Five years ago, Joseph Palumbo never imagined that the Hunters Point property his family had owned for decades would become such a windfall almost overnight.
For many years, he made a successful living selling salon and spa equipment from Long Island City, Queens, a few blocks from the East River waterfront. He knew how to please difficult customers, putting them at ease with a joke or one-liner. He knew how to handle late suppliers or disgruntled employees. And the parking lot his family owned brought in extra income.
But his luck changed when the city opened the door to a frenzy of residential development in the area. In 2004, the City Council rezoned a 43-block commercial area in Hunters Point to allow the construction of condos, apartments and houses. Three years earlier, the council rezoned 37 blocks of the commercial core at Queens Plaza and Court House Square to allow residential development.
Big developers, including Rockrose and AvalonBay Communities, started on high-rise luxury condominiums along the East River eastward. The city initiated plans for a 10-mile greenway that would link four public parks in the area.
The Palumbos’ parking lot and commercial property were suddenly worth millions, and the family decided to get into the development business. They built a luxury condominium complex on the site of the parking lot at 5-03 50th Avenue and 5th Street. Two more are in the planning stages. As they’ve taken on more complex projects, they’ve brought in partners to share the risks, and their surprise line of business is getting more sophisticated.
Many small property owners have also cashed in and turned their office buildings, warehouses and parking lots into luxury condominiums and retail space, making a lot of money along the way.
Palumbo, 48, is one of several small builders helping to transform the area from an Italian-American enclave to a residential neighborhood for people who can’t afford or refuse to pay Manhattan rents. In the process, Palumbo has transformed himself from a small business owner to a wealthy mover and shaker.
While other real estate markets may be feeling the pinch from the credit crunch, even in New York, Palumbo said things are still booming in Long Island City. He is not worried about the increasing number of residential projects changing the neighborhood’s skyline. He said he learned quickly that staying competitive means offering buyers something unique. He won’t say exactly how much money his family has made so far, but no one is complaining.
“Let’s just say everyone in the family is very pleased,” Palumbo said.
Palumbo said he never saw the windfall coming. In 2001, he thought local developer and architect Joseph Escarfullery was crazy to pay more than $400,000 for a rundown two-story building across the street from Palumbo’s business office.
“I didn’t think it was worth the money,” Palumbo said.
But as the project progressed, his father, Joe Palumbo, Sr., 81, got to know Escarfullery, 38. They were more than a little impressed when Escarfullery turned the dilapidated building into a four-family stately brick townhouse. It’s now on the market for $2.9 million.
“We thought, ‘If he can handle that, he’s capable,'” Palumbo said.
So they quickly agreed when Escarfullery approached Palumbo and his father about building luxury condominiums on the family’s parking lot. They used the property as collateral for a $3.1 million construction loan.
That parking lot is now the Galaxy, a five-story, 12-unit luxury condominium development. The units went on the market in October 2006. Their 11-foot ceilings, open layouts and high-end appliances made them an easy sell, said Rick Rosa, a broker with Prudential Douglas Elliman who’s the sales and marketing director for all three developments. By spring, all had been purchased for the asking price of between $614,000 and just over $1 million.
“I had acquired a list of potential buyers before they even broke ground,” Rosa said. “I really hyped it up, basically.”
They only went over budget by about $100,000, and there was only one major delay of about three months when they couldn’t find anyone to pour the concrete floors. Contractors were too busy with other projects, Escarfullery said.
Running a business is pretty much the same, whether you’re dealing with spas or contractors, Palumbo said. But the red tape and legal wrangling involved in developing and financing residential property can be overwhelming at times.
Palumbo said he depended heavily on the expertise of Escarfullery, who had been developing real estate in Long Island City and Manhattan for almost 10 years. Escarfullery also designed the Galaxy, and he said that to be successful, he had to meet the needs of young families who need more room.
“We wanted to create more of a luxury loft-type feel,” Escarfullery said. “If people are going to move from the city, they want bigger apartments.”
Things have gone so well that Palumbo and Escarfullery are planning another condominium development called Greenview, on commercial property the Palumbos own at 5-04 50th Avenue, across the street from the Galaxy and next to Palumbo’s current business office. They used Palumbo’s commercial property as collateral for a $2.2 million construction loan.
The project is still in the planning phases, but once completed by the middle of next year, it will feature six or seven luxury studio and one-bedroom condominiums they hope to sell for at least $725 a square foot, Escarfullery said. They’ve already leased retail space on the bottom floor to L.I.C. Kids, an indoor aerobics center.
“That just shows who’s moving to the neighborhood,” Rosa said. “People who are married or who are getting married.”
They’re also planning a third condo project, which will be bigger than the previous two projects combined. This time, they upped the stakes by actually buying the property they want to develop at 5-43 48th Avenue, two blocks north of their other projects. Palumbo and Escarfullery formed a development company with five other partners called 5-43 Ventures. The partners invested about $10 million in a 50,000-square-foot lot that’s now home to an old woodworking shop and abandoned warehouse.
To reduce construction costs, they partnered with contractors they already trust. Palumbo’s brother and sister are also partners, but their father decided to sit this project out.
“He’s had enough for now,” Palumbo said.
They called this project Solarium because ample sunshine will be a key selling point when it’s completed sometime next fall or winter. The complex will house 28 luxury condos, along with a rooftop garden and a saltwater pool for residents. Escarfullery estimates that the condos will sell for between $725 and $750 a square foot.
It’s got more bells and whistles than previous projects. Each will have a private balcony; two ground-floor units will have their own private saltwater pools and outdoor space, Escarfullery said. They are also thinking about ways to make these condos so energy-efficient, owners won’t even have to pay a Con Edison bill, Escarfullery said. If Con Edison has a power failure, their residents won’t have to worry.
Escarfullery and Palumbo said they’re not sure how to do it, but they’re going to find out if it’s possible. They’re already working with a green architect to design the building.
“With all the construction going on here, we needed an edge,” Escarfullery said. “Competition is increasing, and we need to stand out.”
Apparently, they are. Long-time property owners have even begun approaching Palumbo and Escarfullery about developing their property, too. It’s something they might consider, just not right now, they said.
“The more we become known, the more they come to us,” Palumbo said. “They trust us, and that’s kind of nice to hear.”