The Real Deal - September 2011 Issue by The Real Deal

We define our neighborhoods as much as they define us.

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Schneiderman versus BofA

Doormen: Now passé

Who is winning the burger wars?

Getting to know the landlord

130

New York City’s sexiest brokers

THEREALDEAL N EW YO R K R E A L E S TAT E N E W S

www.TheRealDeal.com

Vol. 9 No. 9 September 2011 $3.00

FACT There were only two leases greater than 100,000 square feet reported in Manhattan last month, according to ﬁgures from brokerage Cassidy Turley. See page 28.

AT A GLANCE Irene fades fast, but ﬁscal woes persist

The best of 100 issues

A look at 20 of the biggest stories and most colorful ﬁgures TRD has covered since launching BY GABBY WARSHAWER through a tentative recovery. The cast of real In its eight years of publication, The Real Deal estate characters that we’ve chronicled is comhas covered the real estate indusprised of larger-than-life ﬁgures FEATURE STORY who’ve made their marks on the try in a city that has been transformed by a massive building boom, was crip- New York skyline in profound ways. They inpled by the subsequent bust, and is now slogging clude moguls such as Harry Macklowe, Donald

Trump, Steven Roth, Stephen Ross, Mary Ann Tighe and scores of others. This month, in our milestone 100th issue, we bring you some of the stories that made the biggest impact on us and on the market.

BY ADAM PINCUS “Mall” is a four-letter word in Manhattan. Despite that, developers have begun to, or are planning to, rehab and build a historic amount of largescale retail in the next few years in the borough. If all 2.5 million-plus square feet of it gets built, it would be the greatest amount of mall-like space delivered in Manhattan during a ﬁve-year period.

Silverstein, 10 years later See page 132.

A rendering of 51 Astor Place

BY C.J. HUGHES Finally on the upswing after a major drop-off, the CMBS market hit a snag this summer and reversed course again. Many had expected offerings to quadruple this year to $50 billion. Now, “a lot of shops have put their pens down.” What’s next?

SPECIAL REPORT

Splitsville for Building with a new bent shift to boutique condos and the Chetrits? Developers conversions as number of offering plans drops

Brothers deny breakup, but some say otherwise

As the 10th anniversary of the World Trade Center attacks approaches, The Real Deal examines how the ﬁnances of the buildings on the 16-acre site pencil out for the developers. See page 40.

The abrupt stall in the commercial mortgage market could hinder a recovery in New York

See story on page 56

See story on page 64

Pricing out the WTC

See story on page 68

Malling up Manhattan CMBS shockwaves A historic amount of large-scale retail is in pipeline

The fallout from Hurricane Irene faded fast in NYC, but last month’s economic turmoil could have a longer-term impact on the residential market as it moves into the normally busy fall season. See page 20.

BY CANDACE TAYLOR The notoriously secretive Chetrit family, one of NYC’s biggest real estate owners, broke its silence last month in a rare phone interview to deny a company split. But multiple industry sources insist the opposite, saying they may have divided their business to protect their assets.

BY SARABETH SANDERS While condo developers may be getting their feet wet once again, the pipeline of projects in NYC looks quite different than it did during the last major round of building. For one thing, most of the condo projects opening in the immediate future are much New condo units in NYC smaller- scale than they were during the 2007 13,990 boom. Developers are also turning to 2008 12,073 condo conversions, which can be cheaper 2009 5,469 than ground-up construction. Still, a re2010 4,870 view of condo offering plans shows a drop 2011 (YTD) 1,903 in the number of projects coming to the (Source: Filings with AG’s ofﬁce) market, even compared to last year.

See story on page 44

See stories beginning on page 47

Maki on a roll Astor Place has seen signiﬁcant changes in the last few years. But critic James Gardner says that’s all small beer compared to the 13-story ofﬁce building that is about to rise at 51 Astor Place, designed by Fumihiko Maki and developed by Edward Minskoff. See page 62.

Russians are coming Spurred by global economic forces, Russian restaurateurs are saying da to New York City and opening a wave of eateries here. See page 34.

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CONGRATULATIONS TO THE REAL DEAL YOUR ON Y UR 100TH ISSUE AND THANK YOU From inception through today and into the future, The Real Deal has been a core part of our development and success.

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Highlights S E P T E M B E R

2 0 1 1

Global economic crisis hits home

Lawyers get back to work

Roosevelt Island University?

Residential brokers face fallout from new round of ﬁnancial uncertainty.

After lull, NYC real estate attorneys are returning to dealmaking. Stanford, Cornell and other top schools are eyeing new campuses there.

David Picket

Roosevelt Island’s famed tram

of: David Picket 26 AtFreshtheoffdesk the sale of the Corner, Gotham Developers’ CEO is shifting to 10th Ave.

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

32 There’s a new (ex-deputy) sheriff in town

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After seven months, AG Eric Schneiderman is winning over some skeptics, but enraging others.

Eric Schneiderman

Russians are coming 34 The Russian restaurateurs open eateries

and eye future locations in NYC.

in the doorman 36 Trading With rents climbing, the premium for attended lobbies is shrinking.

Mari Vanna at 41 East 20th Street

Living in Brooklyn Bridge Park

Brooklyn Bridge Park

Government ofﬁcials reach a deal that paves the way for more private housing in Brooklyn Bridge Park.

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Green value in going green

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Pricing out the WTC

Homes with energy efﬁciency certiﬁcations appear to sell faster on average than those without.

A ﬁnancial breakdown of the 16-acre site, building by building.

Burger wars heat up

42 The fast-expanding fast-food joints

are not all seeing the same success.

44 Meyer (left) and Joseph Chetrit ��

8 September 2011 www.TheRealDeal.com

Chetrits deny split The family says they’re still united, but some sources say otherwise.

Building with a new bent A look at the future of new development in New York City.

Highlights continued

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with less subsidy 51 Surviving City’s affordable housing goals on track, but new threats loom.

56 58

Shockwaves for CMBS The abrupt stall in the CMBS market could hinder New York’s commercial real estate recovery.

This month in real estate history Giuliani launches program to sell foreclosed rental buildings, REBNY puts out guidelines for advertisements, and more.

60 Meet the landlord A new TRD feature different building spotlights differ owners each month. First up: Joseph Sbiroli of Ventura Land Corp.

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Maki on a roll Astor Place’s recent changes are small beer next to the pending 51 Astor designed by Fumihiko Maki.

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Commercial Market Report

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

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National Market Report

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��Metals in Construction ��

Reports from around the country on signiﬁcant developments and trends.

A rendering of the Hudson Yards’ Wintergarden

The Deal Sheet

The ‘malling’ of Manhattan A historic amount of retail space is coming to NYC, setting the stage for a showdown over tenants.

118

Check out this month’s activities.

A look at 20 of the biggest stories The Real Deal has covered since launching.

10 September 2011 www.TheRealDeal.com

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

Calendar of Events

100 issues and counting

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

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Residential Market Report

124

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

128

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

without ‘guts’ 77 Renovating While wealthy homeowners are

130

starting to do gut renovations, most others opt for cheaper upgrades.

We Heard A lighter look at industry buzz.

CAKE ILLUSTRATION FOR THE REAL DEAL BY PETER BONO

Highlights continued 132

SIlverstein’s 10-year mission Just over 10 years ago, developer Larry Silverstein closed on the thenlargest real estate transaction in city history: a $3 billion-plus, 99-year lease on the World Trade Center site. Seven weeks later the buildings were destroyed. This month, Silverstein reﬂects on the tragic loss of life and the rebuilding process in an exclusive interview with The Real Deal.

from the website 120 Highlights Renderings of the new Apple Store in Grand Central cause

A rendering of the Apple Store

128

a stir, a ruling at the W could be the last word on ILSA, and Tabak and Cayre battle over a $22 million Williamsburg

Kleier hubby launches new ﬁrm, and more... Robert Morgenstern — the husband of “Selling New York” star Sabrina Kleier-Morgenstern Kleier (both pictured at left) — and partner Jeffrey Kaye launch a real estate investment ﬁrm. Meanwhile, Josh Guberman changes his company’s name to the Guberman Group to avoid confusion with the residential brokerage named Core.

biggest residential deals 120 The Charting the five biggest residential sales filed with the city last month, and the brokers who made them happen. The top two? Leslie J. Garfield’s Francis O’Shea, who sold a $23 million Upper East Side townhouse, and Sotheby’s Roger Erickson, who sold a $15.4 million home.

brokers and stealth marketing 130 Beautiful A “hot broker” contest that ranks agents by their appearance ﬂatters some and horriﬁes others. A new boost in “stealth marketing” means more guacamole guac recipes from brokers. And, the (now grown) Punky Brewster actress visits the Azure condo. Punky Brewster

12 September 2011 www.TheRealDeal.com

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

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The Real Deal: From issue 1 to 100

hen you have a baby, you are afraid they are going to get into your medicine cabinet or accidentally roll off the bed. You have to keep a close watch. Even when that baby grows up, as a parent you are still afraid they’re going to get hurt. That’s the way I feel about my one-year-old daughter, Sophie, and it’s also the way I feel about The Real Deal. Even though it’s reaching a milestone moment this month with its 100th issue, I still worry about the stray typo or ﬂat headline that is going to jeopardize the magazine’s survival and consign it to the dustbin for readers. Those heightened fears stem from the very early days of the magazine, back in 2003, when it was headquartered out of founder (and publisher) Amir Korangy’s apartment. As The Real Deal’s only other full-time employee (alongside part-time ad man Yoav Barilan, now our director of marketing operations), I knew we had only a few chances to get it right before we would lose readers’ attention, run out of money, or both. So for me, this issue is a great celebration of the magazine’s resilience. The backbone of The Real Deal these days is the gifted group of 25 full-time staffers, plus dozens of freelancers. I’ve found that talent attracts talent: The more gifted people the magazine has hired over the years, the more it has been able to hire even more gifted people. It’s been the secret of our editorial success. Those are the people who put together our pages. Then there are the people who grace our pages.

Celebrating 100 issues, and looking back at the magazine’s infancy

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Certain figures have loomed largest on the New York real estate scene since we began publishing. Starting on page 68, we look back at the most colorful characters and biggest stories we have chronicled over the course of nearly nine years. For me, one of the standouts is developer Harry Macklowe. Talk about resilience. Macklowe, of course, made the biggest gamble in the New York real estate world at the height of the boom, buying $7 billion worth of Midtown office buildings from Sam Zell before he famously defaulted and gave it all back to the bank the next year, in 2008. Now, following his spectacular defeat, Macklowe, who is known as a very creative deal-maker, is back with several projects in the works, including a $360 million development at 737 Park Avenue. This was all preceded by an earlier, even more severe flameout of his career in the 1980s. Real estate is a long-term game, and most successful careers have second or third acts (usually with less extreme risk-taking than Macklowe exhibited). But some of the other colorful characters we look at — superbroker Michael Shvo, who epitomized a slick boom-time mentality, for instance — have been one-act stories. Or at least, so far. This milestone 100th issue for the magazine also coincides with the somber 10th anniversary of 9/11. The two events are linked in some ways : The fortunes of the magazine and the city have both been shaped in the crucible of the post-Sept. 11 world. (One of the reasons Amir said he founded the magazine was that he couldn’t find a job after 9/11.) There have been a lot of economic highs and lows over the last decade. And the city is coming off a particularly rough month — having witnessed the nation’s sterling credit rating get downgraded, with the expected knock on Wall Street and the real estate market (see page 20). Not to mention the two natural disasters — a hurricane and a minor earthquake — that also exposed our vulnerability, even if they didn’t cause that much destruction. The city has proved amazingly resilient over the past decade — which in turn impacts the real estate market. The World Trade Center rebuilding, which is finally happening in full force, is, of course, an example of this (we take a look at the finances of the project on page 40). So is the continuing ascent of Brooklyn and other new neighborhoods (see page 68). So here’s to the 100th issue, which is, incidentally, our largest issue in the past three years. And here’s to the next 100 issues. Enjoy!

Stuart Elliott 18 September 2011 www.TheRealDeal.com

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Hurricane hangover fades, but economic turmoil persists

Normally busy fall season now uncertain after turbulent August shakes conﬁdence

BY CANDACE TAYLOR ugust in New York City is usually a sleepy time, with offices empty by

RESIDENTIAL MARKET R EPORT

noon on Fridays and co-op boards disbanded for the summer. Last month, however, was any-

thing but quiet. After a bruising political battle over the debt ceiling, the U.S. saw its AAA credit rating downgraded by Standard & Poor’s for the ﬁrst time in history, prompting the stock market to plummet. If that weren’t enough, the city — already bracing for the 10-year anniversary of the Sept. 11 terrorist attacks — suffered an earthquake and a hurricane. In the same week.

These events are, at a minimum, distractions from the real estate market. That was most palpably true as Hurricane Irene barreled toward New York City late last month. With the subways shut down, New Yorkers scurried to buy ﬂashlights, and brokers canceled closings and showings. “Open houses were almost entirely canceled or moved,” noted

Douglas Wagner, executive director of leasing at Bond New York. “Most consumers lost interest in the real estate market in favor of either evacuating the city or hunkering down for self-preservation.” Irene’s wrath faded quickly, but the most recent round of ﬁnancial turmoil will have a longer-term impact. Fall is usually one of the

busiest times of the year for real estate sales, but the renewed economic uncertainty could mean a disappointing autumn. Already-skittish homebuyers are now even more reluctant to sign on the dotted line, brokers say. “Immediately following the latest financial scare, some of my buyers pulled out of their deals,” said Patricia Levan, president of the Manhattan-based Levan Real Estate. Thanks to a mortgage contingency clause, one of her clients backed out of his contract to purchase a new Midtown condo after being offered 60 percent financing, not the 65 percent he’d requested. “Even though 5 percent should not have been a deal-breaker, it became one when combined with the stock market plunge,” Levan said. Sellers, too, were influenced by the economic climate. “We had [a] few sellers decide to drop the price and accept an offer that was lower than what they initially wanted to get,” said Naomi Muramatsu, director of sales at Bond New York. Meanwhile, she said, “it is taking a lot longer to negotiate the price and get the contract fully executed, and we have to be constantly on top of everybody to make sure it will move forward.” This fall, “I think activity is going to be questionable,” said Heather McDonough, a vice president at Prudential Douglas Elliman. “Some people will still be sitting on the fence due to the economic uncertainty.” Plus, Rosh Hashanah and Yom Kippur fall later in the autumn than usual, on the last weekend in September and the first weekend in October, respectively. That means a break from the action on what would normally be very busy weekends for real estate, rather than at the beginning of the month, when things are not quite in full swing yet. “The fact that the Jewish holidays are so late will definitely impact the fall selling season,” McDonough said. One saving grace for the market is a continued lack of desirable inventory. About 6,800 Manhattan apartments were available for sale in late August, according to Noah Rosenblatt, the founder of UrbanDigs, a Manhattan property consulting and analytics firm. That’s down 5.6 percent from the same time last year. A spate of new listings typically hits the market after Labor Day, Continued on page 110

20 September 2011 www.TheRealDeal.com

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Lawyers get active again

Real estate attorneys are returning to work on deal transactions BY JAKE MOONEY n 2009, the landscape was bleak for New York City real estate lawyers. Many of the big ﬁrms tried shifting people between departments to deal with the slowdown in real estate business caused by the economic downturn. Then, they let people go through attrition, and even outright layoffs. But it still wasn’t enough, lawyers said.

“When we were at our smallest, we still weren’t as busy as we’d like to be,” said Robert Ivanhoe, chairman of the New York ofﬁce and the global real estate practice at Greenberg Traurig. “Even after the downsizing, we weren’t at capacity.” Ivanhoe, though, was happy to be speaking in the past tense. In the last six months, he said, Greenberg Traurig’s New York real estate practice has increas-

“A year ago, we were cleaning up messes. Now we’re doing deals.” Carl Schwartz, Herrick, Feinstein LLP ingly focused on transactions, rather than the debt restructuring work that his and other ﬁrms fell back on to keep busy in the lean years. Executives at other top ﬁrms agreed: Though the Manhattan market is not back to its pre-recession levels, there is

enough new business to keep real estate lawyers’ hands full. During the worst depths of the downturn, the climate was tough for lawyers. The New York Citybased law ﬁrm Thacher, Profﬁtt & Wood dissolved because of its heavy involvement in mortgage-

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backed securities work. Meanwhile, the city’s big real estate law ﬁrms saw “a change in focus from transactional work to workouts,” said Carl Schwartz, a partner in the real estate department at Herrick, Feinstein LLP. Instead of lucrative, time-intensive real estate deals, lawyers were working on “debt acquisition, getting control of the real estate, restructuring, foreclosing, all that stuff,” he explained. “[But] frankly, there was a whole lot of nothing going on, too.” Now that the market has been improving somewhat, lawyers are seeing an uptick in transactional work. “A year ago, we were cleaning up messes,” Schwartz said. “Now we’re doing deals.” In recent months, Herrick has worked on Sherwood Equities’ acquisition of a stalled development site at 508 West 20th Street; handled the foreclosure sale of 612-618 West 47th Street; and represented investors Yaron Bruckner and Nathan Berman in their $205 million joint-venture acquisition of 70 Pine Street, the landmark American International Building. Law ﬁrms are also keeping busy behind the scenes. With available properties scarce and demand now high, Schwartz said, lawyers are working with investors to evaluate potential acquisitions and assist in bidding wars.

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22 September 2011 www.TheRealDeal.com

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Another newly busy area for attorneys in Manhattan, Ivanhoe said, is recapitalization — or deleveraging overleveraged properties. He said property values have rebounded enough that many owners with large debts can bring in new investors and refinance, sacrificing some equity in exchange for a more favorable mortgage. “Values are still not back to where they were in 2007, but they’re a hell of a lot better than they were in 2009,” Ivanhoe said. “Now that a sale will yield enough money to pay off an existing loan and yield some profit on existing properties, people are willing to sell again.” Real estate transaction work is especially time-consuming and document-intensive, requiring a lot of staff — all good things for a law firm’s bottom line. “We’re much better off if our real estate expertise is employed in handling complex real estate transactions, which is our bread and butter,” Ivanhoe explained. That type of work, he added, Continued on page 112

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Taking Roosevelt Island back to school Compiled by Russell Steinberg

Time for class:

Over the summer, the city pledged $100 million toward a new engineering and science complex on Roosevelt Island, hoping to attract a major university. Stanford and Cornell both plan to submit proposals, and Columbia and the University of Chicago have also expressed interest. A winner will be selected by the end of the year. (DNAInfo)

Population escalation: The two-mile-long island, which is east of Manhattan, has seen its population jump to around 14,000 from 9,500 in the last decade. Stanford’s proposal is expected to call for 1,400 new apartments to house 2,400 students, according to the website business insider.com.

Landmark status:

The abandoned Renwick Smallpox Hospital opened on Roosevelt Island in 1856 with about 100 beds to treat smallpox patients. Now it’s an NYC landmark. The former hospital is surrounded by the 7.5-acre Southpoint Park, which reopened in early August after a $4.5 million restoration.

Residential potential:

The island currently has around 5,000 apartments. Related and Hudson have opened six residential buildings there since 2003. Riverwalk Place, created by the developers in 2006, currently lists condos for between $705,000 and $1.45 million, according to StreetEasy.com.

24 September 2011 www.TheRealDeal.com

Flying high:

Price matters:

Cornell officials say that if selected, its engineering campus would take several years to build, with the first phase costing around $250 million and the full price tag possibly reaching $1 billion. The Cornell Daily Sun reported that the socalled CornellNYCTech campus will focus on “global media” and “technology.”

Retail satisfaction:

In late 2010, the Related Companies and Hudson Companies leased 98,000 square feet of retail on the island from the state. That includes 34 shops, about a quarter of which are still vacant. The developers also manage eight other retail sites, including the island’s only Starbucks and Duane Reade.

The Roosevelt Island Tramway, which holds up to 109 passengers at a time, makes the trip to Manhattan over the East River in about three minutes. The Tram reopened late last year after eight months of repairs. In 2006, it malfunctioned, strand stranding 69 passengers above the East River for 12 hours.

Only 57 years to go:

Although part of Manhattan’s jurisdiction, Roosevelt Island has its own public safety department and waste disposal system that entiis run through a state enti ty. In 1968, the state leased the island from the city. That land lease expires in 2068.

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26 September 2011 www.TheRealDeal.com

PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

Picket always tries to keep fresh flowers, usually an orchid, on his desk. “It’s nice to have a few soft things in your office because there are a lot of hard surfaces in here.”

If he’s having a hard day, this gold course sand trap toy is a reminder of what else he could be doing. “I can think about being somewhere else,” says Picket, who lives in Harrison and is a member of Scarsdale’s Quaker Ridge Golf Club. He tries to play golf at least once a week.

A photo of the Atlas being topped off. Thirty of its 47 stories were out of the ground on Sept. 11, 2001, when a plane heading toward the World Trade Center flew so close, it rattled a crane operator in his cage. “It was a very emotional time for a lot of the guys,” Picket says.

n terms of longevity, it’s hard to match the real estate dynasties of the Dursts, Rudins and Roses. But the Pickets, who have steered the Gotham Organization for four generations, come close. They’ve been building towers in New York since 1913, when Nathan, a Russian immigrant, began putting up Midtown high-rises after a stint with an Orchard Street fruit business. Today it falls to Joel Picket, 73, Nathan’s grandson, and his son, David, 49, to expand the company. In June, the firm sold its wildly successful, 196-unit Upper West Side luxury rental the Corner for $209 million to the retirement fund TIAA-CREF. Now, as CEO of Gotham Developers, a full-service development arm of the parent company, David is set to break ground on a full-block project on 10th Avenue with 1,250 apartments. B y C. J. H ugHes

the

Desk

of:

Ribbon-cutting scissors from the opening of DC USA, an 890,000-squarefoot, Washington, D.C., retail complex modeled on Harlem USA. The mall was developed by Gotham in 2008, in part to help revitalize the Columbia Heights neighborhood of Washington. Picket says it’s almost fully leased and the revenue covers the debt service.

Files for Gotham’s new, yetto-be-named project in the Clinton section of Manhattan, which broke ground on July 1. In addition to the apartments, it will feature 17,000 square feet of retail at grade, which could include a “gourmet supermarket,” he says.

A photo of his wife, Rona, whom he met at Columbia Law School in the 1980s. Picket worked briefly as a lawyer, but “it was not close enough to the action for me.”

A photo of a recent boat trip from Cannes to SaintTropez with his three children: Ben, 15, Matthew, 20, and Nicole, 17.

An admitted technophobe, Picket prefers to keep paper records, and file those papers in stacks, like this one for potential deals.

D Av i D P i c k e t

In 2000, Gotham developed Harlem USA, a 285,000-square-foot retail complex on 125th Street that has an AMC Magic Johnson movie theater, an Old Navy and a New York Sports Club. Critics warned that its mullion-less windows would be shattered by vandals, but “we’ve never had a problem.”

ry. “I like how he bends metal, twists it,” he says. “It’s sort of organic, in a way.”

3. Favorite building that’s not his own: New York by Geh-

Stewart O’Nan, “Wish You Were Here.”

2. Favorite recent book:

fact, Picket says he enjoys writing ideas for novels in notebooks, longhand. He also helps fund the creative writing program at Cornell, his alma mater.

1. Favorite gadget: A pen. In

WHAT YOU DON’T SEE:

A model of the Corner, at West 72nd Street and Broadway. The building, which sold for about $1,400 a square foot, leased in only nine months in 2010, despite its high rents. Two-bedrooms, for example, went for $8,000.

Picket’s office is on the fourth floor of 66 West 38th Street, which also houses the Atlas New York, a rental building developed by the Gotham Organization. Atlas is home to contestants for fashion show “Project Runway” and hosts concerts on its roof (Lady Gaga even played there once). Those types of events help Gotham brand its apartments as “hip, edgy,” Picket says.

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Blockbuster deals disappear While few larger ofﬁce leases get signed, smaller Manhattan spaces get gobbled up, brokers say Brick Realty Capital LLC through an affiliate entity, has purchased the non-performing Mortgages and Notes that encumber the NYC boutique hotel known as the “Flatiron Hotel” located at 1141 Broadway. This was our 19th acquisition of 2011 and is representative of our continuing desire to purchase non-performing mortgages and notes that are secured by income producing properties located throughout the New York metropolitan area. BROKERS ARE ALWAYS PROTECTED Please Contact Us at 646-453-5858 or 212-645-2432 with all offerings or financing needs

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28 September 2011 www.TheRealDeal.com

BY ADAM PINCUS he Manhattan ofﬁce leasing market tightened last month even as the unpredictable stock market and stalled national economy unsettled landlords and tenants alike. Landlords, who have seen their leverage strengthen over the past year, lost a bit of conﬁdence because of the new round of economic turmoil, some Manhattan brokers said.

Manhattan ofﬁce stats Manhattan

Availability Average rate asking rent

Aug ’11 Jul ’11

11.2% 11.5%

$49.02 $48.85

11.7% 11.8%

$55.60 $55.40

9.5% 10.1%

$40.85 $40.87

Midtown

Aug ’11 Jul ’11 Midtown South

C OMMERCIAL MARKET R EPORT

Aug ’11 Jul ’11

“The market was rising rather quickly, particularly in the better product and the better locations, [but] I think tenants’ expectations [now] are that the deals should be improved and they should be more aggressive,” David Hollander, a senior vice president at CB Richard Ellis, said. But that doesn’t mean that most tenants are chomping at the bit to get deals done. Some are becoming more cautious, which is further unsettling landlords. “It is a question of confidence,” George Keller, a senior director at Cushman & Wakefield, said. “Everyone is saying, ‘Let’s sit tight for a while,’” he said. With the recent layoffs at financial firms, he expects more sublease space to be put on the market in the coming months. Meanwhile, unlike the last few months, there were no blockbuster leasing deals in August. In fact, one of the biggest stories last month was the announcement from Swiss banking giant UBS that instead of leasing 800,000 square feet at Larry Silverstein’s 3 World Trade Center, which the bank had been considering, it would keep its large trading floor in Connecticut (see story on page 40). But even as many are locked in a waitand-see mode, so far the overall Manhattan market statistics are not registering a new slump. In fact, the figures, which tend to trail the actual economy, continue to improve. The Manhattan availability rate, which measures space available for rent now or in the next 12 months, dropped by 0.3 points to 11.2 percent in August, preliminary figures from commercial services firm Cassidy Turley showed. That is down from 12.6 percent in August 2010. In another indication of a healthy market, landlords’ asking rents rose slightly last month in Manhattan, by $0.17 per foot to $49.02 per foot. That’s up $1.17 per foot from the same point last year, Cassidy Turley statistics indicated. Activity on mid-size and smaller deals remained healthy even as there were only two leases greater than 100,000 square feet in Manhattan, Cassidy Turley figures showed as of late last month. For example, major Midtown tenant Polo Ralph Lauren expanded at 625 Madison Avenue, taking over another 63,000 square feet in the

Aug ’11 Jul ’11

Downtown

11.6% $37.56 11.9% $37.74

Source: Cassidy Turley

building from the departing tenant, real estate asset management ﬁrm Centerline Capital Group. And in Midtown South, Jack Resnick & Sons, which recently fully leased up one Hudson Square building, put a large block on the market at another in the same neighborhood at 315 Hudson Street. And Downtown, a newly formed ﬁnancial trading company inked a deal for 8,200 square feet at 88 Pine Street.

Midtown In a complicated three-way deal, Polo Ralph Lauren took about 63,000 square feet at SL Green Realty’s 625 Madison Avenue, leasing all of the fifth and part of the fourth floors, CoStar Group reported. Centerline Capital Group — which moved to another SL Green building at 100 Church Street in Lower Manhattan to get cheaper rent — vacated the space and terminated its lease, which ran until 2017. Ralph Lauren, which had first rights to the space, jumped at the opportunity to expand, and inked a direct deal with SL Green. The fashion company already had more than 306,000 square feet in the 570,000square-foot building, CoStar figures show. Ralph Lauren’s new floors will expire at the same time as its existing leases in the building. Hollander, Stephen Siegel and Chris Mansfield, of CBRE, represented Centerline. “We marketed the space for about a year [as a sublease],” said Hollander about finding a tenant to take over Centerline’s space. But because Ralph Lauren had first rights on a lease expiration, “we were a little bit hamstrung.” Yet his client made out well. “Centerline was paying above-market rents [at 625 Madison Avenue] and we were able to move them down to 100 Church at substantially Continued on page 110

HAPPY

TH 100

CONGRATULATIONS

and thanks for covering the evolution of CORE! April, 2005

“I think the future belongs to small brokers, and I’m one of the [few] people to say that,” Corcoran said. “The big guy clearly has the corner on the money, and that’s the downside to being little. But the little guy has the corner on creativity.” June 7, 2005

“Osher names new boutique firm, CORE, providing services to new residential developments and broker re-sales.” July 2, 2008

“CORE is slated to build out its second office at the glassy condo tower Yves Chelsea rising at 166 West 18th Street.”

March 1, 2010

“CORE will be featured on a new HGTV show, Selling NY, which premieres March 18. Agents from CORE, including CEO Shaun Osher, will star in the realty reality program, which focuses on the lives of highend agents.” May 1, 2010

“Boutique brokerage firm CORE ranks second by dollar volume of residential listings.” November, 2010

“While other start-ups failed, Shaun Osher’ five-year-old brokerage survived the downturn, earned TV notoriety, and is now expanding.”

February, 2009

“Shaun Osher, founder and CEO of CORE, recently began publishing the CORE Real Time Report, a monthly report that uses contract data.”

January 12, 2011

“CORE founder and Selling New York star Shaun Osher is relaunching his CORE Talks webisode series.”

corenyc.com

In their words...

The month’s funniest and most insightful comments on real estate “Get the hell off the beach in Asbury Park. ... Get in your cars, and get out of those areas. ...This is going to be an enormous storm and something for New Jersey that we haven’t seen in over 60 years. Do not waste any more time working on your tan.”

“The physician can bury his mistakes, but the architect can only advise his client to plant vines.” CNBC, quoting the late architect Frank Lloyd Wright for a story on the 10 biggest architectural failings in the history of the country.

New Jersey Governor Chris Christie, warning people of personal danger and potential property damage before Hurricane Irene.

“I don’t mind telling people that it’s a former OTB. But I don’t want them to see it was an OTB when they’re standing in front of it, because it was so God-ugly.” Jeffrey Roseman of Newmark, which is marketing the space on Second Avenue between 52nd and 53rd streets.

“Seriously, this has to be the lamest reason ever given for a weak housing market. When you run out of reasons, the fallback is to blame the media. … The ‘crisis of confidence’ comes from banking’s about-face on mortgage financing.”

“This is a profession that generates an enormous amount of arrogance. … I think architects tend to believe that they can almost do anything, which is a wonderful characteristic, but in some cases you just fall flat.” Architect Rafael Viñoly. (New York Observer)

Appraiser Jonathan Miller, on the head of North Jersey Community Bank talking about borrowers’ lack of confidence, on CNBC.

“Many tall buildings have a large base to stand on, and they’re anchored to the granite, which forms the base of all of Manhattan.” 1 World Trade Center architect David Childs, as told to Bloomberg News about the ability of skyscrapers to withstand hurricane conditions. 30 September 2011 www.TheRealDeal.com

“In NYC you can’t get a mortgage to purchase an apartment w/ 2 kitchens unless you have a letter from your Rabbi stating religious necessity.” Brown Harris Stevens broker Julia Hoagland, on Twitter.

“It took me five minutes to know [the fund] was a fraud, and it took me four more hours to prove it was a fraud.” A quote from portfolio manager-turned-Madoff investigator Harry Markopolos in his 2010 book, “No One Would Listen.” (Morning Joe)

“I talked to Walgreens over 18 months ago. I told them, ‘There’s a vacant Chase bank branch right above you, and 4 million people a year from the observatory walk right by it. Now the Walgreens people are really pumped up about it.” Empire State Building owner Anthony Malkin on news that Walgreens is moving from the ground floor to the second floor of the tower. (New York Post)

“You know what? They don’t exist anymore. It’s hard to find them.” Katherine Oliver, commissioner of the Mayor’s Office of Media and Entertainment, on finding gritty NYC neighborhoods to shoot TV shows in, at an event with Bloomberg touting how the film industry has become an economic boon for the city. (New York Times)

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There’s a new (ex-deputy) sheriff in town

After seven months, AG Eric Schneiderman is winning over some skeptics, but enraging others BY DAVID JONES hen New York State Attorney General Eric Schneiderman took office earlier this year, some critics feared he would do more ideological grandstanding than consumer protection and reform. After eights months on the job, the former Democratic state senator (and exdeputy sheriff) appears to be winning over some skeptics while enraging others. The relatively low-profile Schneiderman exploded into the national spotlight last month when he filed a last-minute motion to block a proposed $8.5 billion settlement between Bank of America and investors in 530 New York trusts represented by Bank of New York Mellon. The blockbuster move alleged that Bank of New York effectively tried to carve out a sweetheart deal for itself at the expense of the investors it was supposed to be representing. Indeed, the AG seems to be seizing on the public sentiment among some (mostly in nonbusiness circles) that the big banks have still not been held accountable for the havoc they wreaked on the economy with the financial crisis, which had its roots in the sale of toxic mortgage-backed securities and other questionable lending practices. “This is a moment in American political and economic life [where] we should be working to restore public confidence in both the public sector and the private sector,” Schneiderman told The Real Deal in a telephone interview last month. As the first AG elected to office since the end of the Great Recession, Schneiderman argued that he has a unique opportunity to restore a sense of integrity and stability into a financial system that many critics say was allowed to veer off course by government regulators, ratings agencies and the Washington political establishment. But the AG is not without his critics. Lawyers for Bank of New York vehemently opposed Schneiderman’s intervention, arguing that he had no authority to step into a private settlement agreement. In court documents filed last month, they said he did not cite any prior case law showing precedent for a New York AG to intervene in settlement talks of this nature.

32 September 2011 www.TheRealDeal.com

Kathryn Wylde, the CEO of the Partnership for New York, a business trade group, said the AG jumped in at the 11th hour (there had been an Aug. 30 deadline to ﬁle objections to the settlement agreement) and made “outrageous” accusations against Bank of New York without consulting with the lender ﬁrst. Wylde was criticized last month for speaking out about Schneiderman because she’s a board member at the Federal Reserve Bank of New York. But she said she was speaking on behalf of the partnership and has no su-

eowners who have been wronged,” a spokesman for HUD said in a statement. “We have reached out to a number of attorneys general to ensure the agreement preserves their ability to pursue other claims not included in this settlement, including securitization.” Schneiderman was later removed from a committee of state AGs negotiating the nationwide foreclosure agreement, a move that drew the wrath of the New York congressional delegation. They ﬁred off an angry letter to Iowa AG Tom Miller, who leads the group.

working toward the same goals, ongoing investigations by attorneys general cannot be shut down by efforts to settle quickly, and those responsible must be held accountable.” But despite any headbutting he’s done on the national stage, Schneiderman seems to be making a good impression on at least some in the New York real estate industry so far. “I think he’s the best of the last three,” said Doug Heller, a partner at the law ﬁrm of Herrick, Feinstein, referring Attorney General Eric Schneiderman

Lawyers for Bank of New York vehemently opposed Schneiderman’s intervention, arguing that he had no authority to step into a private settlement agreement. pervisory role in her board position. And she said that while she disagrees with Schneiderman, after speaking to him she believes that he’s sincere in his view that the settlement is a “bad deal” for New Yorkers, and that he’s not intervening for political purposes. But Schneiderman is also in the Obama Administration’s crosshairs. Late last month, the administration was pressuring him to relent on his opposition to a separate 50-state settlement over lending practices by major U.S. banks, the New York Times ﬁrst reported. “Our aim is to reach a settlement that holds the banks accountable and helps hom-

But Schneiderman — who is against a provision in the settlement that will restrict his ability to pursue further litigation — is not backing down. His ofﬁce insists that its goal is to even the playing ﬁeld for investors, so that the banks don’t run roughshod over them. “The AG remains concerned by any settlement agreement that would fail to provide homeowners with meaningful relief to stay in their homes, allow the housing market to begin to recover and get our economy moving again,” said Schneiderman spokesman Danny Kanner in an e-mailed statement. “While our federal and state counterparts may be

to former AG and ex-Governor Eliot Spitzer, and his successor, former AG and current Governor Andrew Cuomo. Heller — a former senior attorney and special deputy AG under the legendary Louis Lefkowitz — noted that compared to Cuomo, who was HUD Secretary in the Clinton Administration, and Spitzer, whose family had major holdings in real estate, Schneiderman has fewer historical ties to the real estate industry. As a result, he said, “he is much more sympathetic to investigating and going after the bad guys.” Continued on page 108

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The Russians are coming Russian restaurateurs turn to New York City, opening eateries and eyeing future locations BY TRACEY SAMUELSON orget the Tea Room. There’s a new wave of Russian restaurants coming to Manhattan, driven by economic and political uncertainty in Europe, a weak U.S. dollar, and the allure of New York’s high-profile restaurant scene. With longterm leases and multimillion-dollar renovation budgets, more and more Russians are saying “da” to New York. “[These restaurants] are all high end,” said Marlen Kruzhkov, an attorney and partner with Gusrae, Kaplan, Bruno & Nusbaum in New York. Kruzhkov represents three Russian restaurant groups with plans to open a combined 12 to 18 restaurants in Manhattan in the next two years. “They’ve invested lot of money in real estate and build-outs; they have long-term plans,” he said. “These are serious leases at long-term values. They’re here to stay.” Late last month, a construction crew began renovating a three-story space that will be the first New York location of Café Pushkin, a high-end Moscow eatery owned by Russian restaurant group Maison Dellos. In April, the group signed a 12-year lease at 41 West 57th Street, a three-story location formerly occupied by Shelly’s Big City restaurant. The ground-floor price per square foot was around $325, according to Leslie Siben, a commercial real estate broker with JDF Realty, who represented Maison Dellos in the deal. “[Maison Dellos executives] knew exactly what they wanted,” said Siben. “They wanted sweeping ceiling heights, and a configuration that can accommodate a very classical design.” And they won’t stop with Pushkin. Siben and her partner on the deal, Benjamin Kahr, are currently advising Maison Dellos as it searches for a 20,000-square-foot commissary outside the city to serve as food storage and a prep kitchen for the additional restaurants, patisseries and lounges the company has planned for New York. “We have big plans for New York,” said Alexander Zaytsev, the general manager of Maison Dellos, adding that the company hopes to open two additional New York locations by 2012. Maison is following in the footsteps of Ginza Project, another Russian restaurant group, which opened MPD on Gansevoort Street last year and Mari Vanna at 41 East 20th Street in August 2009. Modeled after a restaurant concept Ginza developed in Moscow, Mari Vanna is designed to look like a Russian grandmother’s kitchen. The menu offers over a dozen house-infused vodkas, and traditional Russian dishes — from borscht (beet soup with beef ) to caviar.

34 September 2011 www.TheRealDeal.com

Ginza did not respond to requests for comment, but Bond New York broker Jim Coleman, who represented Ginza in its lease negotiations for the restaurant in 2009, likened Mari Vanna to a Russian version of the Hard Rock Café. Just as “Hard Rock Café is [the] same

And this may be just the tip of the iceberg for Russian investors in New York’s culinary scene. Sources say Russian investors in already established New York restaurants are also seeking new Manhattan addresses. Other groups are waiting to see how these new ventures do before taking similar steps.

Russian restaurant groups plan to open a combined 12 to 18 restaurants in Manhattan in the next two years.

Broker Leslie Siben at 41 West 57th Street, which she recently leased to Russian restaurant group Maison Dellos

Mari Vanna at 41 East 20th Street

MPD on Gansevoort Street

wherever you are in the world, a Mari Vanna is the same,” Coleman said. He added that Ginza group had originally planned to splash into the New York market with a large nightclub, but felt the space was a better ﬁt for Mari Vanna.

“These are really ambitious groups,” said Kruzhkov. “If they succeed, we’ll see more and more. There are many others taking a wait-and-see approach.” Why all these openings now, and why New York?

With the Russian population in New York City now over 260,000 people, according to the U.S. Census Bureau, there’s strong demand for Russian cuisine. And there’s currently a lack of authentic, high-end Russian food in New York, Maison Dellos’ Zaytsev said, adding that his company wants to take the opportunity to introduce sophisticated Manhattan diners to this kind of cuisine. “Everything you can see in New York about Russian cuisine, it’s low-level,” he said. “It’s kitsch.” Another factor is that for many restaurateurs, “a large part of it has to do with diversifying out of Russia,” said Ed Mermelstein, another lawyer active in helping Russian clients establish New York restaurant locations. The Russian economy is heavily reliant on oil and natural gas exports, making it highly vulnerable to the ﬂuctuations of commodity prices, he said. “They’re also looking to diversify the customer base,” said Kruzhkov. “If the price of oil drops, or the ruble drops, they have a restaurant in New York that doesn’t depend on [customers in Russia].” The United States is, of course, experiencing its own economic uncertainty, but it still feels like a safe bet for Russian investors, said Kruzhkov. Moreover, with the dollar relatively weak in comparison to the euro or ruble, notoriously expensive New York is offering up a rare bargain to foreign investors. “It’s almost coming to be a discount location, especially over Paris or Moscow,” Coleman said. That “currency discount” is driving Russian investment in New York real estate and other corporate ventures as well. Moscow-born billionaire Mikhail Prokhorov’s purchase of the New Jersey Nets, which was approved by the NBA in May 2010, is perhaps the most high-proﬁle recent example of this trend. But Russian restaurateurs are also seeking the cachet and exposure created by success in the highly competitive New York culinary scene. “A lot of it has to do with the prestige value,” Mermelstein said. “A company like Maison Dellos is a very high-end operator, with over 10 very high-end restaurants. It’s not different from someone like Daniel Boulud opening up all over the world. It starts in a major city and goes worldwide.” “We want to expand our brand to the world level,” Zaytsev said. “Expanding to New York and showing the world our strong product— we’re certain it will be a great step.” TRD SIBEN PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

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Ditching the doorman With rents climbing, the premium for attended lobbies is shrinking BY KATHERINE CLARKE n Manhattan, a doorman is a marker of luxury and status. But as rents rise in a tough economy, tenants are increasingly willing to go without that friendly face to screen visitors and accept packages if it means staying in New York’s most exclusive borough, industry experts said. Data shows that the premium that renters are willing to pay for doormen has shrunk dramatically in the past two years. Between 2010 and mid-year 2011, the premium for rental apartments in buildings with attended lobbies dropped 36 percent for studios, 21 percent for one-bedrooms and 18 percent for two-bedrooms, according to a market report compiled by real estate consulting ﬁrm and brokerage Nancy Packes Inc., in collaboration with StreetEasy. In 2010, for example, the average monthly rent for a studio apartment in a nondoorman building was $1,774; by mid-2011, that ﬁgure had shot up 23 percent to $2,188. In the same time period, the average rent for a studio in an attended building increased just 9 percent, from $2,416 to $2,635. Packes attributed this change to the current combination of skyhigh rents and continued economic uncertainty. That climate has prompted Manhattanites to give up doormen rather than decamping for a less expensive borough, Packes told The Real Deal. “On one level, it’s simple economics,” she said. “Steep increases in rent in the last two years hurt the people who want to remain in Manhattan.” But there are also demographic changes afoot, which speak to long-term changes in New Yorkers’ housing preferences. “There’s been a real shift in the nature of work forces, with many more people coming from creative industries,” Packes said. “They lead a less formal lifestyle, and for them, full service is less important. They’re looking for older buildings that are more in keeping with their personalities.”

One reason for this growth is “an increased interest in rental property from those taking a ‘wait and see’ approach to the unstable sales market,” said Citi Habitats president Gary Malin. He noted that the high-end rental market is doing particularly well, in part because buyers who

do without a doorman [or] a gym, as long as the numbers make sense.’” Michael Chadwick, an agent at brokerage Bond New York, said he’s also noticed that “many young professionals have been moving out of luxury buildings and going for renovated, prewar apartments.”

A “virtual” doorman “can do everything a real doorman can do, except literally open the door for you, and it cuts costs,” Kim said. But the waning demand for doormen is also a reflection of changing Manhattan demographics, Packes said. These days, brokers are working with more people in technology and creative industries, such as marketing and design; in the past, the majority of their rental clients were in finance and law. In 2005, there were eight Manhattan renters working in finance for every one in technology, according to Packes’ report; today that ratio is only four to one. Her data also shows that 17 percent of Manhattan renters are now in the creative sector, up from 8.57 percent in 2005. Salaries in creative fields tend to be lower, so these workers are less likely to splurge on a doorman building. “The employment growth that we’ve seen tends to be on the lower to middle end in terms of earnings,” said Jonathan Miller, the CEO of Miller Samuel Real Estate Appraisers. “We’re seeing more demand for lower-priced renting.” But it’s also a matter of preference. Renters who work in “creative” fields seem to place less emphasis on doormen, brokers said, and some even view attended lobbies as passé. “I deal with a lot of people from creative industries,” said Miron Properties director of leasing Gary Posylkin. These renters often avoid “cookie-cutter” apartment buildings, he said, and instead want “more character in the building, something unique with exposed brick … something that doesn’t have that typical doorman feel.” This preference doesn’t appear to be universal, however. Packes’ data shows that for rental apartments with four or more bedrooms — i.e., the high end of the market — the premium for attended-lobby buildings has actually increased by 34 percent. Packes attributed this to the fact that many high-end buyers accustomed to doorman service are currently renting rather than buying. But it also indicates that the convenience of a real-life doorman will always be attractive to a certain segment of the population, said Miller, who predicted that once the economy recovers, the price premium for amenity-laden properties will rise again. “It’s not that doorman buildings are losing favor, it’s that non-doormen are overpowering doormen in terms of pricing,” he said. TRD

“More people [are] coming from creative industries. … For them, full service is less important.”

Rising rents While the sales market has suffered during the economic downturn of the past few years, rentals are undergoing a recovery. According to a ﬁve-year market report released last month by the brokerage Citi Habitats, the average monthly rent for Manhattan below 96th Street was $3,694 in June, up 8.7 percent from $3,399 in the same month of 2009 and nearing 2007’s average of $3,724. 36 September 2011 www.TheRealDeal.com

Nancy Packes, Nancy Packes Inc. would normally make luxury apartment purchases are opting to rent. But while rents may be nearing their prerecession highs, salaries for many New Yorkers are not. “Renters are unhappy because raises and bonuses are still at recession levels, yet rental prices have increased signiﬁcantly over the past three years,” said Robert Varvara, a real estate agent at Miron Properties. That means some home-seekers are feeling budget pressure, and in response, they’re compromising on amenities, brokers said. That’s especially true if they want to stay in Manhattan rather than moving to Brooklyn or Queens. In this kind of calculus, a full-time doorman is one of the ﬁrst amenities to go, since renters get more space for their money in unattended buildings, said GieFaan Kim, an associate broker at Keller Williams NYC. In non-doorman buildings, “the prices are better, and these days, prices are a big issue,” Kim said. “[Renters] say, ‘I could

This effect is heightened, he said, because many large luxury buildings have now stopped offering the generous concessions they gave tenants during the worst of the downturn. For example, several of his 20something friends have just moved out of a Far West Side luxury building. “They are all moving out because their rents have increased over 13 percent,” he said. And while a doorman was once viewed as a necessity from a safety standpoint, the city has largely seen a continuous trend of decreasing crime since 1991, and neighborhoods that were once considered dangerous, like the Upper West Side, are now prime residential areas. “The city is becoming much safer,” Packes said, noting that many New Yorkers now see doormen as a luxury rather than a necessity. Technology has also improved. Many buildings are now replacing doormen with virtual security systems, brokers said.

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Green homes selling for more BY KENNETH HARNEY ome energy efficiency and sustainability have been major policy priorities for the Obama administration, but lurking in the background are two consistent, pesky questions: Beyond the documentable savings on utilities bills, do such steps add to the resale value of a home? And do they make it easier or faster to sell property? Housing groups and housing officials say that definitive statistical data covering multiple regions of the country is scarce. But some localized research projects in Oregon, Washington and California offer promising hints. In a study covering existing and new houses sold between May of last year

For instance, newly constructed certified houses may be more expensive to start, and existing certified homes may be larger and more likely to be located in highercost neighborhoods where homeowner adoption rates for energy efficiency measures are higher. Nonetheless, said Dakota Gale, Earth Advantage’s manager of sustainable finance, looking back at four years of studies, “we can still see a consistent trend that third-party certification continues to result in a higher sales price, even during the past year, when home sales were down.” A study conducted two years ago by the institute in Seattle and Portland identified what may be another plus: Homes marketed

Homes marketed with energy efficiency certifications appear to sell faster on average than those without. and April 30 of this year, the Earth Advantage Institute, a nonprofit group based in Portland, Ore., found that newly constructed homes with third-party certifications for sustainability and energy efficiency sold for 8 percent more on average than noncertified homes in the six-county Portland metropolitan area. Existing houses with certifications sold for 30 percent more. The raw sales data in the study was provided by the Portland Regional Multiple Listing Service. “Certified” houses were defined as those carrying Energy Star or LEED for Homes designations, or Earth Advantage home certifications. (LEED stands for Leadership in Energy and Environmental Design.) The latest study was the fourth in an annual series conducted by Earth Advantage, each of which has shown clear price premiums for certified houses. However, officials caution that using average sales prices pulled from MLS data without attempting to measure “comparable” homes against one another directly may not be conclusive.

with energy efficiency certifications appear to sell faster on average than those without. The study attempted to come up with rough comparability in appraisal terms between certified and noncertified properties, and found that in Portland, certified homes spent 18 days less on the market after listing than noncertified counterparts. In both Portland and Seattle, researchers documented price premiums — 9.6 percent in Seattle, 4.2 percent in Portland — in a statistical analysis with a 95 percent confidence level. Meanwhile, a recent study on houses in San Diego and Sacramento, Calif., published by the National Bureau of Economic Research, took a different tack: When you install photovoltaic solar panels on your roof, how much do you get back in market resale terms, beyond monthly energy savings? Researchers examined home sales in both metropolitan areas between 2003 and 2010 and found that, on average, solar panel installations cost owners in a sample of homes in the $500,000 range $35,967. But

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with federal and state subsidies, the net average cost came down to $20,892. This net expenditure, in turn, yielded an increase in appraised value by $20,194 — a 97 percent rate of recovery on the investment. Though less than 100 percent, a 97 percent recovery rate is much higher than most home improvements in the most recent “Cost vs. Value” study conducted by Remodeling magazine — well above major kitchen and bathroom renovations. Kevin Morrow, senior program manager for green building at the National Association of Home Builders, said that while many newly constructed homes come with energy and sustainability certiﬁcations, banks don’t necessarily recognize their value when it comes to providing mortgage money. For example, bank underwriters often do not include reduced monthly utilities costs in the household income/household expense ratios that affect the maximum mortgage amounts available to buyers. “The case needs to be made [to lenders],” he said in an interview, “that, hey, these [highly efﬁcient] houses will cost less to operate, so they should be worth more.” Morrow added that appraisers are part of the issue as well, if they don’t have the training to recognize and credit extra value to buildings that have money-saving solar installations, geothermal heating and cooling, Energy Star appliances throughout, water conservation features and other green improvements. The Appraisal Institute, the largest group representing that industry, said it has sponsored “green” appraisal courses for 2,300 appraisers during the past two years, and strongly supports efforts to better incorporate energy and environmental factors into mortgage underwriting and home valuations, including a possible Congressional mandate requiring it. Ken Harney is a syndicated real estate columnist.

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GOVERNMENT BRIEFS Staten Island trades parking lot for new project The city last month announced a plan to redevelop two parcels of land on Staten Island’s St. George waterfront. The city-owned, 14acre site is currently used as a parking lot for the Richmond County Bank Ballpark, home of the Staten Island Yankees. The city has asked developers to submit proposals for the site, and said it will choose one based on its potential for positive economic impact, job creation and waterfront Richmond County Bank Ballpark improvement. Developers will also have to make up for the lost parking space for the ballpark. Proposals are due Nov. 10.

Brooklyn Bridge Park to get housing and a hotel City and state officials signed an agreement last month to allow private housing to be built on the grounds of Brooklyn Bridge Park. Only two days later, the city-run Brooklyn Bridge Park Corporation announced that it is seeking developers for a hotel and residential tower adjacent to the park’s Pier 1. Payments in lieu of taxes from the two parcels are expected to fund a portion of the park’s annual operating cost of $16 million. “The hotel and residential component represent a critical element of our park maintenance plan, and the development’s amenities will benefit all park users for decades to come,” BBP president Regina Myer said in a release. Already, condo conversion One Brooklyn Bridge Park has contributed a few million dollars to park Brooklyn Bridge Park maintenance. Now that a plan for an operating budget has been finalized, the city will free up $55 million needed to help complete the $360 million park. The deal ensures that the 20-acre park, which opened in 2010, will eventually expand to some 85 acres along unused East River piers. The city also announced that it is seeking proposals to build a temporary structure, or “bubble,” enclosing recreational fields inside the park.

Mortgage rates fall to lowest point in decades Mortgage rates hit record lows last month, Freddie Mac announced. In mid-August, the average rate on a 30-year fixed mortgage dipped to 4.15 percent, the lowest level on record dating back to 1971. The last time homebuyers could get such low long-term rates was in the 1950s, when 30-year mortgages were rare, and long-term home loans typically lasted 20 to 25 years, according to USA Today. The average rate on a 15-year fixed mortgage, which is popular for refinancing, fell to 3.36 percent, also a record low. (Freddie Mac’s records date to 1991, but analysts said that is likely the lowest-ever average for 15-year fixed mortgages.) But many would-be homebuyers weren’t able to take advantage of these drops, due to the economic climate: Mortgage applications last month fell to a 15-year low nationwide.

Fare hikes to help fund World Trade Center The Port Authority has approved a plan, proposed by New York Governor Andrew Cuomo and New Jersey Governor Chris Christie, for a steady rise in fares and tolls over the next four years. Starting next month, drivers will have to pay an extra $1.50 in tolls on all Hudson River bridges; those without E-ZPass will pay an additional $2, according to the Wall Street Journal. Smaller toll increases will also be instituted each year until 2015. PATH train fare will increase by 25 cents per year for the next N.J. Governor Chris Christie four years. Much of the money collected will go toward the $11 billion rebuilding of the World Trade Center site, as well as improving city bridges and facilitating commuters’ rides to work, the city said. Compiled by Russell Steinberg

38 September 2011 www.TheRealDeal.com

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From 2007 through the 2011 budget, the Port Authority has spent or all t d $1 9 billi th b ildi

Financing facts:

Of course, the headline-grabbing deal for the building was the 1 million-square-foot lease inked in May by Condé Nast for floors 20 to 41, starting in its first year at about $60 per foot. But it was not the first. In 2009, China Center’s Vantone Industrial inked a 190,810-square-foot lease for floors 64 to 69, starting at $80 per square foot, for a business and cultural center. In addition, the U.S. General Services Administration is expected to lease 300,000 square feet, and the state’s Office of General Services is expected to take additional floors. The leasing agent is Cushman & Wakefield.

Leasing status:

The Port Authority expects the 105story, 2.6 million-square-foot 1 World Trade Center to be completed in 2013 — at a cost of $3.2 billion, or about $1,250 per square foot. That price is far above the norm for Manhattan: the 1.1 million square feet in the supermodern 11 Times Square cost about $1,000 a buildable foot. In another example, the Related Companies said last spring that it was offering to build an office tower for a tenant for $700 per foot. But unlike other modern office towers, 1 World Trade is being constructed with an unprecedented level of durability to withstand attacks. The Port Authority is not trying to find tenants on its own, however. The Durst Organization agreed last August to partner with the agency, and make a minimum investment of $100 million for a reported 5 percent equity stake.

Building overview:

1 World Trade Center

By AdAm Pincus onstruction crews have been working feverishly at the World Trade Center site in anticipation of the 10th anniversary of the Sept. 11 attacks later this month.

1 WTC

But when families and friends of the victims gather there for the commemorative ceremony and the opening of the National September 11 Memorial, they will also see major progress at many of the buildings around them. Indeed, lately — after years of delays and political infight-

7 WTC

ing — steel has been rising rapidly at the 16-acre site. Just to the north of the memorial, attendees will see the new $3.2 billion 1 World Trade Center, the most expensive office building ever constructed in the city, built to about the 80th floor. To the east, they will see the con-

Silverstein owns the rights to build the 80-story, 2.8 million-square-foot office tower through another 99year lease, at 175 Greenwich Street.

Building overview:

3 World Trade Center

No public or private financing is lined up. In August 2010, Silverstein reached an agreement with the Port Authority stating that the tower would receive no public support, and that all funds from insurance and Liberty Bonds that had been allocated to it were redirected to Towers 3 and 4.

Financing facts:

While Silverstein controls the office space at Tower 2, Australian retail giant Westfield Group and the Port Authority control the building’s underground retail space. And they are actively hunting for tenants. Once an office building is constructed, there will be an additional 90,000 square feet of retail on the first four floors.

Leasing status:

The 88-story, 2.4 million-squarefoot tower at 200 Greenwich Street, controlled by Silverstein Properties through a 99-year ground lease, is one of three office projects in the WTC redevelopment that’s currently on hold. That’s largely because Silverstein doesn’t have any tenants lined up, and likely doesn’t want his new buildings to undercut each other when it comes to wooing tenants. The current plan is to construct the site to ground level by the end of the year, and then await a market recovery.

Building overview:

2 World Trade Center

struction at three additional tower sites. While much has been written about the progress at ground zero in a piecemeal fashion, this month, The Real Deal takes a closer at look how all of the pieces fit together — and how the finances pencil out for the developers.

With 10th anniversary of attacks approaching, The Real Deal breaks down the 16-acre site building by building

Pricing out the World Trade Center

40, 41 September 2011 www.TheRealDeal.com

The 1.5 million-square-foot office tower planned for the site of the former Deutsche Bank building at 130 Liberty Street, across from the Trade Center site, is on hold. Silverstein sold his rights to the property back to the Port Authority in 2006. There is no financing in place and no tenants are lined up.

Building overview:

5 World Trade Center

The $1.81 billion price tag for Tower 4 comes in at about $1,000 per square foot of office space — about 20 percent cheaper than 1 World Trade. Silverstein isn’t paying a penny out of pocket for the building; instead, he’s using $1.36 billion in Liberty Bonds and $450 million in insurance proceeds.

Financing facts:

Earlier this year, Silverstein exercised a 2006 option for the City of New York, which pledged its support as a way to push development forward, to lease 580,000 square feet at $56.50 per square foot. If a higher-paying private tenant comes along, Silverstein can tear up the city lease. In addition, the Port Authority has already committed to leasing 600,000 square feet in the tower for its headquarters. The office leasing agent is CBRE. Westfield and the Port Authority control the first four floors of retail, which will have a total of 78,600 square feet.

Leasing status:

The 72-story, 1.8 million-squarefoot office tower at 150 Greenwich Street, another Silverstein tower, is currently under construction and is expected to be complete by 2013. At press time, it had steel rising above the 37th floor.

Building overview:

4 World Trade Center

located $1.9 billion on the building, an analysis of Port Authority annual reports shows. The tower’s price tag has jumped from $2.8 billion, estimated in 2008, to $3.2 billion today. One source, who is not involved in the project but did a back-of-the-envelope calculation, estimated it would take blended rents of about $110 per foot for the project to break even.

5 WTC

WTC MEMORIAL

4 WTC

3 WTC

2 WTC

In July, the Westfield Group signed an agreement to form a joint venture with the Port Authority for 345,000 square feet of retail aboveand belowground, with the potential for another 90,000 square feet in Tower 2. The joint venture is expected to cost about $1.45 billion, or more than $3,300 per square foot for the entire 435,000 square feet. Brokers estimated that tenants would have to pay, on average, more than $200 per foot to support the construction costs, and that asking rents could be anywhere from $200 to $500 per foot (see story on page 64). TRD

Retail overview:

The building has complex financing triggers, which rely on Silverstein raising $300 million in private funding. It also has a condition that he pre-lease 400,000 square feet of office space and secure $1.3 billion of Liberty Bonds and taxable debt before starting construction. The public support is capped at $600 million, divided equally between contributions from the Port Authority, the city and the state.

Financing facts:

The Port Authority had hoped in 2008 that Merrill Lynch would take the entire building, but the investment bank backed out as the market tumbled. UBS had been in talks in June to relocate its Connecticut division to 800,000 square feet in the building, but also backed out, the Wall Street Journal reported last month. CB Richard Ellis is the agent for the building.

Leasing status:

But like Tower 2, the office portion of the building is on hold. However, the August 2010 agreement with the Port Authority required Silverstein to build a three-level retail podium using insurance proceeds. The 65,900-square-foot, above-ground retail podium is being built now and is expected to be at street level by the end of the year. It will be controlled by Westfield and the Port Authority. Silverstein will move forward with an office building once he finds a tenant, with a possible completion of the tower in 2015.

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Who’s winning the burger wars?

While the NYC hamburger boom is showing no signs of letting up, experts say there’s a shakeout on the horizon BY MIRANDA NEUBAUER ith a new Shake Shack in Grand Central, Five Guys all over Midtown and BareBurger in Park Slope and Astoria, the city’s ongoing burger boom is showing no signs of slowing down. But New York only has room for so many burger joints. So which of the many new options are winning over New Yorkers’ stomachs? Volume-wise, the clear winner is Five Guys Burgers and Fries, which has spread like wildfire over the past few years. Founded in Virginia in 1986, Five Guys was the fastest-growing restaurant chain nationally in 2010, according to Technomic, a market research firm. It currently has nine locations in Manhattan and Brooklyn, and is expected to open 12 to 20 new locations in the area over the next year, according to Andrew Moger, the CEO of Branded Concept Development, a design and construction firm that has worked with Five Guys. Known for its made-to-order hamburgers, 11 free toppings and hand-cut fries, Five Guys developed a cult following in Virginia before founder Jerry Murrell started franchising in 2002. The chain is successful, Moger said, because it sticks to what it does best — serving only burgers, hot dogs, grilled cheese sandwiches and fries — at a reasonable price point. Shake Shack is another big winner, but it has a far different model from Five Guys. Founded by celebrity restaurateur Danny Meyer in 2004, it started with an outdoor location in Madison Square Park. Now, it has eight locations, including a seasonal concession at Citi Field. But the chain is far more focused on high-profile locations than opening a large number of restaurants, according to Randy Garutti, COO of Shake Shack. Garutti noted that the company looked for years before settling on its new Downtown Brooklyn location, at the Fulton Street Mall. Garutti said that spot was attractive because of its growth potential, particularly with the construction of nearby Atlantic Yards. If Shake Shack decided to expand, it could give Five Guys a run for its money, according to Marc Frankel, a senior managing director at Newmark Knight Frank Retail, who has worked with McDonald’s and Chipotle. “Danny Meyer has not been very focused on rapid growth,” he said. But if Meyer were to franchise or change his tune, “I think [Shake Shack] could be a force to be reckoned with.”

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42 September 2011 www.TheRealDeal.com

space as other food purveyors, said Faye Fisher, the vice president of Advanced Restaurant Finance, a lender specializing in restaurants. As a result, real estate is cheaper for them. While it costs about $1 million to open the average restaurant, Fisher said, “you can open a burger joint for $400,000, if you have a certain type of property.”

Shake Shack’s Madison Square Park location

Five Guys Burgers and Fries

brgr’s Chelsea location

But New Yorkers these days are picky about their burgers. The fast-food favorites of yesteryear — McDonald’s, Wendy’s and Burger King — no longer satisfy Manhattan’s patty-philes. “I think people now have more sophisticated tastes,” Frankel said. Still, the potential for new burger places is limited, even in New York. The chains cropping up now can’t all ﬂourish. Some will close locations, or simply stop expanding, according to Fisher. “There’s a limit to how many burger chains you can have,” she said. Doug Branigan, senior vice president of franchise operations at the four-year-old, Colorado-based chain Smashburger, predicted that the number of New York City Continued on page 110

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PROFILE

Chetrits deny split

While the family says they’re still operating as a united front, some sources say they’ve divided the business—perhaps to protect their assets BY CANDACE TAYLOR ongues wagged in the real estate industry when news broke that the Chetrit Group — one of the city’s most prominent investment firms — had split in two. Brothers Joseph and Meyer Chetrit would be relocating from the company’s longtime headquarters at 404 Fifth Avenue into offices at 512 Seventh Avenue, Real Estate Alert reported in June. Meanwhile, their two younger brothers, Jacob and Juda, would continue working out of the Fifth Avenue office, but operate under the name of Chetrit Organization. Or would they? The notoriously secretive family broke their silence last month in a rare, albeit brief, phone interview with The Real Deal to deny that a split has occurred. “No, we did not split up,” Meyer Chetrit, often known as Mike, told The Real Deal when reached by phone. In a voice heavily tinged with a French accent, the Moroccan-born mogul said the rumors began because “we opened another office,” at 512 Seventh Avenue. But multiple industry sources in the opposite is true. The brothers “had a big fight, and they absolutely have split up,” said one insider veteran who has worked with the family. In a sign that change may indeed be afoot, a new entity called the Chetrit Organization LLC filed for incorporation in April with the New York State Department of State, according to the agency’s online database. The entity’s address is listed as “c/o Jacob Chetrit, 404 Fifth Avenue, 6th Floor, New York, New York.” The Chetrit Group itself was incorporated in 1999 and is listed as still active. And the Chetrits are facing significant challenges, the kind that can engender acrimony between partners — even the closest of siblings. The first involves asset disposition. Two of the Chetrits’ major properties — the 800,000-square-foot Bed, Bath & Beyond Building at 620 Sixth Avenue, and the Willis (formerly Sears) Tower in Chicago — are for sale. The Chetrits’ Empire Hotel, meanwhile, is not officially on the market but is being quietly shopped around, industry sources said. “They have assets for sale right now, some fairly large assets,” said one industry insider. “Usually, those types of situations lend themselves to

44 September 2011 www.TheRealDeal.com

conflict in terms of how the funds are going to be allocated.” There are other struggles as well, as the New York Observer noted in a recent profile. In late 2010, a venture led by the Chetrit Group lost a development site at 855 Sixth Avenue to Durst Fetner. The firm’s $79.6 million loan on 123 William Street, an office building, is nearing default and has been transferred to special servicing. A plan to convert a former Toy Center building at 1107 Broadway to condos never got off the ground, and the building was recently sold at a foreclosure auction (though the Chetrits sold a 50 percent interest in the property in 2007). The Chetrits are also being sued by the condo board at 1200 Fifth Avenue, an East Harlem condo conversion that began sales in 2006 and is still not sold out. In the midst of all of this strife, the Chetrits have been catapulted to a new level of public scrutiny by their recent purchase of the iconic Hotel Chelsea. The sale closed last month for $77.8 million, according to pub-

lic records. (The deed was signed by Meyer Chetrit, who listed his address as 512 Seventh Avenue.) The landmarked redbrick hotel is a longtime gathering place for artists and musicians, many of whom have lived there for years as rent-stabilized tenants.

“No, we did not split up. … We opened another ofﬁce.” Meyer Chetrit, the Chetrit Group

Brothers Meyer Chetrit, left, and Joseph Chetrit

The Chetrits have hired architect Gene Kaufman to renovate the building, and are likely hoping to repeat the success of their Empire Hotel on the Upper West Side, which they acquired in 2004, upgraded, and reopened with a popular rooftop bar, making it far more attractive to potential buyers. Even the most die-hard of the Chelsea’s residents admit that the hotel — built as a coop in 1883 — needs a renovation. Still, for a family that purportedly wants to stay under the radar, buying a historic property full of vocal, eccentric residents was probably the wrong move.

Protecting family assets Nearly all real estate investors have faced difficulty during the

downturn, and the Chetrits are no different. Somewhat unusual, however, are the millions of dollars in personal guarantees the brothers signed on a number of their properties during the boom. These guarantees, which give the lenders “recourse” to the borrowers’ personal fortunes, were once common in commercial lending, but had largely disappeared in the early 2000s. Still, the Chetrits signed them on several projects, including 855 Sixth Avenue and 5 Beekman Street, according to sources and court documents. That gives credence to one theory about why the ostensibly tight-knit Chetrits may have split: A number of industry experts suggest that the change is not actually a formal separation, but rather an internal restructuring designed to protect the family’s assets. “I think they split to basically help protect all of them from a lot of the recourse that they’ve signed,” said one prominent developer who has worked with the family. “It’s basically a shell game — ﬁnd the assets.” Real estate experts said that’s a strategy some investors use when they get into trouble. It’s possible that “they’re still afﬁliated as a separate group, within an umbrella organization,” according to Ben Thypin

PHOTOGRAPH OF MEYER CHETRIT BY RICHARD LEWIN; PHOTOGRAPH OF JOSEPH CHETRIT © PATRICK MCMULLAN.COM

PROFILE of Real Capital Analytics, who said he had no direct knowledge of the Chetrits’ internal structure. “That wouldn’t be unprecedented among New York real estate families.”

A PR nightmare It’s hard to imagine a new owner less likely simpatico with the reputation of the Hotel Chelsea than the Chetrits. For years, the balconied 23rd Street

mously let tenants pay their rent with artwork, and as a result, the Chelsea has become “one of the last outposts of artistic bohemianism,” said building resident Ed Hamilton, a blogger and author of the book “Legends of the Chelsea Hotel.” The Chetrits, meanwhile, are perceived by residents as hard-driving businessmen more interested in the bottom line than in helping struggling artists. And in contrast to outspoken Hotel Chelsea bohemi-

The Chelsea Hotel, which the Chetrits bought last month

regain control of the hotel — proclaimed their dislike for the Chetrits. One tenant, 30-year resident Tim Sullivan, stood on the sidewalk outside the hotel and loudly dubbed the new owners “slimeballs” and “bullies,” for ﬁring staff and keeping tenants in the dark about their plans. All this attention is likely the last thing the Chetrits want. The ﬁrm has a longstanding reputation for keeping their affairs to themselves, and rarely speaking to the media. “They’re a pretty quiet organization,” said Prudential Douglas Elliman’s Yuval Greenblatt, who worked with the Chetrits for three years in marketing the Columbus

Developer Yitzhak Tessler, a partner of the Chetrits

5 Beekman Street, where the Chetrits defaulted on a loan in 2009 Architect Gene Kaufman was hired to redesign the Chelsea Hotel.

A plan to convert 1107 Broadway, one of the former Toy Center buildings, to condos was unsuccessful.

808 Columbus Avenue, part of the Chetrits’ successful Columbus Square project

hotel has been a bastion of sex, drugs and rock ‘n’ roll, the stomping grounds of poet Dylan Thomas, legendary songstress Janis Joplin and Sex Pistols bassist Sid Vicious. Former manager Stanley Bard fa-

ans, the Chetrits are deeply private, and religious. The sale closed last month, with $85 million in ﬁnancing for the Chetrit Group and junior partner Clipper Equities arranged by Meridian Capital Group. Perhaps not surprisingly, the deal has already become something of a PR nightmare for the Chetrits. When the hotel shut down last month, its iconic neon sign went dark, most of the staff was ﬁred, and reservations were abruptly canceled. Scottish actor Jeffrey Stewart refused to leave his hotel room, then conducted a number of indignant interviews with reporters while still in his pajamas. Tenants watching this spectacle — many of whom had been hopeful that Bard would

PHOTOGRAPHS OF 5 BEEKMAN STREET, TOY CENTER AND CHELSEA HOTEL FOR THE REAL DEAL BY DEREK ZAHEDI

Square residential complex on the Upper West Side. But he disagreed with the frequent characterization of the Chetrits as mysterious. “They were pretty straightforward, gregarious, friendly people,” Greenblatt said. Of course, people in the industry have a strong incentive to respect the Chetrits’ distaste for publicity. “They’re very litigious,” said one industry insider. “That’s why no one wants to talk.” When reached by phone, for example, developer Yitzhak Tessler said: “I prefer not to comment — not off the record, not on the record. I don’t want to speak about it.” Developer Joseph Moinian, a friend of the Chetrits and their partner at the Willis Tower, declined to speak about the family unless the story said only positive things about them. As a result of this mania for privacy, little is publicly known about the Chetrits. In fact, there’s often confusion about who’s who in the family.

What is known is this: Joseph Chetrit is the oldest son of Simon Chetrit, a prominent player in the Moroccan shipping business. Joseph came to the United States from Casablanca in the 1980s, working in textiles. Things seemed to go awry: In 1990, he pled guilty to one felony count of violating customs laws, and served 90 days of community service. However, he had better luck with real estate. According to a July Observer story, Chetrit started with apartment buildings in Brooklyn and Queens. He did his first commercial real estate deal in the U.S. in 1994, with a $13 million purchase of an office building at 19 West 44th Street. From there, he ascended rapidly through the real estate ranks, partnering with his brothers Meyer, Juda and Jacob (who also goes by “Jacques”). Isaac Chetrit, a cousin, heads the separate real estate investment firm AB & Sons. By 2007, the Chetrit Group had an interest in some 50 commercial and residential properties nationwide. That year, the group purchased heavily, The Real Deal reported, buying roughly $627 million in properties (often with partners like Moinian and Tessler), including the Standard Oil Building at 26 Broadway for $225 million; a former nursing home at 1760 Third Avenue for $80 million; and 90 and 100 Trinity Place for $64 million. The same year, however, the company’s sales yielded around $1.2 billion, thanks to deals like the sale of 200 Fifth Avenue, which netted a 42 percent return just two years after the Chetrits bought it. The Chetrits also began to delve into ground-up development. “They’re known less as developers — they really are landlords,” Elliman’s Greenblatt said. Columbus Square, a multi-building rental and condo project, was “their first foray into something that big in terms of new construction,” he said. At Columbus Square, where the Chetrits partnered with Larry Gluck of Stellar Management, “they did phenomenally well,” Greenblatt said, despite the fact that rentals started in 2009, during the downturn. Now, “rents are quite high there,” he noted, adding that a four-bedroom apartment in the complex just rented for around $20,000.

Family affair Business associates say Joseph is the company’s front man and the clear leader among the brothers, in both business and personal affairs. “I’ve always seen Joe as being the father ﬁgure, and everybody else just kind of following,” said one friend of the family. “There are decisions that are made by Continued on page 112

www.TheRealDeal.com September 2011 45

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TH E F U T U R E

DEVELOPMENT

Building with a new bent A look at the drop in offering plans, the shift to boutique condos and conversions, and the new calculus for affordable housing

hen the stock market is plummeting and panicked investors are pouring

NYC

205 Water Street

money into gold, it would seem a less-than-prudent moment to predict the next cycle of new residential development in New York City. But despite the economic turmoil, some New York City developers and their consultants are holding fast to the theory that the increasing demand for living space in the

city means that it’s a good time to bet on new residential buildings. “We’re starting to see purchasers willing to pay, if not above-peak prices, pretty close to peak —

where they were in the second quarter of 2008,” said Kelly Kennedy Mack, president of Corcoran Sunshine Marketing Group. Developers “are optimistic about future market conditions. … They have a real appetite to jump back in after sitting on the sidelines” during the downturn. While developers may be getting their feet wet once again, the pipeline of projects looks quite a bit different than it did during the last round. For one thing, most of the condo projects slated to open in the immediate future are of a much smaller scale than they were during the boom, thanks to a still-tight credit market and developers who are still wary of bringing hundreds of units online at once. Anything getting ﬁnanced on a

Ken Horn

larger scale today is likely a rental building, industry experts say.

A review of condo offering plans submitted to the Attorney General’s office shows fewer offering plans this year than last, and shows that the vast majority of projects coming online through the beginning of 2012 have fewer than 20 units. And with the remaining inventory at boom-time projects like the Edge and the Sheffield now selling at a fast clip, it appears that boutique buildings with a couple dozen units or less will be dominating the market for at least the next couple of years. With the exception of Extell Development’s 1,000-foot One 57 condo and hotel tower, which is slated to launch sales in the fall, the next wave of mega condo projects isn’t likely to come to the market until 2014, 2015 and beyond. While there are hundreds of condos planned at sites like the former Drake Hotel, St. Vincent’s Hospital and 99 Church Street, groundbreaking still appears far off. In the meantime, ground-up boutique condos and big, luxury rental buildings will be joined by condo conversions, which are on the rise. These are also easier to finance than ground-up mega condos, and aren’t as risky, since they take less time to produce.

Mayor Bloomberg

And, as they did during the downturn, the affordable housing developers, propelled by Mayor Michael Bloomberg’s ambitious New Housing Marketplace Plan, will continue to be a boon to the construction industry, though they are also favoring rentals these days and bracing for what could

be some major cuts to important federal funding programs. By Sarabeth Sanders

48 What’s really in the pipeline 50 Boutiques in bloom 51 Surviving with less subsidy 52 Conversion diversion

1212 Fifth Avenue

www.TheRealDeal.com September 2011 47

TH E F U T U R E

DEVELOPMENT

NYC

What’s really in the pipeline? Crunching the numbers on NYC’s future new condo units

BY SARABETH SANDERS he real estate market may be cyclical, but a look at the future of new development in New York suggests that the city isn’t in for a second condo boom — at least not yet. Recent headlines give the impression that the city is being hit by a wave of pricey new mega-condo projects. Here’s a sampling: “Penthouses at Extell’s One 57 ask $98.5 million”; “CIM to begin work at Drake Hotel site”; “Nouvel’s MoMA tower is back before city”; and “Two St. Vincent’s sites enter public review.” But many of the headline-worthy projects in the so-called pipeline are still several years off. And while there are projects in the more immediate pipeline, there are far fewer than there were even last year at this time. One 57 is indeed already rising and set to open for sales in the fall, but the 78-story, Jean Nouvel-designed Torre Verre, which is adjacent to the Museum of Modern Art and is slated to have 480,000 square feet of residential development space, isn’t scheduled to break ground until at least 2013 — maybe as late as 2015 — as the arts blog CultureGrrl recently reported. And although the CIM Group-Harry Macklowe venture at the former Drake Hotel site has hired architect Rafael Vinoly to design what is likely to be a condo and hotel tower there, ﬁnancing has not been secured, and there are two properties on the site that the developers have yet to acquire. The city’s real estate industry will also likely have to wait until at least 2014 before setting eyes on the 450 condos developer Bill Rudin is planning at the former St. Vincent’s Hospital site in Greenwich Village. Meanwhile, in an interview with The Real Deal this month, Silverstein Properties CEO Larry Silverstein said it’s “premature today” to even mention a construction loan at another much-talked-about hotel and condo project, the Four Seasons at 99 Church Street. It won’t break ground until 2013, and won’t open until sometime in 2015, Silverstein said. This month, The Real Deal analyzed data from the state Attorney General’s ofﬁce to get a handle on what is actually on deck for New York City’s immediate new development future. Although the chatter surrounding major new mega-condos has undoubtedly gotten louder in recent months, the numbers show that for the next 12 to 24 months, new condo product coming online will be very scarce.

Shrinking pipeline So far in 2011, the AG has received offering plans for 89 proposed new condos containing some 1,903 new units. (That num48 September 2011 www.TheRealDeal.com

ber doesn’t include the 18 condo conversion plans submitted during the ﬁrst two quarters — see related story on page 52). Based on the average rate of submissions by month, that puts the AG on track to receive 133 new condo plans with 2,854 units by the end of the year. That’s down markedly from 2010, when the AG received plans for 229 projects and 4,870 units. In comparison, developers submitted

construction financing has finally started to open back up? “There is clearly a lot of hype surrounding new development,” said Jonathan Miller, CEO of the appraisal firm Miller Samuel. When it comes to lending, “the talk is it’s looser,” said Extell Development Company president Gary Barnett, whose project, One 57, is being developed through a partnership with an Abu Dhabi govern-

Santander for a $700 million construction loan for the $1.4 billion, 1,000-foot-tall tower, which has already risen above 20 stories. At press time, Extell hadn’t yet ﬁled an offering plan for the project with the AG. Miller agreed that ﬁnancing for residential lending is not easing. “In fact, over the past six months it’s actually tightened,” he said. That’s one reason why there are fewer

New condo units by borough YEAR

NYC

MANHATTAN

BROOKLYN

QUEENS

BRONX

STATEN ISLAND

2006

23,879

10,660

9,404

2,942

592

281

2007

13,990

3,190

6,665

3,762

366

2008

12,073

4,815

4,365

2,579

137

177

2009

5,469

839

2,557

1,898

126

2010

4,870

783

2,297

1,566

186

2011 (YTD)

1,903

466

994

351

Source note: New York State Attorney General’s ofﬁce

A rendering of Jean Nouvel’s 78-story tower on West 53rd Street, which isn’t scheduled to break ground until at least 2013

“On the condo side, people are looking to do projects that are more manageable — that you can see through in a more reasonable amount of time.” David Von Spreckelsen, Toll Brothers City Living 467 Keap Street in Williamsburg

David Von Spreckelsen

Tom Elliott

plans for 444 new condo projects with 12,073 units in 2008, before the bottom dropped out of the market. The number of submitted plans and units had actually been on the decline prior to that. Filings have been shrinking since 2007, when lenders began to pull back on both construction and end loans. But whatever happened to the common refrain of the past couple of months that

ment fund. “The actuality is, it’s not much looser.” He added: “Especially with this latest ﬁnancial mini-crisis, the banks are still being very cautious. … Projects are being underwritten on a very conservative basis, [with] 40 to 50 percent equity in many cases.” The Wall Street Journal reported in July that Barnett was nearing a deal with a lending group led by Bank of America and Banco

projects in the pipeline now than last year at this time. “Developers and lenders see this, and either can’t get ﬁnancing or are opting to wait,” Miller said. Heather McDonough, a broker at Prudential Douglas Elliman who works frequently with condo developers, offered another possible explanation for the decline in plans from 2010, when credit was also tight. Even if the market is indeed reheat-

TH E F U T U R E ing, today’s developers may be “waiting for a more completed product to offer their buyers” before ﬁling their offering plans, she said. In the past, when selling off of ﬂoor plans alone was common, they were probably more anxious to get their plans approved early on so that sales could begin, she said. The AG’s data tracks the date when plans

DEVELOPMENT

er projects coming to the market in that time frame, and that the projects that will launch are relatively tiny (see related story on boutique projects on page 50). Of the 89 new condo offering plans that had been submitted year-to-date as of mid-August, 60 were for projects containing fewer than 20 units; 42 contained fewer than 10. Just two plans — Toll Brothers’ 205 Wa-

NYC

sonable amount of time,” said David Von Spreckelsen, president of Toll Brothers City Living.

Future activity brewing That’s not to say the construction industry is totally stagnant for large-scale multifamily deals. But many of these projects are either rentals or are not expected to

“The viability of some of those projects was relatively uncertain until everybody got comfortable with where the market was headed. … Many of those projects are now moving forward.” Kelly Kennedy Mack, Corcoran Sunshine

New NYC projects ﬁled by quarter, 2008-2011 YE AR A

1ST QUARTER

2ND QUARTER

3RD QUARTER

4TH QUARTER

2008

138

110

107

2009

2010

2011 (YTD)

18 (SO FAR)

N/A

Source note: New York State Attorney General’s ofﬁce

205 Water Street will launch this fall.

15 largest condo plans ﬁled in 2011 (year-to-date) RANK

NAME / ADDRESS

NEIGHBORHOOD

UNITS

250 West Street*

Tribeca

111

Ainslie Tower, 467 Keap Street

Williamsburg

505-515 Flushing Avenue

Williamsburg

80 Meserole Street

Williamsburg

Sycamore Court Condos*

Riverdale

205 Water Street

Dumbo

Walker Tower, 212 West 18th Street

Chelsea

1212 Fifth Avenue*

East Harlem

Sherwood Condominium, 1495 East 28th Street

Sheepshead Bay

180 Scholes Street

Williamsburg

182 15th Street

Park Slope

Bergen Green, 801 Bergen Street

Crown Heights

The Touraine, 132 East 65th Street

Upper East Side

11-25 45th Avenue

Long Island City

130 West 12th Street

Greenwich Village

Source note: New York State Attorney General’s ofﬁce. *Indicates projects that have launched sales.

are initially submitted, rather than when projects are approved for sales or completed. Developers are not allowed to launch sales until their plans are approved, and the AG has 30 days to respond to submissions, though the comments and revisions process can drag things out longer. So the numbers for 2011 are indicative of which new development condos are likely to come online in the next three to six months. The data shows that there are vastly few-

ter Street in Dumbo and Elad Group’s 250 West Street — listed 100 units or more. Elad’s project, which started sales in July, has 111 residential units. Toll’s project, which will launch this fall, actually only contains 65 residential units; the 149 units listed in the offering plan include the parking spaces that will be for sale. “On the condo side, people are looking to do projects that are more manageable — that you can see through in a more rea-

come online for three or four years. By virtually all accounts, ground-up construction is revving up more briskly for rental buildings than for condos, though reliable data on rental projects is more difﬁcult to come by because they aren’t required to go through the same state-approval process. In many cases, stalled condo sites are set to return from hibernation as rentals. That is what happened at 111 Kent Avenue in Williamsburg, which developer Larry Gluck’s

Stellar Management picked up in March. Occupancy at the 62-unit building is slated for the fall. It was also the story of the former Beach Russ factory site at Williamsburg’s nearby 544 Union Avenue, which was originally supposed to be developed as a six-story condo. After changing hands last year, the new building now under construction there is set to be a 98-unit rental and is expected to launch in late 2012. Brand-new sites are being planned as rentals, too. According to new development leasing consultant Nancy Packes’ most recent rental market report, a total of 3,584 new rental units are slated to come online in New York City in 2012 or later, in projects like the Avalon West Chelsea (691 units), the Ten23 (111 units), Gotham West (1,350 units) and 10 East 102nd Street (232 units). Meanwhile, Packes is forecasting that 2,492 rental units will have hit the market by the end of 2011 (351 units at the Chetrit Group and Stellar Management’s Columbus Square are supposed to come online before the year is up). There are also some stalled-condo revivals that aren’t represented on the AG’s list of newly submitted plans. For example, Tribeca’s 56 Leonard Street, which has 145 units, is slated to launch this fall after three years of no activity, according to Kelly Kennedy Mack of Corcoran Sunshine Marketing Group. In addition, Mack said Corcoran Sunshine has a $7 billion pipeline of projects set to come to the market over the next three to four years. That includes 99 Church Street and many other projects that have, for years, been considered stalled. “The viability of some of those projects was relatively uncertain until everybody got comfortable with where the market was headed,” Mack said. “Many of those projects are now moving forward.” Mack said her firm is currently tracking around 50 projects in Downtown Manhattan that are scheduled to launch by 2014. Most of them are smaller properties, and some already have construction financing. In Midtown, where most of the larger future projects are located, Corcoran Sunshine is tracking 13 new projects for that same time frame. Aside from One 57’s expected sales launch this fall, Mack listed Nouvel’s Torre Verre, the Drake Hotel site and Starwood Capital and Tribeca Associates’ Donnell Library site as the major projects to watch in the coming years in the “prime Midtown corridor.” The initial time line for the Donnell Library site has the developers delivering a new library — and, presumably, the 140,000 square feet of condos planned above it — in mid-2014. Of course, the timing of all those projects “is really dependent on when construction financing opens up for much larger-scale projects,” Mack said. And despite the volatility of the market over the past few weeks, “everyone thinks it will.” TRD www.TheRealDeal.com September 2011 49

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Boutiques in bloom

With lending tight and buyers cautious, Manhattan sees steep drop-off in the size of new condo projects BY SARABETH SANDERS t the height of the boom, The Real Deal often wrote of the developers of massive condominium towers one-upping each other with newer, bigger buildings and the next best over-the-top amenity. At Midtown’s 220-unit Platinum, there was the golf simulator and the massage

condo projects since the boom is palpable in Manhattan. According to data compiled by real estate aggregator StreetEasy, the average new condo to hit the market in the borough during 2007 contained 81 units. At that time, buildings like Midtown South’s Twenty9th Park Madison (142 units) and the Upper East Side’s Century Tower (128 units) were hardly headline-grabbers.

“If you look at the major lenders in past markets, it was Lehman Brothers, iStar and Anglo Irish,” said Shaun Osher, founder and CEO of the residential brokerage Core. “Once those three lenders stopped lending and canceled projects, that had a major impact on the psyche of large developments.” So, in place of the Manhattan Houses (581 units) and the Shefﬁelds (580 units)

more risky, not just for the lender and the developer, but for the buyer. In order to qualify for Fannie Mae ﬁnancing, for example, buildings must reach either 51 percent or 70 percent presold. That’s a lot easier to accomplish with 20 units than it is with 200, and today’s buyers are keenly aware of the potential repercussions of purchasing a unit in a large build-

New Manhattan condos launch with fewer units on average

2006: 83 2007: 81 2008: 44 2009: 28 2010: 48 2011: 34

Alchemy Properties’ Kenneth Horn at his under-construction 57-unit condo at 15th Street and Fifth Avenue

room. At the 258-unit Riverhouse in Battery Park City, there was the pet spa. And at the Financial District’s 319-unit William Beaver House, basketball and squash courts, a hot tub and an outdoor shower were all part of the original attempts to woo buyers. How things have changed. Now, with much of the inventory from the boom era’s mega-condos sold off, boutique buildings with fewer amenities are dominating the new development sales market. There’s still the occasional pet spa, of course (see the Related Companies’ 42nd Street condo-rental behemoth MiMA), but the economic climate of the past few years stifled the pipeline on massive projects. So developers, out of necessity, began favoring smaller, more intimate buildings, where privacy was the draw, not flashy bells and whistles. “For the last two years you didn’t see bigger deals,” said Andy Gerringer, the managing director of new business development at the Marketing Directors. “The [projects] coming out today were deals that were worked on a year or two years ago, and that’s when the financing was really difficult.” Indeed, the drop-off in the size of new 50 September 2011 www.TheRealDeal.com

Source: StreetEasy.

77 Reade Street (left), with 29 units, and 471 Washington Street, with 12 units, both launched earlier this year.

In 2010, though, the average condo was down to 48 units. The Setai Fifth Avenue, with 190 units, was by far the largest to launch. And, so far in 2011, the average condo to come online has 34 units, with the 111-unit 250 West Street the biggest of the pack. It’s no secret that a difficult financing climate is the major culprit. Even as lenders warm to multifamily construction in New York, rental developers have reaped most of the benefits. New condos, particularly of the several-hundreds-of-units breed, have been scarce.

have been rentals and boutique condos with a few dozen units or less — like 77 Reade Street and 471 Washington Street, both of which launched earlier this year, with 29 and 12 units, respectively. “There are a lot more people who can pull off a small project,” Osher said. “The equity required to pull off a deal now is a lot larger than it used to be because banks are requiring a larger loan-to-value [ratio], and [there are] not a lot of people who can write a big check.” Large condo projects are also inherently

ing that winds up stagnating, having just witnessed so many boom-time developments go belly-up. “The boutique quality of buildings is becoming important to people because they’re fearful that perhaps if they buy in a 300-unit building and only 100 units are sold, then there are 200 units unsold,” said Kenneth Horn, president of condo development firm Alchemy Properties, which he noted generally focuses on 30- to 70-unit projects. Alchemy is currently developing a 57-unit condo at 15th Street and Fifth Avenue, as well as a 43-unit condo and townhouse complex in Carroll Gardens. Both projects have financing already lined up. David Maundrell, founder of Brooklynbased brokerage aptsandlofts.com, said his company’s recent new development marketing contracts reflect the boutiques-only trend. While aptsandlofts.com will be representing a slew of new rentals set to come online in 2012 and beyond, he said, the vast majority of the company’s new condo pipeline — which Maundrell described as “all these little boutique things all over the Continued on page 114

PHOTOGRAPH OF HORN FOR THE REAL DEAL BY CHRIS MARTIN; BUILDING PHOTOGRAPHS BY DEREK ZAHEDI

TH E F U T U R E

DEVELOPMENT

NYC

Surviving with less subsidy City’s affordable housing goals on track despite budget cuts, but threats loom

BY SARABETH SANDERS ver the summer, New York City crossed the three-quarters mark on the way to Mayor Michael Bloomberg’s goal of churning out 165,000 units of affordable housing by 2014. In his announcement of the milestone, the mayor boasted that the number of New Yorkers ultimately beneﬁting from the plan will exceed the total population of Miami. Of course, Bloomberg has never been short of lofty ambitions. But he picked a challenging time to wager a piece of his legacy on real estate development. In the midst of the ﬁnancial turmoil over the past few years, few construction projects have made it off the ground. Bloomberg’s proposal, dubbed the New Housing Marketplace Plan, was launched in 2003 to spur the development and preservation of subsidized housing for low- to middleincome New Yorkers through a variety of funding programs and tax incentives. But it has already been altered to remain viable in today’s climate. Since the onset of the recession, the program’s focus has shifted from building expensive new-construction units to preserving the existing affordable housing stock, including the many aging Mitchell-Lama apartment buildings scattered throughout the city. Meanwhile, the program’s homeownership component was virtually eliminated in favor of restricted-income rentals, and its original deadline was extended by a year.

Now, severe budget cuts and the looming threat of a double-dip recession are making those last 40,000 units look especially difficult to produce. Most recently, the mayor’s capital budget for 2011 through 2014 slashed its allocation to the Department of Housing Preservation and Development by $70 million. “Resources have been more constrained than originally hoped for,” said Lisa Gomez, executive vice president of development at L+M Development Partners, which currently has some 1,000 new-construction affordable housing units in the pipeline, plus 1,000 to 2,000 additional units slated for preservation. “There were large cuts.” Luckily, though, developers have access to a variety of funding sources “that are not all capital-budget-dependent,” noted Gomez, who is also a former senior vice president of development at the city’s Housing Development Corporation, where she worked as part of Bloomberg’s original New Housing Marketplace team. Indeed, an alphabet soup of state and federal programs help finance affordable housing development in New York City, including the state’s Housing Trust Fund (HTF), and the federal HOME grants and Low-Income Housing Tax Credit (LIHTC) programs, to name just a few. And, the administration is confident that it will be able to meet its housing goals despite cuts to its capital budget. Developers say that in some ways, building affordable housing is easier

CAMBA Gardens in Brooklyn

Gotham West in Midtown

Mayor Michael Bloomberg A rendering of the Domino Sugar Factory project

A rendering of Hunters Point South in Long Island City

now than it was during the real estate boom. Still, new threats to federal funding sources have the affordable housing industry worried.

With the debt-ceiling debate finally over, Congress has moved on to its next battle: figuring out how to slash the federal deficit Continued on page 106

Some of the biggest upcoming affordable housing projects in NYC PROJECT NAME

NEIGHBORHOOD NO. OF AFFORDABLE UNITS

Hunters Point South, Phase I

Long Island City, Queens

685

Low-, middle- and moderate-income rentals

2014

Domino Sugar Factory

Williamsburg, Brooklyn

660

Low- and middle-income rentals

2021

Gotham West

Hell’s Kitchen, Manhattan

600

Low-, middle- and moderate-income rentals

2013

Gowanus Green

Carroll Gardens, Brooklyn

540

Mixed-income rentals, co-ops and condos

2014

West Farms Square

West Farms, The Bronx

526

Low- and moderate-income rentals

2012

Prospect Plaza

Brownsville, Brooklyn

360

TBA

The Ciena and Hobbs Court Apts

East Harlem, Manhattan

338

Low-income rentals

2011

Harlem River Point

East Harlem, Manhattan

314

Low-, middle- and moderate-income rentals

TBA

Melrose Commons North – Site B

Melrose, The Bronx

290

Mixed-income

TBA

Melrose Commons North – Site C

Melrose, The Bronx

257

Low- to moderate income

TBA

Via Verde

Bronxchester, The Bronx

221

Low-income rentals & middle-income co-ops 2012

Melrose Commons North – Site A

Melrose, The Bronx

216

Low-income

TBA

CAMBA Gardens

Flatbush, Brooklyn

209

Low-income and special-needs rentals

2013

Gateway Elton Street I

Spring Creek/ 197

Low-income rentals

2012

Low- and middle-income rentals

TBA

East New York, Brooklyn 461 Dean Street*

Prospect Heights, Brooklyn 184

TYPE

EXPECTED DATE OF COMPLETION

Source note: HPD, The Real Deal research, published reports *This is the ﬁrst residential building at the Atlantic Yards site, which is ultimately slated to have 2,250 units of affordable housing. www.TheRealDeal.com September 2011 51

TH E F U T U R E

DEVELOPMENT

Conversion diversion Condo conversion plans spike as developers look to refashion existing buildings rather than doing ground-up construction BY PETER KIEFER fter a rocky few years during the downturn, New York City condo conversions are starting to make a comeback, and some of the city’s marquee developers are getting in on the action. Conversions are currently underway in Harlem, the Upper East Side, Times Square, Dumbo, the

Lower East Side and Brooklyn Heights, to name a few neighborhoods. And several of those plans have been solidiﬁed over the past six months, adding a new sheen to the condo market that for the past several years appeared to be in a state of self-induced penance. According to the New York State Attorney General’s ofﬁce — which signs off on condo conver-

sion plans — the number of plans filed so far this year is on the rise. In the first two quarters of 2011, 18 plans were filed for condo conversions under Part 23, the state regulation that governs rental-to-condo conversions. That was nearly three times as many as the seven plans submitted over the same period in 2010 and almost as many as the 20 filed

NYC

for all of last year (see chart). While those raw numbers are not earth-shattering, the fact that they have jumped is significant. “The time line to get to market by purchasing a rental, rehabbing it, and selling it as a condo is significantly shorter than buying raw land and having to start from scratch,” said David Behin, a partner at marketing and sales firm MNS and the president of the investment sales and consulting division at the company. “So the opportunities that provide the quickest returns, if financially feasible, will go first, as you are seeing.”

And it’s not just residential buildings being converted. Ofﬁce buildings are also in developers’ crosshairs. For example, in June, Crain’s New York Business reported on the planned conversions of 93 Worth, a 165,000-square-foot Downtown ofﬁce building, to condos, and 1450 Broadway, which

NYC condo conversion plans submitted by year 2006: 46 2007: 75 2008: 37 2009: 17 2010: 20 2011: 18 (so far)

Source: NYS Attorney General’s ofﬁce; includes Part 23 rental-to-condo ﬁlings.

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the Zar Group purchased for $204 million. In the latter case, Zar is planning to lease the building to office tenants in the near term, but is reportedly considering converting it into residential units in the future. Since Part 23 filings cannot move forward until 15 percent of a building’s available units have been sold to residents planning to move into the building within 15 months, the plans submitted to the AG clearly show some appetite in the market for new product. Many of these new conversions are being done by high-profile developers like Aby Rosen, Douglas Durst and Harry Macklowe. Rosen and his partner, Michael Fuchs of RFR Holding, have set their sights on a rental building at 530 Park, which they intend to turn into high-end condos, while Macklowe is converting a 108-unit rental building that he bought in May, at 737 Park Avenue for $255 million, into luxury condos. (The Real Deal published a detailed breakdown of the latter project in the June issue.) Similarly, at 1212 Fifth Avenue, Durst Fetner Residential is converting a 16-story prewar rental building, which it bought from Mount Sinai Hospital back in 2009, to condos. Prices there range from $735,000 to $7.99 million, according to the New York Post. All of this comes as some newer conversions that were conceived Continued on page 114

52 September 2011 www.TheRealDeal.com

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CMBS shockwaves

A look at the abrupt summer stall in the commercial mortgage market that could hinder New York City’s commercial real estate recovery BY C. J. HUGHES uly 27 was a dark day for commercial mortgage-backed securities, or CMBS. On that day, Goldman Sachs and Citigroup were set to begin selling a $1.5 billion batch of CMBS, secured in part by some New York City properties. But at the last minute, Standard & Poor’s essentially put the kibosh on the deal. The rating agency said it had discovered a “glitch” in its methodology and would need more time to vouch for the worth of the mortgages at the heart of the bonds. Without the blessing of S&P, the deal died. And with that, the CMBS market — in which pools of real estate loans are bundled together and sold to investors — hit a major snag few had anticipated when the year began. S&P’s move — along with wild stock market fluctuations, concerns about the debt crisis in Europe and the renewed round of economic problems — helped knock the wind out of the sails of the CMBS market and confirmed the industry’s worst fears of a slowdown. Many expected the CMBS market to quadruple in value from $13 billion in 2010 to $50 billion by the end of 2011, as investors started to regain faith in the strength of the commercial real estate market. Instead, they now expect CMBS issuances to be just $30 billion this year, which calls into question reports of the market’s recovery. When the canceled deal was announced, “in shops across the city, people were screeching,” said a source familiar with many of these “shops,” or banks, who asked to remain anonymous. Especially in the context of the broader macroeconomic meltdown, the source said, “people were hysterical.” There was little direct effect, meanwhile, on the mortgages underlying the Goldman and Citigroup investments. The owners of those buildings had received their loans well before the mortgages were rebundled and issued as bonds. But for the issuers, Goldman and Citigroup, the nixed deal left them vulnerable to large losses, since they were stuck with the underlying mortgages, which they’d been planning to bundle rather than holding on their books. In addition, analysts believe the daisy chain that makes up the lending market is at risk. Without the secondary market that the Goldmans of the world use to sell their loans, smaller lenders might not have deep enough pockets to, say, refinance a 16-unit apartment building on the Upper East Side. The S&P situation could still put a damp-

56 September 2011 www.TheRealDeal.com

er on the larger commercial real estate market, according to Thomas Fink, the head of business development for Trepp, a CMBSfocused research firm. This is the first time, Fink noted, that he recalls a ratings agency bailing on a deal in such a way. “The ramifications of something like [the S&P glitch] are like an engine seizing up on a motor,” said Fink, a former investment banker. “It increased the volatility in the market, and it caused concern among

es to sell, and the market will continue to break down. And as the economy sputters, lenders are demanding stricter repayment terms, sometimes to the point where deals don’t make any ﬁnancial sense for the borrowers, said Peter Mignone, a partner in the real estate practice at the law ﬁrm SNR Denton in Manhattan. “Lenders are not in this game to lose money,” Mignone said. So, “you’re having lots of somber conversations between lend-

returns, since they’re committing to a security in a turbulent market, analysts said. In addition, if profit margins are thin on CMBS, banks will turn around and squeeze their vendors who are providing the mortgages in the first place to make up the profit, creating a vicious cycle, analysts said. Mignone blames the recent market volatility not on any fundamental weaknesses in New York real estate or on the S&P loan recall — indeed, lenders continue to talk

“The CMBS market is in the toilet. Every securitization that has come out in the last 60 days or so has priced well below expectations.” David Viklund, Paul Hastings chief investment ofﬁcers, who are now wondering if the asset class is stable.”

Looking ahead What this sudden cooling of the CMBS market means going forward is anything but clear. “People probably won’t tell you this, but a lot of shops have put their pens down for the rest of the year,” said an industry source. Of course, the CMBS market is a twoway street. If potential buyers of real estate assets don’t agree to loan terms with lenders, there will be no more mortgag-

ers and borrowers saying, ‘Hey, let’s ﬁgure out something.’” The canceled offering has shaken conﬁdence in the industry, said one inside source, who compared it to an auto recall: “You’re a car salesman, you just sold a bunch of cars, and your supplier calls up and says, ‘We’re reviewing whether the brakes we just put on the cars are legal or not.’” The source added, “You know what kind of message that sends to the guy who has been pushing his boss to buy [CMBS]?” Other economic realities are putting pressure on CMBS issuers too, creating new problems. For one, investors want bigger

about many opportunities there, he said — but on outside, unrelated forces. “It’s more a commentary about U.S. politics and debt problems in Europe,” he said. “It seems to be an external system shock.” The political state he was referring to involved a weeks-long standoff between Democrats and Republicans over the country’s debt limit, exposing deep ﬁssures and some uncertainty about the nation’s ﬁscal future. The drawn-out battle led S&P to downgrade the country’s AAA rating — a move that some lenders also criticized the ratings agency for. Ongoing worries about whether certain European nations like ILLUSTRATION FOR THE REAL DEAL BY DAVID COLE

Spain and Italy can pay their bills because of their own debt woes has also made for a cloudy long-term economic outlook, which could have negative repercussions for the real estate industry. At the same time, there are concerns that the workouts behind the loans backing CMBS need greater scrutiny. Sources said many of the special servicers who hammer out those kinds of deals, which used to be independent, are now owned by real estate companies, creating possible conﬂicts of interest. For instance, LNR Partners, which restructured the $1.2 billion mortgage on 666 Fifth Avenue, is now owned by Vornado Realty Trust and partners. And, Vornado recently acquired a 50 percent stake in 666 Fifth, while reducing the building’s loan balance and cutting its interest rate. Similarly, Fortress Investment recently bought special servicer CWCapital Asset Management, and Island Capital purchased special servicer Centerline Capital.

Good times, bad times In happier times, roughly one-third of all landlords and developers depended on CMBS bonds to finance real estate deals. The recent peak of the CMBS market was in 2007, when $243 billion in securities were issued, according to Trepp. By 2009, however, as the office market was tanking, there were just $2 billion in new CMBS offerings. If 2011 had posted $50 billion as expected, it would have marked a vast improvement over recent years, though it still would have only been on par with 2002, when $53 billion in CMBS were sold, according to Trepp. Some lenders who rely on CMBS as a source of capital confirm they have lowered their expectations for the rest of the year. For example, Ladder Capital, a nationally focused, New York-based lender whose portfolio includes CVS pharmacies, will issue far fewer loans than it expected in the next four months, according to a source at the company. Still, the CMBS market hasn’t completely dried up. Archetype Mortgage Capital, which launched in April with the backing of the same

“People probably won’t tell you this, but a lot of shops have put their pens down for the rest of the year,” said an industry source. team that bought LNR — Vornado, with Cerberus Capital Management, iStar Financial and Oaktree — said it’s staying the course. Archetype, which has $725 million in its pipeline, may not have been slammed as badly as its peers because its exposure is far more limited. “We were lucky rather than good,” said Larry Brown, Archetype’s president, adding that he now has to charge more for his loans, because he’s being paid less for each of them. He said his margins are smaller because it’s harder to resell CMBS loans now. (Like any middlemen, the issuers take a cut of the loans they pool and sell.) Last month, Deutsche Bank and UBS together priced a $1.4 billion CMBS offering that is backed by debt from construction loans on new New York hotels, including a pair of Fairfield Inns on West 37th and West 40th streets. Also in the portfolio is debt from the purchase of 283 East 234th Street in the Bronx, a four-story, 21-unit apartment building last listed for $2.6 million. (A spokesperson for Deutsche Bank did not return a call for comment.) On another front, it appears S&P has now gained confidence in its rating methods. Indeed, on Aug. 5, it announced that it could now effectively determine the value of the Goldman/Citigroup bond, which is expected to be floated again after Labor Day. S&P also said it could now rate other bonds again. But late last month, the New York Times reported that Goldman and Citigroup hired S&P competitor Moody’s Investors Service to step in and rate its sale. Critics frequently point to banks’ willingness to simply switch rating agencies until they find a rating that’s favorable. S&P may not be out of the hot seat. In mid-August, the Justice Department announced that it was investigating the agency for possibly overvaluing mortgage securities over the years to help out its clients and pad its bottom line. And S&P’s downgrade of the country’s bond rating caused the government to accuse it of major accounting errors, leading to recriminations from political leaders. For its part, S&P claims that it’s evolving in lockstep with a changing regulatory environment. “Since 2008, S&P has implemented many steps to further enhance our analytics, independence and to prevent commercial interests from influencing ratings,” it said in a statement. In the meantime, all those touched by the stalling of the CMBS market are hoping for a rebound. Without it, the billions in debt coming due on commercial real estate loans will have a hard time getting refinanced, according to David Viklund, a lawyer in the real estate practice at the firm Paul Hastings. “The CMBS market is in the toilet. Every securitization that has come out in the last 60 days or so has priced well below expectations,” said Viklund, adding that “CMBS is needed for a full and complete real estate recovery. “There’s just not enough money out there without CMBS, and banks can’t do this alone,” he said, adding ruefully, “There is an amazing dichotomy between now and April.” TRD www.TheRealDeal.com September 2011 57

THIS MONTH IN

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REAL ESTATE HISTORY The Real Deal looks back at some of New York’s biggest real estate stories 1994: GIULIANI LAUNCHES PROGRAM TO SELL

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FORECLOSED RENTAL BUILDINGS

ayor Rudolph Giuliani announced a plan dubbed “Building Blocks” to turn over thousands of tax-delinquent apartment buildings that the city had repossessed for a nominal cost to new private owners, 17 years ago this month. At the time, the city owned about 29,500 units in 2,910 multifamily buildings that it had taken title to because the owners were unable to pay their real estate taxes. The program ﬁrst targeted buildings in Central Harlem, Bedford-Stuyvesant and the South Bronx. At the time, ofﬁcials said it would cost the city $175 million a year for management and upkeep of the distressed properties in its portfolio. Rudolph Giuliani The program was one in a long string of initiatives by New York City mayors to remove residential multifamily buildings from municipal care and return them to private hands. From the 1970s through 1993, when Giuliani was elected, the city had taken title to thousands of properties after their landlords defaulted on taxes and the city foreclosed on them. The city halted that foreclosure process in 1993 and now sells the liens representing the outstanding debt on the properties to trusts that pursue payback from the owner. The city also arranges third-party transfers to a new owner. Aided by a revived economy, Giuliani’s effort appears to have borne fruit. From 1994 to late 2000, the number of apartment units the city owned fell by 59 percent to 12,362. By 2000 there were only 133 apartment buildings still owned by the city.

1963: REBNY FOLLOWS BETTER BUSINESS BUREAU IN FIRST-EVER ROOM-COUNT STANDARDS

o curb inaccurate residential real estate advertising that exaggerated the size of apartments, the Better Business Bureau of Metropolitan New York and the Real Estate Board of New York adopted standards defining how rooms should be counted, 48 years ago this month. Both organizations were responding to complaints from consumers that advertisements deceptively counted foyers, terraces, alcove kitchens and balconies as rooms, thereby inflating the size of the apartment in ads. The new rules stated that those areas and others (such as bathrooms) could not be included in a property’s room count, although they would be listed. In the first week of the month, the Better Business Bureau published its new guidelines to be used by those advertising properties in the greater metro area, defining what was technically considered a room. REBNY issued its own, very similar, guidelines about a week later. The Better Business Bureau’s guidelines went into effect on Sept. 15, 1963, while REBNY’s did so on Jan. 1, 1964.

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1937: NATION’S LARGEST LOW-INCOME HOUSING PROJECT OPENS IN BROOKLYN

enants began moving into the Williamsburg Houses in Brooklyn — the largest neighborhood redevelopment rental complex in the United States at the time — 74 years ago this month. The move-ins started with 45 families, many of whom formerly lived in dark tenement ﬂats with only cold water. The new buildings, which included 1,622 apartments, were located on four “super blocks,” bounded by Leonard Street, Bushwick Avenue and Maujer and Scholes streets, in central Williamsburg. Rents ranged from about $17.80 per month for a twobedroom to $28.80 per month for a ﬁve-bedroom. More than 25,000 New York residents applied for the limited number of spaces in the Modernist-style buildings designed by architect Richmond Shreve, which were set Williamsburg Houses 15 degrees off the traditional street grid in an effort to get more light in the rooms. Some 600 low-rise buildings, mostly frame construction, were demolished to make way for the project. The Depression-era Project Works Administration developed the 20 four-story buildings at a cost of $12.8 million. The 23-acre complex was managed by the New York City Housing Authority, which was founded just a few years earlier, in 1934. Compiled by Adam Pincus

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The bottom line: Have you raised or lowered rents recently? Downtown, we’ve raised rents 15 percent over the last year, but in Queens and Washington Heights, not so much. We’ve frozen rents in some areas and jacked them up in others. But to our existing tenants, our renewals are always below-market. If we have a good tenant, we always give them an incentive to stay. It’s always been my philosophy to keep tenants in place. How are city and state laws impacting your business? The conversion of the No. 6 oil burners to No. 2 or No. 4 oil burners is a new Bloomberg administration law that will kick in next year. The conversion is an expensive process — for a small to midsize apartment building, it will cost $25,000 to $45,000. There’s also a new elevator inspection rule imposed last year. In addition to all the previous inspections we were already doing, with all their filing fees, we have to hire an independent engineer to inspect each elevator cab, and those costs will run us a couple thousand dollars per cab.

By Jane C. Timm

Life as a landlord: What’s the most challenging part of owning NYC buildings? The regulations and the court system; there’s really nothing like it in the country.

Vital stats:

Name: Joseph Sbiroli Title/Company: Principal of Ventura Land Corp. Age: 52 Family: Married 16 years, with two boys, ages 7 and 11 Hometown: Jackson Heights, Queens Currently living in: Lattingtown, Long Island

What is the best part of your job? I love to see the finished products of the buildings and apartments we renovate. It gives me a tremendous amount of gratification to see the finished product and see good people move in. I just love staring at the before-and-after pictures.

How has being a landlord impacted your own home? It makes me an impossible perfectionist. Our house has been sort of under development for about 10 years — much to the chagrin of my wife. I’m building a recording studio in my house, a billiard room, a Ping-Pong room. I spend all this time building A+ apartments, so everything’s got to be up to the standard. 5025 Broadway

Building blocks: How many buildings do you own? 1,000 apartments in approximately 20 buildings. About two-thirds are in Manhattan — West Village, Meatpacking, Upper East Side, Upper West Side, Washington Heights — and the other third are in Queens. They’re mostly elevator buildings, ranging in size from six to 150 units. The three largest are 14-28 Sickles Street and 5025 Broadway in Upper Manhattan, and 149-35/45 Northern Boulevard in Flushing. How did you become a landlord? I was a real estate lawyer … and my father had some investments in real estate — apartment buildings. I decided to leverage my father’s investments into something significant. As much as I enjoyed the legal practice, I was part of a big institution and I felt that it didn’t really fit my personality.

What current events worry you as a landlord? We’re not likely to get any help from Albany right now, with the Republicans holding on to the Senate by such a slim margin. The best we can do is keep our finger in the dike and hope to not have any more damage inflicted.

343 West 16th Street

Tending to tenants: Tenant horror story? Oh Jesus, there’s so many. A former tenant who lived for years in an apartment, not paying rent, and inflicting damages on the place. He was acting as his own attorney, writing motions and briefs and flummoxing some of the highest-paid attorneys that I have! When we finally evicted him, his apartment was infested by roaches and had never been cleaned. Grease everywhere! And he owed us tens of thousands of dollars. We’re still pursuing him in court. Strangest tenant request? I had a tenant ask for additional Sheetrock in their apartment because they didn’t want to hear their neighbor having sex. We actually did it.

Ventura’s Manhattan properties

When and where was your first building? 1987. My first building was in the South Bronx. When I left the building one day and all four tires of my car were slashed, I decided it was time to move on to other neighborhoods. Are you looking to buy more properties now? I’m always looking. Primarily north of 125th Street in Manhattan, where you can find substantially sized apartment buildings that aren’t renting at their potential. They have more room for development, improvement and gain. Downtown, the apartment buildings are already renting at their maximum potential. 60 September 2011 www.TheRealDeal.com

PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN

WHERE CAN YOU FIND CAPITAL IN TODAY'S MARKET?

ARCHITECTURE REVIEW

less bold and exhibitionistic, something more purely formal, but instead there is something theatrical in Maki’s project. To some of us, this isn’t the finest use of geometry. But it does create a subtle visual dissonance — which is also evident at the World Trade Center site — one that at least shows the sort of initiative and vision usually in short supply in the five boroughs. This Astor Place building promises to be a few months ago, when that department fi- the leaders of the Neomodern trend. a composite of three parts. To the east will nally moved to Thom Mayne’s behemoth beThat trend invokes the formal vocabu- stand a low-lying glazed box, which in size tween 6th and 7th streets, on the Bowery. lary and some of the materials of mid-centu- and shape largely recalls the existing strucThe Mayne building is no beauty either ry Modernism in reaction to the often taste- ture. The real drama, however, is reserved — unless one is a hardcore devotee of Decon- less excesses of Postmodern classicism. But for the two other sections to the west, which structivist architecture. But at the very least, it does so with far greater sensitivity than merge into a slab that is clad in dark granit aspires to be good. all but the finest architects could manage ite masonry to the south and in glass to the As for the existing Rationalistic building in earlier generations. north. The masonry part of the slab, which is at 51 Astor Place, one has the impression As is evident at 51 Astor Place, no less taller, culminates in a chamfered top, while that, when it was designed back in the 1950s, than at his World Trade Center tower, Maki the glazed passage to the north slices into ambition was not even an option. Instead it favors a minimalist conception of Modern- the granite zone with startling violence. represented the stale butt end of the Inter- ism with little ostenThere is something assuredly Denational Style — that vanguardist movement sible detail to disturb constructivist here, something neurotic, violent and destabilized — all A rendering of the new building set to rise at 51 Astor Place. of which is considered a good thing, Inset, the existing building at the site, which will be demolished. according to contemporary taste. But it’s simply not in the character of Japanese Neomodernists like Maki to openly embrace so violent an idiom, as Thom Mayne has done down the street. Instead they tend to tame it and harmonize it with good manners. It should be said that however fine the new Maki building may turn out, the whitebrick building due north of it will qualify, if not ruin, much of its effect, since that whitebrick building is every bit as banal as the earlier version of 51 Astor Place. However, when completed, the new building will change Astor Place forever — and far more drastically than Gwathmey Siegel’s tower, or even the contributions of Mayne and Zapata. Though there are offices nearby, this is the boldest architectural assertion for an office building in an area far better known for its row houses that had been inaugurated and head shops, dormiwith such fervor in the capitories and institutions of higher learning. tals of Europe a generation or two earlier. The Maki building will The existing 51 Astor redwarf all the others and veals a total exhaustion of taste hardly harmonize the Developer Edward Minskoff and judgment. It’s a wanly saljumbled buildings around low box accented with a few it. There is something decidedly unlovely in darkened bay divisions that the mix of boldly Deconstructivist works like contain a weary sequence of Mayne’s academic building with the VictoriArchitect insufficient windows. What an Romanesque of Cooper Union itself, not Fumihiko Maki did it say about an instituto mention the pale Classicism of architect tion famous for its architecture school that the glacial surface of his boldly volumetric Daniel Burnham’s stately pile to the west, it could do no better than this? buildings. the former Wanamaker’s department store Maki, who is also the creative force beConceptually, 51 Astor Place reads as a (which now houses a Kmart), as well the exhind the under-construction 4 World Trade cube from which whole chunks appear to have traordinary colonnade of Lagrange Terrace Center, is surely far finer than the original been sliced away, leaving a curiously voided on the Bowery, one of the oldest buildings in architect of 51 Astor. Like his Japanese com- structure. Though Maki is not a Postmod- the city, from 1832. patriots Shigeru Ban — who designed the ernist, but rather a Neomodernist, there is, Whether that effect was worth pursuing in Metal Shutter Houses in Chelsea — and Yo- in this quirky sense of volume, an element of the first place — beyond the fact that it’s clearly shio Taniguchi, whose most famous project Postmodernist irony to the otherwise severe- an upgrade on what’s currently there — must to date is the renovated Museum of Modern ly chaste idiom he cultivates. A Modernist of be answered by each critic and each pedesArt, the 82-year-old Maki has been one of the old school would have chosen something trian based on his or her own tastes. TRD

James Gardner

Maki on a roll

82-year-old Pritzker winner conjures up a volumetric surprise for Astor Place

or better or for worse, there are few places in Manhattan that have changed, or are changing, more radically than Astor Place. A mere 10 years ago, this intersection of Saint Marks Place and the Bowery was, architecturally speaking, a fairly quiet place that had not seen any noteworthy activity in over a generation. Change came in 2005 with Gwathmey Siegel’s winsome and silvery residential tower at 445 Lafayette Street, as well as, more recently, the Cooper Union academic

building designed by Thom Mayne of the Los Angeles-based firm Morphosis. There’s also the Cooper Square Hotel by Carlos Zapata Studio, which was built around an old tenement building and debuted in late 2008. But all of that is small beer compared with what is about to rise in the very center of the area. Coming soon is a 13-story office building at 51 Astor Place, designed by Fumihiko Maki, winner of the Pritzker Prize, architecture’s highest honor, and developed by Edward Minskoff. Minskoff has said that the speculative tower will have 400,000 rentable square feet and an entire square block of retail. Whatever happens hereafter at 51 Astor Place, the total obliteration of the existing building — which is scheduled to come this fall — should prove to be an unqualified gift to this part of Manhattan. A rationalistic blight upon the neighborhood, it served as Cooper Union’s engineering building until 62 September 2011 www.TheRealDeal.com

PHOTOGRAPH OF ASTOR PLACE BUILDING FOR THE REAL DEAL BY DEREK ZAHEDI

100 THEREALDEAL N EW Y ORK R EAL E STATE

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The‘malling’of Manhattan A historic amount of large-scale retail is coming to NYC

Six large new and rehabbed retail sites planned for Manhattan in the next few years are vying for tenants.

But building mall-like space in Manhattan is not a sure thing.

BY ADAM PINCUS

all” has been a four-letter word in the Manhattan retail world for some

The borough is littered with examples of failed attempts at malls — from the Manhattan

time now. Despite that, Manhattan property owners have begun to — or

Mall, which relaunched as an urban mall in the 1980s, but ultimately saw its retail space re-

are planning to — rehab and build a historic amount of large-scale retail

habbed and reduced in size to ﬁnd success, to the World Financial Center itself. However, there are examples of success too. Case in point is Related’s Time Warner Cen-

over the next few years. Currently, developers such as the Westﬁeld Group, Brookﬁeld Properties, the Related

ter, which opened in 2004 and now has 400,000 square feet in its Shops at Columbus Circle.

Companies and Vornado Realty Trust have more than 2.5 million square feet of retail space

Also, the World Trade Center had rising rents and waiting lists for retailers when it was de-

under construction, or at least on the drawing board, in mall-like projects south of 59th

stroyed in 2001. Jeffrey Roseman, an executive vice president with Newmark Knight Frank Retail, said

Street. If all of what’s planned gets built, it would be the greatest amount of large-scale retail space ever delivered in Manhattan during a ﬁve- or six-year period, a review of prior development

there were “probably more than 75 retailers that have [stores with] more than 50,000 square feet in Manhattan.” While brokers don’t believe the new locations signify a sea change for retail (at least

by The Real Deal shows. Brokers differed on what impact such a large amount of space would have.

when it comes to drawing consumers away from storefronts and into urban malls), the

“I believe it will have a huge positive effect on New York,” said Joanne Podell, executive

If all of the planned projects get built, it would be the greatest amount of large-scale retail space ever delivered in Manhattan during a ﬁve- or six-year period, a review of prior development by The Real Deal shows.

vice president of retail at Cushman & Wakefield, noting that the borough is still short of retail locations. But Bob Grayson, a retail consultant with the Grayson Group, said if all the locations get built, it could put downward pressure on leasing prices. “There is no question; if all that space does come on the market, it should have an impact on the rents that [landlords] can command, because they’ll be slinging it out, probably for similar tenants,” Grayson said. The first major retail project that’s slated to come online is the approximately 200,000square-foot rehabbed space at the World Financial Center. The next, which is slated to debut in 2015, is the World Trade Center, with about 365,000 square feet of retail. Further uptown, two enormous but still-uncertain plans are in place, for approximately 750,000 square feet at Related’s Hudson Yards and about 750,000 square feet at the Farley Meanwhile, the smaller, 130,000-square-foot Port Authority Bus Terminal is open now, but is undergoing a renovation. And finally, South Street Seaport properties, with nearly 300,000 square feet of retail, are also open, but brokers expect them, too, to be reimagined Not all of the space is new — the owners of the World Financial Center are spending $250 million to rehab the existing retail space there in phases (the mall will stay open during construction). And, while not complete, the reimagined space is in competition to lure in

The World Financial Center’s retail space is undergoing a $250 million rehabilitation.

t’s a battle of the titans — at least when it comes to the World Trade Center and the World Financial Center vying for tenants.

64 September 2011 www.TheRealDeal.com

Every broker interviewed repeated the mantra as if on script: “Manhattan is under-retailed.” Demand from tenants has increased cautiously since the uneasy recovery began. Many term used in the shopping center trade world when a company wants to ﬁnd more locations. Also, major retailers that lack locations in Manhattan, such as Nordstrom and Kohl’s, both reported strong second-quarter earnings last month. “It is mixed, cautious. It’s a slowly increasing curve,” said Chase Welles, executive vice presi-

and re-tenanted.

World Financial Center

as dark economic clouds have gathered again on the horizon.

healthy companies are now telling their real estate departments that they are “open to buy,” a

Post Ofﬁce.

tenants today.

planned construction appears to demonstrate a conﬁdence in Manhattan shopping even

dent at Northwest Atlantic, of demand for new stores. Welles represents big-box tenants such as Staples and Whole Foods. Once potential tenants do decide to make a move, they’ll have plenty of options. Here’s a closer look at some of the in-the-works projects.

That’s because both buildings are currently on the lookout for retailers, although the World Financial is in the market with formal plans, while the World Trade Center’s retail plans have not been released. In addition to timing, there are personality differences between the two. Most insiders expected the World Financial Center to have a slightly more upscale mix of retailers than the World Trade Center. That’s partly because, unlike the World Trade Center, the financial center will not be directly over the area’s main transit hub, and will need to more actively lure shoppers in. “Without the transportation infrastructure, World Financial Center is obviously more suited for destination shopping, and I imagine Brookfield will attract shoppers with a cohesive mix of upscale shopping and services,” said Welles, referring to Brookfield Continued on page 104

Vital stats NAME: World Financial Center LOCATION: Between West Street and the

Hudson River, Vesey and Liberty streets OWNER: Brookﬁeld Properties LEASING: McDevitt Company BROKER ESTIMATES FOR RENTS: $150 to

$400 per foot, and/or percentage rents SIZE: 175,000 to 200,000 square feet COST: $250 million rehabilitation ANTICIPATED DELIVERY: Currently open.

Rehabilitated delivery expected Fall 2013

World Trade Center The World Trade Center is expected to have a broad mix of retailers.

cross the street at the WTC, brokers said they expected the retail to have broader appeal, with more options at the lower end, than World Financial. Stores will likely range from the likes

Farley Post Ofﬁce/Moynihan Station

of GNC, the vitamin giant, and discount fashion tenants such as Strawberry, to more upscale tenants such as handbag purveyor Coach. “There are people of every stripe, from the secretary to the executive. The retail is going to have a broad appeal,” said one retail veteran. Cushman’s Podell echoed that point. “I think Hugo Boss is more likely to be at the World Financial Center, and J. Crew is more likely to be at World Trade Center,” she said, noting that she doesn’t know about those two retailers’ intentions speciﬁcally. In July, the Westﬁeld Group, the Australia-based retail property giant, inked a $612.5 million deal with the Port Authority to take a 50 percent stake in the retail at the site, which includes space both above- and belowground. Sources say the company is likely to tap its relationships with

Port Authority Bus Terminal

The Port Authority Bus Terminal is getting a retail rehab.

he Port Authority is quietly upgrading its retail space at the 51-year-old transportation hub in the bustling Times Square district. It’s trying to capture both tourists and commuters, and

Hudson Yards

elated’s Hudson Yards — which is not yet under construction but could be open for business by 2016 — is also going to shoot for high-end tenants at the new 26-acre neighborhood. The project, which includes plans for 12 million square feet of commercial and residential space, will have Rendering of the Hudson Yards’ Wintergarden about 750,000 square feet of retail on 10th Avenue. “We are looking at bridge to luxury,” Jay Cross, president of Related Hudson Yards, said, using

South Street Seaport Changes are afoot for nearly 300,000 square feet of retail space at the South Street Seaport.

NAME: World Trade Center Retail LOCATION: Between West and Church and

Vesey and Liberty streets OWNER: Port Authority of New York and

New Jersey DEVELOPMENT PARTNER: Westﬁeld Group LEASING: Westﬁeld Group SIZE: 365,000 square feet total. Space is

underground and in Towers 3 and 4. Additional 90,000 square feet possible if Tower 2 gets built. BROKER ESTIMATES FOR RENTS: $200 to $500 per foot ANTICIPATED DELIVERY: 2015

Continued on page 104

About 750,000 square feet of retail is slated for the Farley Post Ofﬁce building.

nother potentially enormous project, the expansion of Pennsylvania Station into the Farley Post Ofﬁce building just to the west, would add as much as 750,000 square feet of retail in the Beaux Arts building. The project, to be named in honor of late U.S. Senator Daniel Patrick Moynihan, would create a new retail destination to bookend vibrant West 34th Street. However, it’s by no means certain. Vornado and Related, which partnered to strike a deal with the state in 2006 to develop the retail, face a year-end deadline to solidify the ﬁnancial terms. Furthermore, three avenues to the east are two malls that provide cautionary tales to retailers. The Manhattan Mall and the Herald Center, both within spitting distance of Macy’s on Sixth Avenue at 34th Street, were reimagined in the 1980s, but failed and were rec-

Vital stats

Vital stats NAME: Farley Post Ofﬁce/Moynihan Station LOCATION: Eighth Avenue between

31st and 33rd streets OWNER: NYS Empire State

Development Corp. DEVELOPERS: Related Companies and

reated in scaled-down forms again in subsequent years. Yet in the project’s favor is the massive amount of commuter foot traffic in the area. In 2010, Penn Station was the busiest transportation facility in the country, with 600,000 passengers daily. The first phase of the project broke ground last fall and focuses on the transportation infrastructure. The retail post office will re-

Vornado Realty Trust LEASING: n/a SIZE: 750,000 square feet or more BROKER ESTIMATES FOR RENTS: $200

and $350 per foot ANTICIPATED DELIVERY: 2016

Continued on page 104

increase the amount of retail on the first two floors in the six-story property. But some insiders are scratching their heads about the makeover at the 625 Eighth Avenue site, noting that it will increase the available retail space only slightly, to about 130,000 square feet. (It’s not clear how much space will be added). They wonder why anyone would bring a tenant to the location when a much larger project, a new 1.5 million-square-foot office tower above the bus station, is looming. Vornado, the leasing agent, is leading a group that struck a tentative deal in 2007 to build the office tower, but was facing a deadline in August to finalize it with the Port Authority.

Vital stats NAME: PA Bus Terminal LOCATION: Eighth Avenue and 42nd Street OWNER: Port Authority of New York and New Jersey LEASING: Vornado Realty Trust SIZE: About 130,000 square feet BROKER ESTIMATES FOR RENTS: Up to $500 per foot for a corner; $100 to $250 for inside space DELIVERY: Currently open. Rehab space expected in 2012 or 2013

Continued on page 106

terms to describe upscale and higher-end luxury retailers. Headed by Stephen Ross, the company is actively trying to sign up a large anchor retailer that would lease several hundred thousand square feet, and industry sources say it’s in talks with Nordstrom. But it’s also looking to attract tenants that have one-off stores in hot neighborhoods like Chelsea and the West Village. “They are local, very successful retailers; they are not chains. We would like to think that we could get many of those local, successful retailers to go from a one-store to a two-store concept, and we might be part and parcel of that,” Cross said. He estimated that ofﬁce workers and shoppers would pass

Vital stats NAME: Hudson Yards LOCATION: West of 10th Avenue between 30th and 33rd streets OWNER/DEVELOPER: Related Companies LEASING: Related Companies SIZE: 750,000 square feet within a 12 millionsquare-foot project BROKER ESTIMATES FOR RENTS: $200 per square foot to $350 per square foot ANTICIPATED DELIVERY: 2016

Continued on page 106

he Howard Hughes Corporation, which owns the Seaport, is keeping a tight lid on its plans for the nearly 300,000-square-foot site. The site is comprised of four properties in Lower Manhattan, including the Pier 17 Pavilion and the Fulton Stall Market. Insiders said the retail destination, which was caught up in the bankruptcy of former owner General Growth Properties, will have a more active food component, and possibly a large anchor tenant, once it is reintroduced to the market, possibly in the coming months. TRD

Vital stats NAME: South Street Seaport LOCATION: Fulton St. and Pier 17 at East River OWNER: Howard Hughes Corp. LEASING: Howard Hughes Corp. SIZE: Currently 298,759 square feet of retail (in three historic buildings; one mall) BROKER ESTIMATES FOR RENTS: $80 per foot to $120 per foot DELIVERY: Currently open. Rehabilitated delivery unknown

www.TheRealDeal.com September 2011 65

Stuy Town decision applies retroactively, court rules

Judge says that tenants whose units were illegally deregulated can get rent refunds BY DAVID JONES New York state appellate court ruled last month that a landmark decision involving rent-stabilized tenants at Stuyvesant Town and Peter Cooper Village should be applied retroactively, a move that could impact renters all over the city. In the decision, the court ruled against a Manhattan couple, Bernard and Cora Cahan Gersten, who claimed that their apartment was illegally deregulated in 1999. But the judge also said that the 2009 Stuy Town decision — which protected rent-stabilized tenants from overcharges at apartments that were receiving city tax

In 1999, their landlord, Alverjan Holding, ﬁled a petition to deregulate the original apartment. The state Division of Housing and Community Renewal granted the request, and the Gerstens signed a fouryear lease with the landlord to pay a combined $5,000 rent. After the Roberts decision at Stuy Town, the Gerstens ﬁled suit against their current and former landlords (in 2008, the building was sold to Deutsche Bank subsidiary RREEF), alleging they had been overcharged for rent for the past 11 years. Last September, a Supreme Court judge granted a motion by the Gerstens’ landlords to dismiss the lawsuit, saying the stat-

“Landlords have been making motions to dismiss these cases, saying that it shouldn’t be applied retroactively. Even though we lost the case, it’s a massive victory for tenants at large.” Sam Himmelstein, Himmelstein, McConnell, Gribben, Donoghue & Joseph Stuyvesant Town

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breaks — can be applied retroactively. In the Stuy Town case, Roberts vs. Tishman Speyer, the Court of Appeals ruled that a landlord could not deregulate rents while receiving J-51 tax benefits, which landlords receive in exchange for building upgrades. But the decision left a number of issues unanswered, including whether it should be applied to apartments that had already been removed from rent regulation. Last month’s decision in the Gersten case addressed that question, saying the Roberts ruling should apply to all city apartments, regardless of when they were deregulated. “The Court of Appeals, when they decided Roberts, specifically left open the question of retroactivity,” said attorney Sam Himmelstein, of the law firm of Himmelstein McConnell Gribben Donoghue & Joseph, who represented the Gerstens. “Landlords have been making motions to dismiss these cases, saying that [Roberts] shouldn’t be applied retroactively. Even though we lost the case, it’s a massive victory for tenants at large.” The Gerstens moved into a 20th-floor apartment at 56 Seventh Avenue in 1968 as rent-stabilized tenants, according to court records. By 1995, they had taken over two other apartments in the building, combining all three into one large unit.

ute of limitations had run out. Last month, the appellate court upheld that decision, saying the Gerstens had waited too long to challenge the deregulation. But the court also said the Roberts ruling could not be limited to disputes arising after 2009. “The impact of retroactive application of Roberts would be to protect, where applicable, tenants from rent increases in excess of those allowed by the [rent-stabilization law],” wrote Judge Dianne Renwick on behalf of the court. “A contrary ruling would allow landlords throughout the city to collect rent in excess of those allowed … based upon a faulty statutory interpretation.” The issue of retroactive rents has been a sore point among landlords in New York. A bill was recently introduced that would allow landlords to pay back taxes in cases where they illegally deregulated J-51 apartments. Wolf Haldenstein attorney Alex Schmidt, who represents thousands of tenants at Stuyvesant Town and Peter Cooper Village in the Roberts case, declined to comment, saying he’s still waiting for an appellate court ruling in that case. Belkin Burden attorney Magda Cruz, who represented both landlords, was not immediately available for comment. TRD

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n its eight years of publication, The Real Deal has covered the real estate industry in a city that’s been transformed by a massive building boom, was crippled by the subsequent bust, and is now in the midst of a tentative recovery. The compendium of stories we’ve written runs the gamut from the record-setting building and apartment purchases during the boom, to the toppling of mega-developers during the bust, to new entrepreneurs trying to get into the real estate game during today’s fragile recovery. We have also combed through data for dozens of lists, ranking everything from top Manhattan residential brokers and firms to top commercial firms — including for office leasing, building sales and retail leases — as well as the biggest real estate lawyers and the most active REITs. And, for those who can’t get their fill of real estate statistics, we’ve been putting out our annual Data Book since 2006, which is stuffed with real estate numbers too. This month, for the anniversary of our 100th issue, we bring you some of the most compelling stories we’ve tracked in these pages, many of which have unfolded and evolved over time, much as the magazine itself has. (The magazine started in Publisher Amir Korangy’s then-Prospect Heights apartment with just two full-time staffers, and now operates out of a full floor on West 29th Street with 25 full-time employees and dozens of additional freelancers.) 68 September 2011 www.TheRealDeal.com

The cast of real estate characters that we’ve chronicled since we launched is comprised of colorful, larger-than-life figures

who have made their marks on the New York skyline in profound ways. They include the likes of real estate players such as Harry Macklowe, Donald Trump, Ste-

ven Roth, Stephen Ross, Costas Kondyl Kondylis (whom The Real Deal also just released a documentary film on), the Zeckendorf brothers, Aby Rosen, Mary Ann Tighe, Robert A.M. Stern and scores of others. The amount of money involved in some of the transactions that the magazine has covered is staggering. Of course, there was the $5.4 billion Stuyvesant Town sale, a record for a single real estate as asset, and Google’s $1.77 billion pur purchase of 111 Eighth Avenue, the priciest building sale last year. In 2007 alone there were a re record $48.5 billion in Manhat Manhattan investment sales that tradtrad ed — which dropped to just $3.5 billion in 2009 and rebounded to $13.6 billion in 2010. Dissecting complex deals where the stakes are high and the structure is complex is what makes covering New York real estate so thrilling for us. Plus, in the almost decade that we’ve been plugging away, the real estate DNA of neighborhoods across the city has drastically morphed. Indeed, the crush of new construction, in places like Williamsburg and Chelsea, offers ever-changing examples of the city’s constant reinvention. While our foc focus is always on the real estate — whether it be how a prop property is financed, how many units have sold or how distressed properties are getting worked out by a lender — our coverage also chronicles some of the enormous changes New York has ex experienced over the past several years. Here’s a look at some of the stories that have made the greatest impact.

ILLUSTRATION FOR THE REAL DEAL BY PETER BONO

The Time Warner CenTer — a former no-man’s-land N early eight years ago, prior to the opening of the Time Warner Center, an article in The Real Deal characterized Columbus Circle as a former no-man’s-land for retail, noting that one of the aims of the Related Companies’ $2 billion complex was to turn the area into a destination address. The development was the largest in the United States at the time, and the largest in New York since the World Trade Center was constructed. “Until it is open, I don’t think people will understand the importance of the project,” Related head Stephen Ross told The Real Deal in a 2003 interview. The project did succeed in making the area a destina-

tion, and proved that a high-end, vertical shopping center could thrive in Manhattan (see related story on page 64). By early 2005, 90 percent of the 325,000 square feet of retail space was leased to tenants like Whole Foods, Tourneau, Sephora and Williams-Sonoma. The complex’s Mandarin Oriental hotel, Jazz at Lincoln Center, and well-regarded restaurants such as Per Se also lured consumers to Columbus Circle. Meanwhile, the condominiums at the Time Warner Center became some of the most expensive in the city, attracting celebrity buyers, including NFL quarterback Tom Brady and music superstars Ricky Martin and Jay-Z.

2004

The Time Warner Center transformed Columbus Circle when it opened in 2004.

miChael shvo: over The moon To off The map A couple of months before the collapse of Lehman Brothers, Michael Shvo was reportedly having his interns compete to design the first residential property on the moon. By the middle of 2009, however, the broker who embodied the heights — and, to his critics, excesses — of Manhattan’s real estate boom had all but disappeared from New York. (The Real Deal’s 2009 piece “Where in the world did Shvo go?” looked

“Where in The World did shvo go?” at how the Israeli émigré fled the limelight.) Shvo started in the industry at Prudential Douglas Elliman and quickly became one of the firm’s top-grossing brokers, bringing in hundreds of millions of dollars in sales. He left Elliman to start his own firm in 2004; at the time, the 31-year-old told The

Real Deal that his company would be “the young, happening thing.” Shvo did indeed go on to create happenings at the condos he marketed. The launch of the Philippe Starck–designed Gramercy had burlesque dancers, and the opening of 20 Pine, with interiors designed by Armani Casa, featured a performance by John Legend. Shvo also lived the high-flying lifestyle he marketed, purchasing numerous multimillion-dollar pads. Along with buzz came enmity, though: There were murmurings in the industry of unethical behavior, and other brokers didn’t hide their contempt for his flashy persona and tactics. In the past couple of years, trouble has plagued a number of projects Shvo marketed, including Rector Square, the first occupied condo in the city to enter foreclosure. Shvo declined to comment on which, if any, developments he is currently marketing.

manhaTTan hiTs million-dollar mark In 2004, Manhattan real estate reached a new high-water mark when the average price of an apartment hit more than $1 million for the first time, according to appraisal firm Miller Samuel. Prices kept going up until the market peaked in 2008, when the average hit $1,591,823 and the median sale price for the year was $955,000. While prices peaked in 2008,

the effects of the credit crunch were discernible even before the financial crisis in September: Apartment sales declined every quarter, and totaled 10,299 at the end of the year, down from 13,430 the prior year. In 2009, prices declined an average of 25 percent from the market peak. Since then, there have been some signs of recovery. The average Manhat-

rezonings

One of the biggest moves by the Bloom-

pave The Way for more ToWers

berg administration since The Real Deal’s launch has been the creation of thousands of units of housing by rezoning large swaths of Manhattan, Brooklyn and Queens to allow for residential development. As a result of these rezonings, some neighbor-

Michael Shvo during his real estate prime in 2006

tan price in the fourth quarter of 2010 was $1.482 million, which represented a 14.4 percent year-over-year increase. At the time, however, appraiser Jonathan Miller told The Real Deal that “prices are flat across the board,” and the increases reflected that more of the properties that sold were larger apartments. Still, Miller noted that the “two-year roller coaster of housing trends because of financing and credit” could be over, as sales volume and available inventory at the end of 2010 were in line with 10-year averages. But credit is still incredibly tight. In the sec-

hoods were completely transformed in the aughts. In Chelsea, rezonings paved the way for construction of high-rises along Sixth Avenue between 24th and 31st streets; the stretch, which had been defined by small commercial buildings and parking lots, saw heavy development in the form of towers

“in 2004, manhaTTan real esTaTe reaChed a neW high-WaTer mark.” ond quarter of this year, the average and median sale prices were $1.455 million and $850,000, respectively, indicating a stable but uninspiring market that Miller characterized as “bumping along the bottom.”

2005 such as the Chelsea Landmark and Chelsea Stratus. In the Far West section of the neighborhood near the High Line, a later

www.TheRealDeal.com September 2011 69

Rezonings continued rezoning gave birth to more than a dozen condo projects, including the Caledonia and 100 Eleventh Avenue. In Brooklyn, no area was changed more than WilliamsburgGreenpoint following a 2005 rezoning: Condo towers like the Edge and Northside Piers were built on the formerly industrial area along the waterfront, and dozens of smaller condos were constructed further inland. While the city hoped the rezon-

ing would result in 10,000 new housing units, many projects stalled following the bust in 2008, and in 2009 the Bloomberg administration said only 1,800 units had been built or were under construction. In Queens, Long Island City became a locus of development following a 2001 rezoning; in 2005, The Real Deal reported that 11,550 units of housing were planned for the industrial area. As in Williamsburg, many of those projects failed to come to fruition, but dozens of new buildings, including highrises on the waterfront developed by Avalon Bay and Rockrose, did see the light of day.

Amanda Burden, the chair of the Department of City Planning

sTuyvesanT ToWn’s

2006

mega-sale makes Waves

A view of Stuy Town, which sold for $5.4 billion in 2006

Developer Tishman Speyer and investment firm BlackRock purchased mega apartment development Stuyvesant Town and Peter Cooper Village for $5.4 billion from MetLife in 2006. It was the biggest real estate deal in U.S. history and, of course, one of the biggest stories to hit since The Real Deal’s inception. The record-breaking sale of the 11,232-apartment complex, at the height of the city’s real

estate boom, was predicated on the notion that the new owners could turn much of the property’s rent-regulated stock into marketrate apartments. The market-rate conversions were slow to materialize, however, and tenants’ groups wound up being victorious in a lawsuit, which charged that MetLife and the new owners had improperly deregulated thousands of apartments. By the middle of

2009, it became clear that the heavily leveraged investment was troubled and, in early 2010, after missing a $16 million loan payment, Tishman Speyer and BlackRock announced they were turning the property over to their creditors to avoid bankruptcy. CWCapital, which represents the holders of the $3 billion first mortgage on the complex, took control of the property

late last year, following a failed attempt by hedge-funder Bill Ackman and Winthrop Realty Trust to win control of the buildings by purchasing $45 million in subordinate debt. The tenants’ association and CWCapital have since discussed turning Stuy Town into an affordable co-op. Last year, the special servicer representing CWCapital valued the property at $2.8 billion.

reCords shaTTer during boom During the boom years, one real estate re-

cord after another was shattered. In 2003, the GM Building became the most expensive building sold in North America when Macklowe Properties bought it for $1.4 billion, only to be surpassed by Kushner Companies’ purchase of 666 Fifth Avenue for $1.8 billion in 2006. The 2006 sale of Stuyvesant Town and Peter Cooper Village for more than $5 billion, meanwhile, was the largest single asset sale in U.S. history. The residential real estate world also saw plenty of jaw-dropping deals. Developer Harry Macklowe (who sold the GM Build-

70 September 2011 www.TheRealDeal.com

“in 2008, The reCord for The biggesT Co-op

sale Was seT Three Times, When high-profile buyers paid $46 million, $48 million and $48.9 million for lavish aparTmenTs.” ing in 2008 to pay off mounting debts) made headlines when he paid $51.5 mil-

lion for a combination of seven units at the Plaza in 2007. That was the most money ever spent on a condo. In 2008, the record for the biggest co-op sale was set three times: first when hedge fund manager Scott Bommer paid $46 million for a duplex at 1060 Fifth Avenue, then when Loews Hotels CEO Jonathan Tisch paid $48 million for a unit at 2 East 67th Street, and again when Bommer sold off the co-op he’d acquired months earlier for $48.9 million. In 2006, the biggest home sale ever in the city was notched when investor J. Christopher Flowers paid $53 million for the Harkness

Jonathan Tisch

Mansion at 4 East 75th Street. Last month, Flowers reportedly sold the mansion for $16.5 million less than he paid for it.

The apThorp saga

In 2006, developer Maurice Mann partnered with diamond billionaire Lev Leviev’s Africa Israel to purchase one of the city’s grandest apartment buildings, the Apthorp, on Broadway and 79th Street. The team paid $426 million, and planned to convert the Apthorp, where half of the 163 apartments were rent stabilized, into

condos that were expected to sell for a combined total of more than $1 billion. What followed instead was a protracted drama involving lawsuits, changes in marketing teams, and sales that didn’t come anywhere near initial forecasts. In late 2008, the property was threatened with foreclosure; Mann filed suit against the lender, but, facing litigation from Leviev, agreed to step down as a managing partner of the conversion. The Prudential Douglas Elliman marketing team raced to sell 25 units at the building by September 2009 so that the conversion could be declared effective by the Attorney General’s office, bringing in superbroker Dolly Lenz, and closings finally began in mid-

breaking doWn buyers aT

15 CenTral park WesT

When Arthur and William Lie Zeckendorf purchased the site where 15 Central Park West would rise for $401 million in 2004, some gasped at the price the developers paid. The Zeckendorfs ended up having the last laugh, though, as the condo turned out to be the most successful in history, bringing in $2 billion in sales for the developers by the time it sold out in 2007, from buyers attracted to Robert A.M. Stern’s Neoclas-

sical design. While the limestone-clad development on 61st Street was a throwback to the ’20s, 15 Central Park West’s amenities — including a health club with a 75foot swimming pool, a screening room, wine cellars and an in-house chef — were of this millennium. In 2008, The Real Deal peeled back the curtain on the building with a unit-by-unit breakdown of the first wave of buyers, the most famous of whom

harry maCkloWe: doWn, ouT

Harry Macklowe

and baCk again

No developer gambled on real estate during the boom like Harry Macklowe, and no other developer sustained losses as spectacular. In 2003, Macklowe paid $1.4 billion to buy the GM Building, a record-breaking purchase that was eclipsed a few years

sam Chang’s

fasT, Cheap and ubiquiTous hoTel model What McDonald’s is to hamburgers, the McSam Hotel Group was during the boom years to hotel development: fast, cheap and ubiquitous. In mid-2008, Sam Chang, McSam’s founder, had 5,500 hotel rooms planned in the city (a sizable portion of all units underway in New York); at that point he’d built more than 30 properties. Chang — whom The Real Deal featured on the cov-

er in December 2006 (helping to introduce him to the New York real estate world), who interviewed for “The Closing” in July 2008, and who has had countless stories written about him — brought a new business model to New York. He focused on developing budget hotels more commonly found in other parts of the country — brands like Holiday Inn Express and Days Inn — and it made him

2010. In August 2010, The Real Deal reported exclusively about a so-called lockbox agreement whereby tenants at the building would send rent payments directly to Anglo Irish Bank, rather than to the building’s owners. A few months later, in the fall of 2010, Lenz severed ties with the developers, citing unpaid commissions and mismanagement, and the Corcoran Sunshine Marketing Group replaced Elliman as the building’s exclusive managing agent. Meanwhile, throughout the conversion process, longtime tenants repeatedly complained about the renovation work, and the building racked up dozens of violations with the city. As of June, Corcoran was reporting that average sales prices in

were actor Denzel Washington, Goldman Sachs CEO Lloyd Blankfein, and pop musician Sting. The most expensive unit sold at that point — and, at the time, the most expensive condo to ever sell in a New York building — was a 10,674-square-foot penthouse that hedge fund manager Daniel S. Loeb bought for $45 million. The building has continued to command high prices in resales: William Lie Zeckendorf sold his personal penthouse there for $40 million last December, a deal that worked out to a jawdropping $10,000 a foot.

later by his $7 billion acquisition of seven Midtown office buildings from Sam Zell’s Equity Office Properties. The latter investment went south in 2008, when Macklowe defaulted on a $5.8 billion loan associated with the deal, and lenders assumed control of the buildings. Later that year, Macklowe, whose every move has been chronicled by The Real Deal and other real estate publications, was also forced to sell the GM Building and three other towers to Boston Properties for $3.9 billion. In 2010, meanwhile, Macklowe sold three apartment buildings to Zell for $475 million. His son, Billy Macklowe, severed professional ties with him the same year. While Macklowe saw the lion’s share of his portfolio disappear,

the most prolific developer of limited-service hotels in the city. The Taiwanese immigrant specialized in finding relatively inexpensive places to build, typically in areas zoned for industrial uses, and usually sold them to operators after they’d been constructed. Known for his speed, Chang would buy development parcels over the phone, sight unseen. He has said his idea of retirement would be building one hotel at a time rather than 30. By late 2009, well into the city’s development bust, Chang had reportedly built 37 hotels in New York, but plans to build more slowed as financing became more difficult to obtain. Although Chang is said to have a handful of development projects in the works at pres-

Lev Leviev

the building were $2,000 a foot; original prices were set at around $3,000 a foot. The firm also reported that 25 percent of the units in the building had sold.

2007

2008 he has recently been staging what could turn out to be a comeback: Although he sold the Drake Hotel development site to the CIM Group last year, he is still said to be a partner with CIM on plans for the site. Meanwhile, he purchased 737 Park Avenue for $360 million this year, and last month filed plans with the AG’s office to convert the rental into condos in another partnership with CIM. If the offering plan is approved by July 2012, closings could begin at the Upper East Side properties by late 2012 or 2013.

Sam Chang

ent, he’s been in selling mode lately, unloading stalled sites in the Financial District and Union Square this year. Chang did not return a call for comment.

www.TheRealDeal.com September 2011 71

brooklyn’s

2008

real esTaTe asCenT When The Real Deal started publishing, only two Manhattan-based residential real estate firms had offices in Brooklyn: Corcoran and William B. May. By the following year, 2004, Brown Harris Stevens had inked a deal to take over William B. May’s offices in the borough, and Halstead Property and Prudential Douglas Elliman had also opened Brooklyn out-

“When The Real Deal firsT sTarTed publishing, only TWo manhaTTan-based firms had residenTial real esTaTe offiCes in brooklyn.” posts. At the time, Halstead President Diane Ramirez noted that Brooklyn offered relative affordability compared to Manhattan. But prices in prime Brooklyn neighborhoods have skyrocketed in the years since Ramirez’s statement: A $7 million sale at Dumbo’s Clock Tower

Brownstone Brooklyn real estate is trading at high volumes, despite the tentative market.

lehman broThers falls; The bulls CoWer In September 2008, Lehman Brothers filed for bankruptcy protection, precipitating one of the worst financial crises in the United States since the Great Depression — and roiling the city’s real estate industry. The collapse prompted The Real Deal and other publications to adopt the phrases “pre-Lehman” and “post-Lehman” as shorthand for describing the market. In the aftermath, commercial and residential deals ground to a veritable standstill, stalled construction sites dotted the city’s landscape, and developers ceded

“in 2009, seCondquarTer markeT reporTs shoWed ThaT manhaTTan residenTial sales volume Was off 50 perCenT from The same quarTer in 2008 — a reCord drop.”

condo projects to lenders. By July 2009, second-quarter market reports showed that Manhattan residential sales volume 72 September 2011 www.TheRealDeal.com

was off 50 percent from the same quarter in 2008 — a record drop. That same July, The Real Deal published a story headlined, “New lender motto: Extend and pretend,” industry lingo for lenders holding on to underwater real estate loans because they don’t want to take large, single-quarter losses. The term, which Eastern Consolidated’s Alan Miller used in the story, caught on like wildfire after it appeared in the magazine. Things have, of course, improved since then. On the residential side, prices and volume are both up substantially since 2009, but appraiser Jonathan Miller has repeatedly said the market appears to be on a “sideways” trajectory. On the commercial side, overall values are still thought to be significantly off-peak, though the market has shown signs of recovery: $13.6 billion in property traded last year, over three times what was sold in 2009, according to Cushman & Wakefield. The city began counting stalled building sites in 2009, and the number on the list last November, 710, is believed to represent the peak of the tally. Since then, construction lending has slowly returned and investors have purchased distressed assets. But as of late last month, the city still had 646 stalled sites on the list.

Condominium set a record as the priciest condo to ever sell in the borough, while a handful of Brooklyn Heights townhouses fetched more than $10 million. In tandem, The Real Deal’s coverage of Brooklyn has drastically evolved since those early days, as we’ve dissected the market in the borough, done a first-ever ranking of its top brokers, and written about new development from Bushwick to Brooklyn Heights. The condo boom, meanwhile, changed the landscape in areas like Williamsburg and Downtown Brooklyn. Still, the crush of new development meant Brooklyn was particularly hard-hit by the late-2008 crash: In October 2009, 47 percent of all stalled construction sites in the city were in Brooklyn, and prices had dropped to 2005 levels. As of this year, NYU’s Furman Center was reporting that Brooklyn prices had plummeted more than 30 percent from the market’s peak. But brokerage reports covering Brooklyn have recently indicated a generally stable sales market, with properties in the northwest “brownstone Brooklyn” trading at a high volume and posting price increases.

2009

The high line: a sTarChiTeCT magneT

Annabelle Selldorf

y the time the first section of the High Line opened in 2009, developers had already bet big on the blocks surrounding the elevated train-track-turned-park. Af-

ter the city allocated funds toward greening the High Line in 2004, and rezoned nearby blocks the same year, plans for condos, rentals and hotels mushroomed. In 2005, brokers told The Real Deal that between 7,200 and 10,000 new residential units could well be built in the area within the next decade. At the height of the market, properties were reportedly trading for up to $400 a buildable square foot. Many developments were put on ice after the credit crunch — including a would-be hotel that Jay-Z partnered in.

Still, a number of them designed by notable architects did get built, to the point that the area near the High Line is sometimes referred to as the “starchitecture district.” The blocks near the park include 100 Eleventh Avenue, designed by Pritzker Prize-winner Jean Nouvel; the Annabelle Selldorf-designed 200 Eleventh Avenue, which features an automatic car elevator; the Metal Shutter Houses on West 19th Street, designed by Shigeru Ban; and the Neil Denari-designed HL23 on West 23rd Street.

Jean Nouvel

developers faCe buyer muTiny

Real estate lawsuits surged following the

financial collapse in late 2008. The squabbles pitted would-be buyers and developers — not to mention developers and lenders — against each other. Many buyers tried to get out of contracts for condos by alleging defects in new construction, missed closing dates, or inflated representations of how many units in a building had sold. In December 2009, The Real Deal’s spread “Fighting Buyer Mutiny” looked at the 20 buildings that had the highest percentage of buyers trying to back out of their contracts, and provided a breakdown of how those cases were beginning to get resolved. Much of that coverage focused on an arcane federal law called the Interstate Land Sales Full Disclosure Act (ILSA), which many buyers were seizing on to make their cases. ILSA requires developers to register buildings with 100 or more units with the U.S. Department of Housing and Urban Development before contracts are signed. Lawsuits claiming that developers didn’t provide a mandated report on ILSA registration are still playing out in court, though

While many developers have seen reversals of fortune in recent years, few have been as colorful and well-publicized as Kent Swig’s. Until a few years ago, Swig was considered real estate royalty: a prominent commercial landlord, a principal in Terra Holdings, and Harry Macklowe’s son-in-law. Swig’s standing has suffered, though, as he’s lost control of development projects, faced an onslaught of litigation and separated from his wife. Many of Swig’s troubles centered around his conversion of the Sheffield57 on West 57th Street, which faced numerous lawsuits from tenants after he bought it with other investors for $418 million in 2005. Swig made headlines when one of those partners, Yair Levy,

in a closely watched case, a federal circuit court ruled this March that the sponsors of Harlem’s Fifth on the Park condo and the

One Hunters Point condo in Long Island City were not exempt from ILSA regulations. And, a judge rejected a motion to dis-

miss a similar ILSA suit against the Moinian Group at the W New York Downtown Hotel and Residences last month.

kenT sWig falls off his surfboard

hit him in the head with an ice bucket during a 2008 meeting. The team lost control of the building to a creditor in 2009. The same year, Lehman Brothers filed to foreclose on 45 Broad Street, where Swig (and partners including Robert De Niro) intended to develop a hotel. In 2010, Swig closed the Helmsley-Spear brokerage, which he’d purchased a few years prior, and defaulted on a $12 million loan at 80 Broad Street. Swig, a Califor-

nia transplant and a surfer, also faces personal financial woes, with a reported $50 million in personal debt. In an exclusive interview with The Real Deal last December, however, Swig was sanguine about his future prospects, and said he’d made an agreement with the creditor that took over the Sheffield, Fortress, that gives him a share of potentially “enormous” future profits. He also said that as part of the agreement, he’d agreed to be depicted as “the fall guy” in the press. www.TheRealDeal.com September 2011 73

prediCTing nyC’s

2009

fuTure ghosT ToWers I

n early 2009, when the real estate market was in the darkest of places, The Real Deal surveyed the new development landscape to see which projects were most at risk for becoming empty “ghost towers.” At the time, the trend was already a serious problem in hard-hit cities like Miami and Las Vegas. Sources indicated that there were 23 residential projects in New York City that were in danger of sitting empty for the foreseeable future, while real

estate data provider StreetEasy showed that around 45 percent of the more than 18,000 new units that had come to market in recent years had yet to sell. And, there was still more inventory waiting in the wings. A number of the troubled developments The Real Deal identified at the time wound up turning into rentals, including the 346-unit Financial District development 25 Broad, the 62-unit building at 111 Kent Avenue in Williamsburg, and the

130-unit project at 110 Green Street in Greenpoint. Others, like Rector Square in Battery Park City, saw their developers default or get crushed in foreclosures. However, Rector Square and many others were revived under new ownership. And things eventually turned up for the condos that turned rental, too. The rental market has been strong over the past year, with the vacancy rate reportedly dropping and Manhattan rental rates

increasing to an average of $2,888 in the second quarter of this year, a 10 percent jump from the same time in 2010, according to Citi Habitats. Rental development has also been strong. At 2 Cooper Square, which opened last summer, two apartments rented for more than $20,000 a month, while rents started at $2,630 a month for studios at the 903-unit, Frank Gehry-designed 8 Spruce Street when it launched earlier this year.

CharTing a CenTury

2010

of booms and busTs

While there’s no question that the 2008 financial crisis led to a severe real estate downturn, an analysis conducted by The Real Deal last year found that Manhattan’s

most recent bust probably only ranked as the fourth-worst in the past century, behind the Great Depression and the slump during the 1970s, as well as the savings-and-loan

crisis during the late 1980s and early 1990s. The spread — by reporter Sarah Ryley and headlined “100 Years of Booms and Busts” — was awarded “best commercial real estate story by a trade magazine” by the National Association of Real Estate Editors for 2010. Indeed, residential prices are generally said to be down less than 20 percent from peak levels, which The Real Deal’s analysis found was much less of a decline than in the other downturns — especially compared to the Depression, when values plummeted by a reported 74 percent. Job losses haven’t been as severe, either: The city lost about 65,800 jobs between January 2008 and April 2010. By contrast, it lost 551,900 jobs during the 1970s downturn. Office vacancy also hadn’t reached levels seen in previous busts, with Grubb & Ellis reporting that it stood at 10.2 percent as of mid-2010, well below the engorged amount of space available during the

“The spread Was aWarded “besT CommerCial real esTaTe sTory by a Trade magazine” by The naTional

assoCiaTion of real esTaTe ediTors for 2010.” earlier downturns. Still, the busts share common characteristics — easy credit resulted in building booms in each case — and in some respects, the most recent contraction has proven itself to be second only to the Depression: The 67 percent drop in Manhattan in the average transaction price of all forms of real estate between 2007 and 2009 was topped only by the 72 percent drop during the Depression.

sharif el-gamal speaks ouT

Last fall, at the height of the controversy about Park51 — the planned 15-story, $100 million community center and Islamic prayer space a couple of blocks away from

“The real deal ran an exClusive inTervieW WiTh el-gamal,

park51’s developer, jusT as The ConTroversy surrounding The projeCT Was heaTing up.”

ground zero —The Real Deal ran an exclusive interview with the project’s lead devel74 September 2011 www.TheRealDeal.com

oper, Sharif El-Gamal. Park51 had become a tabloid sensation, with the controversy fueled by opponents who referred to it as the “Ground Zero Mosque,” saying it didn’t belong so close to the World Trade Center. In the interview, El-Gamal, chairman and CEO of the real estate investment firm Soho Properties, stressed that it was neither a mosque nor located at ground zero, and that there “was a narrative that was built in to provoke and sensationalize a topic that should not have gotten the attention that it got.” El-Gamal also said that despite the project’s aims being distorted by critics, the amount of attention had also been a boon for his business, as the “amount of money that wants to come into a real estate deal for us right now is unbelievable.” More recently, El-Gamal has been quoted saying that the construction of Park51 won’t begin for at least five years.

Sharif El-Gamal, photographed for the magazine’s October 2010 issue

In December 2010, Google closed on the purchase of 111 Eighth Avenue for $1.77 billion. The technology giant’s buy of the 2.9 million-square-foot building was the largest U.S. building purchase last year. In July, The Real Deal took a behind-the-scenes look at how the Google deal unfolded, including how the building’s owners agreed to stop actively marketing the property for two nail-biting weeks while the Internet giant’s top brass was deciding whether to approve the purchase. The deal was also seen as a sign of the current, tentative recovery. Data from Cushman & Wakefield

behind The sCenes aT The google deal 111 Eighth Avenue, which Google purchased for $1.77 billion

“The TeChnology gianT’s buy of The 2.9 million-squarefooT building Was The largesT u.s. building purChase lasT year.”

indicates that the market dipped from its peak in 2007, when $48.5 billion of investment sales traded, to a low of $3.5 billion

in 2009, before rebounding to $13.6 billion in 2010. Market reports so far this year indicate further recovery in the commercial market, which some attribute in part to historically low cap rates. A report from

sizing up Condé nasT’s WTC lease C ondé Nast Publications reached an agreement to become the anchor tenant of One World Trade Center this May — a deal that has been hailed as an over-

“The media gianT’s lease for 1 million square feeT of spaCe in The skysCraper reporTedly Works ouT To around $60 a fooT. and, iT lends CaCheT To The doWnToWn markeT.” whelmingly positive development for the future of the World Trade Center and a potential game-changer for the city’s com-

Eastern Consolidated pegged the secondquarter investment sales total at $9.4 billion. Office-property sales, while still lagging in terms of number of transactions, have been bolstered by big-ticket transac-

tions such as Paramount Group’s purchase of a minority interest in 1633 Broadway for $980 million, and Monday Properties’ $760 million recapitalization of 230 Park Avenue through Invesco.

A rendering of One World Trade Center

mercial market. The media giant’s lease for 1 million square feet of space in the skyscraper reportedly works out to around $60 a foot. The agreement not only gives the World Trade Center skyscraper a solid corporate tenant, but also lends cachet to the complex, and positions it, and Lower Manhattan, as a potential home to firms outside of the government and financial sectors. After the lease was inked, The Real Deal reported that it was indicative of a larger trend of companies being willing to consider office space outside of Midtown. Downtown is still the weakest office market in New York, though there are signs of improvement beyond the Condé Nast deal: The availability rate was down to 13 percent in June, its lowest level since peaking at 15 percent in June 2010. This month on page 40, The Real Deal has a two-page spread looking at how the World Trade Center buildings price out for the developers who are building them. TRD www.TheRealDeal.com September 2011 75

IT’S LIKE WE’RE KIDS AGAIN R E A L LY , R E A L LY SPOILED KIDS

WE ARE MONARCH

MONARCH

LONG

LIVE

EXCESS

Q&A

Renovating without guts

While wealthy NYC homeowners are starting to do gut renovations again, many others are still opting for cheaper cosmetic upgrades BY MELISSA DEHNCKE-MCGILL ew York City homeowners are doing far fewer gut renovations than in the past. Instead, many are opting for cheaper cosmetic upgrades like refinishing floors, installing new appliances and replacing countertops. In this month’s Q&A, The Real Deal talked to residential contractors and architects about what kind of activity they’re seeing in the home renovation business in the city, given the touch-and-go economy. Many said that while the wealthiest of clients are still breaking down walls, most others are sticking to kitchens, bathrooms and surface-level fixes. The one exception is for price-conscious young families that are leaving Manhattan for cheaper, farther-flung neighborhoods in Brooklyn and Queens, where they’re buying old, dilapidated homes and buildings as fixer-uppers. With less overall activity in the marketplace, prices have come down. While that might

Nicholas Ricci

owner/president, Professional Services Inc. What’s the market for home renovations like in NYC right now, given the overall economy? Are there more or fewer homeowners renovating than there were a year ago, two years ago and during the boom? The market for higher-end-type renovation work has shrunk drastically. There are far less home and apartment owners remodeling or renovating than there were even a year ago, and even a larger gap than those who were renovating two years ago. As a contractor, what kinds of renovations would you say are most typical these days for homeowners in NYC? Kitchens and bathrooms are still No. 1. It used to be complete renovation projects as No. 2 — but not anymore. Now, it’s painting, floor refinishing, replacing moldings and trim, new flooring, new countertops,

NYC real estate brokers often talk about how much resale value can be added to a property by renovating/upgrading the kitchens and bathrooms. Are homeowners less likely to do that now because their faith in the market has changed? Although you hear brokers talking about adding resale value to a property by redoing bathrooms and kitchens, the truth is that anyone looking to buy something has their own taste and really doesn’t care that a bathroom or kitchen has been renovated recently. It may help in making the final decision to purchase simply because the bathroom or kitchen is in better shape, but it really doesn’t add value to the property. How has the price for home renovations changed for contractors in NYC? Pricing this year is way down compared to last year and tremendously down compared to five years ago for the average contractor. We lose projects to less qualified and/or experienced companies all the time. We simply cannot lower our pricing just because we are competing against inferior companies who will tell their prospective clients anything and charge them

“Pricing this year is way down. … We lose projects to less qualiﬁed companies all the time. We simply cannot lower our pricing just because we are competing against inferior companies who charge [clients] anything, just to win their job.” Nicholas Ricci, Professional Services Inc. new appliances and new vanities. There are nowhere near as many complete renovation projects as in the past. Are homeowners using cheaper materials than they were in the past to save money? No one is really using less costly materials. This is not where the real cost of renovating is. The real cost is the labor.

anything, just to win their job. This is a serious problem. Only a wise consumer will select the true professional over the cheaper contractor. It is very frustrating. What kinds of clients are most likely to renovate today — new homeowners, or sellers preparing their apartments for the market?

be good for homeowners, it’s putting a squeeze on many contractors. Those contractors say they are losing business to inferior and underqualiﬁed competitors who are dropping their prices too low. One contractor went so far as to say, “It’s destroying our industry.” Still, some said they have seen an uptick in the New York City residential remodeling world more recently, especially among clients in the ﬁnance industry who want upgrades to already high-end apartments or vacation homes in Westchester, the Hamptons and elsewhere. They say that a backlog of homeowners who were hungry to do renovations, but held off until the New York economy stabilized, has recently been unleashed. And they note that despite the wild stock market swings last month, they expect things to continue on that course — unless the Dow drops below, say, 10,000. For more on what kinds of remodeling jobs are most and least prevalent, as well as how construction materials are being used on renovation projects today and how contractors have accelerated their building time lines, we turn to our panel of experts.

New homeowners for sure. … Sellers have no interest in ﬁxing things up. They have no interest in spending a dime in order to try and sell. They simply will sell it as is and get as much as they can. What is the most challenging aspect of dealing with home renovations in New York today in light of the economy? Again, the fact that all homeowners are getting so many estimates and for the most part selecting those companies with the lowest bid. This is a very sad situation and is destroying our industry. The average contractor is really a handyman or has worked for someone in the industry for a few years. It’s very easy to get a home improvement contractor’s license by going to the Department of Consumer Affairs and taking a 30-question, multiple-choice test. [These contractors] are all aware of what everybody else is charging and they want to get their foot in the door.

Daniel Kozlov

project manager, New York Modern Interiors LLC What’s the market for home renovations like in NYC right now? The market for home renovations has always been very sectioned off between different scope and price levels of work. Today, on the residential side, we see many of the specialists seeking out business in different niches. [That’s because] many [companies] went out of business. Many big guys [now] take on smaller projects to keep busy. What’s the most challenging aspect of dealing with home renovations in New

York today in light of the economy? Many desperate-or-not professional contractors are trying to get into the jobs at unrealistically low prices. Many times, the hardest part is convincing homeowners that price is not everything and quality cannot be compromised. What are the most surprising trends in home renovations in New York today? Many wealthy clients who continue to purchase luxury properties in Manhattan, the Hamptons, Westchester and other places [are still] performing high-end renovations.

Eric Liftin

owner/founder, MESH Architectures As an architect, what are you seeing in terms of activity in the home renovations market in New York? There are certainly fewer renovation projects going on now than there were during the peak, three or four years ago. Activity has been steady at this lower level during the recession.

Are New Yorkers more or less likely to use an architect to complete a home renovation in this still economically uncertain climate compared to a year ago, two years ago and during the boom? It depends on the size of the project. A larger project requires more vision, more coordination, and ﬁling with the Department of Buildings. As homeowners and homebuyers have scaled back in the last few years, projects have become smaller, sometimes to the point where we say, “You don’t necessarily need an architect to do this work.” www.TheRealDeal.com September 2011 77

Q&A Are gut renovations more or less frequent today than they were a year ago, two years ago and during the boom? These times are encouraging families to venture farther into Brooklyn and Queens, and these properties typically need a complete rehab. These areas — East Williamsburg, Prospect Heights, Gowanus — are full of old garages, and people love the value proposition of creating a new home from a crumbling old shell. So we’re still transforming dilapidated brownstones into modern homes. But budgets have tightened up, of course. Are homeowners using cheaper materials, like lower grades of granite for countertops, than they were in the past? No. The difference between good-quality materials and cheap ones is relatively small, on the scale of a full project. Is it a faster or slower process for homeowners to get contractors started these days, given the economy? Contractors have less work and are easier to engage than a few years ago. The real delays, however, are due to the Department of Buildings. Everyone agrees that DOB’s review procedures for basic jobs has taken on Soviet proportions. Regulations have become punitive and are being enforced — often mis-enforced — by examiners who fear for their positions. There are no more routine approvals for straightforward work, and this process is usually the last barrier to beginning work. How has the price for home renovations changed in New York compared to a year ago, two years ago and during the boom? The price of materials has gone up with the cost increases in energy and other resources. The recession has not pushed down costs. Contractors are more willing to negotiate, so overall costs have not shot up signiﬁcantly. This is a fact of life in New York: Even in a recession, the cost of services does not go down appreciably. What kinds of clients are most likely to renovate today — new homeowners or sellers? I don’t see clients who are renovating to sell, and I wouldn’t encourage people to do that under most circumstances. Nobody in New York likes to pay for other people’s renovations. You are betting that you’re going to nail the taste of your buyer.

Mark Martinez

president, Interior Management As a contractor, what are you seeing in the market for home renovations in NYC? Right now there’s a lot of activity. I’m seeing a tremendous amount of renova78 September 2011 www.TheRealDeal.com

tions happening, much more than in the past two years. After the collapse of the financial markets, the clients that we had, which are on the upper end of the income scale … were extremely cautious and put things on hold. [But] there was a backlog of projects unleashed very recently. Do you think the stock market swings of the past few days will make a difference in the kinds of renovations that New Yorkers do in the near future? It depends on what happens. If the Dow drops below 10,000 and stays there again, then yes. But as of today, with yesterday’s gain, it’s not going to make a difference. Are New Yorkers more or less likely to use an architect to complete a home renovation in this still economically uncertain climate compared to a year ago, two years ago and during the boom? I think they are still using architects. You really have to. Most of the homes in New York are condos or co-ops, and those buildings require it. So there isn’t much getting around it unless you live in a townhouse and you want to take the risk of working without one. I don’t see people doing that unless they are doing very small-scale cosmetic renovations like painting, cabinetry and finishes. Is it a faster or slower process for homeowners to get contractors started these days, given the economy? It is faster. During the boom there was a time when I was turning away a lot of work. Then things slowed down tremendously for a few years. Everyone in my field wanted to get projects and was available to start on a moment’s notice. Today’s market is not where it was during the boom, but the slots are getting filled a little more quickly. Compared to the boom years, people have more availability to start quickly. How much has your business increased or decreased in the last year, in the last two years and since the boom? We lost about 40 percent of revenue at the worst point compared to our best year of the boom. We have come back to approximately a 20 percent loss of revenue since that best year. As far as total revenue goes, we haven’t climbed back to that yet, but we are getting close to it. It’s extremely busy right now. What kinds of clients are most likely to renovate today? All my clients have been new homeowners. I have almost never had a client who was fixing up in order to sell. I think the reason is that we are sort of a boutique firm that does very high-end, custom interiors, and if someone is in the mindset of selling a unit or flipping it, they want to spend as little as possible to do that.

Paul Barnla

owner, Artistic License Interiors Inc. What’s the market for home renovations like in NYC right now, given the overall economy? We are a designbuild firm, which means we provide both design and construction services. My experience and what I hear from my subcontractors is business is slower this year than in years past, but everyone is still working. What kinds of home renovations are most typical these days for homeowners in New York? A large percentage of my clientele in the last year and a half are in the banking industry. I’ve done more and more upgrades to brand-new, high-end apartments over the last two years than in years past. How has the price for home renovations changed in New York recently? The price has come down. Consumers are more careful with what they buy and are more educated on what fixtures and finish materials cost. Lots of new, young, competitive architects hitting the streets have driven down costs. What are the most surprising trends in home renovations in NYC today? The tolerance to spend significantly more on appliances, window covers and audiovisual systems. The $9,000 refrigerator has becoming ever less shocking.

Robert Didier

chapter president for NYC/LI National Association of the Remodeling Industry; project manager of residential and commercial projects, Irwin Contracting Are there more or fewer homeowners renovating than there were a year ago, two years ago and during the boom? There is more renovating being done now than a year or two ago. What kinds of home renovations are most typical these days in NYC? Due to the advanced age of most buildings in New York City, the most popular type of renovation is performed on the bathroom. Given the time period that most were built in, the bathrooms [are typically] very small. … In the past, the No. 1 remodeling job was the kitchen. Are gut renovations more frequent or less frequent today than they were a

year ago, two years ago and during the boom? I would say that they are less frequent today.

Justin Korhammer

president/designer, Anima LLC As an architect, what are you seeing in the home renovations market in NYC? From our perspective, the market has not changed much. The type of projects and clients has shifted, but our overall volume of work has, in fact, increased within the last year. Are you seeing more or fewer gut renovations today than in the recent past? We find that clients who purchase properties in the upper range of the market tend to want to do gut renovations. This is often more a question of prestige than of necessity, and this has not changed since the real estate boom. There is definitely less appetite for complete renovations at the lower end. This is partially due to the difficulty to obtain financing, but also the less-than-certain return of investment. It’s simply no longer a given that every dollar invested in a property will double in resale value. How have the materials that homeowners use in renovations changed in the last year, in the last two years and during the boom? We have observed a great interest in green products and an increased awareness of the wastefulness of construction. Items that used to be the “must-haves” — such as the Sub-Zero fridge and Viking range — have become less of a focus of clients, whereas AV and home automation have become mainstream. Is it a faster or slower process for homeowners to get contractors started these days, given the economy? Timing has become a much more important factor of construction. Basically all of our jobs are run on the shortest possible construction schedule, with penalty clauses. At the same time, the permitting process has become more time-consuming and demanding. Are you seeing more people buying fixeruppers and renovating them now in the New York market? Altogether we are seeing fewer of these properties on the market. Fixer-uppers are often not as discounted as they should be. … In my experience, sellers are typically unwilling to reduce the price low enough for a gut renovation to be worthwhile. TRD

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TRI-STATE BRIEFS CONNECTICUT

ESPN starts building new home for SportsCenter The state of Connecticut is loaning sports giant ESPN $17.5 million to construct a 193,000-squarefoot production facility on the company’s Bristol campus. Ground broke on the so-called Digital Center 2, the future home of SportsCenter broadcasts, early last month. The facility is expected to open in 2014. When complete, it will be the largest of the company’s 19 Bristol buildings, according to

the New London Day. In total, the state will invest up to $25 million in ESPN, with additional funding going toward job training and tax exemptions to

ESPN is the third company in Connecticut to benefit from Governor Dannel Malloy’s “First Five” program, which offers tax credits and loans to the first five A rendering of ESPN’s Digital Center 2

help with the purchase of equipment and construction materials.

businesses in the state to promise to create at least 200 jobs. Health

insurer Cigna and the online ticket is expected to open by the end of exchange TicketNetwork were the next year. Developers then hope to first two recipients. begin on construction of the hotel. “It’s very satisfying, finally, to see WESTCHESTER COUNTY that another new building could be White Plains breaks added to the downtown,” developground on hotel complex er A.J. Rotonde told the Journal A building on Main Street in White News. “I think we finally now can Plains that’s been vacant for 12 years join the renaissance that started will soon be demolished to make over 10 years ago in White Plains.” way for a larger commercial comThe current building at 250270 Main Street, a former A&P, plex, the Journal News reported. A ceremonial groundbreaking will soon be demolished and retook place in late July for the Met- placed by a Chipotle, Planet Fitropolitan Plaza, a $20 million retail ness and other retailers, as well as a and hotel complex. The retail space 130-room hotel operated by Meyer Jabara Hotels. The project is expected to create around 100 construction jobs and 100 permanent hotel and retail jobs.

LONG ISLAND

Home vacancies spike Four percent of homes on Long Island are now vacant, according to 2010 Census data. Census ofﬁcials found 39,348 vacancies in nonseasonal houses and apartments on Long Island last year — or 4 percent of the total number of homes. That compared to 22,352, or 2 percent of the

Long Island home vacancies rise:

2000:

22,352 2010:

39,348

Source: U.S. Census

housing stock, in 2000. The Census deﬁnes an occupied home as any place where a person lives and sleeps “most of the time.” Foreclosure and housing experts say the spike in vacant homes is a result of the recession and mortgage meltdown, according to Newsday. As people ﬂed in search of cheaper housing options, the number of vacant homes rose while poor credit limited the pool of buyers. From 2008 to 2010, lenders took back 3,467 Long Island homes, more than triple the amount between 2005 and 2007. Long Island has around 1 million year-round housing units, and vacancies have increased in 91 percent of communities since 2000. Across the state, the overall residential vacancy rate was 6.2 percent, an increase from 5.2 percent a decade ago. Compiled by Russell Steinberg 80 September 2011 www.TheRealDeal.com

PHOTOGRAPH COURTESY OF ESPN

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

The San Francisco skyline

San Francisco San Francisco Bay Area sales dropped in July, as economic uncertainty kept nervous buyers out of the market, the San Francisco Chronicle reported last month. Throughout the nine Bay Area counties, the median price paid for an existing single-family house was $400,000, down 7.5 percent from the same month of last year, according to DataQuick, a San Diego real estate research ﬁrm. A total of 5,096 homes changed hands, roughly the same as in July 2010. Bank sales of foreclosed homes accounted for 26.6 percent of Bay Area resales in July, and short sales represented 18.8 percent. “People became more concerned about the future and took a step back to the housing sidelines as we saw an increasing number of negative reports on the economy and jobs, and people fretted about the outcomes of the debt-ceiling debate in Washington, D.C.,” Andrew LePage, a DataQuick analyst, told the Chronicle.

foreclosure auction last month for $5.44 million, the Times Picayune reported. The property was purchased by the operator of the surface parking lot at the site, Premium Parking Service. Jim Huger, CEO of Premium Parking, said he intends to retain the land until new opportunities arise. “Like any long-term buyer, we’re interested in A rendering of Trump’s Poydras Street tower

Las Vegas

Washington, D.C. The 291,838-square-foot Capitol Plaza office tower in Washington, D.C., traded hands for $149.5 million last month, Bloomberg News reported. Iowa-based Principal Real Estate Investors purchased the property from Area Property Partners, headed by developer William Mack, and the Van Ness Property Group. The building, which was vacant when Area acquired it in 2007, is now 98 percent leased. Tenants include the U.S. Internal Revenue Service and the Department of Homeland Security. “This is one of the preeminent office properties in a growing submarket with limited Class A office product,” Jim Halliwell, managing director at Principal Real Investors, said in a statement.

New Orleans The Poydras Street parcel where developer Donald Trump once planned to construct the state’s tallest building sold at a sheriff’s 82 September 2011 www.TheRealDeal.com

is backed by the New York State Common Retirement Fund, one of the largest pension plans in the country. Seeded with $500 million in equity to leverage another $500 million in debt, the new fund may ﬁnance up to 12 deals, Hines vice president Doug Donovan said. It will target buildings predominantly occupied by single tenants in Houston and other major U.S. cities. “We together believe that there will be compelling opportunities to develop build-to-suits given the market dynamics,” Donovan said.

any development opportunities,” he said. “When the city is ready for something, we’ll be there.” Trump’s plan for a high-rise condominium project had been in the works since 2005. “The economy just did not justify going forward,” Stephen Dwyer, an attorney for developer Poydras Properties, which worked with Trump on the project, said. He added that Poydras “has not given up on building a project in New Orleans.”

Houston Houston-based developer Hines is planning to launch a $1 billion investment fund to develop, acquire and manage ofﬁce and medical buildings nationwide, the Houston Chronicle reported. The new venture

The Las Vegas rental market is ﬁnally beginning to stabilize after 11 consecutive quarterly declines, according to a recent report by the business advisory ﬁrm Applied Analysis. The report found that apartment rents in the area saw the smallest quarterly drop — 1 percent — since late 2008. The market appears to be “feeling its way along a choppy bottom,” Jake Joyce, a manager at Applied Analysis, told the Las Vegas Review Journal. The average monthly Las Vegas rent dropped to $758 in the third quarter, down from $766 in the same period of last year, the report showed. Meanwhile, occupancy rose to 92 percent from 90.7 percent in the prior-year quarter. Occupancy rates bottomed out at 90.1 percent in late 2009, Joyce said, and have been steadily rising since then. However, Las Vegas landlords are facing more competition from singlefamily homes, as investors increasingly buy houses in all-cash sales with the intention of renting them out. “This is changing the dynamic of our communities, as more and more and more homes have become tenant-occupied,” said local real estate agent Bill Myers.

New Jersey Boston’s Intercontinental Real Estate has made a $215 million deal to renovate an outdated, 770,000-square-foot ofﬁce com-

plex at 800 Scudders Mill Road in Plainsboro, N.J., the Boston Globe reported. The development will be the new U.S. headquarters of Danish drug maker Novo Nordisk. The project is a joint venture with Ivy Equities and LCOR Corporation. Wells Fargo and Sovereign Bank are providing ﬁnancing. “This transaction is a signal that banks, both domestic and international, have faith in the commercial markets coming back,” said Peter Palandjian, CEO of Intercontinental. “We haven’t seen projects of this size since before the collapse.” Work on the development, scheduled to begin next month, is expected to create 500 construction jobs.

Peter Palandjian

Los Angeles Commercial landlord CIM Group has purchased a Hollywood building that once housed the Old Spaghetti Factory restaurant, the L.A. Times reported. CIM plans to construct a mixed-use building at the site, and though the terms of the deal were not disclosed, real estate experts valued the transaction at more than $20 million. The Old Spaghetti Factory closed that location, at 5939 West Sunset Boulevard, several years ago. CIM is considering a design that would preserve the historic building and transform it into a complex with a 22-story, 305-unit residential tower and 40,000 square feet of ofﬁce and retail space, the Times said. Oregon-based development group Gerding Edlen Development announced plans to build at the site in 2006, but the project did not materialize due to the ﬁnancial climate. “Things ground to a halt in Hollywood over the last The Old Spaghetti Factory building

couple of years,” said Leron Gubler, president of the Hollywood Chamber of Commerce. “This will be a chance to really get started again.” Compiled by Katherine Clarke

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Commercial properties recently placed on the market Uptown multifamily portfolio on the market The mortgage note secured by eight prewar apartment buildings in Upper Manhattan is on the market for $70 million. Com3915 Broadway bining for 460 apartments and 25,000 square feet of retail space, the properties are located at 3885 Broadway, 4455 Broadway, 3915 Broadway, 3900 Broadway, 80 and 86 Fort Washington Avenue, 66-72 Fort Washington Avenue and 884 Riverside Drive. Seven of the buildings are located within a few blocks of each other between 160th and 164th streets. Eastern Consolidated is handling the sale on behalf of the special servicer.

Bronx development site on the block A development site at 475 Exterior Street in the Mott Haven section of the Bronx is on the market with an asking price of $25 million. The site’s C4-4/HRW zoning allows for a variety of uses, including residential, commercial, retail, hotel and community space. For buyers taking advantage of the city’s Inclusionary Housing Program for affordable housing, the site has a maximum residential buildable square footage of 764,000 square feet. Otherwise, the property has a buildable square footage of 573,000 for residential use, 657,000 for commercial use

84 September 2011 www.TheRealDeal.com

and 1.24 million for a community facility. Massey Knakal’s Robert Knakal, Nicholas Burns, Jonathan Hageman and Andrew Essick are handling the sale.

Greenwich Village townhouse asking $22M A five-story, multifamily townhouse at 23 Washington Square North is on the market with an asking price of $22 million, or about $3.14 million per unit. The property, built in 1830, has seven units that comprise 8,528 square feet of space. Three of the apartments are two-bedrooms, and four of the units are one-bedrooms. Jill Bane 23 Washington Square North and Jed Garﬁeld of Leslie J. Garﬁeld & Co. are marketing the building.

Flatbush Avenue commercial space for sale A commercial building and development site at 626 Flatbush Avenue in Brooklyn is for sale with an asking price of $15 million. The 52,265-square-foot property is located in Prospect Lefferts Gardens, and is currently occupied by four tenants, including medical ofﬁces and a charter school. One of the retail spaces is vacant. The site has an additional 164,000 square feet of air rights for future development. Jonathan Berman of Ariel Property Advisors is marketing the property.

Chelsea development site on the block A development site at 544 West 26th Street is available for purchase for $14.5 million, or about $1,465 per square foot. The 9,900-square-foot site has 100 feet of frontage on West 26th Street, and allows for a development of up to 68,234 square feet of commercial space and community facilities. The property is currently leased to the City of New York, with approximately ﬁve years remaining on the lease. Jamison Weiner of the Manhattes Group is handling the sale.

Harlem residential portfolio on the market A package of 11 multifamily buildings in Central Harlem is on the market with an asking price of $12.9 million. The walk-up properties are all located between West 134th and 136th streets, along West 135th Street, Adam Clayton Powell Jr. Boulevard, Frederick Douglass Boulevard 488-90 St. Nicholas Avenue and St. Nicholas Avenue. All together, the buildings include about 118,305 square feet of space and consist of 117 residential units and 12 commercial units. Ariel Property Advisors is handling the assignment. Compiled by Linden Lim

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Deal Sheet summary Sales

Overview

By type

Property sales Deals Dollars

The Deal Sheet, on pages 88 to 102, covers transactions from 7/11/11 through 8/10/11. Please submit future deals to deals@therealdeal.com.

40 $1,458,050,000

Financing

By dollar volume (in millions)

Development

185.93

Hotel

Industrial

1.9

Mixed-Use

Multifamily

47.75 430.47

Transactions

Office

617.5

Buildings

Retail

94.5

Aggregate value

$218,550,000

Leases Office

127

Retail

Total

177

Leases square feet Office Retail Total

1,510,316 323,988 1,834,304

Office leases Office leases by industry Industry

Office leases sf by industry Leases

Industry

Top tenant reps for office leasing by sf

Square feet leased

Tenant representative

Square feet leased

Advertising & Marketing

Architecture & Design

Construction

Consulting

12,723

Colliers International

Education

40,649

Cresa Partners

110,371

Entertainment

21,509

Studley

101,095

Entertainment

112,151

Cushman & Wakefield

348,541

Architecture & Design

28,459

Newmark Knight Frank

227,988

Construction

35,000

CB Richard Ellis

151,765 133,000

Fashion*

123,947

Adams & Co.

92,720

Financial

436,293

Jones Lang LaSalle

73,960

Jewelry

25,915

Grubb & Ellis

37,416

Legal

66,454

Dweck Group

23,500

Media

91,925

Own Manhattan Inc.

12,949

Medical

51,490

CBC Hunter Realty

5,900

NGO

159,549

Murray Hill Properties

5,400

Office Business Centers

Jewelry

Office Business Centers

178,757

Wharton Property Advisors

4,176

Other / n/a

61,708

Prudential Douglas Elliman

4,000

Science & Technology

63,787

Kenneth Zund Realty

3,500

Retail leases Top tenant reps for leasing by sf

Retail leases by industry

Broker

Electronics & Technology

23,000

Fashion

49,007

Square feet leased

Retail leases sf by industry

Bloom Real Estate Group

30,000

Fashion

Winick Realty

26,365

Food & Beverage

49,962

Katz & Associates

25,000

Health & Beauty

28,262

Ripco Real Estate

22,500

Other

Kassin Sabbagh Realty

11,800

Toys

Lansco Corp.

11,500

Newmark Knight Frank

10,784

NAI Friedland Realty

9,700

Kenneth Zund Realty

9,000

Cushman & Wakefield

4,800

Prudential Douglas Elliman

4,200

Sierra Realty

2,850

Tarter Stats Oâ&#x20AC;&#x2122;Toole

2,300

(*includes showroom space)

25 1

Other

107,292

Toys

66,465

www.TheRealDeal.com September 2011 87

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 7/11/11 to 8/10/11. Please submit future deals to deals@therealdeal.com.

Office leases Address

Size

Tenant / Representative

Landlord / Representative

Notes

85 Broad St

270,000

Oppenheimer & Company / M. Konsker, M. Astrachan, J. Herman, S. Bauer, C&W

MetLife / P. Riguardi, F. Doyle, C. Wasserberger, A. Tener, Jones Lang LaSalle

The financial services firm signed a 15-year lease for seven floors. Mitch Konsker and Matt Astrachan were with Cushman & Wakefield during negotiations, but have since decamped for Jones Lang LaSalle.

2 Park Ave

100,000

American Society of Mechanical Engineers / L. Manoff, M. Jaccom, Colliers International

n/a / T. Stacom, M. Arkin, D. Green, W. Morris, C&W

The nonprofit signed a lease. The company is relocating from a smaller, 66,000-square-foot space nearby.

2 Park Ave

100,000

Gilt Groupe / Marcus Rayner, Cresa Partners

n/a / T. Stacom, M. Arkin, D. Green, W. Morris, C&W

The online fashion retailer signed a direct lease. The tenant had been subleasing a smaller space in the building.

132 West 31st St

100,000

24/7 Real Media / Greg Tosko, CBRE

C and K / M. Arkin, J. Picco, C&W

The digital marketing company signed a lease extension, converted a sublease to direct and signed a new lease for two more floors, doubling its space at the building, according to the New York Post.

One Hudson Sq

82,844

Getty Images / B. Waterman, L. Korman, D. Levine, M. Feigen, Newmark Knight Frank

Trinity Real Estate / R. Constable, A. Peretz, M. Nahmias, C&W; M. Packman, Trinity Real Estate

The stock photo agency signed a new 15-year lease.

1115 Broadway

58,651

Select Office Suites / James Buslik, Jeff Buslik, N. Zagar, Adams & Co.

Eleven Fifteen Associates / James Buslik, Jeff Buslik, N. Zagar, Adams & Co.

The office space rental provider signed a 15-year lease renewal and expansion.

555 Madison Ave

50,000

Duval & Stachenfeld / n/a

Rodney Corp. / R. Baraf, M. Mandell, E. Silverstein, C&W

The law firm signed a lease. The tenant is relcoating from 101 Park Avenue.

636 Sixth Ave

50,000

SecondMarket Holdings / J. Wenk, P. Formichelli, D. Suozzi, J. Lewis, Jones Lang LaSalle

William Macklowe Co.; Clarion Partners / M. Konsker, M. Astrachan, J. Tootell, M. Ginberg, Jones Lang LaSalle

The online market-trading company signed a 10-year lease on the third through sixth floors.

757 Third Ave

42,665

Rosen Seymour Shapss Martin & Company / M. Sukenik, C. Mongeluzo, C. Borg, Newmark Knight Frank

RFR Realty / Represented in-house

The accounting firm signed a lease renewal.

619 West 54th St

37,416

The Rogosin Institute / G. Gibian, R. Shapiro, Grubb & Ellis

n/a / n/a

The medical treatment and research institute signed a 20-year lease.

1065 Sixth Ave

35,000

Plaza Construction / n/a

n/a / n/a

The contractor signed a lease on the seventh floor. The company relocated from 260 Madison Avenue.

505 Eighth Ave

33,446

Cicatelli Associates / M. Shapses, J. Schwartzenberg, Studley

Newmark Holdings / E. Gural, A. Gurevich, Newmark Knight Frank

The continuing education services provider signed an expansion lease.

902 Broadway

33,000

Micro Office Solutions / P. Mesmer, M. Meyer, Colliers International

902 Associates / P. Mesmer, M. Meyer, Colliers International

The office space provider signed a lease on the sixth and seventh floors.

104 West 40th St

31,947

TKP New York Inc. / J. Mangiacotti, M. Tanaka, CBRE

Savanna / P. Amrich, M. Movshovich, N. King, CBRE

The Japan-based provider of conference and meeting facilities signed a 10year lease on the concourse level and second floor.

104 West 40th St

29,988

Daytop Village Foundation / J. Covello, B. Jones, C&W

Savanna / P. Amrich, M. Movshovich, N. King, CBRE

The nonprofit signed a lease on the third and fourth floors. The tenant is relocating from 54 West 40th Street.

1745 Broadway

27,775

Regent Business Center LLC / Scott Klau, Newmark Knight Frank

Random House / Cassidy Turley

The office space provider signed a sublease.

601 West 27th St

27,500

Quirky / Greg Taubin, Studley

Waterfront New York Realty Corp. / Represented in-house

The social networking site for inventors signed a 10-year lease on part of the seventh floor.

40 Worth St

27,384

Bevmax Office Centers / B. Steinwurtzel, R. Lapidus, J. Gural, Newmark Knight Frank

Newmark Holdings / B. Steinwurtzel, R. Lapidus, Newmark Knight Frank

The office space provider signed a lease.

590 Madison Ave

25,125

Pine River Capital Management / D. Posy, J. Messina, Studley

Edward J. Minskoff Equities / Represented in-house

The global asset management firm signed a lease on the entire 38th floor. The reported asking rent was $130 per square foot.

399 Park Ave

24,662

Moelis & Co. / Louis Dâ&#x20AC;&#x2122;Avanzo, C&W

Legg Mason / S. Bogetti, R. Feher, C. Mansfield, K. Rapp, CBRE

The investment bank signed a six-year sublease on the sixth floor. The reported asking rent was $60 per square foot.

1385 Broadway

23,500

Jacmel Jewelry / M. Beyda, M. Dweck, Dweck Group

Bloomingdale Properties / J. Serko, G. Greenspan, D. Gaines, L. Lazerwitz, C&W

The jewelry firm signed a lease for the entire eighth floor. The reported asking rent was $40 per square foot.

48 Wall St

13,650

The Louis Berger Group Inc. / N. Golden, R. Perlman, L. Brodsky, P. Cipriano, Newmark Knight Frank

Swig Equities / Represented in-house

The engineering and architecture consulting firm signed a new lease.

40 Worth St

12,618

Legal Aid Society / C. Mansfield, J. Cope, CBRE

Newmark Holdings / B. Steinwurtzel, R. Lapidus, Newmark Knight Frank

The nonprofit signed a lease for extra space. It will now occupy more than 69,000 square feet in the building.

230 Park Ave

10,400

Orion Consultants / n/a

Monday Properties / P. Amrich, CBRE; J. Berger, Monday Properties

The strategic management consulting firm signed a 10-year lease on the 22nd floor.

40 Worth St

9,534

New York Downtown Hospital / Richard Kennedy, C&W

Newmark Holdings / B. Steinwurtzel, R. Lapidus, Newmark Knight Frank

The hospital signed a lease for a new location.

485 Seventh Ave

9,238

Gibbs & Cox Inc. / Dennis Karr, Newmark Knight Frank

Gedula 26 / Elliot Aharanoff, Eretz Group

The naval architecture and marine engineering firm signed a lease renewal and expansion.

435 Hudson St

8,000

FremantleMedia / J. Peck, G. Kerper, Studley

Trinity Real Estate / Represented inhouse

The television show producer signed a lease on the fourth floor. The company is relocating from 63 Madison Avenue.

599 11th Ave

8,000

Knight Electrical Services Corporation / D. Berke, D. Zimbaro, C&W

Winter Organization / Neil Rubin, Newmark Knight Frank

The electrical services provider signed a lease.

420 Lexington Ave

7,837

Paladyne Systems LLC / Dan Segal, Newmark Knight Frank

SL Green / Represented in-house

The technology solutions provider to the hedge fund industry signed a lease.

519 Eighth Ave

7,583

MBK Entertainment / Alan Bonett, Adams & Co.

n/a / S. Kaufman, B. Raskob, Kaufman Organization

The music talent company signed a seven-year lease.

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Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

148 West 37th St

7,200

Tribu International Inc. / CBRE

Fashion Associates / James Buslik, Jeff Buslik, Adams & Co.

The fashion company signed a 10-year lease. The reported asking rent was $32 per square foot.

570 Lexington Ave

7,053

Deneufville & Co. / E.N. Cutler, Newmark Knight Frank

The Feil Organization / Represented in-house

The tenant signed a lease.

40 Worth St

7,024

New York Law School / Howard Nottingham, Studley

Newmark Holdings / B. Steinwurtzel, R. Lapidus, Newmark Knight Frank

The law school signed a 20-year lease for extra space. It will now occupy 76,905 square feet in the building.

75 Spring St

6,400

WATG / Robert Corbi, Jones Lang LaSalle

PBS / n/a

The interior design firm signed a lease on the entire seventh floor.

61 Broadway

6,175

Mitsubishi Logistics America Corp. / Tomoko Sasaki, Chilmark Consultants Inc.

Broad Street Development / Represented in-house

The transportation logistics firm signed a lease renewal on the 11th floor.

110 William St

6,070

SharedBook / Robert Corbi, Jones Lang LaSalle

Swig Equities / n/a

The Internet publishing firm signed a five-year lease on the 30th floor.

420 Lexington Ave

5,595

Triad Retail Media / J. Halpern, B. Stella, Cresa Partners

SL Green / Dennis Someck, George Comfort & Sons

The maker of online media programs for e-commerce websites signed a fouryear lease on the 30th floor.

100-104 Fifth Ave

5,400

Interactive Partners / Randy Sherman, Murray Hill Properties

n/a / Grant Greenspan, Kaufman Organization

The product development firm signed a lease. The reported asking rent was $55 per square foot.

55 Broadway

5,000

Alterra Specialty Insurance Services Limited / Scott Cahaly, Jones Lang LaSalle

Broad Street Development / Represented in-house

The insurance firm signed an expansion lease on the 21st floor. The tenant will have a total of 12,586 square feet at the property.

1040 Sixth Ave

4,776

WorkFlowOne / J. Halpern, B. Stella, Cresa Partners

Garden Homes / B. Cohen, M. Leon, R. Kass, Newmark Knight Frank

The print and promotional marketer signed a five-year lease on the 11th floor.

40 Exchange Pl

4,700

Learnit Systems / n/a

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

The nonprofit signed a lease for the penthouse suite.

112 West 34th St

4,176

Access.1 Communications Corp. / Ruth Colp-Haber, Wharton Property Advisors

W&H Properties / M. Arkin, K. Mekles, H. Klein, C&W

The radio station owner signed a lease on the 14th floor. The tenant is relocating from 11 Penn Plaza.

40 Exchange Pl

4,000

Goddard Riverside Community Center / n/a

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

The nonprofit signed a lease on the seventh floor.

99 Richardson St (Brooklyn)

4,000

Area 17 / Sean Philipps, Prudential Douglas Elliman

Richardson Street LLC / Grant Dolgin, Kalmon Dolgin Affiliates

The Internet development company signed a lease.

40 Exchange Pl

4,000

Artists Seminar Corp. / n/a

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

The acting coach signed a long-term lease on the fifth floor. The reported rent was $22 per square foot.

1410 Broadway

3,500

Fit 4 You / Tom Pfingst, Kenneth Zund Realty

LH Charney Associates / Rick Doolittle, Murray Hill Properties

The swimwear manufacturer signed a long-term lease. The reported asking rent was $42 per square foot.

147 West 25th St

3,500

Christian Oth Studio / Benjamin Zanjirian, Metropolitan Property Group

n/a / Martin Mayer, Colliers International

The photographer signed a seven-year lease. The reported asking rent was $30 per square foot.

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Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

55 Broadway

3,406

Syntel Inc. / Michael Morris, Newmark Knight Frank

Broad Street Development / Represented in-house

The information technology and knowledge processing company signed a lease renewal on the 20th floor.

130 William St

3,400

Compass Rose Services / R. Rozins, N. Murray, CBC Hunter Realty

130 William Street Holdings Corp. / Represented in-house

The insurance firm signed a long-term lease.

61 Broadway

3,187

Argus Research Company / A. Field, J. Fein, C&W

Broad Street Development / Represented in-house

The independent equity research firm signed a lease on the 19th floor.

61 Broadway

3,170

Market Technicians Association Inc. / D. Glassman, B. Weinstable, C&W

Broad Street Development / Represented in-house

The nonprofit signed a lease renewal and expansion on the fifth floor.

61 Broadway

3,118

Jill Miller & Associates / Neil Rubin, Newmark Knight Frank

Broad Street Development / Represented in-house

The law firm signed a lease renewal on the 21st floor.

10 West 33rd St

3,063

Ashko Group LLC / David Levy, Adams & Co.

Ten West Thirty Third Associates / David Levy, Adams & Co.

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

61 Broadway

3,054

Winterflood Securities Incorporated / Aaron Ellison, Jones Lang LaSalle

Broad Street Development / Represented in-house

The international capital markets firm signed a lease on the 13th floor.

61 Broadway

3,018

Robinson McDonald & Canna LLP / Michael Morris, Newmark Knight Frank

Broad Street Development / Represented in-house

The law firm signed a lease renewal on the 14th floor.

40 Exchange Pl

3,000

Lionquest Goldfine LLC / n/a

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

The accounting firm signed a lease on the 16th floor. The reported rent was $25 per square foot.

125 East 23rd St

3,000

Kinespirits Inc. / Anand Melwani, ARM Real Estate Group

n/a / Anand Melwani, ARM Real Estate Group

The gyrotonic and gyrokinesis training studio signed a five-year lease for the entire fifth floor and part of the sixth floor.

49 West 38th St

2,800

Enterproid Inc. / J. Buslik, S. Goodman, M. Lorberbaum, Adams & Co.

Heskel’s Properties LLC / R. Zimmerman, A. Udis, Newmark Knight Frank

The smartphone application developer signed a three-year lease. The reported asking rent was $35 per square foot.

55 Broadway

2,800

P & C Insurance Company / George Grace, GE Grace and Company

Broad Street Development / Represented in-house

The insurance firm signed a new lease on the 30th floor.

55 Broadway

2,770

Baumeister & Samuels PC / n/a

Broad Street Development / Represented in-house

The law firm signed a lease renewal on the 15th floor.

39 West 38th St

2,708

SocialFeet / Chris Salizzoni, A.C. Lawrence

Eretz Group / C. O’Toole, S. Moore, Tarter Stats O’Toole

The referral buying company for online retailers signed a three-year lease. The reported asking rent was about $25 per square foot.

110 West 40th St

2,535

SPIRE Creative Group / D. Levy, B. Maslin, Adams & Co.

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

The creative agency signed a five-year lease. The reported asking rent was $36 per square foot.

110 East 23rd St

2,500

Crowd Twist / M. Okun, M. Piccirillo, CBC Hunter Realty

Christos Realty / Represented in-house

The technology firm signed a lease.

40 Exchange Pl

2,500

Tides Center / Charles Beyda, JUD Leasing Corp.

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

The nonprofit signed a lease on the 12th floor.

40 Exchange Pl

2,500

SMA Medical Labs / n/a

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

The medical laboratory signed a long-term lease on the seventh floor. The reported rent was $26 per square foot.

185 Madison Ave

2,350

JC Edward Corp. / J. Buslik, S. Goodman, M. Lorberbaum, Adams & Co.

n/a / F. Schwalbe, J. Schwalbe, Hilson Management Corp.

The shoebox supplier signed a 10-year office lease. The reported asking rent was $40 per square foot.

61 Broadway

2,323

Willdan Group Inc. / Robert Corbi, Jones Lang LaSalle

Broad Street Development / Represented in-house

The engineering and consulting services firm signed a lease renewal on the 20th floor.

119 Fifth Ave

2,100

Intrepidus Group Inc. / J. Buslik, S. Goodman, Adams & Co.

119 Fifth Avenue Corp. / Jeffrey Schwartz, Adams & Co.

The smartphone application developer signed a three-year lease. The reported asking rent was $45 per square foot.

40 Exchange Pl

2,000

iGenii Inc. / n/a

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

The web producer signed a lease on the fourth floor. The reported rent was $26 per square foot.

61 Broadway

2,000

Freedman & Co. CPA / n/a

Broad Street Development / Represented in-house

The full-service tax, accounting and business consulting firm signed a lease renewal on the 14th floor.

1133 Broadway

1,830

The Echo System Corp. / Josh Sands, RE Com Partners LLC

Kew Management / Represented inhouse

The social media marketing company signed a lease.

61 Broadway

1,810

The Fulcrum Group / n/a

Broad Street Development / Represented in-house

The technical operations firm signed a lease renewal on the 16th floor.

20 Jay St (Brooklyn)

1,750

Re Mi Fa Inc. / Nathaniel Persky, 5 Boroughs CRE

Two Trees Management / Caroline Pardo, Two Trees

The film and TV production company signed a lease.

1133 Broadway

1,701

Polynation LLC / James Graham, Winslow & Co.

Kew Management / Represented inhouse

The design and animation post-production facility signed a lease.

15 Maiden Ln

1,675

Frank PR / Max Vizgalin, Own Manhattan Inc.

Heller Properties / Represented inhouse

The public relations company signed a five-year lease on the sixth floor.

15 Maiden Ln

1,675

Big Bad Boo / Max Vizgalin, Own Manhattan Inc.

Heller Properties / Represented inhouse

The animation company signed a five-year lease on the 11th floor.

501 Fifth Ave

1,664

Weather Underground / Max Vizgalin, Own Manhattan Inc.

Abramson Brothers / Represented in-house

The weather information provider signed a lease.

8 West 38th St

1,630

Fredericks of Hollywood / Jeff Buslik, James Buslik, Adams & Co.

Fraglow Realty LLC / R. Zimmerman, A. Udis, Newmark Knight Frank

The lingerie company signed a three-year lease for office space.

20 Jay St (Brooklyn)

1,590

Official.FM USA Inc. / n/a

Two Trees Management / Alexander Bos, Two Trees

The software development firm signed a lease.

110 West 40th St

1,578

Liberty Fabrics Ltd. / Savitt Partners

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

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

20 Jay St (Brooklyn)

1,573

Reading Partners / Nigel Shamash, 5 Boroughs CRE

Two Trees Management / Caroline Pardo, Two Trees

The nonprofit signed a lease.

40 Exchange Pl

1,500

Emerald Institute of NY / n/a

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

The language school signed a five-year lease on the seventh floor. The reported rent was $27 per square foot.

20 Jay St (Brooklyn)

1,486

Tipper.com LLC / Chris Havens, Creative Real Estate Group

Two Trees Management / Caroline Pardo, Two Trees

The e-commerce company signed a lease.

20 Jay St (Brooklyn)

1,486

Heist Inc. / n/a

Two Trees Management / Elizabeth Bueno, Two Trees

The video production company signed a lease.

20 Jay St (Brooklyn)

1,486

Birch B LLC / n/a

Two Trees Management / Alexander Bos, Two Trees

The beverage seller and marketer signed an office lease.

55 Washington St (Brooklyn)

1,436

Breakfast LLC / n/a

Two Trees Management / Caroline Pardo, Two Trees

The website production and design company signed a lease.

92 September 2011 www.TheRealDeal.com

www

The best view of New York real estate is from the top July 2010 - June 2011 Top 10 Largest Offi ce Leases

Top 25 Largest Offi ce Leases

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Source: Compiled from an analysis of data provided by CoStar Inc. and the top Manhattan offi ce leases lists published in Crain’s New York Business (2/14/11; 7/26/10).

New York’s premier real estate firm, since 1917 For the most complete view of the market, more of New York’s leading businesses choose to work with Cushman & Wakefield. Over the past 12 months, Cushman & Wakefield professionals have represented tenants and landlords on 8 of the 10 largest Manhattan office leases and 14 of the top 25 — far more than any other firm. Involvement on more of the largest leases requires a high degree of trust, which is a commitment from clients that enables more market knowledge and better leverage on each assignment. And clients know that brings more success on their terms.

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Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

40 Exchange Pl

1,400

Americas Merchants Receivables / n/a

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

The financial firm signed a long-term lease on the 17th floor. The reported rent was $30 per square foot.

One Maiden Ln

1,300

Y Interact Inc. / Marie Hammoudi, Own Manhattan Inc.

The Lawrence Group / Represented in-house

The design studio signed a five-year lease on the entire 10th floor.

45 Main St (Brooklyn)

1,300

North American Ideon LLC / n/a

Two Trees Management / Alexander Bos, Two Trees

The financial software producer signed a lease.

40 Exchange Pl

1,250

Radius Communications USA / n/a

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

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

390 Fifth Ave

1,250

Otrera / J. Buslik, S. Goodman, Adams & Co.

n/a / F. Schwalbe, J. Schwalbe, Hilson Management Corp.

The jeweler signed a three-year office lease. The reported asking rent was $40 per square foot.

110 West 40th St

1,245

Beverly Browne / D. Levy, B. Maslin, Adams & Co.

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

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

15 Maiden Ln

1,230

Oznoz Entertainment / Max Vizgalin, Own Manhattan Inc.

Heller Properties / Represented inhouse

The distributor of educational products signed a lease.

45 Main St (Brooklyn)

1,201

Lovaro LLC / n/a

Two Trees Management / Caroline Pardo, Two Trees

The product design and branding company signed a lease.

231 West 39th St

1,196

World Apparel Corp. / James Buslik, Jeff Buslik, Adams & Co.

231/249 West 39 Street Associates / James Buslik, Jeff Buslik, Adams & Co.

The fashion company signed a four-year lease. The reported asking rent was $35 per square foot.

110 West 40th St

1,182

IBC-PM / D. Levy, B. Maslin, Adams & Co.

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

The full-service real estate firm signed a six-year lease. The reported asking rent was $39 per square foot.

1123 Broadway

1,160

Bizo Inc. / n/a

Kew Management / Represented inhouse

The marketing firm signed a lease.

231 West 39th St

1,139

CP Shades Inc. / James Buslik, Jeff Buslik, Adams & Co.

231/249 West 39 Street Associates / James Buslik, Jeff Buslik, Adams & Co.

The fashion company signed a three-year lease. The reported asking rent was $35 per square foot.

20 Jay St (Brooklyn)

1,115

Whitney Wood Bailey / n/a

Two Trees Management / Elizabeth Bueno, Two Trees

The artist signed a lease.

112 West 34th St

1,113

SolArc / Chad Beck, Jones Lang LaSalle

W&H Properties / M. Arkin, K. Mekles, H. Klein, C&W

The software solutions provider signed a lease on the 21st floor. The tenant is relocating from 1370 Broadway.

1123 Broadway

1,096

Commercial Pop LLC / J. Buslik, S. Goodman, M. Lorberbaum, Adams & Co.

Kew Management / Represented inhouse

The digital creative agency signed a two-year lease.

611 Broadway

1,060

MEB Inc. / Max Vizgalin, Own Manhattan Inc.

MD Carlisle Realty Corp. / Represented in-house

The chiropractor signed a five-year office lease.

231 West 39th St

1,052

KVM International Fashions Ltd. / Intrepid Real Estate Group

231/249 West 39 Street Associates / James Buslik, Jeff Buslik, Adams & Co.

The fashion company signed a three-year lease. The reported asking rent was $35 per square foot.

40 Exchange Pl

1,000

Trustees of Sailor Snug Harbor / n/a

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

The nonprofit signed a five-year lease on the 17th floor.

160 Broadway

980

Kips Bay Gynecology / Max Vizgalin, Own Manhattan Inc.

Braun Management / Represented in-house

The gynecologist inked an eight-year lease.

350 Lexington Ave

900

Abramson Physical Therapy / Max Vizgalin, Own Manhattan Inc.

Solil Management / Represented inhouse

The physical therapists signed a seven-year lease.

231 West 39th St

900

Yingshun Garments Inc. / James Buslik, Jeff Buslik, Adams & Co.

231/249 West 39 Street Associates / James Buslik, Jeff Buslik, Adams & Co.

The fashion company signed a three-year lease. The reported asking rent was $35 per square foot.

109 West 38th St

859

Texline Inc. / Brett Maslin, Adams & Co.

Diversified Management / Brett Maslin, Adams & Co.

The fashion company signed a five-year lease. The reported asking rent was $32 per square foot.

110 West 40th St

851

The Beauty Group LLC / D. Levy, B. Maslin, Adams & Co.

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

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

110 West 40th St

833

Place Avision Inc. / D. Levy, B. Maslin, Adams & Co.

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

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

40 Exchange Pl

750

Selene Enterprises / n/a

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

The Internet marketing firm signed a five-year lease on the 13th floor. The reported rent was $33 per square foot.

150 Broadway

708

L.G. Fairmont / Max Vizgalin, Own Manhattan Inc.

JEMB Realty / C&W

The real estate firm signed a lease.

580 Fifth Ave

605

n/a / N. Kerem, M. Pinsky, Affinity Commercial

n/a / n/a

The diamond company signed a three-year lease.

40 Exchange Pl

600

My USA Corp. / n/a

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

The Internet marketing firm signed a five-year lease on the 13th floor. The reported rent was $32 per square foot.

111 John St

560

Jenny Lessard Inc. / Max Vizgalin, Own Manhattan Inc.

Braun Management / Represented in-house

The jeweler signed a 10-year office lease.

350 Broadway

524

The Law Offices of Matthew Guadagno Esq. / Max Vizgalin, Own Manhattan Inc.

JRJ Metro Realty Ltd. / Represented in-house

The immigration lawyer inked a five-year lease.

10 West 33rd St

507

Pure Element Apparel LLC / David Levy, Adams & Co.

Ten West Thirty Third Associates / David Levy, Adams & Co.

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

40 Exchange Pl

500

ISCOM Inc. / n/a

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

The Internet marketing firm signed a five-year lease on the 13th floor. The reported rent was $27 per square foot.

110 West 40th St

475

Yettpo Inc. / D. Levy, B. Maslin, Adams & Co.

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

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

110 West 40th St

475

Barry Morentz and Rona Raines / Nick Zagar, Adams & Co.

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

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

110 West 40th St

473

Deow Resource Management / Furumoto Realty

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

The education consulting firm signed a five-year lease. The reported asking rent was $38 per square foot.

55 Washington St (Brooklyn)

472

Brooklyn Fusion LLC / n/a

Two Trees Management / Alexander Bos, Two Trees

The web-based clothing and accessory retailer signed a lease.

11 Hanover Sq

460

ARD Careers / Max Vizgalin, Own Manhattan Inc.

Mount Pleasant Management Corp. / Represented in-house

The executive recruitment firm signed a lease.

1123 Broadway

403

Fracktal Inc. / n/a

Kew Management / Represented inhouse

The computer services company signed a lease.

1123 Broadway

246

Ruffled LLC / n/a

Kew Management / Represented inhouse

The wedding blog signed a lease.

94 September 2011 www.TheRealDeal.com

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Office leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

1133 Broadway

229

Kevin Calica / n/a

Kew Management / Represented inhouse

The artist signed a lease.

80 Wall St

213

Event Planners Plus / Max Vizgalin, Own Manhattan Inc.

Cassidy Turley / Represented in-house

The event planners signed a three-year office lease.

Retail leases Address

Size

Tenant / Representative

Landlord / Representative

Notes

767 Fifth Ave

66,465

FAO Schwarz / n/a

Boston Properties / Bradley Mendelson, C&W

The toy retailer signed a five-year lease renewal for its three-floor space at the GM Building.

55 Fulton St

30,000

Key Foods / Bloom Real Estate Group

n/a / D. LaPierra, R. Hodos, S. Sjurset, S. Moran, CBRE

The supermarket signed a lease for multilevel retail space.

203 Berry St (Brooklyn)

25,000

Retro Fitness / Scott Sher, Katz & Associates

LNA Realty Holdings / R. Condren, E. Altschul, CPEX Real Estate

The fitness club signed a lease for its first Brooklyn location.

Grand Central Terminal

23,000

Apple / n/a

MTA / n/a

The tech giant signed a 10-year lease to occupy the terminal’s north and northeast balconies. The new store will reportedly be the company’s largest in the world.

717 Fifth Ave

18,400

Dolce & Gabbana / n/a

Jeff Sutton; SL Green / n/a

The fashion house signed a 15-year lease. The space was previously occupied by Escada.

452 Fifth Ave

17,500

Staples / n/a

IDB Group / n/a

The office supplies chain signed a lease for multilevel space.

2131 46th Ave (Queens)

13,500

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

21-31 Holdings LLC / R. Senior, I. Shabot, Ripco Real Estate

The bank signed a 20-year lease.

16 Court St (Brooklyn)

11,644

Duane Reade / Ann La Centra, Winick Realty

SL Green / Represented in-house

The drugstore chain signed a lease renewal and expansion.

155 Fifth Ave

11,500

Uniqlo / C. Emery, Y. Staav, Lansco Corp.

Eretz Group / K. Bellantoni, B. Singer, RKF

The Japanese fashion retailer signed a temporary lease through fall 2011 for multilevel space.

551 Fifth Ave

9,584

Tommy Bahama / Amira Yunis, Newmark Knight Frank

The Feil Organization / Represented in-house

The fashion retailer and lifestyle brand signed an expansion lease to add space for a restaurant, bar and lounge. The tenant will now occupy a total of 18,093 square feet at the building.

460 Willis Ave (The Bronx)

9,000

Dollar Tree Stores / Richard Senior, Ripco Real Estate

FRA Willis Realty / Richard Senior, Ripco Real Estate

The discount store signed a seven-year lease for corner space.

163 Varick St

9,000

Blood Manor / Tom Pfingst, Kenneth Zund Realty

163 Varick LLC / Edwin Shirazian, Heritage Realty

The haunted house operator signed a long-term lease for the entire second floor. The reported asking rent was $30 per square foot.

873 Broadway

8,696

Duane Reade / Steven Baker, Winick Realty

873 Broadway LLC / Martin Meyer, Colliers International

The drugstore chain signed a lease.

2585 Coney Island Ave (Brooklyn)

6,400

Sunny Skies Preschool / Morris Sabbagh, Kassin Sabbagh Realty

n/a / n/a

The preschool signed a 15-year lease for ground-floor retail space.

452 Fifth Ave

6,000

Panera Bread / n/a

IDB Group / n/a

The bakery and café chain signed a lease.

950 Westchester Ave (The Bronx)

5,000

Bronx Community Pride Inc. / Kathy Zamechansky, NAI Friedland Realty

Capital Retail Development LLC / Kathy Zamechansky, NAI Friedland Realty

The community center signed a retail lease.

541 Broadway

4,800

Lacoste / G. Spiegelman, M. O’Neill, C&W

n/a / Andrews Building Corp.

The apparel company signed a lease for another location. The reported asking rent was $550 per square foot.

950 Westchester Ave (The Bronx)

3,500

Urban Pathways / R. Herko, D. Scotto, NAI Friedland Realty

Capital Retail Development LLC / R. Herko, D. Scotto, NAI Friedland Realty

The nonprofit signed a retail lease.

145 Ludlow St

3,344

The Participated Agency / n/a

Misrahi Realty / Kelly Lin, Misrahi Realty

The party planners signed a lease.

109 Mercer St

3,100

Ivanka Trump Fine Jewelry Collection / F. Consolo, J. Aquino, Prudential Douglas Elliman

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

The jeweler signed a lease.

39 West End Ave

2,850

n/a / Peter Braus, Sierra Realty

The Brodsky Organization / S. Baker, C. Rapuano, Winick Realty

The tenant signed a lease for a bagel and pizza shop.

200 Chambers St

2,583

Polarn O. Pyret / n/a

Jack Resnick & Sons / n/a

The children’s clothing chain signed a lease.

435 Broome St

2,300

Kate’s Paperie / Greg Kim, Tarter Stats O’Toole

Socket Realty Corp. / Greg Kim, Tarter Stats O’Toole

The stationery retailer signed a lease for a pop-up store. The reported asking rent was $150 per square foot.

545 West 27th St

2,200

Pinch Food Design / David Berger, Bernstein Real Estate

Ekstein Development / Rafe Evans, Walker, Molloy and Company

The catering company signed a 10-year lease for ground-floor retail space at the Chelsea Muse development. The reported rent was $70 per square foot.

164 Ludlow St

2,000

n/a / Kelly Lin, Misrahi Realty

Forrest Partners / Kelly Lin, Misrahi Realty

The event-planning company leased retail space.

55 Broadway

1,923

FedEx Office and Print Services / n/a

Broads Street Development / Represented in-house

The shipping giant and office services provider signed a lease renewal.

15 Main St (Brooklyn)

1,712

No Name Hunt Club LLC / n/a

Two Trees Management / Caroline Pardo, Two Trees

The restaurant signed a lease.

73 Hudson St

1,622

Biscuits and Bath Hudson Street LLC / Robert Kunikoff, Grubb & Ellis

73 Hudson Inc. / Gary Schwartzman, Grubb & Ellis

The dog spa signed a 16-year lease.

325 Broadway

1,600

Subway / Morris Sabbagh, Kassin Sabbagh Realty

325 Broadway Associates / n/a

The sandwich chain signed a 10-year lease.

685 Madison Ave

1,500

Aaron Basha Corp. / L. Shabtai, K. Gedinsky, Winick Realty

Ivanka Trump Collection / L. Shabtai, K. Gedinsky, Winick Realty

The jeweler and accessory retailer signed a lease.

93 Pineapple Walk (Brooklyn)

1,400

Heights Kids / Diana Boutross, Winick Realty

Whitman Owner Corp. / Diana Boutross, Winick Realty

The parenting and children’s products store signed a lease.

35 Avenue A

1,362

Joyful Nails / R. Smith, T. Jung, Winick Realty

NYC Housing Authority / R. Smith, T. Jung, Winick Realty

The salon signed a lease. The tenant is relocating from Houston Street.

848 Sixth Ave

1,300

U.I.E. Group Inc. / M. Majerovsky, S. Majerovsky, Citywide Properties

n/a / n/a

The importer and exporter of human hair signed a retail lease.

824 Broadway

1,200

The Bean Coffee Shop / Morris Sabbagh, Kassin Sabbagh Realty

12 Broadway LLC / Michael Worthman, RKF

The café signed a 12-year lease.

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Retail leases continued Address

Size

Tenant / Representative

Landlord / Representative

Notes

56 West Fordham Rd (The Bronx)

1,200

Envios De Valores La Nacional Corp. / Rick Stassa, NAI Friedland Realty

Grand Ford Associates / Rick Stassa, NAI Friedland Realty

The money transfer services provider signed a retail lease.

2814 Broadway

1,200

Crumbs Bake Shop / Benjamin Birnbaum, Newmark Knight Frank

Friedland Properties / Aaron Prince, Friedland Properties

The baked good chain signed a lease.

781 Fifth Ave

1,140

Ghurka / Steven Orfali, Orfali Group

The Sherry-Netherland / R. Cohen, P. Whitenack, J. Totolo, RKF

The luggage and handbag retailer signed a lease.

685 Madison Ave

1,100

Aaron Basha / F. Consolo, J. Aquino, Prudential Douglas Elliman

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

The jewelry designer signed a lease to relocate its shop.

160 Ninth Ave

1,000

Behaviour / Sandy Schwartz, Schwartz, Levine and Kaplan

n/a / n/a

The designer clothing store signed a new 10-year lease with a five-year renewal option for its second Manhattan store.

136 East 55th St

1,000

Organic Avenue / n/a

n/a / S. Rudin, L. Somoza, Rudin Management

The natural foods shop signed a lease.

1432 Flatbush Ave (Brooklyn)

900

Rockin Robin / Morris Sabbagh, Kassin Sabbagh Realty

n/a / n/a

The restaurant signed a lease.

190 Orchard St

800

n/a / n/a

n/a / Kelly Lin, Misrahi Realty

The tenant leased retail space.

14 Jay St (Brooklyn)

700

Punto Bianco / n/a

Two Trees Management / Caroline Pardo, Two Trees

The espresso bar signed a lease.

393 Lenox Ave

700

Dynamic Cellular / Albert Manopla, Kassin Sabbagh Realty

Baroukh Sassouness / n/a

The cell phone shop signed a 10-year lease.

315 Madison Ave

645

The Change Group / Richard Smith, Winick Realty

Abramson Brothers / Represented inhouse

The money exchange business signed a lease for its fifth New York location.

1486 Third Ave

600

Juice Generation / Cosmo Montemurro, Winick Realty

The Feil Organization / Represented in-house

The fresh juice chain signed a lease for another location.

316 West 14th St

600

Perfect Brows / A. Manopla, M. Sabbagh, Kassin Sabbagh Realty

Icon Realty Management / Represented in-house

The hair removal salon signed a lease. The reported asking rent was $150 per square foot.

30 Greenwich Ave

518

Creative Kids of the West Village / Josh Siegelman, Winick Realty

14 L. Pierre Associates / Josh Siegelman, Winick Realty

The childrenâ&#x20AC;&#x2122;s tutoring center signed a lease for retail space.

124 Forsyth St

500

Callicoon Fine Arts / Annie Yao, Buchbinder & Warren

Garlyle Realty Corporation / Edmund Yee, Garlyle Realty Corporation

The fine arts gallery leased retail space. The reported asking rent was $70 per square foot.

167 Avenue C

400

Dynamic Cellular / Albert Manopla, Kassin Sabbagh Realty

165-167 Avenue C Corp. / n/a

The cell phone shop signed a lease.

Buys Address

Size

Buyer / Representative

Seller / Representative

Notes

Two Gotham Center (Queens)

670,000 sf office bldg

H&R Real Estate Investment Trust / n/a

Tishman Speyer-led group / n/a

The property sold for $415 million. The building was completed last year and cost $316 million to develop. So far, Two Gotham Center is the only part of the planned 3.5 million-square-foot mixed-use complex to be completed.

737 Park Ave

21-story apt. bldg, 103 units total

Harry Macklowe / Carlton Group

The Katz family / Jones Lang LaSalle

The rental building sold for $360 million. The price includes capitalization, financing and other related costs. CIM Group is believed to be an investment partner in the deal, the New York Post reported.

597 Fifth Ave

12-story, 70,000 sf office bldg

Thor Equities / n/a

A & A Acquisitions / n/a

The property sold for $99 million. The building last traded for $79.1 million in 2006, when A & A Acquisitions bought it for $1,015 a square foot.

4 Columbus Circle

135,000 sf office bldg

GLL Real Estate Partners / n/a

Cerberus Capital Management / n/a

The property sold for $96.5 million. Cerberus Capital Management had acquired the building in 2006 for $82.9 million.

222 West 23rd St

175,900 sf hotel

Chetrit Group; Clipper Equities / n/a

Stanley Bard; Marlene Krauss; David Elder / Douglas Harmon, Eastdil Secured

The Hotel Chelsea sold for about $80 million.

733-763 Eighth Ave

300,000 buildable sf development site

Glenwood Management / Brian Ezratty, Eastern Consolidated

TriBeach Holdings LLC / Brian Ezratty, Eastern Consolidated

The stalled development site sold for $76.3 million. Glenwood Management had purchased the distressed mortgage on the property from the Bank of Scotland last year and sued to foreclose on the original developer, TriBeach Holdings.

18-30 West 53rd St

5-story, 100,441 sf library bldg

Tribeca Associates; Starwood Capital / n/a

The New York Public Library / n/a

The former Donnell Library building sold for $67.4 million. The buyers plan to develop the site into a new 120-room, five-star hotel, with new space for the library.

415 West 13th St

11,862 sf retail condo

RREEF affiliate / n/a

Thor Equities / n/a

The multilevel retail space sold for $34 million. Thor Equities purchased the condo in October for $18.54 million.

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Buys continued Address

Size

Buyer/ Representative

Seller / Representative

Notes

45 West 53rd St

Museum bldg

Museum of Modern Art / n/a

American Folk Art Museum / n/a

The building sold for $31.2 million. The American Folk Art Museum plans on moving its entire collection into a smaller space it rents for $1 per year from the Church of Jesus Christ of Latter Day Saints at 2 Lincoln Square.

200 West End Ave

26,000 sf retail condo

The Klein Group; Alto Private Investments / Ross Kaplan, Newmark Knight Frank

Clarion Partners / A. Spies, K. Ziebelman, S. Ching, Eastdil Secured

The retail condo sold for $31 million.

32 Pearl St

Development site

Hersha Hospitality Trust / n/a

McSam Hotel Group / n/a

The property sold for $28.7 million. The buyer plans to develop an 81-room Hampton Inn on the site, according to Real Estate Weekly.

11 West 51st St

4,000 sf retail condo

Samson 51 LLC / RKF

11 West 51 Realty / J. Fishman, M. Kapnick, B. Segall, J. Butwin, RKF

The retail condo at the base of the Jewel Hotel sold for $17.5 million. The space is leased to Banco Popular.

201 East 25th St and 200 East 27th St

89 co-op units

Bronstein Properties / n/a

Alexico Group / n/a

The package of 29 apartments at 201 East 25th Street and 60 units at 200 East 27th Street sold in a foreclosure auction for $15.05 million. The price comes out to about $169,101 per apartment.

862 Broadway

4-story, 5,100 sf mixed-use bldg

L3 Capital / Christopher Korey, Christopher Korey Private Realty

David Z. / Ariel Tirosh, Prudential Douglas Elliman

The walk-up building sold for $11 million.

203 West 107th St

9-story, 34,514 sf apt. bldg, 28 units total

n/a / n/a

n/a / Peter Von Der Ahe, Marcus & Millichap

The property sold for $8.05 million.

132 and 134 West 109th St

Two 5-story apt. bldgs, 18,720 sf total

n/a / Local private family

A European bank / E. Anton, R. Solarz, Eastern Consolidated

The adjacent multifamily buildings sold for $7.8 million.

278-284 South 2nd St (Brooklyn)

Two 5-story apt. bldgs, 44 units total

n/a / n/a

n/a / M. Lively, B. Maddigan, Massey Knakal

The buildings sold for $7.25 million, or about $166 per square foot.

130 West 30th St

2 retail condos, 17,500 sf total

Congregation Beit Simchat Torah / Doug Chitel, Winter & Co.

n/a / Prudential Douglas Elliman; Corcoran

The two retail condos sold for $6.6 million. The spaces previously housed Vani Handbags and Dimitrios Furs. Vani will continue to occupy its space, but the synagogue will eventually build out a new space spanning both units.

31 Lincoln Rd and 510 Flatbush Ave (Brooklyn)

Development site

n/a / n/a

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

The lots sold for $6.5 million. The site was originally slated for a 32-story condo with 86 units, but the new owners are repositioning it as 140 rental units with retail and underground parking.

59 Morton St

5-story multifamily townhouse

n/a / n/a

n/a / James Nelson, Massey Knakal

The townhouse sold for $6.5 million, or $1,059 per square foot.

1265 Gerard Ave (The Bronx)

6-story apt. bldg, 53 units total

The Morgan Group / n/a

Watson Boulevard LLC / M. Sioni, Y. Cohen, A. Payano, Sioni & Partners

The elevator building sold for $5.4 million, or $80 per square foot. The price represents a capitalization rate of 6.9 percent and a gross rent multiple of about 7.9.

2985 Ocean Pkwy (Brooklyn)

4-story, 34,000 sf apt. bldg, 39 units total

n/a / Shlomo Antebi, GFI Realty

The walk-up building sold for $5.15 million. The price represents a gross rent multiple of 11.7.

131 West 33rd St

8,200 sf office condo

Drug Policy Alliance / Carri Lyon, C&W

Time Equities / Brandon Medeiros, Time Equities

The office condo sold for $4.3 million.

10 Box St (Brooklyn)

Development site

n/a / n/a

n/a / M. Lively, B. Maddigan, Massey Knakal

The development site sold for $4.2 million, or $64 per buildable square foot. The property features 65,340 buildable square feet for residential, or 87,120 square feet with an Inclusionary Housing Program bonus.

339 East 90th St

5-story, 10,000 sf apt. bldg, 23 units total

n/a / n/a

n/a / Thomas Gammino Jr., Massey Knakal

The property sold for $4.1 million, or $410 per square foot. The building consists of five studios and 18 junior one-bedrooms.

2 South End Ave

3 retail units, 5,475 sf total

Time Equities / H. Schermer, C. Pulling, Time Equities

n/a / Nick Petkoff, Massey Knakal

The retail component of the Cove Club residential building sold for $3.6 million. The retail units range in size from 565 square feet to 3,000 square feet.

545 West 25th St

4,141 sf office condo

n/a / n/a

n/a / B. Emmetsberger, C. Glanzrock, Massey Knakal

The sixth-floor commercial condo sold for $2.7 million, or $652 per square foot.

7117-21 13th Ave (Brooklyn)

4,950 sf mixed-use bldg

Bay Ridge Medical / R. Senior, I. Shabot, Ripco Real Estate

Joe Teri Holding / R. Senior, I. Shabot, Ripco Real Estate

The property sold for $2.5 million.

308 West 22nd St

4-story residential townhouse, 8 units total

n/a / n/a

n/a / Peter Von Der Ahe, Marcus & Millichap

The townhouse sold for $2.4 million. The apartments have an average monthly rent of $1,543.

83-05 34th St (Queens)

4-story, 13,179 sf apt. bldg, 16 units total

PD34LLC / M. Guttman, A. Jungreis, Rosewood Realty

83-05 34th Ave. LLC / Michael Guttman, Rosewood Realty

The walk-up building sold for $2.3 million. The price represents a gross rent multiple of 10.

11-26 46th Rd (Queens)

1-story, 7,500 sf industrial bldg

n/a / n/a

n/a / Al Holloman, Massey Knakal

The property sold for $1.9 million, or about $250 per square foot.

41-25 54th St (Queens)

4-story, 9,800 sf apt. bldg, 14 units total

PD 54th LLC / A. Jungreis, M. Guttman, Rosewood Realty Group

RW Woodside LLC / A. Jungreis, M. Guttman, Rosewood Realty Group

The walk-up building sold for $1.83 million. The price represents a gross rent multiple of 7.6.

422 Saint Nicholas Ave

5-story, 11,100 sf apt. bldg, 10 units total

King Penguin Properties / Represented in-house

Fortuna Realty Group / Ariel Property Advisors

The walk-up building sold for $1.81 million. The price represents a gross rent multiple of 8.8 and a capitalization rate of 6.8 percent.

306 Mott St

2,000 sf comm. condo

Foreign investor / Oxford Property

n/a / Kelly Lin, Misrahi Realty

The commercial condo traded in a sale-leaseback transaction for $1.8 million.

180 East 94th St

4-story, 3,147 sf mixed-use bldg

n/a / n/a

n/a / J. Nelson, T. Gammino Jr., Massey Knakal

The property sold for $1.8 million, or about $646 per square foot. The building was sold without its air rights, which the seller will retain.

346 Grand St

7,800 sf development site

Private investor / n/a

n/a / Cheskie Weisz, Weisz Associates

The distressed development site sold for $1.8 million.

189-03 Henderson Ave (Queens)

2-story, 26,208 sf apt. bldg, 22 units total

n/a / Yanni Simantov, GFI Realty

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

The walk-up building sold for $1.5 million.

2503 Hughes Ave (The Bronx)

4-story, 14,400 sf apt. bldg, 21 units total

n/a / n/a

n/a / Karl Brumback, Massey Knakal

The walk-up building sold for $1.33 million, or $92 per square foot. The property has 13 one-bedrooms and eight two-bedrooms.

41-01 75th St (Queens)

2,444 sf religious bldg

A Buddhist congregation / n/a

A Lutheran congregation / John Falco, Falco & Isak Realty

The property sold for $1.25 million, or $511 per square foot.

3555 White Plains Rd (The Bronx)

34,800 buildable sf development site

n/a / n/a

n/a / Karl Brumback, Massey Knakal

The mixed-use development site sold for $1.03 million, or about $30 per buildable square foot.

For the best deal, visit our website: www.TheRealDeal.com 80 July 2009 www.TheRealDeal.com 100 September 2011 www.TheRealDeal.com

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Financing Address

Size

Borrower / Representative

Lender / Representative

Notes

222 West 23rd St

175,900 sf hotel

Chetrit Group; Clipper Equities / R. Levine, A. Birnbaum, Meridian Capital Group

Natixis / n/a

An $85 million acquisition and renovation financing was arranged for the Hotel Chelsea. The 36-month, balance-sheet loan features a LIBOR-based rate and a 12-month extension option.

531 Main St

365-unit apt. bldg

Rivercross Tenants Corp. / n/a

NCB / n/a

A $50 million first mortgage was arranged for the building.

Ocean Pkwy, East 7th St and East 8th St (Brooklyn)

4 apt. bldgs, 478 units total

n/a / A. Weinstock, J. Rhine, Meridian Capital Group

n/a / n/a

A new package of mortgages totaling $28.2 million was arranged for the multifamily portfolio. The loans were provided at a rate of 4.25 percent with seven-year terms.

70th Rd and 71st Ave (Queens)

2 apt. bldgs, 226 units total

n/a / C. Shelby, D. Sabesan, Meridian Capital Group

n/a / n/a

A new package of mortgages totaling $12.6 million was arranged for the two co-op buildings. The loans feature a rate of 4.5 percent with seven-year terms.

176 East 71st St

96-unit apt. bldg

The Townsend House Corporation / n/a

NCB / n/a

A $10 million first mortgage was arranged for the building.

509/515 East 77th St

383-unit apt. bldg

Cherokee Owners / n/a

NCB / n/a

An $8.5 million line of credit was arranged for the building.

140 Nassau St

39-unit apt. bldg

140 Nassau Residence Corp. / n/a

NCB / n/a

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

225 East 79th St

70-unit apt. bldg

22579 Owners Corp. / n/a

NCB / n/a

A $3 million first mortgage and a $300,000 line of credit were arranged for the building.

130 West 30th St

17,500 sf retail condo

Congregation Beit Simchat Torah / Doug Chitel, Winter & Co.

n/a / n/a

A $3 million first mortgage was arranged for the acquisition of two retail condos at the building.

18-40/70 211th St (Queens)

240-unit apt. bldg

Bay Terrace Cooperative Section X / n/a

NCB / n/a

A $2.5 million line of credit was arranged for the building.

3800 Waldo Ave (The Bronx)

171-unit apt. bldg

Waldo Gardens Inc. / n/a

NCB / n/a

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

31-30/50/70 138th St (Queens)

144-unit apt. bldg

Linden Towers Cooperative #3 Inc. / n/a

NCB / n/a

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

123 Bay Ridge Pkwy (Brooklyn)

42-unit apt. bldg

The Ridge Owners Corp. / n/a

NCB / n/a

A $2.2 million first mortgage was arranged for the building.

42-95 Main St (Queens)

71-unit apt. bldg

Cherry Lane Owners Corp. / n/a

NCB / n/a

A $1.6 million first mortgage was arranged for the building.

522 LaGuardia Pl

9-unit apt. bldg

West Third Street Apartments Corp. / n/a

NCB / n/a

A $950,000 first mortgage and a $200,000 line of credit were arranged for the building.

212-30 23rd Ave (Queens)

124-unit apt. bldg

Bay Terrace Cooperative Section XII / n/a

NCB / n/a

A $1 million line of credit was arranged for the building.

300 West 108th St

71-unit apt. bldg

300 West 108th Owners / n/a

NCB / n/a

A $1 million line of credit was arranged for the building.

Other Deals Jamestown Properties completes purchase of Chelsea Market Having closed on its acquisition of the remaining stakes in the Chelsea Market building at 75 Ninth Avenue, Georgiabased real estate firm Jamestown Properties now owns the entire property, valued at $795 million, according to public records filed with the city last month. Jamestown, an investor in the property since 2003, recently bought out Angelo Gordon & Co., Belvedere Capital Real Estate Partners and Chelsea Market developer Irwin Cohen for $225 million and aims to add a 300,000-square-foot tower to the building, to be used for additional office space and a hotel. (The deal was announced after the deadline for the Deal Sheet.)

SL Green swoops in to help Joe Moinian at 180 Maiden Lane SL Green Realty has stepped in to help developer Joseph

Moinian stabilize his investment in 180 Maiden Lane, a 1.1 million-square-foot office building in Lower Manhattan, the Wall Street Journal reported, but Moinian will pay heavily for the kindness. SL Green, a mezzanine lender on the downtown property, agreed to help Moinian restructure $292 million worth of debt in return for an ownership stake of 49 percent in the office tower, sources told the Journal last month.

Lam Group acquires two Broadway buildings for $72M Hotel developer the Lam Group went into contract last month to buy two buildings on Broadway at 30th Street from Mocal Realty for $72 million, possibly for a new hotel development, Real Estate Weekly reported. Together, the two buildings, at 1205 and 1225 Broadway, make up around 250,000 square feet of developable space, or up to 370,000

square feet if Lam chooses to purchase adjacent properties that are also on the market. Massey Knakal Realty Services brokered the deal for both sides. (The deal was announced after the deadline for the Deal Sheet.)

Solow pushes his land for U.N. development Developer Sheldon Solow met with city officials last month in a last-ditch effort to plead his case for constructing the new United Nations building to make better use of nine acres he owns along First Avenue just south of the current United Nations site, Crain’s reported. Solow’s plan to construct seven towers on his property has stalled, so he wants the city to consider it for the United Nations project, Crain’s said. Solow proposes that the city build the new tower on his nine-acre site, or across the street from the current U.N. building, at Robert Moses Playground, and replace the playground on his property. TRD

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World Financial Center

from page 64

Properties, which is headed by Ric Clark and owns the complex. The World Financial Center’s original failure as a mall — tenants such as Barneys left years ago — prompted the current rehab. One broker called it “awkward retail.” David Cheikin, Brookfield’s vice president of leasing for New York and Boston, said several hundred potential tenants have already come to look at the World Financial Center’s 40 to 50 spaces. Cheikin said he expected nearly all of the current tenants to be replaced. Cheikin also rejected calling the space a “mall,” saying that at between 175,000 and 200,000 square feet, it is smaller than most malls. He also noted that unlike a mall, it’s integrated with the neighboring streets and the Hudson River. Sources say asking rents at the World Financial Center are between $150 and $400 per foot, with the possibility of percentage-rent deals, which give the landlord a cut of the retailer’s profits. Alissa Bersin, a retail-site specialist with the Philadelphia-based McDevitt Company, Brookfield’s agent at the site, declined to comment on asking rents or on what kinds of retailers the company was seeking. She said only that they were looking for “best-in-class retailers.” Cheikin said that in Brookfield’s pitch to tenants, it highlights that its September 2013 delivery date is years before the Trade Center’s. “Assurity to deliver the product is always an advantage,” he said. Robin Abrams, executive vice president at Lansco, said the complex’s timing is good. “They are going to be in a position to meet this need and desire that has been building,” she said. By 2014, once the space is re-tenanted, Cheikin said he expects gross sales to be twice what they were when the mall was last fully occupied, in 2000.

World Trade Center

from page 65

retailers around the globe to do direct deals with tenants and avoid paying brokers’ fees. One broker, who asked not to be identified being critical of Westfield, said, “They believe they have tenant relationships and don’t need brokers, but most tenants use brokers for their [New York City] deals in particular.” Others disputed that, saying the company would try to do direct deals when possible, but would be open to a broker if the tenant wanted to use one. Sources said Westfield is expected to release its retail plans for the site in the coming weeks. Robert Futterman, chairman and CEO of Robert K. Futterman & Associates, which has a consulting arrangement with the Port Authority for the World Trade Center, said he believed tenants are waiting to see options there. “I think a lot of tenants are holding back,” Futterman said. Retailers will “probably pick one, not the other” between the World Trade Center and the World Financial Center as they choose where to set up Downtown. Some observers believe the rebuilt Trade Center will be upscale, now that Condé Nast has 1 million square feet of office space in the One World Trade Center tower. “[The World Trade Center] is being promoted as an ‘iconic’ destination, so I’m sure Westfield will go for major luxury names, who might not be easy to accommodate in the older buildings Downtown,” said Faith Hope Consolo, chairman of retail leasing and sales at Prudential Douglas Elliman. “Would I try to put a Louis Vuitton, Cartier or Jimmy Choo in the complex? You bet.”

Farley Post Ofﬁce

from page 65

main in place on the Eighth Avenue side of the building, with new entrances for commuters to ease congestion into Penn Station. The retail development — which Vornado and Related are doing with the property owner, Empire State Development Corporation, and in consultation with the Port Authority — is part of the project’s second phase, which could include a hotel or other amenities. That has not yet started. One set of plans from the state’s Moynihan Station Development Corporation shows a possible street-level layout with seven spaces comprising more than 106,000 square feet of retail, including blocks of “destination retail” on the Ninth Avenue side of the building. It also shows blocks of up to 50,000 square feet on other levels in the six-story building. “That is a great building,” Grayson said, referring to the 1912 McKim, Mead & White icon. “It starts with heritage. If you put [in] the right kind of tenant, it can be really exciting,” he said, pointing to examples in historic buildings such as Chelsea Market.

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Affordable housing

by $1.2 trillion over the next decade. Programs like HOME and the LIHTC are on the table. Wendell Walters, assistant commissioner for new construction at HPD, said the department uses HOME to fund a variety of programs, and is “bracing” for possible cuts. “Depending on the level of the cuts,” he said, “we may have to make some adjustments, once we understand what the impact is going to be to the agency.” The department doesn’t foresee the budget for HOME being trimmed “to a level that would impede our goals for the [mayor’s] housing plan,” Walters said, but the “cuts currently under discussion would force us to make some very tough decisions for the years following the plan.” The LIHTC program — which allocates around $35 million to New York per year in credits for the rehabilitation or construction of rental housing for the poor — is particularly crucial, housing advocates say. Alison Badgett, executive director for the New York State Association for Affordable Housing, an industry trade organization, said eliminating the program would result in a “severe decline” in affordable housing development. Most affordable housing veterans are confident that LIHTC isn’t going anywhere, despite the talk. But in today’s climate, “we can’t take anything for granted,” Badgett said. And should the program be curtailed, the effects would be far-reaching. “Detrimental is an understatement,” said Aaron Koffman, director of affordable housing at the Hudson Companies. Hudson projects such as Gateway Elton Street I, the 197-unit, low-income rental development currently underway in East New York, would not have happened without it, he added. In the meantime, though, the Bloomberg administration is sticking with its 2014 deadline, and hoping that preservation projects and some of the large-scale developments already getting off the ground will help it achieve the 165,000-unit goal. Eric Enderlin, assistant commissioner for preservation finance at HPD, said the mayor’s plan is on track, and there are no plans to reduce the overall pipeline of affordable housing projects. That pipeline includes thousands of units at Gotham West in Midtown, Hunters Point South in Long Island City, CAMBA Gardens in Flatbush, the Domino Sugar Factory in Williamsburg, West Farms Road in the Bronx, and many more. (See the chart on page 51 for some of the city’s largest upcoming affordable housing stock projects.) And while there are fewer subsidies available now, developers say that in some ways, the current environment is more favorable for restricted-income projects than during the boom. “It was becoming increasingly harder for the affordable housing industry to compete in 2007 and 2008, when every site was a condo site,” said David Kramer, a principal at the Hudson Companies. “Land and construction costs had gone up to the point where affordable housing just didn’t pencil out.” Now that those costs have dropped, there is “a more level playing field, where affordable housing can get initiated outside city-owned sites,” Kramer said. Plus, construction financing is currently easier to obtain for affordable housing than for market-rate development, especially since banks are required by the federal Community Reinvestment Act to lend, invest and provide services in poor communities. “While we are definitely starting to see construction financing come back across all areas, it’s much more robust in affordable housing, as lenders seek to mitigate risk and obtain CRA credit from their regulators,” Gomez said. Over the next few years, Gomez added, affordable housing development “will be challenging, but I do think that affordable will probably be easier to get done than straight-up market-rate development.” TRD

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from page 65

While the construction timeline remains unclear, given that it could begin sometime after moving in, “why get a tenant all excited?” Futterman asked. The terminal is now home to traditional commuter retailers such as Starbucks, Au Bon Pain and Radio Shack, as well as the 28,000-square-foot Frames NYC Bowling & Lounge. But Vornado has ambitions to upgrade the tenant roster. In marketing materials to brokers, it listed Crunch Fitness and Swarovski as examples of who they would like to lease to. Vornado declined to comment on the rehabilitation.

Hudson Yards

from page 65

through the building 40,000 times per day. That’s far more than the approximately 25,000 that walk through Related’s other mega mall, the Time Warner Center. Cross, however, downplayed the mega element to the space, saying it’s “not really a mall.” Consolo said it would look like one. “Assuming Nordstrom does sign on as the anchor, this could be the most traditional suburban mall format in the city,” she said. 106 September 2011 www.TheRealDeal.com

Schneiderman from page 32 Going after predators

��

While much of the focus in recent weeks has been on the financial sector, Schneiderman has inherited a series of high-profile New York real estate cases as well. In June, he logged a major victory when a state Supreme Court judge issued a $7.4 million judgment against developer Yair Levy, in connection with the collapse of his Rector Square condominium conversion at 322 Rector Place in Battery Park City. The investigation into Levy was launched by Cuomo after The Real Deal uncovered that Levy had illegally sold apartments to an extended-stay hotel company and misappropriated millions of dollars, among other things. Still, it ultimately fell to Schneiderman to prosecute the case. Levy, one of the city’s most controversial condo developers, lost the 304-unit building to a foreclosure from Anglo Irish Bank after defaulting on more than $165 million in mortgage debt, and failing to make ground-lease payments and construction-fee payments to contractors. Judge Joan Lobis ruled that Levy illegally spent money from the building’s reserve fund for personal expenses, among other offenses. When announcing the decision, Schneiderman called Levy a “predator.” As a result of the judge’s decision, Levy received the real estate equivalent of the death penalty — a lifetime ban from selling real estate, making him the first developer in the current downturn to be slapped with such a punishment. Levy’s attorney Rex Whitehorn appealed the decision in July, saying the AG and the judge ignored evidence that Levy spent money from an outside fund (not linked to the reserve account) and had documentation from an accountant stating that he put more funds into the building accounts than he removed. “The AG’s office has handled this entire Yair Levy situation horribly,” said Whitehorn. Besides the Levy case, Schneiderman said he’s initiated as many as seven other real estaterelated investigations, though he declined to name them. The Real Deal has reported on a probe launched earlier this year involving a 48th Street condo tower developed by Manhattan-based Esplanade Capital, a company led by David Scharf and Jay Eisenstadt, as well as investors Kevin and Donal O’Sullivan. The Irish brothers, who run Time Square Construction and Navillus Contracting, recently bought out Esplanade’s stake in the project and threw the property into bankruptcy after lenders sold the defaulted debt. The probe centers on whether millions of dollars deposited by Irish condo buyers were misappropriated by the developers to finance a bulk purchase deal involving Ireland-based Sorrento Asset Management and BridgeStreet Worldwide, an extended-stay hotel firm. Sources told The Real Deal that subpoenas have been issued to several parties and boxes of documents have been handed over to the AG’s office. The brothers’ attorney, John Snyder, confirmed to The Real Deal that the O’Sullivans each received subpoenas, but he called the investigation “informal.” He said they are fully cooperating and are working on a new operating plan in bankruptcy court to stabilize the project.

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Attorney Adam Leitman Bailey, whose eponymous Manhattan-based law firm represents more condo owners than virtually any in the city, said it’s too early to give Schneiderman a grade on his performance. However, he echoes the concerns of many other lawyers about the need for increased staffing in the AG’s real estate division. As of mid-August, the AG’s Real Estate Finance Bureau — which currently has 46 employees, including 14 attorneys — had 150 condo plans submitted statewide year-to-date, plus 2,400 amendments to these and other plans. Overall, the bureau is currently reviewing 395 plans and their related amendments. It also has 93 pending escrow disputes, involving buyers and building sponsors over the return of down payments, and 11 active court cases. Stuart Saft, chairman of the real estate department at the law firm of Dewey & LeBoeuf, said Schneiderman’s office is already demanding much more information from developers regarding new condominium plans. But he said it may be too soon to tell whether it’s a result of the new administration or a reflection of the new economic environment. “They are giving the plans a far more detailed review — both in terms of the narrative and the economics — than I have seen before,” said Saft, who’s also the chairman of the Council of New York Cooperatives and Condominiums. “I don’t know what instructions are coming from high up, except we’ve all lived through the last four years.” Schneiderman, meanwhile, is seen by some as establishing a new, less political temperament. “He has really set a tone for that office,” said a real estate industry executive close to Schneiderman who asked not to be identified. “If you go back to Eliot [Spitzer] you would find people who would say that Eliot was a very political AG. There were some questions about how he would threaten people with that power.” Steven Spinola, president of the Real Estate Board of New York, praised Schneiderman for being willing to listen to the concerns of the industry while still maintaining his duty to protect homebuyers and investors. “I think he is continuing in terms of the Andrew Cuomo style of being aggressive in terms of protecting the consumer, but having the door open [to the industry],” Spinola said. TRD

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Residential market

from page 20

with sellers hoping to capitalize on the busy fall market. But this year, brokers predict that some homeowners will be spooked by the economic climate, and avoid listing their properties if possible. So even if buyer activity is lackluster, a huge pileup of inventory is unlikely. “Many sellers are more cautious putting their properties on the market because of this economic uncertainty, and I don’t think we’ll have a huge spike in inventory this fall season,” said Bond’s Muramatsu. With so many New Yorkers putting off buying or selling their homes, the rental market continues to show strength. “The summer of 2011 was the busiest since 2007, with historically low vacancy rates and higher-than-usual demand, fueling some of the highest rents the Manhattan

Commercial market

market has ever seen,” Bond’s Wagner said. Andrew Barrocas, CEO of the brokerage MNS, said rental incentives “dried up” this summer, and his company has seen brokers’ fees increase by over 25 percent. Barbara Ireland, a salesperson at DJK Residential, estimated that Manhattan rents increased 3 to 4 percent during the course of the summer. David Vandenberg, a senior associate at City Connections Realty, also said prices were up and availabilities down on the rental side. “I advise my clients to have their paperwork ready and be mentally prepared to choose an apartment the same day we meet,” he said. In response to these factors, “more and more brokers are shifting their focus toward the rental market, as the sales

market continues to be stagnant,” said Robert Varvara, an agent at Miron Properties. But the tight rental market does have its challenges. Some renters, aware that prices are now higher, are opting to hang on to their current apartments rather than looking for new ones. That means brokers can’t rely on previous customers as much as they normally would, Varvara said, and have to scramble to ﬁnd new clients. “The volatility has caused renters to be more price-conscious, and as a result they are staying put rather than upgrading,” Varvara said. “This has a real, negative impact on repeat business.” Other renters are pushing back their move-in dates to October or November, “with the hope that more will be available at a lower price,” he said. TRD

an asking rent of $47 per square foot. That’s higher than the average asking rent Cassidy Turley shows for Midtown South, which was flat last month, falling by $0.02 per square foot from July to $40.85 per square foot. While August is a traditionally a slow month, “The activity has been surprisingly good for this time of year. That makes me optimistic for September,” Greenberg said. The U.S. General Services Administration, which currently occupies the eighth floor in the 427,000-square-foot Class B building, has a lease expiring in September 2012. In addition, Greenberg is marketing a 24,822-squarefoot space that’s vacant on the building’s fifth floor. Resnick expects to finish renovating the elevators and the lobby by the first quarter of 2012.

Even as financial services firms continue to trim jobs in New York City, some companies plowed ahead to set up shop. A newly incorporated proprietary trading firm, Merus Capital Partners (not to be confused with the Palo Alto, Calif., venture capital firm Merus Capital), signed a 10year lease for 8,200 square feet on the 17th floor of 88 Pine Street, at Water Street, CoStar data shows. It’s unclear what

Merus paid for the space, but asking rent for a space on the same floor in the 634,000-square-foot building — which is owned by Orient Overseas Associates — was listed for $41 per square foot last month. Cushman’s Keller, who represented Merus, declined to comment on the deal, and Merus could not be reached for comment. Frank Cento and Robert Constable, also of Cushman, represented the landlord. “Lower Manhattan is going through a sea change,” Keller said, especially with creative media firms taking large blocks of space. But many of the recent deals have been smaller. “The activity in the market in Lower Manhattan is basically under 20,000 [square feet],” Keller said, but added that “there are a couple of big tenants running around who have not landed yet.” An employment report published last month by investment firm Eastern Consolidated showed that the city lost 2,300 securities jobs in the first seven months of the year, even as overall office jobs grew by 26,500 in that period. The availability rate for Downtown fell by 0.3 points to 11.6 percent in August, while the average asking rent fell by $0.18 per foot to $37.56 per square foot, Cassidy Turley showed. TRD

have opened. Brgr did not respond to requests for comment. But Frankel noted that brgr locations are larger than other burger spots, with more seating and slightly higher prices. (Brgr’s Beautiful Day Burger costs $7.55; a Shack Burger, by contrast, is $4.50.) “They’re a little bit more expensive, and I think they’re trying to position themselves as a little higherquality offering,” Frankel said. “They require more business to be successful because of their size. They have a harder time competing in the strictly lunch areas.” A decidedly more upscale option is 5 Napkin Burger, an outgrowth of Upper West Side restaurant Nice Matin. The burger was consistently the most popular item on Nice Matin’s menu, and in 2008, owners Andy D’Amico, Simon Oren and Robert Guarino gave it top billing with their new Chelsea eatery. A sit-down restaurant with a full bar and varied menu, 5 Napkin is in a decidedly different niche than Shake Shack, Five Guys or brgr. Customers seem to be responding to the formula: The restaurant now has three New York locations and has expanded to Boston, Miami and Atlanta. Another location is slated for Union Square.

Guarino told The Real Deal that 5 Napkin should have “nice coverage” of the city once the 14th Street location opens. Another fast-growing homegrown chain is BareBurger, which first opened in Astoria in 2009. Serving all-natural, free-range, grass-fed meats, BareBurger already has four locations in the city, and is planning to open three more this fall, in Astoria, Chelsea and the Upper East Side. And, New York City will soon see other new burger chains in the mix. Florida chain Cheeburger Cheeburger recently opened its first city locations in Park Slope and Forest Hills. Meanwhile, Smashburger is currently focused on Long Island and Westchester, but with an expansion of 400 restaurants planned nationwide over the next five years, Branigan said he expects it to enter the Manhattan market within the next year. “We like to find spaces between 1,600 and 2,400 square feet, with foot traffic in front of them, that are highly visible,” he said. “We like to be around other fastcasual restaurants.” Still, he acknowledged the stiff competition in Manhattan. “There will be a shakeout eventually,” he said. TRD

from page 28

below-market rents,” Hollander said. Real Estate Weekly first reported Centerline’s move. David Goldstein and Mitchell Steir of commercial advisory firm Studley represented Ralph Lauren. They did not respond to a request for comment. Average asking rents for Midtown rose by $0.20 per square foot in August to $55.60 per square foot. The availability rate fell by .1 point to 11.7 percent, the Cassidy Turley figures revealed.

Midtown South Last month, Jack Resnick & Sons got an early jump on marketing a space that won’t become available until a year from now. Indeed, it listed a large block in Midtown South, where the availability rate dropped to its lowest level in nearly four years. The availability rate in Midtown South was 9.5 percent in August, down .6 points from the prior month. That was the lowest in the area since it was 9.3 percent in December 2007, Cassidy Turley statistics showed. Resnick’s Brett Greenberg, a managing director with the landlord ﬁrm, said the 51,000-square-foot, full-eighthﬂoor space, at 315 Hudson Street between Vandam and Spring streets, was put on the market in mid-August, with

Downtown

Burger wars from page 42 burger restaurants will dwindle over the next three or four years. Branigan’s company is actually planning to expand beyond its one New York location in Fort Greene, into Manhattan. Still, he predicted that only two or three New York-based chains will likely be successful, alongside two to four strong national chains. So who will be left standing?

Cracking the code Burger joints may seem recession-proof, but just throwing patties on the grill is not enough to guarantee success, Fisher said. Meyer, for example, chooses locations “extraordinarily wisely,” Fisher said. “If you don’t have a lot of foot traffic, you’re not going to be successful.” That’s also clearly on the radar for Five Guys, which mostly sticks to locations in high-density areas. One chain that may be struggling is brgr, which launched in Chelsea in 2006. After opening a second location on the Upper East Side in 2010, brgr announced plans for new storefronts on the Upper West Side, Union Square, Hell’s Kitchen, Flatiron, Midtown East, Soho and parts of Chelsea. But so far, no additional stores 110 September 2011 www.TheRealDeal.com

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Lawyers

from page 22

did not pick up until sometime in 2010, when property owners had been through the process of “price discovery”— coming to terms with the size of their losses and becoming willing to move on. Jay Neveloff, a partner at Kramer Levin Naftalis & Frankel, said he’s encouraged by the kinds of transactions he’s now seeing: longer-term deals on stronger properties. “There isn’t a day when I do not get multiple calls from people looking for deals,” Neveloff said. In particular, his firm has been involved in a lot of property auctions and joint ventures. Of the latter, he said, “These are deals where a lot of equity is committed, financing is arranged or close to being arranged. Two years ago, you weren’t seeing all that joint-venture work.” In May, Kramer Levin represented Africa Israel USA in the $160 million sale of an office condo in the former New York Times building. The firm also represented St. Vincent’s hospital in its April bankruptcy restructuring and the $260 million sale of its Greenwich Village campus. The pipeline of future deals also looks promising, Neveloff said, noting that his firm’s land-use lawyers “are very busy right now,” he said. “So what does it mean? It means

that people are starting to build again.” This time around, the New York City market began to recover faster than in previous recessions, said Mark Edelstein, chairman of the real estate group at Morrison & Foerster. “We actually have workouts and new deals going on at the same time,” Edelstein said, adding that he had never seen both at once before. At Morrison & Foerster, which has large creditors among its clients and does strong business in distressed real estate sales and bankruptcies, Edelstein said the mix of cases a year ago was about 75 percent workouts and 25 percent new deals. Now the percentages have reversed, he said.

A return to hiring In response to all of this, law ﬁrms are starting to hire again, after a period in which most cut their staffs. Neveloff said Kramer Levin hired a senior associate a few weeks ago, and Schwartz said Herrick, Feinstein is slowly beginning to hire again as well. “Relatively speaking, there have been very few associ-

ates hired into real estate, here and at other firms, over the course of the last three to four years,” Schwartz noted. As a result, “there’s going to be real competition for quality associates, because not nearly enough associates have been getting trained — there wasn’t enough work for them.” Ivanhoe said Greenberg Traurig, which downsized “pretty significantly” during the downturn, started hiring again about six months ago. In June, the firm announced that it had tapped high-profile attorney Peter Miller, of Akin Gump Strauss Hauer & Feld, to join its real estate practice. These days, real estate attorneys are most concerned about the recent stock-market turbulence and the uncertain debt picture in the United States and Europe. Though it’s too early to tell how New York’s real estate market will react, Ivanhoe said, the question is how the upheaval will affect the capital market, and whether financing will remain available. Still, he said, the market’s progress to this point — and the local law business’s rebound — has been good news. “I would not have thought we would come this far this fast,” he said, “so I’m very pleasantly surprised.” TRD

Chetrit from page 45 other members [at the Chetrit Group], but I make the main decisions,” Joseph said in a recent deposition for a religious discrimination lawsuit, which the company settled after The Real Deal published a story about the case. (Also while being deposed for that case, Joseph described himself as a “modern Orthodox” Jew and said he attends Manhattan Sephardic Congregation on the Upper East Side. Among other things, the lawsuit alleged that a rabbi regularly comes to the Chetrits’ office to pray with employees.) Meyer, who spent several weeks in the hospital after suffering a stroke last year, appears to function as a secondin-command. Throughout the company’s history, “it was really Meyer and Joe that had all the control,” said one associate. “They made all the decisions.” In public, the seemingly tight-knit Chetrits have presented a united front, with Joseph generally credited as the mastermind behind their deals. But behind the scenes, the younger Chetrit brothers appear to have taken charge of certain projects, and launched their own independent undertakings. For example, when asked in the above deposition about an entity called Simgad Long Island LLC, which is headquartered at 404 Fifth, Joseph said one of the Chetrits was involved, but “I don’t even know which brother.” Jacob Chetrit, meanwhile, is the point person on a deal with investor Charles Dayan at 5 Beekman Street. In 2008, the two took out a loan for $45.75 million from Pacific National Bank to convert the office building into a 180-room hotel. Each contributed about $11 million of his own funds, according to court papers. In 2009, Pacific National filed to foreclose on the mortgage, alleging that the loan was in default. The parties settled in July 2010, with the bank accepting a discounted payoff of the outstanding amount of the loan. In a lawsuit, Jacob, who had signed a personal guarantee, claimed that Dayan had failed to contribute to a $4.25 million initial settlement payment to the bank. Dayan knew Jacob would front the money, the suit claimed, for fear of losing his $11 million capital investment and “enforcement of the guaranties, under which … [both parties] are jointly and severally liable but under which only [Chetrit] has real exposure.” In 2010, a judge ordered Dayan to pay his share of the money. When reached by phone, Chetrit’s attorney, Stephen Meister, said the suit had been resolved. He declined to com112 September 2011 www.TheRealDeal.com

ment on other Chetrit affairs.

Deals in trouble The project at 5 Beekman Street isn’t the only deal causing headaches for the Chetrits. The Chetrits and Tessler purchased 855 Sixth Avenue in 2007 for roughly $140 million, and had been planning a 355,000-square-foot condo tower on a retail base. Even before the downturn, observers felt that the $402-per-squarefoot price was too high for the emerging neighborhood. “By way of underwriting, I [was] saying to myself, ‘How is this going to work?’” recalled one industry veteran. Then, during the downturn, “they weren’t finding any retail tenants and they definitely weren’t finding any office tenants, which made it even harder, because now your cost basis on the land is so high, you can’t make a rental work. You have to do a condo. Well, 30th and Sixth is not a condo market.” With the loan in default, Durst Fetner signed an agreement to buy the note for about $104 million in March 2010, as The Real Deal reported last month. That put Tessler and the Chetrits in a vulnerable position because they were responsible for personal guarantees of up to $19 million, so the latter parties cut a deal to hand over the title to Durst Fetner. The Chetrits also have other legal issues to contend with. One lawsuit involves 1200 Fifth Avenue in East Harlem, a condo conversion where the Chetrits partnered with owner Maurice Mann, the former co-owner of another ill-fated conversion, the Apthorp. In October 2010, the condo board at 1200 Fifth Avenue filed a $15 million lawsuit against the Chetrit Group, naming Meyer Chetrit specifically, along with its contractors and architects. The pending suit alleged “various construction defects” at the project and said the sponsors “elected to ignore and deliberately conceal a number of instances that have proven to be potentially dangerous conditions.” Specifically, they claimed, the building’s 782 new windows were “improperly designed, fabricated and installed.” The suit cited the case of elderly building resident Ruth Newkirk, who alleged that the newly installed window in her bedroom fell in on her when she tried to close it, breaking her hip. Newkirk filed a separate lawsuit, which was settled for $375,000, said her attorney, Robert Ginsberg. The 1200 Fifth Avenue case is ongoing. Jonathan Fink,

the attorney representing the Chetrits, said they have ﬁled a motion to dismiss portions of the complaint, but declined to comment further. Industry sources said that the suit is having a negative impact on sales at the building, where brokers are now reluctant to bring buyers. “If you try to bring a buyer to 1200 Fifth Avenue, you have to tell them the sponsor is being sued,” said one industry source. “This thing at 1200 Fifth hasn’t been wonderful for [the Chetrits’] proﬁle.” When contending with these types of problems, splitting up — even if it’s a legal maneuver rather than a true separation of business interests — is one method used by real estate players to protect their assets, industry experts noted. “That’s the strategy people [use] when they have trouble — split up,” said one insider.

Still better off Still, the Chetrits are in some ways better off than other real estate developers. “They were involved in some pretty proﬁtable transactions during the boom,” Real Capital’s Thypin said. He cited the combined $715 million sales of 200 Fifth Avenue and 1107 Broadway in 2007, which a Chetrit-led group had purchased two years earlier for $355 million. Also, the Chetrits sold 1450 Broadway for $204 million in May, after buying it in 2004 with Moinian and other partners for $122.5 million. “They had a few very good years, so losing a few million here or there in the crash isn’t a big deal,” Thypin said. “A lot of people have lost much more.” And while hotel values in the current marketplace are something of a question mark, the Empire Hotel has “gained in value over the last couple of years since they bought it,” said one industry source. Still, according to multiple sources, disagreements between the brothers contributed to the establishment of separate ofﬁces. After all, it’s not uncommon for real estate families to part ways, especially as the generations wear on. In 2009, for example, the Elghanayan brothers divided their well-respected real estate company, Rockrose, into two separate companies. “Once you get to a certain point in age and net worth, your goals tend to start to go in different directions,” one industry veteran said. TRD

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Boutiques from page 50 place” — will hit the market by the beginning of next year. After that, he said, the pipeline starts to dry up. Of the new condos Maundrell is bringing to market in the coming months, 8892 South 1st Street in Williamsburg, with 31 units, is the largest. Others include 93 Herbert Street, 29 Montrose Avenue and 174 Jackson Avenue, which have eight units apiece. While Horn contends that there is some financing out there for new condos right now, there’s admittedly “not a lot,” and lenders are asking for more money down. Those builders who are new to the game, though, are probably out of luck. “I think new developers have no shot at getting financing,” Horn said. “Zero.” The upstart Grand Street Development, a Brooklyn-based firm, may be one of the few exceptions. The partnership broke ground on its first-ever project, the 174 Jackson Street building that aptsandlofts .com is marketing in Williamsburg, in May 2010, with the help of a $2 million construction loan from a private lender. “I realize that was very, very unique that we were able to get that when nobody else was,” said Dean Marchi, a partner at the firm, who was previously a broker for CB Richard Ellis. “We worked extraordinarily hard to find this lender.” Maundrell said that because financing for new condos is still so tight, it’s possible that within a year, the only new inventory

remaining will be in boutique buildings. “In the meantime, you’re going to see the resales in some of the newer [larger] buildings doing very, very well, or those sellers doing very, very well, because buyers are going to have a limited amount of inventory,” said Stephen Kliegerman, president of Terra Development Marketing, which oversees both Halstead Property’s and Brown Harris Stevens’ marketing divisions. Horn said financing is beginning to open up again for large condo deals, but noted that because those projects typically take around three years or more to complete, it will likely be at least two years before New York buyers begin to see the fruits of that labor. That’s all according to plan for Marchi, who said he decided to break into the condo market while most everyone else was pursuing rentals so that “there would be less product to compete against.” That’s not to say he’s not interested in developing rental buildings, too — he is. But, “when people are zagging I tend to want to zig,” Marchi said. “When there are fewer condos in the market, I’m pleased to be selling.” He’s also banking on the idea that New York real estate has — for the time being — outgrown its flashy, amenity-filled, megaproject phase. While Marchi said he and his partners originally considered putting together a small list of amenities for the four-story 174 Jackson, including an elevator, movie theater and basement gym, by the time

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construction began in May 2010, they decided that “people would prefer that money going into either their pocket or their house.” Now that 174 Jackson is complete, the Grand Street Development partners are on the hunt for their next project, and they’re

sticking with the boutique concept for the time being. “I think that, probably, the worst is behind us, but I’m not sure I’d want to have 80 units going into this market in a week or two,” Marchi said. “Right now, perhaps being a little cautious is a good idea.” TRD

Condo conversion from page 52 of several years ago — and weathered the downturn — are now hitting the market. In April, sales launched at the 45-unit Kirkman Lofts, a Dumbo condo project once home to the Kirkman & Sons soap factory building (construction is scheduled for completion this summer). Meanwhile, in Harlem, sales have been brisk at PS90, where L+M Development Partners recently completed the conversion of an old elementary school into 75 condo units. Eighty percent of the available units have either sold or are in contract, according to Stephen Kliegerman, president of Halstead Property Development Marketing, which is overseeing sales and marketing at PS90 and the Kirkman Building. “I have one or two meetings a day with developers who are looking at a property to convert [to condos], or one that they are bringing to market,” said Kliegerman. “Without a doubt, the developers and investors see an opportunity, and a hole in the market to take advantage of.” There are a host of reasons why developers are starting to turn to conversions again: An increasing absorption rate in the current housing inventory is one, while a lack of financing for new product makes conversions easier to finance than ground-up construction. Also, land prices in New York remain high, and the two- to three-year turnaround time for conversions is much shorter than the four- to seven-year turnaround time for ground-up development, sources say. The quicker turnaround time cuts the project risk and helps avoid long-term construction costs. But until recently, well-known condo conversions were floundering. Midtown’s Sheffield57, for example, was sold in a foreclosure auction in 2009, and Downtown’s Rector Square went back to its lender. Both projects have since been revived under new ownership. “In the summer of 2008, when the economy fell apart, things dropped a lot in new construction, and a lot of developers that were building condos turned them into rentals and waited,” said Mary Ann Rothman, executive director of the Council of New York Cooperatives & Condominiums. “And now, as things are looking better, we are seeing three years’ pent-up demand for condo units.” Stuart Saft, chairman of the global real estate department at the law firm Dewey & LeBoeuf, added another explanation as to why there are more condo conversions in

New York today. The mortgage market has been rocky for potential homeowners since 2008, when quasi-government entities began requiring a condo building to rack up substantial sales before backing a homeowner’s mortgage. For the Federal Housing Administration, that hurdle has been a 30 percent “presale” (meaning that at least 30 percent of the building’s available units must be sold), while for Fannie Mae it’s ranged from 50 to 70 percent. But according to Saft, those restrictions have loosened, at least in New York, because of the housing shortage here and the ability to resort to rentals if the market craters again. “Even though they have had these requirements in place for three or four years, we can negotiate around them. On occasion I have been able to arrange for a debt analyst to meet with one of my clients about a project — and even though they didn’t comply with the requirements, they were able to bend the regulations based on the narrative that housing in New York City is different than in the rest of the country,” he said. Saft predicted that the appeal of conversions will continue for at least another few years, as the risks associated with large, ground-up condo projects linger. Certainly developers remain enthusiastic. Craig Nassi, CEO of BCN Development, is converting a pair of onetime rental buildings — the ﬁrst on East 16th Street in Manhattan, the other at 184 Joralemon Street in Brooklyn Heights — into condos. “Both work great as rentals,” he said. “But both are fabulous as condominiums.” TRD CORRECTIONS A N D C L A R I F I C AT I O N S The story entitled “Rental projects keep marketers aﬂoat” in the August issue of The Real Deal incorrectly called Fifth on the Park a condo-rental hybrid. The sponsor does not rent out any of the units in the condo building.

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The Urban Green Council hosts a tour of Teardrop Park with landscape architecture firm Michael Van Valkenburgh Associates. The tour will focus on the park’s sustainable aspects and the influence of buildings on the landscape. 4 to 6 p.m., Teardrop Park, Battery Park City. Fee: $10 for members and students; $15 for nonmembers. Information and registration: www.urbangreencouncil.org.

The Center for Architecture holds a conference entitled “Lower Manhattan Rising: Looking Toward 9/11/2011.” Professionals who helped plan, design and develop the new World Trade Center site and its surrounding will discuss the future of Lower Manhattan and the implications of its continued growth. Speakers include the Lansco Corporation’s Robin Abrams, Community Board 1 chair Julie Menin, and Jack Nyman, the director of the Steven L. Newman Real Estate Institute. 9 a.m. to 5 pm., Center for Architecture, 536 LaGuardia Place. Fee: $20 for members; $40 for nonmembers. Information and registration: www.aiany.org.

The Associated Builders and Owners of Greater New York holds a luncheon featuring guest speaker Jerry Howard, president of the National Association of Home Builders. Howard will discuss NAHB’s role in Washington and the federal government’s approach to housing policy and the economy. Noon to 2 p.m., Princeton Club, 15 West 43rd Street. Fee: $75 for members; $95 for nonmembers. Information and registration: (212) 385-4949.

2 3 4 5 6 7 8 9 10 11 12

GreenPearl New York holds a conference entitled “Beyond Distress.” Presentation topics range from New Markets Tax Credits to energy-efficient buildings. Speakers include Richard Gollis, principal and founder of the Concord Group, and Carolyn Pianin, managing director of the Carlton Group. 7:30 a.m. to 5:30 p.m., McGraw-Hill Conference Center, 1221 Sixth Avenue, second floor. Fee: $245 with preregistration; $545 at the door. Information and registration: www.greenpearlevents.com or (646) 862-9393.

NWE Consulting hosts an after-work business networking mixer for real estate brokers. The event includes complimentary appetizers, and aims to help brokers network and strengthen existing relationships. Not open to mortgage professionals. 6 to 8 p.m., Latitude Bar and Lounge, 783 Eighth Avenue. Free. Information and registration: evantz@yahoo.com.

118 September 2011 www.TheRealDeal.com

The Council of New York Cooperatives and Condominiums hosts a seminar, “Condo Start-Up: Challenges for Boards and Unit Owners of New Condominiums.” Attorney Stuart Saft, chairman of Dewey & LeBoeuf’s Global Real Estate Department and chairman of the CNYC Board of Directors, will discuss condo and co-op board priorities in the current economic climate. This workshop is limited to condo board members and unit owners. 6:30 to 9 p.m., location to be announced. Fee: Free for members; $50 for nonmembers with advance registration; $65 for nonmembers at the door. Information and registration: www.cnyc.com or (212) 496-7400.

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The Urban Land Institute New York’s Young Leaders Group and executive recruiting firm Korn/Ferry International host a panel discussion entitled “Charting Your Career Course in the New Economy.” The discussion, moderated by Korn/Ferry’s Anthony LoPinto, will focus on building a career in commercial real estate. Panelists include Susan Chapman of American Express, George Comfort & Sons’ Robert Decky, and Rachel Loeb of the World Wide Group. 6:30 to 8 p.m., 31 West 52nd Street. Fee: $25 to $35 for members with preregistration; $35 to $45 for nonmembers with preregistration; $35 to $55 at the door. Information and registration: www.uli.org.

The Association for Real Estate Women and the Mortgage Bankers Association of New York hold a “Knock-Out Night of Networking.” Cocktails and hors d’oeuvres will be served while guests make new contacts and connections. 6 to 8 p.m. Steelcase, 4 Columbus Circle. Fee: $95 for members; $125 for nonmembers. Information and registration: www.arew.org.

16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Crain’s presents a breakfast forum featuring Kenneth Adams, president and CEO of the Empire State Development Corporation. In a discussion moderated by Crain’s assistant managing editor Erik Engquist, Adams will discuss the impact of the newly instituted property tax cap and income tax freeze on the state’s economy. 8 to 9:30 a.m., the Yale Club, 50 Vanderbilt Avenue. Fee: $70 for individuals if preregistered by Sept. 7; $75 thereafter; $650 for tables of 10 if preregistered by Sept. 7; $750 thereafter. Registration required. Information and registration: www.crainsnewyork.com.

The New York Association of Realty Managers holds a real estate expo. Guest speakers include City Council member Gale Brewer, who will discuss how executive orders play a role in city government. 8 a.m. to 4 p.m., Hotel Pennsylvania, 401 Seventh Avenue. Free. Registration required. Information and registration: www.nyarm.com.

The New York University Schack Institute of Real Estate hosts a day of panel discussions entitled “Keeping the Global City Competitive: The Future of the Financial Industries and the Vital Transportation Systems of London and New York.” The event is part of NYU’s London/New York Dialogue series. Speakers include Transport for London commissioner Peter Hendy and former Metropolitan Transit Authority CEO Jay Walder. 9 a.m. to 5 p.m., Kimmel Center for University Life, 60 Washington Square South. Information: stacy.hamm@nyu.edu or (212) 992-3301.

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W Downtown ruling could be last word on ILSA By david Jones A U.S. District Court judge ruled against the Moinian Group in a closely watched dispute with buyers at the W New York Downtown Hotel and Residences. Lawyers say the decision could have far-reaching consequences for use of the Interstate Land Sales Full Disclosure Act in New York. Judge Robert Patterson rejected a motion to dismiss the case filed by Joseph Moinian’s Moinian Group, which developed the 217-unit hotel and condo. Moinian had argued that the federal ILSA law does not apply to condos and was not intended to apply in New York State. But Patterson wrote in his Aug. 22 ruling that “the legislative history and HUD’s interpretative analysis amply dictate that [ILSA] applies to condominiums.” According to lawyers for the W buyers, this new ruling is the most definitive statement from the bench to date about whether New York condos fall under the jurisdiction of ILSA. “This is the first decision in New York that squarely addresses the issue to hold that ILSA definitely does apply to condominiums,” said John Desiderio, an attorney at the law firm of Adam Leitman Bailey, which represented six of the eight buyers involved in the suit. W New York Downtown The law has been used by buyers to back out of condo contracts.

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