The Real Deal October 2011 by The Real Deal

Inside the Anglo auction

Video store holdouts

Foreign guarantors: Worth the risk?

Roommate ads get day in court

109

Kleiers’ new novel: like ‘Sex & City,’ minus sex

THEREALDEAL

Vol. 9 No. 10 October 2011 $3.00 N EW YO R K R E A L E S T A T E N E W S Playing out FACT the ‘what ifs’ In 2011, Canadians have poured

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Wall Street loses its grip

Assessing best & worst cases for NYC’s real estate market

BY C. J. HUGHES If another full-blown recession hits, NYC could see massive residential price drops and “zombie” ofﬁce towers. But if a stimulus is passed or the European crisis clears, the real estate climate here could drastically improve. Inside: 10 “what ifs” for the NY market. See story on page 40

Real estate’s toughest boss

Hot-tempered ﬁnance honcho Howard Michaels is on a roll BY CANDACE TAYLOR Howard Michaels, founder of the Carlton Group, the real estate advisory ﬁrm, FEATURE STORY is having a blockbuster year, with billions in deals so far. But working for him is no picnic: His temper has earned him comparisons to Ari Gold, the brash talent agent on “Entourage.”

How a weakening ﬁnancial sector may drag down NYC real estate further

See story on page 52

BY LEIGH KAMPING-CARDER, ADAM PINCUS AND C. J. HUGHES In the last few weeks, as many of the big banks have been besieged by bad news, the question has become: Will a new round of Wall Street pain trickle down to New York’s already vulnerable residential and S PECIAL commercial markets? Indeed, the financial firms are known for filling big blocks of Manhattan offices, and their employees are the darlings of the

residential luxury market. But there are signs that Wall Street is loosening its grip on the city’s economy as ﬁnancial ﬁrms shed jobs and, in some cases, put sublease space on the market. This month, The Real Deal breaks down all of that, plus looks at the ManR EPORT hattan properties that Wall Street’s biggest tycoons, from Lloyd Blankfein to Jamie big See stories beginning on page 44 Dimon, call home.

Top tweeters

A new club for NYC brokers: Those with 1,000 followers

Shaping skylines: It’s (David) Childs’ play

BY JULIA DAHL To tweet or not to tweet. That is the question for many NYC real estate pros. Some savvy brokers and executives have emerged as the industry’s top tweeters, racking up thousands of followers at a time when the average residential broker has only around 100. Find out who’s in the 1,000-plus club and what their secrets are for parlaying tweets into real estate deals.

See page 110.

See story on page 38

PHOTO CREDITS ARE HERE

$2 billion into NYC properties, more than investors from any other country, according to Real Capital Analytics. See page 66.

AT A GLANCE Sales see uptick, no thanks to low rates Manhattan residential sales activity jumped 16 percent in the third quarter over a year ago, partly due to artiﬁcially small numbers in 2010. Record-low interest rates have little to do with buyers’ decisions and could even hurt the market, some experts say. See pages 16, 18.

Clearing the FiDi fog Brokers in the Financial District are joining forces to tackle problems with transparency they say exist in the residential market there. See page 34. John Jay College’s new 11th Avenue building.

Small investors chip in for buys

Syndication deals on rise

BY JANNA HERRON Small-time investors are increasingly pooling their money to buy or build NYC properties. And they often have a leg up over traditional investors who can’t get ﬁnancing. See story on page 28

The $15 billion enigma

Eastdil Secured manages to stay out of spotlight, despite leading pack in brokering investment sales

BY ADAM PINCUS Google’s record $1.8 billion purchase last year of 111 Eighth Ave. put the name Eastdil Secured on the lips of everyone in NYC Eastdil $4.5B real estate. But the low-profile real estate CBRE $3.6B investment banking firm, which managed C&W $1.7B the sale, typically doesn’t have the same vis(Source note: see page 63) ibility as its rivals. That’s despite doing $15 billion in sales nationally last year and leading the brokerage pack in New York this year, thanks to top-gun brokers Doug Harmon and Adam Spies. Still, the firm is lagging overseas, where the competition is heating up. Top brokerages for NYC investment sales this year

See story on page 62

Going for big and bold on 11th Avenue John Jay’s new 11th Avenue building is a bold addition to the Upper West Side, says critic James Gardner. While the Skidmore, Owings & Merrilldesigned tower may lack the beauty of some of the ﬁrm’s other projects, it makes up for it in character. See page 60.

Coney Island’s roller-coaster ride While Coney Island has clearly come back from the dead, the real estate market there has been held back by the slowdown. See page 68.

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Highlights O C T O B E R

2 0 1 1

Residential activity ramps up

The interest rate debate

School construction multiplies

Manhattan market reports show home sales rose in Q3, but prices were ﬂat. Experts say the allure of rock-bottom ﬁnancing for residential deals is gone.

In the past three years, NYC schools have been driving overall construction starts.

desk of: Ken Fisher 22 AtThetheFisher Brothers exec is an

honorary Green Beret.

words... 26 InThistheir month’s funniest and most insightful real estate comments.

Ken Fisher

Chipping in to buy a slice of NY Syndication deals are heating up, especially among some ethnic groups in the city.

Anglo’s auction 30 Analyzing In wake of loan sell-off,

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borrowers go after the Irish bank, while insiders dissect how its portfolio was divvied up.

Sean FitzPatrick

Last of the Mohicans 32 The How some video store owners are hanging on to their NYC real estate.

Clearing the FiDi fog

Top tweeters

Brokers organize to combat Lower Manhattan’s lack of transparency.

Tips from NYC real estate pros with thousands of Twitter followers.

Finding the black swan

A look at real estate disasters

Wall Street’s grip loosens

TRD spots the doomsday scenarios — and rose-colored glasses — for real estate. A post-Irene survey of NYC’s worst calamities for real estate in the past.

Big banks still play an outsize role in NYC, but other ﬁelds gain ground.

International guarantors: Worth the risk? Residential landlords see more requests from overseas ﬁnancial backers.

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Highlights continued

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estate’s toughest boss? 52 Real Howard Michaels on being

compared to “Entourage’s” Ari Gold.

month in real estate history 54 This The $400M Times Square project that never was; plus, plans take shape for the world’s tallest tower.

Howard Michaels of the Carlton Group

the landlord 58 Meet Alan Zeiss — owner of 217 East 4th Street, 225 East 10th Street and more — talks about his “stolen” building. Eastdil’s Benjamin Lambert, left, and Roy March

62 A $15 billion enigma Eastdil Secured manages to stay out of the spotlight — despite leading the pack in brokering investment sales.

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gets ‘loonie’ 66 Canada For Canadian investors, it may be a record year for commercial real estate deals in NYC, eh?

‘People’s Playground’ 68 The How the redeveloped amusement park is changing Coney Island.

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Commercial Market Report

National Market Report

Brookﬁeld grabs Anton and Solarz

Reports from around the country on signiﬁcant developments and trends.

Eastern Consolidated veterans help the Toronto-based giant ramp up its NYC brokerage operations.

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

100

Eastern Consolidated’s Ronald Solarz, left, and Eric Anton

Calendar of Events Check out this month’s activities.

105

109 A look inside the Kleiers’ new book Will they parlay their new novel into another TV show?

10 October 2011 www.TheRealDeal.com

108

�� Metals in Construction ��

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

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

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Residential Market Report

110

Childs’ play How David Childs went from zoology to One World Trade.

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

106

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

109

We Heard A lighter look at industry buzz.

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aybe the question for Wall Street these days shouldn’t be “When will things get back to normal?” Instead, it should be “Will they ever get back to normal?” That’s one of the ideas we explore in our cover package this month, which looks at the impact of a diminished financial sector on the real estate market in New York. Of course, Wall Street is the prime driver of the city’s economy, and its success (or lack thereof ) determines how many high-end apartments get snapped up, and how much office space gets leased each year. These days, Wall Street workers and firms are spending more cautiously than in the boom-time heyday, hindering the real estate market in the process. But could it stay that way? Are we living in an age of permanently diminished expectations? For any real estate broker whose commission checks are half of what they were a couple of years ago, or any developer who is eking out a profit on a small rental project instead of raking in the dough on big condo towers, that’s an unpalatable thought. But there are some sobering stats, compiled by C. J. Hughes, Adam Pincus and Leigh Kamping-Carder (who we welcome this month as our newest reporter) for a series of stories beginning on page 44: • Wall Street employment has come back weaker after every downturn since the early 1990s, according to New York’s Independent Budget Office. • The number of finance professionals as a percentage of all renters in Manhattan has declined 22 percent from six years ago, a report by Nancy Packes Inc. and StreetEasy found.

Are we living in an age of permanently diminished expectations? • Wall Street shed three times as many jobs as other sectors as a result of the financial crisis, and will contribute only 1/20 of the city’s employment growth through 2015. And that’s not to mention the Dodd-Frank Wall Street Reform Act — which was signed into law last year and will be enacted in 2014. The law mandates that banks have more cash reserves on hand, which could slow lending. Plus, it adds new regulations for derivatives (probably a good thing) and executive pay. It all makes you long for the days when QE2 was just a luxury ocean liner, not the name of a Federal Reserve plan to save the economy. But while Wall Street still runs this town, there are some signs of change on the horizon, with other groups of renters and buyers picking up the slack (albeit at lower price points). That includes a sharp increase in the percentage of overall renters who work in technology or “creative” fields since the mid-2000s. And it’s interesting that Midtown South, the one Manhattan office district that has relatively little to do with Wall Street (in comparison to Midtown and Downtown) — and which houses many creative businesses — has performed best through the downturn (see page 24). But it remains to be seen whether these sectors could ever serve as main economic engines of the city the way finance has. Everyone is looking for the next “Big Idea” to stimulate the economy, President Obama included. Still, it’s not inevitable that Wall Street will always be the city’s dominant economic force. New York has profited wildly from Wall Street for the past three decades. But historically, Wall Street trading didn’t factor into the city’s economy in a huge way in the 1950s and 1960s. Of course it’s also possible I’ll be writing in The Real Deal a decade from now, lamenting the devastating impact New York feels as a result of the latest bubble on Wall Street (the early 2020s version of the S&L crisis or subprime implosion). Elsewhere in the issue, we sketch out some broad best- and worst-case scenarios for New York’s real estate market, given the economic turmoil (see page 40). And we look at how low interest rates might actually be hurting the market now (see page 18). And definitely worth a read is our profile of Howard Michaels, the head of the Carlton Group, which has arranged financing for more than $5 billion in commercial real estate deals this year alone. The story details Michaels’ scrappy, take-noprisoners approach to deal-making, which should be recognizable to everyone who knows and loves the blood sport that is New York real estate. Enjoy the issue.

Stuart Elliott 14 October 2011 www.TheRealDeal.com

From design development through marketing and the sellout of 203 homes at

Nancy Packes and Patrick Smith and their team Displayed Exceptional Brilliance and Creativity Insight and Foresight Planning and Execution. But, there is really only one word to describe how we feel

GRATITUDE V I S I O N A RY D E V E L O P M E N T

Residential sales up, but prices ﬂat New Yorkers remain ‘shell-shocked’ by economy, while foreign buyers continue to prop up the market

BY LEIGH KAMPING-CARDER ast month reminded New Yorkers of two dark days: the terrorist attacks on the World Trade Center, now a decade past, and the third anniver-

RESIDENTIAL MARKET R EPORT sary of Lehman Brothers’ slide into bankruptcy. In addition, the failings of the ﬁnancial system jumped to front of mind as pro-

testors camped out in Lower Manhattan’s Zuccotti Park to “Occupy Wall Street.” But while many New Yorkers were preoccupied with the past, real estate professionals looked to the future, hoping the thirdquarter residential market reports would bring positive news. They weren’t entirely disappointed. Sales activity in Manhattan jumped 16.7 percent from the same period last year. Meanwhile, prices essentially held steady, with

the median sales price in Manhattan falling a scant 0.3 percent to $911,333, according to a report

er, CEO of appraisal ﬁrm Miller Samuel and the report’s author. Miller noted that the jump in

“We’ve heard from both buyers and sellers that they are very surprised by the boost in activity.” Andrew Barrocas, MNS

from Prudential Douglas Elliman. Average price per square foot rose 3.2 percent, while the average overall sale price dropped 1.5 percent, according to Jonathan Mill-

sales activity was partly due to artiﬁcially low volume a year ago, following the expiration of the federal ﬁrst-time homebuyers’ tax credit.

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Another factor, he said, is the continued inﬂux of international buyers into the marketplace. “Foreign buyers are the reason that the new development market has gained traction,” Miller said. Whatever the cause, “we’ve heard from both buyers and sellers that they are very surprised by the boost in activity,” said Andrew Barrocas, CEO of brokerage MNS. Still, over and over again, brokers used the word “cautious” to describe buyers, especially domestic buyers. Victoria Shtainer, a senior vice president at Elliman, said she is much busier than a year ago, but buyers are attending showings with iPads in hand, and closely tracking listings. Kelly Killian, an agent at Bond New York, noted the effect of an uncertain job market on her clients’ behavior. Two clients are waiting until the spring to list their properties while they sort out employment situations, she said. “The domestic buyers are still a bit shell-shocked regarding current joblessness rates and nervous about their own company’s position,” Killian said. As a result, they’re “carefully and critically thinking through deals.” Those getting into the market are individuals with rock-solid job security, purchasers taking advantage of low interest rates for longterm buys (see related story on page 18), or people compelled to move for personal reasons, such as needing more space, brokers said. In the rental market, continued tenant demand coupled with the lack of a corresponding increase in inventory has allowed landlords to keep holding the line on prices and avoid major concessions, brokers said. “There has been very little [rental] inventory compared to last year, with just as much volume, if not more,” said Christine Ra of City Connections Realty. Average Manhattan rents last month inched up 0.8 percent over August levels, according to MNS’ September rental market report. That brought the average monthly rent for a Manhattan one-bedroom to $3,820 in a doorman building and $2,999 in a nondoorman building. Compared to Continued on page 98

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Are low interest CONSIDERING rates played out? SOLAR POWER? Experts say the allure of rock-bottom ﬁnancing for residential deals has worn off

to step into the market right now, and partly BY LEIGH KAMPING-CARDER t’s conventional wisdom that low interest tied to the difficulty in obtaining mortgages, rates stimulate home sales, but in today’s analysts said. The city is already seeing some evidence roller-coaster economy, conventional of that — New York buyers did not jump into wisdom does not seem to apply. Despite the optimism of real estate and the market in force after the Fed’s August inmortgage brokers, analysts say low rates, as terest-rate announcement. a symptom of wider eco“Brokers may use low rates as nomic malaise, may actually hinder home sales in a reason to [convince clients to] buy, but the flaw with that argument is New York. “Brokers may use low that you can’t just look at rates and rates as a reason to [condismiss investors’ confidence.” vince clients to] buy, but Noah Rosenblatt, UrbanDigs the flaw with that argument is that you can’t just look at rates and In the month after the news broke, the dismiss i 30-day pace of signed new contracts in ManRosenblatt, the founder of Manhattan-based hattan dropped 24 percent compared comp red to the UrbanDigs, number of deals signed in March through a property June, according to Rosenblatt. consulting Far from a rush to lock in low and analytics rates, the numbers coincide with firm. seasonal trends, he said. ationally, even with rates The inNationally, dustry headed skimming rock bottom, the into autumn with volume of mortgage applimortgage rates at all-time cations dropped for the lows: Freddie Mac reported third straight month early last month that 30-year in July (marking the and 15-year fixed-rate mortgaglowest level since es were at historically low levels of February), with 4.12 percent and 3.33 percent, respectively. steeper And, rates show no signs of going up, ex- declines in perts say. August, acThat’s partly because on Aug. 9, in an ef- cording to the fort to keep borrowing costs down in a weak- MBA. By Labor er-than-expected economy, the Federal Re- Day weekend, serve announced that it would not raise its the volume target rate, or the rate at which banks lend to had flatlined each other, above 0.25 percent. The Fed also at “extremely pledged to keep rates “exceptionally low” un- low levels” not til at least mid-2013 — a move the Mort- seen in 15 years, the gage Bankers Association, the main industry association said Still, Rosenblatt said, trade group, called “unprecedented.” Typically, real estate insiders interpret “Manhattan real estate is doing low interest rates as a catalyst for sales. In- its own thing, regardless of plunging rates.” deed, since Fed chairman Ben Bernanke and But he added: “I personally do not think, for the central bank started lowering rates in Manhattan, that low yields are going to all of earnest to counteract the downturn in 2008, a sudden spur demand.” Rather, real estate developers and brobrokers in New York have been touting the fact that it’s an unparalleled time to lock in kers should look to overall investor confilow rates. dence — not rates — as a predictor of Man“Anything that can be done to help make hattan residential sales, he said. That’s bereal estate cheaper will help sales, especially cause the rates themselves matter less than in New York, where we have all walks of life the reason they’re low — namely, anxious inthat want to live here,” said Rolan Shnay- vestors worrying less about turning a profit der, director of new development lending and more about keeping their capital investat Manhattan-based Home Owners Mort- ments intact. gage. Jonathan Miller, the CEO of Miller SamThis time around, however, it’s unclear uel Real Estate Appraisers, took it a step furwhether less expensive mortgages will have ther. He said low interest rates are not only the same effect that they’ve had in the past. failing to encourage home purchases, but That is partly due to the reluctance of buyers Continued on page 92

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School construction multiplies, drives NYC building Shovels in the ground:

Despite the tough economy, the number of schools around the city continues to multiply. In the past three years, the New York School Construction Authority has been the largest driver of construction starts, with $4.5 billion worth of projects. Last year alone, it built a record 26 new schools for 17,500 students. And that’s not including colleges and universities. (SCA’s website)

Compiled by Russell Steinberg

Elephants in A NYC the room: beacon: NYU and Columbia, of course, both have massive expansion plans underway. NYU is adding 6 million square feet over the next 20 years. Most recently, it’s begun work on a 170,000-square-foot nursing school. Meanwhile, construction is underway at Columbia’s $6.3 billion, 6.8 million-squarefoot, 17-acre campus, between West 129th and 133rd streets. The school’s total expansion will be completed in the next 25 years.

Hunter in Law and Police presence: Harlem: Order: The Hunter College School of Social Work moved into its new home, an eight-story, 147,000-square-foot facility on Third Avenue in East Harlem,

at the start of the fall semester. The new $135 million building replaced the school’s former location on East 79th Street.

20 October 2011 www.TheRealDeal.com

The new $250 million Fordham Law School, designed by Pei Cobb Freed & Partners, is under construction. The 22-story school is at the university’s Linco ln Center campus and is part of a larger redevelopment project at Fordham expected to be completed by 2033. It has 36,650 square feet of class space and a 60,940square-foot library.

In 2009, the city broke ground on a $750 million police academy in College Point, Queens. Expected to open in 2013, it will hold classrooms, gyms, a firing range and a tactical training village. The city awarded Turner Construction and STV Group a $656 million contract to build the academy, which will replace the Manhattan location on East 20th Street.

The New York Public Library sold its West 44th Street storage facility to the SCA for $40 million in August, after the city approved plans to turn it into a second location for the prestigious Beacon High School, according to DNAinfo. The new school will hold about 1,400 students and could open as early as September 2012.

‘Sprucing’ up the Gehr y To wer:

Opening last month with just 200 students from preK through second grade, the 26-classroom Spruce Street School occupies the four stories at the base of the Frank Gehry-designed 8 Spruce Street rental tower. By 2015, it will be a full elementary and middle school. It includes a 5,000square-foot rooftop play area, new basketball courts and an auditorium.

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PHOTOGRAPH FOR THE REAL DEAL BY MAX DWORKIN

Hanging on the walls are photos of Fisher with all of the U.S. presidents since Reagan; a photo and note from First Lady Michelle Obama; and a certificate from President Bush, who in 2007 appointed Fisher to a nine-member commission to study health care for wounded veterans.

the

Desk

In 2007, on his first of two trips to Iraq, Fisher was given this clock by General David Petraeus, who was leading all U.S. troops in Iraq at the time.

Fisher keeps his guitar in his office because “I don’t want my kids to take it and do a Pete Townshend” jam session.

This iPad is one of two that Fisher owns. He has one for personal use and one for his work at Strategic Hotels & Resorts.

ken fisher

President Obama’s 2010 children’s book, “Of Thee I Sing: A Letter to My Daughters,” has special meaning. The after-tax proceeds from the book are being donated to Fisher House to be used for a scholarship fund for the children of fallen and disabled soldiers. Obama also gave $250,000 of his Nobel Peace Prize money to the organization.

This Captain Kirk figurine is just a small piece of Fisher’s “Star Trek” memorabilia collection. Why is it on his desk? Kirk was “the man,” says Fisher, who turns 53 this month. “He could get himself out of any situation.”

“Beetle Bailey” cartoonist Mort Walker drew this as a get-well gift for Fisher after he had back surgery. Fisher also has an original framed “Doonesbury” cartoon, mentioning Fisher House, signed by that comic’s author, Garry Trudeau.

This framed Green Beret isn’t just a gift-shop souvenir. Fisher has been named both an honorary Green Beret and an honorary marine for his work with Fisher House. “It’s nice, but it’s just a title,” he says. “There are guys and women wearing the uniform who do a lot more than I do.”

This golf bag was a gift from Fisher’s father. He says he loves the game, but “I’m not into golf as a business mechanism.”

These so-called challenge coins are a staple in military circles and are often given out for exemplary service. Fisher has about 100 of them, given to him by the likes of President Obama, Vice President Joe Biden and the Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen.

lies of veterans receiving treatment at military medical centers. As a result of that work, he’s rubbed shoulders with everyone from top-ranking military generals to U.S. presidents. In addition to both of those jobs, he also sits on the board of Strategic Hotels & Resorts, a REIT that owns 17 luxury hotels. With his office at 299 Park Avenue under construction, The Real Deal visited him at home on the 16th floor of his East Side co-op. B y J ill N ooNaN

of:

The shelf behind his desk is almost entirely dedicated to photos of his wife of 19 years, Tammy, and his three kids, ages 15, 17 and 29.

hose in the world of New York City real estate likely know Ken Fisher from his work at Fisher Brothers, one of the city’s largest family-run property owners. Fisher heads up leasing, marketing and management for the company’s 6 million-square-foot Manhattan office portfolio. But what his colleagues may not know is that he is also chairman of the board at the Fisher House Foundation, a nonprofit that develops temporary housing for the fami-

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Manhattan ofﬁce stats Manhattan

Availability Average rate asking rent

Q3 ’11 Q2 ’11

11.0% 11.6%

Midtown

Midtown South

Q3 ’11 Q2 ’11

the third quarter, preliminary figures from commercial firm Cassidy Turley showed late last month. (Those numbers exclude deals from the last few days of the month.) The lower volume came after a strong beginning of the year, in which major tenants like Japanese financial giant Nomura Holding America and publishing powerhouse Condé Nast inked deals for 900,000 square feet and up. The third quarter saw no blockbuster deals: Oppenheimer & Co.’s deal for 270,000 square feet at 85 Broad Street was the largest of the quarter, CoStar Group figures show. Some said the weakness in the national and global economy appeared to be taking a toll on Manhattan leasing activity, while others said the steep increase in asking rents in Midtown was driving down demand. Robert Goodman, executive managing director at commercial firm Colliers International, predicted that larger deals will be put off until tenants get a better sense of whether the market is heading up or down. He said the spike in activity earlier this year was a result of pent-up demand combined with a firming market that encouraged companies to sign before prices rose further. “What’s happened now is that the marketplace [is beginning] to have a lot of uncertainty, and no one wants to look in the rearview mirror and be punished for having made a bad long-term decision,” he said. “I think there are some big deals to be had, but they will be done at a point when people are convinced that they are securing value pricing, and it is not necessarily where we are right now.”

Q3 ’11 Q2 ’11

Like the rest of Manhattan, leasing activity in Midtown offered up mixed signals in the third quarter: Both the amount of space leased and asking rents fell, but availability rates — which measure space available for rent now or in the next 12 months — tightened, the Cassidy Turley stats showed. In some buildings, landlords continued to remain bullish. For example, in the 22-story Class A property at 645 Madi-

11.8% $55.94 12.0% $56.06

Q3 ’11 Q2 ’11

C OMMERCIAL MARKET R EPORT

Midtown

$49.54 $49.07

9.5% $41.12 10.4% $40.48

Downtown

10.5% $37.43 12.0% $37.46

Source: Cassidy Turley

son Avenue, landlord TF Cornerstone put the entire 17th floor, a 7,000-square-foot space, on the market last month with an asking price of $110 a square foot. That was the most expensive space listed with an asking price in CoStar last month for all of Manhattan. The price was far above the average asking rent for Midtown, which was $55.94 per square foot — a decline of $0.12 per foot from the second quarter, Cassidy Turley numbers show. William Cohen, executive vice president at Newmark Knight Frank — who along with Newmark’s Matthew Leon and Ryan Kass is representing the landlord — said it’s the first space to become available in the building in two years. “We got in excess of $100 per foot in the past, and the value is in excess of $100 per foot,” said Cohen, who noted that the Central Park views are attractive to hedge funds, private equity firms and money management offices for wealthy New York families. Farther Downtown, the Michael J. Fox Foundation for Parkinson’s Research, a nonprofit founded by the actor, signed a lease last month to move to George Comfort & Sons’ 498 Seventh Avenue, at 37th Street. The foundation signed a deal for 29,468 square feet on the 18th floor of the 25-story, 795,669-square-foot building, data from CoStar Group shows. The terms of the deal were not available. The agents for the sublet space, Joseph Mangiacotti and Molly Concannon of CB Richard Ellis, did not respond to a request for comment. Holly Barkhymer, a spokesperson for the foundation, declined to comment, citing a policy to not publicize the address, because celebrity seekers come hoping to find Fox. Despite those deals, leasing activity fell Continued on page 94

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In their words...

The month’s funniest and most insightful comments from real estate pros “Really [no projects are] even close to [starting] sales, let alone [ready] for delivery. So to some extent, we have the market to ourselves for the next two to three years. The only caveat is, we can’t have the world melt down. If the world melts down, all bets are off.”

“New York has risen from the ashes, though it was never really in the ashes. I call New York ‘Fantasy Island.’ It saw corrections of no more than 20 percent for condos and co-ops.” Douglaston Development chairman Jeffrey Levine at a panel discussion last month.

Developer Gary Barnett. (NYT)

“The only thing I’m going to own after I sell Rat Island and my real estate is my E-ZPass. New York City and New York State won’t be able to hurt me anymore.” Rat Island owner Red Brennen, who held an auction for the 2.5-acre piece of land near the Bronx late last month. (NYT)

“The real issue isn’t really the chair or the application. As with any good coop, it’s getting past the one hard-ass on the co-op board who always shoots people down because he doesn’t like dogs, but he has two Great Danes because he was grandfathered in.” Jon Stewart on “The Daily Show,” comparing the Palestinians’ attempt to get UN recognition to getting accepted by an NYC co-op board. Palestinian protesters have been using a symbolic chair to represent their seat in the UN.

“The old buildings in New York are so cool. I always wonder how they were made with so much detail.” Reality TV star Kourtney Kardashian on Twitter.

“The film would have benefited from more perspective from the Ratner side of things. Bruce Ratner is portrayed as a character somewhere between Darth Vader and Hannibal Lecter (eating neighborhoods instead of body parts).” Movie critic Clinton O’Connor, on “Battle for Brooklyn,” which screened last month in Cleveland. (Plain Dealer via NY Observer)

“I have grande cojones.” Carlos Olivieri, senior vice president of Edward J. Minskoff Equities, referring to the fact that the company is betting that its speculative office tower 51 Astor will attract tenants. 26 October 2011 www.TheRealDeal.com

“Our office building is seeking LEED certification [as a] green building, but sent all tenants a one-page survey by paper, not email. Dumb.” CEO of Zillow.com Spencer Rascoff on Twitter.

“The pretends and extends are coming due. In previous periods, the opportunity hit you in the face. [But this time] every single distressed asset I have seen” has been 25 percent to 40 percent overpriced. Real estate tycoon Sam Zell. (Bloomberg News)

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Chipping in to buy a piece of New York Syndication deals, especially among ethnic groups, are on the upswing BY JANNA HERRON t’s a deal that blends the American Dream with a touch of globalization, and hints of a bubbling trend. Fifty-three Chinese-Americans pooled $160,000 each to buy a corner at Delancey and Pitt streets on the Lower East Side for $8.5 million this summer. They each plan to contribute $240,000 more to fund the construction of a 53-unit condo to replace the auto shop that is there now, said seller Anthony Marano, a principal at Ozymandius Realty. “Fifty of the units are already spoken for,” Marano told The Real Deal. “It’s not a building that will be vacant or unfinished. We wish we could have done it, but there’s no construction financing to speak of.” The group of Chinese-Americans — known as Delancey Bridge Tower Inc. and led by Yanpo Zhu of Manhattan — approached Marano and his father more than a year ago to buy the land, which consists of five side-by-side lots. Other developers had also expressed interest, Marano said, but the sunset of the 421-a tax abatement at the end of last year kept the numbers from penciling out for many bidders. In the end, Marano and his father chose the Chinese syndication because the money was all-cash and the group offered concessions, such as allowing the elder Marano’s shop to stay open for two months after the deal closes and signing a contract with no contingencies. “Things that a lender would find hard to swallow,” said Marano. “Groups like this have a leg up on every site on the Lower East Side versus conventional groups.” Syndication deals — where small investors pool together their money to purchase property — have long dotted the city’s real estate landscape, whether they involve immigrant groups, wealthy family members or professionals like doctors or lawyers coming together to buy. Some of the Big Apple’s most storied developers and investors, including Larry Silverstein and the late Harry Helmsley, got their start with simple syndication deals. But in certain corners, industry insiders say they are seeing the market for these deals, especially immigrant-led ones, heat up. A confluence of factors such as higher equity requirements for financing and the tepid economy is behind the uptick. But the deals can be tricky, sometimes literally lost in translation, as both sides navigate cultural landmines. Bob Knakal, chairman of Massey Knakal Realty Services, has seen syndication interest from all over the globe: Israel, Germany, Argentina, Brazil, China and South Korea, to name a few. Deals range from the very small, $2.5 million, to the bigger, around $70 million, he said, noting that investors

28 October 2011 www.TheRealDeal.com

he sees are high-net-worth individuals looking for Manhattan properties south of 96th Street without a rent-regulated tenant. “Investors are increasingly worried about their own economies,” he said. “They look at properties as a safety deposit box more than cash ﬂow.” Since the ﬁnancing rules have changed and lenders now require more skin in the game, syndication deals appeal to investors who want to spread out their risk, Knakal noted.

tive country. The group is buying a 35-unit apartment building for an undisclosed sum. Three-quarters of it will be ﬁnanced by a lender. Shafran describes the property as a “very clean walk-up, a nice asset and return.” Adam Hess, partner at TerraCRG, also noted a rise in demand for syndication deals as the global economic uncertainty plays out. Hess has worked on these types of deals for seven years in Brooklyn’s Sunset Park, the city’s fastest-growing Chinese community. “As the Chinese economy has strength-

real estate development as a back door into the U.S., according to both Hess and Adelaide Polsinelli, associate vice president of investments at Marcus & Millichap. Immigrant investors, the two said, are taking advantage of the EB-5 Investor Visa Program, which allows internationals to obtain a green card if they invest money in the U.S. “There is in excess of $200 million in EB-5 money,” Polsinelli said in an e-mail to The Real Deal. “This is a motivating factor.”

Timour Shafran of Capin & Associates in front of the Hamilton Heights building where he has a syndication deal pending

Timour Shafran has a deal under contract in Hamilton Heights with six Japanese investors, five of whom still live in their native country. It’s the economy, stupid Syndication interest started peaking in June when the stock market roller coaster convinced many to seek more stable investments, said Timour Shafran, vice president at Capin & Associates. “Immigrants or first-generation [buyers] tend to gravitate toward investments they can touch and are under their own control,” Shafran said. “The great thing about real estate is that you can rub it. It’s there. It’s not going to move.” Shafran has a deal under contract in Hamilton Heights with six Japanese investors, five of whom still live in their na-

Fifty-three Chinese-Americans pooled together to buy the auto shop on Delancey and Pitt streets, with plans to replace it with a 53-unit condo.

ened and the U.S. economy has weakened, the amount of liquidity in the Chinese system to buy real estate in Sunset Park has increased,” Hess said. Sunset Park investors are interested in retail properties on the main drags on Fifth and Eighth avenues, along with multifamily on the side streets, he said. The deals tilt on the low side (below $2.5 million) with a mix of all-cash and ﬁnanced transactions.

Coming to America Some foreign syndicate investors are using

The EB-5 program stipulates that foreigners who invest in a U.S. commercial enterprise can obtain a green card for themselves and four family members if the investment creates 10 direct or indirect jobs for every investor, explained Steven Polivy, the chair of the economic development and incentives practice at the law firm Akerman Senterfitt in Manhattan. Investors contribute either $500,000 in targeted neighborhoods — where the local jobless rate is significantly higher than the national average Continued on page 98

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Assessing Anglo’s auction In wake of loan sell-off, borrowers go after Irish bank, while insiders dissect how massive portfolio was divvied up

BY DAVID JONES he auction of Anglo Irish Bank’s troubled $9.5 billion U.S. loan portfolio has surprised some industry observers — and spread fear among some borrowers, who worry about having new lenders take over their troubled projects. Ben Thypin, a senior market analyst at Real Capital Analytics, said the fact that three lenders divvied up Anglo Irish’s portfolio was “not particularly unexpected.” “No one bank could really afford to buy the performing loans,” he said. But what was surprising was who ended up at the winners’ table — Lone Star Funds acquired about $5 billion in sub- and nonperforming loans, while Wells Fargo and JPMorgan Chase acquired the remaining performing loans in separate transactions. The surprise stems from the fact that nearly every major investment bank and private equity firm in the country (including the Blackstone Group, TPG Capital and Goldman Sachs) was initially in line to evaluate the portfolio — the biggest such sale in the U.S. in years. The conventional thinking was that a larger private equity firm would acquire the distressed assets, and that commercial banks with retail arms, like JPMorgan and Wells, would shy away from such a large foreign loan portfolio altogether. But in the end, sources say, a lot of those high-profile private equity players came to the table hoping to negotiate steep discounts on the bank’s distressed assets, with the intended goal of flipping the properties for a quick profit. Yet sources familiar with the auction process said the goal of the auction was clear: to maximize revenue at all costs. “A lot of the people dropped out once the brokers told them where the pricing was,” said Eric Anton, who left Eastern Consolidated last month and is now at Brookfield Financial. Anton, who crunched the numbers for clients who ended up not bidding, pointed out that the portfolio was priced before the U.S. debt ceiling debate began to rattle global stock markets. “At the end of the day, they wound up doing like a three-corner pool shot,” Anton said, referring to the three buyers. That three-corner shot comes nearly three years after Anglo Irish’s longtime chairman, Sean FitzPatrick, resigned in 2008 over the revelation of secret loan transfers, which were intended to make the bank look healthier than it was. The bank, however, was experiencing record losses, and in 2009 was taken over by the Irish government. Just before the Anglo Irish auction took

30 October 2011 www.TheRealDeal.com

place in August, rival lender Allied Irish Bank had agreed to sell about $1 billion in loans to Wells Fargo and the Blackstone Group. In that deal, Allied reportedly gave the buyers up to 15 percent off the face value of the loans, and the two buyers took equal

But Lone Star is known to have treaded in risky waters before. In 2003, the ﬁrm acquired a majority stake in Korea Exchange Bank for $1.2 billion, and sold its stake in late 2010 for about $4.1 billion. And in the spring, Lone Star had also expressed an in-

Former Anglo Irish head Sean FitzPatrick, who resigned in 2008 after a loan scandal

Protests outside of an Anglo Irish Bank ofﬁce

Current Anglo Irish chairman Alan Dukes

Anglo Irish lost nearly $25 billion in 2010, and by August of this year it reported that nearly 80 percent of its loan portfolio worldwide was “at risk” — a category that includes impaired loans, loans that are past due but not impaired, and loans that are “lower quality.” In New York alone, it was involved in some of the more disastrous deals in the city’s recent history, including developer Yair Levy’s Rector Square, which was sold at a foreclosure auction, as well as the Mark Hotel, where Anglo sold its $300 million debt to Dune Real Estate Partners for $190 million earlier this year. But following the bank’s takeover by the Irish government, the new management team moved aggressively to resolve many of its troubled assets by selling foreclosures. As part of the restructuring of the Irish banking system, which started in 2009, Anglo Irish recently merged with the Irish Nationwide Building Society, a lender, and was forced to sell off its U.S. and U.K. holdings. In early 2011, that deleveraging process began when Anglo Irish, which is now headed by chairman Alan Dukes, retained the commercial brokerage Eastdil Secured (see related story on page 62) and commercial real estate capital intermediary Holliday Fenoglio Fowler to assess how much it could generate through a sale of its more-than-600-property U.S. loan portfolio. By early June, Eastdil was announced as the broker that would market the sale of the $9.5 billion loan book. Mike Aynsley, group chief executive at Anglo Irish Bank, had this to say in an August report to shareholders about the sale: “The bank’s primary focus remains the orderly workout of the loan book while minimizing losses to the [Irish] taxpayer and maximizing returns on its portfolio.”

“A lot of the people dropped out once the brokers told them where the pricing was.” Eric Anton, Brookﬁeld Financial

splits of the total loan portfolio. So it came as a surprise to observers that Wells Fargo, which had just committed to Allied, went after Anglo’s portfolio as well. Meanwhile, many in the industry expected the distressed portion of Anglo’s portfolio to be snapped up by a New York-based private equity ﬁrm with widespread name recognition, rather than by a smaller private equity ﬁrm like Lone Star, which is based in Dallas.

terest in $1.6 billion in Spanish real estate assets being auctioned off by the Royal Bank of Scotland.

Closely chronicled Anglo’s lending, of course, has been closely chronicled by The Real Deal since the real estate boom, when the bank became one of the most aggressive foreign lenders in the U.S., approving billions of dollars in commercial real estate loans that later soured.

Anger spreads One of the concerns weighing heavily on Anglo Irish is the reaction of its bondholders, who face the prospect of seeing a majority of their investments wiped out in a Continued on page 99

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The Last of the Mohicans How some video store owners are hanging on to their NYC real estate

BY SARAH GROSS n 21st-century New York, watching a movie no longer requires leaving the apartment. Thanks to the likes of Netflix and On Demand, a seemingly inexhaustible supply of films and TV shows now appears at the touch of a button. But what about those who want to pick out a movie at an actual video store? These days, that’s becoming more and more difficult. The number of video rental shops fell 17 percent in the city from 885 in 2002 to 731 in 2007, according to the most recent U.S. Census data. Movie rental giant Blockbuster filed for Chapter 11 in 2010. And, many mom-andpop video rental stores have closed, too, as a result of online competition, following in the footsteps of other contracting industries like bookstores (see Borders) and music shops (see Tower Records) that have also shuttered in the last few years.

World of Video Greenwich Village World of Video at 51 Greenwich Avenue has been in business for 38 years. The owner, Linda Samuels, started it with her brother-in-law, Charlie Grappone, when she got tired of paying late fees at the video stores she frequented. With shabby-chic seating, nostalgic décor, and a 3D sculpture made of DVD cases, World of Video looks like a throwback to the heyday of video rentals. “A lot of people come in for the social atmosphere, the way bookstores used to be,” Samuels said. Some are surprised to ﬁnd a video store that’s still

ies on VHS, and DVDs take up a lot less shelf space. That meant Samuels could downsize to her current 1,500-square-foot space. And for true cinephiles, Netﬂix and On Demand don’t offer enough variety. “There’s a lot that you can’t get,” she said. It’s these passionate movies buffs who seem to be keeping stores like World of Video — which has over 30,000 titles — in business. Still, keeping the lights on isn’t easy, and Samuels said she makes minimal proﬁts with the store. According to a recent report from Newmark Knight Frank, retail space on Greenwich Avenue now rents for roughly $100 to $125 per square foot. Samuels declined to comment on her rent or say who her landlord is, other than to credit him, in part, with the store’s longevity. “He hasn’t found anyone else who wants to pay a higher rent — let’s just put it that way.”

Alan’s Alley Video Chelsea Linda Samuels

open. “A lot of them come in and say, ‘Wow, this is so retro!’” she said. But in some ways, she said, the changing technology has helped her business. World of Video was previously located in a 3,000square-foot space above the Village Vanguard at 178 Seventh Avenue. But about ﬁve years ago, it stopped carrying as many mov32 October 2011 www.TheRealDeal.com

Alan’s Alley Video at 207 Ninth Avenue in Chelsea is hanging on by a thread, according to owner Alan Sklar, who said he doesn’t know how much longer he can stay in business. Sklar opened his 1,600-square-foot storefront 23 years ago, after a childhood spent watching movies (he grew up on a block with a movie theater). But nowadays, he struggles to pay his monthly rent of

Steven Baker, a retail broker and president of Winick Realty Group, said New York’s sky-high rents add to video stores’ problems. Of those that are still around, “most are at the end of what were long-term leases, which are below market rents,” he said. But Faith Hope Consolo, chairman of the retail leasing and sales division at Prudential Douglas Elliman, said independent video stores may actually have an advantage. “While the massive chains are struggling, niche stores — those actually run by videophiles — are surviving,” she said. Plus, many of the remaining stores “are on side streets to begin with, so there may not be as much competition for the space,” Consolo said. This month, The Real Deal checked in with some of the city’s video stalwarts to ﬁnd out what keeps them going, and how they’re holding on to their real estate while so many of their compatriots have gone under.

$12,000, and advances in technology have caused him to lose hope as well as money. These days, he said, “you can watch movies on the train, on your phone. It’s crazy.” Like World of Video, Alan’s Alley manages to eke by, thanks to a loyal custom-

collection” of 40,000-plus titles, said Sklar wistfully. In the meantime, he doesn’t replace people when they leave, and the store airconditioning that broke last summer is still waiting to be ﬁxed.

Heights of Video Brooklyn Heights

Alan Sklar

er base that turns to Sklar and his staff for their knowledge of movie history. Plus, Sklar has devised new revenue streams beyond the traditional movie rental business. The store also has a copying and fax service, for example, and an ATM. And, it works with TV stations and programs like the “Today” show and “Inside Edition,” which often need movie clips. Ad agencies are also a source of business for Sklar, since the mock-ups they produce for clients often involve movie clips. “Very often, [we’re asked to] pick the best movies [to] illustrate something,” he said. But he doesn’t charge for the research or consulting — just the rentals. As for how long he’ll stay open? “There’s always the possibility that we could sell the

Heights of Video (formerly Mr. Video III) at 84 Clark Street has been around for 25 years. Like other video rental stores, this one has seen hard times lately, but that didn’t stop new owner Rafael Perez from taking the reins in January of this year. Perez ﬁrst started working at Mr. Video in 1994, as a high school student. He later became the manager. This winter, previous owner Joseph Pell felt that “the business didn’t have much left to keep going,” Perez said. “This just made me rise to the occa-

Heights of Video (formerly Mr. Video III)

sion, so I made him an offer. I took a pay cut to become an owner of a dying species.” He declined to say exactly how much he paid, Continued on page 94

PHOTOGRAPHS OF SAMUELS AND SKLAR FOR THE REAL DEAL BY DEREK ZAHEDI; PHOTOGRAPH OF MR. VIDEO III BY JILL NOONAN

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Clearing the FiDi fog

Residential agents try to combat Lower Manhattan’s lack of transparency BY JAKE MOONEY he scenario is now vexingly familiar to Tali Berzak, a vice president at NestSeekers International: Potential buyers at 99 John Street, a Downtown condo conversion where she is the project manager, come to the sales office believing the Financial District is depressed, and make lowball offers accordingly. In reality, the Financial District submarket has posted sharp gains in the last year, both in sales volume and in prices per square foot, according to the website StreetEasy and brokers who work in the neighborhood. The larger problem, brokers contend, is that accurate sales figures about FiDi are often not widely disseminated. The lack of information, they say, leads to lower offers being rejected — and, in many cases, frustrates potential buyers into looking elsewhere. “That’s causing deals not to happen that should be happening,” said Prudential Douglas Elliman’s Heather McDonough, who currently has five listings at William Beaver House, the newly constructed condo and rental building at 15 William Street. The solution, she argues, is better information about the Financial District. McDonough is in the process of trying to organize agents at various firms into a “special interest group,” operated through the Real Estate Board of New York, to offer just that. “There’s a few of us that are trying to band together and tell the real story of what’s going on, because it’s transformational,” she said.

FiDi fever Based on her own research, McDonough said, the average price per square foot for sales in FiDi between May and September 34 October 2011 www.TheRealDeal.com

was 13.5 percent higher than it was from January through April, and monthly absorption roughly doubled during the same period. Figures compiled by StreetEasy for The Real Deal tell a similar story: Median prices in the district rose 6.63 percent to $761,706 in the second quarter of 2011, up from $714,341 in the same period of last

Center site, and lower prices than nearby neighborhoods like Soho and Tribeca. But few potential buyers are aware of the improvement in the market in FiDi, Berzak and McDonough lamented. Quarterly market reports from major brokerages like Elliman and the Corcoran Group lump the Financial District in with other Downtown neighborhoods, Berzak argued. As a result,

Heather McDonough, who is trying to organize a “special interest group” of FiDi brokers, at William Beaver House

Sales prices: Financial District vs. Downtown overall Financial District All Downtown

Median price, Q2 2010

Median price, Q2 2011

% change

$714,341 $875,000

$761,706 $847,573

+6.6% -3.1%

Source: StreetEasy

year. By contrast, Downtown Manhattan as a whole saw median prices drop 3.13 percent to $847,573 during the same period. Berzak, who is interested in joining McDonough’s group, said she believes that FiDi’s relative strength is due to upcoming improvements in the neighborhood, such as the redevelopment of the World Trade

the area’s recent gains don’t show up in those reports. Another problem, Berzak said, is that the newest FiDi comps tend not to get distributed to all the brokers working in the area. In part, that’s because the city’s large ﬁrms have less of a presence in the Financial District, an emerging market where prices are lower

than in much of Manhattan. Instead, a relatively large percentage of the neighborhood’s deals are handled by small brokerages. Because of the area’s relatively low prices, “larger companies consider the Financial District like the dump of NYC,” said Tom Bouklis, a principal broker at the Bouklis Group, a Financial District firm with fewer than 20 agents. “They don’t want to work here.” Small brokerages may not have the resources and technology in place to provide their agents with the same up-to-the-minute statistics and training as larger firms, Berzak said. In addition, said Corcoran Sunshine’s William Bish, the sales director at 75 Wall Street, the Financial District is home to a large amount of “shadow inventory” — units that have been built but never listed. As a result, he said, it can be hard for some buyers, and even brokers, to know exactly what’s available and for how much. FiDi’s concentration of large, new development buildings also makes it a target for unscrupulous agents who post fake listings, or generic listings with misleading prices and square-footage figures, Berzak and others said. In the Financial District, “everything is large and new development,” said Sofia Song, vice president for research at Street Easy. While every neighborhood has problems with unethical behavior, large new buildings are “where we tend to find the shell listings,” she said, referring to listings, usually without unit numbers, that do not correspond to specific, available apartments. Recent sales in the Financial District are strong, but they could be stronger if not for the frustration arising from these transparency problems, McDonough said. Though accurate sales figures for individual deals are already publicly available through the city’s ACRIS property records database, she said, an effort to collect, distribute and publicize the data would help spur sales throughout FiDi. Her proposed group would share information on sales and market conditions in real time, and hold educational events for brokers in the neighborhood. The goal is “to provide real-time data to the companies that are smaller, that don’t necessarily have the resources and mechanisms in place to give this kind of real-time data to their salespeople,” she said, adding, “I would just like to see more awareness of what’s going on down there.”

Groupthink Progress so far has been halting. Though several brokers have expressed interest in joining such a group, McDonough said her efforts to involve REBNY have so far been fruitless. (REBNY president Steven Spinola did not respond to calls for comment.) There is talk of a dinner involving 10 or 15 brokers who do business in the neighborhood, she said, but none has yet been scheduled. Continued on page 96

PHOTOGRAPH OF MCDONOUGH FOR THE REAL DEAL BY MAX DWORKIN; PHOTOGRAPH OF FINANCIAL DISTRICT BY DEREK ZAHEDI

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20 percent down? Don’t bet on it

Proposed requirements for down payments could further harm the housing market — if they ever see the light of day

BY KENNETH HARNEY emember the proposed requirement from six federal agencies that homebuyers make minimum 20 percent down payments if they want the lowest interest rates? Remember the controversy that erupted over the plan last spring, when labor unions joined with bankers, civil rights groups, mortgage companies, realty agents and consumer advocates to get it changed? A bipartisan group of 39 senators and more than 250 Democrats and Republicans in the House even signed letters demanding that the agencies ditch the proposal on the grounds that it would be deeply harmful to a housing market mired in deep trouble. Half a year has passed since all

velopment, the Federal Reserve, the Securities and Exchange Commission and the Federal Housing Finance Agency — are officially mum on the proposal during the comment review period. The group includes strong proponents of the 20 percent rule who argue that the “qualified residential mortgage” language adopted by Congress in its 2010 Wall Street financial reform legislation requires them to devise a national standard for safe, low-risk home mortgages based on historical data on default and foreclosure risk. One of the statistical indicators of risk, based on studies of Fannie Mae and Freddie Mac mortgages, they maintain, is the amount of equity a borrower has in the property — the higher the initial equity, the lower the prob-

“If this rule goes into effect as proposed, it will be the last nail in the coffin for the already crippled U.S. housing market. ... Poor underwriting led us into the housing crisis, not down payments.” Senator Johnny Isakson that bubbled up, so here’s an update on the issue: The 20 percent proposal is still alive, but it’s temporarily bogged down in agency reviews of the roughly 12,000 comments filed by interest groups and individuals. Almost certainly it will not be ready for final adoption until the first quarter of 2012. Even then, there will be a mandatory one-year lag before the new requirement takes effect, pushing the down payment standard into 2013 — well after the Presidential and Congressional elections. But can it survive in its current form that long, given the rip currents of the political year that’s just getting under way? The agencies themselves — the Federal Deposit Insurance Corp., the Treasury’s Office of the Comptroller of the Currency, the Department of Housing and Urban De-

ability of foreclosure. Any standard that does not include down payments, proponents insist, will be deﬁcient. But the three coauthors of the QRM provision in the reform legislation say Congress expressly omitted reference to down payments and never intended that the agencies set an equity minimum that would prevent up to 40 percent of buyers from qualifying for a low-interest-rate mortgage. In testimony last month before a House Financial Services subcommittee, one of the coauthors, Senator Johnny Isakson, a Republican from Georgia, said that “if this rule goes into effect as proposed, it will be the last nail in the cofﬁn for the already crippled U.S. housing market. ... Poor underwriting led us into the housing crisis, not down payments.” Isakson, along with senators

Mary Landrieu and Kay Hagan, told the six agencies before they published the proposal that down payments were rejected in congressional discussions as an underwriting standard. The legislation intentionally left the door open for private mortgage insurance to cover the ﬁnancial risks of down payments below 20 percent, just as the government-supervised mortgage investors Fannie Mae and Freddie Mac have permitted for decades. Though a spokesperson for Isakson declined to speculate whether, as rumored on Capitol Hill, he would introduce legislation to kill the 20 percent plan if it were ever adopted, she did say in an e-mail to me that the senator has “faith that the regulators will make the right decision” and that “all his focus now is on stopping [the 20 percent plan] from happening.” The entire QRM controversy comes at a politically sensitive time for President Barack Obama. Housing continues to be a lead weight holding back the economic recovery. His polling numbers are plunging, plus key segments of his political base — unions, community and economic development groups, and consumer activists — oppose any move to force working families to come up with more cash to buy a home. The six agencies’ rule — even sitting in proposed form — is likely to be an attractive target for the President’s opponents next year. The White House does not have the legal authority to dictate regulatory policy to independent bodies such as the Federal Reserve and Federal Housing Finance Agency. But with Treasury and HUD playing important roles in formulating the ﬁnal rule on mortgages, Obama has a direct pipeline into the policymaking process. Bottom line: Don’t expect to see a 20 percent rule any time in the near future. Even independent regulators don’t operate in political vacuums. They’ve either gotten the message already or they will soon. Kenneth Harney is a syndicated real estate columnist.

Visit us on the web: www.TheRealDeal.com 36 October 2011 www.TheRealDeal.com

G O V EIRNN MBERNITEBFR I E F S Waldorf Astoria to get face-lift The city’s Landmarks Preservation Commission last month approved changes to the famed Waldorf Astoria hotel at 301 Park Avenue. The commission okayed an overall face-lift for the building, including a new marquee for the hotel, along with restoration of the automobile court. The plans, designed by architecture ﬁrm BBG-BBGM, call for a new glass and silver canopy to stretch across the hotel’s three primary entrances on Park Avenue. The city’s Historic Districts The Waldorf Astoria Council also supported the project, but the council’s Nadeszhda Williams noted that “[the canopy] does feel a bit too generic for such a stylish landmark.”

NYU debuts affordable-housing database New York University’s Furman Center for Real Estate and Urban Policy has launched a new database offering the ﬁrst comprehensive picture of the city’s more than 171,000 affordable housing units, the Wall Street Journal reported. The new database will draw from the city’s Department of Housing Preservation and Development, the Housing Development Corp., the state’s department of Homes and Community Renewal, and the federal Department of Housing and Urban Development. Previously, information on city affordable housMathew Wambua ing units had been somewhat scattered, with each agency keeping its own database. Ofﬁcials said the new system, which has been dubbed the Subsidized Housing Information Project, will help the city preserve affordable housing units by keeping better track of them. “This allows us to think systemically about the timing of expiration of units,” said HPD Commissioner Mathew Wambua.

CBO questions Obama refinancing plan A report issued last month by the federal Congressional Budget Office is discouraging an Obama administration initiative to refinance loans held by millions of homeowners, the Financial Times reported. The initiative could result in massive losses for private investors while providing little relief to borrowers, the CBO said. Obama’s proposal would allow homeowners with federally backed mortgages to refinance at the current, historically low interest rates. But a study conducted by the agency “recognizes the enormous losses private investors would suffer in a transfer of wealth to borrowers,” Joshua Rosner, managing director at independent research firm Graham Fisher & Co., told the Financial Times. “While such a transfer would be acceptable to some in Washington ... it would result in the unwillingness of investors to buy mortgage-backed securities without charging an exorbitant risk premium to compensate.”

City Council backs attorney general The City Council last month passed a symbolic resolution supporting New York State Attorney General Eric Schneiderman’s investigation into the mortgage practices of major banks. Schneiderman was recently ousted from a national task force negotiating a mass settlement with U.S. mortgage servicers, after he ﬁled a motion to block a prospective $8.5 billion settlement between Bank of America and investors, prompting criticism that he had wasted time. But Schneiderman had concerns that the task force’s settlement Eric Schneiderman would give the banks unnecessary protection from future litigation, the council’s resolution noted. In response to the resolution, Schneiderman said: “Homeowners in every corner of New York have been hit hard by the mortgage crisis, and we must do everything we can to prevent this kind of economic calamity from happening again.” Compiled by Katherine Clarke

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The Best Real Estate Deal You’ll Ever Make

Top tweeters

A new NYC real estate club: Those with 1,000 or more followers on Twitter BY JULIA DAHL o tweet or not to tweet — for New York City real estate professionals, that is the question. When using social media for business, some worry about exposing their personal lives, or putting their foot in their (digital) mouths. But a select group of agents and executives have overcome this dilemma and emerged as the industry’s top tweeters, racking up thousands of followers at a time when the average New York City real estate broker has only around 100. Halstead Property agent Renée Fishman (who won REBNY’s Rookie of the Year Award in 2010), for example, first logged on to Twitter in March 2009 and now has 1,349 followers. She also helps Halstead’s director of web marketing, Matthew Leone, instruct fellow agents on how to market themselves through social media. “At first, I debated what my strategy should be,” says Fishman (@reneefishman), who recalled wondering: “Should I only tweet about real estate?” What Fishman quickly realized, however, is the same thing that her peers in the 1,000-plus followers club know well: On Twitter, it’s best to be yourself. Last month, for example, Fishman tweeted about the finale of HBO’s Entourage: “Damn you #Entourage for getting me teary eyed with your series finale focused on true love & happy endings.” Jason Haber (@jasonhaber), CEO of Rubicon Property, has just over 1,800 followers. He keeps two computers on his desk, one of which he uses entirely to monitor and update his Twitter presence. While Haber’s personal Twitter feed is inextricably linked to his work at Rubicon, it’s also a place where he goes to engage in conversations about subjects ranging from the death penalty to fantasy football. “You have to be authentic,” says Haber. “Otherwise, no one cares.” Curbed creator Lockhart Steele — another well-known Twitter presence in the world of New York real estate — knows this well. “I spend a lot of time on Twitter,” says Steele (@Lock), who has nearly 9,000 followers. “But I’m doing it for myself. I just

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38 October 2011 www.TheRealDeal.com

moved to the South Street Seaport area and I love tweeting about new restaurants and architecture.” Über-appraiser Jonathan Miller is a big fan of Steele’s online persona, which he calls “quirky.” Steele, in turn, says Miller is “hilarious” on Twitter. “I got my Twitter philosophy from Lockhart,” says Miller (@jonathanmiller), who has 4,625 followers. “It’s a mix of serious stuff and one-liners.” So far, at least, industry success does not necessarily correspond with number of Twitter followers. For example, top agent and reality TV star Michele Kleier (@TheKleiers) has about 1,630 followers, and Prudential Douglas Elliman CEO Dottie Herman has about 1,570. But some top agents, like the Corcoran Group’s Carrie Chiang, Elliman’s Dolly Lenz and Brown Harris Stevens’ Shlomi Reuveni, don’t have Twitter accounts at all. “I rely on oldfashioned sales techniques, and that doesn’t necessarily involve having a Twitter account,” says Reuveni. The same applies to real estate brokerages. Firms’ Twitter followings vary widely, and don’t seem to correspond with the company’s size. For example, at press time Corcoran (@corcoran_group) had just about 7,150 followers and Halstead (@Halstead) had 4,796, but Elliman (@PDE_realestate), the city’s largest brokerage, had only 1,018. Meanwhile, Nest Seekers, a much smaller ﬁrm, had nearly 5,000 followers, while Citi Habitats, the city’s biggest rental ﬁrm, had only 502. Up-and-comers Rutenberg Realty had just 185, and Bond New York seemed to be just getting started, with only 50 followers.

21st-century networking Like Fishman, Paul Zweben, senior vice president at Elliman, initially found Twitter somewhat bafﬂing. “I didn’t get it,” admits Zweben with a laugh. “Then I realized it’s all about your personality — it’s like a living diary.” Zweben (@hungrydomaine) currently has 2,337 Twitter followers, who come to him, again, not necessarily for real estate information, but because he routinely posts about his other love: food. Continued on page 92

PREDICTIONS

Is there heaven or hell ahead for the market? A look at some of the best- and worst-case scenarios for NYC real estate — depending on which way the economy goes

he says that knowing with certainty when the next big calamity will hit is as

may bring, experts say, is at best a crapshoot.

turn when it comes. Here, The Real Deal boils down some doomsday (and

BY C. J. HUGHES

f hindsight is 20/20, forecasting the future might be 20/200. Yes,

tough as ﬁnding an actual black swan.

there have been some right-on-target predictions in the last few years

However, Taleb goes on to say that one should try to prepare for life’s

— among them, mathematician Nassim Nicholas Taleb’s warnings

black-swan events — like Hurricane Katrina, say, or the Sept. 11 attacks — by

that a meltdown of the world’s ﬁnancial systems was imminent in the

having safeguards in place for a multitude of worst-case scenarios.

mid-2000s. But nailing down with certainty what tomorrow’s economy

Similarly, it makes sense to follow blue-sky predictions to catch the up-

The difﬁculty of crystal-ball gazing was, in fact, the heart of Taleb’s 2007

some rosy) scenarios and has experts, from economists to brokers, weigh in

book, “The Black Swan: The Impact of the Highly Improbable,” in which

on their merits, to ﬁnd out what they could mean for New York real estate.

Dissecting real estate’s upside if…

Commercial brokerage Cushman & Wakefield put the Manhattan office vacancy rate at 9.4 percent at the end of June and at 6.4 percent in Midtown South in August — the lowest since February 2009. And Cushman researchers are predicting that the lower rate will stay in place going forward, according to a June report. “While there has been some indication recently that financial firms may reduce payrolls, that is not expected to have a major impact on the city,” the report said (see story on page 48 for a differing take). Plus, rents have climbed 11.3 percent in Class A offices in Manhattan since the start of 2010, a trend that Cushman predicts will continue. A market that’s tightened that much so quickly suggests bidding wars between tenants can’t be far behind, McCarthy said. When occupancy rates fall into the low single digits like they did in 2007, landlords “could play tenants off each other,” McCarthy said. “It does happen.”

There’s a second round of stimulus

resident Barack Obama’s first stimulus bill, which had an $835 billion price tag and passed in February 2009, was pilloried by many Republicans as an act of overreach that didn’t lower the unemployment rate. But most economists say that the stimulus, which funded thousands of shovel-ready projects nationwide, did create construction jobs, and that the economic climate might have been far worse without it. That said, another massive program, if focused on long-term fundamentals like adjusting the tax code to help businesses, giving business more incentives to hire or helping to alleviate consumer credit card debt, could “help to repair balance sheets,” said Noah Rosenblatt, the founder of Urban Digs, a real estate analytical website, and a broker. That, in turn, could significantly brighten the mood of the housing market. Any stimulus “needs to be longer term in nature,” Rosenblatt said. “It can’t be, ‘How do we get volume up today?’” Many buyers, he said, are hesitant to pull the trigger on purchases because of anxiety about the nation’s health. But a sustained government effort to get people working in, say, Queens and Brooklyn, “where guys are hurting really bad,” would boost overall consumer confidence, Rosenblatt said. While New York’s 8.7 percent unemployment rate is lower than the national rate of 9.1 percent, shaving a couple more points off of it would do wonders for real estate activity, he added. 40 October 2011 www.TheRealDeal.com

Washington goes to one-party rule in 2012

If NYC stays on pace to add 1 million more residents in the next two decades, the city would need roughly 330,000 new units of housing.

Hiring picks up

ot all the help can come from the public sector. Private businesses would ideally start boosting their payrolls. The good news is that there are signs they are starting to do so. For example, accounting ﬁrms like Deloitte, KPMG and Ernst & Young have re-

cently been hiring — possibly to help banks comply with new regulations mandated under the Dodd-Frank Act. That trend, experts say, could have an immediate (and very positive) impact on the ofﬁce-leasing market in the city because more workers, of course, means greater demand for space.

he next presidential election is just around the political corner, and experts say that it could have serious implications for the economy and the real estate market as a whole. One school of thought is that if either political party wins control of all of the key levers of government, the political gridlock that is now paralyzing Washington could begin to ease. In a less partisan environment, one could argue, this summer’s bruising battle over the debt ceiling, which seems to have pushed Standard & Poor’s to downgrade the U.S.’s credit rating, might have been avoided. And Continued on page 98 ILLUSTRATIONS FOR THE REAL DEAL BY DAVID COLE

PREDICTIONS

How real estate could suffer if…

Inﬂation kicks in

he low interest rates that now make borrowing so attractive could cause bucketloads of money to wind up in circulation. Government efforts to boost spending through stimulus measures could do the same, which in turn might drive down the value of the dollar. In the worst-case scenario, the dollar could tumble so far below the yuan that the Chinese could be less interested in purchasing U.S. Treasury bills. That could mean that the prices for goods, including real estate, could climb faster than incomes do, suddenly putting homes out of the reach of buyers. Sources say if that happens, there would be some concern about “zombie” office towers — if not in New York, elsewhere in the country. Those are towers that are intentionally kept empty by landlords because they are worried about locking in rents that are too low to cover the quickly escalating costs of maintaining the building. Taleb has publicly expressed concern that hyperinflation will be the next big problem besetting the U.S. economy. In fact, Universa Investments, the Santa Monica, Calif.-based hedge fund he works at, is now investing in options on securities that respond to inflation (meaning they’re betting on products believed to be most vulnerable to inflation). “Expectations for home-price performance in 2011 have become somewhat less negative,” economist Robert Shiller said in a news release. “Unfortunately, the average projection is somewhat more negative for each of the following four years.” That softening spells trouble for Wall Street. While the struggles of the housing market in a city like, say, Toledo, Ohio, may seem far removed from Manhattan, consider that the subprime crisis that brought down the economy had its roots in cities and towns throughout the country.

Layoffs continue, and another recession hits

lmost all of the major investment banks have said that they will signiﬁcantly trim their workforces in the weeks ahead, as weakness in the stock market, evident by the sharp drops and climbs of the past few months, continues to cause them pain. When people are out of work, they spend less, which crimps retailers and other businesses, lowering their revenues and putting them on the ropes. That downward spiral has some, like famed economist Nouriel Roubini, who also predicted the last crash and has been dubbed “Dr. Doom,” worried about another full-blown recession. This summer, Roubini put the chances of another recession at 60 percent. If that happens, experts say, the ofﬁce vacancy rate in Midtown, which was hit hard-

If a second recession hits, experts say, the office vacancy rate in Midtown could shoot up to 13 percent, residential prices in Manhattan could drop by 20 percent, and new construction could completely freeze — again. est in the last recession, could shoot up to 13 percent, residential prices in Manhattan could drop by 20 percent, and new construction could completely freeze — again. Barry Gosin, chief executive of Newmark Knight Frank, the commercial brokerage, said any corporate layoffs are cause for concern, especially in New York’s office market. “We would be keeping our heads in the sand if we didn’t think [layoffs] would have some kind of impact,” he said. He added that contractions in the workforce are unfortunately happening as One and Four World Trade Center, the pair of under-construction high-rises in Lower Manhattan, are about to be added to the office supply.

Greek woes become catastrophic

f European countries rush to the aid of Greece, they could wipe out their own reserves. Plus, investors who hold Greek debt might ﬁnd it to be worthless. In a worst-case scenario, some predict that the European Union — which was formed in the early 1990s and is currently comprised of 27 countries — could be broken up. In this case, the euro, the EU’s currency,

would be scrapped and each nation would go back to its old currency, a move that could create harmful trade barriers. Acting individually, those countries could ban certain types of investments by their banks — no Italian debt, for instance — which could destabilize European credit markets, economists say. “It would be hard to contain the centrifugal forces that would be in play” in the dissolution of the EU, said Truman, of the Peterson Institute, projecting that the break-up “is more possible than it was a year ago.” Newmark’s Gosin also believes an EU breakup is not out of the question. He also pointed out that in today’s world, most major global events — whether it’s an earthquake in Japan or a debt default in Greece — have a direct effect on the U.S. economy. “It is all connected,” he said. “And none of the news seems good.” For his part, Truman said the effects of a broken-up EU on New York’s real estate market could be that banks “might get burned, which would in turn cause them to pull back” on everything from bundling commercial mortgage-backed securities to issuing jumbo home loans.

An earthquake hits NYC

he 5.3 quake that hit central Virginia on Aug. 23 did only minor damage in the city. But it did rekindle some fears that New York — which hasn’t been hit by a major tremblor since 1884, when a 5.3 quake hit Brooklyn — is vulnerable. Though new high-rises do have to follow seismic construction codes, established in the 1990s, and the city’s skyscrapers, which can wiggle a bit to withstand hurricanes, are probably sturdy enough, tens of thousands of brick, wood and masonry structures put up in the 19th and early 20th centuries could possibly be felled by tremors. In quake-prone California, landlords in these types of buildings often reinforce their ﬂoors with rods to make them safer. But the chances of convincing property owners here to spend money to do a thing like that may be a lost cause. “The chances of that happening in New York seem very slim,” said Andrew Smyth, a professor of civil engineering at Columbia University. Like an ultimate black-swan event, “earthquakes are rarer here than on the West Coast,” he added. “But when they do happen, the effects are felt quite far,” he said. TRD www.TheRealDeal.com October 2011 41

Real estate disasters, past and present A post-Irene, post-earthquake look at NYC’s worst calamities for property owners BY LISA DESAI

ropical Storm Irene left New York City mostly unscathed, but the city hasn’t always been so lucky. Manhattan has weathered its fair share of natural and man-made disasters, often with long-lasting effects for the real estate market. This month, The Real Deal looked back at the worst disasters in the city’s history, real estate-wise.

British occupation

uring the Revolutionary War, some 30,000 British and mercenary troops occupied the city, severely damaging its infrastructure, according to New

York City historian and real estate attorney Warren Shaw. Gunﬁre destroyed more than 40 percent of the city’s buildings, including the original Trinity Church, he said, while the nonmilitary population fell from 25,000 to around 3,000. According to Shaw, who is senior counsel in the commercial and real estate litigation division of the ofﬁce of Corporation Counsel of the City of New York, “No other American city experienced a comparable level of devastation during the Revolutionary War.” Luckily, the city’s brief status as capital of the new United States prompted a bevy of construction after the war, including the rebuilding of Trinity Church and new docks along the East and Hudson rivers.

thing in its path, consuming more than 20 blocks of (mostly wooden) buildings near Wall Street. Historians estimate that 674 homes and businesses were destroyed, including the New York Stock Exchange, with damages totaling $26 to $40 million. Recovery, however, was rapid: 500 new buildings went up within a year, Shaw said, and the search for replacement office space caused land to double in value. In the wake of the fire, the city’s business district expanded from Wall Street to the rest of Lower Manhattan, which had previously been mostly residential. Historians say the fire’s destruction also prompted wealthy New Yorkers to start moving Uptown — which at that time meant Bond Street, Great Jones Street and Astor Place.

The Draft Riots of 1863

ueled by anger over the ﬁrst federal conscription act and hardships caused by the Civil War, the Draft Riots brought days of rioting, looting and arson.

he Great Fire is said to have caused more property damage, proportionally, than any other event in New York City history. The blaze began in snow-covered

Sept. 11, 2001 was the deadliest day in the city’s history. Most of those on board were of German origin and hailed from the Little Germany, or Kleindeutschland, on the Lower East Side. Kleindeutschland was already on the wane when the ﬁre struck, with upwardly mobile immigrants moving to pricier areas. But the disaster accelerated the rapid dissolution of the neighborhood, because survivors and victims’ relatives were unwilling to remain in an area so associated with tragedy. By 1910, the German community was virtually gone from the area, replaced by other immigrant groups. “It was really a unique tragedy [that] affected the social composition of a district,” said author and historian Edward O’Donnell.

More than 100 people died and some 50 buildings were damaged or destroyed by ﬁre, Shaw said, including the Bull’s Head Hotel on 44th Street and the Fifth Avenue home of Mayor George Opdyke. Property damage was estimated at $1 to $5 million, he said. Perhaps more important for the city’s real estate market, the riots led to stricter regulations for tenement conditions. The Tenement House Act of 1867, for example, speciﬁed one water tap inside each building, one toilet for every 20 residents, and no occupancy by farm animals.

ightning struck a Consolidated Edison substation along the Hudson River during a heat wave in the summer of 1977, prompting a massive power failure throughout most of the city. With the country facing an economic downturn and the city nearly bankrupt, vandalism and rioting broke out in poor neighborhoods, especially in Crown Heights, Bushwick and Fort Greene. When it was all over, 1,616 stores had been either looted or damaged, more than 1,000 ﬁres were set, and 3,776 people were jailed. A Con-

The General Slocum disaster

O Lower Manhattan on the bitterly cold evening of Dec. 16. With the East River frozen solid, firefighters had to cut holes in the ice to get water. The fire flattened every-

42 October 2011 www.TheRealDeal.com

illing nearly 3,000 people, the terrorist attacks of Sept. 11, 2001, had a profound effect on the overall psychology and economy of the city, not to mention the real estate market. According to the Alliance for Downtown New York, some 14 million square feet of commercial ofﬁce

The blackout of 1977

The Great Fire of 1835

nesses [in those areas], so these blocks never got rebuilt,” O’Donnell said. “As late as the mid-1990s, you could not ﬁnd an ATM, bank, grocery store or theater in Fort Greene and parts of Harlem.”

n June 15, 1904, ﬁre broke out aboard the General Slocum, a steamboat that had been chartered by St. Mark’s Evangelical Lutheran Church for its annual picnic. Facing rotten life jackets and a crew untrained in emergency procedures, over 1,000 passengers died. Until 9/11, it

gressional study later put the damage at $300 million. The impact on the real estate market was long-lasting. “Insurance companies started to change their policies and stopped writing policies for busi-

space in Lower Manhattan was damaged, more than 20,000 residents were at least temporarily displaced, and hundreds of shops and restaurants closed, some permanently. The repercussions were severe for the commercial market: Ofﬁce leasing activity dropped some 40 percent in the area between 2001 and 2003, according to the Alliance. But as Manhattan’s economy improved in the mid-2000s, that trend reversed, and leasing activity increased 120 percent between 2003 and 2006. On the residential side, 9/11 had very little impact on the overall Manhattan market, according to appraiser Jonathan Miller. The median sales price for a Manhattan apartment was $420,000 in the fourth quarter of 2001, he said, and by the next year, it had grown to $450,000. Lower Manhattan, however, did see an exodus of residents after 9/11. “No one with children wanted to live here with the dust,” said Barbara Ireland, an associate broker at DJK Residential and longtime Battery Park City resident. By January of 2002, the value of a one-bedroom apartment in Battery Park City had dropped from around $400,000 to roughly $250,000, she said. “Sales in BPC have had a very slow climb back,” she added. TRD

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By C.J. Hughes n the last few weeks, as many of the city’s big banks have been besieged by bad news, and the stock market has seesawed sharply in a short span of time, the question on many analysts’ minds is: Could a new round of pain on Wall Street trickle down to New York’s already vulnerable commercial and residential real estate markets? Indeed, the thinking goes, the financial

companies — like Mobil, Exxon and chemical company Union Carbide — abandoned their New York corporate headquarters in the 1970s and 1980s for other (cheaper) addresses. However, political fights over debt limits in Washington, along with weak consumer confidence and the sovereign debt crises abroad, have recently spooked investors, leading to reduced profits across the

“THOSE EXPECTING THINGS TO GO BACK TO WHERE THEY WERE IN 2007, BEFORE THE BUBBLE POPPED, ARE ASKING TO BE DISAPPOINTED.” Thomas Fink, Trepp services industry and its numerous offices keep commercial occupancy rates high in Manhattan, while its well-paid executives buoy the high-end residential market. Meanwhile, its lower-rung workers drive demand for rental units, sources say. Wall Street has served as an economic engine of the city for decades, ever since major manufacturing and energy

44 October 2011 www.TheRealDeal.com

board at the big investment banks. Bank of America, run by Brian Moynihan, is facing the most severe problems, but other stalwarts of the Street — like Citigroup, headed by Vikram Pandit; Goldman Sachs, led by Lloyd Blankfein; and Morgan Stanley, headed by James Gorman — are also hurting, to name a few. Many of the problems are sparked by

new government reforms and uncertainty among the banks about the production power of their trading divisions — which suggests that the current bump in the road might be more like a steep and treacherous hill. “Those expecting things to go back to where they were in 2007, before the bubble popped, are asking to be disappointed,” said Thomas Fink, a senior vice president with Trepp, a research firm that counts banks among clients. “What we were looking at then was a market driven by excess global liquidity that allowed people to do deals at a very high velocity, which made for a lot of bad decisions,” he noted. In addition, the Street’s sources of capital could diminish, as brokerages in other cities, like Fidelity in Boston, or Vanguard, outside of Philadelphia, make a play for wealth management business currently concentrated in New York, Fink suggested. Indeed, as a wave of retiring baby boomers look for people to help them invest their savings, those brokerage could be the beneficiaries, he said. In the shorter term, evidence of the

struggles the big banks are facing is mounting. At Bank of America, even a $5 billion cash infusion from Warren Buffett in August hasn’t fully stabilized the company, which announced a leadership shake-up last month. The company is still dealing with the fallout of its ill-conceived 2008 purchase of Countrywide, which left its balance sheets swimming with toxic mortgages. In addition, it’s being sued for $10 billion by insurance behemoth AIG, which is claiming that the bank used deceptive sales practices involving securities. At the center of the suit is $28 billion in securities issued by Bank of America and its Merrill Lynch and Countrywide Financial units (and then insured by AIG), according to the 200-page complaint. AIG said in the suit that 40 percent of the mortgages underlying those securities were found to be worse than advertised and even possibly fraudulent, with exaggerated incomes and work histories. A BofA spokesman has said that the sales process was appropriately transparent, and that the securities lost ILLUSTRATION FOR THE REAL DEAL BY SQUAT DESIGN

value simply because the housing market tanked. According to a court spokesman, a trial date for the case has not been set. Early last month, BofA also announced it would cut 30,000 jobs over the next few years — some of which will likely be in Manhattan, where the bank’s offices are housed in the city’s second-tallest building, the Bank of America Tower on Sixth Avenue between 42nd and 43rd streets. Those job cuts, plus the layoffs forecast throughout the financial industry, are expected to have an impact on both the residential and commercial markets throughout the city. In April, the securities and commercial lending sector, which includes the best-known investment banks, employed 257,300 people, according to data from the New York State Department of Labor and Eastern Consolidated. That

total was far below pre-Lehman Brotherscollapse levels of 278,800, but it was a bit of an increase over August 2010, when the total was 250,200, the data shows. However, by August 2011, that total had declined back to 252,800, essentially wiping out all of the employment gains of the past year, according to the data. And the contractions are far from over, said Marisa Di Natale, a director with Moody’s Analytics. “There will be a few thousand more net job losses through the middle of next year,” she said. On the residential side, fewer investment banking employees means fewer high-income earners on the prowl for apartments (see story on page 47). “Everybody is tentative. They’re not grabbing stuff like they used to,” whether $10 million homes, or studios, said Barbara

Fox, president of Fox Residential Group. “And this is Wall Street’s fault, 100 percent.” On the commercial side, it could mean more office space flooding the market, which could drive up vacancy rates to levels not seen in more than a decade (see story on

Meanwhile, as the New York Times and others have reported, the federal bailouts that were boosting the banks in the aftermath of the Lehman Brothers collapse in 2008 are now fading, forcing them into cost-cutting mode.

“EVERYBODY IS TENTATIVE. THEY’RE NOT GRABBING STUFF LIKE THEY USED TO. AND THIS IS WALL STREET’S FAULT, 100 PERCENT.”

Barbara Fox, Fox Residential Group page 48), said Robert Knakal, chairman of Massey Knakal Realty Services, who added that the problem of dwindling demand for office space is not limited to the banks. “If companies continue to shrink, it’s a real concern,” Knakal said.

“In light of the current environment and our ongoing efforts to tightly manage expenses,” Citibank spokeswoman Shannon Bell said in an e-mail, “we are currently only filling positions we believe are critical to the line of business or function.”

STOCK

SLIDES

he combination of all of these pressures is already being reflected in the stomach-churning stock price drops at the big banks. For example, BofA’s stock was at $6.99 on Sept. 19 — down more than 50 percent from $14.19 at the start of the year — while Citi’s stock plunged 44 percent to $27.71 from $49 over the same time frame. Goldman’s shares also dropped, to $104.81 from $173.05, or 40 percent, since Jan. 3. And as the compensation structure has changed recently for bank employees, with more of their pay tied up in stock, these declines could have a profound effect on how much individual bankers spend on real estate. “Clearly the amount of people running

around the city willing to spend money has an effect on everything else,” Knakal said. The banks’ problems — which are widely believed to be self-inflicted and a result of the flimsy securities they peddled in the first place — don’t end there. There are legal and regulatory minefields ahead for all of the firms. Last month, the Federal Housing Finance Agency, the group responsible for getting the finances of Fannie Mae and Freddie Mac in order, sued 17 banks over what it claimed were deceptive mortgage practices. The lawsuit — which named BofA, Citi, JPMorgan Chase (which is headed by Jamie Dimon), Goldman Sachs, Morgan Stanley and Royal Bank of Scotland — is

reportedly seeking $20 billion in damages. The banks, which sold mortgage-backed securities to Fannie and Freddie, have said that Fannie and Freddie were well aware of the risks when they purchased the securities. Separately, the Federal Reserve this summer announced that it’s seeking damages against Goldman for misconduct at a mortgage servicing unit, which the bank recently unloaded. Also, the Dodd-Frank Wall Street Reform Act — which was signed into law in 2010 but won’t be fully enacted till 2014 — could create a chilling effect for the banks in the short term, sources say. Many support the goals of the act, which aims to eliminate much of the risk and leverage from the way banks do

business. But critics say the requirement that forces banks to have greater cash reserves will place a pall on lending. Similarly, the legislation allows regulators to keep a closer eye on derivatives trading, which is resulting in fewer derivatives being sold, another obstacle to lending, sources noted. Other parts of Dodd-Frank seem less controversial, like the creation of a new watchdog group to advise consumers about, say, harmful credit-card fees. And, the new act gives shareholders more voice about executive pay. So what is the impact of all of this going to be on the New York real estate market? “Firms are very skittish right now, and might become even more conservative,” said Moody’s Di Natale.

TIGHT E NING NO.

any analysts expect banks to tighten their purse strings both with home loans and commercial lending, further stifling the market, analysts say. “Dodd-Frank has hamstrung financial institutions,” Knakal said. “They are not making the loans they otherwise would.” To wit: One of Knakal’s wealthy clients is now trying to get a $400,000 loan on a $1 million property, and can’t, he said. The debt-to-loan ratios are starting to skew heavily toward the borrower, he said. Other trend lines indicate that the market

could tilt even more in the favor of all-cash buyers, who already have an advantage, others said. And, as The Real Deal has reported, there’s also some concern that the market for commercial mortgage-backed securities, or CMBS, which earlier this year seemed to be emerging from a funk, could also be stifled by the problems with banks. If they don’t buy the mortgages in the first place, the thinking goes, the whole financing system, which lubricates the wheels of New York’s commercial and

Lending

residential markets, could seize up. For all the doom and gloom that’s settled in over the last few weeks, there is some sense that Wall Street’s problems are not endemic, but temporary, and that certain demographic trends favor it for the long haul. Dan Fasulo, the managing director of research firm Real Capital Analytics, said that the tens of millions of baby boomers poised to retire need money managers, which will create Wall Street jobs. He’s also not worried that banks will decamp for greener pastures. Most back-

office jobs have already been relocated to the suburbs or overseas, and to attract the most skilled employees, banks will have to stay put in Manhattan, which continues to be a popular place to live, he said. “There is only a finite amount of talent available,” Fasulo said. Indeed, even if Wall Street hits “speed bumps,” New York’s real estate markets won’t collapse, he predicted. “I would still rather own a piece of property in Manhattan,” Fasulo said, “than in the middle of the country.” TRD

www.TheRealDeal.com October 2011 45

t ry ee e w v s

By C.J. Hughes all Street is a place, but it’s also a state of mind. And that’s true now more than ever, as the headquarters of New York’s most powerful banks are no longer clustered on one particular Financial District thoroughfare. Likewise, the homes belonging to the bosses of Wall Street’s biggest firms aren’t concentrated in any one place either. While there’s still some historic bias toward Uptown over Downtown, not every Wall Street titan gravitates toward the most exclusive white-glove co-ops. In addition, the success that these high-finance wizards have had with their NYC residential real estate investments is also all over the map. What follows is The Real Deal’s rundown of who, where, and how they’ve done.

Jamie Dimon: CEO, JPMorgan Chase Address: 1185 Park Avenue

any observers say JPMorgan is in the strongest shape, postGreat Recession, of any of the big banks. JPMorgan’s chief honcho, however, may have had less success with his home purchase. The unit is on the “L” line, a floor plan that has three bedrooms and three baths. It cost $4.9 million in 2004, according to city records. While that price may seem relatively modest for a captain of industry, it still might be a bit high for the building, a limestoneand-brick co-op at East 94th Street. Of course, the 1929 high-rise does have its perks, including the fact that it’s discreet. It has a private courtyard that cars can enter — if they can get past the security guards. Dimon’s apartment, real estate records show, faces north and is at the roof level, which suggests it gets good sunlight. Still, another three-bedroom in the building, #7F, sold for just $3.6 million in February. “I think he paid top dollar, unless it was in superb condition with marble baths,” said Larry Kaiser of the brokerage KeyVentures. He added that the most desirable

46 October 2011 www.TheRealDeal.com

WALL

STREET CEOs

Their Manhattan Abodes

apartments in the building are in the “D” n 2007, Pandit bought a co-op in the Beresford, a Central Park West line. But Dimon may not be fazed. According to news reports, he took home $21 million landmark. The 10-room unit, which has views of last year. the American Museum of Natural History, cost $18 million, city records show. But Lloyd Blankfein: by making the purchase, Pandit decidCEO, Goldman Sachs ed not to cast his lot with other pinstripe Address: 15 Central Park West suits. His home, which used to belong to “Odd Couple” actor Tony Randall, is in a building where bankers seem to be in short supply. One’s more likely to run into boldface names like Diana Ross, Glenn Close and John McEnroe, who also live there, than fellow I-bank CEOs. Pandit, who formerly ran a hedge fund, seems to be covering his bets, too. In 2008, he unloaded a combined apartn 2009, as his once unshakable firm was ment at 300 East 85th Street at Second dealing with the public relations fallout Avenue, in a condo called the America, for from receiving a $13 billion government $2.25 million, city property records show. bailout, Blankfein sold his five-bedroom Still, he seems to have held on to another duplex apartment on the Upper East Side combination at 310 East 53rd Street, in a at 941 Park Avenue. 31-story condo in Turtle Bay. That 29th The unit, located at East 81st Street, had floor home cost a total of $10 million at cost $27 million in 2007, but it ultimately the peak of the market in 2006, property sold for only $12 million, according to news records indicate, though it might seem reports. hard to recoup that now. In late Septem However, there’s no need to waste any ber, a three-bedroom there, the priciest tears over the financial loss. Blankfein unit, was listed at $4.2 million. It’s unlanded in a duplex in the city’s most high- clear whether one of his two children, or profile condo building, 15 Central Park any other family members, lives there. West. He and his wife, Laura, purchased the unit in 2006 before it was finished for $27 million and then moved in two years Dr. Josef Ackermann: later. The investment might be sounder than CEO, Deutsche Bank Blankfein’s previous one. Brokers point out Address: 15 West 53rd Street that the A-list of actors and business types who’ve purchased in the building are seeing values increase every time a unit changes hands, even as the reverse is true citywide. Blankfein’s apartment is “now worth at least $40 million,” said Robby Browne, a Corcoran broker who sells in the building and who also lives there. “Prices keep climbing.”

Vikram Pandit: CEO, Citigroup Address: One West 81st Street

or some investment bankers, Midtown is more the ticket. And that might be a well-placed bet. In 1999, Ackermann, a Swiss citizen who has a doctorate in economics, paid $1.5 million, according to StreetEasy, for his twobedroom, two-and-a-half bath unit in the condo known as Museum Tower, right by the Museum of Modern Art. Today, the unit might be worth $3.4 million, based on recent comps in the building, which was designed by César Pelli in the 1980s. Adding to the unit’s desirability is

that it’s on the 50th floor of a 53-story highrise. That offers it a clear view into Rockefeller Center, as well as slices of Central Park and the Hudson River, according to Paul Purcell, founder of Charles Rutenberg Realty, who has often sold there. Then again, “it really depends upon the condition of the apartment,” as the condo’s Reagan-era finishes can look dated, said Donna Olshan of Olshan Realty. Still, perhaps Ackermann — who will step down next May (he will continue to serve on the bank’s board) — doesn’t care. Records suggest that the unit is corporate housing, purchased by his employer.

James Gorman: CEO, Morgan Stanley Address: 1120 Fifth Avenue

orman, an Aussie who began his career as a lawyer, enjoyed a hefty $15 million in compensation last year, according to Forbes. If that isn’t enough, he also might have a nice real estate nest egg to fall back on. Gorman’s six-bedroom, six-bath unit has a private elevator entrance, though a smallish kitchen, according to a floor plan for another unit on the same line. His 44-unit prewar building at East 93rd Street was designed in 1925 by J.E.R. Carpenter, the crème de la crème of coop architects. City records don’t indicate what he paid for it in 2004, but the unit seemed to have been marketed for $7.9 million, based on an old listing on the website of Sotheby’s International Realty power broker Louise Beit, who declined to comment. If true, that’s roughly the same price that a smaller four-bedroom in the building is now being listed for, or $7.75 million, which means Gorman may have gotten a generous amount of square footage for the money. TRD

WALL STREET’S

GRIP

WALL STREET EMPLOYMENT HAS COME BACK WEAKER AFTER EVERY DOWNTURN SINCE THE EARLY 1990S.

LOOSENS By Leigh Kamping-Carder n August, art-world heavyweight Larry Gagosian paid $36.5 million for the Harkness Mansion, the Upper East Side spread that financier J. Christopher Flowers had bought for a recordbreaking $53 million in 2006. To some observers, the fate of the property illustrated the gulf between today’s residential market and the pre-crash boom. However, the art mogul’s purchase could also be a symbol for a longer-term trend affecting residential real estate: the gradual loosening of Wall Street’s grip on the city’s economy — and the growing number of New Yorkers working in education, health care, business services and creative fields. “The first thing to understand is that this trend is several years in the making,” real estate consultant Nancy Packes said. “I do not think that this is a blip or an anomaly.” In 2005, the broad category of financial professionals accounted for about 58 percent of renters in Manhattan below 96th Street. As of May, they made up only about 45 percent, according to a report Packes compiled in collaboration with real estate listings website StreetEasy. Meanwhile, in the same time period, creative workers (including those in media and fashion) doubled their share of the rental pool, from 8.6 percent to 17 percent. Technology workers made up 11.6 percent of renters, up from 7.2 percent. Those numbers echo labor trends across the city. Between August 2005 and August 2011, the most recent month for which statistics are available, the number of jobs here in commercial banking, commodities and securities declined 4.2 percent, from about 263,800 jobs to 252,800, according to data from the New York State Department of Labor and Eastern Consolidated. Wall Street was hit particularly hard by the financial crisis, shedding 3.5 times as many jobs as other sectors, according to the Office of the State Comptroller (see related story on page 44). Some of those jobs have come back in the last year, but the growth rate is a fraction of the level of job gains being seen in business services (which includes the fields of law and accounting), as well as in education and health care, the state data shows. In fact, Wall Street employment has come back weaker after every downturn since the early 1990s, owing partly to out-

ILLUSTRATION FOR THE REAL DEAL BY PETER BONO

sourcing and the automation of work, said Doug Turetsky, chief of staff of New York’s Independent Budget Office. “That has been the general trend after each successive downturn in recent periods: Wall Street comes back, but it doesn’t come back with quite as many jobs as previously,” he said. It’s no surprise then that the IBO projected in May that Wall Street would contribute only 5.4 percent of the city’s employment growth through 2015, while half of all job gains would come from business services and education and health. Though experts said diversification — a stated goal of the Bloomberg Administration — is a positive for New York’s economy, the occupations overtaking finance pay far less than the average job on the

Street, heralding a shift in the market for high-end real estate. According to Packes, the residential sale market will feel the biggest hit, as lower-paid workers in non-finance industries are priced out of buying. “The impact on rentals, therefore, is actually in some ways positive, as more people are in the job market at levels of compensation that don’t qualify them for the Manhattan sale market,” she said. In 2008, six of the top 10 priciest residential deals in Manhattan involved Wall Street buyers, including three hedge-funders and the former executive vice president of Merrill Lynch & Co. Inc., according to an analysis of data provided by StreetEasy. That number, however, has fluctuated in the last five years. So far in 2011, only three of the top 10 sales have been credited to finance bigwigs.

Shifting labor demographics could also affect new developments, as creative and tech workers seek out “San Francisco-like” neighborhoods such as the East Village, Long Island City and parts of Brooklyn, Packes said. Developers are already asking how to tailor unit mixes and amenities to cater to this new class of workers, she said.

Across the river, Peggy Aguayo of Brooklyn brokerage Aguayo & Huebener said that buyers from the world of finance have historically fueled both mid-level and pricier sales, but since the financial crisis, the breakdown has changed. Wall Street buyers continue to dominate high-end home sales (in the $2 million to $4 million range), but these days professionals in film, publishing and IT are buying up more of the mid-range

properties, she said. Of course, Wall Street continues to be a driving force in the residential market, mainly due to its disproportionate hold on the city’s wages. “Even as it’s come back a little bit smaller, [Wall Street] still plays a huge and outsize role in the local economy,” Turetsky said. “And that’s simply because the salaries paid there are just so huge.” Wall Street bonuses, of course, also continue to hold sway over residential sales. Failing to get an anticipated bonus impacts a financier’s decision to buy, said Gary Malin, president of Citi Habitats. “That’s really something we need to watch,” he said. In 2010, total bonuses were a third lower than their peak in 2007, as Wall Street, under scrutiny from regulators, shifted away from incentive pay in favor of higher base salaries and deferred compensation. For 2011, incentive pay at asset management firms will largely stay flat, while investment and commercial banks could see bonuses drop by 10 percent, according to an August report from compensation consulting firm Johnson Associates Inc. Still, so far the economic turmoil that ushered in August has not had a sweeping effect on the real estate plans of Wall Streeters, brokers said. “People at this point are proceeding and not getting caught up with the daily up-and-down market,” said Jill Sloane, an executive vice president at Halstead Property. “At least that’s what I found.” While some may hold off on residential transactions for six months or a year, particularly newer employees, or those who work in departments with steeper losses, others are swooping in to snap up deals, Malin said. “A lot of them are just trying to figure out what their exact circumstances might be.” And, he added, plenty of financiers want to live in places like the East Village. Indeed, diversifying New York’s economy is not a bad thing, Malin said. “As long as employment is strong, and more people are being hired, it’s going to have a positive effect on the real estate market.” TRD

www.TheRealDeal.com October 2011 47

SUBLEASE SPACE CREEPS BACK ONTO MARKET Woes lead to jump in listed Manhattan office space By Adam Pincus hree years ago, with the country in the midst of a financial crisis, major global banks looked to cut costs by subletting their unneeded office space to other companies. Just weeks after Lehman Brothers Holdings filed for bankruptcy, financial institutions like MetLife, Citigroup and Bank of America dumped more than 1 million square feet of this so-called sublease space on the market. As the downturn dragged into 2009, the total amount of sublease space peaked, with Manhattan financial services firms listing at least 4.4 million square feet by the middle of the year. Today, news of Wall Street’s financial losses has pushed banks to take out the knife once again, looking for ways to cut back on expenses. And some real estate insiders expect those boardroom decisions

than 400,000 square feet to 3.6 million square feet in August, Cushman reported. That accounted for nearly all of a small, but significant, 0.1 point rise in the boroughwide sublease availability rate. Preliminary office leasing figures for September from commercial firm Cassidy Turley also show indications of a small increase in sublease space in parts of Midtown. But Robert Sammons, the firm’s vice president of research, looking at his own research, said overall sublease space still remains at its lowest levels since the third quarter of 2008. “Midtown West and [the] Plaza submarkets did climb slightly for [September] over August, but both are minor and still well below the July figures,” said Sammons. Other firms, like Studley, show no rise at all yet.

market by financial services firms. The United States Trust Company, a unit of Bank of America, listed 505,000 square feet at 114 West 47th Street. Meanwhile, Citigroup listed 420,000 square feet at 601 Lexington Avenue, and MetLife put 105,000 square feet at 1095 Sixth Avenue on the market. At the time, commercial firm FirstService Williams (now Colliers International) reported that a total of 1.2 million square feet of sublease space was added to the market in that quarter alone. Ultimately, the amount of all types of sublease space in Manhattan peaked at 11.4 million square feet in the second quarter of 2009 — with about 4.4 million of that from financial services, a 2010 report from CB Richard Ellis shows. Almost no financial firm was untouched. JPMorgan Chase listed two major sites: 452,000 square feet at 277 Park Avenue,

As the economy improved, the firms took back some of the space themselves, including many of the largest blocks, such as the U.S. Trust Company space. Credit Suisse also took back 180,000 square feet at 1 Madison Avenue and 315 Park Avenue South that it had listed in the immediate aftermath of the Lehman collapse.

Current rumblings So far there has been no mad rush for the door. Cushman’s Harbert said he did not expect a wholesale space dump like the one that shook the market three years ago. Through August, there was only about 1.4 million square feet of financial services sublease space on the market, Cushman data shows. But there have been significant reports of job losses. Last month, Bank of America announced it would lay off 30,000 people

BLOCKS OF MANHATTAN

SUBLEASE SPACE LISTED BY SOME OF THE

BIG FINANCIAL FIRMS

to lead to another increase in sublease space in the Manhattan market. There have been small indications that it is already happening, marking a reversal of the steady decline in sublease space that’s occurred over the past two years, as bargain-hunting tenants inked deals. “We are starting to see space creep back on the market,” said Joseph Harbert, chief operating officer for the New York region of Cushman & Wakefield. He said the firm’s researchers saw an uptick in sublease listings — which had been dropping since the recovery began in 2009 — in August. The amount of total sublease space for Class A buildings in Midtown rose by more

48 October 2011 www.TheRealDeal.com

But last month, several financial firms put sublease space on the market. For example, hedge fund Citadel Investment Group listed its 30,529-square-foot 48th floor at 601 Lexington Avenue. And Macquarie Holdings, a global banking and advisory firm, listed nearly 50,000 square feet on two floors at 125 West 55th Street, data from CoStar Group shows. (A spokesperson for Macquarie denied the firm was offering sublease space in the building.)

Faster last time around

In the last three months of 2008, there was a flurry of sublease space dumped on the

A look at office space placed on the market since the 2008 crisis, and what happened to it

and 140,000 square feet at 320 Park Avenue, according to Cassidy Turley data. And Citigroup and asset management firm Legg Mason each put 97,000 square feet at 399 Park Avenue on the market (Citi also listed an additional 190,000 square feet at 485 Lexington Avenue). Much of the sublease space was snapped up in 2009 and 2010 at firesale rents. For example, Chase’s space at 277 Park was carved up by a number of companies, including Japanese financial firm Nomura Holding America, financial services company Sterne Agee, and insurance firm the Hartford Financial Services Group.

globally, and other Wall Street firms like Goldman Sachs, Citigroup, Barclays and UBS have started cutting staff. The financial services sector in Manhattan lost 3,700 positions between April and August of this year, according to Barbara Byrne Denham, chief economist with commercial sales firm Eastern Consolidated. “I could foresee at least 5,000 additional [job cuts] over the next six to 12 months in financial services,” she said. Using a general measure of 200 square feet for every employee, that would mean 1 million square feet of office space was no longer Continued on page 97

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PROFILE

Howard Michaels: The toughest boss in real estate? The hard-driving commercial ﬁnance middleman has already done $5 billion in deals this year, but has a reputation as the ‘Ari Gold’ of the business

BY CANDACE TAYLOR hirty-four years ago, Howard Michaels was knocking on doors in the 2.3 million-square-foot Starrett-Lehigh office building, hawking copy machines for the 3M Company. “I was making bupkis,” Michaels recalled. Those days are undoubtedly over. In 2004, he arranged a $219 million recapitalization of that same building, earning a seven-figure commission for his company, a real estate investment advisory firm known as the Carlton Group. Carlton has been on an especially hot streak this year. So far in 2011, the company says it has closed $5 billion in transactions worldwide. In two high-profile deals this spring, Carlton raised over $500 million of equity and debt for developer Harry Macklowe’s soon-to-be condo conversions at 737 Park Avenue and 150 East 72nd Street. And, at the office building 1180 Sixth Avenue, Carlton brought in an anonymous Chinese investor to bail out owner Murray Hill Properties before a planned foreclosure auction by the mezzanine debt holder, Shorenstein Properties. In July, the commercial property trade publication Real Estate Alert rated Carlton the No. 1 office sales and recapitalization firm in Manhattan for the first half of 2011. (For all property types, The Real Deal’s data ranked Carlton at No. 4. See related story on page 62.) Meanwhile, Carlton opened a new office in Athens last month and a London outpost in April, adding to its locations in Chicago, Los Angeles and Florida. The way Michaels tells it, Carlton’s current level of activity is due to a unique confluence of market factors that play to his strengths. Michaels is fond of repeating that Carlton specializes in raising “passive, promotable equity” for clients — tapping highnet-worth individuals and institutions to access 80 to 100 percent of the capital required for a real estate project. Now, in a difficult deal-making environment, with many of the pre-recession players out of commission, Carlton is uniquely positioned to clean up. “The real estate market right now is obviously very volatile,” Michaels said, excitedly pacing across his glass-walled corner office at 560 Lexington Avenue.

52 October 2011 www.TheRealDeal.com

“But I love it. I couldn’t be having more fun.” Carlton’s detractors have a different take, saying Michaels’ accomplishments are exaggerated by his courting of the press and frequent e-mail blasts, to a database of several hundred thousand contacts in the United States and abroad, when the ﬁrm is working on a deal. And Carlton’s reputation is indelibly

too. If staffers miss them, “there’s hell to pay,” one former employee recalled. “He just has no regard for someone’s personal life or schedule.” Michaels vehemently denied that Carlton has the highest turnover in the business, adding that the ﬁrm has had “many” employees stay with the ﬁrm for at least 10 years. A self-described “workaholic,” he laughed off the comparison to Piven’s

on weekends and over the summer. He swept floors at first, eventually working his way up to sales. Michaels quickly figured out that he liked making money, and he had a knack for it. “Some guys are good at playing football,” he said. “I was good at business.” In 1977, he graduated from American University in Washington, D.C., and be-

Howard Michaels in his ofﬁce at 560 Lexington Avenue last month. “Some guys are good at playing football. I was good at business,” he said.

“Carlton is not for the fainthearted. If you’re not serious about work, this is probably not a good place.” Howard Michaels, the Carlton Group

marked by Michaels’ notorious temper, which has earned him comparisons to Ari Gold, the verbally abusive talent agent played by Jeremy Piven on HBO’s “Entourage.” Michaels’ friends and foes alike note that he is one of the industry’s toughest bosses, and that the ﬁrm cycles through employees at a rapid clip. Carlton has “the highest turnover in the history of real estate companies,” said one industry source. “He has a list of hundreds of people he’s hired [who] have quit.” Michaels is also famous for his grueling schedule. One former employee bemoaned Michaels’ mandatory Sundaymorning conference calls — which take place on holidays and long weekends,

character. But he doesn’t deny that he’s a tough boss. “Carlton is not for the fainthearted,” he said. “If you’re not serious about work, this is probably not a good place. But if it’s someone who’s motivated and wants to do well, this is a great place to work.”

Other people’s money Howard Lee Michaels was born in Flatbush, Brooklyn, in 1955. He was, he told The Real Deal in 2008, “a fat Jewish kid in an all-Italian neighborhood.” Now ﬁt, if stocky, Michaels has an intense gaze that frequently strays towards his ever-present BlackBerry. His father worked in a retail carpet store, he explained, and as a kid, Michaels helped out

gan the circuitous career path that would eventually lead him to real estate. He landed the sales job at 3M within three weeks of graduating from college. From there, he moved to Connecticut General Life Insurance, where a cold call led to a job at the Manhattan-based real estate syndicator Island Planning. Michaels did well at Island. The complex ﬁnancial instruments of today hadn’t yet emerged, and syndicators — who pooled together funds from multiple investors — dominated the market. “By the time I was 30,” he recalled, “I had a chauffeur-driven limousine, I had a day driver, I had a night driver, I had a house in the Hamptons.” Perhaps more important, he’d dis-

PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

PROFILE covered the skill set he would cultivate for the rest of his career: scrounging up capital for real estate deals. “I was always good at raising money for projects,” Michaels said. In the depressed real estate market of the early ’90s, Michaels became a partner at a Long Island-based company called Carlton Brokerage. Along with the other owners, he created a new company called Carlton Property Auctions. “It was a difﬁcult time to sell anything,” recalled Peter Hauspurg, chairman and CEO of Eastern Consolidated, who organized an auction of distressed commercial assets with Michaels in 1993. The two recruited sellers to take part in the auction, compiling “a thick book of distressed properties,” Hauspurg remembered. “We ended up with hundreds of assets.” Some 1,000 people showed up to the

Carlton, along with its clients, began delving into these more complicated transactions. “That was a great segue for us, because a lot of our auction clients were the investment banks,” Michaels explained. “When those banks changed their focus, we took those relationships and started doing financing.” Then, in 1998, an old client from Michaels’ syndication days asked him for help raising the subordinate capital for the purchase of an office building in Washington, D.C. “Within 48 hours, we got four offers for them,” he remembered. The deal wound up fizzling, but Michaels had figured out a way to set himself apart from his competitors. “What does everybody in real estate want? OPM — other people’s money,” Michaels said. “So I decided I was going to

Carlton raised over $500 million of equity and debt for 150 East 72nd Street (left) and 737 Park Avenue, both projects by Harry Macklowe.

More recently, at 737 Park Avenue, Michaels “got the buyer to recognize what the market would give him,” said one Carlton client who asked not to be named. “He found the equity, which was a miracle, if you ask me. He got quality debt for a condo conversion, and the market was disintegrating at the time, too. That was a hard, hard deal. I don’t believe anybody else could have gotten that deal done.” This, and Carlton has only around 50 employees, making it relatively diminutive compared to competitors like Eastdil Secured, CB Richard Ellis and Cushman & Wakeﬁeld. Competitors note, however, that the largest ﬁrms have only a few brokers who specialize in Carlton’s niche. “Even if he only had 12 guys, he’d be larger than all of them,” said one. “Howard could well be one of the biggest players around in that sector.”

1180 Sixth Avenue, where Carlton brought in an investor to bail out Murray Hill Properties

Michael Ashner, CEO of Winthrop Realty Trust

Developer Harry Macklowe

Murray Hill Properties’ Norman Sturner

event, held at the Starlight Room on the top floor of the Waldorf-Astoria. “It worked — we sold a lot of property,” Hauspurg said. Michaels continued expanding Carlton’s auction business. In the mid-’90s, he parted ways with his partners, formed the Carlton Group (they retained Carlton Brokerage) and moved it into Manhattan. By that time, the industry was changing, as securitization replaced syndication. In 1994, J.P. Morgan was widely credited with creating the first credit default swap — a financial instrument that serves as a type of insurance policy against default— and changing the face of modern finance.

become the best person at arranging deals with other people’s capital.” That strategy, he said, has allowed Carlton to do some of the industry’s highestproﬁle deals. For example, Michaels said: “In 2006, when Harry Macklowe wanted to pay off Vornado and [George] Soros, who had some very expensive mezzanine on the General Motors Building, I brought in Jamestown, who gave him a $300 million check to pay them off and build out the Apple Store. And when Charlie Kushner needed $335 million to pay off his mezzanine debt on 666 Fifth Avenue, I brought in a dozen lenders who gave him $525 million.”

Whatever the size, today’s economic climate is particularly beneﬁcial to Carlton and similar companies, Michaels said. Before the recession, “it was a different market to compete in, because you had all the super real estate banks controlling the market,” he said. “You had Lehman, you had Wachovia, you had Bear Stearns, you had Credit Suisse, you had Goldman.” Buyers and owners who had relationships with these players could “get all of their capital needs met,” he said. That’s no longer the case, and borrowers need more help from brokers. “Clearly, in an uncertain environment, the perceived value of an intermediary is more

BUILDING PHOTOGRAPHS FROM PROPERTYSHARK.COM

significant,” said Simon Ziff, president of real estate capital advisory firm AckmanZiff. That gives Carlton, and firms of its ilk, a wider opening to swoop in. “We’re getting a payoff for the last 25 years of traveling the world, and going to every conference, and having relationships with investors throughout the world who now have money to invest in U.S.-based deals,” Michaels said.

Marine-style business Carlton has no shortage of satisfied customers. Murray Hill Properties’ Norman Sturner openly credits Michaels for saving the day at 1180 Sixth Avenue and at One Park Avenue, where Carlton arranged the financing for Vornado’s $180 million recapitalization of the 925,000-square-foot office building, which had been on the brink of foreclosure. Both properties were “in financial crisis,” before he hired Carlton, Sturner said. Michael Ashner, the chairman and CEO of Winthrop Realty Trust, hired Michaels to manage the firm’s attempted foreclosure at Stuyvesant Town in 2010 with the other senior mezzanine lender at the project, Pershing Square Capital Management. (The deal didn’t go through, but Ashner said that had “nothing to do with” Michaels. The parties ended up making a deal with CW Capital instead.) “It was a very complicated foreclosure, and [Carlton] did an excellent job,” Ashner said. “Whenever we’re involved in these mezzanine foreclosures, we use him and his firm.” One element of Michaels’ success is his industry connections. “His Rolodex is as good as anybody’s,” Sturner said. “His tentacles go out to everybody.” But Michaels and others say his success is chiefly a function of persistence. One broker described Carlton’s technique as “calling 100 lenders, and finding someone interested in the deal.” Michaels “doesn’t stop on Friday afternoon and resume on Monday,” Ashner explained. “If a thought occurs to him, he pursues it on Saturday evening, and he’ll call you. International time zones don’t affect him.” While Sturner and Michaels were working on 1180 Sixth and One Park, “he and I spoke literally five times a day, seven days a week,” Sturner said, “and when we couldn’t speak, we would text.” On some occasions, Michaels said, he has even put up deposit money from his own funds to facilitate a client transaction. He does take time off, he said, to be with his five children and his second wife, Continued on page 94

www.TheRealDeal.com October 2011 53

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THIS MONTH IN

REAL ESTATE HISTORY The Real Deal looks back at some of New York’s biggest real estate stories 1983: THE $400M TIMES SQUARE PROJECT THAT NEVER WAS

wenty-eight years ago this month, officials selected a development group to build a $400 million wholesale market at Eighth Avenue and 42nd Street. The mart, which did not end up getting built, was supposed to be the final part of a $1.6 billion plan to remake the seedy Times Square area. Mayor Ed Koch and Governor Mario Cuomo announced that a consortium including the country’s largest operator of merchandise marts, Dallas-based Trammell Crow, and Tishman Speyer Properties would develop the building on the east side of Eighth Avenue from 40th to 42nd streets. The developers dreamed of building a 2.4 million-square-foot Trammell Crow business-to-business market that would turn New York City into the leading wholesale center for computers and software. Other parts of the $1.6 billion plan to remake Times Square included new hotels and office buildings. But the project stalled, and by 1987, Trammell Crow had pulled out. Ultimately, the New York Times and Forest City Ratner constructed the New York Times headquarters on the parcel between 40th and 41st streets, and earlier this year SJP Properties opened 11 Times Square, on the site between 41st and 42nd streets.

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owntown booster and banker David Rockefeller unveiled a $1 billion proposal to rebuild and modernize two large tracts of Lower Manhattan 53 years ago this month that ultimately led to the creation of the World Trade Center towers. Rockefeller, vice chairman of Chase Manhattan Bank, led the executive committee of the two-year-old Downtown-Lower Manhattan Association, which drafted the plan. In a meeting at City Hall, Rockefeller laid out the proposal, which called for razing David Rockefeller hundreds of low, decrepit buildings, as well as making public improvements, in two different sections of Lower Manhattan. The first section was along West Street between Cortlandt and Canal streets and was home to the wholesale produce market. It was slated for industrial use and possibly some residential and retail. The Port Authority of New York and New Jersey later built the World Trade Center towers on a 16-acre site within that larger portion. The second section was on the East Side along South Street, between Coenties Slip and the Brooklyn Bridge. That would be developed for office, retail and affordable housing. The $1 billion cost was unofficial, and the association did not provide an estimate of the public and private construction costs.

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leading real estate broker with backing from a major financier announced plans for a 150-story skyscraper in Lower Manhattan that would dwarf the under-development Chrysler and Empire State buildings, 82 years ago this month. Charles Noyes, the owner of the top brokerage firm Charles F. Noyes Co., and Empire State Building investor and businessman John Raskob disclosed their intention to construct the enormous tower two blocks from City Hall. The plan, which was announced in the final days of a decade-long building boom, was not all bluster. Noyes and real estate investor David Schulte had assembled the necessary buildings on two blocks between Worth and Duane streets, and Broadway and Church streets. They paid about $600,000 for leases controlling the 17 buildings, and also owned properties outright. Charles Noyes But their dreams were quickly dashed with the collapse of the stock market two weeks later and the onset of the Great Depression. In 1935, Noyes and Schulte sold the properties to J.P. Morgan & Co. for about the same price they had paid, the New York Times reported. The next major developer to make such grand plans was Donald Trump, who in November 1985 — in the midst of another real estate boom — said he would build a 1,670-foot-tall tower with 150 stories as part of his abandoned West Side project, Television City. That skyscraper plan was scrapped in 1991 as a recession sapped the desire to build. Compiled by Adam Pincus

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Building blocks:

How many buildings do you own? Seven buildings — a total of 144 apartments and one store. The smallest building is 217 East 4th Street, with 15 units, and the largest is 225 East 10th Street, with 39 units. I had three more properties, but I sold them off. They’re all on the East Side — from the Lower East Side up through the 90s. By Jane C. Timm

Is your family in real estate?

Vital Stats:

224 East 27th Street

Just my brother, Fred. He passed away about 10 years ago, but he started the business in the ’60s as a rental broker — he had his own agency — and later started buying rental [apartment buildings] on the Upper East Side.

Name: Alan Ziess

Title/Company: President of Alan Ziess Realty Limited Age: 63 Hometown: Bronx, N.Y. Currently living in: Tarrytown, N.Y.

How was working with your brother? It was very easy. We were very close; he was a great guy.

How did you become a landlord? I used to be an accountant. But in 1981, I decided to get into the real estate business because my brother was in it. So I became a broker and started selling investment real estate. On the side, I was renting out apartments in the buildings my brother owned, and later I started doing more on the management side. I took over full control of the buildings when my brother passed away. I still maintain my [broker’s] license, be because it’s very hard to get back, but I don’t really do brokerage any more.

Life as a landlord: Which do you like better: being an owner or a broker? Definitely management. There’s a lot less running around. We use outside brokers, so I just visit the buildings a few times a week. I have an exclusive with A.C. Lawrence & Co. Marc Lewis is a close, personal friend of mine, so I give him all of my listings.

Are you looking to buy more buildings? If the right opportunity came along, I would, but right now we’re just sitting. There’s a very limited amount of property for sale and the prices are too high — to buy something at those prices, I don’t think we’d make money.

What is the most challenging part of owning a building in NYC? Dealing with the city regulations and the court system! There are all these building requirements … that [don’t exist] in other parts of the country. I speak to other owners [outside the city], and when I tell them some of the stories that we encounter in New York they just laugh.

A building ‘thief’:

What’s your worst tenant horror story? We had a tenant who claimed she owned the building! She was my brother’s ex-, ex-, ex-, ex-girlfriend. When he passed away, she tried to file a phony will leaving three buildings to her — worth $10 to $15 million. My brother used to write up these agreements to try and get her to leave, but she never did. She used those documents to doctor up deeds. And the City Register accepted them! She tried to collect rent from the other tenants — she actually did from a few. She got all these lawyers trying to wear me down for settlement and I said, “I’ll never settle.” They finally arrested her, and eventually immigration took over and deported her back to Mexico, but it cost us hundreds of thousands of dollars. Who would ever think to do this?

The bottom line: Are you feeling the market’s recovery?

− Ziess Realty’s properties

We’re getting unprecedented rents right now, way above the peaks a few years ago. … I’m just shocked — whatever rent I ask for, I get. I never know if I’m asking too little, but I’m not going to quibble over a few dollars.

How much are you raising rents by? We had to drop rents by 25 percent over the last two years, but now we’re getting 25 percent increases with new tenants. … Even though rents are rising, real estate taxes are rising so much that it really takes a bite out of the increases.

What are you concerned about as a landlord? I’m concerned about our economy’s future, but I think New York has survived better than other cities. That said, I’m taking tenants right now that I wouldn’t ordinarily take — a lot of students. In a strong market, I wouldn’t take students. When you get younger people, they tend to be noisier and it interferes with the working people in the building. But we’re not taking undergraduates, we’re taking graduate students, medical students, Ph.D. students — we’re not taking 18- and 19-year-olds. TRD

58 October 2011 www.TheRealDeal.com

PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

WHERE CAN YOU FIND CAPITAL IN TODAY'S MARKET?

ARCHITECTURE REVIEW

James Gardner

Bringing back the bigness

John Jay’s new addition unapologetically claims its space

igness is back. By “bigness,” I do not as the Bear Stearns Building), as well as mean height — rather, I refer to a for the mediocre PricewaterhouseCoopers kind of hulking squatness, an un- building at 300 Madison Avenue and, alapologetic, as-of-right occupancy of a plot most as mediocre, the Time Warner Cenof land — without any namby-pamby pur- ter at Columbus Circle, among many other chase of “air rights,” or any rising up in a zig- projects. guratted setback to heights made possible At the same time, however, the firm by the construction of some cynically insuf- proved that it still had some life left in it ficient, “privately owned public space.” when 7 World Trade Center came out far Two recent and conspicuous examples of better than many critics (myself includthis new bigness are the Lucida and the Brompton, which occupy the The new addition to John Jay College southeast corners of 86th Street at on 11th Avenue opened just in time for the beginning of the school year. Lexington and Third Avenues, reInset, T.J. Gottesdiener of Skidmore spectively. These structures hark Owings & Merrill, the managing back to the days before the 1916 partner on the project. legislation that mandated how high a building could rise in New York relative to its footprint. But an even more striking instance of this upstart subgenre is on the West Side — the addition to John Jay College of Criminal Justice (part of the City University of New York) that has just opened in time for the beginning of the new school year. According to a news release from John Jay, interest in criminal justice has greatly increased in the last decade, in part due to the World Trade Center terrorist attacks. As a result, John Jay has doubled in size. Until now, the school was mainly limited to its Haaren Hall Building on Columbus Avenue, between 58th and 59th streets. That building — which was designed by C.B.J. Snyder in 1906 and renovated by Rafael Viñoly in 1988 — stretches less than halfway toward Amsterdam Avenue. With this new addition, however, the school reaches all the way to Amsterdam, to form a kind of dumbbell shape, with two boxy structures fronting the avenues, linked by ed) had anticipated. Skidmore Owings & a lower-lying building that stands between Merrill also revised Daniel Libeskind’s dethem. sign for One World Trade Center (formerThe new building on 11th Avenue was ly known as the Freedom Tower) in such a designed by Skidmore Owings & Merrill way as to improve greatly upon the original — once the default architects in New York. conception. Beyond the Big Apple, it’s been responImmediately after the Second World War, under the aegis of Gordon Bunshaft, the sible for a number of distinguished projects, firm designed everything from the Manu- among them the most excellent Trump Infacturers Hanover Trust Branch Bank, at ternational Hotel and Tower in Chicago and 510 Fifth Avenue, to such emblematic struc- the Burj Khalifa in Dubai, by far the tallest tures as the Lever Building and the Manhat- building in the world. The new addition to John Jay College is tan House. In recent years, the firm’s record has not as distinguished or as dramatic as those been more mixed. It was responsible for two projects — this is New York, after all the poorly designed and executed building — but the boldness of its bigness comes as at 383 Madison Avenue (formerly known a welcome disruption of the architectural

stock in that part of the West Side. According to the SOM website, the new John Jay addition, when linked to the old main building, will make it possible for the ﬁrst time to unify all of the college’s activities in a single space, so as to create “an academic city within a city.” To this end, the 14-story, 240-foot-tall building will give the institution an additional 625,000 square feet of space. The to-

60 October 2011 www.TheRealDeal.com

PHOTOGRAPH OF JOHN JAY COLLEGE FOR THE REAL DEAL BY DEREK ZAHEDI; PHOTOGRAPH OF GOTTESDIENER BY JAMES CHANG

tal cost of the project is $557 million. SOM’s T.J. Gottesdiener is managing partner on the project, while Mustafa Abadan is design partner, according to the website Arch Daily. At ﬁrst glance, the new section of John Jay looks a little like the Whitney Museum on Madison Avenue, a slightly topheavy cube that beetles in staggered “setforwards” over the street. But as big as the Whitney is, you could ﬁt at least four of them, I imagine, into the school’s new addition. And whereas the Whitney is a Brutalist monolith fashioned out of granite, the new building engenders a far lighter effect, being formed of wraithlike glass and steel.

Various efforts have been made to enliven the surface of the curtain-walled façade: One trick used throughout is to place flangelike strips of metal across the surface, a device that SOM has used as well at 300 Madison and 7 World Trade. It is not uncommon in recent architecture, and for the life of me, I cannot understand what the designers believe they are accomplishing by using it. Presumably it is supposed to suggest some Postmodern insubstantiality, an emphasis on surface rather than depth. But if it looks somewhat good on the façade of 7 World Trade, it looks a little cheap on Amsterdam Avenue and 58th Street. Though the building is now officially open — Secretary of State Hillary Clinton took part in a memorial service there last month, shortly before the 10th anniversary of 9/11 — the finishing touches are still being applied, so it is not yet easy to judge how well it fits into the fabric of the Upper West Side. According to the initial renderings, the 11th Avenue façade was supposed to have emblazoned across its lower level the college’s name in bold block letters, several stories tall. Fortunately, this plan did not materialize, though the present entrance looks a little like underwhelming and unimaginative default architecture. The other main entrance, between the avenues on 59th Street, is adorned with a somewhat retro, angulated canopy that is similarly unimpressive and that suggests — I assume intentionally — an early sixties Modernist idiom. In the rendering, this area is arrayed with flags of many nations that would certainly add to the overall effect. But it is unclear if that plan will ever materialize. The interstitial area, the Campus Commons, will serve as the institution’s quad. It is marked by a massive glass ceiling that will maximize natural light. Along it are roomy stepped lounges that are intended to facilitate circulation, while serving as gathering spaces. It remains to be seen, of course, how well the new space functions. For that, the building complex will need a few semesters under its belt. For now it can be said that what the new building lacks in beauty, it certainly possesses in the form of pugnacious character. John Jay College has succeeded in making a strong statement that, in urbanistic terms, this institution is emphatically alive. TRD

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PROFILE

A $15 billion enigma

Eastdil Secured manages to stay out of spotlight, despite leading pack in brokering investment sales BY ADAM PINCUS oogle’s record $1.8 billion purchase of 111 Eighth Avenue late last year momentarily put the name Eastdil Secured on the lips of everyone in New York’s real estate industry. But the low-profile real estate investment banking firm, which managed the sale, doesn’t have the street-level cachet that many of its rivals have. While Manhattan’s building-sales brokers and financiers (those who focus on large institutional deals, often over $100 million) know the firm as a powerhouse, many others in real estate still have no idea who Eastdil is. And many are unaware that in addition

nounced in press releases. The information is often provided from behind the scenes, with the fingerprints of Eastdil’s brokers only visible to the few who know the ins and outs of the business. The out-of-sight tack is clearly working — at least in the United States. The Midtown-headquartered firm has only about 250 employees, yet it’s consistently among the top investment sales firms both nationally and in Manhattan, competing with brokerages with more than 10,000 employees. Indeed, the Google deal capped off a robust 2010 for Eastdil, which was ranked No.

in their own league nationally (with the nearest firms, such as Holliday Fenoglio Fowler and Cushman & Wakefield, closing only about half of their levels), the former took an atypical path to the top. And it’s that route that may be holding the firm back internationally, where it’s far weaker.

Wall Street roots Eastdil’s approach to today’s investment sales market can be traced directly back to its Wall Street roots. Even now, much of its income is from real estate investment banking. About 34 percent of the business this year is from property sales, March said, compared with

Benjamin Lambert (left), founder and chairman of Eastdil Secured, and company CEO Roy March last month in the ﬁrm’s Midtown headquarters

to investment sales, the firm does highly sophisticated equity and debt placement. Eastdil’s under-the-radar place in the city’s real estate universe is consistent with its quiet approach nationally. “The people who know the business know who we are, and so we don’t really need to advertise what we accomplish,” Roy March, the company’s CEO, told The Real Deal in a rare interview last month, which also included company founder and chairman Benjamin Lambert. Despite its institutional reticence, however, the firm is fully engaged in both the local and national property and finance world. Indeed, March is on the board of the influential Washington-based lobbying association the Real Estate Roundtable, and Eastdil’s deals are regularly covered in the real estate press, along with nearly every one of its assignments, contracts and Manhattan sales. But those deals are not generally an62 October 2011 www.TheRealDeal.com

“The people who know the business know who we are, and so we don’t really need to advertise what we accomplish.” Roy March, Eastdil Secured 1 nationally in commercial sales for the third time in five years, with $15.4 billion worth of transactions, according to the weekly commercial publication Real Estate Alert. CBRE ranked second with $12.3 billion. In the first half of this year, Real Estate Alert shows that Eastdil had $7.2 billion in sales nationally, just behind CBRE, which racked up $7.9 billion. In Manhattan, through mid-September, Eastdil had $4.5 billion in sales and refinancings, to CBRE’s $3.6 billion, according to an analysis of data from the CoStar Group and Real Capital Analytics by The Real Deal. Yet while Eastdil Secured and CBRE are

12 percent in loan sales and 43 percent in financing and investment banking. Last year, the firm reported $66.7 billion in total transactions. Lambert, whose father and grandfather were Manhattan jewelers, founded the firm in 1967. He was 27 at the time, and saw a need to provide real estate advisory services to large institutional funds. So he formed Eastdil Inc., a wholly owned division of Eastman Dillon, Union Securities, an investment banking firm where he had worked for a few years. At the time, it was at the forefront of a new trend to arrange financing through Wall Street firms. Lambert said he saw an opportunity in

“being able to bring real estate products and needs for capital for the real estate business to Wall Street through the investment banking world.” The firm took advantage of a tectonic shift taking place in the real estate industry, as developers in different regions began to look outside their limited geography for capital, and increasingly turned to Wall Street. “I think Eastdil grew with the markets and grew with the capital flow when firms like ours started raising large private investment funds for national and international investments,” said Douglas Shorenstein, chairman and CEO of Shorenstein Realty Services, a large private real estate investor. Over the next decades, the firm handled some iconic land deals, mostly outside of New York City. In one of the largest, the firm arranged the financing in 1977 for a group, including West Coast developer Donald Bren and Detroit shopping-center magnate Alfred Taubman, to pay $377 million for the Irvine Ranch, which had been used to found the city of Irvine, California. To this day, a handwritten spreadsheet penciling out the expected performance of the property hangs on the wall of Lambert’s conference room. The firm also became deeply involved with the sale of distressed properties from the Resolution Trust Company, the government-backed entity created in 1989 to sell off properties after the savings-and-loan collapse. In addition, Lambert has been a canny investor in his own firm, which has been sold and repurchased multiple times through the decades. The latest of those sales was in 1999, when lender Wells Fargo Bank bought the firm outright for an undisclosed amount. Eastdil remains an independent subsidiary of the bank today, as well as a partner of financial analysis firm Green Street Advisors, which it taps for additional research. Under the Wells umbrella, in 2006 the firm merged with Secured Capital, a Los Angeles-based investment banking firm, shoring up its debt placement skills and West Coast reach. Over the years, the company has at times expanded into different real estate areas and later cut those divisions loose. For example, in 1994, it sold off a property management business. With its sole focus on sales and real estate investment banking, “we have become today the company that we wanted to become when we began,” Lambert said. In terms of the business model, though, its affiliations with financial institutions put the company squarely in the Wall Street camp, rather than in the property brokerage camp, with firms like Cushman & Wakefield and CBRE. Even when it comes to pay, Eastdil has always used the salary-and-bonus structure PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

PROFILE common at Wall Street and financial firms, rather than the commission structure used by most major real estate brokerages. The firm says its salary-and-bonus model is an advantage, allowing it to pay higher compensation than other leading companies that use a commission structure, such as CBRE. Given how closely guarded industry compensation data is, one rival said it’s impossible to verify who pays more, though the source said their claims are “probably braggadocio.”

Helmsley and Harmon Although the company has been based in Manhattan since it was founded, it was not a strong player on the local investment sales scene until the 1990s, when it hired Douglas Harmon, now senior managing director. After graduating from Brown Univer-

Eastdil on the map in Manhattan. The 125 buildings — which included 230 Park Avenue, the Starrett-Lehigh Building at 601 West 26th Street, and the Graybar Building at 420 Lexington Avenue — took several years to unload, but Eastdil was doing that unloading just as investment sales were really starting to grow in importance and volume in Manhattan. Today, at least in the New York City real estate press, Harmon’s name is rarely absent from an Eastdil Secured deal. CoStar ﬁgures show him to be the ﬁrm’s top producer by far, and along with his main rival, CBRE’s Darcy Stacom, he is often named as one of the leading sales brokers of all time. Known for his frenetic personality, his canny negotiating skills, and his top-level access to anyone in the real estate busi-

Avenue to Google for $1.77 billion is the largest user acquisition ever. And the 2007 sale of 450 Park Avenue at $1,585 per square foot is still considered a record price per foot for an office building. Asked about the frequent press mentions of Harmon, Lambert said, “People who want to promote what is going on in the company sometimes go beyond the boundaries of the right way to handle it.” Harmon declined to comment for this article, citing company policy of not talking to the press. Although among Eastdil brokers Harmon is cited most often in the press, he is not the only broker at the firm who is active in Manhattan. March, who leads the firm nationally, has brokered some of the firm’s largest deals around the country and is active here as

he believes Spies to be one of the most active brokers in New York City, despite his low proﬁle. He is rarely quoted in the press, although he is frequently mentioned as a broker along with Harmon. “If anyone knew the true scope of what he is working on, they would recognize that he is far and above the most active broker [of notes and property] between $100 million and $500 million,” Schechtman said.

Courting the bridesmaids While the winning bid on any given deal is the one that matters most in the moment, the so-called bridesmaids, or the losing bidders, are also hugely important to most investment sales brokers. The reason is that once a bidder tries in earnest to win a deal, the seller’s broker knows exactly what they can pay and ex-

Eastdil takes ﬁrst place for Manhattan investment sales over $20 million this year — so far RANK BROKERAGE

2011 SALES

2010 SALES

2010 RANK

Eastdil Secured

$4.5 billion

$2.9 billion

CB Richard Ellis

$3.6 billion

$5.2 billion

Cushman & Wakeﬁeld

$1.7 billion

$578 million

Carlton Group

$1.5 billion

No deals listed

n/a

Jones Lang LaSalle

$871 million

$1 billion

Houlihan Lokey

$770 million

$107 million

Eastern Consolidated

$451 million

$134 million

Georgia Malone & Co.

$443 million

No deals listed

n/a

Holliday Fenoglio Fowler

$429 million

No deals listed

n/a

$315 million

$388 million

10 Hodges Ward Elliott

Source: An analysis by The Real Deal of Real Capital Analytics and CoStar Group data. The ranking is only for large deals, greater than $20 million, which have a buy-side or sell-side broker identiﬁed by name in one of the databases. The 2011 numbers include closed deals through late last month. Partial-interest sales were credited only for the transaction dollar amount.

Eastdil broker Doug Harmon

Eastdil broker Adam Spies

sity in the mid-1980s, Harmon got his feet wet in real estate with a stint in the real estate division of London’s gaming ﬁrm Ladbrokes PLC. Then, from 1985 to 1990, he went to Alvin Dworman’s Midtown-based real estate and investment banking ﬁrm ADCO Group. After that, he headed to business school at UCLA’s Anderson School of Management. And, in 1993 he was hired by Eastdil. But it was landing the complicated, historic assignment with Lambert in 1997 to sell the $5 billion commercial and residential portfolio of Leona Helmsley (amassed by her husband, Harry) that really put

Google’s buy of 111 Eighth Avenue was the biggest investment deal of 2010.

ness, Harmon is also considered quirky and gregarious. (He frequently sprinkles his emails with emoticons and has been spotted wearing sunglasses to meetings. Insiders say he also sends books or framed collages made of news articles, important letters or other mementos to participants in his deals.) March and Lambert, it seems, are faced with balancing his value to the company with making sure that it doesn’t appear that any one person is responsible for a disproportionate share of the company’s business. But Harmon’s deals reveal his impact. His December 2010 sale of 111 Eighth

The 2007 sale of 450 Park Avenue, at $1,585 per square foot, is considered a record price per foot for an ofﬁce building.

230 Park Avenue, left, and 420 Lexington Avenue were part of the Helmsley portfolio that helped put Eastdil on the map in New York City in 1997.

well. He and former Eastdil broker Wayne Maggin sold the General Motors Building to developer Harry Macklowe for a thenrecord $1.4 billion in 2003. More recently, March had roles in the sales of 1211 Sixth Avenue, 1301 Sixth Avenue and the Equity Ofﬁce Portfolio. As CEO, however, March said his main focus is “making sure we procure and execute the deals.” In addition, Harmon’s partner on most deals, Adam Spies, is quietly building up his own impressive body of business. David Schechtman, a senior director at investment sales ﬁrm Eastern Consolidated, said

actly what kind of asset they want. This inside information feeds on itself, providing Eastdil and their main competitor, CBRE, a continuing advantage in the marketplace for the biggest deals. “They have a tremendous list of bridesmaids,” one former employee said. Harmon, March, Spies, and others at the ﬁrm all have impressive Rolodexes, having represented a range of sellers, from institutional owners like Morgan Stanley and Clarion Partners to local players like Joseph Moinian. There is no doubt that the high-end inContinued on page 96

www.TheRealDeal.com October 2011 63

Poking holes in the roommate screen

Ruling could impact shared living in NYC

BY LEIGH KAMPING-CARDER n a city where so many strangers share outcome and scope of appellate decisions. cramped quarters, is discrimination ever Aaron Shmulewitz, an attorney at Belkin justified in hunting for a roommate? Burden Wenig & Goldman who represents That’s the question before a federal appeals co-op and condominium boards, said courts court in Pasadena, Calif., and real estate in- generally seek to broaden laws that aim to siders say the court’s decision could affect remedy discrimination. “It would not surprise me if a court exhow roommate listings operate here. The case dates back to 2003, when two tended [the Fair Housing Act] to cover branches of the nonprofit Fair Housing roommate situations so as to prevent housCouncil sued the classifieds website Room- ing discrimination,” he said. mate.com over features that, among other The Ninth Circuit’s opinion will not be things, required users to disclose their gen- binding in New York, so a local court could der, sexual orientation and family status. The rule differently on a similar case. But the site then let users filter roommates based decision will provide guidance for New York on the same traits, which are protected by judges, attorneys said, and it could impact 1968’s Federal Fair Housing Act or, in the case of sexual preference, by California’s housing law. In early 2009, a Los Angeles Federal court ruled that the Fair Housing Act — which has expanded to protect gender and family status but is silent on shared accommodations — “unambiguously applies” to living arrangements like the ones advertised on Roommate The company claims that the law .com. The company appealed. The U.S. was never intended to regulate Court of Appeals for the Ninth Circuit heard oral arguments in July, so a ruling whether a woman wants to weed out male roommates. in the case could come down anytime. Roommate.com, which is based in Scottsdale, Ariz., garnered about 1 million roommate advertising here, from Craigslist new postings annually when the suit was to newspaper classifieds. filed, though that has since dropped off, acIn the world of online apartment listings, cording to Mike Peters, the site’s head of it’s difficult to create an easy-to-use website business development. About 3,700 of its without requiring users to answer questions current users are in New York state, mostly that potentially violate housing laws, said in New York City, he said. David Vivero, CEO of San Francisco-based The company claims that fair housing online rental management firm RentJuice, law was never intended to regulate whether a which launched in New York this year. woman wants to weed out male roommates, If the Ninth Circuit affirms the lower court in the Roommate.com case, online or a Jewish user wants to screen roommates who don’t keep kosher. listings services will have to strengthen dis“You’re making that decision based on claimers about user content, and potentially a whole host of things, including personal- change their interfaces to protect against inity fit, whether you have similar lifestyles, stitutionalized discrimination, he said. whether you have pets,” said Timothy Alger, Roommate.com has already scrapped the attorney representing Roommate.com. some of the features at issue in the case, The Fair Housing Council, however, said which Peters partly blamed for the drop in the site’s features are tantamount to discrim- users. The fact that “we just can’t come right ination. When the group created test pro- out and ask the questions” makes it more files, gay men ended up with fewer room- difficult to match people, he said. mates to choose from than others because of Craigslist already prohibits most housing user preferences, according to the council’s ads that state discriminatory preferences. (A attorney, Elizabeth Brancart. representative for Craigslist did not immedi“You could certainly see that a filter like ately return a request for comment.) that could be incredibly offensive,” said MiWhatever the outcome of the case, induschael Greenberg, CEO of the Manhattan try insiders said, New Yorkers are unlikely to brokerage Level Group. “At the same time, stop excluding specific categories of people people choose to live with whoever they want when renting out extra rooms. “I’d prefer everybody just saw rainbows to live with.” The Fair Housing Act appears to be de- and unicorns, and not race,” said Jeff Orlick, signed to prevent widespread discrimina- cofounder of Roommates Wanted NYC, a tion, attorneys said, not extend landlord-like group that organizes live roommate meetobligations to people seeking roommates. ups. “But it’s the reality of it, and I don’t think Still, it’s notoriously difficult to predict the it’s going to change.” TRD

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64 October 2011 www.TheRealDeal.com

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Canadians get‘loonie’ with NYC investments For the neighbors to the north, it may be a record year for commercial real estate deals in Gotham BY TOM ACITELLI n December 2007, less than a year before the fall of Lehman Brothers and as the vise of the credit crunch was tightening, SL Green Realty closed on one of the biggest deals of the decade: $1.575 billion for 388 and 390 Greenwich Street, the 2.6 millionsquare-foot office complex then occupied largely by Citigroup. But SL Green, New York’s biggest commercial landlord, did not act alone in the $598-a-square-foot purchase. It had a little help from some loonies, or Canadian dollars. The REIT’s minority partner on the deal, taking a 49.4 percent stake, was SITQ, the real estate investment wing of Caisse de Dépôt et Placement du Québec, a Montreal-based pension fund. (SITQ has since merged with Caisse’s other real estate subsidiary, and now goes by the name Ivanhoe Cambridge.) Other Canadian firms have followed suit. Indeed, buoyed by a strong Canadian dollar (it’s been stronger than the U.S. dollar, at or near parity with it, since 2006) and drawn to steady returns in raucous economic times, these REITs and pension funds have become the biggest, busiest foreign investor pool in New York commercial real estate — beating out British, Middle Eastern, East Asian and other international commercial investors handily. In 2011 so far, Canadians have accounted for $2.02 billion in investment in New York City properties and portfolios of at least $2.5 million each, according to research by Real Capital Analytics. The burst of activity in the last couple of years might presage a further upswing, as the numbers show Canadians are well on their way to pre-recession investment numbers. In 2007, they poured over $2.05 billion into commercial real estate in the city; that number dropped precipitously in 2008 and stayed low through 2009 before increasing over thirtyfold in 2010. Canadians, in fact, are on pace to have their heftiest year since at least 2001, investing in New York’s development sites and office buildings. Sources say that Canadian bullishness stems from the fact that most Canadian investors are either REITs or the investment arms of pension funds, with mandates to look for steady returns. And, New York’s commercial real estate represents some of the steadiest returns globally. “A lot of Canadians are yield buyers,” said Dan Fasulo, a managing director at Real Capital Analytics. “REITs need to deliver income, pension funds need income; they’re not necessarily the opportunistic buyers, like

66 October 2011 www.TheRealDeal.com

a Blackstone here. They’re more, ‘Just get me a 5 or 6 percent return and I’ll be happy.’” Perhaps adhering to Canadian stereotypes, these investors have operated quiet-

that year, the Related Companies closed on its bid to redevelop the 26-acre Hudson Yards on Manhattan’s Far West Side. The ﬁrm, led by Stephen Ross, originally took Goldman

Canadian investment cash ﬂoods into NYC COUNTRY/AREA

2011 SPENDING

Canada

$2 billion

Middle East (overall)

$1.4 billion

Asia (overall)

$1.4 billion

Europe (overall)

$1.1 billion

South Korea

$778.3 million

Switzerland

$524.6 million

Hong Kong

$319.4 million

Israel

$285.3 million

United Kingdom

$132.8 million

Germany

$96.5 million

Source note: Data provided by Real Capital Analytics. Includes properties and portfolios of at least $2.5 million. Figures for 2011 run through Sept. 15.

Canada ups NYC real estate buys

H&R REIT bought Two Gotham Center (top) in Long Island City in August. RXR partnered with the Public Sector Pension Investment Board of Canada to buy the Starrett-Lehigh Building (bottom) earlier this year.

ly, often as silent partners to a bigger New York name. The deals, though, have been quite loud. Earlier this year, SL Green bought out SITQ’s then-45 percent stake in Viacom’s headquarters at 1515 Broadway in a deal that valued the tower at $1.21 billion. (The two had partnered to purchase the tower in 2002.) The deals were loudest in 2010. In May of

YEAR

AMOUNT

2005

$512 million

2006

$1.7 billion

2007

$2.1 billion

2008

$12.8 million

2009

$23.2 million

2010

$708.1 million

2011

$2.0 billion

Source: Data provided by RCA. Numbers for 2011 are through Sept. 15.

Sachs as its ﬁnancial partner, but replaced the investment bank with Oxford Properties Group, the investment arm of the Ontario Municipal Employees Retirement System, which put up $475 million. The 50/50 partnership plans to build 12 million square feet of commercial and residential space. That same month, SL Green executed two big Midtown moves with the Canada Pension Plan Investment Board (CPPIB). The landlord sold a 45 percent, nonmanaging stake in the McGraw-Hill Building at 1221 Avenue of the Americas to the CPPIB for $576 million, and bought a similar-size stake in 600 Lexington Avenue for $87 million, this time with the CPPIB.

Finally, in December 2010, Scott Rechler’s resurgent RXR Realty closed on the $400 million purchase of the Financial Times Building at 1330 Avenue of the Americas. That worked out to about $750 a square foot. RXR bought the FT Building from Otera Capital, the Canadian lender that had taken control of the tower the year before from the embattled Harry Macklowe. (Otera, which is part of the same parent pension firm as Ivanhoe Cambridge, paid $100,000 at a foreclosure auction and agreed to take on $250 million in debt.) So far in 2011, there have been three big transactions involving Canadian financial muscle. In June, the Canadian firm Brookfield Office Properties — which has quietly become the third-biggest commercial landlord in New York City, behind SL Green and Vornado Realty Trust — unveiled its $250 million redesign and redevelopment plan for the Winter Garden, the retail and public spaces in its World Financial Center. A month later, RXR announced its $920 million purchase of the block-size StarrettLehigh Building in West Chelsea — its partner on the deal was the Public Sector Pension Investment Board of Canada. And, in August, H&R REIT, a Canadian open trust, bought Two Gotham Center, the Class A, Long Island City office tower, for $415.5 million. According to an announcement at the time from H&R, the cap rate at Two Gotham Center will work out to 5.585 percent in the first year of ownership, and rents in the 100 percent-leased tower are expected to jump 8 percent every five years for existing tenants. Most of the Canadian investors in this story declined to comment or did not respond to requests for comment, and RXR declined to comment on its partners. But a spokesman for Ivanhoe Cambridge said that New York is an important market for it, and that it hopes to make more investments here, though he did not elaborate. Peter Ballon, the head of real estate investments for the Americas at the CPPIB, Canada’s biggest pension fund, which has 8.2 percent of its roughly $153 billion (Canadian) invested in real estate, said that it waited out the frothier prices of the pre-recession boom. When the bust and recovery came, the CPPIB, like other Canadian vehicles, was ready to capitalize on lower prices — those May 2010 deals involving SL Green were the fund’s first foray into New York. A loonie that had been strong for years and a Canadian economy that largely escaped the global downturn helped. “My understanding is that their pension systems are overfunded; sort of the opposite problem in the U.S., where they are underfunded,” said Andrew Mathias, SL Green’s president. “And they have large amounts of liquidity to invest in income-producing assets like real estate.” Geography didn’t hurt, either. “There is also a dearth of opportunities in Canada,” Real Capital’s Fasulo said. “It’s almost by necessity that some of these bigger Canadian players need to spread out geographically — there’s just a finite amount of buildings for sale in Toronto.” TRD

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Q&A

Coney Island: The ‘People’s Playground?’ A look at how the redeveloped amusement park is changing the nabe BY MELISSA DEHNCKE-MCGILL he last two years have, of course, brought Coney Island back from the dead with its first new amusement parks in a half-century — Luna Park and the Scream Zone. So what’s the status of the rest of the redevelopment of Coney Island? Is it on the same Cyclone-style roller coaster as the rest of the city’s real estate market? In this month’s Q&A, The Real Deal talked to a host of Coney Island’s players, including the commercial brokers who do deals in the area, the city officials pushing forward the remainder of the redevelopment, advocates looking to preserve the neighborhood’s character, and residential brokers who are seeing the demand for housing change. And, of course, we talked to Coney Island’s most prolific developer, Joseph Sitt, whose name and company, Thor Equities, are never far from anyone’s lips when they’re talking about Coney Island. What we found was a cross section of views of what’s happening in the area, which is still expecting up to 5,000 new units of housing and 500,000 square feet of new retail. On the commercial side, retail rents are up about 10 to 15 percent compared to before the 2009 rezoning, and buildings are getting sold. But at least one of our sources said the

C OMMERCIAL

Nate Bliss

vice president, NYC Economic Development Corporation, Development Department; president of the Coney Island Development Corporation We know that the Scream Zone and Luna Park are complete, but can you bring us up to speed on what remains for the redevelopment of the Coney Island amusement park? In 2010, Central Amusement International was selected to lease approximately 6.5 acres from the city to be developed into new amusements [after the rezoning in 2009]. Last year, Luna Park was the ﬁrst new amusement park in Coney Island to open in 50 years. Now in the second year of redevelopment, the park has expanded with the opening of Scream Zone. The two amusement parks represent a $30 million private investment, with an additional $6.6 million by the city. An additional third phase of the amusement park will open next year, followed by a fourth phase in 2013. What are the projections for number of visitors for this season and how does that compare to previous seasons? Luna Park attracted over 450,000 visitors in 2010, its ﬁrst year of operation, and this year, despite the rainy weather, Luna Park and Scream Zone are on pace to surpass last year’s attendance numbers. How is the redevelopment impacting overall economic activity in the area? We expect that over the next 30 years the redevelopment of Coney Island will generate over $14 billion in economic activity. This includes the creation of over 25,000 construction jobs and more than 6,000 permanent jobs. There will be approximately 4,000 to 5,000 new units of housing created outside of the amusement area, with approximately 900 affordable 68 October 2011 www.TheRealDeal.com

units. And the project will generate an additional 500,000 square feet of new neighborhood retail to support a growing and underserved residential community and to create job opportunities. Despite all of the redevelopment efforts, there is still a lack of higher-end restaurants and amenities in the area. Why is that? This summer we have already begun to see a number of new businesses open, including Coney Cones, Cyclone Café, Coney Island Brewing Company, Tattoo Shot Lounge, Bratva Bar and Uncle Louie G’s. Also, the New York Aquarium is making signiﬁcant investments to its space. As the revitalization continues, we anticipate the opening of additional new businesses, which will bring new amenities.

Joseph J. Sitt

chairman/CEO, Thor Equities Activists are concerned about local businesses going under because of all of the changes to the area. How are the changes that you and other developers are making impacting oldtime businesses? The fact is, the redevelopment of Coney Island will be a rising tide that lifts all boats. The area will not have seen the inﬂux of spending, shoppers and tourists in a century. Plus, we forecast a different breed of visitor, who will stay the night and patronize many different levels and kinds of businesses: hotels, restaurants, shops, the boardwalk [and other] attractions. Since its heyday nearly 100 years ago, [Coney Island] has been in a saddening period of gradual decline and decay. Our vision would beneﬁt existing busi-

recession has slowed down progress. “I think people were hoping for a light switch to turn on … but the reality is that it’s taking longer than everyone had hoped,” he said. Another source pointed out some of the buildings that are still ripe for developers to swoop in on, including the Grashorn Building and the Childs Restaurant Building. Meanwhile, Sitt said, all of the redevelopment has “sparked a wave of interest in both the commercial and residential markets.” As part of that interest, however, there are some who want to ensure that the onetime “People’s Playground” and “Poor Man’s Riviera” (as Coney was called back in its heyday) doesn’t price out the lower- and middle-income New Yorkers it was originally built for. Prices on the residential side are down compared to a year ago, and delinquent properties abound. But there’s a sense that the housing market is about to open up as more developers start snifﬁng around for opportunities. For more on which residential price ranges are performing best, which projects are being closely watched and how the summer amusement park season ended, we turn to our panel of experts.

nesses and provide thousands of jobs and a lift to an economically depressed residential community. … I grew up in the area in the ’60s and ’70s. My family and I live in Gravesend now. I jog on the boardwalk and eat in the restaurants. I want to preserve the grit that makes Coney Island so real and well-loved today and calls up

where in New York. I handle properties in Coney Island, Sheepshead Bay and Brighton Beach, and I would say the majority of sales in the past two years have been in Coney Island. We sold a property on Mermaid Avenue. We have another that should be going into contract on West 17th, and a residential development site on Stillwell

“I want to preserve the grit that makes Coney Island so real and well-loved today ... but I seek to reinject the mood of fantasy and dreams that drew millions of visitors in the ﬁrst place.” Joseph Sitt,Thor Equities feelings of nostalgia, but I seek to reinject the mood of fantasy and dreams that drew millions of visitors in the ﬁrst place. What kind of spillover effect is the redevelopment having on the investment sales market in the area? There will be a great positive effect in the short term and — hopefully — a monumental one in the aggregate. Nobody has looked at this neighborhood as more than a time capsule for many, many years. It’s one of the last great opportunities in New York City. The prospect of the project in itself has sparked a wave of interest in both the commercial and residential markets, and in both the sales and rental sectors, which we have not seen in years.

Brian Hanson

director of sales, Massey Knakal What kind of spillover effect is the redevelopment of the amusement park having on the investment sales market in the area? In general, there hasn’t been a huge volume of sales any-

[Avenue] that sold. … I think that the redevelopment has helped the opportunism for the area. People aren’t paying exorbitant money for them, but they are seeing a lot of potential. Coney Island will look a lot different in 10 years than it does today. What types of commercial properties are seeing the most demand? Any income-producing property, because of the long-term investment horizon for that area. Unless you’re selling a vacant building to someone who knows exactly what they’re going to do and can start the business right away, that vacant property is going to be harder to sell than the income-producing property. Despite all of the redevelopment, there is still a lack of higher-end restaurants and amenities in the area. Why is that? I think people were hoping for a light switch to turn on and that it would be immediately different and better, but the reality is it’s taking longer than everyone had hoped, especially with the recession coming right in the middle of the rezoning. I know that there are several higherend and national food chains looking to set up shop. It’s just a matter of a couple of years — ﬁnding the right place and the

Q&A right rent. Thor Equities is just ﬁnishing up their redevelopment on the corner of Stillwell and Surf, and that should be getting some good tenants. What are retail rental rates like in Coney Island today and how does that compare to two years ago? Prices vary depending on the corner, but in-line on Surf Avenue it’s about $35 per square foot. That is up slightly — 10 to 15 percent — from before the rezoning. It was at $30 before the rezoning. What are you seeing in terms of the volume of real estate activity on the whole in Coney Island? Has it increased or decreased in the last year? It has increased. There weren’t many sales in 2009 and early 2010, but there is more property available and more property being purchased than a year ago. [Developer] John Catsimatidis is pretty far along in the approval process for a mixed-use project called Ocean Dreams, at the west end of Surf Avenue. I believe the plans are for a tower containing 400 or so condos and 25,000 square feet of retail. This would be the biggest development in the area since Muss Development put up the Oceana in Brighton Beach. That project was, and still is, hugely successful. Which commercial sectors (investment sales, retail, hotel, etc.) still have the longest way to go? I would say hotel. Before it becomes a place where you or I would want to go to spend a weekend at a couple hundred dollars a night, I think there has to be a lot more to do down there.

Juan Rivero

spokesman, Save Coney Island How concerned are you about old-time Coney Island businesses going under? The departure of old-time Coney Island businesses is of great concern on a number of counts. First, they are part of what makes Coney Island unique, and not some generic strip off an interstate highway. Second, the retention and cultivation of local businesses makes sense as a matter of economic policy, since a higher percentage of the revenues they generate remain within the local economy. It is lamentable that the city has not encouraged leasing to local businesses on the land that it owns. The boardwalk and Coney Island could use the color, quirkiness and creative energy that local entrepreneurs have to offer and that chains and big corporations struggle to provide. There is still a lack of higher-end restaurants and amenities in the area. Do you expect that to change?

Throughout most of its history, Coney Island has been a place of affordable amusement and recreation for anyone who could afford the price of a subway ride. Its old monikers — the People’s Playground, the Poor Man’s Riviera or the Nickel Empire — tell you as much. … Coney Island is an affordable amusement destination that is, and should continue to be, available to all New Yorkers. Are there any buildings or projects outside of the main amusement park that you’re keeping an eye on? Absolutely. The newly landmarked Shore Theater has a central location, and with the right vision it could again be a theater destination. The landmarked Childs Restaurant Building on the boardwalk is an obvious anchor for the western side of the district, and it’s just a matter of time before someone turns it into a restaurant, a club or a concert venue. On the south side of Surf Avenue, we envision the Grashorn, the oldest building in the amusement area, as a museum, a theme restaurant or perhaps a large haunted house. … One current development project we’re watching is the construction of new structures on Surf Avenue by Thor Equities. Regrettably, given Thor’s record so far in Coney Island, we don’t have very high expectations.

Timothy King

managing partner, CPEX Real Estate What types of commercial properties are seeing the most demand in Coney? Retail is the hottest segment. There is still a lack of higher-end restaurants and amenities in the area. Do you expect that to change? The area is in the early stages of redevelopment. Thor has a strong track record of attracting quality tenants. How do land prices compare to before the revitalization of the area started up? Values are up signiﬁcantly over two years ago, [but there have been] more modest increases lately. What are retail rental rates like in Coney Island today? Rents are continuing to escalate. We are currently working on a fast-food lease at $40 per square foot. R ESIDENTIAL

Albert Wilk

owner/broker, Wilk Real Estate How is the overall residential market doing in Coney Island today? There are a lot of delinquent properties with families facing foreclosure. Some of the buildings are neglected because [before]

prices went down these people took out large mortgages and now can’t pay, so the banks are trying to sell notes and buildings. The neighborhood is very diverse, with Spanish, African-American and some Russian families who live in subsidized housing on 8th, 10th and 12th streets.

down 8 percent from both a year ago and three years ago.

What are residential prices like in Coney Island compared to a year or two ago? Prices for housing have gone down a lot. Two years ago, a six-family building in Coney Island had an asking price of about $800,000. Today, a six-family building in the good locations of Coney Island has an asking price of about $675,000. Prices went down about 15 to 20 percent. Coney Island went down more because it is the most underdeveloped location in Brooklyn.

What are the biggest challenges to selling real estate in Coney Island today? The ﬁrst is location. Coney Island is cut off from the rest of the borough by the BQE. It’s a very long commute to Manhattan. [Also], the area deﬁnitely needs more residential amenities like dry cleaners, supermarkets and places to eat for residents, not just Coney Island tourists.

The NYC rental market is performing well, largely because people are tentative about the sales market. How is the rental market doing in Coney Island? Everything is being rented. I don’t see empty apartments on Coney Island. The majority of tenants that live on Coney Island are in subsidized housing or get some kind of city assistance. Junkies can be seen on the street during the day. It is not the healthiest part of Brooklyn. What’s going on with residential development? A few stalled projects have restarted, but I don’t see any new construction. Before, the price of land was skyrocketing because of the new condominiums, and because of that, the cost of the new condominiums was very expensive. Builders were paying $100 to $120 per buildable square foot. Today, I would not advise anybody to start a project if he is paying higher than $65 per buildable square foot, period. It would be suicidal. What is the housing stock like in Coney Island and how is it changing? Are more condos being added to the mix? On the MLS right now there are only eight active listings for one- to three-family houses. There are ﬁve in contract. In condos, we currently have nine units for sale, and we haven’t been able to sell these twobedrooms from $299,000 to $319,000. People here live paycheck to paycheck.

Soﬁa Song

vice president, research, StreetEasy What are prices like in Coney Island compared to a year ago and during the boom? Median prices are

Which price segments of the market are performing best and worst now for sales? Fifty percent of the closings in the second quarter of 2011 were below $300,000. There were only two closings above $500,000. In addition, 53 percent of those closing in the second quarter were co-ops, 22 percent were condos and 25 percent were houses.

Bartolo Raffaele

broker, RE/MAX Metro How is the overall residential sales volume doing in Coney Island today? From six months and a year ago it’s about the same — not good. The boom was excellent, so there is no comparison. Which price segment of the market is performing best right now for sales? Properties are selling for between $300,000 and $400,000. How is the rental market doing right now compared to the sales market? Rentals are doing great because sales are down, but understand that Coney Island isn’t a large area. There are a limited number of houses in Coney Island compared to other areas in Brooklyn. There are reports that developer John Catsimatidis might target those who are 55 and older at his planned condo project. What do you think about that? We need developments built for 55 and older for the future. It would be a great thing to build right by the water.

John Reinhardt

president/CEO, Fillmore Real Estate Are you seeing any new demographics, like young families looking at property in Coney Island? We do occasionally ﬁnd that. People that wouldn’t have ventured into Coney Island a few years ago are excited about the prospect for growth and improvement, just like the people that went to Harlem in the old days. There is a real value and upside potential in Coney Island. What is the residential housing stock like in Coney Island and how is it changing? I anticipate in the next few years that there will be a lot more condos. …There are no real new projects to speak of [right now]. TRD www.TheRealDeal.com October 2011 69

TRI-STATE BRIEFS L OW E R H U D S O N VA L L E Y

Applications for disaster relief

FEMA aids Irene victims Federal ofﬁcials last month approved disaster relief for more than 2,000 residents of Westchester, Rockland and Putnam counties who suffered property damage during Tropical Storm Irene, according to the Journal News. Irene — which brought nearly 9 inches of rain and wind gusts of up to 56 miles per hour to the Hudson Valley — damaged thousands of homes and businesses in the area. As a result of the devastation,

Westchester: 1,039 Rockland: 894 Putnam: 121 Source note: Journal News

the Federal Emergency Management Administration last month set up disaster relief centers in Westchester and Rockland, where individuals who suffered property damage from the storm were eli-

gible for grants of up to $30,000. (A total of $32 million in disaster relief was approved for New York state victims by the middle of last month.) Rye’s Robert Georgio told the Journal News that his business, a high-end kitchen and home showroom, suffered $300,000 in damage due to ﬂooding. In Westchester, more than 1,000 individual applications for disaster relief have been submitted so far — the sixth highest among the New York counties struck by Irene. Some 121 Putnam residents and merchants have applied for

funds, as have 894 in Rockland. In addition to the individual FEMA grants, 28 counties in New York were declared eligible for federal grants to cover public infrastructure damage caused by Irene.

NEW JERSEY

‘Teachers Village’ one step closer to reality New Jersey’s Economic Development Authority approved a package of ﬁnancial incentives, including tax breaks and grants, for the Newark urban renewal project

known as “Teachers Village,” according to the Star Ledger. Slated for completion in 2014, the $142 million project will include three charter schools, 224 apartments for teachers and a day-care center, as well as space for businesses and restaurants. The apartments will be priced for middle-income residents, city officials said, and will help recruit and retain local teachers. The aim of the project is to revitalize Newark by bringing more foot traffic to the area, they said. The project’s developer, Ron Beit, told the Star Ledger that he expects to finalize financing for the project within a few weeks, with the groundbreaking taking place soon after.

CONNECTICUT

Eastdil markets Blue Back Square West Hartford’s upscale Blue Back Square complex is up for sale, according to the Hartford Courant. The 460,000-squarefoot development, which houses ofﬁces, apartments and some 32 retail stores, opened in late 2007. The principal owner of Blue Back Square, Ronus Properties, is looking to unload its entire U.S. real estate portfolio, Rick Langhorne, the president of Atlanta-based Ronus, told the Courant. Ronus Blue Back Square

has retained Eastdil Secured to market Blue Back Square and its other holdings. Langhorne said the property has generated interest, but an asking price has not yet been set. Blue Back Square has a controversial history. In 2004, after town ofﬁcials approved it, three town residents — bankrolled by Taubman Co., the owner of nearby Westfarms mall — ﬁled a lawsuit alleging that West Hartford exceeded its authority in green-lighting the center. The lawsuit was dismissed, and the town council sued Taubman to recoup its legal costs, which delayed the project by a year. Taubman settled out of court and paid the town $4.5 million in late 2009. Compiled by Russell Steinberg 70 October 2011 www.TheRealDeal.com

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NATIONAL MARKET REPORT Commercial and residential real estate news briefs from around the U.S. The Los Angeles skyline

records show that the owner of the 87-yearold Kress property has applied for a permit to change its use from ofﬁce and health club to department store. “We have some smaller stores on the horizon that we’ll be opening in some urban areas,” JCPenney’s outgoing chief executive, Myron Ullman, recently told Women’s Wear Daily. “It’s a function of where the customers live and what their appetite for apparel is.”

San Francisco

Los Angeles Pop icon Christina Aguilera has sold her four-bedroom California mansion at a loss of more than $300,000, according to the blog RealEstalker. The Grammy winner and “The Voice” judge purchased the Hollywood Hills home for $5 million in 2003

Christina Aguilera

and renovated it. She put it back on the market in April 2008 with a listing price of $7.9 million, but sold it last month for just $4.65 million. The identity of the buyer was not immediately clear. The Sunset Strip pad, which she once shared with now ex-husband Jordan Bratman, features a recording studio and pool. Aguilera and Bratman announced their separation in October. Meanwhile, home prices in Southern California fell in August from 2010 levels, marking a sixth consecutive month of declines as sales of low-priced properties dominate the market, according to tracking ﬁrm Data Quick. The median home price in the area was $279,000, a 3.1 percent drop from $288,000 in August 2010 and a 1.4 percent drop from $283,000 in July. Sales 72 October 2011 www.TheRealDeal.com

of homes under $300,000 rose 10.2 percent, however.

Washington, D.C. Teachers’ retirement fund TIAA-CREF last month paid $145.5 million for a 303,262square-foot property in the Washington, D.C., area. In what GlobeSt.com called a “no-brainer” deal, TIAA-CREF paid about $480 per square foot for the fully leased, 19-story building at 1616 North Fort Myer Drive. The federal General Services Administration is the anchor tenant at the building, which is located in the Rosslyn submarket, across the Potomac River from D.C. Cassidy Turley represented the seller, an afﬁliate of Beacon Capital Partners, GlobeSt said. Boston-based Beacon bought the property for $103 million more than it traded for 15 years ago.

the Washington, D.C.-based real estate development ﬁrm Thoron to renovate a 30,000-square-foot building at 1504 Oretha Castle Haley Boulevard, the site of the former Dryades Street Market. Thoron is planning a total of three mixed-use developments in the area. “The plan is to have a really big open space that allows us to have exhibits that talk about the food of the whole South and not just Louisiana,” museum founder and president Liz Williams told the Chronicle. The move is slated for 2013.

Seattle

New Orleans The Southern Food and Beverage Museum, or SoFAB, will relocate from Riverwalk Marketplace near the French Quarter to a historic building in the Central City neighborhood, the Houston Chronicle reported. The museum, which showcases New Orleans’ culinary culture, is partnering with

The Southern Food and Beverage Museum

The Kress building

JCPenney is returning to downtown Seattle after departing almost 30 years ago, according to the Seattle Times. The department store is reportedly planning to open a store in the Kress building at Third Avenue and Pike Street, a block from the location it closed in the early 1980s. At the time, its operators decided it was too far from the center of downtown retail activity. Evidently times have changed; brokers say retail in the area is now expanding. Two blocks away from the Kress building is Men’s Wearhouse, while Swedish retailer H&M opened in 2008 at Sixth and Pike. Though JCPenney would not comment on the rumors, city

The real estate investment ﬁrm Archstone has acquired a 3.15-acre development site in the Potrero Hill neighborhood of San Francisco, the company announced last month. Archstone is planning a 467-unit rental apartment community on the parcel, which is located at the corner of 16th and 7th streets along Southern Embarcadero Freeway. Construction is slated to begin next summer. “The Potrero Hill neighborhood is one of San Francisco’s most sought-after communities today,” said Neil Brown, Archstone’s chief development ofﬁcer, in a statement. “Like much of the San Francisco Bay Area, one of our core markets, opportunities to build an apartment community in Potrero Hill are extremely limited.” The area is anticipating the creation of tens of thousands of jobs from two upcoming developments: the University of California at San Francisco’s Medical Center and Hospital, and Salesforce.com’s global headquarters, the company said.

New Jersey Morris Bailey’s plans to take control of the state-owned Monmouth Park racetrack have stalled, the Bergen Record reported. Last month, Bailey’s attorney sent a letter to state ofﬁcials declaring that a preliminary ﬁve-year deal reached in June was void. Bailey, owner of the Resorts Casino in Atlantic City, was selected by the state over two other bidders to run the cash-strapped Oceanport track. A memorandum of understanding was agreed upon, but the parties were unable to meet a target of Sept. 1 to iron out the details. The track loses about $5 million a year, the Record said. Bailey had planned to transform the complex by adding additional off-track wagering facilities and expanding nontraditional betting opportunities. Dennis Robinson, the president of the New Jersey Sports & Exposition Authority, told the Record that the state is still “having discussions” with Bailey. “It’s always good if you’re

Monmouth Park

talking. If you’re not talking, then you have a problem.” If talks with Bailey were to fail, Robinson said the agency would reopen discussions with previous bidders or put out a new request for proposal. Compiled by Katherine Clarke

THE

MA R K E T

Commercial properties recently placed on the market Midtown commercial building for sale A 17-story ofﬁce and retail building at 2 West 46th Street is listed for sale with an asking price of $80 million. Located in Manhattan’s Diamond District, the prewar, 144,000-square-foot property is 92 percent occupied. About 70 percent of tenants have been in the building for the last decade or longer. The building, which was re2 West 46th Street cently upgraded, has 7,529 square feet of ground-ﬂoor retail space and 5,435 square feet of lower-level retail space. The property also has about 20,000 square feet of unused air rights for future development. David Schechtman, Lipa Lieberman, Marion Jones and Scott Ellard of Eastern Consolidated are marketing the building.

Gramercy multifamily portfolio asking $44M Three adjacent apartment buildings at 336-348 East 18th Street are on the market with an asking price of $44 million. All three walk-up buildings have six stories, and combine for about 52,944 square feet above grade. The 76 units include two one-bedroom apartments, 18 two-bedrooms and

336-348 East 18th Street

74 October 2011 www.TheRealDeal.com

56 three-bedrooms. Seven of the units are rent stabilized, 10 are rent controlled and the remaining apartments are free-market. The rent-regulated units have average monthly rents of $673, while the free-market two- and three-bedrooms average $3,291 and $4,129 per month, respectively. All 59 free-market apartments have been renovated. Massey Knakal’s John Ciraulo, Craig Waggner and Michael Azarian are marketing the property.

Flatiron conversion site on the block A triangular block-front lot at 846-850 Sixth Avenue and 1227 Broadway is on the market as a possible development or conversion, with an asking price of $42.75 million. The site is currently divided into three: a one-story retail building with 846-850 Sixth Avenue parking above it on Sixth Avenue; a four-story office and retail building on the corner of Broadway and West 30th Street; and another parking lot on West 30th Street between Broadway and Sixth Avenue. Of the full 12,260-square-foot lot, 5,060 square feet lie in an M1-6 zoning district, which would allow for 50,600 buildable square feet of office, hotel, manufacturing or community facility uses. The remaining portion of the lot lies in a C6-4X zoning district, which would allow for 72,000 buildable square feet of residential, office and retail uses. Robert Knakal, John Ciraulo, Craig Waggner and Jonathan Hageman of Massey Knakal are handling the sale.

Soho hotel development asking $30M A planned 12-story luxury hotel at 163 Orchard Street is on the market with an asking price of $30 million. The 13,387-square-foot-hotel, which is under construction and is scheduled for an early 2013 delivery, is slated to have 52 rooms. A sale at the asking price would break out to a price per room of $576,923. The planned hotel has a projected gross room revenue of $4.75 million, a projected net operating income of $1.66 million and a projected capitalization rate of 7 percent. An-Chi Miau of Sierra Realty Corporation is marketing the property.

LES residential complex asking $15.9M A three-building complex at 144-150 Ludlow Street is on the market with an asking price of $15.9 million. The package includes adjacent ﬁve- and six-story buildings, along with a four-story walkup. Together the buildings surround a private interior courtyard. The 52 units at the three recently upgraded, rent-regulated buildings include ﬁve studios, seven two-bedrooms and 40 one-bedrooms. Eastern Consolidated’s Brian 144-150 Ludlow Street Ezratty, Aliza Avital, Nancy Tran and Scott Ellard are handling the assignment. Compiled by Linden Lim

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Deal Sheet summary Sales

Overview

By type

Property sales

43 $2,209,610,000

Financing

By dollar volume (in millions) 7

Development

Hotel

Industrial

Mixed-Use

Multifamily

Development

Deals Dollars

The Deal Sheet, on pages 78 to 90, covers transactions from 8/11/11 through 9/10/11. Please submit future deals to deals@therealdeal.com.

147.98 319.4 40 239 1200.79

Transactions

Office

44.5

Buildings

Retail

217.94

Aggregate value

$726,230,000

Leases Office

Retail

Total

147

Leases square feet Office Retail Total

1,013,443 253,847 1,267,290

Office leases Office leases by industry Industry

Office leases sf by industry Leases

Industry

Advertising & Marketing

Architecture & Design

Communications

Consulting

Education

Fashion*

Financial

Top tenant reps for office leasing by sf

Square feet leased

Tenant representative

18,888

Cushman & Wakefield

2,800

Square feet leased 197,029

CB Richard Ellis

96,433

77,000

Studley

76,803

Consulting

37,804

Miyad Realty

64,000

Education

26,780

Jones Lang LaSalle

40,000

106,800

Grubb & Ellis

30,005

196,082

Capstone Realty Advisors

28,113

Newmark Knight Frank

26,509

CBC Hunter Realty

15,088

Jewelry

Legal

Medical

Travers Realty

13,313

NGO

183,709

A.C. Lawrence & Co.

11,599

Other

125,666

6,077 20,985 7,225

Cassidy Turley

11,000

Production

24,741

Midtown Commercial Realty

10,750

Real Estate

89,686

Colliers international

10,000

Science & Technology

80,697

Norman Bobrow & Co.

9,956

Staffing

8,503

Living Real Estate Group

6,800

Retail leases Top tenant reps for leasing by sf

Retail leases by industry

Broker

Drugstore

92,889

Fashion

41,880

Financial

13,370

Food & Beverage

37,956

Winick Realty

Square feet leased

104,936

NYCRS

14,150

Financial

Newmark Knight Frank

13,460

Food & Beverage

Lansco Corp.

10,000

Health and Beauty

New Street Realty Advisors

9,000

Regal Homes Realty

7,500

S.J. Bartha Consulting Group

6,174

Thor High Street Advisors

6,000

Besen Retail

5,384

Optimal Spaces

5,300

DLL Real Estate

4,443

Kalmon Dolgin Affiliates

4,000

S. Sunshine & Associates

2,500

(*includes showroom space)

Other

Retail leases sf by industry

19 6 16

Health and Beauty Other

9,383 58,369

www.TheRealDeal.com October 2011 77

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 8/11/11 to 9 /10/11. Please submit future deals to deals@therealdeal.com.

Office leases Address

Size

Tenant / Representative

Landlord / Representative

Notes

224 West 57th St

152,000

Open Society Foundations / n/a

n/a / Colliers International

The nonprofit leased all of the office space in the Argonaut Building for 30 years, the Wall Street Journal reported. The company is relocating from a smaller, 75,000-square-foot space in a property on 59th Street.

1350 Sixth Ave

88,049

Rothstein Kass / Jared Horowitz, C&W

SL Green / Represented in-house

The accounting firm signed a lease extension and expansion. The tenant, which previously occupied 55,308 square feet on the 10th, 15th and 16th floors, will add 32,741 square feet on the ninth and 14th floors.

3 Park Ave

75,000

TransPerfect Translations International / n/a

Cohen Brothers Realty / n/a

The business services provider signed a lease renewal and expansion.

625 Madison Ave

63,000

Polo Ralph Lauren / D. Goldstein, M. Steir, Studley

Centerline Capital Group; SL Green / D. Hollander, S. Siegel, C. Mansfield, CBRE

The fashion house signed an expansion lease for the entire fifth and part of the fourth floors in a three-way transaction involving departing tenant Centerline Capital Group and landlord SL Green. Centerline vacated the space and terminated its lease, which ran until 2017. Ralph Lauren, which had had first rights to the space, inked a direct deal with SL Green. Ralph Lauren was already leasing more than 306,000 square feet in the building.

100 Church St

57,945

Centerline Capital Group / S. Siegel, D. Hollander, C. Mansfield, CBRE

SL Green / NKF; Larry Swiger, SL Green

The provider of real estate financial and asset management services signed a lease. The company is relocating from 625 Madison Avenue.

100-104 Fifth Ave

40,000

Apple / Martin Horner, Jones Lang LaSalle

Kaufman Organization; Invesco / Grant Greenspan, Kaufman Organization

The tech giant signed a long-term lease on the sixth, 14th and 15th floors. The reported asking rent was $55 per square foot.

7 World Trade Center

32,000

Freedom Specialty Insurance Co. / n/a

Silverstein Properties / n/a

The Scottsdale Insurance subsidiary signed an expansion lease.

623 Fifth Ave

27,496

Doral Financial Corporation / J. Picco, R. Nocom, C&W

n/a / S. Lambert, D. Nevins, Cohen Brothers Realty Corporation

The financial services firm signed a lease extension and expansion. The company extended its lease on the 13th floor, where it occupies 13,010 square feet, and expanded onto the entire 19th floor, where it will add 14,486 square feet of space.

11 West 19th St

26,000

Tory Burch / D. Preate, J. Katcher, C&W

Savitt Partners / Bob Savitt, Savitt Partners

The sportswear designer signed an expansion lease. The company is taking the space in addition to the 26,000 square feet it took in January, and will be occupying a total of 78,000 square feet in the building.

1115 Broadway

23,980

Arenson Office Furnishings / David Glassman, C&W

Eleven Fifteen Associates / James Buslik, Adams & Co.

The furniture showroom and dealership signed a 10-year lease renewal. The reported asking rent was $35 per square foot.

11 Broadway

22,500

Allmenus / Michael Rouzenrouch, Miyad Realty

n/a / J. Mambrino, L. Condon, Studley

The tech company subleased space.

555 Madison Ave

22,000

Keller Williams NYC / n/a

n/a / n/a

The real estate company signed a new lease for full-floor space.

189 Montague St (Brooklyn)

15,170

City of New York / n/a

The Treeline Companies / Kraig Silver, The Treeline Companies

The city signed a lease renewal.

175 Remsen St (Brooklyn)

15,081

The New Allen School / n/a

The Treeline Companies / Kraig Silver, The Treeline Companies

The school signed a lease renewal and expansion on the lower level and the third and 11th floors.

485 Madison Ave

13,803

Standard Security Life Insurance Company of New York / D. Horowitz, J. Peck, Studley

Jack Resnick & Sons / Represented in-house

The life insurance company signed a five-year lease renewal.

120 West 45th St

13,313

Penske Media Corporation / Lee Polster, Travers Realty

DE Shaw & Co. / Roger Griswold, CBRE

The media and publishing company signed a four-year sublease for the entire 24th floor.

101 Park Ave

13,200

Tata Consultancy Services / Roshan Shah, CBRE

n/a / n/a

The IT services and consulting firm signed a 10-year expansion and lease renewal.

295 Lafayette St

12,500

Dolce Vita Footwear / Adam Rappaport, C&W

Swanke Hayden Connell LTD / H. Grufferman, J. Wechsler, S. Santoro, H. Springer, Grubb & Ellis

The footwear company signed a five-year sublease.

149 Fifth Ave

12,000

TargetSpot / G. Greenspan, M. Kaufman, Kaufman Organization

Vendome Group / Joe McLaughlin, Capstone Realty Advisors

The digital audio advertising firm signed a sublease. The reported asking rent was $48 per square foot.

900 Broadway

12,000

Endeavor Global / R. Shah, K. Caggiano, CBRE

n/a / n/a

The nonprofit signed a 10-year direct lease with the landlord for the entire third floor. The tenant had been subleasing a smaller space in the building.

350 Broadway

12,000

Big Beach Films / Michael Rouzenrouch, Miyad Realty

n/a / n/a

The film company signed a lease.

188 Montague St (Brooklyn)

11,699

The New Allen School / n/a

The Treeline Companies / Kraig Silver, The Treeline Companies

The school signed a lease renewal.

220 East 23rd St

11,075

Organization of Staff Analysts / J. McLaughlin, T. Murtha, Capstone Realty Advisors

n/a / n/a

The union of professionals in public service signed a lease renewal.

1700 Broadway

11,000

Spivak Lipton LLP / D. Hoffman, W. Miller, Cassidy Turley

The RubenCompanies / Peter Shimkin, Newmark Knight Frank

The law firm signed a 10-year lease renewal.

825 Third Ave

10,804

ICR LLC / Kevin Daly, C&W

Advance Publications Inc. / D. Hollander, J. Frazier, CBRE

The financial communications consultancy signed a sublease for the entire 31st floor. The company is relocating from 441 Lexington Avenue.

31-00 47th Ave (Queens)

10,750

Swiss Post Solutions / Midtown Commercial Realty

n/a / Jeffrey Unger, Kalmon Dolgin Affiliates

The document-processing center signed an office lease.

2 Park Ave

9,751

North Shore-LIJ Health System / B. Waterman, L. Korman, B. Ozarowski, Newmark Knight Frank

Morgan Stanley / David Green, Cushman & Wakefield

The nonprofit, integrated health system signed a new lease.

536 Broadway

9,705

Avalanche Studios / Ira Rovitz, Grubb & Ellis

Thor Equities / n/a

The software developer signed a 10-year lease for the entire eighth floor.

11 Broadway

8,500

Disconnect LLC / Michael Rouzenrouch, Miyad Realty

n/a / Mendy Braun, Braun Management

The film company signed a lease.

88 Pine St

8,200

Merus Capital Partners / George Keller, C&W

Orient Overseas Associates / F. Cento, R. Constable, C&W

The proprietary trading firm signed a 10-year lease on the 17th floor.

78 October 2011 www.TheRealDeal.com

www.TheRealDeal.net December 200

Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

12 East 49th St

8,200

Stelliam Investment Management / R. Shah, K. Caggiano, CBRE

n/a / n/a

The hedge fund manager signed a 10-year lease to relocate to the building’s 22nd floor from 31 West 52nd Street.

6 East 32nd St

7,680

Vendome Group / J. McLaughlin, K. Phelan, Capstone Realty Advisors

n/a / Wayne Van Aken, Grubb & Ellis

The publishing and information services company subleased space.

535 Fifth Ave

7,300

Control Risks Group / Francine Oro, CBC Hunter Realty

n/a / John Monaco, The Moinian Group

The global risk consultancy signed a seven-year lease.

1150 Sixth Ave

6,500

Jackobin Consulting Services / Harvey Richer, Newmark Knight Frank

Pan American Magazine Building Inc. / C. Abdo, H. Epstein, Winoker Realty

The consulting firm signed a four-year, eight-month lease for the entire fourth floor.

5 Hanover Sq

6,260

Rockwell Global Capital / G. Picco, J. Armano, Cresa Partners

Savanna / F. Cento, J. Fein, C&W

The boutique securities firm signed a seven-year lease on the 15th floor.

78 Reade St

6,000

Karate studio / Abe Saks, Miyad Realty

n/a / n/a

The karate studio signed a lease.

209 West 38th St

5,300

Carhartt / Allen Gurevich, Newmark Knight Frank

Newmark Holdings / Matthew Mandell, Newmark Knight Frank

The apparel manufacturer signed a lease on the eighth floor for showroom and office space. The tenant is relocating from a smaller space at 485 Seventh Avenue.

11 East 26th St

5,088

Project: Worldwide Inc. / CBRE

East Twenty Sixth Associates / James Buslik, Adams & Co.

The engagement marketing firm signed a four-year lease. The reported asking rent was $43 per square foot.

145 East 57th St

5,000

Judson Realty LLC / Barrett Stern, Grubb & Ellis

MIP 145 East 57th Street LLC / Barrett Stern, Grubb & Ellis

The real estate firm signed a 10-year lease renewal.

21 Howard St

5,000

Urban Arts Partnership / Michael Rouzenrouch, Miyad Realty

n/a / n/a

The nonprofit signed a lease.

306 West 38th St

5,000

Jes Gordon LLC / David Youngworth, Living Real Estate Group

Greenfield Real Estate / n/a

The event planner signed a three-year lease for the entire second floor.

151 West 46th St

5,000

Neiger LLP / Avi Ben-Ishay, Norman Bobrow & Co.

n/a / n/a

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

145 East 57th St

5,000

Kranz & Co. LLP / Colliers International

MIP 145 East 57th Street LLC / Barrett Stern, Grubb & Ellis

The accounting firm signed a five-year lease renewal.

145 East 57th St

5,000

Throckmorton Fine Art Inc. / Colliers International

MIP 145 East 57th Street LLC / Barrett Stern, Grubb & Ellis

The art gallery signed a five-year lease renewal.

5 Hanover Sq

4,985

Jones & Jones LLP / Brett Gartner, Winslow & Co.

Savanna / F. Cento, J. Fein, C&W

The law firm signed a 10-year lease on the 10th floor.

666 Third Ave (Chrysler Building)

4,786

Careerbuilder LLC / Michael Plavin, Grubb & Ellis M

Tishman Speyer Properties / n/a

The career resources website signed a five-year lease.

415 Madison Ave

4,741

Fortune Financial Guaranty LLC / Lily Lin, A.C. Lawrence & Co.

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Demetriou General Agency / Nicholas Weld, CBRE

The real estate management firm subleased space on part of the 13th floor. The building is owned by 415 Madison Ave LLC. The sub-landlord will build a wall separating the sub-tenant’s space from its own. The reported asking rent was $36 per square foot.

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Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

39 Broadway

4,443

Merit Hire LLC / Lily Lin, A.C. Lawrence & Co.

n/a / Brian Siegel, The Lawrence Group

The staffing company signed a lease on the seventh floor for five years and three months. The reported asking rent was $26 per square foot.

80 Maiden Ln

4,358

Ottenheimer Health / J. McLaughlin, K. Phelan, Capstone Realty Advisors

AM Holdings Corp. / n/a

The medical office signed a long-term lease on the ninth floor.

145 East 57th St

4,250

After Midnight Company LLC / Barrett Stern, Grubb & Ellis

MIP 145 East 57th Street LLC / Barrett Stern, Grubb & Ellis

The nightlife company signed a 10-year lease renewal.

810 Seventh Ave

3,556

Vine Investments / R. Gottlieb, W. Siegel, CBC Hunter Realty

SL Green / Represented in-house

The hedge fund signed a long-term lease.

990 Stewart Ave (Brooklyn)

3,518

Knight Equity Markets / n/a

The Treeline Companies / Kraig Silver, The Treeline Companies

The capital markets firm signed an expansion lease on the sixth floor.

37 West 39th St

3,420

The Winthrop Group / S. Galin, P. Simel, Handler Real Estate

n/a / Bret Maslin, Adams & Co.

The historical archiving company signed a lease for the building’s penthouse space.

256 West 36th St

3,400

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

256-26 LLC / Catherine O’Toole, Tarter Stats O’Toole

The motivational speaking group signed a long-term lease for the entire second floor.

606 West 26th St

3,000

Body by Simone / Abe Saks, Miyad Realty

n/a / R. Betesh, K. McCann, Sinvin Real Estate

The private training studio signed a lease in an office building.

1410 Broadway

2,980

Maximum Impact Inc. / M Mandel, B. Lewen, Grubb & Ellis

L.H. Charney Associates Inc. / n/a

The promotions firm signed a seven-year lease.

5 Hanover Sq

2,510

Capital Legal Solutions / Omar Sozkesen, Prime Manhattan Realty

Savanna / F. Cento, J. Fein, C&W

The technology firm signed a seven-year lease on the 20th floor.

12 East 33rd St

2,500

National Ethnic Coalition of Organizations / Jared Winter, Capstone Realty Advisors

n/a / Gautam Nagarmat, Berik Management

The nonprofit signed a lease.

55 Fifth Ave

2,500

Robert Half International / H. Stein, T. Stracci, Newmark Knight Frank

Time Equities / Represented in-house

The staffing services firm signed a new lease.

259 West 30th St

2,500

Basic Pay / T. Murtha, J. McLaughlin, Capstone Realty Advisors

Two Friends Realty / Joe McLaughlin, Capstone Realty Advisors

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

261 Fifth Ave

2,458

Treatment Action Group / B. Ozarowski, B. Waterman, L. Korman, Newmark Knight Frank

The Feil Organization / Represented in-house

The nonprofit signed a lease.

146 West 29th St

2,415

A76 Productions / Lily Lin, A.C. Lawrence & Co.

Teresharan Land Co. / Manu Pohani, Teresharan Land Co.

The video and photo production company signed a five-year lease on the eighth floor. The reported asking rent was about $25 per square foot.

230 Fifth Ave

2,000

Zing USA / Annie Yao, Buchbinder & Warren

n/a / Harvey Richer, Newmark Knight Frank

The public relations and marketing communications agency signed a fiveyear lease. The reported asking rent was $40 per square foot.

117 East 24th St

2,000

Taykey / Matthew Kleinman, Miyad Realty

n/a / Eli Someck, Living Real Estate

The tech company signed a lease.

6 East 45th St

1,875

Vaishali Diamond Corporation / Avi Ben-Ishay, Norman Bobrow & Co.

Helper Realty Associates / n/a

The manufacturer and importer of diamonds signed a lease for part of the 11th floor.

121 West 27th St

1,826

Rain Media Inc. / Nancy Washburn, Jonathan Barry Associates

Sixth Avenue West Associates LP / n/a

The documentary production company signed a new five-year lease. The reported asking rent was about $28 per square foot.

608 Fifth Ave

1,801

Michael Khordipour / Avi Ben-Ishay, Norman Bobrow & Co.

RFR Realty / n/a

The jewelry company signed a lease for part of the fifth floor.

155 West 46th St

1,800

Next Media Animation LLC / David Youngworth, Living Real Estate Group

Concord Partners 46th St LLC / n/a

The CGI animation company signed a two-year lease for the entire second floor.

401 Broadway

1,800

Overthinking / Michael Rouzenrouch, Miyad Realty

n/a / Jay Casely, ABS Partners

The marketing firm signed a lease.

5 Hanover Sq

1,730

Community Housing Improvement Program / Gabe Isaacs, Sierra Realty

Savanna / F. Cento, J. Fein, C&W

The trade organization representing apartment building owners signed a seven-year lease on the 16th floor.

183 Madison Ave

1,682

Jacobs Associates / M. Plavin, M. Mandel, Grubb & Ellis

Rigby Asset Management LLC / n/a

The engineering firm signed a five-year lease.

1560 Broadway

1,602

BE FIT Physical Therapy / Todd Hershman, Grubb & Ellis

Newmark & Company Real Estate Inc. / n/a

The physical therapy company signed a five-year lease.

18 Harrison St

1,560

Catalyst Advisors / Greg Kim, Tarter Stats O’Toole

18 Harrison Street Development Associates / Amy Murawski, ABS Partners Real Estate

The healthcare executive search firm signed a five-year lease, with an option, for the entire fourth floor. The reported asking rent was $45 per square foot.

73 Spring St

1,400

Lime Medical / Michael Rouzenrouch, Miyad Realty

n/a / n/a

The tech company signed a lease.

576 Fifth Ave

1,280

N.E.R. Diamonds / Avi Ben-Ishay, Norman Bobrow & Co.

n/a / n/a

The diamond company signed a lease renewal on part of the sixth floor.

1350 Sixth Ave

1,265

OCP Advisors LLC / Betty Posner, NYCRS

SL Green / Represented in-house

The tenant leased medical space.

140 West 57th St

1,121

Georland Corp. / Bertrand De Soultrait, NYCRS

Feil Organization / Represented inhouse

The jewelry showroom signed a lease.

165 Madison Ave

1,000

Andrew Patapis Design / Mayer Jotkowitz, Miyad Realty

n/a / Falcon Properties

The design firm signed a lease.

285 West Broadway

900

Acclivity NYC LLC / Jane Slade, Red Real Estate

285 West Broadway Associates / Joshua Salon, Salon Realty

The New Jersey-based software company signed a three-year lease for a Manhattan office.

1430 Broadway

832

JCL Textile Corporation / Francine Oro, CBC Hunter Realty

Steinberg & Pokoik / Represented inhouse

The textile firm signed a five-year lease renewal.

241 West 37th St

800

G3 Furniture USA / Matthew Kleinman, Miyad Realty

n/a / n/a

The furniture company leased office space.

Retail leases Address

Size

Tenant / Representative

Landlord / Representative

Notes

428 Broadway

23,500

QLOCAL / M. Kass, L. Shabtai, K. Gedinsky, Winick Realty

The Suspenders Building LLC / M. Kass, L. Shabtai, K. Gedinsky, Winick Realty

As part of a “pop-up” short-term lease, QVC and Vogue partnered up for fashion week to host events at the newly excavated retail space.

www www.TheRealDeal.com October 2011 81

Retail leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

350 Fifth Ave (Empire State Building)

18,818

Walgreens / n/a

W&H Properties / A. Goldberg, E. Gelber, M. Chmielecki, CBRE

The drugstore signed a lease renewal and exchanged 10,000 square feet on the concourse level for 10,000 square feet on the second floor.

386 Fulton St (Brooklyn)

17,322

Duane Reade / Zach Mishaan, Winick Realty

CSC Fulton Associates / n/a

The drugstore renewed its lease.

1270 Broadway

14,156

Duane Reade / Young Byunn, Winick Realty

CAN Cornerstone Inc. / Young Byunn, Winick Realty

The drugstore renewed its lease.

575 Lexington Ave

11,717

Duane Reade / Ann La Centra, Winick Realty

575 Lexington Ave Acquisitions LLC / Jedd Nero, CBRE

The drugstore signed a lease.

490 Fulton St (Brooklyn)

10,000

Express / n/a

Crown Acquisitions; Perella Weinberg Partners / n/a

The national apparel company signed a 10-year lease for space in the retail development.

321-323 West 51st St

9,000

Ippudo / Max Dylan Lu, New Street Realty Advisors

Rene Pujol / Aaron Gavios, Square Foot Realty

The ramen chain signed a 15-year lease for its second Manhattan location, which includes the ground floor, the second floor and lower level/basement.

1467 First Ave

8,818

Duane Reade / Ann La Centra, Winick Realty

Ran First Associates / n/a

The drugstore renewed its lease.

54 Crosby St

8,000

n/a / Lansco Corp.

PEP Real Estate / James Famularo, NYCRS

The retailer signed a lease.

761 Broadway

7,550

Duane Reade / Ann La Centra, Winick Realty

Uniway Partners LP / Bruce Spiegel, Rose Associates

The drugstore signed a lease renewal.

412 Knickerbocker Ave (Brooklyn)

7,500

Quick Cash / Mary Jo Spina, Regal Homes Realty

Rochells Youth Center Inc. / E. Dweck, M. Mager, Besen Retail

The retail financial services provider signed a lease.

110 Ridge St

7,000

n/a / James Famularo, NYCRS

Private investor / James Famularo, NYCRS

The day care center signed a lease.

300 West 57th St

6,174

Sur La Table / Steve Bartha, S.J. Bartha Consulting Group

Hearst Corp. / L. Nowkias, Hearts Corp.; D. LaPierre, R. Hodos, S. Sjurset, CBRE

The culinary educators signed a retail lease.

3 Park Ave

6,050

Le Pain Quotidien / A. Yunis, J. Lack, Newmark Knight Frank

Cohen Brothers Realty / B. Mendelson, C. Schwart, C&W

The café and bakery signed a 15-year lease for another location. The space has 4,050 square feet on the ground floor and 2,000 square feet on the mezzanine level.

1354 Lexington Ave

6,000

Duane Reade / Ann La Centra, Winick Realty

1354 Lexington Owner / n/a

The drugstore renewed its lease.

590 Fifth Ave

6,000

National Basketball Association / n/a

Thor Equities / n/a

The NBA signed a lease for a temporary store.

34 North 6th St (Brooklyn)

5,300

Frolic! / Stephen Sunderland, Optimal Spaces

Douglaston Development / Robert Greenstone, Greenstone Realty

The rock ‘n’ roll-inspired play space and enrichment center for children signed a 10-year lease, with options, for retail space at the Edge development.

57-11 Myrtle Ave (Queens)

4,772

Duane Reade / Steven Weissmann, Winick Realty

Ridgewood Mid-Block / Frank Zuckerbrot, Sholom & Zuckerbrot

The drugstore renewed its lease.

100 Church St

4,443

Aroma Espresso Bar / David Latman, DLL Real Estate Ltd.

SL Green / A. Schuster, M. Worthman, R. Berkowitz, RKF; L. Swiger, E. Anazagasty, SL Green

The Israeli coffee and espresso chain signed a long-term lease for its fourth Manhattan location. The company’s other cafes are located at 145 Green Street, 161 West 72nd Street and 205 East 42nd Street.

535 Madison Ave

4,100

IWC Shaffhausen / n/a

Park Tower Group / n/a

The Swiss watchmaker signed a 10-year lease for multilevel space.

541 Myrtle Ave (Brooklyn)

4,000

Absolute Savings / Gary Mayzlin, Kalmon Dolgin Affiliates

941 Washington Associates LLC / Gary Mayzlin, Kalmon Dolgin Affiliates

The operator of discount chant stores signed a lease at the base of a residential condo building.

691 Broadway

3,695

Spencer Gifts / Michael Gleicher, Winick Realty

Mercer Square LLC / Michael Gleicher, Winick Realty

The gift shop signed a lease for its first freestanding location.

250 Hudson St

3,100

Hyper Island Inc. / n/a

Jack Resnick & Sons / n/a

The digital media and advertising school signed a lease for storefront space.

10 Downing St

3,070

Emigrant Bank / Gere Ricker, Milstein Brothers Real Estate

Stonehenge Partners / A. Yunis, J. Lack, Newmark Knight Frank

The bank signed a lease for another location.

10 Downing St

3,000

Bahri Steakhouse / n/a

Stonehenge Partners / A. Yunis, J. Lack, Newmark Knight Frank

The steakhouse signed a lease.

100 Church St

2,548

Pret A Manger / J. Roseman, B. Birnbaum, Newmark Knight Frank

SL Green / A. Schuster, M. Worthman, R. Berkowitz, RKF; L. Swiger, E. Anazagasty, SL Green

The sandwich chain signed a lease for another location, its 28th in Manhattan.

180 East 86th St

2,500

L’Occitane / Chris DeCrosta, Thor High Street Advisors

Charles H. Greenthal & Co. / n/a

The health and beauty products retailer signed a lease.

170 Fifth Ave

2,500

L’Occitane / Chris DeCrosta, Thor High Street Advisors

n/a / Michael Blum, CBRE

The health and beauty products retailer signed a lease.

100 Church St

2,500

The Anne Frank Center / Suzanne Sunshine, S. Sunshine & Associates

SL Green / A. Schuster, M. Worthman, R. Berkowitz, RKF; L. Swiger, E. Anazagasty, SL Green

The nonprofit leased retail space.

608A Castle Hill Ave (The Bronx)

2,500

Blue Castle Laundry / Alex Hill, Winick Realty

R.A. Real Estate / Alex Hill, Winick Realty

The Laundromat signed a lease.

150 East 44th St

2,462

Potbelly / J. Roseman, M. Frankel, B. Birnbaum, Newmark Knight Frank

n/a / B. Spiegel, B. Bergman, Rose Associates

The Chicago-based sandwich chain signed a 15-year lease for another New York location, its third in Manhattan.

64-20 108th St (Queens)

2,400

Citibank / P. Wong, M. Baffa, J. Pell, Newmark Knight Frank

Yellowstone Commons LLC / n/a

The retail bank signed a lease for a new location.

2417 Flatbush Ave (Brooklyn)

2,320

1-800-Mattress / R. Smith, T. Jung, Winick Realty

Prince Plaza Development / R. Smith, T. Jung, Winick Realty

The bedding company signed a lease for its third Brooklyn location.

57-15 Myrtle Ave (Queens)

2,286

Duane Reade / Steven Weissmann, Winick Realty

Myrtle Breeaad LLC / Peter Botsaris, Botsaris Morris Realty

The drugstore renewed its lease.

1142 Third Ave

2,000

UNIQLO / Lansco Corp.

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

The Japanese apparel retailer signed a lease for a pop-up store.

34 North 6th St (Brooklyn)

1,871

Cleo Spa / Tony Park, PD Realty

Douglaston Development / Robert Greenstone, Greenstone Realty

The spa signed a 10-year lease with options.

807 Washington St

1,572

Nicholas Kirkwood / J. Strauss, Z. Beloff, RKF

Romanoff Equities / Represented inhouse

The footwear brand signed a lease for its first U.S. location.

456 Grand St (Brooklyn)

1,450

Naples Drug Guild Inc. / O. Balsamo Aquino, T. Kontis, Harvest International

Triangle Court LLC / O. Balsamo Aquino, T. Kontis, Harvest International

The pharmacy signed a lease.

55 Antin Pl (The Bronx)

1,380

Mt Olive Miracle Temple / Elliott Dweck, Besen Retail

BLDG Beacon Bronx LLC / Matthew Mager, Besen Retail

The church signed a retail lease for a new, larger location.

82 October 2011 www.TheRealDeal.com

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Retail leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

424 East 9th St

1,200

n/a / K. Brandman, J. Famularo, NYCRS

Croman Real Estate / Ken Brandman, NYCRS

The Italian restaurant signed a lease.

504 LaGuardia Pl

1,200

n/a / Kathleen Perkins, NYCRS

n/a / Chris Guzzello, Sinvin Real Estate

The fashion retailer signed a lease.

13 Laight St

1,200

n/a / Kathleen Perkins, NYCRS

n/a / Chris Guzzello, Sinvin Real Estate

The Danish café signed a lease.

1350 Broadway

1,189

Starbucks / David Firestein, Northwest Atlantic Real Estate

W&H Properties / A. Goldberg, E. Gelber, M. Chmielecki, CBRE

The coffee chain signed a new lease for another location.

2054 Wallace Ave (The Bronx)

1,150

Llenil Lama Laundry / Elliott Dweck, Besen Retail

BLDG Beacon Bronx LLC / Matthew Mager, Besen Retail

The laundromat signed a lease.

367 Seventh Ave

1,000

Young J. Rhoyu / Jon Linek, Manhattan Commercial Group

Arthur W. Grieg, Receiver / E. Dweck, M. Mager, Besen Retail

The spa signed a lease.

229 First Ave

1,000

n/a / K. Brandman, J. Famularo, NYCRS

Croman Real Estate / Represented inhouse

The Asian restaurant signed a lease.

75 Nassau St

1,000

n/a / K. Brandman, J. Famularo, NYCRS

Century 21 Realty / Represented inhouse

The tenant signed a lease for a restaurant.

48 Ninth Ave

1,000

L’Occitane / Chris DeCrosta, Thor High Street Advisors

Chelsea/Village Associates / n/a

The health and beauty products retailer signed a lease.

10 Downing St

850

Artsee / Anita Grossberg, Prudential Douglas Elliman

Stonehenge Partners / A. Yunis, J. Lack, Newmark Knight Frank

The eyewear retailer signed a lease.

942 Amsterdam Ave

840

La Toulousaine Boulangerie Pastisserie Café / David Chkheidze, Massey Knakal

940 Amsterdam Corp. / David Chkheidze, Massey Knakal

The café signed a 10-year lease. The reported asking rent was $93 per square foot.

764 Burke Ave (The Bronx)

834

Kelly’s Family Restaurant / Elliott Dweck, Besen Retail

BLDG Beacon Bronx LLC / Matthew Mager, Besen Retail

The restaurant signed a lease to open another location.

435 East 9th St

800

Sierra Vintage LLC / Steven Jacobson, Hopkinson Associates

Benchmark 435 LLC / Represented in-house

The vintage apparel store signed a 10-year lease.

227 Mott St

750

n/a / Kathleen Perkins, NYCRS

Private investor / K. Perkins, K. Brandman, NYCRS

The restaurant signed a lease.

772 Burke Ave (The Bronx)

750

Jerusalem, A Church Without Walls / Elliott Dweck, Besen Retail

BLDG Beacon Bronx LLC / Matthew Mager, Besen Retail

The church signed a retail lease for a new location.

60 West 8th St

700

GiGiK NY Inc. / n/a

n/a / Annie Yao, Buchbinder & Warren

The hosiery boutique signed a 10-year lease for its second Greenwich Village location. The reported asking rent was $130 per square foot.

1045 Lexington Ave

650

Joe the Art of Coffee / Alexandra Turboff, BCD

Solil Management / Represented inhouse

The coffee chain signed a 10-year lease. The reported asking rent was $221 per square foot.

32 Court St (Brooklyn)

630

Tony’s Pizzeria / Robert Greenstone, Greenstone Realty

n/a / Robert Greenstone, Greenstone Realty

The pizzeria signed a 10-year lease with options.

4865 Broadway

512

Mary Kay Cosmetics / Elliott Dweck, Besen Retail

The Parkoff Organization / M. Mager, Besen Retail

The cosmetics company leased retail space for a training studio.

780 Madison Ave

500

Lana Marks / Stuart Ellman, Judson Realty

n/a / Gary Dana, Prudential Douglas Elliman

The handbags retailer signed a 10-year lease.

561 Columbus Ave

460

Momofuku Milk Bar / Mark Tergesen, ABS Partners Real Estate

67 West 87th Street Housing Development Corp. / J. Isa, B. Tregerman, Winick Realty

The dessert shop signed a lease.

504 East 12th St

400

n/a / Ken Brandman, NYCRS

Magnum Real Estate Group / Ken Brandman, NYCRS

The sandwich shop signed a lease.

148-150 West 28th St

400

n/a / Allan Hasty, NYCRS

Private investor / Citi Habitats

The tenant signed a retail lease.

253 East 78th St

400

Yoko Fashions / n/a

GBL 78th Street LLC / Jill Lovatt, Massey Knakal

The fashion retailer signed a 10-year lease. The reported asking rent was $120 per square foot.

4869 Broadway

400

Megam Check Cashing / Elliott Dweck, Besen Retail

The Parkoff Organization / M. Mager, Besen Retail

The check-cashing store signed a lease.

75 Orchard St

358

Carlos Campos / Ben Hakimian, Besen Retail

The Dermot Company Inc. / E. Dweck, M. Mager, Besen Retail

The fashion designer signed a lease.

386 Canal St

300

Roll N’ Go / R. Smith, T. Jung, Winick Realty

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

The fast-food chain signed a lease for its third New York location.

Buys Address

Size

Buyer / Representative

Seller / Representative

Notes

401 East 34th St

706-unit apt. complex

UDR / Georgia Malone, Georgia Malone & Co.

n/a / n/a

The Rivergate apartment complex sold for $443 million in an off-market deal. There were no other brokers involved in the transaction.

95 Wall St

22-story apt. bldg, 507 units total

UDR / n/a

The Moinian Group / n/a

The building formerly known as Dwell95 sold for $325 million, or about $550,000 per unit, excluding the 97-space parking garage and 7,526-squarefoot, ground-level retail space. The apartments are 93 percent occupied, according to UDR, and rent for an average of $3,100 per month.

35 East 76th St

188-room hotel

Cheng Yu-Tung / n/a

Maritz, Wolff & Co. / n/a

The Carlyle Hotel sold for $319.4 million. HSBC supplied a $40.32 million, the New York Post reported. The sale was part of a package of hotels in Dallas, Santa Fe and the British Virgin Islands.

75 Ninth Ave

1.18 million sf mixeduse bldg

Jamestown Properties / n/a

Angelo Gordon & Co.; Belvedere Capital Real Estate Partners; Irwin Cohen / n/a

Jamestown Properties’ buyout of its partners at the Chelsea Market building was completed for $225 million. Jamestown now owns the entire building, valued at $795 million. The buyer plans to add a 300,000-square-foot tower to the building, to be used for office space and a hotel.

120 West 21st St

210-unit apt. bldg

UDR / n/a

n/a / n/a

The Chelsea 21 luxury rental building sold for $138 million. UDR will assume a $31 million first mortgage on the property.

1552 Broadway

15,000 sf retail bldg

SL Green; Jeff Sutton / n/a

The Riese Organization / J. Caplan, R. Baxter, R. Cohen, S. Latham, Jones Lang LaSalle

The property sold for $136.55 million. The building is currently occupied by a T.G.I. Friday’s location.

Manhattan portfolio

5 apt. bldgs

Stone Street Properties / n/a

n/a / n/a

The package of five rental buildings sold for $90 million. The properties are located at 176 East 3rd Street, 420 East 66th Street, 404 East 88th Street, 336 East 81st Street and 344 East 85th Street; the buildings have been renamed the Jesse, the Chase, the Hudson, the Lily and the Emma, respectively.

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Buys continued Address

Size

Buyer/ Representative

Seller / Representative

Notes

1205-1225 Broadway

111,750 buildable sf development site

n/a / D. Rahmani, E. Khalili, Venture Capital Properties

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

The property, which has a three-story commercial building on site, sold for $71.9 million, or about $290 per buildable square foot.

400 East 67th St

3 comm. condos

Prudential Real Estate Investors / n/a

Alexico Group / n/a

The retail condos sold for $61.6 million.

530 West 44th St

Industrial bldg

New York City School Construction Authority / n/a

New York Public Library / n/a

The Annex, a storage space, sold for $40 million. The SCA will build a high school at the site.

88 Leonard St

352-unit apt. bldg

Waterton Associates / Steven Vegh, Multi Investment

Africa Israel USA / S. Kohn, H. Hwang, N. Rockett, K. Wiedenmann, C&W

A 49 percent stake in the rental building closed for $37 million. The transfer of Africa Israel USA’s remaining stake, the senior mortgage and the mezzanine loan is expected to close in the first half of 2012. The prices for those components were $17 million, $132 million and $24 million, respectively, according to a previous report by Bloomberg News, for a total cost of about $210 million. The deal is being closed in two stages for accounting purposes, according to David Schwartz, Waterton Associates’ co-founder.

West Village portfolio

3 apt. bldgs, 85 units total

Stone Street Properties / n/a

Ioannis Danallis / L. Ross, C. Portelli, J. Goldflam, Highcap Group

The package of buildings at 100-102 Christopher Street, 7 Cornelia Street and 11 Cornelia Street sold for $32.6 million, or $362,222 per unit. The price represents a gross rent multiple of 12.1 and a capitalization rate of 6 percent.

344 West 14th St

6-story apt. bldg

First Atlantic Real Estate / n/a

Real Estate Equities Corporation / n/a

The property sold for $23.25 million. Real Estate Equities Corporation purchased the building in 2007 for $14 million.

312-318 West 37th St

Parking lot/ development site

West 37th Street Partners LLC / David Schechtman, Eastern Consolidated

Wenner and Larkin families / David Schechtman, Eastern Consolidated

A joint venture between the Albanese Organization and the Buccini/Polin Group purchased the parking lot for $20.8 million. The buyers plan to develop a 300-room hotel.

509 West 38th St

4-story, 42,800 sf comm. bldg

ELB Holdings LLC / n/a

Prime Property Fund / n/a

The vacant recording studio sold for $20.5 million.

Upper East Side portfolio

7 apt. bldgs and parking lot

Minuit Partners / D. Schechtman, L. Lieberman, Eastern Consolidated

Estate of Arthur Brown / D. Schechtman, L. Lieberman, P. Hauspurg, R. Rogovin, M. Jones Pavone, E. Lee, S. Ellard, Eastern Consolidated

The portfolio of 46 apartments, seven stores and about 175,000 square feet of development rights sold for $19.6 million. The package includes 1160 and 1162 First Avenue, 1144-1150 and 1158 Second Avenue, and 323 East 60th Street.

50-02 2nd St (Queens)

Development site

n/a / D. Junik, G. Blum, D. Baio, Pinnacle Realty

The property sold for $19.3 million.

Bronx portfolio

5 apt. bldgs

n/a / n/a

Investor group including Houlihan-Parnes Realtors members / J. Coleman, J. Manous, M. Cuniberti, Houlihan-Parnes Realtors

Five apartment buildings in the northwest Bronx sold to separate investors for an aggregate price of about $19 million. The buildings are located at 2710 Valentine Avenue, 2695 Briggs Avenue, 2737 Webb Avenue, 3202 Kossuth Avenue and 3215 Hull Avenue.

184-190 West 237th St (The Bronx)

225,227 sf development site

n/a / n/a

n/a / Karl Brumback, Massey Knakal

The site of the former Stella D’oro factory sold for $18.75 million. It currently has a two-story factory building and a one-story garage and retail complex. The property will be redeveloped into a retail shopping center.

45-47 West 38th St

Office bldg

Lodgeworks / n/a

Utica Avenue Hotel LLC / n/a

The property sold for $16 million.

96-02 37th Ave (Queens)

79,336 sf mixed-use bldg

Benedict Realty Group / Ami Efrati, Itzhaki Properties

Junction Enterprises / Ami Efrati, Itzhaki Properties

The property sold for $14 million. The price represents a capitalization rate of 7.4 percent and a gross rent multiple of less than 10. The building has 76 apartments, nine retail spaces and one office space.

1356 First Ave

5-story apt. bldg, 26 units total

DelShah Capital LLC / n/a

n/a / G. Garvin, Massey Knakal; J. McLaughlin, Corcoran

The property sold for $9.13 million, or about $456 per square foot. The building has a retail unit, which is occupied by Italian restaurant Petaluma.

640, 642 and 644 10th Ave

3 apt. bldgs, 24 units total

Local investor / Edmond Levy, Cornerstone Real Estate Investments

640 Tenth Associates / Edmond Levy, Cornerstone Real Estate Investments

The properties sold for $8.65 million, or $446 per square foot. Twenty-one of the 24 apartments were delivered vacant at closing. The buildings, which have four stores at ground level, will remain as rentals.

53 Pitt St

Development site

Delancey Bridge Tower Inc. / n/a

Tony Marano / n/a

The plot of land sold for $8.48 million to a group of 53 Chinese-American investors purchasing as a corporation.

450-452 Amsterdam Ave

Two 5-story apt. bldgs, 16 units and 18,500 sf total

Silverstone Property Group / n/a

n/a / H. Oster, P. Smadbeck, Massey Knakal

The adjacent properties sold for $8.1 million, or about $435 per square foot. The price represents a capitalization rate of 3.7 percent. Seven of the apartments are rent controlled, six are rent stabilized, two are free market and one is temporarily exempt.

40 Rector St

32,019 sf office condo

The Council of School Supervisors and Administrators / K. Kronstadt, R. Kramer, Newmark Knight Frank

Philips International / S. Klau, E. Harris, A. Maltz, H. Stein, Newmark Knight Frank

The 12th-floor commercial condo sold for $8 million. The CSA is relocating its headquarters from Downtown Brooklyn.

115-119 West Kingsbridge Rd (The Bronx)

6-story apt. bldg, 55 units total

n/a / Amit Doshi, Besen & Associates

2690 Webb Avenue LLC / Amit Doshi, Besen & Associates

The walk-up building with seven stores sold for $7.9 million, or $120 per square foot. The price represents a gross rent multiple of 6.5.

64-68 West 125th St

1-story, 7,569 sf retail bldg

n/a / n/a

n/a / J. Shalom, L. Kimyagarov, Massey Knakal

The property sold for $7.1 million, or about $938 per square foot.

Once upon a time, on Fifth Avenue... 125 Fifth Avenue, New York, NY 10003 Flatiron District boutique office building with retail & air rights Built circa 1900, the building had undergone a complete gut renovation in 2008-2010. The second through fifth floors were vacant, and required some work to be completed for occupancy. Work included a complete NYC Landmark Preservation Commission approved restoration of the building’s historic façade. Despite a marquee address, selling a near vacant building in a landmark location took time to find the right buyer at a premium price.

Sold for $18,000,000 ($855/sf) by Carol Ann Flint.

There’s a story behind every deal. 000 October 2008 www.TheRealDeal.com July 2009 www. 80 20092011 www.TheRealDeal.com 86 July October www.TheRealDeal.com

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Buys continued Address

Size

Buyer/ Representative

Seller / Representative

Notes

43-10 10th St (Queens)

1-story, 25,000 sf bldg and 15,000 sf of land

Dykes Lumber Co. / D. Baio, G. Blum, G. Margaronis, M. Prange, Pinnacle Realty

n/a / D. Baio, G. Blum, G. Margaronis, M. Prange, Pinnacle Realty

The property sold for $7.1 million.

450 West 42nd St

70,000 sf comm. unit

Signature Theater Company / n/a

The Related Companies / n/a

The commercial unit at Related’s MiMA mixed-use development sold for $6.67 million. The space, designed by Frank Gehry, will feature three theaters, a rehearsal studio, café, bookstore and offices.

506 and 510 West 150th St

2 apt. bldgs, 61 units total

n/a / n/a

n/a / Robert Shapiro, Massey Knakal

The walk-up building sold for $6.35 million.

139 North 10th St (Brooklyn)

6-story, 30,000 sf apt. bldg

Simon Dushinsky; Fortis Property Group / n/a

Sanjer Raz LLC / Evan Haymes, The Beige Group

The loft building sold for about $6.1 million. The buyers plan to convert the property to luxury condominiums.

88 West 3rd St

Apt. bldg

n/a / Kelly Lin, Misrahi Realty

The walk-up building sold for $6 million.

342 East 46th St

5-story apt. bldg

The Republic of Turkey / n/a

Heritage Realty / n/a

The property sold for $5.1 million. The Republic of Turkey plans to use the building to accommodate its New York City-based staff.

93 Reade St

5-story, 10,475 sf apt. bldg

Knightsbridge Properties Corp. / n/a

n/a / n/a

The property sold for $4.5 million. The buyer plans to convert the rental building to condominiums in the future.

424 Broome St

3,800 sf retail co-op

Ankasa NYC Inc. / Greg Kim, Tarter Stats O’Toole

A. Verglas / Greg Kim, Tarter Stats O’Toole

The retail space sold for $3.69 million. The unit will be used by a luxury home furnishings designer.

679 Greenwich St

3-story apt. bldg, 3 units total

Shuster Greenwich LLC / Orly Hazan, Besen & Associates

Zerose LLC / Glenn Raff, Besen & Associates

The corner building with ground-floor retail sold for $3.6 million. The retail space was delivered vacant.

1114 Nostrand Ave (Brooklyn)

22,000 sf apt. bldg, 28 units total

1114 Nostrand Ave Associates / M. Fridman, B. Zimmermann, The Barcel Group

Duffield Housing Realty LLC / M. Fridman, B. Zimmermann, The Barcel Group

The property sold for $2.85 million. The price for the building, which has five stores, represents a gross rent multiple of about 7.8.

115 Allen St

2,910 sf retail condo

Investor / n/a

n/a / M. DeCheser, J. Nelson, Massey Knakal

The space sold for $2.33 million. The restaurant, which has 1,800 square feet on the ground and 1,110 square feet on the lower level, is occupied by Mary Queen of Scots.

69 Columbia St (Brooklyn)

5-story townhouse, 4 units total

n/a / n/a

n/a / Ken Freeman, Massey Knakal

The multifamily property sold for $2 million, or $254 per square foot. The building has three loft-style rental apartments on the first three floors and an owner’s duplex loft apartment on the fourth and fifth floors.

679-681 Classon Ave (Brooklyn)

4-story, 12,200 sf apt. bldg, 16 units total

n/a / n/a

n/a / S. Antebi, J. Landau, GFI Realty

The walk-up property sold for $1.66 million. The price represents a gross rent multiple of 8.5.

2439-45 86th St (Brooklyn)

10,000 sf development site

n/a / n/a

n/a / J. Shalom, M. Inglis, Massey Knakal

The property sold for $1.65 million, or $165 per buildable square foot.

1063 Eastern Pkwy (Brooklyn)

4-story, 15,800 sf apt. bldg, 16 units total

n/a / Joseph Landau, GFI Realty

n/a / Shlomo Antebi, GFI Realty

The walk-up property sold for $1.4 million. The price represents a gross rent multiple of 6.6.

Financing Address

Size

Borrower / Representative

Lender / Representative

Notes

75 Ninth Ave

1.18 million sf mixeduse bldg

Jamestown Properties / J. Ackemann, W. Yowell, J. Parsonnet, J. O’Meara, S. O’Brien, CBRE

Landesbank BadenWurttemberg / n/a

A $380 million loan was arranged for the recapitalization of the mixed-use, retail and office building.

340 Madison Ave

22-story, 750,000 sf office bldg

RXR Realty; Broadway Partners; USAA Real Estate Company / Michael Tepedino, HFF

Cornerstone Real Estate Advisers / n/a

A $315 million loan was arranged at a 12-year fixed rate to refinance the property.

950 Fifth Ave

8-unit apt. bldg

950 Fifth Avenue Corp. / n/a

NCB / n/a

A $5 million first mortgage and a $2.5 million line of credit were arranged for the building.

2751-53 Crescent St (Queens)

Development site

n/a / Alan Simonowitz, Berko & Associates

National lender / n/a

A $4.15 million construction loan was arranged for the development of a sixstory, 25,880-square-foot mixed-use building with 16 apartments and four medical office spaces.

230 West End Ave

113-unit apt. bldg

230 Apartments Corp. / n/a

NCB / n/a

A $3.4 million first mortgage and a $600,000 line of credit were arranged for the building.

4320 Van Cortlandt Park East (The Bronx)

109-unit apt. bldg

4320 Van Cortlandt Park Owners Inc. / n/a

NCB / n/a

A $2.3 million first mortgage and a $500,000 line of credit were arranged for the building.

68-37 108th Street (Queens)

72-unit apt. bldg

Capri Gardens Owners Corp. / n/a

NCB / n/a

A $2 million first mortgage and a $500,000 line of credit were arranged for the building.

7609 Fourth Ave (Brooklyn)

81-unit apt. bldg

Castle Court Apartments Inc. / n/a

NCB / n/a

A $2 million first mortgage and a $200,000 line of credit were arranged for the building.

424 East 57th St

25-unit apt. bldg

424 East 57th Street Tenants Corp. / n/a

NCB / n/a

A $1.5 million first mortgage and a $500,000 line of credit were arranged for the building.

625 Park Ave

35-unit apt. bldg

625 Park Corporation / n/a

NCB / n/a

A $1.9 million first mortgage was arranged for the building.

44-20 Douglaston Pkwy (Queens)

44-unit apt. bldg

Princeton Owners Corp. / n/a

NCB / n/a

A $1.4 million first mortgage and a $300,000 line of credit were arranged for the building.

8 East 83rd St

81-unit apt. bldg

83rd Street Tenants Inc. / n/a

NCB / n/a

A $1.3 million first mortgage was arranged for the building.

227 East 87th St

18-unit apt. bldg

Yorkville 87 Housing Corp. / n/a

NCB / n/a

A $925,000 first mortgage and a $250,000 line of credit were arranged for the building.

Follow The Real Deal on Twitter so you don't miss out on real estate-related goodness!

When the going gets good, get going! When the going gets very good, get out! Great investment advice from Extell's Gary Barnett. 80 October July 2009 www.TheRealDeal.com 88 2011 www.TheRealDeal.com

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Other Deals SL Green, Sutton partner for $400 million, 10building portfolio The retail investment team of SL Green Realty and Jeff Sutton, president of Wharton Properties, has struck again, according to the Wall Street Journal, paying more than $400 million for a 10-building portfolio that includes prime retail on Fifth and Madison avenues. The investment pair will take control of 724 Fifth Avenue, which has a Prada store at its base, and the building at 760 Madison Avenue, which includes an Armani store. The Armani store is just across the street from a Valentino store at 747 Madison Avenue that SL Green and Sutton combined to purchase in July for $65 million, while the Prada store is nearby the pair’s 717 Fifth Avenue property, which recently inked Dolce & Gabbana as a tenant. (The deal was announced after the deadline for the Deal Sheet.)

Hilfiger’s plan to buy Clock Tower fizzles Tommy Hilfiger’s plan to buy the Clock Tower building for $170 million has fallen apart because he has been unable to secure financing, Crain’s reported. Together with real estate investment company JSR, he had intended to purchase the property at 5 Madison Avenue between 23rd and 24th streets from Africa Israel, and convert it into a luxury hotel and condominium. JSR Capital said there were other reasons apart from financing problems for why the deal fell apart. “Virtually everyone in the real estate business has looked at Clock Tower as a hotel, residential and/or office,” said Ari Schwebel, vice president of operations at JSR Capital. “Some of those were even all-cash buyers. There are reasons not one of them has closed on the building, and it isn’t about financing.”

Witkoff closes on 1107 Broadway for $191M

Rudin locks in $525M loan for St. Vincent’s

Steve Witkoff ’s Witkoff Group completed its purchase of part of the former International Toy Center building from Lehman Brothers Holdings for $191 million, Lehman announced last month, following a bankruptcy auction by Eastdil Secured in June. Witkoff is planning a $290 million condominium conversion of the property, at 1107 Broadway, featuring 145 units, in collaboration with a Morgan Stanley real estate fund. Eastdil Secured brokers Adam Spies and Doug Harmon represented the seller in the deal. (The deal was announced after the deadline for the Deal Sheet.)

The Rudin family’s $800 million redevelopment of the St. Vincent’s Hospital site is one step closer to reality. According to the Wall Street Journal, Rudin Management obtained $525 million in construction financing and can begin construction once the government approval process, already underway, is complete. The relative ease with which the Rudins cleared the financing obstacle given today’s tight lending environment was surprising, the Journal said. (The deal was announced after the deadline for the Deal Sheet.)

Trump forgoes cash in 40 Wall Street deal

General Growth refinances Staten Island Mall

When Donald Trump’s newest tenant in his 70-story office tower at 40 Wall Street suggested an unconventional security deposit payment method, the former would-be presidential candidate took it as an opportunity to bash President Barack Obama. According to the Wall Street Journal, precious metal dealer Apmex will pay the $176,000 security deposit on its 10-year lease with three 32-ounce bars of gold, each about the size of a television remote. (The deal was announced after the deadline for the Deal Sheet.)

General Growth Properties, the shopping mall landlord and owner of the South Street Seaport, refinanced its mortgage on the Staten Island Mall, the company announced last month. It replaced a $273 million, 6.06 percent loan that was scheduled to mature in October 2015 with a new, 12-year fixed-rate loan for the same amount at a 4.77 percent rate. (The deal was announced after the deadline for the Deal Sheet.)

Trio of companies buys 170 Broadway

Billy Macklowe eyes possible Manhattan acquisitions with new investment fund

Highgate Hotels, Crown Acquisitions and the Carlyle Group have bought 170 Broadway for more than a $100 million, Crain’s reported last month. They plan to turn the office building into a hotel. AMG Realty Partners, which is part of GE Capital, sold the 108-year-old, 18-story property with 165,000 square feet between Liberty Street and Maiden Lane. (The deal was announced after the deadline for the Deal Sheet.)

New York City real estate developer William Macklowe appeared on Bloomberg News last month to talk about a new investment fund his eponymous company created with Grove International Partners. The fund, Macklowe said, is a vehicle with the capacity to raise up to $1.5 billion in acquisition capital. While “there’s a limited supply in the acquisition pipeline,” Macklowe said, his firm is on the lookout for investment properties exclusively in Manhattan. TRD

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

90 October 2011 www.TheRealDeal.com

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International guarantors an international client,” said Michael Chadwick, an agent at brokerage Bond New York, who found Tsang her apartment. “If someone didn’t pay you, and they’re not a resident of this country, they’re in China, what are you going to do? What legal recourse do you have?” (Chadwick said that Brodsky, a landlord he has worked with in the past, made an exception for Tsang.) Indeed, most landlords apply the same logic to American guarantors who live outside the Tri-State Area. That’s largely because U.S. federal courts

Interest rates

from page 50

— which typically handle lawsuits between residents of different states — can only serve court filings within a 100-mile radius. So if a landlord sues in Manhattan, he could drag in a defendant from New York, New Jersey or Connecticut; but farther afield, he would have to hire local counsel and file suit in the guarantor’s home state. “If somebody did not pay their rent, it would be very difficult for the landlord to go ahead and collect that rent from somebody that’s in the [U.S.] far away, or outside the country,” said Gordon Golub, Citi

from page 18

are actually stalling sales. Negligible interest rates provide little incentive for banks to lend to homebuyers, leading to ever-stiffer borrowing requirements, Miller said. “How do [banks] make the lending to John and Mary Homebuyer similar to borrowing from the Fed virtually risk-free?” he said. “It’s by making the borrowing requirements Draconian, so that there is no shadow of a doubt that the buyer who’s borrowing the money will ever default. “Until that changes, there can’t be a housing recovery.” Brokers, however, maintain that low rates push those on the sidelines into the game, and allow buyers to get more property for their dollar. “For a long time, I heard from a lot of buyers that they were skeptical of buying because they felt that if interest rates go up, pricing would either stay stagnant or decrease,” said Andrew Barrocas, CEO of the brokerage MNS, adding that the prolonged low rates were “definitely a consumer confidence boost.” But analysts said that the continued depression of rates has undermined their effectiveness. Brokers may insist that buyers act now to lock in low rates, but that sense of urgency is a “media effect,” Rosenblatt said. “The way I look at it is, the benefit [of low rates] has played itself out,” Miller said. TRD

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Habitats’ director of rentals. Even so, many property managers do take guarantors from across the country, including Rose Associates. “Am I going to tell some California surgeon whose daughter wants to go to NYU that he’s not qualified to pay her rent?” said Robert Scaglion, Rose’s senior managing director of residential marketing. And international students do have other options, like turning to Insurent Agency Corp. Billed as the city’s only institutional guarantor, Insurent will underwrite a lease for a foreign tenant with no U.S. credit history for 110 percent of a month’s rent — which brokers and landlords said is filling a niche. International students can also pay six months’ or a year’s worth of rent up front. But that’s not a perfect solution: Aside from the obvious financial burden for students, some landlords are wary of not being able to evict a tenant whose rent they’ve already collected, and rent stabilized buildings are prohibited from accepting these kinds of payments.

Twitter

Finally, international students can hunt for individual landlords willing to entertain flexible arrangements. Like Brodsky, Related Cos. and Archstone, based in Englewood, Colo., have also been known to accept international guarantors, according to Gary Posylkin, director of leasing at brokerage Miron Properties. “We will lease to anybody who qualifies through our standard background-check and credit-check process,” said Peter Jakel, a spokesperson for Archstone. In other words, as long as potential guarantors provide the appropriate documentation, they can secure an apartment with Archstone, Jakel conceded. But for foreign individuals, that can obviously be difficult. A spokeswoman for Related did not immediately confirm whether the company accepts international guarantors. Brodsky did not respond to requests for comment. As for Tsang, she renewed her lease in September. She said Brodsky bumped up her rent $50 per month, but “this year they just handed me the lease renewal like they would any other tenant.” TRD

from page 38

“I got a message from a venture capitalist who follows me on Twitter, saying, ‘If you know as much about real estate as you do about food, you should be my agent,’” says Zweben. A few months later, they closed a deal on an apartment on the Upper West Side. According to Dawn Doherty, a StreetEasy alum who is now Elliman’s chief digital ofﬁcer, Zweben has the right idea by engaging people before they need to buy, sell or rent a home. Social media interaction is about building relationships and trust, explains Doherty, who has just over 1,900 Twitter followers (@CityDawn) and is prepping a course at REBNY to help agents boost their social media presence. Doherty cites Fishman, Zweben and Miller, as well as Warburg’s Nicole Beauchamp (@nikkibeauchamp) and Stephanie Davis (@stephldavis) of the Heddings Property Group, as among the top inﬂuential Twitter users in the city’s real estate world. Beauchamp has close to 2,500 followers, and Davis nearly 2,900.

Taking social media seriously While social media-savvy real estate professionals insist that Twitter should be fun and personality-driven, they were quick to point out that there are some rules to live by. “I never tweet in anger, and I never drunk-tweet — that’s where people get into trouble,” says Fishman. And just because Fishman and her peers don’t tweet exclusively about real estate, it doesn’t mean they don’t use Twitter to advertise listings and open houses. But regardless of what agents post about, quality trumps quantity on Twitter. “Some people are half-assed about Twitter,” Doherty says. “They’ll have an intern tweet, but they aren’t engaging.” And engaging others in your ideas and personality is the future, in real estate and beyond. “Whether you work for a big or small company, we all need to brand ourselves individually or we aren’t going to be in business in a couple years,” says Doherty. “Twitter is perfect for that.” TRD

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 August story “Owners (try to) give back keys,” The Real Deal mistakenly identiﬁed the company run by Mo Vaughn and Eugene Schneur as Ocelot Capital Group in a photo

Capital Markets

caption. The correct company name is Omni New York.

DEBT | EQUITY | INVESTMENT SALES

In September’s “Development Updates,” The Real Deal mistakenly reported that the 2130 ACP condo in Harlem has a 24-hour attended lobby. In fact, it has a part-time attended

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lobby with a virtual concierge. In a September-issue story, The Real Deal incorrectly stated Stephen Kliegerman’s position. He is president of Terra Development Marketing, which oversees both Halstead Property’s and Brown Harris Stevens’ new development marketing divisions, not their marketing divisions.

92 October 2011 www.TheRealDeal.com

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Commercial market report

from page 24

by 32 percent to 3.8 million square feet in Midtown. The availability rate tightened, though, by .2 points to 11.8 percent. Goodman said he expected tenants to hold back because of the general increase in pricing. “[Landlords] are not going to see nearly the amount of activity as was the case earlier in the year,” he said.

Midtown South Midtown South — the market growing the most diverse tenant base in the city — showed the strongest improvement in asking rents in the third quarter. And, it claimed the lowest availability rate in all of Manhattan to boot. Still, leasing activity declined, falling by 31 percent to 1.7 million square feet. Goodman said media, public relations and other creative firms were still expanding in the area. “Midtown South is a different animal,” he said. “[The creative companies] are still maintaining that entrepreneurial spirit. They are continuing to grow. They may not be experiencing explosive growth, but they are still growing.” One recent example is Iris Public Relations, which signed a deal for about 10,000 square feet of space on the entire fifth floor of 632 Broadway. The deal, which was signed in

July, ﬁrst appeared in CoStar last month, showing an asking rent of $40 per foot. Iris, which already has space in the building, is roughly tripling its footprint with the move. The leasing agent for the building is Nora Stats, president of landlord agency ﬁrm Tarter Stats O’Toole. For Midtown South as a whole, asking rents rose $0.64 per foot to $41.12 per foot, Cassidy Turley data revealed. The availability rate declined by .9 points to 9.5 percent.

Downtown While Midtown South is gaining recognition as Manhattan’s main hub for Internet firms, some of those companies still prefer to lease space Downtown. One Downtown-based software firm specializing in mobile-phone applications went office-space hunting in Midtown South, but ended up finding a short lease in Lower Manhattan, said the company’s representative, Bradley Gerla, an executive vice president at CBRE. The company, Oberon Media, which only three years ago signed a lease in One World Financial Center, is moving to 16,103 square feet at 100 Broadway. The firm is leasing about the same amount of space in the new location, but the rent is far less.

The asking rent at the former location was $48 per square foot, while the new deal, a three-year sublet, is in the mid-$20s, Gerla said. Gerla took the company to look at spaces in Midtown South and the Flatiron District. “[But] they felt Downtown was just as appropriate, if not more so,” Gerla said. “The economics are compelling. And they feel there is a techie mentality as well Downtown.” The availability rate tightened the most Downtown last quarter among the three submarkets, despite the largest decrease in the amount of ofﬁce space leased. The availability rate fell by 1.5 points to 10.5 percent in the third quarter, in part because a large block of 586,622 square feet at 70 Pine Street was taken off the market, with the expectation that it will be converted to condominiums. Even as the availability rate declined, Downtown leasing activity fell. It dropped by 51 percent to 1.2 million square feet in the third quarter, the Cassidy Turley ﬁgures showed. But the numbers are slightly skewed because Condé Nast signed its 1 million-square-foot lease at One World Trade Center in June. The Downtown asking rent, just as in Midtown, declined. But it only dropped by three pennies to $37.43 per square foot. TRD

Video stores from page 32 but said that it was “in the ﬁve digits.” He knew it wouldn’t be easy. In recent years, the store has cut costs. “We learned to do without three workers at the counter,” Perez said. The store also scaled back on DVD sales to focus on its core business — rentals. “We learned that the business had to go back to the roots of what it was founded on,” he said. Plus, “we’re good at recommendations, so it brings people back to the store time and time again.” The strategy has seemed to work. “We watched our franchised competitors go bankrupt despite their overwhelmingly large selection,” he said. The store boasts standard video-shop decor, with shelves

of DVDs and old movie posters on the walls, and it sells candy and posters to generate a bit of extra income, Perez said. He’s optimistic about the future. “We know we can reach the top again,” he said, “[by] mom-and-pop standards, anyway.”

Royal Video Exchange Prospect Heights In 1986, Mike Gidiuli opened Royal Video Exchange in a 2,500-square-foot location at 242 Flatbush Avenue. Three years ago, due to sagging business and burgeoning rents, he moved across the street to his current 1,100-square-foot, bare-bones storefront at 317 Flatbush Avenue. The store has

stacks of DVDs but little else. He said he signed a seven-year lease and, for the time being, business is adequate. According to a recent report by CPEX Real Estate Services, asking rents for retail space in the area range from $50 to $64 per square foot. He declined to say what his rent is, but said the smaller store allows him to spend less money on rent, payroll and utilities. “Our expenses are less than before,” he said. Gidiuli said he also has some advantages over giant Internet chains. Royal Video carries adult movies, which Netﬂix, for example, doesn’t. He rents his movies cheaply, too: A ﬁlm costs only $2.30 for 24 hours. TRD

Michaels from page 53 Jennifer Bayer Michaels. But it’s clear that work is never far from his mind. On a family trip to a Murano glass factory in Venice this summer, for example, Michaels ordered an 18carat gold sculpture of a bull for the Carlton office. One reason Michaels works so hard is out of necessity. With his blue-collar background and lack of a brand-name firm, he faces a certain snobbery within the industry. Many of the country’s high-profile real estate assets are owned by institutions, like investment banks or insurance companies. When it comes to selling their property, they often turn to big-name, white-shoe brokerage firms, like Eastdil (see related story on page 62). “Institutions tend to go to institutions,” Ashner explained. Another real estate executive put it more bluntly: “I’ve got a whole team of associates with MBAs from Harvard, Columbia and NYU. We need that, because that’s the peer-to-peer set you need if you’re representing Carlyle and Blackstone and Rockpoint.” As a result of this dynamic, Michaels explained, Carlton has carved out a niche working with individual investors, like Macklowe, rather than with institutions, and more often with borrowers, who typically have more complicated financing needs than sellers. “I do think that, for an institution, it’s sometimes easier for somebody sitting on a committee to pick one of the namebrand companies because it’s a safer choice,” Michaels said. 94 October 2011 www.TheRealDeal.com

That means Carlton’s deals tend to be more difﬁcult transactions. “If it’s a vanilla deal, Howard will have a hard time getting that deal,” said one executive. “These are the tough deals he does — people don’t give him the easy deals.” Some might view this as a shortcoming, but with his oftcited gift for public relations, Michaels paints it as a selling point. “Anybody can raise money for a fully occupied building with lots of cash ﬂow,” Michaels said. “That’s not what we do. We’re like the Marines — we do the tough deals, we do the big deals, we do the time-sensitive deals.”

Bark worse than bite Michaels’ Marine-like mentality may be the key to Carlton’s success, but it’s incredibly difﬁcult on his staff, some say. “He works people to death,” said one industry observer, voicing an opinion shared by the many former Carlton employees now spread throughout the industry. There are the long hours and Sunday-morning phone calls — of which Michaels says, “We start on Sunday — what can I tell you?” Worse, former employees say, is his outsize temper, which is notable even for the cutthroat real estate industry. Clients and fellow brokers say Michaels is often charming and funny — with a few rough edges — in his dealings with them. But with his staff, it’s a different story.

“Many times at staff meetings, he yells at people, insults them,” said one former employee, who said he witnessed Michaels call one staffer “a fat, out-of-shape loser.” Michaels said he doesn’t recall that specific comment, but doesn’t deny that he’s “very intense and very passionate. I’m not above raising my voice if something needs to be emphasized.” He added: “If people don’t do their homework and don’t come to work prepared, they probably shouldn’t be working at Carlton.” His clients are incredibly demanding, he said, and “not everybody is willing to put in the effort that’s required, so we can’t keep people forever if they don’t produce.” Those who know him well say his bark is worse than his bite, and that his aggressive demeanor conceals a caring persona. Still, the extra time it takes to hire and train new people can’t be good for the bottom line, observers noted, and the firm’s revolving-door reputation makes some clients reluctant to work with Michaels. Some of Michaels’ detractors went so far as to suggest that Carlton isn’t as successful as it appears. Through Carlton’s well-oiled P.R. machine, they say, Michaels sometimes downplays or takes credit for other firms’ work. Michaels strongly denies those claims. He added: “Carlton is one of the most successful real estate advisory firms. Whatever we’re doing works.” TRD

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Eastdil from page 63 vestment sales business they do is lucrative. In March, Eastdil signed a deal with Lehman Brothers Holdings to provide advisory services as it disposed of assets in bankruptcy. The failed investment bank paid Eastdil $100,000 per month for the work, and allowed Eastdil to act as broker, bankruptcy records showed. In addition, the ﬁrm was expected to be paid about $2 million for handling the auction sale of 1107 Broadway, the Yitzhak Tessler building bought for $190 million by Steven Witkoff, court papers revealed.

Part of a global giant While Eastdil is a small company, it has a large partner around the world: the California-based lender Wells Fargo. The bank had $12.3 billion in net income in 2010, and Eastdil did not earn even a mention by name in its latest annual report. Yet some critics complain that Eastdil faces a conﬂict of interest placing debt with Wells Fargo. March disputed that, saying Wells Fargo is actually the lender on Eastdil deals less often than would be expected given the percentage of the commercial lending market Wells Fargo holds nationally. Other critics accuse Eastdil — as well as other major players — of preferring buyers that would give their future assignments to Eastdil. Supporters of the ﬁrm see that as sour grapes.

Still, both fans and critics view the firm as a powerful and effective advocate for its clients, generally on the sell side. “They know how to run a process extremely well,” said Glen Siegel, founder of Belvedere Capital, a Manhattan real estate investment firm. Belvedere was part of a joint venture that paid $32.8 million for a commercial condo at 15 East 26th Street, a deal brokered by Eastdil. One company booster offered a hypothetical example of how Harmon might try to work a group of bidders circling at about $100 million, where the seller wants to be at $105 million. Speaking as if he were Harmon talking to one of the bidders, this insider, who is not at Eastdil Secured, said Harmon makes the buyer feel special for paying more. “I have a meeting [coming up] with my client, [the seller]; I am trying to shore up the deal. You are at $100 [million]. This is from me, not direction from the client. I think I can get you the deal at $105 [million]. … I can pitch for you.” Bruce Beal, executive vice president at the developer and landlord Related Companies, underscored that Harmon pushes to get the highest price: “From a buyer’s perspective, they don’t leave a lot of chips on the table.” One source, a supporter of the company, said the firm might not shrink from punishing a buyer, namely one who fails to “perform.” That’s the industry term for complet-

ing an acquisition at the agreed-to price. “You are [seeking a price change, which] you said you were not going to do. And people are going to know about it,” one ally of the ﬁrm said. But a source at a competing brokerage said that happens in any shop: Buyers who don’t perform are regularly blackballed.

Strong locally, weak overseas So far this year, Eastdil has performed better in Manhattan than it did in 2010 for all property types, a review of CoStar and Real Capital statistics shows. For all of 2010, Eastdil had $2.9 billion in investment sales in Manhattan and was crushed by CBRE, which racked up $5.2 billion. But in the ﬁrst nine months of 2011, Eastdil pulled ahead, with a stunning $4.5 billion (buoyed by sales such as RXR Realty’s purchase of the Starrett-Lehigh Building for $920 million), compared with CBRE’s $3.6 billion. For this year, Howard Michaels’ Carlton Group ranked No. 4 for all property types in Manhattan (see related story on page 52). However, not everything Eastdil has marketed has sold. For example, two East Side apartment buildings owned by Post Properties that were put on the market in 2008 for a combined $250 million failed to sell as the economy ﬂoundered. Still, while Eastdil and CBRE dominate the market nationally, overseas Eastdil “has a small footprint,” said Peter Slatin, editorial director at Real Capital. A July Real Capital report shows Eastdil with 15 percent of the market in the Americas, but not even 1 percent in Europe or in Asian markets. CBRE, Jones Lang LaSalle and other

lesser-known firms in New York City, like London-based Knight Frank and Savills, are far bigger internationally, the statistics show. “Eastdil was one of the pioneers of the nationalization and the institutionalization of the brokerage structure,” Slatin said. “[Yet] Eastdil still has a limited global reach in term of doing deals outside the [United States].” But, he added: “They have a great global reach in sourcing clients in doing deals here.” March said the firm is focused on serving its U.S.-based clients such as Blackstone, Beacon Capital and Walton Street, and that most of their assets are in the United States. “We are only sourcing capital in those [overseas] markets,” March said, although he added that his agents had done significant deals in London and Paris. He did not see the U.S. focus as a disadvantage. Many of the firm’s competitors have scores of offices across the globe, while Eastdil only opened offices in London and Hong Kong over the past four years. Yet some clients echoed March’s position that the firm did not need to have a large international presence, in part because its parent company, Wells Fargo, has a global reach. In addition, there just aren’t that many large institutional investors with more than $200 million to place around the world, said Paul Pariser, co-CEO of Taconic Investment Partners. “People who are that serious about investing in the United States will show up,” he said. “Having an office in Paris is convenient, but it doesn’t necessarily mean they can do a better job.” TRD

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Some brokers are skeptical of McDonough’s idea. Bouklis said he had not yet heard of the plan, and while he conceded that big firms have more money for marketing, he disputed the notion that small firms have inferior data. “I don’t think we have less access,” he said. “In our case, we specialize down here, so the Financial District is our backyard.” He said larger firms unfairly look down their noses at mom-and-pop FiDi firms. “They look at a lot of the companies that are here as fly-by-night, or new,” he said. “But there’s a lot of companies that have been working here for years.” Ariel Cohen, an Elliman executive vice president who often works in the Financial District, said he has been frustrated by “knucklehead” brokers stealing his listing photos and changing unit numbers to mis-

96 October 2011 www.TheRealDeal.com

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represent his exclusives as their own. He also said that some FiDi buildings suffer from a lack of exposure and marketing. Still, he said he would be reluctant to join the group that McDonough is trying to organize. “If you have a seminar, I’m not sure it’s going to help,” he said. The tricky part may be convincing brokers, in a competitive market, of the advantage of working together. Bouklis said his interest in the proposed group would depend on the particulars, but said he believes a ﬁrm’s success is based on how well it distributes information internally. “If you don’t specialize somewhere [and] you’re not doing your own research, you can’t possibly have access to everything going on in the area,” he said. “If it’s for my speciﬁc area, with no disrespect to anybody, we know everything here.” TRD

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Crown Heights Plex-es its muscles New luxury rental is a first for the Brooklyn neighborhood BY CANDACE TAYLOR 98-unit luxury rental building — one of the first of its kind — opened last month in southern Crown Heights, signaling what could be a new era for real estate in the Brooklyn neighborhood. The Plex (short for “complex”), is located at 301 Sullivan Place on the corner of Nostrand Avenue. Monthly rents in the building range from $1,350 for a studio to $2,800 for a 1,100-square-foot three-bedroom, according to Prudential Douglas Elliman’s Jessica Peters, who is handling rentals at the project with colleague Stephanie O’Brien. Developed by Nostrand Group LLC and designed by prolific architect Karl Fischer, the seven-story building features an attended lobby with a concierge, a garage, a residents’ lounge with a billiards table, a movie screening room, a refrigerated Fresh Direct storage room and a 1,500-square-foot fitness center with a separate yoga room. These kinds of amenities, now common in Manhattan and in posh neighborhoods of Brooklyn, are still rare in Crown Heights. The multicultural Brooklyn neighborhood is known for its late-19th- and early-20th-century homes, but “there are very few buildings in Crown Heights that have a doorman and amenities,” said Lucien Perry, founder of Lucien Perry Real Estate and a neighborhood resident. “Most of the housing stock tends to be low-rise.” “It’s going to be really nice to see a different type of project come into [Crown Heights],” Peters said, adding: “For the first time in this area, you’re seeing something you would see on the Williamsburg waterfront.” Less prosperous than nearby Park Slope, Crown Heights is perhaps best known for its troubled history: In 1991, the neighborhood made national headlines when a riot pitted Hasidic Jews against African-Americans and Caribbean blacks. The area is still home to diverse cultures, including a large West Indian population and a growing community of Hasidim. The recession hit the neighborhood

The Plex at 301 Sullivan Place in Crown Heights

hard, but real estate in the area has rebounded and has recently seen “strong price gains,” said Soﬁa Song, vice president of research at StreetEasy. Between the second quarter of 2010 and the same period of this year, the average sales price in Crown Heights increased nearly 22 percent to $419,957, StreetEasy showed. By contrast, the overall average home sales price in Brooklyn rose just 13 percent. That improvement is due in part to young people moving to Crown Heights after being priced out of neighborhoods like Williamsburg and Park Slope, Perry noted. “People, during the recession, started looking outside the other areas,” he said. Now, in Crown Heights, “the demographics have shifted dramatically.” In other words, “they’ve got the hipsters coming,” said Peggy Aguayo, co-owner of Brooklyn-based brokerage Aguayo & Huebener. But, Perry emphasized that the swath of Crown Heights north of Eastern Parkway — much of which has now been landmarked — has “an entirely different

dynamic” than the blocks to the south. New restaurants and bars have opened north of Eastern Parkway along Franklin Avenue, he said, but hipsters and nightlife options haven’t yet migrated to southern Crown Heights, where the Plex is located. As a result, the Plex is “an ambitious project, given the location,” Perry said. The building will have to offer “larger space for less money [than other neighbor-

hoods] in order to be viable,” Aguayo said. Peters said the project’s amenities make it a bargain. In Crown Heights, “you don’t really see too many nice rentals,” she said. “The majority of the rentals are in brownstones, and a lot of them need rehab. For $1,300, instead of living in a brownstone that hasn’t been renovated, you’re in an ultra-amenity building.” TRD

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Finance ﬁrms from page 48 needed. Still, layoffs in and of themselves don’t necessarily lead companies to give up ofﬁce space. “You won’t see a lot of space coming back on strictly because of layoffs,” Harbert said. “It will be institutions that are long on space that will put some space back on the market, but very selectively.” Robert Goodman, an executive managing director at Colliers International, said he did not expect the U.S. banks to dump as much space this time around. In part, that’s because they got burned last time when they listed space, then realized that they

needed it again as the economy improved. Plus, many ﬁrms lost money on subleasing, because they leased out the space for less than they owed their landlord in rent. Foreign banks may be the next to unload, he predicted. “I sense that some of the major foreign-based institutions, who have been hesitant to date putting sublease space on the market, will be more likely do so in the next year,” said Goodman. “Whether it is a Credit Suisse, a UBS or a Deutsche Bank, as these foreign institutions reassess their allocations of capital, there clearly will be sublease opportunities.” TRD

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Residential market

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the same period last year, average September rents rose considerably more, with rents for one-bedrooms up 9.4 percent, the report said. But the rental market may see a shift later in the season. That’s because many leases in large rental buildings signed in the summer of 2010 included a month’s free rent or more, extending leases to 14- or 15-month terms. “Those will soon be expiring, dumping more units into this year’s

availability inventory,” the MNS report said. Still, residential real estate professionals remain cautiously optimistic about the months ahead. Barrocas said he expects prices to increase in more established neighborhoods such as Gramercy, the Flatiron District, Soho, Tribeca and the Village. At the Apex Condominiums, above the Aloft Hotel on Frederick Douglass Boulevard in Harlem, prices are almost

10 percent higher than when the 44-unit development opened roughly a year ago, said Jacqueline Urgo, president of the Marketing Directors. “Good buildings and good locations are back in demand,” Urgo said. She added: “With some product moving and still a scarcity of new properties being introduced, we expect to see less inventory available to buyers, and believe closing prices will be closer to asking prices.” TRD

and Portugal, said Ted Truman, a senior fellow with the Peterson Institute for International Economics, a Washington, D.C.-based think tank. With conﬁdence restored, banks might extend more credit to homebuyers here in New York, where the market is relatively better than it is in other parts of the country. Plus, buyers here would feel more comfortable spending if Greece’s debt problem was resolved, because it would help boost the stock markets here and increase investors’ overall net worth.

Rosenblatt said assuming that New York will be a desirable place to work and live in the future is a smart bet. “I don’t think we will revert back to the 1980s, when crime was rising and the quality of life in the city was nowhere near where it is today,” Rosenblatt said. “The leadership that we have will continue to maintain the quality of life that we’ve gotten accustomed to.” Along similar lines in terms of long-term generational thinking and planning for the future, Taleb has also said that the 2008 bank bailout was a mistake because it unfairly burdened the taxpayer. “The Romans had a saying,” he said at a Washington, D.C., forum last year. “The grandchildren should not bear the debt of the grandparents.” Taleb also predicted that the Federal Reserve will likely be eliminated within decades because of its ineffectualness. While that may seem far-fetched, there are many (mostly in the conservative camp) who want the Fed gone and for private banks to set interest rates.

Doomsday from page 40 that would have likely meant a more stable stock market and a greater willingness on behalf of investors to, well, invest. “I think that gridlock is one of the contributing variables to the general … lack of confidence in the future,” said Terrence Martell, a finance professor at Baruch College who also worked for years on Wall Street. “People aren’t stupid. They can read the tea leaves.” In addition, having the GOP in charge would likely mean a looser regulatory environment, which might prompt banks to hire more people and take more space. On the other hand, a sweep by Democrats could lead to tough rules for banks and the hiring of more compliance officers, but could create a sounder footing for the next round of economic growth, some say. “It’s clarity about what to expect that really helps,” McCarthy said.

Greece’s debt problem is ﬁxed If France and Germany come to the rescue of their beleaguered, debt-ridden neighbor, Greece, and help the ﬁnancially strapped country avert a debt default, they would be removing a major thorn from the side of the global economy. Such a rescue could also be important to New York’s residential market. That’s because foreign investors are so crucial here. While overseas buyers are increasingly coming from Asia and South America, Europeans — who would be more seriously impacted if Greece actually defaulted — are still a sizable piece of the residential sales market, sources say. A bailout or restructuring could avert a default and a Lehman Brothers-style European collapse, and thus stave off panic among investors in ailing countries like Ireland

New York’s population grows In the 1970s and 1980s, New Yorkers fled the city, but in more recent years, that migration pattern has reversed itself. Indeed, the population in the five boroughs grew by about 2 percent from 2000 to 2010, according to the U.S. Census. City officials have forecasted an increase of 1 million residents by 2030 — a number at the heart of Mayor Michael Bloomberg’s PlaNYC initiative, a sweeping effort to make the city more livable. If the projections are borne out, that pattern would continue to create healthy demands for housing, while putting upward pressure on home prices and rents — all good news for developers. Indeed, using the standard measurement of three people per household (in New York that may be three roommates) the city would need roughly 330,000 new units of housing in the next two decades. If the population continues to grow as predicted, inventory could be absorbed at a more typical rate, unlike what has happened in the last few years, when much of it lingered on the market. That rising tide could lift the entire industry, according to analysts.

Home values barely budge Tepid demand for real estate, both in New York and nationally, may not just be a problem of the moment — it could persist for years no matter how many tax credits and interest-rate breaks and other buyer incentives the government manages to throw at the problem. That could perpetuate a wait-and-see cycle for buyers, who may think, “What’s the rush? Prices will be soft for years.” This fall, a panel convened by Macro Markets — the ﬁnancial ﬁrm founded by Yale professor Robert Shiller, who correctly predicted the housing bubble — found that home prices nationally will gain just 1.1 percent a year through 2016. To put that in perspective, some prices leaped by double digits in New York during the boom. TRD

Syndication from page 28 — or $1 million in all other areas. This program works best for high-net-worth immigrants rather than smaller-time investors such as the ChineseAmericans who bought the Lower East Side plot. Typically, a multifamily development project doesn’t yield enough jobs to make the EB-5 program work, Polivy said. But he’s successfully ﬁnanced hotel projects, a restaurant complex and a retail transit terminal through the program. “It’s extremely popular and there is a well-developed broker network in China for these types of projects,” he said. While many of these groups are native to countries that have stringent laws for owning real estate, embarking on syndication deals here isn’t always a walk in the park, either.

Typically, the group appoints a spotter, someone who has a more established business, to head the effort. Sometimes that person has done a few real estate deals, while at other times, that person is just experienced in doing business in the U.S. Good due diligence is a must, said Amit Doshi, executive director at Besen & Associates. And whoever is helping to structure the deal should be paid based on the success of the deal, so that he or she has a vested interest, he advised. Polsinelli also noted that partnership disputes can unravel a deal, while Capin & Associates’ Shafran said steering through ﬁnancing can sometimes be a bear, especially if there are no records — such as social security numbers — in existence for the foreigners.

Then, too, there’s the issue of being syndication virgins. “They have to learn a whole new business when they start. Sellers are dealing with novice buyers,” said Shafran. “They don’t necessarily understand what is normal in the transaction. It makes for a lot of miscommunications.” And it calls for a lot of patience, but the rewards can be universal. Just ask Anthony Marano and his father after negotiating with the group of 53 investors for more than a year. “It was a bit of a personal decision for my father. He felt comfortable with [Zhu],” the younger Marano said. “And foreign investors have a different perspective, a longer-term perspective than many developers. They have a 15-year horizon. They are looking to own.” TRD

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Anglo Irish

from page 30

restructuring plan. Those bondholders, and Anglo’s other borrowers, are already entering into litigation battles over the Anglo Irish portfolio auction. For example, Fir Tree Capital, a Manhattan-based hedge fund that holds $200 million in Anglo Irish subordinate bonds, ﬁled suit in U.S. District Court earlier this year, asking a federal judge to halt the Anglo Irish loan sale until a payoff could be guaranteed either by the bank or by the parties that purchased the bank’s assets. While the sale is expected to close before the end of the year, it’s unclear how bondholders will be compensated, and the suit is still pending. Meanwhile, Anglo Irish borrower Africa Israel also ﬁled suit against the bank, alleg-

ing that the sale of the building’s loan to Lone Star violates a rare provision it hammered out with the bank when it restructured the $385 million senior loan at the Apthorp in June 2010. The Apthorp developers argue that the agreement contained a provision that Anglo would not sell the note, and would continue to hold a 51 percent stake in the loan. “This bargained-for right was important to Apthorp to prevent against an unsuitable lender gaining control of the senior loan and to provide certainty to the project,” Fried Frank attorney Gregg Weiner, representing the Apthorp developers, wrote in court ﬁlings. A court date on the temporary restrain-

ing order is scheduled for Oct. 12. In addition, bad deals from as early as 2006 are still haunting the bank. Former Tishman Hotels managing director Timothy Haskin sued Anglo Irish earlier this year over two Manhattan properties that sources say are part of the bank’s distressed loan portfolio — the Eastgate Tower Hotel at 222 East 49th Street and the landmark Beekman Tower Hotel at 3 Mitchell Place. According to court documents Haskin ﬁled, Anglo invested about $48 million from its Ireland-based private banking clients, but later refused to fund the hotel renovations. In 2009, the Irish investors requested that Haskin’s ﬁrm be removed as the general partner, prompting him to sue. The arbitra-

tor ruled in favor of the bank on June 2 of this year. Meanwhile, investors in the partnership have sued Anglo for fraud in Ireland in connection with the venture. Insiders will be watching that case and, more broadly, the overall fallout of the threepronged sale, to see whether it just reshufﬂes bad business deals, or jump-starts the struggling commercial market in the U.S. “The Anglo Irish portfolio was huge, by far the biggest portfolio of loans that had hit the market in quite a while,” said Matthew Anderson, a managing director at Trepp, the commercial real estate research ﬁrm. Lone Star and JPMorgan did not return calls for comment. A spokesman for Wells Fargo declined to comment. TRD

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www.TheRealDeal.com October 2011 99

OC TOBER

C A L E NDA R 1

The American Institute of Architects New York Chapter presents the “Around Manhattan Official Architectural Boat Tour.” Step aboard the teak decks of the yacht “Manhattan” for a cruise through the Hudson, East and Harlem rivers, sailing under 18 bridges while taking a tour designed by the AIANY. Highlights include: Frank Gehry’s 8 Spruce Street, the rapidly rising One World Trade Center, Frank Gehry’s IAC headquarters, Jean Nouvel’s glittering 11th Avenue condos, Governors Island and Brooklyn Bridge Park. 2:15 to 5:15 p.m. Pier 62, Chelsea Piers. Fee: $70 for AIA members, $75 for nonmembers, $40 for children. Complimentary beverage and light hors d’oeuvres included. Information and registration: www.aiany.org.

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The Real Estate Board of New York hosts a panel discussion featuring William Macklowe, CEO of the William Macklowe Company; and David Schonbraun, co-chief investment officer at SL Green Realty. The discussion will be moderated by Simon Ziff, president of the Ackman-Ziff Real Estate Group. Free. REBNY members only. 5:30 to 8 p.m., REBNY, 570 Lexington Avenue. Information and registration: www.rebny.org.

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The New York Commercial Real Estate Women’s Network hosts a panel discussion entitled, “Retail/Hospitality — Driving the Recovery, or Dragging it Down?” Panelists will include Faith Hope Consolo, chairman of Prudential Douglas Elliman’s retail group; Amelia Lim, a vice president at Jones Lang LaSalle Hotels; and Barbara Champoux, a partner at Crowell & Moring. The speakers will discuss the short- and long-term prognosis for commercial real estate in the city, and the importance of retail and lodging to the economic recovery of the city. 6:30 to 8:30 p.m., Citibank, 399 Park Avenue. Fee: $50 for members, $85 for nonmembers. Information and registration: www.nycrew.org.

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Open House New York and Archtober host a tour of 7 World Trade Center. The tour will include the newly opened WTC Marketing Center on the 10th floor, which includes large-scale models and interactive videos about the project and neighborhood. The tour will conclude on one of the raw floors of 7 WTC, offering sweeping views of the city. 1:30 to 3:30 p.m. Fee: $20. Information and registration: www.ohny.org.

The Center for Architecture Foundation hosts a reception and insiders’ tour of MiMA, the Related Companies’ newly constructed residential tower. Tour leaders include Rey Black, a vice president at Related; Bonny Bellant and Linda Casper, interior designers at the Rockwell Group; Manish Chadha, a senior associate at Ismael Leyva Architects; and Arquitectonica’s John Curtis. 6 to 8 p.m., 460 West 42nd Street. Fee: $85, including a $70 tax-deductible contribution to the Center for Architecture Foundation. Advance registration required. Information and registration: www.cfafoundation.org.

City Hall News hosts a breakfast discussion with Landmarks Preservation Commission Chair Robert Tierney, who will speak about how the commission’s role has changed through the years, and how past projects and designations have held up in the court of public opinion and beyond. 8 to 9:30 a.m., Club 101, 101 Park Avenue. Fee: $40 for individual tickets, or $50 after Oct. 7; $300 for tables of 10, or $400 after Oct. 7; $30 for government employees. Information and registration: www.cityhallnews.com.

In celebration of the Ninth Annual OHNY Weekend, openhousenewyork hosts a launch party with drinks and light refreshments at the offices of architecture firm HOK New York. The LEED Platinum design studio, overlooking Bryant Park, exemplifies both OHNY’s and HOK’s commitment to innovation, collaboration and design excellence. 7 to 9 p.m. HOK New York Office, 1065 Avenue of the Americas, Sixth Floor. Fee: $50 in advance, $60 at the door. Information and registration: www.ohny.org.

The Manhattan Association of Realtors hosts a Global Real Estate Symposium. Local experts will share their strategies on how to add foreign buyers to the client roster. Topics include “The Chinese Love Affair with Manhattan” and “Guiding Russian Buyers Through the Transaction.” 9:30 a.m. to 12:30 p.m., Citibank Executive Conference Center, 388 Greenwich Street. Free. Registration required. Contact: global@MANARRealtors.com.

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The Real Estate Board of New York hosts the 23rd annual Residential Deal of the Year Awards and Charity Gala, “Live from the New York Waterfront.” REBNY’s residential brokerage division will announce the winners of the 2011 Deal of the Year contest. The division will also present the Most Promising Residential Rookie Salesperson of the Year award, and the Henry Forster Award for outstanding record of achievement and conduct. 6:30 to 11 p.m., Pier Sixty, Chelsea Piers River. Fee: $375 for individuals, $3,500 for a package of 10. Information and registration: www.rebny.org.

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100 October 2011 www.TheRealDeal.com

Seth Pinsky, president of the New York City Economic Development Corporation, headlines a breakfast forum hosted by the New York Building Congress. The program will focus on the recent release of the Building Congress’s New York City Construction Outlook: 2011-2013, an annual forecast and analysis that focuses on three years of construction spending and employment. 8 to 10:30 a.m., Hilton New York, Trianon Ballroom, 1335 Avenue of the Americas. Fee: $175 for members, $225 for nonmembers. Information and registration: www.buildingcongress.com.

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Blu Realty Group opens real estate office/coffee bar on UWS By AdAm FusFeld Visitors won’t necessarily be looking for an apartment when they step into Blu Realty Group’s forthcoming Upper West Side office; they may just be in the mood for a cup of coffee. The residential brokerage has partnered with Tavalon Tea to bring what it believes is the first real-estate-office-and-coffee-bar concept to Manhattan. Called Blu Café by Tavalon Tea, the café will comprise about 500 square feet of Blu’s 1,600-square-foot space at 120 Riverside Boulevard. The café and office will have the same entrance, with only a glass wall separating them. “We wanted to do this for the neighborhood,” said Alon Chadad, cofounder of Blu. “There’s no place nearby for the neighborhood to sit down, have coffee and enjoy Wi-Fi — it really needs it.” Blu hopes to open the doors to its new office this Blu Realty’s forthcoming Upper West Side office month, Chadad said.

Laboz family buys disputed Brooklyn dormitory for $10.7 million By AdAm Pincus United American Land, the real estate investment firm owned by the Laboz family, paid Brooklyn Law School $10.7 million for a dormitory at 184 Joralemon Street in Brooklyn Heights, a source close to the deal said. Led by brothers Albert, Jody and Jason Laboz, United American closed on the purchase of the 23-unit Beaux Arts property, which had been caught up in a four-month contract dispute, last month. The company plans to renovate the property and “introduce modern, luxury residential rentals, which are in great demand in this Brooklyn Heights submarket,” said Albert Laboz. The units, most of which are twobedrooms, will likely rent for $3,500 to $5,000 per month, he said. United American filed a lawsuit last year, after it attempted to buy the building but the school accepted a higher offer from Craig Nassi’s BCN Development. Nassi was ultimately unable to close on the acquisition. Joseph Cayre From left: Jody, Albert and Jason Laboz 102 October 2011 www.TheRealDeal.com

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