For New York City real estate, 2010 in many ways marked a return to normalcy after the tumultuous aftermath of the financial crisis.
As the ubiquitous real estate appraiser and Miller Samuel CEO Jonathan Miller put it: “it was a year of a sense of relief.”
City home prices stopped their freefall and sales activity improved considerably from the post-Lehman doldrums. Stalled condominium projects like the Sheffield and 1 Rector Park re-started sales. Mexican billionaire Carlos Slim bought Tamir Sapir’s Fifth Avenue townhouse, the Duke Semans mansion, for $44 million.
As the unspoken taboo on ostentatious spending faded, a number of high-end residential properties changed hands at the end of the year, including Brooke Astor’s 14-room duplex at 778 Park Avenue, which finally sold after two years on the market (albeit for a significant discount from its original asking price). Japanese retailer Uniqlo snagged 89,000 square feet at 666 Fifth Avenue‘s former Brooks Brothers space for a record $300 million, demonstrating that retail is still thriving along the posh shopping corridor.
But the economic downturn continued to make its presence felt. The office market remained uneven and troubled lender iStar Financial fought to stave off bankruptcy amid lingering fears of a double-dip recession.
Here are The Real Deal staff’s picks for the stories that most altered the New York City real estate landscape in 2010, in alphabetical order. (For The Real Deal’s selections for the industry’s top performers of the year, check out Best of New York City Real Estate 2010 from the December issue.)
In a recent study, New York City was found to rank number one on a list of the nation’s 15 most bedbug-infested cities. In 2010, bedbug hysteria overtook Manhattan, with tangible consequences for the real estate industry. Gov. David Paterson signed the Bedbug Disclosure Act into law in August, requiring landlords to tell would-be tenants whether any of the insects had been found in their unit or building in the past year, and then sign a rider to that effect. Bedbug scares caused a number of retail stores to temporarily close, including a Victoria’s Secret And South Street Seaport’s Abercrombie & Fitch. The Empire State Building, the Waldorf Astoria, a Times Square movie theater and even a triage room at Kings County Hospital in Brooklyn also had encounters (real or imagined) with the irritating critters. Tenants starting suing their landlords over the insects, and the city stepped up its bedbug-fighting efforts.
In an emotional dispute centered on the iconic New York City skyline, the owners of the Empire State Building went head-to-head with Steven Roth’s Vornado Realty Trust this summer.
The two sides were ensnared in a dispute over Vornado’s proposal to build 15 Penn Plaza, a 1,216-foot-tall Office Building On Seventh Avenue And 33rd Street, two blocks away from the 1,250-foot Empire State Building.
Empire State Building owners Anthony and Peter Malkin lobbied hard for the city to reject the proposal, claiming the 67-story tower would obscure views of the Empire State Building. Vornado, meanwhile, pledged to provide $100 million in transit improvements at Penn Station, and said that the project would provide critically needed office space and create thousands of jobs.
An additional twist heaped more attention on the dispute. Shortly before beginning the push against Vornado, the Malkins rejected requests for the Empire State Building to be lit blue and white in honor of the 100th birthday of Mother Teresa. The move sparked protests and generated worldwide publicity.
City Council member Peter Vallone Jr. told The Real Deal this summer the dispute over 15 Penn Plaza might have gone largely unnoticed were it not for the attention surrounding the Mother Teresa decision. While he voted for 15 Penn Plaza on its merits, he added: “In my mind [it] will always be Mother Teresa Tower.”
Controversy aside, a return to building skyscrapers is a hopeful sign for New York City real estate.
Google’s purchase of 111 Eighth Avenue
This month, Google bought its New York City headquarters at 111 Eighth Avenue for $1.77 billion in cash, in the largest commercial real estate purchase by a tenant in U.S. history. The sellers — Jamestown, New York State Common Retirement Fund and Taconic Partners — reportedly made $1 billion on the deal, and taxes from the sale yield $7.08 million to net cash-strapped New York State, $46.46 million for New York City. Before purchasing the building, Google was the largest tenant in the 2.9 million-square-foot Chelsea building, located between 15th and 16th streets. In more boon for the city, Google is expected to expand its local workforce in the coming years.
In 2010, a once-obscure federal law known as the Interstate Land Sales Full Disclosure Act infuriated developers and divided the legal community. Enacted in 1968, ILSA was intended to protect buyers of out-of-state land by requiring developers to disclose a number of project features. The law had gone unused and unnoticed for years in New York, where developers and lawyers viewed it as redundant with similar local laws. But with buyers clamoring to back out of contracts signed during the boom, lawsuits began invoking the statute, calling attention to developers’ failures to comply with it.
Adding confusion to the furor surrounding use of the law, ILSA rulings have been somewhat unpredictable. A handful of recent cases saw judges finding in favor of buyers: at 20 Pine Street in Lower Manhattan, a judge denied an attempt by the sponsors to have two cases brought forward by buyers thrown out. In September, a judge ruled against Related Companies in an ILSA case, and ordered the developer to return a $510,000 deposit on a unit at the Brompton on the Upper East Side. But at the 505, an 108-unit Hell’s Kitchen condominium, an ILSA case was dismissed in U.S. District Court, marking a defeat for 35 buyers.
One World Trade Center
This year saw important milestones for the rebuilding of the World Trade Center site in Lower Manhattan. Steel for the $3.2 billion One World Trade Center, the 3 million-square-foot skyscraper being erected on the former site of the Twin Towers, reached the halfway point at 52 stories. Meanwhile, a preliminary deal with Conde Nast has brought the building its anchor tenant. Also at the site of the World Trade Center, developer Larry Silverstein’s Church Street towers are progressing, with Tower 4 rising above street level. The eight-acre Sept. 11 memorial is set to open next year, on the 10-year anniversary of the attacks.
The New York real estate story that undoubtedly generated the most headlines this year was Park51, a planned community center and Islamic prayer space two blocks from the World Trade Center site. Aided by the ramp-up to the midterm elections, the project ignited a firestorm of heavily politicized debate not just in New York City, but around the world. The proposed building was labeled the “Ground Zero mosque” by critics, who said an Islamic center had no place so close to the site of the Sept. 11 attacks. Project organizers, Sharif El-Gamal, chairman and CEO of Manhattan-based real estate investment firm Soho Properties, and imam Feisal Abdul Rauf stood their ground, arguing that moving the project would contradict their right to freedom of religion. The city’s Landmarks Preservation Commission in August allowed Park51 to go forward by denying landmark status to a building situated on the site. El-Gamal is now in the process of raising funds for the center.
Rent is Too Damn High
Bearded Vietnam veteran Jimmy McMillan — a candidate of the Rent is Too Damn High Party — enlivened an otherwise boring gubernatorial debate in October by repeatedly bellowing, “the rent is too damn high.”
Videos of his performance went viral on YouTube. With his memorable delivery and one-liners (“If you want to marry a shoe, I’ll marry you”), McMillan provided a moment of levity amid the grim realities of the economic downturn.
It later turned out that McMillan has lived in his Flatbush, Brooklyn apartment for free for the past decade. But his message resonated nonetheless.
McMillan has since released an album, and a documentary about him is being produced by filmmakers Aaron Fisher-Cohen and Kristian Almgren, set to premiere in March.
Stuyvesant Town and Peter Cooper Village returns to creditors
The mammoth East Side rental complex Stuyvesant Town and Peter Cooper Village has made headlines ever since Tishman Speyer and BlackRock purchased it in 2006 for $5.4 billion, in what was the most expensive single residential sale in the country’s history. The deal famously went awry after the collapse of Lehman Brothers and became a parable for the dangerous folly of the mid-2000s real estate boom. That was punctuated in January of 2010, when Tishman Speyer and BlackRock turned the 110-building complex over to their creditors after missing a $16.1 million debt payment. New owner CW Capital took the helm of the sprawling complex and began the difficult work of negotiating with tenants over rents and the possibility of purchasing the units.
After months of rumors, the multi-millionaire and founder of top rental firm Citi Habitats rocked the residential real estate world with the bombshell announcement that he had launched a new brokerage, to be known as Town Residential. At a time when most brokerages are closing offices or ceasing operations entirely, Andrew Heiberger’s well-funded new venture involves well-appointed new offices and perks like contributions to health insurance and gym memberships. To give the launch even more impact, Heiberger announced that top Brown Harris Stevens brokers Wendy Maitland and Reid Price would come aboard as managers. He has since launched a hiring spree that is causing headaches for the heads of top brokerages all over town.
Zeckendorf penthouse sale
Major ink has been spilled about the record-breaking sale of William Lie Zeckendorf’s 41st-floor penthouse at 15 Central Park West, and the deal hasn’t even shown up in city records yet. The deal reportedly closed in late December for $40 million, or $9,940 per square feet, setting a new record for the highest price per square foot for a Manhattan apartment. The transaction edged past a 38th-floor apartment at 15 Central Park West, which sold in 2008 for $27 million, or about $9,486 per square foot.
Zeckendorf, one of the developers of the limestone towers, bought the penthouse for the special discounted price of $10.89 million (including transfer taxes). But instead of hoarding his profits, he decided to literally spread the wealth: he reportedly signed a deal to purchase late investment banker Bruce Wasserstein’s nine-room co-op at 927 Fifth Avenue for $27 million.