While many New York City developers are hamstrung by the recession and scrambling to get their own financial houses in order, some are starting to think about positioning themselves for a market rebound.
Although many of the projects they’re considering are in their infancy — and have yet to reach the desks of the city officials who would need to sign off on them — experts say a few savvy developers are already plotting their post-credit crunch courses. In most cases, the planning does not involve laying out serious money, but instead is more centered around gearing up for zoning approvals or variances on properties that do not have “as of right” development status.
“I think the smart developers are indeed looking at those properties that present difficulties because they have complex entitlement issues, zoning issues or environmental issues,” said Mitchell Korbey, a partner at the law firm Herrick Feinstein and a specialist in urban planning and land use. “Those properties might have been on the back burner during the past several years because of the market’s attractiveness.”
The developers who are moving ahead with projects are clearly those whose balance sheets have not been completely burned by the recession.
For example, as the New York Observer reported, the Extell Development Company filed plans with the city in April to build two new condo projects — a 13-story, 54-unit residential building at 147 West 21st Street and an 18-story, 58-unit building at 225 West 58th Street. And late last month, the company held a news conference with Mayor Bloomberg to announce that it would move forward with the construction of the International Gem Tower on 47th Street in the diamond district — despite the ailing economy. The project is expected to be finished in 2011.
Meanwhile, Brooklyn-based Two Trees Management presented plans to the City Council in April for a residential and commercial tower in Hell’s Kitchen. And, according to public records, Queens-based Jackson Development Group, which specializes in residential construction, filed plans with the city early last month to change the zoning at 3856 Webster Avenue in the Bronx to clear the way for four buildings with a total of 400 residential units.
Multiple properties in manufacturing zones in Bushwick and central Williamsburg — as well as at least two high-profile Manhattan properties — are also in the pipeline for zoning requests, according to sources who declined to identify the properties on the record.
Eric Anton, an executive managing director at Eastern Consolidated, said he is also aware of two major religious organizations that are working on planning separate, large-scale projects.
“It might take you two years to go through whatever the approval process is,” said Robert Ivanhoe, chairman of the law firm Greenberg Traurig’s New York office. “Because that’s so much lead time, people are saying the world should be better then.” Ivanhoe also pointed out that construction on a project being planned now wouldn’t likely begin for another five years.
Planning during a down market has been touted by some of the biggest names in the industry as a smart way to get in position for a rebound. In an October interview with The Real Deal about a Westchester residential project he had halted largely because of the slumping market, Donald Trump said: “Who wants to build in a down market?”
He noted at the time that instead of building the Westchester project, he would use the downturn to line up access to roads and press for zoning changes. “I like getting zoning in a bad market,” he said. “I like starting jobs when the market starts getting good.”
Trump is not alone in his thinking: While the market is still tanking, developers continue to bring their requests to the city. “Many of the developers are still moving ahead, getting approvals for projects that are in the works,” said Tony Avella, chairman of the City Council’s committee on zoning and franchises and a Democrat from Queens. “The applications haven’t slowed down; they’re still continuing.”
And while the Bloomberg administration had a reputation for proactively rezoning the city neighborhood by neighborhood before the downturn, it has only ratcheted up those efforts since the onset of the recession.
The Department of City Planning recently introduced a number of new initiatives, including zoning changes to a 257-block swath of northern Flushing in Queens, and is studying the possibility of rezoning a major area in Astoria, which The Real Deal reported on last month. Meanwhile, the city’s Economic Development Corporation is pushing ahead on seven projects, including the redevelopment of Willets Point and Coney Island — though both were on the drawing board before the crash.
“We cannot repeat the mistakes of the 1970s, when the city underinvested in works and services and ended up paying for it in the long run. Especially in a downturn, it is crucial to keep investing in infrastructure projects,” said Seth Pinsky, president of the EDC. “Not only does this create jobs in the short term, but it positions us to sustain future growth when the economy bounces back.”
That’s not to say everyone is forging ahead. Many developers are, obviously, too caught up in the devastation of the recession and the mess their finances are in to start thinking about future opportunities.
“I think we’re a little early in the cycle. Right now there is just a tremendous amount of pain,” said Anton, referring to the planning of private developers.
Howard Goldman, a land-use attorney who is the principal of his own firm, echoed that thought. “It takes at least one to two years of discussion before a proposal sort of hits the radar screen,” he noted.
He said that while planning during a down market makes perfect sense, “I think that people are still recovering from the market crash and getting things in order.”
Still, the down market leaves well-capitalized players in a favorable position to focus on planning for major projects already in the works.
“Being in the planning phases during this economic cycle offers an opportunity to really focus on being development-ready in terms of design and product flexibility,” said Jay Cross, who as president of Related Hudson Yards is spearheading the Hudson Yards redevelopment.
“This positions us to deliver one of the very first projects in the next economic upturn, capturing pent-up demand as the economy rebounds,” he said.