The Real Deal September 2014 by The Real Deal

Fewer bidding wars as inventory rises

www.TheRealDeal.com

Inside the office of Robert A.M. Stern

NYC’s 2014 records ... so far

N ew York R eal E state N ews

Breaking down the luxury market

A look at the cracks appearing in Manhattan’s high-end residential sector p46

NoMad retail goes upscale

152

Real estate’s restaurateurs

Vol. 12 No. 9 September 2014 $3.00

Resistance to price jumps

Listing discounts deepen

Betting it all on Cuomo

Strained dealings with the mayor and a weak GOP rival have led the industry to ramp up support for the governor, despite scrutiny over real estate ties p40

EB-5 visa

applications hit wall

Manhattan’s last empty lots

Surveying where the most spaces have disappeared — and where they are still in play for hungry developers p85

Investors get more cautious

Ian Schrager’s NYC return After a Manhattan break, the boutique hotelier is back with five new projects p50

No Plan B for luxe condos ILLUSTRATION BY Noah McDonough

THE WAV ERLY TR I U M PHS Re co rd s a l e s a t O ce a n Ave n u e ’s o n l y n ew o ce a n s i d e resi d en ces, Th e Waver l y, set a n ew b en ch m a r k f o r l u x u r y co n d o m i n i u m s , co n f i r m i n g t h e d e m a n d f o r co a sta l l i v i n g . O f f er i n g th e u l ti m a te C a l i f o r n i a l i f e s ty l e , t h e Ma r m o l Ra d z i n e r- d e s i g n e d s p a ce s a t Th e Waver l y a re f i n i sh ed w i th exq u i si tel y r i ch , n a tu ra l m a t e r i a l s a n d o f f e r b re a t h ta ki n g o ce a n a n d p a r k v i ews. Th e b ea u ti f u l l y a p p o i n ted a m en i ti es i n cl u d e a n a t t e n d e d l o b by, a f u l l y e q u i p p e d f i t n e ss cen ter a n d th e Skyb r i d g e Lo u n g e, f ea tu r i n g a v i ew i n g d e ck a n d b a r b e cu e a re a t h a t ove r l o o k t h e l u s h treeto p s o f To n g va Pa r k. We l co m e t o t h e Wave r l y. We l co m e h o m e .

C LOS I N GS N OW I N P RO G R E SS 50% SO LD. P E NT H O U S E CO LLECTION SOL D OU T.

One, Two and Three Bedroom Residences from $995,000 • Sales Gallery open by appointment only Monday - Saturday 10-6pm 1733 Ocean Avenue, Suite 150, Santa Monica, CA 90401 • 310.394.1100 • WaverlySantaMonica.com The developer reserves the right to make modifications to the floor plans, pricing and unit dimensions of residences or other areas at any time. This is neither an offer to sell nor a solicitation to buy in any state where prohibited by law or where prior registration is required. Developer shall have no obligation to sell any residence unless the purchaser executes a sale agreement and other documents required by the developer and such documents are executed and accepted by the developer. The development will be subject to the jurisdiction of a homeowners association and owners will be obligated to pay assessments to the association for maintenance of common facilities. Please review the association budget and Final Subdivision Public Report issued for the development by the California Department of Real Estate for more information. CA BRE #01005145.

ASHKENAZY

ACQUISITION

285 Lafayette Street

Premier Manhattan SoHo

NEW TO OUR PORTFOLIO

LOCATION Frontage on Lafayette, Jersey and Mulberry Streets in the heart of SoHo. SIZE SUBWAY PROXIMITY ±6,900 SF Available within 2 blocks *Divisions Considered within 2 blocks AVAILABLE FRONTAGE within 3 blocks ±43’-4” on Lafayette St. ±49’-4” on Mulberry St. INFORMATION • Frontage on both Lafayette & Mulberry Streets • B rick walls, arched brick doorways, tin ceilings, new wood floors • Neighboring retail includes REI, Equinox, Zara, Uniqlo, Forever 21, Bloomingdales, Hollister, H&M

249 Church Street

TriBeCa LOCATION Northeast Corner of Church & Leonard Streets

SIZE Ground: Cellar: Sub Cellar: Total:

±1,561 SF ±1,556 SF ±1,463 SF ±4,580 SF

FRONTAGE Over 85’ of frontage

*can be combined

FRONTAGE Over 75’ of frontage on Lexington Avenue & 40’along 93rd St. SUBWAY PROXIMITY within 3 blocks within 7 blocks

INFORMATION • Located i n the Upper East Side’s Carnegie Hill neighborhood •C urrent tenants include Ottomanelli Brothers Restaurant, Vela Pizzeria & Pet Central

1991 Broadway

Lincoln Square/Upper West Side FRONTAGE LOCATION SIZE Over 55’ of prime glass On Broadway between 67th Ground: ±4,600 SF frontage on Broadway Mezzanine: ±1,965 SF & 68th Streets Lower Level: ±2,074 SF SUBWAY PROXIMITY Total: ±8,639 SF within 5 blocks INFORMATION • D irectly adjacent to the Apple store at Lincoln Center • D irectly across from the World Famous Lowes Theater and only 3 blocks from Lincoln Center for the Performing Arts

145 Greene Street

SoHo LOCATION Corner of Greene Street & Houston Street

SIZE Ground: Lower Level: Total:

±1,936 SF ±811 SF ±2,747 SF

FRONTAGE Over 124’ of frontage along Houston Street

INFORMATION • Extraordi nary frontage in SoHo • N eighboring retail includes: Chanel, Louis Vuitton, Club Monaco, Ralph Lauren, Burberry, Dior • A t the cross-roads of SoHo, NYU, Greenwich Village, and NoHo

For Leasing Information Please Contact:

A.J. Levine • alevine@aacrealty.com • 646.214.0245 Daniel Iwanicki • diwanicki@aacrealty.com • 646.214.0251

NEW TO OUR PORTFOLIO

LOCATION Spans the entire city block between Wadsworth Avenue & Broadway on the South side of W. 181st St. SUBWAY PROXIMITY within 1 block within 4 blocks SIZE ±25,865 SF

FRONTAGE ±150’ on 181st St. ±102’ on both Broadway & Wadsworth Ave.

*divisions considered

INFORMATION • N eighboring retail includes: Capital One,Duane Reade, McDonald’s, Foot Locker, Citi Bank, The Vitamin Shoppe • Located 1 bl ock North of the GW Bridge Bus Terminal which serves over 4 Million passengers annually and is undergoing a $183.2 million renovation with an array of first class retail and will quadruple in size to 120,000 SF

Upper Manhattan LOCATION Southwest Corner of 5th Avenue & 116th St.

SIZE Available ‘A’: ±3,295 SF* Available ‘B’: ±2,444 SF* Total: ±5,739 SF *can be combined

SUBWAY PROXIMITY within 1 block within 3 blocks within 4 blocks

1400 Fifth Avenue

INFORMATION • 13’ average ceiling heights • At the base of Harlem’s first sustainably constructed condominium building

Upper East Side LOCATION SIZE Northwest corner of Available A: ±895 SF Lexington Avenue & 93rd St. Available B: ±480 SF Total: ±1,375 SF

ACQUISITION

4250 Broadway @ 181st Street

Washington Heights

FRONTAGE ±45’ on Fifth Avenue; ±119’ on 116th St.

INFORMATION • Excel lent access to transportation in a central, highly accessible location • D irectly opposite 56 Leonard, the largest residential development in TriBeCa • Over 15’ -9” ceiling heights with two additional below grade levels

1424 Lexington Avenue

Retail Opportunities

ASHKENAZY

Philip House (1311-1337 Lexington Avenue)

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

SIZE Up to ±4,000 SF

SUBWAY PROXIMITY within 2 blocks

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

Lower East Side LOCATION Corner of Delancey & Clinton Streets, at the foot of the Williamsburg Bridge FRONTAGE Over 100’ of frontage along Delancey Street

SIZE Ground: ±2,725 SF Up To: ±5,250 SF* *with proposed 2nd level

SUBWAY PROXIMITY within 1 block

156 Delancey Street

INFORMATION • Be seen by over 111,189 vehicles and over 200k people traveling the bridge each day • Directly across from the newly approved Essex Crossing Development, a 1.9M SF mixed use project including 1,000 new housing units

TriBeCa LOCATION Southeast Corner of Church Street & Leonard Street

SIZE Ground: Cellar: Sub-Cellar: Total:

241 Church Street (66 Leonard Street) ±7,080 SF ±8,155 SF ±13,236 SF ±28,471 SF

FRONTAGE ±125’ on Church Street ±40’ on Leonard Street

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

Join our Leasing Team:

careers@aacrealty.com

ASHKENAZY

ACQUISITION

285 Lafayette Street

Premier Manhattan SoHo

NEW TO OUR PORTFOLIO

249 Church Street

TriBeCa LOCATION Northeast Corner of Church & Leonard Streets

SIZE Ground: Cellar: Sub Cellar: Total:

±1,561 SF ±1,556 SF ±1,463 SF ±4,580 SF

FRONTAGE Over 85’ of frontage

*can be combined

FRONTAGE Over 75’ of frontage on Lexington Avenue & 40’along 93rd St. SUBWAY PROXIMITY within 3 blocks within 7 blocks

INFORMATION • Located i n the Upper East Side’s Carnegie Hill neighborhood •C urrent tenants include Ottomanelli Brothers Restaurant, Vela Pizzeria & Pet Central

1991 Broadway

145 Greene Street

SoHo LOCATION Corner of Greene Street & Houston Street

SIZE Ground: Lower Level: Total:

±1,936 SF ±811 SF ±2,747 SF

FRONTAGE Over 124’ of frontage along Houston Street

For Leasing Information Please Contact:

A.J. Levine • alevine@aacrealty.com • 646.214.0245 Daniel Iwanicki • diwanicki@aacrealty.com • 646.214.0251

NEW TO OUR PORTFOLIO

LOCATION Spans the entire city block between Wadsworth Avenue & Broadway on the South side of W. 181st St. SUBWAY PROXIMITY within 1 block within 4 blocks SIZE ±25,865 SF

FRONTAGE ±150’ on 181st St. ±102’ on both Broadway & Wadsworth Ave.

*divisions considered

Upper Manhattan LOCATION Southwest Corner of 5th Avenue & 116th St.

SIZE Available ‘A’: ±3,295 SF* Available ‘B’: ±2,444 SF* Total: ±5,739 SF *can be combined

SUBWAY PROXIMITY within 1 block within 3 blocks within 4 blocks

1400 Fifth Avenue

INFORMATION • 13’ average ceiling heights • At the base of Harlem’s first sustainably constructed condominium building

Upper East Side LOCATION SIZE Northwest corner of Available A: ±895 SF Lexington Avenue & 93rd St. Available B: ±480 SF Total: ±1,375 SF

ACQUISITION

4250 Broadway @ 181st Street

Washington Heights

FRONTAGE ±45’ on Fifth Avenue; ±119’ on 116th St.

1424 Lexington Avenue

Retail Opportunities

ASHKENAZY

Philip House (1311-1337 Lexington Avenue)

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

SIZE Up to ±4,000 SF

SUBWAY PROXIMITY within 2 blocks

Lower East Side LOCATION Corner of Delancey & Clinton Streets, at the foot of the Williamsburg Bridge FRONTAGE Over 100’ of frontage along Delancey Street

SIZE Ground: ±2,725 SF Up To: ±5,250 SF* *with proposed 2nd level

SUBWAY PROXIMITY within 1 block

156 Delancey Street

TriBeCa LOCATION Southeast Corner of Church Street & Leonard Street

SIZE Ground: Cellar: Sub-Cellar: Total:

241 Church Street (66 Leonard Street) ±7,080 SF ±8,155 SF ±13,236 SF ±28,471 SF

FRONTAGE ±125’ on Church Street ±40’ on Leonard Street

Join our Leasing Team:

careers@aacrealty.com

4 43 G R E E N W I CH S TR E E T FA LL 2014

YO U ’R E

A BO U T

SPEN D

$500, 000. 00 OR M ORE ON A RENOVATI ON

AND THINK THE SO LUTIO N IS AN ARC HITEC T, A G C , A KITC H EN D ESIG N ER, A PRO JEC T M A N A G ER, A M ILLW O RK DESIG NER, A TILE & STO NE DESIG NER, A FLO O RING SPECIALIST, AN A/V CO NSULTANT.....

GETREADY TO PAY TONsI N PERCENTAGES

OURPROVEN, COHESI VEPROCESSELI MI NATESALLTHELAYERS, ALLTHEEXCUSES, ANDALLTHEWASTEDEXPENSE.

AtTheRenovated Home, wea r ed e s i g n e r swh obu i l dwh a t wed e s i g n , wi t h ou t t h en on s e n s eof bu d g e t sd ou bl i n g , s c h e d u l e sbe c omi n gu n h i n g e da n de l i mi n a t i n gt h ea n t i q u a t e da n dt r i a n g u l a t e da p p r oa c h wh e r ec on t r a c t or bl a me sa r c h i t e c t , a r c h i t e c t bl a me sc on t r a c t or a n dy ou ’ r ei nt h emi d d l e .

PERHAPSW ESHOULD DI SCUSSYOUR UPCOMI NG PROJECT.

TheRenovated Home th eren o vated h o m e.co m

est.1991

YO U ’R E

A BO U T

SPEN D

$500, 000. 00 OR M ORE ON A RENOVATI ON

GETREADY TO PAY TONsI N PERCENTAGES

OURPROVEN, COHESI VEPROCESSELI MI NATESALLTHELAYERS, ALLTHEEXCUSES, ANDALLTHEWASTEDEXPENSE.

PERHAPSW ESHOULD DI SCUSSYOUR UPCOMI NG PROJECT.

TheRenovated Home th eren o vated h o m e.co m

est.1991

Contents S E P T E M B E R 2 0 1 4

INSIDE OUT

Residential buyers less frantic

How low can they go?

Inside the student housing boom

Fewer bidding wars break out as market shows signs of cooling.

Cap rates are at historic lows in this market, but they could drop more. Developers are getting in on the action as NYC colleges up enrollment.

Fordham’s new Lincoln Center project

At the Desk of: Robert A.M. Stern The starchitect talks about writing emails in longhand, his affinity for Fred Astaire and picking out ties.

Architect Robert A.M. Stern

Want to know what goes on at the New School? Passersby need only glance at the institution’s new University Center in Greenwich Village to understand that progressive design education happens here. The building by Skidmore, Owings & Merrill expresses the school’s interdisciplinary approach through a brass-shingled facade crisscrossed by a series of glass-enclosed stairways that highlight a vivid tableau of students circulating within. The unique system encourages collaboration—and a new dialogue between campus and community that is sure to be conversation for decades to come.

Transforming design into reality

In their words... The month’s funniest and most insightful real estate comments.

‘Chasing’ Coleman Hedge-funder Chase Coleman’s savvy Zillow-Trulia bet could be a harbinger of future real estate tech investments. Chase Coleman is reportedly worth $1.9 billion.

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

Publisher of Metals in Construction 211 E 43 ST | NY, NY 10017 | 212-697-5554 | www.ominy.org

Brooklyn in 2016?

Astorino’s long-shot bid

Politicos push Barclays Center to host the Democratic convention for the next presidential election. Watch out, Philly.

Real estate bigwigs steer clear of the governor’s Republican rival.

Rob Astorino, the GOP gubernatorial candidate.

Dissecting NYC’s luxury market A breakdown of the future of Manhattan’s high-end sales market, which is already showing some cracks. Architect: Skidmore, Owings & Merrill Photograph: Tex Jernigan

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

www.TheRealDeal.com March 2012 00

Recent Transactions

$70,000,000

$33,000,000

$7,000,000

Loan Origination Acq/Const Financing Queens, NY July 2014

Loan Origination Multifamily Manhattan, NY July 2014

Loan Origination Retail Brooklyn, NY June 2014

$18,350,000

$3,500,000

$5,310,000

Loan Origination Mixed Use Brooklyn, NY June 2014

Loan Origination Townhouse Manhattan, NY June 2014

Note Acquisition Ofﬁce / Retail Yonkers, NY June 2014

825 Third Avenue 37th Floor New York, NY 10022

(646) 472-1900

www.madisonrealtycapital.com

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

Contents continued next NYC push 50 Schrager’s After a Manhattan break, the

NEW TWIST

hotelier is back with five projects.

records ... so far 55 2014’s A roundup of NYC’s new residential benchmarks to beat before the calendar hits 2015.

Developer Ian Schrager

to school 60 Back The latest industry courses on tap as

Artist Domingo Zapata

the academic year gets underway.

retail surge 62 NoMad’s A new wave of trendy shops is taking the area to the next level.

Zapata hosts LLNYC 66 Domingo The artist holds a bash in his gallerylike home for TRD’s sister mag.

The new ideas that poured into Lower Manhattan’s rebuilding resulted in a stronger infrastructure—and some architectural gems. A key piece in the undertaking is Pelli Clarke Pelli’s new Pavilion at Brookfield Place, a public space serving the 35,000 commuters who use the PATH system daily. Because the system’s track network runs underneath, the pavilion’s soaring roof and hanging glass curtain wall could only be supported at two points. Thornton Tomasetti met the challenge with a pair of 54-foot-tall “basket” columns, each gathering its loads in an expressive weave of lightweight, brightly painted twisting steel tubing that spirals down to plaza level in an ever-tightening array. It is innovative design, with a twist.

Structural Steel Right for any application

Six Chinese power players targeting NYC real estate

Brookfield’s big revamp

A look at GM Building co-owner Zhang Xin and the other titans from the People’s Republic who are scooping up NYC property.

The mega-REIT is seeing a shakeup — from a corporate restructuring to leadership changes.

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

Are NYC townhouses undervalued?

Commercial Market Report

Single-family homes lag behind new condos on the price-per-square-foot front.

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

112

National Market Report Reports from around the country on significant developments and trends.

117

The Deal Sheet 400 West Street is listed for $21.5 million, or just under $3,000 a square foot.

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

132

For help achieving the goals of your next project, contact the Steel Institute of New York.

Development Updates

Doffing and dealing on the links Real estate pros take to the fairway for TRD’s fourth annual golf outing.

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

Eric Anton of HFF follows his shot.

92 Architect: Pelli Clarke Pelli Architects Structural Engineer: Thornton Tomasetti Photograph: Tex Jernigan

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

Not quite on top of the world NYC luxury properties are still a bargain compared to some other global cities, but the gap is narrowing as Asian markets slide.

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

134

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

146

Calendar of Events Check out this month’s activities.

152

We Heard A lighter look at industry buzz.

www.TheRealDeal.com March 2012 00

As your jumbo lender, we understand that the mortgage process needs to be smooth and easy when buying in the luxury market. Our exceptional customer service, coupled with the right loan program, will make buying your home a worry-free experience. • Loan Amounts up to $10,000,000 • Down Payments as Low as 10% • Investment Properties Eligible

• No Prepayment Penalty • Interest Only Options • 1-4 Units, Condos, & Second Homes

• No Private Mortgage Insurance (PMI) on Select Products • VA Jumbo Loans up to $1,500,000

Long Island

Manhattan

LAKEWOOD

560 Broadhollow Road Mellville, NY 11747

120 Broadway, 29th Floor, Suite 2950 New York, NY 10271

(516) 430-5555

(646) 568-3600

401 Madison Ave, Third Floor Lakewood NJ 08701

(732) 719-8750

Highlights Sept. 2014 40

Doubling down on the ‘prince

of darkness’ An eroded relationship with City Hall and a weak Republican challenger in November have prompted the industry to ramp up support for Cuomo.

152

Blockbuster leases at the Midtown South building have established the tower as a key player on the NYC tech scene.

Brokers Adina Azarian, who’s launching a tapas bar, and Lyon Porter, who opened a Brooklyn B&B, are the latest industry pros to get into the hospitality biz on the side.

Remaking 11 Madison

Yelp and Sony are set to move to 11 Madison.

104 A Postmodern marriage Architect Soo K. Chan, in one of his debut U.S. buildings, brings elements of neoModernist and Deconstructivist architecture to the High Line.

A rendering of 515 High Line

Real estate’s restaurateurs

154

Steven Pozycki is ‘the boss’ The SJP Properties CEO talks about living down the hall from Bruce Springsteen, lifeguarding at Jones Beach and battling polio as a child. Steven Pozycki of SJP

14 September 2014 www.TheRealDeal.com

call 212.421.1800 - info@poliformusa.com - www.poliformusa.com Poliform and Varenna Contract Division â&#x20AC;&#x201C; custom made production for turn-key projects

The Real Deal N e w Yo r k R e a l E s tat e N e w s

Whether you need to buy or sell a building having a real estate broker that knows the local players is key - the buyers and the sellers. You need an intensely dedicated broker who is still on the job long after the lights have gone out elsewhere.

You need Rosewood Realty Group

Publisher Amir Korangy Editor-IN-CHIEF Stuart W. Elliott Managing Editor Jill Noonan DEPUTY Managing Editor Eileen AJ Connelly EXECUTIVE Web Editor John Goff Art Directors Ronald Gross, Keziah Makoundou Senior Reporter Adam Pincus ReporterS Hiten Samtani, Rich Bockmann, E.B. Solomont

212.359.9900

www.rosewoodrealtygroup.com

Rosewood Ranked #1 Investment Sales Firm In Outer Boroughs for 2013.

SOUTH FLORIDA BUREAU CHIEF Eric Kalis Contributors C. J. Hughes, David Jones, Adam Piore EDITORIAL OPERATIONS MANAGER Linden Lim Web Producers/WEB REPORTERS Mark Maurer, Julie Strickland, Thomas DiChristopher, Zachary Kussin, Claire Moses SOCIAL MEDIA COORDINATOR Kerry Barger Editorial Assistant Sasha von Oldershausen Interns Juan Zielaskowski, Maurice Mayfield, Maya Kaufman, Alexandra Barrett Photographer Marc Scrivo

*As published in The Real Deal.

Director of mARKETING OPERATIONS Yoav Barilan

We are pleased to announce the following results for the year-to-date August 29th 2014, Rosewood has completed total sales of

$1,276,344,000 which include:

Manhattan: Aggregate sales of

$484,868,000

51 Buildings / 1,277 Residential Units / 85 Commercial Units Brooklyn: Aggregate sales of

$301,990,000

45 Buildings / 1,865 Residential Units / 10 Commercial Units

ASSOCIATE SALES DIRECTOR Ross Fox Advertising Sales Eran Evron, Nick Mascaro, Robert Stearns, Nicki Chadi, Sigalit Levi, Marcus Guest, Chris Cuomo DIGITAL TRAFFic MANAGER Junaid Zahid WebmasterS Nima Negahban, Andrew LoCascio ASSOCIATE WEB DEVELOPER Amir Ghaheri Finance director Kenneth Cyrus OFFICE MANAGER Virginia Durso Circulation Paul Destanko

Bronx: Aggregate sales of

Distribution Mitchell Newman, Patricia Hofmann, Forero Express

$247,356,000

ATTORNEY Barry J. Friedberg Trachtenberg Rodes & Friedberg LLP

47 Buildings / 2,208 Residential Units / 56 Commercial Units

Accountants William T. McCallum, CPA, P.C., Christine Wang

Queens: Aggregate sales of

$242,130,000

16 September 2014 www.TheRealDeal.com

The Real Deal is a registered trademark of Korangy Publishing Inc. Copyright © 2014. Call 212-2601332 or e-mail news@therealdeal.com. Warning: It is illegal to photocopy or reproduce any part of The Real Deal without express written consent. For reprints and duplication rights, call 212-260-1332. Principal office: 158 West 29th St., New York, NY 10001. The Real Deal is published monthly. Annual subscriptions cost $95. Send check or money order to 158 West 29th St., New York, NY 10001.

AN EYE ON SOUTH FLORIDA

A STRENGTHENING MARKET

THRIVING NEIGHBORHOODS

Two truly vibrant cities offering world-class entertainment, fine dining and ideal weather year round are now booming areas ideal for investors and second-home-seekers alike. Miami and Fort Lauderdale present endless opportunities in a stable, growing market.

The Miami market’s median home price increased by 34% in two years, climbing from $315,000 in the ﬁrst half of 2012 to $422,000 during the same period in 2014. Miami is the top US market for all-cash transactions1 and is considered one of the few “cities that matter” to global, high-net-worth investors2.

2014

13 20

fourteen% increase

H N

2 0 HALF 13

2 ND

HALF

2012

3 01

FORT L A

12 20 1

1 ST

2 0 HALF 12

2012

2014

1 ST H A L F

1 ST

F AL

Dubbed the “Venice of America” for its amazing canals and waterfront living, Fort Lauderdale’s median home price increased by 14% in two years. From $250,000 in the ﬁrst half of 2012 to $286,000 during the same period in 2014, Fort Lauderdale is South Florida’s latest booming city.

20 L F 13

HALF

1S T H A L F

E UD

downtown/midtown

the yachting capital 8 new developments 7 miles of public beach 973 acres of public parks

thirty four% increase

L HA

fort lauderdale

foodie paradise 20+ new developments arts/design district 2 new museums

hollywood

oceanfront boardwalk 9 new developments golf/resort lifestyle 1,500 acres of forests

sunny isles beach

key biscayne

one

ONE Sotheby’s International Realty is the #1 brokerage for condo sales over $500,000 in Miami-Dade and Broward counties. We are aﬃliated with 14,000 estate agents in 55 countries worldwide, providing our local experts with unparalleled global reach.

miles of parks & beaches exclusive single-family homes luxury resorts and clubs 3 world-class golf & tennis

miami beach

coral gables

vibrant beach city 15+ new developments top restaurants, shopping & hotels rising arts and culture scene

luxury, single-family homes 100+ cafes and restaurants gardens and art cinemas 22 parks + bike paths

4 ONE

brickell

bayfront ﬁnancial center 15+ new developments new retail & dining considered the heart of Miami

1-square-mile barrier island 10 new developments resort community 2.5 miles of public beach

Beyond a brokerage: Global Real Estate Advisors

ONE’s top 9 competitors

Sell Volume

List Volume

*Condos over $500,000.

1. As reported in Bloomberg.com’s Markets Where Buyers Are Bringing the Money on July 7th, 2014. 2. As reported in the 2014 “Wealth Report” by London-based consulting ﬁrm Knight Frank LLC. Median Home Prices based on MLS information. Brokerage Sales Volume based on data by BrokerMetrics® (sales in last 12 months). ©MMXIV ONE Sotheby’s International Realty, licensed real estate broker. Equal Housing Opportunity. Each oﬃce is independently owned and operated. Information herein is subject to change without notice.

For additional details on the South Florida market, please call 888.998.5560.

onesothebysrealty.com

AN EYE ON SOUTH FLORIDA

A STRENGTHENING MARKET

THRIVING NEIGHBORHOODS

2014

13 20

fourteen% increase

H N

2 0 HALF 13

2 ND

HALF

2012

3 01

FORT L A

12 20 1

1 ST

2 0 HALF 12

2012

2014

1 ST H A L F

1 ST

F AL

20 L F 13

HALF

1S T H A L F

E UD

downtown/midtown

the yachting capital 8 new developments 7 miles of public beach 973 acres of public parks

thirty four% increase

L HA

fort lauderdale

foodie paradise 20+ new developments arts/design district 2 new museums

hollywood

oceanfront boardwalk 9 new developments golf/resort lifestyle 1,500 acres of forests

sunny isles beach

key biscayne

one

miles of parks & beaches exclusive single-family homes luxury resorts and clubs 3 world-class golf & tennis

miami beach

coral gables

vibrant beach city 15+ new developments top restaurants, shopping & hotels rising arts and culture scene

luxury, single-family homes 100+ cafes and restaurants gardens and art cinemas 22 parks + bike paths

4 ONE

brickell

bayfront ﬁnancial center 15+ new developments new retail & dining considered the heart of Miami

1-square-mile barrier island 10 new developments resort community 2.5 miles of public beach

Beyond a brokerage: Global Real Estate Advisors

ONE’s top 9 competitors

Sell Volume

List Volume

*Condos over $500,000.

For additional details on the South Florida market, please call 888.998.5560.

onesothebysrealty.com

EDITOR’S NOTE

Weakness disguised as strength

ALCHEMY PROPERTIES SACKETT UNION HAS SOLD OUT. Alchemy Properties would like to bring specific recognition to the following brokers for contributing to the success of Sackett Union. Joseph Baglio / Madison Estates

Kristina Leonetti / Corcoran

John Bataille / Corcoran

Charles Mattingly / Corcoran

Daniel Canarick / Prime NYC

Greg Mire / Corcoran

Sarah Chamberlin / Halstead

Jo Monteleone / Halstead

Julie Cohen / Brooklyn Heights RE Sarah Cordoba / Corcoran

Ross Nodell / Spire Jay Overbye / Halstead

Paul Dawson / Corcoran

Michael Rauschenberg / Corcoran

Steve Dawson / Sothebys

Elie Reiss / Tungsten Properties

Robert Dvorin / Town

Ryan Roberts / Douglas Elliman

Drew Glick / Brown Harris Stevens Karen Heyman / Sothebys International Realty Jordan Hoch / Douglas Elliman Frances Lanbecker / Douglas Elliman

Steven Rutter / Stribling Andrew Sanders / Sanders Jill Seligson / Brown Harris Stevens Brooklyn Eric Sidman / Independent Firm

COMMERCIAL INSURANCE

FOR EVERY ASPECT OF YOUR BUSINESS.

Construction • Development • All Real Estate Workers Comp • Liability • Owner's Protective Liability Property & Builders Risks • Umbrella/Excess Liability Professional Liability For All Classes • Directors & Officers Liability • Employment Practices Liability Crime & Fidelity • Cyber Liability

ALWEX INSURANCE

If you do not see the New York business insurance policy you need in the list above, please still give us a call! We will work with businesses across New York, New Jersey, Pennsylvania and Connecticut to develop any insurance policy you may need, even non-traditional policies you may not be able to find elsewhere! Call 888-533-7512 or visit our website www.alwex.com to find out how we can help provide you the coverage you need.

t’s too early to tell, but it could be a lot cooler for residential real estate in New York this fall than previously forecasted. Things that have looked like strengths, namely sky-high luxury prices, are now starting to look like potential weaknesses. Real estate pros — even those who are usually cautious in their public statements — are saying those high price tags could start spooking buyers. They’re also acknowledging a decline in overall demand. In some pockets of the city, brokers are also concerned that developers could overload the market with luxury condos. We examine all this in our cover story by E.B. Solomont, starting on page 46, dissecting what the future holds for the luxury market. What happens this month could be telling. The month of September is always a big litmus test for the market, after the seasonal summer slowdown. This year that’s truer than ever. In another story, we examine how brokers are seeing fewer “best and final” offers, which were ubiquitous earlier in the year (see page 24). Worrisome, too, is that luxury condo builders may have no “Plan B” for their projects. During the last cycle, developers built units that they were easily able to convert to rentals when the market went south. (Rentals, of course, perform better in downturns.) This time, developers are building massive super-luxury pads, which are way harder to repurpose if the market shifts. (The logistics of turning a 5,000-square-foot apartment into ten 500-square-foot studios are quite difficult.) See our story on page 58. Another continued sore point may be the industry’s relationship with the political establishment as we head into November’s statewide elections (see page 40). Things arguably looked a lot better a few years ago when the pro-development Mayor Bloomberg was in office and Governor Cuomo wasn’t stained by fallout from the

Things that have looked like strengths in the residential real estate market — namely, sky-high luxury prices — now look like weaknesses. Moreland Commission (even if he is expected to win re-election in a landslide). That’s coupled with the fact that the industry’s biggest lobbying group, REBNY, is losing its longest-serving head, Steve Spinola, next year. Partly in response to all the uncertainty, the industry in doubling down on Cuomo. As reporter Hiten Samtani reports, one day after a damning news report that accused the governor of directing the Moreland Commission to stop investigating his real estate ties, some of the biggest names in the industry contributed to one of Cuomo’s biggest single-day campaign fundraising hauls, which raked in $329,000. But, of course, the market is continuing to show signs of amazing strength as well. (Whether you look at sky-high prices as the mark of a booming, or potentially declining, market is a matter of perspective, after all.) In a story on page 55, we look at the residential records broken in 2014 so far. The list is extensive. It includes: NYC’s priciest co-op sale ever, the priciest Downtown sale and listing, the most expensive rental in the city, the most expensive Brooklyn listing, the priciest Queens condo sale and more. Elsewhere, on the commercial and development fronts, retail rents are on the rise in emerging neighborhoods like NoMad (page 62), Chinese investors are pouring more money into deals (we identify the key players on page 68), parking lots are disappearing in Manhattan because of frenzied building, especially on the West Side (page 85); and market-making developer Ian Schrager is set to unveil a number of buzzworthy Manhattan projects (page 50). Another major trend that could have longer-term ramifications for the industry is the entrance of venture capital and tech money looking to shake up the real estate space. Investors are increasingly seeing the importance technology could play in real estate, particularly the residential side. Tech-infused firms like Urban Compass and CompStak are just the infancy of what’s being planned. We look at some of the biggest investors, who earlier were focused on digital darlings like Instagram, in stories on page 36 and 88. “Real estate’s a massive asset class and may change slowly,” said David Frankel of Founder Collective, which invested early in Uber and BuzzFeed before getting interested in housing. “But there’s so much lucre in it.” Another exec put it this way: “All of a sudden [investors] see everything as up for grabs.” Enjoy the issue.

Contact Harvey Wexelman harvey@alwex.com or Marc Bakhchi marc@alwex.com for more info.

Stuart Elliott 20 September 2014 www.TheRealDeal.com

Artist Yoni Alter

REAL ESTATE FOR A WORLD GONE GLOBAL. LAUNCHING SEPTEMBER 2014. 15309_KF_RealDeal_Sept14.indd 1

8/29/14 2:29 PM

Artist Yoni Alter

REAL ESTATE FOR A WORLD GONE GLOBAL. LAUNCHING SEPTEMBER 2014. 15309_KF_RealDeal_Sept14.indd 1

8/29/14 2:29 PM

Re s i d e n t i a l Ma r k e t By E.B. Solomont alstead Property’s Christopher Kromer and Nora Ariffin said they brokered more than 65 deals last year — all of them ending with a request for “best and final” offers from competing buyers. This year, roughly half their sales are “best and finals,” said Kromer. “There is more available inventory, so buyers are hav-

Buyers less frantic as inventory ticks up

Brokers say they are seeing fewer bidding wars as market shows signs of normalizing

ing more choices, and sellers are having to be more competitive.” Kromer and other brokers said the sales market is returning to a more normalized state thanks to the recent uptick in inventory. That’s resulting in the diminished use of “best and final” offers, in sharp contrast to last year. “Buyers were so frantic about competing for so few properties, they didn’t care,” he said. “I don’t

believe you’re seeing that now.” Manhattan residential properties spent an average of 5.1 months on the market during the April to June period, up from 4.5 months in the first quarter, according to data from real estate appraisal firm Miller Samuel. (While longer, that’s still below the 10-year average of 8.4 months.) The inventory level, which reached a 14-year low of 4,164 listings at the end of 2013, also started

Midtown We represented a major, high-end retailer in the 20-year lease extension and major expansion at the Peninsula Hotel on Fifth Avenue.

Hudson Yards We advised Sherwood Equities in the $200 million sale of almost half a block to Tishman Speyer.

Chelsea We guided a group of syndicated lenders through a $165 million credit facility secured largely by over $80 million in artwork.

to inch up during the quarter. As for pricing, the median sales price of $910,000 during the second quarter was a drop of 6 percent from $972,428 during the first three months of the year. Julia Hoagland, a broker at Brown Harris Stevens, said that the fervor of the 18 months prior to May “seems to be abating somewhat,” and buyers are more confident about their ability to close a

NoMad We helped Meliá Hotels lease space in a new 20-story tower going up just north of Madison Square.

Meatpacking District We advised the owners in a ground lease and JV agreement with the Rockpoint Group to develop a 150,000-square-foot boutique hotel.

HOT DEALS IN HOT NEIGHBORHOODS Think Lower Manhattan. Think Far West Side. Think about the neighborhoods people are talking about. Our New York real estate lawyers are making deals where they count— NoMad, Hudson Yards, Chelsea, Midtown, the Meatpacking District, and the South Street Seaport. Backed by nearly 900 attorneys in 14 offices nationwide, BakerHostetler is the right firm in the right place at the right time. Andrew Drogen Andrew Partner Drogen Partner 212.589.4292 212.589.4292 adrogen@bakerlaw.com adrogen@bakerlaw.com 45 Rockefeller Plaza, New York, NY | bakerlaw.com

24 September 2014 www.TheRealDeal.com

South Street Seaport We advised in the acquisition of what will soon be the Jade Hotel, designed to reflect Seaport history and Colonial Williamsburg.

Gina Mavica Gina Mavica Partner Partner 212.589.4672 212.589.4672 gmavica@bakerlaw.com gmavica@bakerlaw.com

Dennis Russo Dennis Chair of Russo NY Real Estate Chair of NY Real Estate 212.589.4648 212.589.4648 drusso@bakerlaw.com drusso@bakerlaw.com

deal. “There doesn’t seem to be as much of a manic rush to sign at all costs in record time.” Frederick Peters, president of Warburg Realty, agreed that competitive bidding has become less intense, but only in certain segments of the market. “Prices have plateaued in the mid-priced and upper-priced market segments, though not below $2 million, where competition is still fierce and multiple bids still common,” he said. Lately, Kromer said, some sellers have set prices unrealistically high. “You’ll only have a ‘best and final’ when the price attracts multiple interest,” he said. “If the seller is being aggressive with their pricing and is out of alignment with the market … then there’s no sense of urgency on the buyer’s part.” Some brokers said buyers have reconsidered what they want and how much they’re willing to pay. “There’s a fear amongst many of paying ‘too much,’” Nicole Beauchamp, an agent at Engel & Völkers NYC, said in an email. Beauchamp recently helped clients land an apartment in Brooklyn Heights after searching for more than a year and losing more than a dozen bidding wars on two-bedrooms priced between $800,000 and $1 million. She said they signed a contract on a large one-bedroom for under $700,000 with no bidding war. Tom Stuart, a broker at Bond New York who has handled numerous sales at the Clinton Hill Co-ops in Brooklyn, said sellers there who had been routinely getting offers 10 percent to 15 percent above the asking price are now getting offers just 5 percent higher. For example, he recently sold a one-bedroom in the building, at 201 Clinton Avenue, for $500,000, roughly 5.25 percent over the asking price of $475,000. Last year, he sold a comparable unit for 15 percent over the asking price of $425,000 after receiving 12 bids. In June, Stuart also represented a buyer who successfully bid on a one-bedroom duplex at 77 Bleecker Street in the Village, ultimately paying less than the $799,000 asking price. Although he said the open house was well attended, Stuart said his client’s bid of $775,000 was accepted. “That was a surprise,” he said. “It was the first time in a really long time that I put a bid in for a buyer that seemed appropriate and we didn’t have a lot of competition.” TRD

www.TheRealDeal.com March 2012 00

Creative Agency: Squat New York. Photogrpaher: Peter Hurley. Location: Felice 15 Gold Street at Gild Hall- A Thompson Hotel

4 0 WE ST 2 2 N D STR E E T #2 4 BE D R O O M, 3 BATH R O OM 4,100 sq ft

30 E 3RD STREE T 3 STORIES, 3 UNITS 5,300 sq ft

401 EA S T 60T H S T R EE T # 31C 3 B EDR O O M, 3.5 B AT HR O O M 1,956 s q ft

$7,500,000

$7,000,000

$2,895,000

D O WNTO WN

TOWNHOUSE

C O NDO

BRACHA.COM Bracha New York at Keller Williams NYC 425 Park Avenue, 6th Floor, New York, NY 10022 BrachaNY@kwnyc.com

How low can they go? Cap rates are at historic lows in this hot market, and brokers expect the slide to continue By Tom Acitelli ow low can they go? That’s the question many in the New York real estate world are asking right now about capitalization rates, or “cap rates.” The rates, which measure an investor’s return on investment, or yield, are already at historic lows in Manhattan, and could continue to drop throughout 2014, sources say. The lower the rate, the lower the return on investment. And as building prices climb due to sizzling demand, rates have been dipping ever lower in Manhattan. That’s because the hotter the real estate market, the more willing investors are to accept lower returns. While changes to interest rates or the pace of rent increases could alter the trajectory, Manhattan’s investment sales market has been frenetic of late. In the multi-family market, the cap rate for elevator apartment buildings was 3.4 percent in the first half of 2014, according to brokerage Massey Knakal Realty Services. That’s lower than the 4 percent seen at the end of 2013 — and the lowest since 2006. For walkup buildings, the rate was 4.2 per-

cent in the first half of 2014, the lowest since Massey Knakal began tracking it in 1984. Similarly limp cap rates can be found in Manhattan’s office and retail sectors. For office buildings, cap rates were at 4.2 percent in the first half; for retail properties, 4 percent. Both figures represent drops from 4.5 and 4.8 percent, respectively, in 2013, as well as steep drops from 2009, when Massey Knakal began tracking those sectors. Such low cap rates are not a surprise to brokers. That’s because, they say, real estate in the borough remains more lucrative than most other investment vehicles. “Every major investor across the world wants to be in New York,” said Jeffrey Oram, executive managing director at Colliers International. In part that’s because cap rates are still higher than returns on Treasury notes, which have been flirting with zero percent. In other words, investing in Manhattan real estate remains more profitable than investing in the United States. Nationally, yields have dropped too. In mid-August, the U.S. office and retail cap rates were both 6.9 percent, according to

research firm Real Capital Analytics, and the apartment cap rate stood at 6.1 percent. All figures represent the lowest levels since RCA began tracking them in 2002. Brokers say cap rates should continue to spiral down, because the Federal Reserve has long signaled that the interest rates that dictate borrowing costs will remain low into 2015. Brokers expect a gradual rise after that. “As long as rates stay measured — they don’t sky-rocket overnight, they have a slow or orderly rise to them — real estate continues to do well,” said Doug Harmon, senior managing director at Eastdil Secured. The X factor, then, is the pace of rents in multi-family buildings. “The anticipation is

Average asking rent for Class A space in Manhattan reached $75.25 in July, from $69.26 last year, brokerage Cassidy Turley said. Shkury noted that cap rates are still equal to, or higher than, borrowing costs. For instance, in mid-August, the floating rate on a 30-year commercial mortgage was, depending on variables like property size, between 3.35 and 4.5 percent — nearly identical to the cap rate for Manhattan elevator apartment buildings in the first half of the year. And, while thousands of new apartments have come online in Manhattan in recent years and more will come in the next 12 months, they will not be enough to seriously dampen the hot market any time soon, bro-

As building prices climb due to sizzling demand, rates have been dipping ever lower in Manhattan. That’s because the hotter the real estate market, the more willing investors are to accept lower returns. that rents will keep climbing up, [but] at a lower rate” said Shimon Shkury, managing member of Ariel Property Advisors. If rents keep rising, Manhattan cap rates should sink even lower, because building valuations will continue to rise with rent, overtaking any benefit from the increased income. The median Manhattan apartment rent hit $3,300 in June, the highest in five years, according to appraisal firm Miller Samuel. Commercial rents continue to rise, too.

kers say. Tighter lending practices for condo buyers, too, are helping keep apartment demand steady, further bolstering the appeal of multi-family investment. “You’ve got cap rate compression across the country,” Colliers’ Oram said. “And in the places where there’s the highest demand and the lowest perceived risk, the cap rates are going to go the lowest. New York is kind of the perfect storm ... you’ve got incredible demand and amazing financing options.” TRD

(718) 626-4400 | info@metpacproperties.com 26 September 2014 www.TheRealDeal.com

www.TheRealDeal.com March 2012 00

CONDOMINIUM RESIDENCES IN T H E C E N T E R O F T H E N E W D OW N TOW N 5 0 W E S T S T R E E T, N E W Y O R K , N Y 1 0 0 0 6 50WESTNYC.COM

212.766.5050

1 BEDROOMS FROM $1.665 M | 2 BEDROOMS FROM $2.415 M | 3 BEDROOMS FROM $4.24 M | 4 BEDROOMS FROM $6.815 M | PENTHOUSES FROM $18.63 M

EXCLUSIVE SELLING AGENT: TIME EQUITIES INC., LICENSED REAL ESTATE BROKER. THE ARTIST AND COMPUTER RENDERINGS AND EXTERIOR AND INTERIOR DECORATIONS, FINISHES, LAYOUTS, FIXTURES, APPLIANCES, FURNISHINGS, LANDSCAPING AND AMENITIES ARE PROVIDED FOR ILLUSTRATIVE PURPOSES ONLY. ARTIST AND COMPUTER RENDERINGS REFLECT THE PLANNED SCALE AND SPIRIT OF THE BUILDING. SPONSOR RESERVES THE RIGHT TO MAKE SUBSTITUTIONS OF MATERIAL, EQUIPMENT, LAYOUTS, FIXTURES, FINISHES AND APPLIANCES IN ACCORDANCE WITH THE TERMS OF THE OFFERING PLAN. SPONSOR MAKES NO REPRESENTATION OR WARRANTIES EXCEPT AS MAY BE SET FORTH IN THE OFFERING PLAN. SPONSOR MAKES NO REPRESENTATIONS AS TO THE FUTURE OR CONTINUED EXISTENCE OF ANY OF THE NAMED, DESCRIBED OR PORTRAYED ESTABLISHMENTS, STRUCTURES OR FACILITIES. SPONSOR MAKES NO REPRESENTATION THAT FUTURE CONSTRUCTION IN THE NEIGHBORHOOD SURROUNDING THE CONDOMINIUM WILL NOT RESULT IN THE OBSTRUCTION OF THE VIEWS FROM ANY WINDOWS AND/OR TERRACES. FEES AND COSTS MAY BE IMPOSED FOR CERTAIN ACTIVITIES, EVENTS, SERVICES AND PROGRAMS HAPPENING WITHIN THE AMENITIES AND FACILITIES LOCATED AT THE BUILDING. ALL OF THE SERVICES AND FACILITIES DESCRIBED IN THE PLAN MAY NOT BE AVAILABLE UNTIL APPROXIMATELY 12 MONTHS AFTER THE FIRST CLOSING. THE COMPLETE OFFERING TERMS ARE IN THE OFFERING PLAN AVAILABLE FROM THE SPONSOR. PRICES AND AVAILABILITY SUBJECT TO CHANGE. FILE #CD13-0282. SPONSOR NAME: 50 WEST DEVELOPMENT LLC, 55 FIFTH AVENUE, NEW YORK, NY 10003. 50 WEST STREET CONDOMINIUM, 50 WEST STREET, NEW YORK, NY 10006.

50W_RealDeal_140901_FP.indd 1

Date: August 14, 2014

8/14/14 7:27 PM

File Name: 50W_RealDeal_140901_FP_HR.pdf

Project: 50WEST Publication: Real Deal Mag Issue: September issue

Call Source: N/A

For approval, please sign and date below Art:

Date:

Copy:

Date:

Client:

Date:

AM:

Date:

Specs: Full Page 4C Trim Size: 10.5 in (w) × 14.5 in (h)

the

Numbers

Fordham University’s new combined Law School and residence hall at Lincoln Center

300 $2.2 billion Number of student beds proValue of construction starts in NYC by higher education institutions in the past five years. That is expected to reach nearly $10 billion over the next five years, after dipping in 2013.

19% The portion of all 2013 construction

Behind the student housing development boom As academic enrollment rises, construction opportunities take off for NYC real estate players

nrollment in New York City’s academic institutions has been on the rise for some time. But a bunch of major student housing projects are now coming to a head and getting off the ground at once, translating into big real estate opportunities for developers. Schools throughout the city are planning and building new dormitory projects — which typically means contracting with private developers — to accommodate expanding student bodies. Pace University, for example, in 2012 entered into joint venture with the Naftali Group, SL Green Realty and Harel Insurance and Finance to construct a new 34-floor, 378-room dorm in Lower Manhattan. The $130 million project topped out last month. That’s just one of the many residence hall projects in the pipeline. This month, TRD looked at how NYC universities are expanding and where developers are getting in on the action. By Sasha von Oldershausen Pace University’s new dorm at 33 Beekman St.

New To market

starts in NYC that were initiated by NYC’s public and private colleges. Those school starts were valued at $454 million, more than half of which came from one project — construction of a new $252 million academic building for CUNY’s New York City College of Technology in Brooklyn.

17 Number of buildings in Columbia University’s massive 17-acre Manhattanville campus project in Harlem, only three of which may comprise university housing. In a sign that the housing component is not key to the plan, those residential buildings will be built toward the end of the multi-decade project.

$250 million Cost of Fordham University’s new

22-story, 470,000-square-foot combined Law School and residence hall. The Lincoln Center building, built by Gotham Construction, will house 430 undergraduates.

$8,120 Amount Fordham charges each stu-

dent per year for a triple room. Students pay $12,125 for a single. By comparison, the median price for a West Side apartment in July was $3,267 per month, or $29,403 for a nine-month academic year.

2006 The year that CUNY opened its first

dorm in NYC, more than 150 years after its founding. The school, which dates back to 1847, most recently built a $66 million residence hall at the College of Staten Island.

By the Numbers

jected for the five floors of dorm space in Extell’s 52-story, under-construction tower at 555 10th Avenue. Extell has not yet signed a college as a tenant. Students will have a separate entrance, and no access to $500 million tower’s amenities, like the bowling Extell’s 555 10th Avenue alley and gaming lounge.

$26,242 Yearly cost of a private studio

apartment at NYU’s Washington Square Village dorm — one of its 31 residence halls. The average cost of a Manhattan doorman studio apartment in the East Village in June was $3,005 a month, or $27,045 for a school year.

10,000 Number of students Educational Housing Services has in six Manhattan and Brooklyn buildings, including a 1,100bed dorm on the Upper East Side and a 1,400-bed dorm in Brooklyn Heights’ former St. George Hotel. The nonprofit is the city’s largest independent student housing operator.

16 Number of years developer Gregg Sing-

er fought to redevelop the East Village’s former P.S. 64, in one of the city’s longest-running battles over student housing. The city last month OK’d a $16 million plan to transform the landmark into housing for 535 Cooper Union and Joffrey Ballet School students.

2,800 Number of students and faculty mem-

bers to be housed at Cornell University’$2 billion Roosevelt Island tech campus by 2043, when the school reaches full capacity. Hudson Companies and Related Companies are building a $100 million dorm, one of three buildings slated to be ready for the inaugural 2017–18 school year. Sources: Wall Street Journal, New York Times, New York Daily News, EV Grieve and TRD reporting.

142 East 71st Street, Apt. 5C | Price Upon Request

NIKKI FIELD Senior Global Real Estate Advisor, Associate Broker | 212.606.7669 | nikki.field@sothebyshomes.com | www.nikkifield.com East Side Manhattan Brokerage | 38 East 61st Street, New York, NY 10065 Sotheby’s International Realty and the Sotheby’s International Realty logo are registered (or unregistered) service marks used with permission. Operated by Sotheby’s International Realty, Inc. 09-14-field.indd 1

28 September 2014 www.TheRealDeal.com

8/28/2014 11:37:17 AM

9 MINETTA

Unique Development Opportunity Located in the heart of Greenwich Village, 9 Minetta Street presents a once-in-a-lifetime opportunity for a developer or end user to create a substantial single family townhouse of outstanding value. 25 feet wide, extremely rare prime location. Building delivered vacant, with complete and fully approved plans, including curb cut, loading berth/garage and roof deck. Visit us at www.9Minetta.us.

Thomas Guss Real Estate Broker New York Residence Inc. 1501 Broadway, 26th Floor New York, NY 10036 tel: 212.360.7000 ext:103 fax: 212 840 4979 www.NYR.com

: f o k s e

D e h t t

Robert A.M. Stern

amed architect Robert A.M. Stern was born in Flatbush, Brooklyn, in 1939 and earned degrees from Columbia University and the Yale School of Architecture, where he is now dean. The winner of a slew of prestigious architecture awards — none of which are displayed in his West Side office — Stern has designed projects globally, including academic and municipal buildings, homes and resorts. In New York, he’s perhaps best known for his residential work, including 30 Park Place, which Silverstein Properties is currently constructing in Lower Manhattan and, of course, Zeckendorf Development’s 15 Central Park West. The author of roughly two dozen architecture books, most recently “New York 2000,” and “Paradise Planned: The Garden Suburb and the Modern City,” Stern also is the subject of 16 books. His 300-person eponymous firm occupies three and a half floors at 460 West 34th Street, where it’s been located since 1995. The office also includes a writer’s penthouse with a deck, where Stern eats lunch every day. B y C laire M oses

Watercolor drawing

Books On the weekends, Stern works on his books. He’s currently writing

Canvas bag

Lodge, a house built in

a history of the Yale School of Architecture. Every five years, his

Rather than a briefcase,

Colorado in the late 1980s

firm prints a collection of his work from that period. All the

Stern carries a canvas bag

or early 1990s, hangs above

editions are

filled with papers, books

Stern’s desk. At that time,

behind

The drawing of Spruce

stacked on the shelf

and clippings. A lot of it,

Stern’s desk.

Stern said, a watercolor

Stern said, is “material

drawing was made of every

pertaining to New York

house the firm designed. “I like that house,” Stern said, “I like the

architecture and urbanism. I’ve written all these books

owners, I like the drawing.”

about New York and I have said I would not write another one, but who knows? I might.”

Emails Stern’s desk noticeably lacks a key 21st-century feature: a computer. For him, emailing is a ritual that still resembles “the

Blue vase

olden days,” he said. All emails get printed for him. He then writes

This blue vase was sent as a gift to Stern

responses in long hand on the printouts. After a staff member

by a designer in Chicago, who said its

types his replies, they are printed out and returned to Stern for final approval, “because I can’t stand spelling errors.”

Fred Astaire

shape and blue color appealed to him. “It’s kind of modern and sleek,” Stern

Another part of Stern’s outfit

said. If objects catch his eye, they get a

that doesn’t change: his socks.

place by his desk. “But then,” he added,

He typically wears light yellow

“they never leave. I don’t reprogram my

Stern’s office overlooks the Hudson

socks. One day about 10 years

little gallery here.”

Yards development, the Hudson

ago, Stern was told that Astaire

River and large parts of

exclusively wore light yellow socks.

Downtown and the West Side.

“The reason he did, it seems to me,”

The rapid rate of construction

Stern said, “[is that] as a dancer,

in the area is bound to change

he wanted to draw your eyes to his feet. I am no dancer, but I have

The Abington

Stern’s vista in the coming

always wanted to be Fred Astaire.”

years. “If we’re lucky, we’re going to be able to see one or two of our buildings in Hudson Yards.” With a little neck-stretching, it’s already possible to see the Abington House, the luxury rental he designed that hugs the High Line.

30 September 2014 www.TheRealDeal.com

Cuff links “I’m a guy who’s wearing the same cuff links I’ve been wearing since 1966,” Stern said. His daily outfit is similarly consistent, when he puts on the same Gucci loafers and white shirt, with his initials embroidered. “I always wear a white shirt,” Stern said, adding that his big “design decision” is

Models

picking a tie. “I have shopping bags full of

Two model structures sit on the shelf behind Stern’s desk. One is of

ties,” Stern said.

a bus shelter in Florida that was supposed to be built in the 1990s, but never was. The other model, a birthday present from the other partners at his firm, is of Stern’s Hamptons home.

PHOTOGRAPH OF Robert A.M. Stern FOR THE REAL DEAL BY jeremy williams

MASTER BEDROOM BEDROOM 2

16' 6" x 13' 2"

13' 9" x 11' 0"

WIC

2 BEDROOMS & LIBRARY | 3 BATHROOMS

FOYER

LIBRARY

8' 10" x 5' 0"

9' 11" x 10' 1"

W/D

$4,025,000

REF

NORTH, SOUTH, AND WEST EXPOSURES

SO/WR

PANTRY

1,805 SQ. FT. | 168 SQ. M.

GREAT ROOM 21' 3" x 21' 9"

GLASS-WRAPPED CORNER GREAT ROOM FINEST DESIGNER FINISHES INCLUDING DADA KITCHEN, DORNBRACHT AND FANTINI FIXTURES, AND IMPORTED RIMADISIO SLIDING DOORS

BRILLIANT 1 TO 4 BEDROOM CONDOMINIUM RESIDENCES AND A COLLECTION OF GLAMOROUS PENTHOUSES DAZZLING 12,000 SQUARE FOOT RESIDENTS’ CLUB ARCHITECTURE AND INTERIORS BY CETRARUDDY LIGHTING INSTALLATIONS BY ATELIER THIERRY DREYFUS

PRICED FROM $2 MILLION TO OVER $15 MILLION

O N - S I T E S A L E S GA L L E RY | 2 1 2 . 2 6 5 .1 3 5 0 | 135 W52 .COM

EXCLUSIVE MARKETING AND SALES AGENT: DOUGLAS ELLIMAN DEVELOPMENT MARKETING

The complete offering terms are in an offering plan available from the sponsor. File No. CD13-0179. Sponsor: 135 West 52nd Street Owner LLC, 512 Seventh Ave, 15th Floor, New York NY 10018.

US Bankruptcy Court Eastern District of New York • In Re: Joe’s Friendly Service & Son, Inc., d/b/a Thatched Cottage at the Bay Case # 14-70001-REG • In Re: Thatched Cottage LP • Case # 14-70002-REG

AUCTION

Commercial Ma r k e t

B A N K R U P T C Y

Wednesday, September 24th • 12:00 noon 445 East Main Street, Centerport, NY 11721

atceel Br:i1n.08gAcFreaVaccainltiLtoyt C t n o r f r e t a all on 1.1 Acres • Parlly 21,000 Sq FtteW H ua g n i r a or Individ P tC arcel A : Waterfron

in Bulk Available A

Operated & Known as “The Thatched Cottage” 21,000 Sq Ft Catering Facility on 1.1 Acres Plus Non-Adjacent 1.08 Acres Vacant Lot, Presently Used for Parking (2.18 Acres Total) Sold Fully Equipped - Turn-Key Opportunity R. Kenneth Barnard, Esq., Chapter 11 Trustee • LaMonica, Herbst & Maniscalco, Attorneys for the Chapter 11 Trustee David R. Maltz, Auctioneer DCA# 762794 • Richard B. Maltz, Auctioneer DCA# 1240836 David A. Constantino, Auctioneer DCA# 1424944 • Richard B Maltz, Licensed Real Estate Broker

NYC 516.349.7022 • www.MaltzAuctions.com

Top brokers. Top listings.

Deserve the top photographers.

Gain access to NYC’s most in-demand photographers at nyc.vht.com 800-790-8687

TopBrokers@VHT.com

Where have the listings gone? Landlords slow to offer new office leases in summer By Adam Pincus ne aspect of the Manhattan’s office leasing market was stuck in the summer doldrums last month, as landlords put far fewer square feet on the market compared with the yearly average. The brokerage firm DTZ analyzed all new space that hit the market over the past year, and found about 2 million square feet was listed in August, down from the average of about 2.5 million per month. And in larger space, the situation was more dramatic. A review by The Real Deal found only about 200,000 square feet of large, new space in eight buildings listed on CoStar as of late last month, in contrast to about 400,000 square feet in February. Insiders said often landlords don’t list space in August, bowing to the prevailing mindset that tenants and brokers are cooling their heels at the beach or by the pool. But the leasing activity last month indicates that was not the case this year. “I think the general feeling is people are away and not paying attention as much,” William Elder, managing director at the landlord RXR Realty, said. “I am not sure that is ever true, because it’s been very active.” “We don’t hold back listings,” he said, but added, “We will not launch a major marketing campaign” either. A preliminary review showed that August was about on par for monthly leasing activity, said Cushman & Wakefield’s Managing Director Kenneth McCarthy. “August is sort of a mix. There is a sense that things close down in the summer, but I don’t find that to be true,” McCarthy said. “Deals sort of have their own life.” Yet some said it made sense to hold back on new listings. “With business activity generally slower during the summer months, it makes sense to limit the posting of new listings at that time,” said Giorgio Versea, DTZ vice president. Insiders expect large blocks to hit the market in the coming months and years as tenants relocate to newly-constructed buildings. “It is possible that people are waiting,” until after Labor Day, McCarthy said, “but it is also possible that the market is a little healthier and is seeing space absorbed.” The average asking rent for Manhattan rose to $65.24 per square foot in August, from $64.61 per foot the prior month, figures from commercial firm Colliers International showed. At the same time, the availability rate, which measures space vacant or that will be available in approximately 12 months, fell by 0.4 points to 10.4 percent, the Colliers data revealed.

Manhattan office stats AVAILABILITY RATE

Aug ’14 July ’14

Manhattan 10.4% $65.24 10.8% $64.61

Aug ’14 July ’14

Midtown 10.7% $75.20 11.2% $74.59

Aug ’14 July ’14

Midtown South 8.5% $56.60 8.9% $56.56

Aug ’14 July ’14

Downtown 12.5% $50.02 12.8% $48.91

Source: Colliers International

Midtown Underscoring the lack of new listings, the largest new space to hit the market in Midtown last month was just 63,210 square feet, at 630 Fifth Avenue, CoStar’s database showed. That was one of only three spaces greater than 30,000 square feet listed in Midtown, for a total of 133,000 square feet, TRD’s analysis showed. There were summertime deals, however. Private debt and equity placement firm the Audax Group signed a new lease in mid-July for the entire 19th floor of 320 Park Avenue, between 50th and 51st streets, information from the leasing data firm CompStak showed. Audax took about 19,274 square feet in the 750,000-squarefoot building, according to CoStar. David Goldstein, Greg Taubin and Jason Perla of brokerage Savills Studley represented the tenant, while Frank Doyle and David Kleiner of JLL represented the landlord, Mutual of America Life Insurance. The 10-year lease starts at about $90 per square foot, according to CompStak. That is far above the average asking rent for Midtown, which was $75.20 per square foot last month, compared with $74.59 per foot the prior month, Colliers figures showed. Meanwhile, the availability rate fell to 10.7 percent from 11.2 percent in July. Audax is currently located in the 390,000-square-foot 280 Park Avenue, between 48th and 49th streets. Another recent lease, as TRD reported, was inked by Gindi Capital, the real estate portfolio manager for the Gindi family, which owns discount clothing retailer Century 21. Gindi Capital inked a long-term,19,055square-foot lease last month for the entire 11th floor at 19 West 34th Street, a Continued on page 140

32 September 2014 www.TheRealDeal.com

AVG. ASKING RENT

T H E N E W M O D E R N. O N T H E U P P E R W E S T S I D E. T H R E E T O F I V E B E D R O O M C O N D O M I N I U M S D E S I G N E D B Y T H O M A S J U U L - H A N S E N . F R O M $ 4 ,8 5 0 , 0 0 0 . SALES GALLERY 252 WEST 79 STREET NYC 10024

2 1 2 6 8 2 0 0 7 7 2 1 0 W E S T 7 7. C O M

A N A F TA L I G R O U P D E V E L O P M E N T E X C L U S I V E M A R K E T I N G A N D S A L E S A G E N T: C O R C O R A N S U N S H I N E M A R K E T I N G G R O U P I M A G E I S A N A R T I S T R E N D E R I N G F O R I L L U S T R AT I V E P U R P O S E S O N LY. T H E C O M P L E T E O F F E R I N G T E R M S A R E I N A N O F F E R I N G P L A N AVA I L A B L E F R O M S P O N S O R . F I L E N O . C D 1 4 - 0 0 7 6 . S P O N S O R : 2 0 6 - 2 1 0 W. 7 7 T H P R O P E R T Y O W N E R , L . L . C . , C / O T H E N A F TA L I G R O U P, 1 7 0 0 B R O A D W AY, 1 6 T H F L O O R , N E W Y O R K , N E W Y O R K 1 0 0 1 9 . E Q U A L H O U S I N G O P P O R T U N I T Y.

In their words...

The funniest and most insightful comments on real estate

“Ask any one of the thousands of people who are applying for that [affordable housing], and they don’t give a damn.”

Extell Development’s Gary Barnett, defending the use of the so-called “poor door” at his 40 Riverside Boulevard project.

“You could see it as a great American story of a guy who goes down in flames and has to resurrect himself.”

Luxury broker Donna Olshan, on the comeback of developer Ira Shapiro, who defaulted on hundreds of millions in loans during the downturn, but is now reportedly working on the condo conversion of 361 Central Park West.

“You can’t evict a dead person.” Maddy Tarnofsky, attorney for an Afghan princess whose landlord is trying to get her out of her Upper East Side home by serving an eviction notice to her late husband.

“We waited seven years for this. Let’s enjoy it — until the music stops.” Ilan Bracha, Keller Williams NYC founder, reflecting on the hot New York City real estate market.

“The income level for people that live in these areas is just too high.”

A Dermot Company spokesperson, on why the developer is having trouble finding qualified tenants for its affordable units at Downtown Brooklyn’s 66 Rockwell Place.

“I wish it were triage — it’s beyond triage.” New York City Housing Authority

“When you are looking chairwoman Shola Olatoye, on the at this location, you city Housing Authority’s desperate financial situation. have to close your eyes and fast forward “Mr. Macklowe moved like three years.” lightning.” TerraCRG’s Ofer Cohen, on the ongoing transformation of Fort Greene.

34 September 2014 www.TheRealDeal.com

Massey Knakal’s Bob Knakal, on how Harry Macklowe didn’t dilly-dally when given the chance to acquire three Lenox Hill properties for $100 million.

“We are putting our big toe in the marketplace to explore the opportunity.” Vornado’s Steve Roth, on the potential revival of a plan to raze the Hotel Pennsylvania to make way for a 3 million square-foot tower.

“I want it off both of them.”

Donald Trump, on how two Atlantic City casinos are hurting his brand by using the Trump name.

“Guilty.” Top Warburg Realty broker Kate Meckler, admitting in court that she pilfered nearly $1,700 worth of clothes from Saks Fifth Avenue. Sources: WNYC, Crain’s, New York Post, New York Daily News, New York Times, ABC, DNAInfo and TRD reporting.

the ultimate

PENTHOUSE

Expansive 4 Bedroom Penthouse Residence with Breathtaking North, East and West River Views and Spacious Private Terrace. 4 bedrooms, 3.5 baths, 2,688 sf, eat-in-kitchen with pantry, dining room, two walk-in closets in master bedroom, five fixture master bath and laundry room with washer and dryer.

Priced at $6,200,000 A Select Few Two, Three & Four Bedroom Residences Remain Priced from $1,900,000 to $5,000,000

(212) 828 - 4 8 4 8 | A ZURENY.COM 333 East 91st Street (between 1st & 2nd Avenues) ANOTHER FINE DEVELOPMENT BY

The complete offering terms are available in an offering plan available from Sponsor. File No. CD07-0002. Sponsor: 1765 First Associates, LLC, 820 Elmont Rd., Elmont, NY 11003. We are pledged to the letter and the spirit of U.S. policy for the achievement of equal housing opportunity throughout the nation.

The DeMatteis Organizations

‘Chasing’ Coleman

Hedge-funder Chase Coleman’s savvy Zillow-Trulia bet could be a harbinger of future real estate tech investments

By E.B. Solomont onths before Zillow and Trulia announced their $3.5 billion merger on July 28, New York City hedgefund manager Charles P. Coleman III was betting big on online real estate listings. From Tiger Global Management’s Midtown office, on the 35th floor of 9 West 57th Street, Coleman, who goes by Chase, and his team of notoriously prescient analysts gobbled up sizeable chunks of stock in both companies. By the time the deal was announced, Tiger held a 9.4 percent stake in Zillow and a 4.6 percent stake in Trulia, making it Zillow’s second-largest shareholder and Trulia’s fifth-largest. The Zillow-Trulia investment was arguably the firm’s biggest real estate play to date, but it could be a harbinger of things to come — especially considering Tiger’s increasing appetite for real estate technology over the past 18 months. Known for investing early in Facebook and making nearly $1 billion when the social networking site went public in 2012, Tiger led a $50 million investment in the online brokerage Redfin this past November. In

36 September 2014 www.TheRealDeal.com

ship of its one-time competitor. James Cakmak, an analyst at Telsey Advisory Group, an equity research firm and brokerage, said the shareholder base of both companies became increasingly aligned in the months before the deal. That “may have helped move the dialogue between the companies quicker,” he said. In general, Wall Street liked the $3.5 billion all-stock acquisition, which could turn into another big payday for Coleman. Since last year, Zillow’s stock price has nearly doubled and Trulia’s hasn’t been far behind. After buying an initial stake in Zillow and Trulia, Tiger upped its stake in Zillow in August to roughly 9.5 percent of the company valued at $433.7 million.

Old money Chase Coleman, 39, whose net worth is reportedly $1.9 billion

January, it joined Accel India in investing $10.4 million in CommonFloor, an Indian real estate listings site. Dan Miller, co-founder of real estate crowd-funding site Fundrise, said Tiger’s reputation is stellar in real estate tech circles. “They’re well regarded as one of the smarter tech investors in Series B and C stage [fundraising] when there’s real growth potential,” Miller said. Analysts said Tiger, and other investors, probably accelerated Zillow’s six-week court-

A descendant of Peter Stuyvesant, the last Dutch governor of New York, Coleman’s pedigree is old New York money. In 2008, he and his wife Stephanie Ercklentz paid $36.5 million for two apartments at 4 East 66th Street that were formerly owned by Veronica Hearst, the widow of William Randolph Hearst’s son Randolph. Most of Coleman’s wealth comes from Tiger Global — a $15 billion firm he launched in 2001, which has reportedly had returns exceeding 20 percent for the past three years. After graduating from Williams College in 1997, Coleman landed a job as an investment analyst at hedge fund manager Julian Robertson’s Tiger Management. He quickly

became one of Robertston’s protégés. In 2001, Coleman launched Tiger Global with $25 million in seed money from Robertson. Two years later, he added a venture capital arm. While notoriously media-shy, Coleman, who declined to be interviewed, has since multiplied that seed money many times over. Last year, Coleman, 39, was one of the top 25 highest paid hedge-fund managers, according to Forbes, which pegged his net worth at $1.9 billion.

Betting on real estate While real estate isn’t Tiger’s bread and butter, sources said Coleman has recognized an opportunity in the sector much like he did with Facebook, LinkedIn and Zynga. Scott Schleifer, who runs the venture capital division with Lee Fixel, brought the Zillow-Trulia investment to Coleman’s attention and put together the deal, sources said. “They are very sharp investors and they look for trends that can really have a big impact industry-wide,” said Riggs Kubiak, CEO of Honest Buildings, an online marketplace connecting developers and real estate vendors, who’s had several meetings with the Tiger team. Glenn Kelman, CEO of Redfin, said investors have become increasingly convinced of the importance technology could play in real estate, particularly the residential side. “All of a sudden they see everything as up for grabs,” he said. TRD

www.TheRealDeal.com March 2012 00 ILLUSTRATION BY MIKE NUDELMAN/BUSINESS INSIDER

?24B9.A6;4 ?2.9 2@A.A2

The credit score logjam

Lenders blame Fannie, Freddie for reluctance to write mortgages for buyers with less-than-stellar credit BY KENNETH HARNEY re mortgage lenders finally loosening up a little on their credit score requirements, opening the door to larger numbers of home purchasers this summer and fall? It depends on what type of loan the homebuyer is seeking. If it’s a Federal Housing Administration (FHA) insured mortgage, the answer is a resounding yes. The average FICO credit scores for approved applicants for FHA home purchase loans have been dropping steadily this year, according to new data from Ellie Mae, a Pleasanton, Calif.-based company whose mortgage origination software is used by most large lenders. But for those shopping for financing in the much broader conventional market, where most mortgages are purchased or guaranteed by giant investors Fannie Mae and Freddie Mac, scores have not budged for months. They averaged 755 FICO in June, the same as in January, four points below their average for all of 2013. FICO scores run from 300 to 850; higher scores indicate lower risk of default. Though credit scores represent just one factor

top officials at lending institutions suggest something that may not be widely understood by consumers: Fear and finger-pointing are gumming up the system. Lenders fear that big investors such as Fannie and Freddie will force them to buy back loans they make that have below-par scores or underwriting. Both companies have required lenders to repurchase billions of dollars worth of defective mortgages. In the process, they’ve made banks and mortgage companies hyper-obsessive about delivering pristine loans, even though that means rejecting borrowers they would have funded in the years before the housing boom and bust. Anthony Hsieh, founder and CEO of loanDepot, a California-based mortgage company that specializes in conventional loans, says his firm cannot afford the risks of deviating from the Fannie and Freddie guidelines — or even tip-toeing close to the line. “We have no control over credit scores,” he said in an interview. “Until (Fannie and Freddie) put out a directive telling us to provide credit to more

Leaders of the major credit score firms, FICO and VantageScore Solutions, confirm that banks could reduce their scoring requirements from today’s highs, and not materially increase their risk of delinquencies and defaults. that lenders use in determining whether to grant an applicant a mortgage, today’s average required scores are far above historical norms and represent a high hurdle for many would-be purchasers, especially first-time, minority and moderate-income buyers. Phil Bracken, a mortgage industry veteran and founder and chairman of America’s Homeowner Alliance, a nonprofit group that promotes affordable housing, calls current score levels “serious” contributors to a national problem: homeownership is now at 64.8 percent, its lowest level since 1995, in part because so many consumers can’t get past lenders’ severe underwriting tests. The ownership rate for Americans under 35 is 36.2 percent, the lowest on record. “There are lots of people out there who are creditworthy and should be eligible” to buy a home, Bracken says. Scores are not the only obstacle in their way, but they play a powerful role. Leaders of both of the country’s major credit score model developers, FICO and VantageScore Solutions, have confirmed to me that banks could reduce their scoring requirements from today’s highs and not materially increase their risk of delinquencies and defaults. In the process, they would increase the volume of mortgages they make, spur more home sales and stimulate employment. So what’s holding them back? Interviews with 38 September 2014 www.TheRealDeal.com

Americans, our hands are tied.” Spokesmen for Fannie and Freddie say they have tried to ease lenders’ fears about overzealous buyback demands and do not require scores to average 755 or anywhere even close. Both companies do assess higher fees on loans they purchase with credit scores below various thresholds — 740 FICOs and above get the lowest fees — but insist they do not dictate scores. They also point out that many lenders set their own score thresholds higher than Fannie’s or Freddie’s, levying “overlays” that increase costs to consumers. Despite all this, however, there may be glints of hope on the horizon at Fannie and Freddie on credit scores and other fees. Under its new director, Mel Watt, the Federal Housing Finance Agency, which oversees Fannie and Freddie in conservancy, has reached out to lenders and asked for their advice on where to set some of the fees the two investors charge, including those connected with credit scores. The deadline for lenders to respond is Sept. 8. Though no one can predict whether this will help curtail the finger-pointing and fears that are keeping scores unnecessarily high, there’s a real possibility. And that could be a big deal for buyers in the months ahead. Kenneth Harney is a syndicated columnist.

4<C2?;:2;A /?623@ Mayor seeks affordable housing consultant The Housing Development Corp. issued a request for proposals last month seeking consultants to assist with Mayor Bill de Blasio’s goal of constructing 80,000 affordable housing units over the next 10 years. Consultants would provide suggestions on how and where to implement mandatory inclusionary zoning, which neighborhoods the housing plan should focus on and which affordability targets are financially viable, Crain’s reported. Other duties include studying how requirements might change in future markets Vicki Been and how to update existing inclusionary housing programs. The request for proposals is one way that the administration is attempting to make affordable housing more appealing to developers, who are concerned that the efforts could hinder new construction.

City competes for 2016 Democratic convention The city is stepping up efforts to bring the 2016 Democratic National Convention to the Barclays Center. Senator Charles E. Schumer recently led convention officials on a two-day tour, which kicked off with a meal at the Brooklyn arena, The New York Times reported. The tour also included a water taxi ride past the Statue of Liber- Barclays Center ty and dining with Mayor Bill de Blasio and Broadway stars at the Metropolitan Museum of Art. The city faces fierce competition from Philadelphia in the convention bid, and a New York win would raise the Mayor’s national profile. Although the city has more than enough hotel space, political conventions exude greater influence in a swing state, and New York is a Democratic stronghold. However, Amy Dacey, chief executive of the Democratic National Committee, said the committee was “very serious” about Brooklyn.

Fire Island shore to get $68M in Sandy funds Governor Andrew Cuomo has allotted $68 million in state financing to restore Fire Island’s 19-mile shoreline. The shore between Fire Island Inlet and Moriches Inlet lost 4.5 million cubic yards of sand during SuperFire Island storm Sandy, which amounts to about 55 percent of its dune structure, according to the New York Daily News. The restoration is part of a $207 million coastal storm protection project in Suffolk County. Work is slated to begin this fall at Smith Point County Park in Mastic Beach.

Port Authority seeks developer for TWA terminal The Port Authority of New York and New Jersey is seeking a developer to convert John F. Kennedy airport’s landmarked TWA terminal into a hotel. The TWA Terminal Eero Saarinen–designed terminal, which opened in 1962, is considered a masterpiece of mid-century modernism. The PA wants a developer to convert the terminal within two years of being selected and anticipates a lease beginning on Jan. 1, Crain’s reported. The PA’s request for proposals said the developer should preserve the building’s famed historic attributes, and would require the conversion process and subsequent operations to be environmentally sustainable. The RFP follows the January collapse of a deal with hotelier André Balazs, after two years of negotiations. Compiled by Maya Kaufman

Real Estate

and

Politics

Doubling down on the ‘prince of darkness’ An eroded relationship with City Hall and a weak Republican challenger have prompted the industry to ramp up support for Cuomo

Gov. Andrew Cuomo has been consolidating his power and support, particularly among real estate players.

By Hiten Samtani hose who thought that Gov. Andrew Cuomo’s cozy relationship with the real estate industry would suffer because of the recent allegations that he overstepped in his dealings with an anti-corruption panel should think again. In late July, one day after the release of a damning news report that accused the governor of directing the Moreland Commission to stop investigating his real estate ties, some of the industry’s biggest names sent an unequivocal message of support. In a 24-hour period, they and other business leaders opened their checkbooks to the tune of $329,950 for his campaign — among the largest single-day hauls in this entire election cycle. Individuals tied to the real estate developer and investor Fisher Brothers shelled out $40,000 for Cuomo, while an entity sharing an address with Vornado Realty Trust gave $25,000, according to state campaign finance filings. Top brokers also ponied up — Cushman & Wakefield’s Bruce Mosler gave $10,000, while Newmark Grubb Knight Frank’s Brian Waterman and Mark Weiss each gave $5,000. Conventional political wisdom would suggest that even the hint of a scandal should have sent Cuomo’s supporters underground, at least for a while. But with Cuomo’s gargantuan lead over Republican challenger Rob Astorino (see related story on page 44) and with a lessthan-stellar relationship with Mayor Bill de Blasio, industry players have been doubling down on Cuomo. “Short of a major problem, Andrew will win by maybe 60 percent,” said billionaire businessman and real estate mogul John Catsimatidis, the chairman of oil, gas and real estate firm Red Apple Group and a big Cuomo supporter. While the industry considered former Mayor Michael Bloomberg a strong ally, its relationship with City Hall has since eroded. Though the Real Estate Board of New York, the industry’s main lobbying group, has publicly established a working relationship with de Blasio, individual developers and brokers regularly express concerns about the mayor’s policies. The mayor, for example, unsettled developers by mandating, rather than incentivizing, that they include affordable housing in projects that need zoning approvals. He’s also spoken out against providing tax breaks for corporations to relocate or stay in New York, making commercial landlords anxious.

“They’re still feeling de Blasio out,” said Warburg Realty’s Jason Haber, “but with the governor, they know who their dance partner is.” Cuomo, in fact, scored points with real estate players by extending the 421-a tax abatement bill that encourages affordable housing development, but also controversially benefited luxury projects such as Extell Development’s One57. De Blasio has publicly bashed making luxury developments eligible for the incentives. While Cuomo and de Blasio are both Democrats, like many mayors and governors before them, their relationship is lukewarm at best. Neither of their offices returned calls for comment. From the outset, Cuomo has capitalized on de Blasio’s lack of popularity with the real estate community. During the mayoral campaign, sources said, Cuomo used de Blasio’s stance against big business and real estate interests as leverage to strengthen his own relationships. During the primaries, when de Blasio promised voters a “reset” in the city’s relationship with developers, for example, Cuomo was meeting with many of these same developers to express his support. And a month after de Blasio’s primary-night victory speech in which he took a dig at Bill Rudin’s redevelopment of St. Vincent’s hospital, saying that he would change the dynamics of a market “in which luxury condos had replaced community hospitals,” Cuomo appointed Rudin to his Tax Relief Commission. “Certainly the rhetoric of the mayoral campaign gave the governor an opportunity to solidify his reputation with the business community as a centrist political player,” said Kathryn Wylde, president of the influential pro-business group Partnership for New York City. On Cuomo’s watch, the state, through programs such as Excelsior Jobs and Start-Up NY, has doled out financial incentives to attract new companies to New York and to dissuade existing businesses from fleeing to other states. Under Bloomberg, the city also provided large tax breaks for companies such as Fresh Direct. But de Blasio has said he would look to curb those breaks for wealthy corporations. “The state is the only player in that game right now,” Wylde said, referring to the practice of incentivizing corporations, which she noted boosts demand for office space and benefits commercial landlords.

One day after the release of a damning news report that accused the governor of directing an anti-corruption commission to stop investigating his real estate ties, Cuomo had one of the largest single-day campaign fundraising hauls in the entire election cycle.

40 September 2014 www.TheRealDeal.com

Real Estate

The sheriff of Albany Cuomo has consolidated power more effectively than any of his recent predecessors, sources said. Former Gov. Eliot Spitzer, for example, came into office guns blazing, but then notoriously failed to win over the state legislature — even before his infamous sex scandal abruptly ended his tenure. But Cuomo’s ability to line up political support isn’t solely attributed to his charm. Multiple real estate and political sources used the word “bully” to describe Cuomo’s negotiating style, echoing characterizations of Spitzer. “He really is a fascinating political character — Citizen Kane-worthy,” said one source, who claimed he’d been pressured into donating to Cuomo several times. “He’s a king and has his minions, and they serve him.” The perception of Cuomo as ruthless has been around since at least the 1980s, when he was working for his father’s gubernatorial campaign, and the press dubbed him the “prince of darkness” for his take-no-prisoners style. Last July, Cuomo established the Moreland Commission to help him clean up the pervasive corruption in Albany and “investigate whatever they believe needs to be investigated.” But in March, the governor abruptly disbanded the commission, saying its mission was complete. This July, however, the New York Times dropped a political news bomb when it reported on the results of its

and

Politics

merely offered advice and did not force the commission’s leaders to do anything, an account many of the commission’s members have backed. But U.S. Attorney for the Southern District of New York Preet Bharara, who is picking up the commission’s investigations and is also looking into Cuomo’s alleged interference, has warned the governor that pushing commission members to make statements of support for him could constitute obstruction of justice. Cuomo hired prominent white-collar criminal defense lawyer Elkan Abramowitz to defend his office in Bharara’s probe, according to news reports last month. The governor has said he will not comment on the commission because of the ongoing probe. Abramowitz did not respond to requests for comment. Though it’s anybody’s guess what Bharara’s investigation will turn up, voters seem unfazed so far. A Quinnipiac University poll released late last month showed that 56 percent of voters surveyed supported Cuomo, while 28 percent backed Astorino. Real estate titans, too, aren’t too concerned about Cuomo’s chances, and have backed him up with their immense wealth. Thanks in large part to them, Cuomo has about $35 million in his campaign war chest (see related story on page 42) compared with Astorino’s modest $2.4 million.

Connecting with Cuomo Steve Spinola and the real estate community have been among the governor’s biggest backers. The industry has also helped him fill his campaign war chest, which stood at $35 million as of July.

The governor is said to have a lukewarm relationship with Mayor Bill de Blasio. But the two need each other politically and are aligned on some big issues.

Blasio’s purview such as property taxes and crime, several brokers said, adding that confidence in the governor is high. Along with 421-a abatements and corporate tax incentives, de Blasio and Cuomo have been at odds on other real estate issues, too, including a long-debated and under-construction marine waste transfer station on the Upper East Side. The station is designed to reduce the amount of Manhattan’s trash hauled to other boroughs for processing — a move de Blasio emphatically supports, saying every borough should “handle its fair share of the waste we all create.” But Cuomo’s father, former New York Gov. Mario Cuomo, who lives in Sutton Place, recently joined the opposition to the station. If plans for the station fall through, it would be a boon to Leonard Litwin’s Glenwood Management, which has an empire of rental apartments in the neighborhood. Glenwood is by far the younger Cuomo’s greatest financial supporter, donating over $1 million to his campaign since 2011. To be sure, some of the mayor’s recent moves have gone over well with the industry. One of de Blasio’s signature issues, a blueprint to create 200,000 units of affordable housing, has received high marks. “The housing plan did not contain a lot of details,” one top executive at a major New York City–based developer said, “but overall it was an extremely bold statement that bucked the conventional wisdom that new development raises costs. The mayor is looking to build our way out of the affordability crisis, and that’s good for us.” Conversely, Cuomo, to secure the crucial support of the pro-labor Working Families Party, had to move somewhat to the left, Wylde said. He’s vowed, for example, to fight for Democratic control of the state senate and to push for an increase of the minimum wage. And de Blasio and Cuomo do depend on each other politically. In April, de Blasio and the governor stood sideby-side in Albany to announce state legislation providing tax relief to city homeowners impacted by Hurricane Sandy. “Now, [Cuomo and de Blasio] are working together in reinforcing each other in very public ways,” Wylde said.

A departing spin doctor U.S. Attorney for the Southern District of New York Preet Bharara is picking up an investigation into Cuomo’s alleged interference with an anti-corruption commission.

Kathryn Wylde, president of the Partnership for New York City, represents the NYC business leaders who Cuomo has aggressively courted.

Sources say Cuomo has done a better job of consolidating power in Albany than ex-governor Eliot Spitzer and his other predecessors.

three-month investigation, which found that Cuomo and his top aides routinely meddled with the commission’s work. Among other things, the Times said the governor helped ensure that a December report issued by the commission made no mention of REBNY’s political donations. A spokesperson for REBNY told The Real Deal only that the trade group “cooperated with the commission’s investigation at all times and responded to the commission’s requests for information.” Cuomo has defended himself, saying that his office

“Businessmen, we’re pragmatic,” said Jim Wacht, the president of commercial brokerage Lee & Associates NYC and a Cuomo supporter. “We want people who are effective at what they do. Every politician who is effective is an armtwister.”

Making frenemies The industry is, unsurprisingly, more worried about policies coming out of City Hall than the New York State Capitol. Real estate leaders are more focused on issues under de

In addition to the industry’s reset relationship with City Hall, it is also on the brink of losing REBNY president Steven Spinola, who is stepping down next year. For nearly three decades, Spinola has been the industry’s primary cheerleader and garnered serious influence and respect in Albany, including with Cuomo, sources said. Though he will still be involved with the organization as a consultant, his departure leaves a question mark for the industry. “Right now we have no idea who his successor is going to be,” said Wacht. “He or she will have very, very big shoes to fill.” But the vast sums of cash REBNY and its associates invest on the political scene — which according to goodgovernment group Common Cause New York has totaled more than $44 million in state and local races since 2005 — should help Spinola’s successor quickly find his footing with Cuomo. Singer-songwriter legend Billy Joel put it this way in a song he performed at a $50,000-a-head December fundraiser for Cuomo: “If you run for governor, don’t be too concerned. Find a bunch of millionaires with lots of cash to burn.” And if the Republicans lose control of the state senate, which real estate operators are ever fearful about, Cuomo will have even more sway. In that case, Wylde said, “the governor will be the only defense the real estate industry has.” TRD www.TheRealDeal.com September 2014 41

Real Estate

and

Politics

Follow the money

A breakdown of the campaign cash flowing into this year’s statewide elections

By Hiten Samtani ov. Andrew Cuomo has raked in $42.7 million from more than 5,000 donors this election cycle. That’s compared with the $2.6 million his GOP rival Rob Astorino, the Westchester County Executive, collected from roughly 2,200 donors. (They had $35 million and $2.4 million on

Cuomo’s top real estate donors Stephen Ross (Related Companies) $145,000

Marc Holliday (SL Green Realty) $104,843

Aby Rosen (RFR Realty) $104,175

hand, respectively, as of late July.) The figures, released by the nonprofit New York Public Interest Research Group, show Cuomo largely relied on big-ticket donors. In fact, less than 1 percent of his war chest came in contributions of less than $1,000, NYPIRG found. Real estate players have, not surprisingly, donated generously to Cuomo and their pet causes.

Bill Rudin (Rudin Management) $117,500

Martin Edelman (Fisher Brothers) $105,800

Gary Barnett (Extell Development) $200,000

Ric Clark (Brookfield Asset Management) $253,000

Leonard Litwin (Glenwood Management) $1 million

Peter Kalikow (H.J. Kalikow & Company) $150,000

Richard Lefrak (LeFrak Organization) $125,000

Source: Data from NYPIRG. Donations are from the governor’s 10 most generous NYC-based supporters from the real estate industry between December 2010 and mid-July 2014.

Cuomo’s total war chest, by size of donor:

Astorino’s total war chest, by size of donor: Un-itemized: 2.47%

Less than $1,000: 0.77% $1,000 or more: 6.01% $2,600 or more: 11.86% $40,000 or more: 49.28% $10,000 or more: 32.09%

Less than $1,000: 14.02%

$40,000 or more: 16.35%

Big donors make up lion’s share of candidates’ war chests For Cuomo, more than 49 percent of the total $35 million war chest he has amassed has come from donors who have given $40,000 or more. Meanwhile, a mere 0.77 percent of his total haul has been from donors who have given less than $1,000. The picture is not quite as stark for Astorino, but nearly half of his total war chest of $2.4 million has come from those giving $10,000 or more.

$1,000 or more: 17.70%

$10,000 or more: 28.57%

$2,600 or more: 20.90%

Source: NYPIRG tally of total donations.

Genting: $984,244

Jeff Gural and Holdings: $705,400

N.Y.Gaming Association: $553,115

Casino players make big bets

In the past two years, casino companies and players have spent more than $11 million statewide on lobbying and campaign donations, according to NYPIRG’s analysis. Here are the five entities that spent the most on political donations statewide between 2012 and 2013. Source: NYPIRG report on casino interests.

42 September 2014 www.TheRealDeal.com

Nevele: $427,404

Saratoga Harness Racing Inc.: $423,200

Real Estate

and

Politics

Cuomo’s thorny real estate roses A look at the tricky issues the governor will likely tangle with the industry on, if reelected

By Hiten Samtani eal estate players have come out in force to back Gov. Andrew Cuomo this election cycle. But there are some important and controversial real estate–related issues that the governor is expected to tackle in the very likely case that he is reelected. And, sources said, that in doing so, he will likely disappoint some of his key industry supporters. Cuomo, whose office did not respond to requests for comment, will also have to contend with the popularity of a key state figure — his successor as Attorney General, Eric Schneiderman — who’s not always in lockstep with him. Here’s a rundown of some of the thorniest industry issues on tap for the governor:

Casinos Cuomo didn’t leave the fate of New York City casinos to chance. Legislation he pushed through last year to legalize full-fledged casinos in the state for the first time also expressly prohibits new gaming venues in the five boroughs until at least 2019. The move was designed to give the proposed casinos upstate a chance to establish a strong customer base. This fall, the state gaming commission will dole out four new, highly coveted casino licenses in three regions. The state estimates that the new casinos will generate more than $400 million in revenue and help revitalize upstate’s lackluster economy. (Last year, the state collected $877 million from its nine racinos — racing tracks with video-lottery terminals.) But longtime gaming industry analyst Harold Vogel said that $400 million estimate is unrealistic, given that casinos in several states have seen a “flattening out in revenues.” Nevertheless, with at least 13 groups statewide vying for the licenses, Cuomo will be disappointing a slew of casino players. Major casino operators are aggressively pushing for the licenses, and spent more than $11 million in the past two years to influence state and local policymakers, according to the nonprofit New York Public

Interest Research Group. The biggest spender by far is the Malaysian company Genting Group, which is looking to build three upstate casinos. Genting — which developed the Resorts World Casino at Aqueduct Racetrack in Queens and has operated it since it opened in late 2011 — spent $2.5 million on lobbying fees and $984,000 on state and local political

Newmark Holdings’ Jeff Gural

contributions since 2012, according to NYPIRG. Meanwhile, Newmark Holdings’ Jeff Gural, who owns casinos through his firm American Racing and Entertainment, spent just over $75,000 on lobbying fees and $700,000 on political contributions in that same period, in his quest to expand his Tiago Downs racino in Nichols, New York, into a full gaming facility. Casino owners would have been banned from making direct political contributions if a proposed clause prohibiting them from doing so had made its way into the casino expansion legislation. But the clause was nixed at the 11th hour, much to the dismay of good-government groups. “The gambling deal is a boon for certain wealthy special interests and of dubious value to the public,” Susan Lerner, executive director of Common Cause New York, said in a statement on the organization’s website at the time. After the bill passed, Cuomo said there were “some things we couldn’t come to terms with.” But the negotiations were held in a closed session, and it’s unclear who pushed to remove the clause.

and advances in a special escrow account until they deliver a complete apartment to a buyer. The new regulation, according to the memo, is designed to prevent sponsors from using the down payments to pay for construction and to ensure the timely completion of development projects. The memo is one of a series of reforms coming from

Attorney General Eric Schneiderman

Schneiderman, who sources said is now ramping up his local real estate investigations, including against developers, landlords and brokerages.

But Schneiderman’s crusades could sour Cuomo’s relationship with real estate players, who are by far his biggest financial backers. “For the first time in almost three years, the AG’s office is actively pursuing cases and seeking justice for homeowners,” said real estate attorney Adam Leitman Bailey. Perhaps most notably, the office prosecuted a case against notorious Queens’ developer Tommy Huang last year. Huang was barred for five years from any involvement in real estate projects statewide. He was also fined $4.8 million after he pled guilty to securities fraud stemming from selling condos at a project in Elmhurst, despite a 1999 ban barring him from doing so. It’s not just developers that Schneiderman — who is also up for re-election — is targeting. Last month, three small New York City– based brokerages agreed to pay penalties and change their policies to settle an investigation by the AG. The firms, which were representing

rental buildings, admitted to ignoring applicants after learning that they would be using Section 8 housing vouchers to help pay the rent. Schneiderman is also ratcheting up enforcement against landlords who fail to file the city’s Real Property Income and Expense Report, which the city uses to determine a property’s market value for tax-assessment purposes. Some landlords such as Hilton Worldwide, which owns the Hilton New York Hotel, have paid fines in excess of $300,000, according to news reports. While he’s won praise in liberal circles, Schneiderman isn’t scoring points with the governor. He and Cuomo have clashed publicly several times since they took office, including early this year, when they disputed how to spend a $613 million settlement paid by JPMorgan Chase over its role in the 2008 mortgage crisis. Schneiderman wanted to use the

landlords in the lease-ups of their

Continued on page 140

SOLD I $18,400,000 by Ariel Property Advisors 34-year leasehold for newly constructed commercial building 840 Westchester Avenue, Bronx, NY

Our Approach I Investment Sales & Investment Research People and relationships are at the heart of every real estate transaction. We’re committed to providing clients with unmatched value by combining our relationship-driven investment sales operation with superior research and market knowledge.

Action from the AG Last month, the AG’s Real Estate Finance Bureau published a memo requiring condominium sponsors to hold deposits, down payments

arielpa.com | 212.544.9500

www.TheRealDeal.com September 2014 43

Real Estate

and

Politics

Astorino’s long-shot bid

Real estate bigwigs steer clear of Cuomo’s GOP rival By Mark Maurer estchester County Executive Rob Astorino accepted the state Republican Party’s nomination to challenge Gov. Andrew Cuomo in May. But despite his pro-business platform and push to cut property taxes, real estate insiders said Astorino’s campaign is still not on their radar. Elected to his current post in 2009, the 47-year-old Mount Pleasant resident was formerly a host and producer for the Catholic Channel on SiriusXM radio. He also was a co-founder of ESPN Radio in New York City. But the industry is, not surprisingly, hesitant to support a long-shot challenger to Cuomo. The concern, of course, is getting sent out to political pasture after the November election and seeing state support dry up for their projects in the all-but-inevitable event that Cuomo is reelected. Still, Astorino is billing himself as integral to improving the local economy and spurring real estate development — both statewide and in New York City. “There are pockets of rebirth in the outer boroughs, but it’s not spreading far and wide,” he told The Real Deal . His campaign is facing an uphill battle. Even after reports that Cuomo interfered with the state anti-corruption panel known as the Moreland Commission, a Siena College poll found that 58 percent of those surveyed supported Cuomo, while only 28 percent backed Astorino. Some say, however, that the ethics scandal is providing an opening, albeit a small one, for

Rob Astorino, the Westchester County Executive and GOP gubernatorial candidate

Astorino. “Astorino is keeping a spotlight on it,” said Republican strategist Leticia Remauro, a former chair of the Staten Island GOP Party. To date, the biggest real estate battle Astorino has picked is with the U.S. Department of Housing and Urban Development, refusing to use $5.2 million the agency allocated to help him fulfill a federal mandate to build 750 affordable units in more affluent Westchester areas by 2016. Astorino has argued against doing so. “[HUD is] of the preposterous position that the zoning laws need to be watered down or in some cases dismantled,” Astorino said. Holly Leicht, regional administrator at HUD, said the agency is “doing everything possible to provide funding to Westchester County.” “However, in order to be eligible for federal funds, the county must comply with the terms of the settlement to which it agreed more than five years ago,” she said. In terms of other real estate initiatives, Astorino formed the Local Development Corporation, which issues tax-free bonds on behalf of nonprofits. He said it’s spurred over $500 million in financing for capital projects. In addition, Astorino is targeting a handful of real estate-related state laws. He said he’d seek to reform the Scaffold Law, which holds landlords and contractors liable for “gravity-related” accidents in which they are at least partially to blame, and the Wicks Law, which requires separately bid contracts for some government-funded projects. He argues that the laws drive up the costs. “We’ve worked ... to nibble away at some of the onerous rules and regulations that make it difficult to do business,” Astorino said. Astorino said his core supporters on real estate issues are “average, everyday New Yorkers,” not the deep-pocketed donors backing his opponent. And his war chest was a tiny $2.4 million in July, compared to Cuomo’s $35 million, according to state filings. Astorino’s campaign does count a few real estate players as donors. His biggest donor was the Rent Stabilization Association’s PAC and Neighborhood Preservation Political Action Fund, which shelled out $82,000 for him, according to the New York Public Interest Research Group. “We share the same philosophical beliefs as Mr. Astorino,” said Joseph Strasburg, president of the RSA. “Mr. Astorino understands that small building owners collectively constitute an important economic engine.” Democratic strategist Hank Sheinkopf had a more skeptical take. “Nobody knows him and they don’t want to know him,” Sheinkopf said. Astorino, however, sees it differently. “A Republican governor is going to be very important as a check and balance on runaway taxes and spending and anti-business policies in City Hall,” he said. TRD 44 September 2014 www.TheRealDeal.com

www.TheRealDeal.com March 2010

“Engel & Völkers’ 540 international offices and innovative marketing and communication platforms allow us to provide our clients with direct access to the global marketplace.” Howard Morrel, Engel & Völkers NYC

We are very fortunate to welcome The Howard Morrel Team to Engel & Völkers NYC. With a track record over $1 billion in sales, Howard was recognized by The Wall Street Journal in 2014* as the #11 broker in New York City and #113 in the U.S. He has consistently ranked in the nation’s top 1% of all real estate professionals. Members of Howard’s team are fluent in Russian, Mandarin and Spanish. In every respect, the Howard Morrel Team is a perfect fit with our brand and ideally positioned to leverage our global capabilities, contacts and culture.

The Howard Morrel Team Engel & Völkers NYC 430 Park Avenue • 11th Floor • New York • NY 10022 +1 646-757-2515 HowardMorrelTeam@evusa.com * “The Thousand Top Real Estate Professionals,” published by REALTrends and The Wall Street Journal in 2104

HOWARD MORREL TEAM

©2014 Engel & Völkers. All rights reserved. Each brokerage independently owned and operated. Engel & Völkers and its independent License Partners are Equal Opportunity Employers and fully support the principles of the Fair Housing Act.

MorrelTeamFinal.indd 1

8/29/14 12:00 PM

Residential

Dissecting NYC’s luxury market A breakdown of the future of Manhattan’s high-end sales market, which is already showing some cracks Resistance to price jumps

Listing discounts deepen

Inventory overload ahead?

EB-5 VISA applications hit wall

art bubble FEARS TIE TO real estate TROUBLE

Investors get more cautious

46 September 2014 www.TheRealDeal.com

Residential

By E.B. Solomont ew York City’s luxury residential market has, for the last few years, been firing on all cylinders. But there may be cracks in the veneer. Top brokers said they’re seeing some skittishness and price sensitivity at the highest reaches of the city’s residential market. And frenetic building in certain pockets of the city (most notably the Midtown corridor and the neighborhood surrounding the High Line) has some brokers concerned that developers could overload the market with luxury condo projects. There’s no doubt, of course, that trophy apartments are still trading for astronomical

something to push the last inventory?” Luxury broker Leonard Steinberg, president of Urban Compass, said the biggest recent change is a scaling back from the frenzy that dominated the past 18 months. The market “is reverting from an insane market to a strong, steady market,” he said. Yet sources say if the luxury market starts softening, the rest of the market could follow. This month, The Real Deal analyzed a slew of metrics, ranging from bread-andbutter statistics like the number of luxury sales to more nuanced indicators, like the number of foreign investors applying for EB-5 visas, to dissect the underlying strength of the luxury market.

“Buyers are just acting more cautiously than they did in the spring. There’s less hurry.… I would think we’re going to be seeing more price drops come September.” Frederick Peters, Warburg Realty prices: This spring alone saw two $70 million record co-op sales. And during the second quarter, the average price per square foot among the top 10 percent of residential sales in Manhattan hit a new record of $2,735 — a 48 percent spike from five years ago. Nonetheless, several top brokers warned that if prices climb too high, buyers will revolt and the market will start to cool. Already, some said the sales volume at “older” luxury condos is considerably less active than it once was.

Resistance to price jumps As mentioned above, the average price per square foot in Manhattan’s luxury market — defined as the top 10 percent of sales — climbed to a record $2,735 during the second quarter, up more than 36 percent from $2,006 last year, according to real estate appraisal firm Miller Samuel. The average sales price, $7.25 million, and median sales price, $4.97 million, were also up year over year. Jonathan Miller, the president of Miller Samuel, attributed the increases to new

“I don’t think there’s anybody in the new development space that doesn’t have some concerns about a few years down the road in terms of having too much product.” Jonathan Miller, Miller Samuel

“It’s plateaued,” said Douglas Elliman broker Patti LaRocca, who added that even some under-construction buildings are feeling the reverberations. Macklowe Properties outsourced sales this spring at 432 Park (to Douglas Elliman) and 737 Park (to Corcoran Sunshine), a move sources said occurs when a developer is looking to accelerate sales. In addition, top brokers said there’s less hysteria at Extell Development’s One57, where 25 percent of the 94 units in the building are still unsold, roughly the same availability as a year ago. “It’s going to be interesting,” said top Elliman broker Jacky Teplitzky, speculating about One57. “Will [Extell] have to do

developments hitting the market, and predicted prices would keep climbing, because new condos tend to be larger and pricier. This spring, the average size of a new development condo was 3,737 square feet, up nearly 22 percent from the same time last year, he said. Top brokers cautioned that developers might encounter price resistance if apartments continue getting bigger. Steinberg said some developers are actually building smaller units to make them more affordable, even for high-end buyers. For example, he said, Rudin Management is building three-bedroom apartments measuring 2,300 square feet at Greenwich

737 Park Avenue, which hired an outside brokerage to handle sales.

Lane, versus a more typical 2,500 or 2,600 square feet. Notably, while luxury sales have increased in the last year compared to the previous three years, sales of fourbedroom apartments have dropped. In the second quarter, 82 fourbedroom apartments sold, down from 104 in the first quarter, according to Miller Samuel. “Everyone is focused on dollars per square foot,” Steinberg said. “The developer has paid so much for the land per foot, [but] you have to be able to make the apartments still affordable.… The only way to do it, if you need three or four bedrooms, is to shrink the proportions.”

Growing price gap between new condos and resales While prices for new development condos have always been higher than resales, the gap is now widening. The median sales price for resales — some 91 percent of the luxury market — was $4.49 million in the second quarter, up 17 percent from $3.85 million last year. But that didn’t keep pace with median prices in the luxury new development market, which hit $17 million, a stunning 169.5 percent jump during the same time period. Sources expressed some concern about how the widening gap is exacerbating an imbalance in the market. In addition, the fact that so much of the new inventory coming online is geared toward über-wealthy buyers is undoubtedly going to push more people out of the city, Miller said. “One of the glaring challenges facing New York City is affordable housing, and

56 Leonard Street is just one of a slew of luxury condos now competing for buyers.

by affordable I don’t just mean subsidized,” Miller said. “Middle class housing is really a challenge.”

Dip in number of luxury contracts signed During the first half of the year, the number of contracts signed for properties costing $4 million or more dropped by nearly 8 percent compared with the first six months of 2013, according to data compiled by luxury residential brokerage Olshan Realty. Firm owner Donna Olshan attributed the dip to tight inventory. For the first half of 2014, Olshan reported 701 contracts signed for $4-million-andup properties, compared with 759 at this time last year. “When everyone talks about the market, they talk about the strength and excitement going on, but we are seeing less deals done,” said Kelly Kennedy Mack, president of Corcoran Sunshine Marketing Group, whose data from the second quarter showed a 15 percent drop in signed contracts, compared with a year ago. According to Mack, the dip reflects a lack of units priced at $5 million or less, a byproduct of skyrocketing land prices that have forced developers to build ultraluxury properties and compete for the same high-end buyers. In addition, Olshan’s stats show the number of contracts signed on trophy apartments, priced at $10 million and up, was relatively flat during the first half of the year. Even though trophy sales are a market unto themselves, she said, they do impact the rest of the landscape. “It stimulates brokers to try and get a listing of a unique property and try to replicate it,” she said.

Luxury inventory overload Despite the overall inventory crunch, the number of luxury properties on the market is starting to rise. During the second quarter, there were 1,393 units for sale in the top 10 percent of the market, up more than 20 percent from a year ago, according to Miller Samuel.

www.TheRealDeal.com September 2014 47

Residential Miller attributed the uptick to new developments hitting the market in more force in recent months, and he predicted inventory would keep edging higher. “The luxury market is easing or pulling back from a frenzied state a little sooner,” he said. Data from Corcoran Sunshine show a massive number of new units are set to hit the market in the coming months. Mack projected 2,500 new development units would come online by the end of the year, and that 6,000 would hit the market in 2015. That’s still a far cry from the 8,000 new development units launched in 2007, but it’s a 151 percent increase from 2013. Mack said the average asking price for all new development units rose 38 percent from last year’s second quarter, to an “astounding” $7.5 million. “It’s a larger, more glam unit,” she said, but added that “as much as the demand still exists in those categories, the higher up the chain, the buying pool gets smaller.” Others have expressed concern that an influx of new condos could oversaturate the market. Olshan said the market for properties priced at $10 million and up is “the most worrisome.” “It’s a concern about how many units are on the market now and how many will be, with the upcoming product in the Midtown corridor,” she said. Miller put it this way: “I don’t think there’s anybody in the new development space that doesn’t have some concerns about a few years down the road, in terms of having too much product.”

Taking longer to sell high-end apartments While the public perception is that New York City apartments are selling fast, it’s now taking longer to sell high-end residential properties. The luxury absorption rate — defined by Miller Samuel as the time it would take for all existing inventory to sell out — was 12.5 months during the first and second quarters. That’s significantly higher than the 8.7 months and 10.8 months posted in the final two quarters of last year, respectively. The absorption rate had mostly been dropping for the last two years. Frederick Peters, president of Warburg Realty, said he seen “something of a slowdown” in the $5 million to $15 million market. “Buyers are just acting more cautiously than they did in the spring,” he said. “There’s less hurry.… I would think we’re going to be seeing more price drops come September.” Urban Compass’ Steinberg corroborated that trend, saying his sales transaction volume slowed this summer, even though property showings have been strong. “People feel they have more time,” he said. “They don’t feel as pressured to commit. They want to see it all before they decide.” Mack said demand is still high, but new development, in particular, has given

48 September 2014 www.TheRealDeal.com

The Witkoff Group’s 150 Charles Street in the West Village, which started early in the cycle and has wrapped up sales.

buyers more options. “When buildings like 150 Charles and 56 Leonard were introduced, they were the only high-end luxury buildings Downtown,” she said. Today, there are more choices, and even more on the horizon. “You’re seeing those purchases allocated among a greater pool of buildings, so you’re

Greenwich Lane, where Rudin Management is building smaller-than-typical three-bedrooms.

mid-2009, it’s up from the tiny .9 percent discounts logged during the first three months of this year. Kirk Henckels, vice chairman at residential brokerage Stribling & Associates, reiterated what others told TRD: That buyers in the $5 million to $15 million resale market have been increasingly price sensitive. He said he’s seen the trend since

“People feel they have more time. They don’t feel as pressured to commit. They want to see it all before they decide.” Leonard Steinberg, Urban Compass

seeing absorption regularize,” she said.

Listing discounts deepen Buyers searching for luxury apartments were no doubt happy to discover that there were deeper discounts to be had off listing prices in the second quarter. Listing discounts, or the difference between the listing and closing prices, hit 3.7 percent, on average, in the second quarter, according to Miller Samuel.

late April. “The whole resale market just kind of changed,” he said. He cited a mint-condition co-op on Park Avenue in the 70s, priced at $9.5 million, that’s had just five showings since Easter. “I’ve never actually seen that happen before,” he said, referring to the slow foot traffic. Elliman broker Frances Katzen also

“When everyone talks about the market, they talk about the strength and excitement going on, but we are seeing less deals done.” Kelly Kennedy Mack, Corcoran Sunshine Marketing Group That means that a unit listed for, say, $5 million, would end up selling for $4.8 million. While that discount is far lower than the 8.6 percent discounts that the market was seeing in the wake of the recession in

said the majority of discounted properties were resales, as sellers in that segment of the market are trying to compete with the influx of new projects that developers are building. “It’s a function of not as much demand,

and a little more supply,” she said.

Investors getting more cautious

Luxury real estate in New York City has outperformed the S&P 500 over the past decade, with a 6.5 percent compound annual growth rate, compared with 5.6 percent growth for the stock market index. The prices of oil and gold, however, both blew by real estate, with a 10.8 percent and 12.8 percent growth rate, respectively. Those higher oil-and-gold growth rates offer an attractive alternative to investors contemplating where to put their cash. In addition, some brokers are noticing that existing real estate investors in New York are becoming slightly more cautious. Elliman’s Teplitzky said some investors who have $10 million to $15 million to spend in New York are now choosing to buy two or three smaller apartments, instead of one larger one. The runs counter to the recent past, when many investors were brazenly writing massive checks for large apartments. “If you’re coming in as an investor to park the money,” she said, you “don’t want to park the money and gamble it on one apartment.” However, according to data compiled by online real estate listings company CityRealty, the priciest Manhattan condos are still proving to be good investments. For example, the average price per square foot at 15 Central Park West was $6,288 in 2014 — up from $5,203 in 2013. Continued on page 140

Ian Schrager’s NYC return

After a Manhattan break, the boutique hotelier is back with five projects By Mark Maurer an Schrager, who is regularly credited with pioneering the boutique hotel concept, is on something of a New York real estate tear. Schrager has a string of Manhattan projects in the works after a seven-year New York City development hiatus. It’s not that he’s been sitting idle. Schrager was busy launching two hotel brands: Edition, a partnership with Marriott International, and the mid-priced chain Public. Public debuted in Chicago, while Edition launched in Istanbul and London, and is scheduled to open in Miami Beach in November. Over the next three years, Marriott also plans to open Editions in China, Thailand, India, the United Arab Emirates and Los Angeles. Now Schrager, 68, is bringing four hotels (two under each brand) to Manhattan, as well as a 12-story West Village condo to market. Schrager’s last project in the city was the swanky Herzog & de Meuron–designed 40 Bond, an 11-story Noho condo, which he developed with Aby Rosen. He also developed the 23-unit cond-op component of the Gramercy Park Hotel in 2005. But sources say his style has since evolved and that his new projects are going to make waves in the industry. “I think he’s going to shock everybody when he brings these two brands to New York,” said hotel investor Steven Kamali, a former owner of the trendy Surf Lodge in Montauk. “People haven’t figured out his potion, and in gateway cities, his name still carries tremendous cachet.”

working on the Times Square Edition, told The Real Deal that Schrager pushes his ideas hard. “It means you, as a designer, need to keep your mind open, but also push back sometimes to maintain the direction,” Yabu said in a statement. “He appreciates that, because that back-and-forth ultimately leads to the best result.”

John Fox, who recently retired from the hotel research firm PKF Consulting. “The hotels’ bars and restaurants drew a lot of publicity.” Fox said Schrager — who left the Morgans Hotel Group in 2005 to establish an eponymous hotel and real estate development firm — has now “evolved away from hipness to a more thoughtful design of the room and sensitivity toward pricing.”

Hotels — which owns several mid-priced Midtown hotels — said Edition retains the dark-toned interior ambiance of Schrager’s earlier projects, but addresses some of their flaws. The Hudson Hotel and the Paramount Hotel, for example, were known for their small rooms. But Schrager has enlarged the rooms this time around. Sean Hennessey, CEO of hospitality con-

Boutique hotel pioneer Ian Schrager. Right, a rendering of 357 West Street, an 88-unit condo project Schrager is developing with the Witkoff Group and Howard Lorber’s Vector Group.

Project specs Schrager’s Manhattan Public hotels will be located at 215 Chrystie Street on the Lower East Side, and at a yet-to-be-revealed Far West Side site. His Edition hotels are planned for the landmarked Madison Square Park Clock Tower building and Times Square and are set to open in 2015 and 2017, respectively. While the details of all of the projects have not yet been released, the 25-story Chrystie Street Public will reportedly include 11 condos on the upper floors. Douglas Elliman Development Marketing is handling sales at the project, which is being developed with the Witkoff Group. Real estate website Curbed reported that prices there could hover around $4,000 a square foot. Schrager declined to comment. And his condo project at 357 West Street, which is also being developed with Witkoff as well as Howard Lorber’s Vector Group, will have 88 units. Pricing is not yet available. Schrager has tapped Herzog & de Meuron again for both projects. George Yabu, whose New York–based design firm Yabu Pushelberg handled interiors for two of the previous Edition hotels and is 50 September 2014 www.TheRealDeal.com

A rendering of Schrager’s planned Public hotel at 215 Chrystie Street. Right, a detail of the building.

“I think he’s going to shock everybody when he brings these two brands to New York.” Steven Kamali, Steven Kamali Hospitality

Schrager’s evolution Schrager, of course, first made a splash as co-creator of Studio 54 in the late 1970s. He then launched a series of successful hotels, co-founding Morgans Hotel Group in 1984. The hotels — Morgans, the Royalton Hotel, the Paramount Hotel and the Hudson Hotel — delivered an as-of-then-unheardof level of boutique luxury and cemented Schrager’s status as a hotel innovator. “In the Morgans days, the hotels he developed were very much socially prominent,” said

The move appears to have been well timed. “The millennials, and Generations X and Y, care less about traditional luxury than form, function and value,” said Eric Lewis, executive managing director of hospitality and gaming at Cushman & Wakefield, who handled valuations for Schrager on several of his Morgans-era New York City hotels. Public, a pet project for Schrager, undoubtedly emphasizes value over luxury. Edition, on the other hand, is more luxury-focused. Vijay Dandapani, president of Apple Core

sulting firm Lodging Advisors, said staffers at Schrager hotels have told him that Schrager attends every quarterly operations meeting. “He is underappreciated as an operator and finance person, and diligent in making sure the hotel is well-run,” Hennessey noted. Other NYC hoteliers praised him as well. Morris Moinian, founder of the development firm Fortuna Realty Group, said Schrager’s work has inspired him on “how to be an all-in-one: a designer, financier and developer.” TRD www.TheRealDeal.com January 2014 35

TheRealDeal_Final.indd 1

12/24/13 11:22 AM

Artist renderings

57 beautifully designed condominiums Exceptional building amenities 1 â&#x20AC;&#x201C; 3 bedrooms & penthouse, arranged over 20 stories Panoramic views across Manhattan

234e23.com Sales gallery 346 Park Avenue South, 4th Floor 212 234 2330 info@234e23.com

All images are artist renderings. Sponsor reserves the right to make changes in accordance with the terms of the offering plan. This is not an offering. 234 â&#x20AC;&#x201C; 238 E 23rd Property Owner LLC c/o Naftali Group LLC, 1700 Broadway, 16th Floor, New York, NY 10019.The complete offering terms are in an offering plan available from sponsor. File CD13 - 0313.

234 TRD 21inx14.5in.indd 1

29/08/2014 10:58

Artist renderings

57 beautifully designed condominiums Exceptional building amenities 1 â&#x20AC;&#x201C; 3 bedrooms & penthouse, arranged over 20 stories Panoramic views across Manhattan

234e23.com Sales gallery 346 Park Avenue South, 4th Floor 212 234 2330 info@234e23.com

234 TRD 21inx14.5in.indd 1

29/08/2014 10:58

Residential

2014

RECORDS ...so far. A roundup of NYC’s new residential benchmarks to beat before the calendar hits 2015

By Christopher Cameron his year may not be over yet, but the real estate records are already piling up. The year kicked off with city office asking rents hitting their highest point since 2008 — $61.75 per square foot on average. And by April, Manhattan residential rents reached a median price of $3,247 per month, their highest since 2009, according to a Douglas Elliman report. In addition, at the start of 2014, veteran commercial broker Robert Knakal predicted

that the sales volume for all New York City properties would reach a record $63 billion in 2014; that would be a 68 percent increase from 2013. Meanwhile, listings and sales for homes in Manhattan and Brooklyn seem to be breaking records faster than brokers can bring them to market. In fact, since January, more than a dozen outright records have been set across the five boroughs. Though there will undoubtedly be more set before the year is out, this month, The Real Deal rounded up this year’s to-date residential records. Check them out below.

Priciest listing for Downtown condo

Priciest Downtown residential sale

The Ritz Carlton (10 West Street)

he highly anticipated Woolworth Building penthouse attracted quite a bit of attention when it hit the market asking $110 million in June — at the time, it was the most ever asked for a residential condo Downtown. But just a few weeks later, three penthouses of the Ritz Carlton in Battery Park smashed that record when they were listed as a single combination unit for $118.5 million. Located at 10 West Street, the Ritz Carlton penthouse, which was listed by Nest Seekers International broker and “Million Dollar Listing New York” star Ryan Serhant, is now the priciest Manhattan unit on the market. (A 16-room penthouse at the Pierre Hotel, which had been on the market for $125 million, saw a price chop to $95 million; while a 62,000-square-foot, $130 million unit at the Residence at River House on East 52nd Street was pulled from the market earlier this year after the nonprofit River Club of New York struck a deal with the co-op board for an undisclosed price.) At roughly 15,500 square feet, the full-floor duplex at the Ritz is also the largest condo on the market in Manhattan. Its massive size means that its price per square foot is only $7,677, according to Serhant, who said that the $110 million Woolworth unit clocks in close to $12,000 per square foot. “I haven’t been focusing on setting records,” Serhant maintained. “I am just focusing on selling it. I don’t focus on that kind of stuff.”

Walker Tower (212 West 18th Street)

n January, JDS Development Group and PMG sold a unit at Walker Tower, the one-time Verizon Building that the partnership converted into luxury condos, for $50.9 million — the most ever paid for a Downtown residential property, according to both city records and Elliman listing broker Vickey Barron. The 5,955-square-foot, five-bedroom apartment, which was dubbed Penthouse One, was listed in September with a $55 million price tag. Neil Moffitt — the CEO of the high-end Cantonese restaurant chain Hakkasan, as well as head of Angel Management Group, a music venue manager — is reportedly the buyer. Until the Walker Tower deal, the priciest Downtown residential sale was held by the Zeckendorfs’ 18 Gramercy Park South, where Leslie Alexander, the owner of the Houston Rockets, bought a penthouse for $42 million last year.

Priciest co-op sale (tie) 960 Fifth Avenue and 740 Park Avenue

A three-apartment combo unit on the market for $118.5 million at the Ritz Carlton in Battery Park is Manhattan’s priciest listing.

A penthouse at 960 Fifth Avenue that sold for $70 million is tied for the priciest co-op sale. Egyptian billionaire Nassef Sawiris, who bought the co-op at 960 Fifth Avenue.

n June, two Manhattan apartment sales tied to set a new, $70 million record for New York’s most expensive co-ops ever sold. The first was purchased by Egyptian billionaire Nassef Sawiris, who bought the penthouse co-op at 960 Fifth Avenue, which was listed for $65 million. The 12th-floor unit, which reportedly needed a gut renovation at the time of the sale, was owned by the family of the late billionaire businessman and philanthropist Edgar Bronfman. It includes five bedrooms, eight bathrooms, and a wrap-around terrace with views of Central Park from its 77th Street perch. Later that same month, another $70 million deal tied that at 740 Park Avenue, where the official residence of the French ambassador to the United Nations was sold to Israel Englander, founder of the hedge fund Millennium. Englander purchased the 18room duplex co-op in June as a pied-à-terre for his children when they visit New York. According to published reports, the most expensive co-op buy until then was the $52.5 million purchase of another duplex unit at 740 Park by Howard Marks, the head of global investment management firm Oaktree Capital Management. Marks went into contract on that unit — which was owned by Courtney Sale Ross, the wife of former Time Warner chairman Steve Ross — just a month before in May.

56 May 2013 www.TheRealDeal.com

www.TheRealDeal.com September 2014 55

Residential The 11,747-square-foot, 12-bedroom penthouse spans four full floors. Work is expected to wrap up on the building, which is being developed by Bluerock Real Estate and Victor Homes, by the start of the 2015’s second quarter. “The boundaries are being pushed eastward,” said Jason Karadus of Town Residential, who is co-listing the unit. “Preconceived ideas about what areas are acceptable start to fall apart when inventory is tight. It isn’t a coincidence that more luxury properties and retail are beginning to open along First Avenue.”

Priciest rental deal

A co-op at 740 Park Avenue that sold for $70 million is tied for the priciest co-op sale. Hedge-funder Israel Englander, who bought the co-op at 740 Park.

New York Palace Hotel (455 Madison Avenue)

n late 2013, the New York Palace Hotel wrapped up a $140 million renovation, adding four penthouse rental units to its 26 residences. Then in March, the hotel tapped Brown Harris Stevens’ Margaret Bay to market the units, two of which have rented for $250,000 a month — the most ever paid for a New York City rental, according to Bay. (Bay is also the agent of the

Priciest Upper Manhattan rental listings

1080 Amsterdam Avenue and 237 West 139th Street

fully furnished 4,000-square-foot townhouse at 237 West 139th Street hit the market last month asking $12,000 a month. The Stanford White–designed property is now the priciest rental listing in Upper Manhattan, sources say. “This is the kind of special historic property that rarely hits the market as a rental,” said listing broker Jane Forman of Sotheby’s International Realty. “There is some flexAn apartment at 1080 Amsterdam Avenue asking $10,500 a month was, until last month, Upper Manhattan’s priciest rental listing. Two New York Palace Hotel units that rented for $250,000 a month are the priciest rentals in the city.

ibility on the price, but I fully expect to rent it in excess of $10,000 in the near future.” The townhouse unseated a penthouse apartment listed by developers Stonehenge Partners and SL Green Realty in July, which is asking $10,500 a month. That full-floor, two-bedroom unit — located in a building that once served as housing for staffers at St. Luke’s Hospital at the corner of West 113th Street across from Columbia University — includes a wraparound terrace with views of the iconic Cathedral of St. John the Divine. The 95-unit building was designed by Steven Kratchman Architects. By comparison, the average rent in the neighborhood was $2,442 in July — which is far below the Manhattan-wide average of $3,873.

previous record holder, a $135,000-a-month rental at the Waldorf Astoria, which is currently being marketed for the same price.) Known as the Champagne suite and the Jewel suite, both New York Palace units found month-to-month takers at their asking rents, Bay told TRD. The first suite features Dom Pérignon–themed interior design; the second has $1.5 million worth of Martin Katz–designed jewels on display. “The Waldorf was always popular with dignitaries, wealthy executives and politicians, but the New York Palace is attracting more celebrities and rock-star types,” Bay said.

Priciest sale for Harlem historic district 221 West 138th Street

Priciest sale east of Third Avenue The Charles (1355 First Avenue) A unit at the Charles at 1355 First Avenue that’s in contract for $37.94 million is the priciest sale east of Third Avenue.

This townhouse at 221 West 138th Street sold for $2.9 million, the priciest sale in the Harlem historic district known as Striver’s Row.

H T

his spring, the penthouse at the Charles, a glass-and-limestone condo building on First Avenue and East 73rd Street, went into contract for $37.94 million — more than double the previous sales record set east of Third Avenue on the Upper East Side, according to the New York Times.

64 56 September 2014 www.TheRealDeal.com March 2012 www.TheRealDeal.com

arlem’s St. Nicholas Historic District, a three-block area also known as Striver’s Row, may not have eye-popping prices, but homes there are still breaking records. This summer, a landmarked limestone townhouse there did just that, when it sold for $2.9 million. The three-story, 3,900-square-foot property — which is called the Will Marion Cook House and is divided into two units — sold in July. Ron Ferdinand of Kensington Hewes, and Jonathan Cifuentes and Leslie French of East Egg Realty had the listing. “People now realize the value of property in Harlem and the long-term potential of the neighborhood,” Cifuentes said. “I certainly see more record prices to come.”

Residential The previous record on Striver’s Row was held by a townhouse at 237 West 139th Street that sold for $2.4 million, more than three times the neighborhood’s current median sales price of $730,000, according to real estate website Trulia.

Tallest residential building 432 Park Avenue

rooklyn’s median residential sales price reached a record $575,000 in the second quarter, according to an Elliman report. That is not only a 4.5 percent jump from 2013’s second quarter, it’s also 6.5 percent higher than the pre-recession high of $540,000, set back in 2007. “Brooklyn is the only borough to post a median sales price higher than the pre-Lehman peak as it undergoes a radical shift to higher-end property and morphs into a newly popular gateway for new residents of New York City,” said Miller, who prepares Elliman’s market report. The borough’s average sales price also jumped 16.6 percent to $783,296 in the second quarter year-over-year. Meanwhile, both the average and the median sales prices in the borough’s luxury market — the priciest 10 percent of sales — have reached peak levels, according to Miller. And other records are being set regularly in the borough. For example, the penthouse condo at One Brooklyn Bridge Park hit the market in May asking $32 million, topping the previous record for the borough’s priciest listing by $2 million.

Priciest Bed-Stuy, Prospect-Lefferts Gardens and Crown Heights sales In June, 432 Park Avenue became the tallest residential building in the city. Harry Macklowe, along with the CIM Group, is developing the condo tower.

n June, 432 Park Avenue, the über-luxury condo tower being built by the CIM Group and Harry Macklowe, reached the 1,054-foot mark, officially surpassing Extell Development’s 1,005-foot One57. The construction milestone also meant that it became New York City’s tallest residential building. When it’s completed next year, 432 Park should rise 1,397 feet, making it the tallest residential building in the Western Hemisphere. But even that superlative will likely be short-lived. Just blocks away, at the corner of Broadway, Extell is developing another West 57th Street residential super-tower (dubbed the Nordstrom Tower) that is planned for 1,775 feet. Meanwhile, in July, Larry Silverstein unveiled plans for a development at 520 West 41st Street in the Hudson Yards neighborhood that would also rank as one of the largest residential buildings in Manhattan. It’s expected to rise 106 floors and stand 1,100 feet tall. That proposed project calls for more than 1.1 million square feet of residential space, but is still waiting on zoning approvals.

Highest price per square foot in FiDi W New York Downtown (123 Washington Street) n July, two penthouse condos at the Moinian Group’s Residences at the W New York Downtown, which launched sales in 2012, set a price-per-square-foot sales record for the Financial District, according to Jonathan Miller, head of appraisal firm Miller Samuel. A single buyer bought unit 55A, a 799-square-foot one-bedroom, for $1.99 million, or $2,491 per square foot, and unit 55B, a 1,175-square-foot two-bedroom, for $3 million, or $2,562 per square foot. Both penthouses were sponsor units.

Highest median sale price and priciest Brooklyn listing

22 Arlington Place, 96 Quincy Street, 36 Rutland Road and 1234 Dean Street

rices are soaring in the rapidly gentrifying central Brooklyn neighborhood of Bed-Stuy, which has seen a bevy of record-breaking sales since March. Nine of Bed-Stuy’s top 15 residential sales for the past five years — which range in price from $1.5 million to $2.2 million — are from 2014, according to data from real

Crown Heights’ 1234 Dean Street (pictured), Bed-Stuy’s 22 Arlington Place and Prospect-Lefferts Gardens’ 36 Rutland Road all set sales records in their respective neighborhoods.

estate research firm PropertyShark. Currently two Bed-Stuy brownstones share the neighborhood’s $2.25 million sales record: one at 22 Arlington Place, another at 96 Quincy Street. And other once-far-flung Brooklyn neighborhoods are setting records, too. In January, a Prospect-Lefferts Gardens brownstone at 36 Rutland Road sold to Dixon Advisory, an Australian financial services firm, for $1.85 million — a record for a single-family home in the neighborhood. The previous record in Prospect-Lefferts Gardens was set in 2007 by 52 Midwood Street, which sold for $1.67 million. Meanwhile, in Crown Heights, a brownstone at 1234 Dean Street set a neighborhood record for a single-family sale in March when it closed for $1.85 million.

Priciest Queens condo and priciest rental

One Brooklyn Bridge Park

The View (4630 Center Boulevard) and the Roosevelt (40-07 73rd Street)

f you haven’t already heard, Queens is in the midst of its own real estate renaissance, especially in Long Island City, where thousands of new units are being built. Already hundreds of new luxury waterfront apartments have hit the market there, prompting impressive sales. In May, a condo at the View in Long Island City set a Queens record, selling for $3.35 million, beating the $3.04 million record set in 2008 by a unit in the nearby Aris Lofts. A Colombian buyer reportedly paid all cash for the three-bedroom unit in TF Cornerstone’s 17-story building, which launched sales in 2008. The apartment was a resale, not a sponsor unit. Meanwhile, a rental unit in Jackson Heights was snapped up in June for $4,100 a month, setting a new record for that neighborhood, according to Brooklyn real estate A One Brooklyn Bridge Park unit asking $32 million broke the record for the borough’s priciest listing.

Continued on page 138

www.TheRealDeal.com September 2014 57

TOP NOTCH SECURITY

With condo surge, few developers see value in Plan B

Fallback arrangements to turn condo projects into rentals are increasingly rare amid hot market By Mark Maurer he long hot streak for the New York City luxury condominium market has developers rethinking traditional ways of doing business. One dramatic shift: Builders are increasingly plowing ahead with condo projects without putting together a fallback plan to turn a property into a rental. In fact, new development marketers, analysts and other real estate experts said a Plan B is extremely scarce at this stage of the cycle. Developers are more willing to take a risk when they think the market is stable, they said. “That’s the nature of developers,” Andrew Gerringer, managing director at the Marketing Directors, told The Real Deal. “You don’t go into this thinking you’re going to fail.”

T Our family is in the business of keeping your family safe. We have over 25 years of experience in alarm systems, fire alarms, security cameras, locksmith, keys, intercom/buzzer systems, security alarm systems and doors and gates.

A backup plan to go rental with a project would need to generate enough cash to cover what was initially borrowed for the project. The formula for determining whether a building would be viable as a rental depends on a number of factors, with underlying land development and construction costs topping the list. The strength of the submarket the building is in is also important, as is the size of the developer, the financial standing of the lender and how much each apartment can rake in. If a developer fails to hit a particular number of sales, “there’s nothing to do other than wait,” Miller said. He said price concessions were prevalent during the last cycle, but he has not heard of it occurring much recently.

Showroom: 8-12 Ave B, New York, NY 10009 (646) 781-7070 • www.topnotch-security.com

We know the deal. We’ve got you covered.

Insurance JAY M. PERSI

VICE PRESIDENT JAY@COUGHLINGROUP.COM

THOMAS P. COUGHLIN

PRESIDENT TOM@COUGHLINGROUP.COM

Condos/Co-Ops/Apartments/Renters • New Developments • Homes Valuables • Liability • Autos • Life & Health • Business/Commercial OFFICES IN NYC, WESTCHESTER AND CALIFORNIA

(212) 593-0200 52 West 22nd St., NYC 10010 www.coughlingroup.com PROUDLY REPRESENTING

CHUBB, TRAVELERS, HARTFORD, ACE, PURE, CNA, CHARTIS, PHILADELPHIA, AND OTHER FINE COMPANIES

Coughlin Group received Chubb's 2013 Elite Cornerstone Agency Designation Recognized as one of Chubb's Top-Performing Agencies Nationwide. 58 September 2014 www.TheRealDeal.com

From left: Stephen Kliegerman, Nancy Packes and 64 Bayard Street.

This is in marked contrast to five years ago, when many developers opted to scrap condo plans and seek renters for units instead. And before that — prior to the housing crisis — banks routinely underwrote exit strategies for condo projects that sought a switch to rentals. That practice has disappeared, said Nancy Packes, president of real estate marketing firm Nancy Packes Inc. The meteoric rise in condo prices isn’t the only reason developers are casting backup plans aside. The cost of land is also much higher than it was in 2008. Case in point: earlier this year, Harry Macklowe paid $100 million for a 90,000-buildablesquare-foot development site at East 59th Street and Third Avenue. “Since the current Manhattan development math largely only works as condo, I’m not sure how a plan B would be possible in this period,” said Jonathan Miller of appraisal firm Miller Samuel. “With the going-in land cost at record levels, a condo project is generally not feasible as a rental or a hotel.” Miller said the holding period is longer because of lower-cost financing, and investors are quick to work with experienced developers. These factors have solidified the trend, he said.

Stephen Kliegerman, president of Halstead Property Development Marketing, said most developers look at the potential for a fallback, but many backup rental plans simply don’t work, given the new calculus of the New York real estate market. During the economic downturn, Kliegerman said some of his clients slowed down a project while it was under construction or scaled back the size of a condo building, rather than changing direction. Of course, some developers still see value in a fallback plan. Witold Brend of Brend Development Corp. decided last year to construct a 53unit, six-story rental property at 64 Bayard Street in Williamsburg. The initial plan devised in 2010, Kliegerman noted, was to build condos. Brend changed his tack not out of necessity, but because the available financing favored going the rental route, Kliegerman explained. If the property market takes a header, condo developers might have a struggle with lenders to hold on to their projects. “The out-of-pocket money the developers and their equity partners would have to contribute until they can sell could be substantial, based on the amount of rent they receive, versus the carrying of common charges and taxes,” Gerringer said. TRD www.TheRealDeal.com March 2010

Relationship Driven. Execution Focused. Only Meridian Capital Groupâ&#x20AC;&#x2122;s powerful financing relationships can consistently achieve the unparalleled results our clients require.

Meridian Capital Group, LLC

proudly advised on financing for the following transaction:

Land Loan

1.8 Million Sq. Ft. Office Development

3 Hudson Boulevard

New York, NY

This transaction was negotiated by: Drew Anderman, Senior Managing Director Alan Blank, Senior Vice President

1 Battery Park Plaza New York, NY 10004 | 212 972 3600 | www.meridiancapital.com The Real Deal - 3 Hudson Boulevard - D. Anderman A. Blank - September 2014.indd 1

8/26/14 4:31 PM

Education

A look at new courses on timely industry topics as the academic year begins

By Tom DiChristopher s the ranks of New York City’s real estate professionals grow, so does demand for professional development and graduate-level education in the field. Manhattan’s real estate schools report that enrollment — from entry-level agentcertification courses to MBA programs for aspiring real estate executives — is on the rise. Enrollment gains reflect the 8.6 percent increase in the number of licensed real estate salespeople in New York City since last year, according to Department of State data provided to The Real Deal. Core salesperson classes at the Steven L. Newman Real Estate Institute at Baruch College, for example, are increasing in size, and the school is also seeing growth in its other certificate courses. (It would not provide specific enrollment figures.) At New York University’s Schack Institute of Real Estate, graduate, professional certificate, and noncredit courses are also attracting more students. Between the spring semesters of 2013 and 2014, the school saw a 10 percent increase in enrollment in graduate programs, and a 27 percent increase in noncredit enrollment, according to figures provided by the school. At Columbia University’s Paul Milstein Center for Real Estate, which offers MBA and executive MBA programs, enrollment remained consistent in the aftermath of the financial crisis, despite a tight labor market, according to Lynne Sagalyn, the center’s director. But now that the industry has entered a new cycle of growth, the school is also attracting students who are not solely focused on a career in real estate. “When real estate becomes hot again, not only do real estate–focused students want to take classes, but the regular finance students look around and say, ‘I ought to have real estate knowledge as part of my business knowledge,’ ” said Sagalyn. To get a better sense of the type of real estate education prospective students can expect to obtain at these schools, TRD rounded up some of the new offerings in New York this fall:

Steven L. Newman Real Estate Institute at Baruch College Baruch College, part of the City University of New York, is offering courses on a range of timely topics. The school is launching a new course in affordable housing management, 60 September 2014 www.TheRealDeal.com

which covers the skills needed to maintain various types of affordable properties in an economically sustainable manner. The Newman Institute will also explore the creation and evolution of vehicles such as mortgage securities and real estate investment trusts in a new class on real estate capital markets. As foreign investment continues to flow into the U.S. real estate market, the school has devised a course on the EB-5 visa

The school believes greater flexibility will allow students to better align their academic training and professional goals. In addition, the institute has developed a new concentration called “Global Real Estate” that ties together previously offered courses and aims to expose students to various frameworks for real estate development around the world. The concentration includes study trips to a number of U.S. and international cities.

“When real estate becomes hot again, not only do real estate– focused students want to take classes, but the regular finance students look around and say, ‘I ought to have real estate knowledge as part of my business knowledge.’ ” Lynne Sagalyn, Columbia’s Milstein Center for Real Estate program, which provides a pathway for immigrant investors to obtain a green card. And Baruch is also starting an exam course for the new version of LEED AP, the advanced credential in green building and rating. The course is not just for designers, but anyone in real estate who wants to understand the latest standards in green building and how to market them, said Nyman. For details on individual courses and registration, visit www.baruch.cuny.edu/realestate

New York University Schack Institute of Real Estate New York University’s Schack Institute is offering several new courses as part of its masters programs in real estate, construction management and real estate development. The school has new courses focused on understanding tools and techniques to meet the needs of underserved communities, including, “Affordable housing development” and “Community engagement in real estate development.” The Schack Institute is also offering, “Technology in the construction industry,” a course focused on new technologies that can reduce the cost and implementation time for development projects. The administration and faculty have also restructured the finance and investment certificate course requirements to give students the opportunity to develop their final projects within one of three specialized tracks: capital structure investments, corporate finance, and securities/portfolio investment options.

For details on course offerings and admissions, visit www. scps.nyu.edu/academics/departments/schack.html

Paul Milstein Center for Real Estate at Columbia University Columbia’s Milstein Center is integrating new topics into existing courses and introducing classes that are designed to respond to the financial crisis and the new realities of the current real estate cycle. The school is refreshing its “Social Impact Real Estate Investing and Development,” course, which was previously taught by deputy mayor Alicia Glen. The two-part course now explores investment policy and finance for city development, and the financial tools that make affordable housing possible. Michael Giliberto, former managing director of JPMorgan’s investment management business, will teach a course focused on designing and implementing strategies for managing large, private-market real estate investment portfolios. The course extends the center’s offerings in project-level real estate finance and investment management. The school will continue its tradition of offering daylong seminars on emerging issues in the industry. One such event will examine the shift in the joint ventures landscape toward more 50-50 projects (rather than those with clear leaders) by examining how partners share financing risk and control decisions. For more details on Columbia’s programs, visit www8.gsb. columbia.edu/realestate TRD

Living. Powered by Urban Compass.

247 WEST 46TH ST

3 BED, 3.5 BATH

$5.4M

SCOTT HUSTIS LICENSED ASSOCIATE REAL ESTATE BROKER

80 RIVERSIDE BLVD, 33CD

5 BED, 5.5 BATH

$8.5M

MARK JOVANOVIC LICENSED ASSOCIATE REAL ESTATE BROKER

Welcome

Scott Hustis & Mark Jovanovic “Scott and Mark set the standard for the industry as two of the most respected and collaborative professionals in the business. I was blown away by the number of calls I received from business leaders upon hearing about their move to Urban Compass; it’s a true testament to the remarkable reputation they have earned. They are the next generation of real estate leadership and we are proud to have them join the team.” — Robert Reffkin, Urban Compass Founder & CEO

2 1 2 . 9 1 3 . 9 0 5 8 W W W.U R B A N C O M PA S S . C O M F O L LO W U S @ U R B A N C O M PA S S

REAL ESTATE AGENTS AFFILIATED WITH URBAN COMPASS ARE INDEPENDENT CONTRACTOR SALES ASSOCIATES AND ARE NOT EMPLOYEES OF URBAN COMPASS. EQUAL HOUSING OPPORTUNITY. URBAN COMPASS IS A LICENSED REAL ESTATE BROKER LOCATED AT 19 UNION SQUARE WEST, 10TH FL. NY, NY 10003. ALL INFORMATION FURNISHED REGARDING PROPERTY FOR SALE OR RENT OR REGARDING FINANCING IS FROM SOURCES DEEMED RELIABLE, BUT URBAN COMPASS MAKES NO WARRANTY OR REPRESENTATION AS TO THE ACCURACY THEREOF. ALL PROPERTY INFORMATION IS PRESENTED SUBJECT TO ERRORS, OMISSIONS, PRICE CHANGES, CHANGED PROPERTY CONDITIONS, AND WITHDRAWAL OF THE PROPERTY FROM THE MARKET, WITHOUT NOTICE.

stART HERE

NoMad’s retail surge A breakdown of the latest trendy shops helping transform the former wholesale area

By Rich Bockmann oho, Tribeca, the Meatpacking District … and NoMad? The neighborhood north of Madison Square Park is not the first that comes to mind for chic shopping. But a tide of changing retail in the stretch along Broadway from 23rd to 30th streets is altering that. At least, that’s the pitch being sold to prospective tenants by the NoMad Center at the Virgin Hotel, a 100,000-square-foot retail block in the Sir Richard Branson–branded 38-story glass tower. Set to open in 2017, the retail portion of the building developed by the Lam Group will occupy the hotel’s entire frontage on Broadway from 29th to 30th street, in the heart of an area long known for wholesale perfume, jewelry and beauty supply stores. The area has been on the upswing since the restoration of Madison Square Park in the early aughts and was boosted by the arrival of Danny Meyer’s trendy Shake Shack burger joint in 2004. But the arrival of the Ace Hotel back in 2009 heralded the beginning of a new retail landscape that is only now coming into its own. And while the Ace used discounted rents and other rental incentives to attract retailers like Stumptown Coffee and the John Dory Oyster Bar, trendy stores have since migrated to the area without incentives. The Cambodian sandwich

1 The Ace Hotel The property that arguably put NoMad on the map, the Ace has been drawing a young, tech-savvy clientele since it opened in 2009. The New York–based Sydell Group transformed the former Hotel Breslin into a destination in a neighborhood that had previously lacked just that. As part of the plan, Sydell offered discount rents to retail tenants, who then turned over a portion of their earnings, in an effort to create a buzz-worthy mix across the hotel’s retail space. The eclectic mix of tenants include the Michelin-rated Breslin Restaurant, Portland’s iconic Stumptown Coffee, the Fort Green export No. 7 Sub Shop, the boutique clothing store Opening Ceremony, the Project No. 8

13 62 Septmber 2014 www.TheRealDeal.com

joint Num Pang, the salad joint Sweetgreen and the fashion boutique Noir et Blanc are now filling the storefronts along Broadway and its side streets. Aiming to build on that base, the NoMad Center’s leasing team, led by Newmark Grubb Knight Frank executive Mitch Friedel, is testing the market to see just how much the area’s newfound cache is worth. Friedell said he’s aware of comps on nearby Broadway in the $300-a-squarefoot range. “I think we can easily surpass those numbers,” he said, citing “the prestige of the Virgin name,” and the quality of the new space, along with the two years until Shake Shack the hotel’s debut. Andrew Zobler, CEO of the Sydell Group, which developed the Ace and NoMad hotels, said many of the wholesalers in the area have actually been paying premium rents for years. “If you look back five or six years ago, tenants were paying $200 a square foot on Broadway,” he said. “It’s not so much that the rents are really going up materially. It’s more of a shifting in the kind of tenant,” he continued. “What’s changed dramatically is the rents above the retail. Once the neighborhood becomes trendy, the rents above go straight up.” Here’s a look at some of the shops and properties in the area helping to transform Broadway and its side streets: gift store and the John Dory Oyster Bar. Today, the hotel’s retail is completely leased.

2 The NoMad Hotel The second of the Sydell’s NYC hotels, the NoMad, opened in 2012 a block south of the Ace at 1170 Broadway, catering to a clientele that could be described as more Continental. The Beaux Arts building’s 168 rooms were restored by French designer Jacques Garcia, who modeled them after Parisian flats. The NoMad’s ground-floor retail space is occupied by the haute Parisian fashion boutique Maison Kitsune, where animal-print sweatshirts sell for hundreds of dollars. Last year, the developer also purchased

4 the building next door, 1164 Broadway, which became home to the Washington, D.C.–based salad chain Sweetgreen.

3 Eataly The high-end market/restaurant bazaar was formed out of a partnership between Oscar Farinetti, who founded the first Eataly in 2007 in Italy, and celebrity chefs Mario Batali and Lidia Bastianich. It quickly became a foodie (and tourist) destination when it opened at 200 Fifth Avenue in 2010. With about a dozen restaurants, cafes and other stations spread out over some 50,000 square feet, the trendy spot draws about 100,000 visitors a day to the intersection of Broadway and Fifth Avenue, effectively bridging the Flatiron’s retail corridor north to NoMad. Eataly hit its projected revenue of $85 million last year and recently added a Nutella bar after its wine shop shuttered. The building is also home to the Finnish home-wares store Marimekko and the Lego company, which is planning to open its flagship store toward the end of the month. Asking rents along 23rd Street in the building are $375 per square foot, according to the CoStar Group’s database.

4 10 Madison Square West Earlier this year, the private-equity firm Savanna picked up a 20,676-square-foot retail condo at the base of the former International Toy Center at 1107 Broadway, which developer Steve Witkoff is converting into 125 high-end condos. Apartments start with asking prices of $1.46 million and climb to $35 million for the penthouse. Closings at the building, now covered in scaffolding, are expected to begin in January. The development’s website promotes the area’s retail as part of the neighborhood’s appeal, along with its proximity to Madison Square Park. Savanna said it is looking to attract a “global retailer” to the space.

5 The Porcelanosa Building

7 The Thrifty HoG This upscale 2,100-square-foot thrift shop opened at 11 West 25th Street in 2010 selling used clothing, furnishings and home décor items. Proceeds from the business — whose name is an acronym for “Hearts of Gold” — benefit homeless mothers and children, according to the company’s website. The company’s founder, fashion stylist Deborah Koenigsberger, also started the women’s boutique Noir et Blanc next door at 7 West 25th Street. Both buildings are owned by Kew Management.

8 Brickman office buildings Further down 25th Street, work is underway at 24-28 West 25th Street (pictured), a pair of office buildings investor Bruce Brickman and San Francisco–based developer DivcoWest purchased last year. The partners are planning to capitalize on the tech craze in Midtown South and reposition them targeting creative tenants. As part of the deal, Brickman and DivcoWest also purchased a third building at 40 West 25th Street, where earlier this year they signed Reed Krakoff, the former top designer at Coach who left to start his own label, to a 27,000-square-foot office space on the eighth and ninth floors. They also signed a 6,750-square-footlease with the magazine ARTnews in the building, according to CoStar. Brickman did not respond to a request for comment.

9 The Smith restaurant Set to open either later this year or in early 2015, the fourth location of the casual American brassiere will spread out across 9,000 square feet at 1150 Broadway. The building — otherwise known as 230 Fifth — had previously been home to “three unsightly, unseemly cell phone guys,” according to Newmark broker Jonathan Krivine, who put the deal together with fellow NGKF broker Harvey Richer. The Smith signed at $150 a square foot, according to CoStar.

10 Broadway Plaza Hotel

Across 25th Street from 10 Madison Square West, the high-end Spanish ceramics-and-tile company is renovating the former Commodore Criterion Building as its new U.S. headquarters. It purchased the property, which is at 202 Fifth Avenue and is being renamed the Porcelanosa Building, for $40 million in 2012. When completed next summer, the 15,000-square-foot, Sir Norman Foster–designed renovation will include a showroom that will serve as a welcome sign of sorts to the lower end of Broadway in NoMad. The space sits just north of the some of the higher-end home furnishing stores found in Flatiron. The six-story, Neoclassical building dates back to 1918 and had been home to the Commodore Manufacturing Corp. The building’s exterior is landmarked.

Owner Sal-Jon Realty gave a cosmetic make-over last year to its 69-room hotel at 1155 Broadway and is planning to seek city approval in the next year to do a full renovation that will include repositioning the building’s ground-floor retail. The property, which was converted from an office building to a hotel in 2000, hosts several of the neighborhood’s typical wholesale shops, along with Broadway Pizza. The renovation will include an expansion to the lobby, leaving about 6,000 square feet of retail space remaining. Hotel owner Sal Loria told TRD that the company wants to lease the space to a steakhouse/sports bar. In addition, Loria said, the firm would reposition the property from a three-star to a four-star hotel.

6 Hill Country Chicken

The trendy spinning studio signed a lease earlier this summer for 6,000 square feet at the base of Himmel & Meringoff Properties’ 18-story office tower at 12 West 27th Street. The 10-year lease covers 3,500 square feet on the ground floor and another 2,500 in the basement. SoulCycle, which has nine other locations in Manhattan and Brooklyn, is planning to open in the fall. CoStar put the rent at $125 per square foot.

11 SoulCycle This Texas fried chicken enclave, an offshoot of the popular Hill Country Barbecue restaurant on 26th Street, opened in 2010 at 1123 Broadway. The 2,700-square-foot space fronts Broadway and 25th Street at the base of an office building owned by Kew Management, which owns several other properties in the area. Its other tenants include Num Pang sandwich shop, at 1129 Broadway. Kew has a retail vacancy on the ground floor of its office building at 1133 Broadway and says it’s close to signing a lease for a portion of the 9,000-square-foot space. CoStar put Hill Country’s rent at $125 per square foot. Kew declined to comment on rents.

12 Boutique hotel The owners of the boutique Refinery Hotel near Bryant Park Continued on page 138

8 www.TheRealDeal.com September 2014 63

LIVE IN WONDER at The Seymour Step into the quiet calm of the sunlit courtyard, happily tucked away from the rest of the world and youâ&#x20AC;&#x2122;ll find your own comfortable place to recharge; an exclusive sanctuary from the bustle of the Manhattan streets.

Discover wonder within at seymournyc.com T 212-285-2525

1, 2 and 3-bed residences. Prices from just over $1m

All images are artist renderings. Sponsor reserves the right to make changes in accordance with the terms of the offering plan. This is not an offering. 261 â&#x20AC;&#x201C; 267 W 25th Property Owner LLC c/o Naftali Group LLC, 1700 Broadway, 16th Floor, New York, NY 10019. The complete offering terms are in an offering plan available from sponsor. File CD14-0042.

Artists renderings 25TH_REAL_DEAL.indd 1

29/08/2014 10:57

Discover wonder within at seymournyc.com T 212-285-2525

1, 2 and 3-bed residences. Prices from just over $1m

Artists renderings 25TH_REAL_DEAL.indd 1

29/08/2014 10:57

Cover Party

Art, real estate meet at LLNYC bash Artist Domingo Zapata welcomes crowd at his Gramercy Park triplex

By Claire Moses here’s no need to hit the Chelsea galleries to find good art — at least there wasn’t last month. Domingo Zapata’s 6,500-square-foot, art-filled home was the scene for a summertime bash hosted by Luxury Listings NYC, published by The Real Deal, which featured the artist on its July cover. Keller Williams NYC and the Bracha Group sponsored the event. Media personalities, musicians, reality stars, actresses, writers, real estate executives and brokers filled Zapata’s home, taking in the artwork in his second-floor ballroom-turned-studio, sipping cocktails and eating gorgonzola-and-pistachio-covered grapes. The Spanish-American Zapata, who was commissioned last spring to paint a mural on the High Line, receives media attention for the star-studded, salon-style soirees he holds at his home, and has sold his art for six-figure sums to the likes of actor Leonardo DiCaprio, business mogul and philanthropist George Soros and legendary basketball coach Pat Riley. “I like to do smaller get-togethers,” said Zapata, who was getting ready for an exhibition of his work in Mexico City. “A lot of friends come by all the time. I have an open-door policy.” Here are some of the faces in the crowd:

Jacky Teplitzky of Douglas Elliman, left, and Domingo Zapata

Domingo Zapata, left, and Keller Williams NYC’s Ilan Bracha, who sponsored the event

Charles Goubeau, left, of Back Roads Entertainment with JPMorgan’s Jessica Gil

From left: Andrea Tantaros of Fox News, Domingo Zapata, and Kimberly Guilfoyle, also of Fox News From left: Haim Binstock, operating principal at Keller Williams Realty; Kimberly Guilfoyle and Andrea Tantaros of Fox News; Ilan Bracha, chairman of Keller Williams NYC; and TRD’s Yoav Barilan

From left: Angelina Pivarnick of “Jersey Shore”, Fox News’ Andrea Tantaros and GinaMarie Zimmerman of “Big Brother”

Dina Yusupova, left, and Tom Brady of Town Singer Maxwell, left, with art agent Carolyn Antuna and Domingo Zapata

Natalie Baghdadi, left, and Christian Bindel of Keller Williams

Publisher Amir Korangy, left, and Gordon Golub, chief residential real estate officer at Urban Compass

Fox Business News reporter Jennifer Eckhart

Kathy Clarke of the Daily News, left, and LLNYC’s Zachary Kussin

From left: Andrea Tantaros of Fox News; Leonard Steinberg, president of Urban Compass; and Wendy Maitland, managing director of Town

From left: James Goldman, founder and chairman at Big Picture Advisors and Debbie Rodriguez

TRD’s Amir Korangy, left, and Editor-in-Chief Stuart Elliott From left: Jennifer Eckhart of Fox Business News, Andrea Tantaros of Fox News, Adam Weiss of AMW Public Relations, Fox Business News’ Joanna Chow and Veronica Marin of Fox TRD’s Amir Korangy, left, and George Wayne of Vanity Fair TRD’s Amir Korangy, left, and fashion designer Catherine Malandrino

Attorney Mark Seidenfeld, left, with Douglas Elliman’s Nikki Sun and TRD’s Robert Stearns Domingo Zapata, left, and “Law and Order SVU’s” Kelli Giddish From left: Lara Pedrini of Dow Jones, Andrea Feick of Condé Nast and Claire Bodart

TRD’s Amir Korangy, left, with Angelina Pivarnick of “Jersey Shore” and NBC’s Rob Schmitt

66 September 2014 www.TheRealDeal.com

From left: The Corcoran Group’s Charlie Attias, TRD’s Yoav Barilan and Corcoran’s Dan Benichou

George Wayne of Vanity Fair

Photos by Benno Klandt

Chinese real estate titans target NYC These six power players are investing heavily in New York properties By Tom DiChristopher hinese firms and individuals are investing heavily in New York real estate. But while many of the properties being bought are familiar to those in the local real estate industry, those doing the buying are less well known. In fact, some of the biggest names in real estate in the People’s Republic are leading the wave of Chinese investment in New York City property. Some of these investors hope to fill American condos with wealthy Chinese nationals and stock U.S. offices with China’s outwardly looking companies. For others, buying into U.S. assets represents a logical next step in expanding highly diversified portfolios. At the same time, Chinese developers — particularly residential developers — are facing a serious slump in the business at home, as prices fall and vacancies rise in the country’s cities. A number of the nation’s big builders have flagged overbuilding and high land prices as causes for concern. That helps explain, in part, why some of China’s real estate titans are seeking out residential investments in overseas markets like New York. Here is a look at six major property players in China that are making waves in New York.

complexes, industrial parks and business districts in more than 80 Chinese cities. The company also specializes in developing ultra-high-rise towers, and has some of the world’s tallest skyscrapers in its pipeline. Greenland ranked number 268 in Fortune Magazine’s Global 500 last year — two

posted about $1.3 billion in profits last year. Most of Fosun’s $8.3 billion in revenue in 2013 came from industrial operations, which include pharmaceuticals, property development, steel production and mining. It plans to aggressively develop its other main businesses — insurance, investment and as-

Wang Jianlin

From left: China Vanke President Yu Liang, 610 Lexington Avenue and Wanda Group Chairman Wang Jianlin.

China Vanke Given China Vanke’s position as the largest residential developer in China, one could say the company is starting small in the U.S. In February, a partnership comprised of Vanke, Aby Rosen’s RFR Holding and Hines broke ground on 610 Lexington Avenue, a 61-story condo building designed by Sir Norman Foster. Vanke will also develop a four-building, 656-unit condo development in San Francisco in partnership with Tishman Speyer. Vanke was founded in 1984, and began focusing on real estate in 1988. Since then, the company says it has built more than 500,000 homes in 70 cities. Vanke focuses on developing residences for China’s growing urban population. Last year, it constructed 160 million square feet and brought in $28 billion in revenue. Vanke recently voiced concern that prices are overheating in some Chinese cities, Reuters reported. Vanke president Yu Liang told a real estate forum the company could well plow 10 percent of its overall investment into overseas markets in the next five years. The company’s preferred destination in the Western world? The U.S., according to the news service.

Greenland Holding Group It’s no wonder Forest City Ratner chose Greenland Holding Group when it sought a partner to help expedite the construction of the Atlantic Yards project (recently rechristened Pacific Park Brooklyn). Greenland is Shanghai’s largest state-owned enterprise. Since 1992, the company has built urban 68 September 2014 www.TheRealDeal.com

Forbes puts Zhang and Pan’s fortune at $3.9 billion. Last year, SOHO reported a profit of $1.3 billion on revenue of $2.4 billion. The company also transitioned to a business model focused on operating rather than selling buildings. SOHO has built about 32 million square feet of office space and has a total development portfolio of 58 million square feet.

From left: SOHO China Chairman Pan Shiyi, the General Motors Building and SOHO China CEO Zhang Xin.

Few details have emerged since Wanda Group chairman — and China’s richest man — Wang Jianlin said last year he would invest $1 billion in a New York hotel and residence. But Wang has shown his ability to execute. He purchased cinema chain AMC group for $2.6 billion in 2012. He also spent $900 million on a 90-percent stake in a Chicago mixed-use development earlier this year. Last month, he won the right to develop a former department store in Beverly Hills with a $1.2 billion bid. Wang topped Forbes Magazine’s China Rich List with an estimated wealth of $14.1 billion last year. Wanda Group’s assets under management totaled $62.8 billion at the end of 2013. Wang spent 16 years in the army and did a brief stint with the Dalian city government before establishing Wanda Group in 1988. Initially focusing on urban reconstruction in the seaport city of Dalian, the company embarked in 1992 on residential development in Guangzhou, China’s third largest city. Since then, Wanda has diversified into four major businesses: commercial real estate; hotel development and management; department stores, and cultural enterprises, including movie theaters, film production and theme parks.

XIN Development

From left: Greenland Chairman Zhang Yuliang, 1 Chase Manhattan Plaza and Fosun Chairman Guo Guangchang.

spots above Goldman Sachs — and had $58 billion of assets under management as of 2013. In addition to real estate, Greenland has significant interests in energy, finance, construction and hotel and commercial center operations.

Fosun International Fosun International’s $725 million purchase of 1 Chase Manhattan Plaza was the biggest foreign investment in commercial office space last year. That is no surprise when one considers the scale of Fosun’s business. Formed in 1992, Fosun is China’s largest closely held conglomerate. Its co-founder and chairman, Guo Guangchang, has been called “the Warren Buffet of China,” making Fosun the Berkshire Hathaway of the Middle Kingdom. The company has nearly $30 billion in assets under management and

set management — over the coming decade.

Zhang Xin and Pan Shiyi Last year, the wife-and-husband team of Zhang Xin and Pan Shiyi partnered with Brazilian banking magnate Moise Safra to take a 40 percent stake in the General Motors building for $700 million. The deal made Zhang and Pan stakeholders in one of the most valuable real estate assets in the U.S. The duo is no stranger to big deals. Zhang and Pan serve as the chief executive and chairman, respectively, for SOHO China, the country’s largest developer of high-end office space. Founded in 1995, the company focuses on developing architecturally distinct buildings in Beijing and Shanghai by collaborating with notable architects such as Zaha Hadid.

In 2012, XIN Development purchased a Williamsburg condo site for $54 million. The firm has since begun construction on the Oosten, a 216-unit development designed by Dutch architect Piet Boons. XIN Development is the U.S. arm of the Beijing-based homebuilder Xinyuan Real Estate. Founded by chairman and CEO Yong Zhang in 1997, the company has a simple strategy: it acquires land in China’s highgrowth, second tier cities and develops middle-income housing. As of last year, Xinyuan had completed 28 projects comprising more than 42,000 apartments. Between 2009 and 2013, Xinyuan’s revenue grew 50 percent to nearly $900 million, according to its last annual report. Xinyuan became the first Chinese real estate company to list on the New York Stock Exchange in December 2007. Investors don’t appear to be entirely sold on the company, however. Xinyuan, which has a market cap of just $268 million, has seen its stock price tumble nearly 80 percent since going public. TRD www.TheRealDeal.com January 2014 35

The Right Prescription For All Of Your Healthcare Real Estate Needs AVAILABLE PROPERTIES

ARTIST RENDERING

IN THE HEART OF IT ALL 111 East 57th Street At Park Avenue Size: 2,832 to 35,884 SF+/- for lease

BUILT TO SUIT IN CARNEGIE HILL 62 East 88th Street Between Madison & Park Avenue Size: 3,570 to 14,683 SF+/- for lease

THE DOWNTOWN MEDICAL BUILDING 156 William Street Between Ann & Beekman Street Size: 24,000 to 124,000 SF+/- for lease

MAGNIFICENT MADISON AVENUE 667 Madison Avenue At East 61st Street Size: 3,000 SF+/- for lease

AESTHETIC CENTER WITH OR 260 East 66th Street Between Second & Third Avenue Size: 8,071 SF+/- for lease

UPPER EAST MEDICAL SPACE 260 East 67th Street Between Second & Third Avenue Size: 5,200 to over 10,000 SF+/- for lease

LARGE SUTTON AREA DENTAL 400 East 56th Street At First Avenue Size: 3,257 SF+/- for sale

RARE UWS MEDICAL 130 West 86th Street Between Columbus & Amsterdam Avenue Size: 1,200 SF+/- for sale

LARGE MEDICAL CONDO 800 Second Avenue Between East 42nd & East 43rd Street Size: 19,600 SF+/- for sale

RUTHERFORD PLACE MEDICAL CONDO 303 Second Avenue Between East 17th & East 18th Street Size: 2,170 SF+/- for sale

SPECTACULAR MEDICAL SUITES The Corinthian, 345 East 37th Street Between First & Second Avenue Size: 1,871 to 27,179 SF+/- for lease

UPPER EAST SIDE OB/GYN 885 Park Avenue At East 78th Street Size: 1,900 SF+/- for sale

OPHTHALMOLOGIST ON PARK 630 Park Avenue At East 66th Street Size: 1,950 SF+/- for sale

TURN-KEY SURGEONâ&#x20AC;&#x2122;S SUITE 630 Park Avenue At East 66th Street Size: 1,900 SF+/- for sale

FABULOUS FIFTH AVENUE 800A/B Fifth Avenue At East 61st Street Size: 1,468 to 6,477 SF+/- for lease

PARK AVENUE GEM 580 Park Avenue At East 63rd Street Size: 1,700 SF+/- for sale

CLOSE TO GRAND CENTRAL 20 East 46th Street Between Fifth & Madison Avenue Future availabilities for lease

MOVE-IN CONDITION ON MADISON 635 Madison Avenue Between East 59th & East 60th Street Size: 3,200 SF+/- for sublease

CO-OP CORPORATION SALE 1070 Park Avenue At East 88th Street Size: 1,400 SF+/- for sale/lease

COMMERCIAL/PROFESSIONAL ON PARK 1236 Park Avenue At East 96th Street Size: 2,500 SF+/- for sale

RENOVATED TOWNHOUSE SPACE 164 East 61st Street Between Third & Lexington Avenue Size: 1,700 SF+/- for sale

PLAZA DISTRICT MEDICAL 30 Central Park South Beween Fifth & Avenue of the Americas Size: 800 SF+/- for sublease

CONDO CONVERSION ON PARK* 737 Park Avenue At East 71st Street Size: 1,841 to 3,906 SF+/- for sale

PSYCHIATRIST OFFICE/RESIDENTIAL 42 East 73rd Street Between Park & Madison Avenue Size: 500 SF+/- for sale

VILLAGE CONDO 44 East 12th Street Between University Place & Broadway Size: 1,665 SF+/- for sale

MEDICAL SPA FOR SALE 59 East 54th Street Between Madison & Park Avenue Size: 700 SF+/- for sublease

YORKVILLE BUILT TO SUIT 435 East 79th Street Between First & York Avenue Size: 3,369 SF+/- for lease

GREAT UPPER EAST LOCATION 55 East 87th Street Between Park & Madison Avenue Size: 920 SF+/- for sale

LAST CONDO UNIT LEFT** 225 East 64th Street Between 2nd & 3rd Avenue Size: 10,500 SF+/- for lease/sale

ARTIST RENDERING

NEW DEVELOPMENT OPPORTUNITY 516 West 168th Street Between Amsterdam & Audubon Avenue Size: 2,574 to 15,000 SF+/- for lease

Contact us for information on any of these properties or for the largest selection of Healthcare Properties in New York City. Josef Yadgarov Licensed Real Estate Salesperson o: 212.836.1097 jyadgarov@corcoran.com

Paul L. Wexler Licensed Associate Real Estate Broker o: 212.836.1075 plw@corcoran.com

Kathleen Caracappa Licensed Real Estate Salesperson o: 212.893.1441 kcaracappa@corcoran.com

The complete offering terms are in an offering plan from *Sponsor File No: CD110149 **Sponsor File No: CD890467

Real estate agents affiliated with The Corcoran Group are independent contractor sales associates and are not employees of The Corcoran Group. Equal Housing Opportunity. The Corcoran Group is a licensed real estate broker located at 660 Madison Ave, NY, NY 10065. All information furnished regarding property for sale or rent or regarding financing is from sources deemed reliable, but Corcoran makes no warranty or representation as to the accuracy thereof. All property information is presented subject to errors, omissions, price changes, changed property conditions, and withdrawal of the property from the market, without notice. All dimensions provided are approximate. To obtain exact dimensions, Corcoran advises you to hire a qualified architect or engineer.

Pr o f i l e

Brookfield’s big revamp Behind the recent shakeups at the mega-REIT — from corporate restructuring to leadership changes

By Adam Pincus he massive real estate company now known as Brookfield Property Partners is undergoing a shakeup that’s impacting everything from the ranks of its top leadership team to the direction of its New York City portfolio. The firm has seen two of its top executives depart in the last few months and has inked a contract to buy its first residential portfolio in Manhattan. That all comes on the heels of going public last year, a move which prompted financial analysts to begin covering it for the first time this summer. Sources say that the new level of scrutiny is likely to have a positive impact on the flagging stock price at the firm, one of the largest publicly traded real estate companies in the world, with assets valued at $95 billion. Amidst all this activity, the firm is, of course, in the throes of two high-profile New York City projects: The construction of its 5.5 million-square-foot mixed-use Manhattan West complex and the leaseup of the newly rehabbed Brookfield Place, the office complex once known as the World Financial Center. “It’s very dynamic,” said Paul Massey, CEO of commercial firm Massey Knakal Realty Services, referring to the recent activity at the firm and its expansion efforts. “[Brookfield is] huge already in the office and regional mall business, and is really making a push into the multi-family sector, as well as a big push into industrial and hotel,” said Massey, who served on the board of directors of Brookfield Office Properties, before it was acquired by Brookfield Property Partners this spring. The company has, however, been largely mum on the personnel moves. In addition, its complicated corporate restructuring — which involved a merger of two of its affiliated firms — has left many industry officials trying to wrap their heads around all of the changes. And some are at a loss for words on why the firm’s undeniable office leasing success at Brookfield Place hasn’t translated into a boost in its stock price. Instead, for much of the year, the company saw its stock price drop as its rivals have seen theirs soar. Real estate pros said despite the long history of its affiliates and executives, its stock is going through the growing pains of a new, untested company. “New public companies like Brookfield Property Partners often trade at a discount,” said Alex Avery, a stock analyst at the Canadian investment bank CIBC World Markets. “Investors like to see a track record. It is one thing to tell the world what you are going to do. It is another to

70 September 2014 www.TheRealDeal.com

actually do it. Investors value proven accomplishments.”

Personnel matters In 2011, when Mitch Rudin jumped over from CBRE to become president and CEO of U.S. Commercial Operations for Brookfield Office Properties, the industry was split on whether his experience was a good match for the job. Some industry players thought his job at CBRE — where he was president and CEO of New York’s Tri-State Region —

standalone public company. “Rudin is a very talented executive — and the company, and I, hold him in very high regard,” Massey said. However, the explanations about Rudin’s departure don’t address the fact that when Rudin was hired, the plan to create Brookfield Property Partners was already in motion. Massey noted that the plan to fully merge the Brookfield companies was not known at that time. Rudin did not respond to several requests for comment.

earlier this year. Insiders said despite the timing, the affiliates are different companies and Anton and Solarz departures were not related to the merger.

Corporate conundrum Even those who closely follow Brookfield have a hard time explaining its complicated corporate structure. The simplified version, however, is that Brookfield Asset Management spun off Brookfield Property Partners in January 2012, in order to hold and manage its real estate assets, which had been spread among several of its affiliated companies. Analysts said the move created more narrowly focused companies, which has been en vogue recently with corporate investors. The firm is certainly continuing its predecessors’ aggressive approach to New York real estate. “We are looking for mispriced oppor-

Top, Mitch Rudin unexpectedly departed from Brookfield in June. Bottom, Ric Clark, the CEO of Brookfield Property Partners. Right, a rendering of the retail at the revamped Brookfield Place, which the firm has been leasing up.

didn’t align with his new position, which was focused on steering the company’s immense property portfolio rather than mediating between warring brokers. Others, however, said his previous experience at development firm Tishman Speyer, where he was a partner in the mid-1980s, made him well suited for the Brookfield role. Either way, Rudin’s departure from Brookfield this past June shocked the industry. Not only was he the highest-compensated executive at the firm between 2011 and 2013 — according to records filed with the U.S. Securities and Exchange Commission he raked in $10.5 million in cash and stock — sources say he’s well-liked and even-keeled. In addition, at least one source said he was friends with Ric Clark, CEO of Brookfield Property Partners. Nonetheless, company sources said Rudin’s exit was a mutual decision. They said that Rudin’s skill set (and price tag) was not needed once Brookfield Office Properties was acquired by Brookfield Property Partners and was no longer a

While Rudin’s next move has been shrouded in secrecy, one source said he may be flirting with a regional or national executive position at Cushman & Wakefield, or with a position at commercial services firm DTZ, which CBRE’s former global CEO Brett White will soon reportedly lead. A Cushman spokesperson said “there is no truth to that rumor.” DTZ did not comment. Rudin was not the only top executive to leave Brookfield in recent months. Michael McNamara, who was hired in 2012 as head of U.S. acquisitions and dispositions for Brookfield Office Properties, also left this year. He declined to comment. Sources told The Real Deal that they wouldn’t be surprised if several more Brookfield employees were squeezed out in an effort to trim costs and remove a layer of corporate redundancy in the wake of its merger. “There probably were a few more people that were impacted by the overlap,” one company source said. Investment sales brokers Eric Anton and Ron Solarz — who joined Brookfield’s affiliate Brookfield Financial in 2011— left

tunities. We are capital recyclers. That is a big part of our strategy,” Clark said during a recent phone interview with TRD. “We are constantly looking for things in New York.” Clark noted on an earnings call last month that the company is also considering bringing on an investment partner once leasing is farther along at Brookfield Place. In New York, the company has about 18.4 million square feet of office space plus about 700,000 square feet of retail. It also owns a 32 percent stake in mall operator General Growth Properties and 39 percent in another mall REIT, Rouse Properties. By comparison, the city’s largest REIT, SL Green Realty, owns about 28 million square feet of commercial space in Manhattan. And competitor Vornado Realty Trust has about 27 million in all of New York City. Yet Brookfield has a reputation for making big moves. For example, in 1996 it bought a stake in properties owned by the bankrupt real estate firm Olympia & York, which owned some 14.7 million square feet of office space, Continued on page 72

www.TheRealDeal.com February 2014 49

SOLD

$282,000,000 760 Madison Avenue

This premier site is made up of three contiguous buildings on the corner of Madison Avenue and East 65th Street and includes 100 feet of retail frontage and 89,370 buildable square feet.

Guthrie Garvin

Paul J. Massey Jr.

Senior Vice President of Sales ggarvin@masseyknakal.com (212) 696-2500 x 7786

Chief Executive Officer pmassey@masseyknakal.com (212) 696-2500 x 7711

INVESTMENT SALES

RETAIL LEASING

CAPITAL SERVICES | MASSEYKNAKAL.COM

MANHATTAN BROOKLYN STATEN ISLAND THE BRONX QUEENS WESTCHESTER LONG ISLAND NEW JERSEY

Pr o f i l e

6 rooms in 1

Continued from page 70

mostly at the then-World Financial Center. Today Brookfield is, of course, developing Manhattan West in Hudson Yards, which in addition to office space will have about 800 residential rental units. In addition, last month, Clark said on the corporate earning call that the company was in contract to buy its first residential building portfolio in New York City — a huge package of nearly 4,000 units. Sources priced that so-called “Putnam portfolio,” which is based in Upper Manhattan and owned by the residential firm Urban American Management and partners, at about $1 billion. The deal is expected to close this month. In addition, insiders told TRD that Brookfield may ramp up its residential arm in New York and acquire Urban American. Both Clark and Urban American declined to comment.

The weak price is especially worrisome because the company has inked more than 3.5 million square feet of office and retail leases in Manhattan over the past 12 months. That’s while its main rivals at the World Trade Center, across the street, have been in a comparative rut. Meanwhile, Brookfield announced last month that the advertising firm R/GA Media Group signed a lease for 173,000 square feet at Manhattan West, indicating momentum for the Far West Side project. The Canadian financial firm Canaccord Genuity, the first company to cover Brookfield Property stock, recently told investors it believed the stock was worth $24 per share, some 15 percent higher than the stock was at the time of the report. It also rated the shares a “buy.” Yet it cited potential financial pitfalls for Brookfield Property because the compa-

Brookfield is in contract to buy the roughly $1 billion Putnam portfolio (top) in Upper Manhattan and Roosevelt Island. Bottom, Manhattan West, Brookfield’s two-towered Far West Side complex.

Lollipop Bunk Bed | Swing Sofa/Queen Bed | Goliath Console/Dining Table

LifeEdited by Graham Hill 1,000+ sq ft of functionality in 420 sq ft of space. Living room + kitchen + home office + dining for ten + two bedrooms in 420 beautiful square feet? That’s one powerfully functional space. Space-transforming solutions from Resource Furniture add measurable value to every project by maximizing functionality and enhancing market appeal – without increasing the footprint. Learn more about LifeEdited at lifeedited.com

72 September 2014 www.TheRealDeal.com

“Often when we make a large acquisition, they come with the management team, but not always,” Clark told TRD. In an even more ambitious plan, Brookfield is more than two years into negotiations to partner with the Stuyvesant Town and Peter Cooper Village tenants association to take the 11,000-unit rental complex on Manhattan’s East Side partly condo. The deal would create a non-eviction plan that would allow rent-regulated tenants to remain in place.

Stagnant stock Despite all of Brookfield’s recent activity and leasing success, Brookfield Property Partners’ stock has remained stubbornly stagnant. The stock, which began trading in April 2013, is trading far below SL Green’s and Vornado’s. Those stocks were both battered in the downturn, but have since rebounded. SL Green was trading above $108 a share in the middle of last month, up about 25 percent from two years ago. Vornado was above $105 per share, up about 30 percent. By comparison, Brookfield’s stock was trading at just over $21 a share last month, below the roughly $22 price it hit its opening day.

ny will be required to pay $50 million to Brookfield Asset annually, which will impact its bottom line. “In our view, an externally managed company is not the ideal structure for a real estate entity,” Canaccord said in a report released in July. “At this point, it is not clear to what extent the external structure will impact [Brookfield Property’s] valuation.” Overall, financial analysts said that Brookfield Property’s broad real estate portfolio should make the stock attractive. Several insiders predicted that as more banks cover the company, its profile will rise and, in turn, boost its stock price. Massey predicted that the diversified portfolio would attract stock buyers. “People want global exposure to real estate,” he said. But others noted that investors may be turned off by its diversification. Often investors pick REITs or similar stocks in companies because of their specialty in hotels, office or retail, said Larry Longua, an adjunct associate professor at New York University’s Schack Institute of Real Estate. “Not to disparage them, but [it’s like] they have cats and dogs all over the globe. I would step back and wait and see. I would be cautious,” Longua said. TRD www.TheRealDeal.com September 2014 73

P E T E R AS HE SELLING PROPERTIESSINCE1992 “Weknowwhatyouneed! ”

157EAST64THSTREET 3RD FLOOR NY, NY ( 212) 750. 3300

W W W. PETERASHE. COM

STOREFRONT 835LEXI NGTONAVE. ( 212) 8889900

Is NYC’s townhouse market undervalued? Single-family homes lag behind newly constructed condos on the price-per-square-foot front

By E.B. Solomont ealty television interior design duo Cortney and Robert Novogratz paid $4.3 million for their nearly 7,200-square-foot townhouse in the West Village in 2007. They recently listed the home for $21.5 million, or just under $3,000 per square foot. While that price may seem high, the Novogratzes, who had their own HGTV show, “Home by Novogratz,” previously listed the house, which is located at 400 West Street, in 2009 for $25 million to no avail. And yet, compared with prices for new development condos in the neighborhood, the property, which is being listed by Douglas Elliman broker Raphael De Niro, is a relative steal, according to some top brokers. That relative bargain stems from the fact that the price spread between townhouses and condos is widening, thanks to the explosion of luxury condos in recent years. Halstead Property’s Louise Phillips Forbes went a step further, saying that on a price-per-foot basis townhouses are significantly undervalued in New York City. Compared with the Novogratzes’ asking price of $3,000 a foot, nearby condos range from $3,750 to $4,450 a foot. “What [my clients] can get in a co-op or condo is nowhere near what you can buy, on a square-footage basis, in a townhouse,” Forbes said. “There’s been a run on our luxury market,” Forbes said. “These [condo] developments have captured massive numbers, and that market momentum has magnified these numbers in the differentials tremendously.” Brown Harris Stevens’ Paula Del Nunzio, who said townhouses are a “fantastic bargain,” predicted that prices for single-family homes in Manhattan would continue to rise. “There will come a time when a house will cost $100 million, or $5,000 a foot, and nobody will blink,” she said. Still, the day for $100 million townhomes hasn’t quite arrived. “We have not seen, ‘Put any number on it and it will sell,’ like the condo market,’ ” said Linda Melnick, a broker with Stribling & Associates.

defining the condo market.) Sources do point out that comparing the two types of housing can be tricky, since townhouse measurements include exterior walls and common space, while condos do not. Condos also get more ex-

pay a premium for a condominium for just that reason.” And that premium only seems to be increasing. Garfield said that in Chelsea, the average condo can fetch upwards of $3,500 per

Potential profits

The townhouse at 400 West Street, which is on the market for $21.5 million. Below, left, an exterior view. Below, right, Cortney and Robert Novogratz, the husband-and-wife reality TV show design duo, who have listed the home.

Widening spreads While townhouse prices are climbing, they are not rising nearly as fast as condo prices. The median sales price for a townhouse in Manhattan was $3.59 million in 2013 versus $2.7 million in 2004, a 33 percent jump, according to appraisal firm Miller Samuel. However, median condo prices saw a far more dramatic rise, jumping from $804,418 in 2003 versus $1.25 million in 2013 — a massive 55 percent increase. The average price per square foot of a townhouse — $1,144 — is less than the $1,484 condo average. But averages, of course, are often skewed by the astronomical sales that have been more readily 74 September 2014 www.TheRealDeal.com

sliver of the whole residential sector. Overall, it amounts to less than 2 percent of residential transactions, said Jonathan Miller, president of Miller Samuel. In Manhattan, there were 436 townhouses listed in the second quarter, up 4.8 percent from a year ago. But even as inventory edged up, the number of transactions dropped to 59 in the second quarter, compared with 78 in the prior-year period. According to Miller, the drop is a tapering off of last year’s frenzied buying, which he attributed to buyers’ pent-up demand.

The townhouse at 66 Midwood Street in Prospect-Lefferts Gardens sold in July for $2.35 million.

pensive as they get higher in the building, while townhouses obviously don’t have that advantage. According to Jed Garfield, managing partner at townhouse specialist Leslie J. Garfield & Co., “there is an intrinsic difference in value.” “With a condominium, you’re getting all the services that are associated with that,” Garfield said. “Some people will

square foot, while the average townhouse would likely average $3,000. A 15 percent-plus spread is typical in almost every Manhattan neighborhood, and it can be higher in certain areas, he said. “Those spreads are very real,” Garfield added, who nonetheless noted that his office’s average sales are 20 percent higher on a per-square-foot basis this year than last. The townhouse market represents just a

All of this isn’t to say that well-priced townhouses aren’t going into bidding wars. Maura Jarach, chair of the townhouse division at Keller Williams NYC, said she’s seen plenty of those, too. But she’s also seen a buildup of overpriced listings, where the sellers are unrealistic about how much their townhouse is worth. Others concurred. “[Townhouse] sellers are looking at the $90 million apartments and saying, ‘Oh my God, I have 6,000 square feet,’ ” said Stribling’s Melnick. “It’s like everyone’s child is gorgeous. You don’t see the flaws when it’s your own.” In addition, unlike new construction condos, townhouses often require extensive renovations, which can be daunting given the age, and potential landmark status, of the 19th-century buildings that make up the majority of the city’s townhouse stock. None of that matters for some buyers, especially those in brownstone Brooklyn. “The bidding wars are still going on, and the outskirt areas that weren’t as popular five years ago are definitely getting much higher prices,” said Halstead’s Jackie Lew, who sold a townhouse in July at 66 Midwood Street in Prospect-Lefferts Gardens for $450,000 over the $1.9 million asking price. “It was an exorbitant number,” said Lew, adding that new condo development hasn’t inhibited townhouse buyers. “If they’re looking for a townhouse, they are looking for a townhouse.” Over the past few years, developers have recognized the potential profitability that the townhouse market offers and have given buyers the best of both worlds: new construction and newly renovated townhouses. Developers throughout Manhattan and Brooklyn have added townhouse components to larger condos complexes — from Related Companies’ Townhouses at Superior Ink to Rudin Management’s Greenwich Lane project to Hamlin Ventures and Time Equities’ 23 townhouses in Boerum Hill, Brooklyn. “There are people recognizing that they can make more money by building out the spaces and marketing to people who aren’t getting what they want in the co-op and condo market,” Forbes said. TRD www.TheRealDeal.com January 2014 35

Not everything is as hard as you think.

If there is a will, there is a way. Donâ&#x20AC;&#x2122;t miss out on a deal due to a temporary lack of liquidity. Let us fund 100% of your SOFT DEPOSIT so you can go to contract. Our unique program gives you the time and control you need to secure your financing and compete in todayâ&#x20AC;&#x2122;s fiercely competitive Real Estate market.

winchesterequities.com/softdeposits 212.494.9025

Big REBNY report flags nine City Council bills Trade group’s 125-page paper attacks legislation that hinders production of more housing By Rich Bockmann he Real Estate Board of New York flagged nine pieces of legislation introduced by the City Council this year as counterproductive to Mayor Bill de Blasio’s much-publicized affordable housing plan. Among the nine bills are proposals to limit after-hours construction, prohibit owners of buildings with multiple violations from receiving permits and requiring all hotel development plans —

even those that are as of right — to go before local community boards for review. The list is part of an under-the-radar 125-page report REBNY drafted earlier this year as a guideline for City Hall as it considers ways to build or preserve 200,000 affordable units over the next 10 years. “Our goal was to assemble a broad range of ideas and suggestions that, based on their experience, would increase housing production throughout the city,”

notes the report, which was drafted from input by residential builders and operators. According to the trade group, 52 of the more than 250 bills City

business. REBNY maintains that excessive legislation drives up the cost of construction. “Some of these mandates impose modest increases; others are

More than 20 percent of City Council bills introduced in early 2014 were related to real estate. Council members introduced through March, or more than 20 percent, related to the real estate

costly and more troublesome and whose benefits are less compelling,” the report states. “Over the

K2 Just Listed - 10993 Jack Nicklaus Drive North Palm Beach, Florida Spectacular 1.50 acre property on Lake Worth

South style Florida and luxury

K 2

R E A L T Y

JAMES KENNY • PAUL KANEB

K2 Realty is one of the leading luxury real estate firms in all of South Florida. K2 Realty’s unparalleled ability to match their global network of buyers with extraordinary properties in the Palm Beach area has led to the agency becoming one of South Florida’s go-to turnkey real estate firms. Constantly striving to exceed clients’ expectations, the real estate professionals at K2 Realty will always be fully committed to providing exceptional real estate service to their clients. 11676 US HIGHWAY 1 • NORTH PALM BEACH, FL 33408 • WWW.K2PALMBEACH.COM • 561.691.1223

K2 Sold

12210 Banyan Road | 12525 Seminole Beach Road North Palm Beach, Florida Oceanfront estate homes in exclusive Seminole Landing

76 September 2014 www.TheRealDeal.com

years, these mandates have continued to increase, and their collective cost is no longer modest.” The report also flagged a bill introduced by Lower Manhattan Councilwoman Margaret Chin that would require building owners to maintain an escrow account worth 10 percent of five years’ of rent rolls to fund tenant relocations following a vacate order. “Ten percent of rent rolls takes a significant amount of funds … away from building repairs, reserves, and may require an increased mortgage on the property,” the report reads. “HPD already has a mechanism and fund for tenant relocations, where they maintain the ability to collect from owners, and this bill does not increase the circumstances in which an owner is required to compensate tenants.” Chin said vacate orders are a persistent problem in her district, which saw three major incidents in 2013. “Amid the disorder of vacating their homes, residents should at least have the assurance of a place to go until they can make more permanent arrangements,” she said. “This legislation would hold landlords responsible for the welfare of their tenants after a vacate order, and that just makes sense, because it makes things a bit easier for those families and takes some of the uncertainty out of an already difficult situation.” The councilwoman, who co-sponsored seven other bills targeted by REBNY, disputed the suggestion that the legislative proposals would hinder the administration’s affordable-housing goal. “While I understand there are concerns about costs for developers, I’m supporting these bills because of the positive impact they’ll have for tenants and communities across our city,” she said. “I’m also a passionate supporter of Mayor de Blasio’s 10-year affordable housing plan, and I know that good legislation won’t get in the way of accomplishing that goal.” REBNY also used the report to put forth its own proposals that it said would help create affordable housing. On that list are adjusting property taxes that encourage conversion of rentals to condos/coops, changing policies to allow for smaller affordable apartments and building bigger in rezoned neighborhoods that have not seen expected levels of development. TRD

THE BAKER, THE HOMEMAKER, THE CULINARY PROVIDER Now you donâ&#x20AC;&#x2122;t have to be a professional chef to cook like one. But like all who obsess over their craft, you have to trust your tools. Introducing the latest generation of DCS high-performance ranges, built for your home. Serious kitchen equipment for people who love to cook.

dcsappliances.com

To discuss your upcoming residential projects contact: Gina Wieczorek, Builder Development Manager Phone 646.531.5888 or email gina.wieczorek@fisherpaykel.com

400 WEST STREET - TH

5 BR, 4.5 BATH • WEB ID: 857836 • $21.5 M SUSAN GREEN 646.998.7428 BRETT MILES 646.998.7427

16 EAST 96TH STREET

4 BR, 4 BATH • WEB ID: 672552 • $5.395 M ADAM TAYLOR 646.998.7447 WILBUR GONZALEZ 646.738.6937

We define our neighborhoods as much as they define us.

25 West 39th Street 212.398.9800

110 Fifth Avenue 212.633.1000

26 Astor Place 212.584.6100

730 Fifth Avenue 212.242.9900

239 East 79th Street 212.929.1400

337 West Broadway 212.924.4200

530 LaGuardia Place 212.557.5300

88 Greenwich Street 212.269.8888

446 West 14th Street 212.604.0300

33 Irving Place 212.557.6500

220 EAST 73RD STREET

4 BR, 4.5 BATH • WEB ID: 491525 • $3.995 M GINGER BROKAW 646.998.7408 HANNAH REINHARD 646.300.6046

475 GREENWICH STREET

2 BR, 2 BATH • WEB ID: 168746 • $3.3 M ANDREW AZOULAY 646.738.2655

SE AR CH EVERY M AN H AT TAN LIST IN G ALL ON ON E APP. SEARC H : T OWN R ES I D EN TI A L.

Town Residential, LLC (“Town”) is a licensed real estate broker and a partnership of Buttonwood Residential Brokerage, LLC and Thor Equities, LLC. All property listing information, including, but not limited to, square footage, room count, and number of bedrooms are from sources deemed reliable, but are subject to errors, omissions, changes in price, prior sale or withdrawal and should be verified by your own attorney, architect, engineer or zoning expert. This is not intended to solicit property already listed. Town’s owns the following subsidiary real estate brokerages: Town Astor Place LLC; Town Fifth Avenue LLC; Town Flatiron LLC; Town Gramercy Park LLC (“Town Gramercy”); Town Greenwich Street LLC (“Town Financial District”); Town Greenwich Village LLC; Town Soho LLC; Town West Village LLC; or Town 79th Street LLC (“Town Upper East Side”).

395 BROADWAY

2 BR, 2 BATH • WEB ID: 801531 • $1.98 M DANNY DAVIS 646.588.4052

342 WEST 85TH STREET

2 BR, 2 BATH • WEB ID: 937515 • $1.6 M ROBIN LYON-GARDINER 646.998.7456 WIL PARKERSON 646.998.7495

400 WEST STREET - TH

5 BR, 4.5 BATH • WEB ID: 857836 • $21.5 M SUSAN GREEN 646.998.7428 BRETT MILES 646.998.7427

16 EAST 96TH STREET

4 BR, 4 BATH • WEB ID: 672552 • $5.395 M ADAM TAYLOR 646.998.7447 WILBUR GONZALEZ 646.738.6937

We define our neighborhoods as much as they define us.

25 West 39th Street 212.398.9800

110 Fifth Avenue 212.633.1000

26 Astor Place 212.584.6100

730 Fifth Avenue 212.242.9900

239 East 79th Street 212.929.1400

337 West Broadway 212.924.4200

530 LaGuardia Place 212.557.5300

88 Greenwich Street 212.269.8888

446 West 14th Street 212.604.0300

33 Irving Place 212.557.6500

220 EAST 73RD STREET

4 BR, 4.5 BATH • WEB ID: 491525 • $3.995 M GINGER BROKAW 646.998.7408 HANNAH REINHARD 646.300.6046

475 GREENWICH STREET

2 BR, 2 BATH • WEB ID: 168746 • $3.3 M ANDREW AZOULAY 646.738.2655

SE AR CH EVERY M AN H AT TAN LIST IN G ALL ON ON E APP. SEARC H : T OWN R ES I D EN TI A L.

395 BROADWAY

2 BR, 2 BATH • WEB ID: 801531 • $1.98 M DANNY DAVIS 646.588.4052

342 WEST 85TH STREET

2 BR, 2 BATH • WEB ID: 937515 • $1.6 M ROBIN LYON-GARDINER 646.998.7456 WIL PARKERSON 646.998.7495

CITY CENTER REAL ESTATE INC.

MANHAT TANâ&#x20AC;&#x2122;S PREMIER AIR RIGHTS EXPERT

The Orion Developed by Extell 74,158 sq. ft. of Air Rights 350 West 42nd Street

220 Central Park South Developed by Vornado 41,486 sq. ft. of Air Rights This 920 foot residential development will be designed by Robert M. Stern

The Gershwin Developed by Jack Resnick & Sons 105,545 sq. ft. of Air Rights Transaction included the acquisiton of a 35,500 square foot development site which had 355,000 sq. ft. of FAR

Metropolis at 155 East 44th Street Developed by Benenson/Rose 236.083 sq. ft. of Air Rights Transaction also included the acquisition of 208,093 sq. ft. of FASR

250 West 55th Street Developed by Boston Properties 53,281 sq. ft. of Air Rights

Random House 1745 Broadway Developed by Related 254,140 sq. ft. of Air Rights The Air Rights were acquired in 15 separate transactions for this 729,592 sq. ft. mixed use project made up 34.83% of the total GSF of the project

Drake Site, 432 Park Ave Developed by Macklowe Organization 92,179 sq. ft. of Air Rights 1.395 sq. ft. tallest building in NYC and tallest residential development in western hemisphere

1113 York Avenue Developed by the Solow Organization 40,166 sq. ft. of air rights

1800 Park Avenue 126,881 sq. ft. of TDRs. City Center Real estate representing the College of Podiatric Medicine and sold to Vornado. Vornado sold the site to Continuum who will be building two 32-story towers that will be the tallest buildings in Harlem.

340 Madison Avenue 55,000 sq. ft. of TDRS. Acquired for the Macklowe Organization in four separate transactions that involved the acquisition of 55,000 square feet of TDRs from adjacent properties.

237 West 54th Street Acquisition of 25,000 sq. ft. of TDRs generated under the Special Midtown Theater sub-district. Earlier this year the Moinian Group opened up the 34 story, 170,103 sq. ft Hilton Garden Hotel. Architect: Gene Kaufman

1150 Avenue of the Americas 29,000 sq. ft. of TDRs 5 Star hotel, full service plus retail. Gross buildable: 180,000 sq. ft. Nearly 300 suites/rooms. Being built by Morris Moinian of Fortuna Realty Group.

Robert I. Shapiro, Founder and President of City Center Real Estate, is widely recognized as one of Manhattans leading experts on land assemblage and development rights transactions.Clients have included some of the biggest developers and owners in New York City real estate from Avalon Bay to Zeckendorf. Leader and Expert in Manhattan Air Rights, Land Assemblage and Planning & Manhattan Development

1 0 1 0 5 T H AV E , N E W Y O R K , N Y 1 0 0 2 8

(212) 396-9705

RISCITYCENTER@EARTHLINK.NET