EQ. Magazine Spring 2019

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MEET THE PHANTOM. STAMFORD REVIVAL

WEALTH MANAGEMENT

HERO BEACH CLUB


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8 Love at First Sight

Image courtesy of Daniel Wagner

The new Phantom was five years in the making. Join us for our test drive.

SPRING 2019 4

Development PUBLISHER & EDITOR-IN-CHIEF Daniel Hilpert dhilpert@m-equicap.com 917.586.8364 MANAGING EDITOR Peter Falco CONTRIBUTORS Alexander Berger Robert Dunbar Daniel Hilpert Michael Santora Brendan Schmitt Michael A. Smith Jeffrey Steele Mac Wilcox

The Stamford Revival

6

Savoy Bank Builds Relationships

ADVERTISING INQUIRIES sales@equicapmag.com 917.586.8364 EDITORIAL/GENERAL INQUIRIES info@equicapmag.com

EQ. is published by EQ Media LLC ©2019. Any reproduction or other use of the articles, contents or photography without express written consent by EQ Media LLC is strictly prohibited. EQ Media LLC, 10 Grand Central, Suite 1601, New York NY 10017 ©2019 All Rights Reserved.

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Urban Planning

‘POPS’ are a Win-Win

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Wealth Management Premium Financing

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Real Estate Law Underpinning Relief

EDITORIAL DIRECTOR Diana Mosher CREATIVE DIRECTOR Gregory Cullen

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Lender Spotlight

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The Scene Equicap at Miami Art Basel

Building a Culture of Originality

W

elcome to the first issue of EQ Magazine. I’ve always been an avid reader of print media and I’m excited about this foray into the world of publishing. With EQ we’re looking to deepen our relationships with our clients. The goal is to share meaningful content with these successful capital providers, owners and developers and identify trends that will give our clients a competitive advantage. EQ Magazine isn’t about data. There are plenty of other magazines already giving their readers data and transaction score cards. At Equicap we’re building a culture of originality. We shake up the status quo on how to run a debt and equity brokerage firm. Lifestyle is central to EQ’s DNA and experiential luxury will play a central role in our content line-up. Our cover story is a test drive of the new Phantom by Rolls Royce courtesy of Manhattan Motorcars. In this month’s Lender Spotlight we present Savoy Bank — a creative and customer-oriented bank based in New

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Hospitality Inside the Hero Beach Club Deal

York. We’ve had the opportunity to close business with them and structure complicated transactions for our clients. In future issues we will feature other capital providers. The Stamford Revival Development feature highlights our ability to raise equity and cover the entire cap stack including GP, LP and construction debt. EQ Magazine comes as a logical progression from our events which are lifestyle driven and about connecting with our clients in a meaningful way through the experiences we curate. Many luxury companies are seeking to tap into the rising trend of experiential luxury, as their consumers buy fewer products, focusing instead on more experiences in areas such as high-end food and wine, luxury hotels, and travel. EQ assists both Equicap, and the companies EQ features, in attracting and retaining an increasingly sophisticated luxury customer by evolving with them beyond traditional boundaries, while using a classic format.

Daniel Hilpert, Publisher & Editor-in-Chief


THE 2019 EQUICAP

SUPERCAR SUMMER RALLY FRIDAY JULY 12 2019

DAY’S E VENTS 8 00 AM BREAKFAST

Hosted by and located at: Ferrari Maserati of Long Island 65 S Service Road, Plainview, NY

9 00 AM RALLY DEPARTURE 12 30 PM Arrive at GURNEY’S RESORT MONTAUK

290 Old Montauk Hwy, Montauk, NY

1–5 00 PM LUNCH & COCKTAILS

Save the Date — Invitation to follow

.

FERRARI MASERATI OF LONG ISLAND


DE V ELOPMEN T

OPTIMIZING URBAN INFILL A number of commercial and residential developments are underway in Stam-

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THE STAMFORD REVIVAL City’s Opportunity Zones, Participation of Elevate Companies and Toll Brothers Foretell Projects’ Success WRITTEN BY

Jeffrey Steele

ELEVATE COMPANIES WITH CO-DEVELOPMENT PARTNER TOLL BROTHERS WILL BUILD A 450-UNIT MIXED-USE DEVELOPMENT WITH 35,000 SQUARE FEET OF RETAIL.

ford. Among the most noteworthy are a pair showcasing the ways visionary developers are maximizing the city’s potential, while taking advantage of the bountiful promise of opportunity zones. In one of the projects, a text change approved by planning and zoning boards has enabled properties long used for industrial and manufacturing purposes to be repurposed for a 200,000-squarefoot mixed use development. This proj-

ect, at 523 Canal Street in the city’s South End, will deliver a 173-unit apartment community featuring ground-floor retail space. Brooklyn-based developer Elevate Companies has carved out a niche by exploring new markets, hunting rich opportunities and negotiating off-market deals. Bradley Eide, Elevate Companies’ president and CEO, brought in New Jersey-based Fields Development Group as

Rendering courtesy of Newman Architects, PC

S

tamford, Connecticut has always been a coveted place to work, live and r a i s e a f a m i ly. B ut l i ke many older cities, it’s not without blighted areas long vacant, underbuilt or over-dedicated to industrial uses whose best days came and went decades ago. Now, however, ambitious new projects are offering hope of revival. Nearing groundbreaking, these developments are infusing Stamford—including the city’s fabled downtown—with renewed vibrancy. That Stamford is the epicenter of this new development makes perfect sense. The city possesses a wealth of sterling attributes any developer would cherish. First, Stamford is a New York City commuter’s dream. It possesses the second busiest Metro North stop behind Grand Central Station. Commuters are able to reach Midtown Manhattan in the brisk 50 minutes of a longer subway ride. Stamford also merits a stop on Amtrak Acela’s Washington, D.C. and Boston routes, affording commuters to those cities appealing conveniences. But many professionals who call Stamford home have no need for commutes anywhere. That is because many employers—both companies and academic institutions—are opening new locations in Stamford. All the while, existing employers are expanding their presence. Travel search service provider Kayak, athletic apparel maker Rhone, communications provider Charter Communications, job search engine innovator Indeed and tech-focused facility Media Hub are collectively adding more than 2,800 jobs in Stamford in the next three years. Meanwhile, the Universit y of Connecticut’s satellite campus is growing its presence and program offerings, helping attract thousands of additional students year after year. Perhaps most important, Stamford offers an appealing affordability and terrific lifestyle, luring a community-minded population that values desig n-focused living and amenity spaces. Little wonder that Stamford consistently benefits from robust housing demand.


DE V ELOPMEN T

Creative amenities and curated tenant experiences will appeal to the intended tenancy.” —Bradley Eide

his co-development partner, with Katerra Construction serving as construction manager and general contractor. “We are introducing creative amenities and curated tenant experiences to appeal to the intended tenancy,” Eide said, adding Newman Architects has been named architect of record. Another Elevate Companies development has consolidated 732,000 square feet of prime downtown land that had

long lang uished vacant or in an underbuilt state. Elevate Companies will build a 450-unit mixed-use development with 35,000 square feet of retail and approximately 20,000 square feet of amenity space. Eide invited Toll Brothers to be his f irm’s co-development partner on this project, recognizing its capacity to add multiple upsides to the project. First, Toll Brothers’ lifest yle brand is sure

to give the development life. Second, the builder’s marketing genius can be brought fully to bear enticing those in search of eclectic high-rise living burnished with Long Island Sound views. “We are positioning ourselves uniquely as a developer who is interested in bringing on other development partners who add value to our carefully-selected projects… through a shared vision and [a prioritization of ] innovative real estate solutions,” Eide said. CHECKING ALL BOXES Both sites were acquired in off-market transactions, and check off all the boxes for institutional quality investors. Those include each development’s expected 2.5-plus project equity multiple returns, with an internal rate of return in the 20 percent range. Most important, each project is situated in one of Stamford’s five opportunity zones. Because they provide federal tax incentives to developers intent on revitalizing economically-depressed communities, opportunity zones can provide substantially higher after-tax return. “We are now in the market to raise limited partner equity and expect very strong demand for this deal,” said Daniel H i lper t , fou nder a nd m a na g i n g partner of Equicap, a New York Citybased fi rm specializing in debt and equity placement. “We are expecting an LP investor to provide approximately 80 percent of the equity at very competitive terms.” The exit strategy calls for refi nancing and a long-term hold, he added, noting it’s important in both projects that investors share the developer’s long-term perspective. This lengthier horizon is needed to reap the greatest benefit from opportunity zone developments. “Transit-oriented residential developments are a very strong asset class,” Hilpert said. “And we are able to procure very competitive construction f inancing. Additionally, the opportunity zone allows us to pick a competitive LP from a large pool of funds.” “ The Cit y That Work s” ha s long been the Stamford motto. Opportunity zone incentives and forward-looking developments are helping ensure the city will work even more eff iciently in the years ahead. ■

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LENDER SPOTLIGHT

The benefits of the oneto-one relationship are not linear but rather exponential.” —Mac Wilcox

BUILDING CLIENT RELATIONSHIPS Savoy Bank balances high-tech with high-touch WRITTEN BY

Mac Wilcox, President & CEO Savoy Bank New York

A

ll too often when organizations start growing, they immediately forget about one-on-one interactions with customers. These relationships are viewed as “unscalable,” “too time-consuming” or “they don’t make fi nancial sense.” Customers in the fi nance industry are typically fi ltered into specific boxes and those that don’t fi t within the boxes are left out in the cold. In just a few minutes— with a few pieces of data and permission to run your credit— an institution declines your fi nancing. There’s no phone call, no understanding of your business model, no understanding on how you’re trying to take your business to the next level; just an automated response stating that you’ll get a letter in two weeks if they change their mind. Elena Sisti, the Founder and Chair-

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m a n E me r it u s of S avoy B a n k , a nd Magda Souffront, Vice President, Bank Market Manager, saw all this automation as an opportunity. They believe the benefi ts of the one-to-one relationship are not linear but rather exponential. By focusing on adding value to clients, the clients are more likely to be loyal, share their experiences publicly through word of mouth or social media, or endorse you on a reputation platform (LinkedIn). More and more content is being pushed through mediums like email, social media and search engines. The best way to cut through the noise is through experiences from friends or from people’s inner circle. With this vision in place, we opened ou r doors i n 2008. Savoy Ba n k is a homegrown bank formed by a group of New York entrepreneurs and seasoned bankers with a clear mission to provide the city’s small businesses with

the personalized service they deserve. New York is home to more than 200,000 small business enterprises vital to the city economy. However, these businesses are typically pushed to the sideline by fi nancial institutions because of their unique needs. Focusing on these customers, and focusing on the products that mean the most to them, has led to success. Savoy Bank specializes in commercial mortgages, term loans, lines of credit and SBA and USDA loans. We are a preferred SBA Lender, we won the 2017 SBA lending silver award and we’re a Community Development Institution (CDFI). Elena Sisti and Magda Souffront were recently honored in this year’s Crain’s “Notable Women in Banking and Finance.” Instead of using technology to f ilter customers, Savoy uses tech to streamline more transactional parts of banking so we can spend more time interacting and understanding our clients. Applying for fi nancing can be overwhelming; institutions ask for a lot of information with little g uidance on why and how this affects your application. At Savoy, the professionals you meet are the same people making the actual loan and credit decisions for your business, and they will walk you through the entire process. We are entrepreneurs at heart. We understand the importance of being hitech while still keeping a high level of “hi-touch.” Tech has a place in fi nance, but it be shouldn’t the center of it. Our clients should be. We’re rebranding our website right now and the fi rst thing you see on our new home page is success stories from our clients. Most people don’t start a small business with the intention of it staying that way. They star t a small business because they know they were meant for something bigger. They want to make a positive impact not just on their business, but on their communities. These are the Small Giants: the entrepreneurs, the visionaries and the innovators across businesses, cultures and neighborhoods. These are the people we serve. We don’t spend hundreds of millions of dollars in marketing to compete with institutions like Chase and Citibank. Our success comes from our clients succeeding and spreading the word of how we were an integral part of that success. ■


WEALTH MANAGEMENT

PREMIUM FINANCING An attractive funding strategy that leverages your balance sheet — not your cash flow WRITTEN BY

A

Robert Dunbar, DMC & Associates

t D u nba r, Mada n, Cuomo & Associates we serve our clients in every facet of their business and lives. Whether you’re a real estate developer, family office, large or small business owner or an executive, we can be there with you every step of the way. Our value proposition is not only that we are great at solving your family’s estate tax concerns or business planning needs, but that we are also able to leverage our relationships throughout nearly every industry to introduce to you to your next great employee, client, deal or venture. We’ve spent our entire career working with impressive people that have spent their entire lives amassing great fortunes, building incredible businesses and establishing themselves as the best in their fields; and we take pride in connecting you with them so that you may do the same with yours. Our business can be divided into three specific, focused areas of expertise. Each of these areas is designed to evolve with the changing needs of clients. Workplace Solutions takes into account the needs of both the employers and the employee. We’ve found that employers with happier employees have more productive employees and much easier lives. Taking advantage of large deductions can make your tax liability each year considerably lower. Likewise, with our Private Client Group, the goals are to properly prepare for life’s obstacles before they become true obstacles, and while these may vary from individual to individual and family to family, there is no substitute to solving and preparing for them early. The key focuses here are wealth management, risk management, tax efficiency, retirement planning and charitable giving strategies. Lastly, our Advanced Planning Group focuses on the issues of most importance to our most affluent clients. You’ve worked so hard to build

an incredible business and amass a tremendous wealth, now the biggest question is how much would you like your family to keep and how much would you like to give to the government? The ever-evolving estate tax rules in this country have made such a question require proper prior planning to ensure the best outcome — that is, the one that you intend to happen, and not the one that the IRS decides for you. One strategy that our team specializes in is known as Premium Finance Life Insurance. Life insurance is a key component of many clients’ estate plan. The policy is owned by an irrevocable life insurance trust (ILIT or Trust) for the benefit of the client’s spouse, children, grandchildren and subsequent generations. The question that must be addressed is, “What is the best way to pay for the coverage?” Rather than using one’s own funds to pay exorbitant premiums, Premium Financing helps clients acquire the life insurance for which they have an established need by borrowing the funds necessary to pay the premiums from a commercial lender. Also known as Leveraged Life, the ultimate goal is to allow the client to retain their own funds to further their business while simultaneously acquire permanent life insurance for the effective cost of a term policy. In the simplest terms, this is done by leveraging your balance sheet and not your actual cash flow. In most cases we find that Premium Financing can be an attractive funding strategy for those that qualify and that it compliments other non-life insurance estate planning strategies. Likewise, it is a considerably more cost-effective way of funding the insurance than paying the full annual premium out-of-pocket each year. ■ Robert Dunbar is Managing Partner of DMC & Associates, a financial services firm with offices in Manhattan, Long island and Connecticut. DMC is based in New York but happy to travel.

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COVER STORY

AT FIRST SIGHT TEXT PHOTOGR APHY

Daniel Hilpert, Equicap Daniel Wagner

HE NEW PHANTOM HAS BEEN FIVE YEARS IN THE MAKING. IT’S ONLY THE EIGHTH GENERATION IN 92 YEARS TO CARRY THE ROLLS-ROYCE’S FLAGSHIP NAMEPLATE. True luxur y isn’t rushed — it takes Patek Philippe two years to make one of its timepieces; it takes Pedrazzini 6,000 hours to handcraft a boat. RollsRoyce designers and engineers took almost three years to figure out how to make the unique glass-covered dash which is the one-of-a-kind centerpiece of the spectacular interior of the new Phantom sedan.

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It is a chilly Saturday morning when I arrive for my test drive of the Phantom a t M a n h a t t a n Motor c a r s’ show r o om a t 711 Eleventh Avenue. They boast a roster of exotic and super luxury brands under one rooftop, often selling vehicles with price tags topping $1 million to the rich and famous. The new 6.75-liter twin-turbo direct-injected V12 making 563 hp at 5,000 rpm is waiting for me, the rear coach door open, in the driveway. The spacious backseat beckons. This is one of the few cars where the passenger experience is superior to being in the driver’s seat. The Phantom has transported


COVER STORY

The Phantom has transported monarchs, rock stars and captains of industry, and me.”

— DA N I EL H I L PE RT

MANHATTAN MOTORCARS BOASTS A ROSTER OF EXOTIC AND SUPER LUXURY BRANDS, OFTEN SELLING VEHICLES WITH PRICE TAGS TOPPING $1 MILLION TO THE RICH AND FAMOUS.

monarchs, rock stars and captains of industry, and me. It is a global luxury icon. The ease of controlling all facets of comfort and privacy are at your fi ngertips: one to close the privacy shades, one to open them; one to raise the footrest, one to lower it; one to fold down the picnic tray, another to fold out the TV screen. There is a “Starlight Headliner.” Rolls-Royce is taking bespoke to a new level. We leave Manhattan Motorcars and glide effortlessly along the streets of New York City. The silence is incredible. The sound-deadening six millimeters of two-layer glazing on the glass, and the silent seal tires with sound-swallowing foam liners make the new Phantom one of the quietest rides in history. We head down the

Westside Highway — passing under the High Line where pedestrians admire the Phantom as we pass by — and down to the Meatpacking District to stop for a coffee. I spent four hours with the Manhattan Motorcars team driving through the city for our cover story photoshoot and was fortunate to experience fi rst-hand the Phantom’s amazing luxury and comfort. I have a long history with Manhattan Motorcars. I’ve been buying my cars there since 2006. From the sales people to the service team, Manhattan Motorcars’ owner Brian Miller has built an amazing company with New York’s most outstanding selection of high-end vehicles. Brian boasts a roster of exotic and super luxury brands under one rooftop, often selling vehicles with

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COVER STORY

price tags topping $1 million to the rich and famous. Manhattan Motorcars has been described as the city’s premier luxury motorcars dealership—and the only one authorized for Porsche, Bentley, Rolls-Royce, Lamborghini, Spyker, Lotus Koenigsegg and Bugatti in Manhattan. Today, they sell about 850 new cars and 350 used cars a year across all their luxury brands combined, making it one of the top super luxury car dealerships in the country. With six f loors to explore, auto enthusiasts return often to the Manhattan Motorcars showroom to see what’s new and what’s next. The secret to success, Brian says, is providing hands-on impeccable service to people who expect nothing less. I’m excited about our collaboration w it h Ma n hat ta n Motorc a rs for ou r May 16 event at Studio 10 in The West Village. We share the same pool of customers and we’re looking to continue branding our businesses together by focusing on experienced-based events that our clients love. ■ Daniel Hilpert is Managing Director and Founder of Equicap and the publisher of EQ Magazine

THE WORLDCL ASS SOUND SYSTEM IS JUST ONE OF MANY LUXURY FEATURES.

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PHANTOM By the Numbers

5.4

Seconds it takes the extended-wheelbase version to accelerate from zero to 62 mph

6.6

Width of the Phantom VIII, in feet

53.1

Rear legroom in extended-wheelbase version, in inches

155

Top speed (limited), in mph

42.9

Turning radius of standard-wheelbase version, in feet

5,948

Dry weight of extended-wheelbase version, in pounds

1,700

Engine speed for maximum torque, in rpm

1,968

Distance illuminated by the high-beam headlights at night, in feet

93

Years the Phantom model has been in production


RELAX BY THE BEACH

+ 1 6 3 1 6 6 8 9 8 2 5 H E L L O @ H E R O B E A C H C L U B . C O M 6 2 6 M O N TA U K H I G H WAY M O N TA U K , N Y 1 1 9 5 4


REAL ESTATE L AW

LIKE A GOOD NEIGHBOR, RPAPL § 881 IS THERE Developer receives underpinning relief through court-ordered access license WRITTEN BY

Michael A. Smith, Brendan Schmitt and Alexander Berger*

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ew York courts regularly grant construction access licenses to developers under § 881 of the State’s Real Property Actions and Proceedings Law (“RPAPL”), which provides statutory relief to compel the protection of a neighboring property whose owner fails or refuses to consent to such protection under the New York City Building Code (“BC”) § 3309. Those same courts, however, have been reluctant to do so when the RPAPL § 881 request is for permanent encroachments, such as underpinning. But one recent case in New York County Supreme Court, which involves an affordable housing developer’s attempt to underpin a neighboring property, should be noted because of its explicit rejection of what other courts typically view as controlling precedent.

permitted. But sometimes private negotiations break down, or a neighbor refuses to negotiate at all. When that happens, developers often move to “Plan B” — seeking a court-ordered access license through RPAPL § 881.

BACKGROUND New York City development projects are often very close to one or more neighboring properties. When that happens, the Building Code requires protection for the adjoining building, which often means a developer needs access onto the adjoining property or over its airspace. For instance, a developer could need to install innocuous equipment to monitor for vibration or cracks; or the developer could need to install sheds or scaffolding, which are ubiquitous in New York City construction. Sometimes, a developer has to excavate deeper than the neighbor’s foundation, which could require access underneath the neighboring building to install permanent encroachments for support, such as underpinning. “Plan A” is to get consent directly from the neighbor, through a construction license agreement in which both parties negotiate the scope and terms of access that will be

RPAPL § 881 CASES AND PERMANENT ENCROACHMENTS Courts hearing RPAPL § 881 cases strive to apply a “reasonableness standard in balancing the potential hardship to the applicant if the petition is not granted against the inconvenience to the adjoining owner if it is granted.”[1] However, for u nder pinning a nd ot her per manent encroachments, New York courts t y pic a l ly depa r t f rom t his c a se -bycase, fact-specifi c approach. Typically, New York courts do not allow permanent encroachments on neighboring properties through RPAPL § 881, and when they have done so, such licenses have consistently been overturned when heard on appeal. The relationship between the applicable legal authorities on underpinning is frustrating for developers. BC § 3309 is the Building Code section governing protection of adjoining properties during construction. BC § 3309.5 clearly

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MICHAEL A. SMITH Partner, Herrick, Feinstein LLP

requires underpinning beneath adjoining properties for certain development projects, and it even envisions the consequence if the neighbor refuses entry, na mely, the under pinning responsibility “shall devolve” to that neighbor. While RPAPL § 881 is the developer’s avenue for statutory relief when a neighbor blocks a developer from protecting adjoining property as required by BC § 3309, traditionally, such relief has not extended to permanent encroachments such as underpinning (and, therefore, BC § 3309.5). This track record of RPAPL § 881 jurisprudence can seep its way into private negotiations. Sometimes, a developer may redesign its project to avoid permanent encroachments. Of course, such a redesign may not be ideal. This could, for example, result in a loss of valuable square footage that could not otherwise be developed. Moreover, in situations where underpinning is the fastest, cheapest or safest way of supporting excavation, the developer might be faced with a longer project timeline, additional expense and new safety concerns. THE DECISION In the case in question[2], the petitioner was an affordable housing developer that contended that BC § 3309.5 required it to support a neighboring building by underpinning it. After the neighbor refused entry, the developer sought a RPAPL § 881 court-ordered license, which was granted by the court. The court reasoned that permanent encroachments are permissible under RPAPL § 881 when they are “virtually unavoidable,” meaning that “no feasible alternatives” exist. Here, various factors weighed on the court. The developer would be required to redesign the project at signif icant expense if underpinning could not be performed, and valuable basement space


SCENE

would be lost. Underpinning was necessary to prevent the adjoining building from collapsing, and the New York City Department of Buildings (“DOB”) had approved the petitioners’ underpinning plans, following two years of review. While the neighbor proposed alternatives to underpinning, including sheeting and bracing support, the court did not consider these to be viable options because they increased the risk of structural damage to the adjacent building. There was a strong public interest component in that the project was for homeless housing. The court further explained that it “does not read the case law to preclude a license for permanent encroachments altogether,” because RPAPL § 881 permits it to grant licenses “as justice requires.” In reconciling the applicable legal authorities, the court determined that “the DOB’s reg ulations… when read together, clearly anticipate a legal proceeding under RPAPL § 881 to obtain a license for an underpinning. Furthermore, according to the court, “[i]f an underpinning was never allowable, it would have been unnecessary for [previous] decisions to discuss how petitioners failed to carry their burden” with respect to licenses permitting underpinning.

EQUICAP AT

MIAMI ART BASEL

OUR PATRON’S DINNER AT THE DELANO WAS A HIT

In December Equicap hosted the inaugural Miami Art Basel Patron’s Dinner in Support of A Demain. On the eve of the opening of Miami Basel, clients, family offices and developers gathered on the open-air roof of The Delano. Guests enjoyed twilight cocktails and dinner for 50 in support of the launch of A Demain’s arts platform. Attendees included significant investors and owner-operators from New York, Miami, the West Coast, Canada, Latin America, France and Hong Kong.

CONCLUSION While noteworthy, it is unclear if this new case ref lects, and/or will create, any disruption of RPAPL § 881 jurisprudence on permanent encroachments. Putting aside whether other courts will follow suit, this case itself may not withstand scrutiny, if appealed. If, however, other cour ts do follow this case, perhaps the “virtually unavoidable” test for permanent encroachments seeps into private ne g ot i at ion s of c on s t r uc t ion l ic en se agreements with adjoining properties throughout New York City. ■ ©2019 Herrick, Feinstein LLP. The information in this article is not intended as legal advice or legal opinion and should not be construed as such. For more information on this or other real estate matters, please contact: Michael A. Smith at 212 592-1605 or msmith@herrick.com; Brendan Schmitt at 212 592-1689 or bschmitt@herrick.com; or Alexander Berger* at 212 592-1582 or aberger@herrick.com. *Admitted in Connecticut. [1] Matter of Queens Coll. Special Projects Fund, Inc. v. Newman, 154 AD3d 943, 944 (N.Y. App. Div. 2017). [2] CUCS Hous. Dev. Fund Corp. v. Aymes, No. 159303/2018, 2019 N.Y. Misc. LEXIS 731 (N.Y. Sup. Ct. N.Y. Cnty. Feb. 26, 2019)

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URBA N PL A NNING

THE POWER OF ‘POPS’

Why privately owned public spaces, arcades and plazas are vital to the city TEXT RENDERINGS

T

BOTH INDOOR AND OUTDOOR POPS PROMOTE VISIBILIT Y TO ENSURE THE SPACES FEEL OPEN AND SAFE.

he grid defi nes New York Cit y and makes it navigable, but for fast-paced New Yorkers, sometimes walking around the block is just too far. The short cuts through private buildings that make our walks a little shorter—and our knowledge of the town a little greater—are so important to the city’s pulse. This is why privately owned public spaces (POPS), arcades and plazas are vital to the city’s culture, and the reason the city rewards developers handsomely for donating their precious ground floor space to the public. In excha nge for up to 20 percent more z oning f loor a rea , developers give up a 1 to 11 ratio of ground f loor space to add the greater to the top of the building. When these spaces provide enhanced elements such as a direct connection with a subway station, a ratio of 14 to 1 can be achieved. These public spaces are designed to be open and inviting at the sidewalk, accessible, safe, comfortable and engaging. They are also maintained in perpetuity by the building owner in the same manner as

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Michael Santora, Scott Brownrigg + Crown Scott Brownrigg + Crown

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the rest of the building ensuring their longevity. Major portions (75 percent) of the spaces are encouraged to be a regular shape; however, the remaining minor portion (25 percent) has more flexibility to allow articulation of building facades and other unique elements.

POPS are a win/ win for developers, the city and the public.” —Michael Santora Let’s not forget what an important role a strong continuous street wall plays in the feel of the dense areas of New York. To protect this, the city enforces a 175-foot buffer between adjacent open spaces. Waivers can be issued for spaces

across the street from one another if it contributes toward greater pedestrian c i r c u l a t i o n , l i k e 6 ½ Ave n u e d o e s through a series of through block plazas and arcades connecting West 51st Street to West 57th Street. These through block POPS need a minimum clear width of 10 feet for outdoor or 20 feet for indoor. In addition, portions of adjoining buildings that front on the public plaza for more than 120 feet are required to set back from the public plaza at least 10 feet at a height between 60 and 90 feet to prevent a cavernous feeling and respect human scale. To provide both sunny and shaded areas in outdoor POPS and foster landscaping, south-facing spaces are preferred when available, but in no case can they be only north-facing. Both indoor and outdoor POPS promote visibility into and throughout to ensures the spaces feel open and safe. One of t he big ge st cha l lenge s i s getting the public to know about, and use, the spaces that the city worked so hard to create. Currently a new signage competition is helping with just that;


URBA N PL A NNING Allowed floor area can be increased up to 20% by providing a plaza open to the public

THE MORE PEOPLE USING THE SPACE, THE MORE PEOPLE WILL BE ATTRACTED.

however, the primary factor affecting usability is the relationship to the sidewalk. Limitations of promoted elements such as lighting and seating are generally restricted in the fi rst 15 feet perpendicular to the sidewalk frontage to give the most open feel possible and allow the pedestrian traffic to freely flow between the sidewalk and the POPS. The zoning resolution also limits height differences between the POPS and the sidewalk to two feet above the sidewalk (sunken plazas are generally not permitted), as anything greater also acts as a deterrent to usability and causes accessibility issues. Special considerations for plazas over 10,000 square feet and/or plazas that abut sloping streets are available. Two ot he r e le me nt s a l s o pl ay a critical role in a successful POPS: an abundance of comfortable seating that promotes social interaction and light retail elements to draw people in and keep them in the space. Drawing from the modern coffee house strategy, the more people using the space the more

people will be attracted into the space. Slightly less important to the planners, but equally important to the success of the space are things like lush landscaping, ample bicycle storage, inviting lighting and even the right amount of litter receptacles which all play a vital role in the POPS. We are also now seeing the incorporation of artwork, water features and game tables to further enhance the POPS’ public attraction. POPS technically go through the Uniform Land Use Review Procedure ( U LU R P) process, an acronym that sometimes deters developers; however, it is typically not as arduous as some of the discretionary zoning processes. When shepherded through by the right architectural and legal team, POPS are a win/ win for developers, New York City and all who live, work and visit it. ■ Michael Santora is Founder & Principal of Crown Architecture and Consulting, D.P.C, which has recently partnered with Top 100 Global Architecture firm Scott Brownrigg to form Scott Brownrigg + Crown.

Since its inception in 1961,

550 POPS in over 350 buildings

more than

across New York City have been created. Mostly located in Manhattan, but with growing office markets in Brooklyn and Queens, these public spaces are becoming increasingly popular and more evenly dispersed. The aggregate POPS is approaching

3.8M square feet

PUBLIC PL AZAS CONTRIBUTE TO THE VITALIT Y OF A NEIGHBORHOOD.

of public space— that’s more square footage than One World Trade Center.

equicapmag.com    EQ.

17


HOSPITALIT Y

Image courtesy of Hero Beach Club

THE DEVELOPER’S TEAM HAS DONE AN AMAZING JOB PRODUCING A TIMELESS DESIGN WITH OPEN AREAS AND OCEAN VIEWS.

HERO BEACH CLUB Inside the Deal with Daniel Hilpert, Equicap

L

OCATION IS EVERYTHING. So when an ordinary 1950s motel with enviable views of the ocean became available just outside Montauk, hospitality investors Jon Krasner and Teddy Wasserman immediately recognized a lucrative opportunity. With Equicap’s assistance, they obtained f inancing and purchased the property. Rebranded as the Hero Beach Club, they created a beachside oasis with a sprawling lawn for barbecues, a private pool and access to Umbrella Beach. The updated guest rooms combine modern and rustic elements with handmade accents imported from Bali. In our Q&A, Daniel Hilpert of Equicap shares details of the deal.

What was the client’s motivation for buying this particular hotel? Our clients are experienced hospitality guys and saw this as a profitable investment due to its large potential upside. The property was an old Montauk motel that had not been renovated since the 1980s. It had a lot of character, but it was underutilized and needed a face lift. For those that know the area, it was the Oceanside Hotel on Montauk Highway. The property is very well located, has high visibility and direct access to the beach. Our clients have owned a dozen properties in the Hamptons, mainly in Montauk and Sag Harbor. The group is very knowledgeable and knows what it takes to turn a hotel around and run a food and beverage operation. They were a natural fit for this. Another factor was that the seller, a long-time owner, was

18

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looking to retire and exchange the proceeds into NNN investment properties. How extensive was the renovation plan? Our clients closed on the purchase at the end of the season and immediately started a renovation program including some façade work and the renovation of guest rooms and common areas. As developers, they did an amazing job creating a lobby and common area for hotel guests that is more communal and in line with what a younger crowd is looking for. A lot of work was put into the common areas—the courtyard facing the beach formed by the two main buildings. Now known as The Backyard, the courtyard is used to its full potential and is finished with art and outdoor furniture that give it a sophisticated Montauk meets South Beach vibe.

How did you obtain financing for the property when there was a large revenue gap between the current income and your clients’ projected income? We structured an acquisition and renovation loan from a New York-based bank. After our presentation, the lender understood the business plan and saw the developer’s vision. The old motel had operating numbers that did not justify the purchase price and cost of renovation. The lender’s faith was not misplaced—our client executed their timeline, finished construction and met all projections in the first season following the purchase. There are many hotels in Montauk. How has the client positioned this property to be different from all the others? The hotel has a unique location at the entrance to Montauk and is beach adjacent. Since the hotel has no immediate neighbors, the beach tends to give the impression of a private beach. The developer’s team has done an amazing job renovating the rooms and common areas. It’s a very successful, timeless design with a lot of open areas and ocean views. What was your most interesting takeaway from this deal? This was not our first deal in the Hamptons. We have a long and successful history of arranging financing in the area dating back to 2005. We arranged financing for two condominium developments in Sag Harbor and we arranged the acquisition and renovation loan for Baron’s Cove Hotel in Sag Harbor before the current owner took over. We have also been involved in numerous residential construction loans. We know the market well. Our success at Hero Beach has given us more assignments and we continue to be very active in the Hamptons. We learned a lot about seasonal markets, and seasonal hotels such as this one have certain challenges when it comes to finding the right bucket of capital. Not every lender understands the business model. We have taken this knowledge to other markets outside the Hamptons where we are active in arranging hotel construction financing. ■


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