The Real Deal April 2012 by The Real Deal

Sue thy neighbor

Woes for ofﬁce market in B’klyn

How newbie investors start

113

Brokering deals at ‘Burning Man’

113

Eklund and Serhant bare all for TV debut

THEREALDEAL

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Fear & lending in New York With regulators on their backs, banks get too timid

BY ADAM PINCUS While commercial real estate lending has increased in NYC, SPECIAL REPORT banks still have federal regulators breathing down their necks and, in some cases, demanding that they sell off loans. NYC insiders say the result is that banks are going “overboard” and dampening the rate of the recovery.

N EW YO R K R E A L E S T A T E N E W S

Vol. 10 No. 4 April 2012 $3.00

Making nice with Mike Developers with close ties to City Hall, and who’s out of favor

Leftover lowballs With the spring selling season kicking into high gear, brokers are up against an unwelcome obstacle: uninformed buyers who insist on submitting lowball offers. Meanwhile, owners are getting more power in negotiations, brokers say. See page 16.

Carlyle goes shopping

Firm on prowl with $2B to spend and looming IPO

See story on page 30

Teaming up Broker partnerships are on the upswing

BY LEIGH KAMPING-CARDER Residential broker teams are on the rise. But there’s still little guidance for agents on how to divvy up both the work and commissions. See story on page 64

A gentleman broker On the heels of his record sale of Sandy Weill’s apartment for $88 million, broker Kyle Blackmon has snagged another mega listing, this one priced at $77 million. Is the 34-year-old the new go-to agent for the city’s priciest pads? See page 44.

Bloomberg’s buddies: The mayor has some go-to developers and others who are a no-go for city projects.

Mercedes House: Driving design ahead

BY C.J. HUGHES Knowing how to cozy up to City Hall and to elected powers-that-be is often key for future projects. This ofﬁcials is an important skill for any developer, es- month, The Real Deal looked at which NYC real especially those vying for lucrative, cityFEATURE STORY tate ﬁrms have established warm relaled projects. But even for those who are tionships with Mayor Bloomberg and building “as of right,” knowing how to navigate the which have chillier ones. clubby world of politics and getting access to the See story on page 34

Mapping the recovery An analysis of which Manhattan neighborhoods are bouncing back fastest and which are still struggling

Stuart Saft on troubles at Dewey & LeBoeuf

BY LEIGH KAMPING-CARDER The fact that the Manhattan market is a composite of many neighborhoods that often perform differently was never truer than during the downturn, when bidding wars erupted over family-sized Upper West Side co-ops, while Harlem condos lingered on the market. This month, TRD analyzed sales and pricing data to see which neighborhoods have been recovering fastest, and which have been slower to bounce back.

See page 114.

See story on page 47

PHOTO CREDITS ARE HERE

The Supreme Court may decide this month whether to hear a case alleging rent regulation is unconstitutional; the ruling could affect 2.5 million New Yorkers. See page 22.

AT A GLANCE

See story on page 68

BY JANNA HERRON The Washington, D.C.-based Carlyle Group announced a $2.3 billion real estate fund recently. Now, as the fund unleashes its cash, the industry is watching to see which NYC properties will be in its crosshairs. And this is all on the brink of the company’s IPO.

FACT

Nabes with biggest rise in number of sales since ’09 East Village / LES

99%

Harlem

97%

Battery Park City

64%

(Source: see page 47)

NYC’s $50M and under club

The Mercedes House, a massive condo-rental hybrid on the Far West Side, is set to launch its second phase next month. Critic James Gardner says the Enrique Norten-designed project doesn’t ﬁt with the rest of the area. But, he notes, that’s not a bad thing at all. See page 72. Mercedes House

Top building sales brokers that you rarely hear about

BY ADAM PINCUS While giants like CBRE and Eastdil get showered with attention for trophy investment sales, ﬁrms brokering small- and mid-sized deals often go unnoticed. Yet there’s actually more commission to be made in nondescript outer borough buildings. This month, TRD ranked top ﬁrms for deals under $50 million. See story on page 60

Interest in Pinterest NYC real estate pros are jumping on the latest social media craze: Pinterest. What’s all this pinning about? See page 32.

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SAFT PHOTOGRAPH BY MARC SCRIVO, BLOOMBERG PHOTOGRAPH BY GETTY; MERCEDES HOUSE PHOTOGRAPH BY DEREK ZAHEDI

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Highlights A P R I L 2 0 1 2

Buyers’ unreasonable offers With the spring selling season in high gear, brokers battle lowball bids on apartments.

Sue thy neighbor

The end of rent stabilization?

Quality-of-life complaints soar in coops and condos, and so does litigation. A NYC landlord’s lawsuit may soon head to the U.S. Supreme Court.

The Supreme Court building

real estate bucket list 24 Peebles’s Developer Don Peebles plans new

projects in Las Vegas and New York City.

In their words 28 This month’s funniest and most insightful comments from real estate pros.

Don Peebles

The Carlyle Group’s three cofounders, from left: William Conway Jr., Daniel D’Aniello and David Rubenstein

Carlyle goes shopping The Carlyle Group is on the prowl for property, with $2 billion to spend and a looming IPO.

Real estate pros “get pinned”

Making nice with Mike

Too many As in DoBro

The hottest new social media phenomenon, Pinterest, takes the real estate industry by storm.

A look at which NYC real estate ﬁrms have warm relationships with Mayor Bloomberg, and which have chillier ones.

Mayor Michael Bloomberg

Downtown Brooklyn market sees a spike in prime ofﬁce space vacancy.

the ﬁne print on FHA reﬁs 40 Check Ken Harney, on why borrowers may be

disappointed by the newest stimulus plan.

OKs Brooklyn Whole Foods 40 City The city ﬁnally green-lights the longWhole Foods

42 8 April 2012 www.TheRealDeal.com

stalled supermarket project in Gowanus.

The young and the restless New real estate investors ﬁnd creative ways to get into the business.

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Highlights continued 44

$88 million man 44 The After selling the Weill pad for a

��

Kyle Blackmon

record, Kyle Blackmon markets a new mega-listing for $77 million.

the recovery 47 Mapping Which Manhattan neighborhoods are bouncing back, and which areas are still struggling?

Meet the landlord Robert Nelson talks about buying the 972-unit Lafayette Boynton Houses, and why he can’t live in his own buildings.

Aaron Jungreis

Small is lucrative Start-up brokerages grab a bigger slice of the sub-$50 million investment sales market.

Teaming up ��

Broker partnerships are on the rise in NYC residential real estate.

Commercial Market Report Tracking rents and vacancy ﬁgures in Manhattan’s three ofﬁce districts.

��

National Market Report From left: Tal Alexander, Oren Alexander and Benjamin Seiter of Prudential Douglas Elliman’s Alexander Group.

Lobbying for sales With buyers now choosier, developers are spending more on glamorous entryways.

A sculpture at 305 West 16th Street

��Metals in Construction ��

113

The broker who played with ﬁre The Burning Man festival leads to real estate deals, partnerships.

��

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Checking in with brokers to take the pulse of the apartment market.

��

� � ��

Residential Market Report

touch 114 ATheSaftsuper-lawyer talks about protesting the Vietnam War and trouble at Dewey & LeBoeuf.

Reports from around the country on signiﬁcant developments and trends.

The Deal Sheet A roundup of ofﬁce and retail leases, building buys and ﬁnancing.

108

Development Updates An update on the construction and sales status of projects around the city.

110

Residential Deals

What does it take for residential deals to make it to the closing table?

112

Comings & Goings The stories behind the latest job moves and company announcements.

113

We Heard A lighter look at industry buzz.

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THE REAL DEAL N E W YO R K R E A L E S TAT E N E W S PUBLISHER Amir Korangy EDITOR-IN-CHIEF Stuart W. Elliott MANAGING EDITOR Jill Noonan DEPUTY MANAGING EDITOR Candace Taylor WEB EDITOR Lauren Elkies ART DIRECTORS Ronald Gross, Derek Zahedi SENIOR REPORTER Adam Pincus REPORTERS Leigh Kamping-Carder, Katherine Clarke WRITERS Melissa Dehncke-McGill, C.J. Hughes, David Jones, Adam Piore PRODUCTION MANAGER & RESEARCHER Linden Lim EDITORIAL ASSISTANTS Adam Fusfeld, Guelda Voien, Zachary Kussin ILLUSTRATORS David Cole, Yishai Minkin PHOTOGRAPHERS Max Dworkin, Michael Toolan, Marc Scrivo DIRECTOR OF MARKETING OPERATIONS Yoav Barilan ASSOCIATE SALES DIRECTOR Ross Fox ADVERTISING SALES Eran Evron, Abi Laoshe, Joseph Paci, Robert Stearns WEBMASTER Nima Negahban ACCOUNT COORDINATOR Andrea Moreno ADMINISTRATOR Junaid Zahid CIRCULATION Paul Destanko DISTRIBUTION Mitchell Newman, Michael Presto VIDEOGRAPHER Toni Comas ATTORNEY Barry J. Friedberg Trachtenberg Rodes & Friedberg ACCOUNTANTS William T. McCallum, CPA, P.C., Christine Wang The Real Deal is a registered trademark of Korangy Publishing Inc. Copyright © 2012. Call 212-2601332 or e-mail news@therealdeal.com. Warning: It is illegal to photocopy or reproduce any part of The Real Deal without express written consent. For reprints and duplication rights, call 212-260-1332. Principal ofﬁce: 158 West 29th St., New York, NY 10001. The Real Deal is published monthly. Annual subscriptions cost $95. Send check or money order to 158 West 29th St., New York, NY 10001.

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EDITOR’S NOTE Turning the natural order on its head

START FRESH AND EVOLVE WITH ME

he natural order of things is being turned on its head wherever you go these days. While the ﬁrst day of spring was last month, we don’t need Al Gore to tell us that springlike weather has been upon us for months. Meanwhile, a record pollen count that is wreaking havoc on New Yorkers’ allergies and ant infestations are part of the strange fallout we have to deal with as a result of the weird winter. Biblical swarms of locusts are probably next. If that isn’t enough, when you walk by a bar at night, a packed crowd is cheering over a regular season Knicks game. And Jeremy Lin isn’t even scoring 20 points a game anymore (note to self: ask Jonathan Miller about the statistical parallels between real estate and Jeremy Lin’s record run for my next editor’s note). Need I say more about how the natural order of things is being turned on its head? All of these bizarre situations lead me to believe that we could actually be on the verge of a signiﬁcant upswing in the residential real estate market. After all these gloomy years? It seems like it might be the case. There is a lot of optimism out there, as we write about in our residential market report on page 16. As Eddie Shapiro, CEO of Nest Seekers, says, “The recession is over, and we have to get in the mind-set of ‘next real estate boom.’ ” Even watering that comment down by 50 percent to account for broker hype, that’s a pretty strong testament to the market’s nascent comeback. Here are some other ways the natural order of things is being overturned, which we look at in this issue: • A 34-year-old broker is responsible for Manhattan’s priciest apartment sale ever,

All of these bizarre situations lead me to believe that we could actually be on the verge of a signiﬁcant upswing in the residential real estate market.

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which closed earlier this year, beating out superbrokers with decades of experience. And now he has another massive listing, this one for $77 million. We take a look at Brown Harris Stevens broker Kyle Blackmon in a profile on page 44. • Whole Foods just cleared its last hurdle to opening an outpost in Brooklyn (see page 40). Really, it took this long to get a Whole Foods in Brooklyn? Given the emphasis by both the borough and the store on all things organic and artisanal, it seems odd that Brooklyn is one of the last locations to get a Whole Foods. That’s as much a reversal of the normal order of things as seeing Brooklyn restaurants (most recently, Williamsburg barbecue joint Fatty ’Cue) opening outposts in the West Village, where I live. • Harlem is supposed to be one of the main poster children for gentrification in Manhattan, but it actually saw the lowest percentage increase in prices of any neighborhood in Manhattan over the past decade (although prices have risen 41 percent during that period). For these and other surprising stats, including which neighborhoods have fared best and worst since the Wall Street meltdown in 2008, check out page 47. Still, there are some things that reaffirm that the world still makes sense and is not about to spin off its axis: • New Yorkers are still suing one another — and in even greater numbers than ever before — over quality-of-life issues in their apartment buildings. See page 20. • As efficient and technocratic as the Bloomberg administration is compared to past mayoral administrations (think back to the party politics of David Dinkins or the personal politics of Rudy Giuliani), it still makes sense to be friends with the mayor. We look at which developers are in City Hall’s good graces and how they got there. See page 34. • The three cofounders of the Carlyle Group — David Rubenstein, William Conway Jr. and Daniel D’Aniello — received $413 million in compensation last year as company profits rose, showing that you can still make a modest living in finance. The buyout firm, with $2.3 billion in its sixth real estate fund and a planned IPO in the works, has a large presence in New York, which we detail in our story on page 30. Enjoy the issue.

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BY LEIGH KAMPING-CARDER ith the spring selling season kicking into high gear, brokers are up against an unwelcome obstacle: uninformed buyers who insist on submitting lowball offers. Last month, brokers said they struggled to educate buyers accustomed to controlling the market — some of whom made bargain bids on reasonably priced properties — that the spring

Leftover lowballing

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season is a different beast. New apartment hunters are in the mix, and inventory is still down in most parts of Manhattan. “Buyers still think they have the power going back to when the market crashed —more if they have all cash,” said Jennifer Zucher, a senior vice president at Plaza Real Estate Group, who added that dealing with buyers who continue to offer 20 percent below asking price was the biggest

impediment to closing a sale last month. “In reality,” she said, “the owners are getting back more power, especially if they are in desirable locations.” The numbers reﬂect some — but not all — of that sentiment. In the ﬁrst quarter of 2012, the number of Manhattan co-op and condo sales increased 14.9 percent compared to the previous quarter, rising to 2,311 sales from

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a 9.4 percent quarterly drop. Jonathan Miller, CEO of Miller Samuel, attributed the price dip to the current popularity of entry-level apartments, which comprised the second largest market share of home purchases in a decade. Sales activity was weakened in the first quarter by the spate of bad economic news — from the S&P downgrade to Europe’s debt woes — that rocked the country in the late summer and fall. “We had this delay or pause in the fall, and now we’re catching up,” Miller said. “What this suggests is a more robust second quarter.” Brokers reported seeing a customary bump in activity in the first quarter compared to the previous quarter. The uptick ranged across the board, from a jump in traffic at open houses to an increase in accepted offers and signed contracts. Given the lag time between signed contracts and closed sales, not all of that activity showed up in Miller’s first-quarter numbers. And although prices have dropped since the previous quarter, brokers suggested that deals signed in the last month indicated an uptick in prices. Last month was “starting to show positive movement as far as new business coming in, so assuming the trend continues, we’ll get better-looking reports after the second quarter,” said Barak Dunayer, founder of Barak Realty. Yukyong “Kianna” Choi, a vice president at Bond New York, noted that almost all of the roughly 40 properties she showed in the fourth quarter of 2011 were in contract or subject to an accepted offer as of late March, even though some of them had been on the market for almost a year. However, although deals are being signed, it is often only after wrangling with buyers, educating them about the current dearth of inventory and convincing them to pay full asking price — or close to it — especially for prime properties, brokers said. While the mild weather brought apartment hunters out of hibernation, their price expectations are still firmly rooted in the chilly market of 2011’s fourth Continued on page 100

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Sue thy neighbor Quality-of-life complaints soar — and so does litigation BY PETER KIEFER ow long should New Yorkers be forced to suffer a particularly loud (or uniquely odorous) neighbor? For co-op and condo dwellers, the answer increasingly seems to be “not very long.” Over the past several years, attorneys and building managers say they’ve seen a noticeable uptick in the number

of disputes between neighbors in New York City buildings, especially when it comes to noise and smell. As a result, condo and co-op boards are turning to attorneys with greater frequency, leading to higher legal fees and spikes in maintenance and common charges. Aaron Shmulewitz, an attorney at Manhattan law ﬁrm Belkin Burden Wenig & Goldman, said

the number of neighbor-versusneighbor, quality-of-life complaints he’s dealing with at co-ops and condos has doubled over the past several years. There are a number of reasons why these spats are now popping up more frequently, experts said. For one, many owners have seen the value of their homes decline over the past few years, and dis-

agreements with neighbors can feel like pouring salt in the wound. Other factors include shoddy boom-time construction and a

being made, and the venom with which those claims are pursued,” said Jeff Reich, a real estate attorney at Wolf Haldenstein

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NOISE-BUSTERS Many New Yorkers tend to live cheek-by-jowl in apartment buildings, so disagreements with neighbors are nothing new. But these days, such complaints are much more likely to end up in court, attorneys said, and co-op and condo boards are more likely to get involved in resident disputes. “We are brought in much sooner,” said Shmulewitz. “The sides are retreating to their corners much more ﬁrmly than they used to.” One such disagreement is currently playing out at 260 Park Avenue South in Gramercy, a prewar condo where units sell for several millions of dollars. In February, the condo board there sued a resident over his cigarette-smoking habit. Ditto at 200 Chambers Street, where a couple is suing their neighbor for $25,000 (plus fees and damages), alleging that smoke enters their apartment. The case is ongoing. Another increasingly common source of litigation is noise. “I have been handling many more noise disputes over the last year or two,” said Steven Sladkus, also of Wolf Haldenstein. In July, for example, residents of the co-op at 61 West 62nd Street scored a victory when the Appellate Division of the New York State Supreme Court issued a decision stating that the co-op is entitled to a preliminary injunction limiting the amount of noise a rooftop bar at the neighboring Empire Hotel can make. And in September, a judge ruled that claims against Madonna and the co-op board at Harperley Hall on Central Park West (where the Material Girl lived before purchasing an Upper East Side townhouse) could proceed to trial. One of the singer’s neighbors, Karen George, alleged that the blaring music from Madonna’s workout routines caused the walls Continued on page 98

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The Bulletin Board

Rent regulation in the spotlight Compiled by Russell Steinberg

We the people

The fate of rent regulation in NYC could be hanging in the balance. Upper West Side landlords James and Jeanne Harmon filed a lawsuit arguing that the U.S. Supreme Court should strike it down as unconstitutional. The court could decide as early as April 16 whether it will hear the case.

Dollars and cents According to the Harmons’ petition, NYC landlords lose an estimated $2.6 billion annually due to rent regulation, which costs the city around $283 million in lost property taxes.

Some 2.5 million people in NYC live in rent-regulated housing. A rent-stabilized tenant who lives in the Harmons’ brownstone at 32 West 76th Street pays only $951.22 a month for her apartment, while the market-rate unit next door rents for $2,650, according to court documents.

Gradual increase

John Hylan

In 1969, NYC mayor John Lindsay enacted the Rent Stabilization Law, which created the Rent Guidelines Board and charged it with establishing guidelines for rent increases. In 2011, the board authorized a 3.75 percent increase for one-year lease renewals, and a 7.25 percent increase for two-year leases. (NYC Rent Guidelines Board)

A housing emergency

R e n t r eg u l at i o n b eg a n w i th th e E m erg e n c y R e n t Laws o f 1 9 2 0, wh e n NYC M ayor J o h n H ylan tr av e l e d to A lb a n y, u r g i n g th e a d o pt i o n o f r e n t b i l l s to a d d r e s s a severe housing s h ortag e . Th e n i n 1 9 4 3, r e n ts w e r e frozen across NYC. Supreme Court building Rent regulation has existed in som e form ev er since. (NYC Rent Guidelines Board)

Nationwide impact? The high court hasn’t considered the constitutionality of rent-stabilization laws since the Pennsylvania Coal Co. v. Mahon case of 1922. If it hears the Harmon case and rules in the landlords’ favor, the decision could eventually lead to the elimination of rent regulation. (Commercial Observer)

Leaving the program

In 2010, around 17,000 city apartments left rent stabilization. One reason is income deregulation, which let apartments become destabilized when the rent rises above $2,500 per month, or household income rises above $200,000 annually. Also in 2010, about 12,000 units became rent stabilized, mainly because landlords hoped to receive tax benefits.

Harmon history

John Lindsay

32 West 76th Street

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PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

the

Desk

of:

“The Peebles Principles,” published in 2007 by Wiley, is one of three business-lessontype books Peebles has authored. This one, his most successful, sold 30,000 copies.

Peebles used to drink up to 10 cans of Diet Coke a day. But he’s trying to be healthier and is down to about half that.

A glass desk symbolizes Peebles’s design aesthetic: “light, open and uncluttered,” he says.

A gift of 2,000-year-old coins from the Bahrain royal family. Peebles met the family in 2009, when he went to the Middle East to talk with the Qatar government about partnering to buy the Drake Hotel site from Harry Macklowe, “but we couldn’t reach a deal with him,” he says.

“Build-On: Converted Architecture and Transformed Buildings” is inspiring his first Manhattan project. In Tribeca, Peebles is converting a 70,000-square-foot building into a hotel, and next-door, building a 100,000-square-foot condo, though he wouldn’t disclose other details.

The 100 Black Men of Greater Washington, D.C., recognized Peebles in 2009 for providing two annual scholarships to Florida International University. “Our role isn’t just to make money. Our role is to improve the quality of life for more people,” says Peebles, who grew up with a single mother.

Katrina, his wife, has an office down the hall. She does design and marketing for the firm. Last fall, Obama appointed her to the Kennedy Center’s Advisory Committee for the Arts.

Don Peebles

Peebles uses his iPad to stay on top of work and political news. As for his own political aspirations, Peebles, a Congressional page in the 1970s, mulled running for mayor in Washington, D.C., in 2010, but ruled it out because his mother-in-law was ill.

eveloper Don Peebles didn’t graduate from college, but that hasn’t stopped him from achieving real estate success. The Peebles Corporation — the largest African-American run development firm in the country — owns luxury hotels, condos and office buildings in Washington, D.C., and Miami, and has another project planned for Las Vegas. Peebles, 52, is also a political kingmaker, having raised money for politicians, including President Barack Obama. And he recently began relocating his firm’s headquarters from Miami to Madison Avenue because there’s still something to cross off his real estate bucket list: constructing a New York building. “My wife likes to joke I’m like Larry Brown,” the NBA coach whose peripatetic ways are legendary, Peebles says. “But I like new challenges.” B y C. J. H ugHes

which is now in its 18th year. While the event is about showcasing new talent, Suna explained, it also helps boost the off-season economy of the Hamptons, where he owns a home.

A photo with President Obama taken at Peebles’ Washington, D.C., home last year. Peebles has served on Obama’s national finance committee and is very active raising money for the President’s reelection campaign, but he admits to differences. “I disagree with him on tax policy,” he says, “but we’re electing a President, not a chief financial officer.”

A painting by Miami artist Dale Nally. Peebles owns 20 of his works, which hang in his homes and buildings. “I interpret it as wings flying, like a butterfly, which is uplifting,” he says. “I like art that energizes.”

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Ofﬁce leasing sees a sharp drop-off

Manhattan deal activity registers second-slowest quarter since 1995, as financial firms pull back BY ADAM PINCUS he large financial, media and legal firms that drive much of Manhattan’s office leasing market stood on the sidelines during 2012’s first quarter, allowing activity to fall to its second-lowest level since 1995, preliminary figures from commercial services firm Cassidy Turley show. The weak leasing activity also stood in stark contrast to the high volume seen one year ago this quarter, as big companies signed new deals early to lock in rents before they rose too high. “It is definitely slowing,” Peter Goldich, managing director for midtown-based ATCO Brokerage Services, said. ATCO handles leasing for the Hemmerdinger family’s portfolio, which includes 555 Fifth Avenue and 381 Park Avenue South. He added, “We are hearing about a lot of space [coming on the market]. It is challenging.” But Goldich does not believe the slow quarter represents a permanent market realignment and said he did not see the decreased activity impacting asking rents. Indeed, Manhattan asking rents actually rose slightly across the board last month to $53 per square foot, up $0.95 per foot compared to February, data from Cassidy Turley showed. However, as of press time, the firm estimated that there were 6.1 million square feet of relocation and renewals deals in Manhattan in the first quarter. Since 1995, the only slower first quarter was in 2009, when 5.9 million square feet of deals were inked. The first-quarter figure was just over half the 12 million recorded in the first three months of 2011, which was a particularly active period for Manhattan leasing, with major deals like NBC Universal renewing a 1.3 million-square-foot lease at 30 Rockefeller Plaza, and Bloomberg LP leasing 482,399 square feet at 120 Park Avenue. For March, the availability rate (measuring space available now or in the next 12 months) rose slightly for the second month in a row, to 10.5 percent — up 0.1 points from the prior month.

Midtown

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Tenants including financial firms returned big and small blocks of sublease space to the market, real estate professionals said. Last month, JPMorgan Chase listed three noncontiguous floors for a total of 67,912 square feet at 277 Park Avenue, between 47th and 48th streets. Other blocks came back to the market last month as well, data from CoStar Group

Manhattan ofﬁce stats AVAILABILITY RATE

AVG. ASKING RENT

Manhattan March ’12 10.5% February ’12 10.4%

$53.00 $52.05

Midtown March ’12 11.0% February ’12 11.1%

$60.82 $59.23

Midtown South March ’12 9.0% $43.69 February ’12 8.8% $43.12 Downtown March ’12 11.0% February ’12 10.4%

$38.79 $38.29

Source: Cassidy Turley

shows. Pharmaceutical giant Pfizer listed 321,747 square feet at 150 East 42nd Street, and fragrance manufacturer Coty listed two floors of about 52,000 square feet each at 1 Park Avenue. Joseph Harbert, COO of the New York region for Cushman & Wakefield, said there has been “a real slowdown in the financial service sector.” But unlike in late 2008, he said there is no rush to list huge blocks of space. “It’s a trickle, like Chase at 277 Park. That’s three disparate floors for 22,000 square feet each. It’s not a major statement about Chase’s holdings in New York. It’s not dramatic — it’s a trickle,” Harbert said. Companies that are listing space are undoubtedly responding to the uncertain economy. A report released last month from the city’s Independent Budget Office provided more short-term bad news for leasing brokers. The analysis said revenues at the big, publicly traded Wall Street firms would fall again this year, by an estimated 5 percent, and that there would be no growth in 2012 for wages or bonuses in the securities sector. “Real estate is led by business, and if [a company] can’t afford to be in the market now, they will hold off,” said Douglas Levine, an associate vice president at tenant brokerage UGL Services. Still, despite economic concerns, the midtown availability rate fell 0.1 points to 11 percent. At the same time, the asking rent in midtown rose sharply, up $1.59 per foot to $60.82 per square foot, Cassidy Turley figures showed. One example of activity was law firm Continued on page 97

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In their words...

The month’s funniest and most insightful comments from real estate pros

“I live in Chelsea, I have a house on Fire Island, I’m redesigning the Pines — how much more faggy can you get? ... I’m probably gayer than I’ve ever been.” Charles Renfro, a partner at architecture firm Diller Scofidio + Renfro, on how being gay has influenced his work. (Out magazine)

“I was thinking about moving to Brooklyn. But I hope to move to the Upper East Side in the next year and a half.” NYC mayoral candidate Tom Allon, on whether or not he would live at Gracie Mansion if elected. (Wall Street Journal)

“Most people are lazy — to my benefit.” Jonathan Ingber, founder of the commercial real estate information service Actovia.

“Rick Santorum has as much chance of being the GOP nominee as Rosie [O’Donnell] does of ever having a successful television show.” Donald Trump. (Twitter)

“People are unit united in this tiny, few-block area. They’re all the theater rats, and they don’t care about living well.” Candice Bergen, star of Gore Vidal’s “The Best Man” on Broadway, on Manhattan’s theater district. (New York magazine)

“While Blockbuster Video put Upper East Side residents on the couch, House of Jai will get them up and moving again.” Jeffrey Roseman, executive vice president and principal of Newmark Knight Frank Retail, on House of Jai Yoga moving into a space previously occupied by Blockbuster Video.

“The problem is really simple: The food vendors, with about five exceptions, are the ugliest collection of miserable-looking vehicles we’ve ever seen.” Dan Biederman, head of the 34th Street Partnership, arguing to decrease the number of street-food vendor licenses. (DNAinfo)

“If you define success as taxing smallbusiness owners and making their lives miserable, the letter grades have been a complete success.” Andrew Rigie, an executive vice president at the New York State Restaurant Association, regarding the city’s lettergrade system for restaurants. (Crain’s)

“You’re starting to see everyone show up to the party wearing the same outfit.” Cy Wilson, global director of interior design for Starwood Hotels, on more Manhattan buildings adopting displays of multicolored lighting. (Wall Street Journal) 28 April 2012 www.TheRealDeal.com

“Home Goods, love Home Goods! Loaves and Fishes, TJ Maxx.” “The Real Housewives of NYC” star Countess LuAnn de Lesseps, when asked about her go-to home stores. (Refinery29)

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PR O F I L E

Carlyle,ready to shop

With $2.3 billion in its sixth real estate fund and a planned IPO, the equity ﬁrm is on the prowl

The Carlyle Group’s three cofounders (left to right): William Conway Jr., Daniel D’Aniello and David Rubenstein, who reportedly received a combined $413 million in compensation last year.

BY JANNA HERRON he Carlyle Group may be a quiet buyout firm, but it cannot be ignored. The Washington, D.C.– based company — which has $12 billion of real estate worldwide, including in New York — announced its sixth real estate fund in January with $2.34 billion at its disposal. The firm has said it plans to invest opportunistically in residential, hotel, senior living, retail and office properties in major U.S. cities, including the Big Apple. The fund, which is called Carlyle Realty Partners, or CRP VI, is reportedly one of the biggest such funds to debut since Lehman Brothers imploded in September 2008. It has already invested $320 million, or 14 percent of its committed capital, according to its most recent Securities and Exchange Commission filing. And, it’s reportedly made 30 investments from New York City to Seattle. “Carlyle is a top-tier player in real estate, and this is a huge fund,” said Peter DeCheser, senior vice president of global capital markets at commercial firm UGL. And, that hugeness is expected to be felt in New York as it unleashes capital here to 30 April 2012 www.TheRealDeal.com

pick up properties. Meanwhile, still to come is Carlyle’s initial public offering, which could happen as early as this month, according to some reports. But the road to the public markets has been a somewhat bumpy one. After the firm registered its proposed offering with the SEC last September, Wall Street bankers valued the company at $8.5 billion. That was around half the $15.3 billion enterprise value — which takes into account market capitalization, debt, minority interests and preferred shares — of its largest rival, the Blackstone Group, which is headed by Stephen Schwarzman. The lesser valuation came as a slap in the face, given that the two private-equity firms have roughly the same amount in assets. At the time, analysts explained the conservatism by noting that firms like Carlyle, which are heavily focused on company buyouts, don’t offer the same steady stream of earnings as the more diversified Blackstone, which offers advisory services for corporate restructurings. Buyout funds represent the largest share of Carlyle’s assets under management — at $47 billion. That’s followed by its “fund of funds,” or mutual funds that invest in other

QUICK COMPANY FACTS

FIRM NAME: The Carlyle Group COFOUNDERS: David Rubenstein, William Conway Jr. and Daniel D’Aniello HEADQUARTERS: Washington, D.C. NUMBER OF OFFICES: 33 offices on six continents LATEST REAL ESTATE FUND: Carlyle Realty Partners VI COMPANY VALUATION: $8.5 billion CORPORATE STRUCTURE: Private, but slated to issue an IPO funds, at $30 billion, according to its most recent SEC filing. At $12 billion, the group’s 10 real estate funds make up only 8 percent of its total assets under management. Still, the Carlyle Group has been a major player in New York’s property market for a decade and a half. And this latest fund, which reduced its fees late last year to entice more investors, only reinforces the company’s presence here, sources say. “They’re huge. They buy all property types,” said Eric Anton, managing partner at Brookfield Financial. “They do distressed debt. They buy mortgages. They build, and they renovate. They do joint-venture deals for people who need capital.”

SOLIDIFYING A REPUTATION The Carlyle Group’s latest fund is a testament to its solid real estate reputation, sources say. The fund — the ﬁrst one for the ﬁrm since 2007 — had to turn away a half billion dollars after it lowered its fees, said DeCheser. The oversubscribed fund had an original target of $2 billion. “Strong investor demand, which enabled us to exceed our target, is commensurate with the opportunity we see for attractive property investments in select U.S. markets,” the head of Carlyle’s U.S. real estate team, Robert Stuckey, said in a company news release when the fund was announced in January. Some of the early committers were pubPHOTOGRAPH FROM GETTY IMAGES

PR O F I L E Carlyle and its partner sold 1180 Sixth Avenue last year.

Carlyle bought 650 Madison Avenue with Ashkenazy Acquisition in 2008.

lic investors. The Pennsylvania Public School Employees’ Retirement System ponied up $200 million. The Florida State Board of Administration pledged another $83 million, while the Teachers’ Retirement System of Louisiana invested up to $75 million. Meanwhile, the School Employees’ Retirement System of Ohio added another $30 million. That, of course, is not unusual for a fund of this kind. “Typically funds like Carlyle’s attract state pension funds, insurance money, other real estate funds, hedge funds to some extent and very wealthy individuals who are interested in wealth preservation,” DeCheser said. The company marketed a gross internal return rate of 20 percent over an eight-year holding period, the Ohio pension fund said in published reports. Other opportunistic funds advertise similar rates of return between 15 percent and 20 percent, according to invest-

In a statement to The Real Deal last month, Carlyle’s Stuckey said: “We have been investing in the New York market for many years and believe we have built a strong portfolio of premier properties such as 650 Madison Avenue and the retail space at 666 Fifth Avenue. While we invest across the United States, we see continued opportunity in this important market.”

TIGHT SQUEEZES Created in 1987, the Carlyle Group is still headed by its three cofounders: David Rubenstein, William Conway Jr. and Daniel D’Aniello. According to Bloomberg News, the three received $413 million in compensation last year as company profits rose. The firm employs more than 600 investment professionals worldwide, and has 33 offices across six continents. And the company has weathered all of the economic downturns that have transpired since it was founded — in-

“[The Carlyle Group is] huge. They buy all property types. They do distressed debt. They buy mortgages. They build, and they renovate. [And], they do joint venture deals for people who need capital.” ERIC ANTON, BROOKFIELD FINANCIAL ment documents from the Teacher Retirement System of Texas. Carlyle’s ﬁrst real estate fund, which launched in 2000, boasts a 44 percent gross IRR, the top performer of all its funds, according to its latest SEC ﬁling. And only two of its funds — a European-focused fund from 2005 and a 2004 fund — have negative gross IRRs. DeCheser said in addition to going after property portfolios in the major U.S. markets, he also expects the fund to seek the debt behind real estate portfolios. But Dan Fasulo of Real Capital Analytics said a key component of Carlyle’s success is its willingness to do oneoff property deals, unlike Blackstone, which almost exclusively goes after portfolios. “Carlyle will spend the time doing due diligence,” Fasulo said. “They look at opportunities on an asset-by-asset basis.”

cluding the most recent. There have been some tight squeezes, though. Indeed, Carlyle scoured for a capital infusion in 2009 and 2010 for 650 Madison Avenue, an office building that it owned with Ashkenazy Acquisition, headed by Ben Ashkenazy and Michael Alpert, according to news reports. The two companies bought the building for $680 million in April 2008, one of Carlyle’s last transactions before commercial real estate began tanking. But the joint-venture partners finally sold an unspecified preferred equity stake in the building to the China Investment Corp. and AREA Property Partners in June 2010, according to Real Capital Analytics. However, in a sign that the market had improved, late last year the venture was rumored to have sold a

roughly 25 percent interest in the building to Century Plaza that valued the building at $925 million, according to Real Capital. The group also came through a foreclosure scare last year. Shorenstein Partners started foreclosure proceedings on the mezzanine debt at 1180 Sixth Avenue, a midtown building owned jointly by Carlyle and Norman Sturner’s Murray Hill Properties, after the entities defaulted on their mortgage payment . The joint-venture partners had purchased the 23-story office tower in April 2007 for $300.1 million, according to Real Capital Analytics. But the two firms sold the building last May to HNA Property for $274 million, skirting foreclosure. (Murray Hill retained a 10 percent stake in the building, while also holding onto its property management and leasing responsibilities.) Now, after only two close calls during the Great Recession, it appears Carlyle is back on track. DeCheser believes it’s an opportune time for the firm to launch a real estate fund, predicting that 2012 will be “the first year of the next great real estate cycle.” A recent example of Carlyle’s real estate prescience is its highly successful leasing and partial sale of its stake in 666 Fifth Avenue. The firm partnered with Crown Acquisitions and the Kushner Companies to buy an interest in the retail portion of the building in 2008. In April 2010, Japanese fashion retailer Uniqlo agreed to pay $20 million a year for a 89,000-square-foot lease to host its largest flagship store. Almost a year later, the parent company of Spanish apparel chain Zara bought a 39,000-square-foot retail condo for $324 million. The partners finished up by signing on Swiss watchmaker Swatch starting at $4 million a year for 15 years, for the remaining 2,000-square-foot storefront space. The company isn’t shying away from development opportunities either. In September, Carlyle teamed up again with Crown Acquisitions along with Highgate Holdings and nabbed 170 Broadway, an 18-story prewar office building, for $55 million from AMG Realty. The trio plans to transform the building into a hotel with retail space. The company is also combing through the best and final bids for two parcels in its Riv-

Ben Ashkenazy, head of Ashkenazy Acquisition.

Murray Hill Properties’ Norman Sturner, who partnered with Carlyle at 1180 Sixth Avenue. The partners sold the struggling building last year.

Crown Acquisitions’ Stanley Chera

The Blackstone Group’s Stephen Schwarzman

Continued on page 96

www.TheRealDeal.com April 2012 31

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32 April 2012 www.TheRealDeal.com Seiter&Miller 000794 Pub. Real Deal Size 4.625 x 13.125 Issue April /12

Art Director: sd/mm Copywriter: ms Account Executive: wt Date 03/20/12

BY SHEREE R. CURRY the site would lead directly to home sales, etting pinned” has taken on a new and saw it more as a way to grow the Corcomeaning for the 11.7 million month- ran brand. “Selling homes specifically on Pinterest ly visitors to the hottest new social isn’t something we feel is going to happen,” media website: Pinterest. Not surprisingly, New York City real es- Shadbolt said. “It’s not a lead generation tate professionals have also gotten in on the platform for us, it’s simply a place where action. And they’re finding that the photo- we can experiment, listen and extend our focused site is ideally suited to property sales, brand.” perhaps even more so than Twitter or FaceBut as more competitors started using book. Pinterest, Corcoran yanked these food- and “Pinterest is more helpful than those fashion-related boards, and replaced them [other sites] because real estate is a visual with ones that resemble those of other real medium,” said Matthew Leone, director of estate firms, which focus more directly on web marketing and social media for Terra showcasing homes. Holdings, the parent company of Brown And the firm is working on other new Harris Stevens and Halstead Property. “A ideas. lot of people buy real estate by connecting “Right now we’re experimenting with and looking at the visuals. Pinterest is built the idea of ‘The Best of Corcoran.com,’ orfor that.” ganized by rooms, but we also have several Launched in 2009, Pinterest has recently other ideas we’re working on,” said Shadexploded in popularity. It allows each user bolt. “Basically, we have no fixed strategy to create virtual bulletin boards. Then, as here; we’re just experimenting with lots of they surf the web, different approaches they can “pin” difand seeing what feels ferent items — usubest for the user.” ally photos — to their Core, which has Pinterest boards on boards. Other users architecture, home can comment on or decor and interior “re-pin” these items design, also views to their own boards. Prudential Dougthe site primarily as las Elliman CEO a way to raise brand Dottie Herman, for awareness. example, recently “We know that people aren’t neceslaunched a personal sarily buying New Pinterest site, with A Pinterest screenshot York City real estate boards titled “Favorite Places & Spaces,” “Dream Home” and, off a social network site,” said Kristina Helb, of course, one board dedicated to all things director of communications for Core. Elliman. Core’s Pinterest philosophy involves postPinterest’s image-centric concept makes ing “striking images from newly listed propit ideal for showcasing real estate listings, erties that link to our blog and our website, said Audrey Binkowski, director of mar- helping to build traffic and visibility,” Helb keting at the Manhattan brokerage Real- said. “That’s the ultimate goal — to put our Direct. properties in front of as many people as posThe site is “a great visual way to share in- sible, which benefits our sellers.” formation with people,” she said. Core tries to focus narrowly on the realm RealDirect “pins” photos of all its listings of real estate, however. “People don’t want fashion tips from us, on Pinterest, Binkowski said, and so far, that seems to be helping them reach a wider au- or our burger recommendations,” she said. dience. Other brokerages now using PinterAs of right now, most Pinterest visitors est include Halstead Property, the Corcoran are in the Midwest, while Northeast users Group and Core. are still a small percentage, according to InBut the real estate industry’s involvement ternet marketing research firm comScore. in Pinterest is so new that it’s not yet clear But that could soon change: The number how brokers and firms can best utilize the of daily visitors to Pinterest has reportedly platform. grown some 145 percent to nearly 12 million Corcoran, for example, said its Pinterest since the start of the year. David Rosen, business development distrategy has evolved since it started using the site in December. rector for the Rubin Group at Prudential Corcoran originally had popular “boards” Douglas Elliman, said the group hasn’t yet about burgers at neighborhood restaurants joined Pinterest because he feels that serious and New York fashion, feeling that “the best property buyers tend to search specialized way to increase our presence there is simply sites. “They are going to go to StreetEasy or to share amazing things,” explained Matthew Trulia to find real estate,” he said. Shadbolt, Corcoran’s director of interactive Still, he recognizes the growing influence products and marketing. of Pinterest. “You have to try new ground,” he Then and now, the firm was skeptical that said. “So I think there is potential.” TRD

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REAL ESTATE

AND

POLITICS

Making nice with Mike

A look at the developers who have cultivated close relationships with City Hall, and those who haven’t BY C. J. HUGHES

nowing how to cozy up to City Hall is an impor-

Mayor Michael Bloomberg has some go-to developers and some developers who are a no-go for city projects.

tant skill for any developer, especially those vying to get selected for lucrative, city-led projects. But even for those who are building “as of

right,” meaning they have no government hurdles to clear, having a good relationship with the powers that be can be key for future projects. Take, for example, the 2007 purchase of the massive rent-regulated apartment complex Stuyvesant Town by a group led by Tishman Speyer. The $5.4 billion deal was approved, even though many residents of the middle-class enclave staunchly opposed the takeover, fearing they might be displaced. And Mayor Michael Bloomberg did not step in to block the sale — a move viewed by some as tacit support of Tishman’s purchase. (The buyers ultimately relinquished Stuy Town in 2010 after failing to make loan payments.) Also in 2007, by contrast, City Hall and a slew of elected ofﬁcials blocked an attempt by David Bistricer’s Clipper Equity to purchase Brooklyn apartment complex Starrett City for $1.3 billion, amid concerns that it could rob tenants of vital affordable housing. Why differing stances? Some observers speculated that it comes down to relationships. Indeed, Jerry Speyer, Tishman Speyer’s chairman, serves on the board of the Museum of Modern Art, with other city big shots. A former chairman of the Real Estate Board of New York, he also has a stake in the Yankees and sits on the board of the Federal Reserve Bank of New York. “People loved him, so nobody asked why he was paying a lot of money for Stuy Town,” said one person familiar with the behind-the-scenes maneuvering among elected ofﬁcials. Bistricer, on the other hand, was a much more low-key player, who didn’t have the same

the city’s worst landlords by public advocate Bill de Blasio in 2010, but was later removed after clearing up violations. Some have called that characterization of Bistricer unfair because those buildings were troubled when he bought them. Still, “by the time [Bistricer] got his act together,” said a source who asked to remain anonymous, “the narrative had been set.”

pre-existing relationships. “It was Jerry Speyer, the former chairman of the real estate board ... who owns landmarks

Nonetheless, establishing a good relationship with City Hall is a no-brainer, sources say.

all over town, versus someone who most people never heard of,” REBNY president Steven

Bloomberg is considered an efﬁcient and technocratic pro-business mayor looking to grow

Spinola told the New York Times in 2007.

the economy. And he believes development is a key part of that, sources say.

In addition, Bistricer was cited for a host of building violations by residents at the other

This month, The Real Deal looked at which ﬁrms have established warm relationships

Brooklyn apartment buildings he owned, according to the paper. He was named as one of

with City Hall and other public ofﬁcials — and which have chillier ones.

IN THE CITY’S GOOD GRACES...

that will rise on the 26-acre site. Related also seems to have gotten a break on the “living wage” bill being drafted by the city council. Late last month, Christine Quinn, the council speaker, floated a version of the bill that would exempt Related from paying that wage, or $10 an hour, at much of the Hudson Yards work site, according to the New York Times. That means Related could end up paying its employees there $7.25 an hour, the state minimum wage, while developers at other sites would have to pay their workers $10 an hour. Bloomberg — whose office said the city doesn’t play favorites and that projects stand on their own merits, but didn’t elaborate for this story — and REBNY oppose the bill. Either way, the Hudson Yards project will no doubt be a legacy-maker for Bloomberg, and a lucrative feather in Related’s cap. And Related is no doubt qualified to build it.

Related Companies

★

t’s no secret that the Related Companies, the 30-year-old industry giant, is a City Hall darling. In 2005, Related and several others teamed up with the New York Jets to pitch a proposal — which was also being aggressively pushed by Bloomberg — to build a football stadium on the Far West Side. While that plan didn’t come to fruition, the Stephen Ross-led company has remained a go-to developer for the city. In 2008, Related stepped in as a white knight after Tishman Speyer abruptly bowed out of developing a $1 billion mixed-used project at Manhattan’s Hudson Yards site, which is owned by the Metropolitan Transportation Authority, shortly after being selected in a competitive bidding process. While stalled by the ﬁnancial crisis, Related has recently made headway at

34 April 2012 www.TheRealDeal.com

Hudson Yards, where it is partnering with Oxford Properties Group. Indeed, late last year, Bloomberg and Related announced that Coach signed on as a corporate tenant for a 51-story tower

The Related Companies’ Stephen Ross

But the ﬁrm’s relationship with City Hall has long been under a microscope. For years, Related’s critics blasted the friendship between Ross and Daniel Doctoroff — Bloomberg’s former deputy mayor for economic development. Both grew up in suburban Detroit; they also have both been investors in the New York Islanders hockey team. Projects like Related’s redevelopment of Bronx Terminal Market in 2004 stemmed from that friendship, critics said. At that site, the city brought in Related to evaluate the property’s development potential, and later approved the transfer of a lease to Related without a typical city bidding process. But the city defended that move, saying that Related helped it out of a jam at the project, where it had been desperate to evict the landlord, who had let the facility crumble. The city also argued that it couldn’t hold an auction on a site it

PHOTOGRAPH OF BLOOMBERG FROM GETTY IMAGES

REAL ESTATE didn’t control, and the landlord’s lease was good till 2052. Even Related, however, doesn’t always come out a winner. Its plan to bring retail to the Bronx’s Kingsbridge Armory met an end in 2009 in the city council, which voted to override a veto by Bloomberg that would have allowed it to go forward. Related’s supporters say it’s earned a spot in the city’s good graces because of a track record of complicated, neighborhood-deﬁning projects like Time Warner Center, the $1.7 billion development that revitalized Columbus Circle. Another huge recent prize: the mixeduse, middle-income Hunters Point South project in Queens. In February 2011, the city picked Related, along with Phipps Houses and Monadnock Construction, to develop the 5,000-unit project. David Kramer, a principal of the Hudson Companies, which partnered with Related on Roosevelt Island’s Riverwalk complex, said “these public processes are incredibly transparent, and for the most part, meritocratic.” He added: “No developer is going to get selected because they are friendly with folks.”

Vornado Realty Trust

teven Roth’s Vornado Realty Trust is also in the good graces of both the mayor and City Council. The massive real estate investment

★ Vornado’s Steven Roth

trust won a major rezoning in the city council in 2010 after a battle with a rival developer. The zoning change was needed so that the REIT could move forward with its proposed 1,210-foot tower at 15 Penn Plaza on Seventh Avenue and West 32nd Street. As part of its proposal, Vornado pledged to construct and pay for public transit improvements, including creating new subway entrances and opening a pedestrian tunnel. The project got Bloomberg’s vote of conﬁdence, despite objections from the owner of the nearby Empire State Building, Anthony Malkin, that the building would be detrimental to the city’s iconic skyline. “It would be a great addition to our skyline,” Bloomberg ﬁred back.

PHOTOGRAPH OF MOELIS BY CHRIS MARTIN

In the end, the council signed off, increasing the allowable volume of what could be built on the lot — currently home to the Hotel Pennsylvania — by about 50 percent. The project is currently on hold while Vornado nails down an anchor tenant. Bloomberg’s relationship with Vornado

AND

POLITICS

tax-free bond financing. L&M — which has a portfolio of 7,000 units, half of which are affordable housing — is known for working closely with government officials. The Aspen, L&M’s 233-unit project in Harlem, in 2004 became the city’s L&M CEO Ron Moelis attributed the firm’s productive relationship with the city to getting projects done on budget and on time.

over is so high in those agencies and there are new people coming in all the time. For her part, Gomez has also been inﬂuential with community boards, whose support is crucial in the so-called Uniform Land Use Review Procedure, which a project needs to get the green light. She played a key role in front of Community Board 11 to drum up support for 1951 Park Avenue, a 300-unit project in East Harlem, Moelis said. “It’s very important to galvanize support in the community, and with elected ofﬁcials,” he said.

Two Trees Development

dates back further than 15 Penn Plaza. In 2001, Bloomberg struck a deal with Roth to relocate the mega-media company he founded, Bloomberg L.P., into a tower Vornado would build, giving the long-stalled project the anchor tenant it needed to move forward. Further working to Vornado’s advantage is that its principals rub elbows with city bigwigs on the charity circuit, analysts say. Vornado CEO Michael Fascitelli supports the Boy Scouts, while company president David Greenbaum donates to Jewish causes and is frequently photographed at benefits. “Being very philanthropic in the real estate industry goes a long way,” said Bob Knakal, chairman of Massey Knakal Realty Services, who has sold Vornado buildings. “But the city also looks favorably upon developers who maintain their properties well and play by the rules.” And Albany has called on Vornado, too. In 2006, the state awarded Vornado, along with Related, development rights to turn Manhattan’s Farley Post Office into Moynihan Station, while building an office tower across the street on Eighth Avenue. (In February, however, the Moynihan Station Development Corp. rejected the bids for the first phase of construction because they were too high, dealing Vornado a setback.)

L&M Development Partners

ffordable housing builders in New York must navigate an especially daunting thicket of permits and approvals, since they are often building on city land and underwriting it with coveted

first project financed as a 50-30-20 mixed-income rental. L&M CEO Ron Moelis worked with the Department of Housing Preservation and Development to develop the program. More recently, the firm converted a once-abandoned city public school in Harlem, PS 90, into condos. Some of that success can be attributed to Lisa Gomez, a former staffer at the city’s Housing Development Corporation, who L&M hired in 2006 and knows the ins and outs of the public financing system. But as part of the complicated process by which affordable developers get shovels in the ground, they must also often get a green-light from HPD, which dispenses publicly owned land. Last spring, L&M hired Rafael Cestero, the former HPD commissioner, though he left in December. According to Moelis, Cestero was hired to expand the company’s building management business and was prohibited from dealing with any HPD issues. In fact, Moelis said that of his 150 employees, “only a few” come from city government. Instead, he attributed the firm’s productive relationship with the city to getting projects done on budget and on time. Also, the fact that L&M has its own construction division can make for smoother passage through the city’s Department of Buildings and Department of Environmental Protection, Moelis explained. He noted that having ex-city hall personnel on staff doesn’t necessarily “make life easier” for developers, because turn-

wo Trees is famous for taking a rundown Brooklyn neighborhood littered with half-empty warehouses and transforming it into the thriving residential enclave of Dumbo. Getting there wasn’t easy for the company, which is run by the father-son team of David and Jed Walentas. Seventeen years elapsed, from 1981 to 1998, before David Walentas got the rezoning he wanted, and it was for just a single building, One Main Street. In fact, permission granted by the Koch administration to build on public portions of the neighborhood in the early 1980s was revoked a few years later. But since 1998, the rezonings have ﬂowed like gangbusters, seven in all, which Two Trees has said was the result, in large part, of the pro-development positions of Mayors Giuliani and Bloomberg. And the rezonings the company needed were complicated. Over the years, the ﬁrm has needed “mappings, demappings, garage special permits, rezonings, zoning text changes; [reviews from] Landmarks, the Corps of Engineers and the Depart-

★ David Walentas of Two Trees Development

ment of Environmental Conservation,” Walentas’s lawyer, Raymond Levin, told the New York Times in 2008. What helped, sources say, is that the city’s Board of Estimate, a government body that made land-use decisions, was abolished in 1990. That gave the City Planning Commission, which is currently headed by Bloomberg appointee Amanda

www.TheRealDeal.com April 2012 35

REAL ESTATE Burden, more power. And because there are more mayoral appointees on the commission than the board, projects tend to get built more frequently if the mayor is pro-development. And that’s very true of Bloomberg, said Howard Goldman, a former land-use lawyer who now lobbies for developers. “We basically have a pro-business and pro-development mayor, and I think they look at those companies as economic engines that drive the city and create jobs and keep the city prosperous,” he said, adding, “Two Trees has done very, very well.” Meanwhile, the ﬁrm has also made efforts to win public support. Two Trees used direct mailings, community meetings and online marketing to overcome an earlier zoning defeat, by Brooklyn’s Community Board 2, of a 17-story rental at Dock Street. The project will ﬁnally be built this summer. Two Trees’ land-use attorney and lobbyist, Ken Fisher, is also a former city council member. Having worked in government helped him navigate the process, he said. “We understand what’s doable and what’s not,” Fisher said. “When I approach key staff people [in the council], they know that I won’t be wasting their time.”

BFC Partners

n the early 1980s, almost immediately after founding BFC Partners, Donald Capoccia began a two-decades-long development binge in the East Village. Helping him along was the city, which

nity wasn’t friendly. Activists complained about BFC destroying the gardens they had cultivated. And complaints about careless construction prompted a public rebuke from former city council member Maragarita Lopez. But Capoccia was a supporter of Mayor Giuliani, having given about $50,000 to him between 1997 and 2000, according to news reports. Indeed, public records show that the politically active Capoccia also doled out campaign contributions — $13,000 in a citywide election cycle — to a range of politicians, including former city council member Melinda Katz, who headed the council’s influential land-use committee. More recently, in 2005, Capoccia was the beneficiary of political largess for his Schaefer Landing project — a part affordable, part market-rate condo-rental hybrid on the Williamsburg waterfront. The Bloomberg administration paid for the clean-up of the former brewery site and kicked in $2 million. Another $36 million came from the state. “We worked with Mayor Bloomberg and his administration to raise the affordable housing bar even higher and create an economically diverse and flourishing addition to the neighborhood,” Capoccia, who partnered with L&M at the site, said in a statement at the time. Capoccia’s supporters say he’s wellliked because he does his own construction and has a staff laden with engineers, guaranteeing solid project oversight. That was especially useful in putting up Toren, a 240-unit condo in Downtown Brook-

36 April 2012 www.TheRealDeal.com

POLITICS

been appointed to boards by President George W. Bush and Governor George Pataki. And the Republican also crosses party lines. Governor Cuomo recently appointed him to the Battery Park City Authority.

Extell Development Company

the Hudson Yards site, before joining city government. But after Extell lost the bid, Shaw decamped for a position with former Governor David Paterson’s administration in Albany. And, of course, Hudson Yards was not Extell’s last brush with government. In 2010, in a contentious process, the city agreed to rezone ﬁve Riverside South parcels on the Hudson River to allow for even more residential development than originally planned, on the condition that Extell build 500 units of affordable housing and a school. Extell agreed, but is now looking to sell the two parcels that require affordable housing to be built.

★

BFC Partners’ Donald Capoccia is developing a project in the East Village, where he beneﬁted from a city rezoning.

had watched tenements burn down years before and was ready to see them added back to the tax rolls, according to news reports. The bulk of the 4,500 units Capoccia has built in the past 30 years, most for low- and middle-income residents, were centered on the blocks east of the Bowery. But his relationship with that commu-

AND

lyn that straddles 12 subway lines and required collaboration with the MTA. Now, BFC is back in the East Village with its latest project: a 12-story apartment development at 11-17 Second Avenue, which beneﬁted from a speedy rezoning last year, despite much local opposition. But his stature with elected leaders of all party stripes is undeniable. He’s

y all measures, Extell is one of New York’s most proliﬁc developers today. Some of its current projects — like Extell’s Gary Barnett

OUT OF FAVOR WITH THE CITY...

Thor Equities

One57, the 1,000-foot tall skyscraper rising on West 57th Street — are as-of-right, so they require little more than a pile of money and strategic site assembly to get done. Yet when Extell does do projects requiring approvals from city agencies, the firm seems to be looked on favorably. For example, there’s the $750 million International Gem Tower, a 34-story commercial condo in the Diamond District on West 47th Street. Extell, which is headed by Gary Barnett, received $49.6 million in tax breaks from the city and state, contingent on filling the tower with jewelry tenants and companies expanding in the city. “It’s a major private investment on the part of Extell, and it serves as a tremendous vote of confidence in the future of New York City at a time when it’s much needed,” Bloomberg said in a statement in 2009, when the market was in the doldrums. Meanwhile, the state also created a $100 million fund that will provide loans to help diamond merchants buy commercial condos in the Extell tower. The company’s competitive advantage? Barnett attributed his successes to three simple things: “Great design, a lot of work and a lot of patience,” he wrote in an e-mail. Hiring good expediters, who are brought on to work with the DOB and other city agencies in the project approval process, also helps, sources said. Extell has also hired Bloomberg veterans. From 2006 to 2008, former deputy mayor Marc Shaw worked at the firm, helping to prepare Extell’s bid for the Hudson Yards project. Shaw also ran the MTA, which owns

or years, Thor Equities chairman Joe Sitt engaged in a public and acrimonious standoff with the Bloomberg administration over parcels he owned on Coney Island. At ﬁrst, the city offered to pay about $229 a square foot for the land. But Sitt played hardball — essentially holding the land hostage by threatening to build a massive, mixed-use complex on it — before accepting $96 million, or $320 a foot, in 2009. Like the Coney Island parcels, some say Sitt’s M.O. is to unveil bold plans for properties which never materialize. Indeed, he bought the ground lease at Albee Square Mall, which sits on city-owned land, in 2001 for $25 million, and promised a huge new tower in the rundown Downtown Brooklyn area. But in 2008, he sold the property for $125 million before acting on those plans. The move rufﬂed some features in the community. Recently, Sitt has focused more on

✖ Thor Equities’ Joe Sitt

buying and selling buildings (including many on Fifth Avenue in Manhattan), and less on the kind of projects that require a city stamp of approval. That’s probably a good thing: If he did, sources say, he might encounter a lukewarm reception. Sitt was not available for comment.

Malkin Properties

mpire State Building owner Anthony Malkin earned a public rebuke from Continued on page 102

PHOTOGRAPHS OF CAPOCCIA AND SITT FOR THE REAL DEAL BY MAX DWORKIN

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Brooklyn’s Class A woes Borough’s Downtown market sees highest availability in ofﬁce space in more than a decade

BY ADAM PINCUS space in Downtown Brooklyn. “Wall Street he Manhattan office leasing market — even before the financial crisis — had alis thriving compared to most major ready been evolving and [its] back office cities in the country, but just a short required less space. And, in some ways, it subway ride away in Brooklyn, the does not need the proximity to Wall Street [that Brooklyn offers].” market conditions are vastly different. The availability rate — measuring space The office market in Downtown Brooklyn was once going strong with a full slate of vacant now or available over the next 12 long-term leases, and a roster of financial months — in Downtown Brooklyn’s modfirms like Bear Stearns & Company, which ern office space is among the highest in the were locating back offices there to flee ex- nation. pensive Manhattan rents. Developer and landlord Forest City RatBut today its high 90 percent occupancy ner controls most of the market, with about rate masks a staggering 26.8 percent avail- 5.2 million square feet in six buildings. Most ability rate — from downsizing tenants and of those buildings are in the Metro Tech expiring leases in its 8 million square feet of Center complex, as well as three additional modern, Class A office buildings. That’s ac- buildings, including 1 Pierrepont Plaza. Forest City has just 3 percent vacancy in cording to fourth-quarter 2011 figures, the most recent available from commercial firm its portfolio, data from CoStar Group shows. Jones Lang LaSalle. But it acknowledged that about 18 percent The growth of vacant and available space of the portfolio is available, either directly has been a long time in the making, as fi- through Forest City or indirectly through exnancial firms reduced head counts, moved isting companies in the form of a sublease. staff overseas, or decamped to “Our direct market is very, New Jersey. very strong,” said Ali EsmaeilSources say NYU “It is really reflective of zadeh, an assistant vice presiPolytechnic may the macro trends,” said John dent at Forest City Ratner who be looking for more Wheeler, a managing director heads leasing in Brooklyn. He space at Metro Tech. at JLL, who represents office noted that direct space com-

From left: Forest City Ratner’s 1 Pierrepont Plaza, 2 Metro Tech and 6 Metro Tech.

38 April 2012 www.TheRealDeal.com

mands higher rents than sublease space. (Other area landlords include JPMorgan Chase, which owns 3 and 4 Metro Tech, and Muss Development, which owns the 850,000-square-foot 335 Adams Street.) Brooklyn’s slow ofﬁce market is a contrast to its active Downtown residential market that’s seen buyers and renters ﬂock to new towers like Belltel Lofts, Toren and the Brooklyner, among others. In addition, the area’s older Class B market has a lower availability rate of about 16.6 percent and

in several Downtown Brooklyn buildings, has been in high-profile discussions to buy 370 Jay Street. And several sources say it is now also considering taking space in 4 Metro Tech Center, which is owned by JPMorgan Chase. Moreover, optimists say the high availability rate in Downtown Brooklyn does not accurately reflect the fact that the area is becoming more popular as an office destination. “Over the past five years, we’ve seen new

The area’s high 90 percent occupancy rate masks a staggering 26.8 percent availability rate — from downsizing tenants and expiring leases in its 8 million square feet of modern, Class A ofﬁce buildings. even boasts slightly higher asking rents, an anomaly driven by the higher demand for Class B space, ﬁgures from JLL show. But the commercial market in the area could be getting a major boost. The Polytechnic Institute of New York University, which already occupies space

industries like media, advertising and technology relocate to, and grow in, Downtown Brooklyn,” said Thomas Conoscenti, director of real estate and planning for the Downtown Brooklyn Partnership, a nonproﬁt development corporation. Continued on page 94

4 Metro Tech is owned by JPMorgan Chase.

BUILDING PHOTOGRAPHS FOR THE REAL DEAL BY DEREK ZAHEDI

��

Check the ﬁne print on FHA reﬁs

he Obama administration’s new plan to stimulate refinancings of FHA mortgages is likely to help large numbers of homeowners cut their monthly costs — even those who are deeply underwater. But it’s also likely to be a disappointment to many borrowers who aren’t aware of the program’s fine print and end up missing an opportunity to switch into a loan with a rate below 4 percent. To cut through the bureaucratic details, here’s a quick overview of the so-called “streamline refi” program and what it will take for borrowers to qualify. First, the baseline criteria: A borrower’s current home loan must be FHAinsured and must have been put on the agency’s books no later than May 31, 2009. If they have a mortgage owned or backed by Fannie Mae, Freddie Mac, the Department of Veterans Affairs or private investors, they’re out. The May 31, 2009 date is cru-

to be pristine. On top of that, if their refinancing does not provide them a net savings of at least 5 percent in their monthly principal, interest and mortgage insurance payments, they won’t be eligible either. The program won’t take effect until June 11. Those are the main hurdles. But they are substantial enough to exclude hundreds of thousands of current FHA borrowers who might otherwise like to refi. According to an FHA spokesman, Brian Sullivan, FHA has roughly 500,000 active loans in its portfolio that are eliminated from participation solely on the basis of the May 31, 2009 cutoff date. Of those, an estimated 145,000 have mortgage interest rates higher than 5 percent — making them prime candidates for a refi if it weren’t for the cutoff date. Now for the good stuff: Under the Obama plan, if a borrower qualifies on the criteria above,

FHA has roughly 500,000 active loans in its portfolio that are eliminated from participation in the Obama administration’s “streamline reﬁ” program solely on the basis of a May 31, 2009 cutoff date. cial. Their lender can tell them precisely when the FHA “endorsed” their loan for insurance. This is different from the dates they applied for the loan or closed on their house. If it turns out to be anytime later than May 31, 2009, they miss the cut. Borrowers also need to have an unblemished record of ontime mortgage payments for the past 12 months. Maybe they were late occasionally a couple of years back. That’s okay. But the immediate past 12 months need

they get to breeze through the paperwork maze and underwriting hassles that come with any refinancing. The FHA streamline refi requires: • No new verifications of their income or employment status. If they’ve been paying on time for a year, the presumption is that they’ve got the needed income. • No new credit evaluation, credit reports or FICO scores. • No new physical appraisal. The program generally accepts the appraised value of their home

at the time they closed on their current FHA loan as good enough — even if they’re now in serious negative equity territory. Along with the stripped-down underwriting, the new program also comes with valuable financial concessions. To sweeten the deal, the FHA has slashed its regular insurance premium charges for qualified streamline applicants. Take this hypothetical example provided by Paul Skeens, president of Colonial Mortgage Co. in Waldorf, Md: Say a homeowner now has a $180,000 FHA loan at 5.25 percent that dates to March 2009. Their current monthly principal and interest payment is $993.93. With the addition of FHA’s mortgage insurance premium costs of $82.50, their total monthly outlay is $1,076.43. If they qualify for the new streamlined plan, they could lower their interest rate to 3.875 percent and their monthly principal, interest and mortgage insurance to $928.92 — an immediate savings of $147.51 per month or $1,770.12 a year. Over the next 60 months, they’ll save $8,850.60. Not bad. But why the May 31, 2009 cutoff? What about the thousands of responsible borrowers who happened to take out their FHA loans a little more recently, have paid on time and have rates higher than 5 percent? Why punish them? Sullivan said it’s all about the traditional three-year “seasoning” period for mortgages, during which the bulk of insurance claims — delinquencies and foreclosures — normally occur. He denied industry rumors that the 2009 date had anything to do with the FHA’s policy of making partial refunds of up-front insurance premiums to borrowers who refinance during the first 36 months, which might cost the agency millions of dollars if more recent borrowers could qualify for the new program. “How cynical,” he said in response to an e-mail question on the refunds. “This is about easing the pressure on [borrowers] in a responsible way.” Saving money by cutting out more recent FHA borrowers “was never a consideration.” Kenneth Harney is a syndicated real estate columnist.

www.facebook.com / TheRealDealMagazine 40 April 2012 www.TheRealDeal.com

�� City okays Brooklyn Whole Foods Brooklyn foodies (and suspended members of the Park Slope Food Coop), rejoice: The city has green-lighted a new Whole Foods supermarket for Gowanus. The longstalled project cleared its last apparent hurdle recently, when it received approval for zoning changes from the city’s Board of Standards and Appeals, the Daily News reA rendering of Whole Foods Gowanus ported. The board voted unanimously to let the natural-foods market build a 52,000-square-foot store — about ﬁve times bigger than what zoning regulations would otherwise allow. Construction will start this spring, and the store will open in early to mid-2013. Whole Foods bought the site at Third Avenue and 3rd Street in 2004, but plans for the store were temporarily derailed when the soil was found to be contaminated. As part of the plan, the company has begun repairing the adjacent 140-year-old New York and Long Island Coignet Stone Company Building.

NYC building permits jump Construction and demolition permits are on the rise in New York City, in the first significant increase since 2008, Crain’s reported. In the first two months of 2012, the number of permits issued for demolition work in the five boroughs jumped to 328, up 36.7 percent from the same period a year ago, according to the New York City Department of Buildings. And 12,967 construction permits were issued in January and February, up 14 percent from the same period in 2011. Meanwhile, the number of permits for new buildings jumped 42.7 percent year-on-year, to 204. DOB commissioner Robert LiMandri noted that 150 of the new building permits issued this year are Robert LiMandri for residential projects, while 54 are commercial. But those figures are still well below 2008 levels. “We still have a long way to go,” LiMandri said.

Interest rates on G-fees set to rise Congress has mandated an increase in the little-known “guarantee fee” hidden in the interest rates on single-family mortgages resold to Fannie Mae or Freddie Mac, the New York Times reported. Though this so-called “G-fee” does not show up on mortgage documents, the small increase ( just a fraction of a percent per person) could make a signiﬁcant difference in borrowers’ monthly payments, the Times said. In the ﬁrst nine months of 2011 alone, Fannie Mae earned $5.6 billion in guarantee fees. New rates are expected to take effect this month.

Obama administration approves aid for investors Investors who bought multiple homes before the housing market imploded can now qualify for mortgage assistance, Bloomberg News reported. The Obama administration announced last month that beginning in May, it will allow landlords to receive up to four federally subsidized loans, as long as their properties are occupied. These loans are made possible through an expansion of the Home Affordable Modiﬁcation Program, or HAMP. “When we started the program, we focused on owneroccupied houses because the need was so great and we wanted to target the efforts to Timothy Massad that group,” said Timothy Massad, the Department of the Treasury’s assistant secretary for ﬁnancial stability. “Given where we are today, more and more people recognize that vacant properties are a problem no matter how they became vacant.” The expansion comes at a time when less than 1 million home owners have received aid through HAMP, compared to the administration’s original goal of 3 to 4 million. About 700,000 landlords will now be eligible for the program. Compiled by Russell Steinberg

Real_Deal_April_OL.indd 1

3/31/12 10:42 AM

The young and the restless Newbie investors ﬁnd creative ways into the business

BY KATHERINE CLARKE nvesting in real estate can be daunting, especially in the unpredictable postLehman market. And the strategy favored by new investors in the mid-2000s — ground-up condo construction projects — is now viewed as extremely risky. But newcomers to the world of New York real estate investment — especially those with some prior industry experience — are nonetheless finding creative ways to carve out a toehold in the business. For some new companies, like Stone Street Properties and Benchmark Real Estate Group, that means investing in low-risk, multifamily assets and rolling them over for considerable profit, thanks in part to the thriving rental market. Other would-be real estate moguls are building ground-up projects, but keeping them much smaller than in the past. Aspen Properties founder Seth Brown, for example, recently completed a new-construction house — one of only a few fully new brownstones built in Park Slope in decades — and the eight-unit condo Sterling Green in Prospect Heights. Brown said young firms like his, which launched in 2005, are gravitating toward smaller projects because of the difficulties in securing financing for larger deals. “We have been dealing with a lot of new investors in their early 30s who are looking at value-add situations all over Brooklyn, Queens and Upper Manhattan,” said Jerry Swartz, president and founder of HKS Capital Partners, a capital advisory firm. He said his firm is doing an average of two deals a week that involve putting investors and borrowers together to purchase multifamily properties. “The companies all are probably two to four years old, looking to buy distressed opportunities and off-market transactions with low rents,” he said. “They are all very hungry to grow a portfolio and consummate transactions.”

A ‘FINANCEABLE’ INVESTMENT During the easy-credit real estate boom of the mid-2000s, it was common for industry newcomers to plunge into condo projects — whether or not they had any experience. But when the market crashed in 2008, these newbie developers were in for a rude awakening, and many lost signiﬁcant amounts of money. As a result, traditional, large condo projects are no longer viewed as the optimal way to get started in New York City real estate. Instead, many investors are focusing on the less-risky world of multifamily acquisitions, especially in the current hot rental market. According to a recent report by residential brokerage Citi Habitats, the average Manhattan monthly rent was $3,376 in February. That’s just below the all-time peak recorded by the ﬁrm in May 2007. 42 April 2012 www.TheRealDeal.com

From left: Robert Morgenstern and Jeffrey Kaye of Stone Street Properties at 11 Cornelia Street, which they recently purchased.

With rents soaring, lenders are eager to provide ﬁnancing for low- to mid-size residential opportunities in the city. “The multifamily asset class is very ﬁnanceable,” said Ariel Property Advisors president Shimon Shkury. “You can borrow at less than a 4 percent interest rate, and the capital needed is much less than if you were looking to get a

ﬁxed type of asset that’s not that difﬁcult to master.” The initial yield on multifamily assets is traditionally low, but value can be unlocked by making building improvements or removing rent-stabilized tenants. That’s where young, hungry professionals can make their mark. “These are young, energetic guys who are

Kate Shin

“We have been dealing with a lot of new investors in their early 30s who are looking at value-add situations all over Brooklyn, Queens and Upper Manhattan.” JERRY SWARTZ, HKS CAPITAL PARTNERS construction loan.” As a result, the multifamily sector is attracting a broad swath of investors, from high-networth individuals to REITs. That’s one reason why the volume of New York City multifamily building sales spiked 33 percent between 2010 and 2011, according to recent data from Ariel Property Advisors. But multifamily is especially attractive for new companies because of relatively low barriers for entry, explained Aaron Jungreis, founder of commercial brokerage Rosewood Realty Group. “Without trivializing it,” he said, “it’s not the most sophisticated business. ... It’s a very

not afraid to get aggressive with tenants,” Jungreis said. It helps that multifamily lenders also have limited expectations. Since the asset class presents a conservative amount of risk, lenders “don’t expect tremendous amounts of return,” Shkury added. Stone Street Properties is a real estate investment ﬁrm founded last year by Jeffrey Kaye and Robert Morgenstern. Kaye, who previously worked for developer the Gotham Organization, and Morgenstern, a former Gumley Haft Kleier residential broker, used their industry connections to partner

Shin’s revamped townhouse at 170 East 80th Street

Aspen Properties’ new-construction brownstone in Park Slope

Continued on page 100 PHOTOGRAPH OF KAYE AND MORGENSTERN FOR THE REAL DEAL BY CHRIS MARTIN

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The gentleman broker

On the heels of his $88M record-breaking Weill sale, Kyle Blackmon picks up another mega-listing—this one for $77M

BY LEIGH KAMPING-CARDER hristopher Jeffries, cofounder of real estate development ﬁrm Millennium Partners, last month listed his duplex penthouse at the Ritz-Carlton for $77.5 million. That price tag makes Jeffries’ apartment, at 50 Central Park South, the most expensive condo on the market. But even if it goes for the full asking price, it won’t be the priciest Manhattan home ever sold. That honor, of course, goes to the penthouse at 15 Central Park West, which former Citigroup chairman Sanford Weill recently sold to Russian chemical magnate Dmitry Rybolovlev for a record $88 million. The go-to broker for both deals? Kyle Blackmon, a 34-year-old Brown Harris Stevens senior vice president who’s been in residential real estate for less than a decade. Blackmon, himself one of the ﬁrst buyers at 15 Central Park West, represented Weill in purchasing the building’s penthouse for $42.4 million in 2006. Still, it raised eyebrows in the industry when Weill passed over the city’s most prominent brokers to hire Blackmon, a relative

Manhattan brokers. And it may just have catapulted Blackmon into the most elite levels of residential brokering.

the cofounder of National Ofﬁce Supply, which he and a partner sold to Staples in 1994 for $99 million in equity and debt. The couple lives in Englewood, N.J. Blackmon attended Albemarle High School in Charlottesville, where he regularly played guitar at a local coffee shop, according to his yearbook. After graduating in 1996, he studied business and marketing at the University of South Carolina. Blackmon, who claims to have sold more than $500 million worth of real estate, has credited his success to his mother’s determination. “I believe I have made it here largely because my mom taught me to be relentless in the pursuit of my goals,” he told his mother’s alma mater, the University of Virginia’s Curry School of Education, after establishing a fellowship there in 2008 in her honor.

SOUTHERN GENTLEMAN Despite his youth, Blackmon has developed a reputation for being an oldschool broker: a well-mannered, Southern gentleman who forges relationships with colleagues and takes care not to make enemies. (He declined to be interviewed for this article.) “I don’t think anybody would say anything bad about this guy,” said Donna Olshan, founder of luxury brokerage Olshan Realty. Elizabeth Sample, a Sotheby’s International Realty broker who has shown Blackmon’s listing at the Ritz-Carlton, agreed. “I really would only have good things to say about Kyle,” Sample said, adding that the Jeffries spread is “a beautiful, beautiful apartment.” Blackmon is “an exceptionally ﬁne per-

SMART MOVES

Blackmon has sold $125.2 million worth of real estate at 15 Central Park West and represented buyers in an additional $96 million worth of deals there. newcomer, in the ﬁrst place. Some speculate that they were introduced by Blackmon’s mother, Sandra Feagan Stern, who had a high-level job at Citigroup’s private banking arm when Weill was chairman. But a source familiar with the deal said that it was someone who had done business with Blackmon who made the referral, not his mother. In any event, the relationship seems to have paid off for both client and broker. Blackmon scored a 4 percent commission on the $88 million sale, split with Brown Harris Stevens’ Maria Torresy, who represented the buyer. “We truly value our relationship with Kyle,” said Weill and his wife, Joan, in a statement. “He is a real pleasure to work with as he epitomizes professionalism, hard work and attention to detail. He also recognizes the importance of giving back to society, which we applaud.” The deal — widely reported around the world — gave Blackmon a level of visibility reserved for only a select group of

44 April 2012 www.TheRealDeal.com

son — a professional and a gentleman,” added Torresy, who declined to comment in more detail. But the fast-paced Manhattan real estate world also requires toughness, and Blackmon can also be “aggressive” when the situation warrants it, said one experienced broker. Mitchell Speer, a senior vice president at Corcoran, recalled doing a deal with Blackmon at 15 Central Park West. Speer’s client, the seller, had accepted an offer, but was disappointed with the amount. Blackmon arranged to have a client ﬂy out from Wyoming on short notice to see the unit, and his buyer ended up purchasing the apartment for $8 million. Blackmon “did everything he could in order to make the deal happen,” Speer said. (Just over a year later, Blackmon helped the Wyoming client sell the same unit for $12.4 million.) Blackmon grew up in Charlottesville, Va. His mother, Sandra, worked as a

Brown Harris Stevens wunderkind Kyle Blackmon

teacher and university administrator while raising Kyle and his sister on her own. Sandra later become founder and managing director of Home Advisory & Concierge Services for Citigroup’s Citi Private Bank, where her role was to advise the private bank’s most elite clients. She now runs a concierge business that caters to wealthy clientele. Sandra is now married to Evan Stern,

After college, Blackmon moved to New York City and finagled an internship at Brown Harris Stevens — which seldom hires rookie brokers — by cold-calling the office. “I said, ‘I’ll clean out the closets — I’ll do anything,’” Blackmon told The Real Deal last year. After a stint as an assistant for Brown Harris Stevens broker Ileen Schoenfeld, Blackmon began developing his own clientele. (Schoenfeld did not return a call seeking comment.) He quickly won industry recognition: The Real Estate Board of New York gave him salesmanship awards in 2004 and 2007. Last year, he made The Real Deal’s top agents list and was featured in a cover story headlined “Moguls in the Making.” Much of the attention has focused on Blackmon’s deals at 15 Central Park West, the luxurious condo developed by brothers William and Arthur Zeckendorf, the owners of Terra Holdings (the parent company of Brown Harris Stevens). Blackmon was one of the first buyers at 15 Central Park West. He signed a contract in September 2005, two weeks after top broker Robby Browne of the Corcoran Group signed the first deal there. Blackmon plunked down $2.8 million for a two-bedroom on the 25th floor — a savvy move that undoubtedly elevated his career, brokers said. “[Blackmon] made a very astute decision when he decided to purchase an apartment in the building,” said Karen Continued on page 102

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NEIGHBORHOOD REPORT

Mapping the recovery

Which NYC neighborhoods are rebounding, and which are still struggling? The answers may surprise you. By Leigh Kamping-Carder

he truth about the Manhattan residential real estate market is

low mortgage rates fared better. More recently, it’s meant those with a concentration of

that there isn’t just one Manhattan residential real estate mar-

high-end properties are recovering faster, Miller said.

ket. Individual city neighborhoods can see drastic variations

Additionally, the neighborhoods with the most drastic drops in sales volume had the

in price and sales volume, based on the availability of certain

most room to recover, while established areas like the Upper East Side and Upper West

types of housing stock.

Side weathered the downturn with a relatively shallow decline in sales activity.

That’s never been truer than during the recent economic downturn, when

But since 2010, the volume of sales in those wealthier neighborhoods and in

bidding wars erupted over family-size Upper West Side co-ops, while Harlem

other core areas, like the West Village, have fallen slightly. The drop suggests that the economic worries of late 2011 — from the European debt crisis to

condos lingered on the market for years. This month, The Real Deal investigated which Manhattan neighborhoods have

lower Wall Street bonuses — had a more noticeable impact in the established

recovered the fastest since the housing slump and which are still suffering.

areas than in cheaper areas like Harlem.

With the help of data from appraisal ﬁrm Miller Samuel, we ranked Man-

The recent dip that the established neighborhoods are seeing may also

hattan’s neighborhoods based on the percentage growth of co-op and condo-

be related to an artiﬁcial boost in the fourth quarter of 2010 brought on by

minium sales between 2009 — the worst of the downturn — and 2011. The

wealthy buyers picking up properties because they feared the expiration of

research revealed that sought-after areas like Tribeca and Soho bounced back

the Bush tax cuts, Miller said.

almost immediately after the 2008 Lehman Brothers collapse. Others, like

As a benchmark for how the market has fared in recent years, Manhat-

the Financial District and Midtown East, however, are still seeing a continued

tan condo and co-op sales dropped about 28 percent between 2008 and 2009. Between 2009 and 2011, they rose 36.8 percent, hitting 10,161

decrease in activity.

transactions last year (roughly the same number as in 2010). Mean-

“The credit crunch initially was just this across-the-board sweep of markets

while, in the same period, average sale prices rose 2.4 percent, to

stalling and prices falling,” said Miller Samuel CEO Jonathan Miller.

$1.43 million.

“[But] then it becomes a function of the type of housing stock in each neighbor-

Below is a rundown of the market recovery in order of the percent-

hood, [which] reﬂects how the aggregate data improved,” he added.

age sales growth in each neighborhood since 2009.

In 2009, that meant neighborhoods that attracted ﬁrst-time homebuyers lured by

Manhattan post-crash sales volume NEIGHBORHOOD

SALES 2009

SALES 2011

CHANGE

East Village/Lower East Side

135

269

99.3%

Harlem/Morningside Heights/East Harlem/Hamilton Heights

266

523

96.6%

Battery Park City

123

202

64.2%

Soho/Tribeca

287

471

64.1%

Midtown West/Clinton

326

533

63.5%

West Village/Greenwich Village

406

623

53.4%

Union Square/Gramercy Park/Kips Bay/Murray Hill

861

1,241

44.1%

Inwood/Washington Heights/Fort George

135

192

42.2%

Manhattan overall

7,430

10,161 36.8%

Midtown East/Turtle Bay

660

853

29.2%

Upper West Side

1,558

1,984

27.3%

Upper East Side

1,623

2,056

26.7%

Chelsea

499

601

20.4%

Financial District

429

363

-15.4%

major transformation in recent years, with the opening of trendy new bars and boutiques and, in late 2007, the New Museum of Contemporary Art. While some new condos have gone up — such as the 36-unit Vil-

East Village Lower East Side YEAR

SALES

AVG. PRICE

2008

188

$922,738

2009

135

$636,249

2010

182

$778,110

2011

269

$1,001,821

Source: Closed co-op sales. Data provided by Miller Samuel.

123 Third Avenue

Source: Closed co-op and condo sales. Data provided by Miller Samuel. East Village/Lower East Side only includes co-ops. Battery Park City only includes condos.

FOR AT LEAST FOUR STRAIGHT

years, sales volume in the East Village and the Lower East Side has been climbing. The rapidly gentrifying area saw 135 co-op sales in 2009, and that number had nearly doubled by 2011, jumping to 269 — the biggest jump of any neighborhood. (Condo sales are not included in the total because of the small volume of transactions.) During the same period, the average sale price shot up 57.5 percent from $636,249 to just over $1 million.

East Village Lower East Side

Village Green at 311 East 11th Street

PHOTOGRAPH OF 123 THIRD AVENUE BY EVAN JOSEPH; PHOTOGRAPH OF VILLAGE GREEN DEREK ZAHEDI

In the last decade, it has risen a stunning 138.3 percent. Jon Varnedoe, a vice president at Prudential Douglas Elliman and a downtown specialist, attributed the growth to a steady demand for homes in the area without a corresponding increase in supply. The neighborhood has, of course, gone through a

lage Green at 311 East 11th Street and the 48-unit 123 Third Avenue, both of which sold out within a year — the housing stock is still largely dominated by low-rise co-op and rental buildings. That inventory squeeze has meant

www.TheRealDeal.com April 2012 47

NEIGHBORHOOD REPORT that when apartments do come on the market they get snapped up fast. For the last six to 12 months, buyers have adjusted their bids, forgoing lowball offers, Varnedoe said. Some of them are surveying the tight rental market and ﬁnding it cheaper to buy than to rent in the East Village or on the Lower East Side, he said, since the area is one of Manhattan’s most affordable. That is also increasing demand for the neighborhood.

BATTERY PARK CITY’S SALES mar-

Battery Park City

ket has steadily improved over the past few years, a substantial 64.2 percent from 123 transactions in 2009 to 202 in 2011. But Battery Park City suffered more than other neigh-

THE HARLEM HOME SALES

market was hit particularly hard by the recession: Transactions fell 43.6 percent from 2008 to 2009. While that precipitous drop would make any increase look formidable, Harlem’s sales numbers in 2011 also exceeded its volume from before the crash in 2008. In 2011, there were 523 sales in the neighborhood (which also covers East Harlem, Morningside Heights and Hamilton Heights) — nearly double the number from the doldrums of 2009, and about 10.8 percent more than in 2010. Developers added 1,596 new units in Harlem between 2006 and 2008, according to Stephen Kliegerman, president of Halstead Property Development Marketing, and created a glut during the downturn. But “most of the major condo stock from three years ago is gone,” Kliegerman said, estimating that absorption levels are roughly 10 or 15 percent higher now than this time a year ago. While the story of a gentrifying Harlem is nothing new, since late 2010, the area has seen even more new businesses opening, such as Red Rooster, a Marcus Samuelsson restaurant, and the Harlem Tavern,

Harlem

man’s Sonia Stock, who lives and works in Tribeca. That includes the growing reputation of Public School 234, known as the Independence School, a Whole Foods, which opened in 2008, and other improvements. Additionally, with much of the area’s housing stock made up of converted warehouses, such as 250 West Street, Tribeca and Soho are enticing families with large loft apartments offering ﬂexible ﬂoor plans, Stock said. “If you have good schools and nice parks — if you build it, they will come,” she said. But, she added, “there’s low inventory for Tribeca and Soho when it comes to these large open loft spaces,” which means properties tend to get snapped up quickly when they come on the market. IN THE LAST TWO YEARS,

A view of Battery Park City

borhoods during the downturn, since all of the condo towers — the only type of home for sale on the 92-acre site — are subject to land leases, explained Pierre Moran, an associate broker with DJK Residential who specializes in the area. Because of the land leases, only a small fraction of the buildings are Fannie Mae–approved, and few banks were willing to ﬁnance buyBattery Park City ers there during the YEAR SALES AVG. PRICE credit crisis, Moran ex2008 167 $1,270,406 plained. It wasn’t until 2010, when Wells Far2009 123 $1,827,138 go began lending in the 2010 140 $1,508,016 neighborhood, that the 2011 202 $1,203,659 market started to pick Source: Closed condo sales. up, he said. Data provided by Miller Samuel. Prices in the neighborhood haven’t quite kept pace with sales volume; the average sale price in 2011 was just over $1.2 million — about 34 percent less than in 2009. But that may have something to do with the types of units that are selling: The increase in activity has primarily been with studios and one-bedrooms. Compared to a decade ago, average prices are up about 150 percent, more than any other neighborhood.

Midtown West Clinton

sales in Midtown West and Clinton have been as hot as the more common name for this stretch of the West Side: Hell’s Kitchen. Though activity in the

Related’s One MiMa Tower THE POPULAR RESIDENTIAL NEIGHBORHOODS of Soho and Tribeca saw a steep dip in activity in 2009, followed by a sharp rise in 2010 and an ensuing plateau. Between 2008 and 2009, sales activity dropped almost 41 percent to 287 closed deals. In 2010, however, activity rapidly shot up 64 percent to 477 deals. About the same number was clocked in 2011. Prices in the neighborhood have been largely unscathed by the real estate downturn, however. The average sales price, the highest in the city, has hovered at about $2.5 million for the past three years, likely as a result of a decrease in inventory since earSoho / Tribeca ly 2009 as properties YEAR SALES AVG. PRICE have been grabbed off the market without 2008 483 $2,540,248

Soho Tribeca

Red Rooster restaurant in Harlem

a beer garden. That growth, along with YEAR SALES AVG. PRICE residential prices 2008 472 $644,143 that are a relative bargain, has been a 2009 266 $588,648 potent attraction. 2010 472 $569,492 Demand is not 2011 523 $590,801 reﬂected in prices, Source: Closed co-op and condo sales. however. Harlem Data provided by Miller Samuel. Also includes Morningside Heights, East Harlem and buyers are particuHamilton Heights. larly price-sensitive, Kliegerman said, and tend to stick to their budgets rather than pay more for larger apartments. The average price in Harlem rose a modest 3.74 percent to $590,801 in 2011, up from $569,492 in 2010. And although prices have risen 41.6 percent in the last decade, that’s the lowest percentage increase of any part of Manhattan.

Harlem

48 April 2012 www.TheRealDeal.com

being replaced by new 2009 287 $2,528,498 product. More recently, 2010 477 $2,525,425 buildings like Reade57 2011 471 $2,475,706 and 77 Reade Street Source: Closed co-op and condo sales. have come online. Data provided by Miller Samuel. The spike in sales may be partly the result of new services that have made the neighborhood even more attractive to families, said Elli-

area hasn’t quite reached pre-crash levels, sales volume has grown 63.5 percent from 326 in 2009 to 533 last year. Still, that eye-popping figure is partially a result of plummeting activity following the crash: Sales fell a whopping 53 percent between 2008 and 2009 in this neighborhood — a Midtown West steeper decline than Clinton in any other area. YEAR SALES AVG. PRICE Daniel Hedaya, the president 2008 692 $1,998,996 of Platinum Prop- 2009 326 $1,015,185 erties, noted that 2010 484 $1,009,302 the transformation 2011 533 $1,136,929 taking place in the Source: Closed co-op and condo sales. neighborhood — Data provided by Miller Samuel. where his residential brokerage recently opened an office — has been significant. New additions are bringing more residents to the area. They range from Hudson Yards, to the planned extension of the No. 7 subway line on 42nd Street, to the numerous new towers, such as the Dillon, an 83-unit condo at 425 West 53rd Street, and Related’s rental, One MiMA Tower. Between 2000 and 2010, the population of Clinton grew 13 percent, according to city figures. “The whole residential profile of the neighborhood

NEIGHBORHOOD REPORT has changed,” Hedaya said. Indeed, average prices are up about 129 percent over 2001, when residences averaged less than $500,000. Meanwhile, prices were up in 2011, increasing 12 percent over the previous year, from just over $1 million to almost $1.14 million. While some of those planned projects are in their early stages, the promise of new towers and amenities coming to one of the last undeveloped parcels of Manhattan is already helping to boost sales numbers, Hedaya said. Buyers, he said, are betting on the future of the neighborhood. WITH THEIR HEIGHT LIMITS

and historic districts, the neighborhoods of the West Village and Greenwich Village are largely dominated by low-rise co-ops and townhouses, with notable exceptions like the Superior Ink condo at 400 West 12th Street on the western edge of the neighborhood. The building West Village restrictions have Greenwich Village kept a damper on YEAR SALES AVG. PRICE new inventory and, combined with a 2008 509 $1,318,667 steady demand, 2009 406 $1,495,933

West Village Greenwich Village

helped buffer the 2010 648 $1,633,459 area against a post- 2011 623 $1,427,272 crash slump. Source: Closed co-op and condo sales. Sales fell 20.2 Data provided by Miller Samuel. percent from 2008 to 2009 — less than the overall Manhattan rate — and quickly shot up. Since 2009, volume has increased 53.4 percent, hitting 623 sales in 2011. But more recently, the area saw a 3.9 percent drop in sales in 2011 compared to 2010. Armanda Squadrilli, a senior vice president at Elliman whose focus is the West Village, attributes the dip to a lack of listings. “There is a very, very high demand, but not much inventory right now,” she said, noting that it is difﬁcult to show buyers a variety of apartments, drawing out the process of making a deal. Meanwhile, average prices were down 12.6 percent between 2010 and 2011, from $1.63 million to $1.43 million. That is still 4.6 percent off the average sale price in 2009 — nearly $1.5 million — although higher than the 2008 level of $1.3 million.

THE HOUSING STOCK OF UNION

Gramercy Park, Kips Bay and Murray Hill is diverse. It encompasses ritzy co-ops and condos facing Gramercy Park, the less expensive high-rise co-ops of Murray Hill and Kips Bay and condo buildings, each planting their ﬂags around Union Square and the Flatiron District. But across this area, sales have risen steadily since 2009, jumping from 861 to 1,241 deals, or a middle-of-the-pack 44.1 percent increase, just slightly higher than Manhattan

Union Square Gramercy Park Murray Hill Kips Bay

SQUARE,

SINCE 2009, SALES IN MID-

A view of Union Square

Midtown East Turtle Bay

overall. Yet sales activity Union Square has not quite ascended to Gramercy Park prior levels: The number Kips Bay of closed transactions in Murray Hill 2011 was still 4.3 percent YEAR SALES AVG. PRICE lower than in 2008. According to Jes- 2008 1,297 $1,163,493 $997,239 sica Huff, a senior vice 2009 861 president at Halstead 2010 1,074 $1,090,281 Property, the inventory 2011 1,241 $1,058,579 is tighter than ever, and Source: Closed co-op and condo sales. sellers are finding buyers Data provided by Miller Samuel. more readily than they have since the crash (although apartments that need work, or come with high monthly fees, are still a tough sell). To cite one example, at 32 Gramercy Park South, a 185unit co-op where Huff frequently brokers sales, there are currently two properties on the market. Last spring, there were 13 up for grabs, she said. In 2009, five sellers listed properties in the building that ultimately never sold (they were either delisted or rented out), while in 2011, only one seller faced the same fate, according to Huff. “I definitely feel a bounce-back,” she said. THE VOLUME OF SALES IN INWOOD,

Washington Heights and Fort George is rising faster than Manhattan as a whole, although not at the same rate as in Harlem and other neighborhoods north of 96th Street. Between 2009 and 2011, the number of transactions increased steadily, rising 42.2 percent to 192 sales. But that activity is still nearly 10 percent lower than in 2008, when 213 deals closed in the area. The market crash saw sales activity there decline 36.6 percent. Meanwhile, average prices for homes in the area, which is dominated by co-ops, have declined a modest 4 percent since 2009. In 2011, an average apartment in the neighborhood, consistently the cheapest part of Manhattan, cost $366,828, a decline of 5 percent compared to the

Inwood Washington Heights Fort George

Superior Ink at 400 West 12th Street

previous year. The average price is still off by 16.1 percent from 2008, when YEAR SALES AVG. PRICE it was $437,458. 2008 213 $437,458 But a histori2009 135 $382,270 cal look at pricing shows that resi2010 181 $386,001 dences here cost an $366,828 2011 192 average of just over Source: Closed co-op and condo sales. $191,000 in 2001, Data provided by Miller Samuel. meaning they have risen 92 percent in the last decade.

Inwood Washington Heights Fort George

TOWN EAST (which includes

Turtle Bay) have grown by 29.2 percent to 853 sales — but that doesn’t tell the whole story of the market there. Much of that growth occurred in 2010, when the U.S. government offered tax incentives for ﬁrst-time homebuyers — a group that Julie Perlin, a senior vice president at Stribling & Associates, said is drawn to the neighborhood for its supply of less expensive one-bedroom and studio apartments in co-op buildings like 301 East 48th Street. In fact, sales jumped 41 percent in 2010 over the year before. But the tax credit program expired — it applied to contracts 301 East signed by April 30, 48th Street 2010 — and, with it, the sales bump in Midtown East. In 2011, year-overyear sales dropped 8.3 percent. Average prices followed a similar trajectory, spiking in 2010 to $1.55 million before falling 9.5 percent to $1.4 million in 2011. (The mediMidtown East an price in 2010 was Turtle Bay $880,000, closer to YEAR SALES AVG. PRICE the $800,000 purchase price limit for 2008 1,089 $1,845,244 2009 660 $1,346,682 the tax credit.) The area had been 2010 930 $1,553,809 among the hardest 2011 853 $1,406,189 hit during the reSource: Closed co-op and condo sales. cession, with sales Data provided by Miller Samuel. falling 39.4 percent from 2008 to 2009, and average sale prices sliding 27 percent. But looking ahead, Perlin is optimistic. “As long as we see rental prices going up in 2012, and interest rates remaining low in 2012, you’re going to see more buyers coming out and making purchases so that they don’t get tied up into rentals,” she said. LIKE THE UPPER EAST SIDE,

Upper West Side

the Upper West Side did not experience the same kind of boom and bust as other areas. There were 1,558 deals in the neighborhood in 2009, down from 1,972 deals in 2008.

www.TheRealDeal.com April 2012 49

NEIGHBORHOOD REPORT In 2011, the number of deals jumped back to 1,984 — 27.3 percent more than in 2009. Also mimicking the Upper East Side, sales activity has fallen since 2010 — about 7.1 percent — and the neighborhood recovery is lagging the overall Manhattan market. Lisa Lippman, a senior vice president at Brown Harris Stevens who is based in the area, was surprised to ﬁnd the Upper West Side on a list of slower-recovering neighborhoods. But she acknowledged that some of the factors that kept a lid on Manhattan-wide sales volume in the fourth quarter of Upper West Side 2011 may have had YEAR SALES AVG. PRICE a bigger impact on 2008 1,972 $1,915,574 the wealthy buyers 2009 1,558 $1,496,980 of the Upper West Side. 2010 2,135 $1,612,960 Those factors in2011 1,984 $1,681,205 clude last summer’s Source: Closed co-op and condo sales. Standard & Poor’s Data provided by Miller Samuel. downgrade of U.S. government debt, the fear that Greece’s ﬁscal woes would spread and general worries about stock market volatility and lower Wall Street bonuses. A boost in 2010 from the feared end of the Bush tax cuts also had an effect, Miller said. So far in 2012, activity has increased, while prices are holding steady, Lippman said. “Things that are priced right, we’re seeing a lot more multiple bids,” she added. In the last decade, the volume of sales has become more evenly split in the neighborhood between co-ops and condos, as opposed to only co-ops. THE UPPER EAST SIDE, which

Upper East Side

accounts for about a ﬁfth of condo and co-op sales in Manhattan, tends to experience less drastic swings in volume and price than other neighborhoods.

The Second Avenue subway construction is turning off UES buyers.

That held true during the most recent recession: sales volume dropped only 8.1 percent from 1,766 units in 2008 to 1,623 in 2009. Since then, deal volume has grown 26.7 percent, reaching 2,056 in 2011. However, that represents a drop of 2.8 percent from 2010, partly the result of a bump prompted by the threatened expiration of the Bush tax cuts, and the macroeconomic woes of 2011. But on the Upper East Side — where sales of coops outsell condos by roughly a factor of two to one — one key market factor is a mismatch between the types of units buyers are looking for and the type of units that are most readily available. Indeed, the demand

50 April 2012 www.TheRealDeal.com

for scarce three-bedroom and larger apartments popular with families coexists with an oversupply of one- and twobedrooms in the neighUpper East Side borhood, said Carolyn YEAR SALES AVG. PRICE Levitan, a senior vice president with Corco- 2008 1,766 $2,068,360 ran who focuses on the 2009 1,623 $1,742,335 Upper East Side. 2010 2,116 $1,679,804 Meanwhile, con- 2011 2,056 $1,698,083 struction of the ﬁrst Source: Closed co-op and condo sales. phase of the Second Av- Data provided by Miller Samuel. enue subway between East 63rd and 96th streets has scared away buyers along the stretch, she said. “The quality of the neighborhood is not the quiet, charming Upper East Side that we once knew there,” Levitan said. “It’s affecting people’s willingness to buy properties on the Upper East Side. It’s making the neighborhood less desirable.” Indeed, sales in Yorkville — which stretches from East 86th to East 96th streets and from York to Lexington avenues — have screeched to a halt, falling 2.5 percent from 2010 to 2011 after rising by 42 percent from 2009 to 2010. Sales also dropped on the Park and Fifth avenue corridors during that time. However, those properties will no doubt appreciate substantially in value when the subway is completed, Levitan said.

volume could also be the product of inﬂated numbers in 2009. Some buyers signed contracts for new construction condos in 2007 and early 2008 that did not close until 2009, he said. For example, in 2007 he signed a contract to buy his own unit in the Caledonia at 450 West 17th Street; the deal did not close until December 2008. This phenomenon would have impacted Chelsea more than some other places, Zollinger said, since “Chelsea saw a huge increase in buildings during the boom.” Still, the area is made up of all kinds of housing stock, from prewar co-ops to walk-up rentals to glassy condo towers. “With Chelsea you certainly get a potpourri of any type of residential property,” Zollinger said. THE FINANCIAL DISTRICT may

Financial District

have transformed in the last decade, with its numerous ofﬁce-to-residential tower conversions, but sales volume has fallen steadily for at least four years now. In 2011,

IT MAY SEEM COUNTERINTUITIVE,

but Chelsea — which has seen no end of hype in the last few years, with the opening of the High Line and its accompanying inﬂux of new luxury residential towers — has actually recovered slower than many other Manhattan neighborhoods. While there were 601 closed deals in the area in 2011, up 20.4 percent from 2009, Chelsea that increase has been YEAR SALES AVG. PRICE slower than the growth of the Manhattan mar- 2008 747 $1,438,100 ket as a whole. And it’s 2009 499 $1,319,161

Chelsea

still lower than the pre- 2010 532 $1,590,036 crash sales volume. 2011 601 $1,501,319 To some extent, this Source: Closed co-op and condo sales. Data provided by Miller Samuel. slower recovery is due to the fact that when the recession hit, Chelsea was already a well-established residential market. Indeed, sales in Chelsea fell less steeply than in other neighborhoods during the downturn. Meanwhile, average prices have risen 13.8 percent since 2009, to about $1.5 million from $1.32 million, representing the second-highest neighborhood price increase. “Sure, there was a slowdown in 2009 and 2010, but for the most part [Chelsea] has been a healthy neighborhood,” said Eric Zollinger, founder of Zollinger & Associates, a Chelsea-based residential brokerage. Zollinger posited that the relatively low increase in deal The Highline is just one of the new additions to Chelsea.

Occupy Wall Street protesters in Zuccotti Park.

sales activity fell to 363 transactions, a 4.2 percent drop since 2010 and a 15.4 percent drop since 2009, making the Financial District the only part of Manhattan with continually declining sales. Likewise, average prices had been dropping since 2008, although they finally began rebounding between 2010 and 2011, rising 8.6 percent to $963,949 from $887,620. It’s difficult to pinpoint the reason for the drop in sales activity, but Platinum Properties’ Hedaya suggested it might be related to a decrease in inventory. Condo projects in the area, such as the William Beaver House and 25 Broad Street, have gone partly rental, offering cautious buyers another option to purchasing. The Occupy Wall Financial District Street protesters, YEAR SALES AVG. PRICE who camped out in Zuccotti Park for 2008 458 $995,739 weeks last fall, may 2009 429 $924,317 also be partly to 2010 379 $887,620 blame, since buyers 2011 363 $963,949 were less inclined to Source: Closed condo sales. look there, he said. Data provided by Miller Samuel. He noted that was especially true for investors who shied away from the area during the protests. “Wall Street was blockaded off for a few months,” Hedaya continued. “When you’re looking from an investment perspective, it’s difficult to look past that.” Hedaya said that currently there is a lot of activity at the lower end of the market, or residences priced around $500,000. One World Trade Center is quickly rising, and the Fulton Street Transit Center is slated for completion in 2014, bringing new energy to the area. “These are things that have been in the pipeline for so long,” Hedaya said, “but now people can actually visualize [them] being finished.” TRD

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Real Deal April 12 Bratton ND.indd 1

3/20/12 8:50:26 AM

NEIGHBORHOOD REPORT

Taking Manhattan’s pulse

A ‘real-time’ look at what’s happening in each neighborhood, and what’s ahead

BY LEIGH KAMPING-CARDER harting a neighborhood’s recovery since the crash is one thing, given the availability of historical data on sales and pricing. But what about taking the pulse of a neighborhood in real time? Or predicting the future of a neighborhood’s sales market? That’s far trickier. But with help from real estate analytics and consulting ﬁrm Urban Digs, The Real Deal did just that, gathering data on inventory and pending sales for Manhattan co-ops, condos and townhouses from 16 different Manhattan neighborhoods. (“Pending sales” are the number of homes in contract at any given time, not the number of new contracts signed during a set period.) The result is a snapshot of the current supply and demand, as measured by active listings and homes under contract, respectively. Those two data points can provide information about the future course of the sales market. For example, an increase in pending sales indicates that

more closed deals are in the pipeline compared to a year ago and, consequently, that demand for homes in a given market is on the rise. However, to get a more complete picture of the health of a market and to assess buyers’ conﬁdence in an area, it helps to look at changes in active listings as well to see “whether or not inventory is piling up, [and] whether or not demand is eating up inventory,” said Noah Rosenblatt, a broker and the founder of UrbanDigs. If demand is up and supply is down, buyers are forced to “scramble” for properties, Rosenblatt said, giving sellers an advantage. If the opposite is true, properties can languish on the market, forcing sellers to lower their asking prices or take their properties off the market. Furthermore, if both pending sales and active listings are up, it could indicate that not enough buyers are interested in a given neighborhood — or that buyers and sellers are too far apart on prices. For example, in Battery Park City, where deal volume

EAST HARLEM

UPPER WEST SIDE

UPPER EAST SIDE

Pending sales March 2011: 39 March 2012: 62 Change: +59 percent

Pending sales March 2011: 383 March 2012: 408 Change: +6.5 percent

Pending sales March 2011: 456 March 2012: 473 Change: +3.7 percent

Active listings March 2011: 159 March 2012: 194 Change: +22 percent

Active listings March 2011: 1,051 March 2012: 1,033 Change: -1.7 percent

Active listings March 2011: 1,689 March 2012: 1,621 Change: -4 percent

Neighborhood note: Neighborhood More M ore sellers are listiing ng their properties this year in East Harlem. But even more buyers are signing deals, tipping the market in favor of sellers, data show.

Neighborhood note: Neighborhood The T he Upper West Side, S ide, like the Upper East Side, is a barometer for the Manhattan market, but has lagged hot neighborhoods like Tribeca, Rosenblatt said.

Neighborhood note: Neighborhood Pending P ending sales on the Upper U pper East Side have picked up in the last few weeks, suggesting sellers may be lowering pricing expectations to sign deals, Rosenblatt said.

CHELSEA/ MIDTOWN SOUTH Pending sales March 2011: 180 March 2012: 198 Change: +10 percent

has been rising since 2009, pending sales last month were down 73.2 percent compared to the same period last year. But that’s not simply because of a lack of inventory, since listings were down only 17.3 percent. To Rosenblatt, the gap is partly an indication that sellers are not pricing their homes realistically. Conversely, in the Financial District, pending sales are up 60.1 percent year-over-year, and inventory is down 17.9 percent. Of course, wilder swings are more prevalent in neighborhoods with fewer overall sales and listings. It’s not surprising that core areas like the Upper East Side and Upper West Side show a less pronounced change in inventory and pending sales. With the exception of a few neighborhoods, inventory across Manhattan is down compared to last year, the result of a steady pace of sales and a lack of new product hitting the market. As a result, the scales have been tipped slightly in favor of sellers. Here’s a closer look.

TRIBECA

BATTERY PARK CITY

Pending sales March 2011: 72 March 2012: 120 Change: +66.7 percent

Pending sales March 2011: 56 March 2012: 15 Change: -73.2 percent

Active listings March 2011: 249 March 2012: 305 Change: +22.5 percent

Active listings March 2011: 139 March 2012: 115 Change: -17.3 percent

Neighborhood note: Neighborhood Tribeca T ribeca is a neighborhood h ood with near-constant demand; buyers who have lost out on desirable properties are now getting aggressive with their bids, Rosenblatt said.

Neighborhood note: Neighborhood The T he area is underperfforming orming Manhattan, Rosenblatt said. That’s the fallout from a 2010 sales spike when banks started lending there. Pending sales are low, but closer to normal.

1 234 5 6 52 April 2012 www.TheRealDeal.com

Active listings March 2011: 426 March 2012: 457 Change: +7.3 percent

Neighborhood note: Neighborhood IIn n Chelsea, demand and supply are fairly evenly matched in the market, signifying a moderate level of sales growth, Rosenblatt said.

NEIGHBORHOOD REPORT

NORTH HARLEM/ HAMILTON HEIGHTS

Pending sales March 2011: 17 March 2012: 35 Change: +105.9 percent

Pending sales March 2011: 49 March 2012: 30 Change: -38.8 percent

SOUTH HARLEM/MORNINGSIDE HEIGHTS Pending sales March 2011: 81 March 2012: 78 Change: -3.7 percent

7 8 9

Active listings March 2011: 213 March 2012: 151 Change: -29.1 percent

Neighborhood note: With pending sales more than doubling since last year, and listings falling, Inwood/ Washington Heights is showing the kind of numbers that cause properties to ﬂy off the shelves, Rosenblatt said.

Neighborhood note: In 2011, developers added only 268 new units in all of Harlem, the lowest in at least six years, according to Stephen Kliegerman, president of Halstead Property Development Marketing. In North Harlem and Hamilton Heights, demand is down.

MIDTOWN WEST/ CLINTON Pending sales March 2011: 114 March 2012: 120 Change: +5.3 percent

3 11

13 12

6 14

Active listings March 2011: 286 March 2012: 195 Change: -31.8 percent

Active listings March 2011: 195 March 2012: 157 Change: -19.5 percent

INWOOD/ WASHINGTON HEIGHTS

MIDTOWN EAST Pending sales March 2011: 158 March 2012: 179 Change: +13.3 percent

Neighborhood note: In the southern part of Harlem, in contrast to northern Harlem and Hamilton Heights, pending sales have stayed fairly strong compared to the previous year. Karen Shenker, a senior vice president at Corcoran who lives in the area, attributes the demand to new restaurants, bars and supermarkets that have opened in the last year or two.

GRAMERCY PARK/ FLATIRON DISTRICT

MURRAY HILL/ KIPS BAY

Pending sales March 2011: 70 March 2012: 67 Change: -4.2 percent

Pending sales March 2011: 102 March 2012: 122 Change: +19.6 percent

Active listings March 2011: 196 March 2012: 171 Change: -12.8 percent

Active listings March 2011: 367 March 2012: 327 Change: -10.9 percent

N eighborhood Neighborhood note: Gramercy Park and the Flatiron District are roughly in line with the rest of the market, not lagging in the same way as Battery Park City, but not participating in the surge evident in other neighborhoods, Rosenblatt said.

Neighborhood note: As in Midtown East, the Murray Hill/Kips Bay sales market will be helped in the next year by a tight rental market as well as low interest rates, according to Perlin.

10 1 01 13 3 11 1 12 1 Active listings March 2011: 546 March 2012: 503 Change: -7.9 percent

Neighborhood note: In Midtown West/ Clinton, the gap between pending sales and active listings has widened in the last year, indicating a healthy but not frenzied market.

Active listings: March 2011: 820 March 2012: 765 Change: -6.7 percent

Neighborhood note: Julie Neighborhood Perlin, P erlin, a senior vice president with Stribling & Associates, anticipates that much of the inventory in Midtown East will get absorbed in 2012 by ﬁrsttime homebuyers ﬂeeing the increasingly costly rental market.

FINANCIAL DISTRICT/ CIVIC CENTER

SOHO/NOHO/ WEST VILLAGE

LES/EAST VILLAGE/ UNION SQUARE

Pending sales March 2011: 33 March 2012: 53 Change: +60.1 percent

Pending sales March 2011: 105 March 2012: 120 Change: +14.3 percent

Pending sales March 2011: 202 March 2012: 139 Change: -31.2 percent

Active listings March 2011: 340 March 2012: 279 Change: -17.9 percent

Active listings March 2011: 239 March 2012: 200 Change: -16.3 percent

Active listings March 2011: 365 March 2012: 389 Change: +6.6 percent

Neighborhood note: The Financial Neighborhood District D istrict may only be blocks from Battery Park City, but its inventory levels and pending sales have tracked in the opposite direction in the last year, creating the conditions for an improving market. But that improvement comes after four years of steadily falling sales.

Neighborhood note: In the West Neighborhood Village, which like Soho, attracts Village, a steady stream of buyers, the biggest impediment to sales over the next year will be a lack of inventory, said Armanda Squadrilli, a senior vice president at Elliman. “If there is inventory, it will sell,” she said.

Neighborhood note: Though pendNeighborhood iing ng sales dropped in the Lower East Side, East Village and Union Square, Jon Varnedoe, a vice president at Prudential Douglas Elliman, said the neighborhood’s “pent-up buyers” who forestalled purchases during the recession are now conﬁdent prices will only rise.

14 1 4 15 1 16 6

www.TheRealDeal.com April 2012 53

BY TOM ACITELLI — and that mini tech hubs have sprouted in dent of RealDirect.com — an online resi- A CRITICAL MASS o many New Yorkers, Boston different parts of the city like Union Square, dential brokerage and listings consultant Not surprisingly, leasing office space in Bosis a punch line, usually deliv- Soho and, now, Downtown Brooklyn. funded by New York investors that recent- ton and Cambridge can be cheaper than it is ered during baseball season. Indeed, according to CBRE, the tech/ ly took 2,000 square feet at 22 West 21st in New York, especially for the Class B space But New England’s biggest media sector accounted for 13 percent of Street — noted that many tech companies that tech companies, especially start-ups, city — along with Cambridge, Manhattan leasing overall in 2011, up from are still in touch with Boston firms to raise have flocked to. capital. Boston’s Class B space averaged $25 to its neighbor across the Charles River — is 11 percent in 2005. going head-to-head with the Big Apple to The actual amount of space tech firms “There’s a good chance that if you’re rais- $35 per square foot at the end of 2011, and woo technology companies, not only fill of- have leased has also jumped in the last cou- ing money in New York, you’re probably Cambridge averaged $35 to $40. Midtown South — home to Google’s New York fice space, but also provide a boon to the local economy. headquarters at 111 Eighth Avenue and a slew of other tech firms — avIndeed, all three cities are stepping up efforts to become the No. 2 eraged $45.34 per square foot at the BOSTON VERSUS NEW YORK end of 2011, according to the CBRE tech magnet behind California’s SiliGroup. con Valley — if not No. 1. 722,756 POPULATION 8.2 MILLION When introducing the new leaderAnd tech companies, of course, THOMAS MENINO MAYOR MICHAEL BLOOMBERG ship of the city’s soon-to-be-built tech feed off their proximity to each other. GOOGLE, AMAZON, ZMAGS, NOTEWORTHY GOOGLE, YELP, TUMBLR, and engineering school on Roosevelt For instance, Twitter took more MONSTER, WIGGIO, MODKIT TECH TENANTS FACEBOOK, FOURSQUARE than 11,000 square feet from FaceIsland in February, Mayor Michael book at 340 Madison Avenue as FaceBloomberg drove the point home. KENDALL SQ. IN CAMBRIDGE, UNION SQ, FLATIRON DIST., TECH HUBS book moved to a larger space at 335 “It is our hope and expectation INNOVATION DIST. IN SO. BOSTON DOWNTOWN BROOKLYN Madison. that these new companies will join the AVG. RENT IN TECH$45.34 PSF $20 TO $40 PSF Mashable, a social media compaTumblrs and Foursquares of our city,” HEAVY AREAS ny that follows the tech industry, took he said at the time, “bolstering our rep17,485 square feet at 304 Park Avenue utation as a center of innovation and Source note: Office rent rates are from the CBRE Group and are for Class B space. The NYC number is for Class B space in Midtown South. All Boston information includes the City of Boston as well as Cambridge. South. Eight blocks away, test-prep propelling us past Silicon Valley as the software firm Knewton took 16,000 capital of digital technology.” Some in real estate think the city’s square feet and venture capital firm already gotten near there. FirstMark, which has backed tech companies, took 10,600 at 100 Fifth “People used to have to go out to Avenue, already home to Yelp, which signed Silicon Valley to start a company, and I don’t ple of years, according to data on office leas- having conversations with Boston VCs,” he think they feel that way anymore,” said Mi- es of at least 10,000 square feet from com- said. He added that, given the competition for more than 9,000 square feet last sumchael Mandel, a broker with Grubb & Ellis’s mercial firm Cassidy Turley. For example, in for talent between Boston-Cambridge and mer and just recently went public. (Yelp may New York office who’s been following the 2010, the media/information and comput- New York, office space can be a major tool expand there soon, sources said.) Both Knewton and FirstMark “wanted to city’s tech scene since late 2006. “There’s a ers/tech sectors leased about 3.84 million in wooing employees. lot of venture capital activity here.” “Recruiting is very competitive,” Perlson be in the mix of Union Square, the whole Silsquare feet of Manhattan space. In 2011, It helps that New York has plenty of tech- tech companies nearly doubled that, gob- said. “If someone’s in a great spot and they icon Alley tenant mix,” said Grant Greensfriendly office space — with properly hard- bling up about 6 million square feet. have a great office, then that makes them all pan, a principal of the Kaufman Organizawired buildings along with open floor plans Continued on page 96 But Doug Perlson, cofounder and presi- the more attractive.”

STACKING UP TWO TECH HUBS

54 April 2012 www.TheRealDeal.com

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The landlord life Have you ever lived in a building you owned?

Name: Robert Nelson

By Jane C. Timm

Company: Nelson Management Age: 58 Hometown: Gravesend/Sheepshead Bay Currently living in: Upper East Side

Never! And I would never. I think you need to be able to go home at night and leave your work at the office. I wouldn’t want to walk into an apartment building that I owned and lived in and see that there are papers on the floor. I’d never be able to relax.

Building blocks How many buildings do you own?

Tenant horror story?

We manage 18 buildings with 2,600 units. We own 2,200 of those; another 400 units are owned by friends, and we just manage them.

The bottom line

What is the size range of your buildings?

You mentioned you recently purchased the Lafayette Boynton Houses, a middle-income rental com complex. How’s the renovation going?

Our largest complex is our most recent purchase — 972 units [at] the Lafayette Boynton Houses in the Bronx. And the smallest is 17 units at 47 Clifton Place in Brooklyn.

What kind of apartments are they? Middle-income housing. I’m a firm believer that middle-income housing is a dying breed and I like being in that marketplace. I like being able to provide good-quality housing for individuals who make $40,000 to $150,000 a year. … Our target market is [renters who pay] between $1,000 and $2,000 a month.

I’ve had tenants threaten me physically. … It’s disconcerting.

It’s going great. We purchased the property Nov. 1, and Dec. 1 we started to put new windows in; these 40-yearold buildings were drafty. There’s a lot that we’re going to do — we’re replacing a lot of building systems. We’re pleas also going to make it a more aesthetically pleasing place, with new lobbies, new hallways and new elevator cabs. You have residents who have lived in some of these units since [the complex] opened in 1972, and I think the residents are going to be much happier.

Are you looking to buy more buildings? Always.

Is it hard to find tenants who meet those specifications? Where and how do you look?

There are a lot of middle-income wage earners in New York City who cannot afford to live in prime Manhattan or Williamsburg. As a result, they have to move [further out] in the boroughs. We try to find apartment buildings that are close to subways and highways and buses, so people can have an easy commute into Manhattan. And we have a very low vacancy rate.

We only buy in four out of the five boroughs of New York City — Brooklyn, the Bronx, Queens and Manhattan. Our office is in Queens near the Van Wyck [Expressway], the Grand Central [Parkway] and the Jackie Robinson [Parkway.] We can get to any of our buildings in about 15 minutes.

How long have you been in real estate? My father, Daniel Nelson, is in development — Nelson Equities. I took an interest in it when I was young. At 13, I knew the definition of air rights. In the summers during college, I worked as a construction laborer. One summer I worked on the Chrysler Building renovation and I remember peering out the window and seeing Donald Trump renovating the old Biltmore Hotel to turn it into a — Nelson’s New York Hyatt. I also worked for a mortproperties gage broker one summer.

Why did you go into management rather than development?

How has the recession impacted your business? It hasn’t. … I think middle-income housing is recession-proof.

Are you raising rents? Rents are kind of holding steady for us in the bor boroughs. About six months ago, we got back up to prerecession rents. In Manhattan, we are seeing rising rents. TRD

I was with my father for eight years doing asset management, and then 18 years ago I started my own company, Nelson Management. A lot of people asked why I was going into management and my response was, “If I’m going to buy apartment buildings, I want to watch the store.” My way of watching the store is by managing the buildings myself.

606 West 137th Street

56 April 2012 www.TheRealDeal.com

PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

3 BR, 3.5 BATH WEB ID: 630722

481 GREENWICH STREET

$8.95 M

3 BR, 3.5 BATH WEB ID: 133013

60 RIVERSIDE BOULEVARD

$15,000

2 BR, 2 BATH WEB ID: 542364

160 CENTRAL PARK SOUTH

$3.495 M

1 BR, 1 BATH WEB ID: 332388

175 EAST BROADWAY

$8,000

1 BR, 2 BATH WEB ID: 773049

210 CENTRAL PARK SOUTH

$2.0 M

3 BR, 2 BATH WEB ID: 661126

1 GRAMERCY PARK WEST

$12,500

We define our neighborhoods as much as they define us.

110 Fifth Avenue New York, NY 10011 212.633.1000

730 Fifth Avenue New York, NY 10019 212.242.9900

88 Greenwich Street New York, NY 10006 212.269.8888

45 Horatio Street New York, NY 10014 212.604.0300

26 Astor Place New York, NY 10003 212.584.6100

239 East 79th Street New York, NY 10075 212.929.1400

TOWN Residential, LLC is a licensed real estate broker and proud member of REBNY. Town Residential LLC is a partnership with Thor Equities LLC. We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. We encourage and support an affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, handicap, familial status, or national origin.

3 BR, 3.5 BATH WEB ID: 630722

481 GREENWICH STREET

$8.95 M

3 BR, 3.5 BATH WEB ID: 133013

60 RIVERSIDE BOULEVARD

$15,000

2 BR, 2 BATH WEB ID: 542364

160 CENTRAL PARK SOUTH

$3.495 M

1 BR, 1 BATH WEB ID: 332388

175 EAST BROADWAY

$8,000

1 BR, 2 BATH WEB ID: 773049

210 CENTRAL PARK SOUTH

$2.0 M

3 BR, 2 BATH WEB ID: 661126

1 GRAMERCY PARK WEST

$12,500

We define our neighborhoods as much as they define us.

110 Fifth Avenue New York, NY 10011 212.633.1000

730 Fifth Avenue New York, NY 10019 212.242.9900

88 Greenwich Street New York, NY 10006 212.269.8888

45 Horatio Street New York, NY 10014 212.604.0300

26 Astor Place New York, NY 10003 212.584.6100

239 East 79th Street New York, NY 10075 212.929.1400

BUILDING SALES

Small is lucrative Start-up brokerages grab growing share of sub-$50M investment sales market

BY ADAM PINCUS ew York City’s newest investment sales shops — which have been launched by brokers splitting off from established ﬁrms — are handling an increasing portion of the city’s smaller building sales, an analysis from The Real Deal shows. The newbie ﬁrms, like Rosewood Realty Group (and, to a lesser extent, others like Pinnacle Realty of New York and ERG Property Advisors), have not displaced the old-

trophy properties. Last year, investment sales totaled $25.6 billion in New York City, with $7.2 billion of that between $1 million and $50 million, data from Massey Knakal shows. While the smaller ﬁrms don’t attract nearly the attention that the institutional brokerages like CBRE Group, Eastdil Secured, Cushman & Wakeﬁeld and Jones Lang LaSalle do, they are chasing a surprisingly

Aaron Jungreis, the founder of Rosewood Realty Group, has grown his barely four-year-old ﬁrm quickly, doing $364 million in deals under $50 million last year.

Total NYC deals under $50M (2011) COMPANY

DOLLAR VOLUME (IN MILLIONS)

Massey Knakal Realty Services

$750.7

Eastern Consolidated

$379.6

Rosewood Realty Group

$364.8

Besen & Associates

$294.7

Marcus & Millichap

$229.1

Newmark Knight Frank

$216.3

CBRE Group

$209.3

Jones Lang LaSalle

$202.5

Cushman & Wakeﬁeld

$188.9

Grubb & Ellis

$169.5

Capin & Associates

$167.8

GFI Realty Services

$134.9

Studley

$120.9

Friedman-Roth Realty Services

$112.7

ERG Property Advisors

$97.0

Pinnacle Realty of New York

$84.2

Cassidy Turley

$69.4

Highcap Group

$64.7

Berko & Associates

$60.9

Greiner-Maltz Real Estate

$55.1

Cignature Realty Associates

$54.0

Robert K. Futterman & Associates $52.2 guard firms, many of which were founded in the 1980s. But they are starting to give them a run for their money. This month, The Real Deal ranked the city’s investment sales brokerages based on the dollar volume of deals they did at $1 million or more that closed in the five boroughs in 2011. We put the biggest spotlight on firms that did deals valued at less than $50 million in order to look at the smaller and mid-size investments sales firms that rarely get attention in the press. For example, former GFI Realty Services broker Aaron Jungreis, the frenetic founder and president of Rosewood, has grown his barely four-year-old firm into one of the city’s most active companies. It did $364.8 million in deals under $50 million last year — the third-highest dollar amount for the under-$50 million category in the city. It clocked in behind the higher-profile and more established brokerages like Massey Knakal Realty Services, which dominated with $750.7 million in sales under $50 million, and Eastern Consolidated, which racked up $379.6 million. Indeed, there is plenty of money to be made on deals that aren’t mentioned in the same breath as the city’s

60 April 2012 www.TheRealDeal.com

Misrahi Realty

$47.2

Holliday Fenoglio Fowler

$42.2

Ariel Property Advisors

$34.8

Itzhaki Properties

$34.2

Kalmon Dolgin Afﬁliates

$29.4

TerraCRG

$28.1

DEALS ABOVE $50 MILLION:

Norman Bobrow & Co.

$24.1

Between $75 and $110 million

Colliers International

$21.4

CPEX Real Estate

$15.4

Eastdil Secured

$12.9

Total estimated NYC commissions, 2011: DEALS UNDER $50 MILLION:

Between $130 and $175 million

Source: TRD analysis

large amount of commission money. In fact, The Real Deal estimated that the total amount of potential commissions for deals under $50 million last year was between $130 million and $175 million, much larger than the total estimated for deals above $50 million, about $75 million to $110 million. (That’s based on commission rates ranging from 5 percent to 1 percent for deals $50 million and less, and rates of 1 percent downward, to about 0.3 percent, for billiondollar deals.)

Source: CoStar, ﬁrms. Excludes note sales and deals less than $1M.

“That is not such a crazy concept,” Jungreis said. “On a smaller deal you can negotiate and ask for a higher commission.”

GRABBING MARKET SHARE While Massey Knakal, Eastern Consolidated and Rosewood grabbed the top spots on the list, Besen & Associates

PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

BUILDING SALES and Marcus & Millichap rounded out the top five firms for deals under $50 million last year. Those firms brokered $294.7 million and $229.1 million in sales, respectively. Still, Massey Knakal — which has made high-volume brokerage its bread and butter — has seen its market share shrink over the last few years. For instance, Massey Knakal brokered $626 million in 2009, when there were only $6.3 billion in sales citywide and the market was bottoming. In 2011, when there were $25.6 billion in sales citywide, an increase of more than 400 percent, the firm brokered $880.9 million in sales — only 35 percent more than they did two years earlier. Meanwhile, Rosewood only brokered $62 million in

Total NYC sales (2011) COMPANY

DOLLAR VOLUME (IN MILLIONS)

Eastdil Secured

$7,573.8

CBRE Group

$5,646.5

Cushman & Wakeﬁeld

$1,783.7

Jones Lang LaSalle

$1,186.5

Massey Knakal Realty Services

$880.9

Eastern Consolidated

$860.2

Hodges Ward Elliott

$697.3

Holliday Fenoglio Fowler

$608.3

Rosewood Realty Group

$534.3

Studley

$476.5

Georgia Malone & Co.

$443.0

Newmark Knight Frank

$442.6

Marcus & Millichap

$433.1

Savills

$324.0

Besen & Associates

$294.7

Capin & Associates

$217.8

GFI Realty Services

$189.2

Grubb & Ellis

$169.5

Friedman-Roth Realty Services

$112.7

Itzhaki Properties

$106.2

ERG Property Advisors

$97.0

Pinnacle Realty of New York

$84.2

Cassidy Turley

$69.4

Highcap Group

$64.7

Berko & Associates

$60.9

Greiner-Maltz Real Estate

$55.1

Cignature Realty Associates

$54.0

Robert K. Futterman & Associates

$52.2

Lord & Bryant

$52.2

Misrahi Realty

$47.2

Ariel Property Advisors

$34.8

Kalmon Dolgin Afﬁliates

$29.4

Terra CRG

$28.1

Norman Bobrow & Co.

$24.1

Colliers International

$21.4

Source: CoStar, ﬁrms. Excludes note sales and deals less than $1M.

sales in 2009, but did about nine times that last year. For its part, Massey Knakal — which was founded in 1988 by Robert Knakal and Paul Massey — expects sales in 2012 to exceed last year. “[Massey Knakal’s] business is more highly correlated to the number of buildings selling rather than to the dollar volume based on the type of buildings we sell,” Massey said. “We expect large market-share gains in 2012 cementing our position. [The ﬁrst quarter] of 2012 was our best quarter since 2007.” Other new ﬁrms like ERG Property Advisors (which

PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

ranked 15th with $97 million in sales under $50 million), Pinnacle Realty (which ranked 16th with $84.2 million in sales), Highcap Group (which ranked 18th with $64.7 million in sales) and Cignature Realty Associates (which came in 21st with $54.0 million in sales) are making serious inroads. They’re ranking even higher in the $1 million to $10 million deal range (see additional data online), and along with one or two other firms, they’ve collectively taken a $742 million bite from their more established competitors. (The ranking included only commercial firms that are not affiliated with the city’s residential brokerages, some of which have commercial divisions, such as Halstead and Prudential Douglas Elliman.) Amit Doshi, executive director at Besen & Associates, who began brokering deals in 1987, said the new companies were not cutting into his business. “We were in the Bronx, Brooklyn and Queens before it was popular,” he said. That may be true, but now Besen has company.

on the city’s investment sales market. Massey, who launched his ﬁrm after leaving Coldwell Banker Commercial Real Estate Services, didn’t seem too worried about the new competition. “Startup ﬁrms are a natural constant,” he said.

CHASING COMMISSIONS

When major global real estate investors like the Carlyle Group, Blackstone Group or local moguls like the Chetrit Group want to sell high-priced properties, they have a small set of commercial brokerage firms to choose from. They turn to investment broker stars like Doug Harmon of Eastdil or CBRE’s Darcy Stacom, among a handful of others who handle sales of Manhattan’s most expensive commercial properties. And The Real Deal’s ranking of all investment sales deals in 2011 not surprisingly puts those two firms firmly at the top — Eastdil with $7.6 billion in deals in New York City last year, and CBRE with $5.6 billion. Amit Doshi, executive director at Besen & Associates, Behind them are Cushsaid new companies are not man with $1.8 billion and cutting into his business. Jones Lang with $1.2 billion. But there are far more brokerages chasing deals in the often nondescript buildings in far-off corners of the city. J.D. Parker, vice president and regional manager for the Manhattan office of California-based Marcus & Millichap, said his firm was planning to add more brokers in the region. “We’ve been making a heavy push into the $10 to $100 million market over the last two years,” he said. But it’s a cutthroat business, insiders said, where brokers compete aggressively to represent buyers and sellers in transactions. While some deals on the low The Long Island City–based Pinnacle — which was end — from about $1 million to $10 million — are brofounded in 2009 by top brokers from the nearly 60kered for 4 or 5 percent commissions, several brokers year-old Greiner-Maltz — focuses primarily on indussaid they routinely did deals for 2 percent or lower. trial properties in Queens and Brooklyn. But because city One veteran multifamily broker, who did not want rezonings have created more development opportunities, to be identified speaking about how low commission rates go, called himself a “wholesale broker,” who cathey are now able to market those industrial sites as residential and retail as well. tered to long-standing customers. He would gladly “We have a foundation in industrial, but from there we take a $10 million deal at 1 or 2 percent, with an owner do a lot of residential, retail and some office,” said David he’s known for more than a decade. Junik, a company partner. But success is not predicated on fees alone. Jungreis — who has just 10 licensed brokers and Junik and his fellow partners founded Pinnacle during agents at Rosewood — has the most successful of the the downturn, when brokers at other firms were also splitrecent start-up firms, due no doubt in part to a high ting off to start new companies. The slow market gave brolevel of energy. kers time to “focus and develop [their] brand,” he said. The end of the boom seemed to provide that incubaThat fast-paced activity was on view one morntion time for many brokers. Brooklyn-based TerraCRG ing last month, as he stood behind his desk fielding was founded by former Massey Knakal broker Ofer Cocalls from two phones simultaneously for nearly 30 hen in 2008, while Ariel Property Advisors was founded minutes as he communicated with a steady stream of in 2011 by former Massey Knakal broker Shimon Shkury. buyers and sellers. “There is a method to how, when we get a deal, in And also last year, Cignature was launched by Lazer Sternthree to five to 10 calls, it’s done,” he said. hell, a former broker with Capin & Associates, which did That strategy hinges, Jungreis noted, on getting $167.8 million of business under $50 million. There are also several national firms that have to know buyers and sellers, and becoming his clilaunched in New York in the past year — such as Lee & ents’ “eyes and ears, and really [trying] to underAssociates, Avison Young and Stan Johnson. However, as stand what they want — what turns them on, what they hate.” TRD of last year, they had not yet made any significant impact

www.TheRealDeal.com April 2012 61

��

� �� 1985: ZACCARO PLEADS TO KEEP BROKER’S LICENSE

N Where Vision and Results Meet • Landlord-Tenant Disputes • Real Estate Transactions/ Financing • Leases • Co-op and Condo Board Representation • Administrative Proceedings

• Tax Abatements/MCIs • Mortgage Foreclosures • Co-op and Condo Conversions • Bankruptcy and Creditors’ Rights • Commercial Disputes • Land Use and Zoning

ew York City real estate developer John Zaccaro, who was also the husband of vice presidential candidate Geraldine Ferraro, made an emotional appeal 27 years ago this month to keep his real estate broker’s license. The appeal came after Zaccaro admitted he attempted to defraud a mortgage broker two years earlier. “I think I’ve suffered enough,’’ Zaccaro said durGrand Central ing a hearing with the state Department of State, Station making the case that because of his wife’s 1984 White House campaign with Walter Mondale, “everything was blown out of proportion,” The New York Times reported at the time. Ofﬁcials accused Zaccaro of trying to defraud a John Zaccaro and wife, Geraldine Ferraro commercial mortgage broker in 1983 as part of an effort to win a loan for a client who sought to purchase ﬁve multifamily buildings in Queens. He plead guilty in January 1985 and was sentenced to 150 hours of community service. His plea to keep his license failed. The state suspended his license for 90 days. However, his license was later reinstated. And online state records show that his license is still active today. Ferraro died last year.

1938: CITY AGENCIES REQUIRED TO LIST OFFICE SPACE NEEDS

Belkin Burden Wenig & Goldman, LLP 270 Madison Avenue|New York, NY 10016|Phone: 212-867-4466|Fax: 212-297-1859 www.bbwg.com

ew York City adopted a new public bidding system to purchase or lease property 74 years ago this month as part of an effort to combat corruption by civil servants. Mayor Fiorello LaGuardia appointed Lee Smith as director of the city’s Real Estate Bureau in 1938 and charged him with cleaning up corruption at the agency. One of Smith’s first courses of action was to require all city agencies to announce their need for office space in the city’s official paper, The City Record. That allowed owners and brokers to submit potential offers, rather than have taxpayers rely on city employees who Lee Smith could quietly make inefficient or potentially corrupt deals with favored landlords. Smith first announced the plan to require public notification — which was modeled after the system used by the city when it sought bids for construction contracts — to the Real Estate Board of New York and later to the public. Prior to the change, officials in a department would go to the now-defunct Board of Estimate with a location already selected. The choice would then be reviewed by the city’s director of real estate, who would have that space as well as others inspected. Smith, who later served as president of REBNY, said the system was flawed because it often bypassed spaces that were not officially on the market.

1899: H EIR TO VAST NYC REAL ESTATE FORTUNE DIES

obert Goelet, an owner and developer of one of the largest real estate fortunes in New York City, died unexpectedly of heart failure on a visit to Italy 113 years ago this month. Goelet’s fortune, mostly in real estate in Manhattan and Newport, R.I., was valued at $40 million when he died at age 57 on his yacht. The assets, which today would be worth approximately $1 billion, were passed on to his wife Henrietta and teenage son Robert Walton. Robert’s death came just two years after his brother and frequent investment partner, Ogden Goelet, died at the age of 51. Ogden, who also coincidentally died on a yacht, had a similarly valued real estate empire, which was left to his immediate family. At the turn of the century, the family’s property holdings were seen as only second to the Astors, whose assets were estimated in 1907 to be about $500 million. Robert’s estate included properties such as 895-899 Hotel Imperial illustration Broadway at 20th Street; the Hotel Imperial, on Broadway between 31st and 32nd streets; 809-811 Broadway between 11th and 12th streets, and his home at 591 Fifth Avenue at 48th Street, which have since been demolished. The brothers inherited their fortune from older generations of Goelets, including their father, Robert, and their uncle, Peter, who were founders of the Chemical Bank. Compiled by Adam Pincus

62 April 2012 www.TheRealDeal.com

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TEAM PLAYERS

TEAMING UP Broker partnerships on the rise as sales volume stays ﬂat — and clients get more demanding

From left: Tal Alexander, Oren Alexander and Benjamin Seiter of Prudential Douglas Elliman’s Alexander Group.

BY LEIGH KAMPING-CARDER n February, Oren Alexander, a 24year-old vice president at Prudential Douglas Elliman, joined two other brokers to form the Alexander Group. While the name refers to Alexander himself, among the team members, he said it is also a quiet allusion to one of history’s best-known conquerors: Alexander the Great. “We’re all hungry,” Alexander said of his teammates, who are all under 31. “We don’t really have distractions in our lives. Our main focus is on our careers.” Alexander formed the group to corner as many transactions as possible, but plenty of other brokers are currently forming similar partnerships to maximize sales in a low-volume market and to cater to an 64 April 2012 www.TheRealDeal.com

increasingly demanding clientele. While broker teams are nothing new, sources said that the number of teams has been growing steadily in the last few years. (It’s unclear exactly how many teams currently exist because outside entities like the Real Estate Board of New York don’t keep track.) “More often than not, I’m seeing teams on a listing,” said Christopher Kromer, a vice president at Halstead Property who is partnered with his ex-wife, Nora Ariffin (see sidebar on page 66), echoing the observations of other brokers. “Whether or not they’re [officially recognized], I don’t know, but I’m certainly seeing more people team up.” In fact, one of Halstead’s motivations for opening its Park Avenue flagship about

a year ago was to provide top-producing teams with dedicated office space, the firm’s president, Diane Ramirez, said last month at a New York Law School forum. In contrast to the cubicles provided for individual agents, the office has walled off areas for groups, such as the Louise Phillips Forbes team, sources said. Just a few years ago, the idea of a broker teaming up with a marketing specialist or a closing coordinator was rare, said Michael Shapot, who heads up a six-person team at Keller Williams NYC. Now, those associations have increased threefold, he estimated. In New York City, brokers with diverse abilities who are joining forces are following in the footsteps of their counterparts in other regions of the country, sources said.

“Teams [are] the wave of the present,” said Shapot, who moved six of the nine people on his team over from Elliman in February. “Quite frankly,” he added, “Manhattanites are late to the game.” But today’s teams are not identical to the teams of the past, which often revolved around one superbroker, with the teammates playing supporting roles. Alexander, for one, plans to avoid the traditional team structure where one leader directs assistants who handle showings and administrative responsibilities. Although Alexander will manage deals above $3 million and his teammates will cover different parts of the under-$3 million market, he envisions the alliance as a coalition of experienced brokers — a team of equals. PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

TEAM PLAYERS

THE LITVAK TEAM

EUGENE LITVAK

ANA WEISBERGER

“Not everyone in the group will be producing as much as me, maybe,” he said, “but getting close to that.”

FEW FORMAL GUIDELINES Brokers attribute the recent rise in teams to a changing industry that many see becoming more professional and laborious. “It’s really turned into a 24/7 job,” said Brown Harris Stevens senior vice president Russell Miller, who formed a twoperson team with his colleague Mary Beth Flynn in late 2007 before the market took a nosedive. “People will send you e-mails at 2 a.m. and want a quick response.” A sales market that has failed to catch fire (even if the market looks more promising recently), is exacerbating the situation. In this environment, clients are demanding a new level of responsiveness from their real estate professionals. “Today, when you go to get a listing, people want to see that more than one person is working for them,” said Alexander, whose older brother, Tal, is also on his team. With lower volume, brokers say they must now seize every opportunity for a showing and weigh every offer. Add in technology that lets buyers and sellers do their own research online and fire off e-mails at all hours of the day, and brokers find it pays to be available round-theclock. For brokers like Miller, enlisting a partner was the best way to cope. “I don’t know how someone does it on their own,” he said. Additionally, a group represents the kind of security that comes with a twoincome household, minimizing the risk of losing out on deals, and allowing team members to broaden their expertise and client base — even though they ultimately share commissions. Despite the prevalence of broker teams, there is little guidance for agents on how to divvy up the work and — perhaps more importantly — the commissions. The New York State Board of Real Estate, the 15-member group of state elected officials and industry members that helps draft industry regulations, is currently weighing rules that would establish advertising guidelines for teams. But REBNY leaves it to individual brokerages to decide how to regulate the way teams operate, and the city’s major residential

IVAN JARA

ﬁrms have few formal guidelines for brokers who wish to partner up. At Elliman, for example, a manager typically meets with a broker who wants to start a team to ensure that they have enough business to sustain one, as well as the managerial skills to oversee a staff, said Yuval Greenblatt, an executive vice president who

SARAH KATZ

leader” will fall apart, he added. Greenblatt said that teams first became prominent in New York City about 10 years ago, but in recent years they have picked up, although he said it was difficult to quantify the increase, even at his own office. Citi Habitats, the city’s largest rental

Despite the prevalence of broker teams, there is little guidance for agents on how to divvy up the work and — perhaps more importantly — the commissions.

plan that sets out the duties each team member will perform, how commissions and salaries will work and what team activities, such as progress meetings and training sessions, will take place — and to put every agreement between brokers in writing. “Most people don’t truly understand everything they do day-to-day unless they take a step back, digest it and put it in writing,” Malin said. Meanwhile, Bond New York takes a more active approach to establishing teams. “When we have new agents, we encourage them to join a partnership where they aren’t responsible for product knowledge they can’t possibly have as a new agent,” said Bond CEO Bruno Ricciotti. “This allows them to transition into being an asset individually to their customers without sacriﬁcing integrity or the company’s reputation in the interim.”

DIVVYING UP PAY In general, every team in the residential brokering world has a different method for dividing up responsibilities and pay. But most fall into three broad types: Partnerships of two brokers — such as Brown Harris Stevens’ Miller and Flynn or Halstead’s Kromer and Arifﬁn — often split everything right down the middle. (Miller and Kromer both said that their ﬁrms, which are both owned by Terra Holdings, require two-broker teams to divide commissions in half.) Top broker Elaine Clayman, who start-

THE HAMERSLEY TEAM

ELIZABETH HAMERSLEY

TRACIE HAMERSLEY

ROBERT FALCONE

is on the ﬁrm’s management team. “Any time someone tells me they want to merge a team or start a team, I always tell them, ‘One plus one needs to equal three,’” Greenblatt said, explaining that he warns brokers not to enlist team members with overlapping skill sets. Teams made up of agents who simply want to “serve a

JASON LOPEZ

THUY TRUONG

brokerage, takes a similar approach — providing advice to brokers on setting up teams without mandating how they function, according to the ﬁrm’s president, Gary Malin, who could not say how many brokers at the ﬁrm were teamed up. Malin said he recommends that prospective team leaders devise a business

ed her eponymous team 13 years ago when she joined Brown Harris Stevens, has taken a unique assembly-line approach to transactions. She breaks each deal down into a series of steps handled by about a dozen “functional specialists,” including her daughter, Justine Bray, who acts as director of sales, and a transaction manwww.TheRealDeal.com April 2012 65

TEAM PLAYERS

THE SHAPOT TEAM

Litvak Group members start out with a 35 percent split and move up to a 50 percent split after a certain number of deals. But Litvak Group members reach higher commission splits sooner than working directly with the ﬁrm, he said. “I want them to feel incentivized to do better and try harder,” said Litvak, who has a 65 percent split with the company.

ABOUT THE BRAND CARSON ALEXANDER

ELIZABETH EDWARDS

JIM BITING

LUIS VAZQUEZ

MICHAEL SHAPOT

ager who takes care of deals from accepted offer to closing. Ten agents are responsible for signing and showing exclusives, while Clayman herself is the designated negotiator. Many teams, however, still have one broker at the helm who brings in the bulk of the business and then farms out leads to the group’s agents, who then handle the deal from start to finish. The top-ranked Hamersley team at Citi Habitats, led by sisters Tracie and Elizabeth Hamersley, has three additional agents and an assistant, but the sisters bring in an estimated 75 percent or 85 percent of business, they said. The sisters — who have been working together since 2004, registered as an LLC in 2007 and added their first team member in 2008 — give team members a 25 percent cut for sales referrals and 10 percent for referrals of rentals. Otherwise, the Hamersley team addresses splits on a case-by-case basis, depending on how much work a team member has contributed as of the closing, the sisters said. As a rule of thumb, the agent who secures the listing and does most of the work gets 60 percent, while his or her partner on the deal gets 40 percent, they said. The Litvak Group, another team at Citi Habitats, mimics the splits offered at the firm, team founder Eugene Litvak said. Litvak first paired up in 2009, when he could no longer handle his business alone, and collaborated with a colleague who was struggling to find her own clients. Since then, the less-experienced broker 66 April 2012 www.TheRealDeal.com

YING LI-OSHRIN

has left the ﬁrm, and he has established a formal team. The group was incorporated as its own business late last year and has taken on three additional brokers and an assistant.

Regardless of how commissions are split, it’s clear that groups must bring in at least twice as much — or, in some cases, many times more — business for members to make the same money they would as solo brokers. For this reason, Citi Habitats’ Malin said he usually asks prospective team leaders if what they really need is an assistant to handle administrative duties. But running a team comes with its own administrative burden, from training green agents to coordinating group schedules to holding weekly progress meetings. Clayman, for example, devotes an hour three mornings a week to teaching sales training classes. For team members, it’s also difﬁcult to build a name; while they might forge relationships with clients at showings, they don’t establish a track record of closing deals on their own. Sarah Katz, a former personal shopper at Saks Fifth Avenue who is now a member of the Litvak Group, acknowledged this drawback. “Sara Katz is not going to build up a name in the real estate world, and that’s okay with me,” she said. “I don’t need my name in lights anywhere.”

Halstead’s Richard Johnson spent 18 years as a public relations executive before joining the Louise Phillips Forbes team nearly two years ago and appreciated the idea of working with the established “brand” of a veteran broker. “It’s never been about me, it’s always about the brand or the product or the service,” Johnson said. “I look at it the same way here.” But not every team member operates with the same mind-set, and the entrepreneurial qualities that make a successful broker are the same ones that motivate a group member to branch out on his own. In some ways, team leaders are simply training their future competition. Last month, Elliman’s Iman Bacodari and David Cooper left the Jacky Teplitzky team after working with the noted broker for seven and eight years, respectively. Neither broker would explain their reasons for opting to go their separate ways, since they are still with the ﬁrm. Teplitzky did not return requests for comment. As for Alexander, he doesn’t appear worried that his teammates — his brother and an Elliman colleague — will go solo anytime soon, although one longtime friend decided not to join the group at the last minute. He looks at forming a team as a necessary step to becoming one of the city’s leading brokers. “If you want to be competitive today, and you’re really trying to be the top agent in the city, I think you need to have a group,” he said. “It’s the only way to capture the most market share.” TRD

IT’S ALL RELATIVE SOME BROKERS FIND TEAMING UP WITH A SPOUSE — OR EVEN AN EX — IS A GOOD BET

or some, running into an ex-spouse is a trial to be avoided.

so long gives you a shorthand communication that really works

Not so for Halstead brokers Nora Arifﬁn and Christopher

very well in dealing with different clients,” Kromer said.

Kromer, who started working together about six months after getting divorced.

These days, Kromer is dating someone, while Arifﬁn just broke up with her boyfriend of two years. “Having been married

“We were great friends when we were married — we just couldn’t be married to each other,” Arifﬁn said. Arifﬁn, who claims to be Singapore’s original supermodel,

to someone,” Arifﬁn said, “you trust them wholeheartedly.” Arifﬁn and Kromer are not the only brokers in the city to mix romance and real estate.

was the ﬁrst to enter the real estate busi-

Karen Wigdor, who is also with Hal-

ness in 2004 when she was still mar-

stead, started in the industry about 13

ried to Kromer. He joined the business

years ago; a few years later, her hus-

a year later, but in 2007, their marriage

band, Fred, joined her in the business.

ended. After spending some time apart,

Two years ago, the couple’s son, Jeff,

they decided to join forces profession-

also came on to the team.

ally in 2008.

Although all three have a hand in ev-

The pair may not have worked as romantic partners, but as business partners they click. Both have dabbled in act-

ery aspect of the business, Wigdor said Nora Arifﬁn and Christopher Kromer

she tends to handle the negotiations and the conversations with attorneys

ing, but Arifﬁn uses her fashion background to stage apart-

and mortgage brokers, while Fred oversees showings. The

ments, while Kromer, who once worked at Ernst & Young, puts

30-year-old Jeff, who is also an actor (“and I think very nice-

his accounting chops to work analyzing the market.

looking,” Wigdor said) tends to manage listings in trendier

They work on every deal together and split commissions equally. In February, they found a tenant for a 5,600-squarefoot loft at 5 East 17th Street listed for $20,000. “As you can imagine, knowing somebody so intimately for

downtown neighborhoods. “We’re pretty good about not talking real estate at home that much,” she said, “unless it’s a speciﬁc issue.” By Leigh Kamping-Carder

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Fear and lending in New York With regulators breathing down their necks, banks are putting a lock on loans and slowing the recovery

M BY ADAM PINCUS

uch like the high-powered executives who race to get to the Hamptons in two hours on a summer Friday, commercial lenders disregarded regulators’ meek enforcement of lending speed limits during the boom. Today, though, federal bank examiners are acting like traffic cops posted at every exit on the Long Island Expressway, forcing lenders to slow down. While commercial real estate lending has increased in New York over the past year, banks still have federal regulators breathing down their necks. And, according to observers, financial institutions are wary because regulators can demand action if they think something is amiss. Indeed, Yonkers-based Hudson Valley Bank was forced to sell $268 million in performing and nonperforming real estate loans at an auction last month — many of them on New York City properties. The bank acted in response to its regulator, the U.S. Office of the Comptroller of the Currency, which told them last year to cut its concentration of commercial real estate assets, as well as other weak loans. Still, the total amount of loans on banks’ books in New York State jumped by 23 percent to $202 billion between 2010’s fourth quarter and the same time in 2011, data from the Federal Deposit Insurance Corporation shows. And borrowers and commercial brokers acknowledge that lenders are likely preventing some future loans from going belly up as the economy recovers. But some New York real estate players, who have a healthy appetite for risk, say in many cases banks are still being too conservative, simply because they’re scared of getting called to the carpet by federal regulators. “It’s prohibiting additional growth in the market,” said one lending officer at a midsized New York City commercial bank. “The financial disclosures that are required from the guarantors are substantially more than in the past. In my opinion it is overboard when you have a good paying customer for 10 years, and now you need a global cash flow and are going into [each asset] and every corporate tax return.” Specifically, insiders complain that banks are not letting up — even in the slightest on requiring more liquidity, more experience and more partners. In addition, banks are deciding to lend less on some deals if an outside appraiser determines that a property should be valued at less than the buyer is willing to spend. For their part, banks say they are simply doing their due diligence, keeping in mind 68 April 2012 www.TheRealDeal.com

that regulators are conducting tests to determine banks’ so-called CAMELS rating, an acronym for “Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk.” Lowell Dansker, chairman and CEO of regional bank Intervest Bancshares, noted that banks were also frequently selling loans in an effort to stay in line with regulators’ goals.

look at the three key components — experience, liquidity and value — that banks have been looking for in the new, tougher lending environment to see what they really mean for developers on a daily basis.

EXPERIENCE During the boom, many ﬁrst-time builders received ﬁnancing because the land they were building on was deemed a valu-

ic examinations from regulators who will camp out at a medium-size bank about once a year for as long as six weeks, have even come down hard on established development families. In one case on a high-profile Manhattan project, a developer from a family with a long track record in New York real estate purchased a prime development site at a bargain price. But several industry sources say potential lenders are insisting that he partner with a more experienced builder. In that case, Richard Ohebshalom — the son of Fred Ohebshalom, owner of residential and commercial landlord Empire Management — bought the note and took title to a potential development site at 111 Washington Street, two blocks south of the World Trade Center, through his firm, Pink Stone Capital. Sources say major developers have offered to buy the site — where Ohebshalom announced plans to build a 430,000-squarefoot, mixed-used tower — and that it is now worth far more than the defaulted $50 million note he bought. The younger Ohebshalom disputed claims that his firm was running into hurdles getting financing, saying he’s still figuring out plans for the site, and is not yet looking for debt.

“It’s overboard when you have a good paying customer for 10 years, and now you need a global cash ﬂow and are going into every corporate tax return.” ANONYMOUS LENDING OFFICER “There are asset sales going on all day. The market is ﬁlled with banks selling loans to rebalance, either under a directive [from regulators] or to avoid a directive,” he said. A lender will put loans on the market for a number of reasons. They include: to decrease its nonperforming loans, to reduce the concentration of one type of loan, to reduce its investment in one geographic area or to free up capital, said Louis DiPalma, managing partner with Garnet Capital Advisors, which, along with Ackman-Ziff Real Estate Group, handled the sale of the Hudson Valley loans. This month, The Real Deal took a closer

able collateral in itself. Now, developers need to be experienced and also bring equity approaching 30 percent to 40 percent, insiders said. Last month, Gregg Winter, president of midtown-based real estate finance firm Winter & Company, was trying to find a lender to provide up to $10 million to a small developer to complete a stalled Williamsburg residential project. But Winter said “no construction lender will give a loan without [the owner] teaming up with [an experienced] developer with a successful history of building and selling similar product.” Lenders, concerned about the period-

LIQUIDITY

Regulators want banks to be sure that when they make the loan, there is money to cover an unexpected cash-flow gap in the event of a problem, said J. D. Parker, regional manager for the Manhattan office of mortgage and property broker Marcus & Millichap. “Banks are looking at the worstcase scenarios,” Parker said. They want to be sure the borrower has cash on hand in case the building does not remain leased up or construction hits a snag, he said. For example, his firm is working on securing a $5.5 million loan for a cash-flowing acquisition in Queens. During the peak of the market, typically the borrower would have needed reserves that would cover six months to a year of interest payments, or in this case, about $250,000. That’s nowhere near enough today, he said. Today, they want about $1 million. In some cases the banks, to increase their Continued on page 80

STI_The Real Deal_fin.pdf 1 3/30/2012 10:29:15 AM

Lobbying for sales

With buyers now choosier, developers are willing to spend more The lobby at 250 West Street

BY JANE C. TIMM ou only get one chance to make a ﬁrst impression. And in today’s tough real estate market, that impression — the lobby — is costing some residential developers more than ever before. “It’s a very, very educated and discerning buyer in the market right now,” said Tom Elliott, executive vice president of marketing at El-Ad Group, developer of 250 West Street in Tribeca. “We’re spending a lot more money on

That doesn’t come cheap. Developers these days can expect to spend $500,000 to $750,000 on the lobby of a typical 300- to 400-unit condo building, according to Clifford Finn, president of new development marketing at the brokerage Citi Habitats. With apartments selling like hotcakes in the mid-2000s, “it used to be that developers left the lobby till last — and we’d have no money left to ﬁnish it up,” said Funda Durukan, of the architecture and interior design ﬁrm Durukan

“We’re spending a lot more money on common areas because the buyer is much more discerning.” TOM ELLIOTT common areas because the buyer is much more discerning.” During the mid-2000s’ real estate boom, most new condominium developments ﬁnished sales before construction was completed, Elliott said, so lobbies didn’t play much of a role in buyers’ decision-making process. Now, however, the lobby is the ﬁrst thing many buyers see when contemplating an apartment purchase. As a result, developers are spending a higher proportion of their construction budgets on them than they did during the boom. Developers have “realized that a portion of their units will be sold after construction is completed,” Elliott said, “so the common areas, and lobbies in particular, need to be knock-outs.” 70 April 2012 www.TheRealDeal.com

Design. “Now, almost every developer I work with wants to add some amenity spaces, higherend, and spend more money. They don’t mind because they see a return on it.”

EL E G A N T E N T RY At the Driggs, an under-construction rental project at 205 North 9th Street in Williamsburg, Durukan initially designed a 2,170square-foot lobby and recreation room. But the developer then increased the construction budget by roughly 40 percent in order to expand the lobby and add extra common spaces. It seems to be paying off. Fiddler Realty’s David Korn, who is handling rentals at the Driggs, said the building is now 85 percent leased after two months on the market.

“We had 50 percent of the units rented before the lobby was even completed, though of course everyone was very curious about the plans,” he said. “But now that the lobby has been completed, rentals have been coming in much quicker.” In other cases, a better lobby also means a bigger lobby. Michael Lichtenstein, the developer of the new-construction rental building 227 Grand Street in Williamsburg, asked Durukan to double the size of the original lobby from 560 square feet to 1,060 square feet — increasing the budget by roughly 30 percent in the process — in order to help attract prospective tenants, she said. At 250 West Street, a warehouse conversion where units are listed for an average of $1,452 per square foot, Elliott said El-Ad put extra money and effort into the lobby to help make the building stand out. The building’s lobby has an adjoining library, and the stone ﬂoors have a special herringbone pattern. “It’s difﬁcult to do, but it’s a little more special,” Elliott said. He declined to say exactly how much El-Ad budgeted for the lobby, but said it was more than the company has paid in the past. Many developers feel it’s worth it, believing that a well-done lobby is helpful for boosting sales in today’s tough market. Developer Kenneth Horn, founder of Alchemy Properties, said at most of his projects, the building architect designs the lobby. But at his most recent project, the Isis Condominium at 303 East 77th Street, he decided to bring in a separate designer, BNO Design, to upgrade the lobby. Continued on page 96

WELCOME HOME

The lobby of rental building Ten23, where different “niches” for the mail room, concierge and elevators aim to create an intimate feel.

A rendering of 227 Grand Street’s 1,060-square-foot lobby, recently doubled by the developer.

A lounge area adjacent to the lobby at the Driggs, an under-construction residential building in Williamsburg.

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ARCHITECTURE REVIEW

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Mercedes House: A driving force

Enrique Norten’s latest project helps transform far West Side

lowly but surely, the great work of the latest generation of Manhattan developers — the colonization and gentrification of the far West Side — proceeds apace. If proof of this process were needed beyond the incremental additions to Trump Place and the sundry projects that Costas Kondylis has built along 42nd Street between Ninth Avenue and the Hudson River, it could find eloquent testimony in Mercedes House, a massive new residential development that the Mexican architect Enrique Norten has designed for David and Jed Walentas of Two Trees Management on a plot of land covering almost the entire block between 10th and 11th avenues between 53rd and 54th streets. Rising opposite Dewitt Clinton Park and the Hudson River, this two-fold project, a combination of rentals and condos, was originally supposed to be called Clinton Park. But the name was changed (according to what I was told by a source in the sales office) because the 11th Avenue front is occupied by a titanic 330,000square-foot Mercedes-Benz showroom, and because it was therefore assumed that New Yorkers would end up referring to the development as “the Mercedes building” anyway.

ment to date in New York has been Mercedes House, a massive 1.3 millionsquare-foot building that will ultimately contain 696 rentals and 162 condos. This is a two-tiered project, whose ﬁrst and smaller section consists of a stepped progression of stories, 16 in all, along 11th Avenue and 53rd Street. Containing 222 rentals, it was complet-

for “Taller Enrique Norten,” taller being the Spanish word for studio or atelier. Among the projects he is now working on, further aﬁeld, are a Guggenheim Museum branch in Guadalajara, Mexico, a reconceiving of Rutgers University’s College Avenue Campus in New Brunswick, N.J., and a plan to recover a 4.5-mile stretch of riverfront in New Orleans. The second phase of the Mercedes House, a condo-rental hybrid, is set to open on May 1. Below: A look at the building close up.

A MOMENT IN THE SUN Although Norten is an internation- Architect Enrique Norten ally renowned winner of a number of prestigious prizes, for a few years he seemed to be engaged in a Sisyphean ordeal as he tried to get anything built in the five boroughs: Winning a commission was easy enough, but having the thing built was another ed and opened for story entirely. A library for the perbusiness in April of Developer David Walentas forming arts in Brooklyn was anlast year. nounced about nine years ago with The second, much fanfare, but, after protracted and far larger, pordithering and revision, the project tion of Mercedes finally came to nothing. House is 32 stories An equally prominent commisand is connected to sion that was announced shortly the first through an thereafter, a Marriott that was to rise even bolder steplike progression up over Harlem at 125th Street and Developer Jed Walentas that rises up as it snakes back toward Park Avenue similarly came to grief. But in the last few years, the architect’s Tenth Avenue. This part of the project fortunes have turned in the city. is scheduled to open on May 1, accordNorten has carried to completion the ing to Two Trees officials. It will contain well-received luxury condo One York on the 162 condos and 474 rentals, which Canal Street. He has also designed the Ho- will be housed on the 22nd through 32nd tel Americano in West Chelsea, and a dar- floors. In addition to these apartments, ing (though not yet commercially success- the complex will include bocce courts and ful) condo building in Brooklyn, at 580 pit fires, an amphitheater and a gym. Carroll Street, not to mention the Cassa Hotel and Residences, a luminous white A CRAFTSMAN high-rise tower in midtown Manhattan. Born in Mexico City in 1954, Norten is the And yet, surely his biggest achieve- founder of TEN Arquitectos, an acronym 72 April 2012 www.TheRealDeal.com

As for his completed buildings, some of the most memorable can be found in his native Mexico City, where he’s distinguished himself with the National School of Theater at the National Center of the Arts, the Televisa Mixed Use Building and the Habita Hotel, which was voted Latin American Building of the Year in 2002. If there’s a theme in Norten’s work, it’s that he can’t simply blend into the background. In several ways, Mercedes House is a striking building, especially considering the general conservatism of New York architecture. Certainly it doesn’t harmonize especially well with the buildings in its vicinity. But that won’t strike most observers as a problem, since this section of the far West Side is hardly one of the lovelier parts of Manhattan. If Mercedes House stands out for its quality and ambition, so be it for the buildings that neighbor it. One of the dominant features of the

complex is a metallic cladding in two tones of gray — or whitish gray. Although Norten has introduced that chromatic inflection in the interests of visual variety, it adds little to the success of the overall result, despite the fact that the two tones are repeated throughout the length and height of the dappled façade. The desired sense of variation is more successfully fostered by the syncopated windows that seem to float almost arbitrarily across the building’s surface, rising above a two-story, street-level façade enlivened and defined by giant pylons along 11th Avenue. Surely the most distinctive feature of the project, the one that will set people talking, is the passage work — to use a musical analogy — that connects the 16-story structure along 11th with the 32-story structure closer to Tenth. Not only does it represent a highly unusual diagonal movement within the context of Manhattan’s strict grid, it also manages to provide drama to the project, rising like an arpeggio that reaches its crescendo on the 32nd floor of the taller building. At the same time, this structure accomplishes its effect without losing sight of the practical advantages of opening up two large patio spaces that provide far more light and air to the residents than is typical in massive developments of this sort. Let it also be said that the entire project is far more successful in the realization of its details than we’re used to seeing in Manhattan architecture. There is no sense of value engineering here: One cannot help but appreciate the quality with which Norten has designed the glass-andsteel curtain wall, covered in one area with brise-soleil sun shading that defines one of the courtyards created by the diagonal structure. But it is a mark of Norten’s great inspiration that the diagonal structure doesn’t represent a sharp or simple movement. There is an almost willful and organic arbitrariness to its progression, which corresponds to the syncopated rhythms of the windows. Its sense of organic life is carried further by the abundance of greenery already starting to reveal itself at each level of the stepped progression of the façade along 11th, no less than atop each level of the diagonal section, or finally atop the 32-story structure that is about to open. The promised plant life in the two courtyards will enhance this effect still further. The result is a green and most welcome addition to what, heretofore, has always been one of the least hospitable areas for architecture in Manhattan. TRD

PHOTOGRAPHS OF MERCEDES HOUSE FOR THE REAL DEAL BY DEREK ZAHEDI

Q&A

Don’t call it BoCoCa

Boerum Hill, Carroll Gardens and Cobble Hill see tightening inventory and buyers venturing to new corners of the market BY MELISSA DEHNCKE-MCGILL here’s no shortage of neighborhoods that real estate brokers have attempted to coin with catchy names, from widely used newer names like Nolita (North of Little Italy) to names that haven’t caught on with the public yet like SoBro (South Bronx). But one thing even brokers can agree on in Brooklyn is that few who really know the area actually use the term “BoCoCa” when referring to Boerum Hill, Cobble Hill and Carroll Gardens. Still, the term does serve as a handy shorthand when discussing market conditions in the trifecta of popular neighborhoods clustered together just south of Downtown Brooklyn. This month, The Real Deal interviewed analysts and brokers about how the residential market is doing in BoCoCa. Our sources said that inventory is tightening and that townhouses and large apartments are in especially high demand. Those properties, as long as they aren’t in need of a major renovation, are going fastest. But one-bedroom apartments are struggling, largely because buyers are being more discerning and for-

Trish Martin

director of sales, Halstead Property How is overall residential sale volume doing in Cobble Hill, Carroll Gardens and Boerum Hill, also known as BoCoCa, and how does that compare to a year ago, two years ago and during the boom? Townhouses in Cobble Hill are all going into best and final at above ask. My office just put a $3.8 million townhouse into contract that’s in the middle of renovation work. The market is very competitive in Cobble Hill, very brisk in Carroll Gardens and aggressive in Boerum Hill. Boerum Hill has more of a mix of units and sizes than the other two areas. What’s going on with residential prices in the area these days? Prices are up for anything that is a larger apartment. Three-bedrooms, four-bedrooms and townhouses are seeing competitive bid situations. There are a bunch of new projects in the area like the controversial 360 Smith Street, 225 Pacific Street and 58 Strong Place. How is new development doing compared to the rest of the market? There are so few opportunities and sites that can be developed, so when new development units do come on the market, if they are of the larger size, they move fast. ... One-bedrooms plus an office or two-bedrooms will [also] be embraced quickly. Are there any other upcoming new residential projects you’re watching? At the corner of Henry and Amity, the former Lamm Institute [which is part of 74 April 2012 www.TheRealDeal.com

Long Island College Hospital] is being sold off in parcels. The original building will be three separate new townhouses. It’s interesting because no one bought it and tried to turn it into a million threebedroom condo units. It’s unusual because it’s keeping to exactly what the neighborhood is and what the demand is there. In addition, there’s a development on Court near Sackett with huge, loftlike two-bedroom apartments with 2,600 square feet. That will be an interesting test of the market because the use of the space is very unusual for this area. What are the biggest challenges to selling residential property in the area? It’s the lack of supply versus demand. In my experience, there has never been such a tight supply relative to demand — even during the boom.

Terry Naini

senior vice president, Town Residential Which types of residential properties are doing best and worst in the area? The townhouse market is deﬁnitely higher than it was during the boom in all these neighborhoods. The co-op is the toughest segment of the market here. Condos are doing well. Some brownstones have turned into condos, but [in the past] new construction was not available, so if you were looking for a one-bedroom, a two-bedroom or a smaller threebedroom you had no option other than to buy a co-op. That is no longer the case. A lot of co-ops are in small buildings where there might be three to six units. There are a couple of problems with that. Every time you want to get a mortgage it’s hard to get

ward-thinking than they were during the boom, when they figured they could easily flip those properties. In addition, while the area has not seen nearly the same amount of new residential development that other areas of Brooklyn have, like Williamsburg, there are a number of new condo and townhouse projects. And there are more on the way. That’s giving buyers options beyond the co-ops that have historically made up the bulk of the market. Plus, buyers are also venturing further east, deeper into Boerum Hill, despite the housing projects there. And they’re going further west to the Columbia Heights waterfront area, which abuts Brooklyn Bridge Park. Still, there are challenges, including getting mortgages in small buildings, where banks can’t own more than 10 percent of the units, and high down-payment requirements of 25 to 35 percent, which are precluding some first-time buyers from entering the fray. For more on which price ranges are doing best and worst and which new projects brokers are watching, we turn to our panel of experts. a bank to come in because no bank can own more than 10 percent of the building. ... If you already have Wells Fargo or Chase or Citi in there, they can’t loan. Which price ranges are performing best right now in BoCoCa? Houses that are in decent shape, anywhere in the $2 million range, fly off the shelf. When looking at a spacious threebedroom, you’re looking at between $1.2 million and $1.7 million. If it’s in the lower [part of that] price range, it goes fast because there’s not a lot of product.

Which parts of BoCoCa are doing best, and which are struggling most? Boerum Hill is doing amazingly well and I think it’s because of the commute. It’s closer to transportation than the other two neighborhoods. Also the neighborhood has evolved more than Carroll Gardens. A few years ago, people would have chosen Carroll Garden and Cobble Hill over Boerum Hill and that’s no longer the case. In Boerum Hill we have [housing] projects; maybe that’s why [buyers] used to say they wouldn’t go there. But now it’s as if everybody else has encapsulated the

“[In the past] new construction was not available, so if you were looking for a onebedroom, a two-bedroom or a smaller threebedroom you had no option other than to buy a co-op. That is no longer the case.” TERRY NAINI, TOWN RESIDENTIAL Which price ranges are struggling most? At any price, the one-bedroom is tough. One-bedrooms are the toughest market right now because everybody is forward thinking. Even a single person making a ﬁrst purchase wants two-bedrooms as opposed to before, when they were happy just getting one. Are there any upcoming residential projects you think are exciting? I think 340 Court is exciting. It’s too bad that they are doing their own sales. The second phase at 233 Paciﬁc is with the same developer. I think they did a nice job inside. The biggest issue there is they are facing Atlantic and they are on top of a PetSmart. I think the retail tenant is very important in your sellout and it might have been better if they had left it empty until they were sold out.

projects rather than the projects inﬂuencing the neighboring properties. There are also more interesting restaurants that have opened up in the past few years. How long are properties in the area staying on the market these days? It depends on if the property is desirable and doesn’t have any big thing against it. For example, if you have a property facing the BQE, you’re going to have a problem with selling it. It would have been easier during the boom. ... Other than that, the properties are generally going within a few weeks to a few months. If it’s a house, it’s quicker unless it requires a lot of work. On average within the ﬁrst three months everything’s in contract. What are the most surprising trends you’re seeing in the residential market? www.TheRealDeal.com May 2006

Q&A What’s interesting to me is that people are starting to ask for, and go to, the Columbia Street waterfront. There was a time when nobody was willing to cross the BQE. Now because of Brooklyn Bridge Park, more and more people are asking for that area ... and there’s not a lot over there. More development will come in the next few years. Who are the most active buyers, and how does that differ from the past? Before everybody was buying, and now I see more young couples and growing families. We also have some investors now. I did not used to see investors because it’s really a community where buyers live in it.

Scott Klein

vice president, Prudential Douglas Elliman What’s going on with residential prices? They are down compared to the boom, but I think it depends on the property. Townhouse prices are quite strong, [although] they are still reduced somewhat from the height. Which residential properties are hardest to sell these days? Anything that needs signiﬁcant renovation is more difﬁcult to sell. When money is so cheap, people would rather pay for it out of a 4 percent mortgage than have to do the work themselves. The Atlantic Yards project is going to have a huge impact on this area of Brooklyn. Are you already seeing that impact? Moreso for Boerum Hill because it’s closest. However ... we are getting more push back with closer neighborhoods like Fort Greene and Prospect Heights than we are Boerum Hill, which in some ways is just as close. ... I think people are more hesitant to buy properties that are for sale very close to the project. What kinds of discounts off asking prices are being seen these days in the area? It depends on how the property is priced. In general, the rule of thumb is somewhere between 4 and 7 percent negotiability. ... [But] there is less negotiability than there was a year or two ago.

Leslie Marshall

senior vice president, Corcoran Group Which price ranges and apartment types are performing best right now in the area? One- and two-family houses in Cobble

Hill are especially in demand, with multiple offers seen in the $2.5 million market and up into the mid-$3 million range. Larger apartments are also selling very well, and there is always a limited supply of three-bedrooms in BoCoCa, so if something comes on the market, especially with outdoor space, it will sell very quickly.

scape in the area? I’d say the brokerage community has grown somewhat over the past few years and would have grown more were there more inventory to sell. Despite all the talk of new development, there has been relatively little over the past few years compared with Williamsburg and Manhattan.

Are there any upcoming new residential projects that you’re watching? Construction is underway on the second phase of the very successful 14-townhouse project on State Street between Smith and Hoyt. These nine townhouses will be ready in about 18 months, and will be priced around $3.5 million. There are some smaller boutique projects being built as well, such as the very high-end 253 Paciﬁc Street. Another new project, the Collection — on Court Street and Union — is under construction but there is very little public information about it. Cobble Hill Towers, a complex of historic landmarked buildings on Warren and Hicks streets, is the ﬁrst conversion of a rental property in recent memory and is more than 20 percent in contract.

Soﬁa Song

What are the most surprising trends you’re seeing in the area right now? In Carroll Gardens, the Superfund designation of the Gowanus Canal had far less impact on the market than anyone thought it would. And now that Whole Foods is underway, buyers are even more excited to live in Carroll Gardens.

Brian Lehner

senior vice president, Brown Harris Stevens What’s going on with prices outside of the townhouse market? Co-ops and condos have not yet risen to [townhouse] levels. Smaller units have [only] maintained prices over the last two years. But with rents rising, I expect to see some upward movement on the prices for entry-level apartments. What’s going on with financing for residential purchases these days? Mortgages continue to be cheap, and that has been the appeal for buyers at the middle and toward the high end of the market. The downside is that banks, though they’ve relaxed some lending requirements, are still looking for relatively high down payments — 25 to 35 percent in most cases, and that has kept some otherwise qualified first-time buyers away. What’s going on with the broker land-

vice president, research, StreetEasy How is overall residential sale volume doing in BoCoCa? In terms of transaction volume, BoCoCa had 34 percent fewer closings in the last quarter of 2011 compared to the same quarter in 2010. Compared to two years ago, it’s had 64 percent fewer closings. To provide some context, Brooklyn overall had 9.7 percent fewer closings in the fourth quarter compared to 2010, and 14.7 percent fewer closings than in 2009. What’s going on with residential prices in the area these days? The median closing price in the fourth quarter was $713,000. That’s a 6.4 percent increase compared to the prior year and a 32.1 percent jump since 2009 [at the bottom of the market]. Which price ranges are performing best and worst right now in BoCoCa? In this current quarter so far, it appears that the lower-priced listings make up the majority of contracts. About 18 percent of contracts are under $500,000 and 30 percent are in the $500,000 to $750,000 range. About 29 percent of contracts were between $750,000 and $1.25 million. [The rest] of the contracts were above that. How is the new development market doing compared to the rest of the residential market? In the current quarter, 21 percent of listings that have gone into contract were in new developments. In last year’s ﬁrst quarter, only 6 percent of contracts were in new developments.

Saul Retig

associate broker, Brooklyn Bridge Realty Which apartment types are struggling the most in the area? Studios and smaller one-bedrooms can be a struggle to sell. A one-bedroom in a good school zone that can be converted into a two-bedroom will have

better value to a couple that plans to start a family. How is the new development market doing compared to the rest of the residential market? Brooklyn Bridge Realty is the exclusive broker for the condos at the Landmark at Strong Place. [We] first began sales in December 2010 and we are 70 percent sold now. ... The sponsor wisely waited [and launched when] the market was already picking up. Other projects in the area that came on too soon might have had some difficulty, resulting in a turnover of the brokerage firm marketing it or it might have turned into rentals. Are you seeing any impact of the upcoming Atlantic Yards project on the residential market? I’ve had one or two buyers who didn’t want to look close to Atlantic Yards. They thought there would be too much traffic congestion in the area. My take is that it will be a positive. I think that for the first year or so as you get close to the Atlantic Yards, it may affect pricing. But eventually the neighborhood will adjust and prices will hold. Atlantic Yards will be the clincher that will tie in what’s happening in the Metro Tech area and new towers like the Toren or the Brooklyner. Are there any other upcoming new residential projects that you’re watching? The seven-story, 32-unit building at 340 Court Street being built by Alchemy Properties. I have been getting many inquires about it from my buyers. It will really be a significant change in the landscape of that part of Carroll Gardens. What’s the inventory like in the area these days? Things sell quicker than two years ago, but [are not flying] off the shelf as they did during the boom years. ... At open houses for townhouses or two- to threebedrooms you can get 20 to 30 people. What are the biggest challenges to selling in the area these days? Definitely appraisals and financing. It’s very difficult to get expensive construction loans if you have a property that needs a gut renovation. It is common to see ads for all-cash buyers for those properties that need extensive renovations. What’s going on with the broker landscape in the area these days? I’m actually seeing more brokers these days. There are a lot of people who were laid off from other jobs that are doing this temporarily and plan to go back to their professions or maybe will find this is a viable second career. There is also some movement of a relatively new Manhattan brokerage with a few offices already making inquires about opening up in BoCoCa. TRD www.TheRealDeal.com April 2012 75

In order to pay for the work, the school has proposed building 384 townhouses and apartments on the property, 20 percent of which will be affordable. At a public hearlion plan to renovate the estate’s ing last month, town ofﬁcials conoriginal structures, including sidered whether to rezone the estate as a planned landThe Bourne Estate mark preservation, but tabled the decision after almost two hours of passionate public testimony, saying they needed to “process” what they had heard. Suffolk County residents said they worried Bourne’s 115-year-old mansion, about the impact of the developpreserving them as landmarks. ment on the beauty and tranquil-

��

LONG ISLAND

Residents protest Bourne Estate rezoning

rea residents last month spoke out against a proposal to build hundreds of housing units on the historic Bourne Estate in Oakdale, Newsday reported. The 170-acre estate — the former home of Frederick Bourne, onetime president of the Singer sewing machine company — serves as a satellite campus of St. John’s University. The school last summer proposed a $40 mil-

ity of the estate, and said it would worsen trafﬁc and property values in the area. The plans call for the mansion to be used for weddings and other events, with the second and third ﬂoors serving as a “boutique” hotel for guests attending events. A boathouse on the property would be renovated and serve as a space for conferences, private events and recreational use.

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76 April 2012 www.TheRealDeal.com

payments, according to a new study by RealtyTrac. In 2011, foreclosed-on properties in the state sold for an average of $175,715, some 47 percent less than the average sale price of $329,731 for homes not in foreclosure, the Hartford Courant reported. Daren Blomquist, vice president of RealtyTrac, said foreclosed-on homes tend to be in poorer condition — and their owners far more anxious to sell — than nondistressed sales. In Connecticut as a whole, some 11,282 homes went into foreclosure last year, according to RealtyTrac, and foreclosure sales accounted for 15 percent of all residential transactions. Overall, residential sales in the state rose modestly in 2011, increasing 2.2 percent to 4,328. New Haven County saw 3,023 foreclosures last year, more than any other county in Connecticut, and 19 percent of all sales in the county were foreclosures. Tolland County had the fewest foreclosures in the state last year, with 313.

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Dick Clark’s Flintstones home

Los Angeles Yabba dabba do! Television legend Dick Clark last month put his one-bedroom, two-bathroom Malibu home on the market for $3.5 million, CNN reported. The cavelike house, designed by architect Phillip Jon Brown, has frequently drawn comparisons to the prehistoric dwelling of the famous cartoon family the Flintstones. Clark’s landmark house, which has expansive views of the Paciﬁc Ocean, is part of a 23-acre estate listed by Diane Carter of Coldwell Banker. The site is next to the Santa Monica Mountains National Recreation Area, which originally objected to Clark building a home on the property. But the “American Bandstand” star “dug in his heels and said he was going to build a house there,” Brown told CNN. “I came up with the idea that if the house looked like a rock formation, the park conservancy would let us build on top.” The exterior of the home is comprised of heavy stucco, and the interior walls are covered in concrete to give the home its subterranean feel, the architect said.

San Francisco Macys.com, the online component of retailer Macy’s, leased 242,573 square feet of office space at 680 Folsom Street in San Francisco last month, CoStar reported. The company signed a 15-year lease for seven floors at the South of Market district building, and plans to relocate its operations from a number of smaller offices. The deal marks the city’s second-largest lease signed so far this year, and the San Francisco Business Times called it “bricks-andmortar evidence of the city’s dramatic economic recovery.” Landlord TMG Partners purchased 680 Folsom Street and an adjacent property, 50 Hawthorne Street, in 78 April 2012 www.TheRealDeal.com

Silicon Valley As Apple plans a futuristic new headquarters in Silicon Valley, the company is driving the largest growth in commercial property values in the region since the dot-com boom, Bloomberg News reported. Apple leased 1 million square feet in Sunnyvale, Calif. (lowering the vacancy rate in the city by 50 percent) last year, and is expected to take an additional 700,000 square feet somewhere in Silicon Valley this year, Bloomberg News said. Apple’s main office is its Infinite Loop campus in nearby Cupertino, where Apple has 60 percent of the office space. The tech company is also planning a new, 2.8 million-square-foot building in Cupertino, pending city approval. Office occupancy in the region rose by 2.7 million square feet last year, the most since 2000, and rents may grow 11 percent to an average of $36 a square foot in 2012, according to data from Cassidy Turley. “When a large tenant leases a large amount of space, you have the domino effect,” Sam Hamilton, managing director of San Francisco-based DivcoWest, told Bloomberg.

2010 with equity partner Rockwood Capital. The building is currently undergoing an $87 million renovation. Daniel Cressman of Grubb & Ellis represented Macys.com in the deal; Chris Roeder and Gregg Walker of Jones Lang LaSalle represented the landlord. Office rents in San Francisco grew 1.3 percent to an average of $31.23 per square foot in the fourth quarter of 2011, according to the real estate research firm Reis. Meanwhile, video game company Zynga will buy its 670,000-square-foot San Francisco headquarters at 650 Townsend Street, the Wall Street Journal reported. The six-story building, at Eighth Street, has a basketball game machine, a candy room and a coffee shop that provides employees with free coffee. Zynga makes popular Facebook games, such as “FarmVille” and “Mafia Wars.”

Miami Hedge-fund manager Edward Lampert is in contract to pay $40 million for a home on an island off Florida’s Biscayne Bay, the Wall Street Journal reported. When the sale closes, it will be the largest on record in Miami-Dade County. The Italian-style, The Lampert house

17,000-square-foot home has seven bedrooms and sits on 2.7 acres of land. Miami businessman Paul Cejas and his wife, Trudy, currently own the property through a trust. Lampert owns at least one other home, in Greenwich, Conn. The average listing price for a home in Biscayne Bay is

$1.45 million, according to ﬁgures from Zillow.com.

Washington, D.C. 801 9th Street

Japan-based N.S.P. Ventures last month paid $147.5 million to buy the headquarters of the United States Mint at 801 9th Street, according to Commercial Property Executive. The eight-story, 236,000square-foot ofﬁce building was built-to-suit for the Mint, which has triple-net leased the space since 1999. The previous owner was Netherlands-based Wereldhave USA, which bought the building in 2006 for $131.5 million. A number of buyers vied for the building, which is viewed as desirable because of its particularly stable tenant. “You can’t beat buying a building that makes money, and that’s literally what they do there,” said Bruce Baschuk, chairman of J Street Companies, which represented N.S.P. in the deal. The Washington, D.C., area is one of the top-performing ofﬁce investment markets in the country, according to data from commercial brokerage Cassidy Turley. Sales volume in the D.C. metro area was $7.2 billion in 2011, a year-over-year increase of 68 percent.

Chicago Basketball star Michael Jordan has listed his Highland Park mansion for $29 million, the Chicago Tribune reported. The 56,000square-foot compound, located at 2700 Point Lane, has nine bedrooms and 15 full bathrooms, as well as a tennis court, putting green and 15-car garage. And of course, the estate offers an attached basketball complex, with cushioned hardwood ﬂoors, adjustable baskets, and a sound system tuned to provide the perfect court acoustics. Katherine Chez Malkin, of Baird & Warner Real Estate, has the listing. “Michael is selling for a variety of reasons,” Chez Malkin said. “He has many homes and has decided to downsize.” Jordan, a Chicago Bulls legend and now the owner of the Charlotte Bobcats, previously lived in the home with his ex-wife, Juanita, and their three children. The Jordans divorced in late 2006. If the Michael Jordan’s home

Highland Park mansion sells for anywhere near its asking price, it would be the priciest residential sale in the Chicago area. In July 2007, a Lake Bluff home sold for $16 million, according to Midwest Real Estate Data LLC, a multiple listings provider. Compiled by Guelda Voien

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Banks from page 68 capital and improve their standing in the eyes of federal examiners, will demand borrowers open operating accounts in the lending institution as part of the loan conditions, said attorney Joshua Stein, who focuses on real estate ﬁnancing. In testimony before a U.S. House of Representatives subcommittee in February, Jennifer Kelly, a senior deputy comptroller with the OCC, underscored that regulators wanted liquidity, not simply performing loans. Discussing construction loans that often have interest reserves that make loans look current and “performing” even if the project is in distress, she said, “Performance is certainly a key variable in making an assessment of collectibility, [yet] a banker must also consider the borrower’s continued capacity to meet the loan’s terms in the future.” Bobby Bakhchi, president of mortgage brokerage Hybrid Capital, said he’s seen nearly a dozen instances over the past year in which banks have asked borrowers for a global cash ﬂow, which provides a report on the property owner’s holdings across all the assets, to see if there are any weak spots. “This is some of the tighter regulation and increased scrutiny taking place,” Bakhchi said. The above-mentioned executive at the mid-size bank noted that some credentials used to determine liquidity, like tax returns, were often not a good indicator of a borrower’s cash positions — and that asking for them was a waste of time, or worse. The potential borrower “might not be willing to go to that length,” he said, and instead drop out of the loan application. Regulators — including the FDIC, the Board of Governors of the Federal Reserve and the OCC — also look at debt-service coverage ratios, the concentrations of loans

in one area or available capital. Dansker, of Intervest Bancshares, said regulations are not tighter today, but that enforcement is. “There is more in-depth analysis being done by the regulators to make sure the banks are following the rules,” he said. Building buyers in New York are growing increasingly frustrated with how banks are valuing their properties when they are hunting for a loan. Part of the issue is that lenders are often deciding to lend less than the borrower asked for. The major shift, insiders say, is that regulators want lenders to underwrite based on in-place, dependable income, not on anticipated growth. “Banks are underwriting to the current value of the asset, where it is [on] Day One, not based on promised increases,” said Jason Enters, principal with residential landlord Minuit Partners. In addition, large national banks are being stricter than some regional lenders on their in-place underwriting, insiders said. For example, national banks, when projecting future revenue, often use a high 5 percent vacancy rate for rent-regulated apartment buildings — nearly double the city’s actual rate in 2011 — thereby lowering the property’s projected income and its value. The federal government is watching appraisals like a hawk because inﬂated appraisals were partly responsible for fueling the high boom prices. Garrett Thelander, managing director for Massey Knakal Capital Services, noted that even if potential buyers and their appraisers agree on a property’s net operating income, the appraisers might use a lower cap rate for the property — and thus determine a different value for it. (The cap rate measures the ratio between net operating

income and the property’s valuation.) There are some exceptions to the tighter lending regimen. Regulators, and thus banks, have an easier time defending higher loan-to-value ratios on the city’s rent-regulated multifamily properties, in part because of the low vacancy and dependable rent increases. Yet some loans are being made on formerly distressed properties for more money than when they went into default, housing advocates said, raising questions as to why regulators would not raise ﬂags for those loans. Dina Levy, director of organizing and policy at the Urban Homesteading Assistance Board, pointed to a portfolio of buildings formerly owned by a group of Japanese investors and managed by Sam Suzuki, where Hudson Valley provided new loans in September last year at levels higher than the old loans. “The loan did not work at $13.1 million. Why did Hudson Valley think it will work at $13.4 million?” she asked. It’s unclear if those loans were part of the package sold last month. While many in the industry see the regulations as overkill that is dampening a shaky recovery, most agree that it will strengthen the banking sector. “Lots of local banks may have given a few dogs [or bad loans]” to long-time, dependable clients, one small landlord said, noting that nobody wants to take a hard look at those loans. “The net impact is that those banks that were not following the rules have to rejigger their whole organization,” Dansker said. “[But] it ultimately leads to better underwriting and better portfolio management going forward, and that’s what we are all trying to get to.” TRD

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Deal Sheet summary

The Deal Sheet, on pages 84 to 92, covers transactions from 2/11/12 through 3/10/12. Please submit future deals to deals@therealdeal.com.

Sales

Overview

By type

Property sales Dollars

Development

50.26

Hotel

153.3

Industrial

14.45

Mixed-Use

68.83

Multi-family

411.56

Development

Deals

46 $1,210,620,000

Financing

By dollar volume (in millions)

Mixed-Use Multi-family

Transactions

Office

463.8

Buildings

Retail

48.42

Aggregate value

$149,805,000

Leases Office

Retail

Total

102

Leases square feet Office

569,411

Retail

89,025

Total

658,436

Office leases Office leases by industry Industry

Office leases sf by industry Leases

Industry

Top tenant reps for office leasing by sf

Square feet leased

Tenant representative

Square feet leased

Advertising & Marketing

Architecture & Design

CBRE Group

47,614

Education

17,287

CBC Hunter Realty

41,919

Entertainment

18,245

JUD Leasing Corp.

28,200

Locations Inc.

8,400 29,408

Newmark Knight Frank

176,945

Fashion*

57,791

Financial

60,367

Cushman & Wakefield

20,057

Fine Arts

24,136

Denham Wolf Real Estate

16,936

Government

Colliers International

15,100

Health & Beauty

16,160

Lee & Associates

15,000

Legal

12,924

Capstone Realty Advisors

14,400

Medical

32,709

Studley

13,807

NGO

12,700

Cogent Realty

10,200

NGO

9,275

27,115

Other / n/a

78,909

Adams & Co.

8,575

Publishing

26,104

Winoker Realty

8,506

Real Estate

32,996

Halstead Property

7,414

Research

Prudential Douglas Elliman

7,200

Other / n/a

132,000

Retail leases Top tenant reps for leasing by sf

Retail leases by industry

Broker

Education

10,000

Square feet leased

Retail leases sf by industry

Ripco Real Estate

17,800

Fashion

18,920

KZA Realty Group

11,800

Financial

17,800

Winick Realty

11,274

Food & Beverage

14,361

Sholom & Zuckerbrot

9,200

Medical

6,300

Kassin Sabbagh Realty

6,750

Other

Adams & Co.

5,221

NAI Friedland Realty

4,800

Crown Retail Services

4,720

Isaacs & Co.

4,200

Newmark Knight Frank

3,300

A.C. Lawrence & Co.

2,348

Besen Retail

2,240

Prudential Douglas Elliman

1,500

(*includes showroom space)

21,644

www.www.TheRealDeal.com April 2012 83

Deal Sheet

Commercial deals in New York City Deals are listed from largest to smallest in square feet leased or bought. The Deal Sheet covers transactions from 2/11/12 to 3/10/12. Please submit future deals to deals@therealdeal.com.

Office leases Address

Size

Tenant / Representative

Landlord / Representative

Notes

165 Broadway

132,000

Investment Technology Group / N. Goldmacher, B. Goldman, J. Friedman, J. Hennessey, M. Roth, Newmark Knight Frank

Brookfield Properties / Represented in-house

The independent research broker signed a 15-year lease to relocate its corporate headquarters to three floors of the building, also known as One Liberty Plaza.

2275 Coleman St (Brooklyn)

27,115

Americare Inc. / Nick Zweig, Locations Inc.

Kings Plaza Associates / W. O’Brien, H. Litwak, M.C. O’Brien

The provider of home healthcare services signed a lease.

105 Madison Ave

26,700

Empire Office / Paul Davidson, Newmark Knight Frank

A&R Real Estate Inc. / Represented in-house

The office furniture seller and design consultant signed an expansion lease on the 14th and 15th floors.

250 West 57th St

26,104

Perseus Books Group / D. Hollander, C. Meagher, CBRE

W&H Properties / H. Blair, S. Kearns, M. Arkin, C&W

The publishing company signed an expansion lease for the entire 15th floor. The tenant is moving out of a smaller, 6,800-square-foot space on the 13th floor.

600 Madison Ave

22,665

Lee & Associates NYC / n/a

n/a / Greg Taubin, Studley

The real estate company signed a 47-month sublease on the third floor.

655 Third Ave

18,800

Nippon Life Insurance / D. Hollander, A. LoPresti, CBRE

Durst Organization / Represented inhouse

The life insurance company signed a lease, the New York Post reported. The tenant is relocating from 521 Fifth Avenue. The asking rent was $54 per square foot, according to the Post.

900 Third Ave

18,245

CKx Inc. / C. Mongeluzo, C. Horowitz, Newmark Knight Frank

Paramount Group / Represented inhouse

The owner and developer of entertainment content and intellectual property signed a 10-year lease.

75 Broad St

16,936

The New York City Opera / S. Powers, P. Wolf, Denham Wolf Real Estate

JEMB Realty / Frank Cento, C&W

The opera company signed a long-term lease to relocate to the building’s 10th floor.

38 Delancey St

15,000

Kunskapsskolan schools / Peter Braus, Lee & Associates

n/a / Michael Chen, Bond NY

The Swedish educational services provider signed a 10-year lease for Innovate Manhattan, its first leased school in the U.S. The reported asking rent for the third-floor space was $35 per square foot.

240 West 37th St

12,880

Lana Fashionwear / Michael Heaner, Kaufman Organization

n/a / Joseph Mangiacotti, CBRE

The private-label manufacturer signed a seven-year lease. The reported asking rent was $35 per square foot.

350 Fifth Ave

10,968

Exquisite Apparel / T. Sullivan, W. Siegel, CBC Hunter Realty

Empire State Building Company LLC / Ryan Kass, Newmark Knight Frank

The clothing company signed a long-term lease renewal.

100-104 Fifth Ave

10,600

FirstMark Capital / Bruce Rothman, Studley

Kaufman Organization; Invesco Real Estate / Grant Greenspan, Kaufman Organization

The venture capital firm signed a lease. The reported asking rent was $55 per square foot.

75 Broad St

10,200

Craig Michaels Inc. / Mitch Waldman, Cogent Realty

JEMB Realty / Frank Cento, C&W

The producer of business events signed a lease to relocate from 15 Maiden Lane.

747 Third Ave

9,275

The Permanent Mission of Senegal to the United Nations / R. Gottlieb, W. Siegel, R. Rozins, CBC Hunter Realty

n/a / Sage Realty

The Permanent Mission of Senegal signed a long-term lease.

45 Broadway

8,724

Marshall Conway & Bradley PC / N. Murray, P. Sabesan, R. Rozins, CBC Hunter Realty

Cammeby’s / David Ofman, The Lawrence Group

The insurance law firm signed a lease. The tenant is relocating from 116 John Street.

527 Madison Ave

8,600

Quilvest / A. Desino, L. Yudkin, Colliers International

n/a / n/a

The wealth management firm signed a 10-year lease to relocate from a smaller space at 598 Madison Avenue.

350 West 31st St

8,000

America Works / J. McLaughlin, K. Phelan, Capstone Realty Advisors

n/a / Rosario Saglimbeni, Schneider & Schneider

The private workforce development firm signed a lease for the entire second floor.

3 East 54th St

8,000

Borghese / B. Mosler, A. Mirante, D. Glassman, C&W

Cohen Brothers / B. Mosler, A. Mirante, D. Glassman, C&W

The cosmetics firm signed a lease for the entire 20th floor. The tenant is relocating from 10 East 34th Street.

460 West 34th St

7,200

Contemporary Conservation Ltd. / L. Puopolo, A. Furst, Prudential Douglas Elliman

Kaufman Organization / n/a

The preservers of contemporary art signed a lease for new space, the New York Post reported. The reported asking rent was $28 per square foot. The tenant was previously located at a smaller space in the Chelsea Art Museum at 556 West 22nd Street.

75 Broad St

7,124

On-Line Residential / Ken Beilin, Kenneth Beilin Realty

JEMB Realty / Frank Cento, C&W

The real estate listings company signed a lease to relocate from 50 Broad Street.

38 West 21st St

7,000

Drummond Framing / Corey Abdo, Winoker Realty

Jack Vogel Assoc. / Doug Rice, Rice & Associates

The framing company signed an office lease.

242 West 36th St

6,700

Housing Partnership Development Corporation / M. Heaner, G. Greenspan, Kaufman Organization

n/a / Barbara Raskob, Kaufman Organization

The nonprofit signed a 10-year lease. The reported asking rent was $33 per square foot.

1411 Broadway

6,500

International Textile Group ITG / A. Desino, L. Yudkin, Colliers International

n/a / n/a

The textile company signed a seven-year lease to relocate to the building’s 26th floor from the sixth floor.

450 Seventh Ave

6,141

Insight Strategy Advisers LLC / M. Heaner, G. Greenspan, Kaufman Organization

n/a / Barbara Raskob, Kaufman Organization

The healthcare consulting firm signed a lease. The reported asking rent was $45 per square foot.

1410 Broadway

5,635

Mirage Fashions of NY LLC/ Sensational Collection LLC / T. Sullivan, W. Siegel, CBC Hunter Realty

LH Charney & Associates / Richard Doolittle, Murray Hill Properties

The wholesale outerwear firm signed a long-term lease.

49 West 23rd St

5,594

New York Foundling Hospital / Natasha Tomai, Halstead

Twenty Three R.P. Associates / J. Buslik, A. Bonett, Adams & Co.

The hospital signed a new lease. The reported asking rent was $38 per square foot.

40 Exchange Place

5,200

Pearl Capital Corp. / n/a

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The finance company signed a long-term lease. The reported asking rent was $36 per square foot.

40 Exchange Place

5,200

Voice Switching Corp. / Charles Beyda, JUD Leasing Corp.

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The financial firm signed a long-term lease. The reported asking rent was $30 per square foot.

40 Exchange Place

5,200

RIVISS Ventures Group LLC / n/a

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The alternative finance group signed a long-term lease. The reported asking rent was $36 per square foot.

115 West 27th St

5,000

My Humble Abode / Kevin Phelan, Capstone Realty Advisors

115 West 27th Street Co. / n/a

The tenant signed a lease for the entire sixth floor.

84 April 2012 www.TheRealDeal.com

www.TheRealDeal.net December 200

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Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

463 Seventh Ave

4,288

Respekt-Wear Apparel Group / David Levy, Adams & Co.

The Arsenal Company LLC / David Levy, Adams & Co.

The menswear company signed a new five-year lease. The reported asking rent was $39 per square foot.

40 Exchange Place

4,200

Polaris Communications Group / Charles Beyda, JUD Leasing Corp.

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The Internet marketing firm signed a long-term lease. The reported asking rent was $33 per square foot.

40 Exchange Place

4,200

Transperfect Documents Corp. / C&W

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The legal documents services provider signed a five-year lease. The reported asking rent was $24 per square foot.

40 Exchange Place

4,200

The Mana Group / Charles Beyda, JUD Leasing Corp.

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The nonprofit signed a long-term lease. The reported asking rent was $26 per square foot.

40 Exchange Place

4,200

New York Business Partners / Charles Beyda, JUD Leasing Corp.

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The sales and marketing firm signed a long-term lease. The reported asking rent was $26 per square foot.

40 Exchange Place

4,200

Sfinity Corp. / Charles Beyda, JUD Leasing Corp.

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The executive training center signed a 10-year lease. The reported asking rent was $36 per square foot.

24 West 40th St

4,117

SMI / R. Gottlieb, W. Siegel, CBC Hunter Realty

Samson / Erik Harris, Newmark Knight Frank

The media company signed a long-term lease.

800 Third Ave

4,057

The Bank of Italy / Diego Rodino, C&W

n/a / R. Teichman, R. Brickell, Joseph P. Day Realty

The central bank of the Republic of Italy signed a seven-year lease on the 26th floor. The reported asking rent was $65 per square foot.

75 Broad St

3,800

CTC Americas / Jonathan Fein, C&W

JEMB Realty / Frank Cento, C&W

The tenant signed a lease to expand and relocate from 80 Broad Street.

1350 Broadway

3,771

Minds In Sync / Abe Labaton, Vicus Partners

W&H Properties / N. Rubin, R. Silver, A. Sciacca, Newmark Knight Frank

The home products company signed an expansion lease on the 17th floor, the New York Post reported. The tenant now occupies 16,000 square feet in the building.

40 Exchange Place

3,600

Sottile Security Corp. / Charles Beyda, JUD Leasing Corp.

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The security guard company signed a new lease. The reported asking rent was $26 per square foot.

250 West 57th St

3,207

T. Park Central & O. Park Central / Nick Zarnin, Studley

W&H Properties / H. Blair, S. Kearns, K. Mekles, C&W

The real estate firm signed a new lease.

499 Seventh Ave

3,200

Becca Inc. / T. Sullivan, D. Danick, CBC Hunter Realty

499 Fashion Tower LLC / Brian Neugeboren, Savitt Partners

The cosmetics firm signed a lease for a full floor.

463 Seventh Ave

3,155

Item House Incorporated / David Levy, Adams & Co.

The Arsenal Company LLC / David Levy, Adams & Co.

The women’s outerwear company signed a three-year lease renewal. The reported asking rent was $39 per square foot.

800 Third Ave

2,710

Farley Capital / Adam Schultz, CBRE

n/a / R. Teichman, R. Brickell, Joseph P. Day Realty

The investment management firm signed a five-year lease on the 23rd floor. The reported asking rent was $65 per square foot.

39-41 West 38th St

2,708

Archidata Inc. / David Youngworth, Living Real Estate

n/a / C. O’Toole, S. Moore, Tarter Stats O’Toole

The architectural firm signed a lease on the ninth floor.

8-10 West 37th St

2,600

The Brooks Group Associates LTD / Michael Heaner, Kaufman Organization

n/a / Joseph Mangiacotti, CBRE

The public relations agency signed a seven-year lease. The reported asking rent was $35 per square foot.

40 Exchange Place

2,600

FDS Products Inc. / Charles Beyda, JUD Leasing Corp.

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The health and beauty products importer signed a lease. The reported asking rent was $36 per square foot.

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Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

40 West 29th St

2,500

Proper Fools / Elissa Groh, Rice & Associates

Kew Management / Represented inhouse

The fashion brand-building company signed a lease.

1456 First Ave

2,360

House of Jai / Joshua Price, Gallery Real Estate

RFR Realty / J. Roseman, A. Zhen, Newmark Knight Frank

The yoga studio signed a lease.

2239 Frederick Douglass Blvd

2,287

Kumon Learning Centers / n/a

H.T. Commercial Realty LLC / New Street Realty Advisors

The tutoring services provider signed a lease extension and expansion.

1407 Broadway

2,241

Top Fashion of NY / Y. Chang, J. Kosaric, Kaufman Organization

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The fashion company signed a lease. The reported asking rent was $45 per square foot.

40 Exchange Place

2,200

Europe by Car Inc. / n/a

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The car rental company signed a seven-year lease for office space. The reported asking rent was $36 per square foot.

285 West Broadway

2,100

Sinu Inc. / n/a

285 West Broadway Associates LP / Joshua Salon, Salon Realty

The IT support company signed a two-year lease.

1407 Broadway

2,029

M&A Clothing Co. / Suraj Advaney, Triboro Realty

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The clothing company signed a lease. The reported asking rent was $45 per square foot.

1407 Broadway

1,820

Pure Elements Clothing Company Inc. / Jeff Yi, Halstead

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The clothing company signed a lease. The reported asking rent was $45 per square foot.

40 Exchange Place

1,800

BWRC Inc. / n/a

40 Exchange Corp. / Charles Beyda, JUD Leasing Corp.

The nonprofit signed a seven-year lease.

1407 Broadway

1,759

Grip Collections Inc. / Howard Rosenblum, Kaufman Organization

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The clothing company signed a lease. The reported asking rent was $45 per square foot.

210 11th Ave

1,650

Woolmark / David Youngworth, Living Real Estate

n/a / J. LaRosa, J. Casely, ABS Partners

The fashion company signed a lease.

259 West 30th St

1,600

Wealth X LLC / Jane Slade, Tarter Stats O’Toole

Two Friends Realty LLC / Joe McLaughlin, Capstone Realty Advisors

The tenant signed a lease for part of the fourth floor.

247 West 37th St

1,530

Parke & Ronen / M. Heaner, I. Norris, Kaufman Organization

n/a / Matthew Mandell, Newmark Knight Frank

The men’s apparel company signed a five-year lease. The reported asking rent was $30 per square foot.

1407 Broadway

1,506

Espora Inc. / Evan Lieberman, Winoker Realty

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The fashion company signed a lease. The reported asking rent was $45 per square foot.

134 West 26th St

1,400

Global Blue One Interface Solutions / Michael Jaffee, Capstone Realty Advisors

n/a / n/a

The software application company signed a lease for part of the 10th floor.

1407 Broadway

1,359

Spring Import Inc. / Y. Chang, J. Kosaric, Kaufman Organization

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The manufacturer of women’s clothing signed a lease. The reported asking rent was $45 per square foot.

336-342 37th St

1,300

Inc Via Brazil / Matthew Kurzban, Rice & Associates

IGS Realty Co. / Philippe Ifrah, IGS Realty

The tenant signed a lease.

1407 Broadway

1,297

CKP Global Inc. / Y. Chang, J. Kosaric, Kaufman Organization

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The consultancy for the hospitality industry signed a lease. The reported asking rent was $45 per square foot.

1407 Broadway

1,286

Kipas Textiles & Apparel Inc. / Alan Eagle, Bergson Strategies

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The textile company signed a lease. The reported asking rent was $45 per square foot.

1407 Broadway

1,155

Boat 54 Clothing Co. / Y. Chang, J. Kosaric, Kaufman Organization

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The clothing company signed a lease. The reported asking rent was $45 per square foot.

1407 Broadway

1,142

D&A Apparel LLC / Steve Evans, Platinum Properties

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The apparel firm signed a lease. The reported asking rent was $45 per square foot.

463 Seventh Ave

1,132

Ellerin Corp. / David Levy, Adams & Co.

The Arsenal Company LLC / David Levy, Adams & Co.

The apparel company signed a one-year lease renewal. The reported asking rent was $42 per square foot.

1407 Broadway

1,042

Epoch Jeans / Y. Chang, J. Kosaric, Kaufman Organization

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The denim company signed a lease. The reported asking rent was $45 per square foot.

285 West Broadway

1,000

Helicopter Pictures Inc. / n/a

285 West Broadway Associates LP / Joshua Salon, Salon Realty

The film and photography company signed a three-year lease.

1201 Broadway

990

HI Construction Corp. / Elie Reiss, Rice & Associates

1201 Broadway LLC / Michael Joseph, Colliers International

The construction company signed a lease.

1407 Broadway

807

Tentac Co. / Thomas Sakai, Sakai Organization

n/a / Y. Chang, J. Kosaric, Kaufman Organization

The tenant signed a lease. The reported asking rent was $45 per square foot.

Retail leases Address

Size

Tenant / Representative

Landlord / Representative

Notes

2189 Flatbush Ave (Brooklyn)

17,800

TD Bank NA / R. Senior, I. Shabot, Ripco Real Estate

2189 Flatbush Ave Realty LLC / R. Senior, I. Shabot, Ripco Real Estate

The bank signed a 20-year ground lease for a corner space.

1362 Jerome Ave (The Bronx)

10,000

Brightside Academy / KZA Realty Group

1362 Jerome Avenue Heights Associates / Miles Mahony, Ripco Real Estate

The school signed a 10-year retail lease.

Flatbush Ave and Nostrand Ave (Brooklyn)

9,200

Men’s Wearhouse / Sholom & Zuckerbrot

n/a / Peter Botsaris, Botsaris Realty Group

The menswear retailer signed a lease for another location.

808 Columbus Ave

9,086

Hadco 808 / Zach Mishaan, Winick Realty

808 Columbus LLC / L. Shabtai, K. Gedinsky, Winick Realty

The retailer signed a lease.

463 Seventh Ave

5,221

Andrews Thirty Fifth Street Coffee Shop / David Levy, Adams & Co.

The Arsenal Company LLC / David Levy, Adams & Co.

The coffee shop signed a 10-year lease renewal. The reported asking rent was $300 per square foot.

Fifth Ave and Central Park South

4,720

Angelo Galasso / R. Chera, J. Barker, Crown Retail Services

Elad Group / Represented in-house

The menswear designer signed a lease for retail space at the Plaza Hotel’s Edwardian Room.

33 Greene St

4,200

Acne / Joshua Lewin, Isaacs & Co.

Jonas and Ursula Hegewisch / C. Petersen, C. Johnson, RKF

The Swedish lifestyle and apparel brand signed a retail lease.

953 Southern Blvd (The Bronx)

3,800

Nassau Medical / Rick Stassa, NAI Friedland Realty

953 Realty Corp. / Rick Stassa, NAI Friedland Realty

The medical office signed a retail lease.

1294 Third Ave

3,300

Eric Kayser / P. Berkman, D. Berke, Newmark Knight Frank

n/a / Rick Dana, Prudential Douglas Elliman

The artisan bakery signed a lease. The reported asking rent was $175 per square foot.

www www.TheRealDeal.com April 2012 87

Retail leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

2356 University Ave (The Bronx)

2,500

Latuga Innovative Sports & Spine / M. Sabbagh, I. Arzt, Kassin Sabbagh Realty

Kenco Realty / n/a

The sports medicine center leased retail space.

20 Warren St

2,500

Spa Financial / Abraham Kassin, Kassin Sabbagh Realty

20 Warren Street LLC / n/a

The spa signed a lease.

1400 Fifth Ave

2,348

Doggedly Devoted / Jean Bates, A.C. Lawrence & Co.

1400 Fifth Avenue Commercial / Elizabeth Martin, E.L. Martin Partners

The dog day care center signed a 10-year lease. The reported asking rent was $26 per square foot.

100 Broadway

1,888

Duane Reade / Louis Eisinger, Winick Realty

Madison Capital / Louis Eisinger, Winick Realty

The drugstore signed a lease.

6 East 116th St

1,800

Victor Zheng / Kathy Zamechansky, KZA Realty Group

Yuco Management / Kathy Zamechansky, KZA Realty Group

The tenant signed a 10-year lease to open a nail salon and spa.

327 Court St (Brooklyn)

1,500

Prudential Douglas Elliman / Represented in-house

n/a / R. Condren, E. Altschul, CPEX Real Estate

The real estate firm signed a retail lease.

111 St. Marks Place

1,200

Macaron Parlour Patisserie / H. Demetrious, I. Donath, NYCRS

111 St. Marks Place Building Corp. / Jim O’Loughlin, Skyline Realty

The French dessert shop signed a 10-year lease.

4863 Broadway

1,140

Apple Garden Café / M. Mager, E. Dweck, Besen Retail

Parkoff Organization / M. Mager, E. Dweck, Besen Retail

The restaurant signed a lease.

338 East Gun Hill Rd (The Bronx)

1,100

Pawn Brokers of America Inc. / M. Mager, E. Dweck, Besen Retail

BLDG Management Co. Inc. / M. Mager, E. Dweck, Besen Retail

The pawn shop signed a lease.

166-16 Jamaica Ave (Queens)

1,000

Joey Pepperoni / Morris Sabbagh, Kassin Sabbagh Realty

Estate of Lillian Goldman / n/a

The pizza shop signed a lease.

1058 Southern Blvd (The Bronx)

1,000

Little Caesar’s Pizza / R. Herko, D. Scotto, NAI Friedland Realty

1058 Southern Boulevard Realty / Sabough Realty

The pizza chain signed a lease.

195 Court St (Brooklyn)

800

Goldy + Mac / Heights Berkeley Realty

n/a / R. Condren, E. Altschul, CPEX Real Estate

The boutique apparel store signed a lease for another Brooklyn location.

1502 First Ave

800

Six Happiness Restaurant / n/a

First Avenue Partners LLC / M. Mager, K. Schunk, Besen Retail

The restaurant signed a lease.

521 Amsterdam Ave

412

KitchenFactory.com Inc. / n/a

SW Management LC / M. Mager, E. Dweck, Besen Retail

The kitchen showroom signed a retail lease.

1369 Broadway

400

Dunkin Donuts / M. Sabbagh Realty, A. Kassin, Kassin Sabbagh Realty

Cambridge Acquisition LP / David Sitt, Sitt Asset Management

The coffee and donuts chain signed a lease.

282A Brighton Beach Ave (Brooklyn)

350

Metro PCS / Isaac Arzt, Kassin Sabbagh Realty

282A Brighton Beach Avenue / Ralph Hanon, Metropolitan Skyline Realty

The cell phone retailer signed a lease.

1324 Lexington Ave

350

Oliver Nails / n/a

1324 Lexington Avenue LLC / Jill Lovatt, Massey Knakal

The nail salon signed a lease.

1100 Madison Ave

310

The Shade Store / n/a

The Gerel Corporation / Jill Lovatt, Massey Knakal

The custom window treatments retailer signed a lease.

386 Canal St

300

Roll N Go / T. Jung, R. Smith, Winick Realty

Canal Funding Inc. / T. Jung, R. Smith, Winick Realty

The eatery signed a lease to expand its current location.

Address

Size

Buyer / Representative

Seller / Representative

Notes

10 East 53rd St

37-story, 390,000 sf office bldg

SL Green; Canada Pension Plan Investment Board / n/a

n/a / n/a

SL Green closed on its acquisition of the building for $252.2 million, and sold a 45 percent interest in the property to Canada Pension Plan Investment Board. SL Green has previously sold a 45 percent interest in 1221 Avenue of the Americas to the fund for $576 million.

33 Maiden Lane

27-story, 600,000 sf office bldg

The Federal Reserve Bank of New York / n/a

Invesco Real Estate / D. Stacom, W. Shanahan, P. Gillen, CBRE

The property sold for $207.5 million. The buyer is the building’s major tenant, occupying about 75 percent of the property.

1026 First Ave

290,480 sf apt. bldg

SL Green; Stonehenge Partners; Jeff Sutton / n/a

n/a / n/a

The property sold for $109 million.

50 Central Park South

259-room hotel

Westbrook Partners / n/a

Millennium Partners / n/a

The Ritz-Carlton Hotel sold for $105 million, the International Business Times reported. Millennium Partners bought the property for $88.8 million in 2006.

15 East 26th St

20-story, 150,000 sf mixed-use bldg

Savanna / n/a

n/a / n/a

The property sold for about $57 million, the New York Post reported. The first eight floors of the building are commercial condos, and the top 12 floors are condo apartments.

Manhattan portfolio

17 apt. bldgs, 227 units total

Treetop Development / n/a

The Pinnacle Group; Praedium / B. Knakal, H. Oster, Massey Knakal

The package of multifamily buildings sold for about $53 million. The properties are located at 926 Amsterdam Avenue, 929 Amsterdam Avenue, 931 Amsterdam Avenue, 932 Amsterdam Avenue, 934 Amsterdam Avenue, 964 Amsterdam Avenue, 965-7 Amsterdam Avenue, 969 Amsterdam Avenue, 971 Amsterdam Avenue, 924 Columbus Avenue, 926 Columbus Avenue, 928 Columbus Avenue, 943 Columbus Avenue, 953 Columbus Avenue, 961 Columbus Avenue, 973 Columbus Avenue and 342 Manhattan Avenue. In addition to the apartments, the properties together have 27 commercial units.

75 Clinton St (Brooklyn)

75-unit apt. bldg

Invesco Real Estate / n/a

n/a / n/a

The property sold for $50.8 million, Brownstoner reported.

16 East 32nd St

12-story, 71,250 sf hotel, 100 rooms total

16 East 32 / n/a

Ferrado US LLC / n/a

The Avalon hotel sold for $48.3 million, or about $483,000 per key.

Queens portfolio

5 apt. bldgs, 354 units total

n/a / n/a

n/a / B. Knakal, B. Sarath, Massey Knakal

The package of multifamily buildings sold for $38.5 million. The elevator properties are located at 191-11 Woodhull Avenue and 91-59 191st Street in Queens’ Hollis neighborhood and at 148-88 88th Avenue, 88-09 148th Street and 88-25 148th Street in Jamaica. All of the buildings are rent regulated.

364 West 18th St

57,000 sf apt. bldg, 64 units total

Stonehenge Partners / A. Aghravi, B. Ezratty, P. Nigido, Eastern Consolidated

Fortuna Realty Group / A. Aghravi, B. Ezratty, P. Nigido, Eastern Consolidated

The property sold for $33.8 million. The buyer plans to rename the building Stonehenge 18, improve the apartments and reposition the building’s retail space, which is currently configured as eight storefronts.

640 Broadway

9-story, 63,094 sf apt. bldg

n/a / n/a

n/a / R. Knakal, J. Nelson, Massey Knakal

The elevator building sold for $32.5 million.

Buys

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Buys continued Address

Size

Buyer/ Representative

Seller / Representative

Notes

201-205 and 206 West 17th St

Retail condos

n/a / David Ash, Prince Realty Advisors

The retail condo package sold for $30 million.

140 West 28th St

Parking lot

Sovereign Partners / B. Dansker, S. Manne, Marcus & Millichap

140 West 28th Street Associates / B. Dansker, S. Manne, Marcus & Millichap

The parking lot sold for $21.5 million.

991 Third Ave

3-story retail bldg

The Heskel Group / n/a

Emmes Realty / B. Knakal, C. Olsen, Massey Knakal

The property sold for $18.42 million, or about $4,039 per square foot. Capital One Bank signed a triple-net ground lease in 2006 and will occupy the space until 2031.

Harlem portfolio

4 apt. bldgs, 82 units total

Treetop Development / S. Shkury, V. Sozio, M. Tortorici, Ariel Property Advisors

Wavecrest Management Team / S. Shkury, V. Sozio, M. Tortorici, Ariel Property Advisors

The package of multifamily buildings with ground-floor retail sold for $18.4 million. The price represents a capitalization rate of less than 6 percent. The properties are located at 120-26 West 116th Street, 1917-19 Adam Clayton Powell Jr. Boulevard, 110 St. Nicholas Avenue and 110 West 116th Street. The residential units include 60 two-bedrooms and 22 three-bedrooms.

427-31 East 73rd St

Three 5-story apt. bldgs, 56 units total

n/a / n/a

n/a / Guthrie Garvin, Massey Knakal

The adjacent walk-up buildings sold for $10.9 million. Each property is about 9,440 square feet and has approximately 760 square feet of additional air rights. The apartments are comprised of 33 rent-stabilized units, 20 freemarket units, two rent-controlled units and one super’s unit.

227-29 Waverly Place

17,000 sf apt. bldg, 30 units total

Renaissance Properties / A. Miller, R. Ortiz, Eastern Consolidated

Barnel Apartments Inc. / A. Miller, P. Nigido, Eastern Consolidated; J. Nelson, Massey Knakal

The property sold for $10.7 million.

363 Fourth Ave (Brooklyn)

10,801 sf development site

The Naftali Group / n/a

n/a / James Dario, Kalmon Dolgin Affiliates

The development site sold for $10.7 million, Brownstoner reported. Plans have been approved for a 106-unit residential building with 3,592 square feet of commercial space and a 639-square-foot community facility.

134 Haven Ave

6-story, 44,442 sf apt. bldg

n/a / n/a

Dalan Management / Robert Shapiro, Massey Knakal

The property sold for $9.05 million.

1494 Second Ave

5-story, 7,750 sf apt. bldg, 16 units total

A&L 1494 LLC / David Berger, Rosewood Realty

Icon Realty Management / Aaron Jungreis, Rosewood Realty

The walk-up building sold for $7.85 million.

700 Atlantic Ave (Brooklyn)

40,000 sf industrial bldg

Waterbridge Capital / n/a

n/a / n/a

The property sold for about $7 million, the Wall Street Journal reported. The buyer is considering converting the building into a retail center, according to the paper.

498 Broome St

8,036 sf mixed-use bldg

Goose Mountain LLC / Shasta Montes de Oro, Fortune International Realty

My Soho LLC / Carol Ann Flint, Newmark Knight Frank Capital Group

The loft building sold for $6.6 million, or $821 per square foot.

1-10 Lexington Ave (Brooklyn)

55,000 sf industrial bldg

Private investor / Abraham Posner, The Midwood Group

Grandlex LLC / Cheskie Weisz, Weisz Associates

The warehouse sold for $6.4 million. The buyer plans to erect a three-story residential building on the site.

222 West 45th St

25,000 sf of air rights

Joseph Moinian; Starwood Capital Group / n/a

The Shubert Organization / n/a

The air rights sold for $6.13 million, or about $245 per square foot. The buyers acquired the air rights from the Booth Theater, which will be used to increase the size of a planned hotel at 237 West 54th Street, from 27 stories to 34 stories.

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Buys continued Address

Size

Buyer/ Representative

Seller / Representative

Notes

256 West 15th St

6-story, 11,100 sf apt. bldg, 22 units total

n/a / n/a

n/a / Brock Emmetsberger, Massey Knakal

The multifamily building sold for about $6.13 million.

37 Crosby St

7-story, 8,620 sf apt. bldg, 12 units total

n/a / n/a

n/a / Robert Burton, Massey Knakal

The property sold for about $4.38 million, or $507 per square foot.

165 Columbia Heights (Brooklyn)

4,172 sf carriage house

Anita Driscoll Feiger and George Feiger / n/a

Jehovahâ&#x20AC;&#x2122;s Witnesses / n/a

The carriage house sold for $4.1 million, Curbed reported. The property first hit the market in 2008 for $7.2 million.

362 Fourth Ave (Brooklyn)

9,525 sf office bldg

Storage Deluxe / n/a

Alfonso Fig5liolia / n/a

The property sold for $4.1 million. The building is occupied by medical tenant Nephro-Care. The buyer will develop the site into a storage facility after the tenantâ&#x20AC;&#x2122;s lease expires next year. Louis Perfetto and Christine Mulryan of Cohen & Perfetto served as legal counsel to the buyer in the transaction.

610 East 9th St

6-story, 11,568 sf apt. bldg, 24 units total

Icon Realty Management LLC / D. Cohen, A. Jungreis, Rosewood Realty

610 East 9th Street LLC / D. Cohen, A. Jungreis, Rosewood Realty

The prewar walk-up building sold for $4 million. The price represents a gross rent multiple of 10.

108-28 38th Ave (Queens)

4-story, 25,200 sf apt. bldg, 30 units total

Kat Realty / n/a

Canary Holding / John Falco, Falco & Isak Realty

The walk-up building sold for $3.85 million, or about $153 per square foot. The price represents a capitalization rate of 6.3 percent and a gross rent multiple of 9.5.

222 East 81st St

4-story, 7,200 sf apt. bldg

Icon Group / Glenn Raff, Besen & Associates

John A. Stokes Jr. Revocable Trust / Bobby Khurana, Besen & Associates

The vacant building sold for $3.75 million.

2727 Henry Hudson Pkwy (The Bronx)

60,000 sf development site

n/a / Shay Zach, Itzhaki Properties

The property sold for about $2.88 million.

284, 286 and 288 Atlantic Ave (Brooklyn)

2 mixed-use bldgs and vacant lot

Local investor / B. Leary, S. Burk, A. Sigourney, S. Kelly, C. Sendogdular, M. Dzbanek, CPEX Real Estate

n/a / B. Leary, S. Burk, A. Sigourney, S. Kelly, C. Sendogdular, M. Dzbanek, CPEX Real Estate

The package of three properties on adjoining tax lots sold for $2.8 million. The assemblage includes a four-story mixed-use building at 284 Atlantic Avenue, a vacant lot at 286 Atlantic Avenue and another mixed-use building at 288 Atlantic Avenue.

90 Clermont Ave (Brooklyn)

6-story, 7,560 sf apt. bldg, 7 units total

Abraham Equities / n/a

Eastern Capital Clermont LLC / TerraCRG

The new-construction rental building sold for about $2.63 million, or $347 per square foot. The price represents a capitalization rate of about 6.6 percent.

352 East 51st St

5,800 sf multifamily townhouse

n/a / n/a

n/a / C. Olsen, H. Oster, D. Doherty, Massey Knakal

The property sold for $2.6 million, or about $448 per square foot.

322 West 231st St (The Bronx)

Development site

n/a / n/a

n/a / K. Brumback, J. Nelson, Massey Knakal

The property sold for $2.5 million, or about $162 per square foot. The site is comprised of two lots, which are occupied by a veterinary clinic and a parking lot. There is nearly 16,000 buildable square feet as of right.

157 East 25th St

2-story mixed-use bldg

n/a / n/a

n/a / J. Ciraulo, C. Waggner, Massey Knakal

The property sold for about $2.43 million, or $539 per square foot.

34-34 Linden Place (Queens)

Development site

n/a / Lily Ren, Friedman-Roth Realty

The property sold for $2.38 million.

973 44th St (Brooklyn)

4-story apt. bldg, 20 units total

Karp & Kalamotousakis LLP / Matthew Garcia, Besen & Associates

Huang Law Firm / Matthew Garcia, Besen & Associates

The walk-up building sold for $1.6 million, or $111 per square foot. The price represents a capitalization rate of 5.9 percent and a gross rent multiple of 7.5.

2655 Frederick Douglass Blvd

15,656 sf apt. bldg, 16 units total

CRP 2655 FDB LLC / n/a

2655 Frederick Douglass Boulevard LLC / n/a

The property sold for about $1.58 million. The price represents a capitalization rate of 8.5 percent and a gross rent multiple of 5.8.

56-58 West 129th St

5,254 sf development site

n/a / M. Tortorici, S. Shkury, V. Sozio, Ariel Property Advisors

Institutional investors / M. Tortorici, S. Shkury, V. Sozio, Ariel Property Advisors

The one-story building and vacant parcel sold for $1.57 million. The buyer, a developer, is planning a condo building on the site.

514 West 168th St

4,750 sf development site

n/a / n/a

n/a / R. Shapiro, J. Nelson, Massey Knakal

The property sold for $1.4 million, or about $73 per buildable square foot.

211 Taaffe Place (Brooklyn)

4-story, 6,875 sf apt. bldg, 8 units total

n/a / n/a

n/a / Michael Amirkhanian, Massey Knakal

The property sold for about $1.3 million, or about $189 per square foot.

683 Fourth Ave (Brooklyn)

Development site

Ioannis Glyptis and Nick Malafis / n/a

683 4th Ave. LLC / O. Cohen, P. Matheos, TerraCRG

The development site with approved plans for a 15,000-square-foot residential building sold for $1.2 million, or $530 per square foot. The transaction had a price per buildable square foot of $80.

200 Columbia St (Brooklyn)

5,712 sf apt. bldg, 6 units total

n/a / n/a

n/a / S. Burk, A. Sigourney, CPEX Real Estate

The property sold for about $1.14 million.

26-12 4th St (Queens)

5,000 sf warehouse bldg

Gozzer Corporation / Gary Mayzlin, Kalmon Dolgin Affiliates

Private investor / Gary Mayzlin, Kalmon Dolgin Affiliates

The property sold for $1.05 million.

Financing Address

Size

Borrower / Representative

Lender / Representative

Notes

200 East 79th St

45-unit apt. bldg

Skyline Developers / n/a

Wells Fargo / n/a

A $112 million construction loan was provided for the development of a 19story condo. Sales are slated to launch in the fall under Stribling Marketing Associates.

203 East 72nd St

149-unit apt. bldg

203 East 72nd Street Corp. / n/a

NCB / n/a

A $4.7 million first mortgage and a $500,000 line of credit were arranged for the building.

22 West 26th St

20-unit apt. bldg

22 West 26th Street Apartment Corp. / n/a

NCB / n/a

A $4.4 million first mortgage and a $500,000 line of credit were arranged for the building.

2413-83 East 29th St (Brooklyn)

168-unit apt. bldg

Sheepshead Terrace Cooperative Apts. Inc. / n/a

NCB / n/a

A $3.4 million first mortgage and a $1 million line of credit were arranged for the building.

72-10 112th St (Queens)

66-unit apt. bldg

7210 Owners Corp. / n/a

NCB / n/a

A $2.6 million first mortgage and a $500,000 line of credit were arranged for the building.

123 West 87th St

3,944 sf townhouse

n/a / n/a

Emerald Creek Capital / Patrick Janson, Emerald Creek Capital

A $3.055 million first mortgage bridge loan was secured for the refinancing of an existing mortgage on the property.

40 Fifth Ave

73-unit apt. bldg

40 Fifth Avenue Corp. / n/a

NCB / n/a

A $3 million first mortgage was arranged for the building.

35-10 150th St (Queens)

119-unit apt. bldg

Emily Towers Owners Corp. / n/a

NCB / n/a

A $2.5 million first mortgage and a $500,000 line of credit were arranged for the building.

620-640 West 239th St (The Bronx)

72-unit apt. bldg

620 Tenants Corp. / n/a

NCB / n/a

A $1.9 million first mortgage and a $1 million line of credit were arranged for the building.

143-151 Sherman Ave

1-story, 10,000 sf retail bldg

n/a / J. Houlihan, J. Coleman, Houlihan-Parnes Realtors

n/a / n/a

A $2.2 million first mortgage loan was refinanced. The 10-year loan has a fixed interest rate of 4.75 percent for the first five years on a 30-year amortization schedule.

www.TheRealDeal.com April 2012 91

Financing continued Address

Size

Borrower / Representative

Lender / Representative

Notes

303 Mercer St and 258-262 Greene St

63 co-op units

Snug Harbor Owners Corp. / n/a

NCB / n/a

A $2 million second mortgage was arranged for the buildings.

310 West 85th St

35-unit apt. bldg

Mimosa Equities Corp. / n/a

NCB / n/a

A $1.3 million first mortgage and a $500,000 line of credit were arranged for the building.

122-46 West 146th St

27,978 sf development site

122 W. Street Realty Corp. / n/a

Emerald Creek Capital / Jeff Seidler, Emerald Creek Capital

A $1.2 million first mortgage bridge loan was secured for the financing and modification of the development site. The borrower intends to construct a parking lot while fielding offers for a sale of the site for redevelopment.

104 East 37th St

28-unit apt. bldg

East 37th Street Apartments Corp. / n/a

NCB / n/a

An $850,000 first mortgage and a $200,000 line of credit were arranged for the building.

Other Deals Hotel Williamsburg sells for $33 million, setting record Graves Hospitality and KSK Construction announced last month that they completed the sale of the Hotel Williamsburg to King & Grove Hotels for $33 million. King & Grove, the Manhattan-based boutique hotel chain backed by the Chetrit Group, paid $520,000 per key for the 64-room hotel, which closed March 8. The sale price sets a new record for Brooklyn for highest sale price on a per-room basis. (The deal was announced after the deadline for the Deal Sheet.)

Cayres acquire Williamsburg site, plan to bring Whole Foods After battling out Joe Tabak to acquire a bankrupt Williamsburg development, the Cayre family’s Midtown Equities closed on the property and will bring a Whole Foods to the site. According to the New York Post, a partnership of Michael Cayre’s Midtown Equities, Bobby Cayre’s Aurora Capital and Alex Adjmi bought 242 Bedford Avenue, at North 4th Street, from Yahuda Backer for $23 mil-

ATTENTION

lion. The group plans a $40 million, 150,000-square-foot development, which would include luxury rental apartments, a 15,000-square-foot New York Sports Club and the aforementioned Whole Foods. (The deal was announced after the deadline for the Deal Sheet.)

Ace Hotel owner, others buy Temple Court building in Financial District A joint venture partnership including New York Ace Hotel owner and GFI Capital Resources Group President Allen Gross’s GB Lodging is set to purchase the Temple Court building, a nine-story city landmark at 5 Beekman Street formerly owned by the Chetrit Group and Bonjour Capital, GFI told The Real Deal last month. The acquisition is one of GB’s first since it was founded last year by Gross and former Chartres Lodging Group partner Bruce Blum. The purchase price was not clear. (The deal was announced after the deadline for the Deal Sheet.)

CIM closes on Midtown development site Los Angeles-based CIM Group closed its majority stake in

a high-rise residential tower and retail development site in Midtown, according to a statement from the developer last month. The site, at 303 East 51st Street, will be co-developed by CIM Group and Ziel Feldman’s HFZ Capital and construction will begin later this year, the statement said. The project will rise at the corner of Second Avenue and, upon completion, will have 123 units, averaging 1,568 square feet per unit, plus 9,000 square feet of retail space on the ground floor. (The deal was announced after the deadline for the Deal Sheet.)

WTC investor closes on Yves Chelsea retail Deep-pocketed investor Lloyd Goldman, an equity partner in Larry Silverstein’s World Trade Center lease, has closed on the retail component of glassy condominium tower Yves Chelsea at 166 West 18th Street, according to public records filed with the city last month. He paid $6.6 million for the space, which is currently the headquarters of brokerage Core NYC. It was asking $7 million. (The deal was announced after the deadline for the Deal Sheet.) TRD

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Brooklyn ofﬁce market

from page 38

“With anchor institutions like NYU-Poly taking a more active role in the market, we expect that trend to continue,” he added.

FADING DREAM

M Bui See ay ld S 2- ing W 3. sN 24 Bo Y a ot Sh t h ow #6 09

Lured by low rents and 25-year tax abatements that began with the construction of the first Metro Tech building in 1990, tenants flocked to the complex early on. By the late 1990s, it was nearly completely leased up with support space for firms like Bear Stearns and Chase Bank, news reports at the time said. But over the following years, the market started to weaken. And since at least 2004, the Class A availability rate has been on a nearly steady upward push from a tight 7.4 percent to its current level above 26 percent as of the end of 2011, the most recent figures from Cassidy Turley show. Unfortunately for commercial landlords, average rents have risen only by a hair in the last few decades. And in some cases, rents have fallen. In 1985, developers were expecting a tenant to pay prices in the mid-$20s per square foot. Today, average asking rents are in the low $30s, but for some sublease space — for example in 15 Metro Tech Center — asking rents are just $19.50 per square foot, data from CoStar shows. In addition, several sources said that at the 900,000-square-foot 4 Metro Tech, JPMorgan Chase does not want to lease to potential government tenants, such as the city’s Human Services Administration. The firm, sources said, is concerned that such a service-oriented city agency would not mix well with its corporate image. A spokesperson for JPMorgan declined to comment. “They are a bank; they are not in the leasing business. ... If they were a property owner, they would have a more aggressive schedule [for leasing up space],” one Brooklyn real estate source said. Another headwind is that the generous, 25-year Industrial and Commercial Incentive Program real estate tax abatements the city gave to incentivize the construction of Metro Tech, where the last tower was finished in 2005, have started to expire. That makes the cost of leasing space there grow rapidly each year. “It puts [Downtown Brooklyn] at a competitive disadvantage vis-à-vis New Jersey,” which has an extremely aggressive incentives program, said Lee Winter, director of the business incentives practice at Cushman. “Those costs will ultimately be passed through to tenants.”

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While few expect a major turnaround soon, there are signs the negative trend could be coming to an end, some brokers say. “We have seen a lot of recent activity,” said Forest City’s Esmaeilzadeh. “There’s been a lot of pickup in terms of prospective tenants in Downtown Brooklyn. Very recently we have started to see a lot of tech companies and ‘do-it-yourself ’ firms looking at Class A.” Gary Greenspan, executive vice president at Cushman, who along with Cushman’s Mitchell Barnett represented Morgan Stanley at 1 Pierrepont Plaza, said he expected the market to improve. “It’s not going to change in the next 12 to 18 months. [But] it isn’t going to get worse,” Greenspan said. And the availability rate, an ever-shifting number, is likely to drop further. One source said about 133,000 square feet of space had been subleased at 15 Metro Tech, but not yet announced; and that Morgan Stanley was likely remaining on floors 10 through 13 in Pierrepont Plaza, cutting the availability there listed in CoStar from more than 400,000 square feet to about 160,000 square feet. Landlords and agents have been quick to trumpet large leases in the market, including a string of deals in May 2011 at 2 Metro Tech, including 120,000 square feet taken by the U.S. General Services Administration, and 90,000 square feet leased by NYU-Poly. And while NYU is embroiled in a contentious expansion plan in its backyard in Washington Square, its engineering and technical school is looking to Brooklyn, where it will be cheered if it expands further. If it buys 370 Jay Street or opts to purchase or lease 4 Metro Tech Center, as some sources say it might, it would be a shot in the arm for the area’s Class A market. In addition, although CoStar shows nearly all of 4 Metro Tech as available, JPMorgan has quietly filled approximately 400,000 square feet of it with users such as its own home loan divisions from other locations. However, those internal tenants could vacate quickly to make room for a paying tenant or a new owner, sources said. Plus, the market is tightening in Jersey City, which some view as the main competitor for Brooklyn’s Class A space. “You are seeing some very good new demand coming in,” JLL’s Wheeler said. “Jersey City does not have a lot of large-type [space], whereas the Class A [in Brooklyn] is ready to go.” TRD

3/27/12 11:05 AM

www.TheRealDeal.com January 2010 00

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Carlyle

from page 31

erside Center development on the West Side, according to published reports. The sites are saddled with affordable housing and community space requirements, and Carlyle, along with fellow developer Extell Development, is instead focusing on the three luxury condo towers it has planned for the project. Meanwhile, Carlyle picked up another development in December, when it bought a $16 million warehouse in Chelsea from Metro Group International. The firm plans to raze the two-floor, 14,440-square-foot industrial property and develop residential. No word on whether the project is slated for rentals or condos, but the property’s fate seems bright as it sits near the High Line, which has helped gentrify one of the last remaining underdeveloped parts of Manhattan. “They look for aggressive returns, just like any other private equity firm,” said Fasulo. “And they are not afraid of development, like a lot of other money is right now.”

Lagging stocks While Carlyle’s newest real estate venture appears optimistic, the firm’s looming IPO is more uncertain. In general, shares of private-equity firms have been lagging on the stock market, and the underperformance can’t be chalked up to volatile equity markets only. Shares of Blackstone and Apollo are trading well below their IPO prices, making the stocks big losers for early investors, said Josef Schuster, founder of Chicago-based IPO research and investment house IPOX Schuster. “Carlyle’s growth prospects are limited,” Schuster added. Part of the issue is that private-equity firms loaded up on debt to make leveraged buyouts and other deals, and that debt still weighs on their balance sheets, said Scott Sweet, senior managing partner at IPO Boutique, a Florida-based IPO and equity-research firm. Right now, equity investors are avoiding debt-ridden firms, making IPOs less profitable than in years past.

“The only ones who make money are the equity backers, who pay themselves extraordinary dividends, while investors are left holding the bag,” Sweet said. Investors came out winners last year, though. Carlyle brought in a record $19 billion for investors, much it from asset sales, according to a Reuters report on the firm’s yearend earnings released in March. The results wowed Wall Street and could help boost the valuation of the firm, which has yet to price its shares. Still, Carlyle’s IPO doesn’t necessarily make or break its real estate deals, though it would allow the group to raise money and create more funds without needing to go to market, said DeCheser. Still, its latest fund shows it has no problems finding investors for its real estate dealings. “Carlyle is going to go where the opportunities are,” Fasulo said. “They are trading on their name, as most big funds do, to raise money.” TRD

Tech from page 54 tion, which owns 100 Fifth. The desirability of Midtown South pockets like Union Square and the Flatiron District among tech ﬁrms has helped drive the submarket’s vacancy rate to 8.8 percent, the second lowest in the nation behind only Honolulu’s 6.7 percent, according to Cassidy Turley.

Political forces New York has almost double the number of tech companies and employees as Boston. The Big Apple has 230 tech ﬁrms, which employ 19,600 people, according to a survey released this winter of companies with at least 10 employees each by consultancy Cook Associates. Boston, by comparison, has 116 companies with 10,900 people. (Cambridge was not covered in the survey, which was released in January and looked at social networking, advertising, mobile media/commerce, e-commerce, video, analytics and marketing software ﬁrms.) But the political forces in both locations have zeroed in on expanding their tech industries. Boston Mayor Thomas Menino’s administration set up, in 2010, what it called the “Innovation District” on 1,000 acres of once-gritty South Boston waterfront. The area was dominated by rehabbed warehouses. Since the launch, more than 90 businesses have moved there. Menino, who famously eschews e-mail, also endorsed the idea of hundreds of “micro apartments” that developers want to build in South Boston. The small units — which have been compared, not always favorably, to Manhattan apartments — would cater to techies and run no more than 400 square feet each.

In New York, the effort to entice tech companies is being spearheaded by Bloomberg, who founded what’s now a multibillion-dollar media company and who proudly unveiled the city’s new Twitter handle and Facebook page in February. The city most recently flexed its tech muscle in December, when it announced that Cornell University, along with Technion-Israel Institute of Technology, was selected to create a 2 million-square-foot applied sciences and engineering campus on Roosevelt Island. The city is making a $100 million capital contribution to the project. The first phase of the estimated $2 billion campus is slated to be completed in 2017. Shortly before that announcement, Bloomberg also announced that Facebook would open its engineering office — its de facto East Coast headquarters — in New York. That came as a blow to Boston and especially Cambridge, where speculation had raged that the headquarters would be located there, after Facebook cofounder Mark Zuckerberg visited Harvard, his Cambridge-based alma mater, in November. On a smaller scale, last month, city council speaker Christine Quinn announced $100,000 in funding for a study of the Brooklyn Technology Triangle, which touches Dumbo, the Navy Yard and Downtown Brooklyn. A main goal of the study is to find ways to attract more companies to the triangle, which already has as many as 100 tech firms.

Massachusetts techies readily acknowledge that the Roosevelt Island campus will have a signiﬁcant impact on the dynamics of the technology sector. But rather than being concerned, they seem to think it could help the Boston-Cambridge market. With New York

only a short plane or train ride away, any boost that it sees will also be felt a few hours north, said Travis McCready, executive director of the Kendall Square Association, a nonprofit business booster for Cambridge’s main tech hub. The proximity allows for more regional collaboration. Plus, the Boston-Cambridge market already has a critical mass of tech companies and venture capitalists, which keeps the tech industry strong, he said. McCready noted that the tri-state area and Massachusetts are actually geographically smaller than the California tech market, which stretches from San Diego to Silicon Valley. If McCready’s theory is right, the current tech war may be a rising tide that ends up lifting both locations. And many larger brand-name tech firms already have offices in both. Amazon, for instance, has a roughly 60,000-square-foot office at 1350 Sixth Avenue, and plans to open its first Massachusetts outpost in Cambridge’s Kendall Square this spring. And, of course, Google bought the 2.9 million-square-foot 111 Eighth Avenue in late 2010 for nearly $1.8 billion for its East Coast headquarters. The search engine has increased its employee head count in Kendall Square from around 40 five years ago to around 800 today. But Boston and Cambridge were recently battling to be Google’s New England hub — Cambridge won. In the end, though, given New York’s size and the aggressive government push here, Boston-Cambridge may have to content itself with drawing 25,000-square-foot satellite offices while Manhattan claims mega headquarters. “I would say now that New York is No. 2 [in the U.S.],” said Grubb & Ellis’s Mandel. “New York was a threat to Boston [a few years ago], and now I think New York has overtaken Boston.” TRD

To accommodate those seemingly conﬂicting desires, some developers are taking an opposite approach and making lobbies smaller than in the past, which helps cut costs, sources said. “There was a time when luxury meant size in a residential lobby,” said Nancy Ruddy, principal of Manhattan-based Cetra/Ruddy, an architecture and interior design ﬁrm. Today, “we are designing lobbies that have a sense of privacy and intimacy —more like a boutique hotel than a cavernous and anonymous space.” Randy Gerner, a principal at Gerner Kronick + Valcarcel Architects, has designed a number of hotels and rental buildings with this “boutique” lobby feel, including at Ten23, an Equity Residential luxury rental at 500 West 23rd Street. At Ten23, Gerner said he aimed to “design a lobby that’s

not intimidating and that’s really intimate in character.” To do that, he said he “borrowed a lot of the aesthetic cues that we typically use in our hotel work.” Instead of large wood panels, for example, he used bricksized pieces of Australian walnut wood to create a “mosaic, wood brick wall,” he said. He also broke the lobby down into niches — for the mail room, the concierge and the elevators — to create an intimate feel, a design trick often used in hotels. No matter how elegant a building’s lobby, of course, ﬁrst impressions aren’t everything; a lovely entryway can’t disguise a subpar project, Horn noted. “The lobby is the theoretical cherry on top of the cake, but the cake has to taste good,” he said. For buyers, “if apartments aren’t done well, [the lobby] is not going to make a difference.” TRD

Foes with beneﬁts

Lobbies from page 70 The initial lobby plans, designed by the building’s architect, were “bland,” Horn said. “We wanted to spend a little more money and get a little more style,” he added, though he declined to say how much. BNO Design used custom-made furniture and ornate mirrors to try to help bring the Isis’s small lobby to life, Horn said, adding that he believes it’s slowly helping sales. The building is now 60 percent sold after three years on the market.

Hotel inspiration Today’s lobbies also tend to have a different look than those built in the mid-2000s. Consumers these days want lobbies that are visually appealing, with higher-quality materials and more thoughtful ﬁnishes. But they don’t want to overpay. 96 April 2012 www.TheRealDeal.com

Commercial market report from page 26 Pomerantz Haudek Grossman & Gross, which signed a new, 14,320-square-foot lease at 600 Third Avenue, where the asking rent was $63 per square foot, said David Berkey, executive vice president for landlord L&L Holding. The law firm took the entire 20th floor and part of the 21st floor. Ted Rotante, executive managing director at Colliers International, represented the law firm. He did not respond to a request for comment. Berkey said the Manhattanwide stall was not permanent, and was part of the “ebbs and flows in the marketplace. While we acknowledge the slowdown, we don’t think it will last.”

month with the highest increase in the percentage of available space among Manhattan’s three markets, the Cassidy Turley statistics showed. That increase was driven in part by landlords listing blocks of direct space such as 85,000 square feet at 32 Old Slip. Other new listings were 70,000 square feet at 199 Water Street and 58,000 square feet at 17 State Street. In addition, the German lender Commerzbank, which recently signed a renewal lease at 2 World

Financial Center for four ﬂoors, turned around and put one of those ﬂoors on the sublease market last month. The newly listed space is 43,374 square feet, data from CoStar showed. Those parcels contributed to driving the downtown availability rate up to 11 percent in March, up 0.6 points over the prior month. At the same time, the average asking rent rose to $38.79 per foot in March, a $0.50 per foot bump up from February. Bruce Weinberg, executive managing director at Cassidy

Turley, said financial firms normally drive about 35 percent of the leasing, but were down about 10 percent last quarter, impacting the whole market but especially Lower Manhattan. “Downtown is usually the last sector in Manhattan to fully recover, so it is nothing surprising,” he said. But, he added, media and technology are stepping in to fill some of the financial space, which could help strengthen the leasing market overall by diversifying the tenant base. In fact, the Google deal in

Chelsea is actually having an impact downtown, brokers said. As the search engine firm takes back more space in its own building on Eighth Avenue, according to brokers, tenants there have been sent packing, hunting for a new home. L&L’s Berkey said some “who need to do something because of Google” have come calling to his loftlike 973,000-square-foot property at 195 Broadway, between Dey and Fulton streets. But he had no signed deals to report yet. TRD

Midtown South More than a year after Google’s purchase of the 2.9 millionsquare-foot 111 Eighth Avenue in late 2010, a sea change has slowly evolved in Midtown South, said Bruce Mosler, chairman of global brokerage at Cushman & Wakefield. The neighborhood with smaller loftlike buildings now popular with tech firms was once just a step-child to midtown. But it has now grown into its own market, and “is no longer susceptible to the peaks and valleys of midtown.” “The Google [purchase] sealed the deal. That fact of the matter is other companies want to be there because of Google. And rents are beginning to spike there even as rents are relatively flat in Midtown,” Mosler said. One tenant that was already in the market is planning to stay put. Travel Planners, which manages bulk accommodations for attendees of associations and trade shows, is in the process of renewing its lease at 381 Park Avenue South, at 27th Street, for another seven years, ATCO’S Goldich said. When finalized, the travel firm will remain on the entire 14,000square-foot third floor, where the asking rent was $42 per square foot, Goldich said. Meanwhile, the asking rents in Midtown South continued to rise last month, reaching $43.69 per square foot, up $0.57 per foot from the prior month. At the same time, the availability rate ticked up slightly, by 0.2 points, to 9 percent in March, the data from Cassidy Turley showed.

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Neighbor disputes

from page 20

and floors of her apartment to shake. Experts point to a number of reasons for the increase in disputes. The first is financial; people who purchased or refinanced at the peak of the market are sitting on assets that are not worth what they originally paid, Shmulewitz noted. That, combined with layoffs or financial pressures, sometimes causes frustration to spill over into neighborly disputes. Some credence to that argument can be found in the city’s 311 data: Both noise and odor complaints peaked in 2009, at the height of the economic downturn in Manhattan, according to data from the New York City Department of Information Technology and Telecommunications. In 2009, some 251,000 311 calls were complaints about noise, compared to 203,000 in 2011. Some 7,971 311 calls in 2009 involved odor, compared to 6,420 last year. Attorneys said the uptick in complaints in 2009 may be one reason for increased litigation today; disputes that started out as simple complaints have since snowballed into lawsuits. Another factor is shoddy or rushed work by developers during the real estate boom, leading to ill-conceived floor plans and units that allow noise and smell to travel easily from one apartment to another. Ron Bielinski is a principal at Manhattan-based forensic architectural and engineering firm Erwin & Bielinski, which deals with noise and odor migration. He said he has seen a steady increase in work over the last five years. Two-thirds of the cases he works on are for newer developments, he added, and most of the time, the cause can be traced back to a construction defect. Noise troubleshooter Alan Fierstein, founder and president of Acoustilog, said his workload has steadily increased since 2006 — the height of the building boom — when new developments were constructed quickly, often at the expense of proper structural design. “I don’t know if people are getting more sensitive,” Fierstein said. “But they have more things to complain about.”

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Of course, Fierstein said, another reason he’s getting more work is an “increased awareness that acoustic consultants even exist.” In recent years, building boards and residents both seem increasingly concerned about quality-of-life disputes. One reason for that, attorneys said, is a landmark 2006 court ruling in the case of Poyck v. Bryant. Stanley and Michelle Bryant were renters in a condo at 22 West 15th Street who moved out of the building after second-hand smoke seeped into their apartment. The Bryants said the smoke was a health hazard for Michelle, who was recovering from cancer surgery and allergic to the smoke. The owner of the condo they’d been renting, Peter Poyck, sued them for back rent. But a judge ultimately sided with the Bryants, ruling that the secondhand smoke violated the “warranty of habitability,” which says building residents cannot be subjected to conditions that harm life, health or safety. The precedent established in that case now extends to co-op and condo boards as well as rental buildings, attorneys said. Afraid of being sued, boards turn to lawyers — and smell and noise consultants — faster than in the past. “Everyone is afraid of liability and they are acting more prophylactically,” Shmulewitz said. Beyond the intangibles of tension between neighbors, disputes can also result in higher maintenance and common charges. Sound testing, for example, usually costs between $5,000 and $10,000; an expense usually shouldered by the co-op or condo board, according to Wolf Haldenstein’s Sladkus. If a case goes to litigation, legal fees typically start at around $50,000 and can easily run into the six figures. Buildings often budget around $10,000 to $20,000 per year for legal fees, he said, and if those fees suddenly jump to $100,000, the money usually comes from residents’ pocketbooks, in the form of assessments or a hike in maintenance fees and common charges. To make matters worse, “these cases are very time consuming” for lawyers, Sladkus said. “Not only do you have to have sound testing performed and analyzed, but you need affidavits from many of the people who are adversely affected by the noise.” Recent signs that the economy may finally be on the mend could offer some glimmer of hope for these disputes. But, in the words of Marc Luxemburg, president of the Council of New York Cooperatives & Condominiums, they are also just part of who we are. “People have always had situations where they can’t get along,” said Luxemburg. “This has gone on with humans since we came down from the trees.” TRD

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Residential market from page 16 quarter, when year-over-year sales of Manhattan co-ops and condos were down 12.4 percent and the median sale price was more or less stuck around $850,000, according to Miller Samuel’s ﬁgures. Joanie Schumacher, a sales director with Corcoran Sunshine Marketing Group, who is working at the Laurel condominium tower at 400 East 67th Street, observed that last month many apartment hunters were coming back to view properties four, ﬁve or even six times before getting down to negotiations.

These days, that hesitation could end up hurting buyers. Bond’s Choi said that recently many of her buy-side clients have lost out on properties because they were either outbid or failed to submit an offer before someone else signed a deal. “It was a very frustrating experience for my clients who began their search believing that the market was slowing down and they had leverage … but then [they] experience that’s not the case,” she said. Eddie Shapiro, CEO of NestSeekers In-

ternational, said that his agents are advising buyers to bid higher and closer to the asking price. “The recession is over and we have to get in the mind-set of ‘next real estate boom,’ ” he said. “That means, if you ﬁnd something that you like, bid close to ask and be willing to go to full ask. Wait too long or bid too low and you might miss the deal.” Still, not everyone encountered uneducated buyers. Sandy Edry, founder of the Edry Group, a Manhattan-based residential brokerage, said he has encountered

buyers who are adjusting to the current market, even if they are still on the lookout for deals. He said that the biggest challenge of the past month has been dealing with renters who were considering buying, but then reevaluated. “In other words,” he said, “they are tempted to make the leap into homeownership and they even go as far as putting in offers, but then the nerves set in and I get the call that they’ve decided to rent for another year. Oh, well.” TRD

percent to 8 percent over the course of several years, but have achieved much more in just the first few quarters,” Kaye said. But real estate investors need more than just elbow grease to get started in today’s uncertain climate. Lenders are still cautious, industry experts said, so they prefer new investors (or their partners) to have some experience, and to have financial skin in the game (see related story on page 68). Benchmark, founded in 2009 by Aaron Feldman and Jordan Vogel, is only 50 to 60 percent leveraged at the 14 multifamily buildings it’s purchased so far, Vogel said. And Feldman and Vogel, both 32, previously worked at acquisitions firm SG2 Properties, where they were “groomed” in multifamily building management. With-

out that experience, “I don’t think we would be in a position to do what we’re doing,” Feldman said. “We went down this path because this is what we know.” In October, the firm sold 142 Sullivan Street for 60 percent more than it originally paid, after increasing the rent-roll by 35 percent. At 156 Sullivan Street, a 22unit building Benchmark purchased for $6.05 million in 2010, Feldman and Vogel are aiming to repeat their success. They’ve listed the building for $15.75 million. Other young firms who started out doing new-construction condos have now moved into the multifamily sphere. One example is New Jersey–based Treetop Development, founded in 2005 by Adam Mermelstein and partner Azi Mandel. In the mid-2000s, Treetop built the Saffron condo in Jersey City and a 13-unit condo building at 471 Keap Street in Brooklyn, which eventually went rental. But recently, the firm has moved away from ground-up development to focus on multifamily acquisitions. Treetop in February paid $18.4 million for 82 residential and 11 retail units in Upper Manhattan. That transaction was closely followed by the $53 million purchase of 17 buildings on the West Side, between 105th and 108th streets. “I don’t think we feel the [limitations of the] credit market as much as we did with condos,” Mermelstein said.

keting launch for an average of $501 per square foot, said Brown, who is now scouting for larger opportunities. The project yielded a 30 percent annualized return for investors, he said. Brown, who previously worked at Hudson Companies and the LeFrak Organization, said his prior experience was helpful now that he’s out on his own. “If you have a track record of success, it certainly gives lenders peace of mind,” he said. Developer Kate Shin has targeted a different niche: very wealthy Manhattanites. In 2007, Shin founded WEmi:t (Where East Meets West), which focuses on restoring and modernizing townhouses. For her ﬁrst project, Shin partnered with architect Toshiko Mori to restore a 22-foot-wide carriage house at 170 East 80th Street. Shin purchased the townhouse for $8.5 million in 2008. In January of last year, she listed it for $35 million with Paula Del Nunzio of Brown Harris Stevens. “We’re targeting a top-tier market — people with money will always have money,” she explained. “There’s a limited supply for this type of project, but there’s a lot of demand for it all over the world.” Shin was previously a director in the private equity department at Angelo, Gordon & Co., and has signiﬁcant experience raising funds for investment in Asian real estate markets. (In fact, she has already lined up investments for her second and third projects, currently in the pipeline.) She gravitated toward townhouse renovation, she said, because it was a niche market where she could be competitive. If she’d chosen to take the capital from her Asian investors and build a large condo development, she’d be battling for buyers with New York’s top developers. “It would be impossible to survive,” she said. TRD

New investors from page 42 with the investment firm Rockwood Capital. In September, they paid $90 million for a portfolio of five Manhattan rental buildings. Stone Street manages its properties inhouse, aiming to add value by “completely gutting and reconfiguring the apartment[s] to utilize every square foot,” Morgenstern said. Using that strategy, he said, the firm recently leased one unit at 7 Cornelia Street for more than twice what it went for when they bought the building. They said the current strong rental market has also been crucial to the firm’s success. At one of its Manhattan portfolios, Stone Street is paying its investors returns north of 10 percent. “When we purchased this portfolio, we anticipated distributions ranging from 5

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Beyond rentals Multifamily is not for everyone, however. Aspen’s Brown, for example, “never found too much stuff that I got really excited about” in the multifamily sector, he said. “You have to do a really large volume to have it really make sense.” Instead, he focuses primarily on boutique, ground-up construction projects. Last year, he and a partner completed construction on a new two-family brownstone at 319 Fourth Street, which they ultimately sold for $2.87 million. “It did not feel like it was low-risk,” Brown said of the project, which was planned in 2007 and put on hold during the downturn, “but the capital required was less [than for a larger development project.]” And at 580 Sterling Place, all eight units were sold within seven months of the mar-

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City Hall

from page 36

Bloomberg after opposing Vornado’s 2010 plan to build a nearby skyscraper (see related item above). Bloomberg came out against Malkin when the developer said Vornado’s proposed tower would be detrimental to the city’s skyline. “Anybody that builds a building in New York City changes its skyline; we don’t have to run around to every other owner and apologize,” Bloomberg said in 2010, according to the Associated Press. The same year, Quinn, a mayoral hopeful, and other politicians lashed out at Malkin for his refusal to illuminate the Empire State Building in blue and white lights for what would have been Mother Teresa’s 100th birthday. Malkin said he doesn’t light the building for religious ﬁgures. But Malkin also dismissed talk of tension. “I am a big fan of the Bloomberg administration,” he said via e-mail. “There is no bad blood at all. Everyone has differences from time to time. Fifteen Penn Plaza does not deﬁne our relationship.”

condos are now planned for the site, a source familiar with the negotiations said. Ken Fisher, who is also Shaoul’s attorney, dismissed the incidents, saying that the community is just reluctant to change. “There are many people who want to encase the city in amber,” Fisher said, “but if they did that, it would die.”

The Guttman family Josh Guttman and his son Jack own warehouses and apartment buildings in Greenpoint and Dumbo. But they haven’t done much to ingratiate themselves with the local ofﬁcials. Four ﬁres that have occurred on their properties since

tained, according to the Brooklyn District Attorney’s ofﬁce. The Guttmans have promised to bring the bulkheads up to code. They are now at loggerheads with the city over another issue, however. The city’s Department of Transportation sued the Guttmans to get a chain-linked fence removed on Noble Street in Greenpoint, which is blocking access to the waterfront for neighborhood residents. The Guttmans claim they own the property where the fence is located. Josh Guttman did not return a call for comment. The New York City Law Department said the case is active, but in the discovery phase. So far, the duo has not had much business before the city. Empire State Building owner Anthony Malkin dismissed talk of tension with the mayor over a project a rival developer was building, saying he’s a “big fan of the Bloomberg administration.”

Magnum Real Estate Group Magnum, run by Ben Shaoul, ran afoul of some city leaders this winter in a spat involving an East Village property. Shaoul wanted to add a floor to a five-story building on East 10th Street in an area that was under consideration to be landmarked. Rather than wait and find out if the city was going to approve the landmark designation, which would have made any renovations difficult, Shaoul asked the DOB to approve the addition. The agency was required to respond in 40 days. The Landmarks Preservation Commission did vote to stop the project, but not before the addition was approved. Shaoul has also come under fire for adding two floors atop an apartment building at 514 East 6th Street without proper approvals. Tenants said the additions were unsafe, while Shaoul rebutted that those claims were baseless. In 2010, the Board of Standards and Appeals voted to allow him to keep one of the floors, but to remove the penthouse. But Shaoul is seeking a variance to keep both floors in place. In December, state senator Daniel Squadron told the board that Shaoul should not be granted that waiver. “Due to the imperative to protect the safety of residents, the previous noncompliance of the owner and the need to maintain the character of the neighborhood, I urge the BSA to refuse this request for a zoning variance,” Squadron said, according to written testimony. And late last year, Shaoul paid $26 million for the East Village’s Cabrini nursing center with the intention of selling it to the Archdiocese of New York, over the objections of local leaders, like Squadron, who wanted to keep it as a health-care center. But talks with Cabrini broke down and

1991 have been discovered to have been intentionally started, the New York Times reported. Arson was also suspected in a fifth — a 10-alarm blaze in 2006 that destroyed 15 warehouses along the Greenpoint waterfront and took days to extinguish. But investigators ultimately determined that the 10-alarm fire was started by two homeless men. The Guttmans have never been charged with any arsonrelated crimes. But they have been cited for environmental violations at their properties, including the site of the most recent fire, where piers and bulkhead were poorly main-

But if they were to ever develop their waterfront parcels, sources said, they would likely encounter resistance. “It has not been their strategy to go to the local community and try to win friends,” said Stephen Levin, the city council member who represents the area. “That works to their detriment.” On the ﬂip side, Levin applauded the Guttmans’ new Green Desk business, which rents shared ofﬁce space at 158 Water Street and 68 Jay Street in Dumbo. “They haven’t done everything wrong,” he said. TRD

a month later, the deal was in contract for the full asking price, with the multilingual Torresy — who specializes in international clients — representing Rybolovlev. “As brokers, we all wish we had listings like that, and they sold like that,” Corcoran’s Speer said. But the seeming ease of the sale — and the charity component — has also led to some speculation that the listing was designed as a public-relations stunt. Some brokers suggest that Blackmon’s family connections, including his stepfather’s presence in the business world and his mother’s Citigroup ties, must have played a role in his success. Still, Blackmon has continued to rack up eight-ﬁgure sales — and to repeatedly represent buyers who then hire him to sell their units — further solidifying his reputation

in the industry. He is currently listing an $18 million duplex at the Trump International Tower that belongs to Andrew Rosen, founder of the apparel company Theory, as well as consultant Corbett Price’s two-bedroom at 15 Central Park West, on the market for $7.4 million. (Representatives for Rosen and Price did not respond to requests for comment.) As for Jeffries’ apartment at the Ritz-Carlton, that listing is likely the direct result of the Weill sale, brokers said, especially since Jeffries is rumored to have been quietly shopping the 14-room property for several years now with another broker. (Jeffries did not respond to requests for comment.) As Olshan put it, “success breeds success.” TRD

Blackmon from page 44 Duncan, a senior vice president at Fox Residential Group who worked in the sales office at 15 Central Park West from 2005 to 2007. As a building resident, Blackmon not only has access to a wealthy and well-connected clientele (as well as potential sellers), he no doubt has pricing, availability and unit information at his fingertips, brokers said. Blackmon has sold $125.2 million worth of real estate in the building, and represented buyers in an additional $96 million worth of deals there (including Weill’s penthouse purchase), according to Brown Harris Stevens. In November 2011, Blackmon listed Weill’s penthouse for $88 million, or $13,000 per square foot. Just before the listing officially hit the market, Weill announced that he would donate the proceeds to charity. Less than 102 April 2012 www.TheRealDeal.com

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