The Real Deal February 2014 by The Real Deal

Sellers backtrack on ‘best and final’

www.TheRealDeal.com

Industry praise for mayor’s appointees

The NYC area stadium stimulus

N ew York R eal E state N ews

Final sales of Helmsley era

128

Sealing deals with Instagram

Vol. 13 No. 2 February 2014 $3.00

in d n e l se o o l , m o o b e h 6 t 5 o p t s l k a c e a d b C w Y o In thr on rise in N

Sticker shock Jared Kushner, Lies about size at NYC condos accidental CEO at office towers A ranking of new buildings hitting the market shows almost half asking $3,000 a square foot or more p38

The 33-year-old took over his family empire early, but has silenced doubters with $3.5 billion in buys p31

NYC landlords getting bigger profits by increasing ‘loss factor’ for unusable common space p42

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ACQUISITION

Premier Manhattan

200 Central Park South

Columbus Circle/Midtown

NEW TO OUR PORTFOLIO

LOCATION The entire city block of 7th Avenue between 58th Street and Central Park South, this building also includes frontage on both 58th Street and Central Park South. SIZE ±31,249 SF of retail space

SUBWAY PROXIMITY within 2 blocks within 3 blocks

FRONTAGE Over 475’ of wraparound frontage INFORMATION • 4 R etail Units & 17 Professional Units • C urrent tenants include Le Pain Quotidien, Faust Pianos, Allegro Pianos and SBR Multi Sports

145 Greene Street

SoHo LOCATION Corner of Greene Street and Houston Street

SIZE Ground: Lower Level: Total:

±1,970 SF ±960 SF ±2,930 SF

FRONTAGE Over 124’ of frontage along Houston Street

INFORMATION • Features i nclude high ceilings and extraordinary frontage • N eighboring retail includes: Chanel, Louis Vuitton, Club Monaco, Ralph Lauren, Burberry, Dior • A t the cross-roads of SoHo, NYU, Greenwich Village, and NoHo

148 Church Street

LOCATION Corner of Chambers Street & Church Street SUBWAY PROXIMITY at foot of building within 5 blocks

SIZE Ground: Lower Level: Total:

TriBeCa

FRONTAGE ±1,946 SF Over 100’ of highly ±1,956 SF visible frontage ±3,902 SF* along Church & *Up to 5,848 SF with proposed Chambers Streets second level

INFORMATION • The C hambers Street subway station is the 14th busiest station in New York City with an average of 54,000 people passing through weekly • One block from City Hall, five blocks from the World Trade Center

249 Church Street

LOCATION Northeast Corner of Church & Leonard Streets

SIZE Ground: Cellar: Sub Cellar: Total:

TriBeCa

±1,400 SF ±1,885 SF ±1,837 SF ±5,122 SF

FRONTAGE Over 85’ of frontage

INFORMATION • Excel lent access to transportation in a central, highly accessible location • D irectly opposite 56 Leonard, the largest residential development in TriBeCa • 14’ ceiling heights designed for a first class restaurant with two additional below grade levels

80 Carmine Street

West Village LOCATION Corner of Carmine Street & Varick Street

SIZE Ground: Lower Level: Outdoor Patio/ Glass Enclosure: Total:

±3,050 SF ±4,955 SF

SUBWAY PROXIMITY within 2 blocks

±1,000 SF ±9,005 SF

INFORMATION • Turn-key restaurant opportuni ty with 1,000 SF of outdoor patio; all uses considered • N eighboring tenants include: HSBC, CitiBank, Soul Cycle, Equinox, NY Sports Club

For Leasing Information Please Contact:

AJ Levine • alevine@aacrealty.com • 646.214.0245

Retail Opportunities Lincoln Square/Upper West Side NEW TO OUR PORTFOLIO

ASHKENAZY

ACQUISITION

1991 Broadway

LOCATION On Broadway between 67th & 68th Streets SUBWAY PROXIMITY within 5 blocks SIZE Ground: Mezzanine: Lower Level: Total:

FRONTAGE Over 55’ of prime glass frontage on Broadway

±3,000 SF ±2,000 SF ±2,500 SF ±7,500 SF

INFORMATION • D irectly adjacent to the Apple store at Lincoln Center • D irectly across from the World Famous Lowes Theater and only 3 blocks from Lincoln Center for the Performing Arts

Philip House (1311-1337 Lexington Avenue)

Upper East Side LOCATION Located on Lexington Avenue between 88th & 89th Streets

SIZE Multiple Retail Opportunities

SUBWAY PROXIMITY within 2 blocks

INFORMATION • Situated at the base of Philip House, a classic 12-story prewar condominium conversion containing 71 luxury residences • Located in the heart of Carnegie Hill, home to some of the world’s wealthiest residents

Lower East Side LOCATION Corner of Delancey & Clinton Streets, at the foot of the Williamsburg Bridge SUBWAY PROXIMITY within 1 block

SIZE Ground: Up To:

FRONTAGE Over 100’ of frontage along Delancey Street

±2,725 SF ±5,250 SF

156 Delancey Street

INFORMATION • Be seen by over 111,189 vehicles and over 200k people traveling the bridge each day • Directly across from the newly approved Seward Park Development, a 1.65M SF mixed use project including 1,000 new housing units

TriBeCa LOCATION Southeast Corner of Church Street & Leonard Street

SIZE Ground: Cellar: Sub-Cellar: Total:

±934 SF ±3,178 SF ±13,236 SF ±17,348 SF

FRONTAGE ±17’-3” on Church Street

241 Church Street

INFORMATION • Located at the base of the premier residential building in TriBeCa and directly across the street from 56 Leonard, the largest residential development in TriBeCa (145 units over 60 stories) • Central, highly accessible location situated between Wall Street and the Financial District to the South and the West Village and SoHo to the North

Chelsea LOCATION Corner of 6th Avenue and 20th Street in the heart of the Ladies’ Mile

Limelight (656 Avenue of the Americas)

SIZE Ground: ±4,649 SF

INFORMATION • Co-tenants Include: David Barton Gym, Grimaldi’s, Chateau • Redesigned floor plates; this iconic structure represents a spectacular opportunity that would be unachievable in an average building • Surrounded by exceptionally high-volume retail tenants including Bed Bath & Beyond, Marshalls, Trader Joes, Burlington Coat Factory and Home Depot

Daniel Iwanicki • diwanicki@aacrealty.com • 646.214.0251

ASHKENAZY

ACQUISITION

Premier Manhattan

200 Central Park South

Columbus Circle/Midtown

NEW TO OUR PORTFOLIO

SUBWAY PROXIMITY within 2 blocks within 3 blocks

FRONTAGE Over 475’ of wraparound frontage INFORMATION • 4 R etail Units & 17 Professional Units • C urrent tenants include Le Pain Quotidien, Faust Pianos, Allegro Pianos and SBR Multi Sports

145 Greene Street

SoHo LOCATION Corner of Greene Street and Houston Street

SIZE Ground: Lower Level: Total:

±1,970 SF ±960 SF ±2,930 SF

FRONTAGE Over 124’ of frontage along Houston Street

148 Church Street

LOCATION Corner of Chambers Street & Church Street SUBWAY PROXIMITY at foot of building within 5 blocks

SIZE Ground: Lower Level: Total:

TriBeCa

FRONTAGE ±1,946 SF Over 100’ of highly ±1,956 SF visible frontage ±3,902 SF* along Church & *Up to 5,848 SF with proposed Chambers Streets second level

249 Church Street

LOCATION Northeast Corner of Church & Leonard Streets

SIZE Ground: Cellar: Sub Cellar: Total:

TriBeCa

±1,400 SF ±1,885 SF ±1,837 SF ±5,122 SF

FRONTAGE Over 85’ of frontage

80 Carmine Street

West Village LOCATION Corner of Carmine Street & Varick Street

SIZE Ground: Lower Level: Outdoor Patio/ Glass Enclosure: Total:

±3,050 SF ±4,955 SF

SUBWAY PROXIMITY within 2 blocks

±1,000 SF ±9,005 SF

INFORMATION • Turn-key restaurant opportuni ty with 1,000 SF of outdoor patio; all uses considered • N eighboring tenants include: HSBC, CitiBank, Soul Cycle, Equinox, NY Sports Club

For Leasing Information Please Contact:

AJ Levine • alevine@aacrealty.com • 646.214.0245

Retail Opportunities Lincoln Square/Upper West Side NEW TO OUR PORTFOLIO

ASHKENAZY

ACQUISITION

1991 Broadway

LOCATION On Broadway between 67th & 68th Streets SUBWAY PROXIMITY within 5 blocks SIZE Ground: Mezzanine: Lower Level: Total:

FRONTAGE Over 55’ of prime glass frontage on Broadway

±3,000 SF ±2,000 SF ±2,500 SF ±7,500 SF

INFORMATION • D irectly adjacent to the Apple store at Lincoln Center • D irectly across from the World Famous Lowes Theater and only 3 blocks from Lincoln Center for the Performing Arts

Philip House (1311-1337 Lexington Avenue)

Upper East Side LOCATION Located on Lexington Avenue between 88th & 89th Streets

SIZE Multiple Retail Opportunities

SUBWAY PROXIMITY within 2 blocks

Lower East Side LOCATION Corner of Delancey & Clinton Streets, at the foot of the Williamsburg Bridge SUBWAY PROXIMITY within 1 block

SIZE Ground: Up To:

FRONTAGE Over 100’ of frontage along Delancey Street

±2,725 SF ±5,250 SF

156 Delancey Street

TriBeCa LOCATION Southeast Corner of Church Street & Leonard Street

SIZE Ground: Cellar: Sub-Cellar: Total:

±934 SF ±3,178 SF ±13,236 SF ±17,348 SF

FRONTAGE ±17’-3” on Church Street

241 Church Street

Chelsea LOCATION Corner of 6th Avenue and 20th Street in the heart of the Ladies’ Mile

Limelight (656 Avenue of the Americas)

SIZE Ground: ±4,649 SF

Daniel Iwanicki • diwanicki@aacrealty.com • 646.214.0251

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Contents F E B R U A R Y

REFLECTING PRESENCE

Bidding wars take ugly turn

De Blasio eases fears

Bracing for bonuses

2 0 1 4

More sellers back out of deals even after “best and final” offers are in.

Mayor’s first real estate–focused appointees get high marks in industry. Will Wall Street payouts mean more big-ticket apartment sales this year?

A reason to be bullish: Bonuses are expected to be up 5 to 10 percent.

At the desk of: Ismael Leyva The prolific Mexican-born architect talks about everything from working in China to his love of bonsai trees to the dream home he hopes to build for himself upstate. Architect Ismael Leyva

As the only building officially on memorial grounds, the National September 11 Memorial Museum Pavilion must echo the somber dignity of its WTC environs while admitting thousands of visitors to its exhibits each day. To achieve these

words... 28 InThetheir funniest and most insightful real estate comments.

diverse goals, Snøhetta teamed with consultant Front Inc.

Jared Kushner, the accidental CEO

to design an enclosure that both maximizes the building’s security and mirrors its placid surroundings. Through the changing days and seasons, it offers museumgoers a setting

The 33-year-old was forced to take over his family’s firm when his father ran afoul of the law, but has since silenced doubters with $3.5 billion in buys.

for reflection on the past while looking to the future.

Transforming design into reality For help achieving the goals of your next project, contact the Ornamental Metal Institute of New York.

Kushner Companies CEO Jared Kushner

Closing horror stories 34 Wanted: The federal government is asking consumers and real estate pros to share their worst closing experiences.

legal? 34 IsTheBitcoin state is looking into regulations Publisher of Metals in Construction 211 E 43 ST | NY, NY 10017 | 212-697-5554 | www.ominy.org

around the virtual currency, which has gained popularity in the industry.

stadium stimulus 36 The With the Super Bowl front and center, a look how NYC-area stadiums have impacted surrounding real estate.

36 Citi Field, which opened in 2009

Architect: Snøhetta Photo: Snøhetta

10 February 2014www.TheRealDeal.com www.TheRealDeal.com 8 October 2012

A ranking of new Manhattan condos by asking price finds almost half of projects with price tags of $2,000 a square foot or more.

www.TheRealDeal.com March 2012 00

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Contents continued

ASTOR TURF

42 Lies in size How commercial building owners get a boost from increasing ‘loss factor’ and charging for unusable common spaces.

Sam Boymelgreen

Sam Boymelgreen, clearing his family name The fledging developer says his controversial father, Shaya, isn’t involved in his projects.

of beds ahead 46 Plenty City to hit record 110,000 hotel rooms; insiders say no glut in sight, but some fear a dampening of rates.

53 In Manhattan’s East Village, a neighborhood known for passionately independent movements, 51 Astor coolly shows it belongs. Designed to attract a diverse range of tenants by Maki and Associates for Edward J. Minskoff Equities, it links two huge volumes on a full city block yet manages to appear different from each angle. The building’s structural steel acrobatics ensure flexibility to serve this market long-term while coalescing with a neighborhood master plan to connect community through public space—a restrained composition in an unrestrained neighborhood.

Structural Steel Right for any application For help achieving the goals of your next project, contact the Steel Institute of New York.

The winter getaway roundup The vacation destinations — from Mexico to the Swiss Alps — where Gothamites are boosting the market.

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

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

National Market Report

A look at banks’ new (and looser) lending requirements for NYC commercial deals, the new wave of CMBS momentum and the latest lenders getting in the market.

Reports from around the country on significant developments and trends.

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

104

Development Updates

Publisher of Metals in Construction 211 E 43 ST | NY, NY 10017 | 212-697-5553 | www.siny.org

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

Gov. Andrew Cuomo, left, and Mayor Bill de Blasio at the REBNY Gala

crowd gets giddy 72 REBNY Industry welcomes new mayor and council speaker at annual gala.

106

Residential Deals An insiders’ look at how home sales really happen.

120

Calendar of Events Check out this month’s activities.

Architect: Fumihiko Maki, Maki Associates Structural Engineer: Ysrael A. Seinuk Photo: Richard Ginsberg

10 12 February October 2012 2014 www.TheRealDeal.com www.TheRealDeal.com

130

Big Mack Richard Mack on doing soft drugs, getting fired and fielding calls from Russian oligarchs.

128

We Heard A lighter look at industry buzz.

www.TheRealDeal.com March 2012 00

$500,000,000 Closed in 2013 Recent 4th Quarter Transactions

$38,000,000

$37,000,000

$35,000,000

Loan Origination Mixed-Use Conversion Queens, NY December 2013

Loan Origination Multifamily Brooklyn, NY October 2013

Loan Origination Hotel Development Site Manhattan, NY September 2013

$27,000,000

$18,100,000

$17,440,000

Loan Origination Queens / Brooklyn Mixed-Use October 2013

Distressed Note Portfolio Acquisition Brooklyn & Bronx, NY November 2013

Note Financing Multifamily Properties Bronx, NY December 2013

$15,000,000

$12,500,000

$9,600,000

Loan Origination Mixed-Use Brooklyn, NY November 2013

Loan Origination Land Manhattan, NY December 2013

Construction Loan Origination Multifamily Brooklyn, NY November 2013

$7,400,000

$6,250,000

$4,150,000

Distressed Note Acquisition Mixed-Use Queens, NY November 2013

Loan Origination Multifamily Queens, NY December 2013

Loan Origination Land / Predevelopment Miami, Florida December 2013

$3,175,000

$2,450,000

$1,000,000

Distressed Note Acquisition Medical Office Queens, NY November 2013

Distressed Note Acquisition Multifamily / Mixed-Use Queens, NY November 2013

Distressed Note Acquisition Mixed-Use Brooklyn, NY November 2013

825 Third Avenue • 37th Floor • New York, NY 10022

(646) 472-1900 • www.madisonrealtycapital.com Includes deals closed by Sullivan Realty Capital, LLC, an investment adviser registered with the Securities and Exchange Commission doing business as Madison Realty Capital, and its affiliates. Past performance does not guarantee future results. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities listed. Holdings are subject to change.

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

Rosewood Realty Group would like to extend our thanks to all of our clients & friends for helping us achieve another unprecedented year. IN 2013

$2,262,402,000 152 TRANSACTIONS CLOSED CONSISTING OF 339 PROPERTIES TOTALING 12,888 RESIDENTIAL UNITS AND 214 COMMERCIAL UNITS WE ARE PROUD OF OUR PROFESSIONAL TEAM DAVID BERGER BILLY BILLITZER JONATHAN BIRNBAUM JAKE BLATTER DEVIN COHEN STEVEN J. FERGUSON MICHAEL GUTTMAN JOSHUA KLEIN SAMUEL KOORIS MICHAEL KERWIN EDEN MELLOUL RYAN PERKOSKI DAVID SCHEER DOV TEPPER SAM ZAGOREN

WE LOOK FORWARD TO A GREAT 2014! ROSEWOOD REALTY GROUP 38 East 29th Street • New York, NY 10016 • 5th Floor 212 - 359 - 9900 www.rosewoodrealtygroup.com

14 February 2014 www.TheRealDeal.com

DEPUTY Managing Editor Eileen AJ Connelly EXECUTIVE Web Editor John Goff ASSOCIATE WEB Editor Guelda Voien Art Directors Ronald Gross, Keziah Makoundou Senior ReporterS Adam Pincus, Katherine Clarke Reporter Hiten Samtani SOUTH FLORIDA BUREAU CHIEF Eric Kalis Contributors C. J. Hughes, David Jones, Adam Piore EDITORIAL OPERATIONS MANAGER Linden Lim Web Producers Mark Maurer, Julie Strickland, Zachary Kussin, Angela Hunt Editorial Assistant Sasha von Oldershausen Interns Juan Zielaskowski, Inga Ryabchikova Photographers Chris Martin, Marc Scrivo Director of mARKETING OPERATIONS Yoav Barilan ASSOCIATE SALES DIRECTOR Ross Fox Advertising Sales Eran Evron, Abi Laoshe, Nick Mascaro, Robert Stearns, Nicki Chadi, Sigalit Levi DIGITAL TRAFFic MANAGER Junaid Zahid WebmasterS Nima Negahban, Andrew LoCascio Finance director Kenneth Cyrus Administrative Assistant Virginia Durso Circulation Paul Destanko Distribution Mitchell Newman, Patricia Hofmann, Forero Express ATTORNEY Barry J. Friedberg Trachtenberg Rodes & Friedberg LLP Accountants William T. McCallum, CPA, P.C., Christine Wang

The Real Deal is a registered trademark of Korangy Publishing Inc. Copyright © 2014. 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

Real estate’s fuzzy math

oss factor is one of the more maddening concepts in New York City real estate. It’s the measurement that office landlords use to figure out how much tenants pay for the shared space in an office building. The only problem is that a building’s loss factor — and therefore its size — is arbitrary and driven by market forces, so it doesn’t reflect that actual size of a building. To repeat that: the actual size of an office building in New York City does not correspond to its actual size. As reporter Hiten Samtani explores in a story starting on page 42, a building’s rentable square footage typically jumps when it is remeasured after an acquisition, a big renovation, or when an owner is mulling a sale of the property. When the Durst Organization bought a stake in 1 World Trade Center, for example, the size of the building suddenly jumped from 2.6 million to 3 million square feet. The Blackstone Group’s 1140 Avenue of the Americas grew by 40 percent recently, after a capital improvement project. And as the economy improves, loss factor generally increases, so the size of many New York City office buildings will grow without anyone so much as lifting a hammer or hoisting a construction crane. Many in commercial real estate are, of course, already aware of this phenomenon and have gotten used to it, with tenants accepting this as the cost of doing business. But just because people get used to things, doesn’t mean they are right. Building owners are measuring space according to rules set by REBNY, which justified the guidelines to TRD by saying they reflect more than 100 years of office development. But appealing to history rather than to rules is like saying the Spanish Inquisition was acceptable because it had already been going on for a couple of centuries. Numbers are supposed to be the one objective barometer in the real estate world,

Numbers are supposed to be the one objective barometer in the real estate world. When the numbers themselves have been co-opted by market forces, as is the case with loss factor in office buildings, then what do you have to go on? which is always full of smoke and mirrors. When the numbers themselves have been coopted by market forces, then what do you have to go on? Meanwhile, relying on numbers is the precise mission of our ninth annual Data Book, which is included with this issue. The Data Book brings together all the key market stats in one place — from price averages and deal volume across sectors, to the big transactions and most active players. Numbers and data serve as a North Star for real estate players to make decisions about what to buy and what to invest in when navigating the murky waters of real estate. And there are important changes on the horizon for how real estate data is collected and disseminated, including through the rise of so-called “Big Data,” which looks at macro trends, and through seed money that new real estate startups are raising. In addition, shake-ups at established market leaders like StreetEasy in New York could change the kind of information the industry has access to. TRD, too, is planning a major push on the data front in 2014, with a new section on our website that will contain greatly expanded data offerings, as I explain in my introduction to the Data Book. In the meantime, also be sure to check out our main cover story, “Risk is back,” about the looser lending in New York City real estate today. In a throwback to the boom, banks are starting to lend on projected income (rather than what a building is actually generating now), requiring less equity in deals, providing loans to less experienced developers and asking for fewer or no personal guarantees on deals. While things are clearly not as frothy as they were in, say, 2007, it could be problematic if it goes unchecked, market observers say. Also a concern is the price per square foot new condos on the market are asking today, which we examine in a story starting on page 38. We found that more than half the projects surveyed were asking $3,000 a square foot or more, a level that would have been unthinkable in the past. Finally, we take a look at Jared Kushner in a profile on page 31. The young real estate and media mogul has silenced doubters since taking the helm of his family’s real estate empire, snapping up $3.5 billion of buildings. And Mayor Bill de Blasio, too, is winning more industry support as he makes more key real estate appointments (see page 20). Enjoy the issue and enjoy the Data Book.

Stuart Elliott

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18 February 2014 www.TheRealDeal.com

Backtracking on ‘best and final’

Buyers get ‘gazumped’ as sellers ditch agreements at 11th hour BY KATHERINE CLARKE ew York City is generally considered the big leagues of real estate, where buyers (and their brokers) need sharp elbows to secure a deal. Now the city is becoming even more cutthroat for apartment seekers, thanks to a shift in the way bidding wars are resolved, brokers told The Real Deal. In this low-inventory environment, sellers are receiving numerous last-minute offers on their properties, causing them to backtrack on prior agreements to sell, sources said. In bidding wars, which have become increasingly common, the concept of “best and final,” in which brokers ask buyers to submit their highest offers, is no longer an effective tool to get a deal completed, they said, because sellers are frequently ditching those deals at the last moment. “[Best and final] doesn’t work anymore because someone gets ‘gazumped,’ ” said Steven James, president of Douglas Elliman’s Manhattan brokerage. “[A better offer] could come from someone else who put in

all existing inventory at the current pace of sales — dropped to just 3.9 months from 5.4 months in 2012, according to Elliman’s data. The low inventory accounts for why sellers are entertaining last-minute offers. “There’s one apartment per 10 buyers as opposed to one apartment per three buyers,” said Jason Haber, CEO of Rubicon Property, which was bought by Warburg Realty last month. Years ago, “best and final” offers were far more formal, Kleier said. Buyers and their brokers would present their offers simultaneously at the listing manager’s office at a set time. The offer letters were opened and considered with the buyers present. Now they are delivered over email and the purpose is not often to secure a final deal. “ ‘Best and final’ doesn’t mean ‘final,’ ” said appraiser Jonathan Miller, who prepared the Elliman report. Nick Jabbour of Nest Seekers International said the process is more an informational tool for the seller rather than a service to the buyer.

“I came into the industry in the days when a handshake was a handshake ... Now there are people who, for an extra $10,000, will pull out of a deal.” MICHELE KLEIER, KLEIER RESIDENTIAL an offer in best and final, or it could have been from someone who didn’t even put in a best and final offer.” For buyers, the shifting landscape is causing frustration. “I came into the industry in the days when a handshake was a handshake, and if you said, ‘yes,’ you meant, ‘yes,’ ” said Michele Kleier, head of boutique residential brokerage Kleier Residential. “Now there are people who, for an extra $10,000, will pull out of a deal. Sometimes the first person gets so irritated, they don’t want to match it. They just walk away.” Low inventory and heavy sales volume appear to be driving competition between buyers. Buoyed by those two factors, Manhattan condo and co-op prices remained consistently high in 2013, according to a Douglas Elliman market report released last month. The average sales price for a Manhattan home inched up by 1.9 percent, to $1.44 million last year, a modest year-over-year gain, but an increase which brings the average price close to 2007 record levels. Meanwhile, inventory fell to a 14-year low, and sales volume hit its second-highest level in 25 years. In 2013, sales activity surged by 21.2 percent year-over-year to 12,735 apartment sales, while listing inventory fell 12.3 percent, to 4,164 units. The absorption rate — the number of months it would take to sell

“To me, the purpose of best and final is not to have a firm commitment in place,” he said. “It’s a way [for the seller] to get all the information you need from all parties who are planning to throw their hats into the ring to avoid things trickling in later.” In this environment, it’s important to make it clear to the winner that a deal is not a deal until the ink is on the contract, Haber said. “We’re very careful with the term ‘best and final’ because you get a ‘best and final’ in, and then someone blows that offer out of the planet, and what are you supposed to do?” he said. “You can’t have your client not take the better offer. We encourage sellers to offer last licks to the jilted party.” Haber said he hates informing a “best and final” winner that they’ve been ousted by a higher offer. “I hate making those calls. They’re painful because you know that you’re killing someone’s hopes and dreams,” he said. There are still some sellers who will stick to their word and honor their handshake agreements, but only to a point, Jabbour noted. “You can generally tell the type,” he said. “You have the analytical seller and the more emotional seller. The analytical seller is more apt to try to capitalize as much as they can, whereas the emotional type tends to honor their commitment.” TRD

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Mayor’s key appointments ease industry concerns De Blasio’s choices for top jobs impacting real estate seen as positive

By Hiten Samtani ayor Bill de Blasio took over City Hall promising a radical departure from the way government was run by Michael Bloomberg and Rudy Giuliani. But several of his picks for positions vital to the real estate industry are veterans of those administrations. This month, The Real Deal looks at key appointments, and how they might impact the industry.

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President, EDC: Kyle Kimball The decision to retain Bloomberg administration veteran Kyle Kimball as president of the city Economic Development Corporation surprised Kyle Kimball those who expected de Blasio to make a clean break. John Mollenkopf, director of the Center for Urban Research at the City University of New York, said keeping Kimball was de Blasio’s way “to convince people that he had top talent running the city.” Kimball joined the EDC in Bill Bratton 2008 after investment banking stints at JPMorgan Chase and Goldman Sachs. He was chief financial officer and head of the Real Estate Transaction Services Group, which supports real estate sales, funding agreements, developer submissions and project planning, before takAnthony Shorris ing over as president in July, following Seth Pinsky’s departure to RXR Realty. Kimball will have to adjust to the “shift from a City Hall environment that was so pro-business oriented” to a more progressive agenda, Mollenkopf said. For example, though the EDC previously opposed a “living wage” bill, Alicia Glen which stipulates that workers on development projects with city subsidies be paid at least $10 per hour with benefits, or $11.50 per hour without benefits, Kimball recently hinted that he now supports the bill. “It’s our charge to do everything in our power to address rising inequality,” Kimball said in a statement when he was reappointed. Police commissioner: Bill Bratton Real estate players were nervous that a de Blasio administration would shift away from the tough policing strategies of the

Bloomberg era. Steven Spinola, president of the Real Estate Board of New York, told TRD in August that the number one concern for real estate was that rising crime rates would shake investor and builder confidence. So when de Blasio tapped Giuliani-era police commissioner Bill Bratton for a second stint as the city’s top cop, the industry breathed a collective sigh of relief. Bratton’s policing pedigree includes seven years as the chief of the Los Angeles Police Department and two as chief of the former New York City Transit Police, and he is widely perceived as being tough on crime. Bruce Mosler, chair of global brokerage at Cushman & Wakefield, said Bratton’s appointment showed that de Blasio was “exceptionally tuned in” to the business community’s needs. Massey Knakal Realty Services’ chairman Bob Knakal referred to Bratton as “a stud” and said that he “makes the industry feel as if the expected wave of crime may not happen.” First Deputy Mayor: Anthony Shorris Anthony Shorris was most recently a top executive at NYU’s Langone Medical Center, but he’s better known in industry circles for his brief stint as director of the Port Authority of New York and New Jersey, and for being one of the chief architects of former Mayor Ed Koch’s plan to create 100,000 units of affordable housing in a decade — a number his new boss hopes to double. Shorris was unable to rein in the long delays and skyrocketing costs associated with the World Trade Center redevelopment while at the Port Authority from 2007 to 2008. But sources said that his vast government experience made him a good pick as de Blasio’s second-in-command. “You don’t need Mr. Personality as the first deputy mayor,” said Democratic political consultant Hank Sheinkopf. “What you need is Mr. Responsibility and Mr. Get It Done.” Not all the city’s real estate bigwigs will be pleased about Shorris’ appointment, Continued on page 116

www.TheRealDeal.com March 2010

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By the Numbers

5.2 The average 2012 salary in the

$383,000 Average 2013 compensation,

Bracing for bonuses

Will the predicted increase in Wall Street bonuses mean more big-ticket NYC apartment sales?

securities industry was more than five times greater than the average salary in the rest of the private sector, up from just twice as high 25 years ago.

including bonuses, for Goldman Sachs Group’s 32,900 staffers, down about 3 percent from 2012. Total compensation figures also dropped or were flat at JPMorgan Chase, Citigroup and Bank of America, while Lloyd Blankfein Morgan Stanley reported an 11 percent increase.

2,200 Net increase in number of

banking jobs in New York City for the yearlong period that ended in October, while nationwide there was a drop of 2,700. As of November, there were 323,900 financial-services jobs in the city, down from 343,000 in 2006.

15.3% The percentage of new office

leases accounted for by the financial sector in the first nine months of 2013, down from 30 percent in 2007.

Goldman Sachs CEO Lloyd Blankfein

$23 billion Approximate amount of bonuses $

oday’s Wall Streeters aren’t quite reveling in the “More, more, more, more, more, more is never enough” atmosphere depicted by the latest Hollywood take on their business, “The Wolf of Wall Street.” But given the well-established connection between Wall Street bonuses and real estate sales, the New York City real estate industry was paying close attention as banks and investment houses reported final results for 2013 — and started cutting bonus checks to reward their staffers. This month, The Real Deal looked at the relationship between New York City’s financial services and real estate industries. By Sasha von Oldershausen

the nation’s five biggest banks were on track to pay after the first two quarters of 2013, before the market took a disappointing thirdquarter turn. By comparison, an estimated $20 billion in bonuses were doled out in 2012.

5% to 10% Projected increase in bonuses

which the 10 largest banks downsized their Manhattan office spaces between 2008 and 2012. Together, they now occupy just under 32 million square feet.

50% Average portion of total

that compensation firm Johnson Associates expects for all U.S.based banks for 2013.

2 Number of identifiable financial

services executives among the buyers in the top 20 residential deals in Manhattan in 2013. By comparison, in 2008, six of the top 10 priciest residential deals in Manhattan involved Wall Street buyers.

50% Estimated percentage of Douglas Elliman’s NYC buyers who are involved in the finance sector.

New Listing By the Numbers

6 million Amount of square footage by

compensation for bankers and traders now doled out in restricted stock awards, limiting the amount of cash they have to spend on things like real estate.

$14 billion Current value of restricted stock

awarded to employees of the top five banks in last year’s bonuses, thanks to a market rally that pushed shares up as much as 154 percent. A portion of that total is passing into workers’ hands now and can be sold. Sources: Quartz, CNNMoney, Douglas Elliman brokers, New York State comptroller, Options Group, Economist Barbara Denham, Cushman & Wakefield, the New York Times, the Wall Street Journal.

175 East 62nd Street | $2,250,000

Compiled by Yaffi Spodek

22 February 2014 www.TheRealDeal.com

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: f o k s e

D e h t t

Ismael L e y va

DREAM HOME Leyva hopes to resurrect plans, waylaid by the recession, to build this home on land he owns in Columbia County, N.Y.

he prominent Mexican-born architect — behind the Upper East Side condo the Charles and the Riverhouse condos in Battery Park City — cut his teeth working under one of New York’s most prolific architects, Costas Kondylis. In 1996, he struck out on his own, launching an eponymous firm by renting a desk from a friend’s firm for $500 a month. The now 70-person company is headquartered at 48 West 37th Street and also has offices in Costa Rica. And it has more than 50 completed projects in the Big Apple. Here’s a look at Leyva’s office and some of his favorite things. B y G uelda V oien

WOODEN Elephant

Bonsai tree

Leyva often receives gifts from his many

Leyva has a Japanese bonsai tree

foreign-born employees. He has items

that he refers to as his “baby.” The

from India, Croatia, Qatar and Mexico.

tree was a gift, but he could never

A staffer born in India brought him this

figure out from whom because there

wood-carved elephant. But Leyva said

was no return address. “I like miniature things,”

he does not work much in India because

Leyva said.

“the fees are the lowest in the world.”

THE BookSHELF Self-help books are Leyva’s go-to reading

Random House building

One client of Leyva’s owns 5,000 acres in Costa Rica, where this

author and motivational speaker Wayne

Leyva worked in association

sprawling, verdant estate was planned. Unfortunately, the client had a

Dyer, who overcame a childhood in a

with

firm

stroke before breaking ground and the project was killed. Still, Leyva’s

Detroit orphanage, and has written more

Skidmore, Owings & Merrill

proud of the design, which would have allowed a nearby waterfall to

than 30 books, including “The Power

to redevelop the Random

be seen from anywhere in the house.

of Intention,” and “Excuses Be Gone!”

architecture

Costa Rica HOME

material. The architect particularly likes

House Building at 1745 Broadway in 2003. Leyva handled the residential

Golf

component, and SOM the commercial space.

Leyva is an avid golfer, often playing with clients and associates. He

Mixed-use complex in China Leyva once had offices in China, Costa Rica and Qatar, but

mainly plays in New Jersey and Connecticut.

following the financial crisis, only the New York and Costa Rica offices remain. While he designed massive projects like this mixeduse complex in Hangzhou, China, he said he no longer works there. “It’s just the way they do businesses … I never got paid for that [project].”

CARVED MEXICAN Heads Carved heads known as “toltecas” from Zapote, Mexico, which were discovered by a friend who was building a home there. The archaeological relics might be valuable, but Leyva said he “would never sell them.”

THE Theater LIFE Leyva is a regular theatergoer. One of his recent favorites: “The Lion King.”

24 February 2014 www.TheRealDeal.com

PHOTOGRAPH OF ismael leyva FOR THE REAL DEAL BY jeremy williams

Commercial Ma r k e t

Tech tenants set Manhattan office leasing a twitter in January Twitter, IBM, Spotify and Mashable ink deals in Midtown South

By Hiten Samtani f further proof was needed that Manhattan is becoming a technology-company haven, look to leasing activity in January. Several tech powerhouses, including Twitter and IBM, signed major deals last month, and sources said that more big names will soon follow. Most of the tech action was focused in Midtown South. But Midtown and Downtown also saw healthy leasing activity. Richard Bernstein, a vice-president at commercial firm Cassidy Turley, said more high-profile deals and continued absorption are on the way. Prices, he said, are “going only one way, and that’s up.” The average asking rent overall in Manhattan was $60.57 per square foot in January, an increase of $0.16 from $60.41 in December, according to data from commercial brokerage Colliers International. That’s the fifth straight monthly increase, with Midtown

leading the gains. The availability rate, an indicator of space currently vacant or available within the next 12 months, dropped by 0.2 points to 11.1 percent in January, from 11.3 percent in December.

Midtown Vornado Realty Trust and SL Green Realty signed two hedge funds to their jointly owned office building at 280 Park Avenue. Napier Park Global Capital took 25,000 square feet on the third floor of the 1.2-million-squarefoot tower, while Mount Kellett Capital Management will set up on the fourth floor in a deal for up to 35,000 square feet. Napier was represented by Newmark’s Daniel Madison and will pay rents starting in the low$80s per square foot. Mount Kellett was represented by Newmark’s Neil Goldmacher and will pay rents starting in the mid-$80s. The landlords were represented

Manhattan office stats AVAILABILITY AVG. ASKING RATE RENT

Manhattan Jan ’14 11.1% $60.57 Dec ’13 11.3% $60.41 Midtown Jan ’14 11.7% $70.21 Dec ’13 11.3% $69.73 Midtown South Jan ’14 8.6% $54.71 Dec ’13 9.1% $55.18 Downtown Jan ’14 13.6% $48.22 Dec ’13 14.3% $48.60 Source: Colliers International

by a CBRE team led by Mary Ann Tighe and Peter Turchin. Just to the south, Aby Rosen’s RFR Realty inked tax and advisory firm Grant Thornton to 130,357 square feet at 757 Third Avenue.

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Jones Lang LaSalle’s Mitchell Konsker and Alexander Chudnoff led a team representing RFR, the New York Post said. DTZ Americas’ Mike Christian, Gregg Espach and Chris Helgesen repped the tenant. “Certain kinds of buildings will see healthy price increases in Midtown,” said Bernstein, adding there are number of large leasing deals in the immediate pipeline. The average asking rent in Midtown rose to $70.21 per square foot in January, up $0.48 from $69.73 in December, according to Colliers. The availability rate increased by 0.4 percentage points to 11.7 percent from 11.3 percent.

Midtown South Midtown South had an exuberant start to the year, with some of the world’s top tech companies signing leases. Twitter committed to more than 140,000 square feet at Savanna’s 245-249 West 17th Street, located between Seventh and Eighth avenues. The social networking company will pay rents starting in the low-$70s per square foot in a 10-year deal, according to CompStak. Twitter was expected to move to Edward Minskoff ’s 51 Astor Place, but got edged out by IBM, which will take about 120,000 square feet at that building. IBM’s descent upon 51 Astor created a domino effect that hasn’t been seen in the market in a long time, said Bernstein, explaining that the building’s competitors would now become viable tenant destinations. Other notable deals in Midtown South included Spotify, which signed a 52,000-squarefoot expansion at RXR Realty’s 620 Avenue of the Americas, and will reportedly pay rents in the low-$60s per square foot; Mashable, which took 38,580 square feet at L&L’s 114 Fifth Avenue for rents in the mid-$70s per square foot, and Google, which added 17,658 square feet to its space at Jamestown Properties’ Chelsea Market for rents in the mid-$60s per square foot. The average asking rent in Midtown South fell $0.47 to $54.71 per square foot in January, from December, Colliers data show. The availability rate in January was 8.6

percent, a drop of 0.5 percentage points from December.

Downtown Brookfield Office Properties made some headway at Brookfield Place by signing standardized test creator College Board to 145,000 square feet at the 250 Vesey Street building. College Board will pay rent in the mid-$50s per square foot in the 20-year deal, CompStak data show. Brookfield is still trying to lease about 574,000 square feet at the property, according to Bloomberg News, and recently said that it would use the building’s swank retail space to attract office tenants. High-end retailers such as Burberry, Salvatore Ferragamo and Hermès are coming to the complex. Cassidy Turley’s Bernstein said retail often helps change the complexion of an office property. “These high-end boutiques can cast a different profile to those buildings,” he said. Also in the neighborhood, insurance firm Allied World Assurance expanded to 143,297 square feet at Jack Resnick & Sons’ 199 Water Street, continuing a purple patch for leasing at the building that was ravaged by Hurricane Sandy in 2012. Newmark’s Paul Ippolito and Joseph Zona represented Allied World in the 16-year deal, while Cushman & Wakefield’s John Cefaly and Robert Constable worked alongside Resnick’s in-house brokers Brett Greenberg and Dennis Brady to represent the landlord. The neighborhood had a number of in-pipeline deals that should be signed by the end of March and would include “industries that have never located Downtown before,” said CBRE’s Bruce Surry. The average asking rent Downtown was $48.22 per square foot in January, down $0.38 from December, according to Colliers. The availability rate was 13.6 percent, a drop of 0.7 points from December. Investors are also showing interest in converting office buildings such as 180 Water Street, 140 West Street and 49-51 Chambers Street into residential units, which would tighten office supply in the area. TRD

In their words...

The funniest and most insightful comments on real estate

“I’d be crazy not

to accept them as payment.” Bond New York’s Noah Freedman on the brokerage’s move to allow clients to pay using Bitcoin. [CNBC]

“One57 is Exhibit A in what we should be able to prevent.”

“I’d wonder what the dark side is.” Super-broker Dolly Lenz is a bit more skeptical about the cryptocurrency. [CNBC]

Michael Kimmelman, architecture critic, on how Gary Barnett’s towering condo is a prime example of the dangers of lax air rights regulation. [New York Times]

“It was like a [Works Progress Administration] project for the legal department.” “So far, it’s been a combination of smart people we know and respect.” REBNY’s Steven Spinola gives Mayor Bill de Blasio props for his picks for key development positions at City Hall. [Wall Street Journal]

“They’re not really paying attention to the financial market.” Avison Young’s Jason Meister on how Chinese investors in NYC are less focused on cap rates and yields than domestic investors. [Fox Business] 28 February 2014 www.TheRealDeal.com

Developer Roy Stillman, on the complexity of the deal he struck with Sol Goldman’s estate to develop an Upper East Side residential project.

“I just hit a

million [fans] on Facebook. What’s going on here?” The ever-immodest Donald Trump, in a post about reaching a social media milestone. [New York Times]

“Who would have thought when I was growing up with pigeons on the roof, Brooklyn would be such a sizzling place.” NYU president John Sexton, on opening the university’s new engineering school at 6 MetroTech Center in Downtown Brooklyn. [Wall Street Journal]

“If you don’t like what someone did, you take them to “Lenders are going to be court. You don’t looking for a way to keep kill them.” Abraham Buxbaum, brother-in-law and occasional business partner of Williamsburg developer Menachem Stark, speaking out after Stark was kidnapped and murdered.

their staffs busy.”

Erin Lantz, director of Zillow’s Mortgage Marketplace, on how rising interest rates and fewer deals will force banks to get creative. [Bloomberg News]

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Pr o f i l e

Jared Kushner, the accidental CEO The 33-year-old was forced to take over his family’s real estate empire early, but he’s silenced doubters by redirecting the company — and by buying up $3.5 billion in properties

Jared Kushner, 33, has built a portfolio that’s the envy of his peers.

PHOTOGRAPH FOR THE REAL DEAL BY MAX DWORKIN

By Katherine Clarke t age 33, real estate wunderkind Jared Kushner has reached an unexpected point in his life. The sandy-haired mogul and New York Observer publisher now presides over a New York City property portfolio that’s the envy of his peers, comprised of trophy office towers, a multi-family empire in the East Village and a waterfront site in Dumbo widely-imagined as a future technology and creative hub. “When I look at where I am today and back at the plan I had for my life growing up, I’d say that things could not have gone less according to plan,” Kushner told The Real Deal last month from his corner office at the crown jewel of his portfolio, 666 Fifth Avenue. “I’ve learned in life that it’s good to be comfortable with uncertainty.” Kushner said he never imagined himKushner Companies self at the helm of his family company so has 750 employees, soon — or maybe at all. And there were many observers who raised eyebrows up from 80 when when the baby-faced Kushner was thrust Kushner took over as into a leadership role at the firm when CEO in 2008. his father, Charles, the former CEO of Kushner Companies, was arrested on charges of tax evasion, insider trading and witness tampering in 2004. Jared, Charles Kushner’s oldest son, had interned at real estate giants like SL Green Realty and Square Mile Capital and had a few Boston multi-family deals under his belt, but was still in his early 20s and relatively inexperienced. A few months earlier, he had been interning at the Manhattan District Attorney’s office. Now, he was making decisions about a portfolio of office, retail, industrial and residential properties totaling 5 million square feet. A steady stream of New York City deals closed by Kushner in the last several years has largely quieted his detractors and earned him credibility with prospective institutional partners. The company was one of the most active buyers of multi-family apartments in the country between 2010 and 2013, buying more than 12,000 units, including 60 walk-up buildings in Manhattan. Adding to its commercial portfolio, the company also snapped up two office buildings in 2013, one in partnership with Extell Development Company, the other

www.TheRealDeal.com February 2014 31

Pr o f i l e with private equity firm CIM. And Kushner sold an office building at 200 Lafayette Street in September for $150 million after purchasing it for just $50 million with CIM in 2012. In perhaps its most high-profile deal last year, Kushner Companies partnered with Aby Rosen’s RFR Holding to buy a $375 million six-building complex in Dumbo from the Jehovah’s Witnesses. The two companies, in conjunction with Asher Abehsera’s LIVWRK, are planning on transforming the buildings into an office hub for tech and creative firms. Kushner’s active deal making and partnerships with established players have propelled him out of his father’s shadow for the first time, sources said. His 2009 marriage to Ivanka Trump, daughter of billionaire real estate magnate and TV personality Donald Trump, as well as his ownership of the New York Observer, has only added to his public standing. “Most people thought he’d do a deal or two here and there, but all of a sudden he’s doing a lot more,” said Robert Ivanhoe, head of the real estate practice at law firm Greenberg Traurig, who worked with Kushner on the acquisition of the Dumbo portfolio. “I think that was a bit of a surprise [to the industry.]”

Holliday said, “Jared stands out.” “Even at that age, he was different,” Holliday said. “He definitely warranted more attention. You could see the ambition in his eyes and that he was going places.” While in college, Kushner began acquiring small multi-family buildings in Somerville, Mass. On his first deal, his father put up half the cash and Kushner raised the remainder from family friends.

he said. “We would go in, and I’d be saying to him, ‘Why is this taking so long? It’s gotta cost less. We’ve got to do this better.’ Then, I’d have to say, ‘Can I have a ride home now?’ ”

Stepping in early Kushner was forced into his role at Kushner Companies prematurely when his father was arrested. Charles was eventu-

Charles Kushner (left), Jared’s father; Ivanka Trump, Jared’s wife

Going places Kushner grew up in Livingston, N.J., where his father’s largely New Jersey-centric company was based. He spent weekends and summers scoping out garden apartment communities with his dad and worked on construction sites, painting and leasing apartments for the family company. His grandfather Joseph Kushner, a Holocaust survivor, was the first in the family to enter the real estate business. Joseph worked construction on several sites in New York before his fear of heights took him to New Jersey, where the buildings were shorter. Kushner, not surprisingly, had a privileged upbringing, attending the Frisch School, a private Yeshiva day school in Paramus. While he was applying to colleges, his dad reportedly pledged $2.5 million to Harvard University, where Kushner eventually enrolled and graduated with honors. Kushner’s brother Joshua is now the founder of technology venture capital firm Thrive Capital, which invested in — among other companies — the wildly successful photo app Instagram and the crowdfunding website Kickstarter. (Jared is an investor in Thrive.) As an intern at SL Green when he was 20 and still at Harvard, Kushner was taken under CEO Marc Holliday’s wing. “He basically sat down with me and said, ‘these are the eight things you need to know about real estate. Let’s go over one every week for the next eight Fridays,’” Kushner said.

32 February 2014 www.TheRealDeal.com

The Puck Building, where Jared and Ivanka are planning to live.

SL Green CEO Marc Holliday; RFR Holdings’ Aby Rosen, who’s teaming up with Kushner in Dumbo

“I’d be in class, and I’d get a call about a broken toilet and have to go work with the super at one of my buildings,” Kushner recalled. “The funniest part was, I didn’t have a car, so I’d have my contractor, who was this six-foot-five Guatemalan guy named Nelson, pick me up at my dorm in his Dodge Ram pickup truck and take me to the jobs,”

ally convicted of the above mentioned charges. The witness tampering charge stemmed from hiring a prostitute to seduce his brother-in-law and capture it on videotape in an effort to silence his sister, a witness for the prosecution. Alan Hammer, an attorney, acted as CEO of Kushner Companies for three years after Charles went to prison and

before the younger Kushner officially took over that job in 2008. In those three years, Hammer and other top executives at the company helped Kushner juggle his company role with getting an MBA and law degree at New York University and acting as publisher of the Observer newspaper, which he bought for $10 million in 2006. At the time his dad went to prison, Kushner had been interning at the Manhattan D.A.’s office, where he’d dreamt of becoming a prosecutor. “My dad’s arrest made me realize I didn’t want to be a prosecutor anymore,” Kushner explained. “The law is so nuanced. If you’re convicting murderers, it’s one thing. It’s often fairly clear. When you get into things like white-collar crime, there are often a lot of nuances. Seeing my father’s situation, I felt what happened was obviously unjust in terms of the way they pursued him. I just never wanted to be on the other side of that and cause pain to the families I was doing that to, whether right or wrong. The moral weight of that was probably a bit more than I could carry.” Kushner’s appointment as CEO came a year after the company’s biggest-ever deal, the $1.8 billion acquisition of 666 Fifth Avenue. The firm had bought the 1.45-million-square-foot office tower at the height of the market, and then watched as its value plummeted when the recession hit. By 2008, the cash flow was only covering 69 percent of the building’s debt service. Lenders were banging on Kushner’s door. “He had to grow up really fast,” Mike Fascitelli, the former CEO of Vornado Realty Trust, which eventually came in as a partner on the building, told TRD. “The five years [following his father’s arrest] were like dog years. He might have been young going in, but he came out an adult.” To rescue the building from impending default, Kushner employed an ambitious strategy: he bifurcated the building’s retail and office components and sold a 49 percent stake in the retail to the Carlyle Group and Crown Acquisitions for $525 million. Then in 2011, he brought in Vornado to help refinance the rest of the building and restructure the debt. Vornado would take a 49.5 percent stake in the office portion of the property. The retail has since been sold for a second time. In 2011, Kushner, Carlyle and Crown sold a piece of it to Inditex Group, parent of Spanish fashion retailer Zara, for $324 million. Vornado acquired the remainder in 2012 for $707 million. Fascitelli told TRD that while selling the controlling stake in the retail to Crown and Carlyle “may not have been the best move in the long-term,” it was the only logical choice Kushner could have made at the time. It allowed him to keep the building on the company’s books. “It was the right investment, we just Continued on page 108

PHOTOGRAPHS OF KUSHNER AND ROSEN FOR THE REAL DEAL BY HUGH HARTSHORNE

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REGULATING REAL ESTATE

Feds ask consumers, pros to share closing woes

More than 10 percent of pending sales don’t close, and far greater amount see last-minute hiccups By Kenneth Harney he federal government has a real estate question for consumers who’ve bought or refinanced homes that is certain to generate more than an earful: Were there any problems when you went to close the deal? Any last-minute glitches or surprises that delayed the settlement, required unexpected negotiations or, worst of all, blew up the sale or refi? Did the settlement sheet arrive in advance so there was time to review the documents intelligently? Were there any errors or discrepancies that popped up — charges that were considerably higher than expected, loan-related fees or an interest rate that differed from what the buyers thought they had signed up for? Was the whole process pleasant? Was it “empowering”? Wow. Talk about stirring up hornets. The Consumer Financial Protection Bureau, which has broad regulatory powers in the real estate settlement arena, wants to know whether there are common problems

this loan, and we sincerely regret that we’re telling you this on the day before your scheduled closing. Gary Kassan, an agent with Pinnacle Estate Properties in Valencia, Calif., says he routinely gets buyers pre-approved by lenders but that problems pop up after the pre-approval in at least 20 percent of purchases that threaten to delay or disrupt closings. In early January, Kassan was waiting for a lender to agree to close on a deal that was originally scheduled for late December. The problem: underwriters’ questions that arose late in the process about the borrower’s income. “I want to ask all these [loan officers] — why didn’t you bring this up earlier, before you gave [my client] a pre-approval letter?” Cindy Westfall, an agent with Premiere Property Group in the Portland, Ore., area, has had two recent sales knocked off track by underwriting issues just before the closing, one of which caused the entire sale to blow up, forcing her buyers to start

Agent Gary Kassan routinely gets buyers preapproved by lenders, but problems pop up after the pre-approval in at least 20 percent of purchases. that need to be fixed. If so, it may make what it euphemistically calls “interventions” in order to right what seems to be wrong. The bureau also wants to hear from real estate professionals, lenders, title insurance and escrow agents, attorneys and others who play roles in closings on homes — the people who produce, bless and witness the signings of mounds and pounds of paper associated with the settling of America’s home transactions. From industry accounts, the vast majority of closings are successful. The National Association of Realtors estimates that roughly 10 to 12 percent of all pending sales don’t close for various reasons. But conversations with agents suggest that a much higher percentage of settlements experience problems that arise just before or during the event, either delaying or complicating the process. Though eleventh-hour delays can occur because of title insurance-related issues and various other problems, a disproportionate percentage appear to be related to the mortgage. Late in the game, the lender might inform the borrower: Sorry, but we’ve encountered some underwriting red flags in your application that you’ll need to resolve before we can proceed. Or oops, we didn’t get all the loan documents to the closing agent in time. Or worst of all, we’ve changed our mind and we simply cannot do

their home search all over again. “My clients were very stressed” by the entire experience, she said in an interview. Rhonda Masotta, an agent with Bright Realty in Sarasota, Fla., almost found herself in the same situation: Last year, she was sitting at a table for her buyer’s closing on a $1.25 million home. The only thing missing was an essential — confirmation that the bank committed to do the loan had wired the money needed to complete the transaction. “We all waited for hours,” but there was no word from the bank, Masotta said. The closing was rescheduled for the following day, but then came the bad news: The bank had decided to back out of the deal. That’s usually a death sentence on a home sale, but Masotta and her colleagues on both sides of the transaction opted for an emergency rescue attempt and found a bank willing to underwrite and fund the loan on an expedited basis later the same day. That’s not the way closings are supposed to work, but stuff happens. To share experiences with the Consumer Financial Protection Bureau, email the details by Feb. 7. Detailed instructions for submitting comments — and postings of comments made to date — are online in the Jan. 3 Federal Register, at www.federalregister.gov. Kenneth Harney is a syndicated columnist.

Follow The Real Deal on Facebook: www.facebook.com / TheRealDealMagazine 34 February 2014 www.TheRealDeal.com

GOVERNMENT BRIEFS Cuomo eyes $100M for housing “Affordable housing is a crisis. Homelessness is growing,” Gov. Andrew Cuomo said in his State of the State address. Cuomo announced that he would put an additional $100 million into affordable housing. The investment — culled from federal Hurricane Sandy recovery funds — would go toward building Gov. Andrew Cuomo and preserving 3,000 affordable housing units in multi-family developments. This is in addition to the $1 billion House NY initiative he introduced last year to create and preserve 14,300 affordable housing units. The new investment will follow the model used by House NY, which provides funding to organizations involved in low-cost housing development. The governor said in a statement the new construction should also help create more than 3,500 construction jobs.

NYU mulls next move on expansion New York University appeared ready to go ahead with at least part of its planned expansion in Greenwich Village, despite a ruling that opponents interpreted as halting the construction. Manhattan State Supreme Court Judge Donna Mills ruled that NYU would either have to scale back the $6 million, 1.9 million-square-foot project, or seek state approval to proceed, because it calls for using three parcels of city parkland. The decision came in a lawsuit that pegged neighborhood residents against the university, which has earned the reputation as the biggest developer in downtown Manhattan. The university called the ruling “very positive,” because the judge did not vacate the City Council’s landuse approval. The school thinks it NYU needs state OK to expand. will still be able to move forward with its plans to build a 1 million square-foot building on the site of its current gym because it owns the property. It said it will review the decision to decide the impact of the ruling and determine its next legal steps. Neighborhood groups threatened to go back to court, should the school continue any part of its plan. NYU has previously been forced to reduce the size of the “Zipper Building” by 20 percent.

Fed lending rules tighten standards New federal lending rules designed to lower the risk of default kicked in on Jan. 11. These “qualified mortgage” requirements are part of the Dodd-Frank Act, the federal banking regulation reform enacted two years ago in response to the financial crisis. The rules require lenders to document a borrower’s ability to repay a loan by scrutinizing income and debt. Lenders must also confirm a debt-to-income ratio of no more than 43 percent, The New York Times reported. Some in the industry are concerned that the rules will make it more difficult for low-income borrowers to qualify for mortgages, in addition to increasing the cost of jumbo loans (see full story on page 62).

Bitcoin sparks legal controversy The state Department of Financial Services plans to examine the legality of Bitcoin, the virtual currency designed to keep monetary transactions apart from government control by way of a peer-topeer payment system. Since its launch in 2009, Bitcoin gained popularity with a number of small businesses, and more Virtual currency Bitcoin provokes legal concerns recently found a home at Bond New York. But ambiguity over how to categorize the cryptocurrency — whether it should be considered a capital asset or a commodity — has generated questions over whether it merits the formation of new rules. The IRS also is also looking into the matter, Forbes reported. Compiled by Sasha Von Oldershausen

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SPORTS AND REAL ESTATE

tadium timulus A look at what NYC-area stadiums have done for surrounding property values and construction

By Janna Herron ith Super Bowl XLVIII this month at the three-year-old MetLife Stadium in New Jersey’s Meadowlands, the stadium owners are already counting the $1.6 billion project a big win. But a half-built retail and entertainment center across the street raises the question: “If you build it, what will come?” Kevin Costner’s character in the 1989 classic, “Field of Dreams,” needed only a relative handful of paying fans to

show up to his cornfield baseball diamond to save him from bankruptcy. But developers and city officials must promise much more than a full house on game days to sell a sports facility to public officials, and the pitches nearly always include projections that they will stimulate the local economy and help property values and rents to rise. “It’s very hard to generalize what effect a particular stadium will have on an area. Is it going to be multiple use? Can it be used year-round? And what’s the alternative?” said Robert Knakal, chairman of Massey Knakal Realty Services. “For example, the Jets Stadium [that was once proposed] at the West Side rail yards would have led to less economic activity versus what is planned now, which is 20 million square feet of mostly commercial buildings.” The New York City area offers half a dozen case studies to test whether sports facilities and any of the projects that accompany them are making a meaningful impact on the neighborhood’s real estate.

Yankee Stadium, the Bronx Opened in 2009 Nearby parking garage close to bankruptcy Soccer stadium proposed

Home prices in area up 58% since 2005, vs. 50% in Bronx overall Yankee Stadium: Missed opportunity? While the new Yankee Stadium restored many of the signature features that were lost in its predecessor’s 1976 makeover, plans for additional neighborhood development have so far fallen short. The city spent $195 million on four new parks surrounding the stadium, where the first pitch was thrown in 2009. But the original dreams for a hotel, conference center and high school for sports-related careers haven’t materialized. The neighborhood’s development is also marred by a halfused parking lot owned by the Bronx Parking Development 36 February 2014 www.TheRealDeal.com

Co., which is teetering on bankruptcy. In 2011, the BPDC approved a plan to lease the lot sites to two developers to build up to 600 apartment units and 45,000 square feet of retail. But the plan never panned out. “For those of us who think sports facilities can help spur economic activity in an area, there’s a little disappointment with the [Yankee stadium] plan,” said Mark Rosentraub, co-director of Michigan University’s Center for Sport Management, and a leading sports economist. “It may have been a missed opportunity.” The latest plan is for the Yankees, in partnership with Manchester City Football Club of England, to build a professional soccer stadium on a 10-acre site that includes the troubled parking garage. Former Mayor Michael Bloomberg gave the deal his blessing before leaving office last year, but Mayor Bill de Blasio has yet to approve the idea. A de Blasio spokeswoman in December told the New York Times the administration has concerns about the plan because it includes tax breaks, sale of public land and public financing to house a team co-owned by two of the world’s richest sports franchises. The uncertain future of that project is reflected in the median sales prices of homes in the nearby neighborhood of Grand Concourse, which soared after the stadium was announced, but have slumped since its first opening day. Prices are up 58 percent since 2005, when the stadium was announced, compared with 50 percent for the borough as a whole, according to figures StreetEasy provided to TRD. But the median sales price in the neighborhood edged down since 2009, while rising 2 percent in the Bronx overall. “The overall development will take decades to fully come to fruition, so chances are values will not fully reach their potential for many years to come,” said Stephen Preuss, director of sales at Massey Knakal.

Citi Field, Queens Opened in 2009 $3 billion redevelopment getting started Environmental mediation could pose challenges

Home prices in area up 135%–158% since 2005, vs. 71% boroughwide Citi Field: Environmental gamble While the Yankees have had more success on the field than the New York Mets, redevelopment efforts surrounding Citi Field in Queens, which also opened in 2009, are proving more concrete. Related Cos. and Mets owner Sterling Equities won approval in October to build a mega-mall at Willets Point on a lot beside Citi Field, part of a larger $3 billion redevelopment plan to bring entertainment, retail, restaurants and residential buildings to an area known as the Iron Triangle that is cluttered with auto-repair shops and junk yards. The plan, already delayed several years by lawsuits from property owners, is no cakewalk. It involves removing several inches of contaminated topsoil over 23 acres in an environmental remediation effort not seen before. Remediation is expected to take 18 months, but any unforeseen problems could lengthen the cleanup and drive up the cost. “There is no neighborhood, no destination,” said Phil Singer, CEO of Marathon Strategies. “They’re literally creating a new neighborhood to complement the ballpark.” There are still some 40-odd acres remaining in the Iron Triangle that could attract future developers. But until remediation efforts begin, it is likely too soon to gauge the impact on land values, said Rosentraub, who was the principal investigator for the economic analysis that the University of Michigan provided to Sterling. Signs are good, so far. Surrounding housing values in East Flushing and Flushing, which are one-to-two miles away, have outperformed the borough since Citi Field was announced in 2005 and since it opened, according to figures provided by StreetEasy. “In 20 years,” predicted Rosentraub, “this will be one of the most spectacular urban neighborhoods in the city of New York.”

SPORTS AND REAL ESTATE prices in the four neighborhoods surrounding the center — Boerum Hill, Clinton Hill, Park Slope and Prospect Heights — more than outpaced boroughwide gains since the project broke ground in 2010, according to StreetEasy. Whether the arena was a catalyst or beneficiary of what has become the Brooklyn Renaissance in the last decade remains an open question. “I think Barclays was part of the puzzle of Brooklyn exploding into what it is today,” said Goldflam. “It has spread all over from where the stadium is.”

leases at American Dream, including H&M, Uniqlo, Zara and Forever 21. Median housing prices in the same zip code and the neighboring zip code happened to drop 6.5 percent after construction on the original Xanadu project halted in 2009, but regained 6 percent in the last two years since Triple Five signed on. “It didn’t work the first time around. I hope that it works the second time around,” said Rosentraub. “We need to wait awhile to see what happens.”

Barclays Center, Brooklyn Opened in 2012 Surrounding land prices and retail rents skyrocketed Atlantic Yards residential buildings off to slow start

Home prices in area up 10%–23% since 2010, vs. 8% boroughwide Barclays Center: Case study? Since opening in September 2012, the Barclays Center hosted the MTV Music awards and had 2.5 million visitors walk through its doors. It also received Brooklyn Chamber of Commerce’s Building Brooklyn award for economic development. Part of its success comes from the hand-in-hand development plan that included not only the arena, but also the surrounding Atlantic Yards area. “Fundamentally, the Barclays Center was conceived of in a very different way than these other projects,” said Melissa Burch, executive vice president and director of commercial and residential development for Forest City Ratner, the developer of Atlantic Yards. “Barclays Center was always integrated into the fabric of the neighborhood and part of a broader redevelopment plan.” Conceived in 2003, the project was mired in controversy and held up by lawsuits. And once it finally had approvals in place, the financial crisis hit, stifling construction financing. The arena broke ground in 2010, and the first residential building, the prefabricated B2, finally started construction in December. In October, Forest City sold 70 percent of the megaproject to Chinese developer Greenland Holding Group, which subsequently pledged to complete the entire project in eight years. B2, with 363 rental units and 2,000 square feet of groundfloor retail, is slated to open at the end of the year. It’s one of 14 residential buildings planned for Atlantic Yards. In all, the plan includes 6,430 housing units, 250,000 square feet of retail spread throughout the residential buildings, and up to 1.6 million square feet of commercial office space. Despite the delays, surrounding land prices and retail prices have increased. Before Barclays opened, land was going for $75 to $125 per square foot, said Josh Goldflam, managing principal of Highcap Group. Now it trades for $200 per square foot and higher. Developers are taking advantage of the M zoning — typically not desirable —in the area to build hotels. Five years ago, $30 per square foot was the going rate for retail rents. Now it’s $150 a foot, said Timothy King, managing partner of real estate services for CPEX. “I think you can draw a very clear line connecting those dots,” King said. Housing prices have similarly benefited. Median home

Richmond County Bank Ballpark,S.I.

MetLife Stadium, N.J. Opened in 2010 Host of Superbowl XLVIII Nearby mall project in limbo, even under new developer

Home prices in area up 6% in last two years MetLife Stadium: Long-delayed vision The biggest accomplishment so far for the three-year-old MetLife Stadium that houses both the New York Giants and Jets is hosting the 2014 Super Bowl. Fulfilling a more than 10-year-old vision for an adjacent retail and entertainment megacenter is another matter. Plans to build Xanadu were in place long before the new stadium was built. Yet all that there is to show after two developers and about $1.9 billion is a brightly colored shell off the New Jersey Turnpike. In 2011, the site was ostensibly given new life after Gov. Chris Christie chose Triple Five Worldwide —owner of two of the world’s largest malls —to develop the project, renamed American Dream. The new plan outdoes the original vision. It includes a water park, amusement park, performing arts center, indoor ski hill, a movie theater, 400 shops and 50 restaurants. Development was supposed to begin last year, so that the project would be up and running by the Super Bowl. But the owners of the Giants and Jets slapped the developer with a lawsuit last year over concerns about increased traffic on game days. Triple Five countersued in July. The plan for American Dream remains on hold. Triple Five did not respond to inquiries about the project. Rosentraub said redevelopment projects around football stadiums face worse odds than other sports facilities because there are far fewer football games in a season, and stadiums are harder to transform for other uses. Still, many retailers reportedly have signed conditional

Opened in 2001 $580 million Ferris wheel, outlet mall getting started Wheel denied funding from state

Housing prices up 11% since 2008, vs. down 7% boroughwide Staten Island Yankees/Brooklyn Cyclones: Does size matter? The ballparks that house the minor league Staten Island Yankees and the Brooklyn Cyclones are far smaller and older than the other stadiums in the region. Both opened in 2001 and seat about 7,000 people. Plans are in the works to bring a hotel, outlet mall and the world’s largest Ferris wheel to the area surrounding Richmond County Bank Ballpark on Staten Island. Developer BFC Partners hit a setback in December when the New York Wheel was denied state funding because the state said it didn’t offer any economic benefit. But a source close to BFC Partners said the wheel “is still happening,” and preliminary steps started last month on the grounds next to the stadium. Calls to BFC to confirm were not returned. The development stands to add to the residential price growth that St. George, the neighborhood adjacent to the waterfront ballpark, already experienced. Housing prices are up 10.8 percent since 2008, the oldest data available from StreetEasy. By comparison, values on Staten Island dropped 7.2 percent in those years. Meanwhile, MCU Park, home to the Cyclones, benefits from its location, steps away from Coney Island’s historic boardwalk. It also hosts other events, including concerts, boxing matches, even weddings. Despite its seamless integration into the neighborhood, the ball field apparently has had no impact on values in the area. The median home price was $300,055 in 2004, the oldest data available from StreetEasy. Now it’s $300,000. Boroughwide, Brooklyn home prices have nearly doubled since 2004. TRD www.TheRealDeal.com February 2014 37

New Development

aters w t s e t s o d n o c New ern c n o c s a , s e ic r p ot on per-square-fo mounts s e ic r p d n la h over hig

By Katherine Clarke string of developers attempting to replicate the success of trophy residential towers like Extell Development’s One57 and Macklowe Properties’ 432 Park Avenue are placing increasingly ambitious price tags on their properties, sending buyers into a tailspin. The trend is partially the result of today’s historically high land prices, which are prompting some developers to push the envelope on pricing to justify their land purchases. But the willingness to pursue projects that must achieve such high price-per-square-foot sales is also evidence of inexperienced builders falling victim to market hype, sources told The Real Deal. While the number of units slated to come to market over the next several years is relatively low, some question whether there will be a sufficient number of über-luxury buyers to sustain developments asking in excess of $3,000 and $4,000 a foot, particularly in secondary locations. “A lot of people are seeing what [Extell CEO] Gary Barnett, did, and they’re going to attempt to duplicate it,” said Stuart Saft, chair of law firm Holland & Knight’s New York real estate group. Barnett made an investment to acquire the development rights for One57 “long before the moment in time he was going to need them, and he’s benefiting from that now.” 38 February 2014 www.TheRealDeal.com

This month, TRD ranked all of the new Manhattan residential projects that have come onto the market in the last 12 months by average asking price per square foot, along with recently launched projects with units remaining. Of the 47 projects, 22 are asking over $3,000 per square foot, while only 10 ask less than $2,000 a foot. The priciest project with units on the market is 432 Park

TRD ranked the new Manhattan condos that have come online in the last 12 months by price:

47% of the projects

we looked at are asking over $3,000 per square foot. Avenue, where the average price per square foot is $6,894. Not far behind is One57, where a small number of units are still left, and where the average asking price is $6,888, according to an offering plan obtained by TRD. Next up is

the Elad Group’s 22 Central Park South, asking $5,607 per square foot, and Related Companies’ One Madison, asking $5,061 per square foot, according to data from listings website StreetEasy. While those price-per-square-foot figures are exceptionally high even for today’s luxury-driven market, sources say developers shooting for anything above $3,000 could take a serious financial hit if the market turns, especially if they bought their land at a high basis. In other words, while Barnett’s profit margins are large enough to withstand some market turmoil, given that he bought his land before values shot up, that’s not the case for everyone. Developers who forked over serious cash for land don’t have the same financial cushion — and shouldn’t expect the same profit margins. “You get these amateur developers saying, ‘A unit at that building sold at $5,000 a foot.’ But that’s one unit at the top of the building, not the average of the whole market,” said Scott Alper, a principal at the Witkoff Group, at an event hosted by the Young Jewish Professionals last month. In addition, while entry-level and mid-range buyers are dramatically underserved, luxury product is more available. In Manhattan, approximately 10,000 new condominium units are scheduled to come on the market over the next three

New Development years, according to data provided by the new development marketing company Corcoran Sunshine Marketing Group. Of those, the firm defines 60 percent as “luxury units” — asking in excess of $2,000 a foot. Little is being provided for buyers seeking units below $2,000 a foot. In fact, less than 30 percent of the 10,000 units fit that description. New development construction clearly increased since the economic crisis. And while the 10,000 units coming to market over three years is an improvement compared with recent years, it’s still far from the 8,000 units delivered in 2007 alone. In Brooklyn, the inventory shortage of for-sale product is reaching a crisis point, because developers there are building rentals in disproportionately higher numbers since the crash. Only 2,000 new condo units combined are slated to hit the market in the next three years in Brooklyn, according to Corcoran Sunshine’s data, compared with 20,000 new rental units. “All of Manhattan and Brooklyn are in need of product right now,” said Kelly Kennedy Mack, president of Corcoran Sunshine. “The most significant need is for residences below $5 million, as listings in this category have dropped by 24 percent in the past year alone.” Notably, some established development companies are limiting their risk by building smaller projects with only a few expensive units, ensuring that they cash in on the wave of market exuberance before interest rates rise or the pool of luxury buyers is depleted.

The cost equation Developers who snapped up land or buildings for conversions before the boom in the price of dirt are now being rewarded. Those who navigated hairy deals to save money or waited out the recession are in particularly strong positions to sell out with high profit margins. For example, the Rudin family purchased the St. Vincent’s Hospital site out of bankruptcy for $260 million in 2010 after a three-year quest for the property. It ultimately built the Greenwich Lane project, which includes five condo buildings and five single-family homes along West 11th and West 12th streets. And sales have been brisk. The project is already 40 percent sold after its fall launch. And StreetEasy pegs the average price per square foot for the remaining units at $3,098. Mack, whose firm is marketing Greenwich Lane, said it is selling “faster than even our most optimistic projections.” Another development poised to benefit from long-term planning is 50 West Street, a 63-story residential tower being developed by Francis Greenburger’s Time Equities. Time bought the site in the 1980s. Greenburger said he couldn’t remember what he paid, and public records do not go back that far. It was surely little compared with today’s prices. The company tapped architect Helmut Jahn to design a curved glass tower, which is set to be completed in 2016. Sales will begin this spring. Listing prices are not yet released. Developers buying sites now will have to earn the same dollars per square foot being achieved today to make their transactions pencil out. And given the high land costs, they will be forced to hold firm on pricing even if the market shifts. A rendering of 111 West 57th Street

The Rudin family’s Greenwich Lane, where prices for remaining units are roughly $3,100 a square foot

Nonetheless, those extraordinary land prices haven’t stopped developers and investors from picking up properties. In fact, recent development site acquisitions have been breaking price records. The average buildable-per-squarefoot price for a Manhattan development site was $445 in 2013’s fourth quarter, according to data from investment sales brokerage Massey Knakal Realty Services. That’s a 22 percent increase over 2012. In Brooklyn, the average price was $138 per square foot. But in August, Peter Armstrong’s Rigby Asset Management paid $50.24 million, or $1,000 per buildable square foot, for a potential condo conversion property at 17 East 12th Street, a record for the highest price ever for such a site. Meanwhile, Toll Brothers is in contract for nonprofit United Cerebral Palsy’s

Still, the investment will require Shvo to charge buyers up to $3,000 a square foot, sources said, the top end of the market for Chelsea. Shvo is planning to build an art-themed boutique condo in partnership with developer Victor Homes. “Land prices have [increased substantially] over the last year and construction costs continue to rise,” said Robin Schneiderman, director of new business development at Halstead Property Development Marketing. “As a result, many new development projects simply don’t pencil out. We get daily calls from our clients asking if we can achieve certain condo pricing, and we are often forced to hold our clients back.” To justify paying exorbitant land prices, developers must build mega-luxury condominiums with price tags to match, marketers said. But often, the site location — whether it’s mid-

“Land prices have [increased substantially] over the last year and construction costs continue to rise. As a result, many new development projects simply don’t pencil out.” Robin Schneiderman, Halstead Property Development Marketing Flatiron District headquarters at 122-130 East 23rd Street for $150 million, or more than $750 per buildable square foot. “If you pay between $700 and $800 a foot for land and you’re looking at another $400 or $500 a foot for construction costs, another $250 a foot for soft costs and another $200 a foot for marketing costs, for the risk you’re taking, you need to sell that for at least $2,500 a foot or higher,” said Adrienne Albert, CEO and founder of the Marketing Directors, a residential sales and new development marketing firm. “There are very few sites available today that will allow you to bring product to the market at less than $2,500 a foot.” In addition, broker-turned-developer Michael Shvo made headlines last year when he snapped up a development site at 239 10th Avenue for $23.5 million, or $800 per square foot. Shvo has defended the purchase. “It’s not about the dollar per square foot. When you go buy a Birkin bag at Hermès, you’re not calculating how much you’re paying for every inch of your bag. It’s truly looking at real estate as a luxury brand,” he told The New York Times.

Broker-turned-developer Michael Shvo

One Madison, where asking prices are about $5,000 a square foot

block or on an undesirable street — may not warrant the hefty asking prices. Some sites simply won’t fetch $2,500 a foot. While the market for unique and very high-quality product has been proven over the past 12 months, buyers won’t pony up the same cash for lesser product. “This is a very different market than the previous peak, and buyers aren’t making irrational decisions,” Mack said.

Where’s the supply? Over half of the new units in the pipeline are located Downtown, according to Corcoran Sunshine’s data. And demand appears to be keeping up with supply. Downtown sales represented 48 percent of new development transactions in the 2013 fourth quarter, up from 34 percent year-over-year. Still, there are many in the works in other areas. For example, the 57th Street corridor, from Second Avenue to the Hudson River, is in jeopardy of a super-luxury oversupply. “A whole bunch of units are coming on the market aiming for a blended average of $4,000 or $5,000 a foot,” said Andrew Heiberger, founder of brokerage firm Town Residential. “It’s not a matter of the price being too high. The unanswered question is: How many buyers are there that can afford those prices? I don’t think anyone knows the answer.” Among the projects set to come online on 57th Street is the nearly 1,400-foot residential “skinny” tower at 111 West 57th Street by Property Markets Group and JDS Development, the companies behind the successful condominium conversion Walker Tower in Chelsea. Recorded sales at Walker Tower have traded for around $3,300 a foot, according to StreetEasy, while the units currently available, including penthouses, ask an average $4,835 a foot. A penthouse sale at the building last month set a new price record for a Downtown condo, at $50.9 million. Asking prices are not yet released for the 57th Street tower, but sources speculated they could go as high as $6,000 a foot. www.TheRealDeal.com February 2014 39

New Development

Manhattan’S NEW condos by ASKING price per square foot Address

Developer

Broker

No. of units

Average price psf

432 Park Avenue 157 West 57th Street, One57

CIM Group/Macklowe Properties

In-house

126

$6,894

Extell Development

In-house

$6,888

22 Central Park South

Elad Group

Brown Harris Stevens

$5,607

One Madison Park

Related Companies/HFZ Capital

In-house

$5,061

21 East 61st Street, Carlton House

Extell Development/Angelo, Gordon & Co.

In-house

$4,821 $4,764

66 East 11th Street, Delos Living

Delos

Dolly Lenz Real Estate

33 East 74th Street

Daniel E. Straus

Douglas Elliman Development Marketing

$4,582

11 East 68th Street, the Marquand

HFZ Capital

Douglas Elliman

$4,355

20 West 53rd Street, Baccarat

Tribeca Associates/Starwood Capital Group

Corcoran Sunshine

$4,112

33 West 56th Street, Centurion

Antonio Development/Stillman Development

New York Residence

$4,003

293 Lafayette Street, Puck Building penthouses

Kushner Companies

Douglas Elliman

$3,970

21 West 20th Street

Gale International Development

Halstead Property Development Marketing

$3,853 $3,749

150 Charles Street

The Witkoff Group

Douglas Elliman

12 East 13th Street

DHA Capital/Continental Properties

Cantor & Pecorella

$3,726

737 Park Avenue

Macklowe Properties

In-house

108

$3,719

56 Leonard Street

Alexico Group/Hines

Corcoran Sunshine

145

$3,302

400 Fifth Avenue

Bizzi & Partners LLC

Douglas Elliman Developments

190

$3,270

11 North Moore Street

VE Equities/Adjmi & Andreoli

Douglas Elliman

$3,188

180 Sixth Avenue, One Vandam

Quinlan/Tavros

Stribling Marketing Associates

$3,119

155 West 11th Street, Greenwich Lane

Rudin family/Global Holdings

Corcoran Sunshine

200

$3,098

60 East 86th Street

Principals at Glenwood Management

Corcoran Sunshine

$3,035

10 Madison Square West

WG 1107 LLC/ Vector Group Ltd.

Douglas Elliman

125

$3,033

71 Laight Street, Sterling Mason

Taconic Investment Partners

Douglas Elliman

$2,838

50 UN Plaza

Zeckendorf Development/Global Holdings Inc.

In-house

$2,785

505 West 19th Street

HFZ Capital

Corcoran Sunshine

$2,645

500 West 21st Street

Sherwood Equities

Corcoran Sunshine

$2,607

36 Bleecker Street, the Schumacher

Stillman Development International

Douglas Elliman

$2,586

1355 First Avenue, the Charles

Bluerock Real Estate/Victor Homes

Town New Development

$2,541

35 West 15th Street

Alchemy Properties

In-house

$2,531

245 West 14th Street, Village Green West

Alfa Development

Corcoran Group Marketing

$2,449

508 West 24th Street

Tamarkin Co.

Stribling Marketing Associates

$2,386

50 Riverside Boulevard, One Riverside Park

Extell Development

Corcoran Sunshine

219

$2,349

455 West 20th Street

Brodsky Organization

Corcoran Sunshine

$2,313

404 Park Avenue South

Kroonenberg Groep

Corcoran Sunshine

$2,093

160 East 22nd Street

Toll Brothers City Living

In-house

$2,067

5 Franklin Place

Elad Group

Cantor & Pecorella

$2,058

421 Hudson Street, Printing House

Mountbatten Equities

Corcoran Group

183

$2,023

22 Renwick Street

22 Renwick Associates

Brown Harris Stevens SELECT

$1,841

182 West 82nd Street

Naftali Group

Stribling Marketing Associates

$1,803

71 Reade Street

CBSK Ironstate

Douglas Elliman

$1,800

305 East 51st Street, Halcyon

HFZ Capital

Corcoran Sunshine

123

$1,735

101 Leonard Street, the Leonard

Bizzi & Partners LLC

Douglas Elliman

$1,699

151 West 21st Street, Chelsea Green

Alfa Development

Corcoran Group Marketing

$1,682

540 West 49th Street

Fortis Property Group

Halstead Property Development Marketing

114

$1,472

234 East 70th Street

234 East 70th Street Realty LLC

Corcoran Group

$1,428

One Morningside Park

110 Manhattan Equities LLC

Brown Harris Stevens SELECT

$1,370

264 Water Street

264 H2O BORROWER LLC

Marketing Directors

$1,081

Source: Data from CityRealty, StreetEasy, BuzzBuzzHome and TRD research. Includes projects that have come on the market in the last year in Manhattan and prime Brooklyn or recently launched projects with units remaining.

Michael Stern, CEO of JDS, told TRD in October that the project made financial sense because he already owned one of the parcels of his site, which he bought on a “disciplined” basis before land prices escalated. However, JDS and PMG did invest $177.8 million to acquire an adjacent building formerly owned by piano maker Steinway and its accompanying land lease, as well as $40 million for another nearby site. Sources said that kind of pricey buy-in means the developers must get top dollar in the 100-unit tower. Other projects slated for the corridor are another Extell building with 233 condos at 225 West 57th Street and a 65-story tower with rental and condo units by development company the World Wide Group at 252 East 57th Street. While the Extell and PMG/JDS projects are expected to target the top of the luxury market, the World Wide building may be more mid-range luxury, sources said. Saft said he’s confident that the 57th Street projects will be absorbed despite their price tags, even if sales take longer than they would in other neighborhoods. “I think we’re still very early in the cycle,” he said. “I say that 40 February 2014 www.TheRealDeal.com

because of the number of contracts that are still being executed, and the speed at which they’re being executed.” Some of the developers building mega-towers along the 57th Street corridor could also bifurcate the retail from the property and sell it off to make the numbers work. That’s not generally as viable an option for developers of smaller buildings on side streets, where retail is less valuable.

Unit shrinkage The shrinking availability of Manhattan land and increasing luxury prices are leading some developers to build smaller projects with larger units. All three new developments currently represented by Town are boutique condos with full-floor units, Heiberger said. Among them is the Charles, at 1355 First Avenue, where 27 full-floor residences are asking an average of $2,541 per square foot, according to StreetEasy. The website still has 13 active sales listings at the property. Alper said Witkoff has shied away from building giant towers and instead focused on acquiring property with some

kind of finite value proposition, like a view of a park or the river. Such a site is so desirable, he said, it’s partially isolated from market factors like inventory levels and interest rates. “Other than one project where we have 125 units, it’s been 50 or 60 units,” he said. “What our strategy has been over the last four months is buying irreplaceable sites. We’re not assembling sites on side streets or even on avenue sites.” Saft said the boutique condo play allows developers to justify paying higher land prices and to aim for higher-persquare-foot prices, because they can skip years of planning and turn the project around faster, thereby hedging against a declining market a few years out. “If you look around town, there are no buildings with 200 or 300 apartments,” he said. A quick turnaround ensures that the developer gets to market while the going is still good and interest rates remain low. “The whole history of New York has been boom-and-bust and boom-and-bust,” Saft said. “The guys who get in there first, and build and sell, are the ones that make the money. The ones that come in at the tail end of the cycle lose.” TRD

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OFFICE LEASING

Lies in size How commercial building owners get a boost from increasing ‘loss factor’ and charging for unusable common spaces

By Hiten Samtani he Chetrit Group sold 123 William Street to East End Capital and GreenOak Real Estate for $133 million in October. In January, the new owners signed the Institute for Career Development, a workforce training company, to a 26,558-square-foot lease for the 27-story office building’s entire fifth floor, CompStak’s database shows. Asking rent for the space was $37 per square foot.

Loss factor is defined as the percentage difference between rentable area — the number of square feet that office tenants pay for — and usable area. A building with a rentable area of 400,000 square feet and a usable area of 300,000 square feet, for example, has a loss factor of 25 percent. It’s a quirk that landlords can use to their advantage, allowing

during a 2012 earnings call. Holliday was explaining to analysts how, despite a drop in Viacom’s rent-per-square-foot at 1515 Broadway, the media company would pay about 2 percent more in total rent, as SL Green had applied a more aggressive loss factor to the space. Viacom would now be paying for 1.39 million rentable square feet rather than 1.27 million rentable square feet. (Viacom’s expansion to 1.6 million square feet was not reflected in the numbers because, while the company had committed to the additional space, it had not yet occupied it.) Industry sources said a high loss factor is just a reality of the New York market. Loss factor “serves a purpose for the landlord, and the tenant needs to understand that,” said Marisa Manley, founder of Commercial Tenant Real Estate Representation, a tenant advisory firm. “Is it an accurate representation of

“A 300,000-square-foot building in Jersey City becomes a 400,000-square-foot building if you airlift it over the river,” because of aggressive measurement in Manhattan.

But the very same space had earlier been listed on the website Office Space for Rent at 23,610 square feet. Sources said the nearly 3,000-square-foot difference, or potential for roughly $110,000 in extra income, can be explained by a phenomenon known as “loss factor,” which allows landlords to charge for space that is shared by all tenants, or space that is dedicated to the building’s common areas, such as the lobby, hallways, elevators and stairwells. 42 February 2014 www.TheRealDeal.com

Peter Boritz, CEO of Real Data Management them to pass a large part of their costs for the building’s common areas on to tenants. “The rents in the market are a function of loss factor and rental rate,” said SL Green Realty CEO Marc Holliday

OFFICE LEASING 1140 Avenue of the Americas

666 Third Avenue

444 Madison Avenue

Without adding any space, in 20 years these buldings grew:

41%

31%

18%

Square feet 1990: 179,513 2002: 181,000 2011: 253,418

Square feet 1990: 589,660 2002: 745,591 2011: 769,503

Square feet 1990: 401,686 2002: 401,686 2011: 475,000

Dan Doty, a managing director at developer and property manager Hines, said that loss factors increased in recent years despite buildings becoming a lot more efficient. “It’s based on what the market supports,” he said.

it, and they’re all kind of doing it within a similar range, it’s become just one more thing that factors into the deal.” Hines’ Doty echoed the thought, saying that although loss factor may seem like a tough concept to stomach for a layman, the practice is so widespread in New York that it’s seldom a topic of conversation in tenant discussions.

Source: Commerical Tenant Real Estate Representation, Westbrook Partners

the physical space? Absolutely not.” A building’s rentable square footage typically jumps after it is remeasured, said Keith Keppler, a principal at tenant representation firm Cresa New York. That generally happens after an acquisition, a major capital investment or when an owner is mulling a sale of the property, Keppler said, as that’s when landlords push to extract maximum value out of their properties. “It’s going to continue to be a trend, because it’s part of where the long-term investment [in a building] gets recaptured,” Keppler said. Following an equity investment by the Durst Organization in 1 World Trade Center in late 2010, for example, the rentable area of the still-under construction Lower Manhattan tower leaped to 3 million square feet from 2.6 million square feet. When asked to comment on the change at the time, a Durst spokesperson told TRD that it was “now using the industry standard to calculate the size of the building.” “One World Trade Center is now measured like every other commercial office building in New York City,” the spokesperson added. While loss factor is not exclusive to New York City commercial buildings, it is particularly pronounced here. That’s because while most major office markets around the country follow the building measurement guidelines set by the Building Owners and Managers Association, New York follows the Real Estate Board of New York’s guidelines, which allow landlords to more aggressively measure buildings to their advantage. While BOMA calls for a measurement of the interior space to the exterior wall, for example, REBNY guidelines suggest measuring all the way out to the exterior façade of the building, past the window line. REBNY, in a statement to TRD, maintained that the guidelines reflect more than 100 years of office development, including buildings completed before codes were instituted and under earlier building codes. One key result of loss factor is that it can distort the costs for tenants. In terms of asking rents, “New York may not seem that expensive a market,” said Michael Mandel, a former Grubb & Ellis broker who is co-founder of commercial real estate information firm CompStak. “But when you consider that loss factors in New York are significantly higher than the rest of the country,” tenants end up paying a lot more money for the same amount of usable space.

Tale of the tape From 2002 to 2012, 17 out of 50 randomly chosen Midtown Class A and B office buildings reported a size increase greater than 5 percent, according to a study by Commercial Tenant Real Estate Representation. Some had particularly dramatic jumps. For example, without adding any floors, the Blackstone Group’s 1140 Avenue of the Americas saw a 40 percent increase in size in 2010, following a capital improvement project. And shortly after Westbrook Partners bought and renovated 444 Madison Avenue in 2007, the 42-story tower in Midtown East grew by 18 percent. Tishman Speyer’s 3.1 million-square-foot MetLife Building at 200 Park Avenue grew by 275,000 square feet — nearly 10 percent — over the decade, and the CTRR report estimated that at 2012 rental rates, the jump resulted in a $24.3 million increase in annual rental income. Blackstone and Tishman Speyer did not respond to requests for comment. Westbrook declined to comment. REBNY, being a trade organization, has an interest in encouraging generous loss factors, according to CompStak’s Mandel. “What it comes down to,” he said, “is this is a huge profit center for landlords.” Loss factor is something of the Wild West of the commercial real estate business, as there are currently no laws regulating its application, according to Peter Boritz, CEO of Real Data Management, which performs building measurements for most of the city’s major landlords. “A 300,000-square-foot building in Jersey City becomes a 400,000-square-foot building if you airlift it over the river,” Boritz said. “It’s a purely market-driven calculation.” To be sure, most tenant representatives are well-versed in the practice, according to Tom Brady, a commercial broker at Town Residential. “It’s a product that’s become accepted and understood,” he said. In lease negotiations, Brady said, usable square footage is “without question” the focus of the conversation, rather than rentable square footage. “A lot of people get hung up over it,” Mandel said, “but at the end of the day, when every major landlord is doing

“I’d rather attract top tenants based on the space we can offer and the facilities we can provide rather than rely on loss factor,” he said.

Upward pressure The current loss factor in Manhattan for a single-tenant full-floor space, several sources said, is about 27 percent. That figure jumped considerably between 2006 and 2008, during the real estate boom, but stayed relatively flat since, according to Jorge Acosta Jr., the founder of Measure Up, which measures buildings for clients including Vornado Realty Trust, Brookfield Office Properties, Related Companies and Equity Office. The upward pressure on loss factor, several sources said, was driven by aggressive investment sales brokers, who realized that a higher loss factor could result in a better price for their seller. David Hoffman, a veteran leasing broker with Cassidy Turley, recalled a meeting he attended last year with an owner he represents. “A top investment sales broker suggested increasing the building’s loss factor to 29 percent in preparation for a sale,” he said, “and my jaw dropped.” If a landlord is looking to sell a building on a price-persquare-foot basis, or looking to borrow on a property, a higher loss factor would work to his advantage, Hoffman said. New buyers too, would look to retain or even increase the total square footage of their properties, especially if they paid a premium for the building. Acosta said that if the economy continues to improve, Class A office landlords might be able to nudge their loss factor numbers even higher, akin to what happened in 2006. With Class B and C landlords “jumping on the bandwagon over time,” Acosta predicted a loss factor increase of between 1 and 2 percent over the next two years. But Hoffman suggested that the current investment sales market would not stomach the kind of loss factor leaps seen in 2006, as buyers are savvier and more prudent these days. “The market isn’t as frothy as it was back then,” he said. TRD www.TheRealDeal.com February 2014 43

Pr o f i l e

TRD

Sam Boymelgreen, clearing his family name The fledgling developer says his controversial father, Shaya, isn’t involved in his new projects

Developer Sam Boymelgreen is setting his real estate sights on Brooklyn.

By Guelda Voien n the New York City real estate world, it can be difficult for a son to emerge from his father’s shadow. But that task is even more daunting when the father once owed millions to creditors and was being pursued by a slew of litigants. So far, those circumstances are not stopping Sam Boymelgreen, the son of developer Shaya Boymelgreen. Sam struck out on his own in 2012 and is working on a handful of new projects. Naming his development company Boymelgreen LLC is one clear sign he isn’t trying to hide his family affiliation. Slight and soft-spoken, Sam stands in contrast to his gregarious father. But some industry sources are wondering if Shaya’s money is secretly behind his son’s latest investments, which include two ground-up residential developments in Brooklyn. The younger Boymelgreen, 37, also recently leased a 96,000-square-foot loft in the up-and-coming Gowanus section of Brooklyn, where he has ambitious plans for a mixed-use project, though he declined to provide details. The 49year ground lease allows Boymelgreen to develop the site, which is owned by the Acaad family.

44 February 2014 www.TheRealDeal.com

A falling out Before things went south during the recession, Shaya Boymelgreen was building more than 2,500 units in Manhattan and Brooklyn. At many of his projects, he was teamed up with fellow Israeli Lev Leviev, a billionaire diamond magnate who helped turn Boymelgreen from an upstart developer into a household name in the New York real estate industry. But several of the duo’s high-profile condos, like 20 Pine and Downtown by Philippe Starck at 15 Broad Street, were dogged by allegations of shoddy work. And in 2007, the partners had a nasty fallout.

obtain the property’s temporary certificate of occupancy. The next appearance in the ongoing suit is scheduled for May, according to court records. Not everyone holds the elder Boymelgreen’s past against him. “Every developer who had projects in 2007 in New York City had legal problems,” said Ofer Cohen, founder of Brooklyn-based commercial brokerage TerraCRG. But Boymelgreen’s troubles were more dramatic than those of many other developers of the same vintage, partly because of a rapid and ill-timed global expansion.

And despite a 2010 announcement from Shaya that he was getting back into real estate with a focus on Manhattan, his firm, Boymelgreen Developers, does not appear to have any plans for new buildings in the works. An email to Boymelgreen Developers seeking comment bounced back.

The family business Sam is the third of eight children reared in an observant Jewish family in Crown Heights, Brooklyn. He left school at age 14, and moved to Israel to study on his own. He later got his GED, but never expected to work in real estate. In fact, he said,

“It seems natural — and perhaps it’s par for my course, given my father’s well-known name — that when people hear my name, they make a mistake and assume it’s my father.” Sam Boymelgreen Leviev got many of the properties in the split and one of Boymelgreen’s companies fell into bankruptcy in 2009. The legal messes didn’t resolve themselves quickly. In August 2012 — the same year, Sam launched his own company — residents of Dumbo condominium Beacon Tower filed suit, accusing Shaya of falsifying Department of Buildings records to

Others have harsh words about the elder Boymelgreen’s company. “They were known as a reckless, loose organization,” said one fellow developer who asked not to be named. As a result, the association could be a burden for the younger Boymelgreen, who served as his father’s head of operations for 12 years.

when he was in Israel studying “18 hours a day,” he did not even consider what he would do for a living. “I was too philosophical to care,” he told The Real Deal. At 21, he went to a construction site for the first time, for a rental building Boymelgreen Developers was putting up in Continued on page 114

www.TheRealDeal.com January 2011 25 PHOTOGRAPH OF SAM BOYMELGREEN FOR THE REAL DEAL BYJEREMY WILLIAMS

Some of our closed transactions in 2013 Thanks To All Who Helped Make It Happenâ&#x20AC;Ś. SOLD

Bronx, NY

$23,000,000

SOLD

Bronx, NY

SOLD

Bronx, NY

4 Story Elevator Building 90,000 Sq Ft Retail & Office

$35,000,000

13 Story Grand Concourse Elevator Building 274 Apartments & 4 Retail

$17,250,000

$9,000,000

SOLD

Bronx, NY

$13,950,000 2 Six Story Elevators 1 Five Story Walk Up 137 Apartments

SOLD

Bronx, NY

Brooklyn, NY North Williamsburg

$28,750,000

12 Story Grand Concourse Elevator Building 167 Units & 4 Retail

2 Building Package 5 Story Walk Up 98 Apartments

Brooklyn, NY Greenpoint

Manhattan, NY Tribeca

New Construction 28 Apartments & Retail 24,000 Net Sq Ft

$5,000,000

5 Story Walk Up 20 Apartments & 2 Stores

$11,900,000

SOLD

Bronx, NY

Brooklyn, NY

$8,510,000

$4,500,000

$2,150,000

SOLD

JV STRUCTURE

$1,775,000

$50,000,000

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Plenty of beds ahead H By Tom Acitelli otel developers are making 110,000 bets that tourists and business travelers will continue streaming into New York City in record numbers in the coming years. Despite the cyclical nature of the hospitality business, and the fact that there are already an unprecedented number of places for tourists to lay their heads in the five boroughs, the hotel construction boom will deliver roughly 11,000 new rooms in the next three years, bringing the total to 110,000 by 2016, a number not seen in living memory. Right now, hospitality sector analysts expect room rates to continue to rise — albeit at a more modest pace than in recent years — and for the city to continue outperforming the rest of the nation in terms of occupancy, even as more beds become available. In other words, there’s no glut. At least not yet. But the pace of new hotel development in New York City, combined with the inevitably of future downturns, suggests the real possibility of oversupply on the horizon. As one analyst reminded The Real Deal, the industry can turn on a dime.

Building on expectations Coming into 2014, the city’s hotel inventory stood at an alltime high of about 99,000 rooms. That was up by nearly 30 percent from 76,400 six years ago, at the start of the recession, and a gain of about 6.5 percent from the beginning of 2013, according to NYC & Co., the city’s tourism arm. From January 2011 through October 2013, 59 new hotels opened in the five boroughs, according to NYC & Co., with 39 of them in Manhattan. These include the giant 487-room, full-service Hyatt Times Square; the 240-room Viceroy on West 57th Street; the Jade, with its 113 rooms on West 13th Street, and chains like the 90-room Fairfield Inn Chinatown. And that’s just the start. An additional 84 hotels are expected to open between now and 2016. Most of those are also in Manhattan, but there will be 10 in Queens, nine in Brooklyn, three in Staten Island and one in the Bronx. These hotels also run the lodging gamut. They include the 330-room Bossert Hotel conversion in Brooklyn Heights; the renovation of the old Knickerbocker Hotel near Times Square into a 300-room full-service inn; a new 243-room Residence Inn by Marriott across from the new World Trade Center; and the ultraluxury Baccarat Hotel & Residences across from the Museum of Modern Art, which will have 114 rooms and 26 suites. The frenetic development of hotels in New York springs from one main factor: a steady torrent of travelers. The city saw approximately 54.3 million tourists in 2013, shattering 2012’s record of 52 million, and a 54 percent increase over 2002, the year after the September 11 terrorist attacks. In December, city officials predicted that the number of tourists would hit 55 million in 2014. That, of course, is good news for the hotel industry. “A lot of these projects are predicated on the current strong market conditions,” said Tom Baker, managing director of the hospitality sector at commercial firm Savills US. “And their financing is based on that, and their projections are based

46 February 2014 www.TheRealDeal.com

City to hit record 110,000 hotel rooms by 2016; insiders say that’s no glut, but could hold back nightly rates

The Viceroy on West 57th Street has 240 rooms, but bills itself as a boutique hotel.

The 113-room Jade Hotel on West 13th Street

on that. New York City has outperformed every market in America, and I think it’s going to continue to be the strongest market in America.” Unless, of course, there is another sharp economic downturn.

NYC hotel occupancy 2007–2013

86.6

85.9

85.2

84.3

80.2

Filling rooms

83.5

83.4

2007

2008

2009

2010

2011

2012

2013

Hotel rates and profitability 2007–2013 avG daily room rate

RevPar: revenue per available room

350 305.93

300

297.53

253.57

250

280.72

277.17

257.88

270.39 256.13 238.19

236.69

243.05 213.74

225.86

200 189.73

150

100 2007

2008

2009

2010

2011

2012

2013

Source: Data from Lodging Advisors LLC and Smith Travel Research.

The city ended 2013 with a hotel occupancy rate of nearly 87 percent, according to Sean Hennessey, the founder and CEO of hotel consultancy Lodging Advisers LLC. That compared with the recession low of 80.2 percent in 2009. Hennessey predicted that the hotel occupancy rate would remain around 87 percent this year, even as large hotels like the Knickerbocker open. He also forecasts that room rates would continue to rise, but said the increased supply will probably temper those gains. “The pace of opening new hotels is definitely dampening or holding back the pace of improvement in average room rates that we’ve seen in this cyclical recovery, compared to prior cycles,” Hennessey said. During the last few economic recoveries, the city’s average daily room rate increased annually between 8 and 12 percent. But while rates spiked 8.2 percent in 2010 off 2009’s recession low, the pace of gains has slowed sharply since then, rising between 2.6 and 5.6 percent in the last three years, Hennessey’s data show. In 2013, it was up an estimated 4.5 percent. For 2014, Hennessey sees the average daily rate increasing 5.6 percent to $306 — basically matching the peak pre-recession rate in 2008. Yet even as rate increases moderate, the new development should not impact the pace of growth for hotels’ bottom lines, according to Hennessey’s analysis, which included data from Smith Travel Research. In 2008, as the recession started, the revenue per available room (or RevPAR) for Manhattan hotels was $257. It dropped below $200 in 2009. In 2014, it’s expected to reach a post-recession high of $264.91. Other factors, too, bode well for the hotel sector, sources say. Continued on page 112

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Pr o f i l e

The end of the Helmsley era After a $2 billion selling spree, the estate of Harry and Leona is now poised to sell off their final two New York City properties

By Adam Pincus n a headline-grabbing deal in November, the Leona M. and Harry B. Charitable Trust sold the 605-unit Park Lane Hotel for $653 million. But what didn’t make it into the headlines was that the Central Park South property — which was picked up by an investment team that included the Witkoff Group, Jynwel Capital and Highgate Holdings — was the last crown jewel in the legendary estate’s New York City portfolio. The company behind the estate, long run by legendary landlord Harry Helmsley, and then by his widow Leona Helmsley, accumulated a massive property portfolio in New York City and across the country valued at $5 billion at the time of Harry’s death in 1997. Leona began to dismantle the 25-million-square-foot New York City empire right away. But when she died in 2007, there were still dozens of properties remaining. In the last four years, however, the estate sold off more than $2 billion of New York City assets in more than 20 transactions, an analysis of its sales by The Real Deal revealed. “When there is no one around with a motivated interest, it’s probably best for an insensitive executor to

manage cash [rather] than properties,” said Edward Minskoff, whose family has been in New York City development for several generations. In addition to the Park Lane sale, in October the estate sold its 63.75 percent interest in the Empire State Building, where it owned a majority interest in the iconic tower’s sublease, as well as a tiny interest in the partnership that owned the building’s “fee interest,” or the actual property, as distinct from the leasehold interest. Together those sales raked in $491.6 million for the estate. Now, with its crown jewels gone, the estate is poised to sell its very last property interests in New York City. Its stakes in the sub-leasehold of the 762,927-squarefoot office building at 112 West 34th Street and the leasehold at the 916,111-square-foot 1400 Broadway are expected to transfer to the Empire State Realty Trust, a recently launched real estate investment trust managed by Helmsley’s former partner Peter Malkin and his son Anthony. The stakes in those properties, which were tied up in litigation for years, are the last interests that the estate has, or will, sell to the REIT. It’s already sold seven others to the REIT, including the Empire State Building interest.

The Helmsleys in 1984. Harry Helmsley died in 1997. Leona Helmsley died in 2007.

Continued on page 116

The Helmsley estate’s final property sales Property name/address

Property type

Ownership type/stake

Price

Buyer/Owner

Park Lane Hotel, 36 Central Park South

Hotel

100% of fee interest

$653 million

Witkoff Group, Jynwel Capital, Highgate Holdings, Macklowe Properties, Vector Group

Empire State Building, 350 Fifth Avenue

Office

63.75% of sublease

$491.6 million

Empire State Realty Trust

New York Helmsley, 212 East 42nd Street

Hotel

100% of fee interest

$313.5 million

Host Hotels & Resorts

Carlton House, 680 Madison Avenue

Hotel

100% of leasehold

$164 million

Angelo, Gordon Co. and Extell Development

1333 Broadway

Office

50% of leased fee interest

$82.1 million

Empire State Realty Trust

Lincoln Building, 60 East 42nd Street

Office

30% of leasehold

$52.6 million

Empire State Realty Trust

1350 Broadway

Office

32.5% of leasehold

$46.9 million

Empire State Realty Trust

Middletowne Hotel, 148 East 48th Street; and Buchanan Apartment, 760 Third Avenue

Hotel & Apartment

32% of fee interest

$41.6 million

Rao & Rao

Fisk Building, 250 West 57th Street

Office

35% of leasehold

$30.3 million

Empire State Realty Trust

501 Seventh Avenue

Office

59% of leasehold

$21.8 million

Empire State Realty Trust

225 West 23rd Street and 220 West 24th Street

Apartment

50% of leased fee interest

$18.2 millon

Rao & Rao

140 East 56th Street

Retail/Garage

50% of fee interest

$14.3 million

Schneider & Schneider

300 East 46th Street

Apartment

50% of leasehold

$10 million

Schneider & Schneider

Beekman, 575 Park Avenue

Apartment

40% of leased fee interest

$5.8 million

Benenson Capital Partners and David Baldwin Realty

385 Gerard Avenue (Bronx)

Commercial

35.6% of leased fee interest

$3.6 million

Rechler Equity Partners

1359 Broadway

Office

1% of leased fee interest

$1.7 million

Empire State Realty Trust

1001 Sixth Avenue

Office

33% of fee interest

n/a

Private owner

Lexington Towers, 160 East 88th Street

Apartment

50% of leased fee interest

n/a

Schneider & Schneider

Bricken Arcade, 225 West 37th Street

Office

16.67% of leasehold

n/a

Private owner

119 West 57th Street

Office

12% of leased fee interest

n/a

Private owner

Pfizer World Headquarters, 235 West 57th Street

Office

6.25% of leased fee interest

n/a

Private owner

112 West 34th Street

Office

50% of sub-leasehold

pending

Empire State Realty Trust has purchase option

1400 Broadway

Office

25% of leasehold

pending

Empire State Realty Trust has purchase option

Source: Properties are from a 2009 list filed with the Manhattan Surrogate’s Court in connection with the disposition of the Helmsley estate. Court records also included ownership type. Sale prices and owner data from city’s property records and data firm Real Capital Analytics. All properties sold between 2009 and 2013. Properties are referred to by names used during Helmsley ownership.

44 February 2014 www.TheRealDeal.com

www.TheRealDeal.com February 2014 49

Heiberger files suit against Sitt in bid to retain control of Town Residential

Brokerage founder asks judge to reinstate him, prevent hostile buyout By Katherine Clarke own Residential founder Andrew Heiberger filed suit against the firm’s equity partner Joseph Sitt of Thor Equities a few days after he was ousted as CEO last month, according to a legal complaint obtained by The Real Deal. Heiberger asked a judge to issue an injunction preventing Thor from removing him from the brokerage’s board of managers and to declare invalid his dismissal as CEO. In addition, Heiberger is seeking at least $60 million in damages. Heiberger informed Town’s agents of his intention to sue in a company-wide email obtained by TRD. “As you have all heard by now, I am no longer the acting CEO of Town,” he wrote, “but remain a 50 percent owner and board member.” He added, “In the interest of full transparency, I wanted to tell you that I will be in a legal dispute with my partner Joe Sitt. I am confident that the Town brand has enough momentum and is strong enough to prevail.” Heiberger, who founded Town in 2010, was issued a termination notice by Thor on Jan. 22. He publicly said his removal was the result of the expiration of his three-year employment contract, inked in 2011 as part of the partnership deal with Sitt. But the suit

Andrew Heiberger

Joe Sitt

Jeff Appel

maintains the notice purported to dismiss Heiberger based on performance and “bad acts.” It claims the notice also stated that Sitt reserved the right to buy him out of his 50 percent ownership stake against his will. Heiberger’s cash contribution to Town totals $5.87 million, according to the complaint. A Thor spokesperson did not respond to the suit’s allegations, issuing a statement that said only Sitt was focused on working with Town’s leadership and brokers “to continue the company’s rapid ascent to the top of the residential brokerage industry.”

Heiberger brought in Sitt to help fund Town’s expansion, which had four offices at the time. Sitt purportedly committed to investing $8 million over an undetermined period. According to the complaint, Sitt and Heiberger agreed that to compete with other Manhattan firms, the brokerage would need at least 10 offices and 600 brokers. It reached both benchmarks in recent months. The suit alleges that Town has experienced cash-flow issues in the past year, and also claims that last year, Sitt upended a prospective deal to sell to an unidentified “international

brokerage firm.” Meanwhile, sources told TRD that top Town brass played down the dispute, so Heiberger’s email was a shock to many. “They made it sound like it was business as usual,” one broker said. “Then we got this email and it was like, ‘are you kidding me?’ Why isn’t Town telling us what’s going on? It’s becoming embarrassing.” Company president Jeff Appel addressed the staff in an email, assuring agents there would be no change to day-to-day operations, despite the lawsuit. TRD

Seach for Stark’s murderer continues as police suggest landlord’s killers were hired from abroad By Hiten Samtani enachem Stark’s charred corpse was found in a Great Neck, L.I., dumpster on Jan. 4, a day after the Brooklyn landlord was abducted outside his Williamsburg office. Stark’s death, which is still under investigation, rattled not only the ultra-Orthodox Satmar Hasidic community, but also the real estate industry, in which Stark was a controversial player. Police said Stark’s blood and DNA were found inside a Dodge Caravan used in the kidnapping. They also suggested the two men who carried out the deed were contract killers recruited from abroad. The investigation was ripe fodder for the city’s tabloids, which chronicled a long list of Stark’s reputed enemies, from disgruntled tenants to partners on soured real estate deals. What is clear is that Stark had a series of legal and financial tangles stemming from his roughly 1,000-apartment portfolio in the Williamsburg-Bushwick-Greenpoint area, owned largely with longtime partner

50 February 2014 www.TheRealDeal.com

Menachem Stark

100 South 4th Street

Israel Perlmutter. The two defaulted on a $29 million loan made on a 74-unit rental property on 100 South 4th Street in Williamsburg in 2009. A lawsuit filed by a Deutsche Bank-affiliated creditor over the building’s debt led to a court-ordered review of a bank account controlled by the partners, revealing that about $1.7 million was “improperly” removed before Stark’s murder, court filings show.

Stark also owed millions to other creditors, but police said his killing may relate to a $20,000 debt he owed a contractor. Stark’s reputation as a landlord, too, was spotty. He was accused in news reports and online reviews of poorly maintaining buildings. But tenants like three-year resident Jordan Brown told TRD his experience with Stark was “overwhelmingly positive.” His building was well maintained, he added,

and Stark was a jovial and kindly character. Melissa Manning, a commercial tenant at a Stark building at 467 Troutman Street, said he was a friendly landlord who gave her a good deal on her roughly 6,000-squarefoot space. “In Brooklyn, people know the value of their properties, but he was really flexible and not at all money-hungry.” Stark is survived by his wife and seven children. It remains unclear who will assume control over his real estate holdings. Perlmutter declined to comment. Abraham Buxbaum, Stark’s brother-inlaw and partner on seven buildings, said he was at Stark’s house when his family was notified of the murder. “It was a terrible scene.” Buxbaum conceded that Stark had a troubled business history, but said he always stayed within the legal system to resolve his issues. “Yes, Menachem was a shrewd and tough businessman, and tried do everything legally possible to hold on to whatever he was able to,” Buxbaum said. “[But] if you don’t like what someone did, you take them to court. You don’t kill them.” TRD MENACHEM STARK PHOTOGRAPH ELI WOHL www.TheRealDeal.com JanuaryBY 2014 35

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Vacation Homes

The winter getaway roundup The vacation destinations — from Mexico to the Swiss Alps — where Gothamites are boosting the market

Sales at Related Companies’ Viceroy Snowmass in Aspen accounted for 63 percent of ski-in/out unit sales in Snowmass Village.

By Christopher Cameron ast month’s snowstorm and polar vortex left New York City’s streets unusually empty as tourists and natives alike remained inside, huddled up by their radiators — or fireplaces if they were lucky. But the savviest New Yorkers don’t sit by idly, suffering cabin fever. They “winter.” So it’s the ideal time to assess the second-home markets — from Miami to Mexico, and from Aspen to the Swiss Alps — that so many New Yorkers flock to. This month, The Real Deal did just that, rounding up some of the most popular winter getaway destinations. Andrew Heiberger, the founder and CEO of Town Residential, is one of the many who has switched his vacation destination allegiance in recent years. Hei-

he Swiss Alps may be one of the most exclusive second- (or third-) home markets in the world, but the dramatic mountain region is no less desirable for it. Brokers say buyers from around the globe, including from New York, flock there year-round looking to get a piece of Switzerland’s ever-tightening inventory in resort towns like Villars, Verbier, and Zermatt — proximity to Geneva being key. And the market is only getting more competitive. Last year, Switzerland banned the construction of new vacation homes, which prevented about 50 new units from coming to market in Verbier alone, according to Simon Malster, managing director of Investors in Property, a London-based firm that specializes in marketing ski chalets in the Swiss Alps. And with only a few new construction properties available to foreigners in the resorts of Zermatt and SaasFee remaining, Malster predicted that in two to three

The Alps

44 February 2013 www.TheRealDeal.com

berger, who has vacationed in Miami every winter since he was a child, bought a unit in the Setai, a luxury hotel and condominium in South Beach in 2002. He sold that unit in 2009, and — although he still visits South Florida yearly — he recently began wintering on the exclusive island of St. Barts, which is part of the French West Indies in the Caribbean. “It’s a beautiful island; it’s luxurious; the food is excellent,” Heiberger said. Still, it isn’t all about the sun. Cosmopolitan New Yorkers are also big buyers in Vermont ski towns, in France, and in a number of other winter getaway destinations. Read on for a look at some of the locations where Gothamites are helping to boost the market.

And New Yorkers are among those buying. “New Yorkers account for roughly 50 percent of our inquires,” Malster said, adding that he regularly flies to New York because of the high demand for Swiss properties among New Yorkers. Among the high-profile vacationers in the Garden Golf, a ski resort in Crans-Montana, Switzerland, overlooking the Rhône Valley region are singers Tina Turner and Shania Twain. years that there won’t be any new homes Most recently, one of Malster’s available. That, he said, could send prices soaring. New York clients, a banker, paid $3.3 million for a top-floor apartWhile overarching market statisment in the Garden Golf, a ski retics were not available for the region, sort in Crans-Montana. Malster said prices range from around Singers Tina Turner and Shania Twain “It offers a secure environment 6,000 Swiss francs per square meter are among the high-profile regulars in the Swiss Alps. in the center of Europe, and the (or about $1,875 per square foot) in the new under-construction Titlis resort in Engelberg to Swiss franc is one of the strongest currencies in the world,” 25,000 francs per square meter (or $7,812 per foot) in Malster said. “These properties are not expensive to run [because] taxes are cheap, and buyers may be able to the über-luxurious Verbier village.

www.TheRealDeal.com February 2014 53

Vacation Homes borrow up to 70 percent of the purchase price from a Swiss bank at around 1.5 percent.” But secure and cheap money doesn’t make buying in the Swiss Alps easy. Swiss laws regulating the second-home market limit vacation homes owned by non-permanent residents to roughly 2,200 square feet, according to John Stephenson, a London-based “negotiator” with brokerage Knight Frank who specializes in the Swiss and French Alps. So for buyers who can’t close a deal in the Swiss Alps, the French Alps are a good alternative. “The French Alps tend to be better value for money,” Stephenson said, “and the market is completely non-restrictive in comparison to Switzerland.”

urrounded by tranquil Caribbean water and whitesand beaches, St. Barts has become a popular winter getaway for New Yorkers in the know. Famous for its top-notch restaurants, celebrity vacationers like Paul McCartney and Ryan Seacrest, and New Year’s Eve yacht parties, real estate on the island is naturally in high demand. Yet the destination has less than 100 sales per year, according to data from Knight Frank. Back in 2009, Russian billionaire Roman Abramovich reportedly purchased a 70-acre estate on the island for more than $90 million. The neighboring villa is currently on the market for $60 million. But growing demand has strained the small island’s

St. Barts & Anguilla

Zemi Beach Resort & Spa, a newly developed beachfront resort on Anguilla, which has 87 hotel rooms and 28 condos

hy fly to the Alps when there’s Aspen and Vail stateside? The two Colorado ski destinations have long been popular winter getaways with New Yorkers. But the Western markets are currently undergoing a dynamic shift, according to Susan Hershey, an Aspen-based broker with Sotheby’s International Realty. “New Yorkers treat Aspen like the Hamptons,” Hershey said, “and increasingly they are making commitments for weeks or even months.” While resorts such as the Viceroy Snowmass, developed by the Related Companies, and the Residences at the Little Nell, developed by a joint venture called CWA Development, remain popular with New Yorkers, Hershey said there’s been increased interest in buying large single-family homes in areas like Red Mountain and the West End. In fact, the Aspen market saw 431 sales in 2013, a 27 percent increase from 2012, according to a fourth quarter report by Tim Estin, a broker at Aspen Snowmass Sotheby’s International. Sales at the Viceroy alone were responsible for 63 percent of ski-in/out unit sales in Snowmass Village. Overall, the average price per square foot of single-family homes in Aspen fell 12 percent to $938 in 2013’s fourth quarter year-over-year. However, the price per square foot of condos grew 2 percent to $1,000. Meanwhile, in Park City, Utah, the winter vacation market is also booming. The Stein Eriksen Lodge, a five-star resort developed by Los Angeles-based Regent Properties, is debuting the Stein Eriksen Residences this month. The 16-home, 38-condo development is located in Deer Valley, a mile outside of Park City, and prices range from $2 million to $7 million. Sources said about 20 percent of owners in the Stein Eriksen Lodge hail from New York.

Aspen, Vail & Park City

t’s hard to imagine Miami without its New York invaders. The real estate scene, of course, is teeming with New York players, from brokerages like Douglas Elliman and Sotheby’s to developers like Related, Property Markets Group and JDS Development as well as the Plaza Group. And the South Florida city is only gaining popularity with New York buyers. “Miami Beach is hands down the most popular neighborhood with [the northeast demographics],” said Daniela Bonetti, a broker at One Sotheby’s International Realty, and part of the sales and marketing team at the eightunit Beach House 8, a boutique condo, where prices range from $5.9 million to $14 million. Bonetti said most of her clients are from New York, New Jersey and Long Island. In 2013’s fourth quarter, inventory of luxury single-family homes in Miami rose 22.7 percent, year-overyear. Despite that increased supply, the median sale price still managed to increase 4.3 percent to $1.4 million, partially due to growing demand from New York buyers, according to a Douglas Elliman market report. Miami Beach’s growing culinary scene is a lure for

Miami

Celebs Paul McCartney and Ryan Seacrest have been spotted in St. Barts.

limited inventory, reducing the number of sales, driving average prices into the $5 million-plus range and forcing most visitors to rent, explained Robson Zanetti, international sales director at Town Residential. However, a few high-end property sales helped push total sales volume on the island over $100 million in 2013, doubling the roughly $50 million in deals that the island saw the year before, said Zanetti, who is based in New York but refers clients internationally. “Homes on St. Barts only come to market for one of two reasons. An extremely wealthy person decides to move to an even more exclusive island, or a couple gets divorced,” Zanetti said. Meanwhile, St. Barts’ neighbor Anguilla offers much of the same luxury and tropical beauty at a more reasonable price, making it an increasingly popular vacation home market for New Yorkers. “Anguilla is enormously popular with New Yorkers,” said Naomi Cambridge, sales director at Zemi Beach Resort & Spa, a newly developed 115-unit beachfront resort in Anguilla with 87 hotel rooms and 28 condo units that range in price from $2 million to $3 million. “Like everyone else, we are still recovering from the recession, but interest has been growing steadily.”

54 February 2014 www.TheRealDeal.com

Grove at Grand Bay, a two-tower, 99-unit condo in Miami

Northern urbanites, with hot new restaurants with New York–based chefs — such as Mark Iacono, whose muchbuzzed Brooklyn pizza joint Lucali has been frequented by Beyoncé and Jay-Z. And Miami Beach isn’t the only South Florida neighborhood attracting New Yorkers. Philip Freedman, director of sales at Grove at Grand Bay, a two-tower, 99-unit condo in Miami, added that Coconut Grove is also growing in popularity. “It’s a walkable distance to the marina. Yachting is very popular with New York buyers,” he said.

or New Yorkers who don’t want to fly across the country or halfway around the world to ski, it doesn’t get better or cheaper than the slopes of Vermont, where the second-home market is still recovering from the recession. “We are on the onset of improvement,” said Adam Palmiter, whose eponymous brokerage is based in Mt. Snow. “Last year was better than any year since the decline in 2006, but this year is already looking even better.” However, the average price in Mt. Snow was down about 15 percent, to $214,000, in the fourth quarter yearover-year. And in Stowe, the average price fell to $431,000, an 8.4 percent decline, according Lisa Coneeny, president of Vermont Country Properties, a Sotheby’s affiliate. The market in Mt. Snow has been aided somewhat by numerous new vacation developments over the last six years, including Boulder Ridge, Outlook, Snow Vidda, and Trails Edge. But Mt. Snow’s priciest sale of 2013 — a 4,800-square-foot house in the 25-home development called the Peaks — sold for just $990,000. In pricier Stowe, the most expensive sale of 2013 was a 3,400-square-foot home, which was sold for $2.7 million. The seller won the home in an HGTV Dream Home contest two years earlier.

Vermont

ocated at the southern tip of Mexico’s Baja peninsula, the gated oceanfront communities of Los Cabos tempt New York buyers as well as celebrities such as Jennifer Aniston, George Clooney and Tiger Woods with sunshine just about every day. “Mexican vacation homes are becoming more and more popular with American buyers,” said Town’s Zanetti, who occasionally deals in luxury Mexican prop-

Los Cabos

Jennifer Aniston, George Clooney and Tiger Woods are some of the celebrity guests who vacation in Los Cabos.

erty. “It’s international, it’s on the beach, but it’s close to home.” Cathy Buchanan , a salesperson at Los Cabos–based Snell Real Estate, agreed: “2013 was an amazing year for us. We sold about $200 million.” The average sale price for single-family homes in Los Cabos increased 21 percent to $690,000 between 2012 and 2013, according to Carol Billups, the owner of Cabo Realty Pros. Inventory of active listings, meanwhile, increased 7 percent. Most of Los Cabos’ luxury single-family homes — many in $3 million range — sell in the fall, winter and spring months, from Thanksgiving to June. TRD

www.TheRealDeal.com February 2013 45

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Finance

In throwback to boom, banks are starting to lend on pro forma income and requiring less equity in NYC real estate deals

W By Adam Pincus

hen it comes to loans for new construction projects, purchases of office buildings, and other commercial real estate transactions in New York City, sources say that risk is creeping back. As the marketplace has grown increasingly competitive, with more lenders flooding into New York, banks and other lenders are issuing loans on projected income — known as a pro forma — rather than on the existing cash that building owners are raking in. In addition, lenders are providing loans to less experienced developers, and requiring fewer (or no) personal guarantees, sources said. While the lending environment for borrowers has steadily improved since the economy began recovering from the recession, it’s now starting to look a bit more like the boom times of 2007. “People are willing to accept a lower return for the same level of risk,” said Ronnie Levine, managing director at Meridian Capital Group, widely considered the most active commercial mortgage brokerage firm in the city. “[It’s] just another indication of the appetite for risk increasing.” Levine was quick to add, however, that “I don’t think we are back to the high point on risk.”

56 February 2014 www.TheRealDeal.com

These new rules of financial engagement offer a sharp contrast to the lending landscape in New York City’s commercial real estate market just a few years ago. At that time, developers would typically have been required to pony up 20 percent to 30 percent of the equity in the deal. But that amount has fallen drastically, said Ayush Kapahi, a principal with Manhattan-based financial advisory firm HKS Capital Partners. Today, traditional lenders are often satisfied with developers putting in just 5 percent of the equity. On a $100 million project with $20 million in total equity, a developer might have to risk just $1 million themselves. “The developer’s skin in the game is still required, but the amount of skin has diminished,” said Kapahi, whose firm arranged a $25 million first mortgage for a NoMad hotel at 11 East 31st Street last year.

Post-recession, developers were typically required to pony up 20 percent to 30 percent of the equity in a deal. Today, traditional lenders are often satisfied with developers putting in just 5 percent. For lenders and borrowers, it’s been a grueling path back. In the throes of the recession, of course, sales and lending transactions froze. In 2009, brokerage Massey Knakal Realty Services noted that there were just $6.2 billion in commercial real estate sales in New York City, and loan data tracking firm Trepp reported there were no commercial mortgage-backed securities issued. By comparison, last year there were

www.TheRealDeal.com January 2011 25

Finance $37.6 billion in sales, according to Massey Knakal. Trepp reported nearly $12 billion in CMBS (see related story on page 58). Examples of the easier credit landscape abound. In December 2011, HSBC Holdings issued Vornado Realty Trust a $330 million mortgage on its 1-millionsquare-foot office building 11 Penn Plaza. Not even two years later, in November 2013, Wells Fargo and UBS lent the REIT $450 million to refinance that old loan — increasing Vornado’s debt by 36 percent and underscoring banks’ appetite for risk. The riskier lending landscape is nowhere more apparent than in the availability of mezzanine debt and preferred equity. It’s those riskier positions that get wiped out before traditional lenders’ capital if the market tanks or something goes financially awry on a loan. All of these lenders are chasing relatively few deals, pushing interest rates down. “Risk is returning to the market, as evidenced by spreads on all real estate types having seen a precipitous decrease,” said Bobby Bakhchi, president of Midtown-based mortgage brokerage Hybrid Capital. Rates have dropped for both safer and for riskier deals, the former by about 1 point, and the latter for slightly less than that. “In tertiary markets, for ‘story-related’ properties — meaning properties with sound real estate fundamentals — conduit spreads have come down [as well],” Bakhchi said.

“Risk is returning to the market, as evidenced by spreads on all real estate types having seen a precipitous decrease.” Bobby Bakhchi, Hybrid Capital

Bigger risk, smaller reward

The price is right These new and looser lending standards are also being driven by the more aggressive prices for building sales and higher commercial and residential rental rates. For all commercial property types in Manhattan, the average sales price per square foot increased by 60 percent between 2010 and 2013 to $1,040 per foot, according to Massey Knakal’s statistics. Skyrocketing retail rental rates were one of the main drivers pushing up sales values last year. For example, Vornado, Highgate Holdings, Crown Acquisitions and others purchased 650 Madison Avenue for $1.3 billion, for a record $2,235 per foot for an office building. The rising prices are allowing lenders to take risks, because they believe they can get out with their principal, cushioned by rising values, if the project flounders, Kapahi said. Aby Rosen’s Seagram Building, at 375 Park Avenue in the Plaza District, is a good example of how lenders are willing to underwrite pro forma. The building’s May loan, most of which was sliced up for the CMBS market, provided Rosen’s RFR Holding with a loan of $789 million, based on $74 million in projected net operating income. That figure is about $20 million above the actual $54 million in net operating income the building generated for 2012, according to Fitch Ratings. But with rising rents in the neighborhood, the CMBS originators (Citigroup and Deutsche Bank) were counting on the NOI to jump. Significantly, it’s not just Manhattan where lenders are getting more aggressive. High expectations for the Brooklyn office market have also prompted lenders to issue loans on speculative rents, or on properties with vacancies, in that borough. Madison Realty Capital’s Managing Director Josh Zegen said he knows of recent loans in the borough that were underwritten with the expectations for a growth in rents, instead of at the current rental income.

28 March 2012 www.TheRealDeal.com

“We are starting to see Brooklyn office deals where lenders are willing to take more speculative risk,” Zegen said. “There is more pro forma lending going on than a year ago. Maybe not like 2007, but definitely more than there was.” Retail rents have jumped in Williamsburg, fueling lenders to underwrite higher values. In 2011, Joseph Cayre’s Midtown Equities and investor Joseph Tabak were dueling over 242 Bedford Avenue, a bankrupt development site. They were bidding as much as $22 million at the time. A year later, Cayre, along with his nephew Bobby Cayre and the Adjmi family, purchased the site for $23 million. And last year they obtained a first mortgage for $28 million. “With more money chasing deals, you end up with more aggressive terms,” said Daniel Hilpert, managing director at Brooklyn-based Mortgage Equicap, a debt and equity broker. In general, life insurance companies charge owners the lowest interest rates, and private lenders the highest, but each deal depends on the underlying value of the project, sources said.

“There is more pro forma lending going on than a year ago. Maybe not like 2007, but definitely more than there was.” Josh Zegen, Madison Realty Capital

“The developer’s skin in the game is still required, but the amount of skin has diminished.” Ayush Kapahi, HKS Capital Partners

For all this, debt and equity players — including life insurance companies, private lenders, banks and CMBS bond holders — are earning lower rates. “Investors are willing to get paid less for that higher risk,” said Hilpert. For example, preferred equity providers are accepting lower returns. A year ago, an investor looking to place preferred equity might have expected to receive a 15 percent annual return for his or her outlay, plus about 50 percent of the upside. “Today, on the same deal, you would see a 12 percent [annual payment] and 20 percent of the upside,” said Hilpert. In the post-recession world, lenders were typically providing loan-to-value or loan-to-cost ratios — the amount of loan compared to the value or cost of the asset — no higher than 60 percent, meaning that lenders were putting up just over half of the value or cost. (The higher the percent, the riskier the loan is for the lender.) Today, loan-to-value ratios have risen sharply. HKS’ Kapahi cited a $100 million loan he was arranging last month for a Manhattan condo conversion project. Two years ago, such a deal would provide a loanto-value ratio ranging from the mid-50s-percent to the low-60s-percent for the first mortgage, whereas today it’s up to the low-70-percent range, he said. In addition, when factoring in all borrowed capital, including mezzanine and preferred equity, those ratios have crept to more than 90 percent in some cases over the last few years. This newly competitive landscape has also prompted lenders to accept lesser guarantees from borrowers. “There is a lot of non-recourse money,” said Hilpert, referring to a loan in which the borrower is not personally liable, although is on the hook to finish the construction. “There are hardly any repercussions if a project fails.” That came back to burn lenders in the downturn, when many borrowers were not incentivized to keep working on newly underwater projects. Simon Ziff, CEO of financial advisor Ackman-Ziff, said that in addition to forcing down rates, the competition to place money in the market is fundamentally altering the deal structure for debt and equity providers. “Both debt and equity sources are having difficulty getting their money out, and each is willing to look a little like the other in order to creatively deploy capital,” Ziff said. TRD

www.TheRealDeal.com February 2014 57

Finance

Trophy turn for CMBS Commercial mortgage-backed securities see new level of momentum, as market turns toward well-known addresses

By C. J. Hughes t the height of the recession in 2009, the market for commercial mortgage-backed securities hit the very definition of bottom: Zero. No CMBS backed by New York City buildings were sold to investors that year. The CMBS market — in which pools of real estate loans are bundled together and sold to investors — started a slow recovery after that. In 2013, it gained new momentum, this time with a twist. A significant number of these assets were backed by single buildings, and in many cases, they were trophy buildings with recognizable names and addresses, like 650 Madison Avenue, the Seagram Buildings and One Worldwide Plaza. With interest rates still fairly low — about 4.5 percent for a long-term loan — and commercial property values on the rise in Manhattan, analysts say these vital bonds, which in a healthy economy typically finance about a quarter of all building acquisitions and refinancings in the city, are poised for more huge gains this year. “People were declaring them dead a few years ago, and it was way too premature,” said Peter Mignone, an attorney in the real estate finance practice at the law firm Hunton and Williams.

Modest recovery Lenders issued $12 billion in CMBS as part of 235 loans in New York City in 2013, according to the research firm Trepp. That was double the city’s 2012 CMBS tally of $6 billion and 119 loans. While both were a significant jump over 2011, when $3 billion was bundled into 62 CMBS loans, the data show, the market is still a shade of its pre-downturn self. At the peak in 2007, the total for the city was $28 billion. Nevertheless, the trend is clearly positive. Another healthy sign, analysts say, is that building owners and developers are defaulting less, providing more confidence to the banks that securitize their loans and the investors who buy them. In a troubling post-recession high-water mark, the delinquency rate in August 2012 stood at about 9.5 percent, according to Trepp, which considers a loan to be delinquent when a borrower misses at least one monthly payment. Contributing to the problem was that some of the loans that came due that year were issued during the 2007 boom, and carried

58 February 2014 www.TheRealDeal.com

unrealistic underlying valuations for the buildings that backed them, analysts said. By December 2013, the delinquency rate dropped to 6.3 percent, a reflection of larger improvements in the office market. This combination of factors means the landscape for CMBS loans is different these days. “The market’s exploding,” said Howard Michaels, chairman of the Carlton Group, a real estate finance firm that handles debt placement.

Single-asset anchors Historically, CMBS loans contained batches of hundreds of sliced and diced mortgages from a wide range of office

many buildings, they could be opaque and hard to gauge. A CMBS backed by one high-profile building can be more appealing to an investor, because it can be easier to assess the value of the bond as a function of the building. The largest CMBS loan in the city last year was indeed backed by a single property — a $900 million offering for SL Green Realty’s 1515 Broadway, a 1970s office tower in Times Square that serves as media giant Viacom’s headquarters. Underwritten by Deutsche Bank, it was used to refinance a $775 million mortgage inked a year earlier, and allowed SL Green to pocket $116 million.

investors know that the building will produce a steady stream of rent revenue. The quick refinancing, just a year after SL Green got the mortgage from the Bank of China the CMBS replaced, also points to the rapid rise in Manhattan property values. While it may also serve as a hint that froth is already returning to the market, some analysts instead say it’s more a result of the increased availability of debt. “Credit availability is much higher now than it was a year or two ago,” McBride said. “It’s a virtuous circle: The more debt you can take out on a building, the more valuable it is.”

NYC BUILDINGS WITH BIG CMBS DEALS IN 2013

675M

AGE G T R O M 650 MADISON AVENUE

buildings from across the country, that not only varied dramatically in terms of size but also in the heftiness of rent rolls. But sources said as property values increase and investors shy away from complicated bond offerings, CMBS loans are increasingly being anchored by a single asset. In fact, single-asset bonds made up an unusually large 29 percent of all CMBS loans in New York City last year, according to Trepp. In 2007, in contrast, single-asset bonds comprised just 6 percent of all deals. Analysts said Manhattan buildings can be such strong assets, that a loan doesn’t need to have a diverse pool to attract investors. “Their historic loss rates are very low, which has been another plus,” said Joe McBride, a Trepp research analyst. McBride said that in the pre-bust days, when multi-property CMBS loans covered so

574M

CE N A N I F E R THE SEAGRAM BUILDING

The fact that Viacom re-upped and expanded its lease in the 54-story, 1.6 million-square-foot building in 2012, setting itself up to become the sole office tenant by 2020 in the process, likely convinced Deutsche Bank that investors might be interested in buying the debt, analysts say. “The long-term renewal of the Viacom lease, coupled with our redevelopment of the building’s lobby, common areas, retail space, and the introduction of LED signage, has created significant value,” said Andrew Mathias, SL Green’s president, in a statement. CMBS deals like this one will stoke investor appetite “when no major event is set to occur, like a tenant leaving a building,” said Vincent Carrega, of Avison Young, a longtime commercial broker who wasn’t involved with the transaction. That’s because the appeal increases when

710M

C REFINAN

ONE WORLDWIDE PLAZA

Other big-ticket CMBS deals in 2013, according to Trepp, included a $710 million loan last winter to refinance One Worldwide Plaza, a 59-story office tower in Midtown, on Eighth Avenue; the lenders on the deal were Deutsche Bank and Bank of America. Office tenants in the tower include Cravath, Swaine and Moore, the white-shoe law firm, which occupies about 600,000 square feet. But the owners — George Comfort and Sons, RCG Longview and DRA Advisors — won’t be on the hook for all the debt payments. In October, they sold a 49 percent stake in the building to the real estate investment trust American Realty Capital. Meanwhile, an investor group led by Vornado Realty Trust tapped a CMBS loan in the fall in its high-profile purchase of 650 Madison Avenue, a 27-story fullContinued on page 110

www.TheRealDeal.com January 2011 25

Relationship Driven. Execution Focused. 2013 Financing Transaction Highlights

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488,000 Square Feet

Ofﬁce Properties 253,300 Square Feet

Retail Development 133,000 Square Feet

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$115,000,000

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Ofﬁce and Retail Property 788,000 Square Feet

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Flatotel

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625 Madison Avenue

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1/15/14 1:36 PM

Finance

Local players join big banks on top of lending heap

TRD’s first commercial mortgage ranking shows NY banks keeping pace with larger institutions

By Adam Pincus ocal lenders New York Community Bank and Signature Bank finished near the head of the pack in the New York City commercial mortgage market last year by keeping

pace with the loan production of much larger rivals like Deutsche Bank and Bank of America. According to The Real Deal’s first-ever ranking of commercial mortgages, topping the list were Deutsche Bank, with its head-

NYC’s Top 20 Commercial Mortgage Lenders, 2013 Lender

No. of loans

Total $ AMOUNT

Deutsche Bank

$5 billion

New York Community Bank

338

$4.96 billion

Bank of America

$3.29 billion

Wells Fargo

$3.05 billion

Signature Bank

188

$1.88 billion

JPMorgan Chase

$1.67 billion

Morgan Stanley

$1.61 billion

Capital One

$1.58 billion

Metlife

$1.50 billion

Goldman Sachs

$1.45 billion

HSBC

$1.44 billion

Bank of China

$1.40 billion

M&T Bank

$1.38 billion

Citibank

$1.38 billion

Fannie Mae

$1.2 billion

Apple Bank

$988 million

Blackstone Group

$982 million

Prudential

$968 million

NYS Housing Finance Agency

$855 million

Mass Mutual

$686 million

Total

1,044

$37.3 billion

quarters in Frankfurt, Germany, and New York Community Bank, based in Westbury, L.I., which each originated about $5 billion in commercial loans in New York City last year. But the local Long Island bank reached that figure by writing more than 12 times the number of loans as the Germany-based global investment firm. The commercial lending world remains far more opaque than the commercial sales market. Commercial loans are more difficult to compile and compare, because of the variety of mechanisms used to record them, and because multiple lenders often participate in larger originations. In addition, second mortgages and preferred equity are typically not recorded at all. There are national tables of commercial lending, for example the Mortgage Bankers Association compiles a national ranking annually, but none are publicly available detailing only New York City lending. TRD conducted its inaugural ranking of the city’s lenders by analyzing more than 3,500 first-mortgage loans of $5 million or more — a total value of $59 billion — in the five boroughs, provided by financial tracking firm Actovia and data firm PropertyShark, to come up with the top 20 lenders and top 10 borrowers. Deutsche Bank was a co-originator

on two of the three largest loans issued in 2013, for $900 million at SL Green Realty’s 1515 Broadway and for $820 million at Hilton Worldwide’s New York Hilton Midtown at 1335 Sixth Avenue. In all, it wrote 28 commercial mortgages. New York Community Bank’s largest loan, meanwhile, was done in conjunction with investment bank Morgan Stanley. It was a refinancing of a $525 million loan on RXR Realty’s Starrett-Lehigh Building at 601 West 26th Street. But high-ticket deals are not New York Community’s bread and butter. Its second-place ranking came mainly from volume, with a total of 338 loans written, far outstripping its rivals. (Loans made to one borrower across multiple properties were counted as one loan in this survey.) The third-highest lender was Charlotte, N.C.–based Bank of America, which originated $3.3 billion in 32 loans citywide, including a portion of the New York Hilton Midtown and part of the Worldwide Plaza’s $710 million loan, co-written with Deutsche Bank. Next was San Francisco–based Wells Fargo, which originated about $3 billion in 47 deals, including participating in a $266 million first mortgage on the Witkoff Continued on page 114

From left: 1095 Sixth Avenue, Brookfield Place and 1335 Sixth Avenue

Top 10 Commercial Mortgage LOANS IN NYC, 2013 NAME / ADDRESS

LENDER(S)

BORROWER

LOAN AMOUNT

1095 Sixth Avenue

MetLife, Morgan Stanley, Helaba and Goldman Sachs

Blackstone Group

$1 billion

1515 Broadway

Bank of China, Deutsche Bank and Goldman Sachs

SL Green Realty

$900 million

New York Hilton Midtown, 1335 Sixth Avenue

JPMorgan Chase, Bank of America, Deutsche Bank, Goldman Sachs and Morgan Stanley

Hilton Worldwide

$820 million

Brookfield Place, 225 Liberty and 250 Vesey

Deutsche, Royal Bank of Canada, Citi, BofA, Wells Fargo

Brookfield Properties

$800 million

Seagram Building, 375 Park Avenue

Deutsche Bank and Citibank

RFR Holding

$789 million

Worldwide Plaza, 825 Eighth Avenue

Deutsche Bank and Bank of America

George Comfort & Sons

$710 million

650 Madison Avenue

Deutsche Bank and Goldman Sachs

Vornado Realty Trust

$675 million

Sony Building, 550 Madison Avenue

Bank of China

Chetrit Group, Clipper Equity

$600 million

Waldorf Astoria New York, 301 Park Avenue

HSBC Bank and DekaBank Deutsche Girozentrale

Hilton Worldwide

$525 million

Starrett-Lehigh Building, 601 West 26th Street

New York Community Bank and Morgan Stanley

RXR Realty

$525 million

Source (both charts): The Real Deal analysis of data on commercial first mortgages of $5 million or more in New York City for 2013 from loan tracking firm Actovia and PropertyShark.

60 February 2014 www.TheRealDeal.com

www.TheRealDeal.com January 2011 25

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Finance

Mortgage squeeze could hurt outer boroughs

New rules on mortgages likely to hit harder outside Manhattan, where single-family homes, lower down payments more common

By Julie Strickland trict new rules designed to make sure that homeowners avoid mortgages they can’t afford and that lenders won’t face lawsuits from borrowers should their repayment go awry kicked in on Jan. 10. But despite those good intentions, the regulations are sparking concerns that squeezing the

NYC condominium buildings approved for FHA loans Brooklyn 278 of 3,214 Manhattan 98 of 2,332 Queens 90 of 871 Staten Island 31 of 191 Bronx 28 of 165 Citywide 525 of 6,773 Source: Federal Housing Administration

availability of credit will unsettle the housing market, especially in New York City’s outer boroughs. The rules build on moves made by the Federal Reserve at the height of the foreclosure crisis to crack down on the willy-nilly lending that helped fuel the economic collapse. Codified in the 2010 Dodd-Frank financial reform, they require lenders that want the Federal Housing Administration to guarantee their loans to verify that borrowers can repay a loan according to its specified terms. To do that, the new Consumer Financial Protection Bureau created a new category, dubbed “qualified mortgages,” or QM, that follows a long-recognized rule of thumb for separating prime loans from subprime. The new rules bar loans with negative amortization, interest-only payments, balloon payments or terms exceeding 30 years. “No-doc” loans also no longer fly, and among other restrictions, the borrower must have a debtto-income ratio of less than or equal to 43 percent. Still, some say the new debt-to-income ratio, which restricts a borrower’s debt payments to 43 percent of his or her income in an attempt to prevent difficulty keeping up, may be just enough to unsettle the New York City housing market. Before the crisis, those ratios sometimes got as high as 60 percent, and have since tended to max out around 50 percent, according to Rolan Shnayder, director of new development lending at the Manhattan-based H.O.M.E. Mortgage Bankers. While most lenders aim for 45 percent, the mandated tighter ratio will make it harder for some New York City buyers to borrow as much as they want, said Malcolm Hollensteiner, TD Bank’s director of retail lending sales and production. “But I don’t think business is going to stop, credit’s not drying up. And we know at some point we’re going to see the emergence of a secondary mortgage market that buys non-QM loans from lenders. We just don’t know when or what it’s going to look like.” The impact will be felt differently throughout the city. 62 February 2014 www.TheRealDeal.com

The cash buyer reigns supreme in Manhattan, where the median condominium sale price hit $1.32 million in 2013’s fourth quarter, according to Douglas Elliman’s latest market report. Because prices are so high, the standards a buyer must meet to qualify for a purchase at all, let alone to secure outside financing, are already on par with the new QM rules, experts said. For that reason, the borough is less exposed than areas where home financing plays a bigger role. “We know in Manhattan, you have loan programs where the minimum down payment is 30 or 40 percent, because of the sheer sales price, or maybe restrictions from a co-op board,” said Hollensteiner. “Where there’s more need for financing, when you go into markets where you have a higher percentage of FHA and [veteran] borrowers making no to little down payment, or borrowers obtaining conventional financing with 5 percent down, that’s obviously where the debt-to-income ratio can have a larger impact.” Many multi-family buildings have their own standards for the types of financing they will accept. Co-ops will not accept FHA loans, and only about 8 percent of New York City condo buildings are FHA-approved, agen-

Queens was the hardest hit borough in the foreclosure crisis, and also stands to feel the biggest impact from tightening mortgage rules.

cy data shows. Furthering the pinch, the FHA lowered its maximum single-family loan amount for the region on Jan. 1 to $625,000 from $729,750 previously — which, of course, goes farther in some locations than others.

NYC single-family homes Queens 154,393 Staten Island 76,771 Brooklyn 60,857 Bronx 21,996 Manhattan 2,003 Source: PropertyShark

Queens has by far the most stock in the city that could be covered by FHA, with 154,393 single-family homes. The total amount of FHA lending corresponds with the type of housing found throughout the city. In 2013, Queens had the largest chunk of FHA loans, totaling $1.2 trillion.

FHA-insured loans in 2013 Queens $1.2 trillion Brooklyn $1.06 trillion Bronx $511 billion Staten Island $459 billion Manhattan $31 billion Source: Federal Housing Administration

Manhattan had the smallest, with around $31 billion. “I think as you move to the outer boroughs, the probability of impact would be heightened,” said Jonathan Miller, president and CEO of appraisal firm Miller Samuel. “I don’t mean significantly, but the drag on volume could be more than if there was no QM.” But though the tighter rules could weigh down activity, they could help avoid another painful wave of foreclosures. In the subprime mortgage fallout in 2008, foreclosures leaped fourfold citywide, to 2,536, from 635 the year earlier. Yet Manhattan came out with barely a scratch, with the number of completed foreclosures just 35 in 2008. The crisis was most severely felt in Queens, where the number of foreclosures exploded to 1,575 in 2008, nearly six times the prior year’s 273. The other boroughs also got hit hard. •In the Bronx, foreclosures rose 233 percent, to 207 in 2008, from 62 in 2007. •In Brooklyn, the number jumped 133 percent, to 401 in 2008, from 172 in 2007. •In Staten Island, foreclosures nearly tripled, to 318 in 2008, from 116 in 2007. Still, brokers remain characteristically optimistic for this year — with or without QM. “What distinguishes most of the New York market, the Manhattan market, is that the buyers in this town have very deep pockets,” said Frank Russo, a broker with Halstead Property. “You’re not looking at people who have to be highly leveraged and don’t have assets and incomes or solid down payments.” Even in the outer boroughs, where both incomes and home prices are more modest, widespread preparedness among consumers is likely to soften QM’s impact, experts said. “I think that consumers are probably better informed on this topic than we could possibly imagine,” Hollensteiner said. “Consumers should not panic that credit is being pulled from them, that’s not the case at all.” Other brokers go so far as to view increasingly stringent regulations as a boon that will only strengthen the year ahead. “If there are red flags or grave concern, I haven’t seen it,” said Steven Goldschmidt, senior vice president of Warbug Realty. “If there are new lending rules that make for a stronger environment that stops the kinds of issues that plagued us four or five years ago, so much the better.” TRD www.TheRealDeal.com January 2011 25

M A SSEY KNAKAL R EALT Y S E RV I C E S prou dly cong rat u l ate s

TEAM KNAKAL for se l l in g 87 proper ties t o t al i ng ove r $1 Billion in s a les i n 2013 Th a n k y ou to all of our c lie nts , colleagues a n d fr ie nds for making this pos s ible .

Robert Knakal

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Chairman

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and the re st of Te am Knakal: Alexander Baker

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Finance

Doing $5 billion in deals,quietly

Financial brokerage Ackman-Ziff rebuffs acquisition attempts from CBRE and Cushman, looks to grow nationally

Simon Ziff, the president of Ackman-Ziff, which ended 2013 with about $5 billion in closed transactions.

By David Jones n one of last year’s most complex real estate deals, a group led by investor David Werner bought the leasehold at the 1,331-room Milford Plaza hotel for $325 million. The brokerage Eastdil Secured arranged the acquisition, and garnered the headlines. But flying under the radar was financial brokerage Ackman-Ziff, which arranged a crucial $255 million refinancing of the hotel through NorthStar Realty Finance Corp.

in closed transactions. Ziff, 49, said the firm arranges 100 to 150 deals per year, with most in the $40 million to $60 million range. In fact, the company has grown into the eighth largest financial intermediary in the country, with more than $4.5 billion in annual financing for 2012, according to a survey released in June by the publication National Real Estate Investor. That’s up from 15th, with $1.8 billion in transactions, the year before. That’s no small feat for a firm that has

Feldman, managing principal of HFZ Capital Group, a Manhattan-based developer who has worked with the firm. Ziff told The Real Deal that he’s received acquisition bids by rivals Cushman & Wakefield and CBRE Group dating back to 2006, but turned them down. And now, like many commercial finance firms, the company is working to broaden its base of business after fighting through the economic downturn. But, Ziff said, the company has largely reached its growth potential in New York and is

“In New York, all we have to continue to do is block and tackle. The real question is, how do we grow our business nationally?” Simon Ziff, Ackman-Ziff “Many people have taken credit for different things on the deal,” said Simon Ziff, president of the brokerage firm, during a recent interview in the company’s Midtown office. “[But] we were responsible for the leasehold financing.” The deal is one of the many complex financial arrangements that the firm quietly executed since Ziff took the helm almost 20 years ago. His 35-member company — which arranges debt and equity financing, such as construction loans, mezzanine debt, and joint-venture equity — ended 2013 with about $5 billion

64 February 2014 www.TheRealDeal.com

existed in the shadows of its much larger New York rivals Wells Fargo and its subsidiary Eastdil Secured, which ranked second with $24.9 billion, and Meridian Capital, which ranked third with $20 billion in volume. (Another New York competitor, the Singer & Bassuk Organization, did not release market share data. HFF, which is nationally focused, ranked first on the list overall.) “Everybody has more or less the same access to lenders, but they can dissect a transaction from a financial engineering perspective better than most,” said Ziel

focusing its expansion efforts in other markets. “In New York, all we have to continue to do is block and tackle,” he said. “The real question is, how do we grow our business nationally?”

Avoiding conflict The Manhattan-based firm has carved out a niche by representing borrowers but not lenders — a fact it touts as key to avoiding conflicts of interest. In contrast, Meridian is partially owned by Sovereign Bancorp, and Eastdil is owned by Wells Fargo. Neither of those firms

responded to requests for comment. Rob Little, chief investment officer at Cornerstone Real Estate Advisers, which manages $39 billion in real estate assets for MassMutual, said Ackman-Ziff ’s focus on borrowers provides lenders with confidence. “We’re looking for transparency, full and complete information [about the borrower] and no surprises,” Little said. While the firm works on behalf of borrowers, it has a deep Rolodex of lenders ranging from Starwood Capital to MassMutual that have financed projects for its clients. It’s also grown by negotiating deals in various pieces of the capital stack, from traditional senior mortgage debt and mezzanine loans to newer, less-tested avenues like crowdfunding. One veteran industry player said the firm raises money from a large group of investors, directly or through private feeder funds. Then, the source said, it sets up special companies for each deal and draws down money deal by deal to lend or invest. William Friedland, a principal at Friedland Properties who worked as a college intern under Ziff in the 1990s, said Ziff “knows how to resolve conflicts that maybe we could resolve if we spent seven days a week on the phone with a bank.” Friedland’s family has worked with the Continued on page 112

www.TheRealDeal.com January 2011 25 PHOTOGRAPH FOR THE REAL DEAL BY JEREMY WILLIAMS

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70 GREENE STREET - PH

4 BR, 5 BATH

WEB ID: 672744

$12.5 M

41 WARREN STREET - PH

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WEB ID: 163006

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We define our neighborhoods as much as they define us.

33 Irving Place 212.557.6500

35 WEST 12TH STREET - TH 4 BR, 2.5 BATH

110 Fifth Avenue 212.633.1000

26 Astor Place 212.584.6100

730 Fifth Avenue 212.242.9900

239 East 79th Street 212.929.1400

337 West Broadway 212.924.4200

530 LaGuardia Place 212.557.5300

88 Greenwich Street 212.269.8888

446 West 14th Street 212.604.0300

33 Irving Place 212.557.6500

WEB ID: 164956

$8 M

515 EAST 72ND STREET

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WEB ID: 262734

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829 PARK AVENUE

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WEB ID: 537200

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55 EAST END AVENUE

3 BR, 3 BATH

WEB ID: 771978

$2.65 M

70 GREENE STREET - PH

4 BR, 5 BATH

WEB ID: 672744

$12.5 M

41 WARREN STREET - PH

4 BR, 3.5 BATH

WEB ID: 163006

$9 M

We define our neighborhoods as much as they define us.

33 Irving Place 212.557.6500

35 WEST 12TH STREET - TH 4 BR, 2.5 BATH

110 Fifth Avenue 212.633.1000

26 Astor Place 212.584.6100

730 Fifth Avenue 212.242.9900

239 East 79th Street 212.929.1400

337 West Broadway 212.924.4200

530 LaGuardia Place 212.557.5300

88 Greenwich Street 212.269.8888

446 West 14th Street 212.604.0300

33 Irving Place 212.557.6500

WEB ID: 164956

$8 M

515 EAST 72ND STREET

3 BR, 3 BATH

WEB ID: 262734

$4.15 M

829 PARK AVENUE

3 BR, 4 BATH

WEB ID: 537200

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55 EAST END AVENUE

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TH I S M O N T H I N

R EAL E STATE H ISTORY A look back at some of New York City’s biggest real estate stories 1968: Rockefeller proposes $6B urban revitalization plan

COMING SOON

ew York Gov. Nelson Rockefeller outlined a plan for a new non-profit, public-private corporation that was projected to spend $6 billion or more to redevelop impoverished areas of the state, including New York City, 46 years ago this month. Rockefeller said the “revolutionary” Urban Development Corporation would have the authority to sell bonds to support the projects, obtain land through eminent domain and circumvent local zoning rules. He expected the state public benefit corporation would leverage about $1 billion in public financing, with about $5 billion of private financing, to achieve the $6 billion in redevelopment. He cited urban rioting as one impetus for what he described as “drastic” measures. Despite concerns from New York City Mayor John Lindsay about a loss of local control, Albany quickly passed the supportGov. Nelson Rockefeller ing legislation by April and the proposal became law. The nonprofit, since 1995 known as the Empire State Development Corporation, subsequently financed major projects including the 1,655-unit Harlem River Park Towers, the Jacob K. Javits Convention Center, revitalization in Times Square and thousands of apartments on Roosevelt Island and in Battery Park City.

1937: Local chapter of U.S. Realtors group formed

THE APRIL 2014

SOUTH

FLORIDA MARKET REPORT

68 February 2014 www.TheRealDeal.com

he first Manhattan office for the predecessor to the powerful national trade group the National Association of Realtors formally opened 77 years ago this month. Appraiser and broker Robert Armstrong was the founding chairman for the Manhattan chapter of the National Association of Real Estate Boards, as the national group was then known. The members of the local group, including bankers, appraisers and brokers, had been affiliated individually with the national association, but wanted to make it easier for other Manhattan industry professionals to The Manhattan chapter was announced at the Biltmore Hotel. join the national organization. The city’s most powerful trade group, the Real Estate Board of New York, resigned from the National Association of Real Estate Boards on Dec. 31 1927, over jurisdictional issues. The new group never gained much traction, however, and was dissolved in 1945. At the same time, REBNY rejoined the national group. The national group formally changed its name to the National Association of Realtors in 1972. The current local affiliation of that group, the Manhattan Association of Realtors, was incorporated in 2001.

1893: Consolidation limbo hurts Brooklyn realty values

he uncertainty surrounding the proposal to merge the independent city of Brooklyn into a proposed greater New York City brought Brooklyn’s real estate market to a near standstill 121 years ago this month. Real estate agents were going out of business and attorneys and title agents were hunting for work. Furthermore, Brooklyn was averaging just one sale a week in its Real Estate Exchange auction house. “Real estate in Brooklyn is practically dead,” an article in The New York Times that month said. One developer blamed a higher tax burden in Brooklyn for choking investment in the city. The future boroughs voted in November 1894 on the consolidation question. All approved it, although Brooklyn squeaked by with Brooklyn in 1890 a vote of 64,744 in favor of merging and 64,467 against. The merger of what was then New York City (composed of Manhattan and a section of the Bronx) with the eastern portion of the Bronx, Brooklyn, Queens and Staten Island, was finalized on Jan. 1, 1898. Compiled by Adam Pincus

30 YEARS

Thank You To Our Agents, Staff, Executives, and the Co-Brokerage Community for your role in our success and growth over the past 30 Years.

Ne w York Cit y

ha mptons

C o nn e c t i c u t

new jersey

h u d s o n va l l e y

A new guard takes Upper Manhattan

Institutional players out, local shops in as portfolio trading spikes

By Katherine Clarke n active year for the Upper Manhattan multi-family market was topped off in November by the acquisition an 84-building portfolio by Brooklyn-based real estate company E&M Associates from notorious landlord Baruch Singer. The $340 million deal was the largest multi-family portfolio sale of 2013. And it wasn’t the first in Upper Manhattan by E&M, which is led by investors Irving Langer and Leibel Lederman. The pair also

said Victor Sozio of commercial brokerage Ariel Property Advisors. “The amount of transactions year-over-year were almost identical, but the amount of buildings that traded spiked.” In fact, while there were just 106 multi-family transactions Uptown between January 2013 and November 2013, a 1 percent increase year-over-year, the number of properties sold jumped 88 percent, to 151 for the 11-month period, according to data provided by Ariel. Meanwhile, total dollar volume of the

Attorney General Andrew Cuomo led an investigation into Vantage’s conduct in 2010, eventually forcing the company to cough up $1 million in a settlement. A lawsuit filed by rent-regulated tenants across Pinnacle’s buildings citywide still has not been resolved. Both companies have persistently denied significant wrongdoing. These investors largely did not make the returns they hoped for. At Harlem’s 1,802-unit Savoy Park apartment complex, which Vantage purchased in 2006

Upper Manhattan Portfolio Deals IN 2013 Buyer

Neighborhood

Transaction Amount

# of properties

# of Units

E&M Associates

Central Harlem

$339 million

1,593

Orbach Group

Central Harlem/UWS

$246 million

1,031

E&M Associates

West Harlem

$75 million

539

Alma Realty

Washington Heights

$49 million

474

A&E Real Estate Holdings

Washington Heights

$48.2 million

341

Heritage Realty

Hamilton Heights

$45 million

205

Unknown

Hamilton Heights

$31.5 million

112

A&E Real Estate Holdings

Inwood

$31 million

191

E&M Associates

Washington Heights

$27.2 million

190

Castellan Real Estate Partners

Central Harlem

$25.4 million

200

Source: Data from brokerages, public records and TRD research

snapped up 539 units in March from Coltown Properties for $75 million. E&M is among a number of investors nabbing Upper Manhattan units in bulk. They’re joined by New Jersey–based outfits like Treetop Development and the Orbach Group, Queens-based Alma Realty, Doug Eisenberg of A&E Real Estate and Castellan Real Estate Partners. Those companies’ combined purchases in the last two years represent a changing of the guard in Upper Manhattan, as large institutional players move out of the market. Since 2011, major Upper Manhattan landlords backed by institutional capital have largely sold off their massive holdings. Those sales, sources say, are due not only to the strength of the Uptown market, but also to reputational risk associated with operating those portfolios. They’re being quickly replaced with a new type of investor: smaller local shops, less beholden to institutional purse strings. These new buyers instead have alliances with other types of financial backers chasing yield, such as private investment companies and highnet worth individuals, and can sometimes eschew institutional money altogether. For those who do rely on institutional capital, their private equity partners remain notably under the radar. “Portfolio deals are driving a lot of the volume that we’re seeing in Upper Manhattan,” 70 February 2014 www.TheRealDeal.com

Mack, (who is featured in this month’s Closing, on page 130) also admitted that some of the bad press generated by their Uptown deals influenced the decision. “There’s a high level of scrutiny that comes with being a landlord up there,” he said. “I think Area was under more scrutiny than most owners. That’s a shame, because it’s a place that can use more institutional owners, not less.” Yet institutional players have ceded ground across the board. While Treetop Continued on page 110

SOME OF UPPER MANHATTAN’S NEWEST PLAYERS

Treetop’s Adam Mermelstein

year’s transactions more than doubled, to close to $1.5 billion, from just short of $600 million.

Who’s backing out? Investment firms backed by private equity amassed giant Upper Manhattan portfolios in the years preceding the 2008 economic collapse. In all, they took hold of around 75,000, or about 6 percent, of the city’s rent-regulated units between 2004 and 2008, according to news reports. Their business plans involved buying giant rent-regulated apartment buildings with plans to perform upgrades and replace existing tenants with high-paying ones, sources said. Since the buildings generated lukewarm cash flows, these companies were almost entirely dependent on boosting rents above average. The most active players were companies like Neil Rubler’s Vantage Properties, backed by Apollo Real Estate Advisors (which later changed its name to Area Property Partners), and Joel Wiener’s Pinnacle Group, backed by Praedium Capital and private equity firm Normandy Real Estate Partners. Allegedly aggressive tactics on behalf of some of these companies to try to vacate rent-regulated tenants led to headaches and bad press. Then New York State

for $175 million, the developer spent four years digging out from under its debt before selling the complex for $210 million in 2012. Vantage and Area unloaded most of their collective holdings beginning as early as 2010. Last year, Area sold 10 multi-family properties in Washington Heights and Inwood, known as the Decathlon portfolio, for $49 million, about $7.5 million less than the duo paid in 2007. Vantage had largely exited the investment. The purchaser was Alma Realty.

Orbach Group’s Meyer Orbach

Behind the sales There are two reasons for the “exodus” from Upper Manhattan real estate for the major private equity players, said Adam Mermelstein, a principal of Treetop. “For one, they perceive it as a PR risk. They no longer want such reputational risk in their portfolios,” he said. “Also, the market as it stands today has risen quite a bit. It’s an opportunity for funds which do have a life cycle to exit and make a fair amount of money.” Area CEO Richard Mack hedged on why the company moved out of Upper Manhattan. “We had great success up there, as well as a lot of difficulty. I think we would still do business up there, if we found the right deals,” Mack said. He added that the departure “wasn’t related to the market, it was on a deal-by-deal basis.”

A&E’s Doug Eisenberg

www.TheRealDeal.com January 2014 35

CP & Associates Construction Corp. Tel: 212.796.6901 | Fax: 646.291.8986 www.cpassociatesnyc.com

Manhattan based construction services firm CP & Associates bridges cultural differences to complete Minamoto Kitchoan’s exquisite East Coast flagship boutique on Madison Avenue. When Minamoto Kitchoan, a purveyor of Japanese sweets known as Wagashi made the decision to move its Fifth Avenue boutique, they did so knowing they had assembled an international team dedicated to creating a collaborative work environment. The new location at 509 Madison Avenue presented the Wagashi purveyor with a unique opportunity to situate itself in an area that has become one of Manhattan’s sweetest retail corridors; Minamoto counts European chocolatiers Leonidas, Neuhaus, and Neuchatel as its neighbors. The project team consisted of the Minamoto’s representative Kajima Building & Design Group, Inc., Kaneko Architects, P.C. and the construction firm of CP & Associates. Although the bi-level flagship, which features a walk-in freezer, a product preparation area and an executive office totals just over 2,000 sf, the project presented numerous challenges that had to be overcome. Collectively the trio immediately established an approach that would enable them to plan for and manage issues before they would affect the project’s expedited timeline. Minamoto tasked the team with completing their flagship in 10-weeks; delays were out of the question. In conjunction with Kajima and Kaneko, CP devised a trade schedule that dovetailed with Kajima’s master project schedule, enabling the construction firm to maximize trade performance. On any given day, five to eight subcontractors worked simultaneously within the confines of the new boutique. To ensure that the teams remained on the same page and were working with the latest directives communicated from Japan, a fluid model of communication was established. Daily site meetings and numerous calls were conducted between team members to make certain that Minamoto’s expectations were crystal clear to all parties. “On such a high-end project, there is no such thing as over communicating,” said Phillip Pignatelli, principal at CP & Associates. “We had to check and re-check every project detail to ensure nothing would be lost in translation.” To say CP & Associates took extra special care when installing finishes would be an understatement. The majority of finishes were one-of-kind works, hand crafted by Japanese artisans. Minamoto’s flagship features light-boxes faced with Washi paper, Juraku wall coverings and light coves faced with Shikkui, a lime plaster that actively improves indoor air quality. Meticulous attention was paid to their handling and installation. For each, after the manufacturer’s instructions were translated from Minamoto’s native Japanese, a CP principal remained onsite during the installation process to ensure that the intended design aesthetic was achieved. In addition, the flagship also boasts locally sourced finishes such as a Stone Source porcelain tile floor, Luminii LED lighting and handcrafted white oak retail showcases. The final product, a luxuriously crafted boutique that echoes Minamoto’s brand DNA, elevates and showcases the Wagashi purveyor among its neighboring European Chocolatiers. The project also serves as an example of how companies from opposite sides of the world are capable of creating a successful work environment. “When dealing with non-US clients, you must be committed to understanding and respecting the cultural differences that exist between the project teams,” said Pat Acocella, founder of CP & Associates. “You have to develop a model of project management that overcomes those differences. We did that.”

CP & Associates Construction Corp. (“CP & Associates”) is a construction services ﬁrm headquartered in New York, NY. CP & Associates specializes in the construction of commercial, residential and institutional interior and ground-up projects for leading private and public ﬁrms. Since being established in 2008, CP & Associates have completed over million square feet of project space throughout New York, New Jersey and Connecticut.

rebny gala

REBNY crowd giddy as market thrives Industry heavyweights mark strong year at annual black-tie affair; welcome new mayor, speaker

From left: Jimmy Kuhn of Newmark Grubb Knight Frank and James Nelson of Massey Knakal Realty Services

Diane Ramirez of Halstead Property

By Eileen Connelly he biggest turnout in years packed Midtown’s Hilton Hotel for the 118th annual Real Estate Board of New York gala last month. REBNY President Steven Spinola said his priority this year is to “create a real partnership with the City of New York,” to spur the creation of more jobs and affordable housing. In a sign of perhaps a good start, the upbeat crowd gave Mayor Bill de Blasio a warm welcome.

From left: Connie Alimena of Statewide Abstract and Adelaide Polsinelli of Eastern Consolidated

From left: Steven Hornstock of ABS Partners Real Estate, David Falk of Newmark Grubb Knight Frank and Alan Cohen of ABS Partners

From left: William Montana of Studley and Robin Abrams of Lansco

From left: Jeff Kay of Muss Development and Justin Elghanayan of Rockrose Development

James Simmons of Ares Management

Faith Hope Consolo of Douglas Elliman

Douglas Durst of the Durst Organization

From left: Jason and Joshua Muss of Muss Development

Jared Kushner of Kushner Companies From left: Joel, Matt and David Picket of Gotham Organization

From left: Deborah Gutoff of Eastern Consolidated, Robert Tunis of Colliers International, Tom Bow of the Durst Organization and Mary Ann Tighe of CBRE Group

From left: Gene Spiegelman of Cushman & Wakefield, David Brause of Brause Realty and David Green of Cushman & Wakefield

72 February 2014 www.TheRealDeal.com

PHOTOGRAPHS FOR THE REAL DEAL BY Chance yeh, Steve friedman AND adam pincus

rebny gala Nancy Peck of Nancy Peck & Co. and husband Stephen Green of SL Green

City Council Speaker Melissa Mark-Viverito

Gary Barnett of Extell Development

From left: Steve Spinola of REBNY, Rob Speyer of Tishman Speyer and Gov. Andrew Cuomo

Norman Sturner of Murray Hill Properties and Daun Paris of Eastern Consolidated

Burton Resnick of Jack Resnick & Sons

From left: Gov. Andrew Cuomo, Mayor Bill de Blasio and Himmel + Meringoff Propertiesâ&#x20AC;&#x2122; Leslie Wohlman

The REBNY crowd mingling in the ballroom

Charles Cohen of Cohen Brothers Realty

Bill Rudin of Rudin Management

Suzy Reingold of Cushman & Wakefield

Bruce Mosler of Cushman & Wakefield

Jed Walentas of Two Trees Management

Jeffrey Feil of Feil Organization

Thomas Elghanayan of TF Cornerstone

Wendy Maitland of Town Residential

www.TheRealDeal.com February 2014 73

MEET the Landlord

Vital Stats Name: Eugene Schneur Age: 41 Title: Co-founder, Omni New York Born in: St. Petersburg, Russia Currently lives in: Manhattan

St. Petersburg

Russia

Explain the business model. Over 80 percent of our tenants are Section 8. Tenants pay 30 percent of their income. The complex may have a rent increase, but the tenants continue to pay 30 percent of their income. We finance everything with bonds and low-incomehousing tax credits.

What are the joys of the job? That’s easy: When you buy a complex that’s really rundown, and you rehab it and are able to see it improve people’s lives, it’s a good thing.

ow many units does Omni own?

Omni owns 7,817 units, to be exact. We’re in the Bronx, Brooklyn, Manhattan and Queens, as well as Westchester County, Nassau County, Ithaca, Massachusetts — and we have one property in Wyoming. But about 50 percent of the portfolio is in the Bronx.

What’s your biggest building? In December 2012, we purchased our largest complex. It’s in the Bronx, right past the George Washington Bridge, called River Park Towers. It has 1,644 units. It was a complicated deal, because we assumed some old debt from the city. Combining assumed debt and monies paid, it cost over $100 million. The property is now undergoing a renovation. Our smallest building is a 54-unit building in Harlem.

How did you meet your business partner, baseball All-Star Mo Vaughn? I was a mergers and acquisitions attorney in my previous life and worked at Olshan Law. We were representing Mo when he was investing in some restaurants and lounges. One day, 74 February 2014 www.TheRealDeal.com

You bought the crime-ridden Noble Drew Ali Plaza in 2007. Describe that experience.

he called me and asked if I knew anything about affordable housing and low-income tax credits. We didn’t do that kind of work, so I referred him to another firm. He called back — he was very persistent — and said, “This is a very interesting business.” Very quickly, he convinced me to leave the law firm and enter the low-income-housing world.

Why did that world intrigue you? There was a need back then. It was back when Mayor [Michael] Bloomberg’s affordable housing plans were just getting started. Now, it’s a very mature market. If we were breaking into this business in 2014, it would be much harder.

Did you establish Omni right away? Yes, Mo lit the match. That summer, he and I partnered with [investor] Rob Bennett, who had knowledge of the affordable-housing world. He started doing low-incomehousing tax-credit deals back in the early 1990s.

Which were the first buildings you purchased? We purchased our first two buildings in December 2004 in the Bronx. Our niche has been tenant-in-place rehabs. It’s a construction and logistics exercise, a lot of scheduling and working with the tenants to make sure that they’re not going to be home [when work takes place].

Has Mo’s celebrity status helped or hindered you? When we first started, Mo’s celebrity was the spark for our company, in terms of getting meetings. We would not have been able to grow as fast as we did without his name.

It’s 385 units in Brownsville, Brooklyn. We purchased it out of bankruptcy; it had a troubled history. It was built in the 1970s, and by the 1980s, it had become one of the most dangerous housing complexes in New York City. According to the police, they were selling about $4 million of drugs a year out of there. In $5 and $10 increments, that’s a lot of traffic. When we purchased it, the tenants had to go to the post office to collect their mail, because the mailman wouldn’t go there.

Did people think you were crazy? I was in California with my wife at a hotel pool, and Mike Tyson was sitting next to us. I knew that Mike Tyson grew up a few blocks away from the Plaza, so I told him I just bought it. He looked at me and said, “Why would you do that?” The former baddest man on the planet thought it was a bad idea.

What tool could you not live without in this business? Security cameras. We put them everywhere. If you’re on our block or the perimeter of our property, you’re on camera. Some of the tenants say it’s like Big Brother, but most have no issue with it. If someone leaves garbage in the hallway without taking it downstairs, we can run the cameras and give the person a violation. We also employ 11 former New York Police Department personnel, who work for us fulltime doing security.

What’s next for Omni? We have a site that can support 300,000 buildable square feet of development [on Morris Avenue in the Bronx]. We’re also under contract to purchase 600 units in Newark. It will be our first deal in New Jersey.

Are you doing any selling? We’ve never taken anything out of affordability, and we’ve never sold anything. By Katherine Clarke PHOTOGRAPH FOR THE REAL DEAL BY CHRISTIAN FERNANDEZ

Architecture Review

Ja m e s G a r d n e r

Viñoly’s Thames Street design: ‘Purely’radical The super-tall plan for Fisher Brothers and Witkoff’s tower is a drastic improvement over the original Selldorf proposal

t is not often appreciated that, in ad- designs, the principal interest resides in them irregularly deployed across the surdition to the usual choice between the treatment of the external surface. Her face and rising over a glazed and luminous “conventional” and “unconventional” sense of décor is decidedly unconventionbase. Most of these beads were one-story, architecture in New York City, there al, in the simple sense that most architects though some, for no apparent reason, are, in fact, two further options: were two. The result looked odd the “unconventionally convenand quirky and so “unconventional” and the “conventionaltional,” but in a way that somehow ly unconventional.” Both can be remained comfortably within the found in the design plans put confines of licit rebellion. forward for 22 Thames Street in Put another way, the design Lower Manhattan. looked the way conformists For $150 million, Fisher Brothers acquired the site, where a 10-story, decidedly conventional Beaux-Arts building circa 1900 stands. Fisher Brothers and the Witkoff Group now plan to tear that building down and erect a 400-unit residential high-rise, a stone’s throw from the World Trade Center site. From the beginning, there was no question that the developers Starchitect Rafael Viñoly, who was tapped of 22 Thames Street would build to take over for Annabelle Selldorf (below) something tall. The question was whether to build something super-tall and super-thin, or something slightly shorter — but still lofty — and broader. Initially the developers were leaning toward the latter option, in the interests of harmonizing with the surrounding architecture. The design they floated was by Annabelle Selldorf, a renowned and sought-after architect who has been most active in Chelsea in recent years. might imagine architectural reBut a few months ago, the debellion to look. velopers changed architects and By contrast, Viñoly’s design Rafael Viñoly’s 22 Thames is a razor-thin tower rising next to 4WTC in enlisted Rafael Viñoly to design turned that equation on its head. the rendering above. Below, the original design by Annabelle Selldorf. something very tall and very thin. If you are not really paying atIn fact, the massing of this new tention, you might think that the project, which is still pending design, like the one he created approvals, so closely resembles for 432 Park, was — in every rethat of Viñoly’s high-profile unspect except its height — a conder-construction 432 Park Avventional, even boring, specimen enue, which is already near the of Neo-Modernism. The pattern half-way point of its ascent, that is simple and geometric; there is no trace of that syncopated it is hard to imagine that the Uptown building did not weigh heavrhythm that so many contempoily on the developers and cause rary architects favor. There are no them to rethink the design. curved lines to be seen, and the The choice of Viñoly is clearcladding looks as though it could ly the right one. He is, in the case of 22 have not chosen to follow her lead, and have been conceived for any number of Thames, unconventionally convention- also in that she often seems to be pulling Skidmore Owings and Merrill office towers conceived from 1970 to the present. al, whereas Selldorf has proven herself some sequence of formal motifs out of her to be just the opposite: conventionally hat in the hope that they will all coalesce But there is far more to the buildinto something wonderful. unconventional. ing than that. In a certain sense, one Each of the architects’ blueprints for Unfortunately, that does not usually can best understand Viñoly’s designs by 22 Thames includes a tower on a base. But happen. At 22 Thames Street, Selldorf deapplying to them the standards of art the base seems weightier in Selldorf ’s devised a surface treatment that looked rathcriticism, especially those of sculpture, rather than the more usual criteria that sign, and the tower that rises above it is er too much like a two-tone accumulation apply to architecture. squatter. As is usually the case with her of beads, some glazed, some solid, all of

76 February 2014 www.TheRealDeal.com

The closest analogies to 432 Park and 22 Thames are the sculptures of Sol LeWitt and Jackie Windsor, as well as the paintings of Agnes Martin, acts of conceptual art from the 1970s. Or, from slightly earlier, the Minimalist sculptures of Donald Judd and Tony Smith. In the latest design — which could be modified depending on input from city officials — the Downtown building rises up in almost freakish slenderness, a monolithic tower as pure, in its way, as that alien artifact that descended to Earth in Stanley Kubrick’s “2001: A Space Odyssey.” That is to say that Viñoly has purged his surfaces of all adornment or distraction, until the very pertinacity and discipline of his design — in one sense so conventional — bursts through to a design as strikingly original as anything built in Manhattan in over a generation. Immediately to the east of the main tower is a slab of almost wafer-thinness that looks as though it provides some structural support to the tower. It rises from the ground all the way to up the tower’s summit and then surpasses it by about 100 feet. And yet, I am willing to wager a good amount of capital that it serves no structural function at all: it has been included entirely on the basis of the way it looks, and it looks very good indeed. If that shaft surpasses 937 feet, it will make 22 Thames the tallest residential building in Lower Manhattan, surpassing Silverstein Properties' 30 Park Place, which is now under construction. At its base is a structure that resembles the one Selldorf designed, even though it is more perfectly cubic, and thus more satisfying to the eye. The shaft of the tower, to judge from the renderings, is striated by the long rows of windows that rise in uninterrupted bays from the base to the summit. This element as well adds subtle visual interest that belies that initial sense of conventionality that the building eagerly projects. In the most general terms, the formal elements of 22 Thames recall those of 432 Park in their uniform simplicity. And both projects achieve great and memorable beauty through their obedience to those premises. But whereas the Uptown building is almost Neo-Brutalist in its joyous parade of raw concrete, the Downtown building, perhaps out of respect for its architectural context, embraces the conventionality of the glass curtain wall that abounds in this part of the island. If only the other buildings in its vicinity looked as good as this promises to be when completed. TRD

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Boston Properties to market more trophy assets in 2014

CEO says private capital for real estate deals remains “plentiful” By Hiten Samtani iven the robust capital markets environment, Boston Properties will continue to market trophy assets — such as Times Square Tower — for sale or recapitalization in 2014, executives for the real estate investment trust said late last month. President Doug Linde, speaking from Boston during the company’s fourth-quarter earnings call, said that the REIT had been successful at filling buildings such as Times Square Tower and 125 West 55th Street with top-drawer, long-term tenants that provided “really terrific long-term contractual cash flows.” In October, the REIT sold a 45 percent stake in Times Square Tower for $684 million. The towers, Linde said, were “an ideal mechanism for harvesting” given the strong demand for trophy assets, according to a transcript of the call provided by Seeking Alpha. Boston Properties’ Funds from Operations for the fourth quarter of

250 West 55th Street

2013 stood at $197.6 million, a yearover-year increase of 2.6 percent from $192.5 million in the fourth quarter of 2012. Net income available to common shareholders was $88.7 million in the fourth quarter, a year-over-year increase of 36 percent from $65.4 million in the fourth quarter of 2012.

CEO Owen Thomas characterized the interest rate increases in the fourth quarter as “fairly benign” and said that finding private capital for real estate deals remained “plentiful.” Thomas also introduced former CBRE broker John Powers, who took over in January as head of the firm’s New York operations. Powers replaced Robert Selsam, a 33-year veteran of the company. “My ramp-up has been very quick and I’m now fully engaged with every aspect of our operations,” said Powers, who helped Boston Properties design and lease its 1 millionsquare-foot tower at 250 West 55th Street during his tenure with CBRE. Boston Properties management also said that it was on the prowl for development opportunities in the city, especially those that would cater to the technology and media tenants that have dominated leasing activity in Manhattan over the past few quarters. It was possible, Linde said, that the REIT would look beyond its traditional Midtown

Whoever Said

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stronghold, including locations in Midtown South and Downtown. On the leasing front, Linde pointed to highlights such as the 95,000-square-foot deal with billionaire George Soros’ investment firm at 250 West 55th Street. Another 175,000 square feet of deals were in the pipeline at that building, Linde noted. If they were completed, Linde said the building would be about 75 percent leased — though it was unlikely it would hit its target of being 90 percent leased by the end of 2014. Linde also noted the comeback of trophy leasing deals — those in which rents were north of $100 per square foot. In 2013, he said the market saw 54 trophy deals,

for a total of 760,000 square feet, a big jump from 2012’s 38 deals for 550,000 square feet. That’s still a far cry from the 2008 high of 105 deals for almost 2.5 million square feet. In response to a question about how Mayor Bill de Blasio’s push to raise property taxes would affect the industry, Mortimer Zuckerman, who stepped down as CEO of the REIT last year but remains chairman, said that the tax hike wouldn’t be anything dramatic. “I think it has been narrowed by the, shall we say, the experience that the mayor has had with the governor on these issues and not to be able to go too far,” Zuckerman said. TRD

Savanna signs a deal to sell Penn Station site for $65M

Site at 31st Street and Eighth Avenue could be combined with other properties By Katherine Clarke eal estate private equity company Savanna Partners has inked a deal to sell a corner development site at 415 Eighth Avenue for $65 million, The Real Deal learned. Savanna brought the site to market in December, tapping Bob Knakal of investment sales brokerage Massey Knakal Realty Services to market the property. The deal, which is in contract, had not closed at press time. The site, at the corner of 31st Street, has a total buildable square footage of 87,644. But it could be combined with adjacent sites to form a larger lot that would support a retail and residential development of well over 200,000 square feet, it was previously reported. The new owner may also be able to acquire some of the 1.5 million

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square feet of transferable development rights available from the Port Authority’s Moynihan Station redevelopment. Bob Knakal, chairman of Massey Knakal, and a representative for Savanna declined to confirm the deal. The identity of the buyer was not clear. Central Parking has a lease on the site, which is currently used as a parking facility. That lease has a 60-day termination clause, however, meaning development could start within a few months. Savanna acquired the site for $27.85 million in 2007, records show. The company had plans to build a 15-story, 88-unit residential tower there, according to documents filed with the Department of Buildings in 2008. Those plans apparently were abandoned when the recession hit. TRD www.TheRealDeal.com January 2014 35

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Q&A

Afforable housing: poised for another boost Developers say Mayor de Blasio will spur development in afforable sector, won’t hinder market rate projects

By Melissa Dehncke-McGill t’s been a long time since affordable housing development was seen as the ugly duckling of the real estate world in New York City. In fact, its status rose under former Mayor Michael Bloomberg’s ambitious plan to develop and preserve 165,000 affordable units. Now the sector is poised to get another boost as the city’s new mayor, Bill de Blasio, starts implementing his agenda, which hinges on producing 200,000 affordable units. In this month’s Q&A, The Real Deal talked to affordable housing developers and others to gauge what they think of de Blasio’s real estate-related appointees, how his proposals for affordable housing will play out and about the general state of the affordable housing development market. The builders said the biggest challenges right now for the affordable development community in New York are the escalating cost of land and a lack of funding.

They are also advocating for changes to the federal income requirements that New Yorkers would need to meet in order to live in affordable and middle-income developments. Most interviewed said the fear that some industry players have expressed about de Blasio’s agenda tamping down overall market-rate development is unfounded. “The interest rates increasing will put the crimp on market-rate housing and the mayor’s initiative will just be one [thing] many can point to,” said Heidi Burkhart, president of affordable housing brokerage Dane PCG. “If the interest rates do not rise, I would be shocked if the real estate market appetite was crimped.” For more on the returns affordable housing developers are seeing these days, where they expect future housing to be built and what other changes they expect from de Blasio, we turn to our panel of experts.

Jonathan Rose

Adam Weinstein

founder, Jonathan Rose Companies Mayor de Blasio has pledged to create or preserve 200,000 affordable housing units in NYC and said he’d invest $125 million annually from the city’s pension funds to do so. What do you think of his goal and financing mechanism? All affordable housing costs more to develop then its occupants can pay for, so it needs a subsidy. We very much support the use of city pension funds to help provide the equity for affordable housing preservation. Those are investments that will earn a good return for the city’s employees and help preserve housing. In fact, I would recommend the pension funds invest $500 million per year in preservation. The pension funds could also invest another $500 million a year for mixed-income housing. What issues do you think are holding back affordable housing development in NYC? There are two big issues: the lack of inexpensive land in the right locations and the lack of sufficient grant funds to close the financing gap. In which areas of the city are you expecting to see the most affordable housing development during the coming years? Affordable housing and affordable transportation are really linked, so it would be great if the city encouraged affordability along the new subway stops on Second Avenue by providing an FAR bonus for those projects that build extra affordable housing. And, of course, it would be great for the city to create a similar density bonus in Brooklyn, Queens, the Bronx and Staten 82 February 2014 www.TheRealDeal.com www. TheRealDeal.com

Island. The issue is that communities often resist higher density and height. So the mayor has to lead. What are typical projected financial returns for an affordable housing development in NYC in today’s market? Returns on the development of new affordable housing have dropped significantly over the last few years. Essentially the returns come from the development fees, which city agencies have reduced and delayed to the point that they barely cover a developer’s cost. Returns from purchasing and preserving affordable units, or developing new mixed-income housing, can generate 3 to 6 percent cash on cash returns and 8 to 12 percent [internal rates of return.] How do those returns compare to typical market-rate residential development projects in NYC? They are equal to the returns on market-rate rental developments in the early years. But over the long run, market-rate developments will appreciate much more. The returns for condo projects are significantly higher, but bear higher risk. Developers have reportedly tapped the 80-20 program to build over 6,000 units of subsidized housing in high-end towers in the last decade. But critics say the tax-exempt bonds that are being granted to developers could be used more efficiently. The program is very effective, and brings affordable housing to prosperous neighborhoods. I’m sure that the real estate tax formula in the abatement can use more nuance.… Also, perhaps the formula should be different for condos versus rentals, perhaps with condo developments, above a certain sales price, the tax abatement is tied to a contribution to a Housing Trust Fund.

president/CEO, Phipps Houses What issues do you think are holding back affordable housing development in NYC? Land pricing is always the enemy of affordable housing and construction costs. The city is sitting on a ton of inexpensive municipally controlled property adjoining Housing Authority buildings. The way the city went about trying to tap that resource in the last administration wasn’t as well conceived as it could have been. Do you think there will be more opportunity for developers who are currently doing market-rate housing to do affordable housing under de Blasio? I don’t see market-rate developers shifting markedly, because in affordable housing the big revenue source is, was, and shall always be construction and real estate services — not the real estate. It’s an impaired asset by definition and the market-rate game is really a cash-flow game, which is a very different mindset. In which areas of the city are you expecting to see the most affordable housing development during the coming years? Where land is cheap. That would include the South Bronx, Southeast Queens, parts of central Brooklyn and mixed-income developments in some neighborhoods in Harlem.… I could see the de Blasio administration continuing a trend of rezoning. Not so much a shift from manufacturing to residential, but more to mixed zone, which would be potential locations for affordable housing. But rezonings take a long time.

What are the most challenging aspects to developing affordable housing in today’s market? I used to joke that I went into this world to develop affordable housing, but that what I really do is harmonize conflicting governmental programs. [But] it’s always about financing. By definition, affordable housing can’t sustain itself based on the income of the property. The most critical element of that financing is a low-cost governmental mortgage that fills the gap. Controversy erupted last year when Extell created a separate entrance for lower-income residents who were occupying “affordable” units at one of its projects. Do you think developers should be required to provide the same amenities to all types of residents in the same buildings? I think providing amenities and providing a different entrance are very different things. The building segments have been used in other developments without controversy. Our client Silverstein Properties did the exact same zoning arrangement for Silver Towers. They were clear that they would offer the same amenities to [all the] residents and there was almost no controversy. If you offer an amenities package that is rich and desired, whether you walk in this door or that door makes less of a difference. Some in the development community have expressed concern about de Blasio’s wish to replace Bloomberg’s voluntary inclusionary zoning policy with a mandatory policy that would require developers who benefit from rezonings to set aside a percentage of their units as affordable. What are your thoughts? I think this is to a large extent a tempest in a teapot. I do think it’s fair of the government when entitling the owner of a prop-

Q&A erty to greater benefit to ask the owner for something in return. There are lots of ways to effectuate that program. Taking a look at how you abate real estate taxes would be an effective way of coming up with a return that benefits the general populace. Production of inclusionary housing is another one. On a similar note, do you think the new mayor will truly crimp the appetite for building market-rate housing in pursuit of affordable housing as some have suggested? Or do you think that concern is overblown? Overblown. I don’t think the mayor is looking to crimp the appetite in the building market. I think he is simply looking for more ways to produce affordable housing. What are typical projected financial returns for an affordable housing development in NYC in today’s market? I think we are at a point where there is a flood of capital chasing equity returns of 3 to 4 percent. Over the long term, affordable housing is never going to be the great financial return that market rate is.

Don Cappocia

managing principal, BFC Partners What’s the state of the market for affordable housing development? At the end of last year, [the city] did a number of closings to try and finish up the 165,000-unit commitment of the Bloomberg administration. That activity will continue into this year. There was also a shift in resources to preservation projects, which my company got involved in. So between the preservation and the new production, I see us staying busy for at least the next couple of years. What policy changes, if any, on the city, state or federal level would you like to see in connection with affordable housing development? On the federal level, the Federal Reserve should keep lending rates low. The better rates we have, the less capital subsidy we need. Also, there’s been a proposal pending in Washington for at least a couple of years for income averaging. The strict 60 percent of [area median income], certainly in New York, doesn’t address demand effectively. So the idea would be to average up to 80 percent and down to 40 or 50 percent ,and you find a way within a single project to average out to 60 percent and address different income needs. We have been requesting that for some time. Do you think there will be more opportunity for developers who are currently doing market-rate housing to do affordable housing under de Blasio?

Listening to the mayor talk about his agenda, it’s my understanding that he wants to see every project provide some level of affordable housing. Everybody across the spectrum in our industry is going to have an opportunity to work with the administration to produce affordable housing. It will be an interesting exercise. What do you think of de Blasio’s selection of Alicia Glen as his deputy mayor for housing and economic development, and Kyle Kimball as head of EDC? The appointment of Alicia Glen is going to be very helpful. She has an incredible depth of experience in affordable housing projects, and more importantly, in her years at Goldman she has come to really understand and perfect the art of deploying resources in a way that not only produces housing, but also [stimulates] economic development. She understands the nexus of all of this. The same with Kyle. We worked with him at EDC, and he designated us to do Seward Park, which will have 1,000 units, 50 percent of them affordable. What are your thoughts about de Blasio’s wish to replace Bloomberg’s voluntary inclusionary zoning policy with a mandatory policy? If there is going to be a program that’s mandatory, the model has to include an expansion of the technical infrastructure at the [Department of Housing Preservation & Development.] Right now it is very effective, one of the best housing production outfits in the country, but like every other city, there are constrained resources. If the mayor is going to do this, he’s going to have to expand his technical housing production people at HPD and the city’s [Housing Development Corporation.] I’m guessing that is not going to be a big issue, given his agenda. What are typical projected financial returns for an affordable housing development in NYC in today’s market? It’s not a cash-on-cash return, so it’s really hard to answer that question. The returns on affordable housing have been consistent over the last 10 to 15 years. We hold these properties in our portfolio. It is not significant returns compared to market-rate projects. But it’s a consistent return and definitely worth the investment. The institutional investors are there every time we need them.

Heidi Burkhart president, Dane PCG

What’s the state of the market for affordable housing development? My firm has historically concentrated on preservation and rehabilitation of existing stock. In this arena, we have seen a

huge increase of interest from 10 years ago. At that time, it seemed that everyone was making money in conventional real estate, so affordable housing was rather seen as the “ugly duckling.” Affordable housing deals are known as “hairy deals” because there’s a lot of minutia to go through. But in 2008, the conventional market took a turn. Affordable housing, however, remained stable. Since then, there have been several new funds in the space. Do you think there will be more opportunity for developers who are currently doing market-rate housing to do affordable housing under de Blasio? Opportunity has always existed. Recently, though, more awareness of the opportunity has been made. I do see in the next years a rise in parties looking to city, state, and federal agencies for options in constructing developments other than market-rate housing. Interest rates will rise and when they do, I guarantee many more will look to shift to affordable housing. Controversy erupted last year when Extell created a separate entrance for lower-income residents at a project on the Upper West Side. Do you think developers should be required to offer the same amenities for all types of tenants? Knowing Extell’s reputation in the industry, I’m just happy they chose to develop affordable housing at all. Gary Barnett has some of the most beautiful locations locked down. Many times, he does not necessarily need to include affordable housing, but opts to do so to receive more benefits to build. I see him rather like a Steve Jobs of New York City real estate. Many will critique him on his business style or decisions but Barnett has aggressively sought out some of the more complicated deals and has been a trailblazer for developments. As I may not agree with a separate entrance, Barnett is a master at what he does. What are your thoughts about de Blasio’s wish to replace Bloomberg’s voluntary inclusionary zoning policy with a mandatory policy? The size of the development in question would be a big concern of mine. A smaller development looking to meet the mandatory requirement may prove to be tough for the underwriting numbers. I appreciate what de Blasio is suggesting with the mandatory requirement, but prefer the freedom of choice that inclusionary brings. On a similar note, do you think the new mayor will truly crimp the appetite for building market-rate housing in pursuit of affordable housing, as some have suggested? I think the interest rates increasing will put the crimp on market-rate housing, and the mayor’s initiative will just be one many can point to. If the interest rates do not rise, I would be shocked if the real

estate market appetite was crimped.

Martin Dunn

president, Dunn Development Corp. What’s the state of the market for affordable housing development? The demand and need for affordable housing in New York City is unprecedented. We got as many as 20,000 applications for a single project recently. The levels of production of affordable housing under the Bloomberg administration have been relatively consistent in past years. But it’s not keeping pace with need. What policy changes, if any, on the city, state or federal level would you like to see in connection with affordable housing development for NYC? At the city level, I would like to see policy changes to encourage production of affordable housing within primarily market-rate deals without using limited public subsidies. The limited subsidies available should be targeted to economically distressed neighborhoods. At the state level, more housing resources need to be directed to New York City, where the need is greatest. At the federal level, the cuts to the Section 8 and HOME programs need to be restored and the tax-credit program needs to be amended to allow for serving families at a wider range of incomes — both higher and lower. Do you think there will be more opportunity for developers who are currently doing market-rate housing to do affordable housing under de Blasio? As long as the higher-end market is booming, with opportunities for much greater profits, I don’t think you’ll see crossover. Historically it’s been the opposite, affordable housing developers moving into market-rate housing, where significantly more money can be made. What are your thoughts about de Blasio’s wish to replace Bloomberg’s voluntary inclusionary zoning policy with a mandatory policy? I feel strongly that in new rezonings that significantly increase land values, affordable housing should be mandatory and should be paid for from the increased land value — without using public subsidies. I advocated for mandatory inclusionary housing in front of the City Council in 2003 related to the plans for rezoning Greenpoint and Williamsburg. I think the Bloomberg administration missed a significant opportunity there. Property owners reaped huge windfalls, and then government had to pay for all of the affordable housing that was developed. While my firm has benefited from this, it was not good public policy. TRD www.TheRealDeal.com February 2014 83

SOUTH FLORIDA

Real estate news in the Sunshine State TheRealDeal.com/miami

REPORT

Dolphins owner Ross mulls renovations While New York hosts its first Super Bowl, Miami Dolphins owner and Related Cos. head Stephen Ross is trying to get back in the big game. Dolphins CEO Tom Garfinkel recently told a Miami business group the team is revamping plans for extensive renovations at Sun Life Stadium, which last hosted the Super Bowl in 2010. National Football League of-

Sun Life Stadium

ficials say major upgrades are needed before Sun Life gets to host another Super Bowl. The next chance for Miami is 2019. Ross led a failed push for

publicly funded stadium renovations last year. It is unclear whether a new proposal would also include public money. Miami-Dade County commissioners supported a plan that called for $289 million over 30 years from a proposed county hotel bed tax increase, but the plan needed state approval, and the Florida House of Representatives did not even vote on it last spring.

Edgewater sees condo construction boom Condo builders are increasingly targeting Miami’s Edgewater neighborhood, one of the few in South Florida with developable waterfront land. Some of the most notable developers in the region have planted their flags there. At least 10 condo towers are proposed for the 20-block stretch of Biscayne Boulevard from Northeast 17th to 37th streets. Projects include Re-

lated Group’s Icon Bay and Paraiso Bay, Melo Group’s Bay House, mckafka Development Group’s The Crimson and Eastview Development’s Biscayne Beach. Miami condo developer and film producer Valerio Morabito is considering jumping on the Edgewater bandwagon. He could build a series of low-rise condo buildings to offer a different product type from the high-rise projects that dominate the area.

mckafka Development’s the Crimson

Trump Place

200, 220, 240 Riverside Boulevard

Opportunistic land-bankers are also gobbling up Edgewater properties. Brazilian airline mogul Jose Afonso Assumpcao recently picked up a multi-property Edgewater site that has high-rise development potential. He has no immediate plans to build there.

Malaysian gaming giant finds downtown partner

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Trump International Realty New York | 108 Central Park South | New York, NY 10019 Trump International Realty New York is a licensed New York Real Estate Broker. Nitza Shafrir Zinbarg is a Licensed New York Real Estate Associate Broker. Any and all information, documentation, photographs, videos, text promotional material, floor plans, images, data, numbers and statistics (collectively, the “Information”) regarding the Residence including, without limitation, real estate taxes and financing, is from sources deemed reliable, however, no representation or warranty, express or implied, is made as to the accuracy, timeliness, or completeness of the Information. The Information may be subject to inaccuracies, modifications, adjustments, omissions, changes of price or other conditions prior to any sale, lease or financing, without notice to you. For exact dimensions, you must hire your own architect, engineer or other professional. There is no express or implied guarantee that the views or scenery depicted herein will remain unobstructed and/or will be the same view that you will have if you elect to purchase or lease the Residence(s).

84 February 2014 www.TheRealDeal.com

Malaysia-based Genting Group formed a partnership with a prominent racetrack operator and dramatically revised the gambling component of its Resorts World Miami development, which withered in 2011 when state legislators refused to change Florida gaming laws to allow a $3.8 billion casino resort on the former Miami Herald headquarters site downtown. Genting recently announced plans to team up with the owners of Gulfstream racetrack in Hallandale Beach for using Gulfstream’s permit to open 2,000 slot machines and simulcast betting on horse races as part of the larger mixed-use project. To date, state regulators have refused to accept Gulfstream’s contention that the permit allows it to operate gaming facilities in both Miami-Dade and Broward counties. Genting could ask the legislature to clarify the law, push gambling regulators to change it or take legal action to try and secure the permit. By Eric Kalis

THE JILLS THE JILLS THE POWER OF TWO

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Commercial Commercial and and residential real estate news news briefsbriefs residential real estate from around the U.S. from around the U.S.

NATIONAL MARKET REPORT

Sacramento Campbell Soup Co. sold its iconic factory in Sacramento — its oldest U.S. facility — to a partnership led by Los Angeles investment firm Hackman Capital Partners. The new owners plan to convert the 1.6 million square feet of space on 129 acres into a multi-use industrial park, the Merced Sun-Star reported. Campbell said in September 2012 it would shutter the Sacramento plant, built in 1947, along with a smaller New Jersey plant. The

closures were part of a cost-cutting plan, which should save the company about $30 million annually by fiscal 2016, Campbell said. The Sacramento factory shutdown in July meant the loss of 700 blue-collar jobs. Community leaders see the plant’s acquisition as a much-needed boost to the struggling neighborhood. It comes equipped with some valuable assets, including “considerable sewer capacity and the ability to process 2 billion gallons of water a year,” the Sun-Star reported.

The Campbell Soup factory in Sacramento

Hollywood Hills Katy Perry

Singer Katy Perry sold her three-acre Hollywood Hills home, which she shared with ex-husband and comedian Russell Brand. The 8,800-squarefoot house went for $5.65 million, at a nearly $1 million loss, the L.A. Times reported. In 2011, Perry and Brand bought the seven-bedroom home for $6.5 million.

Malibu Los Angeles The much-anticipated Ace Hotel in Downtown L.A. opened its doors last month. The boutique hotel is a confluence of old and new. Built in 1927, its 14-story, 74,000-square-foot building, located at 929 South Broadway, housed the flagship theater of the famed United Artists studio, founded by Mary Pickford, Charlie Chaplin, Douglas Fairbanks and DW Griffith. In the late 1980s, when the downtown area was all but written off, the theater was converted into a ProtThe Ace Hotel estant church. Now at the edge of a revitalized downtown, it’s been turned into the 182-room hotel. Ace Group, which has six other locations, preserved iconic parts of the building, including its cathedral spires and a neon “Jesus Saves” sign on the back of the building, while adding its own distinct touches. According to the hotel website, the lobby, designed by Commune Group, features a large mural designed by Simon and Nikolai Haas, best known for their collaboration with Versace. Ace has also revived the original 1,600-seat theater, which will serve as a live-music performance space. Rooms range from small bedrooms to “Terrace Suites,” featuring 633 square feet of space, a kitchenette and private terrace.

Philadelphia Philadelphia hopes to have its first Land Bank in operation by the end of the year after Mayor Michael Nutter signed a law authorizing the effort to streamline the city’s system of turning over vacant properties. The Land Bank will sell vacant lots. The Land Bank is designed to coordinate the repurposing of approximately 40,000 vacant buildings and lots, using powers such as flexible pricing 86 February 2014 www.TheRealDeal.com

to provide incentives for development and the ability to quickly acquire tax-delinquent properties. To begin operations, the Land Bank needs to incorporate, get city funding in the budget process and begin acquiring land from city agencies, according to Region’s Business. Philadelphia is the largest U.S. city to adopt a land bank, but not the first. Flint, Mich., Syracuse, N.Y., and St. Louis are among the cities that sponsor them, with mixed results.

Chicago Dominick’s Finer Foods, the nearly 90-year-old Chicago grocery chain, vacated all 57 of its remaining stores, leaving empty approximately 2.8 million square feet of retail space. Dominick’s parent, California-based Safeway Inc., said in October it would exit the Chicago market after struggling to turn around its business. It sold 15 stores before shuttering the rest: four to Jewel-Osco, a primary competitor, and 11 to Milwaukee-based

Leonardo DiCaprio’s Malibu home

Leonardo DiCaprio finally sold his Malibu digs, more than a year after he listed the beachfront property at $23 million, Today reported. Last summer, “The Wolf of Wall Street” star relisted the seven-bedroom house at $18.9 million. It sold for $17.35 million at the end of the year.

Tennessee

Dominick’s Finer Foods

Roundy’s Supermarkets. Mayor Rahm Emanuel assembled a task force comprised of community leaders to locate tenants for the vacant stores. The closures took place amid a stalling local real estate market. In the third quarter, the retail vacancy rate rose to 8.9 percent, up from 8.6 in the beginning of the year, according to a Chicago retail market report by CBRE. However, a recent report from Newmark Grubb Knight Frank showed the suburban Chicago retail market actually registered approximately 774,000 square feet of positive net absorption in 2013. “With the exception of some poorly located stores, a lot of these will be absorbed,” said Newmark senior managing director Jim Schutter. “But it will have a depressing effect on some of the rents in those areas.” Whole Foods and Art Van Furniture are rumored to be among the companies looking at the vacant spaces, he added. Compiled by Sasha Von Oldershausen

Sheryl Crow

Sheryl Crow relisted her solar-powered Tennessee ranch at $3.85 million, Today reported. This is the Grammy-winning singer’s third attempt to sell. She initially listed the estate at $7.5 million in 2010. A year later, the size of the lot was cut from 147 acres to 51 acres, while the asking price dropped by 40 percent. Crow’s property includes a 10,264 square foot main house and a 14-stall barn, as well as a pool with a waterfall. By Sasha Von Oldershausen

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ON THE MARKET Murray Hill development site on the market A development site offering up to 63,195 buildable square feet in Murray Hill is on the block with an asking price of $55 million. Located at 11 Park Avenue between East 34th and East 35th streets, the site contains an eight-story parking facility that is triple-net-leased and can be vacated with 11 Park Avenue 180 days notice. The site is zoned C5-3, which has a floor-area ratio of 15 for commercial use and allows up to 63,195 square feet, and a floor-area ratio of 10 for residential use as of right, which would allow 42,130 square feet. If utilized, an inclusionary housing bonus would increase the residential square footage allowance to 50,556. Massey Knakal’s Bob Knakal and John Ciraulo are marketing the property.

Del Nunzio lists UES townhouse for $51M Brown Harris Stevens superbroker Paula Del Nunzio is listing a seven-level Upper East Side townhouse for $51 million, just $2 million shy of the priciest townhouse sale on record. The neo-Georgian mansion functions as the New York headquarters of the nonprofit School of Practical Philosophy. Located on 79th Street between Fifth and Madison avenues, the 16,000-square-foot house was 12 East 79th Street purchased by the school in 1975, which

Commercial properties recently placed on the market

made only minimal changes to the original 1903 layout, according to the Wall Street Journal. The school said in a statement that it is selling the property because “it is time to make the move to a larger space that can better meet our growing needs.”

Chelsea Arts office condos ask record $20M The 21-story Chelsea Arts Tower has two separate commercial condominiums available that may just be the priciest office space ever offered in New York City on a per foot basis, Crain’s reported. The top-floor condo, asking $2,800 per square foot, and space on the 14th floor, asking $1,600 per square foot, together would put as much as $20 million 545 West 25th Street in developer Jack Guttman’s wallet. The 21-story tower, located at 545 West 25th Street between Ninth and 10th avenues, was built in 2006, before the city banned construction of buildings taller than 120 feet in the area, giving the highest floors unobstructed views. The expensive listings in the Chelsea Arts Tower may be driven in part by the scarcity for office condos in the city, as The Real Deal has reported. CBRE Group’s Matt Bergey and Stuart Siegel are handling the sale.

Bond Street retail condo hits market for $13M A corner retail condo housing designer-menswear store Billy Reid on Bond Street has hit the market for $13

million, listing broker Jerome Benayoun of Black Diamond Advisory Group told The Real Deal. The 4,622-square-foot space, at 54 Bond Street, is located on the ground floor of a luxury condo project built by developer Adam Gordon. The white cast-iron building, on the corner of the Bowery, was previously the site of the Bouwerie Lane Theatre. Gordon sold the retail condo to a foreign investment partnership for $5.5 million in 2010. The partnership is now looking to offload the property since its 54 Bond Street principals have different priorities, according to Benayoun. The partnership, known as YHD Bowery Commercial LLC, could not be reached for comment.

Brooklyn corner apartment buildings for sale A package of two apartment buildings in Cobble Hill and Carroll Gardens is on the market with an asking price of $10 million. The corner properties, located at 285 Court Street in Cobble Hill and 384 Court Street in Carroll Gardens, consist of 10 apartments and two retail spaces. The three-story building at 285 Court Street contains four residential units and one retail unit, and the four-story property at 384 Court Street has six residential units and a retail unit, which will be delivered vacant. Adam Hess of TerraCRG is handling the sale. Compiled by Linden Lim

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Deal Sheet summary

The Deal Sheet, on pages 92 to 102, covers transactions from 12/11/13 through 1/10/14. Please submit future deals to deals@therealdeal.com.

Overview Property sales

Financing

Leases (# of deals)

Leases (square feet)

Deals

Transactions

Office

1,226,784

Dollars

$571,390,000

Aggregate value

$194,270,000

Retail

161,470

Total

1,388,254

Sales By dollar volume (in millions)

By type Development Industrial Mixed-use Multi-family

Development

.55

Hotel

$68

0 2.4 2 $ 0 $30.3

Office

Hotel Industrial

Mixed-use

.36

Multi-family

Office

Retail

$413.53

Office leases Office leases by industry

Office leases sf by industry

Industry

Leases of deals

Industry

Top tenant reps for office leasing by sf Leases square feet

Broker

Leases square feet

Architecture & Design 1

Architecture & Design 2,234

CBRE Group 529,055

Construction 1

Construction 1,400

Cushman & Wakefield 436,296

Education 1

Education 4,465

Jones Lang LaSalle 419,000

Entertainment 2

Entertainment 13,443

Studley 71,535

Fashion* 4

Fashion* 425,800

Colliers International 33,774

Financial 7

Financial 557,310

AC Lawrence 20,860

Health & Beauty 3

Health & Beauty 14,743

Adams & Co. 19,029

Jewelry 1

Jewelry 1,517

Lee & Associates NYC

Legal 3

Legal 24,118

Byrnam Wood 11,378

Other 19

Other 181,754

M.C. O'Brien 11,372

11,439

Retail leases Top tenant reps for retail leasing by sf

Retail leases sf by industry

Ripco Real Estate 24,000

Art Galleries

Art Gallery

Winick Realty 14,000

Department Stores

Kassin Sabbagh Realty 12,850

Fashion

Leases square feet

Gotham City Group 10,900 Lee & Associates NYC

10,806

Food & Beverage

PD Properties 9,150

Health & Beauty

DTZ 6,500

Other

Sinvin Real Estate 4,709

(*includes showroom space)

Department Store Fashion Food & Beverage Health & Beauty Other

5,559

0 3,0

Transwestern 4,956

5,0

SCG Retail 5,093

5,750

Retail leases by industry

Broker

www.www.TheRealDeal.com February 2014 91

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 12/11/13 to 1/10/14. Please submit future deals to deals@therealdeal.com.

Office leases Address

Size

Tenant / Representative

Landlord / Representative

Notes

3 World Trade Center

516,000

GroupM / M. Tighe, G. Tosko, L. Crowley Corrinet, B. Herlihy, CBRE

Silverstein Properties / J. Moss, Silverstein Properties; P. Turchin, S. Siegel, CBRE

The media investment management group signed a 20-year lease on nine floors at the base of the under-construction, 80-story tower. GroupM is the first tenant to lease space in the building, which is slated to open in 2017.

501 Seventh Ave

224,000

PVH Corp. / M. Astrachan, M. Konsker, JLL; S. Bauer, C&W

Empire State Realty Trust / T. Durels, Empire State Realty Trust; F. Posniak, H. Blair, S. Kearns, K. Mekles, C&W

The global apparel company signed a lease renewal for Calvin Klein offices.

205 West 39th St

195,000

PVH Corp. / M. Astrachan, M. Konsker, JLL; S. Bauer, C&W

205 West 39th Street Co. / H. Fiddle, E. Haskell, CBRE

The global apparel company signed a lease renewal for Calvin Klein offices.

1359 Broadway

48,387

Ipreo Holdings LLC / J. Genovesi, J. Messina, Studley

Empire State Realty Trust / W. Cohen, N. Rubin, A. Weisz, NGKF; R. Kass, Empire State Realty Trust

The tech company signed a lease renewal.

31 West 34th St

28,000

Jay Suites / n/a

Gotham Holdings / n/a

The office space provider signed a 15-year lease on the seventh floor.

1375 Broadway

22,204

Smartling Inc. / E. Ferriello, R. Tunis, Colliers International

Savanna / M. Meyer, E. Meyer, Colliers International

The tech company signed a new lease for the entire 14th floor.

777 Third Ave

13,055

Sompo Japan Insurance / Kunihiko Otomo, Studley

William Kaufman Organization; Travelers Cos. Inc. / F. Doyle, C. Wasserberger, A. Tener Petrus, J. Schifirin, D. Wassel, JLL; M. Lenchner, Sage Realty

The insurer signed a lease for the entire 24th floor.

777 Third Ave

13,055

Morelli Alters Ratner / Ivan Hillman, CBRE

William Kaufman Organization; Travelers Cos. Inc. / F. Doyle, C. Wasserberger, A. Tener Petrus, J. Schifirin, D. Wassel, JLL; M. Lenchner, Sage Realty

The law firm signed a lease for the entire 31st floor. The tenant is relocating from 950 Third Avenue.

1500 Broadway

12,200

Warner Bros. Television Inc. / Lily Lin, AC Lawrence

Hewitt Associates / n/a

The entertainment company signed a sublease for the entire 30th floor.

430 Park Ave

11,378

Savanna / Gordon Ogden, Byrnam Wood

Park 430 Operating Company LLC / G. Field, K. Saly, C. Finney, C&W

The real estate firm signed a lease for part of the 12th floor.

120 West 45th St

10,093

Lipsky Goodkin & Co., P.C. / Scott Weiss, Studley

SL Green / Represented in-house

The certified public accounting firm signed a 10-year lease renewal on the seventh floor.

587 Fifth Ave

8,660

Art De La Beaute Corporation / Lily Lin, AC Lawrence

Zamir Equities / C. O’Toole, G. Gang, Tarter Stats O’Toole

The beauty products company signed a five-year lease on the entire third and fourth floors.

192 Lexington Ave

8,268

Transit Wireless / A. Bonett, B. Cohn, Adams & Co.

ProCure Treatment Centers Inc. / A. Draznin, H. Berman, NGKF

The tech company signed a sublease.

747 Third Ave

8,263

Phillips & Paolicelli / Arthur Draznin, NGKF

William Kaufman Organization; Travelers Cos. Inc. / F. Doyle, C. Wasserberger, A. Tener Petrus, J. Schifirin, D. Wassel, JLL; M. Lenchner, Sage Realty

The law firm signed a lease for part of the sixth floor.

747 Third Ave

7,105

JSB Partners / R. Plehn, Colliers International; M. Nevins, C&W

William Kaufman Organization; Travelers Cos. Inc. / F. Doyle, C. Wasserberger, A. Tener Petrus, J. Schifirin, D. Wassel, JLL; M. Lenchner, Sage Realty

The executive search firm signed a lease for part of the 15th floor.

1630 East 15th St

6,440

GuildNet Inc. / H. Rodriguez, M. Dubin, Savitt Partners

n/a / Dennis Aprea, AVR Realty Co.

The nonprofit signed a lease.

2275 Coleman St (Brooklyn)

6,046

GPI/GTE / M.C. O’Brien

Kings Plaza Associates / M.C. O’Brien

The engineering firm signed a lease.

315 Hudson St

5,881

TED Conferences LLC / Kim Skarvelis, Cast Iron Real Estate

n/a / n/a

The conference producer signed a lease.

19 West 44th St

5,810

Enclave Capital LLC / M. Kunikoff, D. Someck, Lee & Associates NYC

Deka Immobilien Investment GmbH / William Korchak, Jones Lang LaSalle

The brokerage and capital advisory firm signed a five-year lease for the entire 17th floor. The reported asking rent was $55 per square foot.

155 Wooster St

5,629

L2 Think Tank / D. Someck, J. Myers, Lee & Associates NYC

Centurion Realty LLC / Albert Cohen, Centurion Realty

The think tank signed a five-year, two-month lease.

97-77 Queens Blvd (Queens)

5,326

American Red Cross / M.C. O’Brien

LeFrak Organization / Roy Chipkin, CBRE

The disaster relief organization signed a lease.

747 Third Ave

5,305

BCMS Corporate / Michael Greenberg, Level Group

William Kaufman Organization; Travelers Cos. Inc. / F. Doyle, C. Wasserberger, A. Tener Petrus, J. Schifirin, D. Wassel, JLL; M. Lenchner, Sage Realty

The sell-side advisory services provider for business owners signed a lease for part of the 27th floor.

254 West 31st St

5,240

Work Market / Douglas Dolgoff, C&W

Brause Realty / L. Ornstein, J. Grotto, D. Larsen, Transwestern

The tech company signed a new lease.

411 Fifth Ave

5,194

Melissa & Doug LLC / A. Bonett, B. Cohn, Adams & Co.

411 Fifth Avenue Associates / David Levy, Adams & Co.

The accessories and toy company signed a lease. The reported asking rent was $49 per square foot.

1350 Broadway

4,951

LangdonGord Financial LLC / David Malawer, C&W

Empire State Realty Trust / W. Cohen, N. Rubin, A. Weisz, NGKF; R. Kass, Empire State Realty Trust

The financial services firm signed a new lease.

21 West 38th St

4,465

Kumon North America / Jack Cohen, Colliers International

Brause Realty / R. Zimmerman, A. Udis, I. Weiss, ABS Partners

The after-school education program signed a lease for the entire fifth floor. The reported asking rent was $44 per square foot.

To view more deals visit our website: www.TheRealDeal.com 92 February 2014 www.TheRealDeal.com

www.TheRealDeal.net December 200

WYNWOOD | MIAMI DESIGN DISTRICT | UPPER EAST SIDE | DOWNTOWN | MIAMI BEACH Thank you for helping to make 2013 Metro 1’s most prosperous year yet, and growing fast. We look forward to doing business with you in 2014!

NO ONE SELLS OR LEASES MORE PROPERTIES IN MIAMI’S URBAN CORE THAN METRO 1. Completing more than $400 million in sales transactions, 400+ deals and more than 2 million square feet in the past 3 years alone. Selection of notable 2013 transactions FILLING STATION LOFTS

SOLD!

ARTS & ENT. DISTRICT 1650 N MIAMI CT

WYNWOOD 29 STREET

MIAMI BEACH 7927 - 7931 EAST DRIVE

WYNWOOD 48 NW 25 STREET

100,000 SF | MULTIFAMILY BUILDING SIZE: 81 LOFTS + RETAIL

LOT SIZE: 104,750 SF | INDUSTRIAL / LAND

33,807 SF | MULTIFAMILY LOT SIZE: 44,800 SF

22,462 SF | INDUSTRIAL / FLEX LOT SIZE: 36,250 SF

$8.5 M

LEASED!

SOLD! DOWNTOWN 230 SW 3 STREET LOT SIZE: 69,161 SF | LAND

$4.6 M

$5.6 M

SOLD!

DESIGN DISTRICT 3800 NORTH MIAMI AVE

DESIGN DISTRICT 3740 NE 2 AVE

LEASE SIZE: 10,000 SF | RETAIL

4,431 SF | RETAIL LOT SIZE: 5,250 SF

$5.3 M

SOLD! LITTLE HAVANA 737 - 751 NW 2 STREET

$3 M

LOT SIZE: 65,000 SF | LAND

$2.9 M

BARRY’S BOOTCAMP

SOLD!

WYNWOOD 2085 - 2103 NW 2 AVE

WYNWOOD 2814 - 2826 N MIAMI AVE

LITTLE RIVER 6301 NE 4 AVE

6,020 SF | RETAIL / LAND LOT SIZE: 25,400 SF

1,486 SF | RETAIL LOT SIZE: 5,688 SF

55,371 SF | INDUSTRIAL / FLEX LOT SIZE: 117,507 SF

$2.9 M

$2 M

LEASED! SUNSET HARBOUR 1835 PURDY AVE

$3.3 M

LEASE SIZE: 3,900 SF | RETAIL

$2.1 M

PANTHER COFFEE

LEASED!

SOLD!

SUNSET HARBOUR 1875 PURDY AVE

BISCAYNE BLVD NE 26TH STREET

WYNWOOD 560-566 NW 29 STREET

LITTLE RIVER 6454 NE 4 AVE

LEASE SIZE: 1,650 SF | RETAIL

LOT SIZE: 47,415 SF | LAND

10,951 SF | INDUSTRIAL / FLEX LOT SIZE: 14,000 SF

28,412 SF | INDUSTRIAL / FLEX LOT SIZE: 37,000 SF

$7.6 M

$1.7 M

$1.5 M

METRO 1 IS MIAMI’S URBAN REAL ESTATE LEADER VISIT METRO1.COM FOR A COMPLETE LIST OF MORE THAN 130 EXCLUSIVE LISTINGS.

TONY CHO, president/ceo | 305.571.9991 | info@metro1.com | metro1.com

Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

21 West 38th St

4,465

Henricksen / Giorgio Versea, DTZ

Brause Realty / R. Zimmerman, A. Udis, I. Weiss, ABS Partners

The office furniture company signed a lease for the entire 16th floor. The reported asking rent was $44 per square foot.

396-398 West Broadway

3,500

Bonpoint Inc. / Robin Zendell LLC

HH West Broadway LLC / Christopher Owles, Sinvin Real Estate

The apparel company signed a 10-year lease on the third floor.

777 Third Ave

3,445

Retrophin / Sage Realty

William Kaufman Organization; Travelers Cos. Inc. / F. Doyle, C. Wasserberger, A. Tener Petrus, J. Schifirin, D. Wassel, JLL; M. Lenchner, Sage Realty

The biopharmaceutical company signed a lease for part of the 22nd floor.

1400 Broadway

3,346

Hatch Mott MacDonald / n/a

Empire State Realty Trust / S. Klau, E. Harris, N. Rubin, NGKF

The engineering firm signed a lease.

21 West 38th St

3,300

Skin Operating LLC / Howard Rosenblum, Kaufman Leasing

Brause Realty / R. Zimmerman, A. Udis, I. Weiss, ABS Partners

The apparel design showroom and studio signed a lease for the entire 17th floor. The reported asking rent was $50 per square foot.

1350 Broadway

3,114

HCP Packaging USA Inc. / Paul Bostick, Brentler

Empire State Realty Trust / W. Cohen, N. Rubin, A. Weisz, NGKF; R. Kass, Empire State Realty Trust

The cosmetics firm signed a new lease.

274 Madison Ave

2,969

JAG Physical Therapy New York LLC / A. Hawkins, J. Grotto, Transwestern

Abramson Brothers / n/a

The outpatient physical therapy company signed a seven-year lease.

82-02 Roosevelt Ave

2,800

Borja Law Firm / n/a

Pi Capital Partners / Represented inhouse

The law firm signed a lease for the entire second floor.

411 Fifth Ave

2,565

UIDC Altare Corp. / David Levy, Adams & Co.

411 Fifth Ave. Associates / David Levy, Adams & Co.

The tenant signed a new lease. The reported asking rent was $49 per square foot.

34 West 27th St

2,234

Studio A+T Architects PC / Tungsten Properties

Royal Realty / n/a

The architecture firm signed a five-year lease.

777 Third Ave

2,096

Laxcaux Resource Capital / S. Klau, Z. Weil, NGKF

William Kaufman Organization; Travelers Cos. Inc. / F. Doyle, C. Wasserberger, A. Tener Petrus, J. Schifirin, D. Wassel, JLL; M. Lenchner, Sage Realty

The hedge fund signed a lease for part of the 25th floor.

411 Fifth Ave

1,517

Sunflower Jewelry Inc. / David Levy, Adams & Co.

411 Fifth Ave. Associates / David Levy, Adams & Co.

The jewelry company signed a lease renewal. The reported asking rent was $59 per square foot.

411 Fifth Ave

1,485

Mantero of America Inc. / David Levy, Adams & Co.

411 Fifth Ave. Associates / David Levy, Adams & Co.

The tenant signed a new lease. The reported asking rent was $42 per square foot.

483 10th Ave

1,400

n/a / Margie Sarway, Sinvin Real Estate

10th Avenue Holdings / Julian Kamitzer, KAM Hospitality

The construction firm signed a two-year lease. The reported asking rent was $45 per square foot.

28 West 27th St

1,350

Mind Sight Media / Tungsten Properties

n/a / n/a

The media company signed a one-year lease.

548 West 28th St

1,243

The String Theory / Simone Lillian, Sinvin Real Estate

Marinerâ&#x20AC;&#x2122;s Gate LLC / Jim Pastreich, Pinetree Group

The animation company signed a five-year lease on the sixth floor. The reported asking rent was $50 per square foot.

Retail leases Address

Size

Tenant / Representative

Landlord / Representative

Notes

40-28 College Point Blvd (Queens)

39,000

Nordstrom Rack / n/a

Onex Real Estate Partners / n/a

The department store signed a lease at the Shops at SkyView Center. The space is slated for a fall 2014 opening.

1450 East Ave (The Bronx)

24,000

Marshalls / E. Bukai, P. Ripka, Ripco Real Estate

MPI / E. Bukai, P. Ripka, Ripco Real Estate

The department store signed a lease.

198-15 Horace Harding Expressway (Queens)

14,000

Duane Reade / Winick Realty

n/a / N. Dolgin, G. Dolgin, Kalmon Dolgin Affiliates

The drugstore signed a lease.

94 February 2014 www.TheRealDeal.com

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Retail leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

270 Madison Ave

9,150

Sarah’s Kitchen / Tony Park, PD Properties

ABS Partners / H. Shapiro, Winick Realty; Mark Tergesen, ABS Partners

The eatery signed a lease for multilevel space.

155 Sixth Ave

8,331

Ducati Triumph New York / H. Rosen, P. Shaklis, Lee & Associates NYC

Trinity Real Estate / Tom Lynch, Trinity Real Estate

The tenant signed a 15-year retail lease.

600 West 42nd St

6,500

Spot Experience / Peter Trivelas, DTZ

Silverstein Properties / P. Braus, G. Steinberg, Lee & Associates NYC

The pet care facility signed a 10-year lease at Silver Towers. The reported asking rent was $75 per square foot.

824 10th Ave

4,956

FIKA – NYC / A. Hawkins, K. Williams, Transwestern

824 Tenth Avenue Company LLC / n/a

The coffee, chocolate and restaurant chain signed a 10-year lease for the entire building.

317 Knickerbocker Ave (Brooklyn)

4,000

NYCPet.com / V. Sweeney, T. Dow, Gotham City Group

317 Knickerbocker Ave LLC / Ray Martin, Le Blanc Org.

The pet food and accessories store signed a lease.

115 Franklin St (Brooklyn)

4,000

Restaurant Group / V. Sweeney, T. Dow, Gotham City Group

n/a / Maryam Zadeh, Douglas Elliman

The restaurant group signed a lease.

304 Hudson St

2,559

CR Fashion Book / Roxanne Betesh, Sinvin Real Estate

The Rector, Church-Wardens and Vestrymen of Trinity Church / C. Owles, R. Kornblatt, J. Isbitt, Sinvin Real Estate

The fashion company signed a three-year retail lease. The reported asking rent was $85 per square foot.

440 East Fordham Rd (The Bronx)

2,374

JPMorgan Chase / Dean Rosenzweig, CBRE

One Fordham Plaza LLC / Miles Mahony, Ripco Real Estate

The bank signed a 10-year lease.

1542 Third Ave

1,953

Starbucks / David Firestein, SCG Retail

Empire State Realty Trust / Fred Posniak, Empire State Realty Trust

The coffee chain signed a lease.

184 Kent Ave (Brooklyn)

1,800

NYCPet.com / V. Sweeney, T. Dow, Gotham City Group

JMH Development / n/a

The pet food and accessories store signed a lease.

542 East 14th St

1,800

Dunkin’ Donuts / Bunny Escava, Kassin Sabbagh Realty

n/a / n/a

The coffee and donuts chain signed a lease for a new location.

322 West 57th St

1,680

Starbucks / David Firestein, SCG Retail

Southcroft Company / n/a

The coffee chain signed a lease.

154 Bleecker St

1,605

Frozen Peaks / n/a

n/a / Brendan Gotch, Massey Knakal

The frozen yogurt chain signed a lease.

292 Bedford Ave (Brooklyn)

1,500

Radegast Hall & Biergarten / Roni Dotan, Corcoran

292 Bedford LLC / Garry Steinberg, Lee & Associates NYC

The beer hall signed a 10-year, six-month lease. The reported asking rent was $200 per square foot.

19 East 66th St

1,500

Blum and Poe / n/a

n/a / Jill Lovatt, Massey Knakal

The art gallery signed a new lease on floors four and five.

19 East 66th St

1,500

Dickinson Gallery / n/a

n/a / Jill Lovatt, Massey Knakal

The art gallery signed a lease renewal on the second floor.

19 East 66th St

1,500

Timothy Sammons / n/a

n/a / Jill Lovatt, Massey Knakal

The art gallery signed a lease renewal on the third floor.

1145 Second Ave

1,460

Starbucks / David Firestein, SCG Retail

Storepark LLC / n/a

The coffee chain signed a lease.

9 Edward Morgan Pl

1,350

Twin Donut / Jack Lee, Kassin Sabbagh Realty

Friedland Properties / n/a

The donut shop signed a lease.

174 Broadway

1,300

Sweet Green Apple Spa / Isaac Arzt, Kassin Sabbagh Realty

Maiden Lane Realty / Kassin Sabbagh Realty

The spa signed a lease.

101 Bedford Ave (Brooklyn)

1,200

The Bean / Bunny Escava, Kassin Sabbagh Realty

n/a / n/a

The tenant leased retail space.

426 Lorimet St (Brooklyn)

1,200

Helen’s Nail Salon / Fiona Johnson, Fillmore Real Estate

n/a / J. Wadler, V. Lopez, Kalmon Dolgin Affiliates

The nail salon signed a long-term lease.

8-10 Avenue B

1,200

United Security NYC / David Todjman, Norman Bobrow & Co.

LESMHA / Yesim Ak, Misrahi Realty

The hardware shop signed a lease.

1400 Broadway

1,131

Simit + Smith / Mary Goldsmith Mahoney, Great Circle Real Estate

Empire State Realty Trust / Jared Lack, NGKF

The eatery signed a lease.

663 Classon Ave (Brooklyn)

1,100

Shoestring Press / M.C. O’Brien

Classon Village LP / M.C. O’Brien

The independent print shop signed a lease.

265 Metropolitan Ave (Brooklyn)

1,100

Ruby & Scarlett / V. Sweeney, T. Dow, Gotham City Group

271 Metropolitan Ave LLC / Ray Martin, Le Blanc Org.

The women’s fashion boutique signed a lease.

818 Third Ave

1,000

Suarte / Garry Steinberg, Lee & Associates NYC

The Affina Hotel / Eric Gelbe, CBRE

The Korean shoemaker signed a 10-year lease. The reported asking rent was $200 per square foot.

1000 Sixth Ave

1,000

NYC Luggage & Gifts / Bunny Escava, Kassin Sabbagh Realty

n/a / Jack Terzi, JTRE

The gift shop signed a lease.

218 Madison Ave

1,000

Benny’s Hair Salon / Albert Manopla, Kassin Sabbagh Realty

Buchbinder & Warren / n/a

The hair salon signed a lease.

1149B Elton St (Brooklyn)

926

Hong Nail Salon Inc. / n/a

Gateway Elton Street LLC / M.C. O’Brien

The nail salon signed a lease.

308 Bleecker St

900

Versani / Josh Bowling, Sinvin Real Estate

Variazioni / C. Owles, S. Rappaport, Sinvin Real Estate

The fashion retailer signed a 10-year sublease. The reported asking rent was $267 per square foot.

211 Front St

850

Emily Thompson Florist / Roxanne Betesh, Sinvin Real Estate

Dorathea Thompson / Guillermo Suarez, Massey Knakal

The florist signed a five-year lease with a five-year option. The reported asking rent was $127 per square foot.

28 St. Marks Pl

800

Kung Fu Tea / A. Manopla, A. Dwek, Kassin Sabbagh Realty

n/a / n/a

The tea shop signed a lease.

133 Orchard St

800

Julie Meneret Contemporary Art Gallery / Yesim Ak, Misrahi Realty

133 Orchard Realty Corp. / Daniel Barcelowsky, Misrahi Realty

The art gallery signed a lease.

238 Adam Clayton Powell Blvd

755

Great Wall / H. Goldfarb, S. Lindenfeld, Lee & Associates NYC

AIMCO / H. Goldfarb, S. Lindenfeld, Lee & Associates NYC

The Chinese restaurant signed a 10-year lease. The reported asking rent was $65 per square foot.

176 Seventh Ave

720

Bar Veloce / P. Braus, D. Someck, Lee & Associates NYC

Oberstein Corporation / P. Braus, D. Someck, Lee & Associates NYC

The wine bar signed a 10-year lease.

532 Columbus Ave

700

Vive Le Crepe / Albert Manopla, Kassin Sabbagh Realty

Regina Estates / n/a

The crepe shop signed a lease.

818 Lexington Ave

650

The Jewel Box / Mark Kapnick, SRS Real Estate Partners

The Koeppel Organization / Mark Kapnick, SRS Real Estate Partners

The jeweler leased space for 10 years.

126 McDougal St

600

Smokeless Image / Marc Sitt, Kassin Sabbagh Realty

Majesty Management / n/a

The electronic cigarette company leased retail space.

1111 Brighton Beach Ave (Brooklyn)

600

Perfect Brows / Albert Manopla, Kassin Sabbagh Realty

n/a / n/a

The threading salon signed a lease.

96 February 2014 www.TheRealDeal.com

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EXCITING FIFTH AVENUE FLATIRON AREA NEW YORK, NY RETAIL OPPORTUNITY!

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This unique block of space can accommodate as small as approx. 6,000 RSF for one-level retail, approx. 10,000 RSF for two-level retail (Lower Level and Ground Floor, or as large as approx. 28,000 RSF for three-level retail or office (Lower Level, Ground Floor and Entire Second Floor). LOW E

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Perfect opportunity for a Retailer or a Technology/Media company seeking to have its own entrance to the building. LA

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Very high floor to slab ceilings at all 3 levels • Ground Level - approximately 18 ft. • Lower Level - approximately 14 ft. • 2nd Floor - approximately 14 ft. 2nd Floor possibility affords additional avenue window frontage for signage, natural light, and/or display purposes, and a large non-columned area in one section.

For rental opportunities please call: 212-807-7664 or email 156retail@hrccorp.com www.hrccorp.com 156 Fifth Avenue, New York, NY POTENTIAL STOREFRONT RENDERING Disclaimer: All information supplied is from sources deemed reliable and is furnished subject to errors, omissions, modifications, removal of the listing from sale or lease, and to any listing conditions, including the rates and manner of payment of commissions for particular offerings imposed by HRC Corporation or principals, the terms of which are available to principals or duly licensed brokers. This information may include estimates and projections prepared by HRC Corporation with respect to future events, and these future events may or may not actually occur. Such estimates and projections reflect various assumptions concerning anticipated results. While HRC Corporation believes these assumptions are reasonable, there can be no assurance that any of these estimates and projections will prove to have been correct. Therefore, actual results may vary materially from these forward-thinking estimates and projections. Any square footage dimensions set forth are approximate.

Retail leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

590 West 207th St

600

Liberty Tax / Albert Manopla, Kassin Sabbagh Realty

Elysee Management / n/a

The tax preparation services provider leased space.

174 Delancey St

600

Italian Pizzeria / Yesim Ak, Misrahi Realty

174 Delancey Associates LLC / Daniel Barcelowsky, Misrahi Realty

The pizza shop signed a lease.

174 Delancey St

600

Bike Man / Yesim Ak, Misrahi Realty

174 Delancey Associates LLC / Daniel Barcelowsky, Misrahi Realty

The bicycle shop signed a lease.

226 East 14th St

600

Vivi Bubble Tea / Albert Manopla, Kassin Sabbagh Realty

n/a / Albert Manopla, Kassin Sabbagh Realty

The bubble tea shop signed a lease.

924 Columbus Ave

570

Pie Pie Pizza / Tom Brady, Town Real Estate

Treetop Development / Tom Brady, Town Real Estate

The pizza parlor signed a 13-year lease.

310 East 23rd St

500

Metro PCS / Bunny Escava, Kassin Sabbagh Realty

n/a / Winick Realty

The cell phone shop signed a lease.

64 Delancey St

450

Tripleshoe LLC / Earl Bateman, Rice & Associates

64 Delancey Street LLC / Daniel Barcelowsky, Misrahi Realty

The art gallery signed a lease.

155 West 35th St

400

Metro PCS / Bunny Escava, Kassin Sabbagh Realty

n/a / n/a

The cell phone shop signed a lease.

1 West Eighth St

400

Mister Guy Corp. / Steve Rappaport, Sinvin Real Estate

Benchmark 10 LP / Steve Rappaport, Sinvin Real Estate

The panini shop signed a 10-year lease. The reported asking rent was $203 per square foot.

394 East 149th St (The Bronx)

400

Horizon Wireless / Albert Manopla, Kassin Sabbagh Realty

n/a / n/a

The tenant leased retail space.

86 Chambers St

300

By Suzette / Ryan Bergman, Lansco Corp.

Chamber Street Holding LLC / J. Lack, J. Hafen, NGKF

The crepe shop signed a 10-year lease.

Buys Address

Size

Buyer / Representative

Seller / Representative

Notes

212 West 91st St

362-unit apt. bldg

Acuity Capital Partners / Aaron Jungreis, Rosewood Realty

Brack Capital Real Estate / Aaron Jungreis, Rosewood Realty

The Greystone sold for $139.05 million.

200 East 11th St

12-story, 58-unit apt. bldg

Benchmark Real Estate Group / n/a

n/a / J. Nelson, M. Levine, M. Nickerson, Massey Knakal

The property sold for $57 million.

55 Third Ave

12-story apt. bldg, 55 units total

n/a / HPNY

The property sold for $57 million.

98 February 2014 www.TheRealDeal.com

How does Warburg break records year after year? Our elite team of exceptional agents and managers are driven by our core values: Integrity. Intelligence. Innovation.

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Jay Glazer

Robert E. Elson Nealy Nusbaum Erber Sarah Fiszel James Foreman Amy Fromer June L. Gottlieb Joy T. Grossman Shirley Hackel Victoria G. Hersh Jodie Jackson Angel Joseph Judy Kloner Ronnie G. Lane Lisa Larson Linda M. Lawrence Carol Terner Lederman Christine Miller Martin Kate Meckler Evelyn G. Muller Elizabeth Helene Oâ&#x20AC;&#x2122;Neill Caroline Owens Georgina Pazcoguin Arlene S. Reed

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Rebecca I. Edwardson

Annie Cion Gruenberger

Linda Reiner Evelyn Ricci Sandra Landau Rippe Gordon T. Roberts Robert A. Schulman Susan Silverman Matthew W. Slosar Catherine Silver Smith Jill Steinberg Stacy Sussman Judith B. Thorn Janet D. Traynor Sheila Trichter Virginia H. Waldman Ellen Z. Wedeles

East Side Gallery David M. Adler Mitchel R. Askinas Judy Bauer Nicole Beauchamp Kyler W. Brown Miles Chapin

Charlie Lewis

Maria E. Daou

Alain De Grelle William Foley Susan Getz Steven D. Hoffman Deborah Ribner Stephen Ruben Craig Schiller Dorothy Schrager Meredith Specht Laura H. Takasaki Suzanne D. Weinstein

West Side Rebecca Brooksher Leslie Hutchings Emi Manasse Eric Mendelsohn Hank Orenstein Jillian Roggen Alicja Walters

Bonnie Chajet

Tribeca Michael L. Arkin Natalya Bowen Cate Cahill Herbert Chou Daniel Chugunov Amber Cleary Alicia Corpening Deborah DeMaria Marc Donnenfeld Samantha Rose Frith Cathy A. Haft Marlene S. Hartstein Caleb A. Hartzler Brit Holten Cybele A. Kadagian Shelley L. Kaplan Karen D. Kemp Karen Kostiw Jacqueline L. Kurtz JoĂŠl Moss Marc J. Palermo Thomas M. Rozboril

Rachel Ostow Lustbader

Harriet Kaufman

Diane Sutherland Jocelyn G. Turken Robert Williams

Management Frederick Warburg Peters Robert E. Doernberg Karen A. Gastiaburo Steven O. Goldschmidt Luis Guevarra Kevelyn Guzman Jason Haber Marie Joyce Lori Levin Clelia Peters Doug Williford

Buys continued Address

Size

Buyer / Representative

Seller / Representative

711 Madison Ave

9-unit apt. bldg

Sitt Asset Management; Ashkenazy Acquisition / n/a

Madison Immobilier NV / Adelaide Polsinelli, Eastern Consolidated

The property sold for $48 million.

90-02 Queens Blvd and 28 58th Ave (Queens)

7-story hospital bldg and parking garage

n/a / n/a

n/a / S. Palmese, T. Donovan, Massey Knakal

The properties sold for $47 million.

370-374 Columbus Ave

5-story apt. bldg, 54 units total

n/a / n/a

n/a / B. Knakal, T. Donovan, P. Smadbeck, Massey Knakal

The property sold for $35.75 million, or $1,149 per square foot.

1991 Broadway

Retail condo

Ashkenazy Acquisitions / n/a

Stan Johnson Company / n/a

The property sold for $22 million.

246 Fifth Ave

32,049 sf office bldg

HH Realty Equities / n/a

n/a / D. Noonan, J. Schwartzman, P. Gojkovich, NGKF

The property sold for $19 million.

40-42 Horatio St

16,000 sf mixed-use bldg

n/a / HPNY

The property sold for $13 million.

358 Grove St (Brooklyn)

35 res. units and 2 comm. condos

n/a / n/a

n/a / Michael Amirkhanian, Massey Knakal

The package sold for $10.75 million.

1128 Third Ave

5,309 sf mixed-use bldg

n/a / Ronda Rogovin, Eastern Consolidated

L3 Capital LLC / Adelaide Polsinelli, Eastern Consolidated

The property sold for $9.5 million.

357-365 Flatbush Ave (Brooklyn)

3-story, 10,400 sf apt. bldg, 2 units total

n/a / n/a

n/a / S. Palmese, M. Amirkhanian, Massey Knakal

The property sold for $8.9 million.

10-19 Irving Ave (Queens)

2-story, 75,600 sf industrial bldg

n/a / n/a

n/a / Charles Chang, Highcap Group

The property sold for $8.1 million.

56 West 12th St

4-unit multi-family townhouse

n/a / Leslie Mann, Douglas Elliman

n/a / W. Abramson, M. Olden, Buchbinder & Warren

The property sold for $7.2 million.

87-16 Astoria Blvd (Queens)

12,757 sf retail bldg

n/a / Wells Newell, Newell Realty

n/a / Nicole Carra, NLC Realty

The property sold for $5.9 million.

145 Ludlow St

13,064 sf development site

145 Ludlow LLC / Daniel Barcelowsky, Misrahi Realty

Ludlow Place Corp. / Yesim Ak, Misrahi Realty

The property sold for $5.75 million.

89-21 153rd St (Queens)

6-story apt. bldg, 45 units total

n/a / Marcel Fridman, Barcel Group

NY Affordable Housing LLC / Marcel Fridman, Barcel Group

The property sold for $5.65 million.

1041 Nelson Ave (The Bronx)

6-story, 57,720 sf apt. bldg, 56 units total

n/a / Amit Doshi, Besen & Associates

n/a / A. Doshi, L. Blumberg, Besen & Associates; A. Jungreis, Rosewood Realty

The property sold for $5.6 million.

64 East 1st St

Development site

n/a / Michael Ferrara, Highcap Group

The property sold for $5.4 million. The site is zoned R8B, has a maximum floor-area ratio of 4 and has approximately 13,500 square feet of air rights.

574 and 576 Atlantic Ave (Brooklyn)

2 apt. bldgs, 6 units total

City Urban Realty / n/a

n/a / n/a

The properties sold for $5 million.

19-21 Barrow St

20-unit apt. bldg

Rafael Sassouni / Nathan Benelyahou, Capin & Associates

Rudd Realty / Nathan Benelyahou, Capin & Associates

The property sold for $4.8 million.

585 N Rail Road Ave (Staten Island)

5-story apt. bldg, 35 units total

n/a / Marcel Fridman, Barcel Group

The property sold for $4.7 million.

608 West 191st St

5-story, 19,825 sf apt. bldg, 24 units total

608 West 191st LLC / L. Stenhell, P. Vanderpool, Cignature Realty Group

608 Syl-Ten Assets / L. Stenhell, P. Vanderpool, Cignature Realty Group

The property sold for $3.73 million.

170-174 West St (Brooklyn)

Development site

n/a / G. Saffioti, D. Schechtman, Eastern Consolidated

The property sold for $3.7 million.

542 West 153rd St

29,976 buildable sf development site

n/a / n/a

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

The property sold for $3.6 million.

42-08 College Point Blvd (Queens)

2-story office bldg

n/a / n/a

n/a / Stephen Preuss, Massey Knakal

The property sold for $3.4 million.

369 West 126th St

5-story apt. bldg, 11 units total

n/a / n/a

David Shavolian; Crosby Capital / L. Kimyagarov, J. Lipton, Massey Knakal

The property sold for $3.4 million, or $396 per square foot.

314 50th St (Brooklyn)

20-unit apt. bldg

Silvershore Properties / n/a

n/a / n/a

The property sold for $2.7 million.

161 Hudson St

2,700 sf retail condo

Bert Sohayegh-Baradarian / Roxanne Betesh, Sinvin Real Estate

161 Hudson Unit LLC / Roxanne Betesh, Sinvin Real Estate

The property sold for $2.4 million.

995 East 181st St (The Bronx)

5-story apt. bldg, 24 units total

n/a / n/a

n/a / Nicholas Burns, Massey Knakal

The property sold for $2.29 million.

167 Waverly Ave (Brooklyn)

8-unit apt. bldg

Silvershore Properties / Marcel Fridman, Barcel Group

Ely Management / Marcel Fridman, Barcel Group

The property sold for $2.25 million.

220 Court St (Brooklyn)

3-story mixed-use bldg

n/a / n/a

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

The property sold for $2.16 million, or $899 per square foot.

34-39 56th St (Queens)

2-story, 9,700 sf industrial bldg

Video Concepts / Vincent Lopez, Kalmon Dolgin Affiliates

IL Nuraghe / Vincent Lopez, Kalmon Dolgin Affiliates

The property sold for $2.15 million.

1024-1026 White Plains Rd (The Bronx)

Development site

n/a / n/a

n/a / Nicholas Burns, Massey Knakal

The property sold for $1.95 million.

564 Flatbush Ave (Brooklyn)

3-story mixed-use bldg

n/a / A. Hess, S. Shalumov, TerraCRG

The property sold for $1.7 million, or $322 per square foot.

174 Eighth St (Brooklyn)

3-unit apt. bldg

n/a / n/a

n/a / Adam Hess, TerraCRG

The property sold for $1.5 million.

786 East 149th St

4-story apt. bldg, 17 units total

n/a / n/a

n/a / N. Burns, A. Essick, Massey Knakal

The property sold for $1.5 million.

340-342 East 148th St (The Bronx)

Two 4-story apt. bldgs, 17 units total

n/a / n/a

n/a / D. Simone, N. Burns, A. Essick, Massey Knakal

The properties sold for $1.48 million.

87 Java St (Brooklyn)

4-unit multi-family townhouse

Silvershore Properties / n/a

n/a / n/a

The property sold for $1.4 million.

355 Stockholm St (Brooklyn)

6-unit apt. bldg

n/a / Said Boukhalfa, Marcus & Millichap

The property sold for $1.33 million.

107 Boerum Pl (Brooklyn)

8-unit apt. bldg

S. Rozenberg Associates / Marcel Fridman, Barcel Group

107 Boerum Realty Corp. / Marcel Fridman, Barcel Group

The property sold for $1.3 million.

806 Dean St (Brooklyn)

5-unit apt. bldg

n/a / Marcel Fridman, Barcel Group

The property sold for $1.25 million.

100 February 2014 www.TheRealDeal.com

Notes

Sam’s been busy getting deals done.

Give him a call at: 212-409-1259

We’re with you.

Now open in NY | www.bankunited.com BankUnited, N.A. Member FDIC

14_BKU_1220 Done Deals Real Deal Mag.indd 1

1/30/14 1:39 PM

Buys continued Address

Size

Buyer / Representative

Seller / Representative

Notes

34 Conselyea St (Brooklyn)

Development site

n/a / n/a

n/a / O. Cohen, M. DiBella, D. Marks, P. Matheos, M. Hernandez, TerraCRG

The property sold for $1.15 million, or $307 per buildable square foot.

Financing Address

Size

Borrower / Representative

Lender / Representative

Notes

212 West 91st St

15-story apt. bldg, 362 units total

Acuity Capital Partners / Paradigm Commerical Real Estate

n/a / n/a

A $125 million credit facility was provided for the acquisition of the Greystone, a luxury apartment building.

1775 Grand Concourse (The Bronx)

300,000 sf office bldg

n/a / K. Houlihan Buckley, J. Houlihan, Houlihan-Parnes Realtors

n/a / n/a

A $20 million mini-perm first mortgage was provided for the property.

39-25/65 51st St and 3920/60 52nd St (Queens)

2 apt. bldgs, 425 units total

51st/52nd Street Tenants Corp. / n/a

NCB / n/a

A $15.5 million first mortgage and a $1 million line of credit were arranged for the building.

151 West 145th St, 155 West 145th St and 2468 Adam Clayton Powell Blvd

51 res. units and 4 comm. units

n/a / Kenneth Morrison, Lemor Realty Corp.

CPC Bank; City of New York / n/a

A $11.77 million construction loan was provided for a conversion project.

27 Arion Pl (Brooklyn)

66-unit apt. bldg

n/a / David Eisen, Eastern Union Funding

n/a / n/a

A $9.5 million loan was provided to refinance the property.

3835 and 3845 Sedgwick Ave (The Bronx)

271-unit apt. bldg

Park Reservoir Housing Corp. / n/a

NCB / n/a

A $7.5 million first mortgage was arranged for the building.

3117 Broadway

60-unit apt. bldg

3117 Broadway Owners Corp. / n/a

NCB / n/a

A $3.5 million first mortgage and a $500,000 line of credit were arranged for the building.

Other Deals Time Warner officially announces Hudson Yards move, Columbus Circle sale

Time Warner Center

Time Warner Inc. officially announced the planned move of its media headquarters from Columbus Circle to the Related Companies’ Hudson Yards development on the far West Side last month. Time Warner also confirmed the $1.3 billion purchase of its current home by a Related-led group of investors. Middle Eastern sovereign wealth fund Abu Dhabi Investment Authority and Singaporean wealth fund GIC are reportedly investing in the purchase, though the exact stake of both investors is not certain. GIC pledged $400 million to the acquisition in November, but that amount is reportedly still being negotiated. (The deal was announced after the deadline for the Deal Sheet.)

Koreatown office building sells for $55M A 113,000-square-foot commercial building in Koreatown that houses a Citibank branch has sold for $55 million, according to property records filed with the city last month. The 17-story, 14-unit commercial property at 22-26 West 32nd Street, between Fifth and Sixth avenues, features 12,000 square feet of retail and 101,000 square feet of storage and office space. The Forest Hills, Queens-based buyer of the building operates as Montague Lee 32 LLC, or Lee Roosevelt Thirty Eight, according to property records. The seller, 22-26 West 32nd Street Charles Glogower of Great Neck, N.Y.-based Imperial Investing Corporation, acquired the site from the New York Telephone Company — now owned by Verizon — in 2000. (The deal was announced after the deadline for the Deal Sheet.)

Plans for massive Fort Greene development gather steam

470 Vanderbilt Avenue

GFI Development Company is gearing up to move forward with a 2009 plan to overhaul 470 Vanderbilt Avenue in Fort Greene with the addition of retail space and a brand new mixed-use building next door. The two-building complex is to include 376 residential units, 616,555 square feet of commercial space and around 397 underground parking spaces, according to ULURP-approved permits cited by Brownstoner. Community Board 2 renewed the two permits, originally issued in 2009, last month; they expired because the project had not been completed within a mandated four-year time frame. The ground floor of 470 Vanderbilt will be converted to retail space, and the developer will fill in the structure’s interior courtyards, according to details of the 2009 proposal. 102 February 2014 www.TheRealDeal.com

Law firm Duane Morris inks 89K sf deal at 1540 Broadway National law firm Duane Morris renewed its lease for 89,000 square feet at the Bertelsmann building at 1540 Broadway, The Real Deal has learned. The company, which initially leased the space in 2006, signed for an additional 10 years, the tenant’s broker, Mark Weiss of Newmark Grubb Knight Frank, told The Real Deal. Starting rent for the space is in the low $70s per square foot, according to data provided by 1540 Broadway Compstak. Weiss and his colleague Moshe Sukenik of NGKF represented Duane Morris in the deal. The landlord, a partnership between Edge Fund Advisors, HSBC Alternative Investments Limited and CB Richard Ellis Investors, was represented by CBRE’s Howard Fiddle, Eric Deutsch and Christie Harle. (The deal was announced after the deadline for the Deal Sheet.)

Savanna snaps up City Point-adjacent development site Savanna Partners has snapped up a potentially lucrative Brooklyn lot, just across from City Point, the controversial Downtown Brooklyn mixeduse megadevelopment. Savanna purchased 141 Willoughby Street, across the street from Arcadia Realty Trust’s project, for an undisclosed amount from the Institute of Design and Construction, Crain’s reported last month. The building currently on the Christopher site rises three stories, but the site could support a Schlank new development of up to 240,000 square feet. “141 Willoughby Street is a prime location in Downtown Brooklyn and we see tremendous future value,” Christopher Schlank, a managing partner at Savanna, said in a statement to Crain’s. (The deal was announced after the deadline for the Deal Sheet.)

The College Board takes 145K square feet at Brookfield Place

Brookfield Place

The College Board, the creator of standardized college admission tests including the SAT, is moving Downtown to Brookfield Office Properties’ Brookfield Place. The College Board will take 145,000 square feet at 250 Vesey Street and will set up in space that was previously occupied by Merrill Lynch. The College Board’s headquarters are currently at 45 Columbus Avenue near Lincoln Center, according to Bloomberg News. “This transaction continued to differentiate lower Manhattan as the home to innovative thinkers across a broad spectrum of industries,” David Cheikin, vice president of leasing at Brookfield, said in a statement to Bloomberg News. The College Board will take the entire 16th and 17th floors as well as part of the 18th floor. (The deal was announced after the deadline for the Deal Sheet.) TRD

SENSATIONAL SAGAPONACK SOUTH Sagaponack. When the ingredients of talent and vision merge between a master building group and a prime piece of Sagaponack South land; the outcome is nothing less than extraordinary. Meet Sagaponack Builders, and their creation of the new standard for South-Of-The-Highway Sagaponack luxury living. Construction has just completed on nearly 8,600 SF+/- of masterfully created and designed living space intertwining on 3 custom designed levels. A seamless merger of transitional lifestyle architecture sits gracefully on this prime 1.4 acre Ericas Lane Western facing property. A 2 story glass foyer leads to a light filled living room, anchored by adjacent gathering room, and professional Gaggeneau kitchen. A formal dining room with floating wine cellar, Jr. master suite and 2 car garage round out the 1st floor of the home. The 2nd floor features 4 bedrooms, inclusive of the master suite, which encompasses an entire wing of the home. A place of ultimate relaxation and comfort, the master suite is complete with private terrace, outdoor fireplace, enormous custom closet, and spa inspired bathroom. Take the stairs or ride the 3 stop elevator to the full-height finished lower level. Complete with state-of-the-art stadium seat theatre, 2 additional light filled bedrooms, glass walled gym with reverse osmosis stone wrapped waterfall and massage area. An informal lounge with double sided fireplace complete the setting of the lower level. The outdoor space is only rivaled by five star resorts. A 60 ft, stone wrapped infinity edge swimming pool is adjacent to a push bottom screen porch, fireplace, hot tub, pool cabana and professional outdoor kitchen. Indoor and outdoor living spaces flow seamlessly through custom 9 foot Fleetwood doors that line the entire rear of the home. The regulation sized North/ South sunken tennis court sits on the Southwest end of the property. The property is enhanced with custom specimen trees and perennial plantings, ensuring beauty and privacy year round. Additional features include, Lutron lighting, Savant home automation, camera system, radiant heating, and a backup generator. A true resort inspired compound, built for those who can settle for nothing but the best. Tri-Exclusive. $12.75M WEB# 15402

ZACH AND CODY TEAM AT THE CORCORAN GROUP AGENTS OF CHOICE FOR LUXURY HAMPTONS PROPERTIES

Cody Vichinsky Lic. Real Estate Salesperson m: 631.926.3948 cvichinsky@corcoran.com LuxuryHamptonsProperties.com

Zachary Vichinsky Lic. Real Estate Salesperson m: 631.766.0945 zvichinsky@corcoran.com LuxuryHamptonsProperties.com

Equal Housing Opportunity. The Corcoran Group is a licensed real estate broker located at 1936 Montauk Hwy, Bridgehampton, NY 11932. All information furnished regarding property for sale or rent or regarding financing is from sources deemed reliable, but Corcoran makes no warranty or representation as to the accuracy thereof. All property information is presented subject to errors, omissions, price changes, changed property conditions, and withdrawal of the property from the market, without notice. All dimensions provided are approximate. To obtain exact dimensions, Corcoran advises you to hire a qualified architect or engineer. 2405 Main Street, Bridgehampton NY 11932 | 631.537.7773

Z&C-HL-RealDeal-Feb14.indd 1

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Development updates SALES UPDATES

Brooklyn Heights 72 Poplar Street

SOLD $4,900,000 SOLD SOLD

19-21 BARROW $4,900,000STREET $4,900,000

SOLD

SOLD SOLD

PRIME WEST 19-21 STREET SOLD VILLAGE 19-21 BARROW BARROW STREET

$4,900,000 $4,900,000 PRIME WEST SOLD SOLD 13 UNITS & 1VILLAGE STORE PRIME WEST VILLAGE $4,900,000 SOLD

$4,900,000 $4,900,000 19-21 BARROW STREET 13 UNITS & 1 STORE 19-21 BARROW SOLD UNITS & 1 STREET STORE 5013 FEET of FRONTAGE

19-21 BARROW STREET 19-21 BARROW STREET $4,900,000 $4,900,000 PRIME WEST VILLAGE SOLD

PRIME WEST VILLAGE SOLD SOLD 50 FEET of FRONTAGE SOLD WEST VILLAGE 50PRIME FEET of FRONTAGE NATHAN BENELYAHOU REPRESENTED BOTH SIDES OF THE SOLD $4,900,000 19-21 BARROW STREET 13 UNITS & 1 STORE 13 UNITS & 1 STORE PRIME WEST VILLAGE TRANSACTION $4,900,000 NATHAN BENELYAHOU REPRESENTED BOTH SIDES 19-21 BARROW STREET $4,900,000 19-21 STREET 13 UNITS & 1 STORE NATHAN BENELYAHOU REPRESENTED BOTH SIDES OF OF THE THE $4,900,000 $4,900,000 19-21 STREET SOLD 50BARROW FEET of FRONTAGE

SOLD

TRANSACTION $4,900,000 SOLD PRIME WEST VILLAGE 19-21 BARROW STREET 50 FEET of FRONTAGE TRANSACTION SOLD 50 FEET of FRONTAGE PRIME WEST VILLAGE 19-21 BARROW STREET $4,900,000 19-21 BARROW STREET WEST VILLAGE 19-21 BARROW STREET Over PRIME 20 years of experience in transactional real estate 13 UNITS & 1 STORE $4,900,000 19-21 BARROW PRIME WEST VILLAGE SOLD $4,900,000 19-21 BARROW STREET 13 UNITS & VILLAGE 1 STREET STORE PRIME WEST

PRIME WEST VILLAGE 13 UNITS & STORE $4,900,000 PRIME WEST 13 UNITS &1 1VILLAGE STORE PRIME WEST VILLAGE SOLD 50 FEET of FRONTAGE 5013 FEET of FRONTAGE UNITS & 1 STORE 13 UNITS & 1 STORE 50 FEET of FRONTAGE 50 FEET of FRONTAGE $4,900,000 FEET of FRONTAGE $4,900,000 SOLD 19-21 BARROW STREET 5050FEET of FRONTAGE NATHAN BENELYAHOU REPRESENTED BOTH SIDES OF THE NATHAN BENELYAHOU REPRESENTED BOTH SIDES OF THE TRANSACTION NATHAN BENELYAHOU REPRESENTED BOTH SIDES THE Over 20 years of experience in transactional realOFestate TRANSACTION Over 20 years of experience in transactional real estate 19-21 BARROW TRANSACTIONSTREET

PRIME WEST 19-21 BARROW STREET PRIME WEST VILLAGE VILLAGE 13 UNITS & 1 STORE New York, NY 10018 Fax: (212) 727-9551 13 UNITS & 1VILLAGE STORE UNITS &FRONTAGE 1STORE STORE PRIME 57 West 38 10018 Street, 2FEET Floor WEST Tel: Fax: (212) 727-9550 New York, NY (212) 727-9551 50 of 13 UNITS & 1 57 West 38 Street, 2 Floor Tel: (212) New York, NY 10018FEET of FRONTAGE Fax: (212) 727-9550 727-9551 50 13 UNITS &FRONTAGE 1 STORE Fax: 57 West 38 NY Street, 2FEET Floor Tel: (212) 727-9550 New York, 10018 NATHAN BENELYAHOU REPRESENTED BOTH SIDES OF THE 50 of 50 FEET of 13 UNITS &FRONTAGE 1 STORE Fax: (212) 727-9551 New York, NY 10018 727-9551 50 FEET of FRONTAGE 50 FEET of FRONTAGE NATHAN BENELYAHOU NATHAN BENELYAHOU REPRESENTED 50TRANSACTION FEET ofREPRESENTED FRONTAGE NATHAN BENELYAHOU NATHAN BENELYAHOU REPRESENTED BENELYAHOU REPRESENTED BOTH OF OF THETHE 50 FEET ofREPRESENTED FRONTAGE NATHAN BENELYAHOU REPRESENTED BOTHSIDES SIDES NATHAN Over 20 years of experience in transactional real estate BARROW 57 West 38th Street, 2nd19-21 Floor Tel: (212) 727-9550 Over 20 of experience in real estate nd 13 UNITS &transactional 1STREET STORE PRIME WEST VILLAGE 57 West 38th Street, 2years Tel: (212) 727-9550 nd Floor West NY 38th 10018 Street, 2years Floor Tel: (212) 727-9550 Over 20 of experience in real estate New57York, Fax: (212) 727-9551 13 UNITS &transactional 1 STORE PRIME WEST VILLAGE th

NATHAN BENELYAHOU REPRESENTED BOTH SIDES OF THE PRIMEBARROW WEST VILLAGE 19-21 STREET PRIME WEST 19-21 BARROW STREET 13 UNITS & VILLAGE 1VILLAGE STORE PRIME WEST NATHAN BENELYAHOU REPRESENTED NATHAN BENELYAHOU REPRESENTED BOTH SIDES OF THE BENELYAHOU REPRESENTED BOTH SIDES OF THE NATHAN

BOTH SIDES OF THE TRANSACTION SIDES OF THE TRANSACTION BOTH SIDES OF THE TRANSACTION BENELYAHOU REPRESENTED BOTH SIDES OF THE BOTH SIDES OF THE TRANSACTION NATHAN BENELYAHOU REPRESENTED NATHAN NATHANBOTH BENELYAHOU REPRESENTED BOTH SIDES OF THE TRANSACTION TRANSACTION $4,900,000 TRANSACTION BOTHBENELYAHOU SIDES OF THE TRANSACTION 19-21 BARROW STREET TRANSACTION REPRESENTED BOTH SIDES OF THE NATHAN TRANSACTION BOTH SIDES OF THE TRANSACTION TRANSACTION TRANSACTION Over 20 years of experience in transactional real estate

Sales are slated to launch at the 14-unit condominium building this month. Developed by The Daten Group, and designed by Freyer Architects, the former police precinct features two-, three- and four-bedroom condos ranging in size from 1,424 to 3,368 square feet, and in price from $1.6 million to around $6 million. The penthouse offers 360-degree views of the historic district, and some units include outdoor space. Building amenities include an adjacent garage, gym, lounge, bike storage, and virtual doorman. The price of the 5,000-squarefoot attached townhouse is still being finalized. Douglas Elliman’s Greg Williamson and Rob Gross are the agents. Contact: www.datengroup.com.

Over 20 years of experience in transactional real estate

Over 20 years of experience in transactional real estate Over 20 years of experience in transactional real estate

20 years of experience in real real estateestate 20 years experience intransactional transactional Over Over 20Over years ofofexperience in transactional real estate Over 20 years of experience in transactional real estate th Street, nd Floor 57 West West 38 38th 57 Street, 22nd Floor

Tel: Tel: (212) (212) 727-9550 727-9550 Tel: (212) Tel: Tel: 727-9550 Fax: (212) 727-9551 Fax: (212) 727-9550 727-9551 (212) 727-9550 Tel: (212) 727-9550 Tel: (212) 727-9550 Tel: (212) Fax: 727-9551 Tel: Tel: (212) 727-9550 727-9550 (212) 727-9550 Fax: 727-9551 Fax: (212) 727-9551 Tel: (212) 727-9550 Fax: (212) 727-9551 Tel: (212) 727-9550 Fax: (212) 727-9551 Fax: Fax: (212) (212) 727-9551 Fax: (212) 727-9551 727-9551

transactional real estate Tel: (212) 727-9550 50 FEET of&in&FRONTAGE 13 UNITS 1STORE STORE PRIME WEST 13 UNITS 1VILLAGE Fax: (212) 727-9551 57 West 38 Street, 2FEET Floor Tel: (212) 727-9550 505013 of& FRONTAGE UNITS 1 STORE Fax: (212) 727-9551 FEET of FRONTAGE New York, NY 10018 57 West West 38thNY Street, 22nd Floor th 57 38 Street, Floor New York, th nd New York, NY 10018 57 West West 38 Street, 22nd Floor Over 20 years of10018 experience 57 Street, Floor th th nd th nd2 thNY nd Floor th nd 57 Street, West 38 22nd 57 38 West 38 Street, New York, 10018 57 West 38 Street, 2Floor Floor 57 West 38 Street, Floor New York, NY 10018 West57 2Street, Floor th nd th Street, nd Floor New York, NY 10018 5738 West 38 2 New York, NY 10018 West 38 Street, 2 Floor New York, NY 10018 New York, NY 10018 New York, York, NY New NY 10018 10018 th

57 New York, New NY York,10018 NY New York, NY 10018 10018 th

Fax: (212) 727-9551 Fax: (212) 727-9551 Cell: (516) 557-3367

Columbia Street Waterfront District 255 Columbia Street

NATHAN BENELYAHOU REPRESENTED

REPRESENTED BOTH SIDES OF THE NATHAN BENELYAHOU 50 FEET FRONTAGE BOTH SIDES OF THEof TRANSACTION TRANSACTION NATHAN BENELYAHOU REPRESENTED NATHAN BENELYAHOU REPRESENTED BOTH SIDES OF THE BOTH SIDES OF THE TRANSACTION TRANSACTION

Hand pick your team. Over 20 years of experience in transactional real estate

Over 20 years of experience in transactional real estate th Street, nd Floor 57 West West 38 38th Tel: 57 Street, 22nd Floor Tel: (212) (212) 727-9550 727-9550 New York, York, NY Fax: New NY 10018 10018 Fax: (212) (212) 727-9551 727-9551 th Street, nd Floor 57 West West 38 38th 57 Street, 22nd Floor New York, York, NY New NY 10018 10018

Tel: Tel: (212) (212) 727-9550 727-9550 Fax: Fax: (212) (212) 727-9551 727-9551

Keller Augusta Partners celebrates over 13 years of recruiting expertise within the Real Estate Industry. We're proud to hold the Northeast's premier investment, development, construction, brokerage, design & management firms as our clients. In Real Estate: It's Who You Know.

The seven-story, 13-unit, environmentally friendly boutique condominium developed by HPI Development LLC, and Stribling Marketing Associates, is now 80 percent sold out. The remaining units include a two-bedroom, 890-square-foot apartment for $975,000, and a three-bedroom unit with 1,253 square feet for $1.475 million. In early spring, the building’s four-bedroom penthouse will be released. The building employs Passive House design to maximize energy efficiency. Building amenities include private storage for each residence, a bicycle room, and a 2,000-squarefoot common garden. Stribling Marketing Associates is the agent. Contact: www.255columbia.com.

Tribeca The Sterling Mason 71 Laight Street

The 32-unit condominium project developed by Taconic Investment Partners and

designed by Morris Adjmi, with interior design by Gachot, topped off at seven stories. Construction is slated to be completed in the fall. The two- to six-bedroom units range in size from 2,000 to 5,600 square feet, and in price from $3.9 million to more than $20 million. Building amenities include a library lounge with entertaining space; children’s playroom, bicycle storage; fitness center; private parking garage; and interior courtyard. Douglas Elliman Development Marketing is the agent. Contact: www.thesterlingmason.com.

Soho One Vandam 180 Avenue of the Americas

The 14-story, 25-unit condominium building developed by Quinlan Development Group and Tavros Development Partners has 11 signed contracts. The remaining oneto four-bedroom units range in size from under 1,000 to over 5,000 square feet, and prices range from $1.73 million to $15 million. One Vandam also recently listed the largest of its three penthouses, Penthouse A, a four-bedroom, 5,286-square-foot triplex with five-and-a-half bathrooms and a roof terrace, for $28 million. Building amenities include a 6,400-square-foot landscaped terrace, fitness center, and residents’ lounge. Contact: www.onevandam.com. LEASING UPDATE

Midtown West

Instrata at Mercedes House 550 West 54th Street The 162-unit luxury residence, which sits atop the Enrique Norten–designed Mercedes House, and was developed by Invesco Real Estate, is now 100 percent leased. The 11 stories have one-, twoand three-bedroom units ranging in size from 613 to 1,698 square feet, and in price from $4,095 to $10,757 monthly. Residents have access to the 80,000-squarefoot Mercedes Club, which includes a 30,000-square-foot fitness facility, Wi-Fi café, media room, and lounge with fireplace. Other building amenities include two outdoor decks with a swimming pool, cabanas, lounge areas with fire pits, an outdoor movie theater, a putting green, and a bocce court. Contact: www.instratany.com. TRD

Introducing The Adeline // Full-service // 8-foot windows // Wide-plank oak floors // Hand-laid herringbone tile //

Over 40% sold //1-bedrooms from $625,000 //2-bedrooms from $950,000 //3- & 4-bedrooms from $1,300,000 //25 year 421-a tax abatement (anticipated) // H A L S T E A D P R O P E R T Y D E V E LO P M E N T M A R K E T I N G The complete offering terms are in an offering plan available from sponsor. File No. CD13-0101, Artist rendering and interior decoration, finishes, appliances, and furnishings are provided for illustrative purposes only. Sponsor reserves the right to make substitutions of materials, equipment, fixtures, and finishes in accordance with the terms of the offering plan. Sponsor: West 116 Owners LLC, 1865 Palmer Ave., Suite 203, Larchmont, NY 10538. Equal Housing Opportunity.

212.486.3916 // info@TheAdeline.com // TheAdeline.com //

RESIDENTIAL DEALS Soho $6.17 million 40 Mercer Street, Apt. 4E

Three-bedroom, three-and-a-half bath, 2,370-square-foot unit in a postwar condo building designed by Jean Nouvel; apartment has floor-to-ceiling windows,; master bedroom has a walk-in closet; building has a concierge, rooftop terrace, 50-foot pool, fitness room and private lounge; common charges $4,138 per month; taxes $1,485 per month; asking price $7 million, 142 days on the market. (Broker: Ryan Serhant, Nest Seekers International)

We’ve got the capital connections to deliver the right results. RECENT NORTHMARQ TRANSACTIONS

$68,500,000 New York Hilton Hotel at JFK Airport SIZE: 356 ROOMS CITY: JAMAICA, NY LENDER: REGIONAL BANK

“The apartment was owned by two brothers who were going to college in New York. Instead of a dorm room, their parents bought the apartment. We listed it at the beginning of the summer, and at the time there was little inventory for three bedrooms in Soho, so we priced aggressively at $7 million. There was one issue: It was a little bit messy and we kind of had to have an intervention and clean up the apartment. We had multiple showings. The buyer lived in Soho but was looking for something a little bit bigger. The first offer was very low and we negotiated. We started to include the furniture. The buyer really liked it, and it made a big difference, so we included it in the purchase.” Ryan Serhant, Nest Seekers

Financial District $1.43 million 111 Fulton Street, Apt. 506

$8,580,000 Scott Gardens & PR Scott Apartments SIZE: 276 UNITS CITY: WATERBURY, CT LENDER: FREDDIE MAC

Real Estate Capital 34 OFFICES COAST-TO-COAST New York Metro 212.904.1994

Long Island 516.333.4034

106 February 2014 www.TheRealDeal.com

northmarq.com Capital Services East/Westchester 914.683.3710

One-and-a-half bedroom, two-bathroom, 1,213-square-foot unit in a prewar condo building, the District; apartment has 11-foot ceilings, solid wood floors and bathroom with Jacuzzi tub; building has concierge and doorman; common charges $1,220 per month; asking price $1.449 million; 53 days on the market. (Brokers: Russell Putterman and Reanne Agbayani, Focus Real Estate Group; James Alesi, Douglas Elliman)

“The seller was a longtime friend and client who had purchased the unit in 2010 directly from the sponsor. I also represented them when they purchased. They paid about $970,000. They saw there was continued increase in demand for places in that neighborhood, particularly in that building. It’s very highly desired down there because it’s on Fulton Street, and there’s so much change going on. There’s the new Gehry building, people want to be there. We got one of the highest per foots in the building — about $1,175 per foot. It was purchased by what we perceived to be an investor because they are renting it.” Russell Putterman, Focus Real Estate Group

Chelsea $3.65 million 520 West 19th Street, Apt. 3C

Three-bedroom, two-and-a-half bath, 1,980-square-foot unit in a condo built in 2007, 520 West Chelsea; building is located between the High Line and Hudson River Park; building has 24-hour doorman; apartment has open plan kitchen and master bath wrapped in white marble; common charges $2,020 per month; taxes $402 per month; asking price $3.695 million; nine weeks on the market. (Brokers: Mark Griffith and Cindy Scholz, Citi Habitats; Samir Mahadin, Michel Madie Real Estate) “The general vibe of the building and the design of the layout ended up being the initial draws for both the sellers and the new buyers. The layout of the apartment is truly fantastic. The home feels closer to 2,400 square feet than the nearly 2,000 square feet listed. The boutique nature of the building also ended up being a big selling point for the buyers. At the first showing, they lingered for almost 30 minutes, sat on the couch toward the end, and commented on the ‘Zen-like feel’ of the space.” Mark Griffith, Citi Habitats Compiled by Sasha Von Oldershausen

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Kushner

from page 32

had the wrong capital structure at the wrong time,” Kushner said. “I spent a lot of time on it and left a lot of blood on the floor but I look at the lessons I learned on that deal, who I met through it, and I think that I’ll look back 20 years from now and think it was one of the best deals I ever did.” Part of the reason Kushner was dealing with the 666 Fifth fallout during this time was because when his father was released from his year-long prison stint in 2006, he didn’t come back in as CEO. Sources noted it would have been difficult for the business and financial community to accept his father back into the fray. Barclays and UBS, for example, had reportedly agreed to lend the company $1.6 billion for the Fifth Avenue acquisition in 2007 on the condition that Charles would not be the company face. “It’s interesting to watch when the baton is passed from generation to generation,” Ivanhoe said. “I’ve seen a lot of people fail because they try to be big shots and feel they have to establish their authority. That’s not Jared. He’s never conducted himself with any kind of arrogance. When people see others born into privilege, they expect them to be entitled. Jared’s demeanor undercuts that.”

A new era In personality and investment style, Kushner’s cut from a different cloth than his father, industry insiders said. While Charles can be jovial and sincere, he’s prone to outbursts of temper. Ivanhoe said it was a “personality of extremes.” Jared, on the flip side, could not be more “straight down the middle.” “I’ve never seen any kind of erratic behavior from him,” Ivanhoe said. “Everybody likes him and his lovely wife,” added Extell CEO Gary Barnett. Kushner’s strategy for expanding the company portfolio also differs from his father’s. While under Charles, the firm’s focus was primarily on New Jersey, Jared turned his attention towards New York City, where about 50 percent of the company’s assets are now located. Kushner told TRD that his father’s involvement in company decisions varies deal-by-deal and that he’s currently focused on design elements for a 447-unit rental tower the company is developing in Jersey City, which will break ground later this year. And while Charles largely shied away from taking on institutional partners, his son has courted them, and has partnered with firms like CIM, Invesco and OakTree Capital. The firm has been in growth mode since Jared came on: Of its $7 billion in assets, $3.5 billion has been acquired after 2008, Kushner said. The firm now has 750 employees, up from just 80 in 2008. Key hires include Larry Lipton, the former CFO of Related Companies’ property management business, Patrick Crosetto, from Vornado, and Laurent Morali of French financial firm Calyon Securities. In the East Village, Kushner has been on an acquisition binge, snapping up 60 buildings since 2012. Some industry pros have accused him of overpaying for multi-family product, but Kushner said he’s happy to be the end buyer after other companies have renovated the properties and rolled over rent-regulated tenants. “I don’t need every deal to be a value-add deal,” he said. “I could put my money in the bank and get zero, or I could put it here and get 4 or 5 percent over time. The value of these buildings will do nothing but go up. It’s a desirable, supply-constrained market. When you fast-forward 10 or 20 years, what’s better than that?” Kushner said he was initially losing money on the management of his East Village portfolio, but once he began buying more buildings, the numbers started penciling out. Some industry observers said Kushner’s strategy 108 February 2014 www.TheRealDeal.com

makes sense. Arik Lifschitz, head of multi-family investment company DSA Realty, said creating an infrastructure and hiring a team to manage Kushner’s East Village portfolio was an “economy of scale.” “Once you have a sizable portfolio in a given area, it makes it much easier to manage what you have, and manage more efficiently future purchases in that area,” said Lifschitz, who has significant holdings on the Lower East Side. Kushner is also adding to his multi-family empire outside of Manhattan. In December, the firm acquired a 46-unit rental at 50 North 1st Street in Williamsburg for $33.8 million from Property Markets Group and Largo Investments. Meanwhile, on the commercial side, Kushner has shown a knack for buying vacant office buildings, renovating them and leasing them to large tenants. The strategy paid off big time at 200 Lafayette Street, where he installed JCPenney as a tenant before selling the building to General Growth Properties. And at 80 West End Avenue, a former tank manufac-

where you might think he doesn’t experience it—but that wouldn’t be human,” she said. “He doesn’t react in an emotional way to circumstances; he’s thinking about solutions. I’m in awe of him in that regard.” Residential broker Raphael De Niro of Douglas Elliman, who is marketing the penthouses at the Puck Building alongside colleague Dennis Mangone, said Kushner has been “passionate” and “hands-on” throughout the designing and marketing phases. “Most developers supervise from 30,000 feet and have a couple of underlings that do all the work. Jared is much more hands-on,” he said. “He views himself as the steward of the Puck legacy.”

Betting on the boroughs

Kushner’s biggest deal of 2013 was a $375 million Dumbo acquisition. The properties will be renovated and converted into a tech-office hub, with a residential component. The office buildings will accommodate up to 5,000 bikes and will have outdoor roof space. LIVWRK’s Abehsera, a former executive with Dumbo-based development company Two Trees, orchestrated the partnership between Kushner and RFR and brought in institutional equity partner Invesco. “Jared connects very well to the fund and start-up and tech and creative worlds,” Abehsera said. “He’s a landlord that’s very palatable to those types of tenants. I saw him as someone 200 Lafayette Street, which Kushner and CIM sold last year. Right, Attorney Robert Ivanhoe. who could really add a turing facility, Kushner and Barnett bought the vacant lot of value.” building last summer for $84 million, and in December the The endeavor also aligns with another of Kushner’s nonprofit United Cerebral Palsy of New York City inked a projects, WiredNYC, a rating platform he worked on with deal for 218,000 square feet. The 30-year, triple-net lease the city that evaluates the broadband connectivity and is worth approximately $400 million over its full term, a infrastructure of office buildings and establishes a new source close to the deal told TRD. Internet connectivity benchmark. On the residential front, Kushner is primarily focused Ivanhoe said that despite the involvement of Invesco on rentals, but he’s also completing a condo conversion on and RFR, Kushner has been largely leading the exchange the top floors of the famed Puck Building, at 295 Lafayette of ideas for the project, and has attended every meeting. Gregg Popkin, COO at RFR, said Kushner “has got a Street. The first of five units reportedly went into contract quiet demeanor, but he’s got a very strong bite.” for the full asking price of $27.5 million in December. Kushner told TRD that he and his wife plan to move into “He’s contemplatively assertive,” Popkin said. “He the building this year with their two children, Arabella and thinks carefully, and then has no hesitation about exJoseph. But Trump said they’re still discussing staying in pressing an opinion.” their current home, at Trump Park Avenue, which is closMeanwhile, Kushner said he doesn’t “get that emoer to their offices and where their children will eventually tional” about deals. attend school. “Somebody screws me? Ok, I won’t do business with There’s little separation, it seems, between the couple’s them again, but I won’t say, ‘How dare you?’ I’ll just say, work and personal lives. In between time with their chil- ‘Okay, I don’t need to do business with them,’ ” he said. dren, Trump said the couple often walks construction sites Sources said the significance of the Dumbo deal for and talks shop. Kushner cannot be overstated because it illustrates that “At 10 p.m. on a Saturday night, we’ll be walking institutional players are keen to work with him, despite through units at the Puck Building that are under con- his dad’s past legal woes. struction because he’s showing me their level of finish,” “That’s a big statement given what befell Charlie,” IvanTrump said. “Jared is able to transition seamlessly from hoe said. “I would not have thought that would have hapa call about a deal he’s working on to building magnetic pened as quickly or as easily.” tiles with Arabella.” When helping Invesco do its due diligence on RFR One of Kushner’s best traits, according to his wife: his and Kushner, Ivanhoe said he received questions from sense of calm in the face of a crisis. She witnessed that the investment firm about Charles Kushner’s jail time. “I got a lot of questions about the whole Charlie sitwhen he was dealing with the collapse of the company’s uation, but I was able to tell them, ‘Jared’s as clean as a Fifth Avenue deal. “Jared does not show stress, almost to the point whistle,’ ” he said. TRD www.TheRealDeal.com January 2012 00

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CMBS

from page 58

block office tower that’s home to fashion designer Ralph Lauren. The buyers — Oxford Properties, Crown Acquisitions and Highgate Holdings joined Vornado — paid $1.3 billion, which included a $675 million mortgage that was packaged as a bond and then sold. The deal, which was underwritten by Goldman Sachs and German American Capital Corp, was seen as evidence of the CMBS market’s health. That was because it closed in September, around the same time the market began focusing on the Federal Reserve’s plans to begin reducing stimulus efforts, which many feared would cause CMBS prices to drop. It wasn’t only single-asset CMBS that picked up pace in 2013. The year also saw more traditional multi-asset deals like a $574 million refinancing of the Seagram Building at 375 Park Avenue. The debt on that building, which is owned by Aby Rosen’s RFR Holding, was folded into a $1.4 billion security

along with 93 other properties nationally, according to news reports.

In many ways, these high-profile building deals represent a new direction for CMBS. Traditionally, the beneficiaries of this type of funding were not stable trophy buildings in Midtown that portfolio lenders, who keep their loans on their own books, would gladly lend to; they were owners of riskier assets that many banks didn’t want to touch. Then again, financial institutions tightened their purse strings in general since the recession. And for all its strength, the CMBS market is still far below its 2007 peak. “We are not there yet,” said Amit Doshi, a broker with Besen & Associates, a New York commercial brokerage. But as credit spreads tighten, meaning that lenders can make more money on loans, more sources of funding are expected to emerge in the market, said Hunton and

Williams’ Mignone, who said his clients include credit rating agencies that he could not name. Other sources pointed to new players coming in to CMBS, like Ladder Capital and Rialto Capital Management, a division of the Miami-based Lennar Corporation, while institutions once active in CMBS lending are interested again, like Credit Suisse. Yet for all the benefits to CMBS lending, there are still downsides for borrowers. “Portfolio lenders are easier to talk to and negotiate with” than the servicers of securitized mortgage debt, Avison Young’s Carrega said. And if the deal is valued at less than $25 million, most CMBS lenders won’t even talk to a developer, said Aaron Jungreis, the president of commercial brokerage Rosewood Realty Group. Others noted that ground-up development deals also don’t pass muster. Still, Jungreis said, “I encourage my clients to take all avenues in terms of financing. The CMBS market continues to be strong.” TRD

a joint venture of Heritage Real Estate Partners and Dune Real Estate Partners. A&E’s Eisenberg, who previously worked as a principal of his family business Urban American, departed the company in 2011 and has snapped up several Upper Manhattan portfolios since. In addition to the 103-unit 1 Bogardus Place, which he bought from Vantage and Area, he picked up a four-building multi-family portfolio in Inwood for $31 million from development and investment firm the Dermot Company in December. A&E is known to partner with asset management giant AllianceBernstein on deals. Meanwhile, Treetop has purchased over 800 units in Upper Manhattan since 2012, Mermelstein told TRD. Upper Manhattan now makes up just under a third of the company’s market-rate portfolio. While yields have undoubtedly diminished, as buildings there have become pricier to buy, Mermelstein still perceives Upper Manhattan as undervalued. “In the East Village, you’re seeing portfolios trade at $350,000 to $400,000 a unit,” he said. “Granted, there’s a lot more upside in that the East Village is a true and tested condo market, so there is that exit play. In Northern Manhattan, you can still buy units for under $200,000 a door.” Despite the fact that many institutional players have already exited, there is still significant room for upside, sources said. “Regardless of how aggressive an operator wants to be in turning over rent-stabilized units, it’s rare that

they would be 100 percent successful at it,” Ariel Property Advisors’ Sozio said. “They got the low-hanging fruit, but there is still more upside for a new owner coming in there.” Indeed, some new owners may be content to wait out the market. Rents have been steadily rising. The average asking rent for a one-bedroom apartment in Harlem was $2,480 in December, compared with $2,364 a year earlier, according to residential brokerage MNS. “Some people are not really looking to cash out,” Jungreis said. “They’re looking to put that $10 million gain into a building and they don’t really care about refinancing or reselling right away.” Brokers active in the neighborhood are now tailoring their offerings to these new buyers, Shapiro said, noting that Massey Knakal broke down a portfolio, of roughly 1,100 units across 15 buildings, into more manageable tranches for these mid-sized firms in 2013. The portfolio, formerly owned by Lehman Brothers, sold in six separate transactions for an aggregate of $139 million. “Breaking it into smaller pieces made it much more manageable,” Shapiro said. “You’ll probably be able to extract more upside out of the smaller portfolios.” Mermelstein agreed: “Everybody likes to buy in bulk,” he said. “It’s great to buy 400 units at a time, but 1,000 units at a time gets difficult to wrap your hands around.” “That’s not to say that we would never do it, but I’d probably prefer to take on 400 units now, and another 400 units in three months,” he said. TRD

More trophy towers

Upper Manhattan from page 70 has some institutional backers, such as Phoenix Realty, it’s much more challenging to strike a deal now for institutional partners, Mermelstein said. “In the past, it used to be a slam dunk that you’d get an institutional backer,” he said. “Today, there are probably five or six that are active players. That’s maybe a third of what the number was five years ago.” Some of those backers also believe the market has reached another peak, said Aaron Jungreis, a founder of Rosewood Realty Group. Sellers “are getting prices they never thought they would get,” he said, noting that competition for these assets has intensified. “We’ve had 20 or 30 qualified bidders on some deals.… Five years ago, there might only have been two or three.”

Moving in The new breed of Upper Manhattan landlord was born out of the recession, said Robert Shapiro, a Massey Knakal investment sales broker specializing in the neighborhood. Indeed, the majority of the firms in high gear in 2013 started actively acquiring around 2011 and 2012, as the market started to regain its footing. Orbach, founded in 2005, now has 5,500 apartment units in New York, New Jersey, and Pennsylvania, according to a recent release from the firm. While it was not clear how many of those units are in Upper Manhattan, the group purchased a 33-building apartment package above 96th Street for $246 million in September from

C O R R E C T I O N S A N D C L A R I F I C AT I O N S In the January magazine story, “Hudson Yards retail gets underway,” TRD misstated a provision of the sales agreement for Coach’s office condominium. The agreement stipulates that none of its direct competitors take space in the megaproject’s South Tower. TRD also mischaracterized the rent that the Related Companies receives at the Time Warner Center. It receives a portion of the $1,600 per square foot per year produced by the average tenant. In the January magazine story, “Witkoff: the savvy strategist,” the name of Jynwel Capital was misspelled. TRD also mistakenly said that Witkoff and Ian Schrager partnered to

110 February 2014 www.TheRealDeal.com

buy a property on West and Leroy streets. That property is owned by Ares Management, which acquired AREA Property Partners last year.

In January’s Residential Deals column, the size of Apartment 4A at 61 Irving Place in Gramercy Park was misstated. It is a two-bedroom apartment.

In the January “At the Desk Of: Daniel Blanco,” TRD reversed the ages of Blanco’s children. Josephine is 11, and Amanda is 9.

TRD is looking for a reporter TRD is looking for a real estate reporter who can research and investigate New York City real estate developments and transactions, conduct interviews and write articles for publication in the print magazine and online. Master’s degree in journalism is required. Please send resumes to the attention of Stuart Elliott at The Real Deal. Address is 158 West 29th Street (4th Floor); New York, New York 10001

In January’s Development Updates, TRD misstated the name of the agent handling sales for Bright n’ Green in Brighton Beach. Robert Scarano of Bright n’ Green LLC is acting as the agent.

www.TheRealDeal.com January 2012 00

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Hotels

from page 46

The city’s economy has recovered faster than the rest of the nation’s. Major office development is also continuing apace, with tens of millions of square feet due to come online at projects like the World Trade Center and Hudson Yards. Such office space presupposes business travelers coming into town for meetings. “The Hudson Yards is slated to include two or three significant hotel aspects,” Baker said. “Those will get built, because the office space is being built to support them.” Still, the city’s hotel market, however strong, is volatile. Economic shifts, spurred by any number of factors, can quickly translate into fewer travelers and softening of the hospitality sector. “A lot of people look at hotels as sort of the more risky asset classes,” said Matthew Baron, a principal at Simon Development, which is building a still-unnamed 33-story, 250-room hotel at 31st Street and Madison Avenue. He said he’s largely confident in the market in the next couple of years — his firm’s hotel is due to open toward the end of 2015. But the recent past offers a cautionary tale: Between 2008, when the recession struck, and 2009, Manhattan’s average daily room rate plummeted more than 26 percent, according to Hennessey. And RevPAR saw a similar drop. “When you compare multi-family with a hotel,” Baron said, “ you have to rent that room every night. God forbid, if

there’s an economic collapse like in 2008, your room rates can go from $300 to $150 literally overnight.”

Leading locationsading locations Some locations in the city will undoubtedly see more hotel development and activity than others, along with sharper increases in key metrics. Of the 28 Manhattan hotels projected to open this year, nine are in Midtown or Midtown South, or close by, such as the 135-room Cambria Suites Chelsea, being built on West 28th Street by a partnership led by Choice Hotels International. Another nine are below 14th Street, including the 162room Hotel Ludlow on the Lower East Side and the as-yetunnamed 90-room inn at 24 John Street in the Financial District, which are being developed by BD Hotels, the team behind the Bowery Hotel and the Jane. Average room rates are expected to increase the most in 2014 on the East Side and Uptown, by about $15 a night from 2013, according to Hennessey. Times Square and points farther south, meanwhile, will likely see more modest room rate growth of $5 to $10 a night. In Brooklyn, new hotels are slated to open or are planned for Brooklyn Heights, the BAM Arts District, Dumbo, Williamsburg and the area around the Barclays Center.

In Queens, the hotel development is mostly centered in Jamaica, Flushing and Long Island City. Hennessey forecasts average Brooklyn rates will rise as high as $195 in 2014, up $10 from last year. Occupancy rates will hover around 85 percent, up from 80.7 percent in 2012. “The reason for that is Brooklyn has increased its attractiveness as a destination,” he said, “There is a segment of the traveling public who prefers to be in Brooklyn.” There’s also a segment, of course, that prefers luxury — and the luxury end of the New York hotel market should have another strong year. Though suites at some of the city’s highest-end hotels go for mid-four figures a night, the average nightly cost of a luxury Manhattan hotel room is expected to increase to as high as $440 in 2014, up $20 from last year, according to Hennessey. Economy inns and most chain hotels will see softer rate increases, though occupancy rates for these sectors will be uniformly higher and could even exceed 90 percent. The reason for that goes back to development as well: Construction of mid-scale hotels, especially chains, outpaced luxury hotel development over the last few years. “Overall,” Hennessey said, “the addition of all these new hotels is making hoteliers more focused on cutting room rates or keeping them low, to make sure they get their fair share of customers.” TRD

Ziff from page 64 firm for more than 15 years. Most recently, in August, Ackman-Ziff helped arrange financing for his $141.5 million purchase of the Bank of New York Mellon building at 706 Madison Avenue. Ed Scheetz, founder of King and Grove, a New York– based boutique hotel firm, has worked with Ackman-Ziff on a number of large deals, including a recent refinance for a luxury conversion project in Lower Manhattan. He declined to name the project, but King and Grove recently bought out its partner, the Chetrit Group, at the 127,000-square-foot office building 708 Broadway. “If you are active in the real estate industry, you really can’t go far without bumping into Simon or someone from his team,” said Scheetz, the former CEO of Morgans Hotel Group. Ziff is, in fact, a regular on the industry party circuit as well as on the philanthropy scene. And his thick curly locks are hard to miss. “I finished the ’70s, 16 years old, with a Jewfro,” he joked. “It was really long in December, but I was taking too much abuse [so I cut it.] I prefer it longer. Everyone else is going bald.” He also said he wants credit for the “suit-no-tie” look. “I hate wearing ties,” he said. “I think everyone should donate their tie expense to charity and stop buttoning their top button. It’s liberating.” What wasn’t as liberating for the firm, however, was struggling through the post-2008 downturn. In 2009, when the capital markets dried up, his firm tried to expand into the rough-and-tumble business of loan sales through a joint venture with Westchester-based Garnet Capital Advisors, one of the nation’s largest sellers of distressed debt. But the venture with Garnet did not end well, and Ziff retreated after his core business began to rebound and the two partners found themselves at odds over a closing. “It was the straw that broke the camel’s back,” recalled Ziff. “So we walked away.”

Dominant boutique player Ziff, who grew up in Philipsburg, Pa., was something of a fish 112 February 2014 www.TheRealDeal.com

Simon Ziff

out of water as a kid. “I’m not a Quaker,” he quipped. “I am the last Jew that will ever be Bar Mitzvahed in my home town.” His parents ran a clothing store in nearby State College, home to Penn State University, Ziff ’s alma mater. Still the rabid Penn State fan, he said he tells people, “I come from the white trash Ziff family from Pennsylvania, not the publishing industry Ziff family [known as Ziff-Davis] from New York.” A year out of college, after a stint at MassMutual, he moved to Greenwich Village and enrolled in NYU to start his master’s in real estate and to apply for jobs. Once in New York, he quickly landed at Ackman Brothers & Singer Inc., which was becoming one of the most active financial brokers on the New York real estate scene and was led by Larry Ackman and his partner and cousin, Andrew Singer. The company disbanded in 1995, a few years after Ackman’s son Bill had also left, first to go to Harvard Business School and then to launch hedge fund Pershing Square Capital, where he made his fortune. Bill’s departure cleared the way for Ziff to join Larry Ackman at the helm of the company, which was renamed. Ziff, who is married with three kids and lives in Armonk, said he and Ackman moved quickly to beef up the firm by bringing in new talent and launching a new business model to raise joint-venture equity for clients. One of those recruits, Russell Schildkraut, is now a principal and key figure at the firm, and has closed more than $10 billion in transactions, including facilitating a $275 million refinancing at the 690-

unit Herald Towers on 34th Street last year. “Our goals were to replicate what Sonnenblick Goldman had done in the ’80s, to be a dominant boutique firm specializing in the entire capital stack,” said Ziff. The firm has won six awards from the Real Estate Board of New York for “Deal of the Year.” Today Ackman-Ziff operates mainly in New York and Boston, and in recent years expanded into Miami. It’s also growing its business in California and Washington D.C., where new offices are planned for later this year. In October, the firm announced one of its biggest financing deals, the arrangement of $685 million in debt and preferred equity on a 2,000-unit multi-family portfolio in California.

Staying put The company’s deals have not gone unnoticed. In September, CBRE poached Sean Rosenthal, one of Ziff ’s top executives, who made his mark with the $680 million deal in 2008 to finance the acquisition of 650 Madison Avenue by Ashkenazy Acquisition and the Carlyle Group. And Ziff said that extensive buyout negotiations twice fell apart, in part because he wanted to maintain his way of running the business. In 2006, Ziff said, Cushman & Wakefield was in talks to acquire his firm. However, the talks fell apart, and the next year Cushman bought a majority stake in Sonnenblick Goldman. Then in 2011, Ziff said he entered acquisition negotiations with CBRE, but those talks met the same fate. Cushman didn’t respond to requests for comment; CBRE declined comment. Ziff said he wanted to grow the business before setting a value on it, and he also resisted what he called the “code of the West” style of managing accounts. He said in that environment, account executives at the firm would be competing for the same client, which he feared would create chaos and dissension within the ranks. Ziff, however, said that he wouldn’t rule out an alliance with a strategic partner in the future. “I’m a huge karma guy,” Ziff said. “I hug my competitors at every event.” TRD www.TheRealDeal.com January 00 PHOTOGRAPH FOR THE REAL DEAL BY JEREMY2012 WILLIAMS

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Boymelgreen

from page 44

the East Village. There, he decided he wanted to be part of the real estate world and “create homes for people.” He promptly joined his father’s firm, where he served as head of development and construction for nearly 40 projects, including 20 Pine, the luxury rental 88 Leonard, and Downtown by Philippe Starck — which were trailblazing buildings, adding residential stock to Lower Manhattan at a time when the area was mostly office buildings. Both 20 Pine and Downtown by Starck were later hit with suits over construction problems. Asked about the suits, Boymelgreen said he did not supervise day-to-day construction on the projects and he is “not in any way a part of any of those allegations,” adding “it is not my place to comment on them one way or another.” Indeed, in this case, the apple might have fallen far from the tree. Shaya made waves with his brash style, for instance reportedly telling tenants who were alleging subpar construction in a Brooklyn building that they shouldn’t expect the same quality construction in an outer borough development. “What do they expect — a Manhattan building?” he said, according to the New York Times. Sam, however, takes a different tack. Slight and thoughtful, he is guarded and careful with his comments. Developer Jacob Frydman of United Realty Partners is considering working with Sam on a hotel project but declined to provide details, citing a confidentiality agreement. Frydman noted that Sam and his father “are very different people.” “If [the industry] took the time to get to know Sam in his own right,” said Frydman, “he is a person of tremendous ethical base.”

Behind the curtain Meanwhile, Sam quietly embarked on a development in Windsor Terrace starting in 2012 named the Kestrel.

The 126-unit rental project, at 33 Caton Place, will hit the leasing market in April, with Halstead Property as the exclusive marketer for the building. Some are skeptical that Sam is the actual Boymelgreen behind his ventures. One real estate exec at a firm that provides Shaya Boymelgreen financing said that when the developer was shopping for equity partners for the Caton Place project, investors were told it was Shaya’s endeavor. Sam maintained that his father has “absolutely no connection to the project.” Another executive, who also asked not to be named, said the project did not hold up well during the recent winter storms, noting that snow leaked in and damaged the apartments because proper precautions were not in place to protect it. Sam denied that allegation. Sam said it doesn’t bother him that industry players assume he’s working with his father. “It seems natural — and perhaps it’s par for my course, given my father’s well-known name — that when people hear my name, they make a mistake and assume it’s my father.” Even if Sam’s business is merely a front for his father, that might not be a problem. Many New York City real estate dynasties have seen second chances, especially after the recent recession, sources said.

Bound to Brooklyn Sam also recently made decisive bets on the trendy Clinton Hill area, where he is redeveloping a house for himself, his wife and three kids in addition to a 10-unit condominium at the corner of Washington and Lafayette avenues. Sam said part of the reason he started his own firm was to focus solely on Brooklyn. “Brooklyn has nursed me,” he told TRD from his office at 7 World Trade Center, which is, perhaps ironically, not in Brooklyn. He says he often sees the sun rise after pulling an all-nighter working on projects. “I always knew I was committed to Brooklyn.” He said his office is in Manhattan because most people he works with are based there. “I like to be considerate of other people’s time,” he said. And the younger Boymelgreen’s sights are set on more than condos. Massey Knakal broker Clifford Winfield, who specializes in Gowanus, said Boymelgreen’s project there, located at 255 Butler Street, will be a “hotel or office development.” Sam said he is interested in building mixed-use “entertainment” projects, throwing out a “tennis school,” as an example of something he might build. The developer has also ventured into less-profitable projects. He put some money up when he assembled a coalition of investors to develop a progressive Jewish private school in Prospect Heights, back in 2006. Boymelgreen has never earned a penny from the Luria Academy, he said. His only reward was having a school to send his three kids to. What remains to be seen is whether Sam can make his own name and distinguish himself from his father. “In due time people will get to know me and what I do and who I am,” he said. TRD

Commercial lenders from page 60 Group’s acquisition and redevelopment of the former Helmsley Park Lane Hotel at 36 Central Park South. Rounding out the top five was Signature Bank, based in Midtown, which like New York Community relied on volume over dollar value. Signature did $1.88 billion in mostly multi-family portfolios and other smaller deals, for a total of 188 loans. Its largest was for $52 million at the Crescent Club at 41-17 Crescent Street in Long Island City. TRD’s review found the largest borrowers last year were the Related Companies, with $2.25 billion borrowed in eight loans in Manhattan and Brooklyn, and Vornado Realty Trust, with four loans totaling $1.95 billion. Notable as the recovery picks up steam are the absence of a handful of formerly active European lenders. Foreign lenders no longer in the market include Anglo Irish Bank and Germany’s Hypo Real Estate Holdings which, like Lehman Brothers, another big lender in the past, collapsed during the financial crisis. “We still don’t have as many foreign banks. For example, many of the German banks are no longer lending,” said Steven Kohn, president of equity, debt & structured finance in Cushman & Wakefield’s capital markets group. However, Asian banks are stepping in, Kohn said. The Bank of China, which issued $1.4 billion in loans, did one of the 10 largest loans in the city last year. It originated $600 million for the Chetrit Group’s acquisition and repositioning of the Sony Building at 550 Madison Avenue. It also did a $498 million loan for Milstein Properties’ refinancing of 335 Madison Avenue, which just missed making the top 10. In addition, several local lenders were taken over by larger institutions that remain active, including Brooklyn Federal Savings, which was bought out by the 114 February 2014 www.TheRealDeal.com

NYC’s Top 10 Commercial Borrowers, 2013 Borrower

Loans

Total

Related Companies

$2.25 billion

Vornado Realty Trust

$1.95 billion

RFR Holding

$1.52 billion

Blackstone Group

$1.38 billion

SL Green Realty

$1.35 billion

Hilton Worldwide

$1.34 billion

Brookfield Properties

$1.32 billion

Silverstein Properties

$999 million

Tishman Speyer

$898 million

Chetrit Group

$895 million

Source: The Real Deal analysis of data on commercial first mortgages of $100 million or more in New York City for 2013 from loan tracking firm Actovia and PropertyShark.

New Jersey–based Investors Savings Bank, and the Bank of Smithtown, which was purchased by People’s United Bank, based in Connecticut. Neither Investors nor People’s made the top 20 list, but both wrote more than $500 million in loans last year. Private commercial lenders like Midtown-based Ladder Capital, which originated nearly $534 million in loans, are also emerging as major players in the city. The firm, founded in October 2008, filed with the U.S. Securities and Exchange Commission in December to raise $200 million in an initial public offering. Its filings say it plans to originate more loans and increase the average size of its loans. Howard Michaels, CEO of the investment banking firm the Carlton Group, said he saw aggressive activity last year from Starwood Capital Group, Deutsche Bank, the Blackstone Group and Cantor Fitzgerald, as well as traditional banks. Blackstone joined Deutsche Bank in the top 20, with

$982 million in loans. “Commercial banks are still relatively conservative, but for borrowers they like, they can get very aggressive,” said Michaels, who completed deals last year to finance a redevelopment of 101 Murray Street for a joint venture of the Witkoff Group, Howard Lorber and Fisher Brothers, among others. In addition to the overall ranking, TRD also analyzed more than 120 first mortgage loans worth more than $100 million each by borough. The vast majority of those loans, some $28 billion, were for Manhattan properties exclusively. Several loan packages were spread over multiple boroughs, including to Rubin Schron’s Cammeby’s International and to New York Presbyterian Hospital, which borrowed $500 million from Prudential. These were not included in each borough’s loan totals. Brooklyn had the second-highest total dollar volume for mega-loans, with $1.4 billion, including a $465 million loan provided by Bank of America to Lend Lease and InterContinental Hotels Group, for a rehabilitation of hotels at the U.S. Army’s Fort Hamilton. Queens saw $518 million provided in three loans for $100 million or more. Bank of America’s $225 million loan to casino owner Genting Group for the Resorts World Casino New York in South Ozone Park’s Aqueduct Racetrack, was the biggest. Of the citywide loans valued at $100 million or more, $14.4 billion went to finance office buildings, $8.4 billion went to residential and residential-hotel combinations, $4.1 billion went to retail and retail-office properties, $3.3 billion was issued to hotels and $680 million went to hospitals. Sources said capital remains plentiful. “We are very optimistic for this year,” Kohn said. TRD www.TheRealDeal.com January 2012 00

De Blasio

from page 20

however. He was a vehement critic of the Moynihan Station redevelopment project by the Related Companies and Vornado Realty Trust, saying shortly after his resignation from the Port Authority that the project’s main priority was “what’s good for Related’s investors,” according to watchdog blog Atlantic Yards Report. Deputy Mayor for Housing and Economic Development: Alicia Glen De Blasio tapped longtime Goldman Sachs executive Alicia Glen to be the point person on his ambitious affordable housing plan. Glen’s responsibilities will include oversight of the city’s Department of Housing Preservation and Development and the Housing Authority, the administration said. Since 2002, Glen ran Goldman’s Urban Investment Group — which helps to finance projects in underserved communities — and oversaw the creation of more than $5 billion in development of residential, mixed-use and commercial projects across the country. Prior to that,

she was the assistant commissioner for housing finance at HPD under Giuliani. “Alicia knows the development community well, but she is also very civic-minded,” said Gotham Organization president David Picket. Picket, who added that he knows Glen personally, said her capital markets savvy and experience at HPD would help de Blasio realize his goal of increasing the city’s housing stock. REBNY’s Spinola said in a statement that the decision “continues a string of exceptionally talented and knowledgeable individuals who will work with the new mayor to steer our city moving forward.” Chair, City Council Land Use Committee: David Greenfield An attorney by training, David Greenfield represents Brooklyn’s 44th Council District, which includes the Midwood and Borough Park neighborhoods. Greenfield’s connection to both de Blasio and Council Speaker Melissa Mark-Viverito’s voter base, Sheinkopf said,

made him a natural pick for the coveted position of land use committee chair. This key panel approves development projects and has veto power over City Planning Department rezoning proposals. “Brooklyn did well in the election,” Sheinkopf said, “and the great rule in politics is that you do help your friends and you do punish your enemies.” Greenfield is known as a staunch loyalist of Brooklyn’s Democratic Party Chair Frank Seddio. “We have every expectation that he will be diligent and fair in helping to focus the committee on the important issues facing the city, including creating more good jobs and housing for all New Yorkers,” Spinola said in a statement to Crain’s about the appointment. Campaign finance records shows that Greenfield’s donors include several members of the Gindi family, real estate players and owners of the large discount department store chain Century 21, as well as Richard Cohen, a principal at real estate investment firm GTIS Partners. TRD

Helmsley from page 49 With the Helmsleys now long gone, and the estate’s last New York City properties expected to transfer soon, TRD analyzed what happened to their Big Apple buildings and how much they sold for. We looked at the 24 New York properties the estate owned as of May 2009, which were listed in court documents in connection with Leona’s death. The estate made no purchases since then because its main mission is the disposition of its assets. In court documents, the estate’s trustees put the value of the entire portfolio at $5.2 billion, although they noted that $2 billion of that was in municipal bonds. They also said the estate had “more than 80 interests in real property” in 17 states. And there is no doubt that the estate has benefited greatly from timing its sales to the improving Manhattan investment sales market. “Certainly we are in an upswing over the last two or three years in Manhattan, and throughout the country, and [the estate has] been a big beneficiary of that,” said Dan Fasulo, managing director at data firm Real Capital Analytics.

ceeds from its property sales to the Helmsleys’ charitable trust. Today the estate is led by five trustees: Leona’s sister-in-law Susan Rosenthal, Leona’s grandsons Walter and David Panzirer, Leona’s friend John Codey and her attorney Sandor Frankel. A look at the estate’s portfolio provides a unique lens into a vibrant period of New York City real estate history. That’s largely because when Helmsley made his mark in the business, in the 1930s through the 1980s, property owners shared buildings with groups of friends, family and business associates. “This is the way the old timers did deals in New York. There was a lot of syndication, and Helmsley was one of those guys,” said Fasulo. “Given the complex nature of its partnerships, it should not be surprising that unwinding many of the assets was complex.” The proceedings were so complex that in 2009, the estate’s trustees — which at that time include Leona’s brother, Alvin Rosenthal, rather than Alvin’s wife — argued in Manhattan’s Surrogate’s Court for an advance payment of $4.5 Harry Helmsley first got his start in million for their efforts, which they New York City real estate in 1925, were awarded in 2012. and began buying properties in Helmsley’s ownership inter1936. He eventually owned or manests varied widely. In some inaged as much as 28 million square stances, he owned and controlled feet, most of that with partners, properties alone. In other cases, he owned the land, but leased it including bigwigs of the time like Lawrence Wien, Bernard Kayden The Helmsley estate recently sold its stake in the icon- long-term to another entity. He ic Empire State Building. (Bottom) CBRE broker Darcy and Irving Schneider. also owned stakes in leaseholds Stacom, who advised the estate. Harry amassed the kind of empire at properties owned by other enthat is typically held on to by subsequent generations, but tities. And in a few instances, including the Empire State he had no children of his own. Leona, his second wife, did Building, he owned portions of the operating sublease. have children, but when she died, the remaining proper- All of those complicated arrangements were, of course, ties were directed to the estate, which turns over the pro- inherited by the estate.

The old timers

116 February 2014 www.TheRealDeal.com

Insiders said investment sales powerbroker Darcy Stacom, of CBRE Group, provided brokerage and advisory services to the estate on most, or all, of its sales as it sold off these final 24 New York City properties. Neither the estate nor Stacom, who served as long-time property advisor to Leona Helmsley, responded to requests for comment. But those properties sold at prices ranging from $1.6 million for a tiny lease fee in an office building to the $653 million Park Lane Hotel sale.

Unwinding assets In addition to the aforementioned sales, other high-profile properties that the estate sold since 2009 include the New York Helmsley, a hotel at 212 East 42nd Street, which Host Hotel & Resorts snapped up for $313.5 million and converted into Westin New York Grand Central; the Carlton House at 680 Madison Avenue, a hotel which Extell Development and private equity firm Angelo, Gordon teamed up to buy for $164 million and are now converting to condos; and a 50 percent stake in 1333 Broadway, which was sold to Empire State Realty Trust for $82.1 million. In many cases the Helmsleys’ ownership partners bought up their stake. The Benenson family, one long-time partner, bought the estate’s 40 percent stake in the land under the residential co-op called the Beekman at 575 Park Avenue for $5.76 million in 2010, according to Real Capital Analytics. Richard Kessler, chief operating officer at Benenson Capital Partners, said “we were constantly looking for the opportunity to do something here, and when the opportunity presented itself, we took advantage of it.” He declined to discuss the pricing. Kenneth Patton, who served from 1980 to 1992 as COO of Helmsley’s management and brokerage company, Helmsley-Spear, said many people didn’t realize how extraordinarily vast Harry’s portfolio was beyond his trophy properties. In part that may be why few in the industry are aware that the estate was such an active seller since 2009. “I found over the years that the giant image of Harry Helmsley has masked the nuance of the many holdings he had,” Patton said. Speaking about the sale of the Helmsley estate’s final New York City properties, Jones Lang LaSalle investment sale broker Richard Baxter noted “nothing last forever.” “Look around the city,” he said. “It is rare that you are going to find people owning buildings that their family built.” TRD www.TheRealDeal.com January 2012 00

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www.TheRealDeal.com February 2014 119

f e b r u ary 1

The Museum of Modern Art, in conjunction with Columbia University’s Avery Architectural and Fine Arts Library, presents “Frank Lloyd Wright and the City: Density vs. Dispersal.” 10:30 a.m. to 5:30 p.m., through June 1. The Museum of Modern Art, 11 West 53 Street. Fee: Free museum admission for members, $25 for nonmembers. Information and registration: www.moma.org.

The Association of Real Estate Women presents its first luncheon of 2014. Samantha Rudin, Vice President of Rudin Management Company, will discuss the redevelopment of the St. Vincent’s Hospital site in the West Village, the Greenwich Lane. 11:30 a.m. to 2 p.m. Club 101, 101 Park Avenue at 40th St. Fee: $100 for members of other CREW Chapters and NYBC Council of Industry Women’s Organizations, $120 for nonmembers. Information and registration: www.arew.org.

Halstead Property’s Leonard Gottlieb presents “Suddenly Single: Reinventing Yourself, Your Home, and Your Bank Account.” Featured speakers include Gottlieb and divorce experts Karen McMahon, Stacy Francis and Gail Green. Panel will be moderated by Jaqueline Newman, managing partner at Berkman Bottger Newman & Rodd LLP. 6:30 p.m. to 8 p.m. Resource Furniture, 969 Third Avenue, 4th Floor. Fee: Free. Information and registration: www.halstead.com.

The Architectural League presents “Leroy Street Studio and Hester Street Collaborative.” The event features drinks and informal conversation. 6:30 p.m. Offices of Leroy Street Studio and Hester Street Collaborative, 113 Hester Street. Fee: Free and only open to members, who may bring one nonmember guest. RSVP required. Information and registration: www.archleague.org.

LandlordsNY, in partnership with the Brooklyn Nets, presents the inaugural “LandlordsNY Property Management Symposium.” Bruce Ratner, real estate developer and minority owner of the Brooklyn Nets, will be keynote speaker. Calvin Klein VIP Club and on the Nets Practice Court. 8 a.m. to 1 p.m. Barclays Center, 620 Atlantic Avenue, Brooklyn. Open to LandlordsNY members. Fee: $200. Information and registration: www.landlordsny.com.

The Negotiation Institute presents “The Art of Negotiating Real Estate.” Randy Anderson, professor of real estate at the University of South Florida, will be the keynote speaker. Business attire. 8 a.m. to 4 p.m. The New York Athletic Club, 180 Central Park South. Fee: $625. Information and registration: www.negotiation.com.

120 February 2014 www.TheRealDeal.com

CALENDAR 1

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

The Center for Architecture presents its exhibition opening of “Considering the Quake: Seismic Design on the Edge.” Curators include Ghyslaine McClure and Effie Bouras, McGill University Department of Civil Engineering and Applied Mechanics. Featured projects include the Taipai Performing Arts Center and the Shenzhen stock exchange. 6 p.m. to 8 p.m. The Center for Architecture, 536 LaGuardia Place. Fee: Free. Information and registration: www.cfa.aiany.org.

The Building Owners and Managers Association presents its annual “Pinnacle Awards Banquet.” The awards are presented to “the premier buildings and people in the city.” Business attire. 6 p.m. to 7 p.m. cocktails; 7 p.m. to 8:30 p.m. dinner and awards ceremony; 8:30 p.m. to 9 p.m. celebration reception. Pier 60 at Chelsea Piers, 23rd Street and Hudson River. Fee: $450; tables are available. Information and registration: www.bomany.org.

The Architectural League, in conjunction with The Irwin S. Chanin School of Architecture of the Cooper Union, presents a look at Guy Nordenson, the latest event in its Current Work program. Nordenson, of Guy Nordenson and Associates Structural Engineers, will present a lecture, followed by a moderated conversation. 7 p.m. The Great Hall, The Cooper Union, 7 East 7th Street. Fee: Free for League members, $15 for nonmembers. Information and registration: www.archleague.org.

The Real Estate Board of New York presents “Residential Management Leadership Breakfast.” Dorothy Vermeer of H.K. Kalikow & Co. will be awarded the Residential Management Executive of the Year, and Eva Tatel of Stroock & Stroock & Lavan will be awarded the Community Award. 8:30 a.m. to 10 a.m. The Roosevelt Hotel, 45 East 45th Street. Fee: $75 for individual ticket; sponsorship tickets available. Information and registration: www.rebny.com.

The Center for the Sustainable Built Environment at New York University’s Schack Institute of Real Estate presents its thirdannual conference on sustainable real estate. This year’s conference is entitled, “Big Data and Disruptive Innovation: Is the Real Estate Industry Next?” 8:45 a.m. to 4 p.m. NYU Kimmel Center for University Life, 60 Washington Square South. Fee: $195; sponsorship opportunities available. Information and registration: www.scps.nyu.edu.

The New York Association of Realty Managers presents its networking lunch and building management seminar. Featured speakers include Steven Kirkpatrick, Belkin Burden Wenig & Goldman, and Mark Hankin and Geoffrey R. Mazel, Hankin & Mazel. 11 p.m. to 1:30. The General Society of Mechanics & Tradesmen, 20 West 44th St. Fee: $85 for members, $185 for nonmembers. Information and registration: www.nyarm.com. 0

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