Home and office markets in New York improved in the last year, even if the signs of progress were measured in baby steps. Rental buildings scaled back incentives, distressed-debt investors sank their money into stalled condo projects, and office vacancies appeared to inch down in prime areas.
Those trends should continue through the New Year, according to brokers, developers and urban policy experts, even if things won’t look like the heyday of the mid-2000s before Lehman Brothers collapsed.
To gauge the rebound’s staying power, keep an eye on these 10 projects and deals over the next 12 months.
1. Will Related star on 42nd Street?
A rendering of Related’s 440 West 42nd Street
In March, leasing is set to begin at 440 West 42nd Street, the Related Companies’ vast 60-story complex with 151 condos, 500 rentals, 23,000 square feet of amenities, 13,000 square feet of retail and a 669-room hotel from Yotel, a burgeoning, three-property British hotel chain with snug ship-cabin-like rooms, which is supposed to debut this year. There’s also a theater complex designed by Frank Gehry. Think of it as a Time Warner Center for western Times Square.
Over the last few years, some brokers and developers have questioned whether people will want to live on a street that, while no longer exuding the “Midnight Cowboy” seediness of the past, can feel like a tourist-thronged mosh pit. Plus, huge new rentals that have come online recently could pose strong challenges.
Still, Gary Malin, president of Citi Habitats, which marketed Silver Towers, says renters keep swarming to the city and, without having to worry about a long-term investment, care more about new product than neighborhood.
“Yes, it can be congested there,” he says. “But renters are looking for the latest and greatest, and New York’s still operating with a 1.3 [percent] vacancy rate.”
2. Can Emmitt Smith score with a Harlem Hyatt?
Smith’s project site at Lenox Avenue and West 125th St.
For most of last year, question marks surrounded this $90 million hotel and retail project, a joint effort from the ex-Dallas Cowboy’s ESmith Legacy and Wharton Properties.
Particularly scrutinized was whether the developers could break ground before year’s end on the site, a weedy lot at Lenox Avenue and West 125th Street, to qualify for $20 million in city-issued, tax-exempt federal bonds.
Although environmental drilling was taking place at the full-block site in December, suggesting that Smith had met his deadline, his team simultaneously withdrew its application for the bond money to make a play instead for $20 million in equity, in the form of tax credits, according to a source on the development team. But those incentives, called New Market Tax Credits, which were part of the sweeping tax bill passed by Congress in December, can’t be tapped until 2011, according to the source.
Besides the credits, funding for the hotel part of the project will come from $41 million in senior debt and $13 million in subordinated debt, from the Upper Manhattan Empowerment Zone, plus equity from the development team. All told, the 180-room hotel will be joined by a 50,000-square-foot YMCA, though no tenants have yet been signed for 90,000 square feet of retail space. Still, “the fact that financing exists at all for this project speaks to the overall strength of the deal,” the source added, “and that Harlem is being identified as a great location for this project.”
3. Will the “Gehry effect” affect 8 Spruce Street?
8 Spruce Street
In February, the 36th-floor leasing office opens for the 76-story rental tower from Forest City Ratner in FiDi.
The super-high-rise, which will be New York’s tallest residence, is designed by Frank Gehry, which may explain its reported rents of $80 a square foot for the 900 units. That’s about $20 a square foot more than prices for rented condos in nearby full-service buildings like 111 Fulton (10 stories) and William Beaver House (47 stories), which will be rivals, said Jason Karadus, a broker with Prudential Douglas Elliman who has sold and leased nearby units. Citi Habitats’ Cliff Finn, who marketed 42nd Street’s Silver Towers, is handling leasing.
However, Spruce, with a new public school downstairs, will also offer rare three-bedrooms, making it much more family-friendly than other buildings, Karadus added. Plus, “people may pay extra just to live in a Gehry building,” said Karadus, noting that property values spiked in Bilbao, Spain, after Gehry’s Guggenheim Bilbao opened there.
4. Will someone snap up Helmsley’s hotels?
When Leona Helmsley passed away in 2007, her Maltese, Trouble, famously scored a generous trust fund. In October, her Greenwich mega-mansion went for $35 million, and what’s left of her estate will likely sell this year. One property is the 775-room New York Helmsley on East 42nd Street, which CB Richard Ellis started marketing this fall. While it might require a top-to-bottom renovation, a national chain will probably snap it up, said John Fox, a hotel analyst with Colliers PKF Consulting, noting its proximity to Grand Central and the United Nations.
Another one to watch is the 587-room Helmsley Park Lane on Central Park South, which was first listed in 2008, a year after Helmsley died, before getting pulled off the market because a buyer had trouble lining up financing. It would be ironic, of course, if Helmsley’s old rival Donald Trump were to make a play for the Park Lane. According to Mitchell Pacelle’s 2001 book “Empire,” a family friend once floated the idea to Helmsley of selling the Park Lane to Trump. She is quoted as responding, “I wouldn’t sell anything to that son of a bitch.”
The estate has also divested itself of its share in the 192-room Helmsley Middletowne, on East 48th Street, which it co-owned and managed. That property subsequently closed in May.
Last year, the city’s average room rate was $250, shy of the $309 a night racked up in 2008. However, these possible hotel deals might show investors being bullish on the future anyway. “How they are priced will indicate where buyers see the New York market heading,” Fox explained.
5. Will NYU attempt expansion again?
NYU withdrew a proposal for a new 38-story tower last year in the face of strong community opposition. The apartment-hotel hybrid would have loomed over the Silver Towers complex, an I.M. Pei-designed landmark (different from the Silver Towers on 42nd Street).
Still, the expansionistic school is now eyeing other parts of the parcel, which stretches from LaGuardia Place to Mercer Street, with shorter buildings — like a version proposed for the Morton Williams grocery store site.
However, some preservationists, like Andrew Berman, executive director of the Greenwich Village Society for Historic Preservation, still believe NYU is thinking too big for the neighborhood. “It’s like you have cut off the head of a Medusa and a second, slightly different one has grown in its place,” Berman said of NYU’s Plan B. Instead, he argues, NYU should consider building in FiDi, where opposition would likely be nonexistent. NYU, which is expected to begin the approvals process for the scaled-down towers in the spring, didn’t return a call for comment.
6. Will Related stay on track with Hudson Yards?
Community outrage derailed plans for a Jets Stadium at Hudson Yards; later, the recession slowed other sweeping mixed-use development schemes. But there are small signs of progress at the yards, a 26-acre railroad site controlled by the Related Companies and Canada’s Oxford Properties.
At the end of the year, Related began demolishing a 6,000-square-foot industrial structure to make way for a 1.4 million-square-foot office and apartment tower, the Wall Street Journal reported. Related may be under the gun: It must start paying rent to site owner Metropolitan Transit Authority once the city office market hits an 11 percent vacancy rate, the Journal noted.
At the same time, work has begun on “Hudson Boulevard,” a new midblock street that will run from West 42nd to the site, which abuts West 33rd Street. That’s according to Bob Benfatto, district manager of Community Board 4, which is reviewing proposals for playgrounds, park benches and gardens that will line the new thoroughfare. But Related’s would-be office tenants might be caught in a tug-of-war. Developer Joseph Moinian has said his plans for a new 1.6 million-square-foot office tower nearby on 11th Avenue are finally moving forward.
7. Can the new High Line leg boost property values?
The second section of the High Line
Also pushing up property values on the Far West Side is the High Line, a tremendously popular new park on elevated former railroad tracks, which will open its second section this spring.
That half-mile, $67 million leg, which will run from West 20th to West 30th streets, should help the fortunes of nearby West Chelsea projects like Port 10, a new rental on 10th Avenue, and “+aRt,” a condo on West 28th Street, said Peter Mullan, a vice president of Friends of the High Line, a booster group. “It is an amenity for everybody who moves here,” he says, even if many out-of-towners use it too.
Still, with two-thirds of the park soon to be complete, it may become less of a tourist attraction and more of a shortcut for locals hoping to get from art galleries to, say, Meatpacking District restaurants. An “urban connector” like that could in turn send values even higher, Mullan added.
8. Will Carnegie 57 take shape?
Construction seems to be crawling at Extell’s biggest undertaking, a 74-story Midtown tower to open in 2013 (and which could take the tallest residential building title from 8 Spruce) that’s faced delays relating to loan issues.
Its address, on busy West 57th Street, may be a challenge, said Leonard Steinberg, a Prudential Douglas Elliman broker who specializes in the high-end market. Unlike 15 Central Park West, Carnegie 57 does not face the park, Steinberg pointed out, and the building’s planned hotel tenant, Park Hyatt, “won’t resonate as well as a Four Seasons.” Plus, if a building ever arises at the former Drake Hotel site on Park Avenue — an address with cachet — Carnegie 57 could have stiff competition, Steinberg added. Besides, Hines has planned a 55-story tower designed by Jean Nouvel for West 53rd Street.
But one thing going for Extell, which wouldn’t comment, may be that European buyers love the shopping and theater offerings in Midtown. Residents “can run across the street to Jean Georges and have dinner,” Steinberg said.
9. Can $1,800-a-foot prices fly again?
The Stahl Organization, whose somewhat conservative portfolio includes conversions along Broadway on the Upper West Side, seems to be pushing the envelope with its latest endeavor. The Laureate is a ground-up 76-unit condo on West 76th Street where prices will start at an ambitious $1,800 a foot, which is about $600 higher than average.
It remains to be seen whether buyers will pay that much for a building in a high-traffic section of the neighborhood. Gregg Wolpert, a Stahl copresident, is banking on amenities like a basement pet spa, iPad-equipped playrooms and a piano lounge to help draw in families. Sales start this month.
10. Who will control 3 Columbus Circle?
3 Columbus Circle
This trend seems likely to persist in 2011: developers swooping in for troubled properties. A case in point may be 1775 Broadway, aka 3 Columbus Circle. At the end of last year, owner Joseph Moinian tried to pay off the $259 million he owed on the building to Stephen Ross, of Related, who owns the debt on the distressed 26-story office tower. But Ross, who may want to foreclose and take control instead, rejected the check. A spokesperson for Related had no comment.
An adviser for Moinian, who’s partnered with SL Green on 3 Columbus, tried to downplay the clash, saying that buying debt “is just one way investors try to get their hands on a property.” Still, the adviser admitted, it’s been an effective tool lately. (See “Loan-to-own: Predatory or practical?”)