The Real Deal New York

The Real Deal looks at loan syndication and other ways real estate finance is
reacting to the squeeze on credit and the faltering mortgage market.
First, we investigate some of the macro issues facing the industry,
then we zero in on how these constraints are shaping deals in New York
City.
Figuring out a financial fiasco
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This month, The Real Deal offers a series of stories about
how buyers and sellers in the five boroughs and in the surrounding
suburbs are dealing with one another and with the new financial terrain
a little over a year into the crunch.
A look at buyers and sellers
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Mort Zuckerman, the perma-tanned media tycoon, his low-key partner Ed Linde and the other green eyeshades at Boston Properties watched placidly from the sidelines as moguls like Harry Macklowe and the folks over at Broadway Partners spent money like overindulged housewives with platinum cards.

Now, with some of the boom’s biggest buyers in dire financial straits, Zuckerman and his crew are on the offensive. [more]

For years there was a buzz about the potential of a residential
boom in the South Bronx, but with the credit crunch making it nearly
impossible for small-scale investors to obtain financing in the area,
any sort of explosion appears to be on hold. Local brokers said that while calls from potential homebuyers have
increased exponentially over the last few years, the neighborhood
they’ve dubbed SoBro still lacks an inventory of renovated properties
appealing to buyers seeking deals on the fringe.
South Bronx buzz fizzles” class=”read-more-link”>[more]

In New York City, the frozen credit markets and subprime fallout are beginning to take a toll on commercial activity.

Manhattan sales volume dropped by nearly 60 percent in the first half of 2008, compared to the same time last year. Meanwhile, as of the end of July, Manhattan leasing activity had fallen more than 10 percent compared to the same period last year. Gobbling up smaller firms
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Condo prices in Manhattan continue to edge up at the top end of the market, but in the outer boroughs it is a different story.

Prices have flattened in most areas; however, a look at the top 10 most expensive condos in the outer boroughs reveals some bright spots. Comments

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A survey of the market across the tri-state area shows that trading up is getting hard to do in some parts of the suburbs.

Sellers in the ‘burbs who are looking to move into a trade-up property (homes priced roughly in the high six- and low
seven-figure range) are finding that they’re unable to sell their starter homes. These perfectly qualified buyers are like climbers with gum on their shoes — unable to move up the housing ladder because they can’t get their equity out of their existing “starter” homes. They blame the starter buyers, who are finding it tough to get mortgages, deepening the slump from one segment of the market to the next, making trade-up homes perhaps the most recent sector to be impacted by the current economic crisis.

Elaine Demyen, a sales agent with Burgdorff Realtors in Westfield, NJ, said a slump is gripping trade-up homes in the Garden State because of the trouble buyers for starter homes are having obtaining mortgages. But in addition, she said, sellers of starter homes are pricing them too high and the properties are languishing on the market. Further complicating deals:
Buyers are putting more contingencies into contracts for high six- and low seven-figure homes.

Wall Street job losses and jobs migrating out of New Jersey are contributing to the “sluggish sales pace” for trade-up homes in that state, said Jeff Otteau, president of the Otteau Valuation Group and author of a New Jersey market report. Still, he said that the entire trade-up market has not slumped and that homes in the $600,000 to $800,000 range are selling in New Jersey.

Elizabeth Boscaino, a sales agent with Country Living Associates in Wilton, Conn., said homes in the high six- and low seven-figure range there, however, have been selling slower because her clients can’t unload their own homes fast enough. Buyers are having trouble scraping together down payments, leaving Bosciano’s clients unable to trade up to a higher-priced home.

On Long Island, Katy Anastasio of Anastasio Realtors in Huntingon said many buyers have been holding off on moving up to larger digs because they are having trouble selling their starter homes. Anastasio said homes from $600,000 to $800,000 are slow to sell, while homes priced from $1 to $2 million are selling easier on Long Island.

The difference here? Anastasio said buyers who are looking to spend over $1 million don’t necessarily have to wait to sell another home first.

In Westchester, Gil Mercurio, president of the Westchester County Board of Realtors, said that the county has seen a 28 percent decrease in sales in recent months, with the slump hitting all price ranges. Homes in the high six- and low seven-figure range have been the last to be hurt because this is “a stronger market,” he said. “The people with economic means are the last to be affected by the economy.”

Matt Vanacoro, a broker with Coldwell Banker in Croton-on-Hudson, said sales are going well in Westchester for high six-figure homes. He’s seen buyers who have been able to easily trade up to these homes or purchase from outside the region, thanks in part to some price reductions, making them easier to move.

Despite the anecdotal Fairfield County example above, in general, communities like the leafy Westchester ‘burbs, where the trade-up price range is considered closer to the median than the high end, are doing better.

According to Miller Samuel’s second-quarter report on Long Island for brokerage Prudential Douglas Elliman, which included data for Queens, sales were down 5.3 percent compared to the year-ago quarter. Suffolk’s median price decreased 0.6 percent, to $396,550. Prices, meanwhile, were flat in Nassau, with a second-quarter median price of $485,000, the same as last year.

However, Mark Laffey, the principal of Century 21 Laffey Associates on Long Island, said the tony North Shore has not seen a slump. While some properties have sold slower than expected, he has seen several properties come in over the asking price, including a Great Neck Estates home that sold for 2 percent over the $1.99 million asking price. He also noted that a home in Oyster Bay priced in the mid-$900,000 range sold quickly.

Demyen said there’s a trend in buyers looking to trade up to older homes and benefit from lower property taxes. She said a Victorian home in the high six-figure price range in Cranford sold quickly. That house sits around the corner from another listing, a 1980s home priced at $979,500, which has been on the market for over a year, despite several price cuts over that period.

While New York City’s suburbs have been spared the astronomical foreclosure rates that have hammered the rest of the country, some of the counties surrounding the five boroughs have seen serious spikes in the last year, changing the real estate landscape for both buyers and sellers.

In fact, Westchester Country — one of the wealthiest counties in the tri-state area and home to high-profile residents like Bill and Hillary Clinton — recorded one of the biggest foreclosure increases in the region. Well-to-do Fairfield County, Conn., saw a significant jump as well.

While those counties didn’t have as many actual homes in foreclosure as some of the other counties in the area, they led the pack in foreclosure increases. Between July 2007 and July 2008 (the most recent data on record), Westchester saw a 45 percent jump.

In 2007, there were 232 homes there going into foreclosure; a year later, there were 336 homes in foreclosure, according to
RealtyTrac.com.

Those who follow real estate in Westchester say the spike is connected to the many adjustable-rate mortgages that were issued to buyers in lower-income parts of the county in 2004 and 2005 — loans where the rates have now reset. Most, they say, are for multifamily dwellings.

Many of the loans launch into higher interest rates after two years, and most lenders will foreclose after about a year of default, said Luis Fernandez, licensed real estate salesperson for Keller Williams Realty in Scarsdale.

According to Fernandez, a lot of the buyers that got hit were in the county’s more southern towns, including Yonkers, Mount Vernon and New Rochelle.

Others in Westchester said that while foreclosures are up, there is not cause for alarm because Westchester’s raw numbers are low compared to other parts of the
country.

Gil Mercurio, president of the county Board of Realtors, said more serious than the foreclosures is the jump in short sales. While he did not have statistics, he said that’s what he’s seen anecdotally.

Meanwhile, Fairfield, another of the wealthiest counties in the area, saw a 38 percent increase in foreclosures from the level of July 2007.

In a state where foreclosures dropped overall, they jumped in Fairfield, to 557, from 403 one year earlier. That made the foreclosure rate this July around one out of every 627 homes.

Real estate experts say it’s not the high-end areas that are driving the numbers up.

“It’s because of the urban areas,” said Stuart Svirsky, president of the Mid-
Fairfield Board of Realtors. He added that the suburban areas have not seen any unusual foreclosure spike.

Svirsky said the urban parts of Fairfield, including Danbury, Stamford, Bridgeport and Norwalk, have been showing jumps in foreclosures, and have, in turn, boosted the county figures. He also said many of the foreclosures are related to homeowners taking out adjustable-rate and subprime mortgages.

According to published reports, however, while foreclosures are up significantly in the area since last year, they have also been trending downward significantly since the first quarter of this year.

Moving past Westchester and Fairfield, other parts of the suburban ring around New York City did slightly better. For example, while foreclosures rose in nearby Nassau County, Long Island, the spikes were not as severe. Also, in Bergen County, New Jersey, foreclosures actually dropped.

Even though Long Island’s foreclosure spikes may not have been marked, the overall market there has been sluggish.

Nassau County saw 479 foreclosures for the year as of July — one out of every 957 homes. That represents an 11 percent jump from the same time last year, when there were 432 foreclosures.

According to Pearl Kamer, the chief economist for the Long Island Association, a business and civic organization, many homeowners there used subprime mortgages to purchase their homes as well. Those loan choices have come home to roost, in the form of more foreclosures and a dampening of prices throughout the market.

Kamer said the MLS numbers for June, the most recent period on record, showed a 6.8 percent price drop in Nassau County and an 8.8 percent drop in Suffolk.

“We have a major foreclosure problem,” she said. “[Foreclosures] pull down real estate values in the immediate area and you have a situation with boarded-up houses.”

She said a lack of affordable housing, along with high taxes, will likely mean spillover problems that take several years to play out. She predicted a flat market through 2010 or 2011.

Unlike its counterparts of Westchester, Fairfield and Nassau counties, Bergen County has actually seen fewer foreclosures this year than last.

With an 8 percent decline in foreclosures, the county offered a bright spot for the Garden State. Bergen had only 67 houses in foreclosure this July, representing one out of every 5,197 homes. This compares to 73 foreclosures in July 2007.

But northern New Jersey as a whole, which includes a number of other counties — including Union, Essex and Hudson — didn’t perform as well. In Union County, there were 708 foreclosures in July, up 60 percent since last year. In Essex, there were 555, up 28 percent over the same period. And, in Hudson, there were 119, up 75 percent.

Still, Jeff Otteau, president of the Otteau Valuation Group and an expert on New Jersey real estate, said the state has been handling the foreclosure crisis well.

He noted that the New Jersey housing market actually got hit harder in the 1994 downturn and that there was a higher rate of foreclosures then.

Plus, he is optimistic about what’s coming down the pike.

“The good news is that we are nearing the end,” he said, explaining that he expects to see improvement by the second quarter of 2009.

The market is stagnant in parts as the value of properties gets
lost in translation between buyers and sellers. But no matter how slow
it gets, brokers agree that those who need to sell — or at least think
they do — can get it done.

In some cases the need to sell is tangible: a seller who has
overextended his investments and needs to unload one property to pay
off debt; financial sector employees who need to change locations as
companies restructure; or those who have to sell a nice new condo when
they find themselves out of a job.

“Those who need to sell — be it because of the volatility of the
stock market or lack of job security — are selling,” said Dr. Jeff
Tanenbaum, vice president of BARAK Realty. “If they’re serious, and
they need cash … people are dropping their prices.”

Brokers also report, however, that they are seeing a whole other
demographic of seller that is pricing to sell with speed. These are
nervous sellers who simply anticipate a job loss, or the drop in value
of a recently purchased investment property. Whether their fear is
warranted or not, brokers say that the mere jitters that follow the
words “credit crunch” are bringing prices down.

“A lot of people pricing at the lower end are panicking, [as units
are] now taking longer than 14 to 16 weeks to sell,” said Stacy Wilson,
a broker at Bond New York. “And even though they know Manhattan is
different, owners are getting nervous and cutting prices.”

Wilson believes that many sellers, affected by the “gloom and doom”
media reports about price drops across the country, anticipate a price
drop here and rush to get rid of their properties. In this way, a
“domino effect” is bringing the wave of price reductions to Manhattan.
“These owners know just enough to get themselves in trouble sometimes,”
she said. “Real estate is a long-term investment, not a liquid asset.”

Terrence Harding, vice president and associate broker at Corcoran,
agrees that some of the most eager sellers right now are unloading
extra investments or are in a financial situation where they can no
longer afford what they once could. “But then there were people who
just got a little nervous when the whole credit crunch hit,” he said.

Others believe that the price slippages are not unwarranted, but in
fact are overdue, and will be necessary to lubricate the market over
the next few months.

Jeff Sidney, vice president of Halstead Property, believes that
after Labor Day sellers will begin to realize that if they really need
to sell their home, they will have to “take a hit.” And if they don’t
absolutely need to, they may take their units off the market for a
while.

“I think that sellers who really have to sell their apartments are
going to be pushing hard … and there’s going to be a lot of low-balling
going on,” he said. “The only way that people are even going to get
[their asking price] is if there are multiple bids.”

Sidney predicts that after the annual summer lull in sales traffic
passes, sellers will become more realistic and a shift to a buyer’s
market will become apparent.

“It’s kind of a reality check for a lot of owners,” Harding noted.
“People will say, ‘We wanted to get such and such a price,’ but if they
really need to sell it, they won’t.”

Though many said it wouldn’t happen, it has taken New York City
about nine months to catch up to the rest of the country with regard to
the foreclosure crisis. Certainly, the numbers are lower here than in
other cities, but there is no longer any denying it: Foreclosures are
on the rise in New York City. The question now becomes: Will what is
happening elsewhere in the country — where increasing foreclosures have
resulted in jumps in crime — be part of New York’s future?

At present, the answer is no, but the possibility does exist,
especially in emerging neighborhoods where foreclosures are high. There
is one telling sign that is cause for concern in these areas: Buyers
are already tuned in to the perception of rising crime, regardless of
the reality.

One area to watch is Brooklyn, with its many up-and-coming
neighborhoods. Next to Queens, Brooklyn has been the hardest hit, with
4,895 foreclosure actions initiated in 2007, according to the
Neighborhood Economic Development Advocacy Project (NEDAP).

And this year is likely going to be slightly worse. Based on the
first quarter of 2008, when Brooklyn saw 1,273 foreclosure actions,
NEDAP projects that Brooklyn as a whole could see as many as 5,092
foreclosures by the end of the year.

Aside from the burden foreclosure puts on the local economy —
according to a study done this year by NYU’s Furman Center for Real
Estate and Urban Policy, foreclosures reduce the value of surrounding
properties — and the stress they put on the very real individuals who
default on their mortgages, foreclosures can lead to other collateral
damage, such as the sudden appearance of vacant buildings.

“[Foreclosures] lead to an increased likelihood of vacancy,” said
Ingrid Gould Ellen, co-director of the Furman Center. “But in New York,
the market has been relatively robust. Unlike Cleveland, where homes
are vacant because no one can sell them, here there have been willing
buyers around.”

New York City has so far been lucky in that respect: While cities
like Cleveland and Atlanta have watched their suburbs turn into ghost
towns, New York City has been able to mostly avoid an onslaught of
vacancies.

“There are vacancies, but they don’t last too long,” said Robert
Matthews, chairman of Brooklyn’s Community Board 8, which oversees
parts of Crown Heights, Prospect Heights and Weeksville. Foreclosure
rates in Crown Heights are the 13th worst in the city, with 756 over
the last four years. “It’s not as bad as I had anticipated.”

But with foreclosures on the rise and loans harder and harder to
come by, the possibility that vacant buildings will start cropping up —
especially in emerging neighborhoods like Bed-Stuy, Bushwick and Crown
Heights, where foreclosure rates are high — is a real one.

“Foreclosure is a lengthy process. When the house is empty and
supposedly secured, people go in there and they use it illegally,” said
Nadine Whitted, district manager for Brooklyn’s Community Board 4,
which operates in Bushwick. The neighborhood was the ninth-most
affected with regard to foreclosure actions from 2004 through 2007,
according to NEDAP; it had 890.

“We have problems with stable blocks being now not so stable. It
has an effect on the economy, the community, and if you’re the
next-door neighbor, you better keep your eyes open,” Whitted added.

What she is describing is what’s known as the “broken windows”
theory, which posits that crime is more likely to occur in
neighborhoods where there are visible signs of disorder, such as
abandoned cars or buildings, or even broken windows. These conditions,
the theory goes, act as signals to criminals that society simply isn’t
paying attention.

Some Brooklyn neighborhoods certainly have more signs of that than others.

“Bushwick is a block-by-block situation now,” said David
Maundrell, president of the Brooklyn brokerage aptsandlofts.com. “Some
are great and transformed, and on some there is a lot of drug and crime
activity.”

However, though there is a certain intuitive appeal to the broken
windows theory, it is just that: a theory. In fact, anecdotally, the
opposite is also true: Crime also tends to occur in neighborhoods that
are emerging or on the upswing.

“In certain evolving neighborhoods that have an influx of new
residents, I’m sure there are increased break-ins and muggings, because
[with] the people who live in these neighborhoods, there is an element
there that is prone to resorting to crime. If they see people that have
money, they break into their apartment,” said Maundrell.

Letitia James, a City Council member representing Clinton Hill,
Fort Greene and parts of Crown Heights, Prospect Heights and Bed-Stuy —
agreed: “Increases in robbery and burglary, part of it has to do with
this phenomenon of technology, people walking the streets texting,
playing video games with this very expensive electronic equipment,
being victimized.” In response to a recent rash of muggings in Clinton
Hill, James helped initiate a neighborhood awareness map on the Society
for Clinton Hill Web site in order to bring attention to that and other
crime in the area.

Despite the reality of crime, Maundrell noted that the perception
of crime has a direct relationship to pricing, at least when it comes
to new real estate.

“The price levels change as [notions] of crime go down,” Maundrell
said, addressing Bushwick in particular. “You can have one block where
the apartment is $300,000 and around the corner that same apartment is
20 percent discounted.”

Maundrell also cited a new building in Crown Heights that is two
blocks from the Brooklyn Armory on Atlantic Avenue. The Armory houses a
homeless shelter, and prices at the nearby building were deliberately
discounted because of the perceived impact of the population that
congregates outside the Armory.

“Three blocks up on Washington they’re $625 a square foot, while by
the Armory they’re $525 a square foot,” Maundrell said, noting that he
grew up in Brooklyn and that today “it’s a better, safer place than
ever before.”

That may be true. But that doesn’t make safety any less of a factor for buyers.

“Crime and safety has always been a big concern for buyers, if
they’re not familiar with a neighborhood,” said Tom Le, an associate
vice president at Corcoran, who said he even helps buyers get in touch
with the local precinct. “I always recommend that they look at the
police precinct and check it out for themselves … But I will not
discuss it.”

Le explained that he leaves questions to the police because people
have different comfort levels depending on their experience. Le said he
felt that his weighing in on crime in a given neighborhood could be
misconstrued as either trying to steer a buyer into, or out of, a
neighborhood.

Along similar lines, just talking about crime or foreclosures,
which happens frequently on real estate blogs and in the press, can
have an effect on the perceptions of buyers.

In a sign of the times, Jonathan Butler, creator of Brooklyn-based
real estate blog Brownstoner.com, began posting a regular item called
Foreclosure of the Week. The properties featured are subjectively
chosen from a list of foreclosures provided by the real estate research
site Property Shark.

The idea came to him back in April of 2007, “when the word
[foreclosure] began showing up in the press,” he said. Though the
feature flagged during the fall of last year, he said, “Now I’m posting
them pretty consistently from early this year, as the number of
foreclosures rises.”

“I do think that [attention] about foreclosures in Bed-Stuy has
definitely negatively impacted the psychology for potential buyers,”
Butler added. Bed-Stuy has the second-highest foreclosure rate in the
city, with 2,030 actions filed from 2004 to 2007.

“Bed-Stuy, it’s really like several different neighborhoods. It’s
huge and different block by block. I don’t think this is happening in
Stuyvesant Heights, for example. But for a block that already has empty
lots on it and a handful of nice houses, those kind of blocks that were
already a tougher sell are having a very hard time psychologically,”
Butler said.

Roslyn Huebener, of Brooklyn-based Aguayo and Huebener Realty,
disagreed: “People who are willing to pioneer, to push into emerging
neighborhoods, are making tradeoffs for conveniences. They recognize
there are safety issues, but they’re going for the ultimate goal: to
own or rent a space large enough to accommodate their needs.”

And as far as the foreclosures?

“Vacant buildings do invite intruders and squatters,” she admitted,
but then continued, “It’s something that will pass. It happened only
because of the reckless lending.”

First-time buyers in the city are facing something of a conundrum:
While prices have dropped in some submarkets and given those who have
never owned before a rare window to make a purchase, it’s become harder
to get financing for a mortgage.

As a result of the new financial minefields, many first-time
apartment hunters in New York have changed their approach to securing
affordable financing. In some cases, first-time buyers, who tend to be
in their late 20s and 30s, are having their parents co-sign loans, or
they are plunking down substantially more cash than required in order
to get better mortgage rates.

In other instances, buyers who had their sights set on tonier
Manhattan neighborhoods such as the Upper West and East sides have had
to shift their search to the outer boroughs, where property prices have
seen more softening.

“First-time buyers are getting hit pretty hard,” said Michael
Signet, director of sales for Bond New York. “There’s a glut of studios
and one-bedrooms because they’re not buying as briskly.”

Barry Brandt, director of sales and marketing for MJH Birchwood in
Queens, said he’s recently seen a lot of first-time buyers who were
priced out of Manhattan and Brooklyn and are looking for more space and
amenities for their money. These buyers, who account for about half of
those checking out the broker’s Bayside development, called the Towers
at Water’s Edge, are most often attracted to the price. One-bedrooms,
Brandt noted, range from a little more than $300,000 to around
$450,000.

“The one thing we’re seeing with first-time buyers is they have
done their homework,” Brandt added. “They’re well-armed with
information.”

While brokers generally say they are seeing interest from
first-time buyers, who often purchase in the $350,000 to $550,000 price
range, the numbers suggest those consumers are having a hard time
getting a toehold in the market.

Throughout the first half of this year, the rate of sales for
studio and one-bedroom apartments in Manhattan slowed — indicating that
it’s taking first-time buyers longer to settle on a place and obtain
adequate financing. Corcoran’s mid-year Manhattan report, which was
compiled by Property Shark, said: “While no part of the market was
entirely immune from buyer reluctance, perhaps the hardest hit was the
first-time homebuyer market; 38 percent fewer studios and 34 percent
fewer one-bedroom apartments traded this year.”

In Brooklyn, the rate of sales of all properties declined
substantially in the second quarter of the year, dropping 43.6 percent,
according to a report compiled for Prudential Douglas Elliman by Miller
Samuel.

One indication of the declining demand by first-time buyers in
Brooklyn was a downtick in prices of one-bedroom apartments. A mid-year
report by Corcoran focusing on Brooklyn showed a 4 percent decline in
the median price of one-bedroom co-ops, and a 6 percent price decline
for one-bedroom condos.

Financing difficulties

Brokers say some first-time buyers make it through much of the
deal, only to drop out at the last minute after their mortgage falls
through.

“We’ve had situations where buyers were ready to go but just
couldn’t get the financing,” said Sara Rotter, a sales manager for Citi
Habitats. “The bottom line for any agent working with a first-time
buyer is that they have to prepare them for what’s to come.”

Roberto Gonzalez, a sales agent with Bond New York, said, “I always
counsel clients on what they can afford” before heading out to look at
apartments.

Early on in the sales process, he said, brokers should explain to
prospective buyers the paperwork they will need to complete as well as
the amount of cash they will probably need to produce up front.

Unlike a few years ago, when first-time buyers could lock in
financing in a snap, now more loan applicants are getting turned down
and buyers are being required to fork up more money up front.

Also, because it’s increasingly difficult to get pre-approval for a
mortgage, it’s taking longer for nearly everyone to close on deals.
Even when buyers have solid incomes and good credit profiles, they
aren’t always finding the 90 percent financing they used to rely upon —
let alone the 95 percent or 100 percent financing that no longer seems
to exist.

“I don’t know any banks that are offering 100 percent financing,”
said Melissa Cohn, owner and chief executive of Manhattan Mortgage.
While she said she’s seen about the same number of loan applicants this
year as last year, she noted, “The actual product of the mortgage has
changed.”

Mortgages are now almost exclusively geared toward people with good
credit ratings, solid work histories and enough money to plunk down
up-front to ensure they have a real investment in the property.

One buyer’s tradeoffs

Jason Paulsen, who is in the process of closing on a
750-square-foot two-bedroom apartment in Williamsburg, said he and his
fiancée originally looked at places in Manhattan, but quickly realized
they could get much more for their money in Brooklyn. The apartment
they settled on, which is part of a new development called Belvedere
Condos, cost about $535,000, some 5 percent, or $15,000, less than the
asking price.

“You pay less than half of what you’d pay in Manhattan,” Paulsen said.

The couple currently rents a one-
bedroom on the Lower East Side that would have cost them upwards of $1
million to buy. Their new apartment, which is in the final stages of
construction, will include a private terrace and roof deck, as well as
heated bathroom floors and iPod-driven sound systems.

Paulsen said the mortgage application process wasn’t as difficult
as the couple expected, but that they decided to put 20 percent down in
order to get a better interest rate.

“If there’s a sticking point in the whole thing, that’s definitely the thing,” he said.

Jonathan Miller, president and chief executive of Miller Samuel,
said first-time buyers are beginning to get a boost from the decision
to increase the size of loans that Freddie Mac and Fannie Mae
guarantee. The maximum loans that the quasi-government entities agreed
to back in most New York City neighborhoods rose to $729,000 from
$417,000 earlier this year.

Miller said the policy change, which could cause 10 percent to 20
percent more properties in the metro area to be eligible for a
guarantee, is just starting to help buyers. Loans backed by Freddie Mac
and Fannie Mae tend to be cheaper for banks to fund and therefore have
better terms than other mortgages available to first-time buyers.

Miller said there are probably fewer first-time buyers, but that
the decline is not significant. He attributed the dip to their
difficulty getting financing but said, “They have not been hurt more
than others. I think the impact has been broad-based.”

For now, brokers say they are seeing about the same number of new
buyers streaming through their offices as they did this time last year.

“The buyers are there,” said Jill Sloane, executive vice president
at Halstead Property. “The things that are priced correctly will sell.”

In general, Sloane said fewer people are showing up to open houses, but those that show up are more serious about buying.

Perhaps as a result, many apartment sale prices have remained fairly close to the asking prices in recent months.

For example, two recent Manhattan sales Sloane oversaw that
included first-time buyers closed at $685,000 and $725,000, as compared
with asking prices of $697,000 and $745,000, respectively.

Still, there’s a perception that prices are more negotiable now
than they once were, and some first-time buyers may be sitting on the
sidelines waiting for prices to drop further.

Rotter of Citi Habitats said that, in general, for people planning
on staying in an apartment for four, five or more years, it makes more
sense to buy than rent.

Over the summer, Rotter added, she saw a sudden increase in sales
to first-time buyers in Bay Ridge, Brooklyn Heights and Dumbo.

“Week to week, things can change,” she said.

Imagine an older condo building in a neighborhood undergoing
gentrification. New residents are moving in, bringing their money and,
in the eyes of the old guard, shaking up the building. Sometimes the
parvenus completely renovate their apartments to previously unheard-of
standards; sometimes they simply propose major changes to how the
building is run. In either case, the result is clashes between the
board and new residents.

Now, some real estate attorneys believe that the pressures of
gentrification may be bringing about even more of these occupancy
disputes.

“People come in; they have money; they want better services,” said
Doug Heller, a partner with Herrick, Feinstein. “You go into some of
these older buildings, and the … board is [elderly], and they don’t
want to spend anything on anything. And you’ve got people coming in who
want to do major alterations to their places.”

Sometimes, the condo and co-op boards simply haven’t had to deal
with these types of alterations prior to the area gentrifying, so they
can be lax in enforcing their own rules.

“Nobody really was worried about things like basic alteration
agreements — who’s responsible for what — because nobody had seen any
alterations,” Heller said. “Then, all of a sudden, all kinds of
problems can happen. The board wasn’t operating under a system that
expected this kind of thing, and they feel pretty helpless, because
they haven’t taken adequate precautions.”

He continued, “The older people are just taken by surprise by some
of the improvements the young, wealthy people want to do. This is not
uncommon. It happens everywhere it’s gentrifying.

“It’s been going on in Manhattan for quite a while — for instance, [it started] in Washington Heights a few years ago.”

Since the state’s Housing Court doesn’t enumerate these types of
condo and co-op board conflicts, it’s hard to determine if there has
been an increase, although anecdotal evidence from real estate lawyers
would seem to indicate that there has been.

Each year sees tens of thousands of these types of cases in the housing courts in the five boroughs, attorneys said.

“As alterations, apartment expansions, apartment consolidations and
combinations are becoming more prevalent than previously, we’re seeing
more cases” where boards are failing to review plans carefully or
monitor their execution, said real estate lawyer Eva Talel, a partner
at Stroock Stroock & Lavan whose specialty is representation of
condo and co-op boards.

“The whole issue of alterations becomes very challenging for a
board in terms of, on the one hand, giving the shareholder the benefit
of what they were seeking in doing the alteration … and on the other
hand, protecting everyone else in the building,” she continued.

Lisa Breier Urban, a managing partner and co-founder of Breier
Deutschmeister Urban & Fromme, said she has seen misunderstandings
erupt at properties in Harlem. In one building, which Urban declined to
identify, garbage disposal became an issue.

“The old board was leaving the can out in front, and the newer
members came in and didn’t want that, because people were rifling
through the garbage, so they wanted to set up some other type of
system,” she said. “There was a whole to-do.”

The cans remain unmoved, she said.

Steven Wagner, a managing partner with law firm Wagner Davis, said
another big issue that can often lead to occupancy conflicts these days
is how to spend a building’s money, or the “nurseries versus
gymnasiums” debate.

“I’ve seen that a couple of times, but in each case I’ve seen it,
everybody’s trying to accommodate everyone,” he said. “First of all,
the gym is a nice amenity, but how can you say ‘no’ to the kids? So in
the co-ops I’ve had, people have been making room for both, or none.”

Attorney C. Jaye Berger said there is increasing tension due to
gentrification, but no trend toward increased litigation, because, she
said, poorer people typically can’t afford it.

“You do have these real strange anomalies of old people who’ve
lived in a building for a long time, and you could even still have
renters in some of these buildings, or people who bought for very
little money, and then you have the people who bought years down the
road when the apartment’s been flipped a few times, so they’re paying
millions of dollars,” Berger said. “You’ve got people who are in very
different financial situations, and that’s really where the problem
lies.”

Scott Mollen, a partner at Herrick, Feinstein, agreed.

Mollen said many unit owners in such situations choose not to
litigate, because it’s expensive and difficult to overturn a board
action, and it could also antagonize a co-op board, which will
ultimately approve or deny whoever the tenant presents as a potential
buyer of the unit.

“Conflicts between unit owners and their boards are not new,” noted Mollen.

Mollen said the typical conflicts seen at older buildings are usually a result of new residents clashing with older ones.

“It’s very common to have tension between [older] and younger
owners in condominium and co-op developments because many of the
incoming owners are anxious to live in a building they think provides
competitive services with other buildings they view as first-rate,” he
said. “They believe in the long run, such improvements will help
maintain and enhance the value of their investment.”

While the Housing Court acts as a catchall for occupancy issues,
Talel, who is the chairwoman of the New York City Bar Association’s
Cooperative and Condominium Law Committee, said that since 2006, the
Bar has offered a mediation service that is intended to shift some of
the pressure off the Housing Court by trying to resolve feuds before
they go to court.

Talel also said that quarrels over quality-of-life issues in the city are on the rise.

“Tobacco smoke, noise, those kinds of issues … are leading to an
increase in disputes between apartment owners,” she said. “These kinds
of disputes, rather than involve the whole building in them, might be
better served and better resolved and more amicably and quickly
concluded through mediation.”

If a condo or co-op board does face a lawsuit, Heller recommended it get an attorney if it doesn’t have one.

“If they aren’t equipped with a good,
solid condo attorney, and a lot of them aren’t in fringe areas, they’re going to [need to] get one fast,” he said.

And since many of the lawsuits popping up in developing areas may
be a result of alteration issues, Talel suggested that condo and co-op
boards develop a good alteration agreement for buyers to sign and make
sure that professionals monitor any alterations closely for compliance.

The cost of developing the agreement, along with the professional
contractors used, should be borne by the residents doing the
alterations, she said.

“There is nothing more destructive in a building than an alteration that’s gone wrong,” Talel said.

“It can result in litigation for sure, and extremely bad
relationships, and can have a tangible negative impact on building
infrastructure or neighboring apartments,” she said.

Foreign apartment buyers are disappearing from New York City. It’s
not the plot of a science fiction or horror film, but the influx of
foreigners taking advantage of the weak dollar has slowed down as the
dollar has started to rise. Comments

• Print

By Marc Ferris

While the Financial District’s hip new moniker, FiDi, is catching
on, and the neighborhood is being re-branded as an around-the-clock
destination, the transformation is far from complete.

With Wall Street nose-diving and luxury rental buildings there offering more concessions to attract tenants, The Real Deal
took a sweep through open houses at some of the most high-profile new
buildings there to see how much pain the sales market in Lower
Manhattan’s fastest-growing neighborhood is feeling.

Due to tax policy and a dearth of dirt Downtown, most condos
consist of retrofitted office buildings that have been converted into
blue-chip residences.

But, despite the buzz, open houses at some of the neighborhood’s
hottest properties attracted only a moderate traffic flow on a Sunday
last month.

Certainly, the condos are not flying off the shelves. For instance,
20 Pine Street, which went on sale in 2006, has yet to sellout. Two
other high-profile buildings, the William Beaver House and the W New
York Downtown Hotel & Residences, aren’t sold out either — despite
being on the market since 2006 and 2007, respectively.

Wait and see

At 20 Pine, the former Chase Manhattan Bank headquarters, many
brokers held open houses on the same day last month — for both those
looking to resell units they bought when the building first started
sales as well as for the sponsor looking to unload inventory.

Brokers met with clients in the narrow unfinished lobby as a new resident moved in, adding to the commotion.

Ran Gibor, sales associate, juggled his day from Penthouse 22, a
1,871-square-foot furnished unit on the market for $3.2 million. “It
can get crazy around here, especially since the building isn’t
finished,” he said.

With 409 apartments, 20 Pine is one of the largest condos in FiDi.
Typical buyers include foreigners, financial executives who live uptown
and couples looking for a pied-à-terre, Gibor said. But the building
has suffered from construction delays and a slow start out of the sales
gate.

And last month developer Shaya Boymelgreen and marketer Michael
Shvo were named in a lawsuit filed by a buyer who alleges that the
building exaggerated sales figures and the completion date, and then
refused to rescind its contract.

Deborah DeMaria, a broker with Warburg Realty, lives in a combined
apartment in the building with her husband and two children, and rents
another unit. She bought in June 2006 and was promised a June 2007
move-in date, but had to move three times while waiting another year to
move in.

“A lot of residents are angry with the delays,” she said.

During her Sunday open house, she showed several apartments at 20
Pine and 15 Broad Street to her client, Thomas Addison, a composer who
owns a condo in the Parc Vendome at Columbus Circle.

Addison, 57, a real estate buff who scours Web sites for prices and
trends, dismissed one apartment for its investment potential because it
lacked a bathtub.

“I’m generally in a wait-and-see mode,” he said. “Early investors
in places like 20 Pine and 75 Wall Street are selling for what they
paid, so what does that say?”

He has also looked in the Columbus Circle area, where sales go for
around $1,500 a square foot, he said, adding that he appreciates that
resales in FiDi are going for around $1,200 to $1,300 a square foot.
While he’s attracted to the relative bargains, he said the area “lacks
critical mass.”

“Buildings Downtown need amenities because there’s such a sense of
isolation and it lacks a city vibe; I don’t want to walk out the door
at 9 p.m. onto deserted streets.”

Ryan Smagala, a broker with Homestead New York, also held an open
house at 20 Pine, where he has eight listings for investors who bought
during the heyday of 2006 sight-unseen and are now looking to sell.

Apartment 1512, which measures 784 square feet and is listed at
$885,000, was one of those units. Long and narrow, the apartment had a
large bathroom in addition to an alcove-like space that could be used
for another bed or as an office area.

“My open house was hugely successful, though I didn’t get my first
client until a half hour before it was supposed to end,” said Smagala.
“I stayed an extra hour for seven groups of clients who showed up.”

Light traffic

At the W New York Downtown Hotel & Residences at 123 Washington
Street — which was developed by the Moinian Group and is also being
marketed by Shvo — traffic in the showroom was light until it started
to rain and people came in for refuge. Michael Monterosa, a broker with
Shvo, said he had seven walk-ins and two appointments.

Scheduled for completion in fall 2009, the building will have 217
hotel rooms and 223 condos —159 unfurnished units that have been
available for two years and 64 furnished units that have not yet been
offered for sale, he said.

Out of the 159 residential units available in the project, 30 active sales are listed on StreetEasy.com.

The sales office, located a block from the site, is on a busy corner at 90 West Street.

After visitors enter a faux ’80s club (with a bar) Monterosa leads
them to the selling floor, which has the feel of an art gallery. There,
he manipulates a cursor on an elaborate 3-D projection to highlight the
building’s features and floorplans. He then brings visitors to the
model apartment, whose fridge is stocked with Moet and Perrier.

He said typical buyers at the W are “hip and trendy professionals in their late 30s.”

The one- and two-bedrooms in the building range from $1.1 million
for a 609-square-foot apartment to $2.8 million for a 1,200-square-foot
unit, said Monterosa. Despite overall increases in the rest of the
neighborhood, average price per square foot has dropped 2 percent at
the W New York to $2,016, since November, when sales began.

With about an hour to go at an open house at the William Beaver
House, which lasted from noon to 4 p.m., no attendees had stopped by,
according to a security guard.

Available units range from a 698-square-foot alcove studio listed
at $935,000, to a 1,657-square-foot penthouse in the neighborhood of $4
million. According to a broker on site, 70 percent of the 47-story,
320-unit structure is sold.

Last year the building made headlines when
it sold a unit for about $3,500 a square foot and likely set a record
for FiDi.

Sofia Kim, vice president of research at StreetEasy.com, attributed
this to a new marketing push that de-emphasizes the “soft-core porn,”
designed to appeal to young men with discretionary income, to a more
sophisticated campaign that stresses the building’s design and the
history of Downtown Manhattan.

The building also switched from the Sunshine Marketing Group to
Core Group Marketing. According to StreetEasy.com, the increase at the
William Beaver House mirrors a neighborhood trend (prices rose from
$1,151 to $1,271 per square foot in the last year).

For now, the typical city-based buyer checking out the Financial
District is coming from the Upper East Side or Upper West Side, said
Smagala, the Homestead New York broker.

Jennifer Mikitan, sales director at 55 Wall Street, told The Real Deal
that around a half dozen buyers visited her Sunday open house. The
average price per square foot, $1,543, has remained steady in the last
year at the building, which started sales in 2006.

According to StreetEasy.com, the building is 80 percent sold.

While the neighborhood is undergoing a growth spurt, brokers say the souring economy has spawned bargain hunters.

“I see a lot of bravado from buyers, but many of them are clueless
about what it takes to buy an apartment in this credit atmosphere,”
said Richard Rothbloom of Brown Harris Stevens, who specializes in the
Downtown area. “I tell them they really should be pre-qualified, and
they say, ‘Oh, I think I’ll be fine.’ So then I have to get out my book
and play professor.”

Midtown East office tower on the market

A 49 percent stake in the 22-story office building at 340 Madison Avenue is for sale and is expected to fetch $310 million, the New York Post reported. The 738,686-square-foot tower is located one block from Grand Central Station and spans the blockfront between 43rd and 44th streets. The property has about 400 feet of retail frontage. Owner Broadway Partners purchased the property in 2006 for $550 million from Macklowe Properties, which had completely redeveloped the building before selling it. A $310 million sale would recapitalize the building at $630 million, or $842 per square foot. Cushman & Wakefield is handling the assignment.

Two Post Properties rental buildings for sale

Atlanta-based Post Properties has put its two luxury rental buildings in the city on the market with an expected sales price of $250 million, the Post reported. The Post Toscana at 389 East 89th Street is a 31-story, 209,930-square-foot tower with 199 units; the 150,800-square-foot Post Luminaria stands at 20 stories and has 138 units. A few units are renting at market rate, but the majority is rent regulated through 2013 as part of the 421-a tax abatement program. Douglas Harmon of Eastdil Secured is handling the sale.

Whitney Museum townhouses on the block

Five townhouses owned by the Whitney Museum of American Art on the Upper East Side are reportedly on the market with an asking price of $60 million, according to Crain’s. The properties are located on Madison Avenue between East 74th and East 75th streets, next to the Whitney Museum. Two retail tenants occupy the otherwise empty townhouses. The museum had planned a controversial expansion on the site but scrapped the idea in 2006 in favor of building on a Meatpacking District lot. CB Richard Ellis is marketing the properties.

Harlem development site asking $58 million

A development site spanning an entire blockfront at 1428 Fifth Avenue is on the market with an asking price of $58 million. Known as the Fifth Between the Park Portfolio, the property includes a six-story postwar building with 120 residential units. The buyer will be able to develop the remaining air rights on the site’s vacant parcel, which currently operates as a parking lot. The site has about 150 feet of buildable frontage on West 116th Street and 180 feet of buildable frontage on West 117th Street; a total of 260,000 square feet could be built assuming the passage of a pending zoning change. Shimon Shkury, Thomas Donovan and Michael Tortorici of Massey Knakal are handling the sale.

UES development site on the market

A 11,557-square-foot development site at 1133 York Avenue is on the market with an asking price of $52 million. The parcel occupies the northwest corner of 61st Street and York Avenue, and allows for 154,000 square feet of residential and commercial development. The property has been rezoned to a C1-9 district, and a special permit will enable the buyer to develop a 100-space public parking garage on the cellar and subcellar levels. Brian Ezratty and Scott Ellard of Eastern Consolidated are handling the assignment.

East Village walk-up buildings for sale

Two six-story apartment buildings at 410-414 and 416-418 East 13th streets are on the market with an asking price of $33 million. The properties, located between First Avenue and Avenue A, combine for 80 feet of frontage and have 71 residential units. The building at 410-414 East 13th Street has 18,674 square feet above grade and is comprised of 36 units, including 24 two-bedrooms and 12 three-bedrooms; 416-418 East 13th Street has 16,224 square feet above grade and consists of 35 units, including 23 one-bedrooms, six two-bedrooms and six three-bedrooms. The units are free market with the exception of one rent-controlled tenant and seven rent-stabilized tenants. John Ciraulo, Joseph Sitt and Craig Waggner of Massey Knakal are marketing the properties.

Washington Heights buildings on the block

Two adjacent walk-up properties at 135 and 139 Haven Avenue are on the market with an asking price of $20.5 million. Located on the east side of Haven Avenue between West 172nd and West 173rd streets, the buildings combine for 22,678 square feet of space and have 260 feet of street frontage. Together, the buildings have 130 residential units, of which 122 are rent stabilized, four are rent controlled and four are free market; the average rent per apartment is $986. The properties also have four commercial units, including ground-floor medical space. Robert Shapiro, Christopher Phillips, Robert Knakal and Thomas Donovan of Massey Knakal are handling the assignment.

Compiled by Linden Lim

Founder of the eponymous commercial real estate firm then called
Julien J. Studley in 1954. Studley sold his shares to younger
associates in 2002 and then founded Studley New Vista Associates, which
manages properties he and his Studley associates own.
[more]

Commercial brokers are seeing strong demand for retail condos despite slumping sales of almost every other type of investment property.

Brokers said they consider this type of property a safe harbor for investors, as prices and deals show an increase over last year. [more]

Citi Habitat’s Scott Kriger, the listing agent of 124 Dekalb Avenue in Fort Greene, gets a large number of calls regarding the property from curious passersby.

This is understandable. The building, catty-corner from Fort Greene Park and across the street from the Brooklyn Hospital Center, is a three-story converted firehouse. Its cavernous two-car garage, once home to screaming fire trucks, is caged behind grand wrought-iron gates that sit directly on the sidewalk.

But interest in the building goes beyond its grandiose structure. As its listing notes, it was once home to the production company of a “celebrated filmmaker.”

The production company is 40 Acres and a Mule, and the filmmaker is Spike Lee, whose movies include “Do the Right Thing,” “Summer of Sam” and “Malcolm X”.

“But I only show it to serious buyers,” Kriger said. “By appointment.”

The firehouse was originally constructed sometime before 1900, according to land records at the Brooklyn Historical Society. And at some point, likely in the 1940s, the basement was fortified as a bomb shelter. The fire station remained active until 1974, when it was disbanded as a result of budget cuts. In 1981, when its current owner discovered it, it had been vacant for years.

At the time, Jose Graniela had been renovating and selling loft spaces in Manhattan, and he was in the market for a roomy church or a carriage house with lots of space.

“I believe that space allows creativity, that it’s a natural extension,” he explained. “What I wanted was space to ply my trade, which was design and construction.”

When he heard about the firehouse, which was to be auctioned off by the city, he knew he’d found his next canvas. The competition at the auction, which Graniela described as full to capacity, was stiff. And so when 124 Dekalb Avenue came up, Graniela simply left his hand in the air.

The tactic worked, and for $115,000 —prices were a lot lower then in Fort Greene — Graniela walked out the owner of the firehouse. He’d never even seen the inside.

He ended up pleased with what he found. “Because it was a firehouse and a bomb shelter, the building was solid as a rock,” said Graniela.

He started his renovation by removing an old coal-burning fireplace, dismantling the bathroom stalls and getting rid of barrels of C-Rations (pre-cooked food kept in case of emergency) he discovered in the basement.

On the first floor, he used some of the massive garage space to build three rooms (Lee had his administrative offices there) and a hallway to set apart the steep steps that lead to the second and third floors. The garage now fits two cars neatly.

On the upper floors he replaced windows, built lofts and tiled floors, making sure to keep the original oak wood wherever he found it.

The second floor, an open space with 16-foot ceilings, had a kitchen in the front, which he renovated, and a raised platform in the back. In the center of the room, Graniela built a sleeping loft, which spans the width of the room and cuts the ceiling heights in half.

On the third, he created a series of spaces — bathroom, kitchen, living room, sleeping loft — which spill into one another. One can look down into the bathroom from the sleeping loft, see into the kitchen from the stairs up to the loft, and see into the living room from the entrance to the bathroom. No room is completely closed off from the rest. In the back is a terrace with a treetop view.

It took him four years to finish the renovation. And when he did, he went looking for a tenant.

“I rented it to Spike in 1985, before he was famous, before his first movie really came out, before he had national distribution or distribution at all,” Graniela said.

Lee started off renting just one room in 124 Dekalb Avenue, but over his 22 years there branched out into the rest of the floors. By the end he rented the entire building for around “$4,000 a floor” a month, Graniela said.

Now, all 5,800 square feet of 124 Dekalb’s livable space, not to mention 2,500 in the basement and 1,000 outdoors, is on sale for a whopping $5.89 million. That’s over $1,000 a square foot. (The price was cut from $6 million in late July.)

“I looked at all the surrounding listings for townhouses and small buildings, and there just really was nothing,” said Kriger about trying to find comparable listings. “It’s difficult to compare it to anything because it’s so unique.”

So how did they come up with their price?

“Real estate doubles every 10 years,” said Graniela. “I read it in a magazine.”

He reasoned that the building was worth $2 million in 1990, and that’s what he sold the property to Lee for (Lee sold it back to him within the year). And thus, $4 million in 2000 and $8 million in 2010.

“[Graniela] did an appraisal, which was pretty close [to $6 million], and there is a mystique and a notoriety of the people that came through there,” Kriger said.

Mystique or not, the property is pricey for the neighborhood. Brown Harris Stevens has a five-story brownstone with two simplexes and a duplex that faces Fort Greene Park for $2.95 million. And in nearby Clinton Hill, two carriage houses have been combined into one unit, on the market for $2.5 million.

Pricey, especially given some of the more dated design elements. There is etched glass in the kitchen on the second floor, glass bricks delineate space on the third floor, and the bathrooms have all black fixtures.

There have been no serious offers yet, but Kriger said people are responding.

In the three months the building has been on the market, he said he has shown it to doctors looking for office space, to a Broadway acting troupe seeking new headquarters, private schools, recording artists and filmmakers (in a stroke of inspiration, he listed it in Variety magazine) and to a few foreign buyers who are looking for a home — one with a little history.

By David Jones

While much of New York’s commercial real estate market has fallen victim to the global credit crisis, there appears to be continued investor interest in well-placed hotel assets, as foreign money and visitors continue to flow into the city.

New York City recently surpassed Orlando and Las Vegas as the nation’s leading destination in tourism spending, which analysts say will help drive total visitors and hotel rates to record levels in 2008.

Last year, the Manhattan occupancy rate rose 1.5 percentage points to a record 85.9 percent, based on a record average room rate of $298.81, a 13 percent gain from the prior year.

“New York has really become the market for hotel investment on a global basis,” said Mark Gordon, executive vice president and head of the U.S. hotel group at Cushman & Wakefield Sonnenblick Goldman. “As a result, there continues to be very strong interest in New York hotels, both for sale, and also, on the finance side.”

Gordon said his firm is currently advising or brokering at least a dozen deals in New York, including the sale of three major hotels in Manhattan.

Just last month, he closed an $80 million construction loan for a new extended-stay property on Lexington Avenue, which would be the first newly built hotel on the East Side in decades. Gordon declined to reveal the specific location.

Bridging the gulf

Experts say Middle Eastern investors are driving much of the latest interest in New York hotels, in part because they are looking for a relatively safe place to park the wealth that has been generated by the high price of oil. And despite the problems on Wall Street, New York is still credited with having a strong hotel sector compared to the rest of the market.

Gordon said his firm recently worked with a group from Abu Dhabi on a new hotel investment in New York and he is actively pursing deals for two properties that are Sharia-compliant (meaning they follow rules of Islamic law, which includes being alcohol-free), near Times Square. Both deals are expected to close by the fourth quarter of 2008.

Meanwhile, shares of Morgans Hotel Group Co., the boutique hotel chain founded by Ian Schrager, have been up recently on speculation that sovereign wealth funds from Dubai and Abu Dhabi have made acquisition offers for the chain.

The Times of London reported last month that Dubai-based Zabeel and Mubadala, an investment arm of the Abu Dhabi government, have both offered to buy Morgans for about $600 million, plus debt, which would value the deal at $1.4 billion.

In New York, the company was scheduled to reopen its flagship Morgans Hotel on Madison Avenue between 37th and 38th streets on Aug. 28. That hotel closed in May for a $9 million renovation.

Morgans is also planning to launch its new Mondrian Soho, which it is developing in an existing building on Lafayette Street, in 2009.

Meanwhile, Middle Eastern funds are also in the mix for one of the city’s biggest trophy assets, the Park Lane Hotel. In April, the estate of the late Leona Helmsley hired CB Richard Ellis to find a buyer.

The New York Sun reported recently that a second round of bidding was scheduled and that a deal for the trophy property could range between $800 million and $1 billion.

Jeff Dauray, senior vice president at CBRE, said the expectation of a Park Lane Hotel deal would be “very visible within the market,” but he declined to give any details on the talks.

“It’s fair to say there’s been a good deal of interest over the last six months from international funds that are looking to benefit from the currency arbitrage,” he said. “There’s certainly quite a bit of interest in the New York space, particularly for trophy assets.”

Part of the reason Middle Eastern investors are so involved is that the high cost of capital is preventing many deals from being consummated.

For the first half of 2008, only eight properties, valued at $383 million, were sold in Manhattan, according to Real Capital Analytics, a New York-based research company. This compares with 25 properties, valued at more than $4 billion, in 2007.

Lenders are currently unwilling to finance more than 60 to 65 percent of most hotel deals in this market, and Middle East investors are among the few players with enough cash to satisfy the capital markets.

“Certainly the global network is at play,” said Scott Berman, U.S. advisory leader for hospitality and leisure at PricewaterhouseCoopers. “There’s no question that the sovereign funds that are based in the Middle East are more active.”

Jonathan Bloomberg, executive vice president at CRG Capital, said the number of transactions are down overall in New York because sellers are not willing to reduce prices and lenders are being very cautious about who they do
business with. “You no longer are seeing individuals jump into the game because they can scrape a little money together or because it’s a hot market,” said Bloomberg.

He said in the current market, lenders are only offering 50 to 65 percent loan to value for construction projects and they are requiring recourse in their deals, which often means personal guarantees are being asked of the sponsor.

In a recent report, New York-based HVS Global Hospitality Services noted that several proposed projects would be delayed because of the credit crunch. HVS said the delays in new projects will boost demand and rates for existing hotels.

While overall occupancy percentages are predicted to slip 1 percentage point to 84.4 percent this year, HVS said average room rates are expected to rise 10 percent to $326.73. It said revenue per available room should rise 8.9 percent to $275.87.

“While there are some signs of softness relative to the rest of the [hotel] industry, the metrics we analyze relative to New York are still healthy and impressive,” Berman said.

While overseas funds are leading the charge when it comes to interest in New York hotels, there is still considerable interest from U.S. investors to acquire and develop new properties in the area.

Philadelphia-based Hersha Hospitality Trust, for instance, is actively scouting the city for boutique hotel development and investment opportunities.

“We’re still very bullish on New York,” said Ashish Parikh, chief finance officer at Hersha. “We feel the supply-demand imbalance is going to continue over the next several years.”

The firm has $250 million invested in eight New York hotels and has another $65 million in mezzanine financing on local properties. After buying the 45-room Duane Street Hotel in January for $24.75 million, Hersha bought the Sheraton JFK Airport in June for about $34 million.

In July, Hersha opened the Nu Hotel at 85 Smith Street, the first boutique property in Downtown Brooklyn. Night rates start at $200 per room. The company also bought a stake in the 93-room mixed-used property in January for $17.24 million and invested another $6 million to upgrade it.

During the second quarter, Hersha reported 14 percent same-hotel growth in revenue per available room at its hotel properties.

Then there are the pessimists, who warn that despite the eager shoppers, hotel deals might not regain their 2007 pace.

Herrick, Feinstein attorney Paul Shapses warns that the outlook for major hotel deals in the current market will remain gloomy for the foreseeable future.

“I can’t say there is a pervasive movement toward buying hotels anywhere,” said Shapses. “It’s very difficult to see where there is true light at the end of the tunnel right now.”

“More owners of hotel properties have resigned themselves to take advantage of this great operating environment right now,” added Dan Fasulo, managing director of Real Capital Analytics. “Why fight the market right now when the fundamentals are so strong?”

By Catherine Curan

As stores across the retail spectrum scuttle expansion plans — with Starbucks one of the more notable examples — budget coffee king Dunkin’ Donuts is brewing up a big-league increase in its New York presence.

With 341 New York City locations, Dunkin’ Donuts already operates more stores here than Starbucks. But its no-frills décor and lack of coveted coffeehouse amenities like Wi-Fi have helped its rival win the war of perception about which chain is tops — no matter how often yum-o queen Rachael Ray shills about America running on Dunkin’.

Now, Starbucks, which some say got into trouble because it overextended itself and ended up cannibalizing its own stores, is beating a much-publicized retreat in New York City and nationwide. Meanwhile, Dunkin’ plans to nearly triple its U.S. store count to 15,000 by 2020. That goal includes aggressive development here, seizing on both its competitor’s stumbles and
recession-wary consumers’ desire for less-expensive daily java.

“You’re hearing every day about another national company having problems, that won’t be signing leases, or is in a holding pattern or bankrupt,” said Joseph Isa, a senior director at Winick Realty Group. “Dunkin’ Donuts is bucking that trend and actively and aggressively looking for locations and signing leases.”

The company declined to respond to calls seeking comment, but according to The Real Deal’s research, Dunkin’ has signed at least nine local deals this year, and a dozen in the last two years. Brokers and franchisees are busily lining up more, with one new franchisee set to open 14 stores on the Upper West Side in the next five years.

The company’s flexibility about store sizes, combined with a new, more upscale store design that has greater appeal for landlords, is helping Dunkin’ get deals done. What’s more, landlords feeling the weak economy’s sting are now more amenable to Dunkin’ Donuts franchisees, since they are typically well-capitalized.

“The retail market in general has softened, and landlords who saw Dunkin’ Donuts as not a worthy tenant would now love to have them,” said Jonathan Krieger, a managing director at Robert K. Futterman & Associates, who represented both the tenant and the landlord in a May 2007 Dunkin’ Donuts deal at 370 Lexington Avenue.

Dunkin’ Donuts’ rapid rollout, however, has hit plenty of speed bumps. A widely covered legal battle between the corporation and a Muslim/Orthodox Jewish pair of Brooklyn-based franchise partners last spring raised allegations that the chain is squeezing out small franchisees in favor of larger ones that can more easily achieve the massive corporate growth target. As reported in the New York Post, court records showed Dunkin’ sued franchisees 154 times in the last two years, versus five similar suits from McDonald’s and 12 from Subway in the same period. (The Brooklyn partners did not return a call seeking comment.)

Against this backdrop, many larger franchisees are still seeking to whip up profits with multiple Dunkin’ locations. At press time, Winick’s Isa was negotiating four deals, following fast on the four he has already done this year.

Unlike Starbucks, which is known for corporate deals backed by the mega-firm’s corporate balance sheet, Dunkin’ Donuts’ deals are typically done by franchisees. While working with a franchisee can be off-putting to a landlord, since the guarantees are typically a security deposit and a good-guy guarantee, sources on all sides of these transactions said Dunkin’ Donuts’ financial requirements, typically more stringent than other franchisors’, give more assurance.

“When I take Dunkin’ Donuts to a landlord, they are not worried that the franchisee has a spotty past or won’t be able to pay the rent,” said Isa.

Furthermore, the company is able to branch out because of a current willingness to consider spaces from 800 to 2,000 square feet — a far broader spectrum than many other retailers. Isa’s four deals this year so far have ranged from 760 to 1,378 square feet; the company has even scaled its concept for spaces as small as 400 to 500 square feet.

Franchisee Peter Sedereas, whom Isa represented on a couple of recent Upper West Side transactions, plans one of these small units for his fourth store so far, featuring coffee and donuts only, in a 500-square-foot space at 535 Amsterdam Avenue at 86th Street. That is the southernmost location he has leased so far in his territory spanning West 57th to West 110th streets.

“As we head farther south, rents do get more expensive, but Dunkin’ has come up with a way to create stores in smaller spaces without breaking our business model,” said Sedereas.

An even more important change, though, may be the new look of the stores. Sedereas is outfitting his locations with high-end features straight out of a luxury kitchen designer’s playbook. His first four stores, all of which are slated to be open by September, sport granite countertops, Italian marble floors and dark-stained chair rails — plus Wi-Fi.

“In the past they had bright pink and orange, and the look really didn’t work for Manhattan, especially for a lot of landlords looking to improve their buildings,” said Isa.

Call it the incredible shrinking workplace: New York’s sputtering economy is pushing companies to design offices that are extremely cost-effective, making the most out of every inch of space. As a result, white-collar professionals are working in tighter quarters.

While the allotment of office space per worker has been shrinking for some time, in the last year the average space allocation dipped significantly, to 100 square feet per person in the New York market, compared to about 120 square feet in 2007, according to CoreNet Global, a nonprofit that tracks trends in real estate.

With the Big Apple leading the country in asking rents for Class A office space — $85 per square foot on average — it makes sense for companies to scrutinize how they use their space. Architects report seeing more requests for shared workstations, re-use of a previous tenant’s fixtures and less expensive materials.

Some firms are taking into account how much time employees actually spend in the office and how much time they’re at their desks, said Richard Kadzis, an industry analyst for CoreNet. Firms across many industries are designing offices to be efficient and flexible, he said.

“Space utilization is a very smart thing for companies to be doing,” he said. “In a downturn, they can save a lot of money.”

New York architects said they’re seeing firms lease smaller offices and demand layouts with cost-saving features. For example, new offices feature open workstations that can be shared by more than one worker, which can cut down on the quantity of furniture required for the space. Closed-door offices are equipped with extra electrical outlets to accommodate two or more workers. While some offices have small conference rooms, others forego closed doors altogether. Instead, they opt for open areas with comfortable seating that can work for informal meetings or even work areas for employees with laptops.

Nasdaq eliminated most conference rooms when it remodeled its 65,000-square-foot office at One Liberty Plaza earlier this year, said Marc Spector, a principal with the Spector Group, an architecture firm specializing in commercial projects, which designed the space. “We’re seeing conference rooms disappear,” Spector said.

Smaller layouts can function perfectly well when natural light and other amenities are put into place to make up for the limited space, he said.

The National Audubon Society’s sunny new office at 225 Varick Street is
a little more than half the size of its former offices in the historic building the organization used to own at 700 Broadway in Greenwich Village. The nonprofit no longer needed so much space. Over the years, the number of staff working at its New York headquarters had declined as the group adopted a decentralized approach to operations.

Its new 28,000-square-foot home, on one floor of a former printing house, has high ceilings and full-height windows. Designed to be open to allow daylight to penetrate the entire floor, the project is on track to receive its Leadership in Energy and Environmental Design (LEED) certification.

“You could say it’s right-sized for them,” said Guy Geier, a senior partner at FXFowle Architects, which designed the space. “They have room for growth.”

To compensate for smaller individual workspaces, architect Randolph Gerner sees companies adding amenities like showers, exercise facilities and pantries with dining areas. While closed-door offices haven’t disappeared completely, they’re becoming “an endangered species,” he said. Firms in the financial services sector in particular are doing away with enclosed offices.

“It’s a cultural change,” said Gerner, principal of Gerner, Kronick & Valcarcel.

While the economy is pushing companies to maximize their space, current design also reflects the collaborative nature of the work environment today and the desire by companies to encourage open communication, Gerner and other architects said.

And while the trend toward denser offices has been evolving naturally, and should not be seen as a direct response to the economy, a smaller footprint obviously saves a company money in hard times, Gerner said.

“The present economy may speed a company’s plans to move in this direction,” he said. “Obviously, doing more with less helps the bottom line.”

To save on construction costs, companies in some cases don’t demand a gut renovation. Instead, they try to make an existing layout work, and re-use the lighting, furniture and other fixtures left by previous tenants.

“In the last six to 12 months, we’ve seen a couple of clients move into existing space and ask us to look hard at how to re-use existing features,” said Geier, of FXFowle Architects. “We’re seeing more interest in finding ways to re-use what’s already there.”

From financial services companies to law firms, companies across the board are focused on designing their new offices cost-effectively, said Michael Kleinberg, co-president of MKDA, a corporate space planning and interior design firm. For example, he does not see companies splurging on top-of-the-line furniture.

“For the most part, many of them are looking either to re-use the furniture or, if they’re purchasing new furniture, they’ll be very price-conscious,” he said. “They’ll compare many different manufacturers and not go to the highest end.”

When it moved to new offices at 99 Hudson Street, the Rosetta marketing company did not replace the modular office furniture already there, except for purchasing a few pieces and fabric panels for the work stations, said Edin Rudic, a designer at MKDA, which worked with Rosetta. For private offices, the company purchased economical desks with faux wood finishes made of plastic laminate.

Demand for luxurious new offices has also dried up at John Gallin & Son, a family-owned construction firm that specializes in office interiors for clients from a variety of industries. Instead of high-end materials like sliding glass and metal doors for perimeter offices, the company’s latest projects are being built with less expensive products, said Mark Varian, the company’s president. The company also has seen a decline in projects reaching for environmental LEED certification.

“When the economy gets hit, they’re not going to put [in] a $250-a-square-foot office headquarters,” he said. “We’re seeing more demand for back offices with pretty traditional standard construction.”

While it’s fairly well known that the market has been showing a decline
in taking rents, the bottom line after price negotiations and
accounting for concessions, the summer months may have brought the
first of a surge in owners marking down the advertised price on spaces.
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Go to chart: Ringing up the retail market amid New York City’s economic slowdown

Compiled by Linden Lim

Click here for the desk of Ismael Leyva

Compiled by Lauren Elkies

By Alison Gregor

Shortly after Robert Futterman, the chairman and CEO of Robert K.
Futterman & Associates, was divorced, he was featured in a 2006
magazine piece celebrating the new freedom recent divorcés had to
decorate their own places.

And Futterman did indeed explore his true colors. He showed off a
purple, or eggplant-colored, living room in his Greenwich, Conn., home,
where a black pool table was paired with a photograph of a Chinese man
in a tub surrounded by women.

A similar sense of liberation pervades the retail real estate
broker’s newer apartment in the Porter House, a West 15th Street
condominium in the Meatpacking District.

The three-bedroom, three-bath condo — which, according to the
property deed, Futterman purchased from Us Weekly editor Janice Min for
$3.15 million in 2005 — is where he rests his head on Mondays, Tuesdays
and Wednesdays, when he is not staying in Greenwich.

Before he founded RKF in 1998 at the age of 39, Futterman worked at
Garrick-Aug Associates, where he started in 1983 for $250 a week as a
retail store canvasser, which meant relentlessly trekking the city
looking for vacant retail space to lease.

Futterman, who never graduated from college, quickly rose to become
senior managing director at the firm. And he has now built his own
company into one of the country’s largest independent firms
specializing in leasing retail space. Currently RKF has 107 employees
and four offices nationwide.

Since he started his real estate career, Futterman says he has completed more than $3 billion worth of leasing transactions.

His Manhattan space is filled with dramatic artwork, the rewards of
that successful career. He converted one of the bedrooms in the
apartment, where dark blue and black colors predominate, into a home
office where he has hung a large, realistic painting depicting a nude
woman.

In the living room, a statue of a group of street thugs with
death’s heads for faces is made of fiberglass and tinted dark purple
with auto-body paint.

Futterman said he even briefly considered buying a Damien Hirst skull.

“At the time, I thought I was going to buy one,” he said with a
laugh. “Then I thought, a single guy living in Chelsea with a skull —
isn’t that a little bit too much?”

Futterman, 49, seems to have struck a balance between the
freewheeling and the functional in his “crash pad,” which is 2,271
square feet, and has a bedroom shared by his two sons, Jesse, 15, and
Kevin, 13. (He shares custody with his ex-wife.)

The apartment also has a Valcucine chef’s kitchen, Viking
appliances and Jatoba wood floors, which Futterman had stained to a
near-ebony shade.

But, despite the top-flight kitchen, which was installed by Us
Weekly’s Min, Futterman said he chose the neighborhood, in part, for
its variety of restaurants and entertainment options.

“I used to live on the Upper East Side, before I moved to
Connecticut, and if I went out to restaurants or out to meet friends,
it was always Downtown,” he said. “And I kind of gravitate towards the
West Side more than the East Side.”

Chelsea also affords Futterman an easy commute to his office at 521
Fifth Avenue between 43rd and 44th streets. That helps for someone who
proclaims to be “obsessed with work.”

The neighborhood also helps him keep in close touch with one of New
York City’s thriving retail neighborhoods: The Meatpacking District.

In fact, Futterman’s sixth-floor condo in the Porter House looks
south over the cobblestone streets of the Meatpacking District (and
also has western views of the High Line and a slice of the Hudson
River).

“You can see a lot of the buildings that we’ve leased,” Futterman
said, including the Apple Store at 401 West 14th Street, right across
the street. “We’ve made a big push in the Meatpacking District, and a
lot of it might have to do with the fact that I live here.

“If they’re within my purview, the landlords know they can’t hire anybody else but me,” Futterman added, laughing.

Futterman has chosen to decorate his apartment — which has the tall
arched windows of the 1930s brick Renaissance Revival warehouse it
formerly was — with furniture of modern design and contemporary art. As
retail has grown inextricably entwined with fashion and art in recent
years, perhaps it makes sense that Futterman has gotten seriously into
art collecting since he bought his Porter House apartment. He works
closely with art consultant Andrea Hazen of Hazen Partners Art
Advisory.

“Robert really engages with all of this,” Hazen said. “He really
loves to learn about the art. He’s not just buying it because, ‘Oh
yeah, I need to have this because I’m successful.’ He’s actually
interested in the art and the artists.”

For example, the nude study in his office means more to Futterman
than simply a depiction of aesthetic beauty; there’s a backstory.

“The artist is Christian Jankowski,” said Futterman, whose
72-year-old mother is a painter. “And I’ve actually met the guy, had
dinner with him. The concept in this painting was actually really well
thought out.

“I was as interested in the person who did the art as I was in the piece itself,” Futterman said.

Futterman’s living room, dining room and kitchen are all one
loft-like space, and several distinct artworks draw the eye. One is a
blue neon sign that says “Modus Operandi” in script, done by the
artist-philosopher Joseph Kosuth.

“That was sort of the key piece that things grew off of,” Hazen
said. “It was really exciting when Robert went for it, because it’s not
a picture. It’s new media; it’s very conceptual. I think it really
reflects him, his M.O.”

Futterman was so keen on the piece that he also purchased a book by
Kosuth written in Latin, which he said he cannot read, along with a
book of the philosopher-artist’s ideas on conceptual art in English —
which he has read.

“It’s one thing to know the art,” said Futterman, who has stacked
books about art and other subjects throughout his apartment. “It’s
another thing to read writings by the artist; to get into their head a
little bit. Even though it was very difficult to get into [Kosuth's]
head, you sort of were able to pick up some bits and pieces of his
conceptual art.”

Though drawn to the contemporary, Futterman can also be charmingly
retro. For instance, the round dark blue couch in his living room,
behind which he keeps his electric guitar and bongo drums, is paired
with a circular coffee table in acid-etched bronze, pewter and enamel
depicting warriors, noblemen and steeds. Done by father-and-son
sculptural team Philip and Kelvin LaVerne, the table, which sells for
about $10,000 to $11,000, was made around 1960. (The electric guitar is
not just a dated display either: Futterman learned to play it as a
teenager and seriously considered becoming a rock concert promoter
after college. He still plays.)

Futterman’s decorator, Tatum Kendrick of Tatum Kendrick Design,
also helped him find a large blown-glass sphere lamp, made in Italy in
the 1950s, which hangs over the dining room table. The unusual lamps
over his bed also came from 1950s Italy. Balls of glass on the ends of
a tangle of metal tubes, the lamps look a bit like a cluster of
molecules.

“None of these things are new; they’re all old,” Futterman said.
“It is a little retro, because it sort of sticks out with all the
contemporary furniture.”

Art in the bedroom, which is complete with a walk-in closet, includes a giant photograph of a library by Candida Höfer.

“I felt like I was almost adding a room by having that piece,” Futterman said.

Futterman’s collection of art serves as a backdrop when he entertains, which he likes to do from time to time.

He threw a surprise birthday party recently for colleague Karen
Bellantoni, an executive vice president at Robert K. Futterman &
Associates. As many as 60 people, plus a catering team, can be
accommodated in the condo.

Futterman said that, though he only uses the apartment part-time, he doesn’t see himself selling it any time in the near future.

“This really serves my purpose,” he said. “If I were to trade up
from this, it might be for something with outdoor space — an apartment
where you could actually open a door and walk outside. But for my
purposes, I didn’t really feel I needed that.”
 

Manhattan

Gramercy

$1.345 million

260 Park Avenue South

1-bedroom, 1.5-bath, 1,017 sf condo with home office in prewar elevator building; 24-hr doorman, concierge; stainless steel kitchen, oversized marble master bath with rain shower and soaking tub; southern and western exposures, cityscape views; building has gym and roof deck; common charges $832; taxes $996; asking price $1.5 million; four weeks on the market. (Broker: Frank Ragusa, Bellmarc Realty)

Gramercy

$745,000

235 East 22nd Street

1-bedroom, 1-bath, 875 sf co-op in prewar elevator building (Gramercy House); 24-hr doorman, concierge; unit has hardwood floors, renovated windowed kitchen, separate dining area, wood-burning fireplace, northern and eastern exposures; building has laundry room; maintenance $1,186; 52 percent tax-deductible; asking price $750,000; nine weeks on the market. (Brokers: Fred Slavin, Kathy Gulrich, Bellmarc Realty; S. Jean Meisel, Brown Harris Stevens)

Gramercy

$710,000

200 East 16th Street

1-bedroom, 1-bath, 740 sf co-op in prewar elevator building; 24-hour doorman; unit has hardwood floors, windowed kitchen, period white and black tiled bath, city views from southern and eastern exposures; maintenance $961; 64 percent tax-deductible; asking price $689,000; four weeks on the market. (Brokers: Fred Slavin, Kathy Gulrich, Bellmarc Realty; Deb Stewart, Prudential Douglas Elliman)

Greenwich Village

$3.362 million

445 Lafayette Street

3-bedroom, 3-bath 2,248 sf condo (the Astor Place); 24-hr doorman, concierge; high ceilings, newly windowed kitchen, washer and dryer, new bathrooms, 120 linear feet of floor-to-ceiling windows, northern, southern and eastern exposures, full city views; building has fitness center and laundry; maintenance $5,438; asking price $3.495 million; 90 days on the market. (Brokers: Kristina Ojdanic, Greg Kammerer, Corcoran Group)

Harlem

$630,000

220 Manhattan Avenue

2-bedroom, 1-bath, 825 sf condo in modern elevator building; 24-hour concierge, doorman; spacious unit has garden views and partial park views; building has garage, bike and storage rooms, laundry; common charges $449; taxes $430; asking price $659,000; six weeks on the market. (Broker: Allan Aciman, Bellmarc Realty)

Harlem

$480,000

680 Riverside Drive

2-bedroom, 944 sf condo in prewar elevator building; part-time doorman; stainless steel appliances, marble bathrooms, hardwood floors, river and bridge views; common charges $722; asking price $480,000; 29 weeks on the market. (Brokers: Mary Jo Griner, Rob Kravath, Amy Casey, Barak Realty)

Harlem

$350,000

7-11 West 131st Street

1-bedroom, 1-bath, 535 sf studio in new development (the Parkview); 14-foot ceilings, floor-to-ceiling windows, large closet space; central laundry and storage facilities; kitchen with cherry cabinetry, quartz countertops, stainless steel appliances; marble bathroom with Jacuzzi; common charges $250; asking price $384,900; 31 weeks on the market; (Broker: Jason Barrocas, Bond New York)

Lower East Side

$389,000

500 Grand Street

1-bedroom, 1-bath, 750 sf co-op in pre-war elevator building; natural light, high-beamed ceiling, refurbished hardwood floors, eat-in kitchen, windowed bathroom; building has attended lobby, bicycle room, garage, fitness center, common storage room and laundry facilities; maintenance $550; asking price $449,000; 12 weeks on the market. (Broker: Chris Au, Bond New York)

Midtown East

$499,000

5 Tudor City Place

1-bedroom, 1-bath co-op in prewar elevator building (Windsor Tower); 24-hr doorman, concierge; hardwood floors, large walk-in closet, original casement windows, city views from southern and western exposures; building has storage, laundry and health club on premises; maintenance $930; 59 percent tax-deductible; asking price $499,000; four weeks on the market. (Brokers: Norman Saito, Bellmarc Realty; Pat Singer, Prudential Douglas Elliman)

Midtown West

$4.3 million

146 West 57th Street

3-bedroom, 3.5-bath, 2,584 sf condo in postwar elevator building (Metropolitan Tower); 24-hr doorman, concierge; foyer, second entrance, marble bathrooms, two Jacuzzi tubs, walk-in closets, dishwasher, floor-to-ceiling windows, city-skyline views; building has laundry, roof deck, private storage, video security, pool, health club; common charges $3,092; taxes $2,288; asking price $4.5 million; 53 days on the market. (Brokers: Kristina Ojdanic, Jessica McCann, Corcoran Group)

Upper East Side

$4.4 million

1045 Park Avenue

3-bedroom, 2-bath, 2,600 sf co-op in prewar elevator building; 24-hr doorman; hardwood floor, views of Central Park and Park Avenue; maintenance $4,600; 62 percent tax-deductible; asking price $4.995 million; 16 weeks on the market. (Brokers: Jeff Tanenbaum, Barak Realty; Judith Figuirele, Brown Harris Stevens)

Upper West Side

$659,000

878 West End Avenue

1-bedroom, 1-bath co-op in prewar elevator building; hardwood floors, two exposures, updated kitchen and bathroom; building has storage and laundry; maintenance $775; asking price $649,000; five weeks on the market. (Brokers: Norman Saito, Bellmarc Realty; Laurie Bloomfield, Prudential Douglas Elliman)

Upper West Side

$620,000

56 West 82nd Street

1.5-bedroom, 1-bath, 750 sf co-op in classic brownstone; working fireplace, kitchen and bathroom need renovation; maintenance $984; 50 percent tax-deductible; asking price $630,000; 11 weeks on the market. (Brokers: Thomas Croke, Barak Realty; Mark Kennedy, Prudential Douglas Elliman)

Brooklyn

Brooklyn Heights

$325,000

85 Livingston Street

650 sf studio co-op in postwar elevator building (the Robert Livingston); 24-hr doorman; hardwood floors, southern exposure with city views; building has laundry, storage, gym and garage; maintenance $787; 39 percent tax-deductible; asking price $339,000; 11 weeks on the market. (Broker: Christine Pon Chin, Bellmarc Realty)

Clinton Hill

$319,000

273 Clifton Place

1-bedroom, 1-bath, 483 sf condo in new construction building; dining area, new kitchen, air conditioning, high ceilings, new bath, hardwood floors, private terrace, storage; common charges $232; taxes $26 (abated); asking price $319,000; one day on the market. (Broker: Sonya Spitznas, the Developers Group)

East Williamsburg

160 Manhattan Avenue

$507,500

1-bedroom, 1-bath, 1,100 sf condo in new building; central air, hardwood floors, high ceilings, washer/dryer, home office; building has roof deck; common charges $200; taxes $168 (abated); asking price $507,500; three weeks on the market. (Molly Townsend, the Developers Group)

Flatbush

$200,000

1155 Ocean Avenue

1-bedroom, 1-bath, 843 sf co-op in elevator building; dining area, windowed and renovated kitchen, hardwood floors, one exposure, laundry facilities; maintenance $551; 49 percent tax-deductible; asking price $210,000; 50 weeks on the market. (Broker: Ailene Quinlan, the Developers Group)

Greenpoint

$1.03 million

76 Engert Avenue

2-bedroom, 2-bath duplex penthouse condo in new construction elevator building (Northpoint Towers); windowed kitchen, air conditioning, high ceilings, hardwood floors, park and city-skyline views; building has storage and laundry facilities; common charges $549; taxes $142 (abated); asking price $1.239 million; one day on the market. (Broker: Rachel Poggi, the Developers Group)

Williamsburg

$1.035 million

30 Bayard

2-bedroom, 2-bath, 1,064 sf condo in new construction building (the Aurora); 24-hr doorman; windowed kitchen, central air, high ceilings, hardwood floors, terrace, washer/dryer, two exposures, park and Manhattan views; building has health club, parking and residents’ garden; common charges $964; taxes $150 (abated); asking price $1.05 million; 20 weeks on the market. (Broker: Scott Address, the Developers Group)

Williamsburg

$1.4 million

120 North 7th Street

3-bedroom, 3-bath, 1,300 sf duplex condo in new elevator building; dining area, renovated kitchen and bath, central air, hardwood ceilings, fireplace, terrace, washer/dryer, two exposures; building has storage and laundry facilities, roof deck, gym and party room; common charges $1,202; taxes $1,443 (abated); asking price $1.4 million; three weeks on the market. (Broker: Jessica Pfeiffer, the Developers Group)

Williamsburg

$394,000

225 Maujer Street

1-bedroom, 1-bath, 794 sf duplex condo in one-year-old building; dining area, renovated kitchen, central air, high ceilings; two exposures, washer/dryer; common charges $229; taxes $18 (abated); asking price $399,000; four weeks on the market. (Felicia Putter, the Developers Group)

Queens

Astoria

$713,000

41-26 27th Street

2-bedroom, 2-bathroom, 1,100 sf condo in new construction elevator building; part-time doorman; dining room; building has roof deck, storage, laundry and gym; common charges $693; taxes $43 (abated); asking price $670,000; one day on the market. (Jessica Pfeiffer, the Developers Group)

Long Island City

$825,000

13-11 Jackson Avenue

1-bedroom, 2-bath condo in new elevator building (Echelon); part-time doorman; dining area, renovated kitchen and bathrooms, hardwood floors, washer/dryer, three exposures of Manhattan skyline; building has roof deck, health club and gym; common charges $629; taxes $2,268; asking price $840,000; nine weeks on the market. (Broker: David Ahdoot, the Developers Group)

Considering the intangibles that can factor into buying an apartment — the hipness of a neighborhood, the beauty of a view, whether that roof deck will really become a gathering place for sunset cocktails — getting a handle on how much space there is may seem straightforward.

Yet it isn’t. For condos, appraisers generally use one method, brokers prefer others, and it can be anybody’s guess how developers stretch their measuring tapes (though the results are often, er, generous.)

Co-ops, meanwhile, are an entirely different beast, owing to their unique ownership structure, so square footage usually isn’t included in listings. If it is, brokers admit that they often eyeball it.

Frustrated by these inconsistencies, the Real Estate Board of New York doesn’t bother to include size as a criterion on ResidentialNYC, the public listings service it launched in September 2007, a spokeswoman notes.

But this customary patchwork approach may not be flying anymore. A tightening market has buyers and sellers demanding more data about apartments, including more precise square footage figures, according to lawyers, brokers, developers and appraisers.

Sellers, eager to unload properties quickly in such an uncertain market, don’t want any extra quibbling to derail the sales process, so they are increasingly double-checking the sizes of units before advertising them, sources say.

And buyers, with wallets made lighter by the economic downturn, are unwilling to pay for square footage that doesn’t exist, according to experts. At the same time, it’s becoming a necessity for co-ops to produce hard-and-fast comparables, to vie for buyers who may also be looking at condos.

“All parties involved are paying more attention,” says Max Dobens, a vice president with Prudential Douglas Elliman. His firm — like the Corcoran Group, Brown Harris Stevens and Bellmarc Realty — inserts “approximate” or “estimate” before square-foot figures in its condo listings. Still, “if you see a round number, it’s probably wrong, and the right number is probably higher rather than lower,” he says.

A growing fear of lawsuits may also play a part in the new exactitude.

In November, Rishi and Heather Bhandari sued Two Trees Development over a 1,140-square-foot two-bedroom condo at 110 Livingston Street in Brooklyn that cost $795,000. They claim it’s 17 percent smaller than promised, a “material misrepresentation,” according to the suit.

To head off a similar problem, Dobens, who was representing a seller, recently called out a buyer’s broker for telling his client that an $899,000 two-bedroom Upper East Side condo was 1,020 square feet when it was actually 914 square feet as spelled out in the offering plan, Dobens says.

The buyer’s broker attributed the mix-up to a clerical error, and the matter was eventually dropped without a price change, Dobens adds.

The lesson? “Best to be accurate early so it doesn’t come back to bite you,” Dobens says.

Cubic square footage totals are also being challenged, says Adam Leitman Bailey, a Manhattan-based real estate attorney who’s currently suing a developer for promising nine-foot ceilings but delivering at only eight feet, he says.

The case involves a penthouse in the Empire condo at 188 East 78th Street on the Upper East Side. The unit was purchased by Ellen and Jim Sykes for $3.9 million a few years ago.

Though the Sykeses have since sold the unit, they’re seeking $1 million from the developers, Trevor Davis and Aby Rosen, for money they claim they lost on the sale because the ceilings were too low, Bailey says.

Increasingly holding developers to task, Bailey says, will create “less reckless conduct in the market, and buyers will benefit.”

In the past, developers have pumped up square-foot numbers by including elevator shafts; others tallied up terraces, says Shimshon Heskel of HMS Associates, an appraisal firm based in Borough Park, Brooklyn.

But buyers and sellers may be on to them. In the last few months, there’s been a 10 percent increase in requests for pre-closing verifications, he says.

“You can’t steal square footage,” Heskel says. “The whole industry is going through more scrutiny right now, and that’s good on the whole.”

For their part, developers admit that there are sometimes inaccurate measurements, though they’re typically the fault of sloppy architects, or worse, unscrupulous brokers, says Andrew Bradfield, a principal of Manhattan-based development company Orange Management.

“Built conditions can be off a bit, but if they’re off by 10 to 15 percent, someone is going to figure it out,” he says. “It’s such a bad way to make an extra buck.”

In his 22 Renwick, a 12-story condo between Spring and Canal streets in Soho, unit spaces were measured from the exterior wall, which is the rule of thumb for new buildings, as their walls tend to be thin, Bradfield says. By contrast, the square footage of converted older buildings, which can have thicker construction, is calculated from a mid-wall point.

Renwick’s 19 two- and three-bedrooms, from 1,000 to 1,900 square feet, are priced from $1.3 million to $3.4 million, and 10 have sold since November, Bradfield says.

Eric Albert, the owner of State Street Consultancy, a real estate firm in Boerum Hill, Brooklyn, says that a client once called him out on a co-op that Albert had promised was 850 square feet. Indeed, when the buyer went through with his own ruler, it turned out to be 770 square feet. The buyer ultimately purchased the unit, Albert says.

Typically, though, Albert sells townhouses, and he calculates simply by multiplying the building’s length by width. Although that’s essentially the method used by appraisers, he does it that way because he believes that much internal footage has a fundamental importance, even if it can’t accommodate tables and couches.

“Most people want walls around their bathrooms,” Albert says. “If there is value in that, how can you say that is unusable space?”

The penthouse additions that have been constructed atop Manhattan buildings have not only created
curious-looking skyboxes for wealthy
homeowners; they have also changed the value of the buildings they sit on.

This month The Real Deal set out to find exactly how a penthouse addition changes a building’s value. The experts consulted said penthouse additions can increase the value of both the entire building and individual apartment units.

“There’s certainly potential for enhanced value,” said Jonathan Miller, CEO of the appraisal firm Miller Samuel. “You’re increasing visibility or market awareness of the building. You’re enhancing the mix of apartments in the building. Also, when a co-op approves the penthouse addition, often you will see common areas upgraded as a condition for the renovation.”

The city’s Department of Buildings, which handles permits for construction and renovations, had 164 applications for penthouse additions in Manhattan in 2006 and 141 in 2007. As of late last month, the department had 112 applications to date for 2008, which puts it on pace to reach nearly 170 by the end of the year, besting 2006′s and 2007′s totals.

Costly propositions

Miller said that purchasing roof rights begins at 15 cents on the dollar per square foot compared to apartments in a given building, but added the cost could be “far higher.” The price of the roof can increase to 40 or 50 cents on the dollar per square foot. Some pay even more.

“The more permanence you build into the structure, that ratio increases,” Miller said. “But it’s really market-driven. There are so many variables rolling around that there’s no hard-and-fast rule.”

Arpad Baksa, the architect for a rooftop addition at 477 Broome, said the structure does not make much of a difference in the value of a larger building.

But in a smaller building, he noted, “it definitely does.”

Miller generally advises against building penthouse additions in an unusual style.

“The more people a property can appeal to, the greater the enhancement in value,” he said. “That’s the primary rule of thumb. If it’s not neutral enough, that tends to have a limiting effect on value. The exception would be a world-renowned architect.”

Real estate lawyer Allen Brill, a partner at real estate firm Brill & Misel, said the cost of constructing a luxury rooftop home can run from several hundred thousand dollars to several million.

However, he estimated that the value of an enclosed rooftop structure is twice that of an unenclosed area like a simple terrace.

Architect Kevin Kennon, whose designs were finalists in the World Trade Center competition, has been working on a condo project at 157 Hudson in Tribeca, purchased for $18 million in 2004.

According to Kennon, the project has been delayed because of refinancing issues, but is now scheduled for completion in early fall.

It will have 17 units at an average of 3,000 square feet, and two stories of high-end dwellings on top of the landmarked three-story building.

Kennon seemed confident that the rooftop structures will add value to the building. “Penthouses are always more valuable,” said Kennon. “They tend to go at almost double the square-foot basis.”

Jared Seligman, who was named the Corcoran Group’s 2007 rookie of the year, noted that height regulations can be hard to navigate. But, he said, “Everyone’s first question is, ‘Can we buy the roof?’”

While negotiating for roof rights can be tricky, that hasn’t stopped many New Yorkers from doing it. One thing those looking to build have going for them is the fact that their coveted add-ons can help lower the maintenance costs for other owners in the building because they can help raise cash for the building’s board.

But sometimes the additions are precluded by zoning laws that prevent owners from establishing a permanent structure on the roof. In some of those cases, owners build “cabanas”— temporary structures on the roof — and co-op boards draft contracts so that the owner is bound to destroy the temporary structure if the penthouse is sold.

Marianne Hyde, one half of the husband-wife boutique architectural firm
Zakrzewski + Hyde, said her firm has built or developed plans for 10 penthouse addition properties. One of their projects was the addition baseball star Mike Piazza plopped onto the apartment he bought in 2004 for a reported $4 million in Tribeca. He is now reportedly planning on selling it. According to Curbed, Jon Stewart lives on a separate floor in the same building.

“In New York, everyone likes a trophy apartment, and when you want the outdoor space, a lot of times you need to be on top,” Seligman said.

With housing prices declining in neighborhoods hard hit by the foreclosure crisis, the question on many real estate minds is: Why are banks and investor-controlled trusts not doing more to cut their losses by working out loan modifications?

The answer, according to some analysts, is that mortgage servicers are calling the shots. And although the servicers have a legal obligation to maximize revenue for the owners of the mortgage-backed security, critics of the industry claim that servicers’ financial interests are often in conflict with the investors they are ostensibly working for.

In the last few months, the mortgage servicing industry has come under increased scrutiny, as both housing advocates and state legislators have seized upon its business practices as a problem that may be deepening the housing crisis. Just last month, Governor Paterson signed legislation intended to make the loan modification process less arduous.

Some say mortgage servicers are milking homeowners for delinquency fees, raking in more money from them either before the home reaches foreclosure or before they can catch up on payments.

One key part of the problem: homeowners who are delinquent on their loans can be a critical component of the servicer’s revenue.

“I have had people in the [servicing] industry tell me that their best customer is the one who is always 30 days late,” said Howard Glaser, a former official at the U.S. Department of Housing and Urban Development, and the president of the Washington, D.C.-based Glaser Group, a mortgage industry consulting firm.

“If you can keep the borrower on the hook and paying late fees, that is where the profit is in servicing,” Glaser said. “Otherwise, if everybody is paying on time, there isn’t a tremendous amount of profit.

“There is an element of ‘suck the loan dry, and then once you have gotten everything out of it that you can, you leave the carcass on the side of the road.’”

Maximizing revenue

In many mortgage securitizations, the mortgage servicer pays for the servicing rights on a mortgage. In return for a portion of the interest on the loan, it collects mortgage payments and distributes them to the bank or the trust that owns the mortgages.

Mortgage servicers lose this source of revenue when a house goes into foreclosure. However, some analysts say keeping homeowners on the verge of foreclosure is so profitable that servicers have little incentive to make the types of loan modifications that would enable the homeowners to catch up on their payments and stay current afterwards.

“A lender would say that it is always in their interest to do modifications with borrowers and keep the cash flow coming in from the loans,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, a Manhattan-based group that advocates for low-income communities. “But because of the way the securitization system is structured, it is the servicers who make these decisions. They make fees when the borrower gets behind and the fees amplify — where they don’t make money is in doing loan modifications.”

In addition to the profits servicers make from tacking fees onto delinquent loans, there are other disincentives for them to modify mortgages, said Ellen Harnick, senior policy counsel of the Center for Responsible Lending, a national nonprofit.

Although servicers generally get reimbursed for third-party expenses related to foreclosure, they must cover the costs of loan modification in-house. There is also often a “piggy-backed second mortgage” which, according to CRL, can make modifying difficult because the second-mortgage holder has little incentive to cooperate.

In addition, because mortgage servicers are legally mandated to maximize revenues for the trusts that own the mortgage, they fear being sued by investors if they write down the value of the loan, Harnick said.

“If the servicer simply forecloses on every single mortgage, they are doing what they always did, whereas if they modify a loan or accept a short refinance or a short sale, then they are subject to an argument about whether they properly exercised their discretion,” she said. “Could they have gotten a better deal?”

Disputing allegations

The mortgage securitization industry disputes allegations that servicers are more inclined to foreclose than to pursue loan modifications.

“People think that it is in the best interests of servicers to foreclose, but it is not,” said Tom Deutsch, deputy executive director of the American Securitization Forum. “Ultimately, the servicer loses the [standard] servicing fee, which is their source of revenue, and they have to go through the foreclosure process, which is time-consuming, and for which they do not receive reimbursement.”

Deutsch said one of the biggest barriers to working out loan modifications is borrowers. Borrowers, he said, have failed to take advantage of a fast-track loan modification program that was announced by the ASF late last year.

“A number of servicers have sent out cards and letters to borrowers saying, ‘Congratulations, based on our review of your files you are eligible for a fast-track loan modification — if you sign here we will freeze your interest rate at its existing rate,’” he said. “But in approximately 40 percent of the cases, the borrower doesn’t respond to those letters.”

Another major hurdle is that many homeowners are simply in too much debt to carry even greatly reduced mortgage payments, said Mordy Husarsky, managing director of the Brooklyn-based mortgage brokerage Fairmount Funding. So, loan modifications are simply not doable for a lot of homeowners.

“It depends how much debt servicers are going to have to write down to make it work,” said Husarsky, whose firm recently sold a servicing operation that he says serviced approximately $1 billion worth of mortgages. “Since we are talking about every single loan in foreclosure, it is an arduous task. Who is weeding out all of the borrowers to figure out exactly what it is the borrower is capable of doing? Is it faster and more efficient to foreclose, because then you have to monitor what the modification was? Will the borrower honor the agreement? What happens if they don’t honor it? It is all very complex.”

Also, despite recent efforts by the securitization forum to simplify the loan modification process, there is still a lot of red tape for homeowners.

“It borders on the impossible,” said Charles Assini, legal counselor to Frank Padavan, New York state senator, who has been working with homeowners in Jamaica, Queens, which has been hard hit by the foreclosure crisis. “I doubt a homeowner could do this by himself or herself — just finding the right person to talk to is a monstrous task. It is frustrating because [the mortgage servicers] keep changing the personnel. You never get the same person on the phone. And then the mortgage gets sold, and you have to start all over.”

Changing the law

The legislation passed in Albany and signed into law by Governor Paterson in August holds out some promise of making the loan modification process easier.

Under the new bill, mortgage servicers will be required to notify homeowners who took out subprime or nontraditional mortgages between Jan. 1, 2003 and Sept. 1, 2008, 90 days before initiating a foreclosure proceeding. They will also have to show up to court-monitored settlement hearings with subprime homeowners facing foreclosure.

While many in the homeowner advocacy community support the legislation, it faced stiff opposition from some in the mortgage banking industry, as well as foreclosure attorneys.

“The lending community objected. They said, ‘This is going to slow down our ability to foreclose,’” said Steven Alden, chair of the state Bar Association’s Task Force on Mortgage Foreclosures. “The Legislature said, ‘Good, that is exactly what we wanted to do.’”

Although the new law may slow the pace of foreclosures, it is not clear what impact it will have on the number of foreclosures. For one thing, while the law mandates court-supervised settlement conferences, it does not require servicers to actually modify mortgages.

For another, it doesn’t address a valuable source of revenue, the onerous late fees that servicers attach to delinquent mortgage payments.

Moe Bedard, president of Loan Safe Solutions, a California-based mortgage auditing and loan processing firm, said there is so much money to be made on delinquent loans that servicers are willing to risk that they will lose servicing fees on the percentage of homes that do go into foreclosure.

“The goal is not to have the home foreclosed on,” he said. “It is to rack up as many late fees as you can because of this big foreclosure mess and then save the home at the last minute, charge them 50 grand and put it on the back of the loan. You multiply that by thousands of loans that are doing this, and you see the profit that can be made.”

“Again,” he added, “it is a roulette theory: Some are going to pay off, and some are not.”

While New York real estate brokers may not be licensed to sell properties outside the city, some developers are giving them good money to market out-of-town properties to residents in the five boroughs and overseas.

With a downturn in the sales market being felt more severely outside the borders of New York City, developers are turning to brokers here to tap into their potential pool of purchasers and their international clienteles.

As a result, New York-based brokerages are increasingly working with real estate firms all over the country and world, in places ranging from Jersey City to Houston to Miami to Mexico to Abu Dhabi.

Halstead Property, for example, is marketing a project in Jersey City called A Condo — a loft-style building with 250 one- to three-bedroom units priced from $350,000 to just over $1 million.

“The reason they wanted us was the name-brand recognition of a large firm; they also believed they needed a Manhattan base, and a name that a Manhattanite would recognize,” said Steve Kliegerman, the brokerage’s senior vice president of marketing.

But joining forces with a partner in the city can be tricky for developers working on projects elsewhere — because a New York-licensed broker cannot work out of state unless they are licensed there. (Internationally, the rules vary from country to country.)

In the case of A Condo, the New Jersey firm Classic Realty and New York-based Halstead are both working on sales. Classic Realty is handling the sales office in Jersey City, with Halstead’s New Jersey director of sales, Gene Cordano, who holds dual state licenses, heading up his firm’s effort.

Cordano said the developer of the
project, the Athena Group, wanted to attract both young professionals and empty-nesters from both the city and New Jersey.

In another attempt to attract young New York professionals, West Orange, NJ-based Jordan Baris has teamed up with Fillmore Real Estate, the largest independent brokerage in Brooklyn, to attract buyers across the river to new homes in Newark’s South Ward. The homes are priced starting at $239,000, well below prices of similar starter homes in Brooklyn.

While commission structures can vary in out-of-town deals, in the case of A Condo, commissions accrue to the local agent, and Halstead is paid a referral or marketing fee by the developer. Kliegerman declined to reveal the amount.

Like Halstead, Shvo, which made headlines when it marketed 20 Pine Street and its Armani Casa interiors, is currently marketing projects around the country and globe.

In Shvo’s marketing pipeline are luxury villas with developer Boymelgreen in Houston, Texas; a mixed-use project in Utah; and the private island development dubbed Nurai off the coast of Abu Dhabi. And, there are more on the horizon, said Jason Press, executive vice president of marketing for Shvo.

In most instances, Shvo’s sales teams consist of one or two people from the central sales office and a team of local brokers that they recruit. Shvo also collects a referral fee, but Press said their arrangement is based on performance. He declined to provide more specifics on the commission structure.

The firm also has taken the extra step of becoming licensed out of state in both Texas and Utah. It also acts as the primary broker in Abu Dhabi, where it recently opened an office. Shvo has formed a partnership with Zaya, an Abu Dhabi-based real estate development company, to sell the properties.

Press said Shvo is also in talks to market developments in London, Eastern Europe and some other Middle East locations, and that it is considering a presence in Paris. Members of the firm recently attended a conference in Paris where they conferred with local professionals about the market.

According to real estate experts, it makes sense for New York brokerages to team up with developers elsewhere, especially as the market softens and business here slows down.

Paul Purcell — a partner at Braddock + Purcell who built the Prudential Douglas Elliman corporate development and relocation business, and ran the Corcoran referral group prior to starting his own firm — said the concept of representing out-of-town developers is not new. But, he said, it is
sometimes not as productive as “being physically there or having a representative there.”

As for commission structure, Purcell said the referral fee is commonly 25 percent of the split. So if the total commission in Florida was, say, 6 percent, the referral would be 25 percent of 3 percent, and that amount would accrue to the firm, not the broker. But he said it would not be unheard of for a developer to pay as much as 6 percent, or even more, directly to the referral firm, especially if the market there is hurting.

Prudential Douglas Elliman’s Shemesh Group has partnered with a non-New York developer. Run by managing director Tamir Shemesh, the group’s seven-person team is representing Park Place on the Ocean, a 33-story oceanfront luxury condo development designed by Kobi Karp in Sunny Isles, Fla., just north of Miami Beach. They are marketing the project in New York, nationally and internationally.

The group works with a local sales team at the development to sell the condos. One-bedroom units there start in the high $600,000 range, while three-bedrooms begin at $700,000. The team receives a referral fee for sold units,
Shemesh said. But he declined to reveal the amount.

The development — which is being constructed by Florida
developer Hector Dasso — is expected to be completed in September 2009.

Meanwhile, in an arrangement which was featured on The Real Deal’s Webcast last month, the Bracha Group at Prudential Douglas Elliman was brought on as the exclusive agent for the Canco Lofts development in Jersey City.

And, in April, The Real Deal reported that the Chelsea-based firm Kurland Realty was planning to open a sales center for 200 second homes in a small town in Pike County, Pennsylvania. The Pennsylvania developer, Country Homes, brought Kurland on specifically to target Manhattanites.

In most of these partnerships, the developer expects to tap into the broader advertising reach of the brokerage, Kliegerman said. On the A Condo project, the Athena Group wanted a firm with “a greater reach in terms of advertising.”

Halstead used Google keywords and searches, which Cordano said drove 75 to 80 percent of their traffic.

Although only 15 percent of A Condo’s buyers ended up coming from Manhattan, most were first-time buyers looking for deals.

At an average of $700 per square foot for the one-
bedrooms, the units are “a screaming bargain compared to New York,” said Cordano.

Selling New York City new developments to New York buyers is challenging enough, but selling those same units to buyers from outside of New York can be completely confusing when other states and foreign countries have their own laws about buying and selling real estate.

The rules for advertising or selling real estate are more onerous in some states, like New York and New Jersey, than others.

“The real issue is certain states require [an] attorney general’s approval in that state for the offering plan before you can advertise in that state,” said Clifford Finn, managing director of new development marketing at Citi Habitats. “You have to file your plan and it can be costly.”

In order to market or sell new construction or a rehabilitation project from somewhere outside of the state to New Yorkers, the sponsor has to submit plans to the New York attorney general’s office, which can cost several tens of thousands of dollars.

Similarly, in New Jersey, the state’s real estate commission administers and enforces the Real Estate Sales Full Disclosure Act, which “regulates the marketing and sale in New Jersey of real estate interests located in other states and countries,” according to the state Web site. “Persons who wish to market such properties in New Jersey must first register their projects with the commission.”

Since there is no one public portal with information about all jurisdictions, and laws vary from state to state and country to country, real estate pros suggest developers, and buyers themselves, consult local attorneys in the areas where they are selling or buying property.

Some jurisdictions may not have any regulations, while others require more documentation.

To conduct sales in another state, an agent has to be licensed in that state, said real estate attorney Terrence Oved of Oved & Oved.

Meanwhile, to just advertise or test the market for a project in New York, developers have to submit an application, a so-called Cooperative Policy Statement 1, to the attorney general’s office along with a $225 filing fee. If the application is approved, the state then has to okay the actual ads.

Should a developer want to proceed with sales, he needs to file the offering plan, which can cost up to $30,000, depending on the total offering price, Oved noted.

According to the Web site for the New York attorney general, its real estate financing section “requires the filing of prospectuses or offering circulars, which must
disclose information concerning all material aspects of the offering.”

Patricia Warburg Cliff, a senior vice president and director of European sales for the Corcoran Group, finds the process of selling units in a new development across state lines complicated, though she noted that a resale by an individual outside of New York to a New Yorker does not need to be registered with the state.

Should someone sell units in New York without receiving the necessary approvals from the attorney general’s office, the state can force the developer to file the proper forms, render the sales invalid and sue for damages. However, most people do not go afoul of the law, Oved said, because they work with knowledgeable attorneys.

Even murkier is the overseas buying and selling of real estate.

“Buyers from other states can buy in our developments subject to the offering plan in New York City. However, selling to international buyers requires that all paperwork be handled through an intermediary New York City lawyer familiar with international real estate laws,” said Andrew Gerringer, executive vice president in charge of the development marketing group and investment sales division at Prudential Douglas Elliman.

“I find the whole process unclear and that very few people understand the rules and regulations. There should really be some clear policy easily obtained about this through the AG’s office.”

As for selling real estate in another country, Oved noted that “the protections that are in place in the United States are not as prevalent overseas.”

Elizabeth Stribling, president of Stribling & Associates, echoed his comment: “Amazingly, there are no licensing laws in Europe.”

In France, where Stribling also conducts business, an American firm cannot open an office, she said. But, she added, an American agent can work through a local agency on a referral-fee basis to handle properties or customer referrals.

The calendar says back to school, and for the real estate industry that means back to business and an end to the summer doldrums. Watch for the end of the month to be marked by closings of spring deals, an influx of homes being listed (or re-listed) and buyers taking out their checkbooks.

But although fall is typically when the market goes on an upswing, this year, buyers are still expected to be hesitant to pull the trigger, and September data is expected to be somewhat off from years past as economic uncertainty lingers. Comments

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Perhaps being named ‘One’ — or even something close to it — is a self-fulfilling prophecy.

The addresses of the most expensive condominiums in Brooklyn — One Brooklyn Bridge Park, One Main Street and On Prospect Park (located at One Grand Army Plaza) — appear to herald their top rankings. Those three buildings, between them, account for the borough’s top 10 sales. In two cases, the developers applied for an official address change to get the aspirational number in their monikers, the equivalent of Donald Trump naming his newborn son “Barron.”

Penthouses in these buildings are also the likely contenders for the borough’s next record-breaking sale. To capture that title, they must exceed the current number one, a $7 million-plus, 14th-floor unit at Dumbo’s One Main Street (see At Brooklyn’s new priciest condo in the June issue of The Real Deal). Condo sales in the last four years at the former cardboard box factory, which sits at the edge of a waterfront park between the Manhattan and Brooklyn bridges, have captured, in some cases, over $1,000 a square foot.

Karen Heyman, senior vice president of Sotheby’s International Realty’s Downtown office, who handled the listing, would not reveal the exact sales price but said the contract has been signed.

One Brooklyn Bridge Park — named after the planned 85-acre waterfront park that only recently began construction after decades of wrangling — dominates the top 10 list with the next eight highest sales.

According to figures provided by Jeffrey Stockwell, Stribling senior vice president, contracts for between $4.45 million and $6.96 million are signed for apartments there. Five of those sales are for apartments with two or more units combined. Stockwell said this is a popular trend, as buyers are taking advantage of the construction phase to create larger rooms.

Number 10 on the list is a $4.4 million four-bedroom at One Grand Army Plaza in Prospect Heights, designed by famed minimalist architect Richard Meier. That figure, provided by developer Mario Procida of SDS Procida, is also for a signed contract that hasn’t yet been recorded.

Procida seemed confident during a recent interview that he would have the next record-breaker. He said two buyers are bidding on a 5,652-square-foot penthouse that has an additional 2,861 square feet of terraces on three levels. The price, he said, is up to $8 million.

Two units were combined to create the corner penthouse. Cheryl Nielsen-Saaf, Corcoran director of sales, said several buyers had expressed interest in combining apartments, either to increase the number of rooms or to make them larger. So the developer combined 26 apartments, decreasing the total from 114 to 99 apartments.

The sleek, glass-walled building overlooks Prospect Park, the Brooklyn Botanical Garden and the Brooklyn Public Library — which used to be known as “One Grand Army Plaza.”

However, the library’s use of it as a mailing address was unofficial, and Procida put in an official application for the address with the borough president’s office. Other options had included 1 Eastern Parkway, which lacked that “extra little piece of sizzle,” as Nielsen-Saaf put it.

“We now use 10 Grand Army Plaza,” said library spokeswoman Stephanie Arck.

Naturally, developers of the top-ranked buildings display a touch of bravado when asked about their competition. Of One Brooklyn Bridge Park’s location on the waterfront side of the Brooklyn-Queens Expressway, Procida said, “It’s not a neighborhood, it’s an edge … our residents already have spectacular views.”

The 449-unit One Brooklyn Bridge Park is so close to the glistening harbor, it’s nearly touching it — and borders industrial piers slated to become a rolling green park, poised to be the borough’s finest since Prospect Park. Brooklyn Heights is accessible by a cobblestone street across from busy Furman Street.

Developer Robert Levine, founder of RAL Companies & Affiliates, said he applied to have the former Jehovah’s Witnesses printing factory address changed from 360 Furman Street. “The idea was that we were the first in the park.”

Levine’s prized 4,638-square-foot penthouse is three floors with towering 13-foot ceilings and has a 998-square-foot private rooftop accessible by its own elevator. Tentatively, it is priced at $7.75 million.

But a penthouse under renovation at One Main Street could enable that building to continue its reign as number one. Heyman said developer Two Trees Management is retrofitting the cavernous top floor into a three-story penthouse.

According to a spokeswoman for the developer, the penthouse would be roughly 6,000 square feet, with a private rooftop “observation deck.”

The deck’s most unique features are the four 15-foot-high clocks on each wall and dramatic views of the city.

When Levine was told of the price, he laughed, “If [Two Trees founder David Walentas] sells that penthouse for $30 million, that would be great news for me.”

But few people know exactly what Walentas dreamed up for the cavernous space. He won’t talk about it.

Top 10 most expensive Brooklyn condos

1. One Main Street, Dumbo, $7 million-plus*, full-floor, 3,200 square feet, no terrace, 3 bedrooms, 2.5 baths.

2. One Brooklyn Bridge Park, Brooklyn Heights, $6.96 million, four lower penthouse units combined, 6,145 square feet interior and 826 square feet exterior, 6 bedrooms, 5 bathrooms.

3. One Brooklyn Bridge Park, Brooklyn Heights, $6.19 million, two townhouses combined, 4,949 square feet interior and 839 square feet exterior, 6 bedrooms, 5 bathrooms.

4. One Brooklyn Bridge Park, Brooklyn Heights, $6.05 million, two lower penthouse units combined, 3,442 square feet interior and 1,900 square feet exterior, one bedroom, library, office, 4.5 bathrooms.

5. One Brooklyn Bridge Park, Brooklyn Heights, $5.35 million, lower penthouse, 2,687 square feet interior and 2,029 square feet exterior, 4 bedrooms, 4 bathrooms.

6. One Brooklyn Bridge Park, Brooklyn Heights, $5.15 million, two lower penthouses, 3,456 square feet interior and 1,903 square feet exterior, 4 bedrooms, 4 bathrooms.

7. One Brooklyn Bridge Park, Brooklyn Heights, $4.998 million, two apartments, 3,946 square feet interior (no additional information provided).

8. One Brooklyn Bridge Park, Brooklyn Heights, $4.575 million, lower penthouse, 2,191 square feet interior and 1,696 square feet exterior, 3 bedrooms, 3 bathrooms.

9. One Brooklyn Bridge Park, Brooklyn Heights, $4.45 million, lower penthouse, 2,452 square feet interior and 1,814 square feet exterior, 3 bedrooms, 3 bathrooms.

10. On Prospect Park, Prospect Heights, $4.4 million, 2,608 square feet, 72 square feet exterior, 4 bedrooms, 3 baths.

Go to chart: The top 10 most expensive Staten Island condos

Unlike New York City’s other four boroughs, which continued to post record-breaking condo sales and signed contracts into 2008, Staten Island’s top 10 most expensive condos were nearly all sold before mid-2006, all in projects started in the 1980s.

Figures provided by Property Shark indicate that even some of those high-end properties may have seen depreciation in value.

Still, amazingly enough, those record prices for condos in Staten Island, New York City’s most suburban-like borough, where the housing stock is mainly single-family homes, are less than the average condo price in Manhattan.

In Port Regálle — a Mediterranean-inspired townhouse project started on former wetlands in the 1980s — top condos sold for an average of $360 per square foot between 2003 and 2006. Since then, the average has dropped to $328 per square foot. The project also ran into financial troubles, was taken over by the bank, and is in the process of being completed by another developer.

The Great Kills development still claims nine of the 20 most expensive condos in Staten Island, including the record-breaker, a 2,048-square-foot, three-story townhouse-style condo purchased in 2005 for $989,000 by real estate attorney William O’Neill.

The properties’ multi-tiered back porches overlook the glistening Great Kills Harbor, dotted during the summer with private boats that dock along its coastline. But from the front, they overlook a construction site still in progress.

Another of the top condominium projects, Bay Street Landing in St. George, had serious issues with water leakage when it opened in the 1980s, said Norma Sue Wolfe, one of the first residents and a saleswoman at Gateway Arms Realty Corporation.

Three of the buildings in that development, converted seaside warehouses, are complete — two co-ops and a condominium, 80 Bay Street Landing, which Wolfe said sold out in 1996. The building claims three of the borough’s top 20 sales at between $670,000 and $695,000, for up to 2,579 square feet.

Developer Leib Puretz, who is not responsible for the other three buildings, is nearing completion on a fourth conversion in the gated community, known as the Pearl. While that building also had water leakage issues, Sal Raziano, a sales agent at the project’s marketing firm, Cassandra Properties, insisted they have been resolved.

Puretz also built a new 57-unit building across the street, the Pointe, which is half sold after nine months on the market, according to Raziano.

Meanwhile, Joseph Riccardi, head of the condo board at a tower also built in the 1980s in the predominantly Italian neighborhood of Rosebank, said his building has a waiting list. He owns the borough’s second most expensive condo, a 3,500-square-foot penthouse with two generous terraces that he purchased for $850,000 two years ago.

He attributed his building’s success to its quiet, safe atmosphere. Riccardi, a 40-year-old vice president of a foreign exchange firm, said he’s the youngest person in his building — most residents are retired — and the blue-collar neighborhood around the building is safe at night.

In St. George, “if you walk out after 10 p.m. you’ll get mugged,” he said, noting that at many of the island’s lower-priced condos, “it’s a free-for-all — drug dealers, prostitutes, just a lot of bad elements.”

Riccardi continued, “my neighborhood, it’s an old, blue-collar neighborhood. People know each other.”

Still, Staten Island’s market is generally more sought out for its single-family homes with yards in a suburban setting, which are far more attainable price-wise here than anywhere else in the city.

Dawn Carpenter, president of the Staten Island Board of Realtors, who manages some 1,000 condominiums, said her condo buyers are generally empty nesters, young couples and singles who are attracted to the condo lifestyle, particularly the part that requires no outdoor maintenance.

Until recently, Staten Island had constantly ranked as the city’s fastest-growing borough, growth fueled by the completion of the Verrazano-Narrows Bridge in 1964. With the increase in population, now approaching 500,000, came the demand for more multi-family housing.

However, condo production in Staten Island topped off long before the other boroughs, which continued to see a consistent number of offering plans filed with the Department of State into the second quarter of this year.

According to the department, Staten Island developers filed offering plans for 443 co-op and condo units between 2004 and 2006. Developers filed plans for only 41 units from 2007 through the second quarter of this year.

And, according to the city’s Department of Buildings, in 2006 new building permits dropped by 43 percent compared to the previous year.

Bill Staniford, CEO of Property Shark, said Staten Island’s market has suffered the most in recent years because of decreased demand coupled with one of the highest rates of foreclosure.

Carpenter added that foreclosures are particularly troubling in condominium developments because the lower price of a distressed sale is more likely to affect neighboring property values, and a distressed seller often leaves outstanding common charges unpaid.

But she said the worst may have passed. “We’re holding our own here in Staten Island. We’ve leveled off, so we’re in a good position. We believe the correction is over,” she said.

Jane Kilcullen, a homemaker, lives with her husband, a construction worker, in the borough’s sixth-most expensive condo, also in Port Regálle. She said financial troubles led the bank to take over the project, which has since been re-started by another developer, but some promised amenities, such as the pool, still haven’t been built.

Residents still have first dibs on the development’s private boat slips, which are then often rented out.

Despite the project’s troubles, Kilcullen, a former lifelong Brooklynite, said she loves her townhouse’s spectacular view of Great Kills Harbor and the neighborhood steeped in Italian culture.

They don’t plan to move anytime soon, which is a good plan, according to Staniford, who said the borough is still due for a 10 to 15 percent correction that would take at least five years to work itself out.

Go to chart: The top 10 most expensive Queens Condos

Once
characterized by factories, taxi garages and train yards, Long Island
City has in the past three years transformed itself into Queens’ top
neighborhood for condominium sales.

Buyers who would otherwise live in Manhattan are checking out Long
Island City’s newly constructed, loft-like apartments that are
typically convenient to Midtown. While the neighborhood still retains
much of its industrial grit, amenities to serve the new residents are
opening — last month, it was Food Cellar, the neighborhood’s first
organic supermarket.

Prices for the top 10 condos in Queens ranged from nearly $3
million for a 3,225-square-foot penthouse at Long Island City’s Arris
Lofts, a location which dominated the list with eight spots in the top
10, to $1.5 million for a 2,056-square-foot condo purchased in Forest
Hills three years ago.

Developer Tibi Zicherman owns the fifth-most expensive condo in the
borough, two penthouse apartments he combined in his project, the Badge
Building, also in Long Island City.

The more recent pricey deals are happening despite the large amount
of condo inventory coming on the market there. Other pending deals, if
recorded, would make the Queens top 10 list a more diverse showcase of
Long Island City’s growth, like a $2 million penthouse in the Karl
Fischer-designed PowerHouse Condominium.

Stacy Spielman, sales director, said the sun-soaked penthouse is in
contract with an acrobat, who was taken by its double-level cylindrical
tower of windows. Fischer created four such towers on the building, a
converted power house, to resemble smokestacks.

Spielman, like other brokers in the area, said nearly all of her
prospective buyers work in Midtown Manhattan and are also looking at
condos in that borough.

This is a significant change for the Queens real estate market
compared to a decade ago, said the president of AGH Birchwood
Portfolio, Myles Horn, who has specialized in remarketing large blocks
of unsold condo and co-op units since the 1970s.

“You never used to see anybody who would otherwise live in
Manhattan,” Horn said. “These were people who were always outer-borough
people. It wasn’t an option for them to live in Manhattan.”

In all, there are 10 new condo projects totaling 1,100 apartments
selling in the neighborhood, with 385 units — or 35 percent — left on
the market, according to Melina Starr, a broker at Prudential Douglas
Elliman. She said her firm is also tracking five new projects totaling
478 apartments slated to open this year.

Many of these units are priced between $400,000 and $700,000, and
are selling fast, which might just buoy Long Island City during the
sluggish real estate market while new projects in other neighborhoods,
marketed exclusively to the ultra-high-end buyer, are struggling to
make sales.

Starr said while buyers are taking longer “to pull the trigger,”
she’s not concerned about Long Island City units because they are
significantly less expensive per square foot than the competition in
Manhattan.

“Our first project in Long Island City started sales in 2005, and
we averaged $665 per square foot. Our current projects are averaging
north of $750 per square foot,” she noted. That is still half the
Manhattan new development average of $1,469 per square foot, according
to Corcoran, and less than in many parts of Brooklyn.

Darius Tencza, an attorney who works in Midtown, said he only
looked in Manhattan and Long Island City when he and his wife, Marina,
decided to move back after raising their three kids in a New Jersey
suburb.

“I’ve been commuting in from the ‘burbs for the past 25 years,
except for the time that we lived in Manhattan, and it’s a hassle,”
said Tencza. “We had always thought about moving back when I retired,
but after our last graduated from high school, we thought about it and
said, ‘Why wait?’”

After looking at countless Manhattan properties half the size, the
couple broke the record for the most expensive condo sold in Queens
with their purchase of a $2.995 million, 3,225-square-foot penthouse,
with two terraces totaling 4,500 square feet, at Arris Lofts. Counting
the outdoor space, that’s just $388 per square foot.

Tencza was attracted to the convenience. With the Queens Court
transit hub across the street, it takes him 15 minutes to get to work,
whereas it takes his son “12 minutes just to walk to the 6 train” from
his Upper East Side home. His wife was won over by the space,
particularly outdoors, which after moving from their 7,000-square-foot
house on two acres in the suburbs was the best possible consolation she
could offer their three dogs.

After being on the market for two years, roughly 10 percent of the
237 units at Arris, a converted factory, are still for sale, said
Corcoran vice president Tom Lee.

Two other Arris buyers said they decided to move back to the city
after raising kids in the suburbs, and ended up choosing Long Island
City over Manhattan because it offered more space and convenience.

Lee said empty nesters only comprise a portion of Arris buyers.
Many are young, creative professionals, such as the jet-setting
superstar DJ Danny Tenaglia. He owns the borough’s 13th most expensive
condo, a penthouse down the hall from the Tenczas.

Developer the Andalex Group cut into the triangular center of the
building to create a landscaped common courtyard, which also pours
light into what would otherwise be dark corners of the lofts. Features
like a 24-hour doorman, fitness area and 54-foot lap pool also give the
building a truly luxurious feel.

But the generous terraces are what really set top condos in the neighborhood apart from others in the city.

Badge developer Tibi Zicherman combined two of his 44-unit
building’s apartments, and had the 2,700-square-foot penthouse
customized by the building’s interior designer, Ostap Rudakevych of
Studio Lindfors. Among other features, the developer wanted a terrace
fit for entertaining.

“Tibi also loves to barbecue outside — he told me if he could, he
would grill every day. This led me to create an expansive, easy-to-use
stair leading up to the rooftop terrace, where we installed a sink,
grill and a seating area,” Rudakevych said.

“The stair became the center of the apartment, dividing the guest
wing from the public spaces. To give the interior space of the
apartment a light and airy feeling, the sculptural stair is illuminated
by an oversize skylight, allowing natural light to wash in.”

Doron Zwickel, Prudential Douglas Elliman director of sales at the Badge Building, said units are 85 percent sold.

Bill Staniford, CEO of Property Shark, said Long Island City has
one of the more promising markets in the five boroughs, relatively
speaking.

The top buyers “are definitely going to take a hit, but if they’re
in it for the long term, they’ll be OK in five to 10 years,” said
Staniford. “If you bought at the peak, then everybody is going to lose
some value.”

He also said the area’s mid-priced units, which still feature
luxury amenities and appeal to well-off buyers, would help keep units
selling.

Go to chart: The top 10 most expensive Bronx condos

All
but one of the Bronx’s top 10 most expensive condominiums are in the
lush, hilly neighborhood of Riverdale, seemingly cordoned off from the
rest of the city by the Hudson and Harlem Rivers, Van Cortlandt Park
and the Major Deegan Expressway.

They range from a $1.545 million apartment lined by
floor-to-ceiling windows at the sleek new Solaria tower, to a $1
million apartment that practically hangs over the Hudson River, facing
the New Jersey Palisades at an older building on Palisade Avenue. The
one exception to Riverdale is the borough’s seventh most expensive
condo, on City Island, a far-flung, 230-acre fishing-and-bedroom
community of 5,000 in the Long Island Sound mainly accessible by a
single bridge.

Access to mass transportation, elite public and private schools, a
smattering of tidy shopping and dining options, and attractive scenery
have long made Riverdale a desirable option for New Yorkers more
interested in peace and quiet than a flashy urban lifestyle — at condo
prices significantly lower than in Manhattan.

Susan Goldy, who owns a prominent real estate firm in the area by
the same name, said condo buyers “tend to be people downsizing from
larger homes in Westchester, who want to be closer to Manhattan but
don’t require Manhattan.”

Inversely, she said, families from Manhattan, or families
transferring from out-of-town to work in Manhattan, are attracted to
Riverdale’s abundance of nature and top schools. “Sometimes the city is
just a little too much for them; they need that blend of suburbia.”

Picturesque single-family homes comprise a large part of
Riverdale’s market. Storybook mansions can run up to $4.5 million in
the estate area west of the Henry Hudson Parkway, to as low as $625,000
in North Riverdale near the College of Mount St. Vincent, according to
Trebach Realty.

Luxury condominiums are a relatively new phenomenon (most of the
older multi-family buildings are co-ops). Prices range from around
$300,000 to $1.5 million, up from $150,000 to $1.1 million three years
ago, according to brokers.

Two of the Bronx’s priciest condos are actually townhouses, part of
the Hayden on the Hudson development, which has a large,
crescent-shaped tower as its centerpiece. It was finished in the 1980s
and is nestled on a private hillside road across from Riverdale Park.
Each of the townhouses has a private yard and access to the
development’s pool, gym, tennis courts and nature trails. Such
townhouse-style condominiums are scattered throughout Riverdale.

Bradford Trebach, a broker for 25 years and also vice president of
Bronx Community Board 8, said 15 new buildings have either been
recently completed or are slated for construction in Riverdale.

“This has been the biggest building push in Riverdale since the building boom in the 1950s,” said Trebach.

It’s also one that has met with fierce resistance. Community Board
8 led an effort to “prevent overdevelopment by the contextual
downzoning of large parts of Riverdale and Kingsbridge,” he said. “And
we advocated to create the Fieldston Historic District, which is a
large area of high-end homes in Central Riverdale.”

He said Solaria, Riverdale’s tallest building at 20 stories, “made
it by the skin of its teeth … if Solaria had been just a few days late
in completing its foundation, they would not have been able to build.”

Solaria developer Joseph Korff, principal of Arc Development,
pointed out that as a result, many of the views from his tower are
protected.

Solaria claims six of the top 10 slots, but it hasn’t sold too many
more of its 66 units even after two years on the market. Korff said 30
percent of the building’s apartments are sold. But, according to
Property Shark, a real estate data Web site, sales for only nine units
have been recorded, just enough for a condo offering plan to take
effect.
Note: Correction appended.

Korff noted that he recently revised his sales strategy, and is
considering revising it again, to include more events and direct
marketing. “I think people don’t know about Riverdale, they don’t
really appreciate the neighborhood,” he said.

In response to tightened lending practices, Korff has also engaged
in “more creative solutions without giving up value,” in effect
allowing a buyer to move in early even if he or she is having trouble
selling their home.

A prominent broker in the area, who asked not to be named, said
buyers are deterred by the high price points at the Solaria, coupled
with a lack of deeded parking and a defined dining area. Instead, most
of Solaria’s floor plans adhere to the more modern trend commonly found
in new Manhattan developments, in which the kitchen is separated from
the living and dining area by an open breakfast bar.

While that creates a bright, airy effect, particularly with the
Solaria’s floor-to-ceiling windows, the broker said it’s a deal-breaker
for many Jewish families who, as part of their faith, hold large family
dinners every Friday in observance of the Sabbath.

The broker estimated that roughly 10,000 of Riverdale’s 45,000 residents are Jewish.

“Solaria is across the street from a major Orthodox synagogue, one
of the largest in the city, the Riverdale Jewish Center, and it could
have had tremendous appeal for that reason,” said the broker, adding
that many Jews do not drive in observance of the Sabbath. “This was a
major miscalculation on his part. This is about knowing your market.”

Goldy concurred. “For that market that really wants a traditional
dining area, they’ll just go to another building. But there are enough
people coming into Riverdale who are not requiring that.”

A 1,750-square-foot waterfront apartment in the Boatyard, the first
condominium community built on City Island in the 1980s, is the Bronx’s
seventh most expensive condo at $1.14 million. The gated community,
built on an old boatyard, includes private boat mooring and a pool.

Martin Nash, a pediatric kidney doctor who works in Manhattan,
bought the condo last year as a second home only 15 minutes from his
primary residence in Pelham.

“The place on City Island was so different from the Pelham
location, with all the views and the smells of the waterfront, that I
just decided to buy that place and use it as a summer home,” he said.

His windows face Long Island Sound and Hart Island, where city
inmates are ferried from a nearby port on City Island every day to bury
the city’s unclaimed or unidentified dead, which Nash said doesn’t
bother him.

Local broker Jacqueline Kyle Kall of Port of Kall Realty said
developers are routinely eyeing the sleepy community for new projects,
“but we stamp them out as fast as we can.”

By Gabrielle Birkner

Top billing may
go to Richard Meier, Renzo Piano or Jean Nouvel, but neither the
starchitects, nor their firms, are likely tasked with the majority of
the architectural work on most of the buildings they design.

With a growing number of New York developers seeking out brand-name
architects from abroad, some local firms with strong design traditions
are taking on more behind-the-scenes roles as so-called architects of
record — or executive architects, as they are sometimes called.

As such, the local firms may be responsible for corresponding with
city agencies about code compliance, coordinating pre-construction site
cleanup, communicating a project’s progress and delays to developers
and financial backers, and creating up to 90 percent of the
construction documents.

In other words, they handle the less sexy elements of the job.

For the vast majority of new buildings in America, a single
architecture firm performs both the creative and project management
functions. But when it comes to the highest-profile, megamillion-dollar
projects — and New York has more than its share of them — two
architects are often commissioned. One generates and makes adjustments
to the design concept; another executes that concept.

“Some firms do it grudgingly,” Peter Samton, a partner at the
full-service architecture firm Gruzen Samton, said of accepting work in
an executive, rather than design, capacity. “But this is a big city.
There are many projects and we can’t be too greedy.”

Gruzen Samton, a New York- and Virginia-based firm now in its
eighth decade, is serving as the architect of record on the
German-American architect Helmut Jahn’s 65-story, 580,000-square-foot
residential and hotel tower at 50 West Street; and doing the same for
the Los Angeles-based firm Morphosis on the nine-story,
175,000-square-foot academic building at Cooper Union. The Downtown
tower broke ground in June and is slated for completion next year.

The division of labor between design and executive architects is
not new, but the boundaries of the roles are no longer as clear-cut as
they once were, Samton said.

During the past 20 or so years, and particularly in the last few
years as the stock of high-profile architects has risen in New York
City, what were once two very separate jobs have become increasingly
collaborative. That is thanks in part to electronic communication and
computer-aided design, enabling more back-and-forth between the
architects.

“There are times you have to bite your lip, but usually I feel very
comfortable speaking my mind to the design architect,” Samton said.

This arrangement works best when the two commissioned architects —
with their unique skill sets and directives — make every effort to
integrate their ideas to present a united front to the client.

“If the design architect is so ego-driven that he gets put off by
ideas coming from other people, then it could be a problem,” Samton
said, noting that this has not been the case at 50 West Street or at
Cooper Union. “If you don’t engage in the silly little child’s play of
‘Whose toy is it?’ that’s when you get the best results.”

Architect Steven Kratchman said he has developed a synergistic
working relationship with design starchitect Annabelle Selldorf, with whom he collaborated, as the executive architect on a six-story,
65,000-square-foot addition to a mixed-use building built in 2002 at
415 West 13th Street.

The two architects are again working together — Selldorf as design
architect, and Kratchman as architect of record — on a 19-story,
57,000-square-foot luxury condo. Informally known as the “Sky Garage,”
the building, slated for occupancy in 2009, features parking on every
floor.

“We have great respect for Annabelle’s design ability,” Kratchman
said, explaining that his role as executive architect is to interpret
the designs so that they are “buildable, approvable and, ultimately,
concrete.”

Kratchman said working as an architect of record does not require
him to stymie the creative impulses he employs as a design architect.
“I find it very satisfying, creatively,” he said. “It isn’t dreaming
things up in the same way; it’s problem-solving.”

Other prominent examples of New York firms doing much of the heavy
lifting for starchitects include Davis Brody Bond Aedas for Renzo Piano
on Columbia University’s forthcoming Manhattanville expansion project,
and FXFowle for Piano on the New York Times Building last year. SLCE
Architects served as the architect of record for both Robert A.M. Stern
on 15 Central Park West and for Jean Nouvel on the 40 Mercer
Residences.

The firms may be hired on simultaneously. But frequently, the
client works with the executive architect on a master plan and
preliminary construction documents for months, or even years, before a
design architect is chosen “to put his or her particular stamp” on a
project, said Cliff Moser, who serves as an advisor to the American
Institute of Architects in the area of practice management.

In some cases, the client issues a contract to each firm; in
others, the two firms are covered under a single contract — often
administered by the architect of record, according to Moser.

The jury is still out on how bad the fallout will be for investment banks that barrelled headlong into the mortgage markets — though some are faring better than others.

Many of Wall Street’s investment banks have suffered from massive write-downs after they kept packaging and trading subprime securities for high fees without taking the necessary measures to protect themselves against the positions they were buying.

For instance, Citigroup has written down about $40 billion in assets, while Merrill Lynch, the nation’s largest brokerage firm, has taken $45 billion worth of write-downs. UBS, which has seen $38 billion in write-downs, has been the European bank slammed the hardest by the subprime mortgage market crisis in the United States.

The funds at Bear Stearns, which contained some of the highest-risk securities available, collapsed in June 2007, causing more than $350 billion in write-downs and culminating in the demise of one of the nation’s largest underwriters of mortgage bonds.

The implosion of the funds caused market panic, which mushroomed into the full-blown credit crisis in August 2007.

At the same time, Goldman Sachs apparently foresaw credit issues: Though it continued to package risky mortgages to sell to investors, the investment bank’s hedges were profitable, though investors took losses on the securities. When credit markets came to a halt in late July 2007, Goldman had sold off the risky mortgages that other investment banks had continued to buy.

“Goldman Sachs fared better than Bear Stearns, because Goldman Sachs is still in business, and Bear Stearns isn’t, right?” said Richard Bove, a managing director with Ladenburg Thalmann & Co., who has gained a reputation since 2005 as one of the few maverick bank analysts to predict the implosion in the housing market and its catastrophic effect on banks.

Bove said the move into real estate by investment banks was predictable.

“Whenever a specific area gets, so to speak, a large amount of funding, what these companies do is move their assets, people, resources into that area in order to take advantage of what’s going on in the sector,” Bove said. “They did that in real estate, and the net effect is they wound up overexposed.”

While Bear Stearns had a narrow focus on the weakest portion of the market, Goldman Sachs had a much broader vision of real estate, he said.

“They focused on a lot of businesses outside of real estate, so instead of concentrating their efforts in this one area, which is what Bear Stearns did, Goldman Sachs, by being diversified, was able to ameliorate the blow of the negative part of the cycle,” Bove said.

The latest investment bank to be making headlines is Lehman Brothers Holdings, the smallest of the major Wall Street firms. The bank was a major player in the residential mortgage market — with about $61 billion in mortgages and asset-backed securities — and with its small balance sheet, fears have swirled that large losses could take it down.

“Lehman is also dealing with the fact that they tended to be overly concentrated in the residential mortgage portion of the business,” Bove said. “In other words, diversification is something which works, and these guys didn’t do it, so they’re now struggling to prove that they have a viable investment strategy.”

In the second quarter, Lehman lost $2.8 billion, mostly caused by write-downs from residential real estate investments, and has stated its intentions of raising $6 billion.

Now some bankers also fear that the commercial property market may be heading south, causing defaults on commercial loans and further write-downs for Wall Street banks, which hold about $100 billion of commercial mortgage-backed securities.

Bove said that, though investment banks wound up overexposed in the residential real estate sector, with bad loans and underperforming assets, those that pull through the crisis will most likely not shy away from real estate in the future.

“Now they will pull back and take a more measured pace at looking at the sector, and then they’ll go at it again the next time it heats up,” he said. “It’s a cyclical business. We’re in a down part of the cycle, but the cycle will change, and it will come back.”

The downsizing of New York’s largest financial service companies
means almost nothing but bad news to the city’s office market. But as
investment bankers get their walking papers in the thousands, a handful
of hedge funds that bet right on subprime mortgages and the U.S.
economy are prospering.

The success of funds such as Paulson & Co., Soros Fund
Management and Renaissance Technologies, whose founders earned a
combined $9.4 billion last year, has also inspired plenty of laid-off
investment bankers to do the same and form funds, and they need space
to build their empires from the ashes.

“The economy is a zero-sum game,” said Stephen Gordon, senior
managing director at PBS Real Estate. “For all of the businesses that
have done poorly and are contracting, somebody is going to have made a
contrarian bet and is going to be seeking office space measured by
their recent success.”

Smaller hedge funds and private equity funds that were “just a
little more nimble in their ability to change course” have continued to
do well, according to Gordon.

Recent deals include Turn Key Hedge Funds, which signed a lease for
3,030 square feet at 450 Seventh Avenue, and Bay Harbour Management,
which signed a 10-year lease for 17,500 square feet on the 20th floor
of the Seagram Building at 375 Park Avenue. The company is relocating
from 885 Third Avenue.

Other firms expanded their space. Citadel Investment Group recently
signed a nine-year expansion lease for 30,500 square feet on the 48th
floor at 153 East 53rd Street. The company currently occupies 64,500
square feet on the 44th and 45th floors. QVT Financial doubled its
space in 1177 Sixth Avenue, signing an eight-year lease for the entire
10th floor.

It also seems unlikely that the tens of thousands of employees
slated to get their walking papers in the next year — from Bear
Stearns, Citigroup, JPMorgan Chase, Goldman Sachs, Lehman Brothers, et
al — are going to give up finance and start waiting tables. This
workforce will require desk space at smaller investments firms that can
still afford them.

The great rewards that have come to highly leveraged hedge funds in
recent years come only as a result of great risk, and the potential for
a bad bet to financially bruise a fund and make it unable to pay rent
is not overlooked by astute landlords.

Alan Bonett, senior managing director at Adams & Co., is
representing a prospective tenant that consists of a group of former
Bear Stearns employees who decided to form a hedge fund after the
investment bank’s collapse and sale to JPMorgan. Bonett, who would not
name the fund or its managers, said he expects this type of situation
to become more common over the next year, helping to fill the void in
office demand created by the slips of these new funds’ much larger
predecessors.

Investor groups that have worked within large banks for five or 10
years also have a high degree of credibility in the eyes of landlords,
Bonett said. “The landlord is going to be more willing to strike a deal
with these guys who have a track record,” he said.

Many groups that work within large, established investment banks
have always operated independently, Bonett said. It is often a natural
next step for them to get their own office after their bank goes under
or lays them off.

The demand from hedge funds and private equity funds generally
centers on spaces of 5,000 square feet or less, according to John
Johnson, senior managing director at Studley. Alternatively, Bonett
estimated the range of offices that continue to lease to hedge funds is
closer to between 5,000 and 15,000 square feet.

Johnson said much of the space coming on the market isn’t set up
for small hedge funds or private equity funds, requiring more work
before it’s occupied.

For example, Lehman Brothers has put a 166,000-square-foot block of
sublet space on the market at 399 Park Avenue. While parts of this
chunk would be good for a five- to 10-person investment firm, sections
like the back offices and the trading floor would probably need to be
upgraded to lend themselves to that use.

But some say the space demands of hedge funds in a down market have been overstated.

“A lot of these people who are starting smaller investment
companies might not get off the ground,” said Stuart Lilien, executive
vice president at Lansco Corp.

Lilien said that many new hedge funds are having a tough time
raising funds, during this period of low liquidity and timid investors.
He also explained that because hedge funds are so highly leveraged,
they generally have only a very small percentage of their cash at their
disposal for company expenses, like office space.

“People say ‘that hedge fund has $1 billion in it,’ but they don’t
have $1 billion to back up the lease they signed,” Lilien said. “They
often have a small amount of money, especially at the beginning. And
money can go out the door real fast.”

The Global Hedge Fund Index, an index published by Hedge Fund
Research that tracks the performance of over 55 funds internationally,
was down 3.42 percent year to date in mid-July. While this is a
healthy-looking picture when compared to the greater U.S. economy, it
does not necessarily forecast hedge funds taking the hundreds of
thousands of square feet made available by investment bank contraction.

Another point Lilien considered is that while it’s nice for small
funds to be located in prime locations such as the Plaza District, it’s
not as necessary as it is for the large investment banks, which desire
the cachet and drawing power of being in a central location.

The actual day-to-day operations of a hedge fund rely almost
entirely on access to Internet and phone — amenities that are not
unique to Midtown.

“Hedge funds don’t have to be here in New York,” Lilien said.
“There are loads of them up in Greenwich, Connecticut, and they don’t
suffer from not being here. You used to have people saying, ‘Oh, I want
to stay in New York,’ but now these people just want jobs, and they
will work where the job is.”

Much attention has been focused on the role of sovereign wealth funds in propping up American banks. But as the subprime crisis continues whittling at the market for commercial mortgage-backed securities and traditional domestic lending sources, a number of foreign banks are also stepping into the fray, providing critical capital to select New York developers. Among the leading commercial lenders, German and Irish banks continue to dominate, with Canadian and French banks actively seeking new deals as well. In recent months, Chinese banks have also begun to flex their muscles — and in a bit of a surprise, at least one major Japanese bank has returned to New York.

“There’s certainly more activity on the foreign front than on the U.S. front,” said Dennis Russo, a real estate attorney with New York-based Herrick, Feinstein LLP.

For the first half of 2008, foreign banks provided about 15 percent of commercial real estate loans in the United States, compared to 8 percent supplied by major American banks, based on $33 billion in deals analyzed by Real Capital Analytics. The data show that 50 percent of all deals are being financed by buyers assuming distressed loan payments or mortgages that cannot be sold.

The remaining deals have been financed by savings and loans, insurance companies, finance companies and a small percentage of Wall Street lenders.

German banks Eurohypo AG and Nord/LB have worked very closely with Forest City Ratner in recent months. In July, Forest City closed a $45 million fixed-rate, permanent financing with Nord/LB for its mixed-use office complex at 330 Jay Street in Brooklyn.

In March, Eurohypo led a consortium of banks, including Nord, in the $680 million financing of Forest City’s Beekman tower in Lower Manhattan.

Meanwhile, the real estate intermediary firm Holliday Fenoglio Fowler brokered a $90 million refinancing agreement in July with Germany-based Helaba for 401 West 14th Street, a 62,000-square-foot office and retail complex.

Also, Natixis, a leading French bank, led a syndicate that financed the blockbuster $680 million acquisition of 650 Madison Avenue by Ashkenazy Acquisition Corp. and the Carlyle Group. The trophy office tower includes 600,000 square feet of office and retail space, including the national headquarters of Polo Ralph Lauren and flagship stores of Crate & Barrel and Todd’s.

Scott Zucker, head of acquisition at New York-based Natixis Real Estate Capital, said the bank has been actively looking for new deals, but that it’s been hard to offer attractive terms to borrowers in the current environment.

“We worked on a bunch of acquisitions this year, and a lot of them don’t close,” he said. “Once the buyer goes out to the market and finds out what the cost of senior debt is, and the cost of leverage, they can’t support the purchase price.”

Among Asian banks, Russo said that Sumitomo Mitsui Banking Corp. is actively considering a major commercial office building deal in New York, and the Bank of China has also been active. He declined to give further details on which clients are involved.

Financial experts warn that while international banks have stepped into the breach left by the credit crisis, the companies are being highly selective about who they work with and what type of deals they finance.

Steve Kohn, president of Cushman & Wakefield Sonnenblick Goldman, said foreign lenders are focusing on Class A office buildings and residential towers that provide steady cash flow. Loans are being written with conservative loan-to-value ratios of 60 percent to 70 percent at most, he noted, and banks are staying clear of condos.

He also said banks are tightening up on loan agreements to reduce the amount of risk.

“If there is a development project, you will need completion guarantees,” said Kohn. “If there are operating deficits projected, they will want limited recourse.”

Enoch Lawrence, senior vice president at CB Richard Ellis, said banks are no longer financing deals based on pro forma income projections, but want to see consistent income flows over the previous 12-month period.

Russo added that, for the most part, foreign banks are not lending on deals outside of Manhattan and are shying away from any new construction projects.

Wall Street may seem like a war zone these days as banks collapse, firms bleed jobs and the federal government stands ready to call in the cavalry. It’s unclear who will weather the storm at the end of the day, but it is increasingly clear that the credit crisis has claimed one casualty: residential mortgage-backed securities.

The RMBS market — sometimes blamed for starting the whole mess in the first place — appears to be, at least, badly wounded.

These structured securities, which are bundles of thousands of home mortgages issued by investment banks and government mortgage backers, comprised about 65 percent of approximately $10 trillion in outstanding U.S. mortgage debt in 2007, according to Tomasz Piskorski, a Columbia Business School professor who specializes in real estate.

But what was once a massive infusion into financial markets has slowed to a trickle: July saw the least amount of RMBS issuance since January 2007. In July, private banks issued only $743 million in RMBS — a huge dropoff from $10.1 billion in June, and a fraction of the $105 billion in RMBS issued in March 2007, according to data compiled by Inside Mortgage Finance, a weekly publication.

In fact, this year is on track to be the slowest year for RMBS issuance since 2000.

Government-backed mortgage giants are increasingly the market’s most active players. Freddie Mac and Fannie Mae saw 1 percent and 13 percent rises, respectively, in their RMBS issuance in the first seven months of 2008, compared to January through July 2007.

A similar agency, Ginnie Mae, an entity that allows mortgage lenders to obtain a better price for their mortgage loans on secondary markets, saw a 190 percent increase in that time.

Private banks, meanwhile, have seen staggering declines in issuance. Non-agency RMBS issuance fell 91 percent in the first seven months of this year compared to the first seven months of last year, according to the Inside Mortgage Finance data.

In the second quarter of 2008, non-agency RMBS issuers included Wachovia, Bank of America, Countrywide and Lehman Brothers, according to Guy Cecala, the publisher of Inside Mortgage Finance. But few of these securities involved newly originated mortgages, he added. Most are seasoned loans from bank portfolios or re-
securitizations of previously issued RMBS, he said.

“There are no investors in the world who want a non-agency- or non-U.S.-government-backed security,” Cecala said.

Indeed, the RMBS and asset-backed securities markets look grim. In late July, Merrill Lynch announced it agreed to sell $30.6 billion of securitized debt to an affiliate of Lone Star Funds for only $6.7 billion — a mere 22 cents on the dollar.

“The private-label RMBS business is for the foreseeable future … it’s on its ass. It’s not going anywhere,” said Lawrence Longua, director and clinical associate professor at the REIT Center at New York University’s Schack Institute of Real Estate.

Piskorski, the Columbia professor, predicted there wouldn’t be much of a market for securitized mortgages “at least for a year or two.” And then, he predicted, the banks will have to keep some of the riskiest parts of the loans on their balance sheets.

As the market for mortgage-backed securities has come under attack, so have the merits of securitization itself.

Ethan Penner, principal with Lubert-Adler, a real estate private equity firm with offices around the country, defended securitization in an article in the Wharton Real Estate Review. The securitization model, compared to the “bank deposit/portfolio lending model,” falls short because it increases the cost of capital, offers less transparency and reduces democratic access to capital, Penner argued.

“Securitization is experiencing its first real test. Clearly there will be adjustments,” Penner noted. “Yet there will surely continue to be a significant role for securitization. This is a time for thoughtful regulatory oversight, not the time to throw the baby out with the bathwater.”

The subprime mortgage market has seen its worst days, experts agree, but they don’t foresee a quick recovery.

Worse, they do see problems with Alt-A and prime loans that need to be resolved before a true rebound occurs. Alt-A loans stand between prime and subprime in terms of risk level.

Several key indicators of problems for Alt-A loans are emerging, said David Watts, an analyst for research firm CreditSights. Watts pointed to the upward resetting of interest rates, the end of interest-only payments, and the end of negative amortization.

“Now it’s the turn of Alt-A in these areas,” he said. “And I don’t see prime escaping unscathed.”

Meanwhile, National Mortgage News estimates that financial institutions issued about $2.65 trillion in subprime loans from 2003 through 2007. As of mid-August, banks had suffered almost $500 billion in losses and write-downs since the subprime meltdown started last year.

In order to speed recovery, financial institutions have been working furiously to rid themselves of the most toxic holdings. In May, UBS sold mortgage-backed assets it had valued at $22 billion to money manager BlackRock for $15 billion, or 68 cents on the dollar.

And in July, Merrill Lynch announced it was unloading $30.6 billion in collateralized debt obligations (CDOs) to private-equity firm Lone Star Funds for $6.7 billion, or 22 cents on the dollar.

Merrill’s deal represents a key sign of progress in the credit crisis that has shaken the global financial system, according to David Jones, senior economic advisor to Mizuho Securities and chairman of Investors’ Security Trust Bank in Fort Myers, Fla.

“In a way, the Merrill Lynch deal is a benchmark in this process,” Jones said.

In March, the Federal Reserve had bailed out Bear
Stearns and opened its lending spigot to investment banks. Then, in July, the Treasury Department announced its full support for Fannie Mae and Freddie Mac.

“And now, the Merrill Lynch sale established a market value for that paper,” Jones noted. “The essence of the credit crisis is to determine the value of those complex vehicles like CDOs, many of which include subprime mortgages.”

To be sure, with Merrill financing Lone Star’s purchase of the securities, the sale nets Merrill closer to 5 cents on the dollar than 22 cents, said Thomas Atteberry, president of First Pacific Advisors in Los Angeles, which manages about $1.3 billion of mortgage-related securities.

Still, a floor may have been set for the price of the unwanted paper, and the market is at least functioning. Lone Star’s deal could inspire other vulture investors to jump in and buy.

Already there have been hundreds of billions of dollars of such transactions, noted Richard Bove, a bank analyst for Ladenburg Thalmann. “All the major financial companies are selling this stuff when the opportunity arises,” he said. “I think investors will buy it. They like distressed debt.”

Many banks are also moving to split themselves into “good bank/bad bank,” with the bad bank entity taking the damaged mortgage-related assets. “The problem is how do you value the bad banks?” said Scott Pardee, a veteran Wall Street executive who now teaches economics at Middlebury College.

“There’s a total loss of credibility for the people who put these things together. You have to be very clever as an investor and go through mortgage by mortgage. You can’t just take the classification of mortgage and say this is worth a buck.”

Subprime accounted for $629 billion, or about 9 percent, of the $6.7 trillion mortgage securities market as of the second quarter, according to data compiled by Julian Mann, vice president of the money manager First Pacific.

However, trouble is also brewing in the Alt-A and prime mortgage categories. Alt-A mortgage securities totaled about $842 billion as of the second quarter, prime jumbo securities $507 billion, and agency securities about $4.7 trillion, Mann’s numbers showed.

The key indicators of problems for Alt-A loans are emerging, said Watts of CreditSights. He pointed to the upward resetting of interest rates, the end of interest-only payments and the end of negative amortization. “Now it’s the turn of Alt-A in these areas,” he said. “And I don’t see prime escaping unscathed.”

As of June, 13 percent of subprime loans were in foreclosure, compared to 5 percent for Alt-A and 0.7 percent for prime jumbo, according to JPMorgan Chase.

On the buy side, First Pacific, which manages about $1.36 billion in mortgage securities, has looked at Alt-A-related investments over the past three or four months but hasn’t pulled the trigger yet, its president Atteberry said.

“We have bought distressed assets in the past and think we will end up doing some buying” this time around, he added. “It could be an Alt-A CMO (collateralized mortgage obligation), a homebuilder’s bond or something in the bank loan space.”

Experts estimate bank losses stemming from the mortgage mess will ultimately reach from $1 to $2 trillion. But Jones said significant write-downs are unlikely after the second quarter of next year. “You can see the end of the crisis,” he said.

The $300 billion housing bill passed last month will go a long way to help financial institutions and the mortgage market, particularly by allowing banks to sell some of their damaged mortgage-related assets to the Federal Housing Administration, Jones added. “This bill will loosen mortgage credit.”

He and others say that the bottom of the mortgage market isn’t far away. “Our thesis is that in the first half of next year we’ll find a floor,” Atteberry said. “Then,” he added, “we could stay flat for two to three years” before a rebound.

In “The Subprime Solution: How Today’s Global Financial Crisis
Happened and What to Do about It,” a book out this month, noted
economist Robert Shiller dissects the current housing-market collapse
and offers suggestions for a broader recovery. He recently took time to
speak with Alison Gregor for The Real Deal.
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Developer Ron Moelis wants to finance an apartment building in Williamsburg, and he said the process has gotten tougher in the new credit environment.

His latest project may require more groundwork, so to speak, in the packaging of the loan that will make the building a reality. It’s called pre-syndication, and it’s now part of the conversation in nearly every deal for new construction.

“I’m not sure they’ll require it,” said Moelis, the chief executive officer of L & M Development Partners, discussing the lender requirements for the $60 million project. “The ones over $50 million I think the banks on the large deals are looking to syndicate.”

Although he is still in discussions with several banks, two have come back to him saying that another financial institution would need to be lined up as a partner before they would commit to the deal. And Moelis has plenty of company regarding loan syndication in nascent deals.

Loan syndication, or the practice of cutting up big loans into smaller pieces, is nothing new, but the process has changed as the securitization market has dried up and the credit crunch has spooked lenders.

As recently as a year ago, lenders were less concerned about spreading out the risk in order to get a deal done, Josh Zegen, co-founder of Madison Realty Capital, explained.

A single bank “would commit to take down the whole loan and worry about the syndication risk after the fact,” said Zegen. Today, “when a bank actually commits to a deal, it is committing subject to syndication.”

Richard Bassuk, president of the Singer and Bassuk Organization, said that pre-syndication is an issue he deals with every day.

“In virtually every single deal, banks are not willing to put themselves in a position where after they agreed to make a loan, they bear the risk of underwriting the loan,” Bassuk said. “The banks right up front say, ‘Look, what we’re going to do is, we’re willing to come in, we’re willing to work with you, we’re willing to help bring in other banks, but if we fail to do that, the loan won’t close.’”

Securitization of loans has dropped off precipitously, market participants say.

“That market is dead,” Bassuk said.

Lenders don’t want to get stuck with large, risky loans, said Steven Kohn, president of Cushman & Wakefield Sonnenblick Goldman. Most lenders don’t want to have loans bigger than $50 million on their balance sheet, he said.

“There’s just more concern over holding loans on sheet,” Kohn said. “Lenders would rather do more smaller loans than fewer larger loans. It just reduces their concentration of risk in one asset or market.”

Kohn said that while he didn’t have any numbers on how many deals were being done this way in New York City, it is substantial.

“Most large loans today are being syndicated — it’s sort of a given,” he said.

The most active players in syndication are foreign banks, offshore banks, large banks and insurance companies. Kohn said that insurers such as Met Life, New York Life, Western Mutual, Group Pacific Life and John Hancock were also involved in syndicated deals.

A decision to use a loan syndicate has more to do with the size of the loan than type of project. But they are more common with construction loans, which are generally more risky than permanent or acquisition financing and, as a result, provide more of a reason to spread the risk around. That very risk also makes it more challenging to put a syndicate in place, especially on a large construction project.

Moelis, for example, said he’s had “a couple” of deals under $50 million that closed in the past few months that did not require loan syndication, but that banks are increasingly looking to syndicate the larger new construction deals. He declined to go into more detail because the financing on his Williamsburg project is not yet secured.

Syndicates come together through brokers, banks and borrowers, but the process can be cumbersome.

Getting lenders together to syndicate a large construction loan before it closes can take between eight to 12 months, about twice as long as it would have taken to get financing without pre-syndication a year ago, Bassuk said.

“Today I would probably have to get several banks — all of whom you’d have to have in place, all whom you’d have to negotiate the terms, and the terms are going to be consistent from one bank to the next,” Bassuk said. “The process is very much slowed down, because you have to go to multiple sources in order to have one loan.”

Permanent financing and acquisition loans can take about 50 percent longer than they did a year ago to put together, Bassuk said.

Zegen noted, “It’s getting done in any which way it can. Traditionally it would be a bank would commit to that deal and then ultimately bring together their syndicate, but you can’t really do that in today’s market.”

Although lenders tend to stick with partners with whom they’ve done other deals, clashes can still occur due to differences in corporate cultures.

“The real pitfall is when you put together these deals, every one of these banks has their own way that they like things done,” said Zegen. “It’s subject to every bank’s credit officer and their timeframe. Some are in a rush, some aren’t.”

Jere Lucey, a managing director at the real estate investment banking group at Jones Lang LaSalle, said, “You’ve got to get numerous lenders to all agree. Everyone has to agree on the same leverage, the same price. There are numerous sticking points.”

Kohn said that when his firm is hired to raise capital for a project, they try hard to match parties.

“We will [partner lenders] as part of our effort to try to put lenders together that we think will work well together. Lenders themselves, though, will do it as well, as they know who they’ve co-lended with before and feel comfortable with,” Kohn said.

One area that has to be worked out in advance is whether or not the loan will be divided up on a pari passu basis, meaning that all investors get paid the same rate at the same time. Another option is to have senior and subordinate pieces of the loan, or tranches. Senior debt, often the priciest, gets paid first. Most syndicated deals tend to be pari passu, Kohn said.

Being the lead banker on a syndicated deal can add a small benefit. For example, if a banker agrees to a loan at 200 basis points over the London Interbank Offered Rate and then sells it at 175 over LIBOR, it collects a small profit, Kohn said.

Additionally, on a construction loan, where servicing the loan is more work than permanent financing, the lead bank will collect more.

The trend appears likely to continue in the immediate future, until the securitization market comes back.

“Basically, this is a way for borrowers to get a loan done,” Zegen said.

Montvale, NJ

The Enclave

Developer Woodmont Properties’ project includes 20 luxury villas, ranging from 4,200 to 4,900 square feet, and eight single-family homes, sitting on over one acre each. The villas include 10-foot ceilings, guest rooms, loft areas, libraries and two-car garages. Contact: www.enclavemontvale.com.

East Fishkill, NY

The Livingston

Developer WCI Communities added a new residence style to its Four Corners community. The four-bedroom, single-family homes are 2,672 square feet in size and feature two-story entry foyers, gourmet kitchens with breakfast nooks, and living and dining rooms. Prices start at $479,900. Contact: www.fourcornerswci.com.

Leasing update

Long Branch, NJ

Pier Village

1 Chelsea Avenue

In late July, more than 40 of the 216 new luxury rentals were leased. The building, developed by Applied Development Company, includes studio, one-, two- and three-bedroom residences. Occupancy is expected this month. Monthly rents start at $1,495 for studios. Amenities include an outdoor pool, billiards lounge and 24-room boutique hotel. Contact: www.piervillageliving.com.

Newark, NJ

Eleven80

1180 Raymond Boulevard

More than 275 of the 317 residences at Cogswell Realty Group’s 35-story apartment building were leased as of July. Residences range between 598 and 1,401 square feet, with monthly rents ranging from $1,615 for one-bedroom units to $2,425 for two-bedroom layouts. The building has a concierge service, valet parking, health club, bowling alley, entertainment room and shuttle service to the University District, Newark Airport and Penn Station. Contact:www.eleven80rentals.com.

Sales update

Cliffside Park, NJ

Aurora Over the Hudson

330 Adolphus Avenue

Aurora Development’s 131-unit condominium reached $40 million in sales this summer. The residences were designed by Yoo by Starck and most are over 3,000 square feet, with floor-to-ceiling windows, terraces, individually controlled heating and cooling systems, and an electronic concierge. Amenities include entertainment salons, private dining room, spa and fitness center, valet parking, garden plaza, pool and hot tub. Contact: www.auroraoverthehudson.com.

Jersey City, NJ

Canco Lofts

50 Dey Street

The first of the project’s five condo towers was more than 50 percent sold as of July, as the second tower was opening for sales. Each building is six stories tall; the whole complex will have 550 units. Residences include studios, one-, two- and three-bedroom apartments ranging from 640 to 1,663 square feet in size. Prices are between $350,000 and $850,000. Amenities include a 10,000-square-foot health club with fitness center, yoga studio, event center with Wi-Fi, spa, children’s play room, screening room, bicycle storage, parking garage and shuttle to the PATH trains. Contact: www.cancolofts.com

Jersey City, NJ

The Residences at Dixon Mills

A joint venture between developers Robert Martin Co. and GoldenTree InSite Partners converted the industrial complex into a five-building, 467-unit luxury condominium development. The project is in its third phase of sales, with 110 units already in contract. Prices for the studio, one-, two- and three-bedroom apartments begin in the mid-$200,000s. Amenities include courtyards with grills, private shuttle buses to the PATH station, fitness center, yoga/movement room, lounge, sauna and multi-purpose recreational court. Contact: www.dixonmillsjc.com.

Compiled by Jovana Rizzo

In recent years, Robert De Niro has developed a global profile among
foodies through his partnership in the Nobu restaurant chain. Now De Niro and his partners want to leverage their brand by creating Japanese-themed developments with chichi hotels and residences throughout Europe, Asia, the Middle East and Africa, among other
places. Comments

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By Steve Cutler

If the swift pace of pre-construction sales for Trump Soho, which opened last September listing apartments for $3,000 a square foot, didn’t signal plainly enough where Soho prices were headed, 350 West Broadway, which opened for pre-sales in May, will no doubt tell the real estate world that the bar is continuing to rise.
With apartments at the boutique condominium starting at nearly $10 million each, the term “upscale” hardly begins to describe its potential buyer, nor the value of new development property in Soho.

“All of our [prospective] buyers have homes in other parts of the world,” said Mary Ellen Cashman of Stribling Marketing Associates, which is handling sales for the condo. “The whole nature of Soho has changed. It’s now an international address.”

Perhaps Aby Rosen, the developer of 350 West Broadway, figured with sales slowing for the mundane, merely upscale condominiums in the city, his best bet was to aim at the staggeringly rich buyer. But then, he said, “I have always counted on the high end of the market as the best bet.”

Rosen has previously built such ultra-luxury, celebrity-architect-driven condominiums as 50 Gramercy Park North and 40 Bond Street, both with Ian Schrager.

The super-luxury market, noted Rosen, “is still strong and will always be strong. There’s only eight apartments in this building, and there will always be eight people who will understand the quality that we are providing.” And, presumably, have the bucks to buy it.

Actually, the marketing team might not even need eight buyers; one of the serious contenders for the top floors wants to combine units. “We’re working on a floor plan to combine the top two units,” said Cashman. The intent is to create a 6,000-square-foot palace for $23 million.

Rosen’s relationship with the site for 350 West Broadway follows the evolution of Soho. “I tried to buy that site 15 years ago when it traded for $1 million dollars out of bankruptcy,” he recalled. “I couldn’t get it at that time, and it lay idle for 15 years — it was very sad.”

A diamond dealer bought it out from under Rosen, “then someone else bought it from him, and then I bought it from that person — a great developer,” he added. “He had gotten a set of plans approved, and I went back to the Soho Alliance and a whole bunch of agencies to get the changes I wanted implemented there.”

What did it cost this time around? “Who knows?” said Rosen. “A lot of money; I think $25 million. I tried to buy the neighbor and the site in the back to do a hotel there with Schrager, but I couldn’t get all the pieces of the puzzle together, so I went back to the original scheme.”

The concept capitalizes on the rare frontage on West Broadway. Plans call for 10,000 square feet of retail on two floors at the bottom, and eight full-floor residential units above that.

Rosen says it will be a micro-scale version of the landmark Lever House at 390 Park Avenue, which he acquired in 1998. “It’s the same sort of tower elegantly sitting on the base, with gardens and a green surrounding.”

Rosen brought in architect Dan Shannon of Moed de Armas & Shannon as soon as he bought the site in 2006. “What was unique,” recalled Shannon, “is you have this very articulated two-story storefront retail with metal and lots of glass, but lots of detail in the mullions and a retractable canopy that really says retail. But then the entry [to the residences] is very different. All of a sudden, it’s a very private place.”

The entrance to the apartments is finished with textured rust-colored granite panels similar to the stone that interrupts the glass on the façade.

For the interiors, Rosen called in William Georgis, an “Architectural Digest Top 100″ architect who had designed several of Rosen’s personal residences, the public spaces at the Lever House and is now working with him on a hotel in Palm Beach. The building is Georgis’s first condominium.

The apartment layouts, from nearly 3,000 to 3,500 square feet each, will be Park Avenue meets the Soho loft, a concept close to the designer’s heart. “To me, the challenge has always been to reconcile an open-plan-type lifestyle with a more hierarchal, formal, prewar plan concept,” said Georgis.

The project at 350 West Broadway, he said, “is almost a Park Avenue plan, where there is a gracious entrance foyer with a family bedroom wing separate from public spaces. But at the public space level there is a living/dining area that opens graciously to the kitchen.”

As with a typical Park Avenue apartment, each unit will have a separate entrance for the hired staff. And the living/dining area is designed, Georgis said, “in such a way that if there is staff or somebody working in the kitchen, they are out of sight lines.”

Likewise, the living areas are screened from public view by the stone sheaths that accent the enormous glass panels on the building’s façade. They come up 36 inches on the interior window wall, “so you have the use of the wall for your layout,” said Shannon. “People will feel protected, and they can put furniture against it.”

Each of the two- and three-bedroom apartments will have walnut-stained white oak hardwood floors and a full laundry room. The kitchens and breakfast rooms will include granite countertops, black walnut and stainless-steel cabinets, Gaggenau cooktops and ovens, and Sub-Zero wine coolers and refrigerators. The master baths will have statuary marble and heated flooring, steam showers and Dornbracht fixtures — plus a glowing opaque glass wall.

“Because we have a small footprint,” said Shannon, “we couldn’t put all the bathrooms into the core. So we’ve got a bathroom on the perimeter of the building. We were able to use a big piece of glass [the same glass as on the facade] but we opacify it, and it becomes this lantern in the bathroom.”

From the outside one will see a translucent glass strip running up through the building. But from the bathtub, said Shannon, “you’ll see this glowing white glass panel. You can just make out the skyline outside, but nobody on the street can enjoy what you’re doing inside.”

Most residences will have private outdoor space, including a 2,700-square-foot landscaped setback terrace on the third floor and a 1,388-square-foot rooftop terrace serving the penthouse.

Georgis designed the lobby to showcase works by three artists, including American artist George Condo’s first installation in a condominium.

The large, raucous, colorful Condo painting would seem to belie the clean, classic approach taken with the rest of the building, but makes sense in a project by Aby Rosen, a famous collector of contemporary art. One part of his massive collection is on display in the Lever House lobby, and another is on loan to the sales office for the condominium.

The lobby will also be finished with fumed oak floors, Vermont Cold Spring Black Granite and lacquered panels on the walls, and feature an eclectic mix of custom and antique furniture with elaborate bronze door pulls by Michele Oka Doner, a Soho artist. “Seabed,” a large-scale ceramic installation by Peter Lane, will hang adjacent to the Condo painting.

With the foundation having been laid, the building is just coming out of the ground and is scheduled for completion in summer 2009.

While it opened sales last May with a lavish party, Stribling is planning a low-key marketing campaign, with small salons and private dinners prepared by high-profile chefs, befitting the style to which the prospective buyers are accustomed. That clientele, the kind that keeps pieds-à-terre with three- and four-bedrooms in several cities around the world, helps keep New York City afloat.

“God bless those people,” said Rosen. “Right now we need them more than ever.”

More than a decade and a half after Japanese companies began unloading their New York real estate portfolios, which had included icons like Rockefeller Center, the Tiffany Building and Essex House, Japan has again become a major force in reshaping the city skyline. But today, the impact is seen not in the buying and selling of trophy buildings — it’s in the designing of them.

Following a long financial downturn that began in the early 1990s, Japan faltered economically but flourished culturally, according to Clifford Pearson, the deputy editor-in-chief of Architectural Record and a former Japan Society fellow.

“Japan became a real laboratory for innovative architecture and design,” he said.

Today, architects from Japan are behind millions of square feet of new and soon-to-rise commercial, cultural and residential space in New York.

Among the projects on the horizon are Fumihiko Maki’s angular office towers, which include a 61-story skyscraper to be built at the World Trade Center site with 1.8 million square feet of office space and 146,000 square feet of retail space, and a 14-story, 430,000-square-foot building at Cooper Square, which is scheduled to be completed by early 2011.

Months after snagging the World Trade Center commission, Maki, a Pritzker Prize winner, was chosen in 2004 to design the still-unbuilt, 35-story addition to the United Nations.

Another high-profile Japanese architect, Shigeru Ban, designed the “Metal Shutter Houses,” a West Chelsea condo with a façade that changes according to the amount of natural light residents want filtered into their units.

“I like to create something contextual — a particular design for a particular place,” Ban told The Real Deal, noting that the retractable window coverings that shroud the structure were inspired by the metal shutters on many of the neighborhood’s older buildings.

The condo, which is being marketed by Corcoran Sunshine, is slated to open this fall, and all but one of its nine sprawling units have sold. (Still available is a 4,400-square-foot duplex on the market for $10.25 million.)

The 13-hour time difference between New York and Japan can create some communication challenges, but it also means that a building is essentially being worked on around the clock, said Edward Minskoff, the developer behind Maki’s jewel-box inspired Cooper Square project at 51 Astor Place. He said between the Japanese firm designing the structure and the local architect often hired to assist with the project, there is almost always someone dealing with the project.

Asked about the surge of New York City commissions awarded to Japanese firms, Minskoff said: “People are looking for innovation, and this is what we’re seeing right now.”

This year, Japanese innovation also extended to the New Museum of Contemporary Art on the Bowery, designed by Kazuyo Sejima and Ryue Nishizawa, whose Tokyo-based firm SANAA was the subject of a retrospective exhibit at the museum.

Meanwhile, the Morimoto and Megu restaurants, the Yohji Yamamoto and Louis Vuitton stores, and the Museum of Modern Art are other recent examples of city buildings designed or redesigned by Japanese architects.

Those who follow architecture in the city say such high-profile projects are emblematic of a growing openness among New York institutions and real estate developers to seek out design talent from abroad.

They also speak to the allure of the simple forms and innovative use of space that are hallmarks of Japanese design, according to the architect Terence Riley. As a former chief curator for architecture and design at MoMA, Riley was instrumental in choosing the Tokyo-based Yoshio Taniguchi to redesign the museum, which reopened in 2004.

Riley, who went on to become the director of the Miami Art Museum, said the choice of Taniguchi was one of a couple of recent commissions that “had the impact of opening the design market to foreign architects” — including those not only from Japan, but also from Italy, France, England and elsewhere. He attributes the local success of Japanese firms, in particular, to their expertise in creating structures for dense, vertical cities.

“Most contemporary Japanese architecture is urban architecture,” he said. “It is increasingly exportable because it answers real needs in places like Manhattan, where sites have multiple stakeholders, where there are often daunting adjacencies.”

Also at work is the highly competitive nature of Japan’s architectural field, in which a growing number of architects are seeking out commissions abroad, according to the architecture critic Martin Filler.

Japan’s universities produce many more architecture graduates than the building design industry can accommodate, he said. Therefore, many trained architects take jobs as on-site project managers, creating an environment that fosters a high level of construction where “the seriously talented people rise to the top,” said Filler, who writes for the New York Review of Books, among other publications.

In this elite universe of architects, he said, international recognition is “very important” and “an increasingly necessary part of getting work in Japan.”

Seeking out a foreign architect was not an option that MoMA’s first director, Alfred Barr Jr., had when the West 53rd Street museum went up in the 1930s, according to the architectural historian Francis Morrone.

Though Barr had wanted the German-born Mies van der Rohe to design the building, he faced opposition to hiring anyone but a local architect. The museum’s commission ultimately went with the New York-based Philip Goodwin and Edward Durell Stone. At that time — and until about 15 years ago — New York’s architectural community was mostly closed to foreign firms. Developers instead chose local architects versed in the city’s zoning and building codes, Morrone said.

Still, there are notable exceptions, and the city is home to buildings by foreign — and, specifically, Japanese — architects that predate the MoMA redesign. There is Junzo Yoshimura’s Japan Society building, which opened in 1971. There’s also the interior of the west wing and the auditorium at the Brooklyn Museum, designed by Arata Isozaki together with James Stewart Polshek, and completed in the early 1990s.

Now, at a time when the Internet renders many traditional boundaries meaningless, it’s no wonder that Japanese design has become increasingly sought after, said Yumi Kori, an architect who teaches at Nagoya Institute of Technology in Japan. “The mood of this era fits to the Japanese style,” she said.

Kori, who splits her time between Tokyo and New York, said the MoMA redesign helped introduce New Yorkers to the idea that architecture could be “invisible,” insofar that it facilitates a fluid relationship between indoor and outdoor space.

That fluidity was also one of Junya Ishigami’s goals for his Yohji Yamamoto boutique on Gansevoort Street, which opened earlier this year. The single-story, wedge-shaped structure features large picture windows that have been cut into the brick façade.

As a result, Ishigami explained, clothes displayed on racks in the gallery-like space are visible to pedestrians, and, in turn, “the changing exterior space and the activities of the city create a naturally rich interior space.”

In space-clogged New York City, developers can often only dream about constructing light-filled, energy-efficient buildings that benefit from natural “solar orientation.”

That’s because the challenge is great: The street grid usually dictates how apartment buildings and office towers are positioned. In many cases, taller buildings cast wide shadows on their shorter neighbors and, depending on their appearance, may also spoil the views.

However, there is at least one building attempting to maximize solar orientation to enhance energy usage. And solar energy could get more attention here in the future: Mayor Bloomberg’s recent proposal to place windmills on the city’s skyscrapers was met with some scorn by engineers, who pointed out that New York City was really “a solar city” and that solar panels are far easier to install here and more cost efficient than wind turbines.

Marketers promoting the L Haus condominium project under construction in Long Island City say the building is being designed to take advantage of its solar orientation to enhance the energy efficiency of the apartments and create sunny interiors.

The condo is located in a section of Long Island City that offered the Stahl Organization a unique development site. It’s on an entire city block, flanked by the Long Island Expressway and the Pulaski Bridge; the surrounding buildings are mostly rowhouses and other low-rise structures that are not tall enough to block the views from inside the condos.

Many of the 122 one-, two- and three-bedroom apartments at the L Haus (named for its shape) will have southern exposures. The project is not being marketed as a green building — instead marketers are touting its high-end interior features and generous outdoor amenities. A landscaped, 10,000-square-foot yard will include a rolling lawn with a stone path, a water feature, lounges, tables and a grill. In addition, a roof terrace will provide views of the Manhattan skyline.

The condos, which will range in price from $500,000 to over $1.5 million, are expected to be completed early next year.

“Long Island City is one of the last frontiers for something like this,” said Melina Starr, a director at Prudential Douglas Elliman, noting local restrictions on the height of buildings have kept high-rises from proliferating in certain sections of Long Island City. “There are not a lot of parcels like this.”

The orientation to the sun gives L Haus an advantage in terms of energy efficiency. In many parts of the city, architects designing green buildings must rely on gadgets like photovoltaic panels on rooftops and sun-shading devices to promote energy efficiency indoors.

Solar positioning is an option more commonly used in the suburbs or out in the country.

“We don’t have the luxury of shaping buildings to respond to solar conditions,” said Bruce Fowle of FXFowle Architects, which designed the New York Times Building. “You can’t change the position of a building.”

The New York Times Building features an exterior screen of ceramic tubes running around all sides of the building, which is located on Eighth Avenue between 40th and 41st streets. The screen lets sunlight enter the glass tower at the full height of the windows, but reduces solar gain entering the newspaper’s headquarters by 30 percent, Fowle said.

A dimming system automatically lowers interior lights when natural light reaches a certain level indoors.

As New Yorkers settled back into their weekend rituals in the city after a summer of heading out to the Jersey Shore, the Hamptons and the Catskills, some real estate executives are trying to figure out a way to keep them closer to home next year.

Developers are trying to market a city neighborhood as an alternative weekend getaway. Thus, the area adjacent to Rockaway Beach welcomes the Seavón, a new eight-story luxury condo project hoping to lure vacation home buyers.

Located off the promenade at Beach 119th Street and featuring a rooftop swimming pool, from the outside, the project evokes the Art Deco complexes of South Beach.

“We built a place that will entice people from Manhattan — and [the Rockaways] is just as nice as other beach areas like the Jersey Shore,” said the building’s developer, Oren Evenhar, vice president of Evenhar Development Corporation.

All told, 26 units are for sale, ranging in price from $395,000 for a junior one-bedroom unit to about $1 million for a penthouse suite.

So far, nearly 60 percent of the units have been sold, according to Evenhar. Most of these buyers have indicated the building will be their primary residence, although a few say they will use the Seavón as a vacation home.

In some ways, the project can be seen as chancy: Rockaway Beach (and the surrounding communities) long ago also acquired something of a reputation as a blue-collar enclave, even as many year-round homes, particularly those close to the ocean, began to sell for upwards of $1 million.

The beach is valued by surfers, who claim its breaks are some of the best on the Eastern Seaboard. And because of its proximity, the Rockways have long been a favored destination for day-trippers — a fact memorialized in “Rockaway Beach” by Queens natives the Ramones, who sang, “It’s not hard/Not far to reach.”

Still, the Rockaways — despite the development of upscale residential areas like nearby Belle Harbor and Neponsit — have never enjoyed the kind of cachet of nearby beaches outside of the city.

As a result, the new condo is trying strenuously to cultivate a simulacrum of beach living within the city.

Part of the draw, according to Evenhar, is that Queens feels light years away from Manhattan. “Despite technically being in the same city, it feels like another world out here,” he said.

Brokers are paying close attention to the Seavón, which comes amidst a surge of new building activity on the peninsula.

“This area could take off with development. It’s a nicer beach than most of them in the Hamptons, and it’s less than an hour to Manhattan,” said Andrew Berman, a broker with the firm Urban Underground, who also blogs about development in the Rockaways. “It used to be hard to live in the Rockaways, but more services are starting to arrive.”

So far, it seems the Rosen Partners, developers of the condo renovation in progress at 254 Park Avenue South, are having their cake and eating it too, selling units quickly at high-net prices in a market that is making many builders feel that they’ve bitten off more than they can chew.

The condominium, located on 20th Street and Park Avenue South, has sold 35 percent of its 167 units in a five-week pre-construction blitz, before the developer has even launched a marketing campaign.

The secret? Bite-sized, scaled-down layouts.

To entice the upward-bound young, single professionals who flock to the limitless restaurants and clubs in the Flatiron District, in addition to foreigners buying up pieds-à-terre all over the city with cheap dollars, the developers designed a large number of 400-square-foot-and-under studios.

Starting at $555,000, the units appear to be a deal in this neighborhood, and yet are yielding the developer nearly $1,400 per square foot.

By contrast, Twenty9th Park Madison, the new H. Thomas O’Hara Architects-designed 34-story condo at 39 East 29th Street, off Park Avenue South, has been selling their 536-square-foot studios for around $1,300 a square foot.

“The size of the homes make for bite-sized price-points,” said Jacqueline Urgo, president of the Marketing Directors, which is selling the apartments at the 13-story 254 Park Avenue South. “Even though we’re doing well on a dollar-per-square-foot level, to get a one-bedroom with home office at $1.6 million in that location is a value.”

Note: Correction appended.

Indeed, a two-bedroom at the new Gwathmey Siegel-designed condominium just down the street at 240 Park Avenue South is listed for $1.88 million. (To be fair, that unit occupies over 1,100 square feet.)

The layouts at 254 Park Ave South are compact, noted Urgo. The one-beds with office, so called because the extra “bedroom” doesn’t have windows, are under 1,000 square feet. However, she added, “the volume of the spaces feels huge, because we have 14-foot ceilings.”

“We have a very good ‘take rate,’” said developer Dan Rosen. He referred to the ratio of actual buyers to browsers — a success that he attributes to a precise reading of his demographic, which, as represented by an illustration in the poster-size, nearly wordless brochure, is a young man with a suit and tie and shoes, who is too busy moving and shaking to have had time to put on socks.

To nail that demographic, the developers asked W Hotels to refer a designer.

“W said there’s only one person to talk to,” recalled Architectural Digest Top 100 designer Charles Allem, “and that was me.”

Having worked with Starwood and W Hotels, as well as innumerable high-profile private clients around the globe, Allem knows this buyer well. His company, Charles Allem Design International, “has a lot of bachelor clients — movers and shakers or married couples that don’t have children. So our work there [at 254 Park Avenue South] was totally driven for the mega-power executive, as well as the fabulous, up-and-coming Wall Street boy who really can’t afford to buy in New York, but he still can have something. We geared everything in that direction.”

The sleek, modern scheme for the interiors comes naturally to Allem. “I love simplicity,” he said. “I like things to be very monolithic, very contemporary, but at the same time urban. It’s New York, so we used wonderful ebony woods.”

Allem is fond of grays, he said, and used gunmetal gray on the walls in the corridor and a choice of gray lava stone, or beige limestone-type stone, in the bathrooms.

“I don’t like using 10 or 20 materials,” added Allem. “I think that’s all over the place. I like to select three or four or five materials for a project. I think you get incredible drama when you do that in design.”

The kitchens in the smaller units will be trim. Allem wanted, he said, “to make galley kitchens out of them and not have these huge Sub-Zero refrigerators and these five- and six-top cooktops in a studio apartment in New York. Most developers still do that, and it’s really ridiculous, because mostly all you need in New York is champagne in your refrigerator, and you order up your food.

“Unless it’s a family — then it’s a whole different ball of wax.”

To capitalize on the 14-foot ceilings, some units have a steel ladder leading up to a built-in loft with a seating area with low cushions strewn about and a glass rail that looks onto the living and entry areas.

To retain the ceiling heights in the 1913 building, which was originally meant for offices, “we kept the plumbing, duct work for HVAC and wiring out of the ceiling and moved it into the walls, routing it in a way that doesn’t affect the ceiling height and creates dramatic spaces,” said Rosen.

The Beaux-Arts French-limestone building had been a rental building in its most recent incarnation.

“The interior was absolutely diabolical,” recalled Allem. “I think that building was the hottest building in town in the 1970s and the 1980s. All the modeling houses used to keep their models there, so it was a high-traffic area with lots of parties and things going on. Basically, we tore the whole inside out.”

The diminutive lobby is gunmetal gray, metallic silver and polished stainless steel with faux crocodile accents and a circular carpet. The space is paneled in ebony wood, with unframed resin artwork set into the paneling.

The lower-level glass-walled amenity floor has a gym, game room with billiards and poker tables, and a large kitchen area and coffee lounge that leads into a landscaped courtyard paved in a checkerboard pattern with gunmetal gray stone, green grass and a water feature.

The small layout scheme has yielded a benefit the developers did not expect. It allows them to combine units to meet an unusually high interest in larger apartments.

“I don’t see that building as a family building as such,” said Allem, “but they’ve had some families already buying in there, and, of course, they’re buying the larger units. A lot of people now have combined a couple of the units together.”

The condominium is scheduled for completion by the end of this year.

Clinton Hill

The Isabella

545 Washington Avenue

Sales of the building’s 63 condos started in late July. The building, developed by OL Washington, contains units ranging from 467-square-foot studios to 1,658-square-foot three-bedrooms. Prices start at $285,000 for studios. Some of the project’s homes include private outdoor space and radiant floor heating. Amenities include a 24-hour virtual doorman, rooftop deck, fitness center, parking facility and video intercom security system. Occupancy is expected to begin in fall 2008. The Developers Group is the exclusive sales and marketing agent. Contact: www.theisabellacondos.com.

Greenpoint

149 Huron Street

GW Developments’ 30-unit condominium has simplexes and duplexes ranging from 570 to 1,050 square feet, many of which have private balconies. Prices range from $375,000 to $650,000. Amenities include a fitness center, sauna, steam room, spa, a rooftop garden and parking spaces available for purchase. The building’s interiors were designed by Funda Durukan. Aptsandlofts.com is the exclusive sales and marketing agent. Contact: www.149huron.com.

Harlem

The Ivy

249 East 118th Street

Closings began at the 10-story, 28-unit building in mid-July. The condominium has one- and two-bedroom residences, some with balconies. Prices start at $350,000. Amenities include a doorman, fitness center and storage. The condominium will be managed by Matthew Adam Properties, and Warburg Marketing Group is the exclusive sales and marketing agent.

Lower Manhattan

20 Exchange Place

Developer Metro Loft Management is waiving security deposits for renters with outstanding credit histories for studio and two-bedroom units still available. Rents start at $2,500 per month, and move-ins have already begun. The 800,000-square-foot art deco building was originally built in 1931. Amenities include a fitness center, residents’ lounge, valet and a landscaped sundeck on the 19th floor. There will be over 100,000 square feet of on-site retail space. Contact: www.20xnyc.com.

Tribeca

The Fairchild

415 Washington Street

Developer Atlantic Walk Vestry’s nine-story building features 21 units, including townhouses, penthouses and lofts, many with private outdoor space. Prices are expected to range from $1.97 to $9 million. The building has a brick façade and oversized arched windows. The Marketing Directors is the exclusive sales and marketing agent, and sales are expected to start later this year.

Williamsburg

924 Metropolitan Avenue

Developers David Schwartz and Rush Brook Partners’ new five-story rental building will include 30 one- and two-bedroom apartments. Six of the larger apartments on the upper floors feature 300-square-foot terraces. Amenities include a rooftop garden, fitness center, storage room, laundry room and on-site parking. The units range from 600 to 800 square feet, with monthly rents between $2,000 and $3,200. Aptsandlofts.com is the exclusive marketing and sales agent. Contact: www.924metro.com.

Construction update

Fort Greene

Rockwell Place

96 Rockwell Place

The 12-story condominium conversion of a former piano warehouse topped off in mid-July. The building will have 37 residences and is scheduled to be completed in October 2008. The units include studio, one- and two-bedroom apartments, ranging between 714 and 1,166 square feet in size. The building is 63 percent sold. Prices range from $495,000 to $899,000. Occupancy on the lower floors is expected to start in September. Halstead Property Development Marketing is the exclusive sales and marketing agent. Contact: www.rockwellplace.com.

Lower Manhattan

The Setai

40 Broad Street

The 34-story building topped off in July. The building, developed by Zamir Equities and designed by Robert D. Henry Architects, will feature 167 studio, one-, two- and three-bedroom units, ranging in size from 475 to 3,424 square feet. Prices are between $815,000 and $7.5 million. The building will have 44,000 square feet of amenities, including a spa, restaurant, dining room, wine cellar, health club, concierge and rooftop lounge. Completion is expected in fall 2008. The Marketing Directors is the exclusive marketing and sales agent. Contact: www.setainy.com.

West Village

385 West 12th Street

The seven-story condominium topped off in July. The building, developed by FLAnk, includes 12 units, seven of which were under contract as of mid-July. Available residences range in size from 3,649 to 4,331 square feet and all include a home automation system, which regulates lighting and temperature. Amenities include an outdoor pool, hot tub, fitness center, meditation deck, 24-hour concierge and storage. Completion is expected in early 2009. Contact:www.385west12.com.

Sales update

Chelsea

Yves

166 West 18th Street

Half of the 41 units at developer Magnum Real Estate Group’s 14-story building were under contract in early August. Units in the building, which was designed by Ismael Leyva Architects, range from 700-square-foot one-bedrooms to 3,500-square-foot four-bedrooms. Prices start at $950,000. Amenities include a fitness center, spa, indoor pool, landscaped roof deck and concierge. Cantor Pecorella is the exclusive sales and marketing firm. Contact: www.yveschelsea.com.

Chelsea

650 Sixth Avenue

The seven-story, 67-unit building, developed by Penterium, was 35 percent sold as of July. The project has studio, one-, two- and three-bedroom apartments. Units range from 750 to 2,600 square feet, and prices are between $900,000 and $6 million. Apartments are available for immediate occupancy. Amenities include a fitness center, rooftop deck, doorman and storage. The Corcoran Group is the exclusive sales and marketing agent.

Long Island City

Hunters View

11-15/19 49th Avenue

Simone Development’s 12-story, 73-unit project was 50 percent sold as of early August. The building offers one- and two-bedroom homes ranging in size from 640 to 1,240 square feet. Prices run from $400,000 to $870,000. Amenities include private rooftop space. Brown Harris Stevens Project Marketing is the exclusive sales and marketing agent.

Midtown East

212 East 47th Street

The 35-story building developed by Extell Development Company was 90 percent sold in mid-July. The building features one-, two- and three-bedroom homes, some with private balconies. Prices start at $706,280. Amenities include a fitness center, on-site parking, media lounge, conference center and rooftop garden. Corcoran Marketing Group is the exclusive sales and marketing agent. Contact:

Midtown West

Platinum

247 West 46th Street

Residents began moving in at developer SJP Residential Properties’ building in mid-July, when the 43-story building’s 220 residences were more than 70 percent sold out. The building has a full floor of amenities, which includes a spa lounge, social lounge, golf simulator room, fitness center and wraparound landscaped terrace. The building also includes a concierge, doorman and valet service. Contact: .

Murray Hill

The Charleston

225 East 34th Street

The 191 units in this 40-story building were completely sold out as of late July. The building, developed by LCOR, has one-, two- and three-bedroom apartments, many with balconies, terraces and views of the city. The building has a 2,400-square-foot amenities center with a fitness center, media lounge, dining area and catering kitchen, as well as an outdoor garden. Prudential Douglas Elliman is the marketing and sales agent. Contact: .

Park Slope

The Heritage

309 2nd Street

Developer PRD Realty Corporation’s four-story condominium was 70 percent sold in the beginning of August. Six of the 21 residences are still available. Homes range from 940 to 1,330 square feet in size and include duplexes, one- and two-bedrooms. Prices are between $775,000 and $975,000. Amenities include on-site parking, indoor and outdoor children’s playrooms, storage, balconies, gardens and rooftop cabanas. The building was designed by Karl Fischer, with interiors by Durukan Design. Halstead Property Development Marketing is the exclusive marketing and sales agent. Contact: .

Upper East Side

180 East 93rd Street

Sales began this summer at the boutique condominium. The building, developed by Greystone Property Development, has nine residences. The three- and four-bedroom units include terraces and a home automation system that regulates lighting, security and entertainment. Amenities include a doorman, children’s playroom, wine storage, outdoor space and fitness center. Occupancy is expected in spring 2009. Warburg Realty Partnership is the exclusive sales and marketing agent. Contact: www.180e93.com.

Williamsburg

Twenty Bayard

20 Bayard Street

The 18-story building was 60 percent sold in mid-July. The building contains 64 one-, two- and three-bedroom apartments, ranging from 700 to 1,400 square feet in size. Amenities include a doorman, parking garage, fitness center, children’s playroom, pet spa and roof deck. The building was designed by architect Karl Fischer, with interior designs by Andres Escobar. Prudential Douglas Elliman is the exclusive sales and marketing agent. Contact: www.twentybayard.com.

Compiled by Jovana Rizzo

Reviewed by Beth Braverman

“Thinking About Selling: Strategies to improve your selling performance”

By Neil J. Binder, with Nice Idea Publishing, 164 pages, $19.95

With a credit crunch that shows no signs of abating, it looks like the national housing slowdown — and the current buyers’ market — will not go away any time soon. Could there be a better time for home sellers and real estate brokers to bone up on their basic sales skills?

A new book by Bellmarc Realty cofounder Neil Binder attempts to help readers do just that. “Thinking About Selling: Strategies to Improve Your Selling Performance” is Binder’s fourth book devoted to the art of the deal. This one focuses on selling generally — yet, perhaps surprisingly, offers little take-away information specifically for real estate.

The first half of the book, which is skimmable, attempts to convey selling lessons gleaned from the four-week, in-house training course for Bellmarc’s brokers.

The first few chapters outline selling basics, like rules for becoming a salesperson (Rule No. 1: Anyone can sell; Rule No. 2: The key to being a better salesperson is to grow rather than change) and the qualities of a successful salesperson (according to Binder they are attentiveness, deductive reasoning and likability).

The author also advises readers to cultivate “a big-picture mentality” and says a successful salesperson should always be looking to build a business.

“He knows that if you are only thinking about one deal, you’re losing your focus on the overall objective, which is to create and strengthen a larger enterprise,” Binder writes. “A deal is only one event along the way. He thinks of every customer as a referral base, and every time he treats a customer right, he feels he has done a deal, even if it is not with that customer.”

While Binder lays out these lessons and rules in a lucid and accessible manner, the book initially does little to differentiate itself from the dozens of other how-to sales tomes that overwhelm the shelves of some bookstores.

Yet while the initial chapters offer an introduction to sales that seems tailored to novices, much of the rest of the book offers tips aimed at improving the performance of experienced salespeople.

Sometimes the translation of the brokerage’s sales teachings into written form falls short. For example, a lesson from Bellmarc’s training session that requires participants to step on and off of chairs becomes confusing for a reader to follow.

The book also requires readers to fill out worksheets used in the Bellmarc training sessions and then refer back to them. The worksheets, however, contain many vague instructions and can be frustrating to complete. Further, the book does not explicitly spell out the purpose of some of these exercises.

Yet bright spots emerge. In particular, the sidebars at the end of each chapter, in which Binder offers brief personal memories or observations about the world, are relevant and provocative, and they help make the book’s lessons tangible.

Binder uses a story about his daughter’s piano lessons, for example, to convey the importance of putting passion into one’s work. Another sidebar uses a story about fighter jets to explain the importance of flexibility.

Like a good real estate investment, this book gets more valuable as it progresses.

Chapter seven, “Understanding bio energy,” offers fascinating insight into harnessing personal energy to become more productive and to maximize profits.

The book’s final chapter outlines specific shortcomings Binder has found in unsuccessful salespeople and offers remedies that readers can apply to their own selling techniques.

Salespeople who do not know the market, for example, should start by defining price categories and reviewing the product alternatives for each category to choose the best choices.

“This is how you study the market,” he writes. “If you don’t study the market, you won’t know the market, and you won’t be an authority to your customer.”

The bottom line: Readers would do well to skip the worksheets and skim the first six chapters, making sure to read the sidebars. Chapters seven through 10 offer more detailed pointers that readers can use to become better sellers.

Atlanta

Atlanta-based Post Properties plans to sell five Atlanta apartment communities with the hope of raising $500 million, after losing $27 million in the second quarter compared to earnings of $62 million in the same period last year. A $28.9 million impairment charge had been assessed to the company, one of the largest developers of luxury multifamily communities in the U.S., for writing off falling land values and for predevelopment costs from halting projects as financing became more difficult, the Atlanta Journal-Constitution reported. Among the Atlanta apartment communities Post has put on the block are Post Oglethorpe in Brookhaven and Post Woods near Cumberland Mall. Post is also shopping its two luxury apartment buildings in New York City.

Boston

The stage has been set for what will soon become Boston’s largest single-family home, after investment executive Ofer Nemirovsky spent 10 years acquiring two contiguous buildings at Exeter Street and Commonwealth Avenue in the city’s Back Bay neighborhood. When completed, the $23 million mansion will have 24,000 square feet of living space with 15 bathrooms, three children’s bedrooms, six parking spaces and an elevator. The two-year gut renovation project will also feature an exercise room, media room, recreation room and office for the house manager, the Boston Globe reported.

The greater Boston area is emerging as a destination for top information technology companies, with Oracle Corp. the latest firm to make a big splash in the region. The world’s third-largest software maker will begin construction by the end of the month on a 150,000-square-foot complex at its Burlington office park along Route 128, which will double in size after the expansion is complete, the Boston Globe reported. Oracle has acquired six companies so far this year, including its recent $8.5 billion purchase of BEA Systems. The California-based company’s expansion comes on the heels of aggressive moves made by Google and Microsoft in Cambridge and IBM in nearby Littleton.

Chicago

Falling home prices in Chicago over the past year have put many buyers in negative equity, meaning they owe more on their mortgages than their property is worth. About one-third of all the homes bought in 2006 and 2007 in the Chicago area have negative equity, according to a report by real estate data firm Zillow. In the second quarter, Zillow reported 19.8 percent of homes in the Chicago region sold at a loss, up from 13.4 percent during the same time last year. Eighty percent of all homes in Chicago declined in value in the past year, the Chicago Sun Times reported.

With new development condos languishing on the market across the country, at least one developer in the Chicago area is trying to change things up with quirky incentives. Developer Scott Whelan is offering a $3,000 credit at the nearby Bar on Buena, owned by a former classmate at Illinois State University, for buyers at his Uptown condo project at 927 West Agatite Avenue. The incentives have generated showings at the property, where units are priced from $320,000 to $470,000, but did not yield any sales as of mid-August, the Chicago Sun Times reported.

Las Vegas

The average monthly apartment rent in Las Vegas reached $889, rising $9, or just 1 percent, in the second quarter from the same time last year, according to the Applied Analysis research firm. The second-quarter increase is the lowest growth in rent in four years, the Las Vegas Review-Journal reported. Applied Analysis concluded that the highest rents were in the southwest valley, at an average of $1,106 a month, and the lowest rents were in the northeast, at $763 a month. Occupancy in Las Vegas rose 0.2 percentage points between the first and second quarters, reaching 92.9 percent, down from 93.7 percent from the second quarter of 2007.

Los Angeles

Those in the hunt for new condos in Southern California may find some good deals now, but new condo projects have virtually come to a halt with many builders unable to secure financing and others looking to convert units to rentals. For instance, one of last year’s largest planned condo developments in the Los Angeles area, the Related Companies’ 2,600-unit Grand Avenue project downtown, has yet to come out of the ground. Sherman Harmer, co-chairman of the Urban Council of the California Building Industry Association, estimated that applications for condo building permits are down up to 70 percent in most counties in the region, the Los Angeles Times reported.

Philadelphia

Some residential developers putting up new condos on the Main Line in Philadelphia’s western suburbs are waiting until the housing market turns around. At the beginning of 2007, about eight new condo projects were in various stages along the Main Line. Some of the projects have been completed and sold, while others have yet to start construction. Developer and architect Tom Hall’s yet-to-be-built project, Allaire, is up for sale. Michael Main and Jeff Pendergast of Wycklow Development sold six out of eight units at another project but lowered prices to sell faster, the Philadelphia Business Journal reported.

Phoenix

Homes priced under $350,000 in Phoenix are selling quicker than the rest, according to real estate firm John Hall & Associates. Overall, real estate data firm Information Market said 35 percent of the homes and condominiums sold in July were bank-owned through foreclosure. The median price of the foreclosure sales was $160,000, more than $40,000 below the Valley’s median price. In the Phoenix metro area, pre-foreclosures were down in July, falling from 6,893 to 6,397. This is the first significant drop in pre-foreclosures since foreclosures started to rise last summer, the Arizona Republic reported.

San Francisco

With the high-end market in the Bay Area hurting, brokers are coming up with new ways to attract buyers. Luxury broker Olivia Hsu Decker of Sotheby’s International Realty is holding a six-day event in September for interested buyers to view 30 mansions. The event includes wining and dining prospective buyers, who are chauffeured around to see homes in the $4 to $65 million range. About 40 people, mostly from overseas, have already paid $800 for dinner and limo service, with the option of paying more for hotel accommodations and opera tickets, the San Francisco Chronicle reported.

Seattle

First Industrial Realty Trust announced last month the purchase of a 233,000-square-foot portfolio in Seattle comprised of three distribution facilities, vaulting the Chicago-based company into the top five acquirers of industrial real estate in the Seattle-Tacoma market this year. The properties, located in the Kent Valley submarket, the largest in Puget Sound, are 100 percent leased. The sales price was not disclosed. First Industrial’s expansion in the region also includes the development of two buildings totaling 328,500 square feet in Lacey, southwest of Seattle. The company owns an additional 256 acres of developable land in Seattle-Tacoma, which could be built out to 3.8 million square feet.

Washington, D.C.

The Washington, D.C. area’s investment sales market continues to suffer from the credit crunch. During the first six months of 2008, there was $1.4 billion in commercial sales in the District, down 61 percent from $3.6 billion sold during the same time last year, according to Real Capital Analytics. In Northern Virginia, building sales fell 87 percent, down to $914 million from $6.8 billion a year ago. Maryland’s suburban commercial sales decreased 13 percent in the first half of the year, falling to $459 million from $527 million last year, the Washington Post reported.

Springhill Lake, the D.C. area’s largest apartment community, has sold for $275 million to Empire American Holdings. Located at 9230 Springhill Drive in Greenbelt, Md., the community contains 2,877 residential units, which the buyer plans to renovate. The seller in the deal, AIMCO, was represented by Al Cissel and Scott Melnick of local real estate development and brokerage firm Transwestern. The community lies in proximity to the District’s Downtown area and is reportedly more than 90 percent leased.

Compiled by Jovana Rizzo and Linden Lim

Governor bars criminals from mortgage business

Gov. Charlie Crist and his cabinet voted last month to prohibit anyone convicted of financial crimes from entering the mortgage business. The legislation came after it was revealed that the state’s lax licensing standards had allowed thousands of criminals to become mortgage brokers since 2000, some of which contributed to the at least $85 million in mortgage fraud committed in the state over that period.

The unanimous vote will impose a 15-year waiting period before anyone convicted of a violent crime, including murder, rape and armed robbery, can get into the mortgage business. People convicted of misdemeanors involving fraud, dishonest dealing or “moral turpitude” will have to wait five years from their conviction dates before they can get licensed.

Also in response to the mortgage licensing controversy, Don Saxon, chief of the state’s Office of Financial Regulation, announced that he will resign his post this month. He said he recognizes that closer oversight over the department, which handles licensing, is needed.

A lender to Las Olas Riverfront, a massive retail and entertainment complex in downtown Fort Lauderdale that entered into foreclosure earlier this year, has exercised its right to purchase the property. The company, an affiliate of New York-based hedge fund Cerberus Capital Management, purchased the mortgage from lender ACF Riverfront for $21.8 million. Cerberus has already been in talks with developers about future plans for the 260,000-square-foot property. Boca Developers purchased the site in 2005 for $31.9 million, with plans to demolish its existing buildings to make way for condos, offices, shops and entertainment attractions.

Foreign buyers, tourists boost Florida markets

Florida is the preferred U.S. location for international real estate investors, according to a report released by the National Association of Realtors. According to the report, nearly 26 percent of international buys in the country occur in the state, putting it at the top of the list. Canadian, Mexican, European and Latin American buyers all favored Florida as their top choice for U.S. purchases. The survey used data from May 2007 to May 2008, drawing on about 4,000 responses from registered brokers.

At the same time, foreign tourists have been propping up the South Florida hotel market, according to a report from the Greater Miami Convention & Visitors Bureau, which reported that the first half of 2008 showed the largest increase in foreign visitors in Miami-Dade in a decade. The metro area saw international visitors making overnight stays surge 8.2 percent over that period. This lifted the overall rate of hotel visitors by 3 percent, despite a 1.2 percent decline in domestic visitors.

Builder WCI Communities declares bankruptcy

Developer WCI Communities, builder of single-family homes throughout Florida and the owner of five multi-family properties in Miami-Dade, filed for Chapter 11 bankruptcy reorganization in early August. A U.S. Bankruptcy Court judge signed off on the relief plan, which stated that WCI can deliver clear title to homes and tower residences at closing and authorize title insurance issuance. The court ruled that deposits and other funds received by WCI and held in trust are not subject to the bankruptcy and are to be applied only according to the parties’ agreements and applicable law.

The relief package included an agreement with its senior lenders to immediately access approximately $50 million in cash. An examination of the builder’s path to bankruptcy shows that it could have avoided the Aug. 4 filing if it had taken a buyout offer from Carl Icahn, the company’s largest shareholder, according to GlobeSt. The June 2007 offer wasn’t as bad as the board thought at the time, and the company’s stock subsequently dropped to about 30 cents a share.

Insurance commissioner rejects hike

The head of the Florida Insurance Commission said the state will reject Florida Farm Bureau’s bid for a homeowner policy rate increase, which the insurer says is necessary in the case of severe hurricane damage. Insurance Commissioner Kevin McCarty said the proposed 28 percent average statewide property insurance increase was too sharp and wasn’t supported by the commission’s own numbers.

Some South Floridians faced increases of as much as 96 percent under Florida Farm’s proposal. Officials from Florida Farm, which has 100,500 homeowner policies statewide and 4,700 in South Florida, said the hike would provide backup storm coverage and allow claims to be paid in the wake of a damaging hurricane.

Gov. Crist said that he hopes McCarty also quashes an increase proposed by State Farm Florida executives that would push coverage on its customers’ homes up by an average of 47.1 percent, the Sun-Sentinel reported. South Florida residents, who live in the area most vulnerable to hurricanes, would bear the largest share of that increase.

Compiled by James Kelly

The stretch of Sixth Avenue from 23rd to 34th streets has long been home to a mix of Flower District merchants and wholesale dealers selling items like pocketbooks and wigs. But now, as the wave of residential towers that started construction a few years ago moves into the final phase of completion, more ground-floor retail spaces are opening up.

In a Webcast interview last month, The Real Deal’s Jill Gardiner spoke to two retail brokers to find out whether the 23rd Street retail barrier dividing the eleven-block stretch from more upscale stores in Chelsea is finally coming down. High-end retailer Gracious Home is set to open its doors next month at the Chelsea Landmark on Sixth Avenue between 25th and 26th streets, and across the street at the Chelsea Stratus, David’s Bridal, T-Mobile and a new spa have signed deals for new retail space.

And with new projects at 855 Sixth Avenue and 885 Sixth Avenue, thousands of feet of new retail space is coming down the pike.

Log on to www.therealdeal.com to see the full interview and 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 Bruce Spiegel, head of commercial leasing at Rose Associates.

The Real Deal: You signed a deal with Gracious Home a couple of months back. Tell us a little bit about the challenge in signing them above 23rd Street on this stretch of Sixth Avenue, which really didn’t see this caliber of retailer until now.

Bruce Spiegel: Gracious Home, as you know, has stores on the Upper East Side and the Upper West Side, and they had been in the market for some time looking for a third location. I think they recognized the fact that many of their competitors were below 23rd Street here on Sixth Avenue. They recognized that there was an opportunity for them here.

TRD: It’s interesting that you got Gracious Home here given that they’re a home furnishings store. Home furnishings stores are struggling, at least nationwide — some of them have filed for bankruptcy, and some of them are closing in New York. What’s different about Gracious Home? How were they able to sustain another space this size and expand during this economic downturn?

BS: Gracious Home is truly a New York institution as far as a retail tenant is concerned. With all due respect to the national tenants, [which are] a little more formulistic.

TRD: [The location's size of] 17,000 square feet wasn’t large enough, so you were able to get them additional space next door. Tell us about that.

BS: We reached out to a contiguous building, and we were able to conclude a second transaction with them where they’ll be opening up a design center at 45 West 25th Street.

TRD: What do you really see for the future of this strip? Do you really feel that a barrier has been broken?

BS: Unquestionably, the retail will change here; retail follows residential.

Next, The Real Deal catches up with Ariel Schuster, senior vice president and partner at Robert K. Futterman & Associates.

TRD: You have about 18,000 square feet of retail space [at the Chelsea Stratus]. You’ve signed a lease with David’s Bridal, T-Mobile and a spa. Tell us a little bit about that. What’s the status, when are they moving in, and how much remaining space do you have?

Ariel Schuster: All three tenants including the first Manhattan David’s Bridal will be taking possession in about a month. Hopefully, they’ll be rushing to get open for the holiday season.

TRD: Tell us a little bit about the challenges in luring some of these tenants in, especially restaurants. There really aren’t that many around here.

AS: Part of the challenge is to educate retailers and the restaurateurs about the area north of 23rd. Historically, 23rd Street was a physical and psychological barrier.

TRD: Talk a little bit about the ballpark of rents you’re getting now, and compare that to a couple of years ago.

AS: If you compare the deals that were done today to the first wave, which are in some of the earlier buildings, the rents have certainly tripled. The earlier deals were done in the $60 to $80 range. We’re now well north of that.

TRD: How much of a role did the fact that Gracious Home had already signed across the street impact your ability to convince tenants to sign here?

AS: Convincing the tenants to come here wasn’t the hard part; Gracious Home’s effect was to get the rents even higher.

TRD: What kinds of retailers do you expect to creep up Sixth Avenue toward 34th Street, [and what's next for this area]?

AS: Sixth Avenue is converging from both ways. It’s going from Herald Square down, [but] it’ll take a little while for it to completely connect. It’s pretty established from 23rd to 28th. Most of the blocks have been developed, with a few exceptions. The real void is between 28th and 32nd streets. Hopefully, as all those projects come online, it will be one continuous stretch.

Compiled by Linden Lim

By C.J. Hughes

First, corporations relocated there. Then, tourists streamed back. Now, Times Square, which in the past 15 years has seen a dramatic reversal of fortune as sex shops gave way to family-friendly eateries, is bracing for thousands of new residents.

Escalating a trend that began in earnest earlier this decade, a crop of high-rise rentals is slated for West 42nd Street, just outside the core entertainment district, on land once occupied by parking lots.

Historically, developers have used rentals to establish the residential bona fides of a neighborhood before undertaking more ambitious condo projects. That’s the model that the Financial District has experienced in recent years, brokers said.

But on West 42nd Street, the projects are more than just place-holders, in terms of their scale (which could easily be described as enormous) and their finishes, considered top-of-the-line.

Embodying both of those qualities is Silver Towers, a sprawling aluminum-and-glass complex located at 600 West 42nd Street, on a lot that stretches along 11th Avenue to West 41st Street.

With 1,359 studios to two-bedrooms, it will be the largest single-structure apartment complex in the city, and possibly in the country, when completed in 2010, brokers said.

Most apartments will be located in twin 60-story towers, which were slated to be topped off last month, said Jack Klein, a vice president with Silverstein Properties, the developer. There will be four 6,000-square-foot retail berths clustered around a courtyard, and a 13-story tower with 84 units of affordable housing, he said.

Like high-end condos, Silver Towers’ units will feature expensive finishes such as granite counters, glass-doored kitchen cabinets and stainless-steel appliances. (Silverstein is not aspiring to LEED certification, Klein said.)

Market-rate renters will move in next spring. Though prices haven’t been officially set, studios should start in the “low $2,000s,” said Sandi Rotkoff of Citi Habitats, which is marketing the property.

Though office buildings and condos were once considered for the site, which Silverstein Properties has owned since 1985, Klein said that apartments play to the area’s changing demographics.

“It will appeal to people who have just come to New York, to young people and to people who don’t want to buy until the sales market bottoms out,” he said.

Others might come to be near nightlife, which could be enhanced by the addition of 440 West 42nd Street, a 58-story tower with 600 apartments and 150 condos from the Related Companies. The project will also have 1.2 million square feet of retail, office and “cultural” space, according to Joanna Rose, a spokeswoman for the company. But a 1,800-seat theater proposed earlier for Cirque du Soleil is now off the table.

Rose said no timeline has been set yet for the project, which hasn’t been named. But, she noted, the foundation has been poured.

Lately, profit margins on rentals haven’t been enough to cover development costs, which have skyrocketed in recent years. But jazz up the units with enough luxury finishes and the price points could rise enough to make rentals workable, brokers said.

That could explain 605 West 42nd Street, a 61-story high-rise planned by the Moinian Group for the northwestern corner of 11th Avenue, on four parcels that once included a garage and gas station.

Rather than exactly mimic Moinian’s existing Atelier, a nearby 46-story tower with 478 condos, 605 West 42nd will offer 970 rentals, from studios to three-bedrooms, among the 1,055 units at its site, with the other 85 to be condos, said Michael Buckley, the project manager. Foundations are now being poured, Buckley added, with construction to start in October; occupancy is slated for spring 2010.

Like in Silver Towers, the interiors at 605 West 42nd will be many cuts above run-of-the-mill, as Philippe Starck, the designer, will style them. There will also be a rooftop pool atop the podium linking the two towers.

These touches could boost rents above what Silverstein will ask, Buckley said, as a 600-square-foot studio could go for $3,000 a month. The market can support those prices, he added, even it it’s about to be flooded with new homes.

“Competition exists when there is scarcity of a product,” Buckley said.

While the current projects may be sizeable, they are not pioneers. An earlier project — 420 West 42nd Street — was developed jointly in 2001 by the Brodsky Organization and Quinlan and Field. It offers 264 units in a brown-striped 41-story tower.

Another early project was the 45-story beige-brick Victory, developed by Sidney Fetner Associates, with 417 units at 561 10th Avenue. In late July, studios there were leasing for $2,390 and two-bedrooms for $4,790, according to the building’s rental office.

Silverstein, too, placed a previous bet on the neighborhood. His River Place, which sits on the same full-block lot as Silver Towers (separated by a park), wrapped up in 2001. Its 921 units, from studios to two-bedrooms, start at $2,300, according to its rental office.

And while turnover may be frequent, the average occupancy rate at River Place is 97 percent, Klein said.

That comes despite a relative lack of services. Clothing and housewares stores are few in the blocks west of Ninth Avenue. And public transportation options are slim. (But the now-closed Market Diner, a longtime restaurant at 11th Avenue and West 43rd Street, will reopen with outdoor seating, said Buckley of the Moinian Group, which owns it.)

Though the city promised to extend the No. 7 subway train, the M42 bus line is the only immediate option, said Tim Tompkins, president of the Times Square Alliance, a business improvement district representing 560 stores. Tompkins has lived on Ninth Avenue and West 44th Street for 15 years.

Still, some new residents likely don’t have far to commute to work. Tompkins suggested that residents at the new rental buildings could be employees of companies headquartered within walking distance, such as Reuters, Condé Nast and Ernst & Young.

“It wouldn’t surprise me at all if they worked in this new office district,” Tompkins said.

Perhaps as a result, bargains are hard to come by. The average studio in Midtown West costs $2,123, according to the second-quarter report from brokerage firm Citi Habitats. That represents a 16 percent leap in two years. It also puts the neighborhood in the top half of 15 Manhattan neighborhoods surveyed, the report showed.

And adding so much new supply to the market won’t likely depress prices, said Gary Malin, Citi Habitats’ president, as demand is strong and growing. In fact, even though Wall Street firms are laying people off, they account for just five percent of the city’s jobs, he pointed out.

And, renters previously pushed to the outer boroughs are eager to come back, he said.

“They will say, ‘Does this make sense for me now?’” he said. “And the answer will be, ‘Yes.’”

Vickie Palmos is betting on Astoria.

Just a few months ago, the 30-year-old real estate agent left her job at Value Lane Realty to strike out on her own. Her new company, Astoria NY Condos, specializes exclusively in — you guessed it — new condos in one of Queens’s most diverse neighborhoods.

“Astoria is in the infancy of becoming an area like Park Slope,” Palmos said. “I was getting more and more requests for Astoria condos, so I decided to focus specifically on that market; I’m staking my business on it.”

Indeed, the Queens neighborhood has no less than 10 new projects in the works.

Nonetheless, average condo prices have dropped there in the last year, and several of the latest developments have seen price reductions.

According to numbers compiled by StreetEasy.com, the average price for a condo in Astoria dropped from $519,357 in August 2007 to just under $489,915 in August 2008. (The price of houses, however, has climbed steadily, from an average $891,285 a year ago to $948,875 today.)

Meanwhile, of eight units on the market in the Astoria, a 27-unit building developed by Criterion Group, all but two have dropped their asking prices. And at the Astoria Windsor, the last two sales, both of two-bedroom units, each closed at more than 10 percent below the asking price.

Other projects are reportedly converting from condo to rental, a sign that the market in the neighborhood may be soft.

But Palmos and others shrugged off any negativity, saying compared to nearby Long Island City — where prices average $754 per square foot compared to Astoria’s $647 — units in the neighborhood are selling six weeks faster.

“Astoria buyers aren’t as concerned with amenities,” said Palmos, referring to perks in Long Island City such as the Crescent Club’s Leon Fitness Center, putting green, pool and screening room, and 44-27 Purves’s children’s playroom and roof deck with private cabanas.

In fact, Astoria condos are selling an average of five weeks faster than they were a year ago, which Palmos attributed partly to a new generation of buyers (specifically first-time buyers and a smattering of empty-nesters) discovering the area.

“There’s no infrastructure in Long Island City,” she said at a meeting with a reporter at the New York Grand Café on 30th Avenue in the heart of Astoria. “Astoria is an established community. This is a real neighborhood.”

Indeed, from where she sat, on the corner of bustling 30th Avenue and 37th Street, she could see two other upscale restaurants — brand-new Bala and Flo Café — which are busy serving drinks and appetizers to 20- and 30-somethings. New York Sports Club, Victoria’s Secret, Starbucks and the Gap are all around the corner on Steinway Street, the area’s main commercial drag.

“We’re like Greenwich Village but half the price,” boasted long-time broker Charles Sciberras of Realty Executives Today. “People making $50,000 to $80,000 a year can afford to live here, while you really have to make closer to $100,000 to buy in LIC.”

Palmos said she just closed the last sale on the Newtown Towers, a 10-floor, 28-unit condo tower completed in September 2007 and located at 25-25 Newtown Avenue, less than five blocks from the Astoria N/W subway stop. She expects to start selling the Newtown Villas, another nearby eight-unit condo project, in February.

“Astoria didn’t boom like Brooklyn and LIC because there wasn’t much condo inventory,” explained Corcoran agent Adriano Hultman. “Back in 2004 and 2005, when Williamsburg and LIC became strong, developers would go there because they could buy large parcels of land and build 60- to 80-[unit] apartment buildings.

“Astoria was already a neighborhood so there wasn’t that type of land available.”

According to Hultman, as much as 90 percent of Astoria’s housing stock consists of rental buildings or two- and three-family homes. But like Palmos, Hultman sees the area as being hospitable to “the right kind” of condo development.

So what is the right kind of development for this established, but evolving, neighborhood?

Hultman’s partner at Corcoran, Robson Lemos, said he and Hultman came to the area about three-and-a-half years ago and began reaching out to local brokers and asking potential buyers what kind of condos they’d be attracted to. Soon, they had developed a database of amenities that buyers did and didn’t care about.

“Families wanted big kitchens,” said Lemos. “And we found out a lot of the single people looking at the area traveled a lot, and also were likely to be very active — they wanted big closets to store luggage, surfboards and skis.”

Lemos and Hultman put all this information to good use when they hooked up with Saika Builders to create LIC’s Casa Vizcaya and more recently, the Orient Condo, a 60-unit building going up on the corner of Broadway and Vernon Boulevard in Astoria.

Lemos said the Orient will feature apartments with marble bathrooms and verandas overlooking Socrates Sculpture Park.

Lemos is also marketing the Ionian, a 19-unit building scheduled to start closing this month. According to StreetEasy.com, one-bedrooms there are currently listed for between $499,000 and $559,000.

Shibber Khan, a co-founder of the Criterion Group, which develops real estate in the area, said the firm is bringing “Manhattan-style amenities” to its Astoria buildings.

Criterion recently completed sales at 14-43 28th Avenue, a 38-unit condo constructed in 2005. Another project, 1 Astoria Square, a 117-unit condo building at 21st Street and Astoria Boulevard, is currently in the foundation stage; the firm hopes to begin marketing the condos in December. Khan estimated that studios would start at $275,000, with one- and two-bedrooms asking $350,000 and $450,000, respectively.

“We’re very optimistic about the market,” said Khan. “A lot of the housing stock here is old and outdated, so new product gets snatched up quickly — that’s been our saving grace.”

On 37th Street, the developer Petros Yiannikouros said construction should finish at the Poseidon, an 18-unit condo building, by November and that the project will feature large, glass-enclosed balconies and penthouses with views of Hell’s Gate and Manhattan’s East Side. Yiannikouros said that he hopes amenities like bamboo floors, walk-in closets and Roman baths will set the building apart.

“We’re trying to do something totally different,” said Yiannikouros, who left his life as a chemist in Los Angeles to get into real estate. “We don’t want to do that Astoria brick-block building.”

Palmos is also marketing new condos at the Apollo, an eight-unit condo building on 32nd Street and Ditmars Boulevard, steps from the subway; and the 37th Street Condos, which has nine one- and two-bedroom units ranging in price from $499,000 to $1.15 million.

And the list of new projects goes on. Two other towers, one 20-story condo on the waterfront and another 10-story residential building at 31st and 30th streets are also reportedly in the works.

“The stigma of moving to Queens is really going away,” said Lemos, who points to the area’s proximity to Midtown Manhattan (“A $10 cab ride from Central Park!”), as well as the convenience of having fish and vegetable markets, plus Greek, Italian and Mexican restaurants all crowded together on the six-block stretch of 30th Avenue.

Errol Cilen, a 42-year-old Queens native who’d been living on Long Island until his recent divorce, just bought in the Newtown Tower.

“I was looking for an investment — the ‘next Williamsburg’ kind of deal,” said Cilen, who paid $460,000 for his one-bedroom. “The quality of the condos in Astoria seemed to be really high, and the price was good.”

Tribeca was recently singled out in a report by Forbes.com, which called 10013 “America’s most overpriced zip code,” and brokers there are, in fact, seeing fewer buyers willing to pay those steep prices.

“We are definitely seeing things slowing down,” said Karen Gastiaburo, senior vice president for Warburg Realty in its Tribeca office. “Buyers are taking their time; no one is in a hurry. They want to see what’s going to happen with their jobs, with the upcoming election.”

The Forbes report was based on a price-to-earnings estimate — with earnings generated from rental listings aggregated by the Web site hotpads.com. In other words, how much a property costs versus what it could bring the buyer on the rental market. Tribeca’s 36.3 price-to-earnings ratio means that homes there are selling at a vast premium compared to similar rental properties.

But in fact, according to data from StreetEasy, Tribeca isn’t selling much at all. The Web site noted that 139 sales closed in the second quarter of 2008, down from 212 sales in the second quarter a year earlier.

Blame the credit crunch. Even if an offer is made and accepted, buyers can expect to wait at the banks, which are now scrutinizing more mortgage applications, said Gastiaburo. “We are seeing banks change their minds mid-stream, and buyers are having a rough time getting a mortgage,” she noted. Gastiaburo cited a client who was purchasing a Tribeca property for about $2 million and had signed a contract, but was held up by a bank changing their pre-approval process.

“I’m seeing that it takes three to six months to get an accepted offer. It’s not like four years ago when things sold like crazy off the shelf, when you blinked your eye and something got sold,” she said.

“We’ve had clients in contract on $3.5 million with 90 percent financing,” said Ken Malian, senior executive vice president for Prudential Douglas Elliman. “Then the bank pulled back, and the buyer had to come up with an additional $450,000 to close.”

In the last couple of months Gastiaburo has seen people pull out of deals in new construction buildings. “Because there’s a large gap of time from when you buy and are looking to close, I’ve seen many cases where things have shifted. People have lost jobs and can’t afford the apartment.” Occasionally a buyer can get someone else to buy in and do a flip, she noted.

About half the inventory that’s moving is in new developments. In the second quarter of 2007, 125 apartments sold in new developments, with an average price of $1.82 million. A year later that number dropped to 72, but the average price climbed to $2.37 million, according to StreetEasy.

Brokers are seeing some resurgence in closings for luxury units such as the Tribeca Summit at 415 Greenwich Street. Currently the building has 22 units in contract and eight still on the market.

“Deals are happening when sellers price their property realistically. If a property is overpriced it will sit on the market for a while,” said Malian.

Sean Murphy Turner, a broker for Stribling in Tribeca, said condo apartments in conversion buildings like Artisan Lofts at 143 Reade Street and Sky Lofts at 145 Hudson are also showing some activity.

“Artisan Lofts has done very well this year with only a few units left to sell,” she said. Turner is handling Sky Lofts, which a couple of years ago was ordered by the city to tear down the new penthouse on top of the building because it was built seven feet higher than permitted. The penthouse was then rebuilt. Turner said the building is now in its second phase, with 12 units coming on the market in the fall. A 7,400-square-foot penthouse there went on the market in the beginning of June and was expected to be in contract by the end of August. According to Turner, it’s selling for $34.5 million.

Malian said that the small luxury units for sale in the new Pearline Soap Factory at 414 Washington Street are starting to get some attention. “We weren’t seeing much action in the spring, but since then we’ve gotten offers and signed contracts. Activity has picked up from June and July.”

As for re-sales in Tribeca, StreetEasy reports that there were 79 of them in the second quarter of 2007 with an average price of $2.65 million. This year there were 59 re-sales with an average price of $2.87 million.

“Sellers are not really lowering their prices,” said Alan Miller, senior director at Eastern Consolidated. “Look at the re-sales at 200 Chambers where apartments are being sold by people who bought the units new about two years [ago]. They are going really well.”

Some are seeing south Tribeca (especially an area below Chambers that used to be thought of as the Financial District) moving faster because of new amenities such as Whole Foods on Greenwich Street between Murray and Warren, which opened in July.

“South Tribeca is really growing strong, especially around Murray, Warren and Chambers streets,” said Turner. “There is more value there, with Whole Foods and the close proximity to Hudson River Park. The area is enjoying a surge of popularity that didn’t happen five years ago.”

Heather Bise of DJK Residential said “it’s particularly easy to sell to families” and noted that “there’s Washington Market Park with its large playgrounds and gardens.”

Bise said she sees more and more strollers in the neighborhood. However, not everything is selling. “I’ve been able to find units that are 1,800 square feet for under $2 million. The apartments going for $4 million are just sitting there,” she said.

Fringe areas in Tribeca also seem to be selling slower, said Miller.

“The area east of Broadway, near City Hall and Chinatown, is considered the fringe. Right now there is a project on Franklin Street between Lafayette and Broadway that is moving very slow.”

Some prospective buyers waiting it out to live in Tribeca have ended up renting temporarily.

Jackie Kurtz of Warburg said because the market has slowed, renters aren’t moving out and into condos or co-ops as much.

“They are staying in their apartments longer and so not that many rentals are available,” Kurtz noted.

Kurtz said that rents have gone up in what she calls a “normal” increase over the last year.

Gastiaburo said the rentals move pretty fast. “I showed two apartments last week in one building — they were two two-bedroom apartments, and a few days later they were both gone. I ended up renting a two-bedroom, two-bath over on Laight Street for $15,000 a month.”

Even though it’s generally a buyer’s market, supply and demand keep units in Tribeca moving, said Miller, who took an optimistic stance.

“Tribeca has a limited supply of units and is historically landmarked with restricted zoning — it will never be overdeveloped with buildings that are 30 and 40 stories. It’s not very hard to absorb the supply of units,” he said.

In The Real Deal’s Q & A this month, brokers said the Lower East Side and the East Village are drawing those who want to remain in
Manhattan but can’t afford prices that other Downtown areas are
commanding. They said average price per square foot, at least on the
Lower East Side, is the lowest south of 96th Street, which is drawing
first-time buyers in particular. Comments

• Print

Bending and curving east along the South Fork to the tip of
Montauk, Route 27 is the main road that funnels traffic in and out of
the Hamptons.

But more than simply being a congestion headache on Friday
afternoons this past summer as usual, the highway has traditionally
acted as a dividing line, partitioning the area’s most exclusive homes
on the ocean side on the south from the mix of pricey and mid-range
homes on the bay side to the north.

As the housing market has slowed this year in the Hamptons, some
local brokers say the gap between the markets on either side of the
highway appears to be widening.

“South of the highway remains fine, because it’s a prime location
and it has much more limited inventory, which is often perceived as a
safer investment,” said John Gicking, a senior vice president with
Sotheby’s International Realty. “North of the highway is a much larger
geographic area. Not only are there some $10 to $20 million properties,
but there is a huge supply of new houses that were built in the last
five to 10 years … [and] buyers often don’t perceive as much value
[there].”

During the recent boom times, the stark divide between the two
markets was muddied, as the lesser-developed land to the north lured
affluent buyers and speculators eager to capitalize on the robust
market for mid-range properties — at least mid-range by Hamptons
standards.

But even though the market for prime properties has remained
somewhat healthy on the north side of the highway, the bulk of the
market there is hurting as sales volume and prices both slip, brokers
said.

For starters, there is simply a greater inventory of homes there.
But those homes, including many in the $1 to $3 million range, are also
more vulnerable to market fluctuation compared to the south side, where
mega deals are more frequent.

While market reports do not break down sales volume pegged to the
highway divide, figures for prices are more concrete, showing just how
real the Route 27 marker actually is.

During the second quarter of the year, the median sale price of
properties on the north side of Route 27 fell to $870,000, down 18.1
percent compared to the same quarter last year, while prices stayed
steady to the south, rising by 1 percent to $1.55 million, according to
a market report by Miller Samuel and Prudential Douglas Elliman.

Also during the second quarter of this year, four properties sold
for over $15 million south of the highway (three of which went for
between $20 and $27 million), while only one property north of the
highway, a $17 million transaction, eclipsed the same barometer,
according to records compiled for The Real Deal by the consulting firm Suffolk Research Service.

Since the housing market south of the highway has long been
saturated with lavish oceanfront homes and estates with high-manicured
hedges, prior to the credit crunch speculators zeroed in on the north
and its greater stock of undeveloped land. In turn, they built a glut
of homes that have now become difficult to flip.

Susan Breitenbach, a senior vice president with Corcoran, said the
hardest sells right now are properties in the $3 million range that
speculators built prior to the credit crunch “way north in the woods,
or on not-so-special properties.”

However, she said as the market remains rocky, speculators are
becoming more negotiable and buyers are finding deals, a trend she
doesn’t think will last. She said that’s because post-credit crunch,
speculators are more reluctant to take on new projects.

“These builders aren’t going to have three or four spec projects
going at one time any longer, and if they’re only building one house,
they’re going to be less negotiable,” she said.

Brokers said that the majority of foreclosures that have taken
place this year in the Hamptons have occurred to the north of the
highway and on the western part of the fork. But they insist that the
severity of the foreclosure problem has been blown out of proportion
when it comes to the Hamptons.

In May, the New York Post reported that banks had launched a record
number of preliminary foreclosure actions against borrowers in the
towns of East Hampton and Southampton during the first three months of
the year.

“Only a small fraction of those cases ended up on the gavel,” said
Judi Desiderio, the founder and president of Town & Country Real
Estate.

So far this year, 10 homes have been foreclosed on in Amagansett,
Bridgehampton, East Hampton and Southampton, according to records
compiled by the real estate consulting firm Long Island Profiles. Seven
of those properties are located north of the highway.

Several local brokers pointed to Wall Street’s woes as a major
reason why the market north of the highway is spiraling downward,
saying that the boom prior to the credit crisis in the north’s middle
market, which ranges from $1 million to $3 million (at least for
weekenders), was fueled chiefly by the big bonuses that were being
doled out to bankers.

With many of those same buyers now unsure about their job security,
they have been less apt to buy second homes, several brokers said.

However, other local experts are more skeptical as to why the market is down.

“I don’t care what kind of market you’re in, it could be soybeans
or stocks or real estate, some people get cautious and they won’t sell.
Others panic and reduce prices or hold on,” the president of Suffolk
Research, George Simpson, said. “You can never be positive of what
causes the trends.”

When news broke this summer that U.S. Rep. Charles Rangel had been renting multiple rent-stabilized apartments in Harlem for decades, it set off a flurry of articles about the program that keeps rents low for more than 1 million apartments in New York City.

A USA Today op-ed on Rangel, which was titled “A Congressman’s Arrogance,” for example, maintained that “by occupying so many apartments, Rangel is sticking it to his constituents.” Other articles took note of the fact that a number of famous New York politicians — including Governor David Paterson and former mayor David Dinkins — also have leases on rent-stabilized pads.

The hubbub touched off by Rangel comes as winds of change are buffeting the rent-stabilization program.

Landlords and many in the real estate industry are lobbying to maintain vacancy decontrol, or the rent threshold at which landlords can make an unoccupied apartment market-rate. Opponents of rent-stabilization claim the program is detrimental to building owners and all New York City renters. Tenant activists, on the other hand, are eagerly eyeing Albany, hoping that if Democrats achieve a majority in the state Senate this November, rent-stabilization laws will be strengthened and extended.

The host of factors that may affect rent-stabilization include bills in the state Legislature that seek to get rid of luxury vacancy decontrol and give the City Council more authority over who sits on the Rent Guidelines Board, the body that votes on yearly increases to rent-stabilized apartments.

So, which way is the wind blowing?

While no one’s sure, those in favor and against rent-stabilization in its current form can agree on one thing: The program is unlikely to be abolished anytime soon.

Media attention on Rangel’s leases primarily focused on one aspect of rent-stabilization above all others: How can you call a program that allows a powerful politician to rent four apartments at below-market rate fair?

For many in the real estate industry, that question has a simple answer: Rent-stabilization is unfair. Other housing assistance programs, like Section 8, are tied to a tenant’s income, while rent-stabilized tenants are able to lease an apartment without proving that their income falls below a certain mark. Some rent-stabilization foes also argue that by keeping rents for upwards of a million apartments artificially low, the program inflates rents for the city’s market-rate apartments.

“Whose responsibility is it to provide rent assistance for individuals?” asked Steven Spinola, president of the Real Estate Board of New York. “I would argue that it is the responsibility of government and not owners.”

Spinola said that REBNY and the landlords it represents are pushing for the reform of several facets of rent-stabilization, and they’d especially like to see luxury vacancy decontrol rules strengthened.

“We believe luxury decontrol is the right way to phase out of what is in our opinion an unfair program that provides subsidies for people to live in the city of New York,” said Spinola.

Under vacancy decontrol, which was first introduced in 1993, landlords can take an apartment out of rent-stabilization if rent on a unit is more than $2,000 and the apartment is vacated by its tenant, or if a tenant makes more than $175,000 for two consecutive years.

Spinola noted that there’s no way for landlords to verify tenant income, and that it’s easy for someone who runs their own business to shelter income so that it doesn’t hit the $175,000 mark for two years running.

In addition, Spinola said REBNY would like a provision introduced to the program that disallows people who own homes outside of New York from maintaining a rent-stabilized apartment.

“How many people own a home in the Hamptons and have a protection on their apartment in New York City?” he asked.

Tenant activists, on the other hand, said articles about perceived abuse of rent-stabilization by rich or powerful people like Rangel are the real estate industry’s way of trying to kill a program that allows lower- and middle-income New Yorkers to live in the city.

“What the real estate industry does is select celebrities like Mia Farrow or politicians like Rangel who are living in these apartments in order to dramatize what they say is an unfair situation,” said Andres Mares-Muro, rent-regulation program coordinator for the nonprofit organization Tenants and Neighbors. “The fact is, most people are not in the category of the examples they highlight. The vast majority of people would not be able to afford the apartments they have without rent-stabilization.”

Mares-Muro said tenant activists are supporting a package of bills that would repeal vacancy decontrol — in effect, ensuring that tenants could keep a rent-stabilized lease for their whole life — and would give the City Council final approval over the appointments of people who sit on the Rent Guidelines Board, the body that votes on yearly increases to rent-stabilized leases. At present, the mayor appoints all members of the board. The bills passed the Assembly in May and are expected to be introduced in the Senate in January.

The bills are unlikely to become law without a fight. According to Lisa Breier Urban, a managing partner with the law firm Breier Deutschmeister Urban & Fromme who has represented both rent-stabilized landlords and tenants for more than 15 years, landlords are already unhappy about annual rent increases not covering their expenses.

“A lot of small property owners think it’s unfair that rent increases aren’t keeping up [with] rising fuel costs,” said Urban.

Urban notes that rent-stabilization is unlikely to be repealed when the current law governing it expires in 2011, because “a renewal is built into the law if the vacancy rate is below 5 percent in the city. Assuming the vacancy rates stay below 5 percent, I think rent-stabilization will stay renewed.”

While Spinola doesn’t think rent-stabilization will disappear in the near future either, he says one of the reasons the city has been financially healthy for much of the Bloomberg administration is because more apartments have come out of rent-stabilization.

“Fewer real estate taxes are paid when you keep apartments in rent-stabilization,” he said, and the program keeps investors from having more money to spend on building new developments.

Mares-Muro of Tenants and Neighbors, unsurprisingly, doesn’t buy Spinola’s line of reasoning.

“The rent-stabilized program has served as an incentive for many owners because they get some breaks on some taxes and abatements,” he noted. “It’s also the case that many of the developments that have happened in the city over the past several years are high-end. They’re not buildings that a firefighter or a teacher could afford to rent apartments in.”

Developers could be sued under fair housing act

Developers and landlords, including the Related Companies
and the Durst Organization, may have to spend millions of dollars to
renovate more than 100,000 apartments to comply with federal housing
laws requiring wheelchair accessibility. For the past 20 years,
residential developers have followed city laws to make sure apartments
are accessible to disabled tenants, but the U.S. attorney’s office says
many buildings don’t abide by the federal Fair Housing Act, the New
York Times reported. Violators of the act can be fined up to $110,000,
and courts can order the apartments to be retrofitted for disabled
tenants.

Stringer claims 800 buildings pose fire risks

Manhattan Borough President Scott Stringer charged that more
than 800 city buildings are vulnerable to the kind of catastrophic fire
that ripped through the former Deutsche Bank building last summer,
killing two firefighters. Stringer called for a five-step plan that
includes better cooperation with federal and state agencies, the New
York Daily News reported. The former Deutsche Bank building was exempt
from city building codes because it was owned by a state agency, the
Lower Manhattan Development Corp. Other exempt buildings include Grand
Central Terminal and the UN Secretariat. Mayor Michael Bloomberg wants
to require federal and state buildings to comply with city fire codes.

City approves 125th Street rezoning

The City Planning Commission voted late last month in favor
of rezoning the eastern portion of 125th Street. The vote helps pave
the way for a 1.7 million-square-foot mixed-use complex, which will
include housing, offices, restaurants and stores. City officials have
been working with community activists on the plan for months, but have
yet to pick a developer for the project. Vornado Realty Trust, Thor
Equities and General Growth Properties are among the confirmed bidders,
Crain’s reported. The City Council plans to vote on the rezoning plan
next month.

Sex offenders barred from real estate licenses

Governor David Paterson signed a new law last month that
prevents convicted sex offenders from holding a New York real estate
license. The law closes a loophole that prevents convicted felons from
obtaining a license. It does not, however, apply to misdemeanor sex
offenders. Any offender who already has a license was required to
report their conviction to the state Department of Law by Aug. 13.

Harlem tenants sue Pinnacle Group

Tenants in a rental building at 668 Riverside Drive, at
144th Street, are suing their landlord Pinnacle Group. The tenants say
leaking pipes, rotting wood, damaged ceilings and other problems in the
building must be fixed before Pinnacle converts the Harlem building
into a condominium. The tenant group paid for a report from Rand
Engineering and Architecture, which shows the building needs about
$1.87 million in repairs to comply with plans for the conversion,
including a new roof, the New York Sun reported.

510 Madison Avenue gets stop-work order

Macklowe Properties’ 510 Madison Avenue was hit with a
partial stop-work order from the Department of Buildings, which halted
work on parts of six floors. The DOB said inspectors found a scaffold
without a permit, “failure to safeguard all persons and property” and
“failure to provide adequate protection between personnel hoist and
curtain wall,” the New York Post reported. A construction worker was
hospitalized last month when an unidentified object fell from the site.
The 30-story tower will house a Tourneau watch store.

Compiled by Linden Lim

Have the real estate valuation shenanigans and inflated home appraisals that characterized the boom years disappeared from the marketplace?

Are mortgage loan officers and realty agents — even individual home sellers — continuing to influence or attempting to interfere with appraisals despite new federal rules that ban such behavior?

Ask appraisers, and many will tell you: It’s still business as usual. Attempts at encouraging inflated appraisals continue to be commonplace, though in some cases the techniques have become subtler.

“Absolutely appraisers continue to get pressured” to hit the numbers needed to push transactions to closing, said Bill Garber, government affairs director for the Appraisal Institute, the country’s largest professional organization representing appraisers.

“That has not changed yet,” added Garber, even though recently signed federal housing legislation toughened appraisal standards and the Federal Reserve’s new truth-in-lending rules ban interference, bribes or intimidation designed to influence appraisers’ valuations. The most recent national poll of appraisers, conducted by October Research Corp. two years ago, found that 90 percent of those interviewed reported some form of interference or intimidation by retail loan officers, brokers and third-party appraisal management firms, among others.

Gary Crabtree, principal of Affiliated Appraisers in Bakersfield, Calif., says “it hasn’t gone away,” and there are even some developments on the horizon that could make things worse. Starting Oct. 1, a new federal foreclosure-relief refinancing program gets under way that will require lenders to write down the value of distressed houses to 90 percent of current market value to enable borrowers to be refinanced.

Some appraisers “could find themselves under pressure to inflate values” on those properties to cut lenders’ losses, says Crabtree, even though the federal legislation authorizing the refi program specifically prohibits interference.

Sara Schwarzentraub, president of Inter-State Appraisal Service of La Mesa, Calif., recalls how one client left a recorded message on her office phone complaining that, “If you didn’t know you couldn’t hit what was needed, you shouldn’t have taken the assignment.” The number needed by the caller — a mortgage company employee — was $50,000 to $60,000 higher than current comparable values in the area could support, according to Schwarzentraub.

In Owings, Md., Michael Tsourounis, president of Calvert Appraisal and Realty Services, recounted a recent experience when he visited a mortgage company in his area. Tsourounis inquired about the possibility of doing appraisal work for the lender.

“The office manager asked me directly: ‘If I sent you out to appraise a million-dollar home and the comps (comparable values) only came in at $800,000 … but in your heart you knew it was worth a million dollars, what would you bring it in at?”

Tsourounis says he told the manager that “the market is full of million-dollar houses selling for $750,000. Why should I be responsible for adding one more foreclosed property to the already growing list?”

“Not surprisingly,” he said, he’s never heard back from the lender, never received an appraisal assignment. “Was that a form of interference? You bet it was,” said Tsourounis. “It was just a little subtler, a little less direct, than it used to be.”

The obvious intent here, according to Frank Gregoire, immediate past chairman of the Florida Real Estate Appraisal Board and an appraiser in the St. Petersburg-Tampa area, “is really to find out: Will this guy play ball? Will he be cooperative when we need him?”

Gregoire says appraisers still routinely receive probing e-mails and phone calls from lenders and brokers designed to elicit the same information: Will an appraiser “pre-comp” a property with a sales contract pending at a specific price? Can a specific valuation number needed for a refinancing — which may be far out of line with current local property values — be reliably reached by the appraiser?

Part of the reason in today’s market environment, he said, “is that things are tough, sales volumes are down, and some lenders know that they’ll eventually find someone who’ll cooperate” — often a newcomer to the appraisal field who badly needs an assignment.

“It’s not easy for some of them to say no, especially when they see business go to folks who everybody knows are playing the game.” Only when federal and state governments severely punish unethical appraisers and the people who pressure them “will all this start to get under control,” Gregoire said. But he sees some signs for optimism: State regulators in Florida and elsewhere are cracking down increasingly on appraisers, even stripping away their licenses. And the new federal legislation authorizes financial penalties to be imposed by the secretary of housing when appraisers are found to have caved to pressure and cooked the books to inflate values.

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

Deep in the nearly 700 pages of the new housing bill just signed into law is a complicated tax code change that could affect substantial numbers of people who purchase second homes or rental investment real estate in the coming decade with an eye to occupying them as their main residence later.

The bill narrows the use of the code’s tax-free exclusion that allows sellers of principal residences to escape taxation on the first $500,000 of their profits (married joint-filers) or $250,000 (single-filers). Under current law, sellers can claim the full exclusion if they have used a property as their principal residence for at least two of the five years preceding a sale.

They can also claim the exclusion even if they convert an investment property or vacation house into their principal residence and live there for at least two years. This flexibility has been a boon to many tax-wise owners of multiple houses — particularly during the bubble years when values doubled in some parts of the country.

Property owners in markets with high appreciation rates could sell their principal residences for hefty profits — pocketing the first $250,000 or $500,000 tax-free — and then move into their rental condo or vacation property for a couple of years and repeat the process.

In effect, it was a form of financial alchemy where taxable profits could be magically transmuted into tax-free gains — at least up to the $250,000 and $500,000 limits.

That practice eventually caught the eye of tax reformers on Capitol Hill. Last year the House approved a bill that would ratchet down the rules on such transactions by distinguishing between “nonqualified” periods of rental or investment use and “qualified” periods of principal residence use. It resurfaced this year in the housing bill as a “revenue offset” — a way to raise an extra $1.4 billion over the next decade.

Here’s how the new rule is expected to work: If you buy a second home or investment property on or after Jan. 1, convert it later into your principal residence and then sell, you’ll need to allocate any gain from the sale between periods of qualified and nonqualified usage. Rental or second home usage before 2009 is grandfathered — it won’t count as nonqualified use in the equation.

The minimum period for qualified principal residence use will remain as under current law — two years out of the five preceding the sale. Any nonqualified use will have to be toted up to limit the amount of the tax-free exclusion you are allowed.

Sellers in future years will need to create a fraction against which to multiply their total gain. The numerator (top number) will be the time period the house was used as something other than a principal residence. The denominator (lower number) will be the total period of ownership.

The congressional Joint Tax Committee prepared a hypothetical example to illustrate how the computation would function. Say you are a single taxpayer and you buy a house next Jan. 1 for $400,000. You rent it out for two years and write off $20,000 in depreciation deductions. Then on Jan. 1, 2011, you decide to convert the rental house into your principal residence. You live there for two years. On Jan. 1, 2013, you move out and put the place up for sale. On Jan. 1, 2014, you complete the sale of the house for $700,000.

As under current law, the $20,000 of depreciation write-offs are treated as gross income. The two years of use as a principal residence qualifies you for some amount of tax-free exclusion on the $300,000 gain. But how much?

To figure it out, you divide your aggregate period of nonqualified use (the two rental years) by your total period of ownership (five years) and multiply that fraction (two-fifths or 40 percent) against your total gain of $300,000. The resulting number is the amount that’s subject to capital gains taxation — $120,000 in this case. But the remaining $180,000 is tax-free.

The same scenario of facts under the current tax code would have allowed you to claim the maximum $250,000 exclusion for singles. The $70,000 difference in the tax committee’s hypothetical illustrates why the tougher rule is expected to raise millions in tax revenues for the government year after year. If the facts were changed in the example and you purchased and lived in the house for five years (2011 to 2016), you’d get the full $250,000.

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

In the September issue of The Real Deal, the story “Luxury in small packages on Park Avenue South” spelled Jacqueline Urgo’s name incorrectly.

The September 10 Web story “Oro closings finally expected to begin,” incorrectly stated that the project at 313 Gold was called Oro II, that it was still a sister property to Oro, and that Dean Palin was involved in the project.

A story in the September issue, “Top outer borough condos: Riverdale
commands nearly all spots” incorrectly quoted the developer of the
Solaria condo, Joseph Korff, on the percent of units sold in the
building. He did not say 30 percent of the units in the building had
closed; rather, he said that Solaria had nine closed sales in the
middle of August and 12 either under contract or pending.

Hong Kong developers hunt for deals in mainland China

Developers in Hong Kong are looking to buy cheap land in mainland China as the market slows there.

The Chinese home market is softening as a result of new government rules that are hurting local developers. Beijing has restricted loans for construction, created a tax on land price appreciation, and will take away developers’ land if they don’t build their projects quickly enough, according to the International Herald Tribune.

Hong Kong developers, including Henderson Land, Sun Hung Kai Properties and Sino Land, are taking advantage of the slowdown. In June, Henderson Land was the only bidder for a plot of land in Nanjing offered at a government auction, which it bought at the asking price.

Land prices are expected to fall by thousands of dollars as landowners start to settle for lower prices because of the new credit controls. Analysts at financial services firm Nomura expect residential prices in China to decline 5 to 20 percent through the first half of 2009. Prices in some areas in the southern mainland have already fallen up to 20 percent.

More foreigners buying second homes in Greece

More foreign buyers are looking to Greece to buy or build vacation homes. About 70,000 foreigners own property in Greece, according to the International Herald Tribune, and that number is growing.

Greek brokers said Germans and British are the most numerous buyers, and agents report that more Russians are taking interest in the country.

Most of the buyers pay $600 to $1,500 per square foot for new properties, which is about 20 percent more than they did in 2005.

Some developers are trying to build luxury vacation complexes because of the increased demand for property, but the existing national laws make it difficult to develop. Developers and agents complain that laws governing real estate purchases are inadequate and the incomplete national register causes delays.

By early next year, the government is expected to dictate where new construction is allowed with new zoning laws, but the minimum plot size required for building there — about one acre — is expected to stay the same.

Government laws also make it tricky for buyers looking to purchase in Greece, and buyers usually have to hire a lawyer to navigate the paperwork and land register.

All buyers must pay taxes of 19 percent of new construction or 10 percent for older properties. Non-EU residents have to gain permission to buy property in certain areas of Greece, like the Dodecanese Islands, Crete and Rhodes.

Dubai sees home prices jump as businesses arrive

Dubai City’s financial hub is growing, which is attracting foreign business people and driving up home prices.

Dubai’s economic growth is increasing at about 11 percent a year, according to the International Herald Tribune, and the government expects it to remain at that pace. Housing prices are also seeing increases; they jumped 42 percent in the first three months of 2008.

The city draws about 20,000 new people per month, including a large number of workers from the South Asian subcontinent. Approximately 90 percent of Dubai’s population of 1.4 million is foreign.

U.S. investment banks are claiming spots in the region, despite facing steep quarterly losses. Goldman Sachs, Morgan Stanley, Deutsche Bank and UBS already have investment offices there. Barclays also just started a wealth management office in Dubai.

Morgan Stanley was one of the first American banks to move to Dubai. The bank arrived in the region in 2005 and now has 150 analysts, traders and investment bankers there.

Compiled by Jovana Rizzo

For over 600 years, Istanbul’s Grand Bazaar has been one of the world’s great shopping destinations. But lately it’s losing its luster and fading in local importance as a massive building boom produces dozens of modern shopping malls in the downtown area.

Created by rehabbing former factories, these malls have also been catalysts in popularizing several modern residential neighborhoods.

“Malls are very active, and retail is quite hot,” said Murat Ergin, managing director of Kuzeybati Real Estate in Istanbul, who explained, “they’re not quite European malls and they’re not bazaars. They’re multi-floor shopping centers with three to four floors and an anchor store that’s usually a department store.”

According to Kerim Cin, managing partner of Colliers International Turkey, the commercial building boom has been taking place for the last two to three years, with 90 percent of the construction related to retail. Western-style retail has been limited in Istanbul until now, and brokers emphasize that having European and American retail chains in the city has been a major boon to commercial life.

“The main reason is the stabilizing economy for the past four or five years,” Cin said. “It gave a boost to consumer demand, and that triggered international retailers to enter the market in fashion and other sectors — and to compete with that, local retailers adopted [an] expansion strategy.”

Western chains may be filling some of this space, but it’s been developers from the Persian Gulf who’ve been creating many of the new venues, according to Cin. Wealthy Arabs investing in Istanbul are said to be attracted by the city’s growth potential and status as a stable and affluent Muslim market.

Istanbul’s largest modern mall is the Kanyon Shopping Mall, a mixed-use, open air complex in the Levent financial district. Consisting of a 30-floor office tower and a 22-floor residential block with 179 apartments and four retail levels, the project emulates Nisantasi, an upscale but far older shopping district of Istanbul.

“The Kanyon is located in an area that really mixes business and residential, although it’s more of a business district,” Cin said. “The thing is, in the same area there are another eight or nine shopping centers. So even though we have an undersupply of commercial space, most of the new buildings are located in similar locations.”

Whereas 15 years ago Istanbul had no modern shopping malls, now 35 to 40 exist in the city, with an equal number on the drawing board or under construction. Most of the retail space has been created out of former factories, usually between about 25,000 to 30,000 square feet in size.

Rents at these shopping arcades vary between $4 and $10 per square foot per month.

Istanbul is still “way behind” the European average in terms of retail space, said Ergin. But locals agree the city’s retail renaissance is beginning to spur more modern office development downtown.

“There’s a real undersupply in commercial space,” said Ergin. “There’s huge demand from both internal and external concerns, and there’s not enough development in offices, and logistics are clearly undersupplied.”

The office space hadn’t been built because rents for shopping centers were higher, Cin said. “Everyone chose to do that,” he noted. “But now office demand is rising and rents are rising, and we’re seeing developers starting to pay attention to that.”

He mentioned that the market is changing because interest rates are rising, triggered by global problems, and demand is slightly weaker than it was two or three years ago.

“There are enough shopping centers, but the diversification of the shopping centers is not enough to meet that demand,” he said. “Expectations are that most of the shopping centers under development will not be successful in terms of rents or occupancy because of a weak concept, design or location. They will create an abundance of retail properties in the market.”

At the same time, the abundance of shopping has helped create a kind of revival in the Istanbul residential market, particularly for young families who would otherwise be lured by suburban development. Most of the current residential construction in the area is taking place in the suburbs outside Istanbul because of cheap land. But there isn’t “sufficient social infrastructure out there,” Cin said. “If someone’s going to buy a new apartment, they’ll still choose the city center and even older, secondhand apartments in central locations. It’s easier to commute and there’s more to do.”

Home ownership is popular in Turkey — at around 60 percent, according to brokers — and people tend to buy and renovate if necessary, particularly in the 100-year-old buildings in the city center.

According to Melek Saracer of ART Limited Realty, the downtown Beyoglu area is one of the hottest residential markets, as is Nisantasi, although there’s been serious development in some previously run-down neighborhoods, such as Cihangir and Galata.

And an area that has always been popular and remains so is along the Bosphorus, where no new construction is permitted — and where waterfront properties range from $4 million to $40 million.

Most of the buyers are locals, said Engin Kevenk of Golden Key International, who specializes in the area’s high-end properties, and they usually want to renovate their newly purchased apartment or house themselves.

“The buyer is so happy and so lucky to find something so beautiful, and they want to live in it in a modern fashion,” said Kevenk. “And the best part of it is that they’re still close to downtown Istanbul, for work and for the shopping centers.”

As I write this note, we are preparing the final details of The Real Deal’s fourth annual New Development Forum, which will be held September 10th at Lincoln Center’s Avery Fisher Hall.

Each year we gather 3,000 of our subscribers and readers to network and ask questions of our illustrious panel, which this year includes Larry Silverstein, Charles Kushner, Barbara Corcoran, Steve Witkoff, Mark Zandi, Robert Knakal and R. Donahue Peebles. The opportunity to get insights firsthand from leaders in our industry is a true privilege. Their knowledge and unique perspective on the marketplace is invaluable, and so when you get these heavyweights sitting together in a semi-circle discussing the business of real estate, you have an absolutely fascinating and informative evening.

No doubt we have the smartest people in the market reading our magazine, so pat yourself on the back. Smart people have lots of opinions. We’ve found that the questions from our audience members are often as provocative and compelling as anything we’ve thought of, if not more so, and that’s why I encourage anyone who is serious about real estate to attend this forum — and bring your questions.

A lot of developers complain about having to deal with project managers, architects, builders, subcontractors and the city — and deal with all of them simultaneously. So imagine having to deal with this: Six acres in New York City, more office space than all of downtown Atlanta, 33 designers and architects, over 100 construction firms and subcontractors, and 19 state, local and federal agencies. Now you have an idea of what Larry Silverstein is dealing with as he tries to rebuild the World Trade Center site, the largest single project in New York City history.

Silverstein is one of New York real estate’s biggest players, and with the completion of this project he will be a New York real estate legend.

You hear a lot of different news about the rebuilding of Downtown and the conflicts between the architects and the developers and the city and the MTA and so on. I was curious about what was happening down there, so I made a visit to the giant hole in the ground and had the privilege of getting a tour from Silverstein himself.

Almost immediately one thing became apparent: Despite the conflicts, there are thousands of people and hundreds of organizations trying to create something magnificent out of a disaster. That’s why we felt compelled to have Silverstein as our keynote speaker for this year’s forum to address the future of Downtown. Because no one knows what’s going on Downtown better than him, and that’s something important for every New Yorker.

Each month we work to bring you the most up-to-date news and analysis, but the forum is the one time each year when the tables are turned and we get to hear directly from our readers and meet them face to face. The funny thing about being a member of the media is that many readers have no qualms telling you exactly what they think of you as soon as they get the opportunity; whether they love you or hate you.

Either way, I look forward to hearing it all and I hope you can attend.

Amir Korangy

Halstead joins firms on Atlantic Avenue

Halstead Property is opening its third office in Brooklyn, on Atlantic Avenue’s “Antique Row” in Boerum Hill. The firm’s new storefront space will be at 495 Atlantic Avenue, down the block from real estate brokerages Fillmore Real Estate, Nancy McKiernan Realty and Boerum Hill Realty. Nancy McKiernan said she sold the building to Halstead. The building sold in July for $1.6 million, public records show. Halstead will be moving 25 agents and staff into the 1,300-square-foot space, after renovations are completed by the end of the year.

GFI gets into retail game

As commercial real estate company GFI Capital Resources Group celebrates its 25th anniversary, the firm is diversifying with a new retail group. GFI brought on Lon Rubackin, a former senior vice president at Forest City Ratner, to run the division, called GFI Retail Group, out of the company’s Manhattan office at 50 Broadway. Rubackin said his group, which only consists of him right now, will acquire properties for GFI’s portfolio, lease the company’s space, and represent tenants and landlords in retail deals. Also part of the GFI Capital Resources Group is GFI Mortgage Bankers, GFI Property Management, GFI Insurance Services, GFI Development and GFI Hotels.

Rose bids Bellmarc goodbye

Rose Associates has dissolved its longstanding relationship with Bellmarc Realty, which has handled apartment sales for the family-run company for nearly two decades. Bob Scaglion, managing director of residential marketing at Rose, said the company is now beefing up its own sales division and handling its transactions in-house. Scaglion said the companies had been working together for 16 years. He said the two companies had a good relationship, but that Rose now has sales expertise internally and doesn’t need to farm out the services.

Shaq partnership to develop $90 million condo project in Newark

A partnership backed by basketball superstar Shaquille O’Neal will develop a proposed $90 million luxury condominium in downtown Newark, following the city council’s approval of the deal last month. Boraie O’Neal Urban Development agreed to pay the city $2.7 million to acquire a half-acre site that previously housed Newark’s Science High School at 36-54 Rector Place. It plans to convert the property into a 25-story residential tower. The project would be the first of several urban projects planned by the partnership, which includes the Miami-based O’Neal Group and New Brunswick-based Boraie Development.

Jersey brokerage aims for Brooklyn buyers

A leading New Jersey brokerage has teamed up with Fillmore Real Estate, the largest independent brokerage in Brooklyn, to attract buyers across the river to new single- and two-family homes in Newark’s South Ward. West Orange, N.J.-based Jordan Baris, under a co-brokerage deal with Fillmore, is offering single-family homes starting at $239,000, which it says are 20 percent below normal prices in the area and well below Brooklyn’s high prices. “You’re getting the buyer who either can’t afford to buy in Brooklyn or can afford to buy, but decided that the space they would get is too small for the price,” said John Reinhardt, president and CEO of Fillmore.

Arby’s plans 41 locations in metro New York

Fast-food chain Arby’s has signed an agreement with a local developer to launch 41 new restaurants throughout the New York City area over the next decade. The expansion will be handled by the newly formed RCNY Restaurants venture, led by Charles Chera of RC Chera Realty Group. His sons Raymond and Ralph will serve as president and vice president, respectively. Freestanding locations with drive-thrus will average about 3,000 square feet, in-line locations will be around 2,500 square feet and food court branches will average 800 square feet. The Atlanta-based Arby’s Restaurant Group has about 3,700 locations worldwide but currently does not have any restaurants in Manhattan.

Gosling, Dunst to star in Durst movie

Ryan Gosling will reportedly star as Robert Durst, the older brother of developer Douglas Durst, in a movie called “All Good Things” that will hit theaters next year. Kirsten Dunst will play Kathleen Durst, Robert Durst’s first wife, a 29-year-old medical student who disappeared in 1982, according to published reports. Her disappearance was never solved. Robert Durst’s cross-dressing exploits thrilled New York City throughout the 1980s and 1990s. Durst was acquitted of murdering his neighbor who was found dismembered in Galveston, Texas.


Compiled by Linden Lim

While there has been a slowdown in the market, some major players, namely real estate investment trusts, showed a healthy recovery so far in the third quarter.

In the first half of the third quarter, which ended August 15, the Dow Jones Equity All REIT index — a composite of the stock performance of all publicly traded U.S. REITs tracked by Dow Jones — showed a 5.3 percent gain, an impressive rebound that comes close to covering its 6.1 percent loss in the second quarter.

The REITs with large holdings in New York performed well on an individual basis over that period as well.

Vornado Realty Trust was up 16.2 percent, bolstered by news in late July that construction could begin as early as next year on a skyscraper to rise above the Port Authority bus terminal, a project in which Vornado is a partner.

SL Green — which signed one of Manhattan’s largest office leases of the quarter when it brought accounting firm BDO Seidman into a 121,441-square-foot space at 100 Park Avenue — was up 6 percent in the first half of the third quarter.

The company’s stock also rallied after reporting in late July that its office occupancy increased 40 basis points to 96.7 percent in the second quarter, while its funds-from-operations rose 59 percent.

Boston Properties showed a 10.2 percent leap in stock value since June 30, after announcing a 1 percent gain in funds from operations in the second quarter, during which it announced its joint purchase with a private Dubai-based investor of the $3.95 billion office tower package that included the GM Building, 540 Madison, 125 West 55th Street and Two Grand Central Tower.

Joseph Ben-Zvi, president and founder of brokerage Metrospire, stepped down in mid-August to work for Online Residential, a company owned by Jonathan Greenspan that handles Web site design as well as listing and database services for brokerages and developers in the five boroughs. Ben-Zvi’s appointment as director of sales there coincides with the creation of a new sales division at the company, of which he is the first and only member.

Currently, OLR’s typical client is a smaller brokerage, like Metrospire, with 50 to 100 brokers. Ben-Zvi expressed an interest in pursuing clients with 500 to 1,500 brokers. He declined to name specific potential clients as of press time, but said that negotiations are under way.

“It would be companies that traditionally spent millions of dollars in creating their own databases,” he said.

He also plans to help expand the company’s client base into Long Island, Westchester and eastern New Jersey.

In addition to offering the existing OLR services to new prospective clients, the sales division will be marketing a new line of Web-based applications to be used by brokerages.

Ben-Zvi said that while it will be “a little weird” working with a client base that was once his competition, he does not think it will adversely affect business.

“We were competitive as athletes: Before and after you shake hands, but during play you have your game-face on,” he said. “But now we are not competitors, and we can be a lot more open with each other.”

Over the past several years, Bond New York has been one of the fastest-growing residential brokerages in the city without stepping outside its comfortable niche of apartment resales and rentals. Now, with the creation of a new development marketing division and the opening of its first sales gallery, to give buyers a glimpse of overseas projects, Bond is poised to grow even bigger.

The creation of Bond Property Marketing Group, which was first announced in mid-August, will be headed by managing director Fernanda Forman, who was hired in October 2007. She has been working behind the scenes to get the group up and running. Forman previously worked as director of residential marketing for Starwood Hotels and Resorts Worldwide, as well as executive vice president of real estate sales and leasing for Essex House Hotel.

So far Bond’s new division has only seven brokers, which Forman handpicked from the firm’s existing staff, but it will continue to expand as it picks up more exclusives.

Bond has also announced the opening of a new flagship office, located at 1776 Broadway, in Columbus Circle. About a quarter of the new space will be dedicated to the firm’s sales gallery, showcasing BPMG’s projects.

BPMG has secured exclusive marketing contracts with four projects in Brooklyn. It is also negotiating exclusive agreements with 14 projects in Manhattan and Brooklyn, as well as seven projects in South Florida, Uruguay, Mexico, Costa Rica, Panama and Dubai.

Residential

Coldwell Banker Previews International

Jerry Gemignani, John Wuertz and Michael Mansfield joined the firm’s New York office.

The Corcoran Group

Wigder Frota joined as senior vice president. She was previously with Prudential Douglas Elliman.

Prudential Douglas Elliman

Dianna Lake joined the firm as an agent.

Commercial

CB Richard Ellis

Steven Robinson and Roshan Shah were promoted to vice president from senior associate. Craig Reicher and Ken Rapp were promoted to vice chairman. Frank Scavone joined the company’s investment management group as senior managing director. He was previously executive vice president at Ciena Capital. Steven Yeh joined the investment management group as director of investor services. He was previously with Blackrock.

GFI Management Services

Frederick Mehlman was appointed CEO. He was formerly with Maxx Properties.

Holliday Fenoglio Fowler

Andrew Scandalios was promoted to senior managing director in the firm’s New York City office.

ID Real Estate Partners

Ira Fishman and Dana Moskowitz were named executive vice presidents. Fishman was formerly with Winoker Realty, and Moskowitz was previously with Bradford Allen Realty Services. Clifford Moskowitz joined as director. He was previously with Winoker Realty.

Marcus & Millichap

Adelaide Polsinelli joined the firm as associate vice president of investments in the Manhattan office. She was formerly at Besen & Associates.

Massey Knakal

Michael Amirkhanian was promoted to director of sales for the firm’s Bedford-Stuyvesant operations from associate. Holly Daddario joined the firm as executive assistant to partner Shimon Shkury. She was formerly an assistant buyer with SumiSeo in Massachusetts.

The Related Companies

Vishaan Chakrabarti was promoted to executive vice president of design and planning from senior vice president. He will continue to serve as project manager for Moynihan Station.

Sholom & Zuckerbrot Realty

Joshua Kleinberg was named managing director. He was formerly director of retail leasing at Robert K. Futterman & Associates.

Sinvin Realty

Christopher Johnson joined as director. He was previously an investment sales associate at Eastdil Secured.

Studley

L. Stanton Towne joined the firm as senior managing director. He was previously a partner at McDermott Will & Emery.

Two Trees Management

Natalie Ungari was named associate director of leasing. She was formerly at Stroock & Stroock & Lavan LLP.

Compiled by Jane C. Timm

Go to puzzle: Distressed properties

Click here for solution

By Myles Mellor

Every profession has its cringe-worthy clichés. In real estate, like other endeavors, some crystallize a concept and others are open to interpretation. But there are those that have echoed like broken records for so long that they are almost impossible to avoid. Others are so trite they’re trotted out as punch lines.

The tried-and-true tropes — “location, location, location” and “you get what you pay for” — can be imprecise. Clearly, a crummy product can fail anywhere, and one can get ripped off in any price range.

“And how many times can a neighborhood represent a ‘new frontier’ or be ‘up-and-coming?’” said nightclub broker Alex Picken.

Jonathan Miller, president and CEO of the appraisal firm Miller Samuel, tries to avoid clichés when describing the market, and recoils when he hears them: “I tune out because it’s a scripted response,” he said.

His “number one pet peeve,” though, is the phrase “Manhattan is an island,” connoting the borough’s insulation from the national real estate market.

“The implication is that we’re insulated from reality and that we beat our own drum,” he said. “That has been true in the latest housing cooldown, where we haven’t seen the damage, but in the early 1990s, Manhattan got hit harder than the rest of the country.”

Back then, people referred to the real estate market as a “black hole,” Miller said. “I saw a place in Tudor City that was going for $11,000 and I thought, ‘Gee, I could put that on my credit card,’ but I didn’t — and now it’s worth around $275,000.”

Though most established clichés grow from the grassroots and spread through repetition, some players try to impose overgeneralizations from above. When clichés rear their heads, nuance is generally not in play, Miller said, pointing to the National Association of Realtors’ ads promoting the idea that “it’s always a good time to buy real estate.”

“It undermines the industry’s credibility because it gives the impression that everything is always rosy,” he said. “Clichés don’t come down to right or wrong, they’re just tired and superficial.”

Of course, brokers have secret codes to describe properties — lingo that can change over time. The term “triple mint,” for instance, has shifted in the last few years, said Rick Wohlfarth, who runs his own firm.

“It used to mean that nothing needed to be done,” he said. “Now, it’s being used when a property needs some work. Likewise, the phrase ‘original condition’ meant that something needs a major restoration, but that’s being replaced by ‘estate condition,’ which has a different connotation.”

Treadworn expressions that irk Barak Dunayer, president of Barak Realty, include the maxim that “summer is slow,” he said.

“It drives me crazy. There’s business out there. It tells me that brokers don’t want to work.”

Another phrase that sticks in his craw is “buyers are liars and sellers are worse,” he said. “That’s what brokers say; I hear it all the time.”

The term refers to buyers who flirt with other brokers behind their steady’s back and to sellers who puff up the pedigree and condition of their property.

For him, the bottom line is “if a buyer doesn’t honor exclusivity, it’s the fault of the broker, who failed to win loyalty,” he said.

“To me, it’s an excuse for not providing good service. No one’s lying, they’re looking for values.”

So far, the butler hasn’t done anything. At One Madison Park, where
the 7,577-square-foot penthouse lists for $40 million (a $5 million
reduction), the offer of free butler service for a year, along with an
805-square-foot apartment for the butler, hasn’t moved the unit since
it went on sale last year.

While seemingly over-the-top, the promotion could make sense to the
upper echelon of buyers. Some buyers at 15 Central Park West bought
less-desirable apartments in the building to house their staff.

So why not try to lure power brokers to Madison Square, which is
also developing into a chic bastion. Across the street, at the former
MetLife building (rechristened 5 Madison Avenue), Donatella Versace
will design a penthouse that is expected to sell for upwards of $48
million.

“We wanted to offer consistency in lifestyle for the potential
purchaser,” said Wendy Maitland at Brown Harris Stevens, who devised
the butler promotion at One Madison Park.

“The owner probably won’t be around 365 days a year and would need to have someone here when they’re not.”

Butler service is a relatively new high-end amenity, she said.
However, buyers who already have their own staff or want the help to
live with them can likely be accommodated.

Other developers are pampering buyers with a smorgasbord of plush
services, though they may scale back on amenities as the economy
further sours. The new Alma condo at 30 West 21st Street offers maid
service, a result of several brainstorming sessions aimed at
eliminating chores that everyone loathes doing, said Kevin Comer,
senior managing director at Beck Street Capital.

With 13 large units of around 4,000 square feet, ranging from $6
million to $10 million, his firm figured it would be wise to offer
daily and weekly maid service to residents.

Another nice perk: the case of seasonal wines, offered gratis and chosen by the sommelier at restaurant Daniel.

Other developers have adapted to leaner times. Alchemy Properties’
forthcoming 95-unit, mixed use-development at 800 10th Avenue includes
more basic amenities like a 10,000-square-foot courtyard, storage in
the basement and cabanas on the roof deck, said Ken Horn, the company’s
president.

Instead of providing unnecessary amenities, those costs are
redirected toward interior details, he said. “A lot of times, amenities
are offered as marketing sizzle, but they often don’t last in their
original form.”

Gardens constitute another amenity that has lacked staying power, said Kathryn Higgins, a broker at DJK Residential.

And the butler offer at One Madison Park seems ill-timed, she said.
“It’s not a selling point. Buyers at 15 CPW aren’t sold on a concierge,
a butler, or a trip to Hawaii; they buy the prestige of the building.”

Despite the “protracted game of one-upmanship” regarding amenities
in upscale buildings, said Tim Crowley, managing director at FLAnk,
developers are beginning to cut back due to buyer backlash.

At the Novare (135 West 4th Street) and 441 East 57th Street,
relatively small projects, said Crowley, the company is trimming costs
by installing the cyber doormen, which consist of a control panel
connected to a 24-hour remote monitoring and security service.
Deliveries are placed in private lobby storage bins.

Alluding to a potential shift toward streamlined amenities, he
said, “Developers are beginning to consider the long-term financial
health of their projects as they adapt to the times.”

The Cheyenne Diner will soon be crossing the river. Michael O’Connell, the elder son of Greg O’Connell, the Red Hook developer known for bringing in the popular Fairway market, said he is finally moving the Manhattan diner to the neighborhood early this month.

An avid amateur chef who lives in the neighborhood with his wife, O’Connell’s goal is to move the Cheyenne to a lot his father owns on Beard Street between Van Brunt and Conover streets, about a block from Fairway.

O’Connell said he is partnering with Tom Fox, president of New York Water Taxi, to create a beer garden on a beach with imported sand in front of the Cheyenne, similar to Water Taxi Beach in Long Island City.

“We love the Water Taxi Beach and we think it would be a nice fix if we could offer some transportation down at the pier to promote the [Cheyenne] diner,” O’Connell said.

O’Connell, 37, said he envisions the Cheyenne as an eco-friendly destination restaurant, perhaps using wind or solar-generated power, and plans to restore the diner’s original décor. The project will cost about $40,000 in moving costs, and $400,000 to $500,000 for renovations including an additional adjoining structure for the kitchen. The opening is set for next spring.

The Art Moderne beauty — a mainstay on Ninth Avenue near Penn Station — was scheduled for a tear-down until April, when preservationist Michael Perlman, a fan of the diner’s streamlined façade and wrap-around windows, found O’Connell to buy it for $5,000 and relocate it to a new home.

The deal is the younger O’Connell’s first major independent real estate project, signalling a more prominent role in the family business, which controls roughly 1 million square feet of commercial space plus over 200 residential properties in Red Hook.

The plan to bring the Cheyenne, one of New York’s last railcar-style diners, to Red Hook has won over those nostalgic for New York City’s disappearing diners and others who say it will be a welcome addition to a neighborhood lacking eateries with outdoor seating.

O’Connell also wants to return a catering operation to the front of Pier 41, replacing the hall that operated there before part of the pier collapsed in the mid-90s.

The Cheyenne project is thrusting O’Connell into the spotlight that his father — described as “part Andy Griffith, part Boss Hogg” in a New York magazine article last year — typically revels in. O’Connell senior is alternately celebrated and criticized for reshaping Red Hook from a run-down industrial neighborhood to an enclave bracing for the impact of gentrification. Residents were concerned about traffic overwhelming their neighborhood with IKEA’s opening there in June.

The spotlight has also been on Red Hook recently thanks to MTV’s reality show, “The Real World.” The Brooklyn Paper reported that because renovations were proceeding too slowly at its first choice for Brooklyn, BellTel Lofts in Downtown Brooklyn, the show was seeking a new spot in Red Hook. Initial articles said the show would be taking space on the O’Connell’s Pier 41 — but that site belongs to the former catering hall and is not residential. The O’Connells wouldn’t comment on the reports.

Father and son have worked closely together since the younger O’Connell joined the business full-time in late 2001 — the two often take breaks from heated arguments by having lunch together at tables behind Fairway overlooking the harbor.

“As a father, it’s tough sometimes to give up the reins,” said the elder O’Connell, 66. “But I’m not going to be around forever.” He said he intends to pass on his business to Michael and his brother Greg, 22.

Michael O’Connell has a more reserved personality than his father and said he is happiest on a construction site, operating heavy machinery. “I’m the one who gets things done,” said Michael, who arrived for an interview wearing a gray sweatshirt with a picture of a backhoe on the back.

“I’ve always been into older trucks and I buy equipment and renovate it, refurbish it,” said Michael. “The diner to me is like a piece of equipment that somebody is going to scrap — but actually restored. It’s irreplaceable.”

Former Massey Knakal Brooklyn head sues

Timothy King, a one-time chief operating officer and partner at Massey Knakal Realty, will square off with his former employer in Brooklyn Supreme Court on October 1.

King, a 30-year real estate veteran and former head of Massey Knakal Realty of Brooklyn, alleges in a $3 million lawsuit that when he tried to acquire accurate and audited financial statements, books and company records to determine the value of the company, the defendants — the firm and founders Paul Massey and Robert Knakal — “stonewalled” him.

The suit alleges the company wanted “to hide the defendants’ self-dealing, waste, breach of fiduciary duty and misappropriation of company assets.”

King alleges in the suit that the company violated the Real Property Law and the New York Penal Law by paying “commissions, as referrals, to unlicensed people,” including attorneys, “with the intent to have the attorneys influence the choice of the company as the customers’ real estate broker.”

The judge ordered Massey Knakal of Brooklyn, a limited liability company under investment sales parent company Massey Knakal Realty Services, to prepare audited financial reports and balance sheets from 2002 to the present for a recent court appearance, which was adjourned until October.

The suit alleges that Massey Knakal “failed to provide audited financial statements for 2002 through 2007 as required in the company’s operating agreement which was authored by the defendants.” King hopes to win $3 million “on behalf of Massey Knakal Realty of Brooklyn,” which has six shareholders including King.

When asked to comment on the lawsuit, Massey Knakal CEO Paul Massey said, “Ending a partnership is never easy. We wish Tim well in establishing his leasing business in Brooklyn.”

King joined the firm in 2002 to run the new Brooklyn operation and, according to the amended complaint, he was given 10 percent ownership of the company plus income from 10 percent of its profits. The office began earning money in 2003, and within four years it had sold more than $1 billion in Brooklyn properties, according to King’s bio.

After holding the position as managing partner of the Brooklyn office, King was appointed Massey Knakal’s first COO. He left the company in March.

He charges that the only financial records the firm would give him were “woefully inadequate to explain the transfer of funds from the company to affiliates or the details of the loans themselves.”

The suit also alleges that by not “informing [the buyer and seller] of the dual agency or obtaining the written acknowledgement,” the firm violated a rule against dual agency issued by the New York State Department of State, which grants and oversees real estate licenses. By Lauren Elkies

Corcoran Group takes over marketing on Chelsea project

The Corcoran Group has taken over the marketing and sales of a Chelsea conversion project from marketer Michael Shvo.

Corcoran’s Julie Pham, vice president and associate broker, and Joseph Bongiovanni, a salesman, are now the co-sales directors at 650 Sixth Avenue.

The 67-unit, seven-story landmark building at the corner of 20th Street is being developed by Penterium, the residential development arm of Korean firm Kumkang Housing Corp. This is the developer’s first project in the United States.

On Shvo’s watch, the building was 35 percent sold. When Shvo started marketing 650 Sixth Avenue in June 2007, he referenced the nearby Chelsea art scene and promoted the apartments as blank canvases. Shvo partnered with the Jack Shainman Gallery, and the gallery in the sales office and in a point-click-and-drag feature on the building’s Web site.

Shvo also got the building placed on the Soap Net show “The Fashionista Diaries” last year.

When asked why Shvo is no longer marketing the project, the company e-mailed a statement: “Shvo played an integral role in shaping the concept of 650 Sixth Avenue and bringing it to life. After a successful collaboration, Shvo is focusing on its other projects as its local and international property portfolio rapidly expands in North America, Africa, Asia [and] the Middle East.” By Lauren Elkies

Ritz-Carlton developer sells condo for $28M

The developer of the Midtown New York Ritz-Carlton sold his upper-floor apartment at the hotel-condo building for $28.5 million, about $5.5 million less than its listing price.

Christopher Jeffries, a founding partner of Millenium Partners, sold unit 29, a 5,954-square-foot apartment at 50 Central Park South between Fifth and Sixth avenues, to an unidentified buyer. The four-bedroom unit was listed for $33.9 million on the Web site of brokerage Hall and McNaughton.

Jeffries and his partners built the Lincoln Square complex adjacent to Lincoln Center, and later bought 50 Central Park South, known then as the St. Moritz Hotel, from Ian Schrager’s hotel company in 1999. It was rehabilitated and opened as the Ritz-Carlton New York in 2002, with luxury condominiums on the upper floors.
By Adam Pincus

Gianfranco Ferre sells UES lease to Dior

The Italian fashion house Gianfranco Ferre sold the lease to its shuttered flagship store at 870 Madison Avenue for $3 million to fashion house Christian Dior.

The 3,000-square-foot location at East 71st Street opened in 2004 and closed at the end of July.

Gianfranco Ferre, who died in June 2007, worked for Christian Dior as stylistic director from 1989 until 1997.

At the time of the store’s closing, the company said the move was not related to sales, which grew by 17.6 percent in 2007. It said the store closed so that a new store could open with a repositioned line at another location. A new location has not yet been selected, an official with the company said.

In June, Gianfranco Ferre’s company made a signing a multi-billion-dollar joint venture agreement with developer GIO Developements to develop “couture architecture” worldwide, with the first project slated for Dubai. By Adam Pincus

Shvo employee starts brokerage

Tali Geva, who worked for Michael Shvo at his marketing firm Shvo, has started her own brokerage firm, Avenue.

Geva, whose office is at 666 Broadway near Washington Square Park, was in marketing at Shvo and left the company in December. She then decided she wanted to start a straight brokerage company. Shvo’s sales force works only on-site.

Avenue has re-sale listings at Shvo-marketed buildings, including 20 Pine.

“The company right now is focusing on re-sales as there is a need for it,” Geva said.

The other managers at Avenue are Ariel Levy, who Geva said is a family member, and Shari Markoff, who had been a broker for Shvo. Avenue agent Jamie Goldgrub was also a Shvo broker. By Lauren Elkies

McSam settles claim at stalled Bronx hotel

McSam Hotel Group said it has settled a damage claim related to a Comfort Inn project that had drawn complaints from the community in the Norwood section of the Bronx. But construction delays continue due to an unresolved stop-work order.

The Department of Buildings placed a stop-work order on the property at 3070 Webster Avenue last October. The action was related to construction work that the DOB says was done without proper permits. The agency also states that an adjacent home was damaged.

A concrete wall was built without a permit, DOB records show, and McSam has since paid a $500 fine. But the department says on its Web site that the project still has not been fully brought into compliance.

Gary Wisinski, chief operating officer of McSam Hotels, said the company has recently settled claims by the nearby homeowner for an undisclosed amount, and that McSam’s architectural firm was working to resolve the remaining issues surrounding the delay.

“It’s in the hands of the Department of Buildings,” Wisinski said.

The homeowners, Virginia Hakemian and her brother Harold, said that construction at the Comfort Inn site caused flooding in their basement and major water damage. By David Jones

UWS building sold for $83 million

A 91-unit apartment building on the Upper West Side at 845 West End Avenue and 101st Street sold for $83 million. The buyer of the 15-story building was identified as an affiliate of the real estate investment firm Atlas Capital Group, founded in 2006 by former UBS managing directors Jeffrey Goldberger and Andrew Cohen.

The 1930 doorman building had two- and three-bedrooms renting for between $7,800 and $10,250 over the past year, according to StreetEasy.com.

The buyer also took out a $60 million mortgage on the building. By Adam Pincus

Brooklyn developer to face bank in condo default case

Brooklyn developer Moshe Feller is scheduled to face off in court against Corus Bank, which filed suit against his Karl Fischer-designed Kensington condominium development about two months after contractors walked off the job.

Corus filed suit in June against Caton on the Park, a 107-unit condo building that has sat idle since April 4, when the New York City Department of Buildings issued a stop-work order.

Corus loaned Feller $32.8 million in 2006 to develop the condominium at 23 Caton Place. Feller acquired the site, formerly owned by Kensington Stables, for $6.25 million in 2005. By David Jones

Arthur Zeckendorf pays $10M at 15 CPW

One of the developers of 15 Central Park West, Arthur Zeckendorf, purchased a 4,589-square-foot apartment in the trophy complex for $10.5 million.

The tenth-floor unit has four bedrooms and views facing east, north and west.

The developer got a better deal than tool retailer Robert Glickman, chief executive officer of Harbor Freight Tools, who paid $19.5 million for an apartment about the same size — 4,563 square feet — on the same floor.

Zeckendorf developed 15 CPW with his brother William, who also reportedly bought a unit in the building.
By Adam Pincus

Buyer files suit against 20 Pine Street, claims sales were inflated

Developer Shaya Boymelgreen and marketer Michael Shvo are facing a lawsuit from a Brooklyn-based buyer that alleges they exaggerated sales figures and completion dates at 20 Pine, the Collection, and then refused to rescind a contract to buy 10 apartments.

The suit, filed by 20 Pine Realty in New York State Supreme Court, alleges that 20 Pine Realty entered an agreement to buy 10 condo units at 20 Pine Street in January 2006 and deposited $819,500 to hold the apartments.

Twenty Pine Realty lists its location at 519 Flushing Avenue in Brooklyn. The New York Secretary of State’s records do not list any principals at the firm, which organized as a limited liability corporation in January 2006.

The plaintiff’s lawyer, Yoram Nachimovsky, could not be reached for comment.

The suit claims that the plaintiff tried to walk away from 20 Pine Street during the initial seven-day rescission period, but was turned down and was told the building would still be completed on schedule.

The suit alleges that Boymelgreen told the plaintiff that hard contracts had been signed for 140 of 409 apartments, that nearly all the purchasers were planning on living in the building, and that the entire building would be ready for occupancy by January 2007.

The plaintiff claims that by the end of 2007, it attempted to contact Shvo and the developer regarding the status of 20 Pine Street, but was ignored.

The plaintiff claims that he suffered more than $2 million in losses due to delays.

Twenty Pine has been one of the highest-profile condo developments in Lower Manhattan since Boymelgreen teamed up with Armani/Casa in 2006 to convert the former Chase Manhattan headquarters into luxury condominiums. By David Jones

French handbag retailer buys on Madison Avenue for $48M

Fashion bag maker Longchamp bought the building housing one of its two Manhattan retail stores on the Upper East Side for $48 million.

The Paris-based retailer and manufacturer of fashionable bags, clothes and accessories bought the five-story townhouse at 713 Madison Avenue from heirs to the Mailman family. The Mailmans have given millions of dollars to Columbia University’s School of Public Health.

The sellers were Jody Mailman Wolfe and another company affiliated with the family. Wolfe and the other company still own the neighboring townhouse at 715 Madison Avenue, which houses a ground-floor retail store for Moga Apparel, which sells French and Italian women’s clothes. By Adam Pincus

Barbara Corcoran pays $4M for UES condo

Barbara Corcoran, the founder of the Corcoran Group, and her husband bought the upper-floor condo in a converted townhouse on the Upper East Side for $4 million.

Corcoran and her husband William Higgins bought the unit at 163 East 71st Street in Lenox Hill from the building’s owner, Joseph Frantin. The couple has an apartment at 1192 Park Avenue and 94th Street.

The four-bedroom 71st Street unit occupies the second through fifth floors, with a total of 2,710 square feet, and also includes a hardwood roof deck. The apartment is advertised for $20,000 per month on the Web site of Corcoran’s old firm.

The building, named the Ataraxia, was converted from a single-family home to a two-unit condominium earlier this year. By Adam Pincus

Developer Chang sells hotel site near Times Square for $59M

Hotel developer Sam Chang sold a Times Square-area parcel in the early stages of construction for $59 million, far above the $13.48 million the developer paid for the site in 2006.

The Rhode Island hotel development company Magna Hospitality Group bought the 74,000-square-foot site at was at least the fifth hotel site Chang has sold to Magna since February.

The price difference was not all profit, however. Chang added value to the property through a zoning lot merger, a payment to the city for a bonus in development rights and approved plans for a 39-story hotel, city records show.

In June 2007, Chang merged the zoning of the lot on 39th Street with a neighboring parcel at 308 West 40th Street that was owned by a partnership partially controlled by McSam, which gave Chang an unspecified increase in development rights.

Also in June last year, Chang paid $6.3 million to the Hudson Yards District Improvement Fund, which allowed him to increase the building’s floor-area ratio from 10 to 18, netting the site 59,250 more square feet, city records showed.

The Department of Buildings’ Web site shows approved plans for the Gene Kaufman-designed hotel, one of six Chang had initiated on West 39th Street.
By Adam Pincus

Back in the days when brokerage was a meet-and-greet business,
broker Edward S. Gordon had a more white-shirt, corporate vision: He
led a generational transformation within the business of office leasing
and sales in New York City, modernizing the “space chucker” mentality
into a sophisticated industry based on Wall Street–style management and
consulting.
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1940: 40 Wall Street sold in largest foreclosure auction

The most expensive auction sale to date in New York City was held for the Manhattan Company Building in the Financial District for $11.5 million, 68 years ago this month. The building was completed in 1930 at a cost of at least $17 million, shortly after the 1929 stock market crash. Throughout its first decade, the 72-story building faced the strain of the Great Depression, which led to many broken leases.

The owner, a syndicate that included Wall Street financier George Lewis Ohrstrom and the Starrett Corporation, had trouble making mortgage payments. The building was foreclosed on in August 1940.

The first mortgage fee trustees, Marine Midland Trust Company, bought the building for $11.5 million, an amount representing the principal outstanding on the bonds.

The building was conveyed in December 1940 to 40 Wall Street Building Inc., and by the end of World War II it was nearly fully leased. In 1959 the building, then valued at $32 million, was again put up for auction. It changed hands several times before Donald Trump bought the leasehold for the tower in 1995 for less than $8 million. Trump spent $200 million on renovations, according to his Web site.

The 927-foot-tall building was planned to be the world’s tallest tower, but the Chrysler Building, also completed in 1930, edged it out at 1,046 feet. The Chrysler Building was subsequently topped by the Empire State Building in 1931.

1920: Emergency rent laws passed during housing crisis

New York’s state Legislature and governor approved rent laws 88 years ago this month that would be the predecessor to rent regulation, as governed later by the city’s Rent Guidelines Board. The rules helped tenants squeezed by 1 percent vacancy rates and rampant evictions.

The Emergency Rent Laws of 1920 immediately brought to a halt an estimated 100,000 evictions that were under way, as landlords sought higher rents in a tight market. In the first eight months of 1920, there were 87,442 dispossession proceedings.

The low vacancies were a result of post-World War I population growth in New York City and limited apartment construction because materials had been diverted to the war effort. There were only 89 tenements, with 1,481 apartment units, built in 1919.

The new laws put New York courts in control of rents by asking judges to review requests by landlords for increases on a standard of reasonableness.

The 1 percent vacancy rate remained from 1920 to 1924 but began to increase with new construction spurred by development incentives, such as property tax exemptions for new apartments built until 1932 and the exemption of new buildings from rent control.

The emergency rent laws were ended in 1929 after vacancies crept up to 8 percent, following a high of 107,185 new units built in 1927.

In 1969, after vacancies had plummeted once again, the Rent Guidelines Board was created to regulate rents. Although the goal of rent stabilization remained the same, the new legislation differed from the 1920 law by creating a board that determined the permitted increase in an annual meeting.

1889: NYC’s first skeleton-frame tower built

Manhattan’s first high-rise building constructed with a metal skeleton was completed at 50 Broadway 119 years ago this month, despite an initially skeptical public that doubted the safety of the structural system essential to the skyscraper’s creation.

The system used in the 11-story Tower Building allowed developers to create more value from the land by constructing taller structures with more open floor plates.

In the traditional masonry system of construction, the weight of the building rests on the walls, which were becoming progressively thicker with taller buildings. The Tower Building was erected on a site only 21 feet wide, so by using traditional architecture, much of the floor space would have been taken up by support walls to build to 11 stories.

The Department of Buildings was skeptical of the plan submitted by architect Bradford Lee Gilbert and sent it to the Board of Examiners before finally giving its approval.

Despite the historical significance of the Romanesque-style building, it was demolished in 1914 and replaced in 1927 by a 37-story structure.

ompiled by Adam Pincus