These days, many developers are being forced to find new ways to occupy their time. While projects that were already in the pipeline are finally getting done, getting funding for large-scale new development projects in the city is still a rarity. As a result, many developers are downsizing their plans or looking outside the city for opportunities. Even developers who weathered the downturn well — and are still viewed as attractive borrowers by banks — are branching out.
Developer Matthew Blesso, the president of Blesso Properties, said his company avoided losing money during the downturn because their projects were mostly completed when the slump hit. As a result, the firm hasn’t had trouble getting financing. For a new project he’s developing in Chelsea — a nine-unit condo at 421 West 22nd Street — he said he’s received four different quotes for construction financing.
Regardless, he said, he’s been frustrated looking for deals in New York over the past few years, because he feels prices here are still inflated (see “Bubble or recovery?”).
“We’re not seeing opportunities in New York, despite all the time we’re spending looking,” he said. “We said, ‘Let’s look elsewhere.'”
Now he’s venturing into new territory (literally). He is building a boutique hotel in Panama, and, along with partners, purchased a complex in the Fire Island Pines that includes residential, nightclub, restaurant, hotel and retail space. He also invested in Brooklyn-based design center 3rd Ward, which is looking to expand its real estate footprint.
“We’ve sort of reinvented ourselves,” Blesso said. “We’ve found new ways to make money.”
Some developers are turning to smaller-than-normal projects while they wait for conditions to improve.
Halstead Property agent Rex Gonsalves was recently marketing a townhouse at 9 Commerce Street, and said he was surprised to see a number of developers looking at the place. He eventually sold it to one of them for $2.475 million. He noticed a similar phenomenon with a townhouse he was marketing on Horatio Street, which is “attracting a lot of builders,” he said.
For developers, converting an aging townhouse into a single-family mansion or several residential apartments can be a profitable, if small, project.
“It’s a smaller leverage of capital, and it’s something to keep them busy,” Gonsalves said.
Some developers have found viable new business models in ventures that started as side projects.
Josh Guberman, president and CEO of Core Development Group, is the developer of new condo LUX 74 on the Upper East Side, which was finishing up sales when the downturn hit. Since he escaped the worst of the recession, Guberman said, he’s had no trouble borrowing money, and has been approached by several lenders looking to do projects with him.
But Guberman, who has a summer home in Southampton, recently started helping a friend build and sell a Bridgehampton spec house “on a whim.” When the project sold at full ask just a few weeks after it went on the market, he realized that the area had potential.
“I realized that there are some undervalued areas in the Hamptons that still have an upside,” he said, noting that he is now actively looking at several deals in the area. “There are also some opportunities where risk is being rewarded.”
Plus, he said, he feels it’s a smart strategy to expand beyond Manhattan.
“Limiting yourself to one particular market right now might not be the smartest thing,” Guberman said.