Trouble in Tribeca

For more than a century, Tribeca was a de facto pantry, as its industrial blocks warehoused fruit, spices, vegetables, and most notably, butter and eggs.

But starting in the 1960s, the Downtown neighborhood — which is bounded by Canal Street, Broadway, the former World Trade Center site and the Hudson River — began to give up its perishable goods for people, in a profound way. Brick and Beaux Arts lofts located along wide cobblestone streets began to be converted into apartments.

In fact, those historic buildings, which sit in the 10007 and 10013 zip codes, became some of the priciest homes in New York City.

But since the downturn hit, the real estate market in Tribeca has been in serious trouble. According to sales figures, the area appears to be in far worse shape than many other comparable neighborhoods.

This month, as part of a recurring feature looking at what kinds of deals are closing in different neighborhoods, The Real Deal found that Tribeca saw a stunning 91 percent drop in closings in the past year. This June (the most recent data available) saw only five sales close in Tribeca, at an average price of $2.58 million, data from StreetEasy and the OLR Web site show. All of the units that closed were located in prewar buildings.

The number of closings may not be completely inclusive because there is sometimes a lag period when closings are reported, but brokers say the figure seems to be in the right ballpark.

As a point of a comparison, Tribeca saw 61 closings in June 2008, with an average price of $2.86 million, and a high of $32.8 million for a condo at 25 Murray Street, according to StreetEasy.

And while prices have inched down some, Tribeca sales volume is down far more than even in Manhattan as a whole, which saw sales volume cut in half in the second quarter from a year-ago quarter, according to reports from the city’s top real estate firms.

Brokers say the precipitous drop-off in the swanky Downtown area in June may be more a reflection of the anemic winter and spring market when contracts were signed than current conditions, which have somewhat improved. But they say the plunge also points to ongoing problems — like the fact that Tribeca’s fortunes are closely tied to Wall Street’s because the area is so wealthy.

Plus, when lenders tightened their purse strings in the wake of last fall’s bank collapses, credit dried up for buyers seeking “jumbo” loans — those so large that they are “non-conforming” to government guidelines meant to make it easier for people to buy homes.

Tribeca’s apartment price averages are still well above the limit for non-conforming loans, which is $729,750. In fact, in the middle of last month, the median price for a home on the market there was $2.5 million, StreetEasy data shows.

Even the notably wealthy Upper East Side seems like a relative bargain, with a median price of $1.3 million, according to StreetEasy.

However, some brokers argue that the 61 Tribeca closings of June 2008 are a skewed basis of comparison, because so many apartments in new buildings were closing that month.

As a result, they said the 91 percent drop looks far worse than it actually is.

Sean Turner, a broker at Stribling who has lived in the neighborhood for 25 years, said a more typical number of closings for June would be around 25.

Turner added that if units in 101 Warren Street, One York and 475 Greenwich Street — three new projects that had a lot of activity last summer — hadn’t been closing last June, there would probably have been 34 apartment closings in June 2008, not 61.

“Tribeca doesn’t normally have that kind of activity,” said Turner.

She also noted that the housing stock in Tribeca, which features conversions of sweeping loft spaces, doesn’t offer much in the way of studios or one-bedrooms, which are selling better than other apartment types right now.

So what deals did close this past June in Tribeca?

Turner was the listing agent on one of the few units sold, #7S at 10 Leonard Street, a three-bedroom, two-bath co-op that had been listed at $1.875 million and closed at the same price.

While there was no discount on the listing price, the sellers, who were eager to relocate to a different state, did take a loss on the apartment, for which they had paid $1.94 million, Turner said.

Another explanation for Tribeca’s sluggishness is that with 472 units on the market in mid-July, according to StreetEasy, the inventory outstrips demand, said Lydia Sussek, a broker with the Corcoran Group.

Sussek sold 155 Franklin Street, #3S, a three-bedroom condo that closed in June. The closing price was $2.575 million, down from its $3.55 million listing price last October — a 27 percent reduction in nine months.

“A lot of people had high hopes for pricing and didn’t know what was going on,” said Sussek, referring to last fall’s economic meltdown. “Sellers have expected in the past to get huge money for properties.”

Many buyers also expected to easily qualify for mortgages, though that’s not always the case, said Sussek. Last October, she noted, a couple who had signed a contract on a prewar two-bedroom condo for $2.5 million were denied their financing unexpectedly, and the deal fell through.

Now, the same unit, which has three baths and 2,000 square feet, is about to close for $1.995 million, which is 20 percent less than last fall, she said.

In fact, high-end properties — those above $1.5 million — are having the most trouble in this market, said Bruce Ehrmann, a Stribling broker who has lived in Tribeca for 21 years and is active with Community Board 1.

In June, he managed to sell a three-bedroom condo at 73 Worth Street, #4B, for $2.69 million (it was listed at $3.4 million in September).

For the most part, he tells his clients today to price their units between $1,100 and $1,500 a square foot, (versus about $2,000 a square foot a year ago), “or it won’t move.”

Another trend is that buyers seem increasingly less interested in the gleaming high-rises that sprouted profusely in Tribeca in the last few years, and more drawn to the older, narrow former warehouses that defined the area for so long.

“People don’t want to know any more how exquisite the toilet is,” Ehrmann said. “Location, price and quality are what count again.”

There is evidence to support his claim that the newer units are struggling. A lender has started foreclosure proceedings against 34 Leonard Street, a 16-unit co-op. In addition, 56 Leonard Street, a Herzog and de Meuron-designed skyscraper, stopped construction last year until more financing could be lined up.

But brokers are convinced Tribeca’s woes are temporary, citing its appealing qualities: a lack of sidewalk and street congestion, good schools, the close-by Hudson River Park, and a strong sense of community.

Plus, “our buildings are absolutely stunning and unique,” Turner said, “and all that construction and workmanship cannot be replicated.”

Tribeca’s Transaction Tally for June