foot retail rents are you seeing in the area of Brooklyn that you work in? How does that differ from one, two and five years ago?

The rents on Fulton Street are anywhere from $125 to $250 a square foot, depending on size. They remain basically the same. The difference is that where before they were independent local tenants, now there are national tenants that are paying them.

Timothy King principal, CPEX Real Estate

What kinds of new retailers are showing the most interest in Brooklyn?

Lots of independents or chains are opening their first store in Brooklyn. Boar’s Head is opening a concept store on Court Street to test the marketplace. Yofiore opened their first store at Court Street. A lease has been signed on Smith Street with an apparel store whose sister store is a large chain. I can’t reveal the name, but it is the first ever of this type of apparel store opening in Brooklyn. On some level, with the news of the economic downturn, Brooklyn is the ultimate counter-cyclical marketplace.

Which parts of Brooklyn are you expecting to see the most retail growth in the next five years?

The neighborhoods where there is residential development: Williamsburg, Downtown Brooklyn and areas such as that. In the next three to five years those areas will see 10,000 units of housing. There are new families living there that never lived there before. They will need everything from schools to houses of worship to necessities like Laundromats to supermarkets, high-end apparel stores and specialty food shops.

Can you tell us about any new Brooklyn retail deals that illustrate the state of the market?

[Last month we] leased a 1,200-square-foot retail space at 113 Smith Street to Free People, a women’s clothing boutique created by the founders of Urban Outfitters. The rent for the one-story building at the corner of Pacific and Smith streets was close to the asking price of $9,000 a month.

Noel Caban vice president of retail services/boroughs, CB Richard Ellis

What is the biggest challenge in getting retailers who have traditionally looked to Manhattan to consider Brooklyn?

There is a lack of understanding of how diverse these neighborhoods are. In Brooklyn alone there are 15 to 20 mature retail markets — from Brooklyn Heights to Bay Ridge to Bensonhurst.

What about vacancy rates in light of the economic slowdown? Where are they — either high or low?

Park Slope is a great example of where everything is leased. Where the D’Agostinos and Gothic Cabinet Craft used to be there are now [several] new retail tenants — Bank of America [and] Five Guys Burgers and Fries, which will do well in that location. Seventh Avenue is an established high-income market, similar to the Upper East Side and Brooklyn Heights.

Which parts of Brooklyn are you expecting to see the most retail growth in over the next five years?

Downtown Brooklyn and the adjacent vicinity need retail and services. Williamsburg with all its waterfront development will be under-retailed. Red Hook still has many viable opportunities. Sunset Park is on the cusp of major development, and Coney Island, with its new redevelopment plans, will be an excellent market to anchor in.

What are the biggest selling points being used to pitch Brooklyn? Discounted retail rents? Larger spaces?

Williamsburg, Downtown Brooklyn and even the Fourth Avenue strip off Flatbush have multiple development projects going up. New development is the selling point. If you need more selling points: 53 percent of Brooklyn’s residents are females, and in one square mile you’ll find well over 35,000 people. 

Bronx development site on the market
A 440,000-square-foot plot of vacant land at 825 Bronx River Avenue in the Soundview section of the Bronx is on the market with an asking price of $50 million, or $113 per square foot, according to published reports. The 10-acre site is the former Loral Electronics defense contractor plant and is currently zoned for industrial or retail use. Around 90 percent of the land is vacant, and an 80,000-square-foot building will be demolished. The seller is Long Island-based Lighthouse Real Estate Ventures. Bill Jordan and John Reinertsen of CB Richard Ellis are marketing the property.

Greenwich Village buildings on the block
Two apartment buildings at 201-211 West 11th Street are on the market with an asking price of $47.5 million. There are five stores and 67 apartments, 40 of which are free market and 24 of which are rent-regulated; three units are currently vacant. The properties have 29 one-bedrooms, 26 two-bedrooms, 10 junior-four units and two studios. The average monthly rent is $2,717, or $54 per net square foot. The rents for the retail spaces average $181 per square foot. James Nelson of Massey Knakal is handling the assignment.

Five Manhattan mixed-use properties for sale
A mix of five buildings in Tribeca and Lower Manhattan are on the market with an expected sales price of $34 million. The three-story, 12,500-square-foot mixed-use building at 35 Walker Street is vacant and has additional air rights for development. The five-story loft building at 73 Leonard Street has 12,500 square feet of space, which is 100 percent occupied. The Chapel Moran Inn at 103 Washington Street has a restaurant on the ground floor and seven stories of apartments above, all of which are vacant. The five-story loft property at 10-12 Maiden Lane has 13,709 square feet of space but can be built out to contain an additional 34,900 square feet. The final property is a four-story commercial townhouse with 10,309 rentable square feet at 67 Greenwich Street. Peter DeCheser of Jones Lang LaSalle is handling the sale.

Chelsea development site asking $20 million
A three-story, 27,600-square-foot commercial building at 537-543 West 20th Street is on the market with an asking price of $20 million. The site, located between 10th and 11th avenues, has 100 feet of frontage and lies in a split zoning of M1-5 and C6-3. This allows for a 46,000-square-foot office, hotel or gallery development. Bermuda Limousine Corporation occupies the space but will relocate, and the building will be delivered vacant. Eastern Consolidated brokers Anna Maria Ronquillo, Peter Hauspurg, Alan Miller, David Schechtman and David Lever are marketing the property.

UES retail co-op on the block
A 6,886-square-foot retail co-op with 5,375 square feet of basement space at 1235 Lexington Avenue is on the market with an asking price of $20 million. The space, located at the corner of East 84th Street, is on the ground floor of a 14-story residential building and is occupied by a Duane Reade. The drugstore is on a 20-year lease at the site with rent increases of 12 percent every five years. The new owner would be acquiring 5,107 shares out of a total of 39,575 shares in the building. Eric Anton, Ronald Solarz and David Schechtman of Eastern Consolidated are handling the assignment.

Manhattan portfolio on the market
Three Manhattan properties located at 90 Water Street, 79 Mott Street and 519 Second Avenue are on the market with an aggregate asking price of $19.85 million. The 979-square-foot development site at 90 Water Street can be built out to 14,685 square feet, with a maximum floor-to-area ratio of 15 in a C5-5 zone. The five-story apartment building at 79 Mott Street has two ground-level stores and 16 one-bedrooms above; two units are rent-controlled, seven are rent-stabilized, six are free market and one is vacant. The apartment building at 519 Second Avenue has a bar on the ground floor that can be delivered vacant and eight residential units, five of which are vacant. The 7,350-square-foot property has an additional 7,080 square feet of air rights. Nik Petkoff of Massey Knakal is handling the assignment.

Washington Heights building for sale
A six-story, 54,000-square-foot multifamily property with 74 units at 4321 Broadway is on the market with an asking price of $12.9 million, or $239 per square foot. The building, located between 184th and 185th streets, has an average monthly rent of $1,035. The property sits on a corner lot measuring 103 feet by 120 feet and is located in a C8-3 zone. The asking price represents a per-unit price of $174,000 and a capitalization rate of 4.4 percent. Marcus & Millichap is marketing the property.  

Compiled by Linden Lim

Industry watchers had hoped the sales of Macklowe’s former assets — which were seized in February by Deutsche Bank after the highly leveraged real estate mogul defaulted on nearly $7 billion in loans — would revive what had been a dormant commercial real estate market here.
No real spark from Macklowe resales” class=”read-more-link”>[more]

Barclays deal for Lehman HQ not as good as Chase’s
The ink may still be drying on the agreement to buy Lehman Brothers’ headquarters at 745 Seventh Avenue, but brokers said it appears that Barclays did not get as good a deal as JPMorgan Chase did when it snapped up the failed investment bank Bear Stearns.

London-based Barclays said it agreed to pay $1.5 billion for Lehman’s west Midtown tower and two New Jersey data centers, as well as $250 million for the firm’s North American investment banking and capital markets business.

But, unlike the Chase deal, Barclays did not get a great discount off market value.

Barclay’s said in a statement that the building purchases were “for close to their current market value.”

Ron Cohen, chief marketing officer at Besen and Associates, who was not involved in the sale, said there was not enough public information to know what the deal meant for the turbulent office market.

However, he said, “It sounds like they are not getting quite the deal that JPMorgan Chase got at 383 Madison.”

In March, JPMorgan Chase snapped up the failed investment bank Bear Stearns for a reported $236 million, which included its headquarters at 383 Madison Avenue, valued at about $1 billion.

The Barclays news came days after Lehman Brothers Holdings filed for the largest bankruptcy in United States history.

An investment sales broker not involved in the Barclays deal, who asked not to be identified, said the Lehman building would not command as high a price if offered on the market under normal conditions.

“In the current financial market they couldn’t get financing, especially with one [company] … It would have to have two investors or more instead of just one guy,” he said.

The sale of the Class A headquarters on Seventh Avenue at 50th Street does not provide a barometer of market conditions due to the conditions of the sale — it was arranged under pressure within a few days, real estate experts said.

Eric Anton, executive managing director at Eastern Consolidated, said rapidly constructed deals are often done on estimates.

“My gut tells me they figured this company was worth much more, and they got the building as well,” he said.  By Adam Pincus

Lower Manhattan diverse enough to cushion job losses
The Downtown commercial market will not be devastated by financial sector job losses, despite the fact that the top three firms occupying office space Downtown are three former titans of Wall Street and finance — Merrill Lynch, AIG and Goldman Sachs — according to real estate experts.

That was the message at RealShare New York’s annual conference, where panelists said they expect Lower Manhattan’s growth to continue when the economy strengthens, thanks to the area’s diversity.

Lower Manhattan tenants are more varied today than 10 or 15 years ago, when 52 percent of the area’s real estate was occupied by financial sector institutions, said Sheldon Cohen, senior managing director at CB Richard Ellis.

“Lower Manhattan is finally what we were all looking for it to be — a 24-hour community,” said Steven Spinola, president of the Real Estate Board of New York.

Karen Bellantoni, executive vice president at Robert K. Futterman & Associates, added that the Downtown community has a wider range of real estate needs, including space for high-end retailers who are attracted to Lower Manhattan because of the presence of other luxury retailers.

The panelists did acknowledge the uncertain impact of financial sector job losses on Downtown real estate.

That’s partly because Merrill Lynch, AIG and Goldman Sachs occupy about 10 million square feet of combined space in Lower Manhattan.

“It’s too early to really have any clarity on what’s going to happen” to financial firms’ Downtown office space after the purchase of Merrill, the takeover of AIG and the movement of Goldman to new headquarters, said William Rudin, president of development company Rudin Management. “We’ve known the financial services industry has a rollercoaster effect” on Downtown real estate.

Right now, said Joshua Zamir, managing principal at private real estate equity firm Capstone Equities, “people are a little slower making decisions” in Lower Manhattan, “but it’s not dead.”  By Sara Polsky

Residential brokers try to navigate new playing field
After months of contending with the credit crisis and national housing slump, New York City’s residential real estate market is also preparing for the impact of the Wall Street crisis.

With much of the city’s money tied up in the financial industry, the fall of financial giants like Lehman Brothers, Merrill Lynch and AIG are expected to have a real effect on the industry.

“What we have here is an elevation of anxiety that’s hit the market,” said Pamela Liebman, CEO of the Corcoran Group. Brokers must act as “part psychiatrist, part hand-holder,” as increasingly more cautious buyers and sellers approach the market, she said.

Joyce Pohs, a sales associate at Bellmarc Realty, said she is already feeling the crunch.

“There is a definite sense of ‘let’s wait this out and see how far the real estate market will fall,’” Pohs said. “When Lehman fails, AIG is in disarray and Merrill gets absorbed, it’s hard to argue with a wait-till-December-and-see approach. I just had an offer for a posh Fifth Avenue residence withdrawn.”

Veronica Raehse, an executive vice president and sales manager at Bellmarc, agreed that buyers are going to become even more cautious, but notes that despite Monday’s bad news, Tuesday was a busy day at the Bellmarc West Side office; there were three accepted offers and two successful rental transactions, but she agreed that bad economic news will only make buyers more hesitant to pull the trigger.

Newer brokers may struggle the most.

Barbara Fox, president of Fox Residential Group, said that newer brokers “who have only known boom times” may be in for a shock as the market tightens. “Deals have been falling out of heaven for the last 10 years, and they’re not going to be now.”

Fox predicted that the residential market in the Financial District, which has a number of new high-end rentals and condos, will feel the hit more than the rest of Manhattan.

Apartments there are “a very tough sale right now,” she said, and with the bad news, it will be even tougher. “People are not moving in to the financial industry, they’re moving out of it,” she noted.

Citywide, “I don’t think any business in New York is going to be exempt from this particular set of events,” Fox said.

But people aren’t walking away from signed contracts, they’re simply holding off on making offers until the market settles down, Corcoran’s Liebman said.

She said she remains optimistic that New York’s real estate market will not suffer long-term. “New York is very different. It’s a place [where] everyone wants to be,” she said.  By Jane C. Timm

Bailout plan viewed with hope, uncertainty in NYC
Although it remains unclear how the massive bailout proposal being debated in Washington will impact New York City commercial real estate if it passes, experts believe it could be the first step to unfreezing a market that is expected to see many building failures in the next several years.

Paul Fried, a principal at real estate investment banking firm AFC Realty Capital, said financiers are waiting for the bailout to kick start a frozen lending process for larger commercial properties.

“The short answer is, we still don’t know many of the details of the plan,” he said. “To the extent it provides a stabilizing force it is going to be a good thing for New York and for its real estate values” as well as for its capital markets, city employment and tax revenue, he said.

He viewed the bailout as a helpful first step to restart the commercial lending market for sales of $50 million and up, a segment of the market that is struggling.

Data from real estate services firm Cushman & Wakefield showed just $17.3 billion in sales of Manhattan office properties valued at $10 million or more were closed or under contract by the end of August, a 58 percent decline from $40.3 billion at the same time last year.

But the federal aid is only the first of two steps necessary for the lending market to flow again, the other being clarity about the direction of the economy, Fried said.

The Treasury Department sent the bailout plan to Congress last month, proposing that the federal government buy troubled commercial or residential mortgage-related assets that have lost value. While it is expected that the majority of the failing mortgages will be in the residential market, there will still be a fair number in the commercial market, insiders said.

Robert Knakal, chairman of commercial brokerage Massey Knakal Realty Services, said that whatever system is devised to take over and dispose of the toxic assets, it will take years to unravel the complex securities to determine who the owners are and the percentage of ownership. But a bailout would provide a positive and immediate effect on the credit market.

“I wouldn’t say it would unfreeze it, but it will certainly create a thaw,” he said.

But Jon Southard, director of forecasting at Torto Wheaton Research, a subsidiary of CB Richard Ellis, said in an analysis considering possible outcomes of the bailout proposal that the intervention may not firm up commercial real estate pricing.

“The ‘bailout’ going as planned may result in short-term pain for the commercial real estate market as well,” he wrote. “While we believe that prices of most CMBS [commercial mortgage-backed securities] are destined to go up from their current levels, a successful Treasury intervention would not necessarily result in commercial real estate equity prices rising.”

One possible outcome of the bailout would be helpful to real estate investment trusts (REITs) such as Boston Properties, Reckson Associates Realty and SL Green Realty Trust, which have cash available because they were sitting on the sidelines while private equity firms were buying real estate in highly leveraged deals during the boom times of the commercial market.

A commercial real estate broker, who asked not to be identified, said he expected “several dozen” New York City commercial buildings to fail in the next several years, but he said he did not know how many of them had securitized mortgages that would include them in the federal bailout.

Knakal would not hazard a guess as to how many commercial properties would go into default in New York City, but he expects what is now a small number to grow.

The only default he was aware of worth more than $50 million was Harry Macklowe’s losses stemming from the $7 billion purchase of the Equity Office Properties portfolio.

“Commercial defaults [in New York City] are at a miniscule rate at the present [time], but I anticipate that will change,” he said.

Paul Adornato, a senior REIT analyst for research firm BMO Capital Markets, said the trusts are waiting to see how the bailout progresses.

“In speaking to REIT executives, they are definitely keeping their powder dry and looking for opportunities when the liquidation begins,” he said, both in Manhattan and nationwide. By Adam Pincus

The outlook for New York City real estate is gloomy as the Wall Street
fallout continues. For one, the Wall Street bonuses that helped raise
Manhattan apartment prices in recent years are expected to be
drastically slashed this year. As a result, there are signs of trouble
for high-end apartment sales, which have been instrumental in holding
up the New York market as the rest of the country faltered. Luxury
retailers may struggle as their clientele becomes more frugal because
of the economy. [more]

Right now, the naming rights to so many high-profile buildings are
up for grabs that the clique of elite companies branding the city’s
skyline could be due for a shakeup. That is, if the new names actually
stick.
[more]

When the nation’s finance and banking sector ended as the world
knew it last month, many in the New York City real estate community
were scratching their heads, wondering what this would mean for the
residential and commercial markets here and how deep the pain might be.

With institutions such as Lehman Brothers, Merrill Lynch,
Washington Mutual, Wachovia and the insurance giant AIG falling like
dominoes, there are the obvious questions about what sorts of investors
and lenders would fill the vacuum, and what would happen to any real
estate ventures financed by these defunct or hobbled companies.

In
New York City, the confusion was compounded by the fact that the
financial sector is not just an airy abstraction here, but an actual
economic engine providing jobs and tax revenues.  In 2007, Wall Street
accounted for 5.8 percent of New York City’s private sector employment
and 23 percent of private sector wages.

First and foremost, prognosticators started with predicting the severity of the downturn.

At
the end of last month, as the stock market took its single biggest
daily hit ever (in terms of point drop), economists were having a hard
time determining exactly how bad the fallout from lost financial
services jobs would be in New York. Governor David Paterson said as
many as 40,000 Wall Street jobs might vanish.

Ken McCarthy, a
managing director of New York-area research at the commercial brokerage
Cushman & Wakefield, had the same estimate.  

That’s still
mild by historical standards. In the recession that lasted from 1990 to
mid-1993, a total of 69,600 Wall Street jobs were lost, McCarthy said.
And New York City shed about 60,800 financial sector jobs from the end
of December 2000 to mid-2003, which marked the dotcom bust followed by
the World Trade Center attacks, he said.

So far, about 10,200
Wall Streeters have gotten pink slips since March 2008 — when the
credit crisis that started in the summer of 2007 claimed its first
finance sector victims.

The question now is: What kind of
ripple effect will the Wall Street downturn have on the city’s economy
and real estate market, which are inextricably linked?

Since every Wall Street job is said to create another two jobs, some experts suggested that the city might lose approximately 120,000 jobs in the wake of this financial meltdown.

That compares to a total of 350,000 jobs in the recession of the early 1990s and 250,000 jobs after the dotcom crash.

Even if the recession is shallower, economists anticipate Wall Street bonuses to be minimal to nonexistent this January.

Since
financial sector bonuses tend to be much bigger than salaries, many
have predicted that the worst is yet to come in the residential real
estate market, especially the upper end, which typically benefits
mightily when bonus checks go out. Experts said even the apartment
rental market will be significantly affected.

On the commercial
side, office leasing will take a hit, as failed or restructuring
financial institutions put space back on the market. And, of course,
difficulties obtaining financing will impinge on building sales.

Wall
Street job losses and concomitant economic woes should have
repercussions for all segments of the real estate industry, including
retail, hotels and industrial real estate. Here’s a breakdown of what to expect:

Residential reality sets in, as deals fail and prices drop

While
Manhattan had been more insulated than the rest of the country in the
past year, bolstered by the high end of the market, the numbers started
to slip before Wall Street’s implosion last month.

The average
apartment price in Manhattan was $1.7 million in the second quarter
this year, falling 3 percent from the first quarter, according to real
estate appraisal firm Miller Samuel.

Sales dropped 22 percent between the second quarter of 2007 and the same period in 2008.

And
the news appeared to get even worse after that. Manhattan’s average
condo and co-op prices were down 7 percent in the first two months of
the third quarter from the previous quarter, according to a New York
Times review of closing prices in July and August. Meanwhile, Manhattan
inventory grew about 14 percent from the last week of August to the
last week of September, leaping to more than 7,900 units from around
6,900, according to UrbanDigs.com.

Perhaps some of the growing
inventory numbers are due to scuttled deals. According to a recent
Federal Reserve survey of financial conditions, “a growing number of
deals are said to be falling through” in a weakening Manhattan condo
and co-op market “due to difficulty in getting financing — largely at
the middle of the market.”

Financing difficulties mean that what
should be a buyer’s market, with slowing sales, is actually shutting
out buyers. For brokers, that is not a favorable development.

Larry
Link, the managing director of Pari Passu Realty Corp., said the
residential market had sputtered to a halt, and prices might have to
drop at least 10 to 20 percent for the market to perk up. He predicted
that would happen in early spring 2009.

“When the job loss
numbers start to hit, and the bonus checks are nonexistent in January,
and people take a good, hard look at what’s going on around them, then
you’ll start to get a little more realism in pricing,” Link said.

“You’ll
see more and more incentives being offered,” he continued. “In
Brooklyn, they’ve tried to sell parking spaces and rooftop cabanas and
all that stuff. Those will be tossed in for free.”

Link said he didn’t anticipate any appreciation in residential real estate prices until 2010 or beyond.

But
without hard numbers for the Wall Street job losses, some residential
real estate brokers were adopting a more optimistic take, saying that
New York City wouldn’t take its lumps yet.

Phyllis Pezenik,
vice president for sales and leasing at DJK Residential, said she
doesn’t anticipate a huge influx of apartments flooding the market as a
result of the most recently announced layoffs.

“Those that are
losing their jobs are not going to be in a position where they’re going
to have to sell their properties immediately,” she said. “They’ll be
able to hold on for a while.”

Some brokers were holding out hope
that the government’s proposed bailout plan, which was in flux at press
time after being defeated in the House of Representatives, would help
infuse the credit markets with cash and alleviate some of the pain. But
Cushman & Wakefield’s McCarthy said he believes that even if a plan
passes, it will have little effect on the residential market.

Others noted that the necessity for larger down payments is torpedoing deals.

Darren
Sukenik, an executive vice president at Prudential Douglas Elliman,
said he was recently working with a Citibank employee who wanted to buy
a condo in Tribeca, but that the deal fell apart because the client’s
bank only offered 45 percent financing. Before the credit crunch,
financing for the apartment would have been between 70 and 80 percent,
Sukenik said (see Wall Street fear factor chills market).

High end to feel pain as Wall Street bonuses shrivel  

At
the high end of the residential market — typically defined as the top
10 percent of sales (which in the second quarter of 2008 was all sales
priced at more than $3.15 million) — things do not look rosy.

Kirk
Henckels, the executive vice president and director of private
brokerage at Stribling & Associates, said diminished Wall Street
bonuses this year would slow down the market for apartments in the $5
to $15 million range. Late last month, the state comptroller estimated
that bonuses could drop by about 50 percent this year to about $16
billion from last year’s $33.2 billion (which was down from a record
$33.9 billion in 2006).

Meanwhile, according to the Wall Street
Journal, between Sept. 18 and 26, there were 200 price reductions on
Upper East Side and Upper West Side homes priced at under $10 million.
Corcoran broker Deanna Kory, who handles many properties priced between
$2 and $10 million, told the paper her showings were down in September
about 40 percent compared with the same time in 2007.

And the woes of the stock market should only add to that pain.

“The $15 million-and-up market is generally composed of hedge fund owners and private equity people,” Henckels said. “They’re going to be affected as well.”

Yet
some brokers who specialize in high-end apartments said they anticipate
the deals to continue — especially those involving cash — perhaps
because of layoffs.

“Some of the transactions that will happen
over these next, let’s say, two to eight weeks may very well be forced
sales,” said Stan Ponte, the president of Coldwell Banker Previews
International, the luxury marketing division for Coldwell Banker Hunt
Kennedy.  “No one wants to think of that, as there’s a human behind it
… but there may be opportunities like that — and cash is king.”

Ponte
added that while middle-class Europeans are potential New York City
buyers who are now facing their own economic problems, “that
ultra-wealthy Muscovite, where there are more billionaires per mile
than anywhere else in the world, is still
very interested.”

For foreign buyers, of course, the strength or weakness of their currencies versus the dollar is a key factor.

But
another is inventory. Henckels argued that a general lack of quality
inventory could bolster the market, as opposed to previous economic
downturns. “We’re going into this well positioned,” he said.

Rental rebound or retreat as sales slow?

In Manhattan, rents have been down nearly across the board for the last year.

According
to the Real Estate Group New York brokerage, average rents for
Manhattan studios, one- and two-bedrooms dropped year over year from
September 2008 compared with September 2007. The biggest of those drops
was in doorman studios, where rents fell 7 percent to an average of
$2,584.

 In the firm’s September report, the COO, Daniel Baum,
noted that the “summer upswing that we would normally expect to see was
absent.” But rents rebounded a bit last month, a fact that Baum
attributed to the sluggish sales market.

One broker told
<i>The Real Deal</i> that he was seeing fewer single
professionals with high-end monthly budgets in the $3,500 to $4,500
range because of the economy.    

Pari Passu’s Link, whose
brokerage also handles apartment rentals, said late last month that the
market was starting to feel the preliminary effects of the Wall Street
turmoil. And he, too, said Wall Streeters who once didn’t think twice
about their high-price rentals would have to be more careful with
spending now.

“A lot of the guys who are big players in
investment banks are either losing their jobs, or they’re afraid of
losing their jobs,” he said. “They would have been fine renting an
apartment for $5,000 or $6,000 or $7,000 a month before, but now
they’re a bit gun-shy.”

Link said that landlords can be slow to face reality, but he predicted that at some point soon, they would drop rents further.  

For
the last few months, landlords have been offering incentives — like a
free month’s rent and owner-paid commissions — to new tenants.  Even in
high-end rental buildings, some landlords are already becoming more
open to out-of-state guarantors.

Now, some brokers have
predicted that landlords may start offering incentives to current
tenants to encourage them to renew leases as well.    

Gary Malin, president of Citi Habitats, noted that any downward pressure on rents might be countered by an increase in the number of renters who can’t qualify for home mortgages with more demanding standards.

“With
the rules these days of banks wanting people with better credit scores
and more money upfront and more money in reserve, or you’re not going
to be able to buy — in Manhattan, what other options do you have other
than renting?” Malin asked.

He posited one possible silver
lining: If prices do adjust as a result of the Wall Street breakdown,
it could bring about movement in the rental market.

“You could
see people who wanted to live in Manhattan a year or two years ago, but
just felt [priced out], might find the time is good to move to
Manhattan, because the pricing makes sense to them,” he said.

Office leasing braces for further vacancy hikes, rent drops

In
the office leasing market, where anecdotes of rents dropping in August
and September by as much as 15 percent have been circulating,
uncertainties lay ahead.  

Part of that is related to the consolidation of the financial industry.

As
part of its acquisition of Lehman Brothers, Barclays Capital took over
Lehman’s 1 million-square-foot headquarters at 745 Seventh Avenue. But
Lehman also leases space at a number of other buildings throughout the
city, and much of that space could hit the market when Barclays starts
laying off some of the 10,000 Lehman employees in the coming weeks and
months as it is expected to.

Meanwhile, in Lower Manhattan,
Merrill Lynch, which has about 2.6 million square feet in the World
Financial Center, was renegotiating its lease with Brookfield
Properties when Bank of America stepped in to purchase the floundering
financial institution. That absorption would most likely cut down on
the need for space for the old Merrill, which holds 1.6 million square
feet in addition to the World Financial Center space it occupies.

Considering
the shaky status of insurance giant AIG (which has about 3 million
square feet of office space in Lower Manhattan) and the financial firms
that are likely to shed space, some estimated that 10 million square
feet could be up for grabs. That’s about 2.2 percent of the total 450
million square feet of office space in Manhattan.       

The financial
industry retrenchment leaves a building like 11 Times Square, an
as-yet-unleased 1.2 million-square-foot speculative tower built by SJP Properties, with a highly uncertain future.

Ditto for the
buildings being developed at the World Trade Center site by Silverstein
Properties and the Port Authority of New York and New Jersey.

In
August, the latest data available as of press time, the Manhattan
office vacancy rate was about 8.7 percent, according to Colliers ABR.
That’s a far cry from the 16 percent vacancy rate seen in the recession
of the early 1990s, but brokerages were predicting vacancy rates to hit
double digits by early next year.

Jones Lang LaSalle has predicted Manhattan’s Class A vacancy rate will rise to 11.3 percent by early 2009.

“When
sublease space comes back on the market, it does tend to put pressure
on landlords,” said Cushman & Wakefield’s McCarthy. “And sublease
space has started to come back to the market, so it wouldn’t surprise
us at all to see rental rates decline.”

Of course, critical to understanding what might happen in the office leasing world is pinning down how many jobs will be lost.  

Every
financial services job creates two related jobs, but not all those jobs
use office space, McCarthy noted. Typically, every three Wall Street
jobs create one job that uses office space, he said.

Thus,
Cushman & Wakefield’s predicted loss of about 40,000 financial
sector jobs would imply a loss of another 13,300 related office jobs.
Since each office worker occupies roughly 300 feet of space, that could
mean nearly 16 million square feet of office space could return to
market.

However, some firms might warehouse space as opposed to
subleasing it. Cushman & Wakefield estimated that only 40 to 50
percent of the theoretical glut would return to market.

“However, even if half of it comes to market, it’s going to have an impact on the vacancy rate,” McCarthy said.    

If
one uses numbers from Marisa Di Natale, senior economist with Moody’s
Economy.com, the possible increased inventory in the office leasing
market could be even greater. A loss of 65,000 financial sector jobs in
the 11-county greater metropolitan area would be compounded by the
disappearance of an additional 21,666 office jobs. At 300 square feet
per person, that might lead to as much as 26 million square feet of
space reappearing on the market (or 40 to 50 percent of that using
Cushman & Wakefield’s estimate).

However, Di Natale is
predicting a loss of only 70,000 jobs overall, because she said growth
in industries such as health care, education and government will offset
financial sector losses.    

Marcus Rayner, a principal with
Cresa Partners, a commercial brokerage that represents tenants, said
his firm believes the end result of the Wall Street debacle will be
worse than what’s been forecast thus far.

“If the economists are
predicting something like 60,000 to 70,000 jobs lost overall, that’s a
fairly mild recession,” Rayner said. “It’s not very deep. We happen to
think it’s going to be worse than that … we don’t expect the real
estate markets to recover fully until the middle of 2010.”

Cresa’s
gloomier forecast takes into account sectors such as hedge funds, which
will most likely be hit by redemptions, Rayner said.

People could “start taking their money out of hedge funds, and if they do that, then you’ve got a sector in trouble,” he said.

And the hedge fund industry occupies the most expensive space in Midtown.

The
growing inventory in the office leasing market will be a boon to
tenants, who can expect to see rents drop at least 15 percent from
their levels in late September, Rayner said.

“What you’ve got to
watch for is refinancings,” he said. “Refinancings will be difficult,
and will probably require more equity.”

A landlord will want to
get his or her building fully leased to provide more refinancing
options. “That’s the opportunity for the tenant,” Rayner noted.

Already slowed building sales head for “suspended animation”

One
of the big unknowns swirling around Wall Street’s demise was whether
the proposed government bailout would pass in some new form, and if so,
whether it would kick-start building sales and prevent a portion of the
anticipated building failures in New York City over the next few years.

Building sales have already slowed dramatically since the
summer of 2007, when the credit crisis shrank pools of capital
available to potential buyers. Cushman & Wakefield data showed that
year to date through August, just $17.3 billion worth of sales of
Manhattan office properties valued at $10 million or more were closed
or under contract — a 58 percent decline from the comparable $40.3
billion for the same period last year.

Another report released
by Massey Knakal Realty Services reported that the number of sales of
commercial properties was 31 percent lower in the first half of 2008
in Manhattan, Brooklyn, Queens and the Bronx than in the same period
last year. The largest decline was seen in northern Manhattan, where
sales volume dropped by 63 percent.

Investment sales brokers
were predicting that asset fundamentals, like rents and vacancies,
would take a severe hit due to the Wall Street meltdown — and the
market might grind to a halt altogether.  

According to Crain’s, the city’s largest private landlord, SL Green Realty, has already begun cutting rents in some of its buildings.

“Buyers
who bought at high numbers, particularly in 2006 and 2007, are
reluctant to sell at much lower numbers, so there is right now a sort
of mismatch between the bid and asks on properties,” McCarthy said.
“Those buyers and sellers need to get closer together — and then find
the capital.”

Philip “Tod” Waterman III, a managing member of
Waterman Interests, a company that owns office buildings, said the
building sales market would be in “complete suspended animation” until
the end of the year.

Waterman said he anticipates
tremendous investment activity in 2009 and 2010. “When I say investment
activity, I don’t just mean buildings trading,” he said. “It’s going to
be debt securities trading, and distressed debt trading, and those are
real estate assets.”

However, without extensive pools of credit, it may be difficult to get deals done.

For
instance, chatter has been rampant about AIG selling off some of its
extensive holdings — including three Manhattan buildings — to pay off
the $85 billion federal loan it got from the federal government last
month. But without financing available, it’s unclear who would step up
to buy them.

And a portion of the investment activity could be connected to other financial institutions getting rid of their real estate assets.   

“Last
I checked, Lehman’s real estate book was $40 billion of assets, or
that’s what it’s marked at,” Waterman said. “All of that will hit the
market.”

Waterman said that for at least a period of time, real
estate transactions would be much simpler in their structure, and would
be done only by those firms that have access to large pools of equity
capital. Building values, he predicted, will drop.

“I think
the pendulum swung way too far in the direction of esoteric structure
and overleverage, and opaque leverage, and I think we’ll go back the
other way pretty quickly to a much simpler structure,” he said. “And
that will have a deflating effect on valuations in the short run.”

Large
real estate investment funds and real estate investment advisers will
continue to have the capital resources to make those purchases,
Waterman said.

Chilling effect for new projects, pre-sales a must now

The
pall that spread over the new development market after the credit
crisis of 2007 will continue to widen as the full effects of the Wall
Street calamity are felt, developers said.

“People will hold
back on projects that are not yet substantially in construction,” said
Francis Greenburger, CEO and chairman of the development company Time Equities. 
“They’ll look to time them in a way that’s related to the recovery. I
think you’ll see a lot of projects that were proposed or conceived of,
or in predevelopment, that may be delayed or deferred.”

Greg
Belew, a co-founding partner of the development firm Fifth Square
Partners, said that obtaining construction financing is virtually
impossible, which is having a chilling effect on almost all new
development.

“Certainly, for-sale housing right now is just not
happening,” he said.  “Maybe rental apartments or potentially preleased
office-type developments, but outside of that, I think it’s going to be
a while before you see the spigot turn back on.”

Belew said that developers are wondering who or what will replace former sources of capital that have disappeared.

“I
don’t know who’s going to step into that void where all the traditional
lending sources have been,” he said. “I don’t know if foreign banks, or
hedge funds, or who at some point is going to come in to get the wheels
turning again.”

For developers with residential projects under
construction that are not largely pre-sold, Belew said a worry is that
Wall Street layoffs could result in an influx of apartments on the
market that could compete with new development.

Greenburger, who
was pouring the foundation for one residential project and had two
others on the drawing table late last month, said he will be guided
more by presales in the current market than he would have in recent
years.

“Presales will be an important component of what we do, as well as what other people do,” he said.

As
for construction of new commercial properties — which are comparatively
few in number to begin with — that is expected to dry up as well. Large
commercial development projects such as the World Trade Center, Hudson
Yards and Atlantic Yards could be threatened if no major corporate
tenants emerge.

Retail and hotels to take lumps, industrial holding up

Troubles
on Wall Street — the actual street itself — will put a damper on a
high-end retail presence growing in the Financial District, predicted
Robert Futterman, president of Robert K. Futterman & Associates.  

“The
luxury brands flocking to Wall Street will scratch their heads and
think twice before they pull the trigger to make sure there are people
that have jobs,” Futterman said.

In the past two years, luxury
stores such as Tiffany & Co., Thomas Pink and Hermès opened in
Lower Manhattan. More recently, Whole Foods and Barnes & Noble
opened just north of the World Trade Center site.

Meanwhile, reshuffling going on in the banking system, which recently led to JPMorgan
Chase’s purchase of Washington Mutual’s banking operations, and
Citigroup’s purchase of Wachovia, will mean bank branch closures.  

The
industry is also probably due for a cyclical contraction. There are
about 660 bank branches in Manhattan, up from 446 bank branches in
1998. Along with the fallout from Wall Street job losses, those retail
closures will most likely push down retail rents in some parts of
Manhattan, Futterman said.

And while consumer confidence
should plummet as the jobless rate goes up, Futterman said he believes
consumers will shop close to home, and that the city will continue to
attract every class of retailer.

“New York is the greatest
opportunity for any brand — domestic or international — to do sales
volume,” he said. “You’re still going to have more people and more
shopping on the streets of New York than any other place in the U.S.”

As
for hotels, the city has one of the strongest hotel markets in the
world. Despite Wall Street angst, that will continue, said John Fox, a
senior vice president at PKF Consulting, which specializes in hotels.

He
said New York City has had an average daily rate of $295.98, up 7
percent over last year, and an occupancy rate just shy of 87 percent
for the first eight months of 2008. That’s more than 20 percentage
points over the national average.

As for a curtailment of
corporate travel due to the Wall Street imbroglio, “there’s a sense of
foreboding that we’re going to see a big impact, but we haven’t really
seen it yet,” Fox said.

While immediate cutbacks in business
travel may occur, also irksome for hotel owners late last month was
that September and October are the months when hotels negotiate daily
rates with the corporations that stay in them, he said.

Hotels may need to drop their rates a bit to capture corporate travelers.

“There’s
an expectation that it’s going to be a little tough negotiating this
year, and hotels may give way a little bit,” Fox said.

Since
hotels are facing the same constraints on capital as other real estate
sectors, Fox said that most likely some new hotel projects that had
been announced would be abandoned.

“And I don’t expect to see much in the way of new product announcements in the near term,” he said.

Of
the various sectors of the real estate business, the industrial real
estate market may be the most insulated from the Wall Street crisis.  

While
the difficulties obtaining financing seen in all real estate sectors
are slowing down industrial building sales, leasing remained unaffected
late last month, said Kalmon Dolgin, co-president of Kalmon Dolgin
Affiliates.

“I do anticipate there will be some fallout from
the financial crisis,” Dolgin said. “How that’s resolved will determine
what jobs remain and what jobs are lost.”

Greenburger of Time
Equities is in the early stages on a few industrial redevelopment
projects. He said that there is such a shortage of industrial space in
the city, the market will hold up well despite job losses.

“Even
assuming there’s some fall-off in demand because of economic
conditions, probably the market is so tight, and there’s so little
supply, that those [industrial] projects will be affected less,” he
said. 

Go to chart

While co-op boards started rejecting Wall Street buyers because of their shaky job security at the start of the downturn, it now appears that buyers are getting rejected for another reason. Increasingly, lenders are denying buyers who are looking to get into a co-op when the co-op can’t prove that its financial house is in order.

With increasing frequency, co-op boards are being forced to deliver audited financial statements to a lender before any transaction takes place. They must also show a high percentage of owner-occupants and provide evidence of reserve funds adequate to protect the building in the case of major repair or improvement.

“I think it’s pretty common across the marketplace to find that most banks have tightened their guidelines,” said Chris Goettke, a regional president at National Consumer Cooperative Bank (NCB), the nation’s leading lender to the New York cooperative market.

NCB has been one of the most conservative and profitable mortgage lenders in the U.S., but like many others, it has been burned in recent years by underwriting loans in buildings that were poorly managed or controlled by speculative investors. Citing its inability to sell many of its loans on the secondary market, the firm reported a $500,000 loss in 2007, its first-ever annual loss, compared with a net income of $19.4 million in 2006.

Officials say the goal of the increased level of scrutiny is to uncover any embedded financial risks within a particular building, because a poorly managed co-op will heighten the risk for all the individual owners.

Broken deals

Sindi Schorr, a broker at DJK Residential, said a couple of her clients have seen their co-op deals delayed, and in other cases denied, by snake-bitten lenders.

At least one of her clients ran into problems at 101 West 23rd Street, a co-op apartment building where the co-op corporation does not own the underlying land, but operates the building under a long-term lease from another investor. Such land-lease buildings are generally considered riskier than standard co-ops because, according to brokers and co-op experts, the land owner could choose to sell the land or not renew the lease.  Schorr said the lease at the 23rd Street building still has 31 years left before it expires; however, the payoff date on a 30-year mortgage is considered “too close for comfort” at many banks.

“[My client] would not have been able to get a loan, because the [date] was so close,” said Schorr. “They decided to put a moratorium on everyone else in the building. The board is trying to figure out what to do with the lease.”

The land lease, plus a former bankruptcy at the building, has created significant financial hardships there. Maintenance payments on some of the larger units approach $2,000 per month. Records from StreetEasy, a real estate data provider, show that at least three apartments were sold since December 2007, with the latest transaction being the March sale of a 500-square-foot studio for $290,000, which was 6.5 percent below its original asking price.

Officials at Siren Management Corp., which manages the building, declined to comment and referred questions to the co-op board. Several apartments from the building are currently listed for sale by various brokers.

The last dip

Despite all that, New York co-ops are considered much sounder investments than other kinds of real estate inventory. Co-op boards are known to closely — in some cases, zealously — screen out potential problem tenants. However, that was not always the case.

During the last major housing bubble in the 1980s, about 830,000 apartments were either built new or converted into co-ops and condos, according to the New York State attorney general’s office. In Queens, 25 percent of those units subsequently
defaulted or suffered some level of financial difficulty that caused New York’s housing market to nearly collapse.

The fallout was so bad that the secondary market for buying co-op loans nearly dried up, and several major banks pulled out of co-op lending altogether. It took years of public hearings, heightened oversight by the New York state attorney general and major changes to underwriting standards before the market began to recover.

“Right now, it’s clearly not as bad as it was in the early 1990s,” recalled Myles Horn, principal at developer MJH Birchwood. “Banks are not looking with that kind of circumspection — yet. I have not seen the kind of tightening I would expect; I would expect it to get worse.”

Debra Shultz, director and senior certified mortgage advisor at Manhattan Mortgage Co., said that co-op boards are placing closer scrutiny on potential buyers, and many boards have banned the use of interest-only loans.  

Lender guidelines

On the other hand, she noted that the majority of co-op guidelines have not changed at most lenders. They want at least 50 to 70 percent of a building’s units occupied by primary owners, no more than 20 percent investor-owned units, as well as strong financials, no outstanding litigation and a minimum of 10 or more units per building, which lessens the risk that one individual in default could drag an entire building into foreclosure.  

The fear is that with a high percentage of sponsor-owned or investor-owned units, a financial default by one shareholder could place an enormous burden on the rest of the shareholders, thus placing the underlying mortgage payments in jeopardy.

At successful co-op buildings, a sponsor will usually gain pre-qualification from a lender, which will then place the building on a list of approved co-ops, which in turn speeds the process of approving loans for individual apartments.

Developer Horn noted that at his company’s newest development, the Towers at Water’s Edge in Bayside, Queens, the complex has already been approved by M&T Bank. Horn acquired about 230 units from the original sponsor and is selling those units for about $500 a square foot.

Attorney Lawrence DiGiovanna, whose firm represents more than 30 co-op apartments in Brooklyn, said he has not seen any widespread crackdown on co-op boards. However, he noted that one of his clients, a 300-unit co-op in Sheepshead Bay, was asked by Washington Mutual (which was bought last month by JPMorgan Chase) to put 25 percent of its annual maintenance into Fidelity bond insurance, which protects the building against employee dishonesty.  

“The first time it occurs, the co-op board is being asked on behalf of one little lender for a revision to the entire building’s insurance policy,” he recalled. “The initial reaction on a lot of boards [would be], ‘Don’t be ridiculous.’”

He said that banks are also demanding that co-ops set aside increased reserve funds to handle future capital repairs. “This co-op had $1 million cash in the bank, [but it] wasn’t clear if it was for capital improvements or a reserve fund.”  

Co-op boards that fail to shore up their financial practice can suffer further repercussions. Attorney David Schachter said that banks are refusing to lend to buyers if a co-op board cannot produce audited financial statements.

“If they see a financial statement that’s not audited, they say, ‘We don’t want to do the loan,’” he said. “Before, you didn’t hear any of this.”

As the president of DG Neary Realty, Gil Neary could have gone for a trophy apartment as an obvious symbol of his professional success.

Instead, he turned his home of 24 years, an Art Deco-era apartment in Chelsea Gardens at 255 West 23rd Street, into a distinguished but comfortable throwback to the 1930s decorated with an eclectic collection of period pieces.

The aesthetic makes sense for Neary, who shares the 1,300-square-foot apartment with his long-time partner, Scott Riedel, and owns the boutique residential real estate firm that bears his name and has a lock on much of the Chelsea market.

Neary got his feet wet in real estate as a broker at Bellmarc in 1979 and worked at the Rockrose Development Corp. between 1986 and 1987. When the market crashed in 1987 and he lost his job, he opened his firm out of his apartment with six employees. “I thought, now I’ll do it myself,” he told The Real Deal a few years ago.

DG Neary — which he runs with business partner Dan Gerstein — subsequently found a home at 57 West 16th Street, and carved out a niche by catering to gay clients. The firm currently has about 25 brokers and, in addition to Chelsea, targets all of Downtown Manhattan.

Neary has done some of that business without leaving his building. He said, for example, that he has sold 98 percent of the 160 apartments in Chelsea Gardens over the past 20 years.

“I find when I’m selling apartments here, there are people who come and either that little light bulb goes off, and they get it — or not,” said Neary, an energetic, gregarious 51-year-old who sits on the co-op board and has been actively involved in the restoration of his building, particularly its Art Deco lobbies.

“Some people say, ‘Ewww, there are fire escapes’, or ‘the bricks are dirty,’” he continued. “Other people come in and say, ‘Oh, wow, this is magical.’”

What is magical for Neary about Chelsea Gardens, built in 1939, is its four buildings that surround a leafy, serene garden. It has two entrances, one on 23rd Street and one on 24th Street, each with a lobby. Neary first discovered Chelsea Gardens when his best friend — and now upstairs neighbor — Lia Troy, a broker with Halstead Property, bought an apartment there.

“I called him up and said, ‘You really should look at this building,’” Troy said. “He had once told me that his concept was to live in a building where there was a big garden, and you could have all your friends live in the building, too.”

Neary quickly fell in love with Chelsea Gardens.  

His first apartment had two bedrooms and one bathroom. After a decade there, an elderly neighbor he had befriended, the original owner of her two-bedroom, two-bath apartment, died. He purchased her apartment.

“She was about 89 years old — very lovely,” he said. “In every room, there’s a little something that belonged to her: a couple of dishes in the kitchen, a couple of knickknacks in the living room. So her spirit is happy here.”

This piecemeal approach to decorating his apartment, which has an off-the-foyer floor plan, suited Neary’s goal of recreating a 1939 Deco-style apartment. While he shops at auctions and estate sales, he has also found some of his furniture on the street or at flea markets.

“I call it scavenge and arrange,” he joked. “If you bought an apartment in 1939, you wouldn’t have all your furniture from 1939, because people didn’t go out and buy all their furniture in one day,” Neary explained. “You would have some furniture that was older, that you got from your family. So my furniture is kind of eclectic, but it’s not atypical of what you would have seen in an apartment like this.”  

Thus, the dining room, with its hand-printed “El Morocco”-style wallpaper with giant banana leaves, has a French 1890s-era armoire, which he uses as a china cabinet.

His second bedroom, which serves as a guest bedroom, office and television room, has a massive wooden Gothic cabinet reminiscent of a Catholic altar or the Notre-Dame Cathedral in Paris. And the master bedroom has very little that is Deco at all.

But in most of the apartment, the overarching theme is Deco: for instance, the rugs throughout the apartment. Neary has an additional set of Deco rugs, so he can switch them out from time to time, along with curtains and furniture slipcovers.

He also has three small black tables, along with a dining room table not on display, which were once owned by Jimmy Jemail, the original Inquiring Photographer from the Daily News (the photographer went around and took snapshots of people in the city and provided their answers to a range of man-on-the-street questions). Jemail built and furnished a summer house on Long Island in 1939, which was down the block from a home owned by Neary’s mother. She ended up selling the Inquiring Photographer’s summer house. (Neary’s mother, 81, is also a real estate agent.)

Neary made relatively few structural changes to his second-floor apartment. First, he widened a doorway between the foyer and the dining area to create a floor-through effect, taking advantage of light from windows in the living room and kitchen, as well as the air flow.

“I always call this the ‘concierge apartment,’ because you can see people coming in and out on 24th Street, as well as in the garden [off of 23rd Street],” he said.  “As a real estate broker, I can keep an eye on my constituency.”

Neary also recreated what is now a mustard-colored kitchen.

“The kitchen had linoleum on the floor, and was like a dinette,” he said. “I upgraded the kitchen, because it was a kitchen from 1939, but I tried to make it like a new version of a 1939 kitchen.”

From his extensive experience showing properties, Neary saw his share of grand Upper West Side apartments, and he strove for a kitchen reminiscent of a butler’s pantry. He had at one time assisted an aunt who owned a cabinetmaking business, and he decided to install cherry cabinets with glass doors to make the narrow kitchen look larger.  He retained the molding on top of the cabinets.

He put in two side-by-side, waist-high refrigerators to increase counter space, and added mirrored backsplashes and granite countertops.

“From my designing days, I used a lot of visual tricks,” said Neary, who went to college initially for architecture, graduated with a degree in psychology and later took some design courses.  (He eventually also received an MBA degree from Baruch College.)  

“With the glass in the cabinets, your eye goes to the back of the cabinet instead of the wood.”

Neary left the foyer and living room alone, and, aside from putting in a pedestal sink, he left the guest bathroom as it was, and painted the hallways maroon. In the pale yellow master bathroom, the only room not directly connected to the foyer, he put in a stained glass window.

“I sold an apartment in the building that faced a wall to a fellow, and he said, ‘That doesn’t matter, because I’m a glass artist,’” Neary explained. “‘I’m going to make a beautiful window here, and you won’t notice the wall.’ He made me one too. Most of it is privacy glass, but these little triangles are peek-a-boos so I can see the garden.”

Very little in the lavender master bedroom follows the Deco theme, except the rugs, curtains and a big, round light fixture above the bed that Neary calls “the moon.”

In the second bedroom across the hall, Neary returned to Deco, using lamps from his grandmothers, and two light fixtures with globes straight out of the Sears catalog from 1939. Neary found one of the fixtures in the apartment of someone he was helping to move.

“They were going to throw it out, so I took it, and went to a store in the Village and found the globes,” he said.  At the time, he noticed the fixture was priced at $150.

But the one light was a bit undersized for the room, so 15 years later, Neary decided to purchase another at the same Village store. He figured with inflation, the fixture would cost at most $600, and was stunned when he got a bill for $1,500.

“Then I thought, maybe this wasn’t the best choice,” he said, chuckling. “For $1,500, I could have gotten something really wonderful. But I’d already done it. And the room is a little off balance, and I thought it was a fun way to balance the room.”

Neary’s selective approach to furnishings is mirrored in his art, which is found throughout the apartment. An original Keith Haring painting hangs in the second bedroom with an elaborately carved wooden tramp-art frame most likely worth more than the painting itself, along with paintings of street scenes from the Sacré-Coeur Basilica in Paris.

In the foyer, Neary put his collection of faces, from a painting by Andy Warhol to a photograph of Bette Midler to a Chevalier lithograph with a woman’s face signed by the artist.

“When you come into the foyer, it’s a reception area, so I wanted people to feel like they were being received by a bunch of people,” Neary said. “Sort of like the party, in my head.”

That party’s still calm enough not to require more space. Neary owns the apartment next door and could create a three-bedroom, three-bathroom apartment, but he currently has a tenant there. He said he is comfortable in the apartment.

And he’s taken the money he’s saved to purchase three homes on Fire Island and one in Columbus, Ohio. At the same time, he’s helped several bachelor friends sell their trophy apartments and move into something smaller. “It’s nice to go into a place and go ‘wow,’ but at the end of ‘wow’ is the maintenance,” he said.

To bring new attention to properties that have lingered for weeks or months without any movement, an increasing number of brokers have pulled apartments off the
market, with the intention of giving them a short hiatus and then
re-listing them. Freshening up the inventory” class=”read-more-link”>[more]

 
For years, as home prices rose, the enthusiasm of many brokers for high prices came across as shrewd. But now that the  market is soft, would-be homebuyers are beginning to question some brokers’ still bullish take on the market.

Specifically, buyers say they think brokers and some industry groups like the National Association of Realtors haven’t come to terms with the changed nature of the housing market. And while Wall Streeters — who are dealing with an industry meltdown, federal bailouts and criticism over outlandish compensation — are clearly on top of the public hit list these days, brokers seem to be ranking a close second.

An informal survey on a weekend morning outside the office of a prominent New York brokerage firm showed just how out of favor brokers have become with some.

In line with a recent study, most respondents were favorable or apathetic about brokers and the real estate industry. Still, there were some sharp opinions. One frustrated home shopper likened the city’s brokers to the orchestra of the Titanic. Another would-be buyer claimed brokers were more damaging to the economy than Al Qaeda.

“Frankly, it’s hard to listen to them,” said John Lund, who was looking for an apartment in Greenpoint or Astoria. “I think brokers would do better if they were more upfront about risks.”

Brokers answered these types of complaints by asserting that the problem is out of their hands. While they have been criticized for unduly positive spin by some, they say sellers can be worse. Some brokers say sellers who now refuse to lower their asking price to more realistic levels, especially in fringe neighborhoods, are making for a slower market because units won’t sell until prices are adjusted.

But some in the industry think the brokerage firms bear at least some of the responsibility for the current mess in the nation’s housing markets.

“During the housing boom and post-housing boom era, [brokerages] have been very aggressive in characterizing the market in a very positive way, to the point where there’s been a disconnect with what the data shows,” said Jonathan Miller, president of appraisal firm Miller Samuel.

Miller argues that much of the damage done to the reputation of the industry has been done at a national level, where sugar-coated economic reports from groups like the National Association of Realtors didn’t prepare brokers for the possibility of a down market. David Lereah, the former chief  economist for NAR, came under particular attack for his rosy prognostications even when the national market began to slow.

At the same time, not everyone sees the problem as belonging to the industry. A few industry leaders blame the news media for the current state of affairs.

“If the press over-hammers something, absolutely it becomes a self-fulfilling prophecy,” said Hall Willkie, president of Brown Harris Stevens. His particular gripe: “They frequently talk about the market as if there’s only one market.”

Robyn Kammerer, Halstead Property’s vice president of communications, said she’s been fielding a growing number of negative inquiries from the press and has more trouble conveying positive news. “Some of them grasp at straws for negativity,” she said. “TV, they won’t report on our market report, because it’s not negative.”

While Miller said press is not the most definitive force in real estate, he said optimistic press helped validate brokers’ optimistic pricing during the boom years.

“In 2004 and 2005, pretty much what you set the list at, the market would catch up. It was almost prudent to list optimistic because eventually, you would be proven correct as an agent,” he said. “Now, properties are selling when they’re priced at market.”

Real estate and public relations executives have been considering different ways to repair the industry’s image.

Donna Reichle, a spokesperson for the National Association of Home Builders, suggests providing media with localized and constant sales, inventory and price figures to combat frightening national wire reports.

In New York, Internet sites like PropertyShark, StreetEasy and the city’s Department of Finance Web site have in recent years started to help make more detailed property records and information about price adjustments more readily available.

Miller suggests a multi-pronged approach, including more well-thought-out brokerage branding or image advertising at a national level, combined with instruction to brokers on how to understand and communicate market conditions. “Brokers don’t make markets. Their role is to help move houses, but if they’re not taught how to communicate market conditions, then they’re stuck with the boilerplate given to them,” he said.

Howard Rubenstein, president of the giant public relations firm Rubenstein Associates, which counts a number of real estate players as clients, also thinks the industry could use some rebranding.

“There is a big target on the backs of the real estate industry, which too often has not shown sympathy to the victims of the economic slowdown and the issues projected in the subprime market,” said Rubenstein. “The industry, for too long, has looked at everything through rose-colored glasses. It is time to get clearer lenses.”

He said there are a few steps the industry can take to improve its image. These include stepping up philanthropic activities, emphasizing human interest stories where the industry has helped people in financial distress and regularly providing tips to help buyers and sellers cope with this market.

Over the past few years, New York has gone green with much
fanfare — sprouting green condos, green luxury rentals and even green affordable housing.

Now, close on their heels come green brokers, who vow to track down these eco-friendly residences and to discern whether a unit is truly solar-powered, or just has lots of windows.

But it isn’t always easy to figure out which brokers are environmentally sensitive and which are just full of, er, hot
carbon emissions.  

Unlike with green construction projects, which can be compared with certain widely used energy-efficiency standards, like Leadership in Energy and Environmental Design, or LEED, there aren’t similar yardsticks for brokers.

Indeed, sometimes, these brokers’ credentials seem to begin and end with their firms’ Earth Day-inspired names. And the few classes that are available to burnish eco-qualifications often seem better tailored for suburban markets than urban ones, as they take a national one-size-fits-all approach.

Also, some brokers don’t practice what they preach in their day-to-day lives, promoting a low-impact lifestyle while at the same time increasing their own carbon footprints, critics say.

The fuss may also be premature, brokers, architects, city planners and developers said, noting that green homes make up less than 1 percent of the city’s housing stock.

That cart-before-the-horse mentality seems evident with Green Homes NYC, a nine-month-old brokerage whose lime-hued Web site promises a “full-service real estate agency with a green twist” and a niche in the “green home market.”

But an informal survey of its listings turned up few “green” examples. For instance, an ad for a two-bedroom, $1.9 million condo touts its “high-gloss white cabinetry” and “maple hardwood floors” but nothing else that could be considered environmentally friendly.

“Some of them are green, some of them are not green,” said Ronen Trigoli, an associate broker and the manager. “I don’t have a choice because I need to supply the general public.”

That citywide shortfall of green homes also comes across on the six-month-old Web site for the Built Environment, which drives traffic to brokers, though it essentially functions as a database. Many of the 40 locations on the “property map” are office buildings, schools, government facilities and even a park in Park Slope, Brooklyn, that has a solar-powered waterfall.

Still, even if every visitor to the Web site doesn’t snap up a condo, the material might help raise the awareness of green design, said Jeffrey Schleider, a site creator and Corcoran Group associate broker who  also served on an advisory committee of the U.S. Green Building Council.

“Having the interest and the knowledge out there is helpful,” he said.  

Last summer, Schleider took an online course offered by EcoBroker International, a six-year-old company from Evergreen, Colo., that promises “innovative energy, environmental and green strategies and tools for real estate professionals.”  

The $395 course may also help attract clients. Schleider, for one, estimated he’s picked up eight buyers because of it.

The 18-hour course includes lessons about how energy-saving appliances can help secure bigger home loans, and about improving indoor air quality with carpets and paints that emit low amounts of volatile organic compounds.  

But many of the topics seem geared toward suburban-style residences, like the tips about installing sealed-combustion furnaces to keep pollutants at bay, and the mention of the hazards of leaking radon.

That emphasis on non-multifamily dwellings might account for New York’s comparatively low certified EcoBroker numbers, with 54, versus California’s 324. But chief executive John Beldock pointed out that there are 3,400 EcoBrokers in 47 states and two countries, and that their ranks are increasing monthly by 10 percent.

EcoBroker’s imprimatur may mean little if brokers don’t walk the walk, which can be a tough-to-attain reality.

“I go around shutting off the lights all the time,” said James Dunn, a sales associate at Abbott & Caserta Realtors, based in Wyckoff, N.J., and a certified EcoBroker.  

Still, retrofitting his older home with energy-efficient features would be cost-prohibitive, he noted, and the wait to buy an energy-efficient Smart Car (to replace his older BMW) is a year, he said.

Like homes, brokers come in different shades of green, Dunn said. Indeed, the scale of the 5,300-square-foot home he’s now marketing in Upper Saddle River, N.J., for $1.9 million may seem too huge to be environmentally sensitive.

The five-bedroom features low-flow faucets, a xeriscaped yard requiring little water, and a poured-concrete foundation that should be less permeable than a cinder-block variety.  

“You don’t have to be a hermit living in a hole in the wall,” Dunn said.

Chris Moss, founder of the five-year-old Moss Real Estate Group, said he believes a firm needs to be at least as sustainable as the homes it sells in order to establish a level of credibility.

In fact, his company’s 2,000-square-foot Noho office has floors stained with black tea and vinegar, not artificial chemicals, and plaster walls sealed with beeswax. Also, the bathroom tiles are comprised of recycled Coke bottle glass.  

Plus, Moss has converted the company car, a 1965 Mercedes convertible, to run on electricity generated by wind power.

More operationally, Moss has also devised a “paperless” condo and co-op board package, which in the case of exclusive buildings such as the Dakota, on Central Park West, could save 10,000 pages, according to Moss. Finally, part of Moss’ brokers’ commissions goes toward a national tree-planting fund.

Still, his company’s mission to sell green homes is not easy, as environmentally efficient homes make up less than 50 percent of his listings.

“But we don’t only want to sell green space,” he said. “We want to rethink the process so we are contributing to a more regenerative experience.” 

Manhattan

Chelsea
$599,000
77 Seventh Avenue
Studio, 600 sf co-op; doorman; unit has renovated marble bath; building has live-in super, central laundry room, garage, roof deck; maintenance $741; 40 percent tax-deductible; last listing price $599,000; three weeks on the market. (Broker: Ruth Sobie, Halstead Property)

East Village
$585,000
111 Third Avenue
1-bedroom, 1-bath, 700 sf co-op; 24-hour doorman; building has central laundry room, storage, live-in super, pets welcome; maintenance $892; 52 percent tax-deductible; last listing price $599,000; 28 weeks on the market. (Brokers: Ruth Sobie, Noah Rosenblatt, Halstead Property)

Lower Manhattan
$736,250
99 John Street
1-bedroom, 1-bath, 838 sf condo in prewar elevator building (99 John Deco Lofts); concierge; unit has 12-foot beamed ceilings, stainless-steel appliances, stone countertops, eight-foot windows; building has fitness center, screening area, laundry room, valet, roof deck, complimentary breakfast; common charges $468; taxes $99; asking price $775,000; six weeks on the market. (Broker: Edward Longley, City Connections Realty)

Midtown East
$540,000
245 East 54th Street
1-bedroom, 1-bath, 600 sf co-op in an elevator building (Brevard); doorman; unit has 28-foot living and dining room, renovated granite kitchen and bath, hardwood floors, southern exposure; building has roof deck; maintenance $896; 55 percent tax-deductible; last listing price $549,500; 28 weeks on the market. (Broker: Claire Richard, Halstead Property)

Midtown East
$480,000
324 East 50th Street
1-bedroom, 1-bath, 612 sf co-op; apartment has eat-in kitchen, exposed brick, track lighting, hardwood floors, beamed ceiling, pre-war detail; maintenance $841; last listing price $480,000; three months on the market. (Broker: Mary Murphy-Owens, Citi Habitats)

Midtown East
$326,000
321 East 45th Street
Studio, 1-bath, 400 sf co-op in an elevator building (the Sands); part-time doorman; unit has parquet floors, renovated windowed kitchen, large closets, courtyard views from northern exposure; building has live-in superintendent, laundry, common roof deck; common charges $506; 43 percent tax-deductible; asking price $325,000; seven weeks on the market. (Broker: Ilene Rosenfeld, Bellmarc Realty)

Midtown West
$1.25 million
247 West 46th Street
1-bedroom, 1-bath, 988 sf condo in a new elevator building (Platinum); doorman, concierge; unit has western and northern exposures, washer and dryer; building has fitness center, spa, sauna, golf simulator room, locker rooms, cold storage; common charges $935; taxes $90; last listing price $1.25 million; 15 weeks on the market. (Broker: Amjad Pervez, City Connections Realty)

Midtown West
$775,000
305 West 52nd Street
1-bedroom, 1-bath, 741 sf condo in a new building; part-time doorman; unit has floor-to-ceiling custom closets, soundproof windows, city views, eat-in kitchen, newly remodeled bathroom; building has storage room, laundry facilities; common charges $456; asking price $799,000; seven months on the market. (Broker: Leslie Lazarus, DJK Residential)

Tribeca
$1.24 million
200 Chambers Street
1-bedroom, 1.5-bath, 880 sf condo; 24-hour doorman, concierge; unit has new kitchen, hardwood floors, city views; building has gym, party room, lounge, children’s playroom; common charges $657; taxes $107; last listing price $1.35 million; 17 weeks on market. (Broker: Renee Fishman, Halstead Property)

Upper East Side
$1.06 million
370 East 76th Street
2-bedroom, 2-bath, 1,250 sf co-op in an elevator building; unit has renovated kitchen, treetop views; building has rooftop pool; maintenance $1,391; 48 percent tax-deductible; last listing price $1.125 million; three weeks on the market. (Broker: Brian Lewis, Halstead Property)

Upper East Side
$879,000
305 East 91st Street
2-bedroom, 2-bath, 1,100 sf co-op in a prewar building; unit has two fireplaces, oak-plank floors, high ceilings, Italian tiling, modern appliances, laundry area; maintenance $925; asking price $879,000; seven weeks on the market. (Broker: Ariel Shwedel, Coldwell Banker Hunt Kennedy)

Upper East Side
$470,000
440 East 79th Street
1-bedroom, 1-bath, 550 sf co-op in an elevator building; 24-hour doorman; unit has bamboo wood floors, marble bathroom, stainless-steel appliances; building has health club, garage, bike room, storage room, roof deck; maintenance $754; 48 percent tax-deductible; last listing price $495,000; 24 weeks on the market. (Broker: Jennifer Wizov, Halstead Property)

Upper West Side
$1.248 million
215 West 91st Street
2-bedroom, 1.5-bath, 1,250 sf co-op in a prewar elevator building (De Soto); 24-hour doorman; unit has formal dining room, southern and eastern exposures; building has roof deck, storage, bike room; maintenance $1,789; 44 percent tax-deductible; asking price $1.25 million; six weeks on the market. (Brokers: Robert Lombardo, Barak Realty; Alex Nicholas, Gabriella Winter, the Corcoran Group)

Upper West Side
$460,000
324 West 83rd Street
1-bedroom, 1-bath, 625 sf co-op in a prewar elevator building; building has storage, laundry room, bicycle room, live-in super; maintenance $503; 45 percent tax-deductible; last listing price $499,000; 25 weeks on the market. (Brokers: Lenny Silvia, Lee Lewis, City Connections Realty)

Upper West Side
$325,000
127 West 96th Street
Studio, 1-bath, 400 sf co-op in a prewar building; doorman; unit has windowed kitchen and bath; building is pet-friendly, has common outdoor space; maintenance $430; 36 percent tax-deductible; last listing price $333,000; 24 weeks on the market. (Brokers: Alan Krevis, Frank Russo, Halstead Property)

Uptown
$520,000
2322 Adam Clayton Powell Boulevard
3-bedroom, 3-bath, 1,200 sf condo in an elevator building; unit has a patio; building has storage; maintenance $350; taxes $11; last listing price $520,000; four months on the market. (Broker: Malik Mitchell, Century 21 NYC)

West Village
$2.35 million
505 Greenwich Street
2-bedroom, 2.5-bath, 1,819 sf condo in a new elevator building; doorman, concierge; unit has western, northern and eastern exposures, mahogany floors, 6-foot soaking tub; building has a pet spa, live-in superintendent, fitness center, storage; common charges $1,526; taxes $54; last listing price $2.395 million; 16 weeks on the market. (Broker: Mark Friedman, Halstead Property)

West Village
$1.55 million
88 Jane Street
2-bedroom, 2-bath, 1,100 sf duplex condo in an elevator building; unit has a 150 sf private roof deck; building has laundry facilities; common charges $491; taxes $360; last listing price $1.595 million; 12 weeks on the market. (Broker: Danielle Sevier, JC DeNiro & Associates)

West Village
$630,000
32 Downing Street
1-bedroom, 1-bath, 550 sf co-op in an elevator building; top-floor apartment has open granite kitchen, pre-war details, skylight in the bathroom, southern and western exposures, hardwood floors; building has bike and large individual storage lockers in basement, laundry; maintenance $862; last listing price $650,000; six weeks on the market. (Brokers: Scott Elyanow, Constance Houghton, Citi Habitats)

Bronx

Bronx
$120,000
3239 Barker Avenue
2-bedroom, 1-bath, 700 sf co-op; building has an on-site laundry room; maintenance $673; last listing price $125,000; one year and three months on the market. (Broker: Holly Raby, Century 21 NYC)

Brooklyn

Bay Ridge
$285,000
9255 Shore Road
1-bedroom, 1-bath, 800 sf co-op; top-floor unit has open foyer, eat-in kitchen, full view of the harbor, his-and-her California closets, southern and western exposures, strip hardwood floors, crown moldings; maintenance $596; last listing price $299,000; three months on the market. (Broker: Catherine Cleland, Citi Habitats)

Williamsburg
$935,000
170 North 11th Street
2-bedroom, 2-bath, 1,250 sf condo in a new elevator building; unit has terrace, hardwood floors, central air, washer and dryer, and views of the Williamsburg Bridge; building has storage, laundry facilities, roof deck; common charges $268; taxes $866 and 15-year tax abatement; last listing price $935,000; one week on the market. (Broker: Jordan Silver, the Developers Group)

Williamsburg
$605,000
30 Bayard Street
1-bedroom, 1-bath, 836 sf condo in a new elevator building (the Aurora); 24-hour doorman; unit has renovated kitchen and bath, central air, high ceilings, terrace, home office, washer and dryer; building has roof deck, health club; common charges $436; taxes $900; last listing price $605,000; 16 weeks on the market. (Broker: David Ahdoot, the Developers Group)

Queens

Long Island City
$675,000
13-11 Jackson Avenue
1-bedroom, 2-bath, 1,161 sf condo in a new elevator building (Echelon); 24-hour doorman; unit has central air, views of New York City; common charges $519; taxes $156 and 15-year tax abatement; last listing price $695,000; one day on the market. (Broker: Jennifer Lee, the Developers Group)

Long Island City
$582,500
13-11 Jackson Avenue
1-bedroom, 1-bath, 833 sf condo in a new elevator building (Echelon); part-time doorman; unit has hardwood floors, washer and dryer; building has a gym, roof deck, live-in superintendent and laundry facilities; common charges $518; taxes $156 and 15-year tax abatement; last listing price $595,000; 76 weeks on the market. (Broker: Lisa Leveque, the Developers Group)

Compiled by Jovana Rizzo

President of Warburg Realty Partnership. After starting in the
business as a residential agent in 1980, he worked his way up to
manager at Albert B. Ashforth. In 1991, he bought a majority stake in
the firm’s New York residential arm and renamed it Ashforth Warburg
Associates. Twelve years later, he renamed the firm again, this time to
Warburg Realty Partnership. Today Warburg has 150 brokers in five
Manhattan offices, including one in Harlem, where it was the first
large Manhattan firm to open an office.
The Closing: Frederick Peters” class=”read-more-link”>[more]

It’s a tough time for buyers and sellers. With financial news headlines about Wall Street’s meltdown ratcheting up the fear factor, both sides are cautious about plunging into the real estate market.

As a result of the turmoil, those who work at financial firms are backing out of deals because they are unsure of their job security. Meanwhile, sellers are seeing their units sit on the market longer and are pulling them off. Other buyers who want deals are holding out, thinking prices will come down further. [more]

Roy Stillman likes to keep it in the family. The president of Stillman
Development International, and the developer of the I.M. Pei-designed
Centurion condo project, he recently purchased a penthouse in the
Centurion and then gave it to his mother. She will move in when it’s
delivered in March. [more]

Daniel Baum,
chief executive officer of the Real Estate Group New York, a brokerage,
said the Financial District, which has a number of new condo and
high-end rental projects, could be among the first neighborhoods to see
price drops. Which neighborhoods will take biggest knock?” class=”read-more-link”>[more]

Click here for the desk of Bruno Ricciotti

Compiled by C.J. Hughes

A real estate listing for a $25 million townhouse, featuring original decorative accents throughout its 6,100-square-foot interior, bears a warning: no brokers.

The 113-year-old Upper West Side home, designed in a Victorian style by the celebrated architect Clarence True, is one of scores of New York City properties that can be seen on ForSaleByOwner.com — a Web site dedicated to broker-free sales nationwide.

Other local listings on the site include a 300-square-foot co-op in Upper Manhattan that is on the market for $184,000, a 1,500-square-foot, single-family home in the Sunset Hill section of Staten Island for $527,000 and a 1,900-square-foot condo in Chelsea for $2.5 million.

Yet while For Sale by Owner (FSBO) listings are on the rise nationally because of the downturn in the economy, real estate experts said New York City seems to be bucking that trend. Sources said that they have seen a decline in so-called FSBOs in the five boroughs in the last 12 to 18 months, and that they don’t expect that skid to reverse.

That’s because historically, FSBO activity in the city has waned during economic downturns, said Jonathan Miller, the president of appraisal firm Miller Samuel.

“In a stronger market, sellers are braver — they’ll use discount brokers or try to sell properties themselves,” Miller said. “During a housing boom, the agent ends up as an order taker. In a weaker market, the marketing skills and the brand strength behind the brokerages play a bigger role.”

Left to their own devices, FSBO sellers tend to be two to three months behind the market when it comes to pricing their properties, added Miller.

Bruce Katz, a New York real estate attorney whose firm Katz & Matz facilitates several hundred closings a year, said that FSBO deals have dropped from 8 to 10 percent of his business to 4 to 5 percent during the past year. Today, most clients who list their properties as FSBO eventually end up hiring a broker, he said.

“A few years ago, when anyone could get a mortgage, there were many more people trying to sell on their own — and having a lot more success with it than they would now,” Katz said.

Robyn Stern, a mortgage broker with Manhattan Mortgage Company, said she’s also seen a decline in the number of her clients who are attempting to buy properties listed without a broker. In “skittish times,” when financing is more difficult to come by, Stern said more homeowners look to experts to market their properties and to screen prospective buyers.

Even in the best of times, FSBO sales, which tend to be more prevalent at the lower end of the market, represent only a small fraction of real estate transactions in New York City. That is, in part, because of the prevalence of co-ops in which prospective buyers must gain board approval based on financial and other factors. Sellers have long relied heavily on brokers to screen would-be buyers, who in turn rely on brokers to help them with sometimes idiosyncratic co-op applications.

“Often, the seller doesn’t know how to do the transaction — especially in a co-op, where there are very specific rules that many times the seller is not aware of,” said Tamir Shemesh, a managing director at Prudential Douglas Elliman in Manhattan.

Nonetheless, those who are going FSBO in New York have plenty of company on the national front.

ForSaleByOwner.com and HomesByOwner.com say they’ve seen a burgeoning interest in their sites nationwide. They point to National Association of Realtors data showing that more people finding their homes are ending up purchasing without the help of a broker or agent.

Executives at the companies say that amid a housing-market downturn — when a standard 5 to 6 percent fee commanded by many brokers can make the difference between breaking even and selling at a loss — business is good.

At ForSaleByOwner.com, a seller can pay as little as $89.95 and as much as $899, depending on the package, to list their
home on the site and on partner sites.    

Some sellers in New York say that the Internet has made tasks traditionally the domain of real estate pros — like marketing the property, showing it to prospective buyers and determining which among them is financially qualified to make a purchase — more doable without a broker.

“[It] can be easily accomplished by the seller himself,” the owner of the aforementioned Upper West Side townhouse, who wished to be identified only as James, wrote in an e-mail.

The townhouse was listed at ForSaleByOwner.com last month. Within two weeks, the owner reported that the listing generated more than 850 page views and one offer.

Philip Donnellan, a real estate broker who specializes in foreclosures, is the Long Island-based franchisee of HomesByOwner.com. The site lists FSBO properties on Long Island and in Queens.

“A lot of people have upside-down mortgages or very tight margins — maybe their home is worth $400,000, and they owe $350,000,” so the money they save on paying a commission to a realtor could make a big difference, Donnellan said.

 ”Others think they could do a better job than a realtor would, and save themselves a lot of money.”

In the end, though, many clients who list on the site ultimately join forces with one of the real estate brokers who scan the FSBO portal looking for business, according to Donnellan. He said he bought rights to the local listings at HomesByOwner.com, in part, to find new business for his own
discount brokerage firm.

Dorothy Somekh, a senior vice president at Halstead Property, echoed this view. “With FSBO listings, all the brokers try to pounce,” she said.

Indeed, one FSBO seller, whose one-bedroom Battery Park City apartment was listed for $999,500 at ForSaleByOwner.com last month, reported getting bombarded with e-mail and telephone inquiries from brokers looking for exclusives, and from real estate investors looking to purchase properties at 30 to 40 percent below asking price.

The seller, who purchased in a new development 18 months ago, was looking to flip her contract. She decided to put her home at Riverhouse in Battery Park City on the FSBO site and to give the listing to a non-exclusive discount broker (rather than give it as an exclusive to a Corcoran or an Elliman) because, she said, “We’re in a rush to sell, and we wanted to hit it from all angles.”

 As it turned out, however, the building ran late, so she is in the process of invoking a clause in her contract allowing her to walk away. “We should,” she said, “get our deposit back.” 

Astoria
Plaza 21
2301 21st Avenue
Shelter Rock Builders’ new building designed by T. F. Cusanelli Architects & Planners will have 36 one- and two-bedroom units. The apartments range between 500 and 1,050 square feet, and prices run from $299,000 to $699,000. Most units will include balconies or terraces, stainless steel appliances and washers and dryers. Private parking is available for most residents. Occupancy is scheduled for fall 2009.

Chelsea
+Art
540 West 28th Street
Ekstein Development’s 13-story building will have 189 units, comprised of 101 rental units and 88 condos. Prices range from $520,000 to $4.6 million. The building was designed by architect Leonard Fusco of GF55 Partners, and includes a curated lobby and a landscaped courtyard. Halstead Property Development Marketing is the exclusive marketing and sales agent. Contact: www.540w28.com.

Chelsea
Modern 23
350 West 23rd Street
Keystone Group New York’s new building, designed by Daniel Goldner Architects, will have 15 floor-through units, ranging from 1,661 to 2,581 square feet. Many of the units will have private outdoor space, fireplaces, balconies and terraces. Prices range from $1.95 million to $2.33 million. Amenities include an attended lobby with package room, bicycle storage, roof deck, keyed elevator entry and skyline views. Occupancy is expected in March 2009. The Bracha Group is the exclusive sales and marketing agent. Contact: www.modern23.com.

Fort Greene
80 DeKalb Avenue
Forest City Ratner is building a 335,000-square-foot rental building with 365 units and retail on the ground floor. The building will include studio, one- and two-bedroom apartments, 73 of which will be for low-income residents. Amenities include a 24-hour doorman, concierge, terraces and washers and dryers in most units. Completion is expected in summer 2009.

Greenpoint
118 Greenpoint Avenue
Capital Real Estate Group is converting a 19th-century brick building in the Greenpoint Historic District into a condominium. The 15 apartments include studios, one- and two-bedrooms and duplexes, ranging in size from 527 to 1,352 square feet. Prices are $415,000 to $729,000, and some units are already under contract. Amenities include a washer and dryer in each unit and a rooftop deck.

Long Island City
Packard Square
41-34 Crescent Street
Ciampa Organization’s new rental building has 140 apartments, comprised of studio, one- and two-bedroom units. Monthly rents range from $1,695 to $3,015. The 15-story building was designed by the architects Fakler, Eliason & Porcelli and Stedila Design. Amenities include a full-time doorman, lounge with screening area, library with free Wi-Fi, fitness center, storage and landscaped roof deck. Citi Habitats is the exclusive leasing and marketing agent. Contact: www.packardsquare.com.

Murray Hill
303 East 33rd Street
The Toll Brothers City Living and Kibel Company’s 12-story condominium is registered with the U.S. Green Building Council in anticipation of LEED certification. The 128 apartments include studio, one-, two- and three-bedroom units with 59 different layouts. Prices start at $600,000, and the apartments range from 546 to 2,782 square feet. Sales will start in the fall, and completion is expected in 2009. Amenities include parking, a concierge, roof terrace with reflecting pool and bocce court, fitness center, children’s playroom, media lounge and storage. Contact: www.303e33.com.

Construction update

Fort Greene
Toren
150 Myrtle Avenue
The 38-story, 240-unit condominium, developed by BFC Partners, topped off in late August. The Skidmore, Owings & Merrill-designed building will have studio, one-, two- and three-bedroom apartments ranging in size from 442 to 1,967 square feet. Prices range from around $350,000 to $1.7 million. Amenities at the building, which will have retail space, include an outdoor screening area, fitness center, swimming pool, library, lounge and attended parking garage. The building also will have a cogeneration power plant and expects to achieve a silver LEED rating. Contact: www.torencondo.com.

Long Island City
Star Tower
28-02 42nd Road
The 25-story building, already under construction at Queens Plaza, is getting a new all-glass facade. The condominium, built by developer Roe Development and architect DeArch, will have 180 units, with one- and two-bedroom homes ranging from 617 to 1,213 square feet. Prices are between $425,000 and $1 million. Amenities include a roof deck, fitness center, valet parking and an entertainment area. Contact: www.thestartower.com.

Tribeca
34 Leonard Street
The 16-unit luxury residential building, developed by R Squared Real Estate Partners, topped out in September. The one-, two- and three-bedroom residences range in size from 1,541 to 3,086 square feet. Amenities include a climate-controlled wine cellar, a roof deck with grill and bar area, private sunbathing area with outdoor shower, pet spa and a fitness center. The Marketing Directors is the exclusive sales and marketing agent for the project. Contact: www.34leonard.com.

Sales update

East Williamsburg
Olive Park
100 Maspeth Avenue
The seven-story, 87-unit condominium had 70 units in contract at the end of August. Units range in size from 450-square-foot studios to a 1,300-square-foot penthouse, with prices running from $330,000 to nearly $1 million. The remaining units include studio, one-, two- and three-bedroom apartments priced between $370,000 and $915,000. Aptsandlofts.com is the exclusive sales and marketing agent. Contact: www.oliveparkcondos.com.

Flatiron
The Alma
30 West 21st Street
Beck Street Capital’s boutique condominium contains 11 three-bedroom floor-through residences, a triplex penthouse, and a six-story townhouse adjacent to the building. Units range from 3,000 to 4,500 square feet, with interiors designed by Roman and Williams. Prices are between $6 million and $10 million. Completion is expected in summer 2009. CORE Group Marketing is the exclusive sales and marketing agent. Contact: www.almalofts.com.

Flushing
The Parsons Condominium
38-30 Parsons Boulevard
Veracity Development’s residential building was 70 percent sold as of mid-August. The 45 units range from 635 to 1,200 square feet, and are available for occupancy immediately. Prices are between $430,000 and $977,000. Contact: www.3830parsons.com.

Long Island City
L Haus
11-02 49th Avenue
Sales started in late August at the Stahl Organization’s 122-unit condominium. The building has one-, two- and three-bedroom apartments ranging in price from $500,000 to $1.5 million. Amenities include a media room, fitness center and a rooftop terrace with private cabanas. Prudential Douglas Elliman is the exclusive sales and marketing agent. Contact: www.lhauslic.com.

Midtown
Windsor Park
100 West 58th Street
Only 16 units were left in the condominium as of late August. The remaining units range from studios to three-bedroom, three-bath duplexes. Prices are between $884,000 and $3.5 million. Amenities include 24-hour concierge, doorman, porters, fitness center, storage and rooftop terrace. The Bracha Group is the exclusive sales and marketing agent.

Midtown West
The 505
505 West 47th Street
Parkview Developers’ seven-story condominium was 95 percent sold in early September. The remaining units are priced between $730,000 and $1.395 million, including four one-bedrooms, one two-bedroom and one two-bedroom penthouse. About half of the 109 units have private gardens, balconies, rooftop terraces and views of the skyline. Amenities include a fitness center, courtyard, rooftop garden, storage and a 24-hour attended lobby. The building topped off in September, and completion is expected for summer 2009. Halstead Property and Nest Seekers International are handling marketing and sales. Contact: www.the505hk.com.

Soho
The Renwick
15 Renwick Street
The Harch Group’s 12-story, 44-unit luxury condominium was 40 percent sold at the end of August. Amenities include a sculpture garden, library, boxing gym, pool, sauna, private parking and valet service. Architect Ismael Leyva designed the building, which is slated for completion in 2009. Prudential Douglas Elliman is the exclusive sales and marketing agent. Contact: www.therenwick.com.

Uptown
119th Street and Third Avenue
The 12-story luxury condo opened for sales in September. The 90-unit building, by developer 119 Third Avenue Associates LLC and designed by Barry Rice, has studio, one-, two- and three-bedroom apartments. Prices are between $385,000 and $1.3 million, and amenities include parking, a full-time doorman, rooftop terrace, fitness center and storage. The sales office is located across the street from the condominium at 2181 Third Avenue.

The real estate market has farther to fall before it rebounds, according to the panel of real estate experts who participated in The Real Deal‘s fourth annual new development forum on Sept. 10 at Lincoln Center’s Avery Fisher Hall.

The forum panelists included Larry Silverstein, president and CEO of Silverstein Properties; Charles Kushner, chairman of Kushner Companies; R. Donahue Peebles, chairman and CEO of the Peebles Corporation; Steven Witkoff, chairman and CEO of the Witkoff Group; Robert Knakal, chairman of Massey Knakal Realty; and Barbara Corcoran, author and founder of the Corcoran Group. Brian Sullivan, a Fox Business Network anchor, moderated the event, which drew nearly 3,000 attendees.

Read on for highlights from the panelists’ predictions for New York real estate over the next year. And log on to www.therealdeal.com to view all the video highlights from the forum in our Webcasts section.

Brian Sullivan: Look at where we are. I think that it says a lot about the prestige of this industry that we are a) holding this event here, and b) the fact that it’s a packed house. My first question: Is 2009 going to be interesting in the ‘Wow, we’ve really rebounded’ kind of way or the ‘Oh my gosh, things are really bad’ kind of way?

Steve Witkoff: New York City is a challenging marketplace today. I think it’s less challenging than any other market in the United States, but it’s challenging out there. It’s hard to get commercial leases done. I think it’s hard to sell apartments. I think the rental market is going to get soft, and it’s going to get soft in the tertiary areas, too. And yet, it’s better than any place out there.

* * *

Sullivan: Larry, you’re obviously optimistic. You’re building new buildings, both commercial and residential. You and I spoke yesterday and you said, ‘Things are going to come back; I’m a believer in New York City.’ But [is there] any short-term pain coming?

Larry Silverstein: My sense is that if we’re not at the bottom of that condition, I think we’re close to it. But at some point, if people begin to feel there’s an opportunity for a rebound, I think you’re going to start to see capital coming in to the marketplace in a very significant way.

* * *

R. Donahue Peebles: Right now, we all know on the commercial real estate side, credit is at a constipation level right now. There is no capital available for any major development deal in this marketplace. For capital, the faucet’s turned off, so who’s going to fill that? And the theory is, right now, Europe has a lot of issues. The currency spread is weakened, and so we’re not going to be as attractive as an investment right now.

Sullivan: Okay, so then Steve, if we are, as Don says, constipated, is the Fannie-Freddie takeover, with an ease of credit, the colonic that we all need?

Witkoff: Directly in answer to your question, I think the Fannie-Freddie thing is a great thing because people don’t buy a home in this country unless it’s financed. That’s the way people buy homes in this country.

Robert Knakal: For large-scale development, for a lot of development, capital’s not available. Or for institutional-type buildings that Steve and Larry are buying, it’s very, very difficult to finance them. But what we’re seeing, in the under-$50 million market, debt is plentiful.

* * *

Peebles: I’m not working for my kids, and I’m not working for my grandkids. I’ll let them work for themselves. And also, I don’t want to deprive them, of course, of the excitement of the journey of working for it either. I’m working for a shorter horizon. So we’re looking for deals, and if we can’t see the end of the tunnel in three or four or five years, we’re not interested.

Knakal: If you look at what’s happened in the investment market, and particularly deals under $100 million, the volume is off by about 31 percent, but prices are only down by 5 percent. That’s not a buying opportunity. I think the buying opportunity will come probably later this year and into the first half of 2009.

* * *

Barbara Corcoran: Now you’re some guy in Europe who wants to buy your eighth luxury home here in Manhattan for a nice little pied-à-terre. That guy is going to think a little harder, because he could have gotten it at 30 percent off last year, and now he’s only going to get 20 percent off. So does that devaluation of their euro affect our market? In a subtle way, it does. Whatever, though. There’s always another sucker that’s going to pay the money.

* * *

Corcoran: I know very recently I bought a lousy building — nothing in these guys’ leagues, a little four-story building in the South Bronx. Why did I buy it? I don’t know the South Bronx. But I bought it with a schoolteacher who eats and breathes it, and they hustled me to get my money.

* * *

Corcoran: Nothing against Red Hook, but against my own judgment, I bought the lemon in Red Hook, and it’s still not breaking even. And as we speak, we’re repointing the brick, replacing the boiler. I’ll never make money in Red Hook.

Sullivan: Will anybody make money in Red Hook?

Corcoran: Yes, of course. I just did a terrible purchase.

Sullivan: I think we should all give a round of applause for her honesty.

* * *

Charles Kushner: You know, my son Jared bought 500 units in Harlem. He’s turning over apartments there that he got $700 in rent, [now] he’s getting $1,700 rent. Seventeen hundred dollars in Harlem is still not cheap.

Knakal: That’s why it’s such a travesty, the 421-a tax changes. The impetus for them was to create more affordable housing, and what they’re going to do is have the exact opposite effect. I think you’re going to look back at affordable unit creation in New York City 20 years from now and see a gigantic abyss in 2008, 2009, 2010, because the incentives to create the affordable housing just don’t exist now.

* * *

Sullivan: Write the headline for real estate this time next year. What would it say?

Kushner: I think you’re going to see significantly more defaults, because we have a very low default rate on our debt. It’s not great news, but I think that’s when we’ll be at the beginning of the end. We’re not at the beginning of the end yet. There’s still more pain that’s going to be felt in the marketplace. 

Compiled by Sara Polsky

Although other large New York development firms have mostly avoided investing in retail projects in the Bronx, the Related Companies sees multiple opportunities in the borough.

With three major retail projects in the Bronx either completed or in the pipeline, Related Retail and Glen Goldstein, the company’s president, appear to be poised to get in on the action in the Bronx once again.

One source, who asked not to be identified, and one official from a local community board confirmed a Daily News report that Related Retail is on the verge of completing a fourth deal with the city. The deal will make it a player in the South Bronx’s Plaza at the Hub, a 1.1 million-square-foot project in the South Bronx that is slated to include a 14-screen movie theatre, a large supermarket and roughly 250 apartments.

“My understanding is that Related will be involved in the project,” said Cedric Loftin, the district manager of Community Board 1, which includes the district the project will be built in. “They may have the lead on the project.”

Related’s Goldstein said at this point, his company’s role in the project is undetermined. He referred questions on the matter to the New York City Economic Development Corporation, which did not return a phone call or e-mails seeking comment.

Regardless of whether Related gets involved with the Plaza at the Hub, it is clear that the company views the Bronx, a borough with a historically high crime rate and low median income, as a profitable investment.

But the credit crunch and the unraveling economy appear as dark clouds on the horizon for Related Retail’s plan to invest what could reach over $1 billion in the Bronx.

Goldstein said that like other developers, Related Retail is concerned with the softening market but feels strongly that the Bronx retail market will make good progress.

When asked why Related is investing in the Bronx while other big players have shied away, Goldstein pointed out that his division has spearheaded successful projects in the other outer boroughs, notably Brooklyn and Queens.

“The retail that we’ve developed in the outer boroughs does tremendously well,” he said. “As underserved as the outer boroughs have been, the Bronx, in particular, has been underserved because there has been less development.”

Dan Fasulo, a Bronx native and managing director of Real Capital Analytics, said that the faltering economy is likely to affect the Bronx retail market less than others because it is drastically underdeveloped. He said that for years, Bronx residents have traveled to Westchester, New Jersey and Long Island to shop, and developers are now rushing to catch up with the needs of this market.  

Benefits of the Bronx

Other large developers have chosen wealthier areas for their big retail projects, such as northern New Jersey and Westchester. But Related has developed a number of major projects in comparably lower-income areas with a higher density of residents. For example, Related Retail developed the Gateway Center, a 640,000-square-foot retail complex in the East New York section of Brooklyn, one of the city’s most poverty-stricken and dangerous neighborhoods.

Goldstein said the demographic may not be as favorable in the Bronx compared with wealthier areas, but the population density is much higher, and retailers there have done tremendously well.

Developer Mario Procida of SDS Procida, who is now building a strip mall in the Morrisania section of the borough, said the biggest challenge for developers is convincing retailers, especially national ones, to come to the Bronx.

But Related has already proved that it can draw the big chains to the borough.

Related’s Gateway Center at Bronx Terminal Market, a roughly $500 million project under construction near the new Yankee Stadium, will house national retailers such as Home Depot, Target, Best Buy and Bed Bath & Beyond. The center was expected to open in fall 2009, though Goldstein said it is now 85 percent completed, and the opening date has been pushed forward to early next summer.

However, the jury is still out as to how successful the big boxes and Related can be in the Bronx. Related has only finished one major retail project in the Bronx, the Hub Retail and Office Center. The 170,000-square-foot center, which is home to Staples, Rite Aid and a clothing retailer called Forman Mills, pales in size compared to the company’s future projects.    

As for Related’s newest publicly announced major retail project in the borough, the Shops at the Armory, Goldstein said they are still fine-tuning a realistic timeline with the city and are easily 18 months to two years away from breaking ground on the complex. The project, which Related landed after the city sought proposals, calls for redeveloping the landmark Kingsbridge Armory, located in the northern Bronx, into an indoor and outdoor shopping center with a department store, restaurants and a cinema.

‘Sweetheart deal’

While the Bloomberg administration has spurred the development of affordable housing in the Bronx through subsidies in recent years, the city is offering fewer incentives for retail developers in the borough, brokers said.

“It doesn’t make sense to build free-market residential,” said David Simone, a senior director of sales at Massey Knakal Realty Services, who focuses on the Bronx. “Pretty much every residential project is subsidized but not retail.”

But unlike the average developer, Related has focused on projects in the Bronx that were the brainchild of the Bloomberg administration, a move that has resulted in some huge incentives.

After Related’s proposal for the Hub Retail and Office Center was selected by the city, the company was able to purchase the city-owned vacant property for a relatively low price of $1 million, while also receiving a $4 million low-interest loan on behalf of the city’s Economic Development Corporation, $1.8 million in real estate and tax benefits courtesy of the New York Industrial Development Agency, and $500,000 from the office of the Bronx borough president for the project. Since the center included new office space for the New York City Department of Finance, an additional roughly $16 million was provided by the city for the construction.

In the case of the Gateway Center at Bronx Terminal Market, several elected officials, including declared mayoral candidate Representative Anthony Weiner, have said that Related was given a sweetheart deal to redevelop the site. And the fact that Related’s chairman, Stephen Ross, and former deputy mayor for economic development, Daniel Doctoroff, are good friends and ex-business partners drew ire from government watchdogs and competing developers at the time of the deal.

Goldstein downplayed the role incentives have played in Related’s Bronx projects, saying they were similar to the ones his company obtained for their projects in other outer boroughs. He also said that Related and the city hadn’t settled on any incentives regarding the Shops at the Armory.

“I think we’ve worked closely with EDC. They always take a hard look at giving incentives, and the Bronx isn’t any different,” he said.

As part of each of Related’s two most recent Bronx retail projects, the company has agreed to include some sort of community space. Simone said that the city provides developers that include community space in their developments with a bonus permitting them to build additional square footage on their projects that wouldn’t otherwise be allowed.

The community space is also important to elected officials.

“We have been working with Related Companies and the community to ensure that there will be job opportunities for residents, opportunities for local businesses, neighborhood improvements and adequate space for community use in all the projects they are developing in our borough,” said Bronx Borough President Adolfo Carrión Jr.

Long-term investment

Considering the Bronx’s large working-class population and the scarcity of developable land in the borough, Goldstein said he believes Related’s made sound investments.

“We consider ourselves long-term holders and managers. We never look at things for a quick flip,” he said.

Procida, whose company has been headquartered in the Bronx since the 1970s, said unlike other parts of the city, growth in the Bronx happens at a slower pace.

“I don’t know if you’ll get the accelerated growth that you see in parts of Brooklyn and Manhattan,” he said.

Cortlandt, NY
3144 East Main Street
Westrock Development bought 36 acres across from the Cortlandt Town Center and plans to build a mixed-use development. The site will have housing and a retail complex called Cortlandt Crossings, with 85,000 square feet of retail space. Construction is expected to start in November 2009.

East Fishkill, NY
The Livingston
Developer WCI Communities added a new residence style to its Four Corners community. The 2,672-square-foot single-family homes feature four bedrooms, two and a half baths, two-story entry foyers, high-end kitchens with breakfast nooks and living and dining rooms. Prices start at $479,900. Contact: www.fourcornerswci.com.

Montvale, NJ
The Enclave
Developer Woodmont Properties’ development features 20 luxury villas, ranging from 4,200 to 4,900 square feet, and eight single-family homes, on more than one acre of property each. The villas include 10-foot ceilings, guest rooms, loft areas, libraries and two-car garages. Contact: www.enclavemontvale.com.

Jersey City, NJ
Crystal Point
Fisher Development Associates’ condominium opened last month. The 42-story building designed by Gruzen Samton architects has 269 residences ranging from 800 to 1,817 square feet. All units have “smart home” technology and views of Manhattan. Amenities include a spa, game room, fitness center, screening room and lounge with a catering kitchen. The Marketing Directors is the exclusive sales and marketing agent. Contact: www.crystalpointcondos.com.

Summit, NJ
The Promenade at Summit
545 Morris Avenue
The Diversified Properties development has 22 condominiums and seven single-family homes. The units have two to four bedrooms and range from 1,604 to 4,297 square feet. Occupancy is expected this fall, and sales have started with prices ranging from $599,000 to $884,900. Units have nine-foot ceilings, stainless steel appliances and underground parking with elevator access. Contact: www.545morrisave.com.  TRD

Several luxury residential developments have sprouted around Madison
Square Park in recent years, transforming the neighborhood into a
highly coveted destination. First, there were the condo conversions
including 76 and 50 Madison Avenue; then there was One Madison Square
Park, a new upscale project that sold out in almost a year with only
the penthouse remaining. And, now Versace is designing 55 units at 5
Madison Avenue.

In a Webcast interview last month, The The Real Deal’s Jen
Benepe spoke to two residential brokers about the status of sales at the Madison Square Park area projects they are working on and about whether future developments in the vicinity will be hampered because of the city’s new economic realities.

Log on to www.therealdeal.com to see the full interview and to access the archives. Check back every week for a new edition of The Real Deal’s Webcast, featuring exclusive interviews with industry insiders.

First,The Real Deal speaks to Wendy Maitland, senior vice president of Brown Harris Stevens and managing partner with ID Marketing Group.

The Real Deal: You and Wilbur Gonzalez as a team sold out One Madison Avenue in just about a year. What was the sales process like, and why did it sell so fast?

Wendy Maitland: It was the highest velocity of sales that we experienced since our inception. I think it sold out because … of air rights that allowed the developers, Ira Shapiro’s Slazer Enterprises, to assemble over 600 feet high in the air [and create] an all-glass building with unprecedented views.

TRD: So height is a big factor here?

WM: Particularly in this area. You know, it’s such a historic area for skyscrapers, and it’s really being restored to its original splendor, when buildings like the MetLife Clock Tower, the Flatiron Building [and] the Empire State Building [were built]. So this is now the tallest building between Midtown and lower Tribeca.

TRD: The penthouse has not been sold yet. Have you tried to reduce the price on that?

WM: No, we don’t feel like we’re going to need to reduce the price. It’s very special.

TRD: The next development that you’re marketing is 23 East 22nd Street, which was designed by Rem Koolhaas. How would you say that that building compares to this one, and when do sales start?

WM: Sales start very soon. It’s absolutely beautiful, and it’s very special because it’s Rem Koolhaas’ very first condo project in the world.

TRD: We’re hearing that prices are going to be somewhere around $4,000 per square foot. Do you think that’s doable in this economy?

WM: Yes. There are less than 20 homes, and each one is unique.

TRD: So the economy hasn’t affected either the way you do sales or some of the people you’re selling to?

WM: Of course it has. It has affected our entire city. But it has not stopped certain segments of the market at all.

Next, The Real Deal talks to Vicki Musso, managing director at Coldwell Banker Previews International.

TRD: You’ve been in this area for a while. What would you say are some of the critical factors that make Madison Square Park and the developments around here so successful and so desirable?

Vicki Musso: I think one of the things, obviously, is the park, but [also] the fact that we have such glorious architecture. Many of these buildings were built at the turn of the century. And you know, [it's a] great canvas for the developers to come in and basically turn the neighborhood into another Gramercy Park. It would become a very exclusive enclave.

TRD: There are a number of brand new
developments coming on, such as One Madison Avenue. Do you think that with the economy slowing, we’re going to be seeing fewer of these developments because the developers can’t get financing?

VM: Perhaps. With issues with financing, that might be a factor.

TRD: And do you think that it might affect this area specifically as well?

VM: Yes and no. I still see movement. I can speak actually for a development that Coldwell Banker Previews International is handling right now at 39 East 29th Street. We came on with a big bang, [and] apartments have sold rapidly; we are somewhere between 65 to 70 percent sold out. We continue to have signed contracts every week. It’s a glorious project. I haven’t seen a slowdown yet.

TRD: That project is a little bit farther away from the park. Would you say it is priced slightly lower than some of the places around here, and is that an advantage for you?

VM: Yes, yes and yes.

Compiled by Linden Lim

Having a silver anniversary? Throwing a conference? You’ll discover it is not so easy to find a large event space in a new Manhattan hotel. And whenever there is space, it may be located in an undesirable part of the building, like the basement — and as a result, may have no windows.

 The stage for the space crunch was set when New York City lost some event space during the recent real estate boom. At that time, many hotels were converted to residential buildings. Compounding the problem now is the fact that there’s little new event space materializing because the majority of new hotels being built are typically too small to include the large, open rooms.

Between the credit freeze, the high costs of land and construction, and the current focus on limited-service hotels, New York City developers are not investing in hotel event space. That’s because generally a hotel developer will get a greater return on investment if he or she builds hotel rooms instead of event space, said John Fox, senior vice president and executive in charge of the New York office at hotel consultancy PKF Consulting.

Fox estimated that of the 100 hotels in the pipeline in Manhattan, 10 or fewer will have more than 300 rooms.

“The majority of [the 100] are limited-service, or select-service, that generally would not have much in the way of event space or meeting space,” noted Fox. He said the only way to quantify event space would be to consider each property one by one.

One prolific developer of select-service hotels, the McSam Hotel Group, generally does not include event space in its projects.

“Square footage is so expensive, we tend to gravitate away from that type of product,” said Gary Wisinski, COO of the group.

Kathleen Hurley, communications director for Lodging Econometrics, which produces national hotel reports, said that hotels with 200 or fewer rooms are “a niche not known for large conference/meeting spaces.”

Even some newer high-end boutique hotels — like Robert De Niro’s Greenwich Hotel at 377 Greenwich Street, Nobu Hotel and Residences at 45 Broad Street, W New York Downtown Hotel & Residences at 123 Washington Street, and the Mark Hotel and residences at 25 East 77th Street — are not including non-restaurant space for hosting functions.

One of the issues is simple economics: The credit crisis has affected meeting-related travel.

“The implication is that as meeting-related travel declines, so does the urgency for hotels with meeting space,” Hurley said.

As a result, at some large, fancy hotels, prime real estate — areas with windows and views — is reserved for guest rooms, not parties. The consequence is that the party space is in an undesirable part of the hotel.

For example, the Ritz-Carlton at Battery Park has two large ballrooms, but at the Ritz-Carlton at 50 Central Park South (home to Laurent Tourondel’s BLT Market restaurant), the 1,759-square-foot event space is in a windowless basement.

“Our hotel was developed as an intimate, transient hotel that caters to the traveler; thus, we find that guest rooms with stunning views of Central Park are more valuable and provide a greater return [than] would event space in its place,” said Dianna Tarallo, public relations manager at the hotel.

The Ritz-Carlton on Central Park South is not alone in reserving views for the guests.

At the iconic Plaza Hotel, there are no windows in the renovated 15,000 square feet of event space — including the grand ballroom.

Steven Rice, vice president and general manager of Central Park South Events—manager of the ballroom, meeting rooms and peripheral event space — said that while people enjoy windows and views, selecting an event space boils down to location and the look of the place. He noted the Plaza offers “historical and traditional landmark space” with a modern-day edge.

The way the numbers work, hotel guests beat out conference attendees or wedding celebrants.

“Guest rooms are the most profitable part of a hotel operation,” said Geoff Davis, president of the investment advisors group of Hospitality Real Estate Counselors, a hotel and casino advisory firm.

For every dollar brought in for a hotel room, the owner keeps $0.70, Davis said. For food and beverage (including events), the company retains just $0.10 to $0.15 on the dollar.

Even when there are conference rooms and event spaces, they are generally used to draw hotel guests, said Davis, who recently had to pay for a block of rooms in order to hold a conference at the Waldorf-Astoria.

“Everything is about filling rooms. Everything you do in hotels is about heads and beds,” he said.

A few years ago, the city lost a number of event spaces when some hotels, like the Stanhope and the Delmonico, were converted to condominiums. There’s now a rumor that the Helmsley Park Lane — which has a windowless ballroom and a $1 million renovated restaurant, the Park Room, overlooking Central Park — is the next to be going condo.

For those currently seeking a large party space, there are still options — including event rooms at large hotels, such as the Mandarin Oriental at 80 Columbus Circle, the Pierre on Fifth Avenue at 61st Street, and convention hotels like the Waldorf-Astoria. In addition, there are many large hotels in the Times Square area, and with the growth of the far West Side, there are more hotels in the pipeline for the area around the Jacob K. Javits Convention Center. 

When Mayor Bloomberg’s PlaNYC 2030 kicked off last summer, it called
for the creation of 800 acres of new green space, including 31 new
public plazas, to be built by 2009. So far, only three of
those plazas have been built. But the Department of Transportation,
which is managing the initiative, says 20 plazas will be created by
next year. [more]

The sign on the side of the nearly finished building on West and
Desbrosses streets has drawn attention for prominently displaying the
curious quote from playwright Edward Albee: “You gotta have swine to
show you where the truffles are.” Hunting for Truffles” class=”read-more-link”>[more]

Not all the trend-shattering residential projects in New York are
in West Chelsea. The Madison Square Park/Flatiron area, with its
traditional buildings, is an unlikely spot for the iconoclastic Dutch
designer and architectural philosopher Rem Koolhaas to make his New
York City residential debut, but he has done so with a dramatically
cantilevered, steel-and-glass condominium high-rise under construction
at 23 East 22nd Street.
Koolhaas defies gravity” class=”read-more-link”>[more]

Go to chart: Scale-backs, delays and cost overruns impact NYC’s mega-projects

Compiled by Linden Lim

As the market sours and potential first-time buyers become more
indecisive about whether it makes sense to plunk down money for a
purchase, some developers are allowing them to hold off on the big
decision. [more]

As condominium sales slow, more developers are changing their buildings
from sales to rentals — but that’s not always as easy as just changing
the sign on the door, experts say.
[more]

When one thinks of the chic singles scene Downtown, a child-care center generally does not come to mind, especially inside a sleek condominium.

But, at the Armani Casa-designed 20 Pine in the Financial District, where marketing has targeted single people and hip, young couples, 170 children ages 6 weeks to 5 years old will be romping around at Bright Horizons soon.

Assuming the majority of the people using the child-care center will not be residents of the building, will that become a nuisance to those who live there? How will a child-care center fit with the image of the condo and more importantly — impact sales?

“It could detract from the marketing. It could detract from the appeal of the building,” said Andrew Gerringer, head of the development marketing group and the investment sales division at Prudential Douglas Elliman, who has had no involvement with the project. “It’s interesting because most of the apartments there [will] not be family-oriented apartments because they’re small, so it’s really not a service that the [residents in the] building will take advantage of.”

Marketing for the one- and two-bedroom units at the 38-story condo has been focused on the refined, wealthy buyer.

The project’s developer, Shaya Boymelgreen, told The Real Deal in January 2006 that Armani has a “chic elegance” that complements the aesthetics of 20 Pine.

“If you are the type of buyer who would prefer a five-star restaurant on site or a party room or basketball court, like some other buildings have, you may drop this building a little further down on your list of favorites, all else being equal,” said Gil Neary, a managing partner at Downtown brokerage DG Neary Realty, whose firm is also not involved with the project. On the other hand, “like any added service it may be very attractive to those who would be likely to use it often.”

Some people have already moved into the Michael Shvo-marketed condo conversion, which has suffered from construction delays. The building is expected to be completed before the end of the year. Shvo did not respond to requests for comment.

The child-care center is slated to open early next year, the space indicates on a fact sheet. Leah Lesser, a spokeswoman for Bright Horizons Family Solutions, said the only information she could provide about the center was on the fact sheet.

Bright Horizons at 20 Pine will be operating year-round between 7 a.m. and 6 p.m., Monday through Friday. Bright Horizons Family Solutions manages more than 600 care and education centers in the U.S., Canada and Europe.

Kevin Isbell, a resident already living in 20 Pine, said he had been under the impression that a retailer or restaurant was going to be leasing the commercial space. But, upon learning about the center’s lease, he said its hours of operation “are perfect” because he’ll be at work then anyway. 

“Designing the High Line: Gansevoort Street to 30th Street”

By Patrick Hazari, Friends of the High Line, Finlay Printing, LLC USA, 160 pages, $30

Real estate entrepreneurs hoping to cash in on plans to create a park from the hulking railroad overpass known as the High Line won’t have too much longer to wait. But in case they’ve been getting impatient in the two years since the groundbreaking, Friends of the High Line recently published a comprehensive collection of design plans to reanimate interest.

The full-color, 160-page book, “Designing the High Line: Gansevoort Street to 30th Street,” is a collection of renderings, maps, architectural drawings and photographs of the High Line illustrating its construction in the 1930s, its abandonment after 1980 and its contemporary reconstruction.

The final design plans for Sections 1 and 2 of the High Line, which span 19 blocks, are provided in detail by Field Operations, a landscape and urban design group that includes architecture firm Diller Scofidio + Renfro and others. (The fate of section three of the High Line, which curves along 30th Street into the Hudson Rail Yards, still remains uncertain, according to the book.)

Though the information is not new — and the section on High Line history is a bit thin — the book is nicely laid out with plenty of maps to help the reader locate specific features of the soon-to-be park, and renderings, so the reader can place him- or herself in a realistic park setting. All in all, it’s a step-by-step walk-through of design plans for those who don’t have the time or training to pore over architectural drawings.

Highlights include explanations of such design innovations as the use of striated, concrete planks to allow for “meandering, unscripted movement” (basically, gentle zigzagging) through the planting beds along the train tracks. Though planners had considered retaining the incredibly diverse landscape that developed naturally after the High Line’s abandonment, they eventually had to remove it to strengthen the underlying structure and will now replicate it.

For owners of real estate along the High Line, the book gives point-by-point illustrations of accesses to the High Line from the street and nearby buildings. It also presents special features, such as viewing spurs, sundecks, water features, etc., to which the public will presumably flock. All in all, it’s a two-dimensional taste of what readers will be able to enjoy in reality when Section 1 opens later this year.

Atlanta
The number of foreclosure notices in Gwinnett County, part of the metro Atlanta area, spiked to a monthly record in early September, according to mortgage loan tracking firm Equity Depot/Notivus. The 1,357 notices recorded by the second week of the month already nearly doubled the total for the same month last year and tripled the number from September 2006. Equity Depot/Notivus also noted that the number of foreclosure notices posted in the county in the first nine months of the year was almost equal to the combined total from the same period in 2006 and 2007, the Atlanta Journal-Constitution reported.

Boston
More companies are choosing to look beyond metro Boston to meet their expansion needs, and developers are responding to the growing demand by building more office parks and complexes in the suburbs. Nearly 30 office complexes are currently under development along Route 128 and the Massachusetts Turnpike, with seven in Waltham alone, the Boston Globe reported. Boston developer Dean Stratouly recently acquired three plots of land in Framingham along the turnpike with plans for a 350,000-square-foot office park. The gap is closing between total office space in Boston and its suburbs: Boston now has 3.8 million square feet more space than communities along Route 128, compared to 10.4 million square feet in 2000, according to Cushman & Wakefield.

New England Patriots star quarterback Tom Brady recently closed a real estate deal in Boston’s Back Bay neighborhood that earned him more than he paid for the property in 2006 — and netted him a free duplex penthouse. Brady gut-renovated a Beacon Street building, which he purchased for $6.24 million, and sold three of the four units for $7.95 million to South American banking executive Andrónico Luksic. The sale of the last unit closed in late August, the Boston Globe reported. Brady’s other real estate ventures include investments in Los Angeles and New York, where he last listed his Time Warner Center condo for more than $18 million.

Chicago
Consulting firm Ernst & Young was reportedly close to a deal last month that would relocate its offices from the Sears Tower, where it has been a tenant since 1974. Sources said the company could be looking at a new 1.1 million-square-foot office building currently being developed by the John Buck Co. at 155 North Wacker Drive, the Chicago Sun-Times reported. Ernst & Young’s current lease for 387,000 square feet at the Sears Tower doesn’t expire until 2012, but Buck could be willing to complete a deal years in advance to secure a large tenant. Ernst & Young is reportedly in the market for around 300,000 square feet. The Sears Tower is owned by a partnership that includes New York-based developers Joseph Chetrit and Joseph Moinian.

Las Vegas
After seven straight months of increasing home sales in Las Vegas, the streak finally ended in August with a 1.9 percent drop-off from the prior month, according to the Greater Las Vegas Association of Realtors. There were 2,545 single-family home sales in August, compared to 2,592 in July. Even though the numbers fell slightly, August was still a relatively healthy month for sales — they skyrocketed 93.4 percent from 1,316 in August 2007, the Las Vegas Review-Journal reported. The median sales price, however, continued the downward trend of previous months, falling 4.5 percent from July and 30 percent from the year-ago period.

Los Angeles
A single-tenant retail property at 8727 West Pico Boulevard in Los Angeles reportedly sold for a record price per square foot for that street, a major commercial corridor with landmarks such as the Staples Center, the Westside Pavilion Mall and Fox Studios. The 11,761-square-foot building was purchased for $3.6 million, or around $700 per square foot. The buyer was Coco’s Bakery Restaurant, which had been occupying 5,173 square feet on site prior to the sale. Jonathan Ahron and David Aschkenasy of Charles Dunn Co., a partner of GVA Worldwide, brokered the deal.

Philadelphia
At least four major companies based in metro Philadelphia have been acquired in recent months or will be acquired by corporations from out of town, leading some observers to worry about what might happen to the city’s economy and real estate market if this trend continues and multiple corporate headquarters are relocated. Between April and August, chemical maker Rohm and Haas Co. received a bid worth $18 billion; insurer Philadelphia Consolidated was offered $4.7 billion for a buyout; office equipment distributor Ikon Office Solutions agreed to be taken over for $1.6 billion; and CollaGenex Pharmaceuticals was purchased for $420 million. All four deals are expected to be consummated, the Philadelphia Business Journal reported.

Phoenix
The number of foreclosure sales in the greater Phoenix area increased in August to represent nearly half of all residential transactions for the month, the Phoenix Business Journal reported. More than 3,300 foreclosure sales were recorded out of a total 7,505 deals, according to the Realty Studies division of the Morrison School of Management and Agribusiness at Arizona State University. But some submarkets fared better than others: In Tempe, 23 percent of recorded home sales in August came from foreclosures, while 56 percent of recorded residential deals in Avondale resulted from foreclosures.

Hospitality and entertainment firm Gaylord Entertainment has agreed to purchase 100 acres within the 3,200-acre Mesa Proving Grounds in Mesa, with plans to develop a $1 billion anchor resort and convention center. The proposal for the site, located about 30 miles from downtown Phoenix, also calls for a retail complex and an 18-hole golf course designed by renowned golf course architect Tom Fazio. Gaylord acquired the land from national real estate development firm DMB Associates, which has the remaining 3,100 acres to build out or sell over the long term. Gaylord could break ground on its project as early as 2010 if everything goes as planned.

San Francisco
What was billed last year as the most successful housing raffle in U.S. history is back in the San Francisco Bay Area, giving homebuyers another chance at acquiring their dream home even as the housing market and economic outlook enter a more turbulent period. The raffle is being held by nonprofit Community Action Marin, which sold 34,000 tickets last year at $150 each. Last year’s winner of a four-bedroom San Rafael mansion, dubbed the “Dream House,” opted for a cash prize, so the same home is being offered this year, the San Francisco Chronicle reported. The Craftsman-style home, valued at $2 million today compared to $2.1 million last year, sits on a quarter-acre lot with bay views, a pool, a chef’s kitchen and a library. The drawing will be held in February, and proceeds will be used to help local social services.

Seattle
More homeowners in Seattle and surrounding King County are lowering their asking prices to move properties, a trend that last month led the area to its lowest median sales price for single-family homes since April 2006. Numbers from the Northwest Multiple Listing Service showed that the median price of homes sold in King County in August declined by more than $53,000 from the same month last year, to less than $424,000. That represents an 11 percent drop, the first double-digit decline year over year for the county in more than two years, the Seattle Times reported.

Washington, D.C.
After having signed a flurry of leases for office space earlier this year, the U.S. federal government recently inked three more leases totaling nearly 200,000 square feet of space in Washington, D.C. The Secret Service renewed its lease for the 70,000 square feet the agency occupies at 110 L Street. Also, the Department of Homeland Security and the Department of Veterans Affairs both signed 10-year leases at 1717 H Street NW to split 120,000 square feet of space. The Homeland Security deal comes even as the department has been looking to consolidate its offices — it occupies 70 buildings in 40 locations in the region — at its planned headquarters on the former St. Elizabeths west campus in Southeast D.C., the Washington Business Journal reported.

Compiled by Linden Lim

South Florida sees lower inventory, but still slowest sales in nation
The three-county housing market of Broward, Miami-Dade and Palm Beach saw a three-year inventory of homes on the market drop to a two-year inventory earlier this year, according to the Palm Beach Post. While some analysts say this indicates the market is poised for a rebound, it’s worth noting that sales in the region remain the slowest in the nation, and much of the decrease in inventory is due to frustrated owners taking homes off the market.

Palm Beach County sellers listed 31,020 houses and condos for sale in August, a month when only 1,122 homes sold, according to research firm Trendgraphix. Brokers say a six-month supply of existing homes is normal, so today’s 28-month supply is far from healthy.

According to a recent survey by Altos Research and Real IQ, houses in Palm Beach, Broward and Miami-Dade took an average of 160 days to sell in August. Tampa was a distant second at 129, followed by Detroit at 126. South Florida has led the survey since it began last September.

Lehman Brothers’ bankruptcy hits Miami market
When Lehman Brothers filed for Chapter 11 bankruptcy last month, it held $2 billion in large loans in the region, some of which leveraged major projects in the Miami area. Miami Beach’s Canyon Ranch Resort, Ian Schrager’s investment in the Riande hotel chain, the Donald Trump condo rising in Hollywood and the Related Group’s Icon Brickell in Brickell Bay were all financed by Lehman.

While the fate of Lehman’s interest in these major projects will ultimately be determined by bankruptcy courts, some experts predict that they will be unloaded at greatly discounted prices — possibly in bulk sale to vulture funds — in the investment bank’s effort to pay off its $613 billion in debt to creditors. A fire sale of sponsor-owned units at any one of these projects would greatly harm the value of those already purchased by buyers, analysts said.   

Rising property values in Florida City
While most of South Florida suffered declining property values this year, Florida City bucked the trend with a 13 percent increase, or a $70 million jump in property values. The increase contrasts with a 2.6 percent decline in the total value of property in Miami-Dade County, the Miami Herald reported.

Florida City Mayor Otis Wallace claims that residential developers there had a
realistic projection of the area’s housing needs, and thus avoided the overbuilding that drastically reduced prices elsewhere in Dade. Neighboring Homestead, for example, saw a drop in property values by 5.2 percent, or almost $200 million, in
the past year, largely as a result of speculative development.

The property appreciation was also largely due to retail and commercial growth in the area, including the introductions of Cracker Barrel, Starbucks, Badcock Furniture, Largo Honda, and Power Financial Credit Union, as well as a Best Buy in the pipeline. Recently, Florida City has been offering businesses incentives to move in, such as waiving impact fees and providing financing through tax increment funding. The city commission also recently approved rezoning to allow for a new shopping center, the 12-acre Shops at Dolphin Square.

Ft. Lauderdale marina for sale after shady auction
The New River Marina in Fort Lauderdale, one of Broward County’s nine boatyards for megayachts, is up for sale by its new owner, 84 Marina LLC. The company, which was the marina’s major lender, took the property after a botched bankruptcy auction in July, for which 84 Marina owner Alex Nichols is pursuing sanctions in U.S. Bankruptcy Court.

The winning bidder of the marina’s auction withdrew from his purchase after it was revealed that a lower bid, for $13.5 million, came from an unqualified party, who claimed that his offer was forged. The U.S. Trustee’s Office in Miami, an arm of the federal Justice Department, is currently investigating the legitimacy of the auction.

In March 2007, the marina’s former owners, Bob and Mary Wickman, filed for Chapter 11 bankruptcy on the property, which was valued at more than $21 million in 2006. An auction was then set up in an effort to pay back $13 million owed on the property to Nichols.

Insurance regulators enforce wind coverage discounts
Florida’s Office of Insurance Regulation announced it would take a hard stance on insurance companies’ failure to give homeowners mitigation discounts — reductions in wind coverage charges provided to those who fortify their homes against hurricanes — after making the state’s largest private insurer, State Farm, refund $120 million in such fees to 98,000 customers. Windstorm premium savings can account for up to 68 percent of a homeowner policy’s cost, or as much as $1,360 on a $2,000 premium. The discounts have been required by the state since 2003, but consumer complaints have now alerted state regulators that many insurance providers may not be complying with the law.   

Compiled by James Kelly

Two years ago, Time Out New York named a stretch of South Portland Avenue in Fort Greene the “best block” in New York. Now, while the brownstone market is basically holding its own amidst a sluggish sales climate, developers of a handful of new Fort Greene condos are seeing units languish on the market.
Seeing less green in Fort Greene” class=”read-more-link”>[more]

Washington Heights — an old-fashioned, no-frills neighborhood dominated by small buildings and mom-and-pop stores — is one of the last city neighborhoods for rental bargains, according to brokers.

Suffering a double whammy from the impact of the residential market slowdown and a lingering (some say outdated) reputation for crime, the neighborhood located at the northern tip of Manhattan still attracts priced-out refugees from Greenwich Village, Chelsea and the Upper West Side. Heading uptown for low rents” class=”read-more-link”>[more]

Go to Plaza District statistics

Rampant rent growth characterized the city’s commercial climate for the past three years, but office rent increases have not risen uniformly among Manhattan’s submarkets.

The Plaza District — defined by research firm CoStar as the area between 47th and 65th streets, from Park to Sixth avenues — has seen the steepest increases.

The rent cycle peaked in the first quarter, and brokers say Plaza area office space, as the submarket that’s seen the greatest boost, may also have the farthest to fall as the market recedes. The area, they say, is particularly vulnerable to the Wall Street meltdown because of the large number of financial service tenants who are reeling from last month’s massive upheaval.

After its combination bankruptcy filing and acquisition by the British bank Barclays, Lehman Brothers could see some of its space come on the market for sublease. Barclays is in the process of determining how many of Lehman’s 10,000 employees to keep. Lehman had space at 399 Park Avenue, on the eastern edge of the Plaza District, which it had been looking to parcel out to subtenants before the firm imploded. It is unclear what will happen to Lehman’s space at 31 West 52nd Street, 1271 Sixth Avenue and 1301 Sixth Avenue.

Meanwhile, Merrill Lynch, bought up by Bank of America last month for $50 billion in stock, could shed thousands of employees in the coming months as well. In the Plaza District, Merrill has offices at 717 and 650 Fifth Avenue, 1251 Sixth Avenue and 1 Rockefeller Plaza.

The average asking rent for Class A office space in the submarket was $109.46 per square foot in August 2008, the most recent data available at press time. That was up 34.6 percent from $81.33 per square foot in August 2006 and up 60.1 percent from $68.38 per square foot in August 2005.  

Some brokers remain bullish on the area, pointing out that even with 20 to 50 percent price corrections in the district’s most expensive office towers, rents would still remain above where they were three years ago.

The area is also protected by a limited amount of new construction coming online, which will help keep vacancy rates down, according to Robert Emden, principal at PBS Real Estate. This contrasts with the market’s last downturn, beginning in 2001, when new office supply in the Plaza District was contemporaneous with a leasing slowdown.

The price corrections predicted for the neighborhood may not hit every part of the district equally, but they could get worse given the way the financial service sector has been rocked, brokers said. Still, some of those working in the area report only a mild slowdown, if any, when it comes to smaller offices and very high-priced spaces.

Leasing activity for small spaces there, especially ones 20,000 square feet and smaller, is aided by branch offices of international companies and small investment firms drawn to the cachet of the district, said Mike Kaufman, managing director at the Kaufman Organization.

“There’s still been a lot of interest for smaller spaces [in the area],” said Kaufman. “But if you’re looking to get rid of over 100,000 square feet, that’s a whole different customer.”

While Lehman’s 167,000-square-foot space at 399 Park Avenue is the district’s biggest block of sublease space on the market, there is also an 80,000-square-foot space available at 590 Madison Avenue and a 67,000-square-foot space at 625 Madison Avenue. Rumors also abound that Bank of America will begin shopping around its 600,000 square feet of offices at 9 West 57th Street as its workers move into the new tower at One Bryant Park.

There is a possibility that the large spaces that come to market will eventually be divided into smaller offices for multiple tenants. But brokers who spoke to The Real Deal said that in general, landlords consider it an option of last resort.

“If a space is already set up for a big tenant, it’s going to take a lot of work to make it work for several smaller companies, and the landlord would likely have to upgrade some of the floors,” said Alan Bonnet, senior managing director of Adams & Co.

“But if after a point they cannot dispose of the space in a reasonable time frame, they may decide that they have to chop it up into smaller units,” he said.

John Johnson, senior managing director at Studley, said he believes there are few enough large spaces available in the Plaza District that landlords could likely extract high prices for them once a tenant is found. Although they may move slowly, he said, a landlord would be wise to keep it as a large continuous space because of the relative rarity of that asset now.

Brokers say that the highest-quality Class A space will be especially resilient
to rent corrections, as demand in that price range is relatively impervious to market conditions.

Kaufman said that at the highest price range of the Plaza District, rents might be dropping from $200 to $175 per square foot. This represents a 12.5 percent decrease — well below the 40 percent Class A rent growth from two years ago.

“Those who want to be in these types of assets are going to pay what they have to [in order to] be there,” said Matthew Astrachan, executive vice president at Cushman & Wakefield. “And the difference of $5 or $10 per square foot is just a trade for them. It’s not even a decimal point.”

The new restaurant is striking, with its sleek black exterior and dark interior where neon designs playfully light the space and a waterfall adds a calming sound.

About $100,000 was spent on the women’s bathroom alone (it includes two televisions and a circular sink in the center of the room).

An Asian fusion restaurant with a five-star chef from China — and a sushi chef who worked at Nobu — MoCA could very well be the newest hip restaurant in Manhattan, except for the fact that it’s not. Instead, it’s right off of Austin Street in Forest Hills, an example of the restaurant renaissance taking place in this established neighborhood in Queens.

Always a dining destination for locals, Austin Street has recently seen more trendy eateries open up, providing residents with several Manhattan-like restaurants without having to actually leave the borough. Within the past year or so, at least seven restaurants have opened up on the Austin Street strip or other thoroughfares in the neighborhood: Besides MoCA on 70th Road, there’s Bonfire Grill on Austin Street, Tierra Sana on Queens Boulevard and PJ’s Steakhouse on Yellowstone Boulevard, which opened last summer. On Metropolitan Boulevard, there’s the eatery My Kitchen, the Pampas Argentinas steakhouse and La Tavernetta, an Italian place moving into the neighborhood from Glendale.

“People can’t believe there’s a place like this open in Forest Hills; they expect a place like this in Manhattan,” said Vic Fiallo, co-owner of Tierra Sana, an organic restaurant serving cuisine with Native American and South African influences.

About 1,500 square feet, the restaurant, which officially opened in July, used to be a rotisserie chicken place, Fiallo said. It is now an airy lounge with a wall of French doors facing the boulevard and live music on the weekends.

Other trendy restaurants that have been in business for the last few years include Jade, an 8,000-square-foot Asian eatery and lounge right across from the LIRR station, and Danny Brown Wine Bar & Kitchen on Metropolitan Avenue.

Hip restaurants aren’t the only retail newcomers to the area. Within the past year, national specialty grocer Trader Joe’s opened a location on Metropolitan Avenue, right over the border in Rego Park, and Manhattan bed and bath store Laytner’s Linen did the same on Austin Street.

The New York Sports Club opened its second location in the area in the summer of 2007. It’s also in nearby Rego Park on Queens Boulevard.

In addition to the retailers, there are upscale residential condo developments that seem to be “bringing a new energy and focus to the area,” said Mary Hughes, vice president of leasing for Cord Meyer, which developed projects like the Windsor at Forest Hills Condominium, located on 71st Road.

More recently added to the area is the Horizon Group’s Novo 64, with amenities such as a lounge with a catering kitchen, a cinema and a children’s playroom, in addition to a concierge and gym. (Though admittedly, its location on Yellowstone Boulevard is a far walk from Austin Street.)

The new developments contribute to making the area more desirable, and “go hand in hand” with the new restaurants coming to the area, said John Maltz, president of brokerage Greiner-Maltz. The restaurant rebirth is “driven by the demographics in the area,” which has seen “flat residential prices,” he said, making it an ideal place for younger people to head to after they are priced out of Manhattan or Brooklyn, and, he added, “they are the age group that goes out to eat.”

In Forest Hills, the best spaces on a retail corridor like Queens Boulevard can command $100 to $150 per square foot, Maltz said, while the less desirable places on the boulevard, as well as neighboring side streets, can go for $25 to $30 a square foot. On Austin Street, being on “the right block,” from about 70th to 72nd roads, can cost $150 a square foot, while being on “the wrong block” will run $50 a square foot, Maltz added.

For Tierra Sana’s Fiallo, opening up a restaurant — his first — filled a need that was lacking in the neighborhood. “There weren’t any healthy places to eat,” he said. As a developer of alternative energy businesses, he said it was “natural” for him to be the first to open one.

Filling more than 2,000 square feet, the new MoCA establishment is the parent company’s second location; the first one opened on Long Island over a year ago. Though the company wants to be in Manhattan eventually, Forest Hills was chosen because the competition in Manhattan is stiff, said manager Leo Cheng. “Manhattan has a lot of choices for people,” he said.

Forest Hills, on the other hand, was lacking in “fine dining places,” he said, and added, “We want to provide a modern style to this area.” Starting with the name, apparently: MoCA stands for Modern Culinary Art.

Eight months of renovations and $1.5 million later, MoCA’s design brings a sleek, hip look to the street. Now, “people don’t have to go all the way to Manhattan to eat,” said Cheng.

Besides Austin Street, however, Metropolitan Avenue is developing into a second restaurant row. Galik Amberson, owner of My Kitchen, which originally was on Austin Street in the 1980s before he decamped for Manhattan, has resurrected the restaurant on Metropolitan, near where he lives.

After opening a 1,500-square-foot space last year, he added another 1,500 square feet next door as a banquet hall in January. “It was supposed to be something small,” he joked. “But now it’s turned into something big.”

Running a restaurant in Manhattan is a “nightmare” with inspections from fire, building and health officials, and, of course, high rents, Amberson said. About a decade ago, when he closed his business at Ninth Avenue and 34th Street, his rent was about $15,000 a month for a total of about 6,000 square feet of space on two levels.

Now, Metropolitan Avenue has become a new destination for diners in the neighborhood, as it doesn’t have the traffic and parking issues that Austin Street faces,
he said.

However, the local restaurant revival may not make the guidebooks just yet.
The “Forest Hills restaurant phenomenon is a local Forest Hills phenomenon … no one’s driving in from Long Island to eat in Forest Hills restaurants,” Maltz said.

“Bobby Flay is not opening up a restaurant in the neighborhood.” 

At first glance, there’s little evidence — among the body shops, industrial buildings and taco joints — of a thriving arts community in Bushwick.

But thanks to the abundance of empty warehouses and cheap rents, in the last few years hundreds of workspaces and dozens of tiny galleries have opened shop in Bushwick.

“The migration of galleries has definitely spread out toward Bushwick,” said Mandy Kalajain, 26, executive director of the Williamsburg Gallery Association. While the scene hasn’t reached the critical mass of Chelsea, where roughly 200 galleries crowd together, she estimated more than 40 galleries are presently open in Williamsburg, Greenpoint and Bushwick.

The part of Bushwick seeing the most rental activity by arts-related enterprises is focused around the Morgan Avenue subway station. Although some residents said the area can be unsafe after dark, incidences of muggings are going down as foot traffic by gallery-goers increases. The increase in visitors has led to a blossoming of the retail and restaurant scene, too.

“The new Williamsburg, the new Bedford Avenue, is Wyckoff between Jefferson and Dekalb … I have a list of literally over 100 buildings being built, or converted, in that area right now,” said Seth Lambert, a broker with Sunrise Realty who specializes in live-work loft spaces.

Perhaps the biggest factor in the area’s resurgence has been its low cost of living. Shared loft space in Bushwick is still relatively cheap, usually going for between $600 and $900 per person per month. Such spaces are usually about 1,500 square feet, but can vary in size. They are generally easy to transform into performance or gallery space.

Similar space in Williamsburg generally costs three to four times as much.

Residents said many of the large warehouse spaces have been turned into quasi-artists’ communes. “Artists are everywhere here. There are probably a shitload of people living in all of these warehouses, just nobody sees them,” said Adam Torio, who goes by Ad Deville.

Deville and Alison Haag are emblematic of many of the artsy newcomers to Bushwick. The couple moved to the area after getting evicted from their $2,000 a month Lower East Side apartment. In June, they opened the neighborhood’s newest gallery, Factory Fresh, by spending $750,000 to buy and renovate a corner space on Flushing Avenue that locals said was most recently used as an illegal pool hall and speakeasy.

“This is very similar to how [the Lower East Side] was in the beginning. Bushwick has that beauty to it right now. I just hope it can keep that because the Lower East Side lost it,” said Haag.

Several young entrepreneurs have turned warehouse floors in Bushwick into places where artists can rent inexpensive studio space and equipment, and where parties are held.

One such place is 3rd Ward on Morgan Street, which opened in 2006, and gives members unlimited access to its photo and sound studios, wood- and metal-working shop, multimedia lab and classes — all for $300 a month. Jason Goodman, the executive director of 3rd Ward, said his space has 300 members and a wait list for private studio space and desks.

The space also subsidizes its activities by reinvesting the proceeds from the 2,000-person Halloween parties that it throws each year.

Many artists find that they can subsidize their lifestyles by leasing large spaces, which they then sublease to other artists.

“We have studio spaces here. That’s how we pay the rent,” said Chris Harding, founder of the English Kills gallery on Flushing. “Everybody subsidizes.”

Ray Cross and Garrison Buxton, former Pratt students who founded the Ad Hoc gallery, signed a lease in 2004 for only a portion of the Bogart Street space they currently occupy. Back then, they used the small space as a printmaking studio. Over the next two years they leased more ground-level space in the same warehouse, which they subleased to other artists.

Despite their efforts, Cross said their gallery only broke even last year. But the hiring of a savvy curator, as well as the increasing popularity of street art, has brought them unexpected success more recently.

Three weeks into one of Ad Hoc’s most recent shows, Poets of the Paste, the gallery sold $69,950 worth of art. The pieces were priced between $400 and $8,000, and were created by neighborhood artists.

“[We've come] a long way from the days of selling $2 Pabst Blue Ribbons at parties to make the rent,” Cross said. 

Neighborhood newbies are altering the retail complexion of the Flatiron District.

More than a half-dozen store vacancies pepper Broadway’s home furnishings strip. Now, as fashion retailers such as True Religion set up shop on the avenue, the area’s identity is in flux.

At the same time, signs exist that the area’s fashion corridor, Fifth Avenue, is having a midlife crisis.  

Leases are coming due on several stores there, including Club Monaco, Victoria’s Secret, Anthropologie and Nine West. While prices on Fifth Avenue remain steep, brokers said rent hikes could spark defections and push rents downward for the whole strip between 14th and 23rd streets.

For the moment, the huge pedestrian traffic that Union Square generates is having a halo effect on the Flatiron District to the north on Broadway, brokers said.

“Some people think [Broadway] has taken over Fifth Avenue as the pedestrian boulevard,” noted Ben Fox, president of Winick Realty Group.  

And unlike the Meatpacking District or Soho, “it’s not tourist shopping, it’s people who live in the neighborhood that are shopping,” he said.

Fox is handling two vacancies in the area: 865 Broadway, between 17th and 18th streets, and 893 Broadway, between 19th and 20th streets.

Brokers said that prices range between $200 and $300 per square foot in the Flatiron district along Broadway. These prices have remained relatively stable, although there is a threat that they may soften.

Premium denim merchant True Religion just recently opened at 863 Broadway, between 17th and 18th streets. Right next door at 861 Broadway, Steve Madden opened in the former Caesar’s Pizza shop, and G-Star Raw, the edgy denim retailer, opened at 873 Broadway.

These are the latest retailers to edge in on what has traditionally been home furnishings turf, and others could be on the way. The available retail space on Broadway between 17th and 23rd streets includes 900 and 936 Broadway, spots formerly occupied by Bombay Company and Domain, respectively.

“There’s been a transformation from home furnishings to fashion,” said Mark Finkelstein, president of Retail Strategies. “There’s been a steady decline of home furnishings retailers on that strip.”

He cited 901 Broadway at 20th Street, where the Villeroy & Boch tabletop shop closed, as one of several home goods departures.

Last fall, Miss Sixty, the edgy Italian sportswear chain, took over the space.

The reason for the defections by home-furnishing stores? Rising rents. Analysts say these types of stores generally generate lower margins than apparel stores do, and so they are getting priced out of the area (see Home stores packing it up).

Furthermore, the home-furnishing industry has been hurt by the national housing crisis; Domain and Bombay recently went bankrupt.

At the same time, fashion tenants now view Broadway as a less expensive alternative to Fifth Avenue, where asking rents can run as high as $450 a square foot.

Both the Bombay and the Domain locations have been scouted by home-furnishing chains, which have passed on leases because of the costs. Williams-Sonoma eyed the location vacated by Bombay but ultimately turned it down, said Finkelstein, the retailer’s broker.

Home furnishing retailers Between the Sheets, Natuzzi and Kalaty Carpet scouted the Domain location but got sticker shock and couldn’t cough up the asking rent of $200 per square foot, said Mark Kapnick, managing director of Robert K. Futterman & Associates, the firm handling the lease.

Brokers said that instead, they expect some of Fifth Avenue’s fashion fixtures to move a block over to Broadway.

Indeed, fashion tenants from Fifth Avenue seeking to “downsize” their space by moving east are actively eyeing vacant spots along Broadway. Possible jumpers include Club Monaco, whose asking rent at its 160 Fifth Avenue store at 21st Street is double that of on Broadway and whose lease is up next year.

“As leases are coming due, there will be some measure of musical chairs” among retailers in the Flatiron District, Kapnick said.

Presently, asking rents on Fifth Avenue range from $400 to $450 a square foot. In this recessionary climate, retailers are balking at those prices.

“On Fifth Avenue, middle age has set in,” Fox said. “The feeding frenzy, where retailers would pay anything to secure space, has stopped,”  added Robin Abrams, executive  vice president of the Lansco Group.  

Brokers say landlords have been slow to adjust to the changed market on Fifth Avenue. “In certain ‘A’ locations [on Fifth Avenue], the landlords haven’t budged on their asking rents,” Finkelstein said.

The Club Monaco site at 160 Fifth Avenue was put on the market last year at $400 a square foot for the ground floor space. When the space was leased about 15 years ago, asking rents in the area were about $85 per square foot.   

The landlord’s unrealistic rent expectation could be why Club Monaco has yet to renew the lease, Abrams said.  

“Landlords have some lofty rent expectations on Fifth Avenue, [but retailers] are becoming more cautious about their bottom line,” Kapnick said.  

Not all Fifth Ave landlords are obstinate.

The Lansco Group recently brokered the retail lease at 73 Fifth Avenue for 7 For All Mankind, the high-end denim merchant.

The asking rent on that space was $300 per square foot, below the average price on the strip.

The deal was reportedly done at $250 per square foot, a far cry from the $400-plus asking rents on the avenue, sources estimated. The landlord was more concerned with securing a financially stable tenant than merely the highest bidder, Abrams said.

“I think you’ll see some new faces, and a small rent adjustment downward,” said Kapnick. 

Thought the Hamptons rental season was over? Think again. Brokers on
the East End are seeing a curious new phenomenon this year. With the
economy spiraling downward and Wall Street teetering on the edge, more
Hamptons homeowners are looking to supplement their finances by renting
out their houses during the winter months. [more]

One source of their funds has been the resale of tax credits, including many that they sold to big financial institutions. But now that the financial institutions are dealing with their own dire problems, the demand for those credits is shrinking.

Last year, for instance, Freddie Mac, which was just bailed out by the federal government, purchased $450 million of low-income housing tax credits nationwide. The company’s highly publicized losses this year, however, have driven it to a wait-and-see attitude toward buying more credits, spokesperson Eileen Fitzpatrick said.

“It doesn’t look like we’re going to need very many this year, if any,” Fitzpatrick said.

Financial institutions “have a ton of losses that they’re already writing off, so they don’t need the tax credit,” added Dan Moritz, a principal at the Arker Companies, a developer of low-income housing that uses the credits. “So that’s eliminated a huge source of the buyers of tax credits.”

As supply of the credits increases and demand falls, prices of the credits continue to sink. As recently as three years ago, the tax credits were getting snatched up for as much as $1.07 on the dollar. Nowadays, some credits are pricing in the mid-80 cent range.

Even before the government bailout of Fannie Mae and Freddie Mac, the mortgage giants — and other financial institutions — had pulled back from buying the credits in the face of lower tax liabilities caused by lower profits. Developers, in turn, have been scrambling to find ways to plug financing gaps in projects that would have worked a year ago.

“Fannie and Freddie were a pretty large segment of the market. That’s a huge chunk of capital to replace,” said William Traylor, president of Richman Housing Resources, a syndicator of the credits.

Freddie’s withdrawal alone represented a significant chunk.

“In some ways, it’s a correction,” said Tony Lyons, vice president and regional director for the northeast for National Equity Fund, a syndicator.

“A year ago, there was a high demand for these credits because a lot of investors were very profitable, and they needed to offset their taxes — this was a pretty sought-after investment,” he noted.  “[Then] the returns got pretty low, and they were probably not sustainable at that level.”

Since the federal low-income housing tax credit program began in 1987, it has helped finance new construction or rehabilitation of 2 million rental units nationwide, according to a report released this year by the U.S. Treasury.

But as the market for the credits slows, housing developers who depend on the credits are realizing that projects that would have worked financially a year ago may now need extra money, especially in the face of rising construction costs.

“We’ve been looking for other ways to fill the gap, such as building more green buildings and going to [the New York State Energy Research and Development Authority] to get financing from them,” Moritz of Arker Companies said. “This causes us to have to become a bit more creative.”

The federal tax credits come in two flavors based on the tax savings that they generate. Those savings are calculated as a percentage of certain eligible costs and determined by a formula.

Developers in New York can apply to the state Division of Housing and Community Renewal or to the New York City Department of Housing Preservation and Development for so-called “9 percent” tax credits. These credits are allocated to each state on a per capita basis, and are meant to serve the low-income residents in locations that have high poverty rates.

The other option is for so-called “4 percent” tax credits, which are given to eligible projects on an “as of right” basis whenever tax-exempt bond financing is used. That applies to cases such as 80/20 deals financed by the New York State Housing Finance Agency or affordable housing using one of the New York City Housing Development Corporation’s programs — provided the bonds finance more than 50 percent of the cost of the low income housing.

Regardless of the type of credit, typically a developer will sell them to a syndicator, who will re-sell them to investors (developers do also have the option of using the credits themselves). The investors end up with an ownership interest in the development, which allows them to claim passive losses like depreciation and interest expenses.

The syndicators — firms like Richman or National Equity Fund — aggregate capital and serve as intermediaries between developers and investors. But they also go a step further than brokers because they manage the investments and make sure that the projects are in compliance. That service is essential, because if a project is out of compliance during the time that the investor holds the tax credits, the IRS can recapture some tax benefits.

The equity that the investors contribute allows the developer to need less debt financing, which in turn lowers debt service to a level that lower rent rolls can support.

The investors must commit for 15 years, but the tax benefits can be accelerated so that the investor can get them over 10 years. After the 15-year period has ended, the investors generally exit the transaction.

Currently, with the prices of tax credits falling, yields are rising. “The investors that are left are getting a much better return,” National Equity Fund’s Lyons said. “It’s almost to the point where some of the non-financial institutions are going to start to be attracted back into the market.”

Another plus for buyers is that under the Housing and Economic Recovery Act of 2008, the tax credits now affect alternative minimum tax liabilities in addition to ordinary tax liabilities. This means that corporations subject to AMT can reduce their tax liabilities by buying these credits.

And, the new law helped developers in another way by making more tax credits available so that projects could generate greater equity by selling more credits, even at a lower price.

“That’s a very helpful provision, making a credit more useful to a broader range of investors potentially,” said Traylor of Richman Housing Resources. “We will see new investors coming into the market —  as yields go up, we are seeing interest from other sectors … It’s just hard to tell how much it will be, how much new capital will be coming in and whether it will be anywhere near what would replace those investors who had left the market.”

Bloomberg orders budget cuts after Wall Street losses
Mayor Michael Bloomberg said last month that the city’s budget would have to be cut in some areas to compensate for lost revenue from the collapse of AIG, the Lehman Brothers bankruptcy filing and the ongoing turmoil on Wall Street. Bloomberg ordered such city agencies as the Police Department and the Department of Education to cut spending by a total of $500 million this year and $1 billion in 2009, the New York Times reported. The fallout on Wall Street is expected to drive up the city’s office vacancy rate, lower asking rents and result in more job cuts.

Report says Yankee Stadium deal unfair to taxpayers
The new Yankee Stadium received up to $850 million in taxpayer investments, but will create only 15 permanent jobs, according to Assemblyman Richard Brodsky’s recently released 30-page report, “House That You Built.” The report said the city’s Industrial Development Agency may have violated the law by creating massive amounts of public debt and failing to assure public benefits from the investment. The Yankees got $336 million from the city and state and up to $500 million in interest savings on IRS-approved tax-exempt bonds, the New York Daily News reported.

Brooklyn mortgage firm owner admits to stealing $44M from Fannie Mae
A former owner of a Brooklyn mortgage firm admitted to stealing $44 million from Fannie Mae between 1994 and 2004, the New York Post reported. Leib Pinter, 64, pleaded guilty to conspiracy to commit wire fraud and will face a 10-year sentence when he returns to Brooklyn federal court later this year. Pinter was the owner of Olympia Mortgage Corp. and admitted to pocketing the proceeds from 257 mortgages that his company serviced for Fannie Mae.

State may have known of shady past for Deutsche Bank demo company
State development officials may have known about the John Galt Corporation’s shady past when it hired Galt to tear down the Deutsche Bank building in 2006. The building was, of course, the site of a blaze that killed two firefighters. Some of Galt’s top executives had worked for another company, called the Safeway Environmental Corporation, which had a history of problems with the city’s Department of Investigation, including integrity, competence and financial issues. City investigators accused development officials of knowing about Galt’s questionable ties before hiring the company to demolish the Deutsche Bank building, the Times reported.

Contractors at crane accident get fines
The Occupational Safety and Health Administration, a federal agency, fined three contractors a total of $313,500 for violations at the site of the 19-story tower crane collapse at 303 East 51st Street in May that killed seven people, the Post reported. The charges include failure to properly train employees about job-site hazards, failure to provide protection to stop workers from falling and failure to comply with the crane manufacturer’s specifications when erecting the crane.

Rangel speaks on missed taxes
In explanation of his failure to pay taxes on the rental income of a resort villa in the Dominican Republic, U.S. Representative Charles Rangel said cultural and linguistic barriers made it difficult for him to ascertain the financial details from resort managers. Rangel said he would repay several thousand dollars he owes for his failure to report the $75,000 rental income, the Times reported. Rangel, who is chairman of the tax-writing House Ways and Means Committee, also came under scrutiny for allegedly lobbying the Internal Revenue Service on behalf of the New York Yankees for tax breaks that would save the team up to $66 million on the construction of its new stadium, according to the Daily News.  

Compiled by Linden Lim

Improbable as it sounds at a time when American homeowners have lost billions in equity holdings, a new industry is taking shape to help them tap portions of their equity wealth without incurring traditional mortgage debt or making interest payments.

Three companies with sophisticated capital market backers — REX & Co., Equity Key and Grander Financial — are offering cash to owners who agree to cut them into some of the future appreciation growth of their properties.

The cash typically represents a fraction of the current market value of the home and rises with the percentage of future appreciation the owner is willing to share.

For example, San Francisco-based REX offers $70,000 cash to the owner of a $900,000 house who is willing to share 30 percent of future appreciation. That rises to $117,000 in exchange for a 50 percent share. Existing equity in the home — and future value growth attributable to capital improvements — are not affected by the deal. There are no interest rates or monthly payments, and the timing of the end of the agreement usually is up to the property owner.

Unlike a reverse mortgage, where interest charges accrue and are added to the total debt that must eventually be repaid, all of REX’s receivables are tied to the future growth — or decline — in the value of the real estate. If values go down, REX takes a loss equal to the percentage of the value change it shared in the agreement. If values remain flat, the homeowner repays the amount of the original cash extended by REX.

But if values grow steadily or even boom, the company’s returns have the potential to soar. REX, which says it is now writing agreements in 13 states, is backed by American International Group (AIG), which was just bailed out by the federal government to the tune of $85 billion, and the Royal Bank of Scotland’s Connecticut-based Greenwich Capital Markets subsidiary.

Tjarko Leifer, REX managing director, said, “We see ourselves at the beginning of a much larger industry” that is focused on providing products to efficiently tap the $9 trillion of net equity held by homeowners. Unlike reverse mortgages, which usually are restricted to seniors 62 or older and often entail significant fees, REX has no minimum age limit and relatively modest transaction fees. Participants must have a minimum 25 percent equity stake, however — their total mortgage debt cannot exceed 75 percent of the home’s market value.

The company’s typical clients, Liefer said, are “56-year-old baby boomers” with a 50 percent equity stake in their homes. They’ve built up equity over the years — even in the face of the housing market downturn — and “want to protect what they’ve already got.” But they also “want to take some chips off the table” for investments, personal expenditures or to acquire additional property.

Competitor Equity Key offers similar cash payouts in exchange for
shares of future appreciation, but has an age minimum of 65. Based in San Diego, Equity Key is a subsidiary of KBC Bank N.V., a $450 billion asset
financial institution based in Belgium.

The third player in the market, Grander Financial, is headed by mortgage industry entrepreneur Anthony Hsieh, who founded and sold two major home loan companies, including LoansDirect.com, which became E-Trade Mortgage, and Home Loan Center, which merged into LendingTree LLC. His goal with Grander, he said, is “to create a geographically diverse” portfolio of investments tied to equity movements on homes across the country that will deliver at least moderate average growth rates over the coming years, even if some regional markets go soft.

Under Grander’s “My Equity Freedom” program, the owner of a $500,000 house can receive an immediate $71,429 lump-sum payment in exchange for agreeing to share 50 percent of future appreciation. The owners of a $1 million house could get $142,857 in cash up front for sharing half of their future appreciation.

What’s in the fine print of these cash-for-appreciation deals and why are they not for everybody? Number one: All of the programs to date are highly targeted toward specific property types. For example, REX does not allow condos, duplexes, townhouses, rental real estate, tenants-in-common dwellings, or houses that are not single-family, detached dwellings that are “typical” for their area. Second: Although sponsors bend over backward to emphasize that these are not “mortgage debt,” the fact is that they are real estate financings that give sponsors the legal right to a portion of an owner’s future market value. At the extreme, owners who take the money but do not abide by the contract agreements can face legal remedies ranging all the way to foreclosure.

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

Whether you see it as an exorbitant taxpayer bailout of Wall Street and the banks — or you’re cheering from the sidelines — you can agree: The new federal moves to rescue the mortgage system could have huge impacts on individual consumers in the months ahead.

The $700 billion plan, whose chief architect is Treasury Secretary Henry Paulson Jr., is massive in scope and will inevitably mean higher taxes somewhere down the line.

On the other hand, Paulson argued persuasively to Congress last month that the costs of not acting — and allowing the global financial system to unravel day by day — would ultimately cost taxpayers much more.

The jury will be out on that issue for years. But for consumers — especially those looking for a new mortgage or who are deep in trouble on their current house payments — the plan could have more immediate, life-changing effects. Here’s why.

A key part of the Treasury’s plan requires no approval from Congress — pumping billions of dollars of fresh capital into the home loan market through purchases of mortgage-backed securities.

Fannie Mae and Freddie Mac, now under conservatorship by the federal government, also have been directed to accelerate their investments in mortgage securities. The net effect should be to supply additional dollars for homebuyers and refinancers and to keep a damper on interest rates. So far, so good: Rates for 30-year fixed-rate loans are under 6 percent.

A second key impact of the rescue plan addresses the dire situations faced by an estimated 5 million homeowners who are now behind on their mortgage payments, and often own houses that are worth less than the principal balances owed on them.

The new government-controlled entity that will purchase portfolios of troubled mortgage assets from lenders and bond investors is likely to take a different approach than the private sector to delinquent borrowers. Rather than the slow, loan-by-loan modification efforts typical of banks — so-called “workouts” to lower rates, payments and even loan balances — the new government entity is likely to adopt a fix-the-problem-in-bulk approach advocated by the FDIC, the regulator and insurer of federally chartered banks.

The FDIC has decades of experience handling the acquired assets of failed banks, including, for example, the giant IndyMac Bank, which went under in July. IndyMac had 742,000 mortgages in its portfolio, 60,000 of which were 60 days delinquent or at some stage of foreclosure. One of the first actions the FDIC took after stepping in to pick up IndyMac’s pieces was to declare an immediate halt to all foreclosure actions, pending a portfolio-wide review.

The idea, according to FDIC Chairman Sheila Bair, was to whistle a timeout to “evaluate the problems and identify the best ways to maximize the value of the institution.” Simply pushing through scheduled foreclosures on the bank’s delinquent customers would not achieve that goal because foreclosures are extremely costly to lenders and catastrophic financially for borrowers.

A smarter strategy, according to Bair, was to work out better terms for as many borrowers as possible, turning unaffordable, delinquent mortgages into affordable loans at current income levels. The best way to do that in a large portfolio is not on a retail, loan-by-loan basis, she argued, but rather by using a “systematic” approach where all delinquent borrowers who fit pre-set criteria could automatically qualify for a modification of payment terms.

After an initial review of the 60,000 late borrowers in the IndyMac portfolio, the FDIC deemed roughly 40,000 customers eligible for the loan modification program. Modification terms include rate reductions, the lengthening of payback terms, rescheduling unpaid principal and interest, rate caps, and other techniques. In some cases, rates are reduced to 3 percent for five years, with increases of 1 percent a year until the note rate reaches a ceiling tied to current Freddie Mac 30-year rates.

Unlike private-sector servicers, the FDIC charges no fees for its modifications. In the two months since taking over IndyMac, according to Bair, more than 7,400 modification proposals have been sent to delinquent borrowers, and “thousands more” have received calls attempting to prevent “unnecessary foreclosures.”

That sort of wholesale remedial strategy — including a halt to potentially hundreds of thousands of foreclosures — is what likely awaits financially distressed homeowners when the new federal rescue program kicks in and acquires their mortgages.

Call it what you want. But if you’re one of those troubled borrowers, two words are likely to come to mind: Home saver.  

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

Fannie Mae, Freddie Mac, Merrill Lynch and Lehman Brothers may have dominated the financial headlines last month, but a little-noticed $28 million settlement between the Federal Trade Commission and what’s left of Bear Stearns symbolizes the housing-boom-era products — and practices — that started a lot of the trouble.

Once the fifth-largest investment bank on Wall Street, Bear Stearns was a major funding source for subprime and exotic mortgages — payment-option plans that allowed borrowers to buy expensive houses and run up their debts while making minimal monthly payments, “stated-income” mortgages that required no income or asset verifications, and a variety of other creative concepts. Bear’s subsidiary, EMC Mortgage, serviced hundreds of thousands of these mortgages and had a portfolio in excess of 475,000 loans in 2007, according to the FTC.

But the FTC’s Sept. 9 complaint and settlement alleged that EMC hit mortgage customers with unauthorized fees, misrepresented how much money they owed, harassed homeowners with debt-collection techniques including “property inspections” that were designed to get collectors into houses illegally, and failed to tell national credit reporting bureaus that borrowers were disputing derogatory reports about them from EMC.

Bear Stearns and EMC agreed to pay out the $28 million to consumers as part of the settlement and change its loan servicing procedures, but admitted no wrongdoing. JPMorgan Chase & Co., which acquired Bear and EMC as part of a federally assisted bailout on May 30, was not named in the settlement and had no comment about its terms.

The types of loans Bear Stearns and EMC made their specialty were the jet fuel of the boom, aimed at consumers who often couldn’t afford the houses they wanted and didn’t understand the payment changes and principal balance movements associated with the complex mortgage instruments they used.

Borrowers like these depended heavily upon their loan servicers to maintain accurate records and tell them what they owed and when it was due. Yet EMC, according to the FTC, acquired loan portfolios from lenders without performing proper due-diligence checks on the accuracy or completeness of the loan account files.

“Despite indications that loan data obtained from prior loan servicers … was likely inaccurate or unverified, EMC nonetheless used that data” to demand principal and interest payments and late fees from customers who didn’t actually owe what they were being charged, said the FTC’s complaint.

EMC sometimes made late-payment collection calls immediately after acquiring mortgages, according to the FTC, without having backup data to be certain of the facts. In the course of those collection efforts, EMC allegedly violated the Fair Debt Collection Practices Act by contacting homeowners with phone calls for debt amounts they didn’t necessarily owe, and even resorted to “false representations” to gain access to borrowers’ homes — sending out “property inspectors” who were actually debt collectors seeking to confront borrowers.

The FTC alleged that EMC violated the Fair Credit Reporting Act by sending delinquency and default reports to the national credit reporting bureaus without disclosing that borrowers were disputing EMC’s charges. Failure to report disputes can have serious negative impacts on consumers’ overall credit standings and affect their ability to obtain credit elsewhere.

EMC also allegedly imposed impermissible fees including late-payment and prepayment penalties, and $500 “loan modification” fees among others. They even charged new customers for property inspections when there was no information in loan files suggesting the house needed a physical examination, according to the FTC complaint.

Compounding the problems inherent in the high-risk, high-flying mortgage products of the boom years, a key aspect of the Bear Stearns-EMC case is data integrity. Every month millions of homeowners put their trust in companies they don’t really know — loan servicers working for the borrowers’ original lenders or companies who bought the servicing rights.

If successive servicers do not accurately keep track of borrowers’ loan balances, escrows and payment histories — or worse, as alleged by the FTC in this case, pile on improper charges and violate federal credit, truth in lending and debt collection law — consumers can find themselves in deep financial jams.

“People already have enough problems with their mortgages,” said Lucy Morris, a lead attorney for the FTC in the settlement, “so it’s all the more important that servicers take appropriate care in handling consumers’ billings and collections.”

That’s especially true when the consumers involved happen to be saddled with confusing loans they should never have been sold, stuck with houses that have plummeted in value and are sitting on a conveyer belt moving them closer to foreclosure every month.  

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

In the October issue, the article “Not so easy switching to rentals” referred to 924 Metropolitan in Williamsburg as a building that was originally planned as a condo and was now going rental. The Real Deal has since learned that the project’s developers had always planned on building a rental project.

The story “Limelight Shines on Candela Again” inaccurately referred to the address of Vornado’s condo conversion project. That location is known as 40 East 66th Street.

Turkish officals relax rules for foreign buyers
Demand from foreign buyers in Turkey has increased over the past five years, prompting the government to loosen restrictions on foreign purchases.

The Turkish government temporarily banned property sales to foreigners from April to July this summer as it debated whether to loosen restrictions on the amount of land foreigners were allowed to buy. The ban was removed when fears arose that the second-home market would start to decline.

However, new legislation for foreign buyers was created. The legislation allows individual foreigners to buy property as long as it does not exceed 10 percent of the area in a town’s local planning zone, giving foreigners more options to buy. Before the new law, individual foreigners could purchase land as long as it was 0.5 percent of the province’s total area.

When more foreigners started buying land in Turkey, the government saw that the demand was beneficial for the country’s economy, but decided that the deals had to be controlled, John Howell, senior partner at the U.K.-based International Law Partnership, told the International Herald Tribune.
   
About 70,000 foreigners bought property in Turkey over the past five years, making it one of the fastest-growing markets in the region, according to the Herald Tribune.

Sydney’s suburbs struggle
While Sydney’s beaches are packed with tourists and lined with multi-million dollar homes, the Australian city’s suburban housing market is suffering.

Inland, where the majority of the city’s population of 6 million lives, many are struggling with falling home prices and rises in the cost of living.

Sydney’s average monthly mortgage payment has risen more than 40 percent in the past five years, according to a study by the City Futures Research Center at the University of New South Wales.

In Sydney’s western suburbs, like Bankstown and Canterbury, residents are spending more than 40 percent of their income on mortgage payments, the study found, and home prices have fallen 20 to 50 percent since last year.

The chairman of Wizard Home Loans told the International Herald Tribune that nationwide, 1 million Australians are expected to be threatened with foreclosure by the end of the year.

Skyscrapers going up in low-rise Cambodian city
Several new developments in Phnom Penh, Cambodia will give the largely low-rise city a new skyline.

South Korean developer Yon Woo is building a 42-story luxury residential tower called Gold Tower 42. Units start at 1,647 square feet, and prices range from $460,000 to $1.6 million. The $240 million development is scheduled to be completed in 2011, and 60 percent of the units are already sold.

A 52-story mixed-use building called the International Finance Complex broke ground in June. The $1 billion complex will have offices, apartments and a small international school.

Two more projects adding to the skyline are the 33-story De Castle Royal Condominium and the 31-story River Palace 31.

The general manager at Cambodia’s Bonna Realty Group told the International Herald Tribune that he expects property prices in Phnom Penh to rise between 80 and 100 percent this year. Rental prices in the city have increased 20 to 40 percent over the past year.

Compiled by Jovana Rizzo

To win approval to redevelop the Hudson Yards, the Related Companies had to defeat a number of competing proposals from some of the city’s biggest development companies.

But the also-rans aren’t hurting for development opportunities. Compared to some projects these developers are working on in Asia, the Hudson Yards seems decidedly small-scale.

For instance, Tishman Speyer is pursuing Tellapur Integrated Township, a $2.6 billion project on 400 acres in Hyderabad, India, with over 20 million square feet of developed space. Another firm, Gale International, is undertaking a $35 billion, 100-million-square-foot mixed-use development in South Korea, 40 miles south of Seoul. Promotional materials call that project “the largest private development project ever undertaken anywhere in the world.”

Tishman and Gale are not the only New York-based developers working far from home. With development in New York City and across America slowing down because of the economy and the credit squeeze, many firms are turning their attention  toward Asia.

“We’re looking at a lot of the emerging world. That happens to be where [the growth] is located right now,” said Donald Trump Jr., whose firm has been pursuing projects in South Korea and Dubai for several years. “When India’s saying, ‘We’re really disappointed this year. We’re only going to have 7 percent growth,’ I’m thinking, ‘Are you kidding me? What America would do for 7 percent growth right now.’ “

Presently, Trump is scouting and negotiating projects in Bangkok, Phuket (in southern Thailand), Vietnam, China and India.

Of course, doing business in Asia has its challenges. To finance their mega-projects, American firms are drawing on capital from foreign banks, in the process exposing themselves to currency fluctuations and local regulations. Development executives said they’ve had to borrow carefully.

For its Korean project, where Gale and its partners are essentially building a 1,500-acre city on reclaimed land where 75,000 people will live and 300,000 will work, Taylor Whitman, vice president of business development for Gale International, said  his group has taken out four loans from a consortium of 12 Korean banks. The latest borrowing was $2.5 billion in December.

Elad Properties, on the other hand, used a lot of its existing equity along with “reasonable financing” for its two Singapore projects, which required investments of $2.2 billion and $450 million, respectively, said Miki Naftali, CEO and president of the company. He also said Elad has a trading room at its New York headquarters where a team of analysts work every day to hedge against currency fluctuations.

Working overseas also involves moving New York staff.

Trump believes the majority, perhaps as much as 75 percent, of his family firm’s new developments will be in the emerging world. “I see incredible growth there,” he said, adding that “there’s no question [we] will ultimately move very large numbers of people” to Asia, a number “definitely” measured in the hundreds.

Gale’s Whitman estimates that the vast majority of his firm’s full-time staff is already abroad. Gale has 40 people in Boston, 15 in New York and about 100 scattered between its two offices in South Korea, so that two-thirds of the firm’s staff is stationed halfway around the world. Some are Korean-Americans or other expatriates who relocated to Korea for this project; however, Whitman said most of Gale’s Korean staff members are local hires.

For his part, Naftali said about 20 percent of Elad’s manpower and assets are already deployed in Asia. He estimated that that figure might rise slightly.

“It’s not that we are moving our entire attention to Asia,” Naftali noted.

Besides Singapore, where Elad is building two luxury 38-story residential towers and a 1.6 million-square-foot mix of  office space, high-end hotels, retail and residential apartments, the firm is building  3,500 residential units in the city of Jinan,  north of Beijing. Unlike many developments by New York firms, which target high  earners, that project is aimed at middle-class buyers.

Like most American developers in Asia, Elad is undertaking these developments through a joint venture with foreign partners. Teaming up with local development players isn’t just a savvy way of navigating local mores. In some countries (India and South Korea, for instance), the law essentially requires many types of foreign  companies doing business here to have a local partner.

“The government has to be 100 percent behind it,” noted Whitman, referring to Gale’s project in Songdo, South Korea. “There’s so much red tape with a single building; imagine 120 buildings.”

Still, as large as these projects may be, many market watchers consider the
approach of American firms into Asia to be cautious. “We’ve been seeing U.S. developers come and scout the Indian market over the last 24 to 36 months,” said Manish Kashyap, managing director of transaction services for CB Richard Ellis India. “[But] we’ve seen only a couple of them commit themselves to actual projects in India.”

Still, Kashyap and others believe that
it’s only a matter of time before more North American developers break Indian ground.

“We do need them to come and improve the depth of the market and improve the quality of the product,” he said. “Everyone sees the American, the Singaporean, and the European international developers produce a product that is superior to most Indian developers. [They] will lift the rest of the market.” 

As I write this month’s note, the market appears to be on the brink of catastrophe after the defeat of the government’s bailout plan. Proponents of the rescue plan warn of dire consequences for Wall Street if the government fails to act.

But what about the impact on our industry, which is so closely tied to today’s economic crisis?

 To make sense of what the deteriorating conditions mean for New York City real estate, this month, we bring you an in-depth look at what’s happening on Wall Street and in the political arena from a real estate perspective, with an eye on key sectors of the commercial and residential markets. On the residential side, we look at the climate for high-end sales and for affordable rentals. On the commercial side, we examine office leasing, building sales, hotels and retail as well as what’s going on in the mortgage industry. Through detailed reports and analysis, we offer information you won’t get anywhere else.

This month, we also profile Broadway Partners, led by CEO Scott Lawlor, which may be going down the same path as Harry Macklowe, with similarly gutsy moves that now read more like a cautionary tale. After coming out of nowhere to become one of the biggest building buyers during the boom, today, Broadway Partners owes more money on some of its trophy purchases than the buildings are worth.

Other stories include a look at which developers are buying into their own projects, why some brokers are pulling properties from the market and the difference between what Macklowe’s buildings sold for and what he paid for them. We’re talking about a 15 percent discount off what he paid, which perhaps doesn’t seem too terrible for what were essentially distressed assets.

Finally, we bring you excerpts from The Real Deal’s annual forum, a terrific success where nearly 3,000 people jammed into Lincoln Center to network and to hear our high-profile panel, which included Larry Silverstein, Charles Kushner, Barbara Corcoran and other notables offering their insights on New York real estate. I would like to thank everyone who participated in making this year’s forum so wonderful and extend a warm thanks to all of those who attended. As I promised before the event, I am sure you are now smarter than anyone who was not there.

Speaking of being smart: I know some people are panicking as though the world is ending, but this is really just part of the cycle. What goes up usually comes down. While there aren’t many developers sketching out projects on the drawing board right now and thinking about a 2010 or 2011 delivery date, this may be a strategy for a select few who recognize there will be fewer units on the market in the years to come. They will presumably do well because of the lack of competition. The Dursts, for example, like to start their projects during recessions because by the time they are done, the market is on an upswing again, which was the case with 4 Times Square (the Condé Nast Building), finished in 1999.

Now is not the time for posturing. Now is the time to get things done — in Congress, on Wall Street and on Main Street. In his blog, appraiser Jonathan Miller cited Fed chief Ben Bernanke’s recent comment: “There are no atheists in foxholes and no ideologues in financial crises.”

Let’s hope Bernanke is right.

Enjoy the issue.

Amir Korangy

Century 21 agency merges with RE/MAX
Four Century 21 Calabrese offices and two RE/MAX offices have merged to create a 150-agent firm, RE/MAX Metro, in Brooklyn and Staten Island. RE/MAX Metro will be comprised of about 100 agents from Century 21 Calabrese and about 50 agents from RE/MAX Professionals and RE/MAX First Choice Realty. RE/MAX Metro’s management team will include Sal and Michael Calabrese as well as veteran RE/MAX broker-owners Joe Madaio of RE/MAX First Choice and Frank Pennacchi of RE/MAX Professionals. The firms said they hope the consolidation will allow them to increase their share of the Brooklyn and Staten Island markets.

Ex-Massey Knakal partners rejoin
A former Massey Knakal executive, Brian Leary, and a retired Bear Stearns senior managing director, James Lang, have announced their partnership with former Massey Knakal COO and partner Timothy King in his recently launched commercial brokerage CPEX Real Estate. King — who sued Massey Knakal in June and is slated to be in court with the firm this month — and Leary will oversee the firm’s business services divisions. Lang will oversee the firm’s operations, sales support, administration and business development. The company’s headquarters will be at 32 Court Street in Brooklyn.

Toronto firm acquires stake in GVA Williams
A Toronto-based real estate services company bought a 65 percent interest in brokerage firm GVA Williams. The company, FirstService Corp., a majority owner of Colliers International, will rebrand the new arm Williams Real Estate and make it the center of its New York operation. The deal was expected to close by the end of September.

GFI, Carlyle to purchase distressed properties
GFI Capital Resources Group, a New York-based diversified real estate firm, has entered into a joint venture agreement with the Carlyle Group to purchase $1.2 billion worth of distressed residential apartment buildings in several states. The partnership will leverage $300 million in cash to acquire about 30,000 apartments in New York and elsewhere, Crain’s reported. GFI, which currently owns 20,000 apartments in five states, plans to take advantage of the down market to purchase buildings at discounted rates.  

Compiled by Linden Lim

Former REBNY rookie of the year Tim Melzer is keeping his senior vice president title but changing firms.

Melzer moved from Prudential Douglas Elliman to the Corcoran Group and brought his team of brokers at Elliman, Jonathan Diaz and Tony Testa, with him.

He isn’t wasting time hyping his new firm.

“One of the many reasons I switched was to address many of my sellers’ concerns about being part of Corcoran’s superior Web site,” Melzer said.

And as for his team, “Tony made the move to take advantage of Corcoran’s resources to better his agent-client relationships. Jonathan was just happy to get free in-office massages and Snapple drinks,” Melzer said with tongue firmly in cheek.

Melzer, Testa and Diaz will be getting their Snapples and massages in Soho, working out of Corcoran’s office at 490 Broadway.

“My plan is to be on the long list of top selling brokers at the Corcoran Group,” Melzer said. Melzer has been in real estate for eight years and was awarded the Real Estate Board of New York’s rookie of the year award in 2003.

One of Melzer’s first orders of business at Corcoran was putting his own property on the market. Melzer moved from 136 West 17th Street to 101 Warren Street this year and is selling his duplex Chelsea penthouse for $3.49 million. The apartment has two bedrooms and a private rooftop terrace.  

CORE Group Marketing has named Mark Ripka as its new chief operating officer. Ripka will be working with CORE CEO Shaun Osher to expand the company, including opening a new office in Chelsea.

“We’re poised for tremendous growth,” Ripka said. “Shaun and I are partnering together on strategic hiring and construction of a new flagship office in Chelsea.”

Before his move to CORE, Ripka was vice president at DPS Sporting Club Development Company, where he was responsible for developing and implementing the firm’s brokerage outreach strategy. He previously worked at Sotheby’s International Realty.

“I managed two brokerages for Sotheby’s and helped the company
build a brand-new office,” Ripka said. “You need to build the right infrastructure and right systems from the beginning to enable effective growth and lead the agents.”

Ripka will be overseeing 50 agents at CORE as well as the office’s day-to-day operations.

At Stribling & Associates, two senior executives are making moves that involve a homecoming of sorts.

Elizabeth Ann Kivlan, daughter of Stribling founder Elizabeth Stribling, will be the director of sales of Stribling’s two Downtown offices, and Kenneth Scheff will manage the Uptown office.
Scheff first came to Stribling in August 2003, and has served as the director of sales for the Chelsea and Tribeca offices. Now, he’s moving Uptown to oversee sales, and also experiencing a bit of a homecoming. Scheff was born on the Upper East Side, but moved to the suburbs at a young age.

He said his main priorities at the Uptown office, which is located at 924 Madison Avenue, are getting to know the 150 agents he is overseeing and to keep up the work of the former Uptown manager, Betsy Dean, who retired from Stribling after 18 years.

“Betsy was very, very loved,” Scheff said. “She was a mentor to me.”

Kivlan also had someone to look up to.

“I remember being four or five and my mother talking about co-brokering at the dinner table,” she said. “My mother started the company when I was just under a year old with just 12 brokers, and I was able to watch it grow.”

Kivlan has worked at the Downtown and Uptown offices, and was the team leader for the One
Brooklyn Bridge Park condo development marketed by Stribling.

“It’s lovely to come back Downtown where I started,” Kivlan said. “I want to really work side
by side with my brokers and continue the wonderful business.”

Kivlan’s real estate career started in San Francisco working at Pacific Union. Her two Downtown offices are located at 32 Avenue of the Americas and 340 West 23rd Street.  

Residential

Century 21 NY Metro
Fern Hamberger joined the company.

The Corcoran Group
Jeannie Woodbrey of Corcoran Sunshine Marketing Group was appointed
director of sales for 56 Leonard Street. Danika Dorsey joined as an
on-site sales associate for 56 Leonard Street.

Core Group Marketing
Fredrik Eklund was promoted to managing director from senior vice president.

Halstead Property
Anthony DeVivio joined the firm as director of sales for the Harlem office. He was previously with the Corcoran Group.

Commercial

Bloom Real Estate Group
Beth Weiss joined the company as director. She was formerly with Bergson Strategies.

CB Richard Ellis
Tom Duke joined the company’s retail group as vice president. He was
previously a senior managing director with the Lansco Corporation.

GFI Capital Resources Group
Jeffrey Granowitz joined the firm’s Manhattan office as director of
acquisitions. He was previously a principal with the Praedium Group.

GVA Williams
Howard Cross joined the firm’s tenant rep division. He was previously with CB Richard Ellis.

Jones Lang LaSalle
Cynthia Wasserberger and George Ladyman were promoted from senior vice
president to managing director. Wasserberger was previously a director
with Colliers ABR. Ladyman was previously a vice president with Time
Warner.

Marcus & Millichap
Marco Lala joined the firm as associate vice president of investments
in the Manhattan office. He was previously a partner with Massey
Knakal.

Massey Knakal
Kyle Mast was promoted to managing director of the Manhattan office. He
was formerly the interim sales manager. Daniel Doherty joined the firm
as an associate. John Jennings joined the sales support team as a
researcher.

Rosewood Realty Group
Jake Blattner joined the firm as senior associate. He was previously vice president at Eastern Union Commercial.

Savills
David Ruggiero and Guy Benn joined the firm as vice presidents.
Ruggiero was previously with Goldman Sachs’ investment banking division. Benn was previously with the company’s London office.

Studley
Ian Zilla was promoted to managing director from assistant director.
Paul Revson rejoined the firm after leaving in 2003. He was previously
a principal with the Staubach Company.

Compiled by Roland Li

Go to puzzle: Building on spec

Click here for solution

By Myles Mellor

Architect injured at Goldman site files lawsuit seeking damages

An architect paralyzed from the waist down after being crushed last December by falling building materials at the site of the rising Goldman Sachs headquarters accused the investment bank, Tishman Construction, a state entity and others of negligence, and is seeking an unspecified amount of money for damages, a lawsuit said.

The complaint was filed mid-September in Manhattan State Supreme Court, while Wall Street was rocked by financial turmoil that left Goldman and Morgan Stanley as the only two large independent investment banks standing in the United States.

In his lawsuit, architect Robert Woo said he was permanently injured both physically and emotionally because of the accident on Dec. 14, 2007, at the construction site of the 43-story office tower at 200 West Street at Vesey Street.

Goldman Sachs, now with main offices at 85 Broad Street, is building its 2.1 million-square-foot world
headquarters at the site in Battery Park City near Ground Zero.

Woo, 40, was working as an architect for Adamson Associates Architects at the site when seven tons of metal studs supported by a nylon sling fell, crashing into the trailer in which he was working. He charged that the sling failed due to damage and fraying.

The suit names as defendants the building owner, Goldman Sachs Headquarters; the project’s general contractor, Tishman Construction; the land owner, Battery Park City Authority; three construction contractors; and a safety consultant.

Tishman received four Department of Buildings violations, and the crane operator received one at the time of the accident.

Spokespeople for Goldman Sachs, Tishman and the authority said they did not comment on pending legal matters.

Woo suffered injuries, including trauma to his head and spinal cord, and is confined to a wheelchair for the rest of his life, his attorney, Ben Rubinowitz, said. Also, Woo cannot work as an architect, he added.

Woo’s wife is also named as a plaintiff because of the effect of his injuries on their relationship, the court papers said. They live in Manhattan with their two children.

The suit was brought so Woo could receive compensation for injuries, medical care and pain and suffering, Rubinowitz said. He would not specify the amount of money Woo is hoping for.  By Adam Pincus

Brokers target creative types for Sunset Park workspaces
A firm is pitching Dumbo-style workspaces in Sunset Park, hoping to draw creative professionals to the industrial section of the Brooklyn neighborhood.

Commercial brokerage CRES NYC is representing 11 fully renovated workspaces in Sunset Park’s Industry City, a sprawling industrial complex on 36th Street near the waterfront. The spaces range from 812 square feet to 2,598 square feet, and asking rents average $16 a foot.

Rents for similar spaces in Dumbo go for about $28 a foot, according to Chris Havens, CRES NYC chief executive.

“About eight years ago, Dumbo started to become a commercial area,” Havens said. “We’re delivering renovated, operational space, just like Two Trees does in Dumbo.”

The 11 spaces — more will eventually hit the market — are in a 6 million-square-foot complex owned by Industry City Associates, a partnership that includes Bruce Federman and the Schron and Fruchthandler families. The landlords have already turned thousands of square feet in the property into studio space for artists. By Gabby Warshawer

15 CPW unit flips for $18M
A pair of buyers named Gotham and Vicky Makker bought their second flipped 15 Central Park West condominium for $18.8 million, earning the latest seller $8.2 million for the three months he held the unit.

The Makkers closed on the purchase of unit 34A on Sept. 5 from Brian France, after going into contract on June 30, according to city records.

France closed on the unit June 17, records showed.

The Makkers bought their first unit, 28C, on March 3 for $13.3 million, nearly doubling seller Alex Guodong Li’s purchase price of $6.8 million.  By Adam Pincus

Barbara Corcoran buys $1.4M Bed-Stuy townhouse
Barbara Corcoran, founder of the Corcoran Group, recently closed on the purchase of a five-family limestone townhouse in Bedford-Stuyvesant for $1.46 million, she told The Real Deal.

The three-story building at 408 Stuyvesant Avenue near Fulton Street in the Stuyvesant Heights Historic District had seen a series of price cuts from a listing of $2.1 million in late 2006. The seller, named 593 Jefferson Ave. LLC, purchased the house in August 2005 for $499,500, according to city records.

It was not immediately clear what Corcoran, an author and real estate investor, was planning to do with the 4,000-square-foot building.

Corcoran has been investing in real estate in New York City and beyond since selling her company in 2001 for $70 million. In April, Corcoran and her husband paid $4 million for a condo in a converted townhouse in Lenox Hill.

The Daily News reported last year that Corcoran owned 12 properties in Manhattan, Brooklyn and the Bronx, in addition to an apartment in Manhattan, a beach house in Fire Island and a school house in Duchess County.

In 2005, Corcoran bought a three-story building, with two apartments and ground-floor commercial space, at 293 Van Brunt Street in Red Hook for $1.08 million. It took her two years and a series of rental price cuts before she leased the storefront.  By Adam Pincus

Oro closings to finally start
Oro Condominium, the Ismael Leyva-designed luxury tower in Downtown Brooklyn, recently sent out 30-day notices to buyers that it expects to begin closings at the long-awaited development.

Oro has been the subject of much speculation in recent months as anxious buyers have waited for word of a closing date on the controversial project, which critics have accused of being out of character with the public housing projects and low-density brownstones in nearby Fort Greene.

Prudential Douglas Elliman has sold about 45 percent of the 303 units in the 40-story building at 306 Gold Street, but many of those buyers signed contracts more than a year ago when the New York condominium market was still going strong. According to Streeteasy.com, Oro had 132 units for sale as of early September at prices ranging from $357,000 to $1.43 million.

Some buyers are openly questioning the value of their investment and whether they can even obtain financing.

Sam Heskel, executive vice president of HMS Associates, a Brooklyn-based appraisal service, said that buyers who have been in contract for more than a year may face financing difficulties, as banks have tightened the screws on new consumer financing. Heskel said a number of projects in Downtown Brooklyn have been converted from condo to rental, as sales have slowed considerably.

“People who bought with the intention of flipping will probably try to get their money back,” he said.

Oro officials said they expect to gain approval for the condominium plan from the attorney general’s office and then acquire a temporary certificate of occupancy from the city’s Department of Buildings.

“We’re hoping [to start closings] by the first couple of weeks of October,” said Matthew Faris, vice president at Greenfield Partners, the developer of Oro.

The project, which costs more than $150 million, is the tallest new construction project in Brooklyn, rising 40 stories. Greenfield, a South Norwalk, Conn.-based private equity fund and majority investor in the project, recently bought out the original developers, United Homes, led by Ron Herscho, and Palin Enterprises, run by Dean Palin. Faris said Greenfield was part of the original investment team.

The building, located steps away from the Manhattan Bridge, offers spectacular views of the island, and amenities include a swimming pool, residents’ lounge, screening room and a fitness center with racquetball and basketball courts.

Herscho is working on a site across the street at 313 Gold Street, which was originally planned as a sister property to the Oro tower at 306 Gold Street. Ken Fisher, a land-use attorney representing United Homes, said that groundbreaking on the hotel and apartment complex has been delayed because the developers are still working to secure financing.  By David Jones

Spence School and Luxembourg buy East Side mansions
The exclusive Spence School recently closed on a $27.5 million mansion adjacent to its building at 22 East 91st Street. Spence, a private college preparatory school for girls from kindergarten through 12th grade, bought the Wanamaker Munn House at 17 East 90th Street near Fifth Avenue from the estate of socialite Aimee de Heeren, who died in 2006.

The deal closed on Aug. 15, city records published last month showed. An official with the school said it had no comment on how the building would be used.

Meanwhile, the Grand Duchy of Luxembourg paid $17.5 million for a Beekman Place townhouse. Representatives of the small European country bought the 8,600-square-foot, five-story townhouse at 37 Beekman Place near 51st Street from an entity called 37 Beekman Place LLC.

The sale of the single-family home, built in 1890, closed on Aug. 22, according to city property records posted last month.  By Adam Pincus

Toll brother sells UES condo for $9M
Bruce Toll, vice chairman of Pennsylvania-based homebuilder Toll Brothers, sold a four-bedroom apartment at 15 East 69th Street near Fifth Avenue for $9.7 million.

Toll, who founded the firm with his brother Robert, closed on the sale to Azaleia Glen Holdings on Sept. 3, according to public records.

The 3,023-square-foot unit is in the Westbury, a 17-story condominium building with 47 units.

Bruce Toll, who stepped down as president and chief operating officer of the company in 1998, bought a $26.95 million home in Florida in 2005.

The firm has been hit hard by the credit crunch and slumping housing market, reporting a loss in its latest quarter.  
By Adam Pincus

Developer buys $8M penthouse in Flatiron District
Adam Rose, president of development firm Rose Associates and a member of the third generation of the Rose real estate family dynasty, paid $7.99 million for a penthouse apartment at 240 Park Avenue South. The sale of the apartment closed on Aug. 21, according to property records posted last month. A 52-unit project in the Flatiron District, 240 Park Avenue South was developed by Yitzchak Tessler and designed by Gwathmey Siegel and Associates.  By Adam Pincus

New York City shows foreclosure spike
New York City showed a 13 percent increase in foreclosures in August, compared to the previous month, according to a monthly report from PropertyShark.com.

New York was the only of four markets surveyed in the report — including Los Angeles, Miami and Seattle — that showed an increase over this period.

The change was brought on by a drastic increase in foreclosures in Queens, which outweighed improvements in the other four boroughs. Foreclosures in Queens increased 43 percent from July, to 254 homes, out of the city’s 383 foreclosures.

Meanwhile, Brooklyn showed a 29 percent decrease in foreclosures. Manhattan was down 21 percent, the Bronx was down 17 percent and Staten Island was down 9 percent.

Of the 15 New York City zip codes with the highest number of foreclosures in August, 14 of them were in Queens. The zip code with the most was 11433 — an area including parts of Jamaica, South Jamaica, Hollis and St. Albans — which had 19 new foreclosures during the month.

The average value of a home foreclosed on in New York in August was $485,000.  By James Kelly

Photographer buys $13M Tribeca penthouse
Photographer Albert Watson paid $13.15 million for a three-bedroom penthouse in the Edward Minskoff-developed 101
Warren Street in Tribeca.

The 4,518-square-foot condominium at the southeast corner of the building is the second largest in the 227-unit development. Watson’s apartment includes a 1,669-square-foot wraparound terrace.

The sale by the developers closed on Aug. 19, according to public records posted last month.

Watson made a handsome profit in February this year when he sold for $34 million a West Village building at 777 Washington Street that he bought for $850,000 as a live-work space in 1985.

The 227-unit, 35-floor tower in Tribeca is part of a 1 million-square-foot mixed-use development designed by architects Skidmore, Owings and Merrill.

Barnes & Noble, Bed Bath & Beyond and Whole Foods have signed retail leases at the building.

The apartment, called a “skyhome” by the developers, was listed for $16.3 million on the Corcoran Web site early last month.  By Adam Pincus

Going through the obituaries to find an apartment may seem like a quaint practice in New York City, where real estate advertisements are nearly impossible to escape. But for real estate brokers in a tough market, getting listings from death could be gaining ground.

Indeed, so-called “ambulance-chaser” lists, which include the name of the deceased, the executor and the estate lawyer’s name, may be poised to get more use in New York as the market turns and brokers look for leads wherever they can get them.

“Right now in this market, you have to be creative, and I think these types of lists might be used more now,” said Max Dobens, vice president at Prudential Douglas Elliman. “The brokers who are going to survive in this market are the ones who are resourceful.”

The methods for getting information about the deceased can vary. A New York trusts and estates lawyer, who asked not to be identified, said some firms probably send assistants to the Surrogate’s Court in Lower Manhattan to mine the database for potential listings.

According to information services at the Surrogate’s Court, the database provides all property holdings, the name of the deceased, their last-known address and the name of the executor of the estate.

But there’s also the more formal subscription-based Bernhardt Report, which has been around since 1973. The report provides its readers with a weekly list of new Surrogate’s Court entries without having to trek Downtown.

“My personal opinion is that people who use the Bernhardt Report will continue to use it, and it might get a bit more interest because people might have to dig deeper into the corners to do business,” said Jane Bayard, executive vice president at Warburg Realty, whose firm has been using the list for years.

Arthur Bernhardt, a retired court reporter who founded the report, sold the business two years ago, and it went from a daily to weekly listing.

Meanwhile, the above-mentioned trusts and estates lawyer said he is regularly contacted by brokers eager to help sell the estates he represents.

“Once orders are entered, wills are admitted to probate and an executor is listed, I get a boatload of solicitations,” the lawyer said. “It’s routine; it happens every time I open an estate.” He said so far, he hasn’t noticed any major uptick in those calls.

Some brokerages try to mitigate the nuisance factor of what are basically cold calls to lawyers about properties.

“We try to regulate the number of calls made to a listing in our office by having people initial a listing on the Bernhardt Report when they’ve called, so as not to be annoying,” said Bayard.

Barak Realty currently has the listing for William F. Buckley Jr.’s East 73rd Street apartment, which has an asking price of $24.5 million. Buckley, who is widely considered the patriarch of modern-day conservatism, died in February.

Barak Dunayer, president of the firm, said that the deal came about because of a previously existing relationship he had with Buckley. He said, however, that he was not Buckley’s broker before his death.

Speaking generally, Dunayer said brokers can benefit from their relationship with estate lawyers.  “Brokers are in touch with estate lawyers, and some lawyers pass on those leads,” he noted.

“We don’t actively do this at Barak, but at some brokerages, when a lead comes up for someone who just died, they give the lead to the broker who sold in the building or area before,” he said. “They give it to someone who has experience with that type of property, like a classic seven apartment.

“I know some people who simply look at the obits; it’s definitely done,” said Dunayer.

Michael Gross, author of “740 Park: The Story of  the World’s Richest Apartment Building,” said he knew of a broker who kept a list of all of the elderly widows in  the building.

“I think that the person who keeps a list of the living is far more macabre — waiting for someone to die as opposed to pecking at the corpse,” Gross said.

But some brokers, even those who personally knew the deceased, prefer not to take advantage of such a situation.

Angela Vita, who has run Vita Realty in Carroll Gardens, Brooklyn, for decades, said she and her colleagues often pass by neighborhood funeral homes and see the names of people they know listed outside.

“I’m not comfortable going to people who are in mourning,” Vita said. “I have never done it. We go in to pay our respects, and we tell the family to give themselves six months before they make any big decisions.”

Observant passersby at the corner of Greenwich and Laight streets in Tribeca will likely be doing double takes if a proposed project comes to fruition.

Last month, architect Morris Adjmi and a Spanish investment group, including Grupo Arranz Acinas, received unanimous approval from the city’s Landmarks Preservation Commission for a plan to tear down a graffiti-scarred parking garage at 412 Greenwich Street.

The planned replacement is a new, mixed-use building that replicates the dimensions and façade of
a refurbished warehouse next door.

Adjmi plans to create a “photographic negative” of the warehouse, where the old building’s brick façade will appear to duplicate or create a sort of carbon copy. The light parts of the original building will be dark on the proposed one, and dark parts will be light.

His plan calls for burnished, marine-grade aluminum in the new building to represent the negative image of the present building, down to the scratches in the brick.

The proposed complex will include 32 two- and three-bedroom apartments, ranging in size from 1,800 to 2,400 square feet, and is slated for completion within two years, if the approval process goes well, said Adjmi. Prices for the building have not yet been released.

The application still has to clear City Planning and the Board of Standards and Appeals before it gets the green light, Adjmi said.

A spokesperson for the landmarks commission, Elisabeth de Bourbon, said the body determined that the existing garage was “not representative of the … historic district’s special character.” She said the proposed building, which has cast-iron detail, preserves the character of the surrounding district.

While landmark rules require new buildings in a preservation area to conform to the neighborhood’s context, constructing exact duplicates of existing structures is rare, said Adjmi.

That is not to say that “twin” buildings are not common. For that, one can turn to the two towers at the Time Warner Center, or the two identical buildings that Larry Silverstein is erecting at Silver Tower on 42nd Street. However, duplicating an existing building falls into a different category.   

So why don’t architects copy buildings regularly? To replicate a building outright “would require an unusual sublimation of an architect’s ego,” Adjmi said.

He said he got the idea while walking around the
area surrounding the warehouse to seek inspiration. The
eureka moment came when he realized that the lot next to the warehouse was the exact same size.

A member of the local community board characterized the “mind-boggling” proposal as teetering “between genius and madness.”  

The Real Deal looks back at some of New York’s biggest real estate stories

1981: Record high mortgage rates stifle cooperative sales
The record high mortgage rates that peaked above 18 percent 27 years ago this month depressed sales of co-ops in the city, sales brokers said. The impact was felt most strongly among co-ops priced in the middle range at the time, between $90,000 and $250,000. The president of Darwood Management Company, which managed 40 co-op buildings at the time, reported that of the 50 sales it was working on that year, a quarter fell through.

“Many buyers have decided that it’s too expensive, and others can’t convince the bank to let them have [the money],” the company president told the New York Times.

Nationwide, annual housing sales hit a low in 1981; in the northeast they fell to 46,000 units. That was the lowest number on record from data that went back to 1963, accoring to the U.S. Census Bureau.

Anecdotal evidence from brokers illustrated the drop in volume. At the time, broker Brewster Ives of Douglas Elliman-Gibbons & Ives said the number of sales in the 200 buildings he worked in fell from 1,165 units four years earlier to 698 in 1981.

Hard data on co-op sales was not available in the 1980s and earlier.

Large banks such as Chase Manhattan Bank and Citibank also said applications for loans had declined that year.

1956: World’s first stainless-steel skyscraper opens
The Socony Mobil Building, the first high-rise office tower to be covered in a skin of stainless steel, opened 52 years ago this month near Grand Central Terminal. The 42-story tower occupying an entire block at 150 East 42nd Street between Lexington and Third avenues is covered with thousands of metal panels.

Although other skyscrapers such as the Chrysler Building have had skins of aluminum, no other significant building has been covered in stainless steel. In 2005 the Landmarks Preservation Commission designated the building a landmark.

Socony Mobil Oil Company moved to the  1.6 million-square-foot building 71 years after the Standard Oil Company of New York, its predecessor, first occupied 26 Broadway Downtown.

The 0.037-inch-thick panels stamped with a raised pattern were about one and a half times more expensive than brick, but the developers were friendly with the United States Steel Corporation, which covered the extra cost, the New York Times reported. The building was designed by architects Wallace Harrison and Max Abramovitz, who designed the United Nations and Avery Fisher Hall. The tower was developed by John Galbreath and Peter Ruffin on land owned by an old real estate family, the Goelets.

1921: $600M plan to extend Manhattan unveiled
Citing an effort to preserve the value of Downtown real estate, supporters announced a plan 87 years ago this month to develop a six-square-mile extension south of the Battery by filling in a swath of New York Bay.

Backers said there were no substantial engineering obstacles to the project that would be financed by private investments estimated at $600 million. Supporters, which included the president of the Real Estate Board of New York and the business group the Broadway Association, were concerned that Downtown was losing its office market value as companies migrated to Midtown.

“The ‘northward pull’ will render lower Manhattan a residential section within twenty years unless thoughtful people of vision join together to remedy the geographical defect,” Walter Russell, the president of the Manhattan Extension Inc., told the New York Times. “It would save land values from [severe] depreciation.” The creation of new land would increase the city’s land value by $5 billion, the group claimed.

The concept had been floated before, but it was not until 1921 that an advocacy corporation was created and the project presented formally to the governor and the Port of New York Authority.

Engineer H. L. Shadd threw cold water on the plan in 1922, noting Downtown developed less than half of its potential 4.5 million square feet. In 1926 a report said an advisory board of 100 men to advance the plan might soon be realized. The project appeared to have been quietly abandoned sometime later.

Rosario Candela came to America at the age of 19, knowing just a few words
of English. But within a decade, the Italian immigrant was designing some of
the most luxurious buildings Park Avenue had ever seen.

His quick rise from immigrant to famed architect left a permanent imprint on the city’s skyline — so much so that today, two of his buildings are again in the limelight. Limelight shines on Candela again” class=”read-more-link”>[more]