The view from 34 Berry Street
There is no shortage of stalled condo projects, complete with empty skeletal frames and muddy excavation sites, in Williamsburg.
But for those few projects that have managed to switch from for-sale properties to rentals, glimmers of hope may exist.
Among the first to transition is 34 Berry Street, which began leasing in April.
Developed by Pennsylvania-based LCOR at the corner of North 12th Street, catercorner to McCarren Park, the seven-story building has 142 studio to two-bedroom apartments ranging from 450 to 1,100 square feet.
And there are ample extras — perhaps since it was planned as a condo — including a 1,600-square-foot fitness center, a 24-hour computer lounge and a roof deck equipped with a communal grill. There’s also a 71-space parking garage underneath the building, where spaces go for $275 a month.
“There’s not a lot of inventory on the market [in Williamsburg] with these types of amenities, and there’s a demand for it among renters, who had been picking among older, small buildings,” said Andrew Barrocas, a broker and chief operating officer with the Real Estate Group New York. Barrocas is not connected with the project.
While rents are trending upward in Williamsburg — the average price of a two-bedroom inched up from $2,862 in January to $2,953 in March, according to TREGNY’s data — there is still a concern that the market could eventually be soaked with inventory from other condos-turned-rentals, brokers said.
But for now, developers who reinvent condos as rentals “will do very well,” said Barrocas, adding that other former condos in Williamsburg, like 184 Kent, with 338 units, and 65 Ainslie, with 50 units, have a similar leg up.
Indeed, over the course of three days in April after its leasing office opened, the building received 40 applications, though the deals were sweetened by a free month’s rent. The incentive was necessary because construction is still underway at the building, said Bob Scaglion, a senior managing director of Rose Associates, which is marketing 34 Berry.
With quartz counters and oak-strip floors, 34 Berry’s units are perhaps more polished than much of the current rental inventory in Williamsburg, though the prices on some of its units seem competitive.
Studios will start at $1,700, while one-bedrooms are $2,150, according to David Sigman, a principal of LCOR. In contrast, in March, the average studio in Williamsburg, which has gentrified dramatically in the past decade, leased for $2,118, according to TREGNY. One-bedrooms, meanwhile, were $2,410, the firm’s data shows.
“The rule of thumb for us is to lease 30 units a month, and we think we should be able to do that,” said LCOR’s Sigman of the $65 million project, in which LCOR partnered with the California State Teachers’ Retirement System, a pension fund. This is part of a larger joint venture with the pension fund to invest in a half-dozen existing and new properties in New York and Washington, D.C., Sigman said.
Sigman said he expects the building to be fully occupied by August.
Half of the renters who have shown up so far hail from Brooklyn, and many nearby, according to the rental office, with 35 percent from Manhattan. The remaining 15 percent are renters new to New York.
However, the building’s two-bedrooms, which include terraces and views of the Empire State Building, have asking rents of $5,000 a month, according to Scaglion, and might have a tougher time. The average two-bedroom in Williamsburg in March, the most recent month for which data was available, was far lower, renting for $2,953, the TREGNY data shows.
“I think that price is a bit much,” said Jamie Wiseman, a co-principal of Cayuga Capital Management, which developed next-door 44 Berry Street, a redbrick former quinine factory that was converted into 42 rentals.
Though 44 Berry is not really a competitor (it finished up leasing last August after being on the market for four months), the largest apartments there are considerably cheaper. The priciest apartment there is $4,500, but it is a three-bedroom, Wiseman said.
Still, the units at 44 Berry, with airy loft-type layouts, have quite a different look than the ones at 34 Berry, which has comparably low eight-foot ceilings, plus engineered wood floors and traditional divisions of rooms. In that way, they likely will appeal to a different type of renter, who seeks a larger building with common areas “where they can meet their neighbors,” said Scaglion.
“It really has its own market position,” said Scaglion, who is also marketing 184 Kent, where 30 percent of the 338 units have been leased since January. Rents for studios at that building, a seven-story former warehouse, start at $1,800 — higher than at 34 Berry, though units at 184 Kent are about 15 percent larger, Scaglion said.
And while it may seem risky to put two condos-turned-rentals in direct competition with each other, especially when they are being marketed by the same team, the products are aesthetically dissimilar. Like the units at 44 Berry, 184 Kent has loft-type layouts, which puts the more modernistic 34 Berry in a class by itself, Scaglion said. Also, though Kent is just nine blocks away, it’s a renovation, not new construction.
While Rose’s marketing team is confident about successfully leasing up 34 Berry, the building had a somewhat rocky history.
Atherton-Newport, the original developer, which is now defunct after bankruptcy, abandoned the project before LCOR closed on the site in 2007. But Atherton did clear some key hurdles first, like buying out tenants who lived there and performing environmental studies.
Atherton also hired Perkins Eastman, the global architectural firm, which drafted designs for the building. LCOR was in a rush to meet the June 2008 deadline to qualify for 421-a tax benefits, which it successfully did, a move that stabilized its rents for 15 years as a condition of the abatement. LCOR decided to keep the design “rather than start from scratch,” Sigman said.
Though the interiors were changed to make the building a rental — a peek through the window of a ground-floor unit on a recent afternoon revealed a white-cabinet-lined kitchen that seemed more pedestrian than most condos’ — LCOR kept the distinctive red-glass-checked exterior façade, which stands out on blocks marked by low-slung industrial structures.
“A lot of developers overpaid for land, and when they couldn’t get their out prices, they couldn’t pay their loans, and they went bankrupt,” said Deborah Rieders, a broker with the Corcoran Group, whose condos at Nos. 69, 70 and 72 Berry Street were luckier and sold out.
“In their case, going rental is probably a good thing,” she added.
But it can be tricky to transition a building like that. Rentals need to pack in more units than condos to make the economics work, and the layouts in condos tend to be spacious, often with two bedrooms, which means they eat up space, Sigman explained.
Separately, the road ahead could get bumpy for 34 Berry if investors who bought large blocks of units in towering condos like the nearby Edge and Northside Piers decide to put them on the rental market.
“But we’re just not seeing signs of that just yet,” Sigman said.