The Real Deal November 2011 by The Real Deal

Airbnb sees blue skies in New York

Buying domain names for proﬁt

Unraveling an HPD scam

Debating Dumbo’s new architecture

is no help for some agents 112 Yelp

THEREALDEAL

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Comeback kids

A look at some of NYC’s most impressive real estate recoveries

N EW YO RK R E AL E S T A TE N E W S

Vol. 9 No. 11 November 2011 $3.00

The new foreign buyers City lures investors from abroad as Europe scrambles to control crisis

BY C.J. HUGHES While the industry is not back to its highs, there are comebacks to be found — whether from developers who ﬂopped earlier on mega deals, stock prices that had hit rock bottom, or even bankers whose billion-dollar loans went bellyup and are now back on the scene in a big way. See story on page 68

Autumn market not what it used to be Manhattan brokers say the residential market is seeing less activity this fall than in the past. And they expect the trend to continue as the market becomes more “spring-centric.” See page 22.

Mogul creating new empire, but is his NAI deal in trouble? BY DAVID JONES Billionaire investor Andrew Farkas, who built Insignia Financial Group into one of the counSPECIAL REPORT try’s largest firms, is on his most prolific acquisition run since the ’90s. Most recently, he agreed to buy firm NAI Global and to purchase a stake in Grubb & Ellis. But as he builds his empire, sources say the NAI deal, which has yet to close, has hit snags.

For ofﬁce market, Q4 won’t deliver Manhattan ofﬁce leasing experts say volume may reach only 26 million square feet by the end of 2011, falling far short of expectations. See page 28.

See story on page 32

Top agent abodes

250 West Street

Inside the homes of big-shot Manhattan residential brokers

BY LEIGH KAMPING-CARDER This month, The Real Deal peeks inside the homes of ﬁve top Manhattan brokers. What we found is one agent who paid only $10 for her condo after helping Donald Trump sell 120 units in the building, and another whose townhouse is ﬁlled with Damien Hirst paintings. Find out more about these brokers’ abodes inside.

BY LEIGH KAMPING-CARDER weeks, while others, from tottering econoAt press time, European leaders had reached mies, have ﬂooded into the city as a safe haven. a deal to avert a potentially disastrous Greek The Real Deal looks at 10 countries that send a debt default. The move could signiﬁcant number of homebuyFEATURE S TORY ers here, and breaks down the have implications in NYC, where some foreign buyers have been spooked into priciest riciest 2 2011 deals involving for foreign players. inactivity by the European debt crisis for See stories beginning on page 51

Ron Moelis’ secret weapon

Broker pay draws ﬁre

BY CANDACE TAYLOR At a time when most are cutting back, Ron Moelis’ L+M Development — one of the only ﬁrms in the city that does both affordable and market-rate housing — has added 40 employees. And this spring, the billion-dollar developer will start a new Harlem condo, one of only a few to rise post-Lehman.

BY ADAM PINCUS Some real estate execs are quietly fuming over what they say are aggressive bonuses that several new and expanding commercial firms are paying to poach brokers. In the last few months, Avison Young, Stan Johnson Company, Lee & Associates, Brookfield Firms opening and Financial and Colliers International have expanding in NYC: all made plays to open, expand or ramp up NYC hiring. Sources say at least one of those Avison Young firms has offered twice the typical bonus Lee & Associates package to lure agents — a move that has angered established rivals who believe the Brookfield Financial firm is “over-providing” for brokers “who Stan Johnson Company are not top producers.” See story on page 48

L+M is rare builder of both affordable, market-rate units

Rechler’s Indiana Jones moment See page 114.

Out of 25,000 condo projects nationwide with recent expiration dates for FHA eligibility, only 2,100 have been approved or recertiﬁed; the rest can’t get FHA mortgages. See page 40.

AT A GLANCE

Andrew Farkas: The NYC sequel

See story on page 46

FACT

See story on page 64

Some new commercial ﬁrms accused of offering ‘above market’ to poach agents

Wild wild 250 West Units at the Elad Group’s new condo conversion, 250 West, are moving briskly. Some 36 of the 106 apartments have already sold, due in part to the lack of available inventory in Tribeca. See page 38.

Halal and hipsters on West 29th Street The Real Deal takes a buildingby-building look at one rapidly evolving 29th Street block, as it transitions from wholesalers to trendy shops. See page 60.

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Highlights N O V E M B E R

2 0 1 1

Volatile, shmolatile

Fall market: Not what it used to be

How Apple shaped Manhattan

New York City home-seekers aren’t afraid of a few ups and downs.

Steve Jobs

The city’s residential sales activity is becoming more “spring-centric.” A look at Steve Jobs’s real estate holdings in New York and elsewhere.

up Rose 26 Coming At the desk of developer Jonathan Rose,

who talks about Buddha and Bob Dylan.

words... 30 InThistheir month’s funniest and most insightful comments.

Jonathan Rose

Andrew Farkas

32 Andrew Farkas: The sequel The mogul returns to build another giant real estate empire. �� LEED for Schools��

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10 November 2011 www.TheRealDeal.com

opping developers drive architects crazy 34 Flip-ﬂ Designers scramble as builders — uncertain about the economy — switch from condos to rentals and back again.

36 38

Elad’s Thomas Elliott

Airbnb sees blue skies in NYC The site takes heat from the hotel industry, but its popularity is growing.

Wild Wild West New Elad condo 250 West beneﬁts from Tribeca inventory squeeze.

New FHA rules cause condo headaches

Virtual investing

Ken Harney on a little-publicized switch in federal mortgage policy.

NYC industry pros see returns from purchasing web domain names.

Broker Jed Garﬁeld’s UES townhouse

Unraveling an HPD scam

Where do the top brokers live?

Excessive broker pay?

TRD takes a closer look at corruption in the world of NYC affordable housing.

Inside the homes of some big Manhattan dealmakers. Are ﬁrms paying “above market” to poach agents from the competition?

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Highlights continued

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in Europe 51 Crisis As Greece falters, some Europeans jump into New York real estate.

and hipsters 60 AHalal look at one 29th Street block as a lens on the city’s rapidly changing real estate market.

the landlord 62 Meet Charles Coutinho, owner of 305 East 95th Street, on why he doesn’t live in his own apartment buildings.

Ron Moelis in his new ofﬁce

L+M’s secret weapon How Ron Moelis’s development and construction ﬁrm sold out Columbia Commons in only a year.

month in real estate history 66 This New Yorkers set their own buildings on fire for profit, and mini golf fills vacant Downtown office space during the Depression. ��

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68 Call it a comeback Impressive New York City real estate resurrections.

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From steel wool to ‘gold’ James Gardner on 109 Gold and Dumbo’s post-industrial chic.

for world domination 110 Prepare Broker Fredrik Eklund is launching a new ﬁrm in London.

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112

Jonathan Miller: Stats guru by day, lobsterman by night.

Jonathan Miller

12 November 2011 www.TheRealDeal.com

Reports from around the country on signiﬁcant developments and trends.

A roundup of ofﬁce and retail leases, building buyers and ﬁnancing.

100

Calendar of Events Check out this month’s activities.

106

Development Updates The status of construction and sales at new projects around the city.

Lobster tales

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National Market Report

The Deal Sheet

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

Rechler 114 Indiana RXR CEO Scott Rechler and the “Temple of Doom.”

108

Residential Deals Brokers dish about how they made it to the closing table.

110

Comings & Goings New ventures and companies.

112

We Heard A lighter look at industry buzz.

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GD: RH / SH Publication: Real Deal Magazine Spell check: Issue: November 2011 Call Source: Specs: Full Page, 4C Trim Size: 10.5" Ă&#x2014; 14.5"

THE REAL DEAL N E W YO R K R E A L E S TAT E N E W S PUBLISHER Amir Korangy EDITOR-IN-CHIEF Stuart W. Elliott MANAGING EDITOR Jill Noonan DEPUTY MANAGING EDITOR Candace Taylor WEB EDITOR Lauren Elkies ART DIRECTORS Ronald Gross, Derek Zahedi SENIOR REPORTER Adam Pincus REPORTER Leigh Kamping-Carder WRITERS Catherine Curan, Melissa DehnckeMcGill, Ken Harney, C.J. Hughes, David Jones, Adam Piore PRODUCTION MANAGER & RESEARCHER Linden Lim EDITORIAL ASSISTANTS Adam Fusfeld, Katherine Clarke, Miranda Neubauer

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e won’t be bringing you a crowd that’s going to boo a soldier, cheer executions or applaud the death of an uninsured man, like we’ve seen at this year’s Republican presidential debates. But this month at Lincoln Center, The Real Deal’s first debate — in which real estate bigwigs will square off against one another — promises to be a heated discussion of some of the key issues facing the industry today. As far as we know, it will be the first real estate debate of its kind in New York City. The format is a departure from our usual annual panel discussion. We have a bunch of prominent debaters lined up, and the issues that will be on the table on Nov. 16 are central to the livelihoods of those who work in real estate here in the city. Here’s a rundown of what we have planned: • Curbed founder Lockhart Steele will debate Warburg Realty president Frederick Peters on the role of media in covering real estate. Have blogs and other publications (including this magazine) been fair in their coverage, and what sorts of comments should be allowed on real estate sites? • Developer Billy Macklowe will face off against a high-profile developer (to be announced) on what the government should do, on both the local and federal levels, to boost real estate activity (an especially critical question in these tumultuous and politically divisive times), and debate where the overall real estate market is headed. • Attorneys Adam Leitman Bailey and Stuart Saft, who often find themselves on opposite sides of the courtroom, will argue whether condo buyers should be allowed to back out of contracts as we have seen during the downturn, and address

Prominent real estate figures will debate one another in what promises to be a heated discussion on some of the key issues facing the industry today. the perennial question of the correct balance between the rights of building owners versus the rights of renters and buyers in New York City. Of course, it’s been a busy season for debates in general — with no fewer than eight televised GOP debates so far. And November is always a crowded field for real estate events in New York City. But we hope to be the front-runner on your schedule that night — see page 100 or go to www.TheRealDeal.com for more event details. Meanwhile, there is no debating that there are a bunch of good stories to sink your teeth into in this issue. Our cover story, on foreign buyers, couldn’t be timelier in light of the European debt crisis. Foreign buyers are as important as ever in keeping the Manhattan residential market afloat, and while there was some progress made by governments abroad last month in solving the debt problem, the economic uncertainty still has most European buyers in wait-and-see mode. In general in New York, the fall selling season has been steadily weakening over the years in comparison to the stronger spring season (see story on page 22), though the smaller number of buyers who are looking right now tend to be more serious compared to the past (see page 20). New York has, of course, always been a melting pot. But one block on 29th Street (between Broadway and Fifth Avenue) is a poster child for ethnic and cultural juxtaposition. The block is home to the new Ace Hotel, a mecca for hipsters; a mosque and halal restaurants; the historic church where Donald Trump got married; and a building owned by a Bollywood star. We take an in-depth look at the block’s real estate on page 60. Also worth a read is reporter Adam Pincus’s story on the many new commercial brokerages trying to make inroads into New York, and how they are ruffling feathers at some of the larger and more established firms because of the high payouts they are reportedly offering to lure agents away (see page 48). Finally, check out our story on some of the biggest real estate comebacks of the past several years (page 68), and take a voyeuristic peek inside the homes of some of Manhattan’s top residential agents (page 46). Enjoy the issue!

Stuart Elliott

18 November 2011 www.TheRealDeal.com

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Volatile, shmolatile

There are fewer NYC home-seekers this fall, but those in the marketplace aren’t afraid of a few ups and downs BY LEIGH KAMPING-CARDER icrosoft cofounder Paul Allen kicked off last month by closing on the $25 million purchase of the penthouse co-op at 4 East

RESIDENTIAL MARKET R EPORT 66th Street, where he already reportedly owns an apartment

on the 11th ﬂoor. Allen appears to have had the inside scoop on the property, since it was not listed. The buy was a standout price for the month, but Allen is not the only purchaser taking the plunge. Some buyers remain gun-shy and wary of the up-and-down ﬁnancial market, but others have grown accustomed to the volatility, brokers said. While September was charac-

terized by fear over the economic ﬂuctuations, brokers said, buyers in the last few weeks have started to make decisions faster (although foreign buyers reeling from the debt crisis continue to wait on the sidelines). Brokers also noted that lowball offers gained little traction and bidding wars started anew at some properties. “These swings in the marketplace no longer have a jolting ef-

fect on homebuyers and investors in New York City,” said Robert Varvara, an associate broker at Miron Properties. Or, as Michael Signet, executive director of sales at Bond New York, noted, “No [further] talk of S&P downgrades has buyers back in the mood to buy.”

“These swings in the marketplace no longer have a jolting effect on homebuyers and investors.” Robert Varvara, Miron Properties Trafﬁc has slowed compared to the same time last year at new developments, observed Jacqueline Urgo, president of the Marketing

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Directors. (This could also be a result of the changing seasonality of the Manhattan marketplace — see story on page 22.) But the number of shoppers who become buyers is higher, she said. Urgo interpreted this as a sign that the home-seekers who remain in the marketplace today

are those who are committed to purchasing. “We can assume that real buyers are in the market and are making buying decisions,” Urgo said, “whereas a year ago, they were unsure and still debating whether or not it was the right time to pull the trigger.” Steven Leon, a vice president at Citi Habitats, said buyers making lowball offers are now likely to be disappointed. “Those still with the mentality of getting a deep discount on a property,” he said, “are starting to realize they are losing out to more reasonable purchasers willing to pay close to ask, or at ask.” Meanwhile, in the rental market, industry professionals continue to hum the “landlord’s market” mantra, noting the lack of inventory and the end of concessions. But in the last month, a new type of renter has entered the market, brokers said. For the most part, students and renters with lower budgets have locked up their accommodations. Now, savvier customers with more to spend — couples, discretionary movers and higher-earning business professionals — are shopping for rentals, brokers said. Law and consulting firms, for example, tend to hire new employees later in the fall, while recent college graduates often settle in August and September, in line with the academic calendar, noted Douglas Wagner, Bond’s executive director of leasing. With larger companies opening offices in the city, Argo Real Estate agent Sheryl Berger is seeing a number of individuals relocating for work, with renters particularly interested in Chelsea, the Meatpacking District and the Flatiron District. Last month, for example, Twitter opened its official East Coast headquarters in Midtown. The average monthly rent for a New York City apartment is now $3,267 per month, according to a Continued on page 96

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Autumn market: No longer what it used to be The fall selling season quiets down, as activity becomes ‘spring-centric’ BY SARAH GROSS he autumn leaves are turning, and New York’s fall real estate market may be changing, too. Autumn has traditionally been one of the busiest times of the year for residential sales, along with spring — the season of tax refunds and bonuses. But real estate brokers say the fall selling season has declined in importance over the past few years, thanks to factors like the

city’s dependence on bonuses and later-than-usual Jewish holidays. It’s too soon to say whether the shift is permanent, but some say it could be a long-term trend rather than a temporary side effect of the topsy-turvy, post-Lehman economy. Data shows that fall sales activity has gradually declined over the past few years. According to research compiled by the listings website StreetEasy, 535

2009. Similarly, there were 868 Manhattan sales in October 2009 and 718 in the same period of 2010, but only 371 sales by press time last month. By contrast, spring now appears to have Source: StreetEasy (2011 data is through Oct. 20). gotten busier. In March Manhattan properties went into 2009, for example, 609 units contract in September, down went into contract, accordfrom 571 in the same month of ing to StreetEasy. A year later, last year and 724 in September 1,025 units were sold in the same

Manhattan October sales slow 2009: 868 sales 2010: 718 sales 2011: 371 sales

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month, and March of this year saw 1,010 sales. Various economic factors and world events obviously cause the patterns of sales activity to change somewhat from year to year. But real estate pros say sales activity now appears to be more consistently spring-centric. “The market seems to be more front-end-loaded now,” said real estate appraiser Jonathan Miller, the CEO of Miller Samuel. There are a number of possible explanations for this phenomenon. One major factor is “how important bonuses are,” Miller said. He noted that Wall Street bonuses increased throughout the 2000s, along with the expanding credit bubble and housing boom. Bonus dollar amounts have dropped somewhat in response to today’s rocky economic climate, but Wall Streeters are still accustomed to receiving a large payout in January or February of each year. (Financial-sector workers generally find out the amount of their bonus in December, but don’t get the cash for several months.) Home sellers, in turn, put their properties on the market around that time. “You see inventory ramp up on Jan. 1, because the sellers anticipate this,” Miller said. As a result, “the fall market takes a backseat to the spring market, and the spring market has been expanded.” Another factor is the increasing number of families choosing to stay in the city rather than move to the suburbs. Parents with children are more likely to buy in the spring, so they can spend summer vacation with the kids and be settled by the time the school year starts, brokers said. “The school calendar influences the traffic of people looking,” said Donna Olshan of Olshan Realty. “This is a city where people work hard, and look to evacuate on weekends and school holidays.” That effect of these factors is particularly pronounced this year, brokers said, because of the weakness at the lower end of the real estate market. Due to the volatile economy and perceived lack of job security, cash-strapped singles or couples are less likely to buy apartments, while demand from Continued on page 96

22 November 2011 www.TheRealDeal.com

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10/28/11 4:03 PM

The Bulletin Board

How Steve Jobs and Apple shaped NYC real estate Compiled by Russell Steinberg

Apple in the Big Apple: There are currently four Apple retail stores in Manhattan, with the fifth set to open in Grand Central Terminal this month. Overall, Apple has over 350 locations worldwide, including stores in China, Spain and Germany.

Picture perfect:

Apple’s grand entrance:

When Apple reached an agreement in July with the MTA to open an Apple Store in Grand Central Terminal, Apple agreed to pay $1.1 million a year to rent the 23,000square-foot space, on the terminal’s east balcony, which was previously occupied by the restaurant Metrazur.

Fortune Magazine contributor Philip Elmer-DeWitt, who writes a blog about Apple, reported that the company’s Fifth Avenue store is now NYC’s fifth-most-photographed site, beating even the Statue of Liberty. Fortune cited a Cornell University study that used a supercomputer to evaluate nearly 35 million images on the photo-sharing website Flickr.

Apple’s office:

Apple recently signed a lease for 45,000 square feet of office space at 100-104 Fifth Avenue in the Flatiron District, to accommodate its iAd mobile advertising division. The asking rent was $55 per square foot, according to the New York Post.

24 November 2011 www.TheRealDeal.com

iRevenue:

Apple is no stranger to success. With its average store measuring about 6,000 square feet, according to ABC News, Apple saw its revenue jump from $10 million per store annually in 2001 to $26 million by 2009. A July report from the website Business Insider said the company has made $538 million in “app” sales alone.

Billion-dollar idea:

A record launch: As of last month, Apple said it has sold over 4 million of its new iPhone 4Ss — the most successful iPhone launch in the company’s history.

Apple’s most high-profile NYC store is, of course, at the GM Building on 59th Street, with its now-iconic glass cube. Developer Harry Macklowe, who bought the building for $1.4 billion in 2003 (and lost it five years later), told the Wall Street Journal that he came up with the idea of turning the basement into an Apple Store, but Jobs decided to place the massive cube on Fifth Avenue.

A Central Park abode:

Jobs bought a 3,500-squarefoot apartment in the San Remo on Central Park West in 1982. Though he never spent a night there, according to the New York Times, he spent millions of dollars renovating it. In 2003, he sold it for roughly $14.5 million to U2 frontman Bono.

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PHOTOGRAPH FOR THE REAL DEAL BY MAX DWORKIN

An Albert Einstein photo paired with an image of John Coltrane. Why are they side by side? “They both rethought the way we think. They were interdependent, rather than linear, thinkers.”

This six-volume edition of “The Iconography of Manhattan Island” was a gift from Rose’s late father, Frederick, who was chairman of Rose Associates until shortly before he died in 1999. “He used [it] to understand the history of the places where he was building,” and frequently picked up names for his projects, his son says.

This table was designed about eight years ago by a young architect named Sam Chermayeff, who was Rose’s intern at the time. The two went furniture shopping for Rose’s then-new office, and didn’t find anything they liked, so Chermayeff designed this table himself.

This piece by Tibetan artist Gonkar Gyatso is a collage of tiny advertising logos and other pop-culture symbols that form an image of Buddha. “It transforms all of the cacophonous energies into something more holistic,” says Rose.

onstruction in the city is still slow going, but Jonathan Rose, founder of the eponymous development firm, has a slew of new projects in the pipeline. Rose, a third-generation member of the Rose family real estate dynasty, is opening the 202-unit Via Verde, a mix of affordable rentals and co-ops, this winter in the South Bronx. His firm will soon begin construction on a mixedused Harlem project that includes 90 units of affordable housing, a charter school and office space for Harlem RBI, a nonprofit that works with inner-city kids. In addition, Jonathan Rose Companies is working on a redevelopment plan for Newark, N.J., among other projects. The 75-person firm — which is headquartered in NYC, but has offices in Denver and Albuquerque — is also opening a new office in Seattle this month. (The company is not part of Rose Associates, headed by Jonathan’s brother, Adam, and his cousin, Amy.) Rose, 59, works next to his assistant in a small space at his company’s headquarters on the 23rd floor of the Fred F. French Building at 551 Fifth Avenue, but he often uses this common “living room” for business. B y J ill N ooNaN

At the

Desk

of:JonAthAn

Rose

A biography of activist and builder James Rouse, whom Rose called a “hero, a role model and one of the greatest developers of the 20th century.” Rouse, the founder of the Enterprise Foundation, “thought about how the whole community lived.”

A model of a “dymaxion cube” designed by famed engineer Buckminster Fuller. The 1940s prototype was used to create the domed structures he became internationally known for.

In 2003, Rose and his mother, Sandra, took out this full-page ad in the New York Times, reprinting Senator Robert Byrd’s speech opposing the U.S. invasion in Iraq. Rose’s parents were benefactors for a host of NYC institutions and projects, including the Rose Center for Earth and Space at the American Museum of Natural History.

A photograph of Bob Dylan from his “Highway 61” recording session. “It was a seminal album. And, it’s a moment of creativity,” Rose says.

A first-edition copy of Jacob Riis’ 1890 book “How the Other Half Lives.” Rose says he discovered Riis as a teenager. “His work was one of the sources that led to my commitment to working on poverty and housing in low-income communities.”

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Fourth quarter won’t deliver, execs say Manhattan ofﬁce leasing experts say volume of deals will fall far short of expectations FIFTH

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leases before the end of the year — won’t deliver, sources say. Leasing for 2011 is expected to reach only 25 million or 26 million square feet, barely ahead of last year’s 24 million square feet, figures from commercial firm CBRE show. The last three months of the year are not expected to help. “We are anticipating it being a slightly softer quarter than we have seen in the last three or four quarters,” Matthew Van Buren, president of CBRE’s Tri-State region, said last month at a media briefing. That’s a comedown from July, when the strong 15.7 million square feet completed in the first six months of the year led Van Buren to predict, “If you just do a rough two-times [estimate], you are up there with well over 30 million square feet of leasing anticipated.” Even still, some tenants looking to grow are taking advantage of the slowdown and are snapping up extra space even if it’s not needed right away. Average asking rents for Manhattan overall rose by $1.20 per foot, driven mostly by a large increase in Midtown asking rents, to $50.74 per foot, preliminary figures for October from commercial firm Cassidy Turley showed. At the same time, the availability rate — which measures space available for rent now or in the next 12 months — remained mostly flat, rising by .1 points to 11.1 percent, the firm reported.

��

Following a trend of tenants moving Downtown — often chasing lower rents — operational and financial advisory firm Huron Consulting Group last month put the entire eighth floor at 1120 Sixth Avenue on the market, data from the CoStar Group showed. The 58,150-square-foot space is being marketed by Jones Lang LaSalle’s Douglas Neye and Lisa Kiell, who declined to comment. While the asking rent was not published, rents on neighboring floors are between $57 per foot and $70 per foot. Huron declined to comment, other than to confirm it was moving to 40 Wall Street (where it will open an office in January) and

��

Manhattan ofﬁce stats Manhattan

Availability Average rate asking rent

Oct ’11 Sept ’11

11.1% 11.0%

$50.74 $49.54

Midtown

12.0% $57.62 11.8% $55.94

Oct ’11 Sept ’11 Midtown South

9.4% 9.5%

Oct ’11 Sept ’11

$41.25 $41.12

Downtown

10.4% $37.57 10.5% $37.43

Oct ’11 Sept ’11 Source: Cassidy Turley

it had placed its current Sixth Avenue space on the sublease market. It seems that the move is, in fact, cutting the firm’s rent costs. CoStar shows the asking rent for the 28,812 square feet on the 20th floor of 40 Wall was $31 per square foot. Richard Bernstein, vice chairman at Cassidy Turley, said the market activity has been steady, if not robust. “Leasing velocity remains healthy, but I do see some hesitation. There are many people out there who are going to be cautious heading into 2012,” he said. Last month, Bernstein represented publisher Random House in the sublease of a portion of its space at 1745 Broadway to hedge fund PDT and accounting firm Spielman Koenigsberg & Parker. Average asking rents in Midtown rose by a steep $1.68 per foot last month to $57.62 per foot, but the availability rate rose by .2 points to 12 percent, the Cassidy Turley data showed.

Midtown South Yet another high-tech firm may take space at the building that Apple and Yelp call home, now that the global public health and development nonprofit FHI 360, which currently occupies two full floors of 100104 Fifth Avenue, is moving out. Last month, the landlord Kaufman Organization put the 32,000 square feet, on the eighth and ninth floors in the 305,000square-foot building, on the market. Grant Greenspan, a principal with Kaufman, said the asking rent was $55 per foot. He expected tech firms “that are experiencing growth” to take the space. He noted that the space might get leased by two firms, each taking a floor. Asked when he thought it would be leased up, he said, “My best guess is March of 2012.” The asking rent at the Kaufman building was higher than the average for the MidContinued on page 94

MD_RD_nov_2011_v8_Layout 1 10/27/11 6:04 PM Page 1

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10.27.11 • TMD • Real Deal • magazine trim: 10.5 x 14.5 • mechanical size: 10.75 x 14.75 • Issue: Nov 2011

In their words...

The month’s funniest and most insightful comments from real estate pros “I’m doing a coffee-table book of never-before-seen photographs and a biography which will have the real story of what happened at Studio 54. Of course there will be stories about the famous people who were there, but I won’t be giving away any secrets about my friends.”

“The Constitution doesn’t protect tents. It protects speech and assembly.”

Mayor Michael Bloomberg on Occupy Wall Street protesters camping out in Lower Manhattan’s Zuccotti Park, which is owned by Brookfield Office Properties.

Hotelier Ian Schrager. (New York Post)

“They weren’t going to reinvent the wheel. They were expecting to use our wheel so it wouldn’t cost them anything to build that wheel.” Eric Gordon of REALPlus, on REBNY using his R.O.L.E.X. system to upgrade its technology.

“Fifteen years ago, if anybody told me Barneys is going to be across the street, I would have told them to go to the shrink and get their head examined. It’s mind-boggling. Brooklyn is hot, and Atlantic Avenue is the center of the activity.” Charlie Sahadi, owner of Sahadi’s market on Atlantic Avenue. (Crain’s) 30 November 2011 www.TheRealDeal.com

“[In the Hamptons] ... there is no one big problem, but rather an overall lack of cooperation and cattiness that is all too prevalent out there. I have never bashed my competitors in my 20-year career in Manhattan. Out east, it seems like common practice, in which I and my agents just will not engage.” Doug Heddings, explaining a post on his blog calling the Hamptons market philosophy “Bass Ackwards.” (Curbed)

“I don’t know [whose home this is], but I’m going to give them hell anyway.” An Occupy Wall Street protester, on the “Millionaires March” that targeted Howard Milstein’s apartment building.

“If you’re an insider in the bagel business, the Upper West Side is your proving ground. If you can establish yourself there, you’re king of the hill.” Marc Fintz of Davidovich Bagels, who said his company is in talks to lease the storefront at 2239 Broadway, which famed bagel store H&H vacated in June. (DNAinfo)

“We are appealing the stupid decision by a stupid judge.” Broker Chaim Katzap, referring to the dismissal of a lawsuit against the former owners of Lower East Side housing development Knickerbocker Village and Studley over a 2007 commission dispute.

“Theoretically, at some point, I envision brands like Google, like Amazon — large brands that don’t necessarily have a brick-and-mortar presence — [opening stores in Times Square]. There are a lot of groups out there that predominantly survive on a wholesale business and at some point are going to get it together and figure out how to [sell] retail.” CB Richard Ellis’s David LaPierre.

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Andrew Farkas:The sequel The mogul has returned to build another giant brokerage empire, with a focus on distressed properties

BY DAVID JONES . Scott Fitzgerald once said, “There are no second acts in American lives.” But billionaire investor Andrew Farkas is proving that there are — at least in real estate. Farkas — who built Insignia Financial Group into one of the largest real estate brokerages in the country in the 1990s — is carving out a sequel for himself that could rival his most prolific run of the past 20 years. Last year, his firm snapped up the country’s third-largest special loan servicer, Centerline Holding Corp. Then, in August, he bought JER Partners, another special servicer, and he’s agreed to buy the massive brokerage house NAI Global. In addition, just last month news broke that he’s buying a significant stake in the struggling commercial brokerage Grubb & Ellis. “I am simply replicating a strategy that I deployed with Insignia,” Farkas told The Real Deal in an interview last month at his Fifth Avenue office. “The good news being, I don’t have to learn anything new.” Indeed, Farkas, the scion of the Alexander’s department store chain, has a history of using his personal wealth to build super-brokerages. And, he’s currently using that model to create a conglomerate of different companies that can manage nearly every aspect of a distressed real estate transaction. An industry executive familiar with ongoing negotiations between Farkas and NAI said employees at NAI had been anxiously awaiting Farkas’s arrival because of his deep pockets and successful track record. “Since the beginning of the year, [NAI employees] have been looking forward to the day when the Messiah was going to arrive,” the executive told The Real Deal. NAI, while a considerable dealmaker in certain real estate markets, has a limited profile in New York compared to Grubb & Ellis, which, despite a number of high-profile defections, has a long track record in New York. (National Real Estate Investor shows that NAI did $45 billion of commercial deals in 2010, while Grubb did $12.1 billion.) Sources familiar with the NAI discussions say the original deal terms are being renegotiated and that the deal, which was originally slated to close in the third quarAndrew Farkas has snapped up special servicers, Centerline Holding Corp. and ter, is dragging into the fourth quarter. JER Partners. He’s also agreed to buy NAI Sources also say the Grubb & Ellis neGlobal and is investing in Grubb & Ellis. Andrew Farkas gotiations have complicated the NAI deal. They say one possible resolution would be having Farkas acquire NAI brokerages only in markets that don’t compete with Grubb, particularly overseas. A spokesperson for Farkas has repeatedly stated that he cannot comment on the NAI deal because it has not yet closed. NAI officials also declined to comment. But Bob Knakal, president of commercial real estate brokerage Massey Knakal, gave Farkas a vote of confidence. “Andrew was extraordinarily successful when he did it the last time, and I think probably the goal is to increase market share and take advantage of economies of scale,” he said.

of the largest and most successful brokerages in the country. On his watch, the South Carolina-based company had 55,000 apartments in its portfolio. Insignia was built out of the ashes of the real estate downturn following the 1987 stock market crash. Farkas grew it through the purchase of billions in distressed assets, including the 1991 purchase of real estate syndicator U.S. Shelter Corp. in Greenville, S.C. But by 1996, it had acquired the Edward S. Gordon Company, then the biggest and most dominant commercial brokerage and property management firm in New York, for $74 million. And by 1998, Insignia either owned or managed more than 350,000 residential units and 200 million square feet of commercial space. That same year, Farkas sold Insignia’s residential management business (with the exception of its New York City portfolio) to Denver-based Apartment Investment and Management Co. for $910 million. He then renamed the remaining company Insignia/ESG and relocated the headquarters to Manhattan. Following the sale, in 1999 Insignia acquired the Douglas Elliman residential brokerage from the Millstein family for $65 million. But despite the bold moves to expand and restructure the portfolio, the performance of Insignia/ESG began to fall short of expectations. Sources familiar with the business said the combination of Elliman’s residential brokerage and the Edward S. Gordon commercial brokerage did not mix well. “The residential real estate brokers were just not of the caliber of the commercial brokers,” noted a veteran broker who worked with the firm in the late 1990s. Shares of Insignia languished in the $10 to $12 range during the tech boom of the 1990s. Then in 2003, Farkas sold the residential brokerage arm to Dottie Herman of Prudential Long Island Realty and Howard Lorber for $72 million in preparation for a sale of the remaining business to Los Angeles-based CB Richard Ellis. The sale to CBRE, also in 2003 — in which CBRE paid $256 million in cash and agreed to pay off $155 million in debt and preferred stock — created the nation’s largest commercial real estate services business and gave CBRE a long-awaited entrance into the New York market. After selling Insignia, Farkas formed a privately held merchant bank called Island Capital, and a subsidiary firm called Island Global Yachting, which acquired marinas and land used by luxury yacht owners and boat charter firms. It was also during this period that Farkas turned around his controversial relationship with Andrew Cuomo, the former secretary of Housing and Urban Development. During his tenure, Cuomo had investigated landlord Bruce Rozet, who was accused of accepting kickbacks from a management firm that Insignia later took control of. In 1998, Insignia settled for $7.4 million. More interesting to observers is that the bitter relationship between Farkas and Cuomo warmed up so much that after Farkas launched Island Capital, he hired Cuomo as a vice president. Cuomo left the firm in 2006, to prepare for his run for attorney general, but his former boss became the finance co-chairman of his campaign — a move that stunned

“I am simply replicating a strategy that I deployed with Insignia. The good news being, I don’t have to learn anything new.” Andrew Farkas.

First acquisition tear After starting as a Wall Street trader at the old Salomon Brothers, Farkas launched Insignia in 1990 with about $5 million in family money. The grandson of Alexander’s founder George Farkas, he built Insignia into one

32 November 2011 www.TheRealDeal.com

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Builders’ flip-ﬂops cause architects’ headaches Designers scramble as developers switch from condos to rentals, and back again

BY KATHERINE CLARKE any New York City real estate developers are back in business, reviving once-stalled condo projects or converting office buildings into rentals. But while developers are patting themselves on the back, their architects may be stifling groans. These days, architects are increasingly being asked to design buildings that can change from rentals to condos or vice versa, as developers seek to hedge their bets in a still-uncertain economy. But rental units tend to be smaller, with lower-end finishes and amenities, so designing buildings that serve as both is no easy task. Architect Hugo Subotovsky, of Bronxbased Aufgang + Subotovsky, is currently designing an East Harlem residential project at 318-320 East 112th Street that will start as a rental, then flip to a condo in a few years. “You have to be always thinking, ‘Would that be a good fit for the condo market in the future?’” Subotovsky said. “It’s a fine balance.”

are asking for designs that can work as both condos and rentals. At the 112th Street project, which is being developed by Volmar Construction and Galaxy Construction, Subotovsky is creating ﬂexible layouts. “We make large closets that can be very easily converted into a second bathroom or a powder room, for example,” Subotovsky

of day, said developer Matthew Blesso of Blesso Properties. “Architects, their job is to create things,” he said. “They don’t like to change the program unless it presents an opportunity for them to design something better.” Blesso designed his project at 421 West 22nd Street as a condo, but when it hit the market in 2010, he decided to rent out the

Waffling on design With financing for construction projects scarce in recent years because of the economic climate, architects have faced difficult times. Architecture employment in the U.S. peaked in 2008 at 220,500 jobs, according to the federal Bureau of Labor Statistics, but the profession has since cut 55,000 people, or one in four. When architects do get work, the assignments are often frustrating because many developers are not sure what kind of project to build in today’s uncertain market. “There’s a lot of indecision going on,” said John Cetra, cofounder of Manhattan architecture firm CetraRuddy. On a new Midtown residential project he’s working on, he said, the developer hasn’t yet determined whether to go condo or rental. Cetra said he’s waiting for a decision before beginning the design. That’s because in New York, condos and rentals are usually quite different. A onebedroom rental in Manhattan is typically around 600 to 675 square feet, while a onebedroom condo is usually 700 to 800 square feet, according to architect Randolph Gerner of Gerner Kronick + Valcarcel, which has worked on residential projects like 500 West 23rd Street and 2 Cooper Square. Switching from a condo to a rental, or vice versa, in the middle of development means higher fees for developers and more work for architects. When a project flipflops, architects receive added compensations for the extra time required to amend their design, explained Gerner. “There’s obviously a renegotiation of a contract, and you never know how much work can be involved,” he said. To hedge their bets, some developers 34 November 2011 www.TheRealDeal.com

didn’t have to make many changes. “The type of developments we do, we try to focus on high-end product anyway,” Blesso said.

Scrapping a vision A developer’s decision to change course can also compromise an architect’s artistic vision for a building. At the Orion at 350 West 42nd Street, which launched sales in 2005, developer Extell originally wanted a hybrid building, with rentals at the bottom and condos on the upper floors, said Cetra, who worked on the project. As a result, “the base of the building [was] bigger than the top half,” he said, so the developer could fit more units on the lower floors. When Extell decided to make the building entirely condo, it was too late to go back and rethink the design, Cetra said, noting that he might have designed the tower differently had he known in advance. “We might have done something different with the elevatoring and the lobby had we known,” he said. Architects do have one thing going for them. In New York, the difference between condos and rentals has declined in recent years, as more high-end rentals, like the Frank Gehry-designed 8 Spruce Street, have come on the scene and started competing for wealthy tenants. Prolific architect Costas Kondylis, who has designed more than 80 New York City towers, said the difference between condos and rentals is far less than it was when he started in the business in the 1960s. “You will never be able to notice the difference,” said Kondylis, who worked on Silver Towers on 42nd Street and Glenwood Management’s Marlowe on 81st Street, both of which switched to rentals after being designed as condos. Aside from “perhaps switching Greek marble for Chinese marble,” architects no longer have to make extensive design changes when switching from a rental to a condo, he said. And most architects today recognize that “the market is constantly changing, so we have to adapt,” Gerner said. A stereotype about architects is that they are egotistical, and that “we would rather live on saltines and water than compromise,” he admitted. But in this market in particular, he said, “it’s more of an image we have than a reality.” TRD

“You have to be always thinking, ‘Would that be a good ﬁt for the condo market in the future?’” Hugo Subotovsky, Aufgang + Subotovsky said. “If you’re renting, you may not need a second bathroom, but buyers are more demanding. They’re going to be living there for a longer time.” Sometimes, architects are asked to make two separate designs — one for condos and one for rentals — in the early stages of a project. That can be frustrating for architects, because it means putting a lot of effort into a design that will never see the light

units instead. Now, he’s started buying out tenants in preparation to sell the units. (At press time, Blesso said rents at the building are so high that he is considering continuing as a rental after all.) Luckily, this flip-flopping doesn’t impact the project too much: The units were already relatively small for condos, and had highquality finishes, he said. That meant his architect, Andrea Steele of ANDArchitects,

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Airbnb sees blue skies in NYC While the website is taking heat from the hotel industry, it says number of Big Apple users is on the rise

BY TOM ACITELLI n late June, a San Francisco woman blogged about a nightmare experience renting her apartment through the increasingly popular online listing service Airbnb. She had returned from a week of business travel to “an apartment that had been ransacked” and burglarized, right down to an allegedly photocopied Social Security card. Horror stories followed from other locations, too, throwing the three-year-old Airbnb, then on its way to raising more than $112 million in fresh capital and securing a valuation of $1.2 billion, under a national microscope and prompting elected officials to flex their regulatory muscles. (The company counts actor Ashton Kutcher and a slew of venture capitalists as investors.) New York State had, less than a year before, enacted legislation that banned renting out Class A residential spaces — apartments intended only as permanent, rather than transient, residences — for less than 30 days. The move was prompted, in large part, by complaints from those living next to apartments rented on the website, as well as from the Hotel Association of New York City, a trade group that was concerned about short-term rentals eating into the city’s hospitality business. The horror stories reignited calls from the city’s real estate and hospitality industries to crack down on residents who were treating their apartments as de facto hotel rooms — and cheap ones at that. Last month, The Real Deal found a furnished one-bedroom on West 91st Street advertised for $139 a night. Downtown, on Greenwich Street, a studio (espresso maker and queen bed included) was going for $150 a night. And, that is as the average daily rate for a Manhattan hotel room hovers north of $260. From the industry’s perspective, Airbnb is in violation of a state law that took effect in May and, through its occasional noncompliance, escapes operating costs like taxes, and the cost of fulfilling safety requirements and providing on-site labor. The law, aimed originally at landlords running apartment buildings as hotels, allows short-term rentals — ostensibly Airbnb’s bread and butter. But there’s one gray area: The owner or the tenant must be in residence during the rental period. And therein lies the rub — a lot of Airbnb listings advertise entire apartments, rather than individual rooms. From Airbnb’s perspective, it is operating, as spokeswoman Emily Joffrion put it in an e-mail, “an open marketplace where people can list their extra space.” Also, the company’s terms of service agreement, which users must agree to, requires compliance with local and state laws. The legislation and the controversy don’t appear to have hurt Airbnb in New York — at

36 November 2011 www.TheRealDeal.com

least according to the company, which provided The Real Deal with data on how many users it has in the Big Apple. Until now, there has been little beyond anecdotal evidence regarding Airbnb’s impact on the New York hospitality industry (third parties, like brokerages and hospitality consulting ﬁrms, do not track the site). Joffrion said that the number of city properties listed through the service had in-

September — about twice the average for the city’s hotels. “Unlike hotels, we don’t measure occupancy on availability,” the spokeswoman said. “This stat is calculated on nights booked per month, so again, we aren’t looking at apples to apples in this comparison.” The bad publicity emanating last summer from San Francisco, its home base, did force Airbnb into what its top execu-

say, hotel owners in some segments of the industry at certain times of the year. For example, during off-peak months, like January and February, Airbnb’s Soho lofts and Brooklyn one-bedrooms can dent the demand for New York’s more affordable hotels, sources say. This is where the impact of the site is felt by the industry most acutely. “When we sell rooms for $119, and someone in Brooklyn lists for $59, or even in

From left: Company founders Joe Gebbia, Nathan Blecharczyk and Brian Chesky.

Actor Ashton Kutcher, right, is an investor in Airbnb.

199 $

A sampling of some of the deals listed on Airbnb last month and their nightly rates (from left): apartments on the Upper West Side, on the Lower East Side and in Harlem.

The number of NYC properties listed on Airbnb has increased, on average, 35 percent per month since September 2010. creased, on average, 35 percent per month since September 2010. In mid-September it had more than 6,000 total properties in New York City, including 2,000 priced as monthly rentals. Most of the company’s New York listings, Joffrion claimed, “are situated in neighborhoods through Manhattan and Brooklyn, [in areas] where there are few hotels.” The priciest New York deal to date through the site, she said, was $15,000 for 52 nights at a one-bedroom, two-bathroom loft in Soho. The longest local reservation so far was for 162 nights for a one-bedroom apartment on Flushing Avenue in Brooklyn; the renter paid $11,000, she said. (Neither comes close to the Airbnb world record holder: $46,000 spent for a Paris apartment for 10 months.) At the summer’s peak in August, the average New York Airbnb host rented his or her New York home for 16.1 percent of the month — or ﬁve days. The average Airbnb stay in New York was six nights as of mid-

tive called “a crash course in crisis management.” In late July, CEO Brian Chesky, who founded the company with Nathan Blecharczyk and Joe Gebbia, announced in a blog post that Airbnb would, starting Aug. 15, cover up to $50,000 in losses or damage due to vandalism or theft for those renting out their homes. The policy was also extended retroactively to anyone whose home had already been damaged. In addition, the company introduced a 24hour customer service hotline. Despite the bad publicity, Airbnb listings over the last year have jumped coincidently with explosive growth in New York tourism. In 2010, the city drew a record 48.8 million tourists, who pumped over $31 billion into the local economy, according to the Bloomberg administration. More are expected for 2011. That means there should be enough visitors to satiate both hotels and Airbnb listings — except,

Manhattan, it puts us at a singular disadvantage,” said Vijay Dandapani, president and COO of Apple Core Hotels, a chain of ﬁve Midtown inns, including the Comfort Inn Times Square, and vice chairman of the Hotel Association of New York. This dent doesn’t mean the industry has started pricing itself against Airbnb’s rates, which can be as low or as high as apartment owners and tenants want them to be (The Real Deal found rooms at the Comfort Inn Times Square available for early this month starting at $239.99 a night, while a onebedroom on nearby West 43rd Street was listed on Airbnb for $120 a night for the same period). Instead, New York’s hotels and Airbnb seem to be eyeing each other warily. The site is barely into its fourth year and the industry is barely out of the recession. “Everybody is consciously, on some level,” Dandapani said, “aware of what’s going on with Airbnb.” TRD

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Elad Group’s 250 West beneﬁts from good schools and Tribeca inventory squeeze

BY JULIA DAHL ou’ve likely zipped past 250 West Street while driving up the West Side Highway. The former fruit-and-vegetable warehouse has arched windows, iron shutters and the words “West Street” stenciled on its Hudson River-facing façade. The brick building — which takes up an entire square block between Washington Street and the highway — was for years an administrative space for Citibank. Then, in 2006, it was purchased by the Elad Group, the Israeli developer famous (or infamous, depending on your perspective) for converting the Plaza Hotel into condos. Elad started construction on converting 250 West into apartments in June 2011, and just one month later, with a good year left on that construction, the units were brought to the market. So far, so good, said Ariana Meyerson, managing director of Cantor Pecorella, which is marketing the property. As of last month, 250 West had sold 25 of its 106 units, with 11 in contract. “We’re doing deals every day,” Meyerson told The Real Deal on a recent visit to the site. Since the recession began, New Yorkers have been reluctant to buy from ﬂoor plans, but The Real Deal reported this spring that buyers were again warming up to the idea. The Elad building has a mix of unit sizes — from studios to three-bedrooms to a 7,000-square-foot penthouse with more than 4,000 square feet of outdoor space and a private elevator lobby. Meyerson said buyers have been an “eclectic” bunch, including artists, business owners and, despite the recent Wall Street upheaval, bankers and their families looking to snatch up some of the only new product available in inventory-starved Tribeca.

more than two bedrooms) in Tribeca is particularly scarce. That sector has seen inventory drop by 23.6 percent since last year. Soho, on the other hand, saw large-unit inventory decrease by just 4.4 percent in the past year, and rise 71 percent from 2008. Price per square foot varies at 250 West. For example, apartment 2K, a 1,035-squarefoot studio, is on the market for $1.15 million — approximately $1,100 per square foot.

“No one else has all that,” said Thomas Elliott, executive vice president of sales and marketing for Elad. Deﬁnitive numbers are hard to come by, but according to StreetEasy ﬁgures, only about 50 Manhattan buildings have pools. According to Song, buildings with pools often have higher common charges, due to upkeep and insurance. Of the 50 in her database, the average monthly maintenance

Condo shortage The building’s brisk sales pace doesn’t surprise StreetEasy’s Soﬁa Song. Other than Reade57 on the eastern edge of the neighborhood, she said, there is little new development in Tribeca, so “there’s always demand” for it. And unlike the all-glass Reade57, 250 West is a landmarked, redbrick building and more of a traditional “New York product,” Song said. While Tribeca inventory increased slightly from last year, the neighborhood has 35 percent fewer units available for sale than it did in 2009, according to StreetEasy. In nearby Soho, by contrast, inventory has remained stable since 2009, and has grown by more than 23 percent since 2008, Song said. Drilling down even further, Song said that large-apartment inventory (units with 38 November 2011 www.TheRealDeal.com

Elad’s Thomas Elliott in the lobby at 250 West. Inset, the exterior of 250 West.

Apartment 11H, a three-bedroom, three-and-a-halfbath unit on the top ﬂoor, is listed at $2,239 per square foot, for $9 million. According to Song, the 44 units currently listed for sale average $1,452 per square foot, just below the average of $1,598 for other new developments in Manhattan. In terms of amenities, 250 West will have 5,000 square feet of roof access for all residents (plus private space for three units), a lobby library and a children’s playroom. That’s in addition to a 60-foot indoor pool — still a rarity for new buildings.

is $1,754. At 250 West, common charges average $1,303. According to Song, the only comparable buildings in the neighborhood in terms of size and amenities are 200 Chambers and 101 Warren, newly constructed buildings that are now sold out. Residents of 250 West will also be just across the street (well, highway) from Pier 25 — which has a sand volleyball court, mini-golf course and playground. And, according to the Hudson River Park Trust, a city-and-state partnership charged with overseeing the Hudson River Park, the yetto-be-ﬁnished Pier 26 will include a boat house, a café and an estuarium, or “wet lab”

exhibiting local ecology. That’s not to mention proximity to some of the best public schools in the city, including P.S. 234.

A peek inside For 250 West, the path to conversion hasn’t always been straight. In 2007, Russian investors approached Elad with “a very favorable offer” to purchase the building from them, according to an Elad spokesperson. The economics of the deal made sense, so the company decided to proceed. But the investors were ultimately unable to close. After the sale fell apart, Elad decided to move forward with its original plan to convert the building to condos, but “deteriorating market conditions made it prudent to temporarily delay construction,” the spokesperson said. Construction finally started this spring. Although the building’s exterior evokes old New York, the model unit has a clean and modern feel. There is none of the exposed brick or iron beams that might be expected in a factory conversion. Instead, architect and Israeli designer Gal Nauer — who has worked with Elad on the Plaza and other projects — used neutral marble and stone in the bathrooms, and white oak flooring throughout. The master suite in the model unit features a sixfoot soaking tub and separate shower, a double sink and a walk-in closet with vanity area. In the kitchen, countertops are white quartz and cabinets are shiny white Poggenpohl. Each unit comes with Bosch appliances. A stacked, European-style washer-dryer is tucked into a discreet wall closet (the building also has a laundry room). Elliott also said the building will be prewired for speakers and automatic window shades, in case residents want them. In addition, Elad is selling on-floor storage units for $1,000 per square foot. Depending on the location of the unit, some views will look out over the Hudson River to New Jersey, with the Statue of Liberty and the fast-growing Freedom Tower also in sight. TRD PHOTOGRAPHS FOR THE REAL DEAL BY MAX DWORKIN

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New FHA rules cause condo headaches BY KENNETH HARNEY s a little-publicized switch in federal mortgage policy causing huge problems for condominium sellers, buyers and homeowner association boards across the country — even depressing prices and blocking reﬁnancings? Condo industry leaders, from the 30,000-member Community Associations Institute to individual unit owners and real estate agents, are emphatic that the answer is yes. They say a series of rule revisions by the Federal Housing Administration has caused thousands of condo projects to become ineligible for FHA mortgages. This, in turn, has abruptly shut

a member of the board of directors of the homeowners association, has been trying to sell his condo since May. He has had multiple offers and been in escrow four times — twice with the same purchaser — but because the community’s eligibility has lapsed, buyers who need FHA ﬁnancing have been rejected by lenders. In the meantime, O’Quinn has cut his asking price several times for a total of $81,000 — a value decline that his agent, Anna Nevares of the brokerage Redﬁn, attributes directly to FHA’s policy revisions. Not only did FHA fail to inform the condo board about the changes, according to O’Quinn, but every time the board submit-

ment is not certiﬁed, “our unit isn’t. We’ve exhausted all our options. They’re going to force us to walk away.” Critics say that FHA did not consult adequately with the condo industry before changing its rules — a charge FHA denies — and contend that the agency did not think through some of its policies. Andrew Fortin, government affairs director of the Community Associations Institute, said the rule that is hampering Robinson’s reﬁnancing — that no more than 15 percent of the unit owners in a project be 30 days or more delinquent on their association dues — is often impossible for volunteer boards of directors in large proj-

Critics say that FHA did not consult adequately with the condo industry before changing its rules and did not think through some of its policies. off loan money for would-be condo buyers and refinancers, forcing them to pursue conventional bank loans requiring much higher down payments — sometimes 20 percent and higher versus the FHA’s 3.5 percent minimum — that they often cannot afford. For its part, FHA says the rule changes it has adopted, which focus on project budgets, insurance and financial reserves, have been prudent and are designed to avert losses from delinquencies and foreclosures. But the agency confirms that thousands of condo projects have failed to obtain or apply for required recertifications under the new rules. Out of approximately 25,000 condo projects nationwide with expiration dates for FHA eligibility between last December and Sept. 30 of this year, only 2,100 — just 8.4 percent — have been approved or recertified by the agency, according to Lemar Wooley, an agency spokesperson. “This has been a nightmare,” said Ryan O’Quinn, a unit owner in a townhouse community in Calabasas, Calif. O’Quinn, who is

ted applications for recertification, they were rejected on technical grounds. In one instance, he said, the agency turned down the application solely because the reserve-fund bank account for the condo project did not carry the words “reserve fund.” In the Maryland suburbs outside Washington, D.C., similar scenarios have been playing out. Nancy Jacobsen, executive vice president of Community Paperworks Inc., a consulting firm that assists condo associations, said “there are entire zip code areas where not one condo can meet the new requirements.” Unit owners in such projects find themselves unable either to refinance into today’s 4 percent mortgage market or to sell. Bernard Robinson, an owner of a unit in District Heights, Md., said that because of delinquencies on homeowner association payments in his development that exceed FHA’s limit, he and his wife have not been able to refinance. “We are qualified to refinance personally,” he said in an interview, but because the develop-

ects to keep track of, much less to certify to the FHA. Even worse, according to other critics, the new rules put board members into legal jeopardy by requiring them to sign certifications attesting that the condo documents comply with all local statutes and that they have no knowledge of situations that could cause any unit owner to become delinquent at some later date. The mandatory certification carries a maximum penalty of $1 million in fines and 30 years imprisonment if found to be incorrect. Large numbers of condo boards have balked at this requirement, critics say, leading to the drastic drop in certification requests and condo eligibility. Bottom line for unit owners, sellers and buyers: If an FHA loan figures in their plans, they should first check with the condo board. If the project isn’t certified, they are cut off — at least for now — from some of the most favorable mortgage terms in the marketplace. Kenneth Harney is a syndicated real estate columnist.

Become a fan of The Real Deal on Facebook: www.facebook.com / TheRealDealMagazine 40 November 2011 www.TheRealDeal.com

Government I N B R I Ebriefs F State launches new real estate finance division New York State has created a real estate finance division under the umbrella of its newly established Department of Financial Services, Newsday reported last month. The division will focus predominantly on the mortgage industry, overseeing the enforcement of regulations adopted in the past few years. The Department of Financial Services was inauBenjamin Lawsky (left) with Gov. Andrew Cuomo gurated last month, when Gov. Andrew Cuomo combined the state’s banking and insurance departments, Newsday said. The department is headed by Cuomo’s former chief of staff, Benjamin Lawsky, and is made up of four separate units in addition to the real estate division: banking, insurance, capital markets, and financial fraud and consumer protection. “There will be a new powerful cop on the beat, monitoring things here in New York,” Lawsky said last month, according to Bloomberg News.

Puck penthouse goes back to the drawing board Last month, the New York City Landmarks Preservation Commission rejected developer Jared Kushner’s plans for a penthouse atop the historic Puck Building, the New York Times reported. Kushner is planning six condominium units at the Lafayette Street building, ranging in size from 5,000 to 8,500 square feet and in price from $15 to $50 million. The commission cited concerns about the The Puck Building bulk, scale and design of the penthouse, but didn’t rule it out altogether. Kushner — who is famously married to real estate heiress Ivanka Trump and owns the New York Observer — has the option of returning with a revised proposal, the commission said. “Few buildings in New York are more iconic, more beloved, and more worthy of the designation ‘landmark’ than the Puck Building,” said Andrew Berman, the executive director of the Greenwich Village Society for Historic Preservation. “Any proposed changes must be held to the highest level of scrutiny.”

Fannie and Freddie may try new bonds program In a bid to coax private investors back into the government-dominated mortgage market, the Obama administration is floating a plan to ask Fannie Mae and Freddie Mac to sell bonds for the first time without federal guarantees, the Wall Street Journal reported. Under the proposed pilot program, a small piece — around 5 or 10 percent — of a bond issued by Fannie or Freddie would be sold without a government guarantee. Investors in these bonds would take on additional risk, but receive a higher interest rate in return. Part of the administration’s efforts to wean Fannie and Freddie off of federal support, the pilot program could be launched sometime next year, officials said.

DiNapoli taps Artemis to invest state pension fund New York State Comptroller Thomas DiNapoli has allocated $300 million of state pension cash to Maryland-based Artemis Real Estate Partners, part of an initiative to invest in new, minority-owned ventures, Bloomberg News reported last month. Artemis, an investment firm cofounded by Chicago billionaire Penny Pritzker, will handle the $146.9 billion New York State Common Retirement Fund’s first investment in “emerging managers,” or minority investors, for real estate. “With the emerging-manager program now in place across our asset classes, the fund has affirmed Thomas DiNapoli its status as an innovator in the field and shown once again its commitment to enhancing diversity and opportunity while improving its bottom line,” DiNapoli said. The state pension fund currently invests about $6 billion with emerging managers, Bloomberg said. Compiled by Katherine Clarke

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Buying up domain names in order to turn a proﬁt NYC industry pros see returns from investments in online ‘property’ BY TRACEY SAMUELSON n the late 1990s and early 2000s, the Internet was like an up-and-coming neighborhood — early investors who recognized its potential snapped up property at bargain prices. Now, the value of their investments has increased exponentially. Donna Olshan, president of Olshan Realty in Manhattan, was one of these investors. After reading “Being Digital” by Nicholas Negroponte in 1995, she began to realize the potential of the World Wide Web and started buying unused domain names, or, as she calls it, “Internet real estate.” “I became convinced that the Internet was going to change the way people bought and sold real estate,” Olshan said. She bought gems like Townhouse.com, NY

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RealEstate.com, Coops.com and many others, for $75 each. Olshan’s instincts proved prescient — to say the least. Currently, those domains redirect to Olshan Realty, driving traffic for her business, and she now regularly fields offers from domain investors and industry professionals eager to buy the domain names she owns. But she’s not selling — yet. “When I buy art I hang on to it; when I buy stocks, I’m in it for the long haul,” Olshan explained. No offer has yet matched the value she believes she holds. When asked how much she’s been offered, she laughed and said, “Not enough.” Olshan is one of a number of New York City real estate professionals who apply their investing know-how not just to brickand-mortar buildings, but to online property. It’s often a natural fit, since the concept — and process — of buying and selling online real estate can be similar to investing in physical real estate, though the scale and price are generally much smaller. The buyers and sellers of domain names — known as “domainers”— often employ brokers to negotiate deals, and use contracts that are only a slightly altered version of standard real estate brokerage agreements, said Dave Parkinson, an Internet market-

er and founder of Utah Domain Holdings, based in Lehi, Utah. The company owns roughly 250 domain names purchased for prices ranging from $7 to $450,000 — the latter for boardgames.com. “This is the real estate investing world of the 21st century,” Parkinson said. Parkinson is currently marketing the domain NewYorkApartments.com, which he purchased in a private sale two years ago. While he declined to disclose his purchase price, he said he’s hoping to sell the domain for $150,000 to $200,000. So, how did he arrive at that number? According to Parkinson, there are two main criteria to look at when valuing a domain: First, there’s the search-engine volume of the component terms. According to Google’s advertising arm, an average of 18,000 people type the exact phrase “New York Apartments”

into Google Search each month; about 1 million type some variation of that phrase. Second, the comparable sales of similar domains are helpful pricing tools — just as with physical real estate. As possible comps for this sale, Parkinson points to sales of BoiseRealEstate.com for $50,000 in 2004, and ParkCityRealEstate.com for $60,000 earlier this year. His domain is more valuable, he said, because the search volume is higher, as are New York’s population and real estate values. That’s why Eric Gordon, owner of Manhattan-based real estate technology company Real Plus, recently jumped at the chance to buy NewYorkApartments.co when the new .co domain extension became available a year ago. He also nabbed FindNew YorkApartments.co, NYCoops.co and many other New York- or real estate-related domains. “If the .co extension becomes popular and common, then I could see some of these being worth a signiﬁcant amount of money,” he said. “A thousand dollars? Half a million? Then again, maybe nothing.” And at $9.95 a year for each domain, Gordon can afford to speculate, saying, “Some people who have a million dollars can invest in an apartment, and those with Continued on page 96

Unraveling an HPD scam

A play-by-play look at corruption in the world of NYC affordable housing BY ADAM FUSFELD

contracts, pocketing cash, a Harlem townhouse and a Bronx apartment build-

ast month, six developers and Wendell Walters, an assistant commis-

ing. The developers, in turn, allegedly solicited kickbacks from contractors

sioner at the NYC Department of Housing Preservation and Develop-

seeking construction work, according to the 73-page indictment. Investigators

ment, were arrested on charges of wire fraud, money laundering, rack-

eventually cracked the case with the help of several developers, unnamed in

eteering, extortion and bribery. Prosecutors alleged that Walters, a former

the indictment, who cooperated with the investigation. Walters pleaded not

college basketball player also known as “The Tall Guy” or “The Big Man,” de-

guilty, and is out on $500,000 bail, along with most of the defendants. The

manded bribes from the developers he selected for multimillion-dollar HPD

Real Deal used court documents to untangle the complex web of corruption.

Stevenson Dunn

Lee Hymowitz and Michael Freeman

A high school friend of Walters. Prosecutors allege he was chosen to develop 18 Bedford-Stuyvesant properties, including 750 Lexington Avenue,, after bribing Walters. Dunn is also charged with soliciting kickbacks of at least $50,000 from Doe #2 in order to pay Walters, and threatening violence if #2 refused.

Partners in the law ﬁrm of Hymowitz & Freeman. They developed 964 Greene Avenue and other Bed-Stuy HPD projects with Dunn, and allegedly provided sham invoices to cover up kickbacks from contractors.

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John Doe #2

i ne r

John Doe #1 (Bob Starzecki) Unnamed in the indictment, but city records and published reports indicate that Doe #1 is “Bogdan ‘Bob’ Starzecki,” developer of the Guy Brewer North Homes in Jamaica, Queens. Starzecki pleaded guilty to paying Walters about $700,000 — concealing the cash in coffee cups and golf-ball boxes — in exchange for the right to develop the Guy Brewer project, which includes 21 affordable two-family homes. Starzecki did not return calls for comment. Wendell Walters

Bribe

False invoices

Bribe

(Jose Espinal) Unnamed in the indictment, but court and property records indicate that “Developer 2” is Westchester-based developer Jose Espinal. Espinal allegedly bribed Walters by offering him a deep discount on a six-unit rental apartment building he owned at 2500 Bathgate Avenue in the Bronx. Walters allegedly paid only $60,000 to $80,000 for the building. Espinal, who did not return calls for comment, ﬁled for bankruptcy in 2010, listing Walters as a creditor.

Kickbacks

Developer 2:

Kickbacks

(George Armstrong) A developer and general contractor identiﬁed in published reports as George Armstrong, former head of the New York Housing Partnership. He pleaded guilty to paying Walters at least $20,000 in exchange for the Jerome Stone Development project in Harlem, which involved renovating several brownstones and a ﬁve-unit building at 239 West 137th Street. Armstrong also admitted to paying Dunn $50,000 in exchange for being named the general contractor for the Hancock Street project in Bed-Stuy.

mr e ta

Sergio Benitez Developer who claims to have worked on 80 HPD buildings over the years, including the eight-home Palmetto Cluster project in Bushwick, and is featured in an HPD brochure about city affordable housing. He is charged with soliciting kickbacks from Starzecki.

False invoices

Ki ck ba ck s

False invoice s

Developer 1: (Greg Pascal) Unnamed in the indictment, but according to city documents is the late developer Greg Pascal. The owner of a townhouse at 268 West 139th Street, Pascal allegedly devised a scheme to gift the house to Walters (through Pinckney) in 2004 in exchange for HPD contracts.

Robert Morales and Angel Villanova Bribe

44 November 2011 www.TheRealDeal.com

Person A: (Ed Pinckney) Former Boston Celtics player and childhood friend of Walters, who allegedly acted as the “straw buyer” of the 139th Street home in order to hide the fact that the house was in fact a bribe for Walters. Pinckney, listed on property records for the house, is now an assistant coach for the Chicago Bulls. He did not respond to calls for comment left for him with the Bulls.

Selected by HPD to develop a number of projects between 2006 and 2011, including a small apartment building at 134 Alexander Avenue in Mott Haven. They allegedly demanded kickbacks from Starzecki in exchange for contracting work. Starzecki then allegedly provided fake invoices to cover up the kickbacks, which Morales and Villanova allegedly submitted to HPD for reimbursement.

WHERE CAN YOU FIND CAPITAL IN TODAY'S MARKET?

INSIDE THE HOME

Where do top brokers live?

A peek inside the homes of some of Manhattan’s biggest residential dealmakers BY LEIGH KAMPING-CARDER New Yorker’s address is a marker of identity — especially if the New Yorker is a residential real estate broker. This month, The Real Deal peeked inside the homes of some of Manhattan’s top brokers to find out what’s behind their front doors. The five brokers we visited, who were all in the top 20 on The Real Deal’s latest list of top Manhattan agents (published earlier this year, in the June issue), may specialize in different sectors of the market, but they have all used their industry knowledge to pounce on insider deals and access otherwise obscure properties. So it’s perhaps no surprise that their own homes seem to match up with the homes that fuel their businesses. For example, Jed Garfield — who runs the brokerage that his father founded, Leslie J. Garfield & Co. — grew up in an Upper East Side townhouse, lives in an Upper East Side townhouse, and sells townhouses for a living. Garfield is currently handling the $37.5 million listing of a 20,000-square-foot mansion on East 63rd Street.

Jed Garﬁeld, Leslie J. Garﬁeld & Co. (Upper East Side townhouse)

hen Jed Garfield found the 4,000-square-foot, five-bedroom townhouse on East 89th Street that he would ultimately pay $2.5 million to acquire in 2005, it was a threestory building with a doctor’s office on the first floor. An elderly couple, who owned the building, had previously lived on the upper floors for decades. Garfield, owner of Leslie J. Garfield & Co., had been living in a classic six on Riverside Drive that grew too tight after he and his wife had a second child, so when he heard about the townhouse — a relative steal — through work connections, he made a move. The sellers first went into contract with another buyer, but when that deal fell through, Garfield jumped. Jumped on a train, that is, heading to Westchester to give the couple a check for the deposit, calling his stockbroker en route to make sure the check would clear. “I love being in a house,” said Garfield during a recent interview at his home. “I mean, it’s what I sell for a living,

Meanwhile, Ryan Serhant of Nest Seekers International cut his teeth Downtown, heading up the sales ofﬁces at 99 John Deco Lofts and 36 Gramercy Park East. He claims to have closed $72 million in transactions so far this year, and makes his home in another newish Downtown development, 20 Pine. For her part, Lisa Lippman of Brown Harris Stevens recently sold a full-ﬂoor penthouse condominium on West 71st Street for $9.85 million, her second Upper West Side sale over $9 million in a month. Is it a coincidence that she lives in an Upper West Side condo herself? The Corcoran Group’s Carrie Chiang frequently makes headlines for handling the most expensive deal in any given week, most recently the $23.65 million sale of Nautica founder David Chu’s Park Avenue penthouse. Nearly 20 years ago, her ability to sell dozens of condos for Donald Trump helped her land her current abode. And, Kathy Sloane of Brown Harris Stevens pulled a similar trick to nab a second home in the Catskill Mountains.

so I like the idea. I live in what I sell.” Then he began a $2 million, 18-month gut renovation, which involved adding a fourth story to the house, and redoing the wiring, plumbing, windows and floors, as well as replacing the rear wall. “It’s all stuff that I liked in other people’s houses,” Garfield said of his renovation. “And also that I thought I’d be able to resell at some point.” As for the décor, Garfield indulged in his love of art —

A view of Jed Garﬁeld’s kitchen and upstairs living room, which is ﬁlled with Damien Hirst paintings and sketches.

Lisa Lippman, Brown Harris Stevens (Upper West Side condominium)

isa Lippman, a senior vice president at Brown Harris Stevens, not only had the inside scoop on her fourbedroom condo at the Ariel West on West 99th Street, but helped design the building as well. In her previous position at Corcoran, Lippman participated in a focus group that advised the developer, Extell Development Company, on designing a building to appeal to the growing number of families living in New York. Lippman’s suggestions included installing large kitchens, putting a basketball court on the ground ﬂoor, and designating a block of units for four-bedroom apartments priced under $5 million, she said. As soon as sales started in 2006, Lippman slapped down $2.7 million to get a 2,725-square-foot unit of her own on the fourth ﬂoor, becoming the second buyer to go into contract at the glass-sheathed tower. Between the 10-foot ceilings and huge windows, “it couldn’t be bad,” Lippman said, explaining her decision to buy before the building was complete. 46 November 2011 www.TheRealDeal.com

the vast living room walls are practically piled with paintings and sketches by Damien Hirst. However, he cut the decorating short when it came to the second floor, which includes a living room and a library. The living room contains just two small armchairs, and Garfield said he practices his golf putting on the room’s expanse of cream carpet. “When it got down to this floor,” Garfield said, “the decorators told us it was going to be some abstract amount of money, and we said, ‘We’re not furnishing it. We’re done.’”

A peek at the kitchen and dining room in Lisa Lippman’s condo at the Ariel West on West 99th Street.

In hindsight, however, she would have paid $100,000 more to have a unit high enough to clear a neighboring brick building, which obscures her view but was absent from the ﬂoor plans. Lippman, her husband and her sons — ages six, 14 and 17 — moved in mid-2008. (Her two elder sons from her ﬁrst marriage split their time between the condo and their father’s home at 106th Street and Broadway.) There are now more than 100 kids living in the building, she said. With its central air-conditioning, pool, gym and terrace, the new development is a welcome change for Lippman, who has lived in 16 apartments in her 25 years in New York City, all of them prewar, small and “quirky.” The condo’s interior design showcases Lippman’s favorite color, purple, from a Venetian glass lamp to the lilac walls and accent pillows in the master bedroom, which she pointed out during a recent visit to her home. (Her second wedding dress was also purple.) Also on display are a number of family heirlooms, including her parents’ 1930s-era club chairs, Impressionist-style paintings from her uncle, and an 18th-century wooden highboy that her late grandfather brought from Europe in 1931. “I’ve always made sure to have tall ceilings for it,” Lippman said. PHOTOGRAPH OF GARFIELD FOR THE REAL DEAL BY HUGH HARTSHORNE

INSIDE THE HOME Carrie Chiang, The Corcoran Group (Trump Palace condo)

Kathy Sloane, Brown Harris Stevens (Catskills house)

or some apartment hunters, it helps to know Donald Trump. Not only to know him but, like Corcoran Group superbroker Carrie Chiang, to help him sell dozens of sparkling new apartments. Chiang nabbed her 2,300-square-foot, three-bedroom condo at the Trump Palace by helping its namesake sell 120 units at the 283-unit tower, which opened in 1991, she said. The 39th-floor condo at 200 East 69th Street, between Second and Third avenues, is one of the best in the 55-story building, Chiang said, adding that she has no plans to budge. In a phone interview, Chiang praised her home’s panoramic city views, visible from the terrace, as well as the high ceilings and formal living and dining rooms. When asked how much she paid, Chiang laughed. “Do I have to reveal that?” she said. “I got it very cheap because I sold 120 units there, right?” City records said that Chiang bought a 39th-floor unit from Trump in 1992 for just $10 “and other valuable consideration.” She later took out a $975,000 mortgage on the property, records showed. (By way of comparison, a threebedroom on the 24th floor went into contract in August for $3.35 million, according to listings website StreetEasy.) Since the early 1990s, Chiang has purchased several additional apartments in the building, which she said are investment properties where her three children live. Most recently, in June, she closed on a 525-square-foot, fourthfloor condo for which she paid $450,000, according to property records.

Trump Palace, where superbroker Carrie Chiang bought an apartment for just $10 in 1992.

hen one leaves the city, one leaves it for a sense of peace and tranquility,” said Kathy Sloane, a senior vice president at Brown Harris Stevens, explaining why twice a month she makes the two-hour-and-ﬁfteen-minute trek to Beaverkill Valley, the site of her second home. Nestled in the Catskill Mountains, the property is subject to a conservation easement, thanks to scion-cum-conservationist Laurance Rockefeller Jr., who in 1985 began quietly buying up 100,000 acres in the region to protect it from encroaching development. Sloane — who declined to discuss her Fifth Avenue residence in Manhattan — was there near the start, helping Rockefeller for a decade ﬁnd conservation-minded buyers willing to buy protected land on which to build their homes. Most of them came from New York City, but the properties also attracted interest from individuals in Delaware, Maryland, Connecticut and California, she said. Sloane acquired her own plot in 1986 but never built on the property. Then, in 2007, she purchased another Beaverkill house where her family had rented for 14 years. She declined to disclose how much she paid.

Ryan Serhant, Nest Seekers International (20 Pine rental)

etween his close-cropped silvery blond hair, frequent consultations with his BlackBerry, and allusions to success with the ladies, Ryan Serhant of Nest Seekers International is almost a caricature of the young, high-powered New York City broker. So his reasons for paying $5,500 per month for a two-bedroom rental at 20 Pine, where he has lived for about a year, are not altogether surprising. For one, the Financial District building put him close to the 99 John Deco Lofts, where Serhant manages sales. Second, Armani/Casa’s sleek interior design at 20 Pine would hopefully impress girls. (“That’s the whole goal,” Serhant joked.) And lastly, the 1,600-square-foot unit can accommodate camera crews for the Manhattan spinoff of Bravo’s reality television series “Million Dollar Listing,” on which Serhant is a cast member. (The show is set to debut in 2012.) With filming dates set, the 27-year-old Serhant had to find an apartment quickly about a year ago, and relied on the services of fellow broker Nick Jabbour, who has now joined him at Nest Seekers. On a recent tour of the apartment, Serhant pointed out the scuff marks that an errant crew member left on his bedroom walls, and said that he was accustomed to having strangers in his apartment. “Most of the time they’re naked,” he joked, tapping away at his BlackBerry. Aside from the size of the apartment and its finishes, Serhant said that he appreciated the unit’s entranceway, which is separate from the rest of the apartment. Rather than filling the entrance with the usual shoes and coats, PHOTOGRAPH OF CHIANG FOR THE REAL DEAL BY BEN BAKER

Ryan Serhant commissioned a painting of a tiger for his rental at 20 Pine. Below, a view of the living room in the $5,500-a-month two-bedroom.

Kathy Sloane’s second home in Beaverkill Valley, N.Y., which she bought in 2007. Top, a photo of Sloane at the nearby Beaverkill Valley Inn.

however, Serhant commissioned a painting of a tiger to hang on the wall. “I wanted an ‘Oh shit’ kind of feeling as you entered the apartment,” he said. His home features other artistic embellishments, including guitars hung on the walls (he used to play), Nest Seekers sales awards, and a portrait of a more casual Serhant in a denim jacket, hung above the toilet.

She said the 2,600-square-foot, wood-shingle house has a living room with a cathedral ceiling, a library, 1,500 square feet of outdoor deck space, and views of the Catskills ridges. Sloane’s nearest neighbor is a Tibetan Buddhist lodge. Conservation restrictions have not stopped Sloane from continuing to renovate the house, including creating an entrance gallery, tearing down a wall to open up a room, adding a balcony to one of the bedrooms, and extending the deck within the footprint dictated by the home’s deed. “We made changes that were modest but had a powerful effect,” she said. Sloane has since designated her son and daughter-inlaw as part-owners to ensure the house stays in the family for future generations. TRD www.TheRealDeal.com November 2011 47

Excessive pay to get brokers in the door? Accusations of ﬁrms paying ‘above market’ to poach brokers swirl, leading at least one company to offer ‘retention bonuses’ to agents

BY ADAM PINCUS eal estate executives are quietly fuming over what they say are aggressive bonuses that several new and expanding commercial ﬁrms are paying to poach brokers. The past two months have been a particularly active time for brokers shifting alliances, partly because some ﬁrms have stumbled in the weak economy and make

for soft targets, and partly because brokerages with a national presence are expanding into the New York market, which remains one of the strongest in the nation. In the last few months, the ﬁrms Avison Young, Stan Johnson, Lee & Associates and Brookﬁeld Financial have all made plays to open or expand in New York. As an example of the rich compensation being offered to switch

ﬁrms, several top executives said that Colliers International — which has been on a hiring binge in the city over the last year, and has picked off at least a half-dozen agents from companies like CB Richard Ellis and NAI Global — has offered twice the typical bonus package to lure agents. “[The ﬁrm] is overproviding for these individuals, who are not top producers,” said a high-level

source at a competing ﬁrm. Similar complaints were made about Avison Young. Another ex-

kers? And offering them ridiculous sums of money to leave?” Meanwhile, at least one ﬁrm,

“[The ﬁrm] is overproviding for these individuals, who are not top producers,” a high-level source at a competing brokerage said. ecutive told The Real Deal: “You don’t think Avison Young had a recruitment ﬁrm canvasing my bro-

Newmark Knight Frank, which was acquired last month by financial brokerage BGC Partners, is giving many of its employees a cash payment that some describe as a “retention bonus” for those who stay on board. However, the number of brokers moving around is showing no signs of slowing. Michael T. Cohen, president of the Tri-State region for Colliers, denied that the firm was paying above-market rates for new agents, but said he expected more brokers to switch firms. “When the market slows down, brokers are looking for ways to punch up their earnings and reconsidering whether they have the right platform,” Cohen said. “I think you’ll see some shifting around over the next year.”

Big bucks, big hires Last month, Studley announced that it had hired away the president of the Tri-State region’s retail division at the weakened Grubb & Ellis to lead Studley’s first retail team in this area. Also, in September, Brookfield Financial lured two longtime brokers from Eastern Consolidated to open an investment sales business here. Meanwhile, two companies firmly established outside of New York, Toronto-based Avison Young and Stan Johnson, an investment sales firm based in Oklahoma, announced in late September that they had made their first local hires in New York. And this month, local brokerage and management firm Sierra Realty will join the California-based national network Lee & Associates — and will operate under the name Lee & Associates NYC. The firm expects to announce the hiring of two experienced brokers from a competing firm soon. While all firms provide some form of financial incentive package to lure talent, there is no set industry amount. Continued on page 94

48 November 2011 www.TheRealDeal.com

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Foreign Buyers

Debt crisis mode

With Greece faltering, some Europeans jump into NYC market, but most wait to pull the trigger By Leigh Kamping-Carder ast month, Fredrik Eklund, a Prudential Douglas Elliman managing director who also runs an eponymous Stockholm-based brokerage, was arranging the sale of a $6.5 million Upper East Side triplex to an overseas buyer from Greece. Given the economic chaos plaguing the Hellenic republic, it may seem unlikely for a Greek buyer to invest millions in New York City real estate right now. But the reasoning behind the purchase was simple: “They have to get their money out of Greece,” Eklund said. As the European debt crisis continues, wealthy individuals from tottering European economies may be looking to New York City homes as the proverbial “safe haven” for their assets — a good bet compared to erratic global stock markets and residential markets across the pond. And, last month, Senator Charles Schumer, the Democrat from New York, and Senator Mike Lee, a Republican from Utah, joined forced to introduce legislation to encourage more of them to park their money in real estate here. The legislation would grant limited visas to foreigners who invest at least $500,000 in cash in residential real estate in the U.S. “I don’t think … people are flocking to the States because they’re afraid of the euro collapsing,” said John Cahill, a partner in the real estate practice of law firm Paul Hastings. “But I do think from an investment perspective — which has been compounded by the euro crisis — it just makes investing in a place like New York City all the more appetizing.” However, in the last few weeks some would-be buyers have become spooked by the debt crisis, as well as the corresponding drop in the value of the euro, and have become skittish about pulling the trigger on New York City home purchases. At press time, European leaders had reportedly reached an agreement with the region’s banks requiring them to swallow a 50 percent loss on their holdings of Greek debt, averting an involuntary and disorderly default in Greece. The euro hit $1.42, recovering from the tumble it took starting in early September. However, plans for European banks to raise capital to protect against future sovereign debt defaults and for European governments to more than double the region’s bailout fund to $1.4 trillion remained murky. “The issue is contagion,” with the situation in Greece, said Jacob Kirkegaard, a research fellow at the Peterson Institute for International Economics, a Washington, D.C.-based nonprofit that studies international economic policy. Since Europe’s banks hold a large amount of assets compared to the size of

ILLUSTRATION FOR THE REAL DEAL BY PETER BONO

their national governments and national economies, a run on the banks would set off a domino effect, threatening the solvency of indebted countries like Italy or even Belgium, Kirkegaard said. That kind of crisis will affect high-networth individuals, who make up New York’s pool of foreign buyers, “quite dramatically,” Kierkegaard said. Starting around Labor Day, brokers said, some buyers taking note of the headlines out of Europe, as well as fluctuating exchange rates, adopted a “wait-and-see” attitude. “It can go two ways,” said Richard Tayar, a Florence native and director of Italian property services at Keller Williams

ternational clients, such as Brown Harris Stevens’ Paula Del Nunzio and Stribling & Associates’ Elizabeth Stribling, said they have not seen an uptick in the number of European house hunters as a result of the troubles in the European Union. But those European buyers who plan to purchase have changed their habits, either taking longer to bid or submitting lower offers, said Lisa Lippman, a Brown Harris Stevens senior vice president. Eklund, who now sees “more worrisome faces,” said European buyers have more questions for him. In the past they might have closed on a deal in 48 hours, but since the spring, they visit properties several times, he said.

“PEOPLE ARE NERVOUS. PEOPLE ARE WAITING TO SEE WHAT HAPPENS IN EUROPE. THEY’RE WAITING TO SEE IF IT’S GOING TO PUT US INTO A DOUBLE-DIP RECESSION.” Lisa Lippman, Brown Harris Stevens Realty who caters to Italians interested in Manhattan properties. “One way is, people are willing to invest outside of Italy, they want to do it right away, and are ready to buy property here in New York,” he said. They may have funds ready to invest thanks to a two-year-old tax amnesty program that lets Italians repatriate undeclared assets under more lenient penalties, Tayar explained. But he has also seen that “some people are saying, ‘Let’s wait and see if the currency is going to reevaluate, and then we’ll talk again.’” Brokers who frequently work with in-

Keller Williams’ Tayar said he has one Italian client who is teaching at Columbia University and recently picked up two apartments in Harlem, one to live in and one to rent out, when the exchange rate was particularly favorable. But another Italian client, who was planning to spend $2 million, decided to hold off when the euro dropped. And a third is considering investing in German bonds rather than in New York City real estate. “People are nervous,” Lippman said. “People are waiting to see what happens in Europe. They’re waiting to see if it’s going to put us into a double-dip recession.”

Of course, that hesitancy extends across the market, as Stribling noted. “People are either very worried and don’t do anything, or they want to transfer their money into areas they feel are safer.” Back in Florence and Rome, sales activity is slow, Tayar said, adding that Tuscany-based colleagues are getting numerous inquiries from individuals who want to unload their villas and vineyards. (As of 2009, homeownership rates in the European Union were at 73.5 percent. In the same year, 67 percent of U.S. residents owned homes, although that number has since fallen slightly.) New York boasts a number of qualities that make it attractive for European buyers, including its relative inexpensiveness and political stability. In terms of housing costs, New York now ranks seventh among 10 “world-class” cities that compete for global investment dollars, according to a September report from London-based brokerage Savills, which standardized accommodation costs across diverse cities by comparing how much a seven-person executive team would spend on housing in each city. According to the report, the average New York City property costs $998,863, or $812 per square foot — more expensive than the standard property in Sydney, Moscow or Mumbai, but still cheaper than Hong Kong, London, Tokyo, Singapore, Paris and Shanghai. Meanwhile, in New York, brokers are seeing big distinctions among what buyers from different countries are looking for. While the bulk of foreign buyers coming from the so-called BRIC countries (the emerging markets of Brazil, Russia, India and China) are shopping for status symbols, buyers from the so-called PIGS (the faltering markets of Portugal, Italy, Greece and Spain) are looking for safe investments, according to Guido Pompilj, founder of New York-based brokerage Vivaldi Real Estate, who works primarily with Italian, but also Asian and South American, clients. “It’s a parking place for money,” said Patricia Cliff, the Corcoran Group’s director of international sales, referring to Europeans’ tendency toward long-term real estate purchases in Manhattan. “The European debt crisis has made people in Europe more aware that they want to have something in a different place, some bricks and mortar in an area with a different currency,” she said. But they’re not fleeing to U.S. markets, she added. Like Cliff, those who work with European clients will no doubt continue to monitor the events unfolding overseas. “The headlines coming out of Europe are tough,” Lippman said. “People really realize that the global economy is the global economy.” TRD www.TheRealDeal.com November 2011 51

Foreign Buyers

Nation-building, for NYC real estate A look at the shifting currencies and economies of 10 countries that send a significant number of residential buyers to NYC

CANADA Currency: Canadian Dollar At press time: $1 = $1.01 A year ago: $1 = $1.01 By Leigh Kamping-Carder oreign nationals buy homes in New York City for a plethora of reasons: the culture, their children, America’s political openness and, lately, the relative economic stability of the city’s residential real estate market. Below, The Real Deal takes a look at the economies and currencies of 10 nations that send significant numbers of buyers to New York, according to brokers, research reports and numbers from new development marketers. Perhaps the most active new foreign buyers are coming from the emerging markets of Russia, China and Brazil, where individuals are using their increased purchasing power to snap up pieds-à-terre and homes for their college-bound children at some of the city’s most high-profile properties. Buyers from countries that have managed to keep their export economies strong through the downturn, such as South Korea and Argentina, continue to play a role in the residential market here. Likewise, purchasers with strong currencies relative to the U.S. dollar — Canadians, Japanese, Brazilians and Europeans — are able to jump in at attractive prices, or afford more-expensive apartments. Even buyers from countries with uncertain economic futures — particularly Italy — are parking their funds in New York residences.

anada survived the global economic crisis relatively well, thanks in part to a highly regulated banking system that didn’t have the same exposure to the subprime mortgage market as its U.S. counterpart. North of the border, housing prices are up, and jobs are returning. Canada’s economy has also been helped by its oil wealth: It is the top supplier of foreign oil to the U.S., and Chinese energy companies have reportedly recently invested $10 billion in the country’s oil industry. Still, as America’s largest trading partner, Canada is intimately connected to the fortunes of the U.S., and troubles here — including the housing crisis and intractable unemployment — promise to slow its growth. Canada’s GDP growth is expected to drop to 2 percent over the next year, down from a 3.2 percent growth rate in 2010.

FRANCE

BRAZIL

Currency: Euro At press time: $1 = E 0.72 A year ago: $1 = E 0.71

Currency: Real At press time: $1 = BRL 1.73 A year ago: $1 = BRL 1.66

uoyed by the discovery of oil off the coast of Rio de Janeiro in 2008 and China’s need for raw materials, Brazil has transformed itself from a regional player into a global power. Growth is expected to slow from last year’s 7.5 percent, but nonetheless, Brazil’s economy — which is valued at $2.1 trillion — is expected to become the world’s fifth-largest in the next few years. The country is a primary supplier of natural resources (petrochemicals and lumber), as well as agricultural goods (coffee and beef ). Brazil’s economic explosion, coupled with high interest rates, has lured foreign investors, who have driven up the value of the real by 40 percent since the start of 2009. As a result, Brazilians have grown wealthier and have done their share of buying: Average per capita purchases in the U.S. (including for real estate) jumped 250 percent between 2003 and 2010. While Brazil is poised to host the 2014 World Cup and the 2016 Olympic Games, not everything is rosy: The International Monetary Fund warned recently that inflation rates are expected to increase.

52 November 2011 www.TheRealDeal.com

ARGENTINA Currency: Peso At press time: $1 = ARS 4.21 A year ago: $1 = ARS 3.95

he days of Argentina’s crippling economic crisis, when the South American country defaulted on about $100 billion of sovereign debt in 2001, are far behind it. The country was mildly affected by the global recession in 2009 — mainly because of a drop in global commodity prices — but this exporter of agricultural products such as soy, corn and livestock has rebounded. In 2010, Argentina’s gross domestic product grew 9.2 percent to $380 billion. Growth is projected to decrease over the next year, hitting 4.6 percent in 2012, but like fellow commodity producers Chile, Paraguay, Peru and Uruguay, Argentina is expected to continue to fuel growth in South America.

rance has played a leading role in trying to find a solution to the European debt crisis. In recent weeks, the government has been working to shore up capital at French banks exposed to the sovereign debt of Greece and other unsteady European economies. It also joined Belgium in partly nationalizing the Belgian and French bank Dexia, the first casualty of the most recent crisis. Meanwhile, President Nicolas Sarkozy, who is battling for reelection, unveiled a budget in late September that would freeze spending and cut $1.38 billion to reduce the national debt. The country’s future economic outlook is mixed. France has recovered since 2009, when its economy shrank 2.6 percent, and Moody’s confirmed last month that its triple-A credit rating had a stable outlook. But the IMF said that France faces an increased risk of a double-dip recession.

Foreign Buyers THE MOST ACTIVE FOREIGN BUYERS ARE COMING FROM THE EMERGING MARKETS OF RUSSIA, CHINA AND BRAZIL, WHERE INDIVIDUALS ARE USING THEIR NEWFOUND PURCHASING POWER TO SNAP UP PIEDS-À-TERRE AND HOMES AT SOME OF THE CITY’S MOST HIGH-PROFILE PROPERTIES.

RUSSIA Currency: Ruble At press time: $1 = RUB 32.35 A year ago: $1 = RUB 30.32

oscow’s exploitation of petroleum exports has propelled Russia into one of the fastest-growing economies on the world stage, and wealthy Russians are known for buying only the highest of high-end properties in New York. However, investors are mindful of the political situation in Russia. In September, President Dmitry Medvedev announced he would not seek reelection so that Prime Minister Vladimir Putin, the former president, could run in his stead. Russia is also vulnerable to a worldwide economic slowdown and a corresponding drop in commodity prices — an echo of the 2008 recession, when the country’s growth rate leveled at 1.1 percent, down from 9.5 percent a year earlier, and foreign investors retreated. Last year brought a modest recovery for Russia, and Russian buyers are out in force in New York’s high-end market. (One broker said she shows a $20 million Upper East Side townhouse to a wealthy Russian at least once a week.) International economist Jacob Kirkegaard of the Peterson Institute for International Economics in Washington, D.C., predicted Russians will continue to buy at “the very top end of the top, top segment.”

GERMANY Currency: Euro At press time: $1 = E 0.72 A year ago: $1 = E 0.71

s the largest economy in the European Union, and one of a handful across the globe operating near pre-recession levels, Germany is considered the engine of the region. Germany’s deficit decreased from 3.7 percent of GDP in 2010 to 2.7 percent in the first part of 2011, and is expected to fall further by the end of this year. The country’s GDP hit $3.5 trillion in 2010, although growth is forecast to slow down. Chancellor Angela Merkel has reportedly pledged to “do everything necessary to ensure the recapitalization of Europe’s banks,” although the prospect of the bloc’s central bank printing money to buy sovereign debt is a tough pill to swallow in Germany, where the fear of inflation is ingrained in the public psyche. While Germans are less prevalent in the New York market than, say, Italians, the London-based brokerage Savills counts them as one of the five major nationalities buying in New York City.

JAPAN ITALY Currency: Euro At press time: $1 = E 0.72 A year ago: $1 = E 0.71

talian buyers are a force in the city, but back home, the country is nothing short of an economic mess. Italy’s debt, second only to Greece’s, rests at 120 percent of the GDP, up from 104 percent at the start of the global economic crisis. Furthermore, Italy’s large, untaxed underground economy — principally in the retail, hospitality and construction sectors — makes up an estimated 27 percent of its output. Early last month, Moody’s downgraded Italy’s government bond rating, and said the outlook for the rating was negative. Over the next year, the Italian economy is projected to grind to a near-standstill. Italian Prime Minister Silvio Berlusconi, who barely survived a confidence vote last month, is now seen as lacking the political clout to pass measures needed to bring Italy’s sky-high debt under control. A default in Italy poses a much greater threat to the world economy than a default in Greece, since its economy is several times larger.

Currency: Yen At press time: $1 = JPY 77.12 A year ago: $1 = JPY 81.28

CHINA SOUTH KOREA

Currency: Renminbi At press time: $1 = CNY 6.38 A year ago: $1 = CNY 6.64

ow the world’s second-largest economy, China posted double-digit growth in 2010 and exported $1.5 trillion in goods. However, Europe’s debt crisis could put a dent in China’s exports. In the third quarter of 2011, China’s GDP grew 9.1 percent — an envious number for most countries, but reportedly the lowest rate for China in two years. (Its trade surplus for the month of September fell to $14.5 billion, down from $17.8 billion a month earlier.) The IMF projects that China’s GDP, now at $5.88 trillion, will grow at 9 percent in 2012, down from 10.3 percent last year. Although Beijing has gradually allowed the value of the renminbi to rise since mid-2010, experts outside China continue to call the currency undervalued. Regardless, Chinese buyers are flooding the New York market, picking up Chelsea condos for their children and touring properties like 20 Pine, 15 Central Park West and the Time Warner Center.

Currency: Won At press time: $1 = KRW 1,156 A year ago: $1 = KRW 1,109

he home of electronics makers Samsung and LG Electronics, South Korea benefits from exports of technology like semiconductors, telecommunications equipment and computers, as well as cars. The U.S. and South Korea recently solidified their close trading relationship: Last month, U.S. lawmakers passed a long-awaited free-trade agreement with South Korea, its seventh-largest trading partner. Supporters say the pact will lower the cost of goods for American consumers while expanding the market for U.S. exports. The Asian country saw a healthy growth rate of 6.2 percent in 2010, although that number is forecast to drop to 4.4 percent over the next year.

apan’s economy was rocked in March by natural disasters: a severe earthquake followed by a tsunami and the threat of radiation leaks at the Fukushima Daiichi nuclear power plant. Not only did the quake cause up to $310 billion in damage, it also disrupted global supply chains, triggering an estimated 30 percent drop in worldwide car manufacturing in the two months after the event. Japan’s central bank infused more than $325 billion into the economy, and the country’s high level of debt is still a concern. In the last few years, the value of the yen has surged, as investors look for a safe place to park their assets in the midst of widespread economic uncertainty (although it dropped after the earthquake and again in July). Yet overall, the outlook for Japan is positive. “Industrial production is now growing rapidly, business sentiment is improving sharply, and household spending is recovering quickly,” the IMF said in September, adding that “a V-shaped short-term rebound seems to be underway.”

www.TheRealDeal.com November 2011 53

Foreign Buyers

Global glitterati in NYC A look at which of the priciest 2011 Manhattan residential deals have involved international players By Leigh Kamping-Carder That New York City draws property hunters from around the world is no surprise. In fact, 15 percent of buyers in the city today are international, according to Elizabeth Stribling, president of Stribling & Associates. But just how big a force are foreign nationals in the highest reaches of the residential market? To find out, The Real Deal combed through the priciest deals of this year so far, relying on data provided by listings aggregator StreetEasy, to find out which of the biggest transactions involved international buyers and sellers. Of the top 20 deals, six had one or more parties from outside the U.S., according to property records, press reports and interviews. These deals may be a small fraction of the properties changing hands, but between the Russian buyer spending $48 million on a pied-à-terre and the Irish seller unloading his Upper East Side mansion, they are a microcosm of a world in financial flux.

16 EAST 69TH ST (TOWNHOUSE)

$48M

RITZ CARLTON (CONDO) 15 CENTRAL PARK WEST (CONDO)

1020 FIFTH AVE (CO-OP)

834 FIFTH AVE (CO-OP) $36.5M

141 PRINCE ST (CO-OP)

$36M

$30.6M

$30M

4 EAST 75TH ST (THE HARKNESS MANSION)

$26.8M $25M

$25M $24.9M $24.5M $23.4M

The Plaza #1209 time warner center PENTHOUSE

610 PARK AVE (CONDO)

t $48 million, Russian music producer Igor Krutoy’s March purchase of a 6,000-squarefoot apartment at the Plaza is the highest price ever paid for a Manhattan condo. The sale is also the most extreme example of a widely cited trend: the preponderance of Russians procuring property in the ultra-high-end New York market. The founder of MuzTV, Russia’s answer to MTV, Krutoy, pictured here, intends to use the property as a pied-à-terre, his financial advisor, Ilya Bykov, principal at New York’s Protax Services Inc., which provides legal, tax and property-management services for international clients, told The Real Deal. Krutoy’s search for Manhattan digs took four years, Bykov said. He ultimately settled on the 12th-floor residence because it came “beautifully designed” and fully furnished by the former owner, who combined three units at the hotel to create the five-bedroom spread, Bykov said. Lisa Simonsen, an agent with Prudential Douglas Elliman, brokered the sale. She did not immediately respond to requests for comment.

54 November 2011 www.TheRealDeal.com

834 FIFTH AVE (CO-OP)

his $30.6 million sale of a penthouse at the Time Warner Center is shrouded in mystery. The New York Post pegged the buyer as Taek Jho Low, a young Malaysian fund manager known for his love of partying. Property records were signed by a representative for a Swiss trust. Raphael De Niro, managing director at Elliman, along with his wife and business partner, Claudine De Niro, represented the seller. He not only declined to confirm Low’s involvement, citing a 19-page confidentiality agreement, but said he was unsure of the identity of the buyer, who apparently attended showings in a large group that included multiple attorneys. A globe-trotting success story, Low, pictured here, reportedly started his fund while studying at the Wharton School at the University of Pennsylvania. Overall, the Malaysian economy has fared better than others since the 2008 crisis, having been insulated from risky investments by strict banking regulations. Todd Wagner, cofounder of Internet broadcaster Broadcast.com, first listed the four-bedroom condo atop the Mandarin Oriental Hotel in January 2010 for $38 million, according to StreetEasy. The 4,822-square-foot apartment boasts floor-to-ceiling windows and a salt-water aquarium suspended from the ceiling, the listing said.

845 FIFTH AVE (CO-OP)

Foreign Buyer/Seller Domestic Buyer/Seller

Foreign Buyers

20 east 64th street 20 east 10th street

he Irish financier Derek Quinlan sold this 25-foot-wide, five-story mansion in July, netting $23 million, somewhat lower than his last ask of $29.5 million. Quinlan, pictured here, paid $26.2 million for the six-bedroom, 12,000-square-foot home in 2005. But just like the finances of his native country, Quinlan’s investments went south. He first listed the property in 2009 with Elliman’s Dolly Lenz and Monique Silberman, but the sale was ultimately brokered by Leslie J. Garfield’s Francis O’Shea. O’Shea said he secured Quinlan’s business with a “good, old-fashioned cold-call canvas situation.” Quinlan’s financial troubles were no secret, and the headlines prompted lowball offers from people who thought the onetime private equity manager was desperate to sell, O’Shea said. The buyer’s attorney, Richard Cohen of the law firm Cohen & Coleman, declined to name the purchaser, which was listed as a Delaware-based LLC. But he noted that one of the complications of buying from a foreign national is a federal law that essentially requires buyers to withhold 10 percent of the purchase price for tax purposes. In situations where the property is sold at a loss (like the Quinlan sale), buyers can take steps to skip this process, he said.

the plaza #501, #502

C B

arbara Garza, who sits on the board of directors of Coca-Cola Femsa SAB de CV, a Mexico City-based soft-drink bottler, was reportedly behind the $19 million purchase of two units at the Plaza in June. Described as a “dual residence” in the listing, the condos went for $15.3 million and $3.7 million — together putting them on the top-20 priciest list by a hair. Gigi Mahon, an author and onetime editor at New York Magazine, sold the units, which together form a 3,811-square-foot, four-bedroom apartment. Emilie O’Sullivan, a senior vice president at Corcoran, pictured here, was the listing broker. She did not immediately return requests for comment. A representative for Coca-Cola Femsa could not immediately confirm whether Garza was behind the deal.

$23M

live Ng, the Malaysian-born chairman of China Cablecom Holdings, sold this 25-foot-wide Greenwich Village townhouse for just shy of $19 million in March. He bought it in 2000 for about $5 million. It’s no secret that the Chinese economy is booming. But China Cablecom, a joint venture between the Chinese government and a local state-owned enterprise, has seen its share price drop almost 90 percent over the last year. Of course, Ng, pictured here, may have sold for any number of reasons. (He could not immediately be reached.) Speculation swirled around the sale because, as the New York Observer reported, the entity that bought the property — the New York-based Heirloom Trust — was the same one that Sarah Jessica Parker and Matthew Broderick used for a failed purchase two doors down the block. And, Parker’s business manager, Frank Selvaggi, appears on the deed. He did not immediately return a request for comment.

970 PARK AVE (CO-OP)

$22M

$21.9M $20.5M

$20.5M $20M

$19M

GRAMERCY PARK HOTEL PENTHOUSE

$18.9M 988 FIFTH AVE (CONDO)

he $22 million sale of this Gramercy Park Hotel penthouse involved Icelandic parties on both sides. The seller was Jon Asgeir Johannesson, a retail tycoon who bought three apartments at the hotel in 2006 and 2007, two of which he combined to create the two-floor property he sold in February. The buyer was listed as Mynni Ehf, an Icelandic entity, and the deed was signed by Eyjólfur Gunnarsson, reportedly an Icelandic investor, who could not immediately be reached for comment. Tim Cass, a senior vice president at the Corcoran Group, handled the sale for Johannesson, pictured here, but was not immediately available to comment. Glitnir Bank, based in Reykjavik, sued Johannesson in New York in May 2010, claiming he and former bank executives raided the bank to prop up their own failing companies. Glitnir, now in dissolution, is just one of the casualties of the 2008 collapse of Iceland’s banking system, which resulted in a $5 billion bailout for the Nordic island from the International Monetary Fund.

TIME WARNER CENTER (CONDO)

20 P Resi riciest Deal dentia s of 2 l 011

640 PARK AVE (CO-OP)

www.TheRealDeal.com November 2011 55

Foreign Buyers

The myth of the ‘all-cash’ buyer International purchasers may pay in cash, but often they’re bankrolled by mortgages in their home countries

By Leigh Kamping-Carder t’s an oft-repeated mantra in New York real estate that foreign buyers pay in cash. Indeed, their ability to come to the negotiating table with rubles and renminbi and reals in hand — ensuring a quick closing — is seen as confirmation of their affluence. “The perception here is that because they’re not getting a loan in the United States … they are these really wealthy people putting down hundreds of thousands of dollars,” said Marc Fitapelli, a Manhattanbased commercial and residential real estate attorney. But that’s not always the case. While everyone knows when a foreign buyer obtains a mortgage in the U.S., when they get a loan in their home country — secured against cash, stock, local real estate or other assets — U.S. sellers, brokers and attorneys are often none the wiser. Guido Pompilj, founder of Manhattanbased Vivaldi Real Estate — who works with foreign buyers, primarily from his native Italy — estimated that 75 percent of foreign nationals who buy in New York are truly all-cash. But the remaining 25 percent, he said, rely on financing, with the majority taking out loans back home. Even some buyers who can afford to purchase entirely with cash are taking out loans, rather than depleting their capital, insiders said. “[Foreign buyers] come here and they

56 November 2011 www.TheRealDeal.com

have the cash ready, or the ability to get it ready in a timely manner,” said Barak Dunayer, the founder of Barak Realty. They appear to be all-cash when they arrive stateside, but eight times out of 10 they are relying on financing back home, he said. Coming to the U.S. with cash in hand, of course, makes it easier to convince New York City sellers that a deal is doable, given the hurdles foreign nationals face when obtaining financing here. One of Fitapelli’s clients, a Londonbased investment banker, financed his purchase of a $4 million Upper West Side condo with a loan secured against stock that he obtained in the U.K., after failing to find a better interest rate in the U.S. It’s not that foreign buyers are sneaking

“They’re not coming with a contingency, so how they raise their money overseas is, candidly, not relevant,” said Michael Xylas, co-manager of the real estate department at law firm Abrams Garfinkel Margolis Bergson in Manhattan. “A check is a check is a check.” Sellers, and even brokers, may never know whether the funds for the purchase are ultimately coming from an Italian or a British bank, rather than an individual’s existing wealth, insiders said. In theory, loan information should come to light when a buyer submits financial statements to the seller, particularly if a condominium board is involved, Pompilj said. But that is not a surefire way to uncover

“THEY’RE NOT COMING WITH A CONTINGENCY, SO HOW THEY RAISE THEIR MONEY OVERSEAS IS, CANDIDLY, NOT RELEVANT. A CHECK IS A CHECK IS A CHECK.” Michael Xylas, Abrams Garfinkel Margolis Bergson around, Dunayer said. It’s that the sale is structured around a cash payment, without a mortgage contingency. Just like a true allcash deal, the buyer doesn’t have an out if he or she can’t come up with the purchase price, and the seller is entitled to keep the deposit if the deal falls through. For that reason, sellers rarely probe about where the cash is coming from, Pompilj said.

international financing, and there are no rules requiring foreign nationals to disclose overseas loans, experts said. A condo board or a sales office may ask for proof of a buyer’s funds, but that has more to do with proving they can pay common charges than determining whether or not they are leveraged abroad, Xylas said. “When a client gives me financial state-

ments and tells me he has no loans overseas, there’s no way that can be determined for sure,” Pompilj said. As for more-stringent co-op boards, most foreign buyers steer clear of them anyway, insiders said. Sometimes brokers don’t ask enough questions of their international clients. “They don’t qualify the buyers all the way,” Dunayer said, adding that as a seller’s broker, he has met numerous buyers who appeared to be all-cash, but upon further questioning, turned out to have loans overseas. However, with the economic upheaval roiling Europe and its banks, it may become more difficult for Europeans to get financing abroad, experts said. And, for some foreign buyers, a mortgage in the U.S. is also an attractive option, albeit one with additional complications — including, typically, a 50 percent down payment, translations of financial documents, and additional reference letters to verify assets and income. The biggest difficulty, however, may be the small number of U.S. banks willing to lend to foreigners, a problem that became more pronounced when U.S. banks tightened their lending standards after Lehman Brothers collapsed. “Now, it’s a very segmented market,” said Ilya Bykov, principal at New York’s Protax Services Inc., which provides legal, tax and property-management services for interContinued on page 99

ILLUSTRATION FOR THE REAL DEAL BY PAUL CIARAVINO

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730 Fifth Avenue New York, NY 10019 212.242.9900

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88 Greenwich Street New York, NY 10006 212.269.8888

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

Neighborhood Close-Up

The north side of 29th Street between Fifth Avenue and Broadway

Halal and hipsters A look at one rapidly evolving 29th Street block

By Jane C. Timm wenty-Ninth Street, between Fifth Avenue and Broadway, is a block in transition. Once dominated by knock-off purse dealers and wholesale perfumeries, this diverse stretch is now home to a hip hotel and pricey new boutiques. It’s also the site of the Masjid Ar-Rahman mosque, and the scents of halal now mingle with those of Stumptown Coffee, the Michelin-starred Breslin Bar & Dining Room, and the Pakistani and Indian restaurant Gourmet Palace. A few doors down is

the church where Donald Trump married his first wife, Ivana. The block, residents and brokers predict, is poised for a development explosion. Local landlords say they are now raising rents for tenants, and receiving countless inquiries from developers, restaurateurs, and retailers looking to move onto the block. “There [are] not that many areas left to develop right around Fifth Avenue,” explained Larry Rich, senior vice president of marketing at the brokerage Core, who often shows apartments in the area. Twenty years ago, when Tracey Dewart

bought a co-op at 12 West 29th Street, the area was full of “junkies and homeless people,” she recalled. Dewart, who now owns retail space in the building, said there are still people clogging up her stoop, but these days, they are well-coiffed Ace Hotel guests and Stumptown devotees. “Actually, there are more coffee-drinkers than there were junkies,” Dewart said. “I’m not sure which [is] better.” The biggest catalyst for change in the area has been the transformation of the single-room-occupancy Hotel Breslin into the hipper-than-thou Ace Hotel.

Since the Ace opened in 2009, young, creative types have started moving into the area, their sights set on prewar real estate with a proximity to nightlife, said Rich. He noted, however, that the area is not yet prime residential real estate. “The ladies who lunch are not going down to 29th Street,” he said. “These are the trendy pioneers.” And there is more to come. “This is the very beginning of it,” Rich said. “Something’s happening here.” This month, The Real Deal went building by building to get a closer look.

264 Fifth Avenue

larger one-bedrooms. The owner is currently repairing the façade and replacing the roof, Morrow said, and will raise rents once the work is done. In the last year, Morrow said the owner has seen an increase in inquiries about purchasing the building, which isn’t for sale. Retailers have regularly expressed interest in combining some of the smaller storefronts into one space, which Morrow said is possible if there’s turnover among the ground-floor tenants. She declined to give asking rents for the retail stores, but Jason Pruger, an executive managing director at Newmark Knight Frank Retail, estimated that the spaces would likely lease for $100 to $125 per square foot.

ers said the site has never been developed, largely because the 28th Street side is in the Madison Square Park North Historic District.

to lease the now-vacant, 4,000-squarefoot space to an artist, like Robert Hite, the painter, photographer and sculptor who had a temporary gallery there last winter. While restaurants often inquire about the space, she said, the co-op shareholders don’t want an eatery on the premises. Dewart said she’s asking around $50 per square foot for her retail space, which comes to about $2,000 a month more than she’s charged past tenants. Other owners, too, are charging more. On the residential side, a one-bedroom unit in the building, which rented for $4,500 in April, jumped to $4,950 in August, according to StreetEasy. Dewart said the area “has always been full of artists and architects and graphic designers,” but the Ace “put us on the map.”

Shamiana International bought this 14unit rental building in 1982, according to city records. The ground floor of the 83-year-old structure has three small stores, including Royal Sari House and Lakhani Sportswear. But the loss of other

12 West 29th Street Dewart owns the two bottom floors of this

6-10 West 29th Street

nearby T-shirt and luggage stores is hurting retailers like these. “They depend on the presence of multiple storefronts to make the business work, and when the Ace moved in, it shut down several stores,” Dewart said. “Those who have tried to stay are having trouble.” Kaufman Management’s Kathy Morrow, who manages 264 Fifth, said monthly residential rents range from $1,800 for small studios to $3,400 for

This 16,000-square-foot Central Parking System lot is sandwiched between 28th and 29th streets. According to PropertyShark, it’s been owned since the 1960s by Philmar Realty Corp. Neighborhood insid-

The south side of 29th Street between Fifth Avenue and Broadway

60 November 2011 www.TheRealDeal.com

14 West 29th Street

building; the upper floors are occupied by the seven-unit co-op where she lives. For years, Dewart said, her retail tenants sold T-shirts and knock-off purses — occasionally, she’d be surprised to see them get busted by the cops. Today, she’s hoping

Gentrification often leads to conflict, as restaurateur Ken Friedman learned in 2009, when he made plans to open a dive bar on the ground floor of this landmarked building, owned by the Lillian Goldman Family Foundation. (Goldman was the wife of the late Sol Goldman, a real estate tycoon who had amassed New York’s largest private real estate empire when he died in 1987, with more than 600 properties. After years of battling over his estate, Lillian ended up with approximately

Neighborhood Close-Up

Portland, Ore.-based coffee purveyor, to provide caffeine fixes for the MacBook-toting bloggers and techies who park themselves in the hotel lobby.

the boutiques Project No. 8 and No. 8b downtown. The stores sells travel gadgets, New York-made trinkets for travelers, and hip but easily packable clothes.

20 West 29th Street: The Ace Hotel

1200 Broadway: Gilsey House

This landmarked 1904 building is owned by LGF Enterprises, another part of the Lillian Goldman family holdings. In 2007, GFI Development Company paid $40 million for the long-term lease, and brought in Ace hotelier Alex Calderwood. With a few re-

one-third of it.) The building has rental apartments upstairs and retail space on the ground floor. To make way for Friedman’s bar, building management evicted the two retail tenants, including clothing wholesaler Bhopi International. But after complaints about alcohol consumption from the mosque across the street (another factor, reportedly, was a Breslin event that featured chef Fergus Henderson cooking whole pigs for a crowd of foodies), Friedman agreed to move the bar to the Breslin basement. Now, restaurant management said that project isn’t going forward either. The ground-floor retail spaces at 14 West 29th Street are still boarded up. Pruger estimated that the landlord could likely command a rent of $75 to $100 per square foot for the space, slightly more for a restaurant. “Even next to the Ace, it’s still a side street,” he noted.

16 West 29th Street: The Breslin Bar & Dining Room On the ground floor of the Ace Hotel is The Breslin Bar & Dining Room, from Spotted Pig restaurateurs Friedman and April Bloomfield. Since opening in 2009, the Breslin has become one of the city’s most popular — and hard-to-get-into —restaurants. Pruger noted that restaurants and boutiques brought in by the Ace likely pay lower-thanmarket-rate rents, because the Ace sees them as an amenity for its visitors.

maining Hotel Breslin tenants staying on as permanent residents, the 260-room hotel opened its doors in June 2009. Rates range from $169 a night for bunk beds to $800 dollars a night for a suite. The popular lobby bar draws boisterous crowds on the weekends. On the building’s Broadway side, Friedman and Bloomfield reincarnated the defunct John Dory Oyster Bar, and the Lower East Side-based boutique Opening Ceremony was one of the earliest shops to sign up for the Ace’s retail space. They’re joined by No. 7 Sub, a sandwich shop that garners long lines at lunchtime.

Before Gilsey House went co-op in 1979, it was a hotel famed for its regulars (like writer Oscar Wilde) and for being the first New York hotel to offer phone service to its guests. Property values for the 33 apartments here have jumped around 40 percent in the last few years, to $850 to $950 per square foot, according to Jesse Meyer, a Bellmarc agent who lives in the Gilsey. Unit 5B, for example, sold for $1.65 million last year, up from $1.12 million the last time it traded, in 2004. This summer, unit 4B sold for $1.36 million. Newcomers are mostly young professionals and artists

looking for a prewar loft feel, Meyer said. “The guys from the Ace really cleaned up the area,” she said, adding that the Gilsey’s retail tenants — toy, eyewear and jewelry wholesalers — have been sprucing up their retail storefronts to attract a higher-paying clientele.

singer, songwriter and musician. According to StreetEasy, the foundation purchased the two apartment buildings from Auto Park Inc. in 2001 for $2.5 million. That same year, the Masjid Ar-Rahman mosque opened in the basement that connects the two structures. Gourmet Palace, a Pakistani and Indian restaurant, occupies the storefront at 13 West 29th Street. At 15 West 29th Street, the halal (which means prepared in accordance with Muslim specifications) restaurant La Sani occupies the first-floor storefront space.

9 West 29th Street This row house was once home to wealthy tobacco merchant David McAlphin, along with his three children and eight servants. It was also the site of the high-profile theft of a diamond brooch, according to an 1869 New York Times story. Today, the five-story building, owned by PMH Realties LLC, is a combination of office and studio space. Tenants include the corporate offices of the Breslin Bar, the TV production company Spin the Bottle and the research consultancy Brand Keys. The ground floor houses a computer sales and repair shop. Tad Lowe, the CEO and founder of Spin the Bottle, said his company has been located on 29th Street for over a decade. The area’s convergence of halal and hipster is part of the reason he loves it — when the mosque’s call to prayer rings through the streets at the end of each week, Lowe said, laughing, “That’s how we know it’s Friday!”

13 and 15 West 29th Street In the late 1800s, the famous opera singer John Chatterton and actress Lillian Russell lived at 13 West 29th Street. Today, the building and No. 15 next door are owned by the A.R. Rahman Foundation, an anti-poverty organization founded by Rahman, a Bollywood

1-5 West 29th Street The landmarked Marble Collegiate Church is the oldest building on the block; the current structure was built in 1854 for a congregation that dates back to 1628. Famously, Dr. Norman Vincent Peale first preached on “the power of positive thinking” here. Former parishioners include Richard Nixon, and Donald Trump

22 West 29th Street: No. 8a The Ace opened No. 8A, a travel and design shop, here in February 2010. It’s run by Elizabeth Beer and Brian Janusiak, who also own

18 West 29th Street: Stumptown Coffee Roasters The Ace also brought in Stumptown, the

www.TheRealDeal.com November 2011 61

Building blocks: How many buildings do you own? Fifteen. We have 261 units in five buildings in Westchester, and 214 units in 10 buildings in Manhattan. The smallest building is 350 East 51st Street, a seven-unit brownstone that we recently put on the market. The largest Manhattan building is 305 East 95th Street, with 59 units. By Jane C. Timm

Vital Stats:

What’s the price range? In Manhattan, it runs from small studios at $1,600 [per month] to a big duplex with a backyard at $5,700.

Name: Charles Coutinho Age: 48 Hometown: New York, N.Y. Currently living in: Sutton Place

170-178 Ninth Avenue

Have you ever lived in your buildings? I’ve lived in a few of my buildings, and to be honest, I wouldn’t recommend it. It’s slightly disconcerting to be going down the elevator when someone gets on and starts asking you detailed questions about their stove not working properly.

A family affair:

Life as a landlord:

How did you get into real estate? I was in academia — history. Unfortunately, academia doesn’t really offer you a living wage unless you’re very, very lucky or very, very good, and I was neither. After a couple years, genteel poverty got me down. My family was already in the business, so they sent me to manage a building in one of the rougher neighborhoods in Mount Vernon. It really grounded me in terms of the day-to-day donkey work. After that, they let me get more involved in expanding our Manhattan business.

What’s the most challenging part about owning NYC buildings? The city bureaucracy — it’s infuriating, ridiculous and unhelpful. The courts and HPD are very anti-owner, very anti-landlord. Real estate taxes keep going up, too. In Manhattan, we pay about $865,000 per year in taxes for all our buildings. I’m definitely not getting $865,000 in services from the city, to put it mildly.

How long has your family been in the business? My parents are expatriates from Brazil; they bought their first building in 1974, in Queens. By the late 1980s, they had accumulated around 350 units in lower Westchester County — very plain, very vanilla multifamily buildings. Since I came along, we’ve purchased about 175 units in Manhattan. More or less my whole family is in the business, though my father has mostly retired. Are you looking to buy more buildings? Tentatively, we’re looking. But the market for buildings below $25 million — the size of building that we’re interested in — is stagnant.

— Coutinho’s Manhattan properties

What’s the best part? You meet an immensely interesting variety of people, who I would definitely not have met in academia. I’ve [rented to] fashion models, the Belgian military attaché and the Venezuelan ambassador to the United Nations. Tenant horror story? I had a 95-year-old Holocaust survivor who died in February of last year. The next day, some unnamed individual had gotten access to the apartment and changed all the locks. He claimed that he was entitled to succession rights on the apartment. He wasn’t a relative or a significant other — he said he was entitled because he was a “spiritual son” to the deceased man. They had gone to synagogue together and had long, spiritual discussions about the world, he said. We litigated. After $20,000 in legal fees, we finally settled it. What’s the strangest request a tenant has ever made? We had to have façade work done and we notified our tenants. One woman sent us a fax asking us to schedule the work for only Thursdays. On the other days, she wrote, “I’m afraid my positive energy would be affected by people working outside the window.” But on Thursdays, she said she’d be out of the apartment.

The bottom line: How is the market doing, from your perspective? In terms of rentals, it has recovered, though not back to the 2007, 2008 levels. The asking rents are still anywhere from 5 to 15 percent below what they were in 2007, but we’re no longer giving concessions to rent new apartments. Thankfully, that’s overwith. As a landlord, what worries you? That the American economy appears to be growing at a much slower rate than in prior decades, and how that’s going to affect Manhattan’s middle class — the people who make $50,000 to $150,000. Those are my tenants. Wall Street’s downsizing, but where is this job-producing machine that is going to get me future tenants in 10 to 15 years? We’ve heard the term “landlord” is now considered outdated — what do you think? I never use the term “landlord” to describe myself; it does have a certain archaic aspect to it. I grew up thinking of a landlord as someone who was a slightly grouchy, middle-class-looking white gentleman. … I describe myself as a managing agent to my tenants, but my card says “managing director.” I thought “president” sounded too pretentious. TRD 62 November 2011 www.TheRealDeal.com

PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

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PROFILE

L+M’s secret weapon

The billion-dollar developer, one of only a few straddling the low-income and market-rate worlds, grows despite uncertain real estate climate BY CANDACE TAYLOR n 1998, L+M Development Partners started its ﬁrst affordable housing project on West 148th Street, between Adam Clayton Powell and Frederick Douglass boulevards. At the time, the vacant block was inhabited solely by boarded-up, grafﬁti-scrawled buildings, abandoned by their owners in the ’60s and ’70s. In the middle of the block sat P.S. 90, a Collegiate Gothic-style structure built in 1907 by architect Charles Snyder. Unused by school-

individual apartments during the co-op craze of the 1980s, then moved into small affordable housing projects, and ﬁnally into high-proﬁle condo projects like Northside Piers in Williamsburg, the 249-unit Kalahari in Harlem and Brooklyn’s Columbia Commons, which completed a rapid sellout this spring. “Part of the reason I think we’ve been successful in this business is because we have evolved,” L+M CEO Moelis told The Real Deal during an interview last month.

Like all developers, L+M took its share of hard knocks after the ﬁnancial crisis, with slow sales at Northside Piers and PS90. But L+M has a few key advantages: Unlike most developers, it has its own construction arm, which helps keep costs down and provides an additional revenue stream when times get tough. And, it’s one of only a few ﬁrms to do both affordable and market-rate development, often in the same project. “There’s only a handful of people who do both,” explained Toll Brothers’ David Von

L+M CEO Ron Moelis shooting hoops in his new ofﬁce at 419 Park Avenue South, which the company moved into to accommodate the 40 new employees it’s hired since 2008

“We were very busy right after the crash,” Moelis said. “Affordable housing ... was still good business, because it wasn’t market oriented.” children for 30 years, the building’s windowpanes were broken or missing, and its stone gargoyles tarnished. Trees sprouted amid overturned desks. This spring, a buyer paid $1.13 million for a three-bedroom combination apartment in the P.S. 90 building — restored and converted to condos by L+M. Over the past several decades, L+M’s stature has grown along with the real estate prices in New York City. Since its inception, the company has built more than 8,000 units — or some $2 billion worth — of affordable and market-rate housing in the New York area. Company founders Ron Moelis and Sandy Loewentheil started out ﬂipping

64 November 2011 www.TheRealDeal.com

“Every five to seven years, I think you have to sort of look at what the world is doing, see where the motion is going.” That strategy has served him well. At a time when most development companies are cutting back, L+M is growing. To accommodate about 40 new employees it’s hired since 2008, the company recently moved into a new 8,000-square-foot office at 419 Park Avenue South, Moelis said. L+M is also expanding its operations outside of New York for the first time, Moelis said, with a project in New Orleans and potential deals in San Francisco and New Jersey. The company is also planning to start construction this spring on a new condo in Harlem, one of only a few to rise in the post-Lehman era.

Spreckelsen, who partnered with L+M at Northside Piers. That ability is increasingly in demand, he noted, now that changes to the city’s 421-a tax incentive program require developers to build affordable housing on the site of their market-rate projects, rather than off-site, in order to qualify for tax breaks. Moelis is “a star in the world of affordable housing,” said developer Jonathan Rose, founder of the Jonathan Rose Companies (see related story on Rose on page 26). “He’s one of the industry leaders.”

The ‘messy stuff’ In May 2010, the 42-unit new condominium Columbia Commons hit the market in

Brooklyn, along with its accompanying 95-unit, income-restricted rental portion, the Columbia Hicks Apartments. It was a less-than-promising start. L+M had closed on the ﬁnancing for the deal in October 2008, just as the Lehman Brothers bankruptcy was wreaking havoc on the real estate market. Neighbors had come out in droves to protest the demolition of the historic Hamberger Christmas Display factory to make way for the project. And as sales started, the project was criticized for having “an unfortunate BQE proximity,” as the blog Curbed put it. Being on the “wrong side” of the highway put it not in desirable Cobble Hill, but in the up-and-coming Columbia Street Waterfront District. So L+M surprised the industry when it announced in May 2011 that the last Columbia Commons unit had gone into contract, making it one of the fastest-selling — if not the fastest-selling — new developments since Lehman crashed. Moelis said he’d initially selected the site because “it was in a desirable school district, and we thought it would hold up.” Still, he was “pleasantly surprised” when the units sold briskly at prices of roughly $700 per square foot — slightly lower than the $750 he’d hoped for when the project was designed, but higher than expected after the market crash. (By contrast, units at Northside Piers sold for roughly $750 per square foot, compared to the projected $900, Moelis said.) Columbia Commons “was a very successful project,” Moelis said. “We made a nice, good return. Not a home run, but for that market, we made good returns.” This spring, he’s hoping for similar success in Harlem. On 116th Street between Malcolm X Boulevard and Fifth Avenue, L+M will soon start construction on a two-building project with 100 affordable rental units and 85 marketrate condos, Moelis said. Because the project is across the street from the Kalahari, it’s playfully called “K2” inhouse, though it doesn’t have an ofﬁcial name or address yet. The company also recently bought the note on a property in Long Island City and is planning a 180-unit 80-20

PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

PROFILE rental project there, Moelis said. Affordable housing isn’t an easy niche. It requires knowledge of complicated city, state and federal programs, as well as good relationships with nonprofits and government officials. (As evidence of L+M’s close relationship with city government, former Department of Housing Preservation and Development commissioner Rafael Cestero resigned from that post in March to join L+M as a managing director.) “It’s not for the amateur,” explained Rose, who also specializes in the field. “You’ve really got to understand how to put together complicated financing to make affordable housing work.” Moelis said he actually relishes this skill set, which he calls “the messy stuff.” “We find it to be fun,” he said. “It’s interesting. That’s part of what separates us from a lot of the market developers, and also separates us a little from the affordable developers, in that we do a little of both.”

one lender interested,” Moelis said, “because we had no track record and really no money.” But they successfully renovated the buildings, selling the 18 apartments as condos and creating three retail stores, which they still own today. Their next building, a 30-unit condo project on Avenue B with 25 percent affordable hous-

housing under then-Mayor Ed Koch’s Vacant Building Program. Affordable housing developers hadn’t yet started using the complicated new LIHTC program, which “took a while to understand,” Moelis said. (Plus, he noted, there was less competition for these projects than there is now, since many investors shied away from then-crime-ridden

Sandy Loewentheil, who founded L+M with Moelis in 1984

sale units set aside for households with incomes at or below 185 percent of the area median. Northside Piers was the first market-rate condo in New York to have affordable rental units on site. The Aspen, L+M’s 233-unit rental project in East Harlem, in 2004 became the city’s first project financed as a 50-3020 mixed-income rental. Moelis worked

The exterior of the Columbia Hicks project in Brooklyn

From law to land use Gaining those esoteric skills wasn’t an overnight process. Growing up in Westchester, Moelis dreamed of becoming a Supreme Court justice. After law school at NYU, he clerked for a federal judge. But once he started practicing law, the high-energy Moelis realized he “wasn’t cut out for that.” “I can’t sit still very long,” explained Moelis, who has a basketball hoop in his new office so he can practice shots during downtime. “I was bored.” While in law school, he’d started “playing around” with real estate, and in 1984, a mutual friend introduced him to Loewentheil. Like Moelis, Loewentheil grew up in New Rochelle. He had a background in construction — his father and grandfather had built condos and rentals for years in Westchester. But after working with them for a short time after college, Loewentheil wanted to go off on his own. The two young men clicked immediately. They started out small, buying the rights to apartments from rent-stabilized tenants when their buildings went co-op, then renovating and flipping them. Their first real development project was 214-216 Avenue A in the East Village, four crumbling rental buildings owned by a friend of Moelis’s family. The owner “was not really a real estate person,” Moelis said. “We came to him and said, ‘Look, we need to gut these buildings.’ We basically agreed to do it together.” Of course, that was easier said than done for the fledgling company. “We sent out 30 applications to lenders, and got

P.S. 90: Before and after L+M’s renovation

The Kalahari at 40 West 116th Street. L+M is now working on “K2” across the street.

The Aspen at 1955 First Avenue, the city’s ﬁrst 50-30-20 mixed-income rental project.

ing, was “our ﬁrst introduction to HPD,” Moelis said. By that time, the housing boom of the ’80s had begun to collapse, and affordable housing seemed like a good bet. Moelis and Loewentheil decided to take advantage of the new Low-Income Housing Tax Credit program, which had been introduced by the Department of Housing and Urban Development in 1986. At the time, the city had started converting unoccupied buildings into affordable

with HPD to develop the program, which sets aside 20 percent of the units for low-income tenants, 30 percent for middle-income renters and the rest for market-rate residents. L+M has been able to be creative in part because it has a full-ﬂedged construction division, L+M Builders Group, headed by Loewentheil until he entered semi-retirement a few years back. The existence of L+M Builders frees up Moe-

PHOTOGRAPH OF LOEWENTHEIL COURTESY OF L+M DEVELOPMENT PARTNERS

New York City.) But Moelis was “good with numbers” and had some tax training from law school, he recalled, so L+M was able to use the new program to successfully bid on a 58-unit project in the Bronx, becoming the first developer to integrate the LIHTC and Vacant Building programs. It wasn’t the last time L+M would be on the forefront of public-private partnerships to finance affordable housing deals. The Kalahari was one of the city’s first mixed-income condos, with half of its for-

Continued on page 98

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1980: CITY SEES RECORD RATES OF ARSON

ultifamily property owners in the city were setting fires to their own buildings at a record rate, a report published 31 years ago this month showed. City fire officials expected arsonists to burn down a record 9,500 properties in 1980 — that was up from 7,754 in 1979, and twice the number destroyed in 1977. With the demand for rental apartments in struggling neighborhoods weak, landlords (mostly in Brooklyn and the Bronx) opted to illegally destroy their buildings in an effort to pocket the insurance money. Residential properties were targeted about 80 percent of the time. A burned-out building in the Bronx “Arson will be a top priority,” said Charles Hynes, the city’s fire commissioner (and, since 1990, Brooklyn’s district attorney). The impact on some neighborhoods was startling. Between 1976 and 1977, for example, 1,140 multifamily properties were burned down in Bushwick alone. But 1980 was the turning point in the crisis, ending with 8,979 fires, fewer than anticipated. And the numbers fell in the following years. In 1984, for example, there were only 5,157 arsons citywide.

1930: MINI GOLF FILLS VACANT DOWNTOWN OFFICE SPACE

miniature golf course known as Twelvetrees, one of the first putt-putt links constructed in a Lower Manhattan office building, opened 81 years ago this month. The 18-hole course at the now-demolished 35 Maiden Lane opened on the heels of a mini-golf craze that swept the country in the 1920s. But the course — which took its name from the building’s 12 supporting columns refashioned as oak trees — was reportedly the first installed in Lower Manhattan to fill vacant office space created by the Great Depression. It wasn’t the only indoor course in Lower Manhattan. Another opened the same year in An indoor mini-golf course the Downtown Athletic Club, a newly constructed building at 19 West Street. In fact, entrepreneurs were opening so many mini-golf courses in office buildings that the Real Estate Board of New York got involved to keep costs down for building owners. At a meeting in January 1931, a REBNY official said the group had been able to keep insurance rates the same for buildings with a course, “provided it does not occupy more than 5,000 square feet.”

1902: FIRST STEEL-FRAME TOWER RAZED FOR GRAY LADY

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orkers began what is considered to be the nation’s first demolition of a building constructed using the revolutionary steel-frame system 109 years ago this month, when they started dismantling the nine-story Pabst Hotel to make way for the New York Times headquarters. Skeptics of the steel-frame engineering — which first came into use in the mid-1880s, leading to the proliferation of skyscrapers — thought buildings’ support structure would rust or weaken over time. “In the minds of a great many people the impression is firmly implanted that the steel frame will continue in use until a ‘skyscraper’ collapses in a pile of rubbish and a cloud of dust” as a result of corrosion, a writer in the Times wrote that year. The deconstruction of the Pabst building at the intersection of 42nd Street, Broadway and Seventh Avenue gave developers the first chance to see the impact on a steel building over time. Upon taking it apart, they found there was very little change to the steel in the few The Pabst Hotel years it was up. The building — which had a hotel, restaurant and bar — opened in 1899 and was owned by the Pabst Brewing Company. Adolph Ochs, then-publisher of the Times, bought the lease to the property and in 1904 opened the newspaper’s new headquarters, now known as One Times Square. That same year the square was renamed Times Square in honor of the paper, from Longacre Square. Compiled by Adam Pincus

COMEBACKS

Climbing back to the top A look at some of NYC’s most impressive real estate revivals — from developers to stock prices to once-down-and-out city blocks

B Y C. J. H UGHES

like pariahs, or stock prices that have

hree autumns ago,

bounced back from the doldrums at

the collapse of Lehm-

some public real estate companies.

an Brothers knocked

There are also geographic stretches of

the wind out of New

the city that had been pocked with emp-

York’s real estate in-

ty retail spaces and empty condo build-

dustry. Home sales ﬂattened. Prices

ings, but are now ﬁlling up with stores

plunged. And, as layoffs mounted,

and residents. There are even some

ofﬁce buildings emptied out. While

bankers who had been caught up in the

there have been some spurts of activ-

subprime mess who are now back on

ity, the industry has not gotten back

the lending scene in a big way.

to the highs of the boom. In fact, as

Of course, some of these phoenix-

the unemployment rate still hovers at

es would say they were never down

an uncomfortably high level, and Wall

and out, following the lead of LL Cool

Street (a once-reliable real estate en-

J in “Mama Said Knock You Out”:

gine) reports losses, it seems that a

“Don’t call it a comeback,” he sang.

complete recovery might be years away. All the same, there are signs of comebacks — whether they are from developers who once defaulted on mega-loans and seemed

“I’ve been here for years.” Read on for sketches of those whose fortunes have recently improved.

Comeback developers

110-building complex Stuyvesant Town/Peter Cooper Village for a record $5.4 billion and then lost it to lenders in January 2010 — is another survivor. As The Real Deal has reported, in 2010, Tishman bought more than $1 billion of propn 2008, Harry Macklowe, of course, became the poster boy for overleveraging, when he erty worldwide, up from $99 million in 2009. The firm is on track for more of the same famously lost all seven of the Midtown buildings he had purchased for $7 billion from this year, in places like France, China and India. Equity Office Properties Trust. Indeed, in Hyderabad, India, a project called Tellapur Integrated Township, which riNow, though, just when many had written him off, there are signs of life. Last quarter, vals Stuy Town in size, is making progress after years of delays. Last year, the first phase of he closed on the purchase of 737 Park, a rental at East 71st Street that he’s converting to construction on the planned $2 billion, 32 million-square-foot project (which has homes, shops and hotels over 400 acres) got underway. Like Macklowe, who had only an estimated $50 million of personal equity in his failed blockbuster deal, Tishman’s financial exposure in the Stuy Town deal, in which it partnered with BlackRock, could have been as little as $50 million, said Daniel Alpert, of the Manhattan-based real estate investment bank Westwood Capital. That’s chump change for a firm of Tishman’s stature, Alpert said. “While it was certainly a blow to ego and reputation, I can’t imagine they hit the canvas as an economic matter,” he said. “It was a classic case of other people’s money.” Developer Harry Macklowe is converting 737 Park (right) from rentals to condos. Jerry Speyer’s firm has recovered post-Stuy Town.

condos, for $250 million. According to news reports, he’s paid off the note for the site of the Drake Hotel, at Park and East 57th Street, with help from the CIM Group. In addition, he and Prudential Douglas Elliman chairman Howard Lorber have purchased the note on 953 First Avenue, an empty lot where the Oliver, a condo from Alexico, was supposed to rise. It’s not clear how much equity Macklowe himself has in any of the deals; one person who has previously advised him said it appears that Macklowe has ripped a page from Donald Trump’s playbook and is essentially acting as a front man for groups of investors. But that source said that if a 1,000-foot tower were to go up at the Drake site, which has been empty since 2006, Macklowe might be rehabilitated. “It would be his phoenix rising,” the source said, adding, “He picked the perfect profession. As long as you don’t kill anybody, you can live again.” Macklowe’s not the only developer coming back. Tishman Speyer — which also became a poster child of the bust when it bought the 68 November 2011 www.TheRealDeal.com

Comeback stock prices E

ven though Lehman went belly up in September 2008, the pain seemed to take a while to work its way through the public markets. Indeed, it wasn’t until late the next winter that the markets finally hit their low point. Share prices have recovered nicely since then, sometimes by almost a factor of four, and, at least until recently, were outperforming typical blue-chip public companies by an almost two-to-one margin. Among the rebounders, analysts say, are the most influential, aggressive and most successful local real estate investment trusts: Boston Properties, Vornado Realty Trust and SL Green Realty. The renewed confidence in the stocks is all the more remarkable considering that many ILLUSTRATION FOR THE REAL DEAL BY PAUL CIARAVINO

COMEBACKS tage of the run-up, Zuckerman exercised $18 million in stock options this year.) The REIT had dropped to $92.64 at the end of last month — but that’s still 191 percent higher than its 2009 low. At the same time, Vornado, headed by Steven Roth and Michael Fascitelli, saw its stock price sink to $29.31 in March 2009, From left to right: Vornado’s Steve Roth and Michael Fascitelli, SL Green’s Marc Holliday and Boston Properties’ Mort Zuckerman have all seen their stock prices rise. but it, too, soared this past July, to $98.60, a 236 perREITs, which by law must distribute 90 percent of taxable income to investors, couldn’t cent leap. In the middle of last month, it was at $76.72. even pay dividends during those gloomy days. And by extension, that meant that they had While the recent price dip could, of course, be making it harder to sell shares and raise few financing options to buy and build real estate. money, it doesn’t bode badly for Vornado’s development plans, said Sheila McGrath, a Now, though, they are in an enviable position because they have so much “dry powder” managing director with Keefe, Bruyette & Woods in Manhattan. She cited the 2 millionto deploy, said Ken Patton, a professor at NYU’s Shack Institute of Real Estate and the for- square-foot high-rise, 15 Penn Plaza, that Vornado is planning for the Hotel Pennsylvania mer COO of Helmsley Spear. site across from Penn Station. “As long as the returns pencil out” — that is, as long as it can get an anchor tenant — “The [companies that] were too dependent on debt are drilling dry holes because they don’t have those kind of resources,” said Patton, referring to private companies that can “they can make it work,” she said. no longer readily secure financing. Meanwhile, SL Green, which is the city’s largest office landlord — with stakes in the Sure, decades ago, when REITs began appearing, some questioned whether or not Lipstick Building, 2 Herald Square and 292 Madison Avenue — saw its share price tank to the management that controlled them could do so scrupulously, in the spirit of publicly $11.62 in February 2009. But it’s bounced back significantly since. Its 2011 high was $88.30 owned firms, Patton added, but they turned out to be fine: “These guys are winners in the in May — a 660 percent jump over 2009. game,” he said, referring to Boston Properties, Vornado and SL Green. Plus, in addition to raising money through public offerings, SL Green, which is headed Of the local trio, Mort Zuckerman’s Boston Properties, which owns the General Mo- by president Marc Holliday, has aggressively sold bonds through private offerings to the tors Building and 510 Madison Avenue, seems to have fared the best. tune of about $675 million in the past two years. Its share price cratered to $31.73 in March 2009, but hit a recent high of $112.36 in July However, its total rent revenue — a key indicator of an REIT’s health — plunged 44 percent of this year — a 260 percent spike. (Its boom-time high was $127.04 in February 2007.) from 2010’s third quarter to 2011’s third quarter, according to its recent earnings report. Meanwhile, in the third quarter, the company announced that rent increases in Still, SL Green is plowing ahead: In September, it teamed up with Jeff Sutton’s Wharton its offices had boosted building revenue by 26 percent in the last year, beating ana- Properties and Stonehenge Properties to buy a 10-building Midtown retail portfolio for lysts’ expectations. In addition, after delays, the company is now building 250 West $400 million. The firm is also close to signing a major ad firm as an office tenant for 3 Co55th Street, the first new office high-rise since the crash. (Perhaps taking advan- lumbus Circle, a renovated office tower, according to people familiar with the deal.

Comeback projects I

t was on, then it was off, and now the new Nets basketball arena is on again — albeit in a severely truncated form. Brooklyn residents have been buzzing about the fact that, after years of protracted legal battles, the arena is now quickly taking form at the intersection of Atlantic and Flatbush avenues. Indeed, just when Atlantic Yards — the 22-acre combination housing development/ basketball stadium — seemed dead, developer Bruce Ratner got the project back on track, partly by dropping starchitect Frank Gehry’s pricey design for a more prosaic one from SHoP Architects. Ratner, who runs Forest City Ratner Enterprises, also eliminated much of the previously planned housing from the site, won some key lawsuits and even paid his chief antagonist, Daniel Goldstein, founder of Develop Don’t Destroy Brooklyn, $3 million to relocate. Much of the opposition was directed at plans to use eminent domain to remove homes and businesses that stood in the way of the project. Critics might not be mollified by the changes at the project, which broke ground last year. To wit: The arena, promised as a model of urban integration, will be flanked by several parking lots, and might not look that much different from any suburban basketball arena. Still, it will have at least three apartment buildings, according to Forest City spokesman Joe DePlasco. He said construction on one of those building will begin this year. And, he said, the arena is on track to open in time for the 2012 NBA season. “There was obviously extended litigation and a dramatic shift in the economy,” he added of the $4.5 billion project, “but interest in the project did not wane.” The project, which took six years to launch, may be an act of saving face for Ratner, if nothing else. Hudson Yards, the comparable LIRR rail site in Manhattan, also was on life support a few years ago. The site had been at the center of one of Mayor Bloomberg’s early big-picture ideas, to build a stadium for the New York Jets atop the yards. Community activists, however, put a nail in its coffin. Then came the state’s attempt to put residential and commercial towers above the tracks leased from the Metropolitan Transportation Authority. That invitation drew five high-profile bidders.

In that effort, a joint venture between Tishman Speyer and Morgan Stanley, which was planning to relocate its headquarters there, emerged the winner. But the $1 billion deal collapsed in May 2008 after the developer attempted to renegotiate the terms. Just days after the Tishman Speyer deal died, however, the Related Companies stepped in to fill the void. The firm, which is partDeveloper Stephen Ross is reportedly going to be starting nering with Canadian firm Oxford construction at Hudson Yards early next year. Properties, is promising a $15 billion development with 24 million square feet of office space, 13,500 apartments, and 2 million square feet of hotels. The Wall Street Journal reported last month that Related will likely begin construction on the project at the beginning of 2012. But it said it was unclear whether Related could get the financing it needs to proceed further. In late October, though, Related was reportedly in talks with the luxDeveloper Bruce Ratner’s Nets arena is finally taking shape at the ury accessories company Coach to intersection of Flatbush and Atlantic avenues. take 600,000 square feet in a highrise at West 30th Street. That would be Related’s first office tenant. At the same time, Credit Suisse-First Boston is sniffing around, with an eye toward taking almost 2 million square feet of office space when its existing Manhattan leases expire in a few years, according to news reports. Continued on page 97

www.TheRealDeal.com November 2011 69

James Gardner | Architecture Review

From steel wool to ‘gold’ The trend for post-industrial chic grabs Dumbo — with 109 Gold the latest result

ack in the late 1970s, artists and like-minded bohemians who colonized the area in Brooklyn that lay in the shadow of the Manhattan Bridge thought they had hit on a bright idea: Apply the somewhat unlovely name of “Dumbo” to the area, and it would stand in such a bad odor that no one, least of all developers, would ever want to go there. According to this logic, the place would thus be safe for its down-at-the-heels inhabitants to continue living in large lofts without having to pay too much. Of course, that strategy seems laughable today, now that Dumbo has become one of the city’s most vibrant areas for development, as new buildings, like the recently completed 109 Gold Street, designed by the Manhattan-based firm Kutnicki Bernstein Architects, have just gone on the market. The supreme irony — as is so often the case with gentrification — is that the artists, dancers and demimondaines, who were attracted to the area precisely because it afforded them an escape from the spiritual values and the property values of the middle class, spurred the gentrification that the area needed. And now — as has previously been seen in the West Village, Soho, Chelsea and, more recently, the Meatpacking District — those artists can no longer afford the high rents that they, by their very presence, brought into being. Today, Dumbo (which, of course, stands for Down Under the Manhattan Bridge Overpass) comprises two sections: the areas between the Brooklyn and Manhattan bridges and the swath between the Manhattan Bridge and Vinegar Hill. It is in the latter area that 109 Gold Street can be found. Formerly known as Fulton Landing, the neighborhood was once devoted to the manufacturing of heavy machinery and (most famously) Brillo Pads. When the factory workers moved away in the 1970s, it became an artists’ enclave and, in 1977, even became home to a top-tier restaurant: The River Café. But a sense of edginess and danger continued to haunt the area even into the early years of this past decade. Now, however, most of that mystique has evaporated. In its place is yet another family-friendly part of the city. Perhaps the high point of this transformation (or the kiss of death, depending on your perspective) was the decision of the New York City Landmarks Preservation Commission, in 2007, to designate Dumbo a historic district. The new development at 109 Gold Street is a case study because of what it reveals about development in the neighborhood, even more than because of any inherent charm or beauty in its design. Though the initial rendering promised 70 November 2011 www.TheRealDeal.com

a crisply rationalist gray building with an been ingeniously angled into the conceporiginal green accent along the façade, the tual box of the building. Perhaps nothing ﬁnished result is a tried and tested exam- about it recalls Le Corbusier more emphatiple of professional product, with accents cally than that it is conceived almost like a in something like mocha and passages of horizontal slab, whereas many, if not most, stainless steel. All of this recalls such Mod- Neomodernist projects in recent years have ernist pioneers as Swiss architect Le Cor- tended more to the aesthetic of towers. busier — with his pure white façades and modules formed from straight, clean, unadorned lines — in a way that certainly is a far cry from the early20th-century, brickand-mortar aesthetic of most of the neighborhood’s other buildings. That geometric and rationalistic aesthetic seems to be the Above: An overview of Dumbo, which was once devoted to the manufacturing of overriding sensibility heavy machinery and (most famously) Brillo Pads.

Halstead Property is marketing units at 109 Gold, where prices range from $325,000 to $1.075 million.

The new condo at 109 Gold Street is a case study because of what it reveals about development in the neighborhood, even more than because of any inherent charm or beauty in its design. that deﬁnes the 25-year-old practice of Kutnicki Bernstein Architects, to judge from other recent projects that have come out of their studio, such as the residential buildings at 201 West 17th Street and 517 West 46th Street, as well as NYU’s Goldman Student Lounge, not to mention sundry additional projects in Brooklyn. Seven stories tall and glazed at street level, 109 Gold’s most conspicuous amenities are the balconies that line the façade from the second to the sixth ﬂoors, which have

As The Real Deal has reported, this 33unit condominium, developed by Gold & York LLC and marketed by Halstead Property Development Marketing (hired after Prudential Douglas Elliman struggled to sell the apartments), contains studios along with one- and two-bedroom units, ranging in price from $325,000 to $1.075 million. The interiors aspire to the same austere purity as that of the building’s exterior. Photographs of the interiors show kitchens and living areas that are conceived in a pristine-

ly rectilinear style, their component parts minimalist and unobtrusive. According to the listings website StreetEasy, finishes include Nordic white ash flooring and white lacquer cabinetry with CaesarStone countertops. The development at 109 Gold Street, however, is only one of a slew of new buildings that have gone up or been converted in the area in the last few years. Others will be found at 100 Gold Street, at 133, 192 and 205 Water Street, as well as at 84 Front Street. Of course, Dumbo is not unique in New York City as an example of an industrial zone that’s been redeemed in the name of residential development. The improbable aesthetic of industrialage ruins seems irresistible in our post-industrial age. It has been witnessed, after all, nearly everywhere over the past generation, from France and Germany to Australia and Argentina. For instance, the Domino Sugar Factory, which once seemed a brutish eyesore, has now, through this change of taste, come to be seen as an imposing monument whose august massing charms us as much as any cathedral or fortified castle of Medieval Europe. The much-hyped High Line (and the Meatpacking District through which it cuts) are only the most famous recent examples of this transformation. But in Dumbo, as opposed to the generally lowlying Meatpacking District, there are far taller, even hulking buildings. And yet, as big as they are, they seem small in their effect when set against the Manhattan Bridge. That this area would have been redeemed, as it has been, for well-to-do families underscores not only the vagaries of taste, but also the desperate demand for real estate in the five boroughs. And it points up one other thing that’s not often appreciated: Even with landmarking of buildings, even with the designating of whole neighborhoods as historical districts, there still remains a large and well-nigh inexhaustible percentage of Manhattan (starting with the area north of about 125th Street all the way to the northern tip of the island), not to mention even more of the outer boroughs, that will one day become ripe for development, if it’s not already there. As for some of the longer-term residents of Dumbo, they’ve expressed regrets, it seems, about all the efforts they’ve put into improving their neighborhood. As one of them, a carpenter, told the New York Times a few years ago, “If I knew then what I know now, I wouldn’t have worked so hard to get rid of the crackheads and the crack whores.” TRD www.TheRealDeal.com 200 PHOTOGRAPHS FOR THE REAL DEAL BYAugust DEREK ZAHEDI

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Q&A

NYC’s retail therapy

Brokers say prime locations are thriving, secondary areas are hurting and the holiday shopping season is going to be crucial BY MELISSA DEHNCKE-MCGILL ew York is, of course, the shopping (and eating) capital of the country — if not the world. But what do the latest concerns about a double-dip recession mean for the countless stores, restaurants and shops packed into Manhattan? In this month’s Q&A, The Real Deal talked to Manhattan retail brokers about how the retail market — which tanked in the wake of the 2008 ﬁnancial meltdown — is holding up. Brokers said they are seeing strong rents and activity in prime areas like Fifth Avenue, Time Square, Soho and the Upper West Side. But, they say, secondary and tertiary submarkets are hurting, with continuing declines in asking rents and increases in vacancy rates. And many are anxiously waiting to see how this holiday season plays out for retailers, which could have major implications for expansion plans going forward. The expectation among most is that national holiday sales will be ﬂat, but that New York will do a bit better.

Steven Baker

president, Winick Realty Group There are obviously concerns about this latest economic rough patch and the possibility of a double-dip recession. So how is Manhattan retail doing today compared to six months ago, a year ago and right after the Lehman Brothers collapse? Despite the doom and gloom that’s in the news, we’re still seeing strong activity in retail submarkets such as upper and lower Fifth Avenue, Soho, Times Square and the Upper West Side. It’s the secondary and tertiary markets that are suffering a bit and [where] inventory is stagnating. What are you seeing in terms of Manhattan retail rents? How much have they increased or declined in the last six months, one year and three years? Asking-rent growth ranges anywhere from 7 percent to 36 percent. Some retail corridors are experiencing signiﬁcant growth in asking rents year over year — such as Times Square and the West Village. Fifth Avenue between 42nd and 49th streets has seen an increase in asking rents of approximately 21 percent in the past six months to a year. And, on lower Broadway in the Financial District, asking rents have grown by approximately 36 percent over the same period. Conversely, 125th Street, river to river, has seen a decrease in asking rents of approximately 12 percent. Corridors in the Meatpacking District and on Third Avenue in the 60s have also experienced a decline in asking rents. [Again], secondary and tertiary neighborhoods are taking a hit. Second Avenue in particular has been taking a rather large hit as a result of the subway construction in the area. 72 November 2011 www.TheRealDeal.com

We know that burger joints have been on the make for a while, but what other retailers are most active in Manhattan? Quick-service food users still seem to be fairly aggressive. Chipotle has made a number of really good real estate decisions and a lot of similar users are trying to follow suit. For example, Pret A Manger and Le Pain Quotidien are continuing to open stores. Coffee and sandwich retailers also seem to be aggressive, with Potbelly [Sandwich Shop] and Coffee Bean & Tea Leaf being the latest chains trying to penetrate the NYC market. What are the most worrying trends and the most positive trends you’re seeing today in the Manhattan retail world? The unemployment rate of 9.1 percent, [stock] market volatility and the current state of the global economy are all worrying, but the growth in tourism has been a boon to many of New York City’s retail areas, and I believe that will continue. The holiday season is right around the corner. What are you expecting in terms of holiday sales? I believe that same-store sales, year over year, will be ﬂat across the country. The Manhattan market will be higher, but not signiﬁcantly so. Which big retail spaces are you keeping an eye on right now in Manhattan for what they might say about the market? It’s going to be interesting to see what retailer takes the Durst Organization’s 4 Times Square, which was formerly home to the ESPN Zone. It will also be interesting to see who takes SL Green/Moinian’s 3 Columbus Circle. The Real Deal recently wrote about a number of sites, including the World Trade Center, the World Financial Center, the Port Authority and Hudson Yards,

But sources had mixed views on whether there will be more holiday pop-up shops this year than last. Some said the once-vacant retail space those pop-ups were housed in has been mostly snapped up as a result of a market that has seen overall improvement; others said with more retailers interested in testing the New York waters, they would hunt out any available space. Meanwhile, brokers are also keeping an eye on several large, vacant sites, including the Durst Organization’s 4 Times Square (former home to the ESPN Zone); the stores once occupied by the now-bankrupt book giant Borders; and 3 Columbus Circle, to see how quickly they get taken and what kind of rents they yield. For more on which retailers are aggressively seeking space in Manhattan, which ones are retreating, and how the city is going to handle the next wave of available retail space that’s about to hit, we turn to our panel of experts.

which are in the pipeline and could add more than 2.5 million square feet of retail space below 59th Street in the coming years. How do you think that’s going to impact the retail market? While it is a lot of inventory to absorb, I don’t believe the World Trade Center will have a lot of challenges filling spots. We just came back from a presentation at Brookfield for the repositioning of the retail at the World Financial Center and I think it will take time, but their spaces will be absorbed due to the sheer population of office workers in the surrounding area. I’m most excited about the prospects of the Hudson Yards. I’ve done a number of deals in the neighborhood and believe that it’s one of the most underrated trade areas in NYC for retail.

Michael O’Neill

senior director of retail services, Cushman & Wakefield How is overall Manhattan retail doing today compared to six months ago, a year ago and right after the Lehman Brothers collapse? The concern about the current state of the global economy and the decline of consumer confidence has resulted in reevaluation and a wait-andsee approach by many retailers. This more cautious mindset is more prevalent than it was six months ago and even one year ago, when there was a greater sense of stability and confidence that we were in an improving economic climate. Despite the fact that there seems to be a more conservative approach by retailers, it is certainly a better environment than in the months following the Lehman Brothers collapse. How much have Manhattan retail rents

increased or decreased in the last six months to a year? It varies market by market, but average asking rents have remained relatively stable in most markets during the last year, although we have seen notable increases over the last 12-month period in Soho, Times Square and the Upper West Side. Which geographic areas have seen the biggest drop-offs in price and the biggest increases in vacancy rates? The average asking rent on Madison Avenue at the end of the third quarter was $863 per square foot compared to $947 per square foot in the ﬁrst quarter of 2009. With that said, the availability rate has remained relatively stable and there is a sense of renewed demand on Madison Avenue. We only statistically track the prime retail markets and I believe the most substantial decreases in rents and increases in availability rates have occurred in the more secondary markets. We know that burger joints have been on the make for a while now, but what other retailers are most active in Manhattan? There have been several established retailers introducing new concepts to the market. [For example], the Gap recently opened its Athleta concept, Brooks Brothers will be opening its university collection in the Flatiron District, and Nike will be opening its ﬁrst running concept store in the Flatiron area as well. What are the most worrying trends and the most positive trends you’re seeing today in the Manhattan retail world? The reported plan of several retailers to shrink their footprint is worrisome. As a practical matter, though, I believe that will be implemented more in suburban environments than in urban markets like New York.

Q&A What do you expect in terms of pop-up stores in Manhattan for the holidays? Will there be more this year than last? I think you will see a number of pop-up stores this holiday season. Any well-located property that is vacant is a potential opportunity for a company interested in testing the market. Companies like Under Armour and Toys “R” Us have typically attempted to secure temporary stores during the holiday season. In addition, Target opened a pop-up store to introduce [its new] Missoni line. Uniqlo also opened several pop-up stores throughout Manhattan to promote the opening of 666 Fifth Avenue.

Faith Hope Consolo

chairman, retail leasing and sales division, Prudential Douglas Elliman How is overall Manhattan retail doing? Rents are increasing slowly in some areas and quickly on the main boulevards. Madison and Fifth are close to pre-Lehman levels. Manhattan rents overall are still about 15 percent down from fall 2008, but it’s very neighborhood-speciﬁc. What’s going on with Manhattan retail vacancy on the whole these days? New York City’s vacancy is at 2.2 percent, compared with 7.1 percent nationally. That’s a healthy market. Compare that with other reports in 2009 that had vacancy in some areas at 15 percent. Which areas have seen the biggest price drops and vacancy increases? Harlem’s rebirth as a retail destination stalled out a bit during the downturn. It’s slowly coming back. Also, the Lower East Side, which had been seeing some highend shops moving over from Soho, is reconﬁguring to more neighborhood-oriented shops right now. For a while, landlords were offering lots of incentives. Are you still seeing that? Fewer incentives are being offered today — we’re certainly not seeing the free rents that were being offered a couple of years ago. Do retailers still want TI money? Yes. Are they getting it? To some degree, particularly in cases where landlords want to retain a good store. Which retailers are most active today? Major designers are expanding, including Zac Posen, Ralph Lauren and Polarn O. Pyret. Uniqlo is [also] opening and Buccellati is relocating. We’re also seeing lots of sports/outdoor shops, with REI and Eastern Mountain both taking major spaces. What do you expect in terms of pop-up stores in Manhattan for the holidays? We won’t see as many as in previous years,

simply because we have fewer vacant spaces. … Some retailers, including Uniqlo and Joe Fresh, are popping up as they ready permanent stores. One interesting pop-up open now through the end of November is Sephora’s fragrance boutique, Sensorium, on West 14th Street. Which big retail spaces are you keeping an eye on right now in Manhattan? The former Borders spaces at Time Warner Center and Penn Plaza will be an interesting case study. The two locations are quite different and it will be fascinating to see what retailers take the space. How do you think all of the retail space at the upcoming mega-projects will impact the market? Each of these projects has a very deﬁnite target market, and there will be heavy competition between the pairs that are geographically close. I can certainly see a battle between the World Trade Center and World Financial Center. The Port Authority and Hudson Yards will compete less. The Port is already well established as a commuter base, and if Hudson Yards does get Nordstrom as an anchor, it will skew much differently.

Jeffrey Roseman

executive vice president, Newmark Knight Frank Retail What’s going on with Manhattan retail and how does that compare to six months ago, a year ago and right after the Lehman collapse? Believe it or not, compared to six months ago, Manhattan retail rents are increasing. … Apparel and food seem to be the most popular sectors. Obviously, right after Lehman Brothers collapsed the market stood still. But Manhattan retail rents, for the most part, are back to pre-2008 numbers. Which areas of Manhattan retail are doing best and worst? The areas seeing the most vibrancy include Soho, the Meatpacking District, Times Square, Columbus Circle, Fifth Avenue and 34th Street. Certain areas that had artiﬁcially risen due to speciﬁc sectors driving up the rents, like banks and drugstores, have corrected to the more appropriate rates. Examples of these areas include the East Village, Upper East Side, Upper West Side and Lower East Side. We know that burger joints have been on the make, but what other retailers are most active in Manhattan today? Quick-service food continues to be very active in the city with chains such as Panera Bread, Potbelly, Chipotle and Chop’t ag-

gressively looking for space. International fashion retailers still are very bullish on Manhattan, including Uniqlo, Zara, Topshop and Desigual. What are the most worrying and most positive trends you’re seeing in retail? What worries me are certain areas like Fifth Avenue pricing themselves out of the market and retailers not being able to generate enough business to support rents. The positive trends include retailers’ acceptance of going multilevel to help offset the large rental numbers. What are you expecting in terms of holiday sales and what kind of holiday season are Manhattan retailers preparing for? Economic indicators are obviously very cautious for this holiday season. While I think retailers in most of the country will have flat to small gains in sales, I think Manhattan, because of the incredible tourism numbers we are seeing, should weather the season more comfortably. With that said, I think the moderately priced retailer and the über-luxury retailer will do the best, while the middle-of-the pack retailers might have a hard time. Which big retail spaces are you keeping an eye on right now in Manhattan? There are a few defining large retail spaces that will anchor different parts of town. The corner of 42nd Street and Sixth Avenue is the gateway between Bryant Park and Times Square, and the right retailer there will seamlessly connect both markets. Also, 3 Columbus Circle, which we are handling, sits directly adjacent to Time Warner Center. How do you think all of the retail space at the upcoming mega-projects will impact the market? While there are a lot of new large developments coming online in the future, the reality is they will all be coming online at widely differing times. Retail at the World Trade Center will obviously lease very quickly based on its history as one of the top shopping malls in the country. Hudson Yards will finally provide some of the department stores that have anxiously been trying to get into the city with a place to go. The World Financial Center and Port Authority will be smaller projects in scope, but nonetheless should have a bunch of retailers to choose from.

Stanley Lindenfeld

senior managing director, Grubb & Ellis How much have retail prices increased since Lehman collapsed? In the strongest retail corridors in Manhattan, asking rents are not only

back to what they were before Lehman collapsed, but have increased up to 25 percent. This includes prime areas such as Times Square, Herald Square, 34th Street and Fifth Avenue. Upper Madison prices are starting to creep up again, but have not returned to what they were before the Lehman collapse. What are the most worrying trends and the most positive trends you’re seeing today in the Manhattan retail world? Retailers are expanding once again; however, both the pool of retailers and available spaces have shrunk. As retailers became more cautious and selective, the better spaces were quickly taken. That, in turn, made decisions harder for the retailers cautiously contemplating expansion and looking for prime space.

Lisa Rosenthal

director, retail services group, Lansco How is Manhattan retail doing today given the overall economic climate? We are seeing rents rise on prime locations as stores are being leased. Asking rents on Fifth Avenue are over $2,000 per square foot. After the Lehman collapse everyone was in shock. It took a while for the landlords to adjust to the reality that there were few tenants in the market then. The few tenants who were brave enough to sign leases in 2009, in retrospect, got great deals. Will there be more pop-up stores this holiday season than in the past or less? I think there will be less because more of the good space has been absorbed and is no longer available for pop-ups. There is also another trend that is happening with pop-ups: Businesses that are not even traditional retailers want to do pop-ups. I got a call today from a book publisher who wanted to do a pop-up. Other than burger joints, which retailers are most active in Manhattan today? It was cell stores, then it was banks and then it was coffee. It still is coffee, but now it seems everyone who calls me has a yogurt store concept. We are also seeing new retailers from many countries. They are everything from large, fast-fashion apparel, such as Joe Fresh from Canada, to a patisserie from France called Ladurée and a gelateria from Italy called Amarino. What are the most worrying and the most positive trends you’re seeing today in the Manhattan retail world? In my mind they’re both the same: It’s that the market is tightening, and as a broker who represents tenants, it’s harder to ﬁnd great space. TRD www.TheRealDeal.com November 2011 73

Tri-state briefs NEW JERSEY

Tate George

B-baller goes from hard court to federal court Tate George, a onetime New Jersey Nets basketball player, was arrested last month on charges of running a $2 million Ponzi scheme under the guise of a real estate development ﬁrm, the Newark Star-Ledger reported. George, a Newark native, is famous for hitting “The Shot” — a last-second jumper in the 1990 NCAA Tournament — while playing for the UConn Huskies in col-

lege. His company, the George Group, claimed to manage $500 million in assets. Would-be investors, some of whom were for-

mer professional athletes, gave George some $2 million to buy and develop real estate around New Jersey. Instead, he allegedly used the money to pay existing investors and for personal expenses, such as improvements to his home, restaurant meals and clothing. Authorities said the George Group actually had virtually no income-generating operations. George maintained his innocence and said he intends to plead not guilty. He was released on $250,000 bail. If found guilty, he faces up to 20 years in prison.

CONNECTICUT

CT residents get loans to delay foreclosure Over 1,000 Connecticut residents have secured interest-free loans, thanks to a foreclosure prevention program created by last year’s ﬁnancial reforms, according to the Hartford Courant. The Federal Homeowners’ Loan Program provided 1,070 loans totaling roughly $55 million to Connecticut residents, the Courant said. Under the program, up to $50,000 worth of aid was available to borrowers who had

experienced a 15 percent reduction in income due to unemployment, underemployment or medical expenses. The funds were part of the $1 billion given to the U.S. Department of Housing and Urban Development under the federal Dodd-Frank Wall Street Reform and Consumer Protection Act. The Connecticut Housing Finance Authority and CHFA-authorized counseling agencies received more than 3,600 applications before the Sept. 1 deadline. Connecticut, one of ﬁve states to qualify for funding, was initially given $33 million but that was increased, given the volume of applications. The loans, for borrowers who were 90 days delinquent on their mortgage payments, required borrowers to be reasonably likely to resume paying their mortgage within two years. Loans do not have to be repaid as long as the borrowers keep their primary residences for at least ﬁve years and, in that period, they make their mortgage payments on time.

WESTCHESTER

County mourns builder Well-known Westchester developer Martin Berger , who is credited with transforming downtown White Plains, died last month after suffering heart failure. He was 81. “He was literally a guy that shaped the Westchester business and residential landscape,” Jon Halpern, CEO of Halpern Real Estate Ventures, told Westfair Online. Berger

Martin Berger, right, with partner Robert Weinberg

formed his company, Robert Martin Co., in 1959 with partner Robert Weinberg. The two developed condos, ofﬁce buildings and parks throughout the county. At the time of Berger’s death, the company was working on a $20 million project to build a Super Stop & Shop on an undeveloped lot in Tarrytown. Berger also served on the Westchester County Parkway Commission. In 1999, the Journal News named Berger and Weinberg as two of Westchester’s most inﬂuential people of the 20th century. Compiled by Russell Steinberg 74 November 2011 www.TheRealDeal.com

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National market report Commercial and residential real estate news briefs from around the U.S.

The lobby of the new Public Chicago hotel

ing for bankruptcy in 2008. In papers ﬁled with the U.S. Bankruptcy Court in Manhattan last month, lawyers for Lehman said Goldman’s “unilateral and groundless termination of the agreement was wrongful,” since it violated Lehman’s contractual right to extend the deal’s deadline. Lehman also called the fund’s move “a blatant attempt to avoid its contractual obligations.”

Seattle

Chicago Hotelier Ian Schrager last month opened the new Public Chicago hotel at 1301 North State Parkway. The 285-room hotel, formerly home to the Ambassador East, is the ﬁrst in Schrager’s new line of midrange properties aimed at cost-conscious guests, Bloomberg News reported. Schrager bought the property, in the city’s Gold Coast section, for about $25 million and spent roughly the same amount to renovate the hotel and its famous restaurant, the Pump Room. “The building had great bones,” Schrager told Bloomberg. “It’s an iconic landmark. It might be Chicago’s Plaza Hotel.” Room rates start at $135 a night, and Schrager said he expects Public hotels to attract guests who would normally stay in a Courtyard by Marriott or Hilton Garden Inn. Last month, Schrager won a 76 million-pound ($119 million) bid for a Crowne Plaza hotel in London that likely will be the next Public location. Occupancy for all hotels in Chicago climbed to 64 percent from January through August, up from 62 percent a year earlier, according to Bloomberg, and the average daily room rate rose 5.3 percent to $114.20.

Looking to gain a presence in Oregon and a larger market share in the Pacific Northwest, Jones Lang LaSalle has purchased Pacific Real Estate Partners, a commercial real estate brokerage based in the Seattle suburb of Bellevue, according to the Puget Sound Business Journal. Elizabeth Hearle, Northwest market director for Jones Lang LaSalle, declined to confirm the purchase price, but sources said it was around $8 million. PREP, which has 49 employees, will retain its offices in Bellevue, Tacoma and Portland, the Journal said, but its Seattle office employees will relocate to Jones Lang LaSalle’s Seattle offices at 601 Union Street. The deal has been in the works for some time, Hearle said. “It took time for us to get to know each other at the highest level and in the field,” she said. “We think this is a very solid investment to make.” Jones Lang LaSalle has operated in the Pacific Northwest since 1995 and has some 400 agents in the region, the company said. vinced lenders of his legitimacy by securing their loans with real estate trust deeds that were actually worthless, because multiple lenders were given deeds to the same property. Due to be sentenced in March, Muhawieh could face up to 10 years in prison plus a fine of up to twice the amount of the fraud. Muhawieh also pleaded guilty to one charge of wire fraud relating to a $62,500 transaction in 2006.

Los Angeles Former “Friends” actor Matthew Perry has listed his four-bedroom, ﬁve-and-a-halfbathroom Malibu mansion for sale for $13.5 million, the L.A. Times reported. With a home theater, media room and pool, the house has 3,677 square feet of living space and is listed by Greg Holcomb and Mark Rutstein of Partners Trust in Beverly Hills. Public records show that Perry bought the property in 2005 for $6.55 million. Perry, famous for his role as Chandler Bing on the popular ’90s sitcom, purchased a Sunset Strip home for $8.65 million earlier this year.

76 November 2011 www.TheRealDeal.com

UBS Realty Investors paid 3D Investments roughly $45 million to buy the 21story, 434-room Kyoto Grand Hotel and Gardens in L.A.’s Little Tokyo, according to the Times. The Kyoto Grand, built in 1977 and formerly known as the New Otani Hotel & Garden, has long been a destination for Japanese tourists. UBS is expected to rebrand the 21-story property as a DoubleTree hotel. Newport Beach-based Rim Hospitalities, manager of the Marriott Los Angeles and the Sheraton Los Angeles, is slated to take over operations at the hotel, the Times said.

Denver Los Angeles-based Lowe Enterprises Investors last month purchased the 231,454square-foot Denver Club ofﬁce building on behalf of a pension-fund client, GlobeSt.com reported. The 24-story historic building is located at 518 17th Street in the city’s Central Business District. It recently underwent a massive $10 million renovation, with upgrades to its lobby, elevators and mechanical systems, and will receive $1.5 million in additional improvements under its new ownership. Kerri O’Neill, senior vice president of LEI, called the building “a landmark asset in a prime location,” adding that it “should The Denver Club

Washington, D.C.

San Francisco Real estate developer Maher Muhawieh pleaded guilty last month to defrauding 80 investors out of $25 million between January 2006 and March 2009, the San Francisco Chronicle reported. Muhawieh told investors he would use their money to purchase and renovate local properties, and allegedly used it for personal expenses instead. The Chronicle said Muhawieh con-

Kyoto Grand

Matthew Perry

The Lehman Brothers estate filed a lawsuit seeking $100 million in damages from a Goldman Sachs Group fund, the Wall Street Journal reported, alleging that it walked away from a $1.26 billion deal two days before it was set to close. Lehman had been set to sell the fund its 78.5 percent equity stake in 10 office buildings in a suburb of Washington, as part of a massive ongoing effort to monetize its real estate assets and raise money to pay back creditors after fil-

beneﬁt greatly from the continuing recovery of the Denver market.” The Denver Club is currently 76 percent leased. Compiled by Katherine Clarke

On the market Trump Place sites could fetch up to $400M Two Trump Place development sites — one on the southwest corner of 61st Street and West End Avenue and the other at the northwest corner of 59th Street and West End — have been put on the market, the New York Post reported. The seller is a joint venture between the Carlyle Group and Extell Development that is looking to reduce its joint holdings. Sources told the newspaper that the sites could fetch nearly $400 million combined. The parcels, which are currently being used as parking lots, are together approved for up to 1,200 apartments, the Post reported. Holliday Fenoglio Fowler is marketing the lots on behalf of the partnership.

Invesco places 33 Maiden Lane on the market Atlanta-based investment fund Invesco put the ofﬁce tower at 33 Maiden Lane on the market last month, Crain’s reported. But thanks to a unique tenant, the building’s sales price may be compromised: Three-fourths of the 625,000-square-foot tower is leased by the ultra-creditworthy Federal Reserve Bank of New York. But the bank rented the space in 1986 in an agreement that runs through 2023, guaranteeing it will be paying below-market rates for another dozen years. The bank’s presence will likely limit the sales price to about $350 per square foot, or $218 million, Crain’s said — much less than the city’s 33 Maiden Lane $509-per-foot average for ofﬁce build-

78 November 2011 www.TheRealDeal.com

Commercial properties recently placed on the market

ings. CB Richard Ellis brokers Darcy Stacom and William Shanahan are marketing the property.

Five-building ‘TriStar Portfolio’ for sale A portfolio of ﬁve mixed-use, downtown Manhattan buildings is on the market with an asking price of $60 million. The walk-up buildings, which are located in the West Village and Nolita and on the Lower East Side, are together known as the TriStar Portfolio. The buildings include: a six-story property with 42 apartments and four commercial units at 380-386 Broome Street; a ﬁvestory property with 13 apartments and two retail units at 9 Christopher Street; and two six-story properties with a combined 45 apartments and eight commercial spaces at 5559 and 61-63 Delancey Street. The portfolio is being marketed by a Massey Knakal team that includes James Nelson, Robert Burton, Michael De9 Christopher Street Cheser, Mitchell Levine, David Fowler, Caroline Hannigan and Matthew Nickerson.

Chelsea residential package on the market A portfolio of three apartment buildings and a residential development site in Chelsea is on the market with an asking price of $24.5 million. The properties include 801-803 Ninth Avenue, two ﬁve-story apartment buildings with 20 residential units and four retail units, one of which is

vacant; 767 Ninth Avenue, a four-story apartment building with six residential units and one retail unit, currently occupied by a pharmacy; and 805 Ninth Avenue, an as-of-right residential development site with 21,000 square feet of zoning ﬂoor area. Eastern Consolidated’s Gabriel Safﬁoti and Eric Weinberg are handling 767 Ninth Avenue the assignment.

LES mixed-use building asking $20M An eight-story mixed-use building at 165-167 Eldridge Street is for sale with an asking price of about $20 million. The 30,000-square-foot property, built in 2004, has commercial space on the ground and second floors as well as in the basement. Floors three through eight have a total of 18 one- and two-bedroom rental apartments. The third-floor units, along with select units on the fourth, sixth and seventh floors, have terraces. Units 8A and 8B have access to the rooftop garden. The building will be eligible for conversion to condos on June 30, 2016, when the apartments become freemarket. Robert Khodadadian of Skyline Properties is handling the sale. 165-167 Eldridge Street Compiled by Linden Lim

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Deal Sheet summary

The Deal Sheet, on pages 82 to 92, covers transactions from 9/11/11 through 10/10/11. Please submit future deals to deals@therealdeal.com.

Sales

Overview

By type

Property sales

Development

Deals Dollars

45 $1,992,780,000

Financing

By dollar volume (in millions) Development

496.19

Hotel

Industrial

Mixed-Use

28.33

Multi-family

191.93

Mixed-Use Multi-family

0 7.88

Transactions

Office

1,256.75

Buildings

Retail

11.7

Aggregate value

$636,420,000

Leases Office

Retail

Total

157

Leases square feet Office Retail Total

1,211,574 331,277 1,542,851

Office leases Office leases by industry Industry

Office leases sf by industry Leases

Industry

Top tenant reps for office leasing by sf

Square feet leased

Tenant representative

Square feet leased

Advertising & Marketing

Consulting

38,157

Richard Berzine & Co.

271,247

Education

40,600

Cushman & Wakefield

179,330

Entertainment

10,036

Newmark Knight Frank

163,214

131,822

Jones Lang LaSalle

Fashion*

40,821

Cassidy Turley

Financial

340,714

CB Richard Ellis

304,428

102,300 97,189

Food & Beverage

20,398

Studley

74,681

Government

37,000

Okada & Co.

25,742

Home Furnishings

30,000

Rice & Associates

23,125

Media

30,193

Sinvin Real Estate

21,898

NGO

81,109

Murray Hill Properties

19,861

86,093

Rosenhaus Real Estate

16,000

11,175

Prime Manhattan Realty

15,755

Adams & Co.

14,311

Other / n/a

Photography

Public Relations

Publishing

287,456

Real Estate

16,000

10,000

Colliers International

12,068 11,915

Grubb & Ellis

Retail leases Top tenant reps for leasing by sf

Retail leases by industry

Broker

Fashion

91,529

Square feet leased

Retail leases sf by industry

CNS Real Estate

74,000

Food & Beverage

40,283

Winick Realty

42,208

Health & Beauty

23,845

Crown Retail Services

20,000

Hospitality

43,600

Other

85,245

Seasonal

46,775

Sinvin Real Estate

14,564

Other

Task Realty

13,630

Seasonal

Kassin Sabbagh Realty

12,400

CB Richard Ellis

10,700

Mogull Realty

10,000

Ripco Real Estate

8,330

Newmark Knight Frank

8,300

Prudential Douglas Elliman

8,225

Centric Real Estate Advisors

7,300

New Street Advisors

5,000

00 May 2www.TheRealDeal.com (*includes showroom space)

25 4

www.www.TheRealDeal.com November 2011 81

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 9/11/11 to 10 /10/11. Please submit future deals to deals@therealdeal.com.

Office leases Address

Size

Tenant / Representative

Landlord / Representative

Notes

330 Hudson St

271,247

Pearson Inc. / R. Berzine, R. DeAngelis, R. Fenn, Richard Berzine & Co.; Jones Lang LaSalle

Beacon Capital Partners / n/a

The education company and publisher signed a 15-year lease for the entire fifth through 13th floors. The tenant is expected to occupy the space during the fourth quarter of 2013. After moving in, the company will have about 706,000 square feet total in a three-building campus that includes 330, 345 and 375 Hudson Street.

7 World Trade Center

125,000

MSCI Inc. / G. Greenspan, M. Burgio, C&W

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

The provider of investment decision support tools signed a 20-year lease for floors 47 through 49. The company is relocating from smaller offices at One Chase Plaza and 88 Pine Street, the New York Post reported. The building is now 100 percent occupied.

150 East 42nd St

94,000

Aegis Media Americas Inc. / A. Ardise, R. Bernstein, Cassidy Turley

n/a / S. Gottlieb, E. Goldman, R. Laginestra, B. Dooley, CBRE

The UK-based media and digital marketing communications firm signed a 15-year lease. The tenant, which is subleasing the entire 13th and 14th floors through 2013, will be converting to a direct lease with the landlord.

750 Third Ave

56,065

Endurance Capital Management / J. Frazier, D. Hollander, M. Holzhauer, D. Kaufman, CBRE

Fairchild Publications; SL Green / Ryan Masiello, Jones Lang LaSalle

The financial firm signed a sublease for 40,483 square feet on the second floor and 3,525 square feet on the 10th floor, as well as a 10-year direct lease with the landlord for 12,057 square feet, also on the 10th floor.

26 Broadway

42,291

Juvenile Diabetes Research Foundation / Howard Nottingham, Studley

26 Waterview LLC / H. Kesseler, J. Jacobs, Newmark Knight Frank

The nonprofit signed a new lease for the entire 15th floor, doubling its occupancy in the building. The tenant had moved into the 14th floor in 2009.

666 Third Ave

37,000

The State of the Netherlands / John Lizzul, Newmark Knight Frank

Tishman Speyer / Represented inhouse

The State of the Netherlands signed a 15-year lease on the 18th and 19th floors of the Chrysler East building. The tenant is relocating and consolidating its Consulate Generalâ&#x20AC;&#x2122;s office and its U.N. Mission.

411 Lafayette St

33,000

New York University / J. Kuhn, H. Kessler, B. Ozarowski, J. Gosin, Newmark Knight Frank

Himmel + Meringoff Properties / D. Rubens, A. Shinn, L. Block, Winick Realty; M. Stein, J. Vacker, Himmel + Meringoff

The university signed a 10-year expansion lease on parts of the third and fourth floors and the entire fifth floor, bringing its total occupancy in the building to 45,000 square feet.

1114 Sixth Ave

31,285

Luxor Capital Group / J. Ackerson, C. Reicher, M. Tighe, CBRE

Brookfield Properties / n/a

The hedge fund signed a lease renewal.

580 Gerard Ave (The Bronx)

30,000

Jaba Furniture Corp. / n/a

NR Property 2 LLC / A. Weisman, D. Woods, M. Cottingham, Grubb & Ellis

The furniture company signed a five-year lease for office and warehouse space.

498 Seventh Ave

29,468

Michael J. Fox Foundation / n/a

George Comfort & Sons / J. Mangiacotti, M. Concannon, CBRE

The nonprofit signed a lease on the 18th floor.

250 Park Ave

29,212

CIFC Corp. / E. Harris, S. Vardi, Newmark Knight Frank

AEW Capital / W. Miller, D. Hoffman, Cassidy Turley

The loan asset manager signed a new lease to expand onto the fourth floor. The tenant had been occupying a smaller, 18,000-square-foot space on the fifth floor.

40 Wall St

28,812

Huron Consulting / Lisa Kiell, Jones Lang LaSalle

The Trump Organization / C&W

The consulting firm signed a lease for the entire 20th floor.

1350 Broadway

24,862

e-Dialog / D. Katcher, E. Cagner, Newmark Knight Frank

W&H Properties / R. Silver, J. Fanuzzi, Newmark Knight Frank

The digital marketing firm signed a lease expansion and renewal, more than doubling its occupancy in the building.

666 Fifth Ave

24,140

Golub Capital / B. Waterman, L. Korman, D. Madison, B. Ozarowski, Newmark Knight Frank

Kushner Companies / S. Siegel, H. Fiddle, Z. Freeman, S. Li, M. Concannon, CBRE

The credit asset management and direct lending business signed a lease. The company is relocating from a smaller, 20,000-square-foot space at 551 Madison Avenue.

1180 Sixth Ave

22,107

Scripps Networks LLC / Samuel Clark, C&W

HNA Group / G. Varricchio, B. Varricchio, J. Tamborlane, Murray Hill Properties

The entertainment and media firm signed a six-year lease. The reported asking rent was $55 per square foot.

40 Wall St

16,209

IBISWorld Inc. / M. Shapses, C. Marx, J. Messina, C. Koeck, Studley

The Trump Organization / C&W

The publisher of U.S. industry research signed a long-term lease for half of the 15th floor.

One Grand Central Place

16,181

Haver Analytics / J. Peck, G. Kerper, Studley

W&H Properties / W. Cohen, R. Kass, J. Christiano, Newmark Knight Frank

The financial company signed a lease expansion and renewal.

411 Lafayette St

16,000

HQ Global Workplaces / Richard Rosenhaus, Rosenhaus Real Estate

Himmel + Meringoff Properties / D. Rubens, A. Shinn, L. Block, Winick Realty; M. Stein, J. Vacker, Himmel + Meringoff

The office-space provider signed a 10-year lease on the top floor.

1 Penn Plaza

13,575

SECOR Asset Management / Joe Cirone, C&W

Broadway Partners / K. Ciminelli, D. Falk, P. Shimkin, Newmark Knight Frank

The asset management firm subleased space.

40 Wall St

12,068

SS&C / Michael Cohen, Colliers International

The Trump Organization / C&W

The investment and financial management company signed a lease for part of the 15th floor.

72 Spring St

11,298

Agro-Farma Inc. / C. Owles, T. Jerry, Sinvin Real Estate

Spring Street Co. LLC / C. Owles, T. Jerry, Sinvin Real Estate

The yogurt company signed a 10-year office lease on the 12th floor. The reported asking rent was $50 per square foot.

632 Broadway

10,000

Iris Public Relations / n/a

n/a / Nora Stats, Tarter Stats Oâ&#x20AC;&#x2122;Toole

The public relations firm signed a lease on the entire fifth floor. The reported asking rent was $40 per square foot.

536 Broadway

9,705

Avalance Studios New York / Ira Rovitz, Grubb & Ellis

530 Broadway LLC / n/a

The video game developer signed a 10.5-year lease.

680 Fifth Ave

9,400

La Prairie Inc. / David Berke, C&W

Lodz Properties / B. Hay, B. Gell, CBRE

The cosmetics company signed an expansion lease on the entire 11th floor. The tenant also occupies the entire 13th and 14th floors.

40 Wall St

9,248

American Precious Metals Exchange Inc. / C&W

The Trump Organization / C&W

APMEX, the precious metals dealer, signed a 10-year lease for the entire 50th floor. The tenant paid the $176,000 security deposit with three 32-ounce bars of gold. Michael Kinney of Loeb & Loeb LLP served as legal counsel on behalf of the tenant.

477 Madison Ave

8,300

The Aspen Insitute / D. Lebenstein, D. Wollens, Cassidy Turley

n/a / D. Hoffman Jr., W. Miller, Cassidy Turley

The nonprofit signed a 10-year lease for its New York executive and administrative offices.

599 11th Ave

8,000

Sanky Communications / M. Morris, P. Ippolito, Newmark Knight Frank

The Winter Organization / N. Rubin, R. Silver, Newmark Knight Frank

The communications firm signed a lease.

82 November 2011 www.TheRealDeal.com

www.TheRealDeal.net December 200

Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

1250 Broadway

7,675

Office Depot / Randy Sherman, Murray Hill Properties

JT MH 1250 Owner LP / Randy Sherman, Murray Hill Properties

The office-supplies retailer signed a 3.5-year office lease. The reported asking rent was $52 per square foot.

254 West 35th St

7,500

High Production Inc. / Christopher Okada, Okada & Co.

n/a / Bilur Akipek, Bremenhouse

The fashion company signed a lease.

254 West 35th St

7,500

Natasha Accessories / Christopher Okada, Okada & Co.

n/a / Bilur Akipek, Bremenhouse

The fashion company signed a lease.

1250 Broadway

7,249

Spectrum Group / Gary Rosen, SL Green

JT MH 1250 Owner LP / Randy Sherman, Murray Hill Properties

The financial firm signed a six-year lease. The reported asking rent was $48 per square foot.

38 West 21st St

7,000

Whitehall Advisors / Jamie Jacobs, Newmark Knight Frank

Jack Vogel Associates / T. Jacobs, D. Rice, Rice & Associates

The UK-based consulting firm signed a lease.

42 West 39th St

6,500

Executive Color Systems / Prime Manhattan Realty

42-52 West 39 Street LLC / David Levy, Adams & Co.

The office equipment company signed a six-year lease. The reported asking rent was $38 per square foot.

35 West 35th St

6,000

42nd St. Photo / Elizabeth Juviler, Rice & Associates

Crystal Properties / Steve Cytryn, Crystal Properties

The photography equipment retailer signed a lease for second-floor office space.

35 West 36th St

5,860

React2Media / Marilyn Kane, Nichols Kane Realty

3536 Associates LLC / Robert Kaplan, Hidrock Realty

The marketing agency signed a seven-year lease. The reported asking rent was $34 per square foot.

30-12 41st Ave (Queens)

5,500

Chocomize / n/a

n/a / G. Margaronis, J. Kleinberg, Pinnacle Realty

The chocolate company signed a lease for fourth-floor loft office space.

39-41 West 38th St

5,283

Workshop/APD / J. Meran, H. Iwata, C. Okada, Okada & Co.

n/a / Catherine Oâ&#x20AC;&#x2122;Toole, Tarter Stats Oâ&#x20AC;&#x2122;Toole

The architectural firm signed a lease.

183 Madison Ave

5,086

Destination Media/GSTV / B. Varricchio, J. Rubens, Murray Hill Properties

Rigby 183 LLC / Harry Blair, C&W

The entertainment and media firm signed a seven-year lease. The reported asking rent was $55 per square foot.

1407 Broadway

4,802

iApparel LLC / David Menaged, Intrepid Real Estate

n/a / Michael Heaner, Kaufman Organization

The fashion company signed a seven-year lease. The reported asking rent was $42 per square foot.

461 Park Ave

4,775

Avalon Partners / Elizabeth Juviler, Rice & Associates

n/a / R. Sherman, B. Spagna, Murray Hill Properties

The financial firm signed a six-year sublease. The reported asking rent was $38 per square foot.

515 Madison Ave

4,600

Madison Strategic Partners / Elie Reiss, Rice & Associates

Newmark Holdings / Newmark Knight Frank

The life insurance asset manager signed a new, three-year lease on the 13th floor. The tenant is relocating from 41 Madison Avenue.

110 West 40th St

4,519

Imago Sales USA / Norman Bobrow, Norman Bobrow & Co.

One Ten West Fortieth / D. Levy, B. Maslin, Adams & Co.

The book and print production services company signed a 10-year lease. The reported asking rent was $39 per square foot.

1250 Broadway

4,369

ShoreTel / Mercedes Fernandez, Jones Lang LaSalle

JT MH 1250 Owner LP / Randy Sherman, Murray Hill Properties

The telecommunications company signed a 5.5-year lease. The reported asking rent was $48 per square foot.

40 Exchange St

4,200

Learn It Systems / Joseph Friedman, Adams & Co.

n/a / Charles Beyda, Jud Leasing Corp.

The educational services company signed a five-year lease. The reported asking rent was $28 per square foot.

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A T E S S L E R D E V E L O P M E N T W W W. T E S S L E R D E V E L O P M E N T S . C O M 3 2 3 PA R K AV E N U E S O U T H

84 November 2011 www.TheRealDeal.com

Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

162 West 21st St

4,000

Plus et Plus Inc. / Elizabeth Juviler, Rice & Associates

Northside Realty Corp. / Stan Putko, Orenda Estates LLC

The marketing company signed an expansion lease.

133 East 58th St

3,890

Cardiovascular Prevention and Therapeutics of New York LLC / Stanley Piesh, Prime Manhattan Realty

n/a / Frances Delgorio, Jack Resnick & Sons

The medical office signed a lease.

9 East 19th St

3,750

Koichiro Doi Studios / Earl Bateman, Rice & Associates

Gamrel / Doug Rice, Rice & Associates

The Japanese fashion photographer signed a lease on the second floor.

1-5 West 19th St

3,600

Grand Cru Selections / Esther Zar, Murray Hill Properties

Jan Cobb / Michael Pinney, Signature Partners

The wine distributor signed a 3.5-year sublease for office space. The reported asking rent was $33 per square foot.

132 Crosby St

3,500

Joy Cioci New York LLC / J. Tamborlane, M. Politi, R. Nizolek, Murray Hill Properties

598 Broadway Realty Associates Inc. / Dennis Someck, George Comfort & Sons

The fashion designer signed a four-year lease for showroom space. The reported asking rent was $37 per square foot.

256 West 36th St

3,400

Synergy Education Inc. / W. Siegel, R. Rozins, CBC Hunter Realty

256-26 LLC / C. O’Toole, G. Kim, Tarter Stats O’Toole

The educational company signed a lease for the entire second floor. The reported asking rent was $36 per square foot.

400 Madison Ave

3,390

Duet Asset Management / R. Feher, A. Smolyansky, CBRE

n/a / n/a

The asset management firm signed a lease for part of the 16th floor.

1114 Sixth Ave

3,319

Redwood Trust / R. Griswold, A. Smolyansky, CBRE

n/a / n/a

The financial firm signed a lease.

551 Madison Ave

3,130

Three Ocean Partners / R. Griswold, A. Smolyansky, CBRE

n/a / n/a

The boutique merchant banking advisory firm signed a lease for the entire 38th floor.

250 Hudson St

3,100

Hyper Island / R. Kornblatt, T. Jerry, Sinvin Real Estate

n/a / Brett Greenberg, Jack Resnick & Sons

The advertising firm signed a five-year lease on the ground floor. The reported asking rent was $50 per square foot.

110 West 40th St

3,059

Nu Image Fabrics Inc. / D. Levy, B. Maslin, Adams & Co.

One Ten West Fortieth / D. Levy, B. Maslin, Adams & Co.

The textile converter signed a seven-year lease renewal. The reported asking rent was $39 per square foot.

106 Liberty St

3,000

Emergency Physician Associates PLLC / Stanley Piesh, Prime Manhattan Realty

n/a / Stanley Lindenfeld, Grubb & Ellis

The medical office signed a lease.

475 Park Ave South

3,000

Tervela Inc. / J. Costello, T. Jerry, R. Kornblatt, Sinvin Real Estate

475 Building Company LLC / Kenneth Beilin, Kenneth L. Beilin Real Estate

The technology firm signed a two-year sublease on the 19th floor. The reported asking rent was $38 per square foot.

261 11th Ave

3,000

bigapplefilms LLC / J. Costello, R. Kornblatt, Sinvin Real Estate

Bulgroup Colorado LLC / R. Betesh, K. McCann, Sinvin Real Estate

The media and film company signed a three-year office lease on the ground floor. The reported asking rent was $40 per square foot.

25 West 45th St

2,592

Glenfarne Capital / Kevin Phelan, Capstone Realty Advisors Inc.

APF Properties / Joshua Goldman, C&W

The financial services firm signed a lease on the fourth floor.

259 West 30th St

2,500

Sitters in the City / Chelsea Merrifield, Capstone Realty Advisors

Two Friends Realty / Joe McLaughlin, Capstone Realty Advisors

The daycare service signed a lease for the second-floor office space.

110 East 23rd St

2,500

Shelby.tv / M. Okun, M. Piccirillo, CBC Hunter Realty

n/a / George Vatakis, Christos Realty

The online video-sharing platform signed a lease.

35 West 36th St

2,440

The Apparel Maker / Robert Kaplan, Hidrock Realty

3536 Associates LLC / Robert Kaplan, Hidrock Realty

The apparel company signed a five-year lease. The reported asking rent was $34 per square foot.

150 East 58th St

2,365

New York Spinal Specialists / Stanley Piesh, Prime Manhattan Realty

n/a / Jared Solomon, Vornado

The medical office signed a lease.

20 Jay St (Brooklyn)

2,345

Plausible Labs Cooperative Inc. / n/a

Two Trees Management / Caroline Pardo, Two Trees

The mobile software consultancy signed a lease.

405 Lexington Ave

2,210

Wilfred Aubrey LLC / Barry Lewen, Grubb & Ellis

HCL International Inc. / n/a

The securities and investment firm signed a four-year sublease.

110 West 40th St

2,174

Jiing Sheng USA Ltd. / D. Levy, B. Maslin, Adams & Co.

One Ten West Fortieth / D. Levy, B. Maslin, Adams & Co.

The fashion company signed a three-year lease renewal. The reported asking rent was $39 per square foot.

1407 Broadway

2,029

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

n/a / G. Greenspan, M. Heaner, Y. Chang, Kaufman Organization

The fashion company signed a three-year lease. The reported asking rent was $42 per square foot.

430 West 14th St

2,009

TOMS Shoes Inc. / n/a

Madison Tower NY LLC / F. Mancini, A. Weisman, S. Siegel, Grubb & Ellis

The shoe designer signed a five-year lease.

885 Third Ave

1,923

Paladin Strategici Partners / Michael Okun, CBC Hunter Realty

n/a / n/a

The investment management firm signed a lease.

20 Jay St (Brooklyn)

1,750

Type/Code LLC / n/a

Two Trees Management / Elizabeth Bueno, Two Trees

The interactive design company signed a lease.

530 Seventh Ave

1,700

Audio Technology / Brett Maslin, Adams & Co.

Savitt Partners / Brett Maslin, Adams & Co.

The audio technology firm signed a three-year lease. The reported asking rent was $45 per square foot.

260 West 35th St

1,500

New World Solutions / Ken Lerner, Okada & Co.

n/a / 260 W35th Street LLC

The computer-servicing company signed a lease.

611 Broadway

1,500

J.D. Bell Inc. / Simone Lillian, Sinvin Real Estate

Cable Building Partners LLC / Represented in-house

The interior design firm signed a five-year lease on the fourth floor. The reported asking rent was $41 per square foot.

462 Broadway

1,425

Gimletta Holdings LLC / Greg Kim, Tarter Stats O’Toole

Women Make Movies Inc. / A. Weston, K. Fishel, Legacy Real Estate

The photo stylist signed an office lease for part of the fifth floor.

147 West 35th St

1,150

Bensoni / Frank Hurtado, Okada & Co.

n/a / Carlos Silberman, Falcon Properties

The fashion company signed a lease.

1407 Broadway

1,142

D & A Apparel LLC / Steve Evans, Platinum Properties

n/a / M. Heaner, Y. Chang, G. Greenspan, Kaufman Organization

The fashion company signed a three-year lease. The reported asking rent was $42 per square foot.

45 Main St (Brooklyn)

1,135

Armchair Studio LLC / n/a

Two Trees Management / Alexander Bos, Two Trees

The graphic design and computer programming company signed a lease.

1407 Broadway

1,058

Best Lining Corporation / Joe Lui, Citi Habitats

n/a / M. Heaner, Y. Chang, G. Greenspan, Kaufman Organization

The fashion company signed a five-year lease. The reported asking rent was $42 per square foot.

494 Eighth Ave

1,050

International Treatment Preparedness Coalition / Hiro Iwata, Okada & Co.

n/a / J. Rubens, M. Politi, Murray Hill Properties

The nonprofit signed a lease.

152 West 36th St

1,000

Mister Hollywood / Hiro Iwata, Okada & Co.

n/a / Carlos Silberman, Falcon Properties

The fashion company signed a lease.

16 West 36th St

998

Nominations USA Inc. / CBC Hunter Realty

Beach Plaza Corporation / D. Levy, N. Zagar, Adams & Co.

The tenant signed a four-year lease. The reported asking rent was $36 per square foot.

1115 Broadway

960

Emcor Services New York/New Jersey / James Buslik, Adams & Co.

Eleven Fifteen Associates / James Buslik, Adams & Co.

The mechanical and electrical construction services provider signed a fiveyear lease. The reported asking rent was $22 per square foot.

www www.TheRealDeal.com November 2011 85

Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

1407 Broadway

953

Young Threads NYC / M. Heaner, Y. Chang, G. Greenspan, Kaufman Organization

n/a / M. Heaner, Y. Chang, G. Greenspan, Kaufman Organization

The factory-direct fashion company signed a three-year lease. The reported asking rent was $42 per square foot.

1407 Broadway

825

KikServices LLC / Andrew Baron, NSNYRE

n/a / Yvonne Chang, Kaufman Organization

The fashion company signed a five-year lease. The reported asking rent was $42 per square foot.

320 West 37th St

759

Rhie LLC / Hiro Iwata, Okada & Co.

n/a / Matthew Feigen, Newmark Knight Frank

The fashion company signed a lease.

485 Seventh Ave

735

JDU LLC / Haim Vinik, A.C. Lawrence & Co.

The Eretz Group / E. Zar, M. Politi, R. Nizolek, Murray Hill Properties

The garment company signed a 3.5-year lease for showroom space.

34 West 33rd St

728

BAK Apparel Inc. / D. Levy, B. Maslin, Adams & Co.

Arcade Building Associates / D. Levy, B. Maslin, Adams & Co.

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

34 West 33rd St

720

Corner Point LLC / D. Levy, B. Maslin, Adams & Co.

Arcade Building Associates / D. Levy, B. Maslin, Adams & Co.

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

34 West 33rd St

517

Frenchie Mini Couture Corporation / D. Levy, B. Maslin, Adams & Co.

Arcade Building Associates / D. Levy, B. Maslin, Adams & Co.

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

430 West 14th St

331

Celsius Films Inc. / n/a

Madison Tower NY LLC / F. Mancini, S. Siegel, A. Weisman, Grubb & Ellis

The motion picture and video production company signed a two-year lease.

45 Main St (Brooklyn)

269

Unfinished Side Productions Inc. / n/a

Two Trees Management / Elizabeth Bueno, Two Trees

The music publicity and production firm signed a lease.

148 West 37th St

253

Emcor Services New York/New Jersey / James Buslik, Adams & Co.

Fashion Associates / James Buslik, Adams & Co.

The mechanical and electrical construction services provider signed a threeyear lease. The reported asking rent was $22 per square foot.

Retail leases Address

Size

Tenant / Representative

Landlord / Representative

Notes

River Ave and Exterior St (The Bronx)

74,000

Burlington Coat Factory / Cliff Simon, CNS Real Estate

Related Companies / P. Ripka, J. Hanlon, Ripco Real Estate

The outerwear retailer signed a lease for its first Bronx location.

3 West 8th St

43,600

Richard Born; Sean MacPherson / n/a

n/a / E. Kurtz, M. Ball, F. Rudd, The Rudd Group

The hoteliers signed a long-term, triple-net lease for the entire eight-story building, the New York Post reported. The building had served as a dormitory for the past 25 years for the New School students.

766 Sixth Ave

24,317

Spirit Halloween / Alex Hill, Winick Realty

Marine Estates LLC / B. Spiegel, B. Bergman, Rose Associates

The Halloween costumes and accessories store signed a temporary, twomonth lease for a pop-up store at the Chelsea Landmark, a rental building.

158 West 27th St

20,000

Planet Fitness / R. Chera, J. Barker, Crown Retail Services

Himmel + Meringoff / Represented in-house

The fitness chain signed a 15-year lease for another location. The tenant will occupy the ground and second floors.

97 Greene St and 106 Wooster St

10,700

Tiffany and Company / A. Healey, P. Muratore, CBRE

Soho Centrale LLC; 102-106 Wooster LLC / C. Owles, M. Glanzberg, S. Shannon, Sinvin Real Estate

The jewelry company signed a lease for 12 years and 4.5 months for 6,200 square feet on the ground floor and 4,500 square feet of selling space on the lower level.

960 Sixth Ave

10,000

BankUnited / Kim Mogull, Mogull Realty

Hidrock Realty / n/a

The Florida-based bank signed a long-term lease for multilevel space.

1750 East Gunhill Rd (The Bronx)

8,828

Spirit Halloween / Alex Hill, Winick Realty

Duane Reade / Ann La Centra, Winick Realty

The Halloween costume and accessories retailer signed a lease.

2129 White Plains Rd (The Bronx)

8,450

Ricky’s NYC / Task Realty

M. Sopher & Co. LLC / n/a

The accessories and beauty supplies retailer signed a lease for a Halloween store.

200 West End Ave

7,300

apple seeds / Debra Larsen, Centric Real Estate Advisors

200 WE Owner LLC / Ross Kaplan, Newmark Knight Frank

The children’s activity center and all-in-one play space signed a new, 15-year lease to open its second Manhattan location.

420 Fifth Ave

7,025

CVS Pharmacy / J. Pruger, R. Kaplan, T. Gallina, Newmark Knight Frank

Heritage Realty Services / A. Mandell, R. Skulnik, Ripco Real Estate

The drugstore signed a lease.

112 Ridge St

6,000

Sunny Skies Preschool / Morris Sabbagh Realty, Kassin Sabbagh Realty

Ridge Street Partners LLC / James Famularo, NYCRS

The daycare center signed a 20-year lease.

54 Thompson St

5,500

Pera Soho / n/a

n/a / n/a

The Turkish restaurant signed a lease for another Manhattan location.

55 West 125th St

5,180

Ricky’s NYC / Adam Stupak, Task Realty

Cogswell Realty / R. Jacobs, A. Stapleton, Cogswell Realty

The accessories and beauty-supplies retailer signed a two-month lease for a pop-up Halloween shop.

One Grand Central Place

5,125

Pantries / Harvey Shaw, Prudential Douglas Elliman

W&H Properties / A. Yunis, J. Lack, Newmark Knight Frank

The café and restaurant signed a lease.

321 West 51st St

5,000

Ippudo Restaurant of NY / Max Lu, New Street Advisors

Rene Pujol / A. Gavios, H. Aaron, Square Foot Realty

The Japanese restaurant signed a 10-year lease for its second New York location. The space includes 4,000 square feet on the ground floor and 1,000 square feet on the mezzanine level.

123 West 17th St

4,711

Canvass Home / Drew Weiss, JDF Realty

121-125 West 17 Owners Corp. / J. Pennington, B. Cohen, Z. Nathan, Ripco Real Estate

The Soho-based home furnishings store signed a lease to open a Chelsea showroom.

4 Flatbush Ave (Brooklyn)

4,100

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

Flatbush-Fulton Realty Associates / R. Senior, I. Shabot, Ripco Real Estate

The bank signed a 20-year lease for a location at the foot of the Fulton Street Mall.

39-09 Main St (Queens)

4,000

AT&T / S. Baker, S. Weissmann, Winick Realty

Pi Associates LLC / Represented inhouse

The mobile services retailer signed a lease.

210 11th Ave

3,645

Leila Heller Gallery / Earl Bateman, Rice & Associates

Onbar Associates LLC / Joe LaRosa, ABS Partners

The art gallery signed a lease.

411 Lafayette St

3,500

Dienst + Dotter / Tricia Rosen, Rosen & Jacobs Realty

Himmel + Meringoff Properties / D. Rubens, A. Shinn, L. Block, Winick Realty; M. Stein, J. Vacker, Himmel + Meringoff

The Scandinavian antiques-and-paintings retailer signed a lease for its first Manhattan location.

667 Madison Ave

3,100

Paul & Shark / F. Consolo, J. Aquino, Prudential Douglas Elliman

n/a / F. Consolo, J. Aquino, Prudential Douglas Elliman

The Italian sportswear company signed a retail lease. The tenant is taking space previously occupied by Michael Kors.

91 Greene St

3,100

USApe LLC / Christopher Owles, Sinvin Real Estate

91 Greene LLC / Christopher Owles, Sinvin Real Estate

The fashion retailer leased the entire building for five years. The reported asking rent for the ground-floor portion was $400 per square foot.

3809 Broadway

3,000

McDonald’s / Miles Mahony, Ripco Real Estate

Apple Bank for Savings / Brad Cohen, Ripco Real Estate

The fast-food chain signed a long-term lease to relocate its café concept from across the street.

86 November 2011 www.TheRealDeal.com

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Retail leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

111 Cedar St

3,000

STAT Medical Associates PLLC / n/a

111 Cedar Street LLC / H. Goldfarb, S. Lindenfeld, G. Schwartzman, Grubb & Ellis

The ambulatory healthcare facility signed a 10-year retail lease.

285 West Broadway

3,000

Bestype Digital Imaging LLC / Represented in-house

285 West Broadway Associates LP / Joshua Salon, Salon Realty Corp.

The printing and signage service provider signed an 8.5-year retail lease.

798 and 800 Madison Ave

2,800

Cesare Attolini / Brad Siderow, The Siderow Organization

The Parkoff Organization / Represented in-house

The Italian clothing company signed a retail lease.

31 East 17th St

2,500

AT&T / Steven Baker, Winick Realty

North Fork Bank / Represented inhouse

The mobile services retailer signed a lease.

120-126 11th Ave

2,500

Elizabeth Dee Gallery LLC / n/a

Puissance Enterprises / A. Weisman, S. Siegel, Grubb & Ellis

The art gallery signed a five-year lease extension.

189 Spring St

2,250

International Pastry Concepts LLC / S. Rappaport, K. McCann, Sinvin Real Estate

LF East 21 Property Co. LLC / S. Rappaport, K. McCann, Sinvin Real Estate

The pastry company signed a 10-year lease for 1,250 square feet on the ground floor and 1,000 square feet of patio space. The reported asking rent for the ground-floor space was $192 per square foot.

147 Wooster St

2,250

Stepevi Inc. / C. Owles, S. Lillian, Sinvin Real Estate

Karen Jansons / C. Owles, S. Lillian, Sinvin Real Estate

The home furnishings retailer signed a five-year lease with a five-year option. The lease includes 1,800 square feet on the ground and 450 square feet of mezzanine-level space. The reported asking rent on the ground level was $120 per square foot.

85 John St

2,213

Basics Plus / Joseph Isa, Winick Realty

Henry 85 LLC / G. Alterman, Z. Fox, RKF

The housewares and hardware chain signed a lease for its ninth NYC location.

376 Broome St

2,200

Matta NY Ltd. / Stephen Tarter, Tarter Stats O’Toole

n/a / Greg Kim, Tarter Stats O’Toole

The clothing retailer signed a temporary lease.

188 Ludlow St

2,200

Think Pink Spa Inc. / Steve Rappaport, Sinvin Real Estate

Ludlow Street Development LLC / Steve Rappaport, Sinvin Real Estate

The nail salon and spa signed a lease for 10 years and five months. The reported asking rent was $110 per square foot.

110 West 26th St

2,000

La Mano Pottery / Kristin McCann, Sinvin Real Estate

n/a / Ray Abramcyk, The Lawrence Group

The art education company signed a 10-year retail lease. The reported asking rent was $42 per square foot.

184 Dyckman St

2,000

O’Janny’s Restaurant / Morris Sabbagh Realty, Kassin Sabbagh Realty

184 Dyckman Street LLC / n/a

The restaurant signed a lease.

343 Gold St

1,950

Building on Bond / n/a

Avalon Bay Communities / J. Pennington, B. Cohen, Ripco Real Estate

The tenant signed a long-term lease for a new restaurant concept at the base of Avalon Fort Greene.

231 West 18th St

1,800

Ina Designer Consignment / Jason Turner, Zelnik & Co.

Oreto LLC / K. McCann, J. Bowling, Sinvin Real Estate

The fashion retailer signed a 10-year lease. The reported asking rent was about $53 per square foot.

798 and 800 Madison Ave

1,800

John Lobb / Brad Siderow, The Siderow Organization

The Parkoff Organization / Represented in-house

The English shoemaker signed a lease.

498 Sixth Ave

1,785

16 Handles / Neal Ohm, CS Commercial Group

Sixth Avenue Equities LLC / Jay Gilbert, Newmark Knight Frank

The frozen yogurt chain signed a lease.

425 West Broadway

1,700

Alex and Ani Inc. / A. Yunis, J. Pierik, Carpionato Properties

Farkas Management LLC / Peter Levitan, Sierra Realty

The jewelry and lifestyle brand signed a lease for its first New York city retail store.

147 First Ave

1,600

The Bean Coffee Shop / Morris Sabbagh, Kassin Sabbagh Realty

Icon Realty / Terrence Lowenberg, Icon Realty

The café signed a 12-year lease. The reported asking rent was $110 per square foot.

1015 Sixth Ave

1,600

2 Bros Pizza / Morris Sabbagh Realty, Kassin Sabbagh Realty

Helm Management / Ron Noy, NYREX

The pizzeria signed a 10-year lease. The reported asking rent was $165 per square foot.

135 Christopher St

1,500

Amber / n/a

Christopher Realty LLC / J. Pennington, B. Cohen, Z. Nathan, Ripco Real Estate

The Asian fusion restaurant group signed a long-term lease.

1570 Second Ave

1,500

Ko / n/a

Extell Development / J. Pennington, B. Cohen, Ripco Real Estate

The Asian restaurant group signed a long-term lease.

275 Bleecker St

1,500

David’s Tea USA Inc. / Michael Hirschfeld, Surge Retail International

275 Bleecker Corp. / Steve Rappaport, Sinvin Real Estate

The tea shop signed a 10-year lease. The reported asking rent was $160 per square foot.

2600 Broadway

1,334

16 Handles / Neal Ohm, CS Commercial Group

Weinreb Management / J. Gilbert, S. Morden, Newmark Knight Frank

The frozen yogurt chain signed a lease.

3638 Bailey Ave (The Bronx)

1,300

C.A.C. Industries / M. Esposito, R. Bergman, NY Retail Group

Estate of Salvator Sciandra / NY Retail Group

The construction company signed a two-year retail lease for a field office.

254 Park Ave South

1,275

Crumbs / Jeff Roseman, Newmark Knight Frank

254 PAS Property LLC / B. Cohen, P. Garcia, Ripco Real Estate

The bakery chain signed a long-term lease for another location. The reported asking rent on the ground floor was $150 per square foot.

455 Park Ave South

1,230

Energy Kitchen / Brad Cohen, Ripco Real Estate

Farbod Realty Corp. / D. LaPierre, S. Moran, CBRE

The fast-health-food chain signed a lease for its 10th Manhattan location,

395 Amsterdam Ave

1,200

Classic Kids Photography / Walker Malloy

172 West 70th LLC / J. Pennington, B. Cohen, Z. Nathan, Ripco Real Estate

The photography studio signed a long-term lease for another location.

164-12 Jamaica Ave (Queens)

1,200

Georgina Jewelry / Isaac Arzt, Kassin Sabbagh Realty

Jamaica Avenue Realty Associates / n/a

The jeweler signed a lease.

2310 Adam Clayton Powell Blvd

915

BR Wireless 2324 Inc. / n/a

AIMCO 2300-2310 LLC / H. Goldfarb, S. Lindenfeld, Grubb & Ellis

The mobile phone company signed a five-year retail lease.

3620 Bailey Ave (The Bronx)

850

Nunez Signs and Awning / M. Esposito, R. Bergman, NY Retail Group

Estate of Salvator Sciandra / NY Retail Group

The maker of signs and awnings signed a 10-year retail lease.

412 East 9th St

810

8th Street Wine Cellar / J. Bowling, J. Costello, Sinvin Real Estate

North River Investment Company / J. Bowling, J. Costello, Sinvin Real Estate

The wine shop signed a 15-year lease. The reported asking rent was about $81 per square foot.

1589 Flatbush Ave (Brooklyn)

650

Monir Attar Inc. / M.C. O’Brien

Nomur Realty Management / M.C. O’Brien

The perfume and oil shop signed a lease for its second location.

260 Marcus Garvey Blvd (Brooklyn)

645

Mami’s Dominican Beauty Salon / M.C. O’Brien

New-Hab Housing Development Fund Corporation / M.C. O’Brien

The beauty salon signed a lease for its third location.

198 Spring St

550

Volang / C. Owles, K. McCann, Sinvin Real Estate

LF East 21 Property Co. LLC / C. Owles, K. McCann, Sinvin Real Estate

The fashion retailer signed a five-year lease. The reported asking rent was $229 per square foot.

116 Madison Ave

479

Sean / C. Owles, K. McCann, Sinvin Real Estate

n/a / Jud Ebersman, Walter & Samuels

The fashion retailer signed a five-year sublease.

259 Bleecker St

475

Three Monkeys Eyewear / C. Owles, S. Shannon, Sinvin Real Estate

259 Bleecker LLC / Steve Rappaport, Sinvin Real Estate

The eyewear retailer signed a 10-year lease. The reported asking rent was about $275 per square foot.

529 Marcy Ave (Brooklyn)

474

Bandar Kassim / M.C. O’Brien

New-Hab Housing Development Fund Corporation / M.C. O’Brien

The tenant signed a lease to open a deli.

88 November 2011 www.TheRealDeal.com The

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Retail leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

856 Nostrand Ave (Brooklyn)

461

Mobile Trendz IV / M.C. O’Brien

New-Hab Housing Development Fund Corporation / M.C. O’Brien

The tenant signed a lease to open a new Boost Mobile cell phone shop.

535 Hudson St

450

Doughboy Bakery / Steve Rappaport, Sinvin Real Estate

n/a / Marisa Almeida-Lecki, CS Commercial Group

The bakery and café signed a lease for 8.5 years with a five-year option. The reported asking rent was about $247 per square foot.

436 West Broadway

400

Robert Marc Eyewear / Isaacs & Co.

436 Realty LLC / Christopher Owles, Sinvin Real Estate

The eyewear retailer signed a five-year lease renewal. The reported asking rent was $470 per square foot.

116 McDougal St

400

Lucky 777 Chili Co. / n/a

MacDougal Associates LLC / Jeffrey Angel, RES Commercial Corp.

The chili company signed a lease for its first retail location in NYC.

829 Second Ave

350

Perfect Brows / Joshua Singer, Winick Realty

Olympia House LLC / Annie Shinn, Winick Realty

The health and beauty chain signed a lease for another location.

Buys Address

Size

Buyer / Representative

Seller / Representative

530 Fifth Ave

26-story, 500,000 sf office bldg

Crown Acquisitions; Murray Hill Properties; Jamestown Properties; Rockwood Capital / n/a

The Chetrit Group; The Moinian Group / n/a

The property sold for $390 million, or $780 per square foot, the Wall Street Journal reported. Jamestown Properties and Rockwood Capital, which are providing equity for the purchase, will be the controlling equity holders in the property. The selling group originally acquired the building for $210 million in 2004. The building has 21,790 square feet of retail space on Fifth Avenue, currently occupied by LensCrafters, Chase bank and Fossil. The building also has several big-name office tenants, including JPMorgan Chase and MassMutual.

1540 Broadway

907,427 sf office bldg

HSBC Alternative Investments; Edge Fund Advisors / n/a

CBRE Investors / D. Stacom, W. Shanahan, CBRE

The remaining 51 percent stake in the Bertelsmann building sold for $346.8 million. The buyers acquired 49 percent of the building from CB Richard Ellis in November 2010, in a deal valued at $254 million. CBRE had previously purchased the property in a fire sale from Macklowe Properties.

Seventh Ave and Greenwich Ave

Former hospital/ development site

The Rudin family / n/a

U.S. Bankruptcy Court for the Southern District of New York / n/a

The Rudin family’s $260 million purchase of the former main campus of St. Vincent’s Hospital in Greenwich Village closed last month, the Wall Street Journal reported. The Rudins bought the property from the closed hospital’s Chapter 11 estate. The Rudins’ $800 million plan to redevelop the site calls for a new healthcare center, condominiums, townhomes and an elementary school.

1107 Broadway

16-story office bldg

Witkoff Group / n/a

Lehman Brothers / A. Spies, D. Harmon, Eastdil Secured

The purchase of the building, a part of the former International Toy Center, closed for $191 million, following a bankruptcy auction in June. The new ownership is planning a $290 million condo conversion, featuring 145 units, in collaboration with a Morgan Stanley real estate fund.

475 Fifth Ave

280,000 sf office bldg

TIAA-CREF / n/a

Barclays Capital Real Estate / D. Stacom, W. Shanahan, CBRE

The property sold for $144 million, or about $514 per square foot. A joint venture of real estate developer Joseph Moinian and Westbrook Capital acquired 475 Fifth Avenue, located at 41st Street, in 2007 for $160 million, but lender Barclays took the property back in 2009 through a deed in lieu of foreclosure.

31 Penn Plaza

18-story, 444,000 sf office bldg

Savanna / n/a

C&K Properties; Zamir Equities / R. Cohen, R. Baxter, S. Latham, J. Caplan, Jones Lang LaSalle

The property sold for $130 million. The building will undergo $26 million in capital improvements to update the property and lease the available office space, Savanna said, including a new front entrance, fully renovated lobby, modernized elevators and other building upgrades and maintenance.

170 Amsterdam Ave

20,700 sf development site

Equity Residential / n/a

American Continental Properties / n/a

Equity Residential signed a 99-year lease with the intention of building apartments with retail at the stalled site, the New York Post reported. The deal was valued at $76.5 million.

165 West 60th St

Development site

Glenwood Management / n/a

Fordham University / n/a

The vacant development site sold for $75 million, adding to the new ownership’s collection of sites formerly owned by Fordham University. The buyer is believed to be planning a 54-story residential tower at an adjacent lot at 160 West 60th Street.

93 Worth St

165,000 sf office bldg

Izaki Group Investments USA / n/a

World Wide Holdings / V. Carrega, Y. Oelsner, C. Kingsley, J. Meister, Grubb & Ellis

The property sold for $49.7 million. The building is slated for conversion into a 96-unit residential condo.

1143 Second Ave

6-story, 85,000 sf apt. bldg, 93 units total

Stonehenge Partners / n/a

KFJ Realty / n/a

The property sold for $47 million. The building contains 52 studios and 41 one-bedrooms, and has about 10,000 square feet of ground-floor commercial space. The building has 77,000 square feet of development rights.

12-14 Warren St

Development site

Anida Operacions Singulares / n/a

Rc1 LLC / Kelly Lin, Misrahi Realty

The existing building with additional air rights sold for $26.17 million.

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000 October 80 20092008 www.TheRealDeal.com 90 July November 2011www.TheRealDeal.com www.TheRealDeal.com July 2009 www.

Buys continued Address

Size

Buyer/ Representative

Seller / Representative

Notes

412 East 90th St

Development site

The Spence School / n/a

Hertz Corporation / n/a

The property sold for $26.1 million, the New York Observer reported.

344-346 West 14th St

6-story, 22,000 sf apt. bldg, 20 units total

First Atlantic Real Estate / n/a

Real Estate Equities Corporation / V. Carrega, N. Helman, C. Kingsley, J. Meister, Grubb & Ellis

The property sold for $23.25 million. The price represents a stabilized capitalization rate of about 5.45 percent. In addition to the apartments, the building has two retail spaces with selling basements.

Bronx portfolio

5 apt. bldgs, 196 units total

Investors / n/a

Investors / J. Coleman, J. Manous, M. Cuniberti, Houlihan-Parnes Realtors

The package of apartment buildings sold in separate transactions for an aggregate price of about $19 million. The portfolio includes a six-story, 36unit building at 2710 Valentine Avenue; a six-story, 48-unit building at 2695 Briggs Avenue; a five-story, 26-unit building at 2737 Webb Avenue; a fivestory, 32-unit building at 3202 Kossuth Avenue; and a five-story, 54-unit building at 3215 Hull Avenue.

Bronx portfolio

6 apt. bldgs, 260 units total

Gazivoda Realty / n/a

Bluestone Group / n/a

The package of once severely distressed apartment buildings sold as part of a bankruptcy case filed by the former ownership company, for $17.6 million. The properties are located at 1636 University Avenue, 1640 University Avenue, 1589 East 172nd Street, 1585 East 172nd Street, 1268 Stratford Avenue and 1350 Dr. Martin Luther King Jr. Boulevard.

529-537 East 81st St

5 apt. bldgs, 41,600 sf and 100 units total

n/a / George Niblock, FriedmanRoth Realty

n/a / Bill Harra, ABC Management

The contiguous residential buildings sold for $16.9 million.

48 North 8th St (Brooklyn)

Development site

North 7/8 JV LLC / Aaron Jungreis, Rosewood Realty

Van Bensen Management / Aaron Jungreis, Rosewood Realty

The property sold for $12.25 million, or $102 per buildable square foot. The site has been preapproved for a 120,000-square-foot residential development.

184 Joralemon St (Brooklyn)

12-story, 30,000 sf dorm bldg

United American Land / n/a

Brooklyn Law School / n/a

The dorm building sold for $10.7 million. The buyer plans to renovate the property, “and introduce modern, luxury residential rentals, which are in great demand in this Brooklyn Heights submarket,” Albert Laboz, a principal with United American Land, told The Real Deal.

500 West 43rd St

Parking garage, 130 spaces total

Harbor Group International / n/a

Alliance Parking Services LLC / n/a

The three-level parking facility sold for $10.5 million. The garage is net leased to the Hertz Corporation, which uses the space for one of its car rental sites.

142 Sullivan St

7-story, 16,212 sf apt. bldg, 28 units total

Galiano LLC / George Niblock, Friedman-Roth Realty

Benchmark Real Estate / George Niblock, Friedman-Roth Realty

The property sold for $9.43 million, or $582 per square foot. The seller had acquired the building, which has two retail units, in October 2009 for $5.9 million

838 Riverside Dr

6-story, 56,190 sf apt. bldg, 42 units total

n/a / n/a

n/a / Robert Shapiro, Massey Knakal

The elevator building sold for $9.4 million, or $167 per square foot.

113 East 61st St

6-story, 5,700 sf townhouse

n/a / n/a

n/a / G. Garvin, R. Knakal, Massey Knakal

The property sold for $8.3 million, or about $1,456 per square foot. The building was bank owned after a foreclosure and was most recently used as offices by a hedge fund, according to a release from the broker. The buyer plans to convert the property back to a single-family residence.

334 Canal St

5-story, 14,545 sf apt. bldg

Vornado / n/a

CNBS Trust / David Noonan, Newmark Knight Frank

The building sold for $8.2 million at an auction, Crain’s reported. The property has full-floor loft apartments and a 2,900-square-foot retail space.

156 Prince St

6-story, 15,000 apt. bldg, 24 units total

n/a / n/a

n/a / R. Burton, Massey Knakal; J. Weintraub, L. Schaffer, Prudential Douglas Elliman

The elevator building sold for $7.8 million, or $520 per square foot. Thirteen of the apartments are rent stabilized and three are rent controlled.

449 Washington St

5-story, 8,200 sf mixed-use bldg

n/a / Massey Knakal

Fresh Squeezed LLC / Christopher Johnson, Sinvin Real Estate

The building sold for $6.9 million, or about $841 per square foot.

1181 Grand St (Brooklyn)

1-story, 31,000 sf industrial bldg

English Kills Realty LLC / Steve Nadel, Pinnacle Realty

n/a / S. Nadel, D. Junik, Pinnacle Realty

The warehouse sold for $6.58 million.

261 East Kingsbridge Rd (The Bronx)

6-story, 66,780 sf apt. bldg, 67 units total

n/a / Alan Zucco, Besen & Associates

The elevator building sold for $6.4 million, or $96 per square foot. The price represents a capitalization rate of 7 percent and a gross rent multiple of 7.2. The property, which has nine indoor parking spaces, is entirely rent stabilized.

82 Christopher St

5-story mixed-use bldg

Jayvanka LLC / Rex Gonzalez, Halstead

Beck Street Capital / James Nelson, Massey Knakal

The property sold for about $6.1 million. Beck Street Capital bought the building in December 2005 for $3.7 million.

666 West 162nd St

6-story, 53,034 sf apt. bldg, 50 units total

n/a / n/a

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

The elevator building sold for $6 million. There are 17 one-bedrooms, 19 twobedrooms, nine three-bedrooms and five four-bedrooms.

59-25 Kissena Blvd (Queens)

22,000 sf comm. bldg

Gramercy Surgery Center Inc. / n/a

Emblem Health; Health Insurance Plan of Greater New York / Colliers International; M.C. O’Brien

The property sold for $5.6 million. The buyer will renovate and use the building as an ambulatory surgery center.

193 Spring St

3-story, 5,000 sf mixed-use bldg

Marco Gonzalez / n/a

The Kash Group / M. Glanzberg, S. Rappaport, Sinvin Real Estate

The building sold for $5.5 million, or $1,100 per square foot.

147 East 30th St

5-story, 10,070 sf apt. bldg, 20 units total

n/a / n/a

n/a / J. Ciraulo, R. Knakal, J. Hageman, M. Azarian, Massey Knakal

The elevator building sold for $4.51 million, or about $448 per square foot. Ten of the apartments are rent stabilized.

279 Church St

6-story, 9,975 sf apt. bldg

n/a / Shane Barbanel, GFI Realty

The loft building sold for $4.5 million.

211 West 22nd St

5-story, 3,400 sf townhouse

n/a / n/a

n/a / B. Emmetsberger, J. Nelson, Massey Knakal

The property sold for $3.85 million, or about $1,132 per square foot. The building, which is configured as a triplex apartment and two floor-through units on the third and fourth floors, was purchased for conversion into a single-family home.

138 West 19th St

4-story office bldg

Overseas development fund / n/a

Private investor / Billy Billitzer, Itzhaki Properties

The walk-up building with ground-floor retail sold for $3 million, or $731 per square foot. The property, which is being delivered vacant, has an additional 10,000 square feet of air rights.

216 East 95th St

5-story, 8,150 sf apt. bldg, 10 units total

216 East 95 LLC / A. Jungreis, M. Kerwin, Rosewood Realty

216 East 95th Street LLC / A. Jungreis, M. Kerwin, Rosewood Realty

The walk-up sold for $2.7 million. The price represents a gross rent multiple of 11.

1423 Avenue J (Brooklyn)

7,403 sf apt. bldg

Saya LLC / C. Cahane, Forte Capital Management

n/a / C. Cahane, Forte Capital Management

The property sold for $2.67 million, or $360 per square foot, to a 1031 exchange buyer. The price represents a capitalization rate of 6 percent.

219 Jay St (Brooklyn)

30,000 buildable sf development site

n/a / n/a

145 Hudson St

3,000 sf office condo

Hudson 1928 LLC / Michelle Stone, Sinvin Real Estate

CTK Ventures LLC / A. Shmaruk, A. Kriegston, Manhattes Group

The second-floor commercial condo sold for $2.25 million, or $750 per square foot.

541 Bergen St (Brooklyn)

16-unit apt. bldg

Local investor / Marcel Fridman, Barcel Group

n/a / David Warren, Barcel Group

The walk-up building sold for $1.72 million. The price represents a gross rent multiple of 10.

80 July 2009 www.TheRealDeal.com

n/a / Stephen house ad Palmese, Massey Knakal

The development site sold for $2.3 million, or about $78 per buildable square foot.

www.TheRealDeal.com November 2011 91

Buys continued Address

Size

Buyer/ Representative

Seller / Representative

Notes

79 West 127th St

5-story redevelopment bldg

n/a / n/a

n/a / R. Shapiro, L. Kimyagarov, Massey Knakal

The property sold for $1.57 million, or about $150 per square foot. The building is in a state of disrepair due to a previous fire.

1020 Manhattan Ave (Brooklyn)

8,500 sf mixed-use bldg

n/a / Shay Zach, Itzhaki Properties

The property sold for $1.53 million. The building has seven residential units and five retail units.

15-15 132nd St (Queens)

6,593 sf warehouse bldg

Or Bakol LLC / Theo Kontis, Harvest International

Solos International Group / Stephen Preuss, Massey Knakal

The industrial building sold for $1.3 million.

306 Mott St

Comm. condo

Private investor / n/a

Ramon LLC / Kelly Lin, Misrahi Realty

The commercial condo traded for $1.2 million in a sale-leaseback transaction. The space has a private backyard.

162 Linden Blvd (Brooklyn)

4-story, 10,757 sf apt. bldg, 6 units total

Local investor / n/a

n/a / S. Antebi, Y. Simantov, GFI Realty

The property sold for $1 million. The price represents a gross rent multiple of 7.2. The building has three retail stores.

Financing Address

Size

Borrower / Representative

Lender / Representative

Notes

Seventh Ave and Greenwich Ave

Former hospital/ development site

The Rudin family / n/a

Bank of America; JPMorgan Chase; Bank of New York Mellon; M&T Bank / n/a

The Rudin family obtained $525 million in construction financing for its $800 million redevelopment of the main campus of St. Vincent’s Hospital, the Wall Street Journal reported. Plans call for luxury condos, townhomes, a medical facility and an elementary school.

80 Broad St

36-story, 417,000 sf office bldg

Savanna / J. Estreich, C. Barnett, Estreich & Company

Mesa West Capital / n/a

A $65.3 million loan was secured to finance the acquisition of the property and the new ownership’s capital improvement campaign, which will include a $23 million investment towards building improvements, leasing commissions and renovations to tenant spaces.

Spring St and Wooster St

7-story, 76,000 office bldg

n/a / Harold D. Baker & Co.

RiverSource Life Insurance Company / n/a

An $18 million first mortgage was arranged for the property. The loan was placed for a 10-year term with a 30-year amortization schedule. Mulberry recently opened its New York flagship store in the retail portion of the building.

400 East 77th St

158-unit apt. bldg

400 East 77th Owners Inc. / n/a

NCB / n/a

A $6.2 million first mortgage and a $1 million line of credit were arranged for the building.

315 East 72nd St

225-unit apt. bldg

315 East 72nd Street Owners Inc. / n/a

NCB / n/a

A $4 million first mortgage and a $3 million line of credit were arranged for the building.

212 East 29th St

5-story apt. bldg, 13 units total

n/a / D. Morris, A. Stewart, Cronheim Mortgage

n/a / n/a

A $4.87 million loan was arranged for the acquisition of the walk-up building. The 10-year loan has a fixed interest rate of 4.5 percent and amortizes over 30 years. The loan amount represents 70 percent of the building’s purchase price.

525 West 238th St

69-unit apt. bldg

Fieldston Garden Apartments Inc. / n/a

NCB / n/a

A $3.8 million first mortgage and a $500,000 line of credit were arranged for the building.

520-522 West 50th St

40-unit apt. bldg

520 West 50th Street Inc. / n/a

NCB / n/a

A $1.8 million first mortgage and a $750,000 line of credit were arranged for the building.

65-70 Booth St (Queens)

42-unit apt. bldg

Rhoda Apartments Corporation / n/a

NCB / n/a

A $1.7 million first mortgage and a $500,000 line of credit were arranged for the building.

Other Deals Africa Israel sells Clock Tower for $165M

Park Ave. Plaza, second building fetch $569M

Africa Israel USA is selling the Clock Tower building at 5 Madison Avenue to an undisclosed buyer for $165 million, the company announced last month. The transaction is expected to close Dec. 15, or upon extension of the agreement and an additional $1 million payment, around Jan. 16, 2012. “We are delighted to have reached an agreement with a very credit-worthy buyer to secure the future of this remarkable building and support the burgeoning vitality of the Madison Square Park neighborhood,” Tamir Kazaz, CEO of Africa Israel, said in a statement, declining to provide information besides what was in the press release. (The deal was announced after the deadline for the Deal Sheet.)

When Boston-based real estate investment firm the Rockpoint Group announced that it had sold its stake of Park Avenue Plaza at 55 East 42nd Street early last month, the company declined to reveal how much it had received for the sale. But according to public records filed with the city Oct. 26, Rockpoint received a massive $569.1 million for its 49 percent share of the 1.2 million-square-foot Plaza plus another building at 49 East 52nd Street. The company was represented by CB Richard Ellis, according to data from Real Capital Analytics. (The deal was announced after the deadline for the Deal Sheet.)

West Side arms race continues as Brookfield, Related prepare sites for construction

The New York City Human Resources Administration last month inked a 20-year lease for 400,000 square feet at a 10story building at 470 Vanderbilt Avenue in the Fort Greene area of Brooklyn, the New York Times reported. It was, as of last month, the biggest real estate deal in Brooklyn in 2011, and brings the building to 85 percent occupancy. “The building is huge — an entire city block — and it has basically sat vacant and derelict for years,” said Steven Hurwitz, the vice president of acquisitions and developments at GFI Development, the company that owns the ground lease. (The deal was announced after the deadline for the Deal Sheet.)

In their efforts not to fall behind one another in the development of massive West Side sites, Related Companies and Brookfield Office Properties each plan to begin construction at their properties early next year, the Wall Street Journal reported. At Hudson Yards, at the LIRR storage area between 10th and 12th avenues and 30th and 33rd streets, Related is close to an agreement with Coach for 600,000 square feet in the first building set to rise at the site’s southeast corner. But financing for the building may not be complete until the developer can ink another tenant. Meanwhile, Brookfield has said several times that next year it will start constructing the $300 million deck above the rail tracks, along Ninth Avenue between 31st and 33rd Streets, which is needed before any structures rise. 80 2009 www.TheRealDeal.com 92 July November 2011 www.TheRealDeal.com

HRA inks the biggest lease in Brooklyn this year, ditches Manhattan digs

Savanna to buy 21 Penn Plaza for $137M New York-based real estate investor Savanna last month formed a partnership with the Feil Organization to purchase the office building known as 21 Penn Plaza for $137 million,

the New York Post reported, marking another acquisition for the active firm. Recently, Savanna picked up nearby 31 Penn Plaza for $130 million. It has also acquired 100 Wall Street, 80 Broad Street, 386 Park Avenue South, 104 West 40th Street, 1375 Broadway and 5 Hanover Square through a $550 million investment fund it closed in April. (The deal was announced after the deadline for the Deal Sheet.)

New Tower Trust buying 309 Fifth Avenue A site at 309 Fifth Avenue, between 31st and 32nd streets, is in contract to be sold to an entity controlled by New Tower Trust, which is based in Bethesda, Md., the Post reported last month. The newspaper described the property as a 27,000-square-foot building that is part of a larger, 150,000-square-foot development site. The site was last sold in 2006 for about $50 million and carried a $31 million mortgage from Arbor. (The deal was announced after the deadline for the Deal Sheet.)

Silverstein still hopes private firm can force city out of 4 WTC The previously reported deal for the city’s Human Resources Administration to take more than half a million square feet at 4 World Trade Center could be upended by a privatesector tenant, according to the Post. The developer of the 2.2 million-square-foot building, Silverstein Properties President Larry Silverstein, had previously said that if a private tenant takes the space the city’s commitment “may not be necessary.” He and the Port Authority of New York & New Jersey, which owns the site, would prefer private tenants to fill the space, the Post said. TRD

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Commercial market

from page 28

town South market, which was $41.25 per square foot, just $0.13 per foot above last month’s ﬁgure. The availability rate fell modestly last month, by .1 points to 9.4 percent, the Cassidy Turley statistics revealed.

Downtown The big managed healthcare company Healthfirst, which inked last year’s largest relocation lease Downtown, at SL Green Realty’s 100 Church Street, is now taking more space in the building. In August 2010, the nonprofit signed a 20-year deal for 172,600 square feet on the 16th through 19th floors. Then, last month, it signed for another 57,817 square feet with

an asking rent of $36 per foot, on the 14th ﬂoor, CoStar data showed. Jones Lang LaSalle brokers Bill Peters and Derek Trulson represented the tenant. The building was represented by a team of Newmark Knight Frank brokers led by James Kuhn, as well as SL Green agents. SL Green took full ownership of the 21-story ofﬁce building from the Sapir Organization in January 2010. At the time, 58 percent of the 1 million-square-foot building was vacant. “Tenants are moving into [mostly] empty buildings; you are seeing that in Midtown and Downtown,” Peters said. At such properties, ironically, existing tenants are getting

boxed in as newer tenants take long-term leases around them. Therefore, companies such as Healthﬁrst are looking to sign for more space than they currently need, “to control their destiny.” Asking rents Downtown followed the pattern seen in Manhattan overall, with the market remaining stable, with a slight improvement. Asking rents rose by $0.14 per foot to $37.57 per square foot from the prior month, but are down by $0.41 per foot from the same month a year ago. But while average asking rents have remained in a thin margin for the last 12 months, the vacancy rate has fallen steadily. Last month it was 10.4 percent, down .1 points from the prior month, and down from 13.5 percent one year ago. TRD

are, in fact, giving an undisclosed amount of money not as a retention bonus but as a “show of appreciation” to the majority of employees, both commissioned and salaried, who remained at the ﬁrm.

like a year’s worth of production.” While Avison Young declined to comment for this article, company CEO Mark Rose was quoted in a Canadian publication last month saying that part of a new $40 million investment by Canadian private equity firm Tricor Pacific Capital would be used to grow its New York office. Rose — who was at the helm of Grubb & Ellis when it merged with NNN Realty Advisors in 2007 — is spearheading the U.S. expansion. However, several longtime Manhattan brokers said it would be tough for Avison Young to break into this market by hiring brokers a few at a time. “If you think you can build a company and culture and business based on buying talent, it is a ludicrous concept, and you will fail,” is how Newmark’s Gosin bluntly put it. James Wacht, principal of the New York office of Lee & Associates, would not comment on what financial incentives were being offered, but said senior brokers would be allowed to invest as shareholders in the New York office and subsequent offices that open. The New York City office of NAI Global may be in a better position to hire talent next year. It lost a few agents a year ago to Colliers, and more recently a pair to Murray Hill Properties, and has been in limbo for months as it negotiates to sell to investor Andrew Farkas and his CIII Capital Partners (see related story on page 32). That deal, announced in June, was expected to close in the third quarter, but did not. Insiders said a separate Farkas deal with ailing Grubb & Ellis may be delaying the NAI purchase. One insider said NAI’s New York office had fallen behind in paying draws, the money advanced to relatively junior agents to keep them afloat. Jeffrey Finn, president and CEO of NAI Global, told The Real Deal there was no financial issue with draws. “Our position on draws is they are meant for an interim period, and we continue to use draws as a method to help people transition and stabilize in the industry,” he said. A source at NAI said the company would be more aggressive about recruiting — utilizing incentives such as preferred splits — once a sale to Farkas was finalized, now expected by the end of the year. TRD

Compensation from page 48 However, insiders say there is a rough guideline that a firm will pay successful brokers a onetime bonus equal to their average annual earnings over the past three to five years. Superstar brokers, meanwhile, can get up to four times that. In a standard incentive deal, a broker who earned $500,000 in gross commissions annually over several years and took home $250,000 would be offered a cash incentive of $250,000 to join a firm. But sources said some of the firms that are hiring now are offering bonuses that are twice that — or $500,000 to those who generate $500,000 in gross commissions — to mid-level (rather than superstar) brokers. Other incentives that companies are using to lure brokers include higher commission splits (either for a limited time or permanently), agreements to pick up additional expenses for brokers, and offers to pay for stock from their old companies that will be lost because of the move. Newmark is one firm paying brokers who stay put. The company, among the top three or four in the city, has not seen an exodus of agents. Sources say there were bitter complaints recently about a proposed new broker contract whereby the firm would pay brokers some of their commissions in company stock. However, they noted, company CEO Barry Gosin agreed to keep paying brokers the traditional way — although payments in stock will remain in some fashion. “They saw a contract and got pissed off,” one Newmark insider said. “It is being modified.” While the deal for Newmark’s principals to sell the company to BGC for $63 million in cash plus stock was finalized in the middle of last month, each agent now has to negotiate a contract with the new owner. The firm’s 14 major producers — whom the insider said control 75 percent to 80 percent of the business — are locked in for about five years. While some industry sources said Newmark is offering “retention bonuses” of about 10 percent of a year’s income to brokers, that characterization was disputed by others. The company source said that Newmark principals

Aggressive incentives No firm wants to be seen as overpaying for brokers, and the mere suggestion that a firm is paying “above market” can cause executives to wince. That’s because firms don’t want to be seen as being profligate with money or desperate to bring on successful agents. The money, the firms say, is spent with the expectation that the firm will recoup its investment in two or three years. Cohen said Colliers’ incentives were in line with the industry. But (like the rest of the more than a dozen sources The Real Deal spoke with for this story) he declined to provide specific numbers about his own firm. “The formula that we and others use is, what is the individual or team average production over three to five years, and then we focus on the house share of that,” Cohen said. He added that it is “not uncommon, in a multiyear agreement, for the incentives to be given out over a period of years and tied to production.” Colliers made some cost-cutting moves over the summer, and cut back salaried staff in property accounting and corporate accounting. Sources said the local office is looking to hire a sales manager, leading to rumors, which Cohen denied, about a high-level shake-up there. The local office is led by Cohen, CEO Mark Jaccom and COO Joseph Caridi. While Colliers has a long presence in the region through the old firm Williams Real Estate, Avison Young is trying to gain a beachhead by hiring experienced agents from other firms. In September, Avison Young — which has opened 10 offices in the United States since 2009 — hired leasing broker Gregory Kraut, a former first vice president at CBRE, as a principal. An executive at another New York brokerage firm said Avison Young was “talking to people in every discipline — sales, retail, office,” and offering incentives, “probably

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 October issue story “Assessing Anglo’s auction,” The Real Deal incorrectly quoted Ben Thypin of Real Capital Analytics about the auction of Anglo Irish’s portfolio. The correct and full quote is: “No one but a bank could really afford to buy the performing loans, so the performers and nonperformers inevitably went to different buyers.” In the October issue story “Meet the Landlord,” The Real Deal misspelled a name. The correct spelling is: “Alan Ziess.” In the October issue story “Top Tweeters,” The Real Deal incorrectly stated that Halstead Property agent Renée Fishman won REBNY’s Rookie of the Year Award in 2010. In fact, she won it in 2009. 94 November 2011 www.TheRealDeal.com

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Residential market

Behind every real estate deal there is a thoughtful, business-savvy professional.

rental market report by RentJuice released last month. In west Soho, the city’s most expensive neighborhood for tenants, average asking rents hit $7,782 per month, while in Tribeca and Central Park South average rents were $5,151 and $4,309, the report said. Those moving here for jobs are facing an uphill battle in ﬁnding housing, since many renters who moved during the recession are staying put, unable to ﬁnd the same kinds of bargains, Wagner said. Citi Habitats’ Leon said that nearly all of his tenants have decided to renew their leases, even with a rent increase, rather than move. Still, despite the much-discussed landlord’s market, tenants continue to haggle over new leases, from the rent to the broker’s fee to the conditions of the apartment, said Miron agent Julia Perez. In the last month, Wagner has encountered renters in at least six instances who have secured landlord approval to move into new apartments — on prime blocks on East 10th Street, West 16th Street and elsewhere — only to turn around and try to renegotiate the rental rates. Not one of those six tenants has succeeded, he said. TRD

Fall selling

M.S. in Real Estate Even in the toughest of economic times, well-connected, well-informed real estate professionals who understand the markets and who anticipate the needs of their clients will find success. The M.S. in Real Estate, offered by the NYU Schack Institute of Real Estate, integrates theory with real-world application, covering every segment of the industry. Learn from faculty members who are top professionals in the field. Join a global network of more than 2,000 alumni. Gain the competitive advantage in the real estate capital of the world – NYC. Information Session: Tuesday, November 8, 6–8 p.m. Kimmel Center, 60 Washington Square South, New York, NY For event information and to RSVP visit scps.nyu.edu/graduate-events6a

scps.nyu.edu/msre1a 212-998-7100

96 November 2011 www.TheRealDeal.com

Seiter&Miller 000666 Pub. The Real Deal Size 4.625 x 13.125 Issue November Art Director: lg Copywriter: ms Account Executive: wt Date 10/26/11

from page 20

from page 22

growing families in need of larger apartments has stayed strong, said Doug Perlson, CEO of the Manhattan-based online brokerage RealDirect. The timing of the fall Jewish holidays also impacts the relative importance of the fall selling season. In some years, Rosh Hashanah is celebrated just after Labor Day; this year, it fell on Sept. 29. Every year, “the volume of activity declines in the two weeks when there are Jewish holidays,” Olshan said. During the week of Rosh Hashanah this year, there were only three sales of Manhattan homes priced above $4 million, down from nine the week before, according to Olshan’s weekly Luxury Report. When this lull comes midway through autumn, it tends to disrupt the momentum of the sales market. That’s because brokers have less time to close deals before Thanksgiving, when the holiday season again distracts New Yorkers from real estate, Olshan said. “Selling time in the fall season has already been somewhat marginalized by the spring, and now you cut into selling time even more [with the Jewish holidays],” Miller said. Sellers are also nervous about listing their homes in the fall, Perlson said, because if the transaction falls through in today’s difficult mortgage climate, they face the prospect of putting the home back on the market during the slow winter season. “If your deal falls through, it’s Thanksgiving, and you are not on the market again until after the New Year,” Perlson said. “This risk may be pushing some sellers to simply wait until after the New Year, when there is a longer season.” Noah Rosenblatt, founder of the real estate analytics and consulting firm UrbanDigs, said it’s too soon to determine if this is a long-term change in the patterns of New York real estate. But it shows no sign of abating yet, if bonuses are any indication. “There’s no indication that in the next five years there’ll be any big changes [to bonuses],” Miller said. “At least in the near term, they will remain a significant part of our regional economy.” TRD

Internet

from page 42

ten dollars can invest in a domain name.” But there are, of course, significant differences between online and offline property investments, said Shaun Osher, CEO of the Manhattan brokerage Core. “An apartment can be bought, sold and lived in by many families,” Osher wrote via email. “An Internet domain name is only valuable to the person or business the address specifically relates to.” Osher’s strategy is to buy domains that relate to his specific business or goals, rather than to purchase broad key-word phrases, like Gordon and Olshan have done. One such site is CoreTalks.com, on which he currently hosts his blog. He said he’s not even concerned that someone else currently owns shaunosher.com. In fact, he turned down a recent offer to buy it because the price was too high. Parkinson, though, has a slightly different take. He looks for domains with a geographic and an industry focus, from NewYorkApartments.com to UtahMortgages .com. Then it’s just a matter of finding a buyer for whom a domain will have value. “Just like real estate, it’s about finding the right buyer,” he said. TRD

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Comebacks

from page 69

Comeback financiers Rob Verrone claims that his nickname, “Large Loan,” stuck simply because it rhymes. But there’s no question that the former Wachovia banker was at the center of some major deals during the boom — working with Macklowe, SL Green, the Carlyle Group and other high-profile players to secure financing on projects like 650 Madison, the Chelsea Market and the StarrettLehigh Building. He also put $2.9 billion of Wachovia’s money into the Stuy Town deal, though he sold the debt to investors, recouping the bank’s stake. Wachovia issued $69 billion in loans during the boom, according to a recent Bloomberg Businessweek profile of Verrone. In many ways he was partly responsible for the risky, overleveraged lending practices that led to failed deals — or at least he was part of the process that led to problems in the banking system. And many of the developers he issued loans to got stuck with bills they couldn’t pay. Verrone declined to comment for this story, but by his own public admission, he also helped inflate the bubble by making loans easy to come by (though he didn’t get stuck with them because he sold off the debt to hungry investors as bonds). He left Wachovia in 2008, right before it nearly imploded, which could have hurt his career. But he was picked up by Wells Fargo and since then, something odd has occurred. Some of the developers who purchased debt from him and got in trouble are asking him to come back and help them restructure those loans. His new firm, Iron Hound Management, which he founded in 2009, has issued more than $4.5 billion in loans. Recently, Verrone’s firm helped refinance 666 Fifth Avenue, according to industry sources, and is working out troubled loans for three of Joe Moinian’s buildings: 180 Maiden Lane, 3 Columbus Circle and the Ocean. Two of them — 180 and the Ocean — were buildings he secured financing for in the first go-around.

Rob “Large Loan” Verrone

clothing company Net-a-Porter. Part and parcel of that activity is the fact that venture capital money is ﬂowing into the tech sector. In the third quarter, 86 start-ups in the state — the vast majority of them based in the city — raised $831 million, topping former frontrunner Boston’s 83 deals, worth $710 million, according to CB Insights, a research company. “There is clearly something going on,” Ken McCarthy, senior economist and senior management director at Cushman & Wakeﬁeld, said. Average rents for these companies are about $40 a square foot, higher than they were a decade ago, when tech start-ups could lock in $20, said Jennifer Falk, executive director of the Union Square Partnership, a business improvement district that covers a neighborhood where many of those tech companies are based.

Comeback streets

Retailers were an early casualty of the recession, closing up shop on Madison from the East 50s to the East 80s. The number of store vacancies along the stretch in 2009 was about 30, meaning about one in every seven stores was empty, a high in recent memory, an analysis by The Real Deal at the time found. And those vendors were high-end retailers. French glass designer Lalique, linen company E. Braun & Co., and jeweler David Yurman, for example, all relocated. At the same time, rents plunged, data shows, to about $700 a square foot from $1,800 precrash. Now, though, Madison Avenue may be in the midst of a revival. There were about 10 deals in the third quarter, mostly with high-end apparel companies, said Jeffrey Roseman, a retail broker with Newmark Knight Frank. They included spaces taken by Michael Kors at 677 Madison, Faberge Jewelers at 694 Madison, and Valentino at 821 Madison. And rents have spiked, up to $1,400 in some cases, Roseman said, adding that he was never worried about long-term ills for Madison. Comeback industry New York’s “Silicon Alley,” the collection of tech “This is the true luxury street in New York businesses in Manhattan, was dominant in the City,” he said. “People want ‘Madison Avenue’ late 1990s. Until recently, though, the industry on their shopping bags.” was resting in peace. Meanwhile, Fourth Avenue in Brooklyn saw Madison Avenue saw 10 deals for retail leases in the third quarter. Unlike the other comeback kids being feaa slew of new construction condos go up during tured this month, NYC tech’s trajectory wasn’t the boom, after the six-lane thoroughfare, which tied to the 2008 financial meltdown. Nonetheis lined with gas stations and auto-body shops, was rezoned in 2003 to allow for buildings up less, it has roared back in recent years with a to 12 stories. hunger for loft-style office space — just like in the old days. Those projects very publicly stalled when the As The Real Deal has reported, in addition to market turned. But as The Real Deal reported in Google’s record purchase of 111 Eighth Avenue August, the stretch has started to find its footing late last year, dozens of online businesses have as several condos, like the Arias, turned rental or been gobbling up Manhattan office space. For chopped prices and began filling up. example, the wedding website TheKnot.com reIn fact, the 95-unit Arias is 95 percent leased cently leased 64,000 square feet at 195 Broadafter only a few months on the market, a spokesway. Meanwhile, online retailer Gilt Groupe man said. Fourth Avenue in Brooklyn, where new development buildings have started filling up. Others doing well include the Argyle, at Sevexpanded to a two-floor, 98,000-square-foot enth Street, which is now about 70 percent sold, brokers say, and 500 Fourth Avenue. berth at 2 Park Avenue. Also, last month, Twitter opened its first New York office at And some, like Novo, at Fourth Street; Crest, at Second Street; and C560, on nearby 340 Madison Avenue. And Tumblr, a blogging service, leased space on East 21st Street. Other tech start-ups to put down tent stakes here in 2011 include ZocDoc, which books Carroll Street, are sold out, said Aroza Sanjana, a broker at Brooklyn’s Warren Lewis doctor’s appointments; FreeWheel Media, an ad sales company; and consumer re- Realty. She also said a new condo called Jade 8 near the Gowanus Canal will start marview site Yelp, which is at 104 Fifth Avenue, also home to Apple and to women’s online keting its eight units soon. TRD PHOTOGRAPH OF VERRONE BY MICHAEL EDWARDS FROM BLOOMBERG BUSINESSWEEK; BROOKLYN PHOTO BY DEREK ZAHEDI 40 March 2011 www.TheRealDeal.com

www.TheRealDeal.com November 2011 97

Farkas

from page 32

many in the industry and the political world. The relationship was also scrutinized in the 2010 gubernatorial race, when Cuomo successfully ran against Tea Party candidate Carl Paladino. A Farkas spokesperson declined to comment on his relationship with Cuomo. Despite questions raised by the Cuomo controversy, Farkas has kept his legacy intact as an iconic dealmaker.

Acquisition tear, take two This time around, Farkas is again going after distressed and undervalued assets, but has waded into a much more sophisticated and complex set of deals. In late August, his C-III Capital Partners (an afﬁliate of Island Capital Group) signed a deal to buy the special servicing arm of JER Partners, which manages $35.5 billion in specially serviced loans nationwide. The companies will manage a combined 14,000 loans with an aggregate balance of $152 billion, $17 billion of which are currently in special servicing. The acquisition came on the heels of Farkas’s purchase of Centerline last year. He’s also recently started up a new round of acquisitions. Just last month, C-III announced the deal to invest $10 million in Grubb & Ellis. Grubb & Ellis had previously been in negotiations with Colony Capital, but that deal stalled earlier this year. Grubb & Ellis ofﬁcials declined comment. Under the new agreement, C-III will buy $4 million of Colony Capital’s existing investment and the two will jointly own 100 percent of Grubb’s senior secured debt. The acquisition gives Grubb, whose stock has been on

L+M

Farkas told The Real Deal that his goal is to leverage the various products and services of these companies to help investors gain access to capital and create a single point of contact for nearly everything required to restructure a deal. “To the extent there are more defaults in underlying loans, there’s more opportunity to provide capital [to resolve these situations],” said Farkas. “In doing so, we are able to insert ourselves into the ownership positions or the capital stacks that are having financial difficulties.” Rival brokerages such as CBRE, Jones Lang LaSalle and Cushman & Wakefield will be the main target of Farkas’s expansion, and some executives agreed that large corporate clients will be attracted to a one-stop point of service on certain loan deals. “Grubb & Ellis would hold a lot more value to Andrew Farkas and Colony Capital than it would to just stand-alone investors,” said Sandy Monaghan, managing director of Cushman & Wakefield’s capital markets group. “The inherent value within Farkas and his group is that Farkas controls a lot of product through his special servicing arm.” Larry Longua, director of the REIT Center and an associate professor at NYU’s Schack Institute of Real Estate, said from his perspective, “It looked like a high-risk gamble

back then and this is a high-risk gamble. “This is kind of the ice age. We’re not going to see the levels of growth 20 years ago. It’s going to take a lot longer, and it’s going to cost a lot more for [Farkas] to replicate what he did before,” he said. Monaghan pointed out that Farkas is not alone in trying to build out a multilayered platform of real estate services. For example, BCG Partners — a financial brokerage led by Howard Lutnick, chairman and CEO of investment fund Cantor Fitzgerald — completed a deal last month to snap up Newmark & Company Real Estate. A spokesman for BCG said the company does not comment on future strategy. There are other firms that could give Farkas a run for his money, especially on the special-servicing side. For example, Fortress Investment Group, the $43 billion fund manager known for foreclosing on the Sheffield condominium near Columbus Circle, has expanded into the special-servicing and real estate finance sectors. Meanwhile, Miami-based LNR Property, the world’s largest special servicer of real estate loans, has also taken steps to diversify its business, putting it in the crosshairs of Farkas’s expanding empire. As the economy continues to stall in the U.S., and the European debt crisis continues to rattle global markets, firms like LNR and CWCapital will continue to pursue their strategies to diversify in competition with Farkas. But Farkas noted that the longer the economy is in distress, the more his company will thrive. “The truth is, the more challenging the climate, the better it is for our strategy of distressed investment,” he said. TRD

Investment Group — hit the market in 2009, at the height of the downturn. Of the 75 units, four are left. The high-ceilinged apartments sold for decent prices — about $550 per square foot — but it took “a long time” to sell the units, Moelis said. He paid off the lender, Wells Fargo, last month, but the slow sales process means L+M won’t make a profit on condo sales at the project. “We’re paying a big interest rate to Goldman for their mezz,” he said, “so if it takes a long time to sell, that means it hurts.” Overall, however, L+M won’t lose money on PS90, in part because having a construction division provides an additional source of income. Because L+M’s construction and development divisions are technically separate companies, they each have their own fee structures. And while profits from condo sales vary depending on the market, general contractors get paid the price they negotiated with the lenders, investors and developer. (If they come in under budget, they can make more profit, Moelis said, whereas if they go over budget, they make less.) “As long as we finish the job, we make the construction profit,” Moelis explained. “It’s not market-dependent.” When condo sales were at a standstill during the recession, profits L+M made from construction jobs helped keep the company afloat, especially at affordable housing projects that continued despite the economic turmoil. “We were very busy right after the crash,” Moelis said. “Affordable housing ... was still good business.” Rose said he sometimes wishes his company had its own construction division. “Having a construction division is a big advantage,” Rose said. “From the project point of view, it gives the company direct control of the project’s quality, budget and schedule. From the profitability point of view, it adds another source of profit on a project. Affordable housing projects are only modestly profitable, so having multiple sources of income

is very helpful.” That’s a good thing, because many of L+M’s projects are not easy. At Columbia Commons, for example, Moelis acquired the land for a reasonable “$8 to $10 million,” including the cost of rezoning, but the deal took six years to come together. After working out an agreement with the feuding factions of the family that owned the land, L+M began the process of rezoning it from manufacturing to residential. In exchange for building affordable housing, the city contributed some land to the project. Then, when the Hamberger factory was demolished to make way for the project, dozens of concerned neighbors turned out at community board meetings, said Craig Hammerman, the district manager of Brooklyn’s Community Board 6. “People felt the size of the L+M project might be overwhelming,” he said. Plus, this rapidly gentrifying section of Brooklyn had been scarred in recent years by run-ins with developers, explained City Council member Brad Lander. “The community has been hit by these developers who were not responsive to the neighbors,” Lander said. “There have been a lot of bad experiences.” To their surprise, Moelis incorporated the board’s suggestions on the color of the brick, and agreed to reduce the height of the project from eight to six stories. L+M “really went out of their way to engage in an active dialogue with the community about the design,” Hammerman said. Of course, Moelis wasn’t cooperating out of sheer altruism. The community’s participation in the project eased the construction and sales process, and likely helped it sell out faster. “Anytime that there’s a project the community has an opportunity to leave an imprint on, there’s usually more buyin by the community in general,” Hammerman said. “The smart developers realize that.” TRD

life support (it was at 46 cents a share last month), a renewed sense of stability. And, sources say, Farkas and Colony are negotiating a much broader transaction with Grubb than just the $10 million investment. They say the two ﬁrms are looking to hammer out a deal that could give them total control of the ﬁrm.

A targeted expansion

from page 65

lis “to do creative ﬁnancing that works well in these deals,” Loewentheil said. “It’s made [Ron’s] life a lot easier knowing that he’s got this construction arm that can build these projects,” he added. “It allows him to focus on his side of the business.”

Writing down investments In the mid-2000s, L+M started doing more market-rate condos, Moelis said, “because the market was so good.” That turned out to be a less-than-ideal scenario when the financial crisis slammed into the city in 2008. At the time, L+M was involved in about five condo deals, and had “about a half a billion dollars of debt,” Moelis said, though he noted that he didn’t have personal recourse on any of his deals. It was especially bad timing for two of L+M’s deals: Northside Piers and PS90. Of Northside Piers, Moelis said, “I expected it to be my biggest financial success, but because of where the markets went, it wasn’t.” Luckily, he’d brought in two partners to share the risk: Toll Brothers for the market-rate units, and Dunn Development on the affordable side. The first two buildings of Northside Piers contain 450 market-rate condo units, and an adjacent building called Palmers Dock has 113 affordable rentals. After several years on the market, there are still 50 market-rate units left, though Williamsburg has rebounded better than he expected it would right after the crash. “Two years ago, I wrote my investment down to zero,” Moelis said. Instead, “we’ll get a lot of our money back.” As for PS90, Moelis has a soft spot for the project because of its location: L+M redeveloped the other buildings on the once-vacant block one by one, starting with an 87-unit, lowincome rental project and progressing to middle-income rentals and co-op units. PS90 — one of several L+M projects financed through a $100 million dedicated fund with Goldman Sachs Urban 98 November 2011 www.TheRealDeal.com

Cash myth

from page 56

national clients. “There are very few private banks that would touch foreign nationals.” But that might be changing, according to sources, including Jason Auerbach, a divisional manager at First Choice Loan Services. Auerbach opened the New York ofﬁce of First Choice a year ago, partly to cater to foreign nationals seeking U.S. mortgages. In the last year and a half, three competitors have also started lending to

this market, he said. “The foreign national mortgage market is very active,” he noted. While the bar for foreigners to obtain mortgages in the U.S. is high, the upside is an interest rate that, in many cases, is lower than those available at home, insiders said. (A buyer like Fitapelli’s Londonbased investment banker, with an established banking relationship back home, may still be able to get a lower interest rate overseas, experts said.)

Interest rates in Russia, for example, vary between 10 percent and 20 percent, depending on the type of loan involved, Bykov said. But wealthy Russians whom private banks are courting as customers can get rates in the U.S. as low as 2 percent, he said. Fitapelli and Robert London, a private mortgage specialist at Manhattan-based lender Thomas Funding Group, worked with one Panama native who signed an allcash deal — and could have come up with

the funds if necessary — but decided to ﬁnance half the purchase price with a U.S. mortgage anyway. The contract did not have a mortgage contingency, nor did it prevent the buyer from applying for a loan, Fitapelli said. But the seller, who assumed the foreign buyer had the money in hand, was “a little upset,” he said. “It’s true for brokers and sellers,” Dunayer said. “Just ask the questions; don’t take anything for granted.” TRD

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The Association of Real Estate Women presents “Hudson Yards Transformation of Midtown’s West Side” with speaker Jay Cross, president of Related Hudson Yards. Cross, who is leading Related’s development of the 26-acre Hudson Yards site, will give an update on the project’s progress. 11:30 a.m. to 2 p.m. Club 101, 101 Park Avenue. Fee: free for AREW members, $120 for nonmembers. Information and registration: www.arew.org.

CapRate Events holds the inaugural New Jersey Apartment Summit, with sessions on how institutional capital is changing the state’s apartment industry, and the state of commercial multifamily financing. Speakers include Ronald Ladell, senior vice president of AvalonBay Communities; Carl Goldberg, partner at the Roseland Property Company; and Richard Miller, CEO of the Pegasus Group. 7:30 a.m. to 5 p.m. The Grand Summit Hotel, 570 Springfield Avenue, Summit, N.J. Fee: $275 by credit card, $250 by check. Group discounts available. Information and registration: www.apartmentsummit.com/nj.

The Young Real Estate Professionals of New York presents a networking event with light appetizers. 6:30 to 9:30 p.m. Polar Lounge at the Hotel Marcel, 201 East 24th Street. Fee: $10. Registration: yrepnyrsvp@yahoo.com.

The Real Estate Insiders Network hosts a continental breakfast. Kosher food will be served. 8 to 10 a.m. Café Centro, 200 Park Avenue. Fee: $40. Registration: rsakols@reinny.com.

The NYC Real Estate Expo features over 20 real estate-focused seminars. A forum entitled “The NYC Real Estate Titans” will feature Richard Mack, North American CEO of Area Property Partners; John Catsimatidis, chairman and CEO of Red Apple Group; and columnist Michael Stoler as moderator. Seth Pinsky, president of the city’s Economic Development Corp., will speak at a seminar called “New York: Who’s Driving This Train?” 8 a.m. to 4:30 p.m. Columbia University, 2920 Broadway. Fee: $80. Information and registration: www.nycrealestateexpo.com.

The Massey Knakal Multifamily Summit features 14 sessions, including “New Development Showdown: Rentals vs. Condos — Where’s the Best Money to Be Made?” and “Affordable Housing: The Changing Fundamentals of the Low-Income Housing Market.” Featured speakers include Bruce Beal, executive vice president of the Related Companies, and Harold Fetner, president and CEO of Durst Fetner Residential. 8 a.m. to 4:30 p.m. McGraw-Hill Conference Center, 1221 Sixth Avenue. Fee: $245 until Nov. 3, then $345. Information and registration: www.greenpearl.com/mkms2011.

New York Commercial Real Estate Women hosts its 10th Anniversary Holiday Gala, featuring cocktails, dinner and awards. Fee: $85 for NYCREW members, $110 for CREW Network members, $125 for nonmembers. 6:30 to 9 p.m. Columbus Citizens Foundation Townhouse, 8 East 69th Street. Information and registration: www.nycrew.org.

100 November 2011 www.TheRealDeal.com

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The Brooklyn Historical Society hosts its Brooklyn Real Estate Roundtable fifth-anniversary luncheon, featuring City Council Speaker Christine Quinn, who will discuss issues concerning the city’s economy and development. Other panelists include Jed Walentas, vice president of Two Trees Management, who will discuss Two Trees’ new hotel at 80 Wythe Avenue in Williamsburg; Karen Hopkins, president of the Brooklyn Academy of Music, who will speak about the Fisher Building, which BAM recently opened on Ashland Place; and David Gemach, public affairs director of Consolidated Edison, who will discuss Con Edison’s infrastructure and future plans in Brooklyn. 12 to 2 p.m. 128 Pierrepont Street. Fee: $300. Information and registration: www.brooklynhistory.org.

B’nai B’rith hosts its monthly real estate luncheon featuring Robert Von Ancken, senior executive managing director at Grubb & Ellis Consulting Services. 12 p.m. 100 Park Avenue. Fee: $60 up to two days in advance, $70 at the door. Registration: (212) 885-7239 or akuilan@bdo.com.

The Associated Builders and Owners of Greater New York hosts a luncheon featuring Adrienne Albert, CEO of the Marketing Directors. Albert will discuss the unit types and sizes, and condo amenities, to build now. 12 p.m. The Princeton Club, 15 West 43rd Street. Fee: $75 for ABO members, $95 for nonmembers. Registration: (212) 385-4949.

The New York City Department of City Planning, the Harvard University Graduate School of Design and the Real Estate Institute of Baruch College host “Zoning the City,” a conference on the challenges facing the city and the role of zoning in meeting them. Speakers include Robert Steel, deputy mayor for economic development; Amanda Burden, director of city planning; and Mary Ann Tighe, CEO for the New York Tri-State Region at CB Richard Ellis. 8:30 a.m. to 5:30 p.m. McGraw Hill Conference Center, 1221 Sixth Avenue. Fee: $395; $150 for government, community organization or academic employees; $50 for students. Information and registration: www.zoningthecity.com.

The Real Deal hosts its seventh annual forum, where developers, brokers, financiers, economists and city officials debate the current and future direction of New York City real estate. Developer Billy Macklowe will face off against a special guest; Dewey & LeBouef’s Stuart Saft will debate attorney Adam Leitman Bailey; and Warburg’s Frederick Peters will challenge Lockhart Steele, founder and editor of the Curbed Network. 3 to 8:30 p.m. Avery Fisher Hall, 10 Lincoln Center Plaza. Fee: $25. Information: bit.ly/realdealforum.

The New York University Schack Institute of Real Estate is hosting its 44th annual conference on capital markets in real estate. The topic of this year’s conference is “The Velocity of Reward and Risk in the Age of Social Networking: The Express Lane to a Recovery in the Global Real Estate Capital Markets.” Panelists will include Stephen Ross, chairman and CEO of the Related Companies; Bill Rudin, vice chairman and CEO of Rudin Management Company; and Larry Silverstein, president and CEO of Silverstein Properties. 8 a.m. to 3:40 p.m. Waldorf Astoria, 301 Park Avenue. Fee: $795. Information and registration: www.scps.nyu.edu/realestate.

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THE CLOSING THE DATA BOOK EVENTS

IHOP steps into the Limelight

MAGAZINE

MULTI-MEDIA

JOB BOARD

TIPS

SOUTH FLORIDA

IHOP to take space in Chelsea’s Limelight

Manhattan Apartments sues A.C. Lawrence By Candace Taylor An alliance between 27-year-old rental brokerage Manhattan Apartments and upstart A.C. Lawrence has soured, leaving the two firms embroiled in a court battle. Manhattan Apartments founder Gerald “Jerry” Weinstein filed a lawsuit in New York State Supreme Court against A.C. Lawrence and its principals, Larry Friedman and Anthony DeGrotta, along with Weinstein’s business partner, supermarket mogul Leonard Franzblau. Alleging breach of contract and fraud, Weinstein sued for roughly $10 million. Friedman and DeGrotta — who were hired in 2009 as consultants at Manhattan Apartments — and Gerald Weinstein Franzblau quickly countersued, claiming that Weinstein “commandeered” the company by changing passwords, funneling money into new bank accounts, and even barring them from the office. “Not only are we vigorously defending the case, but vigorously prosecuting the counterclaims,” said attorney Philip Greenberg, who is representing A.C. Lawrence and Franzblau. “As far as we’re concerned, the case is really about the counterclaims.”

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