The Real Deal New York

Townsend too

Hudson Yards gets one more luxury rental
By Steve Cutler | July 01, 2010 07:00AM

The newly completed Townsend at 350 West 37th Street adds 206 more
luxury rentals to the couple thousand that have come to market recently
in Hudson Yards, a neighborhood no one had even heard of 10 years ago.

One street over, Emerald Green has 569 units, with similar
finishes, in the same price range. And further west, there are nearly
400 units at 455 West 37th Street, and 835 units at 505 West 37th (both
by TF Cornerstone). Plus, Douglaston Development recently delivered 288
units at Ohm at 11th Avenue and 30th Street.

But despite the stiff competition, Cliff Finn, the managing
director of new development at Citi Habitats, which is marketing the
building for the developer, Lalezarian Properties, said leasing up the
Townsend “shouldn’t take more than six months.”

If Glenwood Management’s experience at Emerald Green right across
the street is a reliable indicator, Finn isn’t just being cocky.

The first of those two towers began leasing in September 2009 and
at first, Glenwood offered two months of free rent, said Gary Jacob,
the company’s executive vice president. The demand was strong enough to
cut the concession back to one month by October. Soon after that, the
company raised rents, “and by the middle of December of ’09, we were
about 85 percent leased,” said Jacob, noting that Glenwood has now
eliminated the free rent concession in all of its buildings.

Some buildings in the area, like the massive 505 West 37th, are
still offering no-fee apartments and a month or two of free rent.
Townsend, which is scheduled to open and start leasing at the beginning
of this month, will no doubt have to distinguish itself, particularly
from the nearby Emerald Green, perhaps its closest competitor.

The building plans to offer one month of free rent plus pay the
broker’s fee — at least when it first launches — to stay competitive.

And Townsend’s developer, Kevin Lalezarian, said there are unique
amenities, like the sound system at the building (there are iPod
docking stations in the living rooms and bedrooms of each apartment,
and recessed speakers throughout the units) that will help set the
building apart. Finn agreed.

“It’s a little kitschy thing that might make someone take my $3,100
one-bedroom over the next guy’s,” said Finn. “Each building has a
different style to it, a different hook.”

Like a number of the new developers in the area, the Townsend is an
80/20 project, meaning that 20 percent of the building, or 41 units,
will be set aside as affordable housing, while the remaining 80 percent
will be market rate. The affordable units will be leased at large
discounts to qualified applicants chosen by a state-administered
lottery system.

The market-rate units, meanwhile, are priced at $2,480 to $2,680 a
month for studios; $2,925 to $3,595 for one-bedrooms; and $3,825 to
$4,650 for two-bedrooms. The building contains mostly one- and
two-bedroom apartments, and some on floors four and 12 have balconies.
The building also has a rooftop terrace.

The units have floor-to-ceiling glass windows, solid natural oak
plank flooring, open kitchens with hardwood cabinetry, and stone
countertops.

Lalezarian — whose other properties include the Casa on West 21st
Street, 100 Maiden Lane and the 510-unit Brooklyn Gold — bought the
properties that make up the Townsend site at the beginning of 2007 for
about $14.75 million. Although the market was strong at the time, “we
bought the property off market and we are happy with our cost basis,”
he said. He estimates building costs will come to about $100 million.
The 80/20 program helped finance construction and provided tax breaks.
It took two years from the time that Lalezarian closed on the various
parcels of land until the time construction could start in early 2009,
because of the leases and tenants in place.

The market has no doubt shifted dramatically in the several years
since Lalezarian closed on the properties. But Lalezarian said he has
not decreased prices. That it is opening into a suddenly improved,
albeit still not booming, rental market is a lucky break, the developer
admitted.

“I wish we could say we timed the market perfectly,” he said, “but
we were just fortunate to be opening in the stronger rental market.”

While Townsend technically lies within the Hudson Yards district,
which was rezoned for residential development in 2005, it is located
right near the eastern border of Eighth Avenue, close to the subway. In
some ways, it is actually more Garment Center than Hudson Yards.

Yet brokers argue that while the area is still industrial and lacks
retail, the new crop of buildings along the Hudson Yards’ western end
has advantages.

“There is the cachet that comes from the less developed areas,”
said Nancy Packes, president of Brown Harris Stevens Project Marketing
Group, which is marketing the 34-story rental Ohm.

Packes is also quick to point out that there is a supermarket a
block and a half from Ohm, and notes that the building runs a shuttle
bus to the subway, as do many buildings near the river, including the
massive Silver Towers on West 42nd Street, another competitor.

Ohm opened in January and “will probably finish the lease-up by the
end of September,” said Packes. “The recent number of deals per week
and per month have been what you would expect from a much more
centrally located building. We have at least 40 deals a month.”

As The Real Deal reported last month, while rental activity
is up, some rental agents saw less activity this spring than they had
expected. And the notoriously slow rental and sales summer season is
just starting to set in, which could create another challenge for the
Townsend and its competitors.

But Lalezarian remains optimistic, albeit “cautiously,” that
superstitious qualifier that typically precedes “optimistic” these
days.

“In all the buildings in our portfolio, we are seeing a definite improvement,” he said.

“For a long time we were renting apartments in our existing
buildings that were vacant,” he said. “Now we are back to the time
where we are renting apartments before the existing tenant is out. That
is one of the first signs that absorption and turnover has caught up to
the market.”


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